<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CLARK REFINING & MARKETING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2911 43-1491230
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
8182 MARYLAND AVENUE
ST. LOUIS, MISSOURI 63105
(314) 854-9696
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
KATHERINE D. KNOCKE, ESQ.
CLARK REFINING & MARKETING, INC.
8182 MARYLAND AVENUE
ST. LOUIS, MISSOURI 63105
(314) 854-9696
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILSON S. NEELY, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
8 5/8% New Senior Notes due 2008. $110,000,000 100% $110,000,000 $32,450.00
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</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR THE TIME THE REGISTRATION STATEMENT BECOMES +
+EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH EACH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
LOGO PRELIMINARY PROSPECTUS DATED SEPTEMBER 25, 1998
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
CLARK REFINING & MARKETING, INC.
FOR ANY AND ALL OF ITS OUTSTANDING
OFFER TO EXCHANGE ITS
8 5/8% SENIOR NOTES DUE 2008
8 5/8% NEW SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED.
Clark Refining & Marketing, Inc., a Delaware corporation ("Clark" or the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus (the "Prospectus") and the accompanying Letter of
Transmittal (the "Letter of Transmittal") to exchange (the "Exchange Offer")
$1,000 principal amount of its 8 5/8% New Senior Notes due 2008 (the "New
Notes") which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to the Registration Statement of which this
Prospectus is a part, for each $1,000 principal amount at maturity of its
outstanding 8 5/8% Senior Notes due 2008 (the "Old Notes"). The form and terms
of the New Notes are identical in all material respects to the form and terms
of the Old Notes except that the New Notes have been registered under the
Securities Act and therefore will not bear legends restricting the transfer
thereof. The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits under the indenture governing the Old Notes (the
"Indenture"). The offering of the Old Notes is referred to herein as the "Debt
Offering." The Old Notes and the New Notes are collectively referred to herein
as the "Notes." See "The Exchange Offer" and "Description of the New Notes."
Clark will accept for exchange any and all Old Notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on , 1998, unless
extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer." Old Notes may be tendered only in integral multiples of $1,000.
Interest on the New Notes will be payable on February 15 and August 15 of
each year, commencing February 15, 1999. The New Notes will mature on August
15, 2008. The New Notes will be redeemable at the option of the Company, in
whole or in part, at any time on and after August 15, 2003 at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. In addition, up to 35% in aggregate principal amount of the New
Notes originally issued are redeemable at the option of the Company out of the
net cash proceeds of one or more Equity Offerings (as defined herein) at any
time prior to August 15, 2002 at a redemption price equal to 108.625% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date.
Upon the occurrence of a Change of Control that results in a Rating Decline
(each as defined herein), the Company will be required to offer to purchase all
of the New Notes at 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase.
The New Notes will rank pari passu with all unsubordinated indebtedness of
the Company, including indebtedness under the Credit Agreement, the 8 3/8%
Notes, the 9 1/2% Notes and the Amended and Restated Term Loan Agreement (each
as defined herein). The obligations of the Company under the Credit Agreement,
however, are secured by a lien on substantially all of the Company's cash and
cash equivalents, receivables, crude oil, refined product and other inventories
and trademarks and other intellectual property and, accordingly, such
indebtedness will effectively rank senior in right of payment to the New Notes
to the extent of such assets.
(Continued)
SEE "RISK FACTORS" ON PAGES 18-25 FOR A DISCUSSION OF CERTAIN RISK FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION AND OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Preliminary Prospectus is 1998.
<PAGE>
(Continuation of cover page)
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, the Company believes that the New Notes issued in exchange for Old
Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by any Holders (as defined herein) thereof (other than
(i) a broker-dealer who purchases such New Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such Holder that is an "affiliate" of the Company,
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act; provided that the Holder is acquiring such New Notes in its ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in any distribution of the New
Notes. Persons wishing to exchange Old Notes in the Exchange Offer must
represent to the Company that such conditions have been met. However, any
Holder who is an "affiliate" of the Company or who tenders in the Exchange
Offer with the intention to participate or for the purpose of participating,
in a distribution of the New Notes cannot rely on the interpretation by the
staff of the Commission set forth in the above-referenced no-action letters,
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the Old Notes.
See "Risk Factors--Consequences to Non-Tendering Holders of Old Notes." In
addition, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus, meeting the requirements of the Securities Act, in connection with
any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities and not acquired directly from the Company. The Company has agreed
that for a period of up to 90 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." EXCEPT AS DESCRIBED IN THIS
PARAGRAPH, THIS PROSPECTUS MAY NOT BE USED FOR AN OFFER TO RESELL, RESALE OR
OTHER TRANSFER OF NEW NOTES.
<PAGE>
No person has been authorized in connection with the offering made hereby to
give any information or to make any representations other than those contained
in this Prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any
securities other than the securities to which it relates or an offer to sell
or the solicitation of an offer to buy such securities in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is correct as of any
date subsequent to the date hereof.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 5
Prospectus Summary........................................................ 6
Risk Factors.............................................................. 18
Use of Proceeds........................................................... 25
The Lima Acquisition...................................................... 26
The Exchange Offer........................................................ 34
Capitalization............................................................ 42
Selected Consolidated Financial and Other Data............................ 43
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 45
Quarterly Financial Information........................................... 57
Business.................................................................. 58
Management................................................................ 78
Security Ownership of Certain Owners and Management....................... 85
Certain Transactions...................................................... 85
Description of the New Notes.............................................. 87
Book Entry; Delivery and Form............................................. 112
Certain United States Federal Income Tax Consequences of the Exchange..... 115
Certain United States Federal Income Tax Considerations for Non-United
States Holders........................................................... 115
Description of Certain Debt Instruments................................... 118
Plan of Distribution...................................................... 123
Legal Matters............................................................. 123
Experts................................................................... 124
Index to Financial Statements and Schedules............................... F-1
Opinion and Summary Report of Turner, Mason & Company..................... A-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith has filed reports and other information with the Commission. Such
reports and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices at 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports and
information statements and other information regarding registrants, such as
the Company, that file electronically with the Commission.
The Company has agreed that, if at any time while the New Notes are
"restricted securities" within the meaning of the Securities Act, the Company
is not subject to the informational requirements of the Exchange Act, the
Company will furnish to holders of the New Notes and to prospective purchasers
designated by such holders the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule
144A in connection with resales of the New Notes.
Each report attached as an Appendix is current only as of the date of the
report, and the delivery of such reports as Appendices hereto shall not create
any implication that there has been no change in the affairs of the Company
since the date thereof or that the information contained therein is current as
of any time subsequent to its date. Any statement contained herein shall be
deemed to be modified or suspended for the purpose of this Prospectus to the
extent that a subsequent statement contained herein modifies or supersedes
that statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. In addition, any statement contained in any such report attached
as an Appendix shall be deemed to be superseded for the purpose of this
Prospectus to the extent that a discussion contained herein relating to the
same subject matter omits such statement. Any such statement omitted shall not
be deemed to constitute a part of this Prospectus.
FORWARD-LOOKING STATEMENTS
THE STATEMENTS IN THIS PROSPECTUS THAT ARE NOT HISTORICAL INFORMATION ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. WORDS SUCH
AS "EXPECTS," "INTENDS," "PLANS," "PROJECTS," "BELIEVES," "ESTIMATES" AND
SIMILAR EXPRESSIONS ARE USED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. ANY
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
INVOLVE SIGNIFICANT RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY VARY
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS.
AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY ARE
CHANGES IN INDUSTRY-WIDE REFINING MARGINS, CHANGES IN CRUDE OIL AND OTHER RAW
MATERIAL COSTS, AND WORLD AND REGIONAL EVENTS THAT COULD SIGNIFICANTLY
INCREASE VOLATILITY IN THE MARKETPLACE. THE COMPANY'S CRUDE OIL SUPPLY COULD
BE AFFECTED BY FACTORS BEYOND ITS CONTROL, SUCH AS EMBARGOES, THE CONTINUED
DISCOVERY AND PRODUCTION OF LIGHT SWEET CRUDE OIL, OR MILITARY CONFLICTS
BETWEEN (OR INTERNAL INSTABILITY IN) ONE OR MORE OIL-PRODUCING COUNTRIES. THE
COMPANY'S BUSINESS IS ALSO AFFECTED BY THE CONTINUED AVAILABILITY OF DEBT AND
EQUITY FINANCING, CHANGES IN LABOR RELATIONS, GENERAL ECONOMIC CONDITIONS
(INCLUDING RECESSIONARY TRENDS, INFLATION AND INTEREST RATES), MARKET SUPPLY
AND DEMAND FOR THE COMPANY'S PRODUCTS, THE RELIABILITY AND EFFICIENCY OF THE
COMPANY'S OPERATING FACILITIES, THE LEVEL OF OPERATING EXPENSES AND HAZARDS
COMMON TO OPERATING FACILITIES (INCLUDING EQUIPMENT MALFUNCTIONS, PLANT
4
<PAGE>
CONSTRUCTION/REPAIR DELAYS, EXPLOSIONS, FIRES, OIL SPILLS AND SEVERE WEATHER
EFFECTS), ACTIONS TAKEN BY COMPETITORS (INCLUDING BOTH PRICING AND EXPANSION
AND RETIREMENT OF REFINERY CAPACITY IN RESPONSE TO MARKET CONDITIONS), AND
CIVIL, CRIMINAL, REGULATORY OR ADMINISTRATIVE ACTIONS, CLAIMS OR PROCEEDINGS
(INCLUDING DOMESTIC AND INTERNATIONAL POLITICAL, LEGISLATIVE, REGULATORY AND
LEGAL ACTIONS AND REGULATIONS DEALING WITH PROTECTION OF THE ENVIRONMENT,
INCLUDING GASOLINE COMPOSITION AND CHARACTERISTICS). UNPREDICTABLE OR UNKNOWN
FACTORS NOT DISCUSSED HEREIN COULD ALSO HAVE MATERIAL ADVERSE EFFECTS ON
FORWARD-LOOKING STATEMENTS.
ALTHOUGH THE COMPANY BELIEVES THAT ITS EXPECTATIONS REGARDING FUTURE EVENTS
ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE THAT THESE ARE
ALL THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO VARY MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS OR THAT ITS EXPECTATIONS REGARDING FUTURE
DEVELOPMENTS WILL PROVE TO BE CORRECT.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Current Report on Form 8-K filed August 21, 1998 with the
Commission is incorporated by reference in this Prospectus.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the date the Exchange Offer is terminated are
incorporated by reference in this Prospectus.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements, and related
notes, appearing elsewhere in this Prospectus. Unless the context otherwise
requires, prior to the Lima Acquisition (as defined herein), the term "Company"
refers to the Company and its subsidiaries and after the Lima Acquisition, the
term refers to the Company and its subsidiaries including the Lima Refinery (as
defined herein). The Lima Refinery will be operated as a part of the refining
division of the Company. Unless otherwise specified herein, or the context
otherwise requires, all information relating to the Lima Refinery and its
historical operations is based on information supplied to the Company by the
seller, which has not been independently verified. Certain other information
relating to the Lima Refinery is based on the Company's best estimates of
operating results it would have achieved at the Lima Refinery had the Company
purchased the Lima Refinery on January 1, 1997 and operated it and the related
assets in the proposed manner from January 1, 1997 through December 31, 1997.
See "Risk Factors--Company Estimates Regarding the Lima Acquisition" elsewhere
herein.
THE COMPANY
The Company is one of the five largest independent refiners and marketers of
petroleum products in the United States ("U.S."), with one Texas Gulf Coast
refinery, one Ohio refinery and two Illinois refineries representing over
540,000 barrels per day ("bpd") of rated crude oil throughput capacity. The
Company is also currently one of the ten largest direct operators of gasoline
and convenience stores in the U.S. with 692 retail outlets in six Midwestern
states (as of June 30, 1998). The Company also distributes its products through
an additional 170 independently operated Clark branded outlets. The Company's
retail network has conducted operations under the Clark brand name for over 65
years. The Company also markets gasoline, diesel fuel and other petroleum
products on a wholesale unbranded basis.
The Company has focused its business objectives with an entrepreneurial
orientation towards cost reduction, productivity improvements, selective
capital investments and growth through acquisitions. Important initiatives
include the August 1998 acquisition of British Petroleum's Lima, Ohio refinery
and certain other assets; the acquisition of Chevron U.S.A. Inc.'s ("Chevron")
Port Arthur, Texas, refinery and certain other assets; retail acquisitions and
divestitures intended to strengthen the Company's position in core markets; the
marketing division's store re-imaging program; and the refining division's
productivity enhancement programs. The Company believes it is well positioned
to benefit from improving refining industry fundamentals and to take advantage
of growth opportunities in the marketing and refining sectors.
The Company is a wholly-owned subsidiary of Clark USA, Inc. ("Clark USA"),
which is controlled by Blackstone Capital Partners III Merchant Banking Fund
L.P. and its affiliates ("Blackstone") through a 78.5% voting interest (68.0%
economic interest). Clark USA's other principal shareholder is an affiliate of
Occidental Petroleum Corporation with a 19.9% voting interest (30.7% economic
interest).
REFINING
The Company operates four refineries and 17 product terminals located in its
Midwest and Gulf Coast market areas, two crude oil terminals, an LPG terminal
and has minority equity interests in certain crude oil pipelines. See "--
Pipeline Sales." The refining division is the largest business division of the
Company in terms of total assets and has significant operating leverage to
crack spreads and crude oil differentials, which provides the potential for the
Company to significantly increase its
6
<PAGE>
operating cash flow if these variables continue to improve. Recent improvements
in industry conditions and productivity gains contributed to the refining
division's record contribution to operating income of $167.9 million in fiscal
1997, excluding certain inventory and other related special items ("Operating
Contribution"). For additional cash flow disclosures, see "Selected
Consolidated Financial and Other Data."
The Port Arthur refinery is located in Port Arthur, Texas. The refinery has
the ability to process 100% sour crude oil, including up to 20% heavy sour
crude oil, and has coking capabilities. Heavy sour crude oil has historically
been available at substantially lower costs when compared to light sweet crude
oil such as West Texas Intermediate ("WTI"). The Port Arthur refinery has the
ability to produce jet fuel, 100% low-sulfur diesel fuel, 55% summer
reformulated gasoline ("RFG") and 75% winter RFG. The refinery's Texas Gulf
Coast location provides access to numerous cost effective domestic and
international crude oil sources, and its products can be sold in the
Midcontinent and Eastern U.S., as well as in export markets. Since acquiring
the Port Arthur refinery in early 1995, the Company has increased crude oil
throughput capability from approximately 178,000 bpd to its current 225,000 bpd
and has lowered operating expenses by approximately 50c per barrel. From the
date of the acquisition through June 30, 1998, the Port Arthur refinery has
generated an Operating Contribution of approximately $281.0 million. For
additional cash flow disclosures, see "Selected Consolidated Financial and
Other Data."
The Company's Illinois refineries, Blue Island (near Chicago, Illinois) and
Hartford (near St. Louis, Missouri), are supplied by common carrier crude oil
pipelines and are located on inland waterways with barge access. The refineries
have access to multiple sources of foreign and domestic crude oil and benefit
from crude oil input flexibility. Recent pipeline expansions, including the new
capacity of the Express Pipeline and expanded capacity on the Interprovincial
Pipeline, have served to increase the availability of lower cost crude oil to
the Company's Illinois refineries. The two refineries are connected by product
pipelines, increasing flexibility relative to stand-alone operations. The
Company's product terminals allow efficient distribution of refinery production
through pipeline systems. The Company believes that the Midwest location of
these refineries has provided relatively high refining margins with less
volatility than comparable operations located in other regions of the U.S.,
principally because demand for refined product has exceeded production in the
region. This excess demand has been satisfied by imports from other regions,
providing Midwest refineries with a transportation advantage.
MARKETING
The Company markets gasoline and convenience products in six Midwestern
states through a retail network of Company-operated stores and also markets
refined petroleum products through a wholesale program to distributors, chain
retailers and industrial consumers. The Company's wholesale operation markets
petroleum products in both the Midwest and Gulf Coast regions of the U.S. The
Company's retail presence is focused in the Great Lakes region of the U.S.
where Company-operated stores market value-oriented gasoline products,
cigarettes and a mix of On The Go (R) (non-tobacco) convenience products. As
noted above, the Company operates a high proportion of Clark-branded retail
locations, which the Company believes enables it to respond more quickly and
uniformly to changing market conditions than many of its competitors, including
major oil companies that generally operate their stores through dealer or
jobber networks. Of the Company-operated retail locations, approximately 75%
are located on Company-owned real estate and 25% are on leased locations. In
1997, the Company sold approximately 1 billion gallons of fuel (representing
approximately 27% of current refining production) and over $280 million of
convenience products through approximately 200 million retail transactions and
sold an additional 1.1 billion gallons of fuel to wholesale customers including
Clark-branded retailers, major transportation companies and commercial
companies.
7
<PAGE>
Over the past several years, the Company has focused on building core markets
where it believes it can maintain or develop market shares of 7.5% to 15% in
order to leverage brand recognition, promotions and other marketing and
operating activities. In part due to this focus, the Company's core market
monthly gasoline sales per store averaged 115,800 gallons in 1997, which
exceeded the 1997 national industry average of 86,400 gallons, while monthly
sales per square foot averaged approximately $50 for convenience products
versus the industry average of approximately $26. The Company believes its low
operating costs rank it in the first quartile of its industry, providing it
with an important competitive advantage. Chicago, Central Illinois, Southern
Michigan, Cleveland, Milwaukee and Toledo currently are the Company's six
highest volume core metropolitan markets, with market shares of 5% to 15%. A
current trend toward consolidation in the marketing sector is viewed positively
by the Company due to growth and other opportunities that may develop.
The Company currently sells gasoline and diesel fuel on an unbranded basis to
approximately 400 distributors and chain retailers. The Company believes these
sales offer higher profitability than spot market alternatives. Wholesale sales
are also made to the transportation and commercial sector, including airlines,
railroads, barge lines and other industrial end-users. During 1997 and 1998,
the Company has continued to expand its new branded jobber program, increasing
to 170 the number of outlets owned and operated by branded jobbers as of June
30, 1998. The Company believes that a branded distributor program, new business
franchise marketing, and further focus on the transportation and commercial
sectors offer significant opportunities for incremental sales volumes and
earnings in the future.
THE LIMA ACQUISITION
On August 10, 1998, the Company completed the purchase from BP Exploration &
Oil Inc., The Standard Oil Company, BP Oil Pipeline Company and BP Chemicals
Inc. (collectively, "BP") of BP's Lima, Ohio refinery, Buckeye Road crude oil
terminal and Vine Street products terminal (collectively, the "Lima Refinery")
for a purchase price of $175 million plus approximately $40 million for the
hydrocarbon inventory at the Lima Refinery on August 10, 1998 (the "Lima
Acquisition"). In addition, an estimated $70 million will be paid for crude oil
in transit currently owned by BP, the payment for which will occur over the two
months following August 10, 1998 as the crude oil is delivered to the Lima
Refinery. Approximately $50 million of this amount will be funded through
proceeds from the sale of finished products over the same period. The Lima
Refinery was purchased with limited representations, warranties and closing
conditions. Subject to the terms and limitations set forth in the Agreement for
the Purchase and Sale of Lima Oil Refinery, dated July 1, 1998 (the "Purchase
Agreement"), BP has agreed to indemnify the Company for all environmental and
other liabilities and obligations arising from the ownership and operation of
the Lima Refinery prior to Closing. See "The Lima Acquisition--The Purchase
Agreement." The Company believes that the Lima Refinery:
. is a high quality, profitable refinery;
. is located in the Company's existing core retail and wholesale markets;
. provides the opportunity for improved results of operations and cash
flow;
. is being acquired at an attractive acquisition price based on recent
refinery transactions;
. enhances the Company's scale and competitive position; and
. improves the Company's and Clark USA's ability to access the public
equity markets.
The Lima Refinery is a single train, fully integrated coking refinery that
has a rated crude oil throughput capacity of approximately 170,000 bpd, which
increased the Company's crude oil throughput capacity from 370,000 bpd to
approximately 540,000 bpd. The Lima Refinery is a highly automated, modern oil
refinery with a Nelson complexity rating of 8.7 and an estimated replacement
cost of $1.2 billion. The Midwest location of the Lima Refinery has
historically provided it with a transportation cost advantage and less gross
margin volatility than refineries in other regions since
8
<PAGE>
demand for refined products has exceeded supply in the region. The Lima
Refinery complements the Company's existing assets in the region as it is
located in existing core retail and wholesale markets where the Company already
has distribution capability.
The Lima Refinery, which is located on a 650 acre site, was designed to
process light sweet crude oil and has historically run a predominantly domestic
sweet crude oil slate. In addition to over five million barrels of on-site
storage and a rail products loading and unloading system, the Lima Refinery
also has access to a system of crude oil and product pipelines and terminals.
At approximately 170,000 bpd, the Lima Refinery is large enough to realize
economies of scale and other efficiencies. According to a 1994 industry study,
the Lima Refinery ranked in the 2nd quartile in terms of fixed costs and in the
1st quartile in operational availability, turnaround index and maintenance
index.
On August 10, 1998, the Company entered into an amended and restated term
loan agreement with certain lenders and Goldman Sachs Credit Partners L.P., as
agent, pursuant to which the Company borrowed an additional $115 million (the
"Amended and Restated Term Loan Agreement"). Borrowings under the Amended and
Restated Term Loan Agreement are senior unsecured obligations of the Company.
On August 10, 1998, the Company also sold $110 million aggregate principal
amount of its Old Notes to the Initial Purchasers (as defined herein), which
then placed the Old Notes with institutional investors. The Company used the
proceeds from the additional borrowings under the Amended and Restated Term
Loan Agreement and from the sale of the Old Notes, along with available cash,
to fund the Lima Acquisition and related costs.
Also in connection with the Lima Acquisition, the Company amended its
revolving credit facility, to increase its size to the lesser of $700 million
or the amount available under a borrowing base, as defined, representing
specified percentages of cash, investments, accounts receivable, inventory and
other working capital items.
BUSINESS STRATEGY
The Company's business strategy focuses on improving productivity,
selectively adding scale through the acquisition of low-cost, quality assets,
optimizing capital investments, promoting an entrepreneurial culture where
employee incentives are aligned with performance objectives, and maintaining
strong liquidity and financial flexibility.
. Improving Productivity. The Company continues to implement relatively
low-cost projects in its refining and marketing operations designed to
increase production, sales volumes and production yields and to improve
its sales mix while reducing input costs and operating expenses.
Examples of these types of initiatives include improvements at the Port
Arthur refinery, increased yields and crude oil throughput capability at
its Illinois refineries and improved monthly fuel volumes, convenience
product sales and margins in the retail division.
. Adding Scale Through Acquisitions. The Company intends to continue to
selectively add scale to its refining and marketing operations through
the acquisition of low-cost, quality assets. Since 1994, the Company has
almost quadrupled its refining capacity by acquiring the Lima and Port
Arthur refineries and has strengthened its Northern Illinois and
Southern Michigan presence by acquiring retail stores in these core
markets.
. Optimizing Capital Investment. The Company seeks to optimize capital
investments by linking discretionary capital investment to internally
generated cash flow and minimizing investment risk while maximizing
project returns. As an example, in response to weak 1995 and 1996
industry refining market conditions, discretionary capital expenditures
were scaled back significantly from historical levels. Due to improved
results in 1997 and a more robust refining industry environment, the
Company implemented several low risk, high payback discretionary capital
projects.
. Promoting Entrepreneurial Culture. The Company emphasizes an
entrepreneurial management approach which uses employee incentives to
enhance financial performance
9
<PAGE>
and safety. All of the Company's employees participate in its
performance management, profit sharing or other incentive plans, and the
Company has a stock incentive plan for certain key employees.
. Maintaining Strong Liquidity and Financial Flexibility. The Company
and Clark USA will continue to seek to improve their capital structure.
The Company has historically maintained significant liquidity and, as of
June 30, 1998, had a cash balance of approximately $190 million. The
equity recapitalization and the debt refinancing and repayment completed
in October and November 1997 were designed to strengthen the balance
sheet of Clark USA and the Company by extending debt maturities,
increasing prepayment flexibility and lowering the overall borrowing
cost. The sale of the Offered Pipelines (as defined below), if
consummated, would add approximately $74 million of cash to the
Company's balance sheet. The Company believes the Lima Acquisition
provides the opportunity to increase earnings and cash flows which, in
turn, better positions the Company to access the public equity markets
and further improve its capital structure.
PIPELINE SALES
In 1997, the Company determined that its minority interests in the Southcap
Pipe Line Company, Chicap Pipe Line Company, Wolverine Pipe Line Company and
Westshore Pipe Line Company (collectively, the "Offered Pipelines") were not
strategic since the Company's shipping rights are assured due to the
pipelines' operation as common carrier pipelines and the Company's historical
throughput. During July 1998, the Company sold its interest in the Westshore
Pipe Line Company and the Wolverine Pipe Line Company for net proceeds of
approximately $17 million, resulting in an after tax book gain of
approximately $12 million. The Company has signed definitive agreements to
sell its interests in the remaining two pipeline companies, subject to
regulatory approval, for net proceeds of approximately $57 million that, if
consummated, would result in an estimated after tax book gain of approximately
$56 million. Although the Company expects to close the remaining two
transactions by September 30, 1998, there can be no assurance that it will be
able to do so by such time or at all. The Offered Pipelines contributed
approximately $8 million of dividends for the fiscal year ended December 31,
1997.
PORT ARTHUR UPGRADE PROJECT
In March 1998, the Company announced that it had entered into a long-term
crude oil supply agreement with P.M.I. Comercio Internacional, S.A. de C.V.,
an affiliate of Petroleos Mexicanos, the Mexican state oil company. The terms
of the contract provide the Company with the foundation necessary to continue
developing a project to upgrade the Port Arthur refinery to process primarily
lower-cost, heavy sour crude oil. Under the agreement, the Company expects to
purchase in the range of 150,000 to 210,000 bpd of heavy, sour Maya crude oil
for use at the Port Arthur refinery. The supply contract would also assist in
stabilizing earnings and cash flows from the project. The contract period
would run for a minimum of eight years from the completion of the project,
which could be as early as January 2001. The Port Arthur refinery has several
important characteristics that make it attractive for this type of
arrangement. Its Gulf Coast location provides excellent access to waterborne
Mexican crude oil. Additionally, the refinery already has some of the
infrastructure and processing capability necessary to support an upgraded
operation.
The project, which the Company expects to generate attractive returns, is
currently projected to cost approximately $600-$700 million and is currently
expected to be financed on a non-recourse basis to the Company and Clark USA.
The project will include construction of an 80,000 bpd delayed coker and a
35,000 bpd hydrocracking unit and expansion of the crude unit capacity to
approximately 250,000 bpd. If the project is completed, the Port Arthur
refinery will have the ability to process heavy,
10
<PAGE>
sour crude oil up to an estimated 80% of its capacity. The implementation of
the project is subject to certain conditions, such as final determination of
economic and technical feasibility, arrangement of suitable financing, and
securing appropriate tax abatements. The Company currently expects to begin
construction of the project in the fourth quarter of 1998 and to have the
financing in place early in 1999.
THE AMENDED AND RESTATED TERM LOAN AGREEMENT
On August 10, 1998, the Company entered into the Amended and Restated Term
Loan Agreement. The Amended and Restated Term Loan Agreement amends and
restates a credit agreement, dated as of November 21, 1997 and provides for an
additional unsecured term loan of $115 million. The proceeds of the loan were
used to fund a portion of the purchase price of the Lima Acquisition. Interest
under the term loan is based on the London Interbank Offered Rate plus 2.75%.
The new loans are scheduled to be repaid by November 15, 2004.
THE DEBT OFFERING
On August 10, 1998, the Company sold $110,000,000 aggregate principal amount
of its Old Notes to the Initial Purchasers (as defined herein), which then
placed the Old Notes with institutional investors (the "Debt Offering"). The
net proceeds of the Debt Offering were used to pay a portion of the purchase
price for the Lima Acquisition.
THE CONSENT SOLICITATION
In connection with the Debt Offering, the Amended and Restated Term Loan
Agreement and expansion of the Company's Working Capital Facility, Clark USA
solicited and received consents from the holders of its 10 7/8% Senior Notes
due 2005 (the "10 7/8% Notes") and its 11 1/2% Senior Cumulative Exchangeable
Preferred Stock (the "11 1/2% Preferred Stock") to modify the terms of certain
covenants under the instruments governing such securities to enable the Company
to incur indebtedness to finance the Lima Acquisition (the "Consent
Solicitation").
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Registration Agreement........ The Old Notes were sold by the Company on August
10, 1998 to Goldman, Sachs & Co., J.P. Morgan &
Co., Salomon Smith Barney and Wasserstein Perella
Securities, Inc., as initial purchasers (the
"Initial Purchasers"), which then placed the Old
Notes with institutional investors. In connection
therewith, the Company executed and delivered for
the benefit of the Holders of the Old Notes an
exchange and registration rights agreement (the
"Registration Agreement") providing for the Ex-
change Offer.
The Exchange Offer............ $1,000 principal amount at maturity of New Notes
in exchange for each $1,000 principal amount of
Old Notes.
As of the date hereof, $110.0 million aggregate
principal amount at maturity of Old Notes are
outstanding. The Company will issue the New Notes
to holders on or promptly after the Expiration
Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that New
Notes issued in exchange for Old Notes pursuant
to the Exchange Offer may be offered for resale,
resold and otherwise trans-
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
ferred by any Holder thereof (other than (i) a
broker-dealer who purchases such New Notes di-
rectly from the Company to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (ii) any such Holder that
is an "affiliate" of the Company within the mean-
ing of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act; pro-
vided that the Holder is acquiring such New Notes
in its ordinary course of business and is not
participating, and has no arrangement or under-
standing with any person to participate, in any
distribution of the New Notes. Persons wishing to
exchange Old Notes in the Exchange Offer must
represent to the Company that such conditions
have been met. However, any Holder who is an
"affiliate" of the Company or who tenders in the
Exchange Offer for the purpose of distributing
the New Notes cannot rely on the interpretation
of the staff of the Commission set forth in the
above-referenced no-action letters and must com-
ply with the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or transfer of the Old Notes. See
"Risk Factors--Consequences to Non-Tendering
Holders of Old Notes."
Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospec-
tus in connection with any resale of such New
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with re-
sales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activ-
ities or other trading activities and not ac-
quired directly from the Company. The Company has
agreed that for a period of up to 90 days after
the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connec-
tion with any such resale. See "Plan of Distribu-
tion."
Expiration Date.............. 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended.
Conditions to the Exchange The Exchange Offer is subject to certain custom-
Offer....................... ary conditions which may be waived by the Compa-
ny. See "The Exchange Offer--Conditions."
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Old Each Holder of Old Notes wishing to accept the
Notes....................... Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, to-
gether with the Old Notes and any other required
documentation to the Exchange Agent (as defined
herein) at the address set forth herein. By exe-
cuting the Letter of Transmittal, each Holder
will represent to the Company that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such
New Notes, whether or not such person is the
Holder, that neither the Holder nor any such
other person has an arrangement or understanding
with any person to participate in the distribu-
tion of such New Notes and that neither the
Holder nor any such other person is an "affili-
ate," as defined under Rule 405 of the Securities
Act, of the Company. See "The Exchange Offer--
Procedures for Tendering." Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result
of market-making activities or other trading ac-
tivities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
New Notes. See "The Exchange Offer--Procedures
for Tendering" and "Plan of Distribution."
Special Procedures for Bene- Any beneficial owner whose Old Notes are regis-
ficial Owners............... tered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender
should contact such registered Holder promptly
and instruct such registered Holder to tender on
such beneficial owner's behalf. If such benefi-
cial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and
executing the Letter of Transmittal and deliver-
ing his Old Notes, either make appropriate ar-
rangements to register ownership of the Old Notes
in such owner's name or obtain a properly com-
pleted bond power from the registered Holder. The
transfer of registered ownership may take consid-
erable time. See "The Exchange Offer--Procedures
for Tendering."
Guaranteed Delivery Proce- Holders of Old Notes who wish to tender their Old
dures....................... Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Ex-
change Agent prior to the Expiration Date, must
tender their Old Notes according
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Pro-
cedures."
Withdrawal Rights............ Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
Acceptance of Old Notes and The Company will accept for exchange any and all
Delivery of New Notes....... Old Notes which are properly tendered in the Ex-
change Of-
fer prior to 5:00 p.m., New York City time, on
the Expiration Date. The New Notes issued pursu-
ant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Certain Federal Income Tax
Consequences................ The exchange pursuant to the Exchange Offer
should not be treated as a taxable exchange for
federal income tax purposes. See "Certain Federal
Income Tax Considerations--Consequences of the
Exchange Offer to Exchanging and Nonexchanging
Holders."
Exchange Agent
Old Notes................... Bankers Trust Company is serving as Exchange
Agent in connection with the exchange offer of
New Notes for Old Notes.
</TABLE>
SUMMARY OF TERMS OF NEW NOTES
The Exchange Offer applies to $110.0 million aggregate principal amount of
Old Notes. The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes, and will be entitled to the benefits of the Indenture. See
"Description of the New Notes."
Securities Offered........ $110 million aggregate principal amount of 8 5/8%
New Senior Notes due 2008.
Issuer.................... Clark Refining & Marketing, Inc.
Maturity Date............. August 15, 2008.
Interest Payment Dates.... February 15 and August 15 of each year, commencing
February 15, 1999.
Mandatory Redemption...... None.
Optional Redemption....... The New Notes will be redeemable at the option of
the Company, in whole or in part, at any time on
and after August 15, 2003 at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. In addition, up
to 35% in aggregate principal amount of New Notes
originally issued are redeemable at the option of
the Company out of the net cash proceeds of one or
more Equity Offerings at any time prior to August
15, 2002 at a redemption price equal to 108.625% of
the principal amount thereof, plus accrued and
unpaid interest, if any, to the redemption date.
14
<PAGE>
Ranking................... The New Notes will rank pari passu in right of
payment with all senior indebtedness of the
Company, which at on the issue date of the New
Notes will consist solely of the Company's 9 1/2%
Senior Notes due 2004 (the "9 1/2% Notes"), the
Company's 8 3/8% Senior Notes due 2007 (the "8 3/8%
Notes") and obligations under the Credit Agreement
(as defined) and the Amended and Restated Term Loan
Agreement. Because the New Notes are unsecured,
obligations under the Credit Agreement will
effectively rank senior to the New Notes to the
extent of the security in respect of the Credit
Agreement.
Change of Control......... Following a Change of Control that results in a
Rating Decline (as defined herein), the Company
will be required to offer to purchase all of the
New Notes at 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any,
to the date of purchase. There can be no assurance,
however, that the Company will have sufficient
funds with which to purchase the New Notes at that
time, and certain provisions of the Company's other
debt agreements (including the Credit Agreement)
may further limit the Company's ability to make
such purchases. See "Risk Factors--Change of
Control Provisions in the New Notes" and
"Description of the New Notes."
Certain Covenants Prior
to an Investment Grade
Rating Event.............
The indenture contains certain covenants that,
among other things, limit the ability of the
Company to incur or guarantee additional
indebtedness, pay dividends on and redeem capital
stock, sell assets and capital stock, enter into
transactions with affiliates, create liens, engage
in mergers and consolidations or transfer
substantially all of its assets to another person.
However, all of these covenants are subject to a
number of important qualifications and exceptions.
See "Description of the New Notes."
Certain Covenants After
an Investment Grade
Rating Event.............
After the occurrence of an Investment Grade Rating
Event (as defined herein), certain of the covenants
described in the preceding paragraph will cease to
exist or will be modified. The Indenture at such
time will contain covenants that, among other
things, limit the Company's ability to create liens
with respect to certain assets, enter into sale-
leaseback transactions and engage in mergers and
consolidations.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New Notes
offered in the Exchange Offer.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering any Old Notes.
15
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The summary consolidated financial data set forth below for the Company as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 are derived from the audited financial statements included
elsewhere herein. The summary financial data set forth below for the Company as
of December 31, 1993, 1994 and 1995 and for each of the two years in the period
ended December 31, 1994 are derived from audited financial statements not
included herein. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes included elsewhere
herein. The summary historical data as of June 30, 1998 and for the six-month
periods ended June 30, 1997 and 1998 are derived from the unaudited financial
statements included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Net sales and operating
revenues.............. $2,263.4 $2,440.0 $4,486.1 $5,072.7 $4,335.7 $2,172.7 $1,801.1
Cost of sales.......... 1,936.6 2,092.5 4,018.3 4,560.0 3,705.7 1,874.7 1,483.8
Operating expenses(a).. 202.6 220.1 373.5 418.9 432.3 211.5 218.2
General and
administrative
expenses(a)........... 43.0 51.2 52.1 59.1 65.5 29.0 35.1
Depreciation and
amortization(b)....... 35.3 37.3 43.5 48.4 61.2 27.8 31.5
Inventory (recovery of)
write-down to market
value................. 26.5 (26.5) -- -- 19.2 -- 30.9
Recapitalization, asset
writeoffs and other
charges............... -- -- -- -- 49.0 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ $ 19.4 $ 65.4 $ (1.3) $ (13.7) $ 2.8 $ 29.7 $ 1.6
Interest and financing
costs, net(c)......... 29.9 37.6 39.9 38.7 39.8 17.5 22.0
Other income
(expense)(d).......... 11.4 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before taxes,
extraordinary items
and cumulative effect
of change in
accounting
principles............ $ 0.9 $ 27.8 $ (41.2) $ (52.4) $ (37.0) $ 12.2 $ (20.4)
Income tax provision
(benefit)............. (0.5) 9.7 (15.7) (13.9) 10.5 7.0 0.2
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of change in
accounting
principles............ $ 1.4 $ 18.1 $ (25.5) $ (38.5) $ (47.5) $ 5.2 $ (20.6)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
investments........... $ 212.1 $ 134.1 $ 106.6 $ 334.3 $ 244.6 $ 271.9 $ 190.3
Total assets........... 829.1 859.5 1,188.3 1,393.3 1,260.9 1,331.6 1,205.1
Long-term debt......... 401.0 400.7 420.4 417.6 587.4 416.1 582.4
Stockholder's equity... 146.0 162.9 304.1 534.1 260.9 539.3 230.8
SELECTED FINANCIAL DATA:
Cash flows from
operating activities.. $ 68.4 $ 53.7 $ (85.6) $ 16.9 $ 94.9 $ 6.9 $ (8.0)
Cash flows from
investing activities.. (19.8) (21.2) (134.1) 212.0 (123.6) (67.7) (31.7)
Cash flows from
financing activities.. (1.1) (5.4) 174.7 30.0 (61.0) (1.5) (14.6)
Ratio of earnings to
fixed charges(e)(f)... -- 1.56x -- -- -- 1.41x --
EBITDA(g).............. $ 54.7 $ 102.7 $ 42.2 $ 34.7 $ 64.0 $ 57.5 $ 33.1
EBITDA, as adjusted(h). 81.2 76.2 42.2 34.7 132.2 57.5 64.0
Expenditures for
turnaround............ $ 20.6 $ 11.2 $ 6.5 $ 13.9 $ 47.4 $ 30.0 $ 11.1
Expenditures for
property, plant and
equipment............. 67.9 100.3 42.1 45.0 81.7 39.9 34.5
Refinery acquisition
expenditures.......... -- 13.5 71.8 -- -- -- --
OPERATING DATA:
Refining Division:
Port Arthur Refinery
(acquired February 27,
1995) Production (m
bbls/day)............. -- -- 207.7 210.8 213.5 198.5 230.2
Gross margin (per
bbl)(a)............... -- -- $ 2.28 $ 2.78 $ 3.84 $ 3.99 $ 4.00
Operating
expenses(mm)(a)....... -- -- 121.6 164.7 170.7 83.7 88.0
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
(CONTINUED):
Refining Division
(continued):
Blue Island, Hartford
and other refining
Production (m
bbls/day)............. 134.7 140.3 136.5 134.2 135.8 141.2 120.5
Gross margin (per
bbl)(a)............... $ 3.68 $ 3.35 $ 2.51 $ 2.56 $ 3.79 $ 3.92 $ 4.08
Operating expenses
(mm)(a)............... 104.3 115.0 130.2 126.6 123.2 63.3 64.2
Refining Operating
Contribution (mm)..... 63.0 38.8 (2.3) 25.6 167.9 85.9 89.5
Retail Division(a):
Number of core market
stores (average)(i)... 547 553 595 620 666 663 670
Gasoline volume (mm
gals)................. 726.6 763.3 838.1 858.7 912.4 434.7 451.1
Gasoline volume (m gals
per month per store).. 110.7 115.0 117.4 115.4 115.8 110.6 113.7
Gasoline gross margin
(cents/gal)........... 11.4c 11.3c 11.9c 10.6c 10.5c 10.2c 10.4c
Convenience product
sales (mm)............ $143.6 $158.0 $189.9 $201.8 $244.3 $115.5 $129.8
Convenience product
sales (m pmps)........ 21.9 23.8 26.6 27.1 30.6 29.0 32.3
Convenience product
gross margin and other
income (mm)........... $ 36.4 $ 39.8 $ 46.5 $ 52.2 $ 64.6 $ 30.4 $ 34.4
Convenience product
gross margin (m
pmps)................. 5.5 6.0 6.5 7.0 8.1 7.7 8.6
Operating expenses
(mm)(a)............... $ 64.5 $ 70.6 $ 90.3 $101.8 $118.4 $ 55.1 $ 60.9
Core market store
contribution (mm)..... 35.0 35.3 38.3 20.5 19.8 8.7 8.9
Non-core stores, bus.
development & other
(mm).................. 14.6 9.1 6.9 4.7 3.1 1.4 --
Retail Operating
Contribution (mm)..... $ 49.6 $ 44.4 $ 45.2 $ 25.2 $ 22.9 $ 10.1 $ 8.9
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
(b) Amortization includes amortization of turnaround costs and organizational
costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $1.2 million, $1.2 million, $5.2 million, $6.5 million and $7.0
million for the years ended December 31, 1993, 1994, 1995, 1996 and 1997,
and $3.5 million and $1.0 million for the six months ended June 30, 1997
and 1998, respectively. Interest and financing costs, net, also included
interest on all indebtedness, net of capitalized interest and interest
income.
(d) Other income in 1993 included the final settlement of litigation with
Drexel Burnham Lambert Incorporated of $8.5 million and a gain from the
sale of non-core stores of $2.9 million.
(e) The ratio of earnings to fixed charges is computed by dividing (i) earnings
before income taxes (adjusted to recognize only distributed earnings from
less than 50% owned persons accounted for under the equity method) plus
fixed charges, excluding capitalized interest by (ii) fixed charges,
excluding capitalized interest. Fixed charges consisted of interest on
indebtedness, including amortization of discount and debt issuance costs
and the estimated interest components (one-third) of rental and lease
expense.
(f) As a result of the losses for the years ended December 31, 1993, 1995, 1996
and 1997, earnings were insufficient to cover fixed charges by $1.7
million, $44.0 million, $53.6 million and $29.0 million, respectively. As a
result of the losses for the six months ended June 30, 1998, earnings were
insufficient to cover fixed charges by $19.8 million.
(g) Earnings before interests, taxes, depreciation and amortization ("EBITDA")
is a commonly used non-GAAP financial measure but should not be construed
as an alternative to operating income or cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles ("GAAP")).
(h) EBITDA, as adjusted, does not reflect cash necessary or available to fund
cash requirements. EBITDA, as adjusted, in 1993 and 1994 excluded the
write-down in 1993 and the recovery in 1994 of a $26.5 million inventory
valuation adjustment. EBITDA, as adjusted in 1997 and for the six months
ended June 30, 1998 excluded the write-down of $19.2 million and $30.9
million, respectively, for inventory valuation adjustments and EBITDA, as
adjusted, in 1997 also excluded recapitalization charges, asset writeoffs
and other special charges of $49.0 million.
(i) Ten stores included in 1997 and 1998 operated exclusively as convenience
stores and did not sell fuel.
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RISK FACTORS
The New Notes involve certain risks. Holders of the Old Notes should
consider the following risk factors, as well as the other information
contained in this Prospectus, before tendering any Old Notes.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES
Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Old Notes. Thereafter, any Holder of Old Notes who
does not tender its Old Notes in the Exchange Offer, including any Holder
which is an "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company which cannot tender its Old Notes in the Exchange Offer,
will continue to hold restricted securities which may not be offered, sold or
otherwise transferred, pledged or hypothecated except pursuant to Rule 144 and
Rule 144A under the Securities Act or pursuant to any other exemption from
registration under the Securities Act relating to the disposition of
securities, provided that an opinion of counsel is furnished to the Company
that such an exemption is available.
SUBSTANTIAL LEVERAGE, HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER FIXED CHARGES
The Company has consolidated indebtedness that is substantial in relation to
its stockholder's equity. As of June 30, 1998, the Company had outstanding
long-term indebtedness (including current portions) of approximately $585.7
million. As of June 30, 1998, on a pro forma basis after giving effect to the
consummation of the Offering, the Amended and Restated Term Loan Agreement (as
defined herein) and the application of the net proceeds therefrom, and the
sale of the Offered Pipelines, the Company would have had outstanding long-
term indebtedness (including current portions) of approximately $810.4 million
and stockholder's equity of approximately $298.6 million. See
"Capitalization." The Credit Agreement, the Amended and Restated Term Loan
Agreement, the indentures governing the 9 1/2% Notes, the 8 3/8% Notes and the
Company's 8 7/8% Senior Subordinated Notes due 2007 (the "8 7/8% Senior
Subordinated Notes") (collectively, the "Existing Indentures") and the
Indenture, permit the incurrence of additional indebtedness by the Company
subject to certain limitations specified therein.
The Company had net losses before extraordinary items of $25.5 million,
$38.5 million and $47.5 million for the years ended December 31, 1995,
December 31, 1996 and December 31, 1997, respectively. As a result of these
losses, earnings were insufficient to cover fixed charges by $44.0 million,
$53.6 million and $29.0 million for such periods, respectively. The Company
may experience net losses in the future.
The level of the Company's indebtedness could have several important
consequences for holders of the New Notes, including, but not limited to, the
following: (i) a significant portion of the Company's cash flow from
operations will be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, acquisitions, general
corporate or other purposes may be limited; (iii) the Company's leveraged
position and the covenants contained in the Existing Indentures, the Credit
Agreement, the Amended and Restated Term Loan Agreement and the Indenture
could limit the Company's ability to compete, as well as its ability to expand
and make capital improvements; and (iv) the Company's level of indebtedness
could make it more vulnerable to economic downturns and more sensitive to
volatility in the petroleum industry, limit its ability to withstand
competitive pressures and reduce its flexibility in responding to changing
business and economic conditions.
The Company's ability to pay interest on the New Notes and to satisfy its
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and
other factors, certain of which are beyond its control. The Company
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anticipates that available cash, together with borrowings under the Credit
Agreement and other sources of liquidity will be adequate to meet the
Company's anticipated requirements for working capital, capital expenditures,
interest payments and scheduled principal payments through at least the end of
1999. There can be no assurance, however, that the Company will continue to
generate sufficient cash flow from operations in the future to service its
debt and make necessary capital expenditures. If unable to do so, the Company
may be required to reduce or delay planned capital expenditures, seek
additional financing, dispose of certain assets and/or seek to refinance some
or all of its debt. There can be no assurance that any of these alternatives
could be effected, if at all, on satisfactory terms.
Additionally, if the Company were to sustain a decline in its operating
results or available cash, it could experience difficulty in complying with
the covenants contained in the Credit Agreement, the Amended and Restated Term
Loan Agreement, the Existing Indentures, the Indenture or any other agreements
governing future indebtedness of the Company. The failure to comply with such
covenants could result in an event of default under these agreements, thereby
permitting acceleration of such indebtedness as well as indebtedness under
other instruments that contain cross-acceleration and cross-default
provisions.
In addition, the Company's sole stockholder, Clark USA, has substantial
indebtedness. As of June 30, 1998, Clark USA had outstanding long-term
indebtedness of approximately $175.0 million and Exchangeable Preferred Stock
with an aggregate liquidation preference of $66.6 million ($68.5 million as of
June 30, 1998). Clark USA has no significant independent operations and relies
on receipt of funds from the Company to meet its debt and dividend
obligations. Failure of Clark USA to meet its debt and dividend obligations
could have a material adverse effect on the Company.
VOLATILITY OF REFINING AND MARKETING MARGINS
The Company's earnings and cash flow from operations are primarily dependent
upon processing crude oil and selling quantities of refined products at
refining and marketing margins sufficient to cover fixed and variable
expenses. Oil refining is a complex process that is subject to scheduled and
unscheduled downtime.
Crude oil costs and refined product prices depend on numerous factors beyond
the Company's control, including the supply of, and demand for, crude oil,
gasoline and other refined products which, in turn, depend on, among other
factors, changes in domestic and foreign economies, political affairs and
production levels, the availability of imports, the marketing of competitive
fuels, the extent of government regulation and expected and actual weather
conditions. The prices received by the Company for its refined products are
affected by regional factors such as product pipeline capacity, local market
conditions and the level of operations of competing refineries. A large, rapid
increase in crude oil prices would adversely affect the Company's operating
margins if the increased cost of raw materials could not be passed on to the
Company's customers. Alternatively, a large rapid decrease in crude oil prices
may adversely affect the Company's operating margins since feedstock costs are
fixed on average two to three weeks prior to the manufacture and sale of the
finished products. The Company currently purchases approximately 74% of its
crude oil requirements in the spot market, where prices are subject to market
fluctuations. Because of the Port Arthur refinery's U.S. Gulf Coast location
and the two Illinois refineries' and the Lima Refinery's locations on major
crude oil pipelines, the Company believes that adequate supplies of crude oil
will be available in the spot market. No assurance can be given, however, that
the Company will be able to negotiate favorable prices for crude oil in the
spot market or that adequate supplies will be available during times of
shortages. See "Business--Refining--Inventory Management." In recent years,
crude oil costs and prices of refined products have fluctuated substantially.
Accordingly, the Company's earnings are subject to substantial fluctuations,
as reflected by losses incurred in the fiscal years of 1995, 1996 and 1997.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations." On
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occasion, the Company utilizes U.S. Gulf Coast based derivatives, such as
forward future and option contracts on crack spreads with respect to a portion
of the production of the Port Arthur refinery. While this hedging strategy is
intended to provide an acceptable profit margin on a portion of the Port
Arthur refinery production, the use of such a strategy could limit the
Company's ability to participate in an improvement in Gulf Coast crack
spreads. See "Business--Refining--Inventory Management."
THE LIMA ACQUISITION
The Lima Acquisition will have significant effects on all of the Company's
operations. The Lima Acquisition increased the Company's refining capacity
from 370,000 bpd to 540,000 bpd. As a result, the Company will experience
corresponding increases in (i) working capital requirements, (ii) demands on
management resources, (iii) requirements for crude oil feedstock supply and
(iv) quantities of refined product output which must be stored, transported
and marketed by the Company. There can be no assurance that the Company will
be able to successfully implement its business strategy with respect to the
Lima Refinery.
The Lima Refinery was purchased on an "as is" basis, with limited
representations, warranties and closing conditions. While BP will indemnify
the Company for all liabilities and obligations arising from the ownership and
operation of the Lima Refinery prior to August 10, 1998 subject to certain
terms and limitations contained in the Purchase Agreement (including the
requirement that certain environmental indemnity claims be made within 17
years of Closing), the ownership and operation of the facility post-August 10,
1998 may subject the Company in the future to risks of substantial liability
for environmental matters, for which the Company has agreed to indemnify BP.
The Company has offered employment to the employees of the Lima Refinery.
However, because BP had previously announced that the Lima Refinery was to be
closed, many of such employees have accepted offers of employment with other
operations of BP. While BP has agreed to assist the Company in its efforts to
retain the Lima Refinery's employees, the Company will assume the risks
associated with attracting and retaining an appropriate work force.
COMPANY ESTIMATES REGARDING THE LIMA ACQUISITION
The Company's estimates for the Lima Refinery included herein represent the
Company's best estimates of the operating results it would have achieved at
the Lima Refinery, had the Company purchased the Lima Refinery on January 1,
1997 and operated it and the related assets in the proposed manner from
January 1, 1997 through December 31, 1997. The estimates are based upon a
number of assumptions, some of which may not materialize. Other assumptions
may materialize but in a subsequent period. Unanticipated events may occur
which could affect actual results achieved by the Company after the Lima
Acquisition. The Lima Refinery's actual results after the Lima Acquisition
will vary from the estimates and these variations may be material. Prospective
investors are cautioned not to place undue reliance on the estimates. The
Company does not intend to update or otherwise revise the estimates to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. The estimates were not prepared with a view toward
compliance with published guidelines of the American Institute of Certified
Public Accountants or generally accepted accounting principles. Neither the
Company's independent auditors, nor any other independent accountants, have
compiled, examined, or performed any procedures with respect to the Company's
or Turner, Mason & Company's estimates regarding the Lima Acquisition
contained herein, nor have they expressed any opinion or any form of assurance
on such information or its achievability, and assume no responsibility for,
and disclaim any association with, the aforementioned estimates. See "Summary
of Company Estimates Regarding the Lima Acquisition."
INTEREST RATES
The Credit Agreement and the Amended and Restated Term Loan Agreement
provide for interest at rates that fluctuate quarterly and could increase. An
increase in interest rates will increase the
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Company's interest expense and adversely affect the Company's income and cash
flow available to make payments on the Notes and the Company's other
indebtedness. See "Description of Certain Debt Instruments."
COMPETITION
The refining and marketing segment of the oil industry is highly
competitive. Many of the Company's principal competitors are integrated
multinational oil companies that are substantially larger and better known
than the Company. Because of their diversity, integration of operations,
larger capitalization and greater resources, the major oil companies may be
better able to withstand volatile market conditions, compete on the basis of
price and more readily obtain crude oil in times of shortages. See "Business--
Competition."
LIQUIDITY
The Company's cash, cash equivalents and short-term investments as of June
30, 1998 totalled $190.3 million. In addition, the Company had $400.0 million
available (subject to customary borrowing conditions) under the Credit
Agreement for the issuance of letters of credit and short-term cash borrowings
(subject to a $50.0 million sublimit). As of June 30, 1998, on a pro forma
basis after giving effect to the Lima Acquisition, the Offering, the Amended
and Restated Term Loan Agreement, the application of the net proceeds
therefrom and the payment of fees and expenses in connection therewith, and
the sale of the Offered Pipelines, the Company's cash and short-term
investments would have been $259.3 million. As a result of the increased
indebtedness of the Company resulting from the Offering, annual interest
expense will increase. There are a number of other factors which may have a
material effect on the Company's liquidity, including the following.
The Company's short-term working capital requirements (primarily letter of
credit issuances to support crude oil requirements) fluctuate with the pricing
and sourcing of crude oil. Historically, the Company's internally generated
cash flows have been sufficient to meet its needs. The Credit Agreement is a
revolving line of credit for short-term cash borrowings and for the issuance
of letters of credit. In connection with the Lima Acquisition, the Credit
Agreement was amended on August 10, 1998 to increase the facility to the
lesser of $700.0 million or a borrowing base calculated with reference to cash
and cash equivalents, eligible investments, eligible receivables and eligible
petroleum inventories, provided that direct borrowings are limited to the
principal amount of $150 million. As of June 30, 1998 and prior to the Lima
Acquisition, the maximum commitment under the Credit Agreement was $372.0
million, of which $197.2 million was used for letters of credit; there were no
direct borrowings as of such date. The Credit Agreement is currently due to
expire December 31, 1999. To the extent the Company is unable to refinance its
working capital facility on a timely basis and on satisfactory terms, there
can be no assurance that the Company will have adequate liquidity. In
addition, the Company is required to comply with certain financial covenants
contained in the Credit Agreement. There can be no assurance that the Company
will remain in compliance with such covenants if industry conditions weaken
and continue for an extended period of time, which would have a direct impact
on the Company.
The Company also has a number of longer term needs for cash. The Company
estimates that mandatory capital and turnaround expenditures, including
environmental and regulatory expenditures and other nondiscretionary
expenditures, from 1998 through 2000 will be approximately $95.0 million per
year. While the Company expects that internally generated cash flows will be
sufficient to support such capital expenditures, there can be no assurance in
this regard. The Company links discretionary capital spending to cash flow
generated and, as of June 30, 1998, did not have any material long-term
commitments for discretionary capital expenditures. If internally generated
cash flows are insufficient to support such mandatory and discretionary
capital expenditures, the Company may be required to
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seek additional financing or postpone such capital expenditures. There can be
no assurance that any such additional financing could be obtained or, if
obtained, that the terms of any such financing would be satisfactory to the
Company.
The Company's 1997 term loan under the Amended and Restated Term Loan
Agreement becomes due in 2004 (25% becomes due in 2003). In addition, the
Company's 9 1/2% Notes become due in 2004, with an $87.5 million sinking fund
payment required to be made in September 2003, the Company's 8 3/8% Notes
become due in 2007, and the full amount of the 1998 term loan under the
Amended and Restated Term Loan Agreement becomes due in 2004. The Company may
not have sufficient funds to repay in full the entire amount of such
obligations when they become due and would therefore be required to refinance
all or a portion of such obligations at or prior to their maturity.
In connection with the Port Arthur refinery acquisition, the Company agreed
to make contingent payments to Chevron of up to $125.0 million over a five-
year period beginning in February 1995 in the event that certain refining
industry margin indicators exceed certain escalating levels. Such contingent
payments were not payable based upon these industry margin indicators for the
first three measurement periods through September 30, 1995, 1996 and 1997. The
Company believes that, even if such contingent payments would be required to
be made, they would not have a material adverse effect on the Company's
financial position or results of operations since the Company would also
benefit from such increased margins.
The Lima Refinery will require maintenance capital expenditures of
approximately $20 million per year and the scheduled turnaround at the Lima
Refinery in 1999 is currently estimated to require capital expenditures of
approximately $30 million. See "Summary of Company Estimates Regarding the
Lima Acquisition."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Existing Indentures, the Credit Agreement, the Amended and Restated Term
Loan Agreement and the Indenture contain certain covenants that restrict,
among other things, the ability of the Company to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales or asset swaps, enter into certain
transactions with affiliates, impose restrictions on the ability of a
subsidiary to pay dividends or make certain payments, enter into sale and
leaseback transactions, conduct businesses other than their current business,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of their assets. The
Credit Agreement also requires the Company to satisfy certain financial
condition tests. The ability of the Company to meet these financial condition
tests can be affected by events beyond its control, and there can be no
assurance that the Company will meet such tests. A breach of any of these
covenants could result in a default under the Existing Indentures, the Credit
Agreement, the Amended and Restated Term Loan Agreement or the Indenture. Upon
an occurrence of an event of default under the Existing Indentures, the Credit
Agreement, the Amended and Restated Term Loan Agreement or the Indenture, the
lenders thereunder could elect to declare all amounts outstanding thereunder,
together with accrued interest, to be immediately due and payable. In the case
of the Credit Agreement, if the Company were unable to repay such amounts, the
lenders thereunder could proceed against the collateral granted to them to
secure such indebtedness. If the Credit Agreement indebtedness were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full that indebtedness and the other indebtedness of
the Company. See "Description of Certain Debt Instruments."
CARRYOVER TAX ATTRIBUTES--RESTRICTIONS ON AVAILABILITY
The Company files a consolidated U.S. federal income tax return with Clark
USA. A substantial portion of the carryover tax attributes of the Clark USA
consolidated tax return group (the "Group") was contributed by the Company.
The members of the Group, including the Company, have entered into a
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tax sharing agreement with Clark USA which provides for cash payments in the
event carryover tax attributes are used to reduce the Group's consolidated tax
liability.
As of December 31, 1997, the Group has made net cumulative payments of $12.6
million (Company--$12.0 million) under the federal alternative minimum tax
system which are available (in the form of a minimum tax credit) to reduce
future regular income tax payments. As of December 31, 1997, the Group had a
federal net operating loss carryforward of $294.0 million (Company--$216.6
million) and federal business tax credit carryforwards in the amount of $3.3
million (Company--$3.3 million). Such net operating losses and business tax
credit carryforwards have carryover periods of 15 years and are available to
reduce future taxable income and tax liabilities through the years ending
December 31, 2012 and 2011, respectively.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended,
restrict the utilization of net operating losses and other carryover tax
attributes (including business tax credit and minimum tax credit
carryforwards) upon the occurrence of an "ownership change" for federal income
tax purposes. Blackstone's acquisition of a majority interest in Clark USA on
November 3, 1997 resulted in an ownership change of the Group for this
purpose. Accordingly, it is possible that the Company's ability to utilize
such net operating loss and business tax credit carryforwards over the
carryforward periods could be significantly limited.
CHANGE OF CONTROL PROVISIONS IN THE NEW NOTES
The Change of Control feature of the New Notes may, in certain
circumstances, make it more difficult or discourage a takeover of Clark USA
and, as a result, may make removal of incumbent management more difficult. The
Change of Control purchase feature, however, is not the result of the
Company's knowledge of any specific effort to accumulate Clark USA's stock or
to obtain control of Clark USA or the Company by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of antitakeover provisions. Instead, the Change of Control purchase
feature is a result of negotiations between the Company and the Initial
Purchasers. Clark USA has no present intention to engage in a transaction
involving a Change of Control, although it is possible that Clark USA could
decide to do so in the future.
ENVIRONMENTAL LIABILITIES AND GOVERNMENTAL REGULATIONS
The Company's operations are subject to comprehensive and frequently
changing federal, state and local environmental laws and regulations. These
laws, and the regulations promulgated thereunder, set forth stringent
environmental standards for the Company's operations and provide for civil and
criminal penalties for violations. Any new environmental initiatives, more
vigorous regulatory enforcement policies or stricter interpretation of
existing laws could have a material adverse effect on the financial condition
or results of operations of the Company. Any such development could require
significant additional expenditures to achieve compliance with such
requirements or policies. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Business--Environmental Matters" and "Business--Legal
Proceedings."
The Company's operations also are subject to liability for the investigation
and cleanup of environmental contamination at properties that it owns and
operates and at off-site locations where the Company arranged for the disposal
of hazardous substances. The Company is involved in several proceedings
relating to its liability for the investigation and cleanup of such sites.
There can be no assurance that the Company will not become involved in further
litigation or other proceedings or that, if the Company were to be held
responsible for damages in any litigation or proceedings (including existing
ones), such costs would be covered by insurance or would not be material. See
"Business--Environmental Matters" and "Business--Legal Proceedings." In
addition, the Company believes that there is extensive contamination at the
site on which the Port Arthur Refinery is located. Pursuant to
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the purchase agreement governing the Port Arthur Refinery acquisition (the
"Port Arthur Purchase Agreement"), Chevron retained primary responsibility for
remediation of most pre-closing contamination and the Company retained
responsibility for the remediation under the active operating units (the
"Excluded Areas"). If Chevron should be unable to meet its obligations under
the Port Arthur Purchase Agreement regarding remediation of contamination on
the remainder of the site, on account of bankruptcy or otherwise, the Company
may become responsible for such remediation.
In addition, the Company believes that there may be contamination at the
Lima Refinery as well as liability under CERCLA (as defined herein) for the
disposal of hazardous waste generated by the Lima Refinery. In connection with
the Lima Acquisition, however, BP has agreed to indemnify the Company for all
environmental liabilities and obligations (subject to the requirement that
certain environmental claims be made within 17 years after the August 10, 1998
completion of the Lima Acquisition) arising from the ownership and operation
of the Lima Refinery prior to Closing. If BP should be unable to meet such
obligations, on account of bankruptcy or otherwise, the Company may become
responsible for such environmental liabilities and obligations. See "The Lima
Acquisition--The Purchase Agreement."
In addition to liability for the cleanup of environmental contamination, the
Company is also subject to liability for violations of environmental, health
and safety laws that regulate its current operations. The Illinois Attorney
General, the U.S. Attorney and the United States Environmental Protection
Agency (the "EPA") have filed or have threatened to file a number of
enforcement actions relating to the Blue Island refinery. The Hartford
refinery is also the subject of a Clean Air Act enforcement by the EPA. See
"Business--Environmental Matters" and "Business--Legal Proceedings."
While it is not possible at this time to estimate the ultimate amount of
liability with respect to the currently identified environmental matters
described above, the Company is of the opinion that the aggregate amount of
such liability will not have a material adverse effect on its financial
position; however, an adverse outcome of any one or more of these matters
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period.
The Company's operations are large and complex. The numerous environmental
regulations to which the Company is subject are complicated, sometimes
ambiguous, and often changing. In addition, the Company may not have detected
certain violations of environmental laws and regulations because the
conditions that constitute such violations may not be apparent. It is
therefore possible that certain of the Company's operations are not currently
in compliance with state or federal environmental laws and regulations.
Accordingly, the Company may be required to make additional expenditures to
comply with existing environmental requirements. Such expenditures, along with
fines or other penalties for noncompliance with environmental requirements,
could have a material adverse effect on the Company's financial condition,
results of operations, cash flow or liquidity.
Cigarette sales account for approximately 56% of the Company's convenience
product sales. In recent years, governmental entities in the U.S. at all
levels have taken or have proposed actions that may have the effect of
reducing sales of cigarettes in general or sales of cigarettes through
convenience stores. A significant reduction in the consumption of cigarettes
or in the ability of convenience stores to market cigarettes, may have a
significant, adverse effect on the Company's convenience product sales.
INFLUENCE OF PRINCIPAL STOCKHOLDER
Blackstone beneficially owns approximately 78.5% of the total voting power
of all classes of Clark USA's capital stock. Currently, three of Clark USA's
six directors and three of the Company's five directors are affiliated with
Blackstone. Accordingly, Blackstone is in a position to exert a controlling
influence over Clark USA and the Company. The relationship with Blackstone
creates the potential for conflicts of interest between the Company and
Blackstone. See "Management--Security Ownership of Certain Owners and
Management" and "Certain Transactions."
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LACK OF PUBLIC MARKET
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued to a small number of institutional investors on August 10,
1998. There is no existing trading market for the New Notes, and there can be
no assurance regarding the future development of a market for the New Notes or
the ability of holders of the New Notes to sell their New Notes or the price
at which such holders may be able to sell their New Notes. If such a market
were to develop, the New Notes could trade at prices that may be higher or
lower than the principal amount of the New Notes depending on many factors,
including prevailing interest rates, the Company's operating results and the
market for similar securities. The Initial Purchasers have advised the Company
that they currently intend to make a market in the New Notes. The Initial
Purchasers are not obligated to do so, however, and any market-making with
respect to the New Notes may be discontinued at any time without notice.
Therefore, there can be no assurance as to the liquidity of any trading market
for the New Notes or that an active public market for the New Notes will
develop. The Company does not intend to apply for listing or quotation of the
New Notes on any securities exchange or stock market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain obligations of the Company
under the Registration Agreement. The Company will not receive any proceeds
from the issuance of the New Notes offered in the Exchange Offer. In
consideration for issuing the New Notes, the Company will receive in exchange
Old Notes in like principal amount, the form and terms of which are the same
in all material respects as the form and terms of the New Notes except that
the New Notes have been registered under the Securities Act and, therefore, do
not include restrictions on transfer or rights to registration thereunder. The
Old Notes surrendered in exchange for New Notes will be retired and canceled
and cannot be reissued. Accordingly, issuance of the New Notes will not result
in any increase in the indebtedness of the Company.
The net proceeds from the Offering of Old Notes and from additional
borrowings under the Amended and Restated Term Loan Agreement were used to pay
the purchase price for the Lima Refinery and certain related assets acquired
from BP as described herein.
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THE LIMA ACQUISITION
OVERVIEW
On August 10, 1998, the Company acquired the Lima Refinery for a purchase
price of $175 million plus the market value of the hydrocarbon inventory at
the Lima Refinery at Closing, which was approximately $40 million. In
addition, an estimated $70 million will be paid for crude oil in transit
currently owned by BP, the payment for which will occur over the two months
following August 10, 1998 as the crude oil is delivered to the Lima Refinery.
Approximately $50 million of this amount will be funded through proceeds from
the sale of finished products over the same period. The Lima Refinery was
purchased with limited representations, warranties and closing conditions.
Subject to the terms and limitations set forth in the Purchase Agreement
(including the requirement that certain environmental claims be made within 17
years after Closing), BP has indemnified the Company for all environmental and
other liabilities and obligations arising from the ownership and operation of
the Lima Refinery prior to Closing. The Company believes that the Lima
Refinery:
. is a high quality, profitable refinery;
. is located in the Company's existing core retail and wholesale markets;
. provides the opportunity for improved results of operations and cash
flow;
. is being acquired at an attractive acquisition price based on recent
refinery transactions;
. enhances the Company's scale and competitive position; and
. improves the Company's and Clark USA's ability to access the public
equity markets.
The Lima Refinery is a single train, fully integrated coking refinery that
has a rated crude oil throughput capacity of approximately 170,000 bpd, which
increased the Company's crude oil throughput capacity from 370,000 bpd to
approximately 540,000 bpd. The Lima Refinery is a highly automated, modern oil
refinery with a Nelson complexity rating of 8.7 and an estimated replacement
cost of $1.2 billion. The Midwest location of the Lima Refinery has
historically provided it with a transportation cost advantage and less gross
margin volatility than refineries in other regions since demand for refined
products has exceeded supply in the region. The Lima Refinery complements the
Company's existing assets in the region as it is located in existing core
retail and wholesale markets where the Company already has distribution
capability.
HISTORY
Originally known as the Solar Refinery, the first refinery on the Lima
Refinery's site was constructed in 1886 by The Standard Oil Company to take
advantage of what was to become the world's greatest oil producing area until
1910. Following the break-up of Standard Oil in 1911 by U.S. anti-trust
litigation, the Standard Oil Company of Ohio (Sohio as it was known in the
Midwest) did not own the Lima Refinery. However, in 1931, Sohio acquired the
Lima Refinery and invested heavily to ensure that it would remain a
technologically modern refinery. Most of the processing units in the Lima
Refinery have been rebuilt since 1970, making the Lima Refinery relatively
young among Midwest refineries. BP gained control of the Lima Refinery when
Standard Oil merged with BP in 1987.
In 1996, BP announced its intention to sell the Lima Refinery. The Company
participated in BP's sale process at such time and performed extensive due
diligence during 1996, including the review of information provided by BP,
presentations from BP's management, interviews of key Lima Refinery personnel,
a visit to the Lima Refinery and the modification of BP's linear programming
model of the Lima Refinery. However, the Company did not make an offer to
purchase the Lima Refinery at that time. In late 1996, BP announced that it
could not locate a suitable buyer for the Lima Refinery and would close the
Lima Refinery in two years. Despite such announcement, BP continued to invest
at near historical levels for maintenance operating expenses and mandatory
capital expenditures at the Lima Refinery during 1997. In May 1998, the
Company expressed an interest to BP to purchase the Lima Refinery and was
provided with updated operating information on the Lima Refinery.
26
<PAGE>
THE LIMA REFINERY
The Lima Refinery, which is located on a 650 acre site, was designed to
process light sweet crude oil and has historically run a predominately
domestic sweet crude oil slate. In addition to over five million barrels of
on-site storage and a rail products loading and unloading system, the Lima
Refinery also has access to a system of crude oil and product pipelines and
terminals. At approximately 170,000 bpd, the Lima Refinery is large enough to
realize economies of scale and other efficiencies. According to a 1994
industry study, the Lima Refinery ranked in the 2nd quartile in terms of fixed
costs and in the 1st quartile in operational availability, turnaround index
and maintenance index.
The Lima Refinery's major processing units and associated current
capabilities are listed below:
<TABLE>
<CAPTION>
CAPACITY (BARRELS PER DAY,
PROCESSING UNIT EXCEPT AS NOTED)
--------------- --------------------------
<S> <C>
Crude unit...................................... 170,000
Vacuum unit..................................... 54,000
FCC unit........................................ 40,000
Coker unit...................................... 22,500
Reformer........................................ 56,000
HDS............................................. 60,000
Isocracker...................................... 26,000
Isomerization................................... 18,500
Aromatics....................................... 25,500
Trolumen........................................ 1,200
Hydrogen purification unit...................... 1.2 mm scfh 90% H2
Sulfur recovery unit............................ 54 long tons
</TABLE>
CRUDE OIL SUPPLY AND REFINED PRODUCT DISTRIBUTION
Crude oil for the Lima Refinery can be obtained from a variety of sources
and transported through several crude oil pipelines. The Lima Refinery
receives 100% of its crude oil supply via pipeline. Delivery routes include
the Mid-Valley, Salem-Stoy-Lima (SSL) and the Marathon pipeline systems as the
three crude pipeline systems with final delivery capability to the refinery,
with connections to Capline, Mobil, Ozark, IPL and other pipeline systems.
Historically, the Lima Refinery has been supplied by domestic crude oil moving
via the Mesa and West Texas Gulf pipeline into the Mid-Valley pipeline system.
Gulf Coast sourced foreign crude oil can be supplied to the Lima Refinery via
the LOOP/LOCAP system into Capline and then into the Lima Refinery either
through the SSL or Marathon pipeline systems. Canadian crude oil can be
supplied to the refinery through the IPL system which connects to the Marathon
pipeline system.
The Lima Refinery distributes products through several refined product
pipeline systems and by rail, truck or the adjacent Vine Street terminal. Most
refinery products are distributed by using the Buckeye or Inland Pipeline
Systems. The Buckeye Pipeline System is a publicly held, common carrier,
interstate pipeline system with connections throughout the Midwest. Through
Buckeye, the Lima Refinery has access to markets in Northern/Central Ohio,
Indiana, Michigan and Western Pennsylvania. The Inland Pipeline System is a
private intra-state system jointly owned by BP, Shell, Unocal and Sun and
available solely for their use.
THE MIDWEST MARKET
The Lima Refinery is located in the U.S. Midwest PADD II (Petroleum Area for
Defense District), where demand for light products (gasoline and distillates)
has historically exceeded refining production by approximately 800,000 bpd.
This light products shortfall has historically been even more acute in Ohio.
Ohio refining capacity is approximately 500,000 bpd. However, even with this
refining capacity, there are movements of approximately 130,000 bpd of light
products into the state. Some of this
27
<PAGE>
additional light product supply comes from refineries in adjoining states,
including Michigan and Kentucky. Historically there has been strong enough
demand in Ohio to justify the cost
of importing production from other markets. Transportation costs for refined
products from the Gulf Coast to the Ohio market have averaged approximately
$1.10 per barrel.
THE PURCHASE AGREEMENT
The Purchase Agreement provided that BP sold all of the following to the
Company: (i) the Lima Refinery, including all machinery and equipment used in
the operation of the Lima Refinery; (ii) the real property on which the Lima
Refinery is located, and certain related leased property; (iii) four crude oil
storage and blending tanks and the real property on which they are situated;
(iv) all hydrocarbon and non-hydrocarbon inventories at the Lima Refinery; (v)
a paid-up, nonexclusive, royalty-free license to use certain technology and
intellectual property of BP and its affiliates in the operation of the Lima
Refinery; and (vi) certain other assets as described in the Purchase Agreement
(collectively, the "Purchased Assets"). The purchase price for the Purchased
Assets was $175 million plus the market value of the hydrocarbon inventory at
the Lima Refinery at Closing, which was approximately $40 million. In
addition, an estimated $70 million will be paid for crude oil in transit
currently owned by BP, the payment for which will occur over the two months
following the consummation of the Lima Acquisition as the crude oil is
delivered to the Lima Refinery. Approximately $50 million of this amount will
be funded through proceeds from the sale of finished products over the same
period. The Company also agreed to assume and indemnify BP for all liabilities
arising from the ownership and operation of the Lima Refinery after the
Closing.
The Purchase Agreement provided for the Lima Refinery to be purchased with
limited representations, warranties and closing conditions. Subject to certain
terms and limitations set forth in the Purchase Agreement, BP agreed to
indemnify the Company for all environmental and other liabilities and
obligations arising from the ownership and operation of the Lima Refinery
prior to the Closing or from the breach by BP of any representation, warranty
or covenant contained in the Purchase Agreement. Indemnity claims for breaches
of representations and warranties (other than environmental matters) and
certain pre-Closing covenants must be brought within one year after the
Closing. Certain environmental indemnity claims (including for breaches of
representations and warranties) must be brought within 17 years after the
Closing. Except for environmental matters, the Company will not have a claim
against BP for breaches of representations and warranties and certain pre-
Closing covenants until the aggregate of all losses for such matters exceeds
$3.5 million and BP's aggregate liability for such losses will not exceed $25
million.
The Company agreed to offer employment to the employees of the Lima
Refinery. However, because BP had previously announced that the Lima Refinery
was to be closed, many of such employees have accepted offers of employment
with other operations of BP. While BP has agreed to assist the Company in its
efforts to retain the Lima Refinery's employees, the Company will assume the
risks associated with attracting and retaining an appropriate work force.
The Company has agreed to convey to BP Chemicals Inc. ("BP Chemicals") 15
acres of the Lima Refinery's property in order to permit BP Chemicals to
proceed with the previously announced construction of a 1:4 Butanediol Plant
("BDO Plant") at the Lima Refinery site. The specific location of the BDO
Plant will be mutually agreed upon by the Company and BP Chemicals. In
addition, the Company will assume certain agreements with BP Chemicals and BP
Oil Pipeline Company providing for the purchase and sale by the Lima Refinery
of propylene and certain other chemicals. The Company and the parties to such
agreements have agreed to negotiate in good faith to seek to enter into new
long-term agreements for the purchase and sale of propylene and such other
chemicals.
28
<PAGE>
SUMMARY OF COMPANY ESTIMATES REGARDING THE LIMA ACQUISITION
INTRODUCTION
BP has historically operated the Lima Refinery as a component of its
integrated global system and especially its Midwest refining and marketing
system. As a result, the Company believes that decisions such as those
relating to crude slate, yield, total throughput and capital expenditures were
likely made to optimize the performance of BP's entire integrated system, as
opposed to that of the Lima Refinery specifically. The Company is not
acquiring the Lima Refinery's sources of crude oil and other feedstocks, sales
force, customer base or trade names. There are no historical financial
statements covering the Lima Refinery on a stand-alone basis. Further, the
Company believes any such financial statements would not be meaningful for the
reasons set forth above.
COMPANY ESTIMATES
The Company believes that the Lima Acquisition will provide an opportunity
to improve the Company's operating results and cash flow. The Company and
Turner, Mason & Company, an independent energy consulting firm ("Turner,
Mason"), reviewed the historical and proposed operation of the Lima Refinery.
The Company's estimates represent the operating results of the Lima Refinery
as if the Company had acquired the assets on January 1, 1997 and operated them
during 1997 in accordance with the Company's proposed operation of the Lima
Refinery. The Company believes 1997 market prices are appropriate since it is
the last full year for which market prices are available.
The Company's estimates, set forth below, were developed as follows: (i)
feedstocks and refined product yields were based on BP's linear program and
modified by the Company during due diligence based on the assets being
acquired, and results of the linear program were then compared to actual
charges and yield data (which resulted in higher crude oil throughput, but
yields which were more conservative than the actual yields generated by BP in
1997), (ii) gross margin was calculated using the applicable 1997 market
prices, (iii) operating expenses were based on actual historical performance
with adjustments for higher crude oil throughput and the Company's expected
mode of operation and (iv) general and administrative costs were estimated for
those services previously provided by BP's corporate staff. As discussed above
under "The Lima Acquisition--The Purchase Agreement," because BP had
previously announced that the Lima Refinery was to be closed, many employees
have accepted offers of employment with other operations of BP. While BP has
agreed to assist the Company in its efforts to retain the Lima Refinery's
employees, the Company will assume the risks associated with attracting and
retaining an appropriate workforce and may thus incur higher employment-
related costs initially.
The Company's estimates for the Lima Refinery included herein were not
prepared with a view toward compliance with published guidelines of the
American Institute of Certified Public Accountants or generally accepted
accounting principles. Neither the Company's independent auditors, nor any
other independent accountants, have compiled, examined, or performed any
procedures with respect to the Company's or Turner, Mason's estimates
regarding the Lima Acquisition contained herein, nor have they expressed any
opinion or any form of assurance on such information or its achievability, and
assume no responsibility for, and disclaim any association with, the
aforementioned estimates. These figures represent the Company's best estimates
of the operating and financial results of the Lima Refinery had the Company
operated it and the related assets in 1997 and assuming the Company had been
successful in implementing its anticipated changes and expected mode of
operation.
The Company's estimates and underlying assumptions were independently
reviewed and confirmed by Turner, Mason. Turner, Mason was furnished with
information concerning the Lima Refinery available to the Company, conducted a
site visit and discussed the operations of the Lima Refinery with management
of BP and of the Company. The Company did not place any limitations upon
Turner, Mason with respect to procedures followed or factors considered by
Turner, Mason in
29
<PAGE>
rendering its opinion. In Turner, Mason's opinion, the assumptions underlying
the Company's estimates provide a reasonable basis for the Company's
estimates, and the Company's estimates are reasonable. Turner, Mason's opinion
and summary report are included elsewhere herein.
The success of the Company's planned operation of the Lima Refinery is
subject to uncertainties and contingencies beyond the Company's control,
including business, economic, regulatory and competitive uncertainties and
contingencies. No assurance can be given that the planned operations and
anticipated benefits would have been realized had the Company actually
operated the Lima Refinery in 1997. The gross margin and operating expense
estimates are based on various assumptions. Some of these assumptions may not
materialize. Other assumptions may materialize but in a subsequent period.
Unanticipated events may occur subsequent to the date of this document. The
actual results achieved by the Company at the Lima Refinery will vary from
those set forth below and the variations may be material. Consequently, the
inclusion of the estimates herein should not be regarded as a representation
by the Company, Turner, Mason or any other person that the estimates would
have been achieved in 1997 or will be achieved in the future. Holders are
cautioned not to place undue reliance on these estimates.
The Company does not intend to update or otherwise revise the estimates to
reflect circumstances existing after the date hereof or to reflect the
occurrence of unanticipated events, even in the event that any or all of the
assumptions are shown to be in error. Furthermore, the Company does not intend
to update or revise the estimates to reflect changes in general economic or
industry conditions. The Company's regular quarterly and annual financial
statements will be included in the Company's Quarterly Reports on Form 10-Q
and Annual Reports on Form 10-K, which will be filed with the Securities and
Exchange Commission. Information contained in such financial statements will
be deemed to supersede the estimates.
ESTIMATED 1997 LIMA REFINERY CONTRIBUTION
The Company estimates that the Lima Refinery would have generated $64.6
million of cash flow from operating activities before working capital changes
and income taxes in 1997 after giving effect to the estimated processing
rates, yields and operating expenses. This estimate was based on (i) 1997 spot
market prices for crude oil and refined products adjusted for transportation
differentials, (ii) feedstocks and refined product yields based on the
modification of BP's linear programming model (which resulted in higher crude
oil throughput, but yields which were more conservative than the actual yields
generated by BP in 1997), (iii) actual historical operating expenses adjusted
for higher throughput and the Company's mode of operation and (iv) general and
administrative costs estimated for those services previously provided by BP's
corporate staff.
The Company's estimates for the Lima Refinery based on 1997 market prices
are as follows:
<TABLE>
<CAPTION>
1997 ESTIMATE
----------------
($ IN MILLIONS,
EXCEPT AS NOTED)
<S> <C>
Crude oil throughput (m bbls/day)........................ 160.5
Production (m bbls/day).................................. 165.0
Gross margin ($/bbl of production)....................... $ 2.82
Operating expenses ($/bbl of production)................. 1.73
Gross margin............................................. 170.1
Operating expenses....................................... 104.3
General and administrative costs......................... 1.2
Refinery Cash Flow from operating activities before
working capital changes and income taxes (a)............ $ 64.6
</TABLE>
- --------
(a) A $0.10 per barrel change in the realized gross margin or operating
expenses would have increased or decreased this amount by approximately $6
million.
30
<PAGE>
Refinery Feedstocks:
<TABLE>
<CAPTION>
1997 ACTUAL 1997 ESTIMATE
----------- -------------
(THOUSANDS OF BARRELS PER
DAY)
<S> <C> <C>
Light sweet crude oil............................ 140.9 153.5
Light sour crude oil............................. 12.5 7.0
Other............................................ 7.7 3.6
----- -----
Total.......................................... 161.1 164.1
===== =====
</TABLE>
Refinery Production:
<TABLE>
<CAPTION>
1997 ACTUAL 1997 ESTIMATE
----------- -------------
(THOUSANDS OF BARRELS PER
DAY)
<S> <C> <C>
Gasoline......................................... 82.6 81.7
Diesel fuel...................................... 36.9 36.4
Jet fuel......................................... 17.1 20.2
Petrochemical products........................... 7.7 7.7
Other............................................ 18.7 19.0
----- -----
Total.......................................... 163.0 165.0
===== =====
</TABLE>
SUMMARY OF COMPANY ESTIMATE ASSUMPTIONS
In connection with the execution of the Purchase Agreement, the Company
performed limited due diligence on the Lima Refinery, including the review of
information provided by BP, discussions with the Lima Refinery manager and a
preliminary visit to the Lima Refinery. The results of this limited due
diligence, together with the more extensive due diligence performed in 1996,
are the basis for the Company's assumptions. The assumptions underlying the
anticipated changes in processing rates, yields and operating expenses are
described below. The estimates assume that (i) the Lima Acquisition occurred
at January 1, 1997; (ii) the Company successfully implemented its planned
changes in processing rates, yields and operating expenses; and (iii) BP
assumed responsibility for pre-Closing environmental remediation. Pursuant to
the terms of the Purchase Agreement, the Company conducted a more extensive
due diligence review, including visits to the Lima Refinery and interviews
with key Lima Refinery personnel, between July 6 and July 10, 1998.
Feedstocks
The Company assumed that domestic and foreign crude oil would have been
purchased at market prices and transported via available pipeline routes at
published tariff rates for delivery to the Lima Refinery, which is consistent
with historical operation. The mix of foreign and domestic crude oil
feedstocks was consistent with historical throughputs. From 1995 to 1997, the
Lima Refinery averaged
approximately 152,000 bpd of crude oil throughput and approximately 159,000
bpd of total feedstocks. However, the Company believes the processing rates
were limited during this period due to the Lima Refinery's pending sale and
closure. The crude unit has a design capacity of approximately 170,000 bpd and
processed 174,000 bpd for one week in November 1995. Therefore, the Company
believes it can achieve crude oil throughput of 160,500 bpd and total
production of 165,000 bpd.
The Company believes there may be a further opportunity to improve the crude
oil inputs into the Lima Refinery by selecting more optimal crude oil types,
but such opportunity was not included in the Company's estimates.
Yields
The Lima Refinery has historically been optimized as part of an integrated
system with BP's nearby Toledo refinery, the adjacent BP chemical operation
and the BP light product marketing network. As a result, the Company believes
there is an opportunity to optimize the Lima Refinery as a
31
<PAGE>
stand-alone operation to take full advantage of the Lima Refinery's asset
capability. The Company assumed the products generated according to the linear
programming model were sold at spot market prices. The estimated product
yields are more conservative than the actual yields generated by BP in 1997.
Operating and General and Administrative Expenses
The Company adjusted historical operating expense levels of the Lima
Refinery principally for higher throughput levels and the replacement of self-
insurance with premium-based insurance. Incremental general and administrative
costs were added for functions previously provided by BP's corporate staff and
not allocated to the Lima Refinery.
Capital Investment
From 1991-1997, BP invested an aggregate of approximately $212 million in
the Lima Refinery. Based on initial due diligence, the Company expects
mandatory capital expenditures to average approximately $20 million per year
for the period from 1999 to 2002 and turnaround expenses to cost approximately
$30 million once every five years. The Lima Refinery is scheduled to have the
first such major maintenance turnaround in 1999. The Company expects cash
flows from the Lima Refinery to be adequate to cover incremental financing and
mandatory capital and turnaround costs.
32
<PAGE>
THE CONSENT SOLICITATION
In connection with the Offering, Clark USA solicited and received consents
from the holders of its 10 7/8% Notes and from the holders of its 11 1/2%
Preferred Stock, to modify the terms of certain covenants under the indentures
governing these securities in order to enable the Company to incur
indebtedness to finance the Lima Acquisition (the "Amendments"). The above
described solicitation on the part of Clark USA is hereinafter referred to as
the "Consent Solicitation."
The purpose of the Consent Solicitation was to facilitate the closing of the
Lima Acquisition. The consent payment was $20 in cash for each $1,000 in
principal amount of the 10 7/8% Notes and $20 in cash for each share ($1,000
liquidation preference) of 11 1/2% Preferred Stock. The Company reimbursed
Clark USA for the consent payments.
The Amendments amended the instruments governing the 10 7/8% Notes and the
11 1/2% Preferred Stock to, among other things, provide an express exception
for the incurrence of indebtedness in an aggregate amount not to exceed $250
million to finance the Lima Acquisition.
33
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on August 10, 1998 to the Initial
Purchasers, which then placed the Old Notes with institutional investors. In
connection therewith, the Company entered into the Registration Agreement,
which required that, within 90 days following the issuance of the Old Notes,
the Company file with the Commission a registration statement under the
Securities Act with respect to the issuance of New Notes, use its best efforts
to cause such registration statement to become effective under the Securities
Act and, upon the effectiveness of that registration statement, offer to the
Holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount of New Notes, which will be issued without a restrictive
legend and may be reoffered and resold by such Holders without restrictions or
limitations under the Securities Act. A copy of the Registration Agreement has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The term "Holder" with respect to the Exchange Offer
means any person (i) in whose name Old Notes are registered on the books of
the Company or any other person who has obtained a properly completed bond
power from the registered holder or (ii) whose Old Notes are held of record by
DTC who desires to deliver such Old Notes by book-entry transfer at DTC.
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any Holder thereof (other than
(i) a broker-dealer who purchases such New Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act; provided that the Holder is acquiring such New Notes in its ordinary
course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Persons wishing to exchange Old Notes in the Exchange Offer must
represent to the Company that such conditions have been met. Any Holder who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes could not rely on such interpretation by the
staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. In addition, any such resale transaction should be covered
by an effective registration statement containing the selling security holders
information required by Item 507 of Regulation S-K of the Securities Act.
Further, any Holder who may be deemed an "affiliate" of the Company cannot
rely on the interpretation by the staff of the Commission set forth in the
above-referenced no-action letters with respect to resales of the New Notes
without compliance with the registration and prospectus delivery requirements
of the Securities Act.
In addition, each broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such broker-
dealer as a result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution."
The Old Notes were issued to a small number of institutional investors on
August 10, 1998 and there is no public market for them at present. To the
extent Old Notes are tendered and accepted in the exchange, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, Holders of Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected.
34
<PAGE>
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of the Indenture (as
defined herein).
As of the date hereof, $110.0 million aggregate principal amount at maturity
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all such registered Holders as of , 1998.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer, by giving oral or written notice of such
delay, extension or termination to the Exchange Agent or (ii) to amend the
terms of the Exchange Offer in
35
<PAGE>
any manner. Any such delay in acceptance, extension, termination or amendment
will be followed as promptly as practicable by a public announcement thereof.
If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered Holders, and the Company will extend the Exchange Offer for a
period of five (5) to ten (10) business days, depending upon the significance
of the amendment and the manner of disclosure to the registered Holders, if
the Exchange Offer would otherwise expire during such five (5) to ten (10)
business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be
tendered effectively, the Old Notes, Letter of Transmittal and other required
documents must be received by the Exchange Agent at the address set forth
below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. The term "Agent's Message" means a message, transmitted by
DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Company may enforce such Letter of Transmittal against such
participant.
Book-Entry Delivery of the Old Notes. Within two business days after the
date of this Exchange Offer, the Exchange Agent will establish an account with
respect to the Old Notes at DTC for purposes of the Exchange Offer. Any
financial institution that is a participant in the DTC system may make book-
entry delivery of Old Notes by causing DTC to transfer such Old Notes into the
Exchange Agent's account in accordance with DTC's procedure for such transfer.
Although delivery of Old Notes may be effected through book-entry at DTC, the
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or (in the case of a book-entry transfer through the DTC Automatic
Tender Offer Program ("ATOP")) an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must be transmitted to and
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at one of its addresses set forth in "--Exchange Agent."
DELIVERY OF SUCH DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Company. Holders
may request their respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transactions for such Holders.
36
<PAGE>
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered Holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond power are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify Holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date or, as set forth below under "--Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
37
<PAGE>
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, that neither the Holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the Holder
nor any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of the Company. If the Holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
such Holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may affect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes to be tendered in proper form for transfer (or a
confirmation of a book-transfer into the Exchange Agent's account at DTC of
Old Notes delivered electronically) and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer to be tendered in proper form for
transfer (or a confirmation of a book-transfer into the Exchange Agent's
account at DTC of Old Notes delivered electronically) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five (5) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
be signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes into the name of the person withdrawing the tender,
and (iv) specify the name in which any such Old Notes are to be registered, if
different from
38
<PAGE>
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company
in its sole discretion, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued
with respect thereto unless the Old Notes so withdrawn are validly retendered.
Properly withdrawn Old Notes may be retendered by following the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without
cost to such Holder.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Old Notes for, any New Notes,
and may terminate the Exchange Offer as provided herein before the acceptance
of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company, or
any material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries; or
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to the Company; or
(d) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering Holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of Holders to withdraw
such Old Notes (see "--Withdrawal of Tenders"), or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered Holders, and the Company will extend the
Exchange Offer for a period of five (5) to ten (10) business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, if the Exchange Offer would otherwise expire during such
five (5) to ten (10) business day period.
39
<PAGE>
EXCHANGE AGENT
Exchange Agent for New Notes. Bankers Trust Company has been appointed as
Exchange Agent for the exchange of New Notes for Old Notes, pursuant to the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
By Registered or Certified Mail: By Overnight Courier:
BT Services Tennessee, Inc. BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group
P.O. Box 292737 Reorganization Unit
Nashville, Tennessee 37229-2737 648 Grassmere Park Road
Nashville, Tennessee 37211
By Hand:
Attn: Reorganization Department
Bankers Trust Company
Corporate Trust & Agency Group
Confirm by Telephone
(615) 835-3572
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
By Facsimile:
(615) 835-3701
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and will pay the reasonable fees and expenses of one firm acting as counsel
for the Holders of Old Notes should such Holders deem it advisable to appoint
such counsel.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$300,000. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if
40
<PAGE>
a transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized upon
consummation of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
41
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998, and as adjusted to give effect to the Lima Acquisition, the payment
of fees and expenses associated with the Lima Acquisition and the Consent
Solicitation, the Offering, the Amended and Restated Term Loan Agreement and
the application of a portion of the net proceeds therefrom and the sale of the
Offered Pipelines. This table should be read in conjunction with the
Consolidated Financial Statements of the Company, and the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
-------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Cash, cash equivalents and short term investments(a)....... $190.3 $ 259.3
====== ========
LONG-TERM DEBT (b):
9 1/2% Notes............................................. $171.7 $ 171.7
1997 Term Loan Agreement................................. 125.0 125.0
8 3/8% Notes............................................. 99.3 99.3
8 7/8% Senior Subordinated Notes......................... 173.8 173.8
8 5/8% Senior Notes...................................... -- 109.7
Amended and Restated Term Loan Agreement................. -- 115.0
Capital leases and other................................. 12.6 12.6
------ --------
Total long-term debt................................... $582.4 $ 807.1
------ --------
STOCKHOLDER'S EQUITY:
Common, $0.01 par value (100 shares issued and
outstanding)............................................ $ -- $ --
Paid-in-capital.......................................... 239.7 239.7
Retained earnings (a).................................... (8.9) 58.9
------ --------
Total stockholder's equity............................. $230.8 $ 298.6
------ --------
Total capitalization................................... $813.2 $1,105.7
====== ========
</TABLE>
- --------
(a) Pro forma amount gives effect to the sale of the Offered Pipelines for net
proceeds of $74.0 million, which would result in an estimated after-tax
book gain of $67.8 million.
(b) Does not reflect the utilization of $197.2 million at June 30, 1998 under
the Credit Agreement to support outstanding letters of credit.
42
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial data set forth below for the Company as
of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997 are derived from the audited financial statements
included elsewhere herein. The selected financial data set forth below for the
Company as of December 31, 1993, 1994 and 1995 and for each of the two years
in the period ended December 31, 1994 are derived from audited financial
statements not included herein. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
included elsewhere herein. The selected historical data as of June 30, 1998
and for the six-month periods ended June 30, 1997 and 1998 are derived from
the unaudited financial statements included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Net sales and operating
revenues.............. $2,263.4 $2,440.0 $4,486.1 $5,072.7 $4,335.7 $2,172.7 $1,801.1
Cost of sales.......... 1,936.6 2,092.5 4,018.3 4,560.0 3,705.7 1,874.7 1,483.8
Operating expenses(a).. 202.6 220.1 373.5 418.9 432.3 211.5 218.2
General and
administrative
expenses(a)........... 43.0 51.2 52.1 59.1 65.5 29.0 35.1
Depreciation and
amortization(b)....... 35.3 37.3 43.5 48.4 61.2 27.8 31.5
Inventory (recovery of)
write-down to market
value................. 26.5 (26.5) -- -- 19.2 -- 30.9
Recapitalization, asset
writeoffs and other
charges............... -- -- -- -- 49.0 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)................ $ 19.4 $ 65.4 $ (1.3) $ (13.7) $ 2.8 $ 29.7 $ 1.6
Interest and financing
costs, net(c)......... 29.9 37.6 39.9 38.7 39.8 17.5 22.0
Other income
(expense)(d).......... 11.4 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before taxes,
extraordinary items
and cumulative effect
of change in
accounting
principles............ $ 0.9 $ 27.8 $ (41.2) $ (52.4) $ (37.0) $ 12.2 $ (20.4)
Income tax provision
(benefit)............. (0.5) 9.7 (15.7) (13.9) 10.5 7.0 0.2
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of change in
accounting
principles............ $ 1.4 $ 18.1 $ (25.5) $ (38.5) $ (47.5) $ 5.2 $ (20.6)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
investments........... $ 212.1 $ 134.1 $ 106.6 $ 334.3 $ 244.6 $ 271.9 $ 190.3
Total assets........... 829.1 859.5 1,188.3 1,393.3 1,260.9 1,331.6 1,205.1
Long-term debt......... 401.0 400.7 420.4 417.6 587.4 416.1 582.4
Stockholder's equity... 146.0 162.9 304.1 534.1 260.9 539.3 230.8
SELECTED FINANCIAL DATA:
Cash flows from
operating activities.. $ 68.4 $ 53.7 $ (85.6) $ 16.9 $ 94.9 $ 6.9 $ (8.0)
Cash flows from
investing activities.. (19.8) (21.2) (134.1) 212.0 (123.6) (67.7) (31.7)
Cash flows from
financing activities.. (1.1) (5.4) 174.7 30.0 (61.0) (1.5) (14.6)
Ratio of earnings to
fixed charges(e)(f)... -- 1.56x -- -- -- 1.41x --
EBITDA(g).............. $ 54.7 $ 102.7 $ 42.2 $ 34.7 $ 64.0 $ 57.5 $ 33.1
EBITDA, as adjusted(h). 81.2 76.2 42.2 34.7 132.2 57.5 64.0
Expenditures for
turnaround............ 20.6 11.2 6.5 13.9 47.4 30.0 11.1
Expenditures for
property, plant and
equipment............. 67.9 100.3 42.1 45.0 81.7 39.9 34.5
Refinery acquisition
expenditures.......... -- 13.5 71.8 -- -- -- --
OPERATING DATA:
Refining Division:
Port Arthur Refinery
(acquired February 27,
1995)
Production (m
bbls/day)............. -- -- 207.7 210.8 213.5 198.5 230.2
Gross margin (per
bbl)(a)............... -- -- $ 2.28 $ 2.78 $ 3.84 $ 3.99 $ 4.00
Operating expenses
(mm)(a)............... -- -- 121.6 164.7 170.7 83.7 88.0
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
(CONTINUED):
Refining Division
(continued):
Blue Island, Hartford
and other refining
Production
(m bbls/day).......... 134.7 140.3 136.5 134.2 135.8 141.2 120.5
Gross margin (per
bbl)(a)............... $ 3.68 $ 3.35 $ 2.51 $ 2.56 $ 3.79 $ 3.92 $ 4.08
Operating expenses
(mm)(a)............... 104.3 115.0 130.2 126.6 123.2 63.3 64.2
Refining Operating
Contribution (mm)..... 63.0 38.8 (2.3) 25.6 167.9 85.9 89.5
Retail Division(a):
Number of core market
stores (average)(i)... 547 553 595 620 666 663 670
Gasoline volume (mm
gals)................. 726.6 763.3 838.1 858.7 912.4 434.7 451.1
Gasoline volume (m gals
per month per store).. 110.7 115.0 117.4 115.4 115.8 110.6 113.7
Gasoline gross margin
(cents/gal)........... 11.4c 11.3c 11.9c 10.6c 10.5c 10.2c 10.4c
Convenience product
sales (mm)............ $143.6 $158.0 $189.9 $201.8 $244.3 $115.5 $129.8
Convenience product
sales (mpmps)......... 21.9 23.8 26.6 27.1 30.6 29.0 32.3
Convenience product
gross margin and other
income (mm)........... $ 36.4 $ 39.8 $ 46.5 $ 52.2 $ 64.6 $ 30.4 $ 34.4
Convenience product
gross margin (mpmps).. 5.5 6.0 6.5 7.0 8.1 7.7 8.6
Operating expenses
(mm)(a)............... $ 64.5 $ 70.6 $ 90.3 $101.8 $118.4 $ 55.1 $ 60.9
Core market store
contribution to
operating income
(mm).................. 35.0 35.3 38.3 20.5 19.8 8.7 8.9
Non-core stores, bus.
development & other
(mm).................. 14.6 9.1 6.9 4.7 3.1 1.4 --
Retail Operating
Contribution (mm)..... $ 49.6 $ 44.4 $ 45.2 $ 25.2 $ 22.9 $ 10.1 $ 8.9
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
(b) Amortization includes amortization of turnaround costs and organizational
costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $1.2 million, $1.2 million, $5.2 million, $6.5 million and $7.0
million for the years ended December 31, 1993, 1994, 1995, 1996 and 1997,
and $3.5 million and $1.0 million for the six-months ended June 30, 1997
and 1998, respectively. Interest and financing costs, net, also included
interest on all indebtedness, net of capitalized interest and interest
income.
(d) Other income in 1993 included the final settlement of litigation with
Drexel Burnham Lambert Incorporated of $8.5 million and a gain from the
sale of non-core stores of $2.9 million.
(e) The ratio of earnings to fixed charges is computed by dividing (i)
earnings before income taxes (adjusted to recognize only distributed
earnings from less than 50% owned persons accounted for under the equity
method) plus fixed charges, excluding capitalized interest by (ii) fixed
charges, excluding capitalized interest. Fixed charges consisted of
interest on indebtedness, including amortization of discount and debt
issuance costs and the estimated interest components (one-third) of rental
and lease expense.
(f) As a result of the losses for the years ended December 31, 1993, 1995,
1996 and 1997, earnings were insufficient to cover fixed charges by $1.7
million, $44.0 million, $53.6 million and $29.0 million, respectively. As
a result of the losses for the six months ended June 30, 1998, earnings
were insufficient to cover fixed charges by $19.8 million.
(g) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
is a commonly used non-GAAP financial measure but should not be construed
as an alternative to operating income or cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles ("GAAP")).
(h) EBITDA, as adjusted, does not reflect cash necessary or available to fund
cash requirements. EBITDA, as adjusted, in 1993 and 1994 excluded the
write-down in 1993 and the recovery in 1994 of a $26.5 million inventory
valuation adjustment. EBITDA, as adjusted, in 1997 and for the six months
ended June 30, 1998 excluded the write-down of $19.2 million and $30.9
million, respectively, for inventory valuation adjustments and EBITDA, as
adjusted, in 1997 also excluded recapitalization charges, asset writeoffs
and other special charges of $49.0 million.
(i) Ten stores included in 1997 and 1998 operated exclusively as convenience
stores and did not sell fuel.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto appearing elsewhere in this Prospectus.
RESULTS OF OPERATIONS
OVERVIEW
The Company's results are significantly affected by a variety of factors
beyond its control, including the supply of, and demand for, crude oil,
gasoline and other refined products which, in turn, depend on, among other
factors, changes in domestic and foreign economies, weather conditions,
domestic and foreign political affairs, production levels, the availability of
imports, the marketing of competitive fuels and the extent of government
regulation. Although margins are significantly affected by industry and
regional factors, the Company can influence its margins through the efficiency
of its operations. While the Company's net sales and operating revenues
fluctuate significantly with movements in industry crude oil prices, such
prices do not generally have a direct long-term relationship to net earnings.
Crude oil price movements may impact net earnings in the short term because of
fixed price crude oil purchase commitments which average approximately five
million barrels. See "--Refining." The effect of changes in crude oil prices
on the Company's operating results is determined more by the rate at which the
prices of refined products adjust to reflect such changes. The Company
believes that, in general, low crude oil prices indirectly benefit operating
results over the longer term due to increased demand and decreased working
capital requirements. Conversely, the Company believes that high crude oil
prices generally result in decreased demand and increased working capital
requirements over the long term. Increased refinery production is typically
associated with improved results of operations, while reduced production,
which generally occurs during scheduled refinery maintenance turnarounds,
negatively affects results of operations.
The following table illustrates the potential pre-tax earnings impact based
on historical operating rates estimated by the Company resulting from changes
in several key market indicators: (i) sweet crude oil cracking margins--the
spread between gasoline and diesel fuel prices and input (e.g., a benchmark
light sweet crude oil) costs; (ii) sweet/sour differentials--the spread
between a benchmark light sour crude oil and a benchmark light sweet crude
oil; (iii) heavy/light differentials--the spread between a benchmark light
sweet crude oil and a benchmark heavy sour crude oil; and (iv) retail
margins--the spread between product prices at the retail level and wholesale
product costs.
<TABLE>
<CAPTION>
PRE-TAX EARNINGS IMPACT ON THE COMPANY
----------------------------------------------
EARNINGS SENSITIVITY CHANGE BEFORE LIMA ACQUISITION AFTER LIMA ACQUISITION
- -------------------- ---------------- ----------------------- ----------------------
<S> <C> <C> <C>
Refining margins (a)
Sweet crude cracking
margin............... $0.10 per barrel $13 million $20 million
Sweet sour
differentials........ 0.10 per barrel 9 million 9 million
Heavy light
differentials........ 0.10 per barrel 3 million 3 million
Retail margins.......... $0.01 per gallon $10 million $10 million
</TABLE>
- --------
(a) Based on an assumed production of approximately 225,000 bpd for the Port
Arthur refinery, 170,000 bpd for the Lima refinery and 145,000 bpd for the
Illinois refineries.
The following tables provide supplementary data in a format that is not
intended to represent an income statement presented in accordance with
generally accepted accounting principles. Certain reclassifications have also
been made to prior periods to conform to current period presentation. The
Company considers certain items in each of the periods discussed to be special
items. These items are discussed separately.
45
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
1997 1998
------------ ------------
(IN MILLIONS, UNAUDITED)
<S> <C> <C>
OPERATING INCOME:
Refining contribution to operating income........... $ 85.9 $ 89.5
Retail contribution to operating income............. 10.1 8.9
Corporate general and administrative expenses....... (7.4) (9.9)
------------ ------------
Operating Contribution............................ $ 88.6 $ 88.5
Inventory timing adjustments loss(a)................ 31.1 24.5
Inventory write-down to market...................... -- 30.9
Depreciation and amortization....................... 27.8 31.5
------------ ------------
Operating income.................................. $ 29.7 $ 1.6
============ ============
</TABLE>
- --------
(a) Includes adjustments to inventory costs caused by timing differences
between when crude oil is actually purchased and refined products are
actually sold, and a daily "market in, market out" operations measurement
methodology for the refining division.
The Company recorded an Operating Contribution (earnings before interest,
taxes, depreciation, amortization and inventory-related charges) of $88.5
million for the six months ended June 30, 1998 which compared to $88.6 million
in the first six months of 1997. The Company recorded a net loss of $20.6
million in the first half of 1998 compared to net earnings of $5.2 million in
the same period of 1997.
A decrease in crude oil prices of approximately $3.50 per barrel for the
year to date resulted in a negative impact on net earnings of $55.4 million
for the first half of 1998 as compared to a negative impact of $31.1 million
in the same period a year ago. These inventory-related charges in 1998
included a non-cash accounting charge of $30.9 million to write down inventory
carrying costs to current market value. The Company believes it may recover
these charges if hydrocarbon prices increase.
Net sales and operating revenues decreased approximately 17% in the six
months ended June 30, 1998 as compared to the same period of 1997 principally
as a result of lower worldwide crude oil and product prices in the current
year which reduced both sales and cost of goods sold.
REFINING
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
1997 1998
---------- ----------
(IN MILLIONS, EXCEPT
PER BARREL DATA)
<S> <C> <C>
REFINING DIVISION
OPERATING STATISTICS:
PORT ARTHUR REFINERY
Crude oil throughput (m
bbls/day).............. 192.6(a) 227.7
Production (m
bbls/day).............. 198.5(a) 230.2
Gross margin ($ per
barrel of production).. $ 3.99 $ 4.00
Operating expenses...... 83.7 88.0
Net margin.............. 59.7 78.5
BLUE ISLAND, HARTFORD AND
OTHER REFINING
Crude oil throughput (m
bbls/day).............. 135.3 118.8(b)
Production (m
bbls/day).............. 141.2 120.5(b)
Gross margin ($ per
barrel of production).. $ 3.92 $ 4.08
Operating expenses...... 63.3 64.2
Net margin.............. $ 36.8 $ 24.7
Divisional general and
administrative expenses.. 10.6 13.7
---------- ----------
Refining contribution to
operating income......... $ 85.9 $ 89.5
========== ==========
</TABLE>
- --------
(a) Crude oil throughput and production reflected scheduled downtime on most
processing units for approximately one month during a maintenance
turnaround in the six months ended June 30, 1997.
(b) Crude oil throughput and production reflected scheduled downtime on most
processing units at the Blue Island refinery for approximately one month
during a maintenance turnaround in the six months ended June 30, 1998.
46
<PAGE>
Refining division contribution to operating income of $89.5 million in the
first half of 1998 exceeded year-ago levels of $85.9 million principally
because there was less total scheduled downtime in 1998. In the first six
months of 1997 a maintenance turnaround at the Port Arthur refinery reduced
refining contribution by an estimated $16 million versus a total impact of
scheduled downtime of approximately $9 million during 1998. During the Blue
Island refinery turnaround, improvements were made to the Blue Island
refinery's vacuum unit that are designed to upgrade approximately 2,000
barrels per day of asphalt-type material to diesel fuel. During the second
quarter and first half of 1998, the Port Arthur refinery continued its
significant productivity improvements under Clark's ownership with record
throughput rates achieved on the crude and FCC units.
Weaker margins for gasoline and distillates in the first half of 1998 versus
the same period of 1997 were largely offset by favorable discounts for heavy
and medium sour crude oil. Industry margin indicators for the Gulf Coast and
Chicago markets were each down approximately 40 cents per barrel in the first
half of 1998 as compared to the same period of 1997. Warmer-than-normal
weather and the Asian financial crisis reduced world-wide demand, and when
combined with high industry inventory levels, resulted in ample supply and a
squeeze on light products margins.
RETAIL
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
RETAIL DIVISION OPERATING STATISTICS:
Core Market Stores
Gasoline volume (mm gals.).............................. 434.7 451.1
Gasoline gross margin (cents/gal.)...................... 10.2c 10.4c
Gasoline gross margin................................... $ 44.4 $ 46.9
Convenience product sales............................... $ 115.5 $ 129.8
Convenience product margin and other income............. 30.4 34.4
Operating expenses...................................... 55.1 60.9
Divisional general and administrative expenses.......... 11.0 11.5
--------- ---------
Core market store contribution............................ $ 8.7 $ 8.9
Non-core store contribution and other..................... 1.4 --
--------- ---------
Retail contribution to operating income................... $ 10.1 $ 8.9
========= =========
Core Market Stores--Per Month Per Store
Company operated stores (average) (a)................... 663 670
Gasoline volume (m gals.)............................... 110.6 113.7
Convenience product sales (thousands)................... $ 29.0 $ 32.3
Convenience product gross margin (thousands)............ 7.7 8.6
</TABLE>
- --------
(a) Ten stores were operated as convenience stores only.
Retail contribution to operating income from core market stores of $8.9
million for the first six months of 1998 was relatively flat with the year-ago
contribution. Improvements in retail fuel and convenience product gross
margins were offset by higher operating expenses associated with increased
advertising and labor costs. Total retail contribution was reduced principally
due to less contribution for non-core stores. The Company has sold 110 non-
core stores principally to Clark branded marketers in the first half of 1998
generating approximately $13.9 million of proceeds. As of June 30, 1998, the
Company's program to reposition its assets in non-core markets was
substantially complete.
Other Financial Highlights
Corporate general and administrative expenses increased in the first half of
1998 over the comparable period in 1997 principally because of increased
consulting services and increased information services costs related to year
2000 upgrades.
47
<PAGE>
Interest and finance costs, net for the six months ended June 30, 1998
increased over the comparable period in 1997 principally because of the
addition of the 8 7/8% Senior Subordinated Notes, due 2007 in late 1997. This
increase was only partially offset by reduced borrowing rates and reduced
deferred financing cost amortization resulting from the Company's other
financing activities in late 1997.
Depreciation and amortization expense increased in the first six months of
1998 over the comparable period in 1997 principally because of amortization
related to the Port Arthur maintenance turnaround performed in the first
quarter of 1997.
1997 COMPARED WITH 1996 AND 1995:
FINANCIAL RESULTS:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
OPERATING INCOME:
Refining contribution to operating income......... $ (2.3) $ 25.6 $ 167.9
Retail contribution to operating income........... 45.2 25.2 22.9
Corporate general and administrative expenses..... 12.8 14.6 17.4
------- -------- --------
Operating Contribution............................ $ 30.1 $ 36.2 $ 173.4
Inventory timing adjustments gain (loss).......... 12.1 (1.5) (41.2)
Inventory write-down to market.................... -- -- 19.2
Recapitalization, asset write-offs and other
costs............................................ -- -- 49.0
Depreciation and amortization..................... 43.5 48.4 61.2
------- -------- --------
Operating income (loss)........................... $ (1.3) $ (13.7) $ 2.8
======= ======== ========
</TABLE>
The Company recorded an Operating Contribution of $173.4 million in 1997
which was improved over the Operating Contribution of $36.2 million and $30.1
million in 1996 and 1995, respectively. Refining industry conditions improved
in 1997 from the previous two years and the Company had strong operations
despite two major scheduled maintenance turnarounds during the year. However,
principally due to several significant items the Company considers special, it
reported a net loss of $58.2 million in 1997 compared to net losses of $38.5
million and $25.5 million in 1996 and 1995, respectively. Net sales and
operating revenues and cost of goods sold were higher in 1996 than 1997 or
1995 principally because of higher hydrocarbon prices in that period.
Special items totaled $120.1 million in 1997 of which $109.4 million reduced
operating income and $10.7 million was recorded as an extraordinary item for
early retirement of debt. See Note 8 "Long Term Debt" and Note 14
"Recapitalization, Asset Write-offs and Other Charges" to the Consolidated
Financial Statements. The inventory timing adjustment loss of $41.2 million in
1997 was principally due to the timing impact of an over $8 per barrel
decrease in crude oil prices on crude oil purchases, and refined product sale
commitments. Gains in 1996 resulting from rising crude oil prices were offset
by the volatility of the crude oil market principally related to the
uncertainty associated with Iraq's pending reentry into the world markets.
These gains and losses resulted from the fact that feedstock acquisition costs
are fixed on average two to three weeks prior to the manufacture and sale of
the finished products. The Company does not currently hedge this price risk
because of the cost of entering into appropriate hedge-related derivatives and
the long-term nature of such risk. A non-cash accounting charge of $19.2
million was recorded in 1997 to reflect the decline in the value of petroleum
inventories below carrying value caused by the substantial drop in petroleum
prices. Recapitalization, asset write-offs and other costs totaled $49.0
million in 1997. This item included a non-cash charge of $21.8 million
principally to writedown the value of an idled refining capital project that
is being dismantled for
48
<PAGE>
more productive use. A non-cash charge of $16.5 million was also recorded in
1997 due to a change in strategic direction principally for certain legal,
environmental and other accruals related to existing actions. In addition, the
Company incurred costs of $10.7 million in connection with affiliates of
Blackstone acquiring a controlling interest in Clark USA.
REFINING
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
(IN MILLIONS, EXCEPT
OPERATING DATA)
<S> <C> <C> <C>
OPERATING STATISTICS:
PORT ARTHUR REFINERY (ACQUIRED FEBRUARY 27, 1995)
Crude oil throughput (m bbls/day).................... 198.9 199.8 206.6
Production (m bbls/day).............................. 207.7 210.8 213.5
Gross margin (per barrel of production).............. $ 2.28 $ 2.78 $ 3.84
Operating expenses................................... 121.6 164.7 170.7
Net margin......................................... 24.2 49.7 128.6
BLUE ISLAND, HARTFORD AND OTHER REFINING
Crude oil throughput (m bbls/day).................... 133.6 132.7 128.5
Production (m bbls/day).............................. 136.5 134.2 135.8
Gross margin (per barrel of production).............. $ 2.51 $ 2.56 $ 3.79
Operating expenses................................... 130.2 126.6 123.2
Net margin......................................... (4.9) (0.9) 64.9
Divisional general and administrative expenses....... 21.6 23.2 25.6
------- ------- -------
Refining contribution to operating income............ $ (2.3) $ 25.6 $ 167.9
======= ======= =======
</TABLE>
Refining division contribution to operating income in 1997 was $167.9
million, significantly higher than the 1996 ($25.6 million) or 1995 (negative
$2.3 million) contribution. Contribution increased in 1997 due to improved
yields and throughput and wider crude oil quality differentials. Crude oil
quality differential market indicators for light sour crude oil improved from
$1.02 per barrel and $1.24 per barrel in 1995 and 1996, respectively, to $1.71
per barrel in 1997. Market indicators for the benefit for heavy sour crude oil
improved from $4.03 per barrel and $4.78 per barrel in 1995 and 1996,
respectively, to $5.63 per barrel in 1997. The Company believes these crude
oil quality differential indicators improved primarily due to increased
production of heavy and sour crude oil, increased availability of Canadian
light and heavy sour crude oil from the Express and Interprovincial pipelines,
higher levels of industry refinery maintenance turnarounds and milder winter
weather in the first quarter of 1997. Hartford refinery results in 1997
particularly benefited from improved access to lower-cost Canadian heavy crude
oil. Port Arthur refinery results in 1997 were also buoyed by the operational
benefits realized from a first quarter maintenance turnaround. Refining
operating contribution improved in 1996 over 1995 principally because of an
improvement in the Port Arthur refinery's gross margin resulting from
improvements in operating rates, reliability and yields. More normal winter
weather, and corresponding demand, contributed to a 2.4% increase in fuels
demand from 1995 to 1996. However, these positive market trends were more than
offset by reduced by-product margins.
The major scheduled maintenance turnarounds in 1997 at the Port Arthur
refinery and the Hartford refinery resulted in an opportunity cost from lost
production of $19.3 million. Unscheduled downtime at the Blue Island refinery
in 1995 and 1996 reduced gross margins by an estimated $5.5 million and $3.1
million, respectively, in these years.
Operating expenses increased at the Port Arthur refinery from 1995 to 1996
and 1997 principally due to the refinery being owned for a full year in the
last two years versus only 10 months in 1995.
49
<PAGE>
Refinery fuel costs were also much higher in the past two years due to higher
natural gas prices. Operating expenses for the Illinois refineries were higher
in 1995 due to expenses ($6.5 million) associated with unplanned downtime at
the Blue Island refinery. Divisional general and administrative expenses
increased in 1996 and 1997 principally because of the full year inclusion of
administrative functions located at the Port Arthur refinery and higher
incentive pay in 1997 due to a stronger Operating Contribution.
RETAIL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1996 1997
------- ------- -------
(IN MILLIONS, EXCEPT
OPERATING DATA)
<S> <C> <C> <C>
OPERATING STATISTICS:
Core Market Stores
Gasoline volume (mm gals).......................... 838.1 858.7 912.4
Gasoline gross margin (cents/gal).................. 11.9c 10.6c 10.5c
Gasoline gross margin.............................. $ 99.8 $ 91.4 $ 96.1
Convenience product sales.......................... 189.9 201.8 244.3
Convenience product margin and other income........ 46.5 52.2 64.6
Operating expenses................................. 90.3 101.8 118.4
Divisional general and administrative expenses..... 17.7 21.3 22.5
------- ------- -------
Core market store contribution....................... $ 38.3 $ 20.5 $ 19.8
Non-core store contribution and other................ 6.9 4.7 3.1
------- ------- -------
Retail contribution to operating income.............. $ 45.2 $ 25.2 $ 22.9
======= ======= =======
Core Market Stores--Per Month Per Store
Company operated stores (average)(a)............... 595 620 666
Gasoline volume (m gals)........................... 117.4 115.4 115.8
Convenience product sales (thousands).............. $ 26.6 $ 27.1 $ 30.6
Convenience product gross margin (thousands)....... 6.5 7.0 8.1
</TABLE>
- --------
(a) Ten stores included in 1997 operated as convenience stores only.
The retail division contributed $22.9 million to operating income in 1997
(1996--$25.2 million; 1995--$45.2 million). The retail division Operating
Contribution in 1996 and 1997 was below 1995 levels primarily due to pressure
on retail gasoline margins. In 1996, this margin pressure resulted from an
increase in wholesale gasoline costs associated with rising and higher crude
oil prices that was not fully captured in retail selling prices due to an
extremely competitive Midwest retail market environment. Retail margins have
historically benefited when crude oil prices fall, but the benefit of the
crude oil price decline in 1997 was not fully realized because wholesale
prices did not fall as much as crude oil prices and due to highly competitive
retail markets. Gross margins on convenience product sales and monthly
convenience product sales and gross margins per store improved over the last
three years due to the addition of larger stores and an improved mix of higher
margin On The Go(R) convenience products. Operating and general and
administrative expenses have increased over the last three years principally
because of lease expenses and higher operating costs for larger stores
acquired during this period and expansion of the Company's credit card
program.
The Company continued to implement its strategy in 1997 to focus its
Company-operated retail operations on core markets. Over the past three years,
123 stores have been acquired in core markets; 49 of these stores were
acquired in 1997. These stores typically have a much larger convenience store
than the "traditional" Clark store. The Company also was actively marketing in
1997 the remaining stores in non-core markets. During 1997 and the first half
of 1998, 146 stores were sold
50
<PAGE>
to independent operators and it is expected that an additional 32 stores will
be sold or closed by year-end 1998. These stores contributed approximately $5
million to operating income in 1997. Many of these stores will be converted to
the Company's branded jobber program.
OTHER FINANCIAL MATTERS
Corporate and divisional general and administrative expenses increased in
1997 over 1996 and 1995 principally because of accruals for higher incentive
compensation resulting from the Company's stronger Operating Contribution.
Depreciation and amortization expenses increased in 1997 over 1996 and 1995
principally because of amortization of the Port Arthur refinery maintenance
turnaround performed in the first quarter of 1997. In addition, the Company
had higher capital expenditures in 1997.
Interest and financing costs, net, increased in 1997 over 1996 principally
because of incremental debt added by the Company as part of a financial
restructuring of the Company and Clark USA. The Company redeemed $225 million
of its 10 1/2% Senior Notes due 2001 ("10 1/2% Notes") and returned capital of
$215 million to Clark USA so it could repurchase substantially all of its
Senior Secured Zero Coupon Notes due 2000 ("Zero Coupon Notes"). The Company
issued $100 million of the 8 3/8% Notes and $175 million of the 8 7/8% Senior
Subordinated Notes, and entered into the $125 million 1997 Term Loan Agreement
(together, the "November Offering"). See Note 8 "Long Term Debt" and Note 14
"Recapitalization, Asset Write-offs and Other Charges" to the Consolidated
Financial Statements.
The Company operates many computer programs that use only two digits to
identify a year. If these programs are not modified or replaced by the year
2000, such applications and embedded systems could fail or create erroneous
results. Some applications and embedded systems have already been replaced or
modified. The Company has hired outside consultants to assist it in evaluating
the scope of the remaining required program conversions or replacements. The
Company has expended $0.7 million through June 30, 1998 and estimates the cost
of such remaining program conversions or replacements to be approximately $5
million to $10 million, and estimates completion by June 30, 1999. Such costs
will be expensed as incurred and funded from operations. The Company reviews
the progress of its year 2000 program weekly and if it is determined that any
item is falling behind schedule the Company has, or will, identify an
alternative remediation or replacement approach.
In addition, the Company is communicating with, and evaluating the systems
of, its customers, suppliers, financial institutions and others with which it
does business to identify any year 2000 issues. Presently, the Company does
not anticipate that the year 2000 problem will have a material adverse effect
on the operations or financial performance of the Company. There can be no
assurance, however, that the year 2000 problem will not adversely affect the
Company and its business. Likewise, there can be no assurance that the
Company's customers, suppliers, financial institutions and others will be year
2000 compliant.
ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement
establishes net standards for reporting information about operating segments
in annual financial statements and requires selected operating segment
information to be reported in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement
becomes effective for the Company's financial statements beginning with the
year ended December 31, 1998 at which time restatement of prior period segment
information presented for comparative purposes is required. Interim period
information is not required until the second year of application, at which
time comparative information is required.
51
<PAGE>
In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement becomes effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. The Company is currently evaluating this new
standard, the impact it may have on the Company's accounting and reporting,
and planning for when to adopt the standard.
OUTLOOK
Since most of the Company's products are commodities, supply and demand for
crude oil and refined products have a significant impact on the Company's
results. Demand for fuel products has grown by an average of 2% per year since
1992, primarily as a result of increased miles driven and little improvement
in the fuel efficiency of the U.S. automobile fleet. The Company believes that
capital spending in the refining sector is highly correlated to refining
industry profitability. As a result of the high capital spending levels of the
early 1990s, the industry's ability to produce refined products exceeded
demand in recent years. Since then, industry refinery capital spending has
declined. The Company expects that there will continue to be volatility in
refining margins and the Company's earnings because of the seasonal nature of
refined product demand and the commodity nature of the Company's refined
products.
In the short term, retail margins are generally squeezed in periods of rapid
oil price increases, as was the case in 1996, and widen as prices stabilize or
fall. In late 1998, the deadline for UST compliance will be reached. The
Company believes the investment required by these regulations may cause
smaller, less competitive locations to close. In the long term, the Company
believes retail margins are driven by market share and concentration. The
Company believes that, over the last five years, the Company's Midwest market
has averaged among the lowest margins in the U.S. due to its relatively high
level of fragmentation.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Cash and short-term investments...... $ 106.6 $ 334.3 $ 244.6 $ 271.9 $ 190.3
Working capital...................... 193.1 399.5 263.7 369.6 233.8
Property, plant and equipment........ 549.3 555.7 575.6 571.1 574.4
Long-term debt....................... 420.4 417.6 587.4 416.1 582.4
Stockholder's equity................. 304.1 534.1 260.9 539.3 230.8
Operating Cash Flow.................. 7.6 (4.6) 72.6 36.7 45.4
</TABLE>
Net cash provided by operating activities, excluding working capital changes
("Operating Cash Flow"), for the six months ended June 30, 1998 was $45.4
million compared to $36.7 million in the year-earlier period. Working capital
as of June 30, 1998 was $233.8 million, a 1.70-to-1 current ratio, versus
$263.7 million as of December 31, 1997, a 1.74-to-1 current ratio. Total
working capital decreased in the first half of 1998 principally due to the
non-cash inventory write-down of $30.9 million and debt reduction.
Operating Cash Flow for the year ended December 31, 1997 was $72.6 million
compared with net cash used of $4.6 million in 1996 and Operating Cash Flow of
$7.6 million in 1995. Operating Cash Flow improved in 1997 principally because
of a stronger refining margin environment and improved refining productivity.
Working capital as of December 31, 1997 was $263.7 million, a 1.74 to 1
current ratio, versus $399.5 million, a 2.00 to 1 current ratio, as of
December 31, 1996 and $193.1 million, a
52
<PAGE>
1.48 to 1 current ratio, as of December 31, 1995. Working capital decreased
during 1997 principally because of the acquisition of 48 retail stores in
Michigan, the capital cost of the Port Arthur and Hartford refinery
maintenance turnarounds, the return of capital to Clark USA, and lower
inventory carrying values caused by the decrease in hydrocarbon prices in
1997. Working capital increased in 1996 as a result of the sale of an advance
crude oil purchase receivable contributed by Clark USA for net cash proceeds
of $235.4 million.
As part of its overall inventory management and crude acquisition
strategies, the Company routinely buys and sells, in varying degrees, crude
oil in the spot market. Such ongoing activities carry various payment terms
and require the Company to maintain adequate liquidity and working capital
facilities. The Company's short-term working capital requirements fluctuate
with the pricing and sourcing of crude oil. Historically, the Company's
internally generated cash flows have been sufficient to meet its needs. The
Credit Agreement is used for the issuance of letters of credit primarily for
the purchase of crude oil and other feedstocks and refined products.
In September 1997, the Company entered the Credit Agreement which provides
for borrowings and the issuance of letters of credit. In connection with the
Lima Acquisition, the Credit Agreement was amended on August 10, 1998 to
increase the facility to the lesser of $700 million or the amount of a
borrowing base calculated with respect to the Company's cash and cash
equivalents, eligible investments, eligible receivables and eligible petroleum
inventories provided that direct borrowings are limited to the principal
amount of $150 million. Borrowings under the Credit Agreement are secured by a
lien on substantially all of the Company's cash and cash equivalents,
receivables, crude oil, refined product inventories and other inventories and
trademarks and other intellectual property. The amount available under the
borrowing base associated with such facility at June 30, 1998, and prior to
the Lima Acquisition, was $372 million and approximately $197 million of the
facility was utilized for letters of credit. As of June 30, 1998, there were
no direct borrowings under the Credit Agreement and the Company was in
compliance with all covenants of the Credit Agreement.
The Credit Agreement contains covenants and conditions which, among other
things, limit dividends, indebtedness, liens, investments, contingent
obligations and capital expenditures, and require the Company to maintain its
property and insurance, to pay all taxes and comply with all laws, and to
provide periodic information and conduct periodic audits on behalf of the
lenders. The Company is also required to comply with certain financial
covenants. The financial covenants are: (i) maintenance of working capital of
at least $150 million; (ii) maintenance of a tangible net worth (as defined)
of at least $280 million (subject to adjustment); and (iii) maintenance of
minimum levels of balance sheet cash (as defined) of $50 million. The
covenants also provide for a cumulative cash flow test, as defined in the
Credit Agreement, that, from March 31, 1997, shall not be less than or equal
to zero. The Credit Agreement also limits the amount of future additional
indebtedness that may be incurred by the Company, subject to certain
exceptions, including a general exception for up to $75 million of
indebtedness.
Cash flows used in, and from, investing activities (excluding short-term
investment activities which the Company manages similar to cash and cash
equivalents) are primarily affected by acquisitions and capital expenditures,
including refinery maintenance turnarounds. Cash flows used in investing
activities in the first six months of 1998 (excluding short-term investments)
were $31.7 million as compared to $67.7 million in the year-earlier period.
Cash flows used in investing activities in 1998 were reduced by proceeds of
$13.9 million from the sale of certain non-core retail stores. The higher
investing activities in 1997 resulted principally from the Port Arthur
refinery turnaround ($30.0 million) and the acquisition and subsequent image
conversion of 48 retail stores in Michigan ($20.1 million). Refinery capital
expenditures totaled $22.6 million in the first half of 1998 (1997--$12.5
million) principally related to a project to increase the throughput of
Canadian heavy, sour crude oil at the Hartford refinery, a project to upgrade
vacuum tower bottoms at the Blue Island refinery and various mandatory
expenditures at the Port Arthur refinery. Turnaround expenditures in the first
half of 1998
53
<PAGE>
related to the previously-mentioned Blue Island refinery turnaround and to a
Port Arthur refinery turnaround currently scheduled for early 1999. Retail
capital expenditures for the first six months of 1998 totaled $10.1 million
(1997--$6.3 million, excluding the Michigan acquisition and subsequent image
conversion) and were principally for underground storage tank-related work.
Cash flows used in investing activities (excluding short-term investments)
in 1997 were $123.6 million as compared to cash flow generated in 1996 of
$180.9 million and cash flow used in 1995 of $118.5 million. Two major
refinery maintenance turnarounds and a large retail store acquisition
increased cash flow used in investing activities in 1997. Cash flow was
generated in 1996 from the sale of an advance crude oil purchase receivable
contributed to the Company by Clark USA. Cash flow used in investing
activities in 1995 was higher principally because of the Port Arthur refinery
acquisition. Capital expenditures for property, plant and equipment totaled
$81.7 million in 1997 (1996--$45.0 million; 1995--$42.1 million) and
expenditures for refinery maintenance turnarounds totaled $47.4 million
(1996--$13.9 million; 1995--$6.5 million). Capital expenditures were reduced
in 1996 and 1995 in response to lower Operating Cash Flow. Refining division
capital expenditures were $32.0 million in 1997 (1996--$19.4 million, 1995--
$15.8 million). Approximately one-half of 1997 and 1996 expenditures were
discretionary, with the balance and most of 1995 expenditures primarily for
mandatory maintenance and environmental expenditures. Discretionary refining
capital expenditures in 1997 were principally to increase the ability of the
Hartford refinery to process heavy, sour Canadian crude oil and
debottlenecking improvements to the Port Arthur refinery's FCC unit. Retail
capital expenditures in 1997 totaled $45.7 million (1996--$24.6 million;
1995--$25.2 million). Retail capital expenditures increased in 1997 due to the
acquisition and subsequent image conversion of 48 retail stores in Michigan
($21 million). Approximately one-half of 1996 and 1995 expenditures were for
regulatory compliance, principally underground storage tank-related work and
vapor recovery.
In February 1995, the Company acquired the Port Arthur refinery from Chevron
for approximately $70 million, plus inventory and spare parts of approximately
$122 million and the assumption of certain liabilities estimated at $19.4
million. The purchase agreement also provided for contingent payments to
Chevron of up to $125 million over a five-year period from the closing date of
the Port Arthur refinery acquisition in the event that refining industry
margin indicators exceed certain escalating levels. The Company believes that
even if such contingent payments would be required, they would not have a
material adverse effect on the Company since the Company would also benefit
from such increased margins. Such contingent payments were not payable for the
first three measurement periods ended September 30, 1995, 1996 and 1997, and
based on these industry margin indicators from inception through June 30,
1998, the Company had a cumulative benefit of approximately $38.2 million
applicable to future calculations.
The Company classifies its capital expenditures into two categories,
mandatory and discretionary. Mandatory maintenance capital expenditures are
required to maintain safe and reliable operations, and mandatory environmental
expenditures are required to comply with regulations pertaining to ground,
water and air contamination and occupational, safety and health issues. The
Company estimates that total mandatory capital and turnaround expenditures
through 2000 will average approximately $85.0 million per year in the refining
division and $10.0 million per year in the retail division. Costs to comply
with future regulations cannot be estimated.
Expenditures to comply with reformulated and low-sulfur fuels regulations
are primarily discretionary, subject to market conditions and economic
justification. These fuel programs impose restrictions on properties of fuels
to be refined and marketed, including those pertaining to gasoline volatility,
oxygenate content, detergent addition and sulfur content. The regulations
regarding these fuel properties vary in markets in which the Company operates,
based on attainment of air quality standards and the time of the year. The
Company's Port Arthur, Blue Island and Hartford refineries have the capability
to produce approximately 60%, 60%, and 25%, respectively, of their gasoline
54
<PAGE>
production in RFG. Each refinery's maximum RFG production may be limited based
on the clean fuels attainment of the Company's total refining system. The Port
Arthur refinery has the capability to produce 100% low-sulfur diesel fuel.
The Company has a philosophy to link total capital expenditures to cash
generated from operations. The Company has a total capital and refinery
maintenance turnaround expenditure budget of approximately $130 million for
1998. Total capital expenditures may be under budget if cash flow is less than
expected, and higher than budget if cash flow is better than expected.
Cash flows used in financing activities for six months of 1998 increased as
compared to the same period in 1997 principally because of the return of
capital to the Company's parent, Clark USA, for its debt service requirements
and the repurchase of the Company's 9 1/2% Notes tendered under its required
change of control offer ($3.3 million).
Cash flow used by financing activities was $61.0 million in 1997 as compared
to cash flow provided by financing activities of $30.0 million and $174.7
million in 1996 and 1995, respectively. In November 1997, the Company returned
capital of $215 million to Clark USA so that it could repurchase for $206.6
million, $259.2 million (value at maturity) of its Zero Coupon Notes tendered
pursuant to a tender offer. Clark USA called the remaining outstanding Zero
Coupon Notes on February 15, 1998. Also in November 1997, the Company
completed an offering of notes, receiving net proceeds of approximately $390
million. On December 24, 1997, the Company redeemed all $225 million of the 10
1/2% Notes outstanding at a price of $1,032.96 for each $1,000.00 principal
amount of the Notes. In 1995, financing activities reflected the partial
financing of the Port Arthur refinery acquisition with the contribution of
capital by Clark USA (the balance was financed with cash on hand), fees
related to the larger working capital facility associated with the expanded
working capital needs of the Company following the Port Arthur refinery
acquisition and two capital leases associated with the sale and leaseback of
certain refinery equipment at the Hartford and Port Arthur refineries.
On November 3, 1997, Blackstone acquired the 13,500,000 shares of Common
Stock of Clark USA previously held by TrizecHahn and certain of its
subsidiaries, as a result of which Blackstone obtained a controlling interest
in Clark USA. This transaction triggered the change of control covenant in
Clark USA's Zero Coupon Notes and the Company's 9 1/2% Notes and 10 1/2% Notes
and could have triggered the Change of Control covenant in the Clark USA's 10
7/8% Notes had it resulted in a Ratings Decline (as defined) during the 90
days following the change of control. Under such covenants, noteholders had
the right to require the Company and Clark USA to repurchase their notes at
101% of face value. However, all of the 10 1/2% Notes and the Zero Coupon
Notes were redeemed or repurchased by the Company and Clark USA in late 1997
and early 1998 in connection with the November Offering, and the Company was
only required to repurchase $3.3 million of the 9 1/2% Notes during the change
of control tender period. In addition, the Blackstone Transaction did not
result in a Ratings Decline. The Company's Credit Agreement was amended to
permit the acquisition by Blackstone of the Company's Common Stock.
Funds generated from operating activities together with existing cash, cash
equivalents and short-term investments, are expected to be adequate to fund
existing requirements for working capital and capital expenditure programs for
the next year. Due to the commodity nature of its products, the Company's
operating results are subject to rapid and wide fluctuations. While the
Company believes that its maintenance of large cash, cash equivalents and
short-term investment balances and its operating philosophies will be
sufficient to provide the Company with adequate liquidity through the next
year, there can be no assurance that market conditions will not be worse than
anticipated. Future working capital, discretionary capital expenditures,
environmentally mandated spending and acquisitions may require additional debt
or equity capital.
In March 1998, the Company announced that it had entered into a long-term
crude oil supply agreement with P.M.I. Comercio Internacional, S.A. de C.V.,
an affiliate of Petroleos Mexicanos, the
55
<PAGE>
Mexican state oil company. The terms of the contract provide the Company with
the foundation necessary to continue developing a project to upgrade the Port
Arthur refinery to process primarily lower-cost, heavy sour crude oil. Under
the agreement, the Company expects to purchase in the range of 150,000 to
210,000 bpd of heavy, sour Maya crude oil for use at the Port Arthur refinery.
The supply contract would assist in stabilizing earnings and cash flows from
the project. The contract period would run for a minimum of eight years from
the completion of the project, which could be as early as January 2001. The
Port Arthur refinery has several important characteristics that make it
attractive for this type of arrangement. Its Gulf Coast location provides
excellent access to waterborne Mexican crude oil. Additionally, the refinery
already has much of the infrastructure and processing capability necessary to
support an upgraded operation.
The project, which the Company expects to generate attractive returns, is
currently projected to cost approximately $600-$700 million and is currently
expected to be financed on a non-recourse basis to the Company and Clark USA.
The project will include construction of an 80,000 bpd delayed coker and a
35,000 bpd hydrocracking unit and expansion of the crude unit capacity to
approximately 250,000 bpd. If the project is completed, the Port Arthur
refinery will have the ability to process heavy, sour crude oil up to an
estimated 80% of its capacity. The implementation of the project is subject to
certain conditions, such as final determination of economic and technical
feasibility, arrangement of suitable financing, and securing appropriate tax
abatements. The Company currently expects to begin construction of the project
in the fourth quarter of 1998 and to have the financing in place early in
1999.
On August 10, 1998, the Company acquired the Lima Refinery for $175 million
plus inventory of approximately $40 million. The Company funded the Lima
Acquisition and related costs with $5 million of cash on hand and the proceeds
from the Old Notes and from an additional $115 million term loan under the
Amended and Restated Term Loan Agreement. An additional net working capital
investment of $20 million is expected to be incurred in the two months
following the acquisition as intransit inventories are purchased and funded
from existing cash. From 1991-1997, BP invested an aggregate of approximately
$212 million in the Lima Refinery. Based on the Company's due diligence, the
Company expects mandatory capital expenditures to average approximately $20
million per year for the period from 1999 to 2002 and turnaround expenses to
cost approximately $30 million once every five years. The Lima Refinery is
scheduled to have the first such major maintenance turnaround in 1999. The
Company expects cash flows from the Lima Refinery to be adequate to cover
incremental financing and mandatory capital and turnaround costs.
In 1997, the Company determined that its minority interests in the Offered
Pipelines were not strategic since the Company's shipping rights are assured
due to the pipelines' operation as common carrier pipelines and the Company's
historical throughput on such pipelines. During July 1998, the Company sold
its interest in the Westshore Pipe Line Company and the Wolverine Pipe Line
Company for net proceeds of approximately $17 million, resulting in an after-
tax book gain of approximately $12 million. The Company has signed definitive
agreements to sell its interests in the remaining two pipeline companies,
subject to regulatory approval, for net proceeds of approximately $57 million
that, if consummated, would result in an estimated after-tax book gain of
approximately $56 million. Although the Company expects to close the remaining
two transactions by September 1998, there can be no assurance that it will be
able to do so by such time or at all. The Offered Pipelines contributed
approximately $8 million of dividends for the fiscal year ended December 31,
1997.
56
<PAGE>
QUARTERLY FINANCIAL INFORMATION
The following quarterly financial information has been prepared from the
financial records of the Company without audit, and reflects all adjustments
which are, in the opinion of management, necessary for fair presentation of
the results of operations for the interim periods presented.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1998
Net sales............................. $ 823.5 $ 977.6
Gross profit.......................... 134.5 182.8
Operating income (loss)............... (31.5) 33.1
Net earnings (loss)................... (42.7) 22.1
1997
Net sales............................. $ 999.0 $1,173.7 $1,123.6 $1,039.4
Gross profit.......................... 105.4 192.7 206.9 125.0
Operating income (loss)............... (29.3) 59.0 64.6 (91.5)
Net earnings (loss)................... (37.4) 42.6 51.2 (114.6)
1996
Net sales............................. $1,140.2 $1,334.7 $1,249.5 $1,348.3
Gross profit.......................... 115.0 134.8 128.3 134.6
Operating income (loss)............... (12.1) 9.0 (4.3) (6.3)
Net earnings (loss)................... (13.6) (1.0) (9.3) (14.6)
</TABLE>
57
<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company is one of the five largest independent refiners and marketers of
petroleum products in the U.S., with one Texas Gulf Coast refinery, one Ohio
refinery and two Illinois refineries representing over 540,000 bpd of rated
crude oil throughput capacity. The Company is also currently one of the ten
largest direct operators of gasoline and convenience stores in the U.S., with
692 retail outlets in six Midwestern states (as of June 30, 1998). The Company
also distributes its products through an additional 170 independently operated
Clark branded outlets. The Company's retail network has conducted operations
under the Clark brand name for over 65 years. The Company also markets
gasoline, diesel fuel and other petroleum products on a wholesale unbranded
basis.
The Company is a Delaware corporation, with its principal executive offices
located at 8182 Maryland Avenue, St. Louis, Missouri 63105, telephone number
(314) 854-9696.
COMPANY HISTORY
All of the outstanding common stock of the Company is owned by Clark USA.
Clark USA was formed in November 1988 by Trizec Hahn Corporation (formerly The
Horsham Corporation, "TrizecHahn") and a minority shareholder to acquire
substantially all of the assets of Apex Oil Company, Inc., a Wisconsin
corporation (formerly OC Oil & Refining Corporation and, prior thereto, Clark
Oil & Refining Corporation, a Wisconsin corporation) and its subsidiaries
("Old Clark") and certain other assets and liabilities. In December 1992,
TrizecHahn and Clark USA entered into a transaction with the minority
shareholder that resulted in TrizecHahn increasing its ownership from 60% to
100% of the outstanding equity of Clark USA at that time.
On February 27, 1995, Clark USA sold $135 million of common stock to a
wholly owned subsidiary of TrizecHahn. The TrizecHahn subsidiary immediately
resold $120 million of such stock to certain affiliates (the "Tiger Funds") of
Tiger Management Corporation ("Tiger"), representing an equity ownership
interest of 40% of Clark USA at that time. As a result of these sales of
common stock, the Company received an equity contribution of $150 million from
Clark USA and used these proceeds along with existing cash to acquire from
Chevron the Port Arthur refinery for approximately $70.0 million, plus
approximately $122.0 million for inventory and spare parts, and the assumption
of certain liabilities estimated at $19.4 million. The Company is also
obligated under certain circumstances to pay to Chevron contingent payments
(the "Chevron Contingent Payments") pursuant to a formula based on refining
industry margin indicators and the volume of crude oil processed at the Port
Arthur refinery over a five-year period. The maximum total amount of the
Chevron Contingent Payments is $125 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." The Port Arthur refinery increased the Company's crude oil
throughput capacity by over 140% and expanded its market to the Gulf Coast of
the U.S.
In December 1995, an affiliate of Occidental C.O.B. Partners ("Oxy")
acquired approximately 19% of the equity in Clark USA in exchange for the
delivery of certain amounts of crude oil over a six-year period ending in
2001. Clark USA contributed the Oxy advance crude oil purchase receivable to
the Company in October 1996 and the Company sold the receivable for net cash
proceeds of $235.4 million. See "Business--The Oxy Advance Crude Oil Purchase
Receivable Transactions."
On October 1, 1997, Clark USA and its stockholders completed an equity
recapitalization whereby all previously issued shares of Class A Common Stock
of Clark USA held by the Tiger Funds of Tiger (then representing approximately
31% of the total voting power of all classes of Clark USA stock) were
reclassified into Class E Common Stock. TrizecHahn then purchased all of the
Class E Common Stock
58
<PAGE>
for $7.00 per share in cash, resulting in a total purchase price of $63.0
million. All of such shares of Class E Common Stock were subsequently
reclassified into 63,000 shares of the 11 1/2% Preferred Stock of Clark USA
and sold to institutional investors.
In addition, the shares of common stock of Clark USA owned by Oxy were
exchanged for an equal number of shares of Class F Common Stock having voting
rights limited as a class to the lesser of (a) the aggregate voting power of
such shares on a one-vote-per-share basis and (b) 19.9% of the total voting
power of all classes of Clark USA's voting stock. The Class F Common Stock is
convertible at any time to Common Stock of Clark USA, on a one-for-one basis,
at the option of any holder other than Oxy and its affiliates. Clark USA also
issued to Oxy an additional 545,455 shares of Class F Common Stock in full
satisfaction of Clark USA's obligation to issue shares under its then existing
Stockholders' Agreement with Oxy.
On November 3, 1997, Blackstone acquired all of the 13,500,000 shares of the
Company's common stock previously held by TrizecHahn and certain of its
subsidiaries (the "Blackstone Transaction"). As a result, Blackstone obtained
a 68.0% equity interest (78.5% voting interest) in the Company. The Company's
other principal shareholder is Occidental Petroleum Corporation with a 30.7%
equity interest (19.9% voting interest).
BUSINESS STRATEGY
The Company's business strategy focuses on improving productivity,
selectively adding scale through the acquisition of low-cost, quality assets,
optimizing capital investments, promoting an entrepreneurial culture where
employee incentives are aligned with performance objectives, and maintaining
strong liquidity and financial flexibility.
. Improving Productivity. The Company continues to implement relatively
low-cost projects in its refining and marketing operations designed to
increase production, sales volumes and production yields and to improve
its sales mix while reducing input costs and operating expenses.
Examples of these types of initiatives include improvements at the Port
Arthur refinery, increased yields and crude oil throughput capability at
its Illinois refineries and improved monthly fuel volumes, convenience
product sales and margins in the retail division.
. Adding Scale Through Acquisitions. The Company intends to continue to
selectively add scale to its refining and marketing operations through
the acquisition of low-cost, quality assets. Since 1994, the Company has
almost quadrupled its refining capacity by acquiring the Lima and Port
Arthur refineries and has strengthened its Northern Illinois and
Southern Michigan presence by acquiring retail stores in these core
markets.
. Optimizing Capital Investment. The Company seeks to optimize capital
investments by linking discretionary capital investment to internally
generated cash flow and minimizing investment risk while maximizing
project returns. As an example, in response to weak 1995 and 1996
industry refining market conditions, discretionary capital expenditures
were scaled back significantly from historical levels. Due to improved
results in 1997 and a more robust refining industry environment, the
Company implemented several low risk, high payback discretionary capital
projects.
. Promoting Entrepreneurial Culture. The Company emphasizes an
entrepreneurial management approach which uses employee incentives to
enhance financial performance and safety. All of the Company's employees
participate in its performance management, profit sharing or other
incentive plans, and the Company has a stock incentive plan for certain
key employees.
59
<PAGE>
. Maintaining Strong Liquidity and Financial Flexibility. The Company and
Clark USA will continue to seek to improve their capital structure. The
Company has historically maintained significant liquidity and, as of
June 30, 1998, had a cash balance of approximately $190 million. The
equity recapitalization and the debt refinancing and repayment completed
in October and November 1997 were designed to strengthen the balance
sheet of Clark USA and the Company by extending debt maturities,
increasing prepayment flexibility and lowering the overall borrowing
cost. The sale of the Offered Pipelines (as defined below), if
consummated, would add approximately $74 million of cash to the
Company's balance sheet. The Company believes the Lima Acquisition
provides the opportunity to increase earnings and cash flows which, in
turn, better positions the Company to access the public equity markets
and further improve its capital structure.
REFINING
OVERVIEW
The refining division operates one refinery in Texas, one refinery in Ohio
and two refineries in Illinois with a combined crude oil throughput capacity
of approximately 540,000 bpd. The Company also owns 17 product terminals
located in its Midwest and Gulf Coast market areas, two crude oil terminals,
an LPG terminal and crude oil pipeline interests. The Company's refining crude
oil throughput capacity ranks it as one of the five largest independent
refining and marketing companies in the U.S.
STRATEGY
Since the refining division operates in a commodity-based market environment
in which market prices for crude oil and refined products fluctuate
significantly, the refining division's business strategy focuses on those
areas it can control. The refining division's strategy includes the following
key elements:
. Improving Productivity. The refining division focuses on initiatives
requiring little or no capital investment that increase production,
improve product yields and recoveries or reduce operating costs.
Comprehensive plant-level programs focus on comparisons to industry
benchmark studies as a tool to develop strategies that improve plant
reliability.
. Adding Scale Through Acquisitions. As part of its growth strategy, the
refining division seeks attractive assets that may be acquired at
favorable valuations. The Lima Acquisition and Port Arthur Refinery
acquisition are examples of this type of strategy. The Company believes
current industry conditions may offer similar opportunities in the
future.
. Optimizing Capital Investments. Refining capital expenditures are linked
to cash flow generated from operations. The Company emphasizes an
entrepreneurial approach to discretionary expenditures, and to perceived
mandatory expenditures, such as those required to comply with
reformulated and low-sulfur fuels regulations. The Company may seek to
comply with regulations through the use of alternative markets for
existing products if adequate returns on investment are not assured.
Most discretionary capital expenditures in the past three years have had
payback periods of less than four years.
. Promoting Entrepreneurial Culture. Refining division employees are
involved in a team-based approach aimed at improving operations. All
employees participate in some form of gain-sharing program. The Company
believes this philosophy has significantly contributed to past
productivity gains.
60
<PAGE>
PORT ARTHUR REFINERY
The Port Arthur refinery is located in Port Arthur, Texas, approximately 90
miles east of Houston, and is situated on an approximately 4,000 acre site.
The refinery initially began processing oil in 1901 following the first
discovery of oil in Texas. The refinery has a rated crude oil throughput
capacity of approximately 225,000 bpd and the ability to process 100% sour
crude oil, including up to 20% heavy crude oil, and has coking capabilities.
Heavy sour crude oil has historically been available at substantially lower
cost when compared to light sweet crude oil such as WTI. The Port Arthur
refinery has the ability to produce jet fuel, 100% low-sulfur diesel fuel, 55%
summer RFG and 75% winter RFG. The refinery's Texas Gulf Coast location
provides access to numerous cost effective domestic and international crude
oil sources, and its products can be sold in the Midcontinent and Eastern U.S.
as well as in export markets.
Since acquiring the Port Arthur refinery in early 1995, the Company has
increased crude oil throughput capability from approximately 178,000 bpd to
its current 225,000 bpd and has lowered operating expenses by approximately
50c per barrel. From the date of the acquisition through June 30, 1998, the
Port Arthur refinery has generated an Operating Contribution of approximately
$281.0 million.
In March 1998, the Company announced that it had entered into a long-term
crude oil supply agreement with P.M.I. Comercio Internacional, S.A. de C.V.,
an affiliate of Petroleos Mexicanos, the Mexican state oil company. The terms
of the contract provide the Company with the foundation necessary to continue
developing a project to upgrade the Port Arthur refinery to process primarily
lower-cost, heavy sour crude oil. Under the agreement, the Company expects to
purchase in the range of 150,000 to 210,000 bpd of heavy, sour Maya crude oil
for use at the Port Arthur refinery. The supply contract would also assist in
stabilizing earnings and cash flows from the project. The contract period
would run for a minimum of eight years from the completion of the project,
which could be as early as January 2001. The Port Arthur refinery has several
important characteristics that make it attractive for this type of
arrangement. Its Gulf Coast location provides excellent access to waterborne
Mexican crude oil. Additionally, the refinery already has much of the
infrastructure and processing capability necessary to support an upgraded
operation.
The project, which the Company expects to generate attractive returns, is
currently projected to cost approximately $600-$700 million and is currently
expected to be financed on a non-recourse basis to the Company and Clark USA.
The project will include construction of an 80,000 bpd delayed coker and a
35,000 bpd hydrocracking unit and expansion of the crude unit capacity to
approximately 250,000 bpd. If the project is completed, the Port Arthur
refinery will have the ability to process heavy, sour crude oil up to an
estimated 80% of its capacity. The implementation of the project is subject to
certain conditions, such as final determination of economic and technical
feasibility, arrangement of suitable financing, and securing appropriate tax
abatements. The Company currently expects to begin construction of the project
in the fourth quarter of 1998 and to have the financing in place early in
1999.
61
<PAGE>
The feedstocks and production of the Port Arthur refinery for the ten months
it was owned in 1995 and for the full years ended December 31, 1996 and 1997,
and the six months ended June 30, 1997 and 1998 were as follows:
PORT ARTHUR REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, -------------------------- ---------------------------
1995 1996 1997(A) 1997(A) 1998
------------ ------------ ------------ ------------- ------------
BBLS % BBLS % BBLS % BBLS % BBLS %
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(BARRELS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FEEDSTOCKS
Light Sweet Crude Oil.. 22,268 35.0% 11,018 14.5% 8,395 11.1% 5,708 17.0% 3,842 9.3%
Light Sour Crude Oil... 31,518 49.5 36,855 48.3 34,815 46.2 8,262 24.6 15,307 37.0
Heavy Sweet Crude Oil.. -- -- 23,920 31.4 5,694 7.6 4,481 13.3 834 2.0
Heavy Sour Crude Oil... 7,488 11.8 1,327 1.7 26,482 35.1 16,404 48.9 21,238 51.4
Unfinished &
Blendstocks........... 2,349 3.7 3,128 4.1 -- -- (1,278) (3.8) 105 0.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 63,623 100.0% 76,248 100.0% 77,005 100.0% 33,577 100.0% 41,326 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
PRODUCTION
Gasoline
Unleaded............... 13,966 21.8 20,840 27.0 19,944 25.6 8,691 24.2 15,130 36.3
Premium Unleaded....... 13,030 20.4 12,258 15.9 11,132 14.3 4,891 13.6 3,242 7.8
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
26,996 42.2 33,098 42.9 31,076 39.9 13,582 37.8 18,372 44.1
Other Products
Low-Sulfur Diesel Fu-
el.................... 14,739 23.1 17,443 22.6 21,760 27.9 9,301 25.9 11,047 26.5
Jet Fuel............... 9,047 14.1 11,166 14.5 8,123 10.4 4,085 11.4 4,640 11.1
Petrochemical Prod-
ucts.................. 5,382 8.4 6,751 8.7 9,474 12.2 3,908 10.9 4,159 10.0
Others................. 7,794 12.2 8,703 11.3 7,506 9.6 5,050 14.0 3,444 8.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
36,962 57.8 44,063 57.1 46,863 60.1 22,344 62.2 23,290 55.9
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 63,958 100.0% 77,162 100.0% 77,939 100.0% 35,926 100.0% 41,662 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Output/Day.............. 207.7 210.8 213.5 198.5 230.2
</TABLE>
- --------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
of approximately one month on selected units.
LIMA REFINERY
See "The Lima Acquisition" and "Summary of Company Estimates Regarding the
Lima Acquisition."
ILLINOIS REFINERIES
The Company's Illinois refineries, Blue Island (near Chicago, Illinois) and
Hartford (near St. Louis, Missouri), are supplied by common carrier crude oil
pipelines and are located on inland waterways with barge access. The
refineries have access to multiple sources of foreign and domestic crude oil
and benefit from crude oil input flexibility. Recent pipeline expansions,
including the new capacity of the Express Pipeline and expanded capacity on
the Interprovincial Pipeline, have served to increase the availability of
lower-cost crude oil to the Company's Illinois refineries. The two refineries
are connected by product pipelines, increasing flexibility relative to stand-
alone operations. The Company's product terminals allow efficient distribution
of refinery production through pipeline systems. The Company believes that the
Midwest location of these refineries has provided relatively high refining
margins with less volatility than comparable operations located in other
regions of the U.S., principally because demand for refined products has
exceeded production in the region. This excess demand has been satisfied by
imports from other regions, providing Midwest refineries with a transportation
advantage.
BLUE ISLAND REFINERY
The Blue Island refinery is located in Blue Island, Illinois, approximately
17 miles south of Chicago. The refinery is situated on a 170-acre site,
bounded by the town of Blue Island and the Calumet-Sag
62
<PAGE>
Canal. The facility was initially constructed in 1945 and, through a series of
improvements and expansions, has reached a crude oil capacity of 80,000 bpd,
although actual average monthly throughput rates are sustained at levels in
excess of rated capacity during certain times of the year. Blue Island has
among the highest capabilities to produce gasoline relative to the other
refineries in its market area and through productivity initiatives has
achieved the flexibility to produce up to 60% RFG and some low-sulfur diesel
fuel when market prices warrant and based on the clean fuels attainment of the
Company's total refining system. During most of the year, gasoline is the most
profitable refinery product.
Since 1992, the Company has increased the crude oil throughput capability at
the Blue Island refinery by approximately 10,000 bpd, introduced light sour
crude oil as a lower-cost feedstock, improved the FCC unit operation and
introduced the capability to produce RFG.
The feedstocks and production of the Blue Island refinery for the years
ended December 31, 1995, 1996 and 1997 and the six months ended June 30, 1997
and 1998 were as follows:
BLUE ISLAND REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- --------------------------
1995(A) 1996(A) 1997 1997 1998(A)
------------ ------------ ------------ ------------ ------------
BBLS % BBLS % BBLS % BBLS % BBLS %
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(BARRELS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil.. 18,975 74.0% 21,203 84.2% 18,871 72.3% 9,214 67.3% 7,165 68.1%
Light Sour Crude Oil... 6,318 24.6 3,860 15.3 6,617 25.4 3,808 27.8 2,881 27.4
Unfinished &
Blendstocks .......... 347 1.4 132 0.5 606 2.3 672 4.9 468 4.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 25,640 100.0% 25,195 100.0% 26,094 100.0% 13,694 100.0% 10,514 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Production
Gasoline
Unleaded............... 12,737 50.1 12,497 50.9 13,753 52.5 7,284 54.9 5,810 55.4
Premium Unleaded....... 3,540 13.9 2,922 11.6 3,055 11.7 1,447 10.9 1,212 11.6
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
16,277 64.0 15,419 62.5 16,808 64.2 8,731 65.8 7,022 67.0
Other Products
Diesel Fuel............ 5,133 20.2 5,690 22.5 5,422 20.7 2,854 21.5 1,960 18.7
Others................. 4,016 15.8 3,755 15.0 3,937 15.1 1,692 12.7 1,504 14.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
9,149 36.0 9,445 37.5 9,359 35.8 4,546 34.2 3,464 33.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 25,426 100.0% 24,864 100.0% 26,167 100.0% 13,277 100.0% 10,486 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Output/Day.............. 69.7 68.0 71.7 73.4 57.9
</TABLE>
- --------
(a) Output during 1995, 1996 and the six months ended June 30, 1998 was
reduced by significant planned and unplanned downtime.
HARTFORD REFINERY
The Hartford refinery is located in Hartford, Illinois, approximately 17
miles northeast of St. Louis. The refinery is situated on a 400-acre site. The
facility was initially constructed in 1941 and, through a series of
improvements and expansions, has reached a crude oil refining capacity of
approximately 65,000 bpd. The Hartford refinery includes a coker unit and,
consequently, has the ability to process a variety of crude oil including
lower cost, heavy sour crude oil into higher-value products such as gasoline
and diesel fuel. The Hartford refinery has the capability to process
approximately 50% heavy sour crude oil and 25% medium sour crude oil. This
upgrading capability allows the refinery to benefit from higher margins if
heavy sour crude oil is at a significant discount to light sweet crude oil.
Since 1992, the Company has increased the crude oil throughput capability at
the Hartford refinery by approximately 10,000 bpd, improved overall liquid
recovery by approximately 3%, improved FCC
63
<PAGE>
unit yields by approximately 3%, increased higher-valued crude unit yields by
approximately 2,000 bpd and dramatically reduced combined "recordable" and
"days away from work" rates from 27 in 1990 to an average of less than 4
during the period from 1994 to 1997.
The feedstocks and production of the Hartford refinery for the years ended
December 31, 1995, 1996 and 1997 and six months ended June 30, 1997 and 1998
were as follows:
HARTFORD REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- ---------------------------
1995 1996 1997(A) 1997(A) 1998
------------ ------------ ------------ ------------ -------------
BBLS % BBLS % BBLS % BBLS % BBLS %
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(BARRELS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FEEDSTOCKS
Light Sweet Crude Oil.. 5,008 20.8% 3,725 15.5% 2,579 10.9% 481 4.1% 1,366 12.5%
Light Sour Crude Oil... 13,520 56.0 19,588 81.4 13,626 57.9 5,912 50.1 3,205 29.3
Heavy Sour Crude Oil... 4,960 20.6 179 0.7 5,200 22.1 5,079 43.1 6,886 62.9
Unfinished &
Blendstocks........... 637 2.6 567 2.4 2,149 9.1 317 2.7 (511) (4.7)
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 24,125 100.0% 24,059 100.0% 23,554 100.0% 11,789 100.0% 10,946 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
PRODUCTION
Gasoline
Unleaded............... 11,497 47.2 10,882 44.9 11,481 49.0 5,578 45.4 4,967 43.8
Premium Unleaded....... 1,723 7.1 1,728 7.1 926 4.0 483 4.0 324 2.9
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
13,220 54.3 12,610 52.0 12,407 53.0 6,061 49.4 5,291 46.7
Other Products
High-Sulfur Diesel Fu-
el.................... 8,090 33.2 8,950 36.9 7,149 30.5 3,763 30.6 3,091 27.3
Others................. 3,060 12.5 2,703 11.1 3,850 16.5 2,455 20.0 2,952 26.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
11,150 45.7 11,653 48.0 10,999 47.0 6,218 50.6 6,043 53.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 24,370 100.0% 24,263 100.0% 23,406 100.0% 12,279 100.0% 11,334 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Output/Day.............. 66.8 66.2 64.1 67.8 62.6
</TABLE>
- --------
(a) The 1997 results reflect maintenance turnaround downtime of approximately
one month on selected units.
TERMINALS AND PIPELINES
Refined products are distributed primarily through the Company's terminals,
Company-owned and common carrier product pipelines and by leased barges over
the Mississippi, Illinois and Ohio rivers. The Company owns 15 product
terminals with a combined capacity of approximately 3.8 million barrels
throughout its upper Midwest market area. In addition to cost efficiencies in
supplying its retail network, the terminal distribution system allows
efficient distribution of refinery production. The Company also owns a crude
oil and refined product terminal, a refined products terminal and an LPG
terminal with a combined capacity of approximately 7.1 million barrels
associated with the Port Arthur refinery in Texas.
The Company enters into refined product exchange agreements with
unaffiliated companies to broaden its geographical distribution capabilities,
and products are also received through exchange terminals and distribution
points throughout the Central U.S.
The Company's pipeline interests, as of June 30, 1998, were as follows:
<TABLE>
<CAPTION>
PIPELINE TYPE INTEREST ROUTE
- -------- ---- -------- -----
<S> <C> <C> <C>
Southcap*............... Crude oil 36.0% St. James, LA to Patoka, IL
Chicap*................. Crude oil 22.7 Patoka, IL to Mokena, IL
Clark Port Arthur....... Crude oil and products 100.0 Port Arthur and Beaumont, TX
Wolverine*+............. Products 9.5 Chicago, IL to Toledo, OH
West Shore*+............ Products 11.1 Chicago, IL to Green Bay, WI
</TABLE>
- --------
* Denotes Offered Pipelines.
+ Sold in July 1998.
64
<PAGE>
These pipelines operate as common carriers pursuant to published pipeline
tariffs, which also apply to use by the Company. The Company also owns a
proprietary refined products pipeline from the Blue Island refinery to its
terminal in Hammond, Indiana, and from the Port Arthur refinery to its LPG
terminal in Fannett, Texas.
In 1997, the Company determined that its minority interests in the Offered
Pipelines were not strategic since the Company's shipping rights are assured
due to the pipelines' operation as common carrier pipelines and the Company's
historical throughput. During July 1998, the Company sold its interest in the
Westshore Pipe Line Company and the Wolverine Pipe Line Company for net
proceeds of approximately $17 million, resulting in an after-tax book gain of
approximately $12 million. The Company has signed definitive agreements to
sell its interests in the remaining two pipeline companies, subject to due
diligence by the buyer and rights of first refusal by existing pipeline
owners, for net proceeds of approximately $57 million that, if consummated,
would result in an estimated after tax book gain of approximately $56 million.
Although the Company expects to close the remaining two transactions by
September 30, 1998, there can be no assurance that it will be able to do so by
such time or at all. The Offered Pipelines contributed approximately $8
million of dividends for the fiscal year ended December 31, 1997.
SUPPLY AND DISTRIBUTION
The Company's integrated refining and marketing assets are strategically
located in the central U.S. in close proximity to a variety of supply and
distribution channels. As a result, the Company has the flexibility to acquire
economic domestic or foreign crude oil and has the ability to distribute its
products to its own system and to most domestic wholesale markets.
The Port Arthur refinery's Texas Gulf Coast location provides access to
numerous cost-effective domestic and international crude oil sources which can
be accessed by waterborne delivery or through the West Texas Gulf pipeline.
The Company's Illinois refineries are located on major inland water
transportation routes and are connected to various local, interstate and
Canadian common carrier pipelines. The Blue Island refinery can receive
Canadian crude oil through the Lakehead Pipeline from Canada, foreign and
domestic crude oil through the Capline Pipeline system originating in the
Louisiana Gulf Coast region, and domestic crude oil originating in West Texas,
Oklahoma and the Rocky Mountains through the Arco Pipeline system. The
Hartford refinery has access to foreign and domestic crude oil supplies
through the Capline/Capwood Pipeline systems and access to Canadian crude oil
through the Express Pipeline and the Mobil/IPL pipeline system. Both
refineries are situated on major water transportation routes which provide
flexibility to receive crude oil or intermediate feedstocks by barge when
economical.
The Company has several crude oil supply contracts that total approximately
141,000 bpd with several third-party suppliers, including P.M.I. Comercio
Internacional, S.A. de C.V., an affiliate of Petroleos Mexicanos, S.A. de
C.V.; Lagoven, an affiliate of Petroleos de Venezuela; and Gulf Canada. These
contracts are generally cancelable upon one to three months' notice by either
party, but are intended to remain in place for the foreseeable future. The
remainder of the Company's crude oil supply requirements are acquired on the
spot market from third-party foreign and domestic sources.
In addition to gasoline, the Company's refineries produce other types of
refined products. No. 2 diesel fuel is used mainly as a fuel for diesel
burning engines. No. 2 diesel fuel production is moved via pipeline or barge
to the Company's 17 product terminals and is sold over the Company's terminal
truck racks or through refinery pipeline or barge movement. The Port Arthur
refinery produces jet fuel which is generally sold through pipelines. Other
production includes residual oils (slurry oil and vacuum tower bottoms) which
are used mainly for heavy industrial fuel (e.g., power generation) and in the
manufacturing of roofing flux or for asphalt used in highway paving. The
Company has agreements to sell to Chevron 24,000 bpd of gasoline and 1,000 bpd
of low-sulfur diesel from the Port Arthur refinery through February 28, 1999.
This contract is cancelable upon 90 days' notice by either party. The
65
<PAGE>
Company supplies gasoline and diesel fuel to its retail system first, then
distributes products to its wholesale operations based on the highest average
market returns before being sold into the spot market.
The Company also has an agreement to exchange certain refined products and
chemicals with Chevron Chemical Company, which exchanged amounts averaged
approximately 25,000 bpd during 1995, 1996 and 1997. This contract is
cancelable upon 18 months notice by either party or by mutual agreement.
The Port Arthur refinery's products can be sold in the Midcontinent and
Eastern U.S. as well as export markets. These markets can be accessed through
the Explorer, Texas Eastern and Colonial pipelines or by ship or barge. The
Company's Illinois refineries can distribute their products through various
common carrier and proprietary pipelines which connect the 15 Midwest product
terminals or by barge.
INVENTORY MANAGEMENT
The Company employs several strategies to minimize the impact on
profitability due to the volatility in feedstock costs and refined product
prices. These strategies generally involve the purchase and sale of exchange-
traded, energy-related futures and options with a duration of six months or
less. In addition, the Company to a lesser extent uses energy swap agreements
similar to those traded on the exchanges, such as crack spreads and crude oil
options, to better match the specific price movements in the Company's markets
as opposed to the delivery point of the exchange-traded contract. These
strategies are designed to minimize, on a short-term basis, the Company's
exposure to the risk of fluctuations in crude oil prices and refined product
margins. The number of barrels of crude oil and refined products covered by
such contracts varies from time to time. Such purchases and sales are closely
managed and subject to internally established risk standards. The results of
these hedging activities affect refining costs of sales and inventory costs.
The Company does not engage in speculative futures or derivative transactions.
The Company manages its total inventory position in a manner consistent with
a risk management policy which states that a normal operating inventory level
(base load) will not be offset using risk management techniques, while
material builds or draws from this normal level may be offset by appropriate
risk management strategies to protect against an adverse impact due to
unfavorable price moves. The Company's retail network also reduces overall
risk by providing ratable market sales which represent approximately 27% of
the refineries' gasoline production. In addition, the retail network benefits
from a reliable and cost-effective source of supply.
Due to the Port Arthur refinery's Gulf Coast location, the Company has the
opportunity to limit its exposure to price fluctuations on crude oil and
finished product production through the use of U.S. Gulf Coast-based energy
derivatives, such as forward futures and option contracts relating to Gulf
Coast crack spreads. There exists a market for Gulf Coast refinery crack
spreads based on published spot market product prices and exchange-traded
crude oil. Since the Company sells the majority of the Port Arthur refinery's
production into the Gulf Coast spot market, the Company believes that forward
future and option contracts related to crack spreads may be used effectively
to hedge refining margins. While the Company's hedging program is intended to
provide a more predictable profit margin on a portion of the Port Arthur
refinery production, the use of such a program could limit the Company's
ability to participate in an improvement in Gulf Coast crack spreads.
CLEAN AIR ACT/REFORMULATED FUELS
Under the Clean Air Act, the EPA promulgated regulations mandating low-
sulfur diesel fuel for all on-road consumers, and RFG for ozone non-attainment
areas, including Chicago, Milwaukee and Houston in the Company's direct market
area.
66
<PAGE>
The Clean Air Act requires the EPA to review national ambient air quality
standards for certain pollutants every five years. In July 1997, after such a
review, the EPA adopted more stringent national standards for ground level
ozone (smog) and particulate matter (soot). These standards, when implemented,
are likely to increase significantly the number of nonattainment areas and
thus require additional pollution controls, more extensive use of RFG, and
possibly new diesel fuel standards. Efforts are being made to influence the
legislative branch to repeal the new standards under the Congressional Review
Act. A lawsuit filed by the U.S. Chamber of Commerce, the American Trucking
Association and the National Coalition of Petroleum Retailers is challenging
the implementation of these standards. As a result, it is too early to
determine what impact this rule could have on the Company.
Expenditures required to comply with reformulated fuels regulations are
primarily discretionary, subject to market conditions and economic
justification. The reformulated fuels programs impose restrictions on
properties of fuels to be refined and marketed, including those pertaining to
gasoline volatility, oxygenated content, detergent addition and sulfur
content. The regulations regarding these fuel properties vary in markets in
which the Company operates, based on attainment of air quality standards and
the time of the year. The Company's Port Arthur, Blue Island and Hartford
refineries have the capability to produce up to approximately 60%, 60%, and
25%, respectively, of their gasoline production in RFG. Each refinery's
maximum RFG production may be limited based on the clean fuels attainment of
the Company's total refining system. The Port Arthur refinery has the
capability to produce 100% low-sulfur diesel fuel.
MARKET ENVIRONMENT
The Company's feedstocks and refined products are principally commodities
and, as such, are significantly affected by a variety of factors beyond its
control, including the supply of, and demand for, crude oil, gasoline and
other refined products which, in turn, depend on, among other factors, changes
in domestic and foreign economies, weather conditions, political affairs,
crude oil production levels, the rate of industry investments, the
availability of imports, the marketing of competitive fuels and the extent of
government regulations. The Company's results are also impacted by seasonal
fluctuations with generally stronger earnings recorded during the higher
transportation-demand periods of the spring and summer and weaker earnings
recorded during the fall and winter.
The Company believes that it is well positioned to benefit from potential
long-term improvements in refining industry profitability. The Company
believes refining industry improvement may result from (i) increased demand
for gasoline and distillate fuel, (ii) domestic refinery crude oil
distillation utilization rates nearing maximum sustainable rates, (iii)
reduced growth in conversion capacity, and (iv) increased availability of
lower cost heavy sour crude oil. Conversion refers to the ability to extract
more higher valued products, such as gasoline and distillate fuel, out of the
same barrel of crude oil.
The Company believes industry improvement has occurred since 1995 and
particularly in 1997 as indicated by the Company's record 1997 Operating
Contribution and improvement in certain key industry market indicators listed
in the table below:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR SIX MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
----- ----- ----- ----- ----- ------- -------
(IN DOLLARS PER BARREL)
<S> <C> <C> <C> <C> <C> <C> <C>
Gulf Coast 3/2/1 crack spread...... $2.85 $2.61 $2.38 $2.65 $3.24 $ 3.34 $2.96
Chicago 3/2/1 crack spread......... 3.40 3.86 3.14 4.02 4.04 4.33 3.87
Heavy sour crude oil discount...... 6.40 4.75 4.03 4.78 5.63 5.81 6.33
Light sour crude oil discount...... 1.60 0.95 1.02 1.24 1.71 1.94 1.79
</TABLE>
- --------
Source: Platt's
67
<PAGE>
According to the U.S. Department of Energy, Energy Information
Administration ("EIA"), U.S. demand for gasoline and distillate fuel grew from
9.4 million bpd in 1980 to 11.4 million bpd in 1997, averaging growth of 1.3%
per year during this period. The Company believes this growth in U.S. demand
for gasoline and distillate fuel is principally due to increased economic
activity in the U.S. This growth reflects the expansion of the U.S. vehicle
fleet miles driven, increased seat-miles flown on U.S. airlines and reduced
improvement in vehicle miles per gallon due to consumer preference for light
trucks and sport-utility vehicles as indicated by statistics from the U.S.
Department of Transportation. The Company believes U.S. gasoline and
distillate fuel demand will continue to track U.S. economic activity.
Since 1980, U.S. crude oil distillation capacity decreased from 18.1 million
bpd to 15.7 million bpd in 1997, according to the Oil & Gas Journal, as 137
refineries closed between 1980 and 1997. However, during this period,
conversion capacity increased to meet the growing demand for transportation
fuels. From the early 1990s until 1996, growth in conversion capacity exceeded
demand growth. According to the Oil and Gas Journal and the American Petroleum
Institute, since the early 1990s, industry capital spending, especially non-
environmental capital spending, much of which was for increased conversion
capacity, has decreased as indicated in the table below. The Company believes
this decrease is due to reduced industry profitability caused by overcapacity.
The Company believes "excess" conversion capacity may have reached equilibrium
with demand in 1996.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ----
(IN BILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total capital expenditures.............. $4.4 $6.1 $6.1 $5.4 $5.1 $4.9 $3.9 $3.9
Environmental capital expenditures...... 1.3 1.8 3.3 3.2 3.1 2.2 0.8 N/A
</TABLE>
According to the EIA, U.S. crude oil distillation utilization rates have
steadily increased from approximately 75% in 1980 to approximately 95% in
1997. The Company believes U.S. crude oil distillation utilization rates may
be approaching long-term sustainable maximums due to the requirement for
routine maintenance and the likelihood of unplanned downtime.
The Company believes that, due to the crude oil processing capabilities of
its refineries, it may benefit from increased availability of heavy sour crude
oil. Crude oil pipeline expansions into the U.S. Midwest in 1996 and 1997 have
increased the availability of Canadian heavy sour crude oil and thereby
improved competition for crude oil sales to Midwest refiners. Additionally,
industry studies indicate improved availability of heavy and light sour crude
oil over the next several years due to increased crude oil supply from several
Western Hemisphere sources, primarily Canada and Latin America.
MARKETING
The Company markets gasoline and convenience products in six Midwestern
states through a retail network of Company-operated stores and also markets
refined petroleum products through a wholesale program to distributors, chain
retailers and industrial consumers. The Company's wholesale operation markets
petroleum products in both the Midwest and Gulf Coast regions of the U.S. The
Company's retail presence is focused in the Great Lakes region of the U.S.
where Company-operated stores market value-oriented gasoline products,
cigarettes and a mix of On The Go(R) (non-tobacco) convenience products. As
noted above, the Company operates a high proportion of Clark-branded retail
locations, which the Company believes enables it to respond more quickly and
uniformly to changing market conditions than many of its competitors,
including major oil companies that generally operate their stores through
dealer or jobber networks. Of the Company-operated retail locations,
approximately 75% are located on Company-owned real estate and 25% are on
leased locations. In 1997, the Company sold approximately 1.0 billion gallons
of fuel (representing approximately 27% of current refining
68
<PAGE>
production) and over $280 million of convenience products through
approximately 200 million retail transactions and sold an additional 1.1
billion gallons of fuel to wholesale customers ranging from Clark-branded
retailers to major transportation and commercial companies.
RETAIL DIVISION
The Company's retail strategy is based on two primary objectives,
optimization and growth, and is intended to accomplish four strategic goals:
(i) optimize core market stores by achieving first quartile return on capital
employed, (ii) realize significant productivity within the current asset base,
(ii) grow earnings through acquisitions and new initiatives designed to
leverage existing expertise, product knowledge and market/brand strength, and
(iv) meet all environmental and legislative requirements.
. Optimization. The retail division operating strategy centers around
optimizing the productivity of existing assets by maximizing overall
gross margin and controlling expenses. The Company's marketing strategy
is designed to position the Company as a dominant value-oriented
marketer to customers who are in their cars and on the go. The Company
believes that continued improvements in existing processes and
initiatives such as gasoline pricing, growth of higher-margin premium
gasoline grades and On The Go(R) convenience product lines, growth of
other income/new concept initiatives (such as lottery, money orders,
fast food, car washes, etc.) together with management of controllable
expenses are the most effective ways to improve profitability.
. Growth. In order to support its retail strategic objectives, the Company
performs thorough fundamental market analyses. The Company's analytical
system evaluates each existing and potential market to identify those
that it believes will produce the highest return on investment. In
markets where the Company has a competitive strength on which to build
or where opportunities have been identified by preferred market
analysis, the Company will consider making opportunistic acquisitions to
expand its market share in existing markets as well as larger
acquisitions to enter new markets. The Company believes that continued
growth through such acquisitions as the 131 stores acquired since 1994
contributes to building the Clark brand in core markets. In markets
where the Company has experienced value deterioration in assets and the
preferred market analysis has indicated no long-term market potential
exists, the Company will consider divesting retail locations if
favorable sale opportunities arise or if the Company determines the
locations would be more profitable if converted to branded jobber
locations. The Company sold 36 stores in 1997 and 110 stores in the
first half of 1998. Most of these stores were converted to branded
jobber locations. As of June 30, 1998, the Company was in the process of
selling 32 additional stores in outlying non-core locations.
The retail division's optimization and growth strategy is consistent with
the Company's overall business strategy and includes the following key
elements:
. Improving Productivity. The retail division's goal is to achieve
significant productivity gains exclusive of external market factors.
Examples of key productivity initiatives include increasing gasoline and
convenience product sales volumes, improving gasoline pricing and
shifting product mixes to higher-margin products.
. Optimizing Capital Investments. Retail division capital expenditures are
linked to retail division earnings, with strict emphasis placed on
internally funding capital projects. Capital is primarily budgeted for
projects relating to environmental compliance plans and discretionary
productivity improvements.
. Creating Value Through People. The retail division employs a
decentralized, team-oriented culture with training programs and employee
incentives designed to deliver premier customer service. The Company
believes that customer satisfaction is linked to employee satisfaction,
and that its incentive systems and feedback processes will contribute to
the performance and motivation of its workforce.
69
<PAGE>
RETAIL OPERATIONS OVERVIEW
The Company's retail system began operations during the 1930s with the
opening of Old Clark's first store in Milwaukee, Wisconsin. Old Clark then
expanded throughout the Midwest. At its peak in the early 1970s, Old Clark had
more than 1,800 retail stores and had established a strong market reputation
for the sale of high-octane gasoline at discount prices. In subsequent years,
Old Clark, in line with the general industry trends, rationalized its
operating stores by closing marginal locations. During the 1970s, the majority
of Old Clark's stores were dealer-operated. During the years 1973 through
1983, Old Clark assumed operation of most of its stores to ensure more direct
control of its marketing and distribution network.
As of June 30, 1998, the Company had 692 Company-operated retail locations,
nearly all of which operated under the Clark brand name. The Company believes
a high proportion of Company-operated stores enables it to respond more
quickly and uniformly to changing market conditions than many of its
competitors, including major oil companies whose focus has generally been
operating their stores through dealer or jobber networks. Of these stores, 75%
were located on Company-owned real estate and 25% were leased locations.
Over the past several years, the Company has focused on building core
markets where it believes it can maintain or develop market share of 7.5% to
15% in order to leverage brand recognition, promotions and other marketing and
operating activities. In 1997, the Company's core market monthly gasoline
sales per store averaged 115,800 gallons, which exceeded the 1997 national
industry average of 86,400 gallons, while monthly sales per square foot
averaged approximately $50 for convenience products versus the industry
average of approximately $26. The Company believes that it is in the first
quartile in terms of operating costs in its regions, which provides it with an
important competitive advantage. Chicago, Central Illinois, Southern Michigan,
Cleveland, Milwaukee and Toledo are currently the Company's six highest volume
core metropolitan markets, with market shares of 5% to 15%. A current trend
toward consolidation in the marketing sector is viewed positively by the
Company due to growth opportunities that may develop and the potential
beneficial impact that consolidation may have on longer-term pricing.
Over the past few years the Company has also grown its market share in
several of its core markets through retail store acquisitions. In October
1994, the Company acquired 25 stores in metropolitan Chicago from State Oil
and in April 1995 acquired 35 stores in Central Illinois from Illico
Independent Oil Company. In 1996, the Company acquired four additional stores
from State Oil and 10 high-volume Chicago locations from Bell Fuels, Inc. In
August 1998, the Company acquired 8 stores in Chicago from King Petroleum.
These acquisitions increased the Company's market share in Chicago to
approximately 9%. In January 1997, the Company acquired 48 stores in Southern
Michigan from Silcorp, Ltd. This transaction increased the Company's Southern
Michigan market share from approximately 5% to 7%. One additional store was
acquired in Maywood, Illinois in August 1997.
Simultaneously with growing the Company's market share in core markets
through acquisitions, the Company has divested stores in non-core markets.
Since 1993, the Company has divested approximately 280 stores.
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<PAGE>
The geographic distribution of Company-operated retail stores by state as of
June 30, 1998, was as follows:
GEOGRAPHICAL DISTRIBUTION OF RETAIL STORES
<TABLE>
<CAPTION>
COMPANY- INDEPENDENTLY-
OPERATED OPERATED TOTAL
-------- -------------- -----
<S> <C> <C> <C>
Illinois....................................... 239 28 267
Michigan....................................... 205 34 239
Ohio........................................... 110 43 153
Indiana........................................ 78 11 89
Wisconsin...................................... 55 5 60
Other States(a)................................ 5 49 54
--- --- ---
Total.......................................... 692 170 862
=== === ===
</TABLE>
- --------
(a) Iowa, Louisiana, Missouri, and Texas.
The Company also continues to optimize its retail stores through
productivity achieved from improved operations, profit-enhancing capital
expenditures and the addition of incremental new concept and other income
initiatives. From 1993 to 1996, the Company transformed the image of its
retail network by converting it from a 1950s look to a new, vibrant color
scheme. In 1993, the Company initiated a strategy to increase the sales of On
The Go(R) products to reduce the Company's reliance on tobacco sales. This was
accomplished by remodeling store interiors and adding soda fountain machines
and interior beverage coolers. In an effort to continue to improve gasoline
volume, pricing and growth of higher-margin premium gasoline grades and On The
Go(R) convenience product lines, the Company continues to upgrade the
equipment for core-market stores including canopies and multiple product
dispensers ("MPDs"). Currently, approximately 96% of stores have canopies and
approximately 76% of stores have MPDs. It is believed that MPDs improve
volumes and margins by enabling the Company to market a more profitable
midgrade gasoline product without the large capital expenditures required for
additional underground storage tanks. The installation of canopies enhances
gasoline volumes with better lighting and shelter from adverse weather
conditions. In 1996, the Company began adding "pay-at-the-pump" credit card
technology and as of June 30, 1998, had 79 locations with this service, and
will continue to evaluate the addition of similar technology at additional
locations, as well as other income initiatives, including car washes and
branded fast food.
As a result of the above initiatives and recent acquisitions, the Company
has, from 1993 to 1997, improved core market monthly fuel volume per store by
5% to 115,800 gallons, increased monthly convenience product sales per store
by 40% to $30,600, increased the mix of On The Go(R) convenience products from
32% to 44% of total convenience product sales, and improved monthly
convenience product gross margin per store by 47% to $8,100.
The Company has implemented a number of environmental projects at its retail
stores. These projects include the ongoing response to the September 1988
regulations that provided for a ten-year transition period through 1998, and
are related to the design, construction, installation, repair and testing of
underground storage tanks ("UST") and the requirement of the Clean Air Act to
install Stage II vapor recovery systems at certain retail stores. The Company
has UST leak detection devices installed at nearly all retail locations. As of
June 30, 1998, approximately 97% of current locations met the December 1998
federal UST compliance standards. In many cases, state funds are available to
cover a portion of the cost of complying with the UST standards. The Company
estimates that mandatory retail capital expenditures for environmental and
regulatory compliance for 1998, net of costs recovered from state funds, will
be approximately $17 million. Costs for complying with future regulations
cannot be estimated.
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<PAGE>
MARKET ENVIRONMENT
The sale of gasoline at the retail level is considered a mature industry as
consumption has historically increased at 1% to 2% per year, and industry
studies indicate that many markets have reached saturation in terms of the
number of retail outlets and fuel dispensing capability. The retail markets in
which Clark operates are highly competitive. Many well-capitalized major oil
companies and numerous independent marketers have made substantial investments
in their retail assets. Historically, this competitive environment has caused
retail gasoline margins in the Company's Midwest markets to be among the
lowest in the country.
The Company believes that the increased sale of convenience products and
fast food and the expanded offering of other services like car washes and pay-
at-the-pump technology will be the primary avenues for individual site growth
in the industry. Industry studies also indicate that the retail markets have
been characterized by several significant trends including (i) increased
rationalization of stores and consolidation of companies, (ii) changing
consumer demand to emphasize convenience and value, (iii) the impact of
governmental regulations on product offerings and services, and (iv) during
1996 and 1997, unstable gasoline unit margins due to crude oil and related
wholesale and retail price volatility.
. Rationalization/Consolidation. During the past several years, major oil
companies have rationalized their retail systems to gain efficiencies.
These companies divested nonstrategic locations to focus on areas near
strategic supply sources, which has put a higher concentration of market
share in fewer geographic regions for many of these companies. In
addition, smaller operators have closed marginal and unprofitable
locations due to the investment requirements to meet the 1998 UST
environmental compliance deadline. More recently, oil companies and
convenience store chains have sought to consolidate through mergers,
acquisitions and joint ventures. The lack of availability of favorable
new locations, the high cost of construction of new facilities and the
opportunity to achieve significant cost reduction and brand building
synergies make consolidation attractive for many companies.
. Changing Consumer Demand. Industry studies indicate that consumer buying
behavior continues to reflect the effect of increasing demands on
consumer time and money. Consumers have generally become time-
constrained, value-minded buyers who expect quality goods at reasonable
prices.
. Government Regulations. The gasoline and convenience store industry is
subject to significant governmental regulations. The environmental
requirements for Stage II vapor recovery and UST upgrades have been
partially responsible for the closing of more than 27,000 retail stores
or close to 13% of U.S. outlets over the eight-year period of 1991 to
1998. This trend is expected to continue through 1998. It is anticipated
that these regulations may also cause many companies with vehicle fleet
programs to abandon on-site fueling in favor of retail fueling. Most
recently, the Food and Drug Administration has initiated a series of
regulations intended to stop the sale of tobacco products to minors.
Such regulations, if enacted, may impact the way such tobacco products
are marketed throughout the country.
. Volatile Wholesale Costs. The volatility of crude oil and wholesale
costs can materially affect the profitability of retail gasoline
operations. Typically, there is a delay between changes in wholesale
product costs and changes in retail gasoline prices that prevents
operators from maintaining stable gasoline margins. During periods of
rapidly rising wholesale costs, margins are usually compressed.
Conversely, during periods of falling wholesale costs, margins usually
expand.
WHOLESALE DIVISION
The Company's wholesale division strategy is to leverage its strengths in
the distribution and marketing of petroleum and On The Go(R) products to
create value through commercial relationships
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<PAGE>
with minimal capital investment. The wholesale division strategy is designed
to create value by focusing on distinct channels of trade and offering
products and services that meet the unique needs of targeted customers.
Wholesale marketing can be divided into four primary functions: (i) fuel sales
to commercial and transportation end-users, (ii) fuel sales to reseller-
distributors, (iii) branded franchise marketing, and (iv) new business
franchise marketing.
The Company currently sells gasoline and diesel fuel on an unbranded basis
to approximately 400 distributors and chain retailers. The Company believes
these sales offer higher profitability than spot market alternatives.
Wholesale sales are also made to the transportation and commercial sectors,
including airlines, railroads, barge lines and other industrial end-users. In
1996, the Company continued growth of a new branded jobber program and as of
June 30, 1998, had 170 outlets owned and operated by branded jobbers. The
Company believes that a branded distributor program, new business franchise
marketing, and further focus on the transportation and commercial sector offer
significant opportunities for incremental sales volumes and earnings in the
future.
Fuel sales to all channels of trade focus on maximizing netback realizations
(revenue less all distribution and working capital investment costs). The
wholesale division continues to refine and integrate netback management tools
to identify the most attractive short-term sales opportunities as well as to
identify the most profitable markets over the long term. Channels of trade,
product, and market-specific strategies are continually refined and optimized
through this netback methodology. Efforts focus on improving returns and
optimizing the core Midwest system while expanding Gulf Coast marketing
activities around the supply of refined products available from the Port
Arthur refinery.
COMPETITION
The refining and marketing segment of the oil industry is highly
competitive. Many of the Company's principal competitors are integrated
multinational oil companies that are substantially larger and better known
than the Company. Because of their diversity, integration of operations,
larger capitalization and greater resources, these major oil companies may be
better able to withstand volatile market conditions, more effectively compete
on the basis of price and more readily obtain crude oil in times of shortages.
The principal competitive factors affecting the Company's refining division
are crude oil and other feedstock costs, refinery efficiency, refinery product
mix and product distribution and transportation costs. Certain of the
Company's larger competitors have refineries which are larger and, as a
result, could have lower per-barrel costs or high margins per barrel of
throughput. The Company has no crude oil reserves and is not engaged in
exploration and production activities. The Company obtains nearly all of its
crude oil requirements on the spot market from unaffiliated sources. The
Company believes that it will be able to obtain adequate crude oil and other
feedstocks at generally competitive prices for the foreseeable future.
The principal competitive factors affecting the Company's retail marketing
division are locations of stores, product price and quality, appearance and
cleanliness of stores, brand identification and market share. Competition from
large, integrated oil and gas companies, as well as convenience stores which
sell motor fuel, is expected to continue. The principal competitive factors
affecting the Company's wholesale marketing business are product price and
quality, reliability and availability of supply and location of distribution
points.
THE OXY ADVANCE CRUDE OIL PURCHASE RECEIVABLE TRANSACTION
Pursuant to a merger agreement and a series of related agreements with
affiliates of Oxy in December 1995, the Company acquired the right to receive
the equivalent of 17.661 million barrels of
73
<PAGE>
WTI to be delivered over six years according to a defined schedule. In
connection with this transaction, Clark USA issued common stock valued at
approximately $120.0 million, or $20 per share (6,000,000 shares), and paid
$100.0 million in cash to Oxy. Clark USA contributed the Oxy advance crude oil
purchase receivable to the Company in October 1996 and the Company sold the
receivable for net cash proceeds of $235.4 million.
ENVIRONMENTAL MATTERS
COMPLIANCE MATTERS
Operators of refineries and gasoline stores are subject to comprehensive and
frequently changing federal, state and local environmental laws and
regulations, including those governing emissions of air pollutants, discharges
of wastewater and stormwater, and the handling and disposal of nonhazardous
and hazardous waste. Federal, state and local laws and regulations
establishing numerous requirements and providing penalties for violations
thereof affect nearly all of the operations of the Company. Included among
such laws and regulations are the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). Also
significantly affecting the Company are the rules and regulations of the
Occupational Safety and Health Administration. Many of these laws authorize
the imposition of civil and criminal sanctions upon companies that fail to
comply with applicable statutory or regulatory requirements. As discussed
below, federal and state agencies have filed various enforcement actions
alleging that the Company has violated a number of environmental laws and
regulations. The Company nevertheless believes that, in all material respects,
its existing operations are in compliance with such laws and regulations.
The Company's operations are large and complex. The numerous environmental
regulations to which the Company is subject are complicated, sometimes
ambiguous, and often changing. In addition, the Company may not have detected
certain violations of environmental laws and regulations because the
conditions that constitute such violations may not be apparent. It is
therefore possible that certain of the Company's operations are not currently
in compliance with state or federal environmental laws and regulations.
Accordingly, the Company may be required to make additional expenditures to
comply with existing environmental requirements. Such expenditures, along with
compliance with environmental requirements, could have a material adverse
effect on the Company's financial condition, results of operations, cash flow
or liquidity.
Regulations issued by the EPA in 1988 with respect to USTs require the
Company, over a period of up to ten years, to install, where not already in
place, detection devices and corrosion protection on all USTs and piping at
its retail gasoline outlets. The regulations also require periodic tightness
testing of USTs and piping. Commencing in 1998, operators will be required
under these regulations to install continuous monitoring systems for
underground tanks. In order to bring its retail stores into compliance with
these regulations, the Company estimates that capital expenditures of
approximately $17 million, net of costs recovered from state funds, will be
required for 1998. See "--Marketing" and "--Retail Operations Overview."
The Company anticipates that, in addition to expenditures necessary to
comply with existing environmental requirements, it will incur costs in the
future to comply with new regulatory requirements arising from recently
enacted statutes (such as the Clean Air Act requirements relating to operating
permits and the control of hazardous air pollutants) and possibly with new
statutory requirements.
The Company cannot predict what environmental legislation or regulations
will be enacted in the future or how existing or future laws or regulations
will be administered or interpreted with respect to products or activities to
which they have not previously been applied. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of the
regulatory agencies or stricter
74
<PAGE>
interpretation of existing laws which may develop in the future, could have an
adverse effect on the financial position or operations of the Company and
could require substantial additional expenditures by the Company for the
installation and operation of pollution control systems and equipment. See "--
Legal Proceedings."
REMEDIATION MATTERS
In addition to environmental laws that regulate the Company's ongoing
operations, Clark's various operations also are subject to liability for the
remediation of contaminated soil and groundwater. Under CERCLA and analogous
state laws, certain persons may be liable as a result of the release or
threatened release of hazardous substances (including petroleum) into the
environment. Such persons include the current owner or operator of property
where such releases or threatened releases have occurred, any persons who
owned or operated such property during the time that hazardous substances were
released at such property, and persons who arranged for the disposal of
hazardous substances at such property. Liability under CERCLA is strict.
Courts have also determined that liability under CERCLA is, in most cases
where the government is the plaintiff, joint and several, meaning that any
responsible party could be held liable for all costs necessary for
investigating and remediating a release or threatened release of hazardous
substances. As a practical matter, liability at most CERCLA (and similar)
sites is shared among all the solvent "potentially responsible parties"
("PRPs"). The most relevant factors in determining the probable liability of a
party at a CERCLA site usually are the cost of investigation and remediation,
the relative amount of hazardous substances contributed by the party to the
site and the number of solvent PRPs. While the Company maintains property and
casualty insurance in the normal course of its business, such insurance does
not typically cover remediation and certain other environmental expenses.
The release or discharge of petroleum and other hazardous materials can
occur at refineries, terminals and retail stores. The Company has identified a
variety of potential environmental issues at its refineries, terminals and
retail stores. In addition, each refinery has areas on-site which may contain
hazardous waste or hazardous substance contamination and which may have to be
addressed in the future at substantial cost. Many of the terminals may also
require remediation due to the age of tanks and facilities and as a result of
current or past activities at the terminal properties including several
significant spills and past on-site waste disposal practices.
LEGAL AND GOVERNMENTAL PROCEEDINGS
The Company is also the subject of various environmental-related legal
proceedings. See "--Legal Proceedings."
EMPLOYEES
Currently the Company employs approximately 7,500 people, approximately
1,200 of whom were covered by collective bargaining agreements at the Blue
Island, Hartford, Lima and Port Arthur refineries. The Port Arthur refinery
contract expires in January 1999, the Hartford refinery contract expires in
February 2002 and the Blue Island and Lima refinery contracts expire in August
2002. In addition, the Company has union contracts for certain employees at
its Hammond, Indiana, and St. Louis, Missouri, terminals. Relationships with
the unions have been good and neither Old Clark nor the Company has ever
experienced a work stoppage as a result of labor disagreements.
LEGAL PROCEEDINGS
As a result of its activities, the Company is the subject of a number of
legal and administrative proceedings relating to environmental matters. The
Company is required by the Commission to disclose all matters that could be
material or that involve a governmental authority and could reasonably involve
monetary sanctions of $100,000 or greater.
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<PAGE>
Hartford Federal Enforcement. In May 1997, the EPA served a Notice of
Violation on the Company alleging violations of the Clean Air Act, and
regulations promulgated thereunder, in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit. No estimate can be made at
this time of the Company's potential liability, if any, as a result of this
matter.
Hartford State Enforcement. In 1996, the Company settled the matter People
of the State of Illinois v. Clark Refining & Marketing, Inc. PCB No. 95-163.
One remaining issue concerning the exempt status of the Company's wastewater
treatment system was submitted to an administrative agency on a stipulation of
facts. No estimate of any liability with respect to this remaining element of
the complaint can be made at this time.
Blue Island Federal Enforcement. The Blue Island refinery is the subject of
federal investigations concerning potential violations of certain
environmental laws and regulations. In March 1997, the EPA initiated a
multimedia investigation at the Blue Island refinery. The investigation
included an on-site visit, requests for information and meetings. In March
1997, the Company received a Grand Jury subpoena requesting certain documents
relating to wastewater discharges. In September 1998, the Company was served
with a complaint in the matter, United States v. Clark Refining & Marketing,
Inc., alleging that the Company has operated the refinery in violation of
certain federal laws relating to air pollution, water pollution and solid
waste management. No estimate can be made of the Company's potential
liability, if any, as a result of these matters.
Blue Island State Enforcement. People ex rel. Ryan v. Clark Refining &
Marketing, Inc., is currently pending in the Circuit Court of Cook County,
Illinois alleging operation of the Blue Island refinery in violation of
environmental laws. The allegations originate from a fire that occurred in the
Isomax unit in March 1995, a release of hydrogen fluoride in May 1995 from a
processing unit, other releases into the air that occurred in the past three
years, and releases of wastewater and stormwater to the Cal Sag Channel. The
Company has filed an answer denying the material allegations in the lawsuit.
No estimate of any liability with respect to this matter can be made at this
time.
St. Louis Terminal. In January 1994, a gasoline spill occurred at the
Company's St. Louis terminal. In May 1997, the Company received correspondence
from the State of Missouri seeking the payment of a penalty of less than
$200,000 related to this matter.
Sashabaw Road. In May 1993, the Company received correspondence from the
Michigan Department of Natural Resources ("MDNR") indicating that the MDNR
believes that the Company may be a potentially responsible party in connection
with groundwater contamination in the vicinity of one of its retail stores on
Sashabaw Road in Oakland County, Michigan. In July 1994, MDNR commenced suit
against the Company and is currently seeking $300,000 to resolve the matter.
Port Arthur Refinery. The original refinery on the site of the Port Arthur
refinery began operating in 1901, prior to modern environmental laws and
methods of operation. While the Company believes, as a result, that there is
extensive contamination at the site, the Company is unable to estimate the
cost of remediating such contamination. Under the purchase agreement between
the Company and Chevron, Chevron will be obligated to perform the required
remediation of more than 97% of pre-closing contamination. The Company
estimates its obligation at approximately $8 million. As a result of the
acquisition, the Company may become jointly and severally liable under CERCLA
for the costs of investigation and remediation at the site. In the event that
Chevron is unable (as a result of bankruptcy or otherwise) or unwilling to
perform the required remediation at the site, the Company may be required to
do so. The cost of any such remediation could be substantial and could be
beyond the Company's financial ability. In June 1997, the Company, Chevron and
the State of Texas entered into an Agreed Order that substantially confirmed
the relative obligations of the Company and Chevron.
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<PAGE>
As of June 30, 1998, the Company had accrued a total of $39.8 million for
legal and environmental-related obligations that may result from the matters
noted above, other legal and environmental matters and obligations associated
with certain retail sites. While it is not possible at this time to estimate
the ultimate amount of liability with respect to the legal proceedings
described above, the Company is of the opinion that the aggregate amount of
any such liability will not have a material adverse effect on its financial
position; however, an adverse outcome of any one or more of these matters
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period.
In addition to the specific matters discussed above, the Company has also
been named in various other suits and claims. While it is not possible to
estimate with certainty the ultimate legal and financial liability with
respect to these other legal proceedings, the Company believes the outcome of
these other suits and claims will not have a material adverse effect on the
Company's financial position, operating results or cash flow.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers, Controller, Treasurer and Secretary of
the Company and their respective ages and positions are set forth in the table
below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William C. Rusnack.......... 54 President, Chief Executive Officer and Chief
Operating Officer; Director
Bradley D. Aldrich.......... 44 Executive Vice President--Refining
Brandon K. Barnholt......... 40 Executive Vice President--Marketing
Maura J. Clark.............. 39 Executive Vice President--Corporate Development
and Chief Financial Officer
Dennis R. Eichholz.......... 45 Controller and Treasurer
Katherine D. Knocke......... 41 Secretary
Marshall A. Cohen........... 63 Director; Chairman of the Board
David A. Stockman........... 51 Director
Glenn H. Hutchins........... 43 Director
David I. Foley.............. 31 Director
</TABLE>
The board of directors of the Company currently consists of five directors
who serve until the next annual meeting of stockholders or until a successor
is duly elected. Directors do not receive any compensation for their services
as such. Executive officers of the Company serve at the discretion of the
board of directors of the Company.
On April 15, 1998, William C. Rusnack was appointed as president, chief
operating officer, chief executive officer and a director of the Company and
Clark USA. Mr. Rusnack replaced Paul D. Melnuk who had previously announced he
was leaving the Company and Clark USA, effective May 1, 1998. Mr. Rusnack
previously served 31 years with Atlantic Richfield Corporation ("ARCO") and
was involved in all areas of its energy business, including refining
operations, retail marketing, products transportation, exploration and
production, and human resources. He most recently served as President of ARCO
Products Company from 1993 to 1997 and was President of ARCO Transportation
Company from 1990 to 1993. He currently serves as a director of Flowserve (a
$1 billion, NYSE-listed corporation).
Bradley D. Aldrich has served as Executive Vice President--Refining, since
December 1994. From August 1991 through November 1994, Mr. Aldrich served as
Vice President, Supply & Distribution for CF Industries, Inc., a chemical
fertilizer manufacturer and distributor. Mr. Aldrich previously served as
Manager, Light Oil Supply--North America of Conoco, Inc. from August 1989
through July 1991.
Brandon K. Barnholt has served as Executive Vice President--Marketing, since
February 1995, and served as Executive Vice President--Retail Marketing from
December 1993 through February 1995, as Vice President--Retail Marketing from
July 1992 through December 1993, and as Managing Director--Retail Marketing
from May 1992 through July 1992. Mr. Barnholt previously served as Retail
Marketing Manager of Conoco, Inc. from March 1991 through March 1992.
Maura J. Clark has served as Executive Vice President--Corporate Development
and Chief Financial Officer of the Company and Clark USA since August 1995.
Ms. Clark previously served as Vice President--Finance at North American Life
Assurance Company, a financial services company,
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<PAGE>
from September 1993 through July 1995. From May 1990 to September 1993, Ms.
Clark served as Vice President--Corporate Finance and Corporate Development of
North American Trust Company (formerly First City Trust Company), a subsidiary
of North American Life Assurance Company.
Dennis R. Eichholz, who joined the Company in November 1988, has served as
Vice President--Controller of the Company and Controller and Treasurer of
Clark USA since February 1995. Mr. Eichholz has served as Vice President--
Treasurer of Clark since December 1991.
Katherine D. Knocke has served as Secretary of the Company and Clark USA
since April 1995. Ms. Knocke has served as in-house counsel of the Company
since August 1994. Ms. Knocke previously was employed as an associate with the
St. Louis law firm of Armstrong, Teasdale, Schlafly & Davis from September
1989 through August 1994.
Marshall A. Cohen has served as a director of the Company since November 3,
1997 and as Chairman since January 27, 1998. Mr. Cohen has served as Counsel
at Cassels Brook & Blackwell since October 1996. Mr. Cohen previously served
as President and Chief Executive Officer of The Molson Companies Limited from
November 1988 to September 1996.
David A. Stockman has served as a director of Company since November 3,
1997. Mr. Stockman is a Senior Managing Director of The Blackstone Group L.P.,
which he joined in 1988. Mr. Stockman is also Co-Chairman of the board of
directors of Collins & Aikman Corporation and a member of the boards of
directors of American Axle Manufacturing Inc., Bar Technologies Inc., The
Imperial Home Decor Group Inc. and Haynes International Inc.
Glenn H. Hutchins has served as a director of the Company since May 18,
1998. Mr. Hutchins is a Senior Managing Director of the Blackstone Group L.P.,
which he joined in 1994. Mr. Hutchins was a Managing Director of Thomas H. Lee
Co. ("THL") from 1987 until 1994 and, while on leave from THL during parts of
1993 and 1994, was a Special Advisor in the White House. Mr. Hutchins is a
member of the boards of directors of American Axel Manufacturing Inc., CommNet
Cellular Inc., Corp. Banca (Argentina) S.A., Corp. Group. C.V., and Haynes
International Inc. In 1994, Mr. Hutchins was also appointed Chairman of the
board of directors of the Western N.I.S. Enterprise Fund by President Clinton.
David I. Foley has served as a director of the Company since November 3,
1997. Mr. Foley is an Associate at The Blackstone Group L.P., which he joined
in 1995. Prior to joining Blackstone, Mr. Foley was a member of AEA Investors,
Inc. and The Monitor Company. He currently serves on the board of directors of
The Imperial Home Decor Group, Inc., Prime Succession Inc. and Rose Hills
Company.
Except as described above, there are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which such person was elected or appointed as a director or executive officer.
There are no family relationships between any director or executive officer
and any other director or executive officer.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Company to
its Chief Executive Officer and its other executive officers whose total
annual compensation exceeded $100,000 for each of the years in the three-year
period ended December 31, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
---------------------- OTHER ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS/OPTION COMPENSATION(A)
- --------------------------- ---- -------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul D. Melnuk(b)....... 1997 $407,036 $384,050 -- -- $3,321
President and Chief
Executive Officer 1996 325,000 130,000 -- -- 6,816
1995 326,836 75,000 -- 100,000(c) 5,479
Bradley D. Aldrich...... 1997 252,611 219,600 -- -- 2,767
Executive Vice
President--Refining 1996 211,779 47,500 -- -- 6,849
1995 176,224 42,500 -- 130,000(c)(d) --
Brandon K. Barnholt..... 1997 253,003 154,600 -- -- 3,044
Executive Vice
President--Marketing 1996 211,799 87,500 -- -- 6,802
1995 176,276 75,000 -- 50,000(c) 5,329
Maura J. Clark(e)....... 1997 220,998 153,300 -- -- --
Executive Vice
President--Corporate 1996 36,779 47,500 -- -- --
Development and Chief
Financial Officer 1995 -- -- -- -- --
Edward J. Stiften(f).... 1997 159,616 81,350 -- -- --
Executive Vice
President--Chief 1996 -- -- -- -- --
Administrative Officer 1995 -- -- -- -- --
</TABLE>
- --------
(a) Represents amount accrued for the account of such individuals under the
Clark Retirement Savings Plan (the "Savings Plan").
(b) Mr. Melnuk resigned his position with the Company, effective May 1, 1998.
(c) Options issued pursuant to the Performance Plan as described below.
(d) Mr. Aldrich and Mr. Barnholt (granted in 1993) held options to acquire
TrizecHahn Subordinate Voting Shares ("TrizecHahn Shares") received as
compensation from TrizecHahn for services performed for the Company under
the TrizecHahn Amended and Restated 1987 Stock Option Plan (the
"TrizecHahn Option Plan"). These options were exercised in 1998.
(e) In 1995 and 1996, Ms. Clark was an employee of TrizecHahn and served the
Company under a management consulting arrangement. Ms. Clark earned
approximately $175,000 in 1996 and $117,000 in 1995 under such
arrangement. As of January 1, 1997, Ms. Clark became an employee of the
Company. The 1996 amounts reflected in this table are for 1996
compensation paid by the Company in 1997.
(f) Mr. Stiften resigned his position with the Company, effective March 3,
1998.
STOCK OPTIONS GRANTED DURING 1997
There were no options granted during 1997 to the named executive officers
under the Performance Plan (as defined) for services performed for the
Company.
YEAR-END OPTION VALUES
The following table sets forth information with respect to the number and
value of unexercised options to purchase common stock of Clark USA and
TrizecHahn Shares held by the executive officers named in the executive
compensation table as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES ACQUIRED UNEXERCISED OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ON EXERCISE VALUE AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(A)
DURING YEAR ENDED REALIZED ON ------------------------- -------------------------
NAME DECEMBER 31, 1997 EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul D. Melnuk(b) -- $ -- -- 100,000 $ -- $--
Bradley D. Aldrich -- -- 100,000 30,000 1,042,710 --
Brandon K. Barnholt -- -- 70,000 50,000 858,375 --
</TABLE>
- --------
(a) For the TrizecHahn Shares the value is based upon the closing price on the
New York Stock Exchange-Composite Transactions on December 31, 1997. For
the common stock of Clark USA the value is based on the sale price in the
Blackstone Transaction.
(b) Mr. Melnuk also holds options to acquire TrizecHahn Shares received as
compensation for services provided to TrizecHahn.
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<PAGE>
SHORT-TERM PERFORMANCE PLAN
Employees of the Company participate in an annual incentive plan which
places at risk an incremental portion of their total compensation based on
Company, business unit and/or individual performance. The targeted at-risk
compensation increases with the ability of the individual to affect business
performance, ranging from 12% for support personnel to 200% for the Chief
Executive Officer. The other executive officers have the opportunity to earn
an annual incentive equal to 150% of the individual's base salary. The actual
award is determined based on financial performance with individual and
executive team performance evaluated against pre-established operating
objectives designed to achieve planned financial results. For essentially all
other employees, annual incentives are based on specific performance
indicators utilized to operate the business, principally productivity and
profitability measures.
LONG-TERM PERFORMANCE PLAN
The Company has adopted a Long-Term Performance Plan (the "Performance
Plan"). Under the Performance Plan, designated employees, including executive
officers, of Clark USA and its subsidiaries and other related entities are
eligible to receive awards in the form of stock options, stock appreciation
rights and stock grants. The Performance Plan is intended to promote the
growth and performance of the Company by encouraging employees to acquire an
ownership interest in Clark USA and to provide incentives for employee
performance. An aggregate of 1,250,000 shares of Common Stock may be awarded
under the Performance Plan, either from authorized, unissued shares which have
been reserved for such purpose or from shares purchased on the open market,
subject to adjustment in the event of a stock split, stock dividend,
recapitalization or similar change in the outstanding common stock of Clark
USA. As of December 31, 1997, 531,500 stock options were outstanding under the
Performance Plan.
The Performance Plan is administered by the board of directors' Compensation
Committee. Subject to the provisions of the Performance Plan, the Compensation
Committee is authorized to determine who may participate in the Performance
Plan and the number and types of awards made to each participant, and the
terms, conditions and limitations applicable to each award. Awards may be
granted singularly, in combination or in tandem. Subject to certain
limitations, the board of directors is authorized to amend, modify or
terminate the Performance Plan to meet any changes in legal requirements or
for any other purpose permitted by law.
Payment of awards may be made in the form of cash, stock or combinations
thereof and may include such restrictions as the Compensation Committee shall
determine, including, in the case of stock, restrictions on transfer and
forfeiture provisions. The price at which shares of Common Stock may be
purchased under a stock option may not be less than the fair market value of
such shares on the date of grant. If permitted by the Compensation Committee,
such price may be paid by means of tendering Common Stock, or surrendering
another award, including restricted stock, valued at fair market value on the
date of exercise, or any combination thereof. Further, with Compensation
Committee approval, payments may be deferred, either in the form of
installments or as a future lump sum payment. Dividends or dividend equivalent
rights may be extended to and made part of any award denominated in stock,
subject to such terms, conditions and restrictions as the Compensation
Committee may establish. At the discretion of the Compensation Committee, a
participant may be offered an election to substitute an award for another
award or awards of the same or different type. Stock options initially have a
10-year term with a three-year vesting schedule and are not exercisable until
Clark USA's Common Stock is publicly traded.
If the employment of a participant terminates, subject to certain exceptions
for retirement, resignation, death or disability, all unexercised, deferred
and unpaid awards will be canceled immediately, unless the award agreement
provides otherwise. Subject to certain exceptions for death
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<PAGE>
or disability, or employment by a governmental, charitable or educational
institution, no award or other benefit under the Performance Plan is
assignable or transferable, or payable to or exercisable by anyone other than
the participant to whom it was granted.
In the event of a "Change of Control" of Clark USA, with respect to awards
held by Performance Plan participants who have been employed by the Company
for at least six months, (a) all stock appreciation rights which have not been
granted in tandem with stock options will become exercisable in full, (b) the
restrictions applicable to all shares of restricted stock will lapse and such
shares will be deemed fully vested, (c) all stock awards will be deemed to be
earned in full, and (d) any participant who has been granted a stock option
which is not exercisable in full will be entitled, in lieu of the exercise of
such stock options, to obtain cash payment in an amount equal to the
difference between the option price of such stock option and the offer price
(in the case of a tender offer or exchange offer) or the value of common stock
covered by such stock option, determined as provided in the Performance Plan.
The Blackstone Transaction triggered the Change of Control provision under the
Performance Plan. The Company does not expect that the Change of Control will
have a material impact on the Performance Plan.
Blackstone is implementing a management incentive program designed to in-
crease management's ownership of Clark USA's stock through direct purchases
and options tied to the financial performance of the Company.
CLARK SAVINGS PLAN
The Clark Savings Plan, which became effective in 1989, permits employees to
make before-tax and after-tax contributions and provides for employer
incentive matching contributions. Under the Savings Plan, each employee of the
Company (and such other related companies as may adopt the Savings Plan) who
has completed at least six months of service may become a participant.
Participants are permitted to make before-tax contributions to the Savings
Plan, effected through payroll deduction, of from 1% to 15% of their
compensation. The Company makes matching contributions equal to 200% of a
participant's before-tax contributions up to 3% of compensation. Participants
are also permitted to make after-tax contributions through payroll deduction,
of from 1% to 5% of compensation, which are not matched by employer
contributions; provided that before-tax contributions and after-tax
contributions, in the aggregate, may not exceed the lesser of 15% of
compensation or $10,000 in 1998. All employer contributions are vested at a
rate of 20% per year of service, becoming fully vested after five years of
service. Amounts in employees' accounts may be invested in a variety of
permitted investments, as directed by the employee, including TrizecHahn
Shares. Participants' vested accounts are distributable upon a participant's
disability, death, retirement or separation from service. Subject to certain
restrictions, employees may make loans or withdrawals of employee
contributions during the term of their employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation of the Company's executive officers has historically been
determined by the Company's board of directors. Mr. Rusnack, the Company's
President and Chief Executive Officer, is a member of the Company's board of
directors. Other than reimbursement of their expenses, the Company's directors
do not receive any compensation for their services as directors. There are no
interlocks between the Company and other entities involving the Company's
executive officers and board members who serve as executive officers or board
members of other entities, except with respect to Clark USA and Clark USA's
principal shareholders, Blackstone and Oxy.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with three of its senior
executives (the "Executive Employment Agreements"). The Executive Employment
Agreements have five-year terms,
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<PAGE>
and provide for automatic extension on an annual basis unless 90 days' notice
of cancellation is given by either party. The Executive Employment Agreements
provide that if a Change of Control occurs within two years prior to the
scheduled expiration date, then the expiration date will be automatically
extended until the second anniversary of the Change of Control date. The
Blackstone Transaction constituted a Change of Control under the Executive
Employment Agreements.
During the term of the Executive Employment Agreements, the employee is
precluded from soliciting or encouraging proposals regarding the acquisition
of Clark USA or its subsidiaries (or of another material part of the business
of Clark USA), absent explicit approval of the Chief Executive Officer of the
Company.
The Executive Employment Agreements provide separation benefits to the
employee if the employee's employment is terminated by the Company without
"Cause" prior to the expiration date of the agreement. "Cause" is defined to
include the employee's failure to substantially perform his or her duties,
willful misconduct that materially injures Clark USA or its affiliates, or
conviction of a criminal offense involving dishonesty or moral turpitude. The
Executive Employment Agreements also provide that if the employee resigns for
"Good Reason" prior to the expiration date of the agreement, the employee will
receive separation benefits. "Good Reason" is defined to include certain
demotions, reductions in compensation, and relocation.
The separation benefits payable under the Executive Employment Agreements
generally include a lump sum payment of three times annual salary and bonus,
acceleration of stock option exercisability, continuation of the Company's
life, medical, accident and disability arrangements for one year after
termination of employment (subject to the employee's continuing to pay the
employee share of the premiums), payment of the cost of job relocation
counseling, and payment of legal fees in connection with termination.
The Executive Employment Agreements also provide for gross-up payments to be
made to the employee to cover certain penalty taxes in connection with a
Change of Control.
As a condition of receiving the separation benefits under the Executive
Employment Agreements, an employee is required to maintain the confidentiality
of information relating to the Company and its affiliates and to release the
Company and its affiliates from certain claims.
EMPLOYMENT AGREEMENT FOR WILLIAM C. RUSNACK
The Company has entered into a memorandum of agreement (the "Agreement")
with William C. Rusnack (the "Executive"). The Agreement has a term beginning
on the date that it was executed (the "Agreement Date") and ending on the
fourth anniversary of the Agreement Date (the "Initial Term"), provided, that
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of the Initial Term then the Agreement shall be automatically
renewed for an additional one year renewal term (a "Renewal Term"). Similarly,
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of any Renewal Term, then the Agreement shall be automatically
renewed for an additional one year Renewal Term. In the event of a Change in
Control (as defined therein), the Agreement shall remain in effect until at
least the second anniversary of the Change in Control.
The Agreement also provides that: (i) the Executive shall be Chief Executive
Officer and President of the Company and Clark USA, (ii) Clark USA shall use
its best efforts to have the Executive elected to its board of directors and
shall vote its shares in favor of electing the Executive to the Company's
board of directors, (iii) the Executive's base salary shall not be less than
$415,000 (the "Salary"), (iv) the Executive's target bonus (the "Target
Bonus") shall be equal to 100% of the Salary (with a minimum bonus of 50% of
Salary for 1998), (v) the Executive will be provided with welfare benefits and
other fringe benefits to the same extent and on the same terms as those
benefits are provided to
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<PAGE>
the Company's other senior management employees, (vi) the Executive shall
participate in the Company's relocation policy at level 4, and (vii) the
Executive shall receive a gross-up for any parachute excise taxes that may
result from any payment, whether under the Agreement or otherwise.
In the event that Executive's employment is (a) terminated by the Company
without Cause (as defined therein), (b) terminated by the Executive for Good
Reason (as defined therein), or (c) terminates at the end of the Initial Term
(or a Renewal Term) because the Company gave notice preventing the occurrence
of a Renewal Term, then the Executive shall receive from the Company: (i) in
addition to any other compensation and benefits accrued but unpaid, a lump sum
equal to the product of (a) three and (b) the sum of the Salary and Target
Bonus, (ii) relocation and counseling services, and (iii) continued
participation in all life insurance, medical, dental, health and accident and
disability plans, programs or arrangements in which Executive was entitled to
participate immediately prior to his termination for up to one year.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Company is owned by Clark USA.
The following table and the accompanying notes set forth certain information
concerning the beneficial ownership of the Common Stock and Class F Common
Stock of Clark USA, as of the date hereof: (i) each person who is known by the
Company to own beneficially more than 5% of the common stock of the Company,
(ii) each director and each executive officer who is the beneficial owner of
shares of common stock of Clark USA, and (iii) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT PERCENT OF TOTAL
NAME AND ADDRESS TITLE OF CLASS SHARES OF CLASS VOTING POWER(A)
---------------- -------------- ---------- -------- ----------------
<S> <C> <C> <C> <C>
Blackstone Management Common 13,500,000 98.1% 78.5%
Associates III L.L.C.(b)..
345 Park Avenue
New York, NY 10154
Occidental Petroleum Class F Common 6,101,010 100.0 19.9
Corporation...............
10889 Wilshire Boulevard
Los Angeles, California
90024
All directors and executive Common 13,500,000 98.1 78.5
officers as a group(b)....
</TABLE>
- --------
(a) Represents the total voting power of all shares of common stock
beneficially owned by the named stockholder.
(b) The 13,500,000 shares held by Blackstone are directly held as follows:
10,771,005.354 shares by Blackstone, 1,918,994.646 shares by Blackstone
Offshore Capital Partners III L.P. and 810,000 shares by Blackstone Family
Investment Partnership III L.P., of each of which Blackstone Management
Associates III L.L.C. is the general partner having voting and dispositive
power.
CERTAIN TRANSACTIONS
TrizecHahn and the Company had certain agreements which provided certain
management services to each other from time to time. The Company established
trade credit with various suppliers of its petroleum requirements, requiring
the guarantee of TrizecHahn. Fees related to trade credit guarantees totaled
$0.2 million and $0.2 million in 1995 and 1996, respectively. All trade credit
guarantees were terminated in August 1996.
The business relationships described above between the Company and
TrizecHahn were on terms no less favorable in any respect than those which
could have been obtained through dealings with third parties.
In connection with the Blackstone Transaction, affiliates of Blackstone
received fees of $7.0 million, and the Company reimbursed Blackstone for $1.7
million of out-of-pocket expenses incurred in connection with the Blackstone
Transaction and the November Offering. In addition, an affiliate of Blackstone
receives a monitoring fee equal to $2.0 million per annum. Affiliates of
Blackstone may in the future receive customary fees for advisory services
rendered to the Company. Such fees will be negotiated from time to time with
the independent members of the Company's board of directors on an arm's-length
basis and will be based on the services performed and the prevailing fees then
charged by third parties for comparable services.
In connection with the October 1997 transaction with Tiger, the shares of
common stock of Clark USA owned by Oxy were exchanged for an equal number of
shares of Class F Common Stock having voting rights limited as a class to the
lesser of (a) the aggregate voting power of such shares on a one-vote-per-
share basis and (b) 19.9% of the total voting power of all classes of Clark
USA's voting stock. The Class F Common Stock is convertible at any time to
Common Stock of Clark USA, on a one-for-one basis, at the option of any holder
other than Oxy and its affiliates. Clark USA also issued to Oxy an additional
545,455 shares of Class F Common Stock in full satisfaction of Clark USA's
obligation to issue shares under its then existing Stockholders' Agreement
with Oxy.
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<PAGE>
In early 1998, Clark USA engaged Oxy to provide certain advisory and
consulting services in connection with ongoing crude oil supplier decisions
and related purchase and hedging strategies. In consideration for these
services, Clark USA issued and delivered to Oxy an additional 101,010 shares
of its Class F Common Stock.
In March 1998, Clark USA settled certain obligations outstanding between
Clark USA and Gulf arising out of the December 1995 advance crude oil purchase
receivable transactions. Clark USA paid Gulf $4 million, released 213,654
escrowed shares of Common Stock to Gulf, and released Gulf from its obligation
to deliver certain amounts of crude oil through 2001. In exchange, Gulf agreed
to release Clark USA from obligations to pay further commissions related to
the Oxy Transaction and agreed to allow Clark USA to cancel 1,008,619 shares
of its Common Stock.
Clark USA contributed $268.6 million of capital to the Company during 1996.
Clark USA contributed $33.6 million from the proceeds of debt issued in the
Oxy/Gulf transactions in January of 1996. In addition, $235.0 million was
contributed to the Company from the contribution and subsequent sale of the
Oxy advance crude oil purchase receivable and the associated hedge contracts
in October of 1996. During 1995, Clark USA contributed $165.6 million to the
Company. Upon the issuance of stock in the first quarter of 1995, Clark USA
contributed $150.0 million for the purchase of the Port Arthur facility and
also contributed $9.2 million for operating purposes. In addition, from the
proceeds of debt issued in the Oxy/Gulf transactions, Clark USA contributed
$6.4 million in December 1995 to the Company. In November 1997, the Company
returned capital to Clark USA in an amount equal to approximately $215.0
million (the "Special Dividend").
It is expected that Blackstone will receive a fee for financial advisory
services rendered to the Company in connection with the Lima Acquisition, the
Debt Offering, additional borrowings under the Amended and Restated Term Loan
Agreement and the Consent Solicitation. The fee, which is expected to be $2.5
million, will be paid at a future date to be determined.
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<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The Exchange Offer applies to $110.0 million aggregate principal amount of
Old Notes. The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The New Notes will evidence the same debt as
the Old Notes, and will be entitled to the benefits of the Indenture.
The New Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and Bankers Trust Company, as trustee (the "Trustee"), as
supplemented and amended from time to time. The New Notes are subject to all
provisions of the Indenture under which it is issued, and holders of New Notes
are referred to the Indenture for a complete statement thereof. The following
summary of certain provisions of the Indenture and the Registration Agreement
does not purport to be complete and is qualified in its entirety by reference
to the Indenture and the Registration Agreement, including the definitions
therein of certain terms used below. A copy of the proposed form of Indenture
and the Registration Agreement is available from the Company upon request. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." For purposes of this section, the term the
"Company" refers to Clark only and does not include its subsidiaries.
As of the date of the Indenture, each of the Company's Subsidiaries will be
a Restricted Subsidiary and the Notes will not be assigned an investment grade
rating. However, under certain circumstances, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture. In addition, upon the assignment by S&P
and Moody's of an Investment Grade Rating to the New Notes, the Company will
not be subject to certain restrictive covenants set forth in the Indenture.
The New Notes will be senior unsecured obligations of the Company limited in
aggregate principal amount to $110.0 million and will mature on August 15,
2008. Interest on the New Notes will accrue at the rate of 8 5/8% per annum
and will be payable semiannually in arrears on February 15 and August 15,
commencing on February 15, 1999, to holders of record on the immediately
preceding February 1 and August 1, respectively.
INTEREST AND SETTLEMENT
Interest on the New Notes will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. The New Notes will be payable both as to principal and interest
at the office or agency of the Company maintained for such purpose within the
City and State of New York or, at the option of the Company, payment of
interest may be made by check mailed to the holders of the New Notes at their
addresses set forth in the register of holders of New Notes. Until otherwise
designated by the Company, the Company's office or agency in New York will be
the office of the Trustee maintained for such purpose. The New Notes will be
issued in registered form, without coupons, and in minimum denominations of
$1,000.
Settlement for the New Notes will be made in immediately available funds.
Payments by the Company in respect of the New Notes (including principal,
premium, if any, and interest and Additional Interest, if any) will be made in
immediately available funds. Secondary trading in long-term notes and
debentures of corporate issuers is generally settled in clearing-house or
next-day funds. In contrast, the New Notes are expected to trade in the
Depository's Same-Day Funds Settlement System, and any secondary market
trading activity in the New Notes will, therefore, be required by the
Depository to be settled in immediately available funds. No assurance can be
given as to the effect, if any, of such settlement arrangements on trading
activity in the New Notes.
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<PAGE>
RANKING
The New Notes will rank senior in right of payment to all subordinated
Indebtedness of the Company. The New Notes will rank pari passu in right of
payment with all current and future senior Indebtedness of the Company,
including borrowings under the Credit Agreement, the 9 1/2% Notes, the 8 3/8%
Notes and the term loans under the Amended and Restated Term Loan Agreements.
The Credit Agreement, however, and all borrowings thereunder, are secured by a
lien on substantially all of the Company's cash and cash equivalents,
receivables, crude oil, refined product and other inventories and trademarks
and other intellectual property. As of June 30, 1998, there was approximately
$197.2 million outstanding under the Credit Agreement in the form of letter of
credit issuances and there were no outstanding borrowings.
MANDATORY REDEMPTION
The New Notes are not subject to any mandatory redemption.
OPTIONAL REDEMPTION
The New Notes will be redeemable, at the Company's option, in whole or in
part, at any time on and after August 15, 2003, upon not less than 30 nor more
than 60 days' notice mailed to each holder of New Notes to be redeemed at such
holder's address appearing in the Company's Security Register, in principal
amounts of $1,000 or an integral multiple of $1,000, at the following
redemption prices (expressed as percentages of the principal amount) if
redeemed during the 12-month period commencing on August 15 of each of the
years set forth below, plus, in each case, accrued interest thereon to, but
excluding, the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.............................................................. 104.312%
2004.............................................................. 102.156%
2005 and thereafter............................................... 100.000%
</TABLE>
In addition, the Company may, at its option, use the net cash proceeds of
one or more Equity Offerings to the extent the net cash proceeds thereof are
contributed to the equity capital of the Company to redeem for cash up to 35%
in aggregate principal amount of the New Notes originally issued under the
Indenture at any time prior to August 15, 2002, at a redemption price equal to
108.625% of the aggregate principal amount so redeemed, plus accrued interest;
provided that at least 65% of the principal amount of New Notes originally
issued remains outstanding immediately after such redemption. Any such
redemption will be required to occur on or prior to 120 days after the receipt
by the Company of the net cash proceeds of such Equity Offering and upon not
less than 30 nor more than 60 days' notice mailed to each holder of New Notes
to be redeemed at such holder's address appearing in the Company's Security
Register, in principal amounts of $1,000 or an integral multiple of $1,000.
CHANGE OF CONTROL
In the event that there shall occur a Change of Control resulting in a
Rating Decline, then the Company shall make an Offer (as described under "--
Procedures for Offers" below) to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of each holder's New Notes at a purchase price
equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest, including Additional Interest, to the date of purchase. Such
right to require the repurchase of New Notes shall not continue after a
discharge of the Company from its obligations with respect to the New Notes
(see "Defeasance").
The Change of Control purchase feature of the New Notes may, in certain
circumstances, make it more difficult or discourage a takeover of the Company
and, as a result, may make removal of incumbent management more difficult. The
Change of Control purchase feature, however, is not the result of the
Company's knowledge of any specific effort to accumulate the Company's stock
or to obtain control of the Company by means of a merger, tender offer,
solicitation or otherwise, or part of a plan by management to adopt a series
of anti-takeover provisions. Instead, the Change of Control
88
<PAGE>
purchase feature is a result of negotiations between the Company and the
Initial Purchasers. The Company has no present intention to engage in a
transaction involving a Change of Control, although it is possible that the
Company could decide to do so in the future.
The Amended and Restated Term Loan Agreement and the Existing Indentures
contain "change of control" provisions similar to the Change of Control
provision in the Indenture. If a Change of Control were to occur, it is likely
that the Company would not have sufficient assets to satisfy its obligation to
purchase all of the Notes that might be delivered by holders seeking to
exercise the purchase right and any repurchase obligations pursuant to the
Amended and Restated Term Loan Agreement, the 9 1/2% Notes and the 8 3/8%
Notes, all of which will rank pari passu with the Notes.
In addition, pursuant to the terms of the Indenture, the Company is only
required to offer to repurchase the Notes in the event that a Change of
Control results in a Rating Decline. The Change of Control provisions
contained in the 9 1/2% Notes do not require that a Rating Decline occur as a
condition for the Company to offer to repurchase such notes upon the
occurrence of a Change of Control. Consequently, if a Change of Control were
to occur which does not result in a Rating Decline, the Company would be
required to offer to repurchase the 9 1/2% Notes, but would not be required to
offer to repurchase the New Notes offered hereby, the 8 3/8% Notes or the
obligations under the Amended and Restated Term Loan Agreement. A "change of
control" under the Credit Agreement is an event of default under the Credit
Agreement.
The provisions of the Indenture would not necessarily afford holders of the
New Notes protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect such holders.
PROVISION OF FINANCIAL INFORMATION
So long as any of the New Notes are outstanding, the Company will file with
the Commission the annual reports, quarterly reports and other documents that
the Company would have been required to file with the Commission pursuant to
Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to
such Sections, and the Company will provide to all holders copies of such
reports and documents.
COVENANTS
Upon the occurrence of an Investment Grade Rating Event with respect to the
New Notes, the covenants imposed on the Company by the Indenture governing
such series of New Notes will change. See "--Certain Investment Grade
Covenants." An "Investment Grade Rating Event" shall occur on the first day on
which the New Notes are assigned an Investment Grade Rating. An "Investment
Grade Rating" means (i) a Moody's Rating of Baa3 or higher and an S&P Rating
of at least BB+ or (ii) a Moody's Rating of Ba1 or higher and an S&P Rating of
at least BBB- or, in each case, if Moody's or S&P shall change their rating
system, equivalent ratings.
Certain Non-Investment Grade Covenants
The Indenture contains, among others, the following covenants, each of which
shall apply to the Company from the Issue Date until the occurrence of an
Investment Grade Rating Event:
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment, unless (i) at the time of and immediately after giving
effect to the proposed Restricted Payment, no Default or Event of Default
shall have occurred and be continuing, or would occur as a consequence
thereof, (ii) either the Company would (a) at the time of such Restricted
Payment and after giving pro forma effect thereto, have a Consolidated
Adjusted Net Worth exceeding $200.0 million or (b) be permitted to incur at
least
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$1.00 of additional Indebtedness pursuant to the Consolidated Operating Cash
Flow Ratio test set forth in the first paragraph of the covenant described
under "--Limitation on Indebtedness," and (iii) at the time of and immediately
after giving effect to the proposed Restricted Payment (the value of any such
payment if other than cash, as determined in good faith by the board of
directors of the Company and evidenced by a Board Resolution), the aggregate
amount of all Restricted Payments (including Restricted Payments permitted by
clauses (b), (j), (l) and (m) of the next succeeding paragraph and excluding
the other Restricted Payments permitted by such paragraph) declared or made
subsequent to the Issue Date shall not exceed the sum of (a) 50% of the
aggregate Consolidated Net Operating Income (or, if such aggregate
Consolidated Net Operating Income is a deficit, minus 100% of such deficit) of
the Company for the period (taken as one accounting period) from April 1, 1998
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment plus (b) 100% of the aggregate net proceeds, including cash and the
fair market value of property other than cash (as determined in good faith by
the board of directors of the Company and evidenced by a Board Resolution),
received by the Company since April 1, 1998, from any Person other than a
Subsidiary of the Company as a result of the issuance of Capital Stock (other
than any Disqualified Capital Stock) of the Company including such Capital
Stock issued upon conversion of Indebtedness or upon exercise of warrants and
any contributions to the capital of the Company (other than Excluded
Contributions) received by the Company from any such Person plus (c) to the
extent that any Restricted Investment that was made after April 1, 1998, is
sold for cash or otherwise liquidated or repaid for cash, the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any). For purposes of any calculation pursuant to the
preceding sentence which is required to be made within 60 days after the
declaration of a dividend by the Company, such dividend shall be deemed to be
paid at the date of declaration.
The foregoing provisions of this covenant will not be violated by reason of
(a) the payment of any dividends or distributions payable solely in shares of
the Company's Capital Stock (other than Disqualified Capital Stock) or in
options, warrants or other rights to acquire the Company's Capital Stock
(other than Disqualified Capital Stock), (b) the payment of any dividend
within 60 days after the date of declaration thereof if, at such date of
declaration, such payment complied with the provisions described above, (c)
the payment of cash dividends or the making of loans or advances to Clark USA
after October 1, 2002, in an amount sufficient to enable Clark USA to make
cash payments of interest or dividends required to be made in respect of the
11 1/2% Preferred Stock or the Exchange Debentures in accordance with the
terms thereof in effect on the Issue Date, (d) the payment of cash dividends
or the making of loans or advances in an amount sufficient to enable Clark USA
to make payments required to be made in respect of the 10 7/8% Notes in
accordance with the terms thereof in effect on the Issue Date, (e) the
retirement of any shares of the Company's Capital Stock in exchange for, or
out of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other shares of its Capital Stock (other than
Disqualified Capital Stock) or options, warrants or other rights to purchase
the Company's Capital Stock (other than Disqualified Capital Stock) and the
declaration and payment of dividends on such new Capital Stock in an aggregate
amount no greater than the amount of dividends declarable and payable on such
retired Capital Stock immediately prior to such retirement, (f) the Chevron
Payment, (g) the AOC Payment, (h) the Gulf Payments, (i) other Restricted
Payments in an aggregate amount not to exceed $50 million, (j) the making of
any payment in redemption of Capital Stock of the Company or Clark USA or
options to purchase such Capital Stock granted to officers or employees of the
Company or Clark USA pursuant to any stock option, stock purchase or other
stock plan approved by the board of directors of the Company or Clark USA in
connection with the severance or termination of officers or employees not to
exceed $8.0 million per annum or the payment of cash dividends or the making
of loans or advances to Clark USA to permit it to make such payments, (k) the
declaration and payment of dividends to holders of any class or series of
preferred stock of the Company and its Restricted Subsidiaries issued in
accordance with the covenant "Limitation on Indebtedness," (l) the payment of
dividends on the Company's common stock,
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following the first public offering of the Company's or Clark USA's common
stock after the Issue Date, of up to 6% per annum of the net proceeds received
by the Company in such public offering or the payment of funds to Clark USA in
amounts necessary to permit Clark USA to make such payments to the extent the
proceeds of such offering were contributed to the equity capital of the
Company, (m) so long as no Default or Event of Default shall have occurred and
be continuing (or would result therefrom), the payment to Clark USA (in the
form of dividends, loans, advances or otherwise) of 100% of the proceeds of
Indebtedness incurred pursuant to clause (xv) of the definition of "Permitted
Indebtedness" to redeem, repurchase, defease or otherwise acquire or retire
for value the 10 7/8% Notes; provided, however, that at the time of such
redemption, repurchase, defeasance or other acquisition or retirement for
value, the Consolidated Operating Cash Flow Ratio of the Company, after giving
effect to the incurrence of Indebtedness in connection therewith, would be
greater than 1.75-to-1.0, (n) the payment of dividends or the making of loans
or advances by the Company to Clark USA in an amount not to exceed $2.0
million in any fiscal year for costs and expenses incurred by Clark USA in its
capacity as a holding company or for services rendered to the Company, (o)
Restricted Investments not to exceed at any one time an aggregate of $75.0
million, and (p) Restricted Investments made with Excluded Contributions.
The board of directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Default or Event of Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated shall be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this "Limitation on Restricted Payments" covenant. All
such outstanding Investments shall be deemed to constitute Investments in an
amount equal to the greatest of (x) the net book value of such Investments at
the time of such designation, (y) the fair market value of such Investments at
the time of such designation, and (z) the original fair market value of such
Investments at the time they were made. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, incur any Indebtedness (including
Acquired Debt) other than (i) the New Notes and the obligations outstanding or
incurred on the Issue Date under the Amended and Restated Term Loan Agreement
and (ii) Permitted Indebtedness, unless after giving effect to the incurrence
of such Indebtedness and the receipt and application of the proceeds
therefrom, the Company's Consolidated Operating Cash Flow Ratio is greater
than 2-to-1. Notwithstanding the foregoing, the Company's Unrestricted
Subsidiaries may incur Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
such event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company.
Other than the limitations on incurrence of Indebtedness contained in this
covenant, there are no provisions in the Indenture that would protect the
holders of the New Notes in the event of a highly leveraged transaction.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES OF THE COMPANY. The Company will not, and will not permit any
Restricted Subsidiary of the Company (other than a Securitization Special
Purpose Entity) to, create or otherwise cause or suffer to exist or become
effective, any consensual encumbrance or restriction which, by its terms,
restricts the ability of any Restricted Subsidiary of the Company (other than
a Securitization Special Purpose Entity) to (i) pay dividends or make any
other distributions on any such Restricted Subsidiary's Capital Stock or pay
any Indebtedness owed to the Company or any Restricted Subsidiary of the
Company, (ii) make any loans or advances to the Company or any Restricted
Subsidiary of the Company, or (iii) transfer any of its property or assets to
the Company or any Restricted Subsidiary of the Company, except for, in
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the case of clauses (i), (ii) and (iii) above, any restrictions (a) existing
under the Indenture and any restrictions existing on the Issue Date pursuant
to any agreement relating to Existing Indebtedness of the Company or any
Restricted Subsidiary, (b) pursuant to an agreement relating to Indebtedness
incurred by such Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company and outstanding on such date
and not incurred in anticipation of becoming a Restricted Subsidiary, (c)
imposed by virtue of applicable corporate law or regulation and relating
solely to the payment of dividends or distributions to stockholders, (d) with
respect to restrictions of the nature described in clause (iii) above,
included in a contract entered into in the ordinary course of business and
consistent with past practices that contains provisions restricting the
assignment of such contract, (e) pursuant to an agreement effecting a renewal,
extension, refinancing, refunding or replacement of Indebtedness referred to
in (a) or (b) above; provided, however, that the provisions contained in such
renewal, extension, refinancing, refunding or replacement agreement relating
to such encumbrance or restriction, taken as a whole, are not materially more
restrictive than the provisions contained in the agreement the subject
thereof, as determined in good faith by the board of directors, or (f) which
will not in the aggregate cause the Company not to have the funds necessary to
pay the principal of, premium, if any, or interest, including Additional
Interest, on the New Notes at their Stated Maturity.
LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. The Company
will not, and will not permit any Restricted Subsidiary of the Company to,
directly or indirectly, conduct any business or enter into any transaction or
series of similar transactions (including, without limitation, the purchase,
sale, transfer, lease or exchange of any property or the rendering of any
service) with (i) any direct or indirect holder of more than 5% of any class
of Capital Stock of the Company or of any Restricted Subsidiary of the Company
(other than transactions between or among the Company and/or its Restricted
Subsidiaries except for Restricted Subsidiaries owned in any part by the
Principal Shareholders) or (ii) any Affiliate of the Company (other than
transactions between or among the Company and/or its Restricted Subsidiaries
except for Restricted Subsidiaries owned in any part by the Principal
Shareholders) (each of the foregoing, a "Shareholder/Affiliate Transaction")
unless the terms of such business, transaction or series of transactions are
as favorable to the Company or such Restricted Subsidiary in all material
respects as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with a
Person which is not such a stockholder or Affiliate and, if such transaction
or series of transactions involves payment for services of such a stockholder
or Affiliate, (x) for amounts greater than $10.0 million and less than $25.0
million per annum, the Company shall deliver an Officers' Certificate to the
Trustee certifying that such Shareholder/Affiliate Transaction complies with
clause (b) above or (y) for amounts equal to or greater than $25.0 million per
annum, then (A) a majority of the disinterested members of the board of
directors shall in good faith determine that such payments are fair
consideration for the services performed or to be performed (evidenced by a
Board Resolution) or (B) the Company must receive a favorable opinion from a
nationally recognized investment banking firm chosen by the Company or, if no
such investment banking firm is in a position to provide such opinion, a
similar firm chosen by the Company (having expertise in the specific area
which is the subject of the opinion), that such payments are fair
consideration for the services performed or to be performed (a copy of which
shall be delivered to the Trustee); provided that the foregoing requirements
shall not apply to (i) Shareholder/Affiliate Transactions involving the
purchase or sale of crude oil, vacuum tower bottoms, refined products or other
inventory, so long as (y) in the case of such transactions involving crude
oil, such transactions are priced in line with the market price of a crude
benchmark and (z) the pricing of each of such transactions are equivalent to
the pricing of comparable transactions with unrelated third parties; and
provided further that the Gulf Payments shall not be deemed a
Shareholder/Affiliate Transaction, (ii) Restricted Payments permitted by the
provisions of the Indenture described under "Limitation on Restricted
Payments", (iii) payments made in connection with the Blackstone Transaction,
including fees to Blackstone, (iv) payment of annual management, consulting,
monitoring and advisory fees and related expenses to Blackstone and its
affiliates and (v) payment of reasonable and customary fees
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paid to, and indemnity provided on behalf of, officers, directors, employees
or consultants of the Company or any Restricted Subsidiary, (vi) payments by
the Company or any of its Restricted Subsidiaries to Blackstone and its
Affiliates made for any financial advisory, financing, underwriting or
placement services or in respect of other investment banking activities,
including, without limitation, in connection with acquisitions or divestitures
which payments are approved by a majority of the board of directors of the
Company in good faith, (vii) payments or loans to employees or consultants
which are approved by a majority of the board of directors of the Company in
good faith, (viii) any agreement in effect on the Issue Date and any amendment
thereto (so long as any such amendment is not disadvantageous to the holders
of the New Notes in any material respect) or any transaction contemplated
thereby, or (ix) any stockholder agreement or registration rights agreement to
which the Company is a party on the Issue Date and any similar agreements
which it may enter into thereafter; provided that the performance by the
Company or any of its Restricted Subsidiaries of obligations under any future
amendment or under such a similar agreement entered into after the Issue Date
shall only be permitted by this clause (ix) to the extent that the terms of
any such amendment or new agreement are not disadvantageous to the holders of
the New Notes in any material respect.
LIMITATION ON CERTAIN ASSET DISPOSITIONS. The Company will not, and will not
permit any Restricted Subsidiary of the Company to, make any Asset Disposition
unless (i) the Company or such Restricted Subsidiary receives consideration at
the time of such disposition (or in the case of a lease, over the term of such
lease) at least equal to the fair market value of the shares or assets
disposed of (which shall be as determined in good faith by the Company), and
(ii) at least 75% of the consideration for such disposition consists of cash
or Cash Equivalents; provided that the following will be deemed to be cash for
purposes of this covenant: (1) the amount of any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the New Notes) that are
assumed by the transferee of any such assets and (2) any notes or other
obligations received by the Company or such Restricted Subsidiary from a
transferee that are converted by the Company or such Restricted Subsidiary
into cash within 180 days after such Asset Disposition; provided, further,
that the 75% limitation referred to above in clause (ii) will not apply to (x)
any disposition of assets in which the cash portion of such consideration
received therefor on an after-tax basis, determined in accordance with the
foregoing proviso, is equal to or greater than what the after-tax net proceeds
would have been had such transaction complied with the aforementioned 75%
limitation, (y) any disposition of assets (other than the Port Arthur
Refinery) in exchange for assets of comparable fair market value related to
the Principal Business of the Company, provided that in any such exchange of
assets of the Company or a Restricted Subsidiary with a fair market value in
excess of $20.0 million occurring when Blackstone fails to hold, directly or
indirectly, 30% or more of the total voting power of all classes of stock of
the Company, the Company shall obtain an opinion or report from a nationally
recognized investment banking firm, valuation expert or accounting firm
confirming that the assets received by the Company and such Restricted
Subsidiary in such exchange have a fair market value at least equal to the
assets so exchanged, or (z) any disposition of Securitization Program Assets
to any Securitization Special Purpose Entity in exchange for Indebtedness of,
procurement of letters of credit and similar instruments by, or equity or
other interests in, such Securitization Special Purpose Entity.
Within 360 days of the later of (a) the receipt of the Net Available
Proceeds and (b) the date of such applicable Asset Disposition, the Company
may elect to (i) apply the Net Available Proceeds from such Asset Disposition
to permanently redeem or repay Indebtedness of the Company or any Restricted
Subsidiary, other than Indebtedness of the Company which is subordinated to
the Notes or (ii) apply the Net Available Proceeds from such Asset Disposition
to invest in assets related to the Principal Business of the Company or
Capital Stock of any Person primarily engaged in the Principal Business if, as
a result of such acquisition, such Person becomes a Restricted Subsidiary.
Pending the final application of any such Net Available Proceeds, the Company
may temporarily invest such
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Net Available Proceeds in any manner permitted by the Indentures. Any Net
Available Proceeds from an Asset Disposition not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds."
As soon as practical, but in no event later than ten (10) Business Days
after any date (an "Asset Disposition Trigger Date") that the aggregate amount
of Excess Proceeds exceeds $25.0 million, the Company will commence an Offer
(as described below under "Procedures for Offers") to purchase the maximum
principal amount of New Notes that may be purchased out of the Excess Proceeds
and to purchase the maximum amount of other Indebtedness of Clark USA or the
Company having similar rights to be purchased out of such Excess Proceeds, in
each case at an Offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, including
Additional Interest, to the date of purchase. To the extent that any Excess
Proceeds remain after completion of an Offer, the Company may use the
remaining amount for general corporate purposes. Upon completion of such
Offer, the amount of Excess Proceeds will be reset to zero.
LIMITATION ON LIENS. The Company will not, directly or indirectly, create,
incur, assume or suffer to exist any Lien (other than Permitted Liens) on any
asset now owned or hereafter acquired, or on any income or profits therefrom,
or assign or convey any right to receive income therefrom to secure any
Indebtedness which is pari passu with or subordinate in right of payment to
the New Notes, unless the New Notes are secured equally and ratably
simultaneously with or prior to the creation, incurrence or assumption of such
Lien for so long as such Lien exists; provided, that in any case involving a
Lien securing Indebtedness which is subordinated in right of payment to the
New Notes, such Lien is subordinated to the Lien securing the New Notes to the
same extent that such subordinated debt is subordinated to the New Notes.
LIMITATION ON MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company shall
not consolidate or merge with or into (whether or not the Company is the
Surviving Person), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions to another Person unless (i) the Surviving Person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia, (ii) the Surviving Person (if other
than the Company) assumes all of the obligations of the Company under the
Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustees, (iii) at the time of and immediately
after such transaction, no Default or Event of Default shall have occurred and
be continuing, and (iv) except with respect to a merger with or into Clark USA
that does not result in a Rating Decline, after giving pro forma effect to the
transaction, either (a) the Surviving Person would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Consolidated Operating
Cash Flow Ratio test set forth in the first paragraph of the covenant
described under "--Limitations on Indebtedness" or (b) the Consolidated
Operating Cash Flow Ratio of the Surviving Person would be no less than such
ratio for the Company immediately prior to such transaction.
LIMITATION ON ISSUANCE OF GUARANTEES OF INDEBTEDNESS. The Company will not
permit any Restricted Subsidiary, directly or indirectly, to guarantee or
secure the payment of any Indebtedness of the Company unless such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for the guarantee or security of the payment of the
New Notes by such Restricted Subsidiary (other than the grant of security
interests in cash and cash equivalents, receivables and product inventories to
secure obligations under the Credit Agreement). If the Indebtedness to be
guaranteed is subordinated to the New Notes, the guarantee or security of such
Indebtedness shall be subordinated to the guarantee or security of the New
Notes to the same extent as the Indebtedness to be guaranteed is subordinated
to the New Notes under the Indenture. Notwithstanding the foregoing, any such
guarantee or security by a Restricted Subsidiary of the New Notes shall
provide by its terms that it shall be automatically and unconditionally
released and discharged upon either (i) the release or discharge of such
guarantee or security of payment of such
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other Indebtedness, except a discharge by or as a result of payment under such
guarantee or security or (ii) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Company's Capital Stock in, or
all or substantially all the assets of, such Restricted Subsidiary, which
sale, exchange or transfer is made in compliance with the applicable provision
of the Indenture.
Certain Investment Grade Covenants
Upon the occurrence of an Investment Grade Rating Event with respect to the
New Notes, each of the covenants (except for "--Limitation on Issuance of
Guarantees of Indebtedness" and clauses (i), (ii) and (iii) of "--Limitation
on Merger, Consolidation and Sale of Assets") described above under "--Certain
Non-Investment Grade Covenants" shall be of no further force and effect and
shall cease to apply to the Company and its Restricted Subsidiaries. In
addition, the Indenture contains, among other things, the following covenants,
each of which will apply to the Company upon and after the occurrence of an
Investment Grade Rating Event with respect to the New Notes issued thereunder.
RESTRICTIONS ON SECURED INDEBTEDNESS. If the Company shall incur, issue,
assume or guarantee any Indebtedness secured by a Lien on any Principal
Property of the Company or on any share of stock or Indebtedness of any
Restricted Subsidiary (other than a Securitization Special Purpose Entity),
the Company will secure the New Notes equally and ratably with (or, at the
Company's option, prior to) such secured Indebtedness so long as such
Indebtedness shall be so secured, unless the aggregate amount of all such
secured Indebtedness, together with all Attributable Indebtedness of the
Company with respect to any sale and leaseback transactions involving
Principal Properties (with the exception of such transactions which are
excluded as described in clauses (i) through (v) under "--Restrictions on
Sales and Leasebacks" below), would not exceed 10% of Consolidated Net
Tangible Assets. The above restriction does not apply to, and there will be
excluded from secured Indebtedness in any computation under such restriction,
Indebtedness secured by: (i) Liens on property of, or on any share of stock or
Indebtedness of, any corporation existing at the time such corporation becomes
a Restricted Subsidiary and Liens on any property acquired from a corporation
which is merged with or into the Company or a Subsidiary, (ii) Liens in favor
of the Company, (iii) Liens in favor of governmental bodies to secure
progress, advance or other payments, (iv) Liens upon any property acquired
after the date of the Indenture, securing the purchase price thereof or
created or incurred simultaneously with (or within 270 days after) such
acquisition to finance the acquisition of such property or existing on such
property at the time of such acquisition, or Liens on improvements after such
date, in each case subject to certain conditions and provided that the
principal amount of the obligation or indebtedness secured by such Lien shall
not exceed 100% of the cost or fair value (as determined in good faith by the
Company), whichever shall be lower, of the property at the time of the
acquisition, construction or improvement thereof, (v) Liens securing
industrial revenue or pollution control bonds, (vi) Liens arising out of any
final judgment for the payment of money aggregating not in excess of $25.0
million which remains unstayed, in effect and unpaid for a period of 60
consecutive days or Liens arising out of any judgments which are being
contested in good faith, (vii) Permitted Liens in existence on the date of the
Investment Grade Rating Event, (viii) Liens to secure obligations arising from
time to time under the Credit Agreement including Guaranties thereof, or (ix)
any extension, renewal, or replacement of any Lien referred to in the
foregoing clauses (i) through (viii) inclusive.
RESTRICTIONS ON SALES AND LEASEBACKS. The Company may not enter into any
sale and leaseback transaction involving any Principal Property, unless the
aggregate amount of all Attributable Indebtedness of the Company with respect
to such transaction plus all secured Indebtedness (with the exception of
secured Indebtedness which is excluded as described in clauses (i) through
(ix) under "--Restrictions on Secured Indebtedness" above) would not exceed
10% of Consolidated Net Tangible Assets. This restriction does not apply to,
and there shall be excluded from Attributable Indebtedness in any computation
under such restriction, any sale and leaseback transaction if: (i) the lease
is for a period, including renewal rights, not in excess of three years; (ii)
the sale of the Principal
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Property is made within 270 days after its acquisition, construction or
improvements; (iii) the lease secures or relates to industrial revenue or
pollution control bonds; (iv) the transaction is between the Company and a
Restricted Subsidiary; or (v) the Company, within 270 days after the sale is
completed, applies to the retirement of Indebtedness of the Company or a
Restricted Subsidiary, or to the purchase of other property which will
constitute a Principal Property, an amount not less than the greater of (1)
the net proceeds of the sale of the Principal Property leased or (2) the fair
market value (as determined by the Company in good faith) of the Principal
Property leased. The amount to be applied to the retirement of Indebtedness
shall be reduced by (x) the principal amount of any debentures or notes
(including the New Notes) of the Company or a Restricted Subsidiary
surrendered within 270 days after such sale to the applicable trustee for
retirement and cancellation, (y) the principal amount of Indebtedness, other
than the items referred to in the preceding clause (x), voluntarily retired by
the Company or a Restricted Subsidiary within 270 days after such sale and (z)
associated transaction expenses.
Procedures for Offers
Within 30 days following a Change of Control resulting in a Rating Decline
and on any Asset Disposition Trigger Date, the Company will mail to each
holder of New Notes, at such holder's registered address, a notice stating:
(i) the Offer is being made as a result of a Change of Control or one or more
Asset Dispositions, the length of time the Offer shall remain open, and the
maximum aggregate principal amount of New Notes that will be accepted for
payment pursuant to such Offer, (ii) the purchase price, the amount of accrued
and unpaid interest, including Additional Interest, as of the Purchase Date,
and the Purchase Date, (iii) in the case of a Change of Control, the
circumstances and material facts regarding such Change of Control, to the
extent known to the Company (including, but not limited to, information with
respect to pro forma and historical financial information after giving effect
to such Change of Control, and information regarding the Person or Persons
acquiring control), and (iv) such other information required by the Indenture
and applicable laws and regulations.
On the Purchase Date for any Offer, the Company will (1) in the case of an
Offer resulting from a Change of Control, accept for payment all New Notes
tendered pursuant to such Offer and, in the case of an Offer resulting from
one or more Asset Dispositions, accept for payment the maximum principal
amount of New Notes tendered pursuant to such Offer that can be purchased out
of Excess Proceeds from such Asset Dispositions, which amount shall equal the
product of (a) the amount of such Excess Proceeds and (b) a fraction whose
numerator is the aggregate amount of all obligations owing under New Notes
tendered pursuant to such offering and whose denominator is the sum of the
aggregate amount of all obligations owing under New Notes tendered pursuant to
such offering and the aggregate amount of all obligations owing under other
Indebtedness of Clark USA or the Company tendered pursuant to similar rights
to repayment or repurchase, (2) deposit with the Paying Agent the aggregate
purchase price of all New Notes accepted for payment and any accrued and
unpaid interest, including Additional Interest, on such New Notes as of the
Purchase Date, and (3) deliver or cause to be delivered to the Trustee all New
Notes tendered pursuant to the Offer. If less than all New Notes tendered
pursuant to any Offer are accepted for payment by the Company for any reason,
selection of the New Notes to be purchased will be in compliance with the
requirements of the principal national securities exchange, if any, on which
the New Notes are listed or, if the New Notes are not so listed, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that New
Notes accepted for payment in part shall only be purchased in integral
multiples of $1,000. The Paying Agent will promptly mail to each holder of New
Notes accepted for payment an amount equal to the Purchase price for such
Notes plus any accrued and unpaid interest, including Additional Interest
thereon. The Trustee will promptly authenticate and mail to such holder of New
Notes accepted for payment in part new New Notes equal in principal amount to
any unpurchased portion of the New Notes, and any New Notes not accepted for
payment in whole or in part shall be promptly returned to the holder thereof.
On and after a Purchase Date, interest will cease to accrue on the New Notes
accepted for payment. The Company will announce the results of the Offer to
holders of the New Notes on or as soon as practicable after the Purchase Date.
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The Company will comply with all applicable requirements of Rule 14e-1 under
the Exchange Act and all other applicable securities laws and regulations
thereunder, to the extent applicable, in connection with any Offer.
Events of Default
The following will be Events of Default under the Indenture: (a) failure to
pay any interest on any Note issued under the Indenture when due, continued
for 30 days; (b) failure to pay principal of (or premium, if any, on) any Note
issued under the Indenture when due; (c) failure to perform or comply with the
provisions described under "--Certain Covenants--Limitation on Merger,
Consolidation and Sale of Assets;" (d) failure to perform any other covenant
or warranty of the Company in the Indenture, continued for 30 days after
written notice as provided in the Indenture; (e) failure to pay, at final
maturity, in excess of $25.0 million principal amount of any indebtedness of
the Company or any Restricted Subsidiary of the Company, or acceleration of
any indebtedness of the Company or any Restricted Subsidiary of the Company in
an aggregate principal amount in excess of $25.0 million; (f) the rendering of
a final judgment or judgments (not subject to appeal and not covered by
insurance) against the Company or any of its Restricted Subsidiaries in an
aggregate principal amount in excess of $50.0 million which remains unstayed,
in effect and unpaid for a period of 60 consecutive days thereafter; and (g)
certain events in bankruptcy, insolvency or reorganization affecting the
Company or any Significant Subsidiary of the Company.
If an Event of Default shall occur and be continuing, either the Trustee or
the holders of at least 25% in aggregate principal amount of the outstanding
Notes issued under the Indenture may accelerate the maturity of all Notes
issued under the Indenture; provided, however, that after such acceleration,
but before a judgment or decree based on acceleration, the holders of a
majority in aggregate principal amount of outstanding Notes issued under the
Indenture may, under certain circumstances, rescind and annul such
acceleration if all Events of Default, other than the nonpayment of
accelerated principal, have been cured or waived as provided in the Indenture.
For information as to waiver of defaults, see "--Modification and Waiver."
No holder of any New Note will have any right to institute any proceeding
with respect to an Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless the holders of at least 25% in aggregate principal
amount of the outstanding Notes issued under such Indenture shall have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee, and the Trustee shall not have received from the
holders of a majority in aggregate principal amount of the outstanding Notes
issued under such Indenture a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. However, such
limitations do not apply to a suit instituted by a holder of a Note for
enforcement of payment of the principal of (and premium, if any) or interest
on such Note on or after the respective due dates expressed in such Note.
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under such
Indenture at the request or direction of any of the holders, unless such
holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes issued under
an Indenture will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee.
The Company will be required to furnish to each Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
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Defeasance
The Indenture provides that, at the option of the Company, (A) if
applicable, the Company will be discharged from any and all obligations in
respect of the outstanding New Notes issued under such Indenture or (B) if
applicable, the Company may omit to comply with certain restrictive covenants,
and that such omission shall not be deemed to be an Event of Default under the
Indenture and the New Notes issued thereunder in the case of either (A) or
(B), upon irrevocable deposit with the Trustee, in trust, of money and/or U.S.
government obligations which will provide money in an amount sufficient in the
opinion of a nationally recognized accounting firm to pay the principal of and
premium, if any, and each installment of interest, if any, on the outstanding
New Notes issued under such Indenture. With respect to clause (B), the
obligations under the Indenture other than with respect to such covenants and
the Events of Default other than the Event of Default relating to such
covenants above shall remain in full force and effect. Such trust may only be
established if, among other things (i) with respect to clause (A), the Company
has received from, or there has been published by, the Internal Revenue
Service (the "Service") a ruling or there has been a change in law, which in
the Opinion of Counsel provides that holders of the New Notes will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred; or, with
respect to clause (B), the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the New Notes will not recognize
gain or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred; (ii) no Event of Default or event
that, with the passing of time or the giving of notice, or both, shall
constitute an Event of Default shall have occurred or be continuing; (iii) the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
such deposit shall not cause the Trustee or the trust so created to be subject
to the Investment Company Act of 1940; and (iv) certain other customary
conditions precedent.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest on, any Note, (b) reduce the
principal amount of (or the premium), or interest on, any Notes, (c) change
the place or currency of payment of principal of (or premium), or interest on,
any New Notes, (d) impair the right to institute suit for the enforcement of
any payment on or with respect to any Notes, (e) reduce the above-stated
percentage of outstanding Notes necessary to modify or amend the Indenture,
(f) reduce the percentage of aggregate principal amount of outstanding Notes
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults, or (g) modify any provisions of the Indenture
relating to the modification and amendment of the Indenture or the waiver of
past defaults or covenants, except as otherwise specified.
The holders of a majority in aggregate principal amount of the outstanding
Notes may waive compliance by the Company with certain restrictive provisions
of the Indenture. The holders of a majority in aggregate principal amount of
the outstanding Notes may waive any past default under the Indenture.
The Trustee
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs.
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The Indenture and the provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions with the Company or any Affiliate; provided, however, that if it
acquires any conflicting interest (as defined in the Indenture or in the Trust
Indenture Act), it must eliminate such conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amended and Restated Term Loan Agreement" means the amended and restated
term loan agreement, dated as of August 10, 1998, among the Company, certain
lenders and Goldman Sachs Credit Partners L.P., as agent, as amended from time
to time.
"AOC Payment" means all payments made to AOC Limited Partnership, a limited
partnership organized under the laws of the State of Missouri, constituting
"Additional Redemption Consideration" required to be paid by Clark USA
pursuant to Section 2.4 of the Stock Purchase and Redemption Agreement.
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
Restricted Subsidiaries with, into or to another Person in a transaction in
which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but
excluding a disposition by a Restricted Subsidiary of such Person to such
Person or a Restricted Subsidiary of such Person) of (i) shares of Capital
Stock (other than directors' qualifying shares) or other ownership interests
of a Restricted Subsidiary of such Person, (ii) substantially all of the
assets of such Person or any of its Restricted Subsidiaries representing a
division or line of business, or (iii) other assets or rights of such Person
or any of its Restricted Subsidiaries outside of the ordinary course of
business, which in the case of either clause (i), (ii) or (iii), whether in a
single transaction or a series of related transactions, result in Net
Available Proceeds in excess of $10.0 million; provided that (x) any transfer,
conveyance, sale, lease or other disposition of assets securing the Credit
Agreement in connection with the enforcement of the security interests therein
and (y) any sale of crude oil, vacuum tower bottoms, refined products, or
other inventory shall not be deemed an Asset Disposition hereunder.
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"Attributable Indebtedness" means the total net amount of rent required to
be paid during the remaining primary term of any particular lease under which
any person is at the time liable, discounted at the rate per annum equal to
the weighted average interest rate borne by the Notes.
"Blackstone" means Blackstone Capital Partners III Merchant Banking Fund
L.P. and its affiliates.
"Blackstone Transaction" means the acquisition of 13,500,000 shares of
common stock of Clark USA previously held by Trizec Hahn Corporation and
certain of its subsidiaries.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
95% of the accounts receivable owned by the Company and its Restricted
Subsidiaries (excluding any accounts receivable from Restricted Subsidiaries
and any accounts receivable that are more than 90 days past due) as of such
date, plus (ii) 90% of the market value of inventory owned by the Company and
its Restricted Subsidiaries as of such date, plus (iii) 100% of the cash and
Cash Equivalents owned by the Company and its Restricted Subsidiaries as of
such date that are, as of such date, held in one or more separate accounts
under the direct control of the agent bank under the Credit Agreement and that
are as of such date pledged to secure working capital borrowings under the
Credit Agreement.
"Capital Lease" means, at the time any determination thereof is to be made,
any lease of property, real or personal or mixed, in respect of which the
present value of the minimum rental commitment would be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"Capitalized Lease Obligation" of any Person means any lease of any property
(whether real, personal or mixed) by such Person as lessee which, in
conformity with GAAP, is required to be accounted for as a Capital Lease on
the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of any association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, and (iii) in the case of a partnership, partnership interests
(whether general or limited).
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses
(ii) and (iii) entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's or S&P and, in each case, maturing
within six months after the date of acquisition.
"Change of Control" means any transaction the result of which is that any
Person (an "Acquiring Person") other than Blackstone, or a Person, a majority
of whose voting equity is owned by Blackstone, becomes the Beneficial Owner,
directly or indirectly, of shares of stock of the Company or Clark USA
entitling such Acquiring Person to exercise 50% or more of the total voting
power of all classes of stock of the Company or Clark USA, as the case may be,
entitled to vote in elections of directors. The term "Beneficial Owner" shall
be determined in accordance with Rule 13d-3 under the Exchange Act.
"Chevron Payment" means that certain contingent payment obligation of Clark
USA to Chevron U.S.A. Inc. based on industry refining margins and the volume
of refined oil products produced at the Port Arthur Refinery over a five-year
period, pursuant to Section 3.1(d) of the Asset Purchase Agreement, dated as
of August 18, 1994, between Clark USA and Chevron U.S.A. Inc., as amended.
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"Clark USA" means Clark USA, Inc., a Delaware corporation and the direct
parent of the Company.
"Consolidated Adjusted Net Worth" of any Person means the total amount of
consolidated stockholder's equity (par value plus additional paid-in capital
(including all Capital Stock except as excluded below) plus retained earnings
or minus accumulated deficit) of such Person as reflected on the consolidated
balance sheet of such Person and its Restricted Subsidiaries for the most
recent Quarter prior to the event requiring such determination to be made,
after excluding (to the extent otherwise included therein and without
duplication) the following (the amount of such stockholder's equity and
deductions therefrom to be computed, except as noted below, in accordance with
GAAP consistently applied): (i) any amount receivable but not paid from sales
of Capital Stock of such Person or its Restricted Subsidiaries determined on a
consolidated basis; (ii) any revaluation or other write-up in book value of
assets subsequent to the date hereof (other than write-ups of oil inventory
previously written down and other than reevaluations or write-ups upon the
acquisition of assets acquired in a transaction to be accounted for by
purchase accounting under GAAP); (iii) treasury stock; (iv) an amount equal to
the excess, if any, of the amount reflected on the books and records of such
Person or its Restricted Subsidiaries for the securities of any Person which
is not a Restricted Subsidiary of such Person over the lesser of cost or
market value (as determined in good faith by the board of directors of such
Person or such Restricted Subsidiary); (v) Disqualified Capital Stock; (vi)
equity securities of such Person or its Restricted Subsidiaries which are not
Disqualified Capital Stock but which are exchangeable for or convertible into
debt securities of such Person or such Restricted Subsidiary, as the case may
be, other than at the option of such Person or such Restricted Subsidiary
except to the extent that the exchange or conversion rights in such other
equity securities cannot, under any circumstances, be exercised prior to
Maturity; (vii) the cumulative foreign currency translation adjustment, if
any; and (viii) write-offs of non-cash items in an amount not to exceed $80.0
million.
"Consolidated Net Operating Income" means, when used with reference to any
Person, for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP, provided that (i) the Net Income of any Person which
is not a Subsidiary of such Person or is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to such Person or its Restricted Subsidiaries, (ii) the Net
Income of any Unrestricted Subsidiary shall be excluded (except to the extent
distributed to the Company or one of its Subsidiaries), (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, (iv) extraordinary
gains and losses and gains and losses from the sale of assets outside the
ordinary course of such Person's business shall be excluded, (v) the
cumulative effect of changes in accounting principles in the year of adoption
of such changes shall be excluded, and (vi) the tax effect of any of the items
described in clauses (i) through (v) above shall be excluded.
"Consolidated Net Tangible Assets" of a Person means the consolidated total
assets of such Person and its Restricted Subsidiaries determined in accordance
with GAAP, less the sum of (i) all current liabilities and current liability
items and (ii) all goodwill, trade names, trademarks, patents, organization
expense, unamortized debt discount and expense and other similar intangibles
properly classified as intangibles in accordance with GAAP.
"Consolidated Operating Cash Flow" means with respect to any Person,
Consolidated Net Operating Income of such Person and its Restricted
Subsidiaries without giving effect to gains and losses on securities
transactions (net of related taxes) for the period described below, increased
by the sum of (i) Consolidated Fixed Charges of such Person and its Restricted
Subsidiaries which reduced Consolidated Net Operating Income for such period,
(ii) consolidated income tax expense (net of taxes relating to gains and
losses on securities transactions) of such Person and its Restricted
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Subsidiaries which reduced Consolidated Net Operating Income for such period,
(iii) consolidated depreciation and amortization expense (including
amortization of purchase accounting adjustments) of such Person and its
Restricted Subsidiaries and other noncash items to the extent any of which
reduced Consolidated Net Operating Income for such period, (iv) expenses
incurred in connection with the Blackstone Transaction in an amount not to
exceed $9.0 million, and (v) any annual management monitoring, consulting and
advisory fees and related expenses paid to Blackstone and its affiliates in an
amount not to exceed $2.0 million, less noncash items which increased
Consolidated Net Operating Income for such period, all as determined for such
Person and its consolidated Restricted Subsidiaries in accordance with GAAP
for the four full Quarters for which financial information in respect thereof
is available immediately prior to the Transaction Date.
"Consolidated Operating Cash Flow Ratio" means, with respect to any Person,
the ratio of (i) Consolidated Operating Cash Flow of such Person and its
Restricted Subsidiaries for the four Quarters for which financial information
in respect thereof is available immediately prior to the Transaction Date to
(ii) the aggregate Fixed Charges of such Person and its Restricted
Subsidiaries for such four Quarters, such Fixed Charges and Preferred Stock
Dividends to be calculated on the basis of the amount of the Indebtedness,
Capitalized Lease Obligations and Preferred Stock of such Person and its
Restricted Subsidiaries outstanding on the Transaction Date and assuming the
continuation of market interest rate levels prevailing on the Transaction Date
in any calculation of interest rates in respect of floating interest rate
obligations; provided, however, that if such Person or any Restricted
Subsidiary of such Person shall have acquired, sold or otherwise disposed of
any Material Asset or engaged in an Equity Offering during the four full
Quarters for which financial information in respect thereof is available
immediately prior to the Transaction Date or during the period from the end of
such fourth full Quarter to and including the Transaction Date, the
calculation required in clause (i) above will be made giving effect to such
acquisition, sale or disposition or the other investment of the Net Available
Proceeds of such Equity Offering on a pro forma basis as if such acquisition,
sale, disposition or investment had occurred at the beginning of such four
full Quarter period without giving effect to clause (iii) of the definition of
"Consolidated Net Operating Income" (that is, including in such calculation
the Net Income for the relevant prior period of any Person acquired in a
pooling of interests transaction, notwithstanding the provisions of said
clause (iii)); provided, further, that Fixed Charges of such Person during the
applicable period shall not include the amount of consolidated interest
expense which is directly attributable to Indebtedness to the extent such
Indebtedness is reduced by the proceeds of the incurrence of such Indebtedness
which gave rise to the need to calculate the Consolidated Operating Cash Flow
Ratio. Any such pro forma calculation may include adjustments appropriate, in
the reasonable determination of the Company as set forth in an Officer's
Certificate, to (i) reflect operating expense reductions reasonably expected
to result from the acquisition by the Company of such Material Asset or (ii)
eliminate the effect of any extraordinary accounting event with respect to any
acquired Person on Consolidated Net Operating Income.
"Credit Agreement" means that certain Credit Agreement, dated as of
September 25, 1997, by and among the Company and the financial institutions
party thereto, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith), and in each case
as amended, modified, extended, renewed, refunded, replaced or refinanced from
time to time.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such
Person is the Surviving Person) or the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of such Person's
assets.
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"Disqualified Capital Stock" means any Capital Stock of the Company that,
either by its terms or by the terms of any security into which it is
convertible or exchangeable, is, or upon the happening of any event or passage
of time would be, required to be redeemed or purchased (other than pursuant to
an offer to repurchase such Capital Stock following a change of control, which
offer may not be completed until 45 days after completion of the Offer
described under "--Change of Control"), including at the option of the holder,
in whole or in part, or has, or upon the happening of an event or passage of
time would have, a redemption, sinking fund or similar payment due, on or
prior to August 15, 2008.
"Equity Offering" means any public or private sale of Capital Stock
(including options, warrants or rights with respect thereto) of the Company or
of Clark USA.
"Excluded Contribution" means the net cash proceeds received by the Company
after the Issue Date from (a) contributions to its common equity capital and
(b) the sale (other than to a Subsidiary or to any Company or Subsidiary
management equity plan or stock option plan or any other management or
employee benefit plan or agreement) of Capital Stock of the Company (other
than Disqualified Stock), in each case, designated as Excluded Contributions
pursuant to an Officers' Certificate.
"Existing Indebtedness" means any Indebtedness of the Company and its
Subsidiaries incurred on or outstanding as of the Issue Date and in any event
Indebtedness evidenced by the Credit Agreement, the 1997 Term Loan Agreement,
the 9 1/2% Notes, the 8 3/8% Notes and the 8 7/8% Senior Subordinated Notes
whether or not outstanding on the Issue Date.
"Fixed Charges" of any Person means, for any period, the sum of (i)
consolidated Interest Expense of such Person and its Restricted Subsidiaries,
plus (ii) all but the principal component of rentals in respect of
consolidated Capitalized Lease Obligations of such Person and its Restricted
Subsidiaries paid, accrued or scheduled to be paid or accrued by such Person
and its Restricted Subsidiaries during such period, and determined in
accordance with GAAP, plus (iii) all cash dividend payments (excluding items
eliminated in consolidation) on any series of preferred stock of such Person.
For purposes of this definition, (a) interest on Indebtedness which accrues on
a fluctuating basis for periods succeeding the date of determination shall be
deemed to accrue at a rate equal to the average daily rate of interest in
effect during such immediately preceding Quarter and (b) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined in good faith by the chief financial officer, treasurer
or controller of such Person to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP (including Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entities as have been approved by a significant segment of the
accounting profession, which were in effect on November 21, 1997.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Gulf Payments" means all payments (other than the initial purchase price of
$26.9 million under the Gulf Oil Purchase Contract) to Gulf Resources
Corporation, a Panamanian corporation, and/or any of its Affiliates, in each
case, pursuant to the Gulf Merger Agreement, the Gulf Oil Purchase Contract,
the Gulf Stockholders' Agreement and the Gulf Pledge Agreement, as each is in
effect on the date hereof.
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"Indebtedness" with respect to any Person, means any indebtedness,
including, in the case of the Company, the indebtedness evidenced by the
Notes, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including pursuant
to Capital Leases) (except any such balance that constitutes a trade payable
in the ordinary course of business that is not overdue by more than 90 days
from the invoice date or is being contested in good faith), if and to the
extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared on a consolidated basis in accordance
with GAAP, and shall also include, to the extent not otherwise included, the
Guaranty of Indebtedness of other Persons not included in the financial
statements of the Company, the maximum fixed redemption or repurchase price of
Disqualified Capital Stock (or if not redeemable or subject to repurchase, the
issue price) and the maximum fixed redemption or repurchase price (or if not
redeemable or subject to repurchase, the issue price) of Preferred Stock
issued by any Restricted Subsidiary of the Company to any Person other than to
the Company or a Restricted Subsidiary.
"Interest Expense" of any Person means, for any period, the aggregate amount
of interest expense in respect of Indebtedness (excluding (a) the Chevron
Payment, (b) the AOC Payment, (c) the Gulf Payments and (d) the amortization
of debt issuance expense relating to the Notes, the 8 3/8% Notes, the 8 7/8%
Senior Subordinated Notes, and the Indebtedness under the Amended and Restated
Term Loan Agreement, but including without limitation or duplication (i)
amortization of debt issuance expense with respect to other Indebtedness, (ii)
amortization of original issue discount on any Indebtedness, and (iii) the
interest portion of any deferred payment obligation, all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financings and the net cost associated with Interest
Swap Obligations) paid, accrued or scheduled to be paid or accrued by such
Person during such period, determined in accordance with GAAP.
"Interest Swap Obligations" means, when used with reference to any Person,
the obligations of such person under (i) interest rate swap agreements,
interest rate exchange agreements, interest rate cap agreements, and interest
rate collar agreements, (ii) currency swap agreements and currency exchange
agreements, and (iii) other similar agreements or arrangements, which are, in
each such case, designed solely to protect such Person against fluctuations in
interest rates or currency exchange rates.
"Investment" means, when used with reference to any Person, any direct or
indirect advances, loans or other extensions of credit or capital
contributions by such Person to (by means of transfers of property to others
or payments for property or services for the account or use of others, or
otherwise), or purchases or acquisitions by such Person of Capital Stock,
bonds, notes, debentures or other securities issued by, any other Person or
any Guaranty or assumption of any liability (contingent or otherwise) by such
Person of any Indebtedness or Obligations of any other Person and all other
items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Investment Grade Rating" means (i) a Moody's Rating of Baa3 or higher and
an S&P Rating of at least BB+ or (ii) a Moody's Rating of Ba1 or higher and an
S&P Rating of at least BBB- or, in each case, if Moody's or S&P shall change
their rating system, equivalent ratings.
"Investment Grade Rating Event" means the first day on which the Notes are
assigned an Investment Grade Rating.
"Issue Date" means August 10, 1998.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind (except for taxes not yet owing)
in respect of such asset, whether or not filed,
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retention agreement, any lease in the nature thereof, any option or other
agreement to sell and, with respect to which, any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Material Asset" means, with respect to the Company or any Restricted
Subsidiary, any asset, related group of assets, business or division of the
Company or any Restricted Subsidiary (including any capital stock of any
Restricted Subsidiary) which (i) for the most recent fiscal year of the
Company, accounted or would have accounted for more than 3% of the
consolidated revenues of the Company or (ii) as at the end of such fiscal
year, represented or would have represented more than 3% of the consolidated
assets of the Company or had a fair market value in excess of $10 million, all
as shown (x) with respect to any sale or disposition, on the consolidated
financial statements of the Company for such fiscal year or such shorter
period as such assets, business or division were owned by the Company or any
Restricted Subsidiary and (y) with respect to any acquisition, on consolidated
pro forma financial statements of the Company for the four full Quarters for
which financial information in respect thereof is available immediately prior
to such acquisition, giving effect thereto on a pro forma basis as if such
acquisition had occurred at the beginning of such four full Quarters.
"Maturity" means, with respect to the Notes, the date on which the principal
of such Notes becomes due and payable as provided in the Indenture, whether at
the Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means cash or readily marketable cash equivalents
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of assumption by the acquiree of Indebtedness or other obligations
relating to such properties or assets or received in any other noncash form)
net of (i) all legal and accounting expenses, commissions and other fees and
expenses incurred and all federal, state, provincial, foreign and local taxes
required to be accrued as a liability as a consequence of such issuance and
(ii) all payments made by such Person or its Subsidiaries on any Indebtedness
which must, in order to obtain a necessary consent to such issuance or by
applicable law, be repaid out of the proceeds from such issuance.
"Net Income" of any Person for any period means the net income (loss) from
continuing operations of such Person for such period, determined in accordance
with GAAP.
"Non-Recourse Debt" means Indebtedness as to which neither the Company nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender.
"Obligations" means any principal (and premium, if any), interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Indebtedness" means Indebtedness incurred by the Company or its
Restricted Subsidiaries (i) to renew, extend, refinance or refund Indebtedness
that is permitted to be incurred pursuant to the Consolidated Operating Cash
Flow Ratio test set forth in the covenant described under "--Limitation on
Indebtedness" and clauses (ii) through (iv) and (xi) below; provided, however,
that such Indebtedness does not exceed the principal amount of the
Indebtedness so renewed, extended, refinanced or refunded plus the amount of
any premium required to be paid in connection with such refinancing pursuant
to the terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company or such Restricted Subsidiary as
necessary to accomplish
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such refinancing by means of a tender offer or privately negotiated
repurchase, plus the expenses of the Company or such Restricted Subsidiary
incurred in connection with such refinancing; and provided, however, that
Indebtedness the proceeds of which are used to refinance or refund such
Indebtedness shall only be permitted if (A) in the case of any refinancing or
refunding of Indebtedness that is pari passu with the Notes the refinancing or
refunding Indebtedness is made pari passu with the New Notes or subordinated
to the New Notes, (B) in the case of any refinancing or refunding of
Indebtedness that is subordinated to the New Notes the refinancing or
refunding Indebtedness is made subordinated to the New Notes at least to the
same extent as such Indebtedness being refinanced or refunded was subordinated
to the New Notes and (C) in the case of the refinancing or refunding of
Indebtedness that is subordinated to the New Notes, the refinancing or
refunding Indebtedness by its terms, or by the terms of any agreement or
instrument pursuant to which such Indebtedness is issued, (x) does not provide
for payments of principal of such Indebtedness at the stated maturity thereof
or by way of a sinking fund applicable thereto or by way of any mandatory
redemption, defeasance, retirement or repurchase thereof by the Company or
such Restricted Subsidiary (including any redemption, retirement or repurchase
which is contingent upon events or circumstances, but excluding any retirement
required by virtue of acceleration of such Indebtedness upon an event of
default thereunder), in each case prior to the final stated maturity of the
Indebtedness being refinanced or refunded and (y) does not permit redemption
or other retirement (including pursuant to an offer to purchase made by the
Company or such Restricted Subsidiary) of such Indebtedness at the option of
the holder thereof prior to the final stated maturity of the Indebtedness
being refinanced or refunded, other than a redemption or other retirement at
the option of the holder of such Indebtedness (including pursuant to an offer
to purchase made by the Company or such Restricted Subsidiary), which is
conditioned upon the change of control of the Company or such Restricted
Subsidiary; (ii) arising from time to time under the Credit Agreement in an
aggregate principal amount which, together with any obligations under clause
(xi) below, do not exceed the greater of (a) $700.0 million at any one time
outstanding less the aggregate amount of all proceeds of all Asset
Dispositions that have been applied since the Issue Date to permanently reduce
the outstanding amount of such Indebtedness and (b) the amount of the
Borrowing Base as of such date (calculated on a pro forma basis after giving
effect to such borrowing and the application of the proceeds therefrom); (iii)
outstanding or incurred on the Issue Date; (iv) evidenced by trade letters of
credit incurred in the ordinary course of business not to exceed $20 million
in the aggregate at any time; (v) between or among the Company and/or its
Restricted Subsidiaries other than Restricted Subsidiaries owned in any part
by the Principal Shareholders; (vi) which is Subordinated Indebtedness; (vii)
arising out of Sale and Leaseback Transactions or Capitalized Lease
Obligations relating to computers and other office equipment and elements,
catalysts or other chemicals used in connection with the refining of petroleum
or petroleum by-products; (viii) the proceeds of which are used to make the
Chevron Payment, the AOC Payment and the Gulf Payments; (ix) arising out of
Interest Swap Obligations; (x) in connection with capital projects qualifying
under Section 142(a) (or any successor provision) of the Internal Revenue Code
of 1986, as amended, in an amount not to exceed $75.0 million in the aggregate
at any time; (xi) obligations of the Company or any Restricted Subsidiary in
connection with any Qualified Securitization Transaction in an amount which,
together with any amount under clause (ii) above, does not exceed the greater
of (a) $700.0 million at any one time outstanding less the aggregate amount of
all proceeds of all Asset Dispositions that have been applied since the Issue
Date to permanently reduce the outstanding amount of such Indebtedness and (b)
the amount of the Borrowing Base as of such date (calculated on a pro forma
basis after giving effect to such borrowing and the application of the
proceeds therefrom); (xii) any guarantee by the Company of Indebtedness of any
of its Restricted Subsidiaries so long as the incurrence of such Indebtedness
is permitted to be incurred under the covenant "Limitation on Indebtedness;"
(xiii) Indebtedness or preferred stock of Persons that are acquired by the
Company or any of its Restricted Subsidiaries or merged into the Company or a
Restricted Subsidiary in accordance with the terms of the applicable
Indenture; provided that such Indebtedness or preferred stock is not incurred
in contemplation of such acquisition or merger; and provided further that
after giving effect to such acquisition or merger either (A) the Company would
be
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permitted to incur at least $1.00 of additional Indebtedness under the
Consolidated Operating Cash Flow Ratio test set forth in the first paragraph
of "--Limitation on Indebtedness" or (B) the Company's Consolidated Operating
Cash Flow Ratio is equal to or greater than such ratio immediately prior to
such acquisition or merger; (xiv) in an amount not greater than twice the
aggregate amount of cash contributions made to the capital of the Company;
(xv) in exchange for, or the proceeds of which are used to refund or refinance
the 10 7/8% Notes; provided, however, that after giving effect to such
exchange, refunding or refinancing, the Consolidating Operating Cash Flow
Ratio exceeds 1.75-to-1.0 and such Indebtedness shall be subordinated to the
New Notes to at least the same extent as the 8 7/8% Senior Subordinated Notes
are subordinated to the New Notes; and (xvi) in addition to Indebtedness
permitted by clauses (i) through (xv) above, Indebtedness not to exceed on a
consolidated basis for the Company and its Restricted Subsidiaries at any time
$75.0 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company, provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend
to any assets other than those of the Person merged into or consolidated with
the Company; (iii) Liens on property existing at the time of acquisition
thereof by the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition; (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens existing on the Issue Date; (vi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(vii) Liens imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary
course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor; (viii) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract
from the value of the property or the assets of the Company or impair the use
of such property in the operation of the Company's business; (ix) judgment
Liens to the extent that such judgments do not cause or constitute a Default
or an Event of Default; (x) Liens to secure the payment of all or a part of
the purchase price of property or assets acquired or the construction costs of
property or assets constructed in the ordinary course of business on or after
the Issue Date, provided that (a) such property or assets are used in the
Principal Business of the Company, (b) at the time of incurrence of any such
Lien, the aggregate principal amount of the obligations secured by such Lien
shall not exceed the lesser of the cost or fair market value of the assets or
property (or portions thereof) so acquired or constructed, (c) each such Lien
shall encumber only the assets or property (or portions thereof) so acquired
or constructed and shall attach to such assets or property within 180 days of
the purchase or construction thereof and (d) any Indebtedness secured by such
Lien shall have been permitted to be incurred under the covenant entitled
"Limitation on Indebtedness"; (xi) Liens incurred in the ordinary course of
business of the Company with respect to obligations that do not exceed 5% of
Consolidated Net Tangible Assets at any one time outstanding; (xii) Liens
incurred in connection with Interest Swap Obligations; (xiii) Liens on any
Securitization Program Assets in connection with any Qualified Securitization
Transaction; and (xiv) Liens to secure obligations owing from time to time
under the Credit Agreement and Guaranties thereof.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, estate, unincorporated organization
or government or any agency or political subdivision thereof.
"Port Arthur Refinery" means the refinery in Port Arthur, Texas and certain
other assets acquired from Chevron U.S.A., Inc.
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"Principal Business" means, with respect to the Company and its Restricted
Subsidiaries, (i) the business of the acquisition, processing, marketing,
refining, storage and/or transportation of hydrocarbons and/or royalty or
other interests in crude oil or associated products related thereto, (ii) the
acquisition, operation, improvement, leasing and other use of convenience
stores, retail service stations, truck stops and other public accommodations
in connection therewith, (iii) any business currently engaged in by the
Company or its Restricted Subsidiaries on the Issue Date, and (iv) any
activity or business that is a reasonable extension, development or expansion
of, or reasonably related to, any of the foregoing.
"Principal Property" means (i) any refinery and related pipelines,
terminalling and processing equipment or (ii) any other real property or
marketing assets or related group of such assets of the Company having a fair
market value in excess of $20.0 million.
"Principal Shareholders" means (i) Blackstone, (ii) Occidental Petroleum
Corporation and (iii) Affiliates of the Persons described in the foregoing
clauses (i) and (ii), other than the Company and its Subsidiaries.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Subsidiary
pursuant to which the Company or any Subsidiary may sell, convey, grant a
security interest in or otherwise transfer to a Securitization Special Purpose
Entity, and such Securitization Special Purpose Entity may sell, convey, grant
a security interest in, or otherwise transfer to any other Person, any
Securitization Program Assets (whether now existing or arising in the future).
"Quarter" means a fiscal quarterly period of the Company.
"Rating Agencies" means (i) S&P and Moody's or (ii) if S&P or Moody's or
both of them are not making ratings of the New Notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "-"); AAA, AA, A, BBB, BB, B,
CCC, CC, C and D (or equivalent successor categories); (ii) with respect to
Moody's, any of the following categories (any of which may include a "1," "2"
or "3"); Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor
categories), and (iii) the equivalent of any such categories of S&P or Moody's
used by another Rating Agency, if applicable.
"Rating Decline" means that at any time within 90 days (which period shall
be extended so long as the rating of the Notes is under publicly announced
consideration for possible down grade by any Rating Agency) after the date of
public notice of a Change of Control, or of the intention of the Company or of
any Person to effect a Change of Control, the rating of the Notes is decreased
by both Rating Agencies by one or more categories and the ratings on the Notes
following such downgrade is below Investment Grade.
"Receivables" means all rights of the Company or any Subsidiary of the
Company to payments (whether constituting accounts, chattel paper,
instruments, general intangibles or otherwise, and including the right to
payment of any interest or finance charges), which rights are identified in
the accounting records of the Company or such Subsidiary as accounts
receivable.
"Redemption Date," when used with respect to any New Note to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture.
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"Redemption Price," when used with respect to any New Note to be redeemed,
means the price at which it is to be redeemed pursuant to the Indenture.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in-substance or legal defeasance) or other
acquisition or retirement for value (collectively a "prepayment") (other than
in connection with a concurrent issuance of pari passu or Subordinated
Indebtedness) directly or indirectly, by the Company or a Restricted
Subsidiary, prior to the scheduled maturity on or prior to any scheduled
repayment of principal (and premium, if any) or sinking fund payment, in
respect of Indebtedness of the Company (other than the New Notes) which is
subordinate in right of payment to the New Notes.
"Restricted Investment" means any direct or indirect Investment by the
Company or any Restricted Subsidiary of the Company in (i) any Affiliate of
the Company which is not a Restricted Subsidiary of the Company and (ii) any
Unrestricted Subsidiary of the Company, other than direct or indirect
investments in (a) Polymer Asphalt L.L.C., a Missouri limited liability
company, (b) Bagel Street Holdings, Inc., and (c) any pipeline company in
which the Company or any of its Restricted Subsidiaries now owns or hereafter
acquires any interest; provided that the aggregate amount of Investments made
by the Company or any of its Restricted Subsidiaries pursuant to clauses (a),
(b) and (c) above shall not exceed $25.0 million in the aggregate at any one
time outstanding provided, that no Investment in a Securitization Special
Purpose Entity in connection with a Qualified Securitization Transaction shall
be a Restricted Investment.
"Restricted Payment" means (i) any Stock Payment, (ii) any Restricted
Investment or (iii) any Restricted Debt Prepayment. Notwithstanding the
foregoing, Restricted Payments shall not include (a) payments by the Company
to any Restricted Subsidiary of the Company, (b) payments by any Restricted
Subsidiary of the Company to the Company or any other Restricted Subsidiary of
the Company, (c) the Chevron Payment, (d) the AOC Payment, and (e) the Gulf
Payments.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Rating Services and its successors.
"Sale and Leaseback Transaction" of any Person means an arrangement with any
lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which
has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or
commencement of operation thereof to such lender or investor or to any Person
to whom funds have been or are to be advanced by such lender or investor on
the security of such property or asset. The stated maturity of such
arrangement shall be the date of the last payment of rent or any other amount
due under such arrangement prior to the first date on which such arrangement
may be terminated by the lessee without payment of a penalty.
"Securitization Program Assets" means (a) all Receivables and inventory
which are described as being transferred by the Company or any Subsidiary of
the Company pursuant to documents relating to any Qualified Securitization
Transaction, (b) all Securitization Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in the
foregoing clauses.
"Securitization Related Assets" means (i) any rights arising under the
documentation governing or relating to Receivables (including rights in
respect of Liens securing such Receivables and other credit support in respect
of such Receivables) or to inventory, (ii) any proceeds of such Receivables or
inventory and any lockboxes or accounts in which such proceeds are deposited,
(iii) spread accounts and other similar accounts (and any amounts on deposit
therein) established in connection
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with a Qualified Securitization Transaction, (iv) any warranty, indemnity,
dilution and other intercompany claim arising out of the documents relating to
such Qualified Securitization Transaction, and (v) other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable or inventory.
"Securitization Special Purpose Entity" means a Person (including, without
limitation, a Subsidiary of the Company) created in connection with the
transactions contemplated by a Qualified Securitization Transaction, which
Person engages in no activities other than those incidental to such Qualified
Securitization Transaction.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means August 15, 2008.
"Stock Payment" means, with respect to the Company, any dividend, either in
cash or in property (except dividends payable in Capital Stock of the Company
which is not convertible into Indebtedness), on, or the making by the Company
of any other distribution in respect of, its Capital Stock, now or hereafter
outstanding, or the redemption, repurchase, retirement, defeasance or any
acquisition for value by the Company, directly or indirectly, of its Capital
Stock or any warrants, rights or options to purchase or acquire shares of any
class of its Capital Stock, now or hereafter outstanding (other than in
exchange for the Company's Capital Stock (other than Disqualified Capital
Stock) or options, warrants or other rights to purchase the Company's Capital
Stock (other than Disqualified Capital Stock)).
"Stock Purchase and Redemption Agreement" means that certain Stock Purchase
and Redemption Agreement dated as of December 30, 1992, by and among AOC
Limited Partnership, P. Anthony Novelly, Samuel R. Goldstein, G&N Investments,
Inc., The Horsham Corporation, the Company and Clark USA.
"Subordinated Indebtedness" means, with respect to the New Notes, any
Indebtedness of the Company which is subordinated in right of payment to the
New Notes and with respect to which no payments of principal (by way of
sinking fund, mandatory redemption, maturity or otherwise) including, without
limitation, at the option of the holder thereof (other than pursuant to an
offer to repurchase such Subordinated Indebtedness following a change of
control, which offer may not be completed until 45 days after completion of
the Offer described under "--Change of Control") are required to be made by
the Company at any time prior to the Stated Maturity of the New Notes.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
total voting power of all classes of the outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and
one or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and the power to direct the policies, management and
affairs thereof.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or
the Person to which such Disposition is made.
"Transaction Date" means the date on which the Indebtedness giving rise to
the need to calculate the Consolidated Operating Cash Flow Ratio was incurred
or the date on which, pursuant to the terms of this Indenture, the transaction
giving rise to the need to calculate the Consolidated Operating Cash Flow
Ratio occurred.
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"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the Issue Date; provided, however, that in the event the Trust Indenture Act
of 1939 is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
board of directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; and (b) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (x) to subscribe for additional Capital Stock
(including options, warrants or other rights to acquire Capital Stock) or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results. The board of
directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under "--Certain Covenants--Limitation on Indebtedness," and (ii) no Default
or Event of Default would be in existence following such designation.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"Wholly Owned U.S. Restricted Subsidiary" of any Person means a Wholly Owned
Restricted Subsidiary of such Person which is organized under the laws of any
state in the United States or of the District of Columbia.
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BOOK ENTRY; DELIVERY AND FORM
GENERAL
The New Notes are being offered to existing Holders of the Old Notes. The
New Notes will be issued only in fully registered form, without interest
coupons. The New Notes will not be issued in bearer form.
The New Notes will initially be represented by a single permanent global
certificate (collectively the "Global Notes"). The Global Notes will be
deposited with the Trustee, as custodian for DTC in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee.
In addition, transfer of beneficial interests in the Global Notes will be
subject to the applicable rules and procedures of DTC and its direct or
indirect participants, which may change from time to time. Beneficial
interests in the Global Notes may not be exchanged for New Notes in certified
form except in the limited circumstances described below. See "--Exchange of
Interests in Global Notes for Certificated Notes."
EXCHANGE OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
As long as DTC, or its nominee, is the registered holder of the Global
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner and holder of the New Notes represented by such Global Notes for all
purposes under the Indenture and the New Notes. Unless DTC notifies the
Company that it is unwilling or unable to continue as depository for the
Global Notes, or ceases to be a "Clearing Agency" registered under the
Exchange Act, or announces an intention permanently to cease doing business or
does in fact do so, or an Event of Default has occurred and is continuing with
respect to a Global Note, owners of beneficial interests in a Global Note will
not be entitled to have any portions of such Global Note registered in their
names, will not receive or be entitled to receive a physical delivery of New
Notes in definitive form and will not be considered the owners or holders of
the Global Notes (or any New Notes represented thereby) under the Indenture or
the New Notes. In addition, no beneficial owner of an interest in a Global
Note will be able to transfer that interest except in accordance with DTC's
applicable procedures (in addition to those under the applicable Indenture
referred to herein). In the event that owners of beneficial interests in a
Global Note become entitled to receive New Notes in certificated form, such
New Notes will be issued only as New Notes in certificated form in
denominations of $1,000 and integral multiples thereof.
DEPOSITORY PROCEDURES WITH RESPECT TO GLOBAL NOTES
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures
are solely within the control of the respective settlement systems and are
subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
Upon the issuance of the Global Notes, DTC will credit, on its internal
system, the respective principal amount of the individual beneficial interests
represented by such Global Notes to the accounts with DTC ("Participants") or
persons who hold interests through Participants. Ownership of beneficial
interests in the Global Notes will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interest of persons other than Participants).
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AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF THE GLOBAL
NOTES, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE SOLE
OWNER AND HOLDER OF THE NEW NOTES REPRESENTED BY SUCH GLOBAL NOTES FOR ALL
PURPOSES UNDER THE INDENTURES AND THE NEW NOTES. Unless DTC notifies the
Company that it is unwilling or unable to continue as depository for the
Global Notes, or ceases to be a "Clearing Agency" registered under the
Exchange Act, or announces an intention permanently to cease business or does
in fact do so, or an Event of Default has occurred and is continuing with
respect to the Global Notes, owners of beneficial interests in a Global Note
will not be entitled to have any portions of such Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
such applicable New Notes in definitive form and will not be considered the
owners or holders of such Global Notes (or any applicable New Notes presented
thereby) under the applicable Indenture or series of New Notes. In addition,
no beneficial owner of an interest in the Global Notes will be able to
transfer that interest except in accordance with DTC's applicable procedures
(in addition to those under the Indenture referred to herein). In the event
that owners of beneficial interests in a Global Note become entitled to
receive such applicable New Notes in definitive form, such New Notes will be
issued only in registered form in denominations of $1,000 and integral
multiples thereof.
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither
the Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
All payments with respect to the New Notes will be made by the Company in
immediately available funds. Subject to the following considerations,
beneficial interests in the Global Notes will trade in DTC's Settlement System
unit maturity, and secondary market trading activity in such interests will
therefore settle in immediately available funds. The Company expects that DTC
or its nominee, upon receipt of any payment of principal or interest in
respect of a Global Note representing any New Notes held by it or its nominee,
will immediately credit participants' accounts with payment in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note representing such New Notes as shown on the records of DTC
or its nominee. The Company also expects the payments by Participants to
owners of beneficial interest in such Global Notes held through such
Participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name." Such payments will be the
responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one or more Participants
to whose account with DTC interests in the Global Notes are credited and only
in respect of such portion of the aggregate principal amount of the New Notes
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the New Notes, DTC reserves the
right to exchange the Global Notes for legended New Notes in certificated
form, and to distribute such New Notes to its Participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code, as amended, and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created
to hold securities for its Participants and facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in accounts of its
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Participants, thereby eliminating the need for physical transfer and delivery
of certificates. Direct Participants of the Depository ("Direct Participants")
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. The Depository is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to the DTC and its Participants are on file with the
Commission.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Notes among
Participants of DTC it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Trustees nor any of their respective agents will have
any responsibility for the performance by DTC, its Participants or Indirect
Participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing
the records relating to, or payments made on account of, beneficial ownership
interests in Global Notes.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE
The exchange of Old Notes for New Notes in the Exchange Offer will not
constitute a taxable event to holders. Consequently, no gain or loss will be
recognized by a holder upon receipt of a New Note, the holding period of the
New Note will include the holding period the Old Note and the basis of the New
Note will be the same as the basis of the Old Note immediately before the
exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR NEW NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES FOR NON-UNITED STATES HOLDERS
The following summary describes the material United States federal income
tax consequences of the ownership of Notes as of the date hereof by a Non-U.S.
Holder (as defined below). Except where noted, this discussion assumes that
the Notes are held as capital assets (generally, property held for
investment). As used herein the term "Non-U.S. Holder" means any person or
entity that is not a United States Holder ("U.S. Holder"). A U.S. Holder is
any beneficial owner of a Note that is (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is subject to U.S. federal income taxation
regardless of its source or (iv) a trust which is subject to the supervision
of a court within the United States and the control of one or more United
States persons as described in section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended (the "Code").
The discussion below is based upon the provisions of the Code, and
regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to result in
United States federal income tax consequences different from those discussed
below. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of principal
or interest on a Note owned by a Non-U.S. Holder, provided (i) that the
beneficial owner does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled
to vote within the meaning of section 871(h)(3) of the Code and the
regulations thereunder, (ii) the beneficial owner is not a controlled
foreign corporation that is related to the Company through stock ownership,
(iii) the beneficial owner is not a bank whose receipt of interest on a
Note is described in section 881(c)(3)(A) of the Code and (iv) the
beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-U.S. Holder upon the
sale, exchange, retirement or other disposition of a Note; and
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(c) a Note beneficially owned by an individual who at the time of death
is a Non-U.S. Holder will not be subject to United States federal estate
tax as a result of such individual's death, provided that such individual
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the company entitled to vote within
the meaning of section 871(h)(3) of the Code and provided that the interest
payments with respect to such Note would not have been, if received at the
time of such individual's death, effectively connected with the conduct of
a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner
is not a United States Holder. Currently, these requirements will be met if
(1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a United States Holder (which
certification may be made on an Internal Revenue Service ("IRS") Form W-8 (or
successor form)) or (2) a financial institution holding the Note on behalf of
the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it and furnishes a paying agent with a copy
thereof. Under recently finalized Treasury regulations (the "Final
Regulations"), the statement requirement referred to in (a)(iv) above may also
be satisfied with other documentary evidence for interest paid after December
31, 1999 with respect to an offshore account or through certain foreign
intermediaries.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest made to such
Non-U.S. Holder will be subject to a 30% withholding tax unless the beneficial
owner of the Note provides the Company or its paying agent, as the case may
be, with a properly executed (1) IRS Form 1001 (or successor form) claiming an
exemption from (or a reduction in) withholding under the benefit of an
applicable tax treaty or (2) IRS Form 4224 (or successor form) stating that
interest paid on the Note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or
business in the United States. Under the Final Regulations, Non-U.S. Holders
will generally be required to provide IRS Form W-8 in lieu of IRS Form 1001
and IRS Form 4224, although alternative documentation may be applicable in
certain situations. Moreover, under the Final Regulations, the benefit of an
applicable tax treaty may, in certain circumstances, and subject to
significant limitations under the Code, be claimed by the foreign partners of
a foreign partnership that holds the Notes. Foreign partners are urged to
consult their own tax advisors to determine whether they are eligible to claim
such benefits.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the Note is effectively connected with the conduct of such
trade or business, the Non-U.S. Holder, although exempt from the withholding
tax discussed above, will be subject to United States federal income tax on
such interest on a net income basis in the same manner as if it were a United
States Holder. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or lower applicable treaty rate)
of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, interest on a Note will be included
in such foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with the
conduct of a trade or business in the United States by the Non-U.S. Holder, or
(ii) in the case of a Non-U.S. Holder who is an individual, such individual is
present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met. A Non-U.S. Holder that is a foreign corporation may also be subject
to a branch profits tax equal to 30% (or lower applicable treaty rate) on any
gain or income realized upon the sale, exchange, retirement or other
disposition of a Note that is effectively connected with the conduct of a
trade or business in the United States by such Non-U.S. Holder.
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Special rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations", "passive foreign investment companies" and "foreign
personal holding companies", that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that may be relevant to
them.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, no information reporting or backup withholding will be required
with respect to payments made by the Company or any paying agent to Non-U.S.
Holders if a statement described in (a)(iv) above has been received (and the
payor does not have actual knowledge that the beneficial owner is a United
States Holder).
In addition, backup withholding and information reporting may apply to the
proceeds of the sale of a Note within the United States or conducted through
certain U.S. related financial intermediaries
unless the statement described in (a)(iv) above has been received (and the
payor does not have actual knowledge that the beneficial owner is a United
States Holder) or the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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DESCRIPTION OF CERTAIN DEBT INSTRUMENTS
Set forth below is a summary of certain debt instruments to which the
Company is a party. The summary does not purport to be complete, and where
reference is made to particular provisions of a debt instrument, such
provisions, including the definition of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. Copies of such agreements are available from the
Company.
CREDIT AGREEMENT
The Company's Credit Agreement provides for revolving loan borrowings and
letter of credit issuances of up to the lesser of $700.0 million or the amount
of a borrowing base, calculated with respect to the Company's cash and cash
equivalents, eligible investments, eligible receivables and certain eligible
hydrocarbon inventories, provided that revolving loans are limited to the
principal amount of $150.0 million. The proceeds of revolving loans may be
used for working capital and other general corporate purposes.
Borrowings under the Credit Agreement are secured by a lien on substantially
all of the Company's cash and cash equivalents, receivables, crude oil and
refined product inventories of the Company located at its refineries and
terminals and in transit via pipelines and trademarks.
Outstanding principal balances under the Credit Agreement bear interest at
annual floating rates equal to the LIBOR Rate plus marginal rates between
0.625% and 2.250% or the agent bank's prime rate plus marginal rates between
0% and 1.250%. The marginal rates are subject to adjustment under the Credit
Agreement, based upon changes in the Company's ratio of cash, cash equivalents
and eligible investments to the face amount of outstanding letters of credit
and the Company's ratio of indebtedness to twelve-month-trailing EBITDA. The
Credit Agreement terminates, and all amounts outstanding thereunder are due
and payable, on December 31, 1999. The Credit Agreement contains
representations and warranties, funding and yield protection provisions,
borrowing conditions precedent, financial and other covenants and
restrictions, events of default and other provisions customary for bank credit
agreements of this type.
Covenants and provisions contained in the Credit Agreement restrict (with
certain exceptions), among other things, the Company's and its subsidiaries'
ability: (i) to create or incur liens, (ii) to engage in certain asset sales,
(iii) to engage in mergers, consolidations, and sales of substantially all
assets, (iv) to make loans and investments, (v) to incur additional
indebtedness, (vi) to engage in certain transactions with affiliates, (vii) to
use loan proceeds to acquire or carry margin stock, or to acquire securities
in violation of certain sections of the Exchange Act, (viii) to create or
become or remain liable with respect to certain contingent liabilities, (ix)
to enter into certain joint ventures, (x) to enter into certain lease
obligations, (xi) to make certain dividend and other restricted payments,
(xii) to change the nature of its principal business, (xiii) to make any
significant change in its accounting practices, (xiv) to incur certain
liabilities or engage in certain prohibited transactions under ERISA, (xv) to
maintain deposit accounts not under the control of the banks, or to take
certain other action with respect to its bank accounts, (xvi) to engage in
speculative trading, and (xvii) to amend, modify or terminate certain material
agreements. The Company is also required to comply with certain financial
covenants. The current financial covenants are: (i) maintenance of working
capital (as defined) of at least $150.0 million at all times; (ii) maintenance
of a tangible net worth (as defined) of at least $280.0 million (subject to
adjustment); and (iii) maintenance of minimum levels of balance sheet cash (as
defined) of $50 million at all times. The covenants also provide for a
cumulative cash flow test, as
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defined in the Credit Agreement, that, from March 31, 1997, shall not be less
than or equal to zero. The Credit Agreement also limits the amount of future
additional indebtedness that may be incurred by the Company, subject to
certain exceptions, including a general exception for up to $75 million of
indebtedness.
Events of default under the Credit Agreement include, among other things:
(i) any failure of the Company to pay principal thereunder when due, or to pay
interest or any other amount due within three days after the date due; (ii)
material inaccuracy of any representation or warranty given by the Company
therein; (iii) breach by the Company of certain covenants contained therein;
(iv) the continuance of a default by the Company in the performance of or the
compliance with other covenants and agreements for 20 days after the
occurrence thereof; (v) breach of or default under any indebtedness in excess
of $5.0 million and continuance beyond any applicable grace period; (vi)
certain acts of bankruptcy or insolvency; (vii) the occurrence of certain
events under ERISA; (viii) certain judgments, writs or warrants of attachment
of similar process remaining undischarged, unvacated, unbonded, or unstayed
for a period of 10 days; (ix) the occurrence of a change of control; (x) the
loss of material licenses of permits; (xi) the failure of the liens of the
banks to be first priority perfected liens, subject to certain permitted
liens; or (xii) Clark USA incurs any indebtedness in the aggregate in excess
of $25.0 million (subject to certain exceptions).
AMENDED AND RESTATED TERM LOAN AGREEMENT
On November 21, 1997, the Company entered into a Loan Agreement with certain
lenders and Goldman Sachs Credit Partners L.P., as Agent, pursuant to which
the Company borrowed $125.0 million (the "1997 Term Loan"). The proceeds of
the 1997 Term Loan were used, together with the other net proceeds from the
November Offering, to redeem the Company's outstanding 10 1/2% Notes. The
remaining net proceeds were used to replenish the Company's cash reserves.
Concurrently with the Debt Offering, the Company amended and restated the 1997
Term Loan, pursuant to which the Company borrowed an additional $115.0 million
(the "Amended and Restated Term Loan Agreement"). The proceeds from the new
$115 million term loan were used, together with the proceeds from the Debt
Offering and available cash, to pay the purchase price for the Lima Refinery
and certain related inventory acquired from BP and to pay certain fees and
expenses.
Borrowings under the Amended and Restated Term Loan Agreement are senior
unsecured obligations of the Company. One quarter of the borrowings under the
1997 Term Loan will mature on November 15, 2003, and the remaining three
quarters plus all other amounts outstanding thereunder mature on November 15,
2004. The full amount of borrowings under the 1998 Term Loan are expected to
become due in 2004. Under the Amended and Restated Term Loan Agreement, the
Company is able to prepay the borrowings in whole or in part in an amount
equal to 102.50% of the aggregate principal amount so prepaid prior to
November 15, 1998, 101.25% of the aggregate principal amount so prepaid after
November 15, 1998, and prior to November 15, 1999, and 100% of the aggregate
principal amount so prepaid after November 15, 1999 plus, in each case,
accrued interest thereon through but excluding the date of such prepayment.
In the event that there shall occur a Change of Control resulting in a
Rating Decline, the Company shall make an offer to prepay the outstanding
balance under the Term Loan Agreements in an amount equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
date of prepayment.
Outstanding principal balances under the Amended and Restated Term Loan
Agreement bear interest at the LIBOR Rate (as defined in the Amended and
Restated Term Loan Agreement) plus a margin of 275 basis points.
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The Amended and Restated Term Loan Agreement contains customary
representations and warranties. Covenants and events of default under the
Amended and Restated Term Loan Agreement are substantially similar to those of
the 8 5/8% Notes.
Lenders under the Amended and Restated Term Loan Agreement have customary
voting, participation, indemnification and assignment rights.
9 1/2% NOTES
The 9 1/2% Notes are governed by an Indenture dated as of September 15,
1992, between the Company and the Bank of New York, as successor trustee to
NationsBank of Virginia, N.A., (the "9 1/2% Note Indenture").
Interest on the 9 1/2% Notes is payable in cash semi-annually on March 15
and September 15 of each year. The 9 1/2% Notes are not convertible or
exchangeable into any other security.
A sinking fund payment with respect to the 9 1/2% Notes, in the amount of
$87.5 million, is required to be made prior to September 15, 2003.
The 9 1/2% Notes are senior obligations of the Company, ranking pari passu
in right of payment with all other senior debt of the Company.
The 9 1/2% Notes are redeemable at the option of the Company at any time on
or after September 15, 1997, in whole or in part from time to time, at
104.750% of principal amount thereof, plus accrued interest, reducing to
102.375% of principal amount thereof, plus accrued interest on September 15,
1998, and to 100% of the principal amount thereof, plus accrued interest, on
or after September 15, 1999.
The Company is required to offer to purchase all outstanding 9 1/2% Notes at
101% of their principal amount, plus accrued interest, in the event of a
Change of Control (as defined in the 9 1/2% Note Indenture, which definition
is substantially similar to that contained in the Indentures, except that the
Change of Control need not be accompanied by a rating decline).
The Company is required to make an offer to purchase up to 10% of the
principal amount of the 9 1/2% Notes originally issued at 100% of their
principal amount, plus accrued interest, if the Company's Consolidated
Adjusted Net Worth (as defined) as of the end of any two consecutive fiscal
quarters is less than $100 million.
The Company is required to make an offer to purchase outstanding 9 1/2%
Notes at the applicable redemption price if the Company or a subsidiary makes
an Asset Disposition (as defined in the 9 1/2% Note Indenture) and the sale
proceeds are not reinvested. The offer to purchase is limited to the net
proceeds from such Asset Disposition.
The 9 1/2% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company and its subsidiaries to pay cash
dividends on or repurchase capital stock, enter into agreements restricting
the ability of a subsidiary to pay money or transfer assets to the Company,
enter into certain transactions with their affiliates, engage in speculative
trading, incur additional indebtedness, create liens, engage in sale and
leaseback transactions, dispose of certain assets and engage in mergers and
consolidations.
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Events of Default under the 9 1/2% Note Indenture include: (i) failure to
pay any interest on any 9 1/2% Notes when due, continued for 30 days; (ii)
failure to pay principal of or premium, if any, on the 9 1/2% Notes when due
at maturity (upon acceleration, redemption or otherwise); (iii) failure to
comply with the covenant regarding mergers and consolidations; (iv) failure to
perform any other covenant or agreement of the Company in the 9 1/2% Note
Indenture, continued for 30 days after written notice as provided in the 9
1/2% Note Indenture; (v) failure to pay at final maturity in excess of $5.0
million principal amount of any indebtedness of the Company or any subsidiary
of the Company, or acceleration of any indebtedness of the Company or any
subsidiary of the Company in an aggregate principal amount in excess of $5.0
million; (vi) the entry of a final judgment or judgments against the Company
or any subsidiary in an amount in excess of $5.0 million, that are not paid,
discharged or stayed within 60 days; and (vii) certain events of bankruptcy,
insolvency or reorganization of the Company or any significant subsidiary.
8 3/8% NOTES
The 8 3/8% Notes are governed by an Indenture, dated as of November 21,
1997, between the Company and Bankers Trust Company, as trustee (the "8 3/8%
Note Indenture").
Interest on the 8 3/8% Notes is payable in cash semi-annually on May 15 and
November 15 of each year. The 8 3/8% Notes are not convertible or exchangeable
into any other security.
The 8 3/8% Notes are senior obligations of the Company, ranking pari passu
in right of payment with all other senior debt of the Company.
The 8 3/8% Notes are redeemable at the option of the Company at any time on
or after November 15, 2002, in whole or in part from time to time, at 104.187%
of principal amount thereof, plus accrued interest, reducing to 102.094% of
principal amount thereof, plus accrued interest on November 15, 2003, and to
100% of the principal amount thereof, plus accrued interest, on or after
November 15, 2004. In addition, up to 35% in aggregate principal amount of the
8 3/8% Notes originally issued are redeemable at the option of the Company out
of the net cash proceeds of one or more Equity Offerings at any time prior to
November 15, 2001, at a redemption price equal to 108.375% of the principal
amount thereof, plus accrued and unpaid interest, if any, at the redemption
date.
The Company is required to offer to purchase all outstanding 8 3/8% Notes at
101% of their principal amount, plus accrued interest, in the event of a
Change of Control (as defined in the 8 3/8% Note Indenture, which definition
is substantially similar to that contained in the Indentures).
The Company is required to make an offer to purchase outstanding 8 3/8%
Notes at the applicable redemption price if the Company or a subsidiary makes
an Asset Disposition (as defined in the 8 3/8% Note Indenture) and the sale
proceeds are not reinvested or used to refinance other indebtedness. The offer
to purchase is limited to the net proceeds from such Asset Disposition.
The 8 3/8% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company to incur or guarantee additional
indebtedness, pay dividends on and redeem capital stock, sell assets and
capital stock, enter into transactions with affiliates, create liens, engage
in mergers and consolidations or transfer substantially all of its assets to
another person. After the occurrence of an Investment Grade Rating Event (as
defined in the 8 3/8% Note Indenture), certain of the covenants described in
the preceding sentence will cease to exist or will be modified. The 8 3/8%
Note Indenture at such time will contain covenants that, among other things,
limit the Company's ability to create liens with respect to certain assets,
enter into sale-leaseback transactions and engage in mergers and
consolidations.
Events of Default under the 8 3/8% Note Indenture include: (i) failure to
pay any interest on any 8 3/8% Notes when due, continued for 30 days; (ii)
failure to pay principal of or premium, if any, on the 8 3/8% Notes when due
at maturity (upon acceleration, redemption or otherwise); (iii) failure to
comply
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with the covenant regarding mergers and consolidations; (iv) failure to
perform any other covenant or agreement of the Company in the 8 3/8% Note
Indenture, continued for 30 days after written notice as provided in the 8
3/8% Note Indenture; (v) failure to pay at final maturity in excess of $25.0
million principal amount of any indebtedness of the Company or any subsidiary
of the Company, or acceleration of any indebtedness of the Company or any
subsidiary of the Company in an aggregate principal amount in excess of $25.0
million; (vi) the entry of a final judgment or judgments against the Company
or any subsidiary in an amount in excess of $50.0 million, that are not paid,
discharged or stayed within 60 days; and (vii) certain events of bankruptcy,
insolvency or reorganization of the Company or any significant subsidiary.
8 7/8% SENIOR SUBORDINATED NOTES
The 8 7/8% Senior Subordinated Notes are governed by an Indenture, dated as
of November 21, 1997, between the Company and Marine Midland Bank, as trustee
(the "8 7/8% Note Indenture").
Interest on the 8 7/8% Senior Subordinated Notes is payable in cash semi-
annually on May 15 and November 15 of each year. The 8 7/8% Senior
Subordinated Notes are not convertible or exchangeable into any other
security.
The 8 7/8% Senior Subordinated Notes are senior subordinated obligations of
the Company, subordinated in right of payment to all senior debt of the
Company.
The 8 7/8% Senior Subordinated Notes are redeemable at the option of the
Company at any time on or after November 15, 1992, in whole or in part from
time to time, at 104.437% of principal amount thereof, plus accrued interest,
reducing to 102.958% of principal amount thereof, plus accrued interest on
November 15, 2003, reducing to 101.479% of principal amount thereof, plus
accrued interest on November 15, 2004 and to 100% of the principal amount
thereof, plus accrued interest, on or after November 15, 2005.
The 8 7/8% Senior Subordinated Notes will be redeemable at the option of the
Company, in whole or in part, at any time on and after November 15, 2002 at
the redemption prices set forth herein, plus accrued and unpaid interest, if
any, to the date of redemption. In addition, up to 35% in aggregate principal
amount of 8 7/8% Senior Subordinated Notes originally issued are redeemable at
the option of the Company out of the net cash proceeds of one or more Equity
Offerings at any time prior to November 15, 2001 at a redemption price equal
to 108.875% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the redemption date.
The Company is required to offer to purchase all outstanding 8 7/8% Senior
Subordinated Notes at 101% of their principal amount, plus accrued interest,
in the event of a Change of Control (as defined in the 8 7/8% Note Indenture,
which definition is substantially similar to that contained in the
Indentures).
The Company is required to make an offer to purchase outstanding 8 7/8%
Notes at the applicable redemption price if the Company or a subsidiary makes
an Asset Disposition (as defined in the 8 7/8% Note Indenture) and the sale
proceeds are not reinvested or used to refinance other indebtedness. The offer
to purchase is limited to the net proceeds from such Asset Disposition.
The 8 7/8% Note Indenture contains certain covenants that, among other
things, limit the ability of the Company to incur or guarantee additional
indebtedness, pay dividends on and redeem capital stock, sell assets and
capital stock, enter into transactions with affiliates, create liens, engage
in mergers and consolidations or transfer substantially all of its assets to
another person. After the occurrence of an Investment Grade Rating Event (as
defined in the 8 7/8% Note Indenture), certain of the covenants described in
the preceding sentence will cease to exist or will be modified. The 8 7/8%
Note Indenture at such time will contain covenants that, among other things,
limit the Company's ability to create liens with respect to certain assets,
enter into sale-leaseback transactions and engage in mergers and
consolidations.
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Events of Default under the 8 7/8% Note Indenture include: (i) failure to
pay any interest on any 8 7/8% Senior Subordinated Notes when due, continued
for 30 days; (ii) failure to pay principal of or premium, if any, on the 8
7/8% Senior Subordinated Notes when due at maturity (upon acceleration,
redemption or otherwise); (iii) failure to comply with the covenant regarding
mergers and consolidations; (iv) failure to perform any other covenant or
agreement of the Company in the 8 7/8% Note Indenture, continued for 30 days
after written notice as provided in the 8 7/8% Note Indenture; (v) failure to
pay at final maturity in excess of $25 million principal amount of any
indebtedness of the Company or any subsidiary of the Company, or acceleration
of any indebtedness of the Company or any subsidiary of the Company in an
aggregate principal amount in excess of $25 million; (vi) the entry of a final
judgment or judgments against the Company or any subsidiary in an amount in
excess of $50 million, that are not paid, discharged or stayed within 60 days;
and (vii) certain events of bankruptcy, insolvency or reorganization of the
Company or any significant subsidiary.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities and not acquired directly from the Company. The Company has
agreed that for a period of up to 90 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of up to 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay the
expenses incident to the Exchange Offer and will indemnify the Holders of the
Old Notes against certain liabilities, including liabilities under the
Securities Act, in connection with the Exchange Offer.
LEGAL MATTERS
The validity of and other matters related to the New Notes will be passed
upon for the Company by Simpson Thacher & Bartlett.
123
<PAGE>
EXPERTS
The financial statements as of and for the year ended December 31, 1997
included in this registration statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is included
elsewhere herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the six
month period ended June 30, 1998 which is included in this Prospectus,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their report included elsewhere herein, they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied. Deloitte &
Touche LLP are not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
The consolidated balance sheet as of December 31, 1996, and the consolidated
statements of earnings, stockholder's equity, and cash flows for each of the
two years in the period ended December 31, 1996, included in this Prospectus,
have been included herein in reliance on the report of PricewaterhouseCoopers
LLP (on July 1, 1998, Coopers & Lybrand L.L.P. merged with Price Waterhouse
LLP to form PricewaterhouseCoopers LLP), independent accountants, given on the
authority of that firm as experts in accounting and auditing.
Neither the Company's independent auditors, nor any other independent
accountants, have compiled, examined, or performed any procedures with respect
to the Company's or Turner, Mason's estimates regarding the Lima Acquisition
contained herein, nor have they expressed any opinion or any form of assurance
on such information or its achievability, and assume no responsibility for,
and disclaim any association with, the aforementioned estimates.
124
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Clark Refining & Marketing, Inc. and Subsidiary:
Annual Financial Statements
Report of Independent Accountants..................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997.......... F-4
Consolidated Statements of Earnings for the years ended December 31,
1995, 1996 and 1997.................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997.................................................. F-6
Consolidated Statement of Stockholder's Equity for the years ended
December 31, 1995, 1996 and 1997..................................... F-7
Notes to Consolidated Financial Statements............................ F-8
Interim Financial Statements
Report of Independent Accountants..................................... F-20
Consolidated Balance Sheet as of June 30, 1998........................ F-21
Consolidated Statements of Earnings for the six months ended June 30,
1997 and 1998........................................................ F-22
Consolidated Statements of Cash Flows for the six months ended June
30, 1997 and 1998.................................................... F-23
Notes to Consolidated Financial Statements............................ F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Clark Refining & Marketing, Inc.
We have audited the accompanying consolidated balance sheet of Clark
Refining & Marketing, Inc. and Subsidiary (the "Company") as of December 31,
1997 and the related consolidated statement of earnings, stockholder's equity,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such 1997 consolidated financial statements present fairly,
in all material respects, the financial position of the Company at December
31, 1997, and the results of their operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
February 6, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Clark Refining & Marketing, Inc:
We have audited the accompanying consolidated balance sheet of Clark
Refining & Marketing, Inc. and Subsidiary (a Delaware corporation), as of
December 31, 1996 and the consolidated statements of earnings, stockholder's
equity and cash flows for the years ended December 31, 1995 and 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Clark
Refining & Marketing, Inc. and Subsidiary as of December 31, 1996 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1995 and 1996 in conformity with generally accepted
accounting principles.
PricewaterhouseCoopers LLP
St. Louis, Missouri
February 4, 1997
F-3
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REFERENCE DECEMBER 31, DECEMBER 31,
NOTE 1996 1997
--------- ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ 2 $ 319.4 $ 229.7
Short-term investments................... 2, 3 14.9 14.9
Accounts receivable...................... 2 170.6 92.9
Receivable from affiliates............... 1.1 2.2
Inventories.............................. 2, 4 277.1 261.4
Prepaid expenses and other............... 15.4 18.2
-------- --------
Total current assets................... 798.5 619.3
PROPERTY, PLANT AND EQUIPMENT.............. 2, 5 555.7 575.6
OTHER ASSETS............................... 2, 6 39.1 66.0
-------- --------
$1,393.3 $1,260.9
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable......................... 7 $ 294.3 $ 219.0
Payable to affiliates.................... 8.8 14.8
Accrued expenses and other............... 8, 9 49.4 69.7
Accrued taxes other than income.......... 46.5 52.1
-------- --------
Total current liabilities.............. 399.0 355.6
LONG-TERM DEBT............................. 8, 9 417.6 587.4
DEFERRED INCOME TAXES...................... 2, 12 0.8 --
OTHER LONG-TERM LIABILITIES................ 11 41.8 57.0
CONTINGENCIES.............................. 16 -- --
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value per share;
1,000 shares authorized and 100 shares
issued and outstanding)................. -- --
Paid-in capital.......................... 10 464.2 249.2
Retained earnings........................ 3, 7 69.9 11.7
-------- --------
Total stockholder's equity............. 534.1 260.9
-------- --------
$1,393.3 $1,260.9
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
REFERENCE ----------------------------------
NOTE 1995 1996 1997
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES AND OPERATING
REVENUES........................ $ 4,486.1 $ 5,072.7 $ 4,335.7
EXPENSES:
Cost of sales.................. (4,018.3) (4,560.0) (3,705.7)
Operating expenses............. (373.5) (418.9) (432.3)
General and administrative
expenses...................... (52.1) (59.1) (65.5)
Depreciation................... 2 (31.5) (37.3) (40.7)
Amortization................... 2, 6 (12.0) (11.1) (20.5)
Inventory write-down to
market........................ 4 -- -- (19.2)
Recapitalization, asset write-
offs and other charges........ 14 -- -- (49.0)
---------- ---------- ----------
(4,487.4) (5,086.4) (4,332.9)
---------- ---------- ----------
OPERATING INCOME (LOSS).......... (1.3) (13.7) 2.8
Interest expense and finance
income, net................... 8 (39.9) (38.7) (39.8)
---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.............. (41.2) (52.4) (37.0)
Income tax (provision)
benefit....................... 2, 12 15.7 13.9 (10.5)
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM... (25.5) (38.5) (47.5)
Extinguishment of debt......... 8 -- -- (10.7)
---------- ---------- ----------
NET LOSS......................... $ (25.5) $ (38.5) $ (58.2)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................... $ (25.5) $ (38.5) $ (58.2)
Extraordinary item.......................... -- -- 10.7
Adjustments:
Depreciation............................... 31.4 37.3 40.7
Amortization............................... 17.4 17.8 27.5
Share of earnings of affiliates, net of
dividends................................. (1.4) (0.1) (1.3)
Deferred income taxes...................... (15.7) (22.1) (0.8)
Inventory write-down to market............. -- -- 19.2
Recapitalization, asset write-offs and
other charges............................. -- -- 31.5
Other...................................... 1.4 1.0 3.3
Cash provided by (reinvested in) working
capital--Accounts receivable, prepaid
expenses and other......................... (111.0) 12.8 81.3
Inventories................................ (139.0) 13.3 (3.1)
Accounts payable, accrued expenses, taxes
other than income and other............... 156.8 (4.6) (55.9)
---------- --------- ----------
Net cash provided by (used in) operating
activities............................... (85.6) 16.9 94.9
---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments......... (41.5) -- (3.0)
Sales of short-term investments............. 25.9 31.1 --
Maturities of short-term investments........ -- -- 3.0
Expenditures for property, plant and
equipment.................................. (42.1) (45.0) (81.7)
Expenditures for turnaround................. (6.5) (13.9) (47.4)
Refinery acquisition expenditures........... (71.8) -- --
Proceeds from disposals of property, plant
and equipment.............................. 1.9 4.4 5.5
Advance crude oil purchase receivable....... -- 235.4 --
---------- --------- ----------
Net cash provided by (used in) investing
activities............................... (134.1) 212.0 (123.6)
---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments..................... (1.6) (2.8) (234.2)
Proceeds from issuance of long-term debt.... -- -- 398.0
Proceeds from capital lease transactions.... 24.3 -- --
Capital contribution received (returned).... 165.6 33.6 (215.0)
Deferred financing costs.................... (13.6) (0.8) (9.8)
---------- --------- ----------
Net cash provided by (used in) financing
activities............................... 174.7 30.0 (61.0)
---------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. (45.0) 258.9 (89.7)
CASH AND CASH EQUIVALENTS, beginning of
period...................................... 105.5 60.5 319.4
---------- --------- ----------
CASH AND CASH EQUIVALENTS, end of period..... $ 60.5 $ 319.4 $ 229.7
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ------- -------- -------
<S> <C> <C> <C> <C>
Balance--January 1, 1995..................... $ -- $ 30.0 $132.9 $ 162.9
Change in unrealized short-term investment
gains and losses, net of taxes ........... -- -- 1.1 1.1
Capital contributions...................... -- 165.6 -- 165.6
Net loss................................... -- -- (25.5) (25.5)
----- ------- ------ -------
Balance--December 31, 1995................... -- 195.6 108.5 304.1
Change in unrealized short-term investment
gains and losses, net of taxes............ -- -- (0.1) (0.1)
Capital contribution....................... -- 268.6 -- 268.6
Net loss................................... -- -- (38.5) (38.5)
----- ------- ------ -------
Balance--December 31, 1996................... -- 464.2 69.9 534.1
Capital contribution returned.............. -- (215.0) -- (215.0)
Net loss................................... -- -- (58.2) (58.2)
----- ------- ------ -------
Balance--December 31, 1997................... $ -- $ 249.2 $ 11.7 $ 260.9
===== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(TABULAR DOLLAR AMOUNTS IN MILLIONS OF US DOLLARS)
1. GENERAL
Clark Refining & Marketing, Inc., a Delaware corporation ("Clark" or "the
Company"), is wholly owned by Clark USA, Inc., a Delaware corporation ("Clark
USA"). Clark's principal operations include crude oil refining, wholesale and
retail marketing of refined petroleum products and retail marketing of
convenience store items in the Central United States.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
The Company's earnings and cash flow from operations are primarily dependent
upon processing crude oil and selling quantities of refined petroleum products
at margins sufficient to cover operating expenses. Crude oil and refined
petroleum products are commodities, and factors largely out of the Company's
control can cause prices to vary, in a wide range, over a short period of
time. This potential margin volatility can have a material effect on financial
position, current period earnings and cash flow.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS; SHORT-TERM INVESTMENTS
Clark considers all highly liquid investments, such as time deposits, money
market instruments, commercial paper and United States and foreign government
securities, purchased with an original maturity of three months or less, to be
cash equivalents. Short-term investments consist of similar investments, as
well as United States government security funds, maturing more than three
months from date of purchase and are carried at fair value (see Note 3 "Short-
term Investments"). Clark invests only in AA rated or better fixed income
marketable securities or the short-term rated equivalent.
The Company classifies checks issued which have not yet cleared the bank
account as accounts payable. Such balances included in "Accounts payable" were
$17.1 million and $12.9 million as of December 31, 1997 and 1996,
respectively.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the credit quality of the Company's
customer base and industry collateralization practices. As of December 31,
1997, the Company had $20.6 million (1996--$36.4 million) due from Chevron USA
Products Co. ("Chevron"). Sales to Chevron in 1997 totaled $455.7 million
(1996--$455.8 million; 1995--$448.8 million).
INVENTORIES
Inventories are stated at the lower of cost, predominantly using the last-
in, first-out "LIFO" method, or market on an aggregate basis. During the year
ended December 31, 1997, total petroleum inventory quantities were reduced,
resulting in a LIFO liquidation, the effect of which increased pretax earnings
by $0.3 million (1996--$2.4 million). There was no such effect in the year
ended December 31, 1995.
F-8
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
To limit risk related to price fluctuations, Clark employs risk strategies
using crude oil and refined products futures and options contracts to manage
potentially volatile market movements on aggregate physical and contracted
inventory positions. As of December 31, 1997, Clark's open contracts
represented 2.3 million barrels of crude oil and refined products, and had
terms extending into July 1998. As of December 31, 1996, Clark's open
contracts represented 0.7 million barrels of crude oil and refined products,
and had terms extending into February 1997.
The Company considers all futures and options contracts to be part of its
risk management strategy. Unrealized gains and losses on open contracts are
recognized as a product cost component unless the contract can be identified
as a price risk hedge of specific inventory positions or open commitments, in
which case the unrealized gain or loss is deferred and recognized as an
adjustment to the carrying amount of petroleum inventories or accounts payable
if related to open commitments. Deferred gains and losses on these contracts
are recognized as an adjustment to product cost when such inventories are sold
or consumed. As of December 31, 1997, the Company had net unrealized losses on
open futures and options contracts of $1.9 million (1996--net unrealized gains
of $1.2 million) all of which have been recognized in operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment additions are recorded at cost. Depreciation
of property, plant and equipment is computed using the straight-line method
over the estimated useful lives of the assets or group of assets. The cost of
buildings and marketing facilities on leased land and leasehold improvements
are amortized on a straight-line basis over the shorter of the estimated
useful life or the lease term. The Company capitalizes the interest cost
associated with major construction projects based on the effective interest
rate on aggregate borrowings.
Expenditures for maintenance and repairs are expensed. Major replacements
and additions are capitalized. Gains and losses on assets depreciated on an
individual basis are included in current income. Upon disposal of assets
depreciated on a group basis, unless unusual in nature or amount, residual
cost less salvage is charged against accumulated depreciation.
ENVIRONMENTAL COSTS
Environmental expenditures are expensed or capitalized depending upon their
future economic benefit. Costs which improve a property as compared with the
condition of the property when originally constructed or acquired and costs
which prevent future environmental contamination are capitalized. Costs which
return a property to its condition at the time of acquisition or original
construction are expensed.
DEFERRED TURNAROUND AND FINANCING COSTS
A turnaround is a periodically required standard procedure for maintenance
of a refinery that involves the shutdown and inspection of major processing
units and generally occurs approximately every two to three years. Turnaround
costs, which are included in "Other assets", are amortized over the period to
the next scheduled turnaround, beginning the month following completion.
Financing costs related to obtaining or refinancing of debt are deferred and
amortized over the expected life of the debt.
INCOME TAXES
Clark files a consolidated U.S. federal income tax return with Clark USA but
computes its provision on a separate company basis. Deferred taxes are
classified as current, included in prepaid or accrued
F-9
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expenses, or noncurrent depending on the classification of the assets and
liabilities to which the temporary differences relate. Deferred taxes arising
from temporary differences that are not related to a specific asset or
liability are classified as current or noncurrent depending on the periods in
which the temporary differences are expected to reverse. The Company records a
valuation allowance when necessary to reduce the net deferred tax asset to an
amount expected to be realized.
EMPLOYEE BENEFIT PLANS
The Clark Refining & Marketing, Inc. Retirement Savings Plan and separate
Trust (the "Plan"), a defined contribution plan, covers substantially all
employees of Clark. Under terms of the Plan, Clark matches the amount of
employee contributions, subject to specified limits. Contributions to the Plan
during 1997 were $6.5 million (1996--$6.4 million; 1995--$5.5 million).
Clark provides certain benefits for most retirees once they have reached a
specified age and specified years of service. These benefits include health
insurance in excess of social security and an employee paid deductible amount,
and life insurance equal to the employee's annual salary.
3. SHORT-TERM INVESTMENTS
The Company's short-term investments are all considered Available-for-Sale
and are carried at fair value with the resulting unrealized gain or loss (net
of applicable taxes) shown as a component of retained earnings.
Short-term investments consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------------------------------- --------------------------------
AMORTIZED UNREALIZED AGGREGATE AMORTIZED UNREALIZED AGGREGATE
MAJOR SECURITY TYPE COST GAIN/(LOSS) FAIR VALUE COST GAIN/(LOSS) FAIR VALUE
- ------------------- --------- ----------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Debt Securities.... $15.0 $(0.1) $14.9 $14.9 $ -- $14.9
</TABLE>
The net unrealized position as of December 31, 1997 included no gains or
losses (1996--gains of $0.0 million and losses of $0.1 million).
The contractual maturities of the short-term investments as of December 31,
1997 were:
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less................................. $ 4.9 $ 4.9
Due after one year through five years................... 10.0 10.0
----- -----
$14.9 $14.9
===== =====
</TABLE>
Although some of the contractual maturities of these short-term investments
are over one year, management's intent is to use the funds for current
operations and not hold the investments to maturity.
For the year ended December 31, 1997, there were no proceeds from sales of
short-term investments. For the same period in 1996 and 1995, the proceeds
from the sale of short-term investments were $31.1 million and $25.9 million,
respectively, with no realized gains or losses in either period. Realized
gains and losses are presented in "Interest and finance costs, net" and are
computed using the specific identification method.
F-10
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The change in the net unrealized holding gains or losses on Available-for-
Sale securities for the year ended December 31, 1997, was a gain of $0.1
million. For the same period in 1996, there was a net unrealized holding loss
of $0.1 million.
Cash and cash equivalents include $20.8 million of debt securities whose
cost approximated market value as of December 31, 1997 (1996--$20.0 million)
and for which there were no realized gains or losses recorded in the period.
4. INVENTORIES
The carrying value of inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Crude oil..................................................... $105.8 $ 80.2
Refined products and blendstocks.............................. 136.8 143.4
Convenience products.......................................... 17.6 22.4
Warehouse stock and other..................................... 16.9 15.4
------ ------
$277.1 $261.4
====== ======
</TABLE>
As of December 31, 1997, crude oil and refined product inventories' LIFO
cost exceeded market value by $19.2 million, resulting in a valuation write-
down. As of December 31, 1996, the market value of crude oil and refined
product inventories was approximately $81.7 million above the carrying value.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land....................................................... $ 19.7 $ 26.7
Refineries................................................. 434.6 443.7
Retail stores.............................................. 210.0 244.0
Product terminals and pipelines............................ 62.5 65.3
Other...................................................... 12.1 10.0
------- -------
738.9 789.7
Accumulated depreciation and amortization.................. (183.2) (214.1)
------- -------
$ 555.7 $ 575.6
======= =======
</TABLE>
As of December 31, 1997 property, plant and equipment included $48.7 million
(1996--$43.8 million) of construction in progress. Capital lease assets at
cost of $24.6 million (1996--$25.3 million) were included in property, plant
and equipment as of December 31, 1997.
6. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Deferred financing costs........................................ $14.4 $13.4
Deferred turnaround costs....................................... 17.0 43.9
Investment in non-consolidated affiliates....................... 6.4 7.7
Other........................................................... 1.3 1.0
----- -----
$39.1 $66.0
===== =====
</TABLE>
F-11
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Amortization of deferred financing costs for the year ended December 31,
1997, was $7.0 million (1996--$6.5 million; 1995--$5.2 million). Amortization
of turnaround costs for the year ended December 31, 1997 was $20.5 million
(1996--$11.1 million; 1995--$12.0 million).
7. WORKING CAPITAL FACILITY
On September 25, 1997, the Company entered into a $400 million revolving
credit facility. The credit facility, which expires on December 31, 1999,
provides for borrowings and letter of credit issuances of up to the lesser of
$400 million or the amount available under a defined borrowing base calculated
with respect to the Company's cash and cash equivalents, eligible investments,
eligible receivables and eligible petroleum inventories ($486.0 million as of
December 31, 1997). Direct borrowings under the credit facility are limited to
$50 million. The Company uses the facility primarily for the issuance of
letters of credit to secure purchases of crude oil. The Company is required to
comply with certain financial covenants including maintaining defined levels
of working capital, cash, cash equivalents and qualifying investments,
tangible net worth, and cumulative cash flow, as defined. As of December 31,
1997, $272.1 million of the line of credit was utilized for letters of credit,
of which $121.0 million supported commitments for future deliveries of
petroleum products. As of December 31, 1996, under the previous facility,
$298.5 million of the line of credit was utilized for letters of credit, of
which $78.4 supported commitments for future deliveries of petroleum products.
There were no direct cash borrowings under any revolving credit facility as of
December 31, 1997 and 1996.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
8 3/8% Senior Notes due November 15, 2007 ("8 3/8% Senior
Notes")...................................................... $ -- $ 99.3
8 7/8% Senior Subordinated Notes due November 15, 2007 ("8
7/8% Senior Subordinated Notes")............................. -- 173.8
Floating Rate Term Loan due November 15, 2003 and 2004
("Floating Rate Loan")....................................... -- 125.0
10 1/2% Senior Notes due December 1, 2001 ("10 1/2% Senior
Notes")...................................................... 225.0 --
9 1/2% Senior Notes due September 15, 2004 ("9 1/2% Senior
Notes")...................................................... 175.0 175.0
Obligations under capital leases and other notes.............. 20.6 17.6
------ ------
420.6 590.7
Less current portion........................................ 3.0 3.3
------ ------
$417.6 $587.4
====== ======
</TABLE>
The estimated fair value of long-term debt as of December 31, 1997 was
$602.8 million (1996--$431.8 million), determined using quoted market prices
for these issues. The obligations under capital leases have a market value
which approximates cost.
The 9 1/2% Senior Notes and 10 1/2% Senior Notes were issued by Clark in
September 1992 and December 1991, respectively, and are unsecured. The 9 1/2%
Senior Notes are redeemable at the Company's option at a redemption price
beginning September 1997 at 104.75% and decreasing to 100% of principal two
years later. The 10 1/2% Senior Notes were redeemed in December 1997 at
102.625% with a portion of the proceeds from the new offerings described below
and available cash.
The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes were issued by
Clark in November 1997 at a discount of 0.734% and 0.719%, respectively. These
notes are unsecured, with the 8 7/8% Senior Subordinated Notes subordinated in
right of payment to all unsubordinated indebtedness of the
F-12
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company. The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes are
redeemable at the option of the Company beginning November 2002, at a
redemption price of 104.187% and 104.437% of principal, respectively, which
decreases to 100% of principal amount in 2004 and 2005, respectively. Up to
35% in aggregate principal amount of the notes originally issued are
redeemable at the option of the Company out of the net cash proceeds of one or
more equity offerings at any time prior to November 15, 2001, at a redemption
price equal to 108.875% of principal.
Clark also borrowed $125.0 million under a floating rate term loan agreement
expiring in 2004. Of the principal outstanding, 25% must be repaid in 2003.
The Floating Rate Loan is a senior unsecured obligation of Clark and bears
interest at the London Interbank Offer Rate (LIBOR) plus a margin of 275 basis
points, 8.625% for the current quarter. The loan may be repaid in whole or in
part at any time at the redemption price of 102.5% of principal in the first
year, 101.25% of principal in the second year and at 100% of principal
thereafter.
The Clark note indentures contain certain restrictive covenants including
limitations on the payment of dividends, limitations on the payment of amounts
to related parties, limitations on the incurrence of debt, redemption
provisions related to change of control and incurrence of liens, maintenance
of a minimum net worth.
During 1995, Clark entered into two sale/leaseback lease transactions for a
total of $24.3 million. Each capital lease has a term of five years. One lease
has a fixed rate of 8.36% and the other lease rate floats at a spread of 2.25%
over LIBOR.
The scheduled maturities of long-term debt during the next five years are
(in millions): 1998--$3.3 (included in "Accrued expenses and other"); 1999--
$3.3; 2000--$10.8; 2001--$0.0; 2002--$0.0; 2003 and thereafter--$575.1.
EXTINGUISHMENT OF DEBT
In 1997, the Company redeemed the 10 1/2% Senior Notes. As a result, the
Company recorded an extraordinary item of $10.7 million for the redemption
premium ($5.9 million), the write-off of deferred financing costs ($3.7
million), and other related costs ($1.1 million).
INTEREST AND FINANCE COSTS
Interest and finance costs, net, included in the statements of earnings,
consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- ------
<S> <C> <C> <C>
Interest expense....................................... $42.2 $42.9 $ 44.7
Finance costs.......................................... 5.2 6.5 11.0
Interest and finance income............................ (6.1) (9.7) (14.5)
----- ----- ------
41.3 39.7 41.2
Capitalized interest................................... (1.4) (1.0) (1.4)
----- ----- ------
Interest and finance costs, net........................ $39.9 $38.7 $ 39.8
===== ===== ======
</TABLE>
Cash paid for interest expense in 1997 was $44.8 million (1996--$42.9
million; 1995--$42.2 million). Accrued interest payable as of December 31,
1997 of $8.7 million (December 31, 1996--$6.8 million) is included in "Accrued
expenses and other."
F-13
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASE COMMITMENTS
Clark leases premises and equipment under lease arrangements, many of which
are non-cancelable. Clark leases store property and equipment with lease terms
extending to 2017, some of which have escalation clauses based on a set amount
or increases in the Consumer Price Index. Clark also has operating lease
agreements for certain equipment at the refineries, retail stores, and the
general office. These lease terms range from 1 to 8 years with the option to
purchase some of the equipment at the end of the lease term at fair market
value. The leases generally provide that Clark pay taxes, insurance, and
maintenance expenses related to the leased assets. As of December 31, 1997,
net future minimum lease payments under capital leases and non-cancelable
operating leases were as follows (in millions): 1998--$17.3; 1999--$17.2;
2000--$22.9; 2001--$9.6; 2002--$8.4; and $106.2 in the aggregate thereafter.
Rental expense during 1997 was $16.9 million (1996--$16.5 million; 1995--$9.1
million).
10. RELATED PARTY TRANSACTIONS
Transactions of significance with related parties not disclosed elsewhere in
the footnotes are detailed below:
CLARK USA, INC.
During 1997, the Company returned $215.0 million of capital to Clark USA for
its repurchase of the Zero Coupon Notes.
Clark USA contributed $268.6 million of capital to its subsidiary, Clark,
during 1996. Clark USA contributed $33.6 million from the proceeds of debt
issued in the Occidental/Gulf transactions in January of 1996. In addition,
$235.0 million was contributed to Clark from the contribution and subsequent
sale of the Occidental advance crude oil purchase receivable and the
associated hedge contracts in October of 1996. During 1995, Clark USA
contributed $165.6 million to Clark. Upon the issuance of stock in the first
quarter of 1995, Clark USA contributed $150.0 million for the purchase of the
Port Arthur refinery and also contributed $9.2 million for operating purposes.
In addition, from the proceeds of debt issued in the Occidental/Gulf
transactions, Clark USA contributed $6.4 million in December of 1995 to Clark.
MANAGEMENT SERVICES AND TRADE CREDIT GUARANTEES
TrizecHahn Corporation ("TrizecHahn") and Clark had agreements to provide
certain management services to each other from time to time. Clark established
trade credit with various suppliers of its petroleum requirements,
occasionally requiring the guarantee of TrizecHahn. Fees related to trade
credit guarantees totaled $0.2 million and $0.2 million in 1995 and 1996,
respectively. The last trade credit guarantee was terminated in August, 1996.
On November 3, 1997, Blackstone Capital Partners III Merchant Banking Fund
L.P. and its affiliates ("Blackstone") acquired a controlling interest in
Clark USA (the "Blackstone Transaction"). In connection with the Blackstone
Transaction, affiliates of Blackstone received fees of $7.0 million, and the
Company reimbursed Blackstone for $1.7 million of out-of-pocket expenses
related to the Blackstone Transaction, and the issuance of the 8 3/8% Senior
Notes and 8 7/8% Senior Subordinated Notes and entering into the Floating Rate
Loan (the "Offering"). In addition, the Company is negotiating a monitoring
agreement with an affiliate of Blackstone under which Blackstone would receive
a monitoring fee equal to $2.0 million per annum As of December 31, 1997, the
Company had a payable to Blackstone of $2.0 million for annual monitoring
fees. Affiliates of Blackstone may in the
F-14
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
future receive customary fees for advisory services rendered to the Company.
Such fees will be negotiated from time to time with the independent members of
the Company's board of directors on an arm's-length basis and will be based on
the services performed and the prevailing fees then charged by third parties
for comparable services.
FINANCE COST REIMBURSEMENT
As of December 31, 1997, Clark is due $1.3 million from TrizecHahn for
reimbursable costs associated with the transactions for equity
recapitalization (see Note 13 "Equity Recapitalization and Change in
Control").
11. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The following table sets forth the unfunded status for the post retirement
health and life insurance plans:
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees..................................................... $11.9 $10.7
Fully eligible plan participants............................. 0.9 1.2
Other plan participants...................................... 16.7 15.3
----- -----
Total...................................................... 29.5 27.2
Unrecognized net (gain)/loss................................... (0.2) 3.7
Unrecognized prior service cost................................ 0.6 0.6
----- -----
Accrued postretirement benefit liability....................... $29.9 $31.5
===== =====
</TABLE>
The components of net periodic postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service Costs.............................................. $1.0 $1.1 $1.1
Interest Costs............................................. 2.2 2.1 1.7
---- ---- ----
Net periodic postretirement benefit cost................... $3.2 $3.2 $2.8
==== ==== ====
</TABLE>
A discount rate of 7.50% (1996--7.50%) was assumed as well as a 4.00%
(1996--4.25%) rate of increase in the compensation level. For measuring the
expected postretirement benefit obligation, the health care cost trend rate
ranged from 6.50% to 9.25% in 1997, grading down to an ultimate rate in 2003
of 5.25%. The effect of increasing the average health care cost trend rates by
one percentage point would increase the accumulated postretirement benefit
obligation, as of December 31, 1997, by $4.1 million and increase the annual
aggregate service and interest costs by $0.5 million.
F-15
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES
Clark provides for deferred taxes under the asset and liability approach
which requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
The income tax provision (benefit) is summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Earnings (loss) before provision for income taxes
Continuing operations............................ $(41.2) $(52.4) $(37.0)
Extraordinary item............................... -- -- (10.7)
------ ------ ------
$(41.2) $(52.4) $(47.7)
====== ====== ======
Income tax provision (benefit):
Continuing operations............................ $(15.7) $(13.9) $ 10.5
Extraordinary item............................... -- -- --
------ ------ ------
$(15.7) $(13.9) $ 10.5
====== ====== ======
Current provision (benefit)--Federal............... $ -- $ 3.3 $ 9.6
--State............................................ -- 4.8 1.7
------ ------ ------
-- 8.1 11.3
------ ------ ------
Deferred provision (benefit)--Federal.............. (15.7) (15.2) (0.9)
--State............................................ -- (6.8) 0.1
------ ------ ------
(15.7) (22.0) (0.8)
------ ------ ------
Income tax provision (benefit)..................... $(15.7) $(13.9) $ 10.5
====== ====== ======
</TABLE>
A reconciliation between the income tax provision computed on pretax income
at the statutory federal rate and the actual provision for income taxes is as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Federal taxes computed at 35%..................... $(14.4) $(18.3) $(16.7)
State taxes, net of federal effect................ (1.6) (1.3) 1.2
Nontaxable dividend income........................ (2.2) (2.4) (1.9)
Valuation allowance............................... -- 6.1 28.4
Other items, net.................................. 2.5 2.0 (0.5)
------ ------ ------
Income tax provision (benefit).................... $(15.7) $(13.9) $ 10.5
====== ====== ======
</TABLE>
F-16
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following represents the approximate tax effect of each significant
temporary difference giving rise to deferred tax liabilities and assets as of
December 31, 1996 and 1997.
<TABLE>
<CAPTION>
1996 1997
----- -----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment.............................. $85.4 $96.3
Turnaround costs........................................... 4.9 13.1
Inventory.................................................. 18.0 --
Other...................................................... 0.1 0.8
----- -----
108.4 110.2
----- -----
Deferred tax assets:
Alternative minimum tax credit............................. 15.4 12.0
Trademarks................................................. 4.4 4.5
Environmental and other future costs....................... 19.0 20.3
Tax loss carryforwards..................................... 69.0 87.4
Inventory.................................................. -- 3.1
Other...................................................... 5.9 17.4
----- -----
113.7 144.7
----- -----
Valuation allowance.......................................... (6.1) (34.5)
----- -----
Net deferred tax liability................................... $ 0.8 $ --
===== =====
</TABLE>
As of December 31, 1997, Clark has made net cumulative payments of $12.0
million under the Federal alternative minimum tax system which are available
to reduce future regular income tax payments. As of December 31, 1997, Clark
had a Federal net operating loss carryforward of $216.6 million and Federal
business tax credit carryforwards in the amount of $3.3 million. Such
operating losses and tax credit carryforwards have carryover periods of 15
years and are available to reduce future tax liabilities through the years
ending December 31, 2012 and 2011, respectively.
The valuation allowance as of December 31, 1997 was $34.5 million (1996--
$6.1 million). In calculating the increase in the valuation allowance, Clark
assumed as future taxable income only future reversals of existing taxable
temporary differences and available tax planning strategies.
During 1997, Clark USA made a Federal tax payment of $5.0 million in
settlement of an Internal Revenue Service examination for tax years ended
December 31, 1993 and December 31, 1994. The Company provides for its portion
of such consolidated liability under its tax sharing agreement with Clark USA.
Clark made net 1997 cash state tax payments of $2.6 million. (1996--$0.6
million; 1995--$0.7 million).
Section 382 of the Internal Revenue Code restricts the utilization of net
operating losses and other carryover tax attributes upon the occurrence of an
ownership change, as defined. Such an ownership change occurred during 1997 as
a result of the purchase of a majority interest in Clark USA by an affiliate
of Blackstone (see Note 13 "Equity Recapitalization and Change in Control".
However, based upon the existence of future taxable income from reversals of
existing taxable temporary differences and available tax planning strategies,
management believes such limitation will not restrict Clark's ability to
significantly utilize the net operating losses over the 15 year carryforward
period.
F-17
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EQUITY RECAPITALIZATION AND CHANGE IN CONTROL
The Blackstone Transaction triggered the Change of Control covenant in the
Company's 9 1/2% Senior Notes and 10 1/2% Senior Notes. Under such covenants,
noteholders would have the right to require the Company to repurchase their
notes at 101% of face value. However, all of the 10 1/2% Senior Notes were
redeemed in late 1997 in connection with the Offering, and the Company was
only required to repurchase $3.3 million of the 9 1/2% Senior Notes during the
Change of Control tender period. The Company's credit facility was amended to
permit the acquisition by Blackstone of Clark USA's Common Stock.
14. RECAPITALIZATION, ASSET WRITE-OFF'S AND OTHER CHARGES
In 1997, the Company recorded a charge to operations in the amount of $49.0
million for recapitalization expenses, asset write-offs and other charges
incurred in connection with the Company's equity recapitalization and change
in control.
The total charge includes $21.8 million of asset write-offs principally
related to an investment in a project initiated to produce low-sulfur diesel
fuel at the Hartford refinery (the "DHDS Project"). In 1992, this project was
delayed based on internal and third party analysis that indicated an
oversupply of low-sulfur diesel fuel capacity in the Company's market. Based
on the analysis, the Company projected relatively narrow price differentials
between low and high sulfur products. In December 1997, subsequent to the
Blackstone Transaction, the Company determined that certain equipment
purchased for the DHDS Project would yield a higher value being utilized at
the Hartford and Port Arthur refineries, rather than remaining idle until the
diesel fuel differentials widened sufficiently to justify completing the DHDS
Project. As a result of this decision, the equipment was written down to its
fair market value.
In connection with the Blackstone Transaction, the Company incurred costs of
$10.7 million which included transaction, advisory, and monitoring fees. The
Company also recorded a charge of $16.5 million, resulting from a change in
strategic direction, primarily for certain environmental, legal and other
accruals related to existing actions.
15. STOCK OPTION PLANS
The Company has adopted a compensatory Long-Term Performance Plan (the
"Performance Plan"). Under the Performance Plan, designated employees,
including executive officers, of the Company and its subsidiaries and other
related entities are eligible to receive awards in the form of stock options,
stock appreciation rights and stock grants.
An aggregate of 1,250,000 shares of Clark USA Inc., Common Stock may be
awarded under the Performance Plan, either from authorized, unissued shares
which have been reserved for such purpose or from shares purchased on the open
market, subject to adjustment in the event of a stock split, stock dividend,
recapitalization or similar change in the outstanding Common Stock of the
Company. The options normally extend for 10 years and become exercisable
within 3 years of the grant date. Additionally, under this plan the stock
options granted may not be sold or otherwise transferred, and are not
exercisable until after a public offering of stock is completed by the Company
or change of control (as defined in the Plan). The Blackstone Transaction
constituted a change in control under the Plan. Stock granted under this plan
is priced at the fair market value at the date of grant.
F-18
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1997 and 1996, no additional shares were granted under this Plan. In
1995, 549,000 shares were granted under this Plan and priced at the fair
market value at the date of grant. As of December 31, 1997, 531,500 stock
options were outstanding (1996--549,000) at an exercise price of $15 per
share.
16. CONTINGENCIES
Clark USA and the Company are subject to various legal proceedings related
to governmental regulations and other actions arising out of the normal course
of business, including legal proceedings related to environmental matters.
Among those actions and proceedings are the following:
The Equal Employment Opportunity Commission ("EEOC") alleged that Clark had
engaged in age discrimination in violation of the Age Discrimination in
Employment Act. The action involves 38 former managers believed to have been
affected by an alleged pattern and practice. The relief sought by the EEOC
includes reinstatement or reassignment of the individuals allegedly affected,
payment of back wages and benefits, an injunction prohibiting employment
practices which discriminate on the basis of age, and institution of practices
to eradicate the effects of any past discriminatory practices.
Clark is the subject of a purported class action lawsuit related to an on-
site electrical malfunction at Clark's Blue Island Refinery on October 7,
1994, which resulted in the release to the atmosphere of used catalyst
containing low levels of heavy metals, including antimony, nickel and
vanadium. This release resulted in the temporary evacuation of certain areas
near the refinery, including a high school, and approximately fifty people
were taken to area hospitals. Clark offered to reimburse the medical expenses
incurred by persons receiving treatment. The purported class action lawsuit
was filed on behalf of various named individuals and purported plaintiff
classes, including residents of Blue Island, Illinois and Eisenhower High
School students, alleging claims based on common law nuisance, negligence,
willful and wanton negligence and the Illinois Family Expense Act as a result
of this incident. Plaintiffs seek to recover damages in an unspecified amount
for alleged medical expenses, diminished property values, pain and suffering
and other damages. Plaintiffs also seek punitive damages in an unspecified
amount.
While it is not possible at this time to establish the ultimate amount of
liability with respect to the Company's contingent liabilities, Clark USA and
the Company are of the opinion that the aggregate amount of any such
liabilities, for which provision has not been made, will not have a material
adverse effect on their financial position; however, an adverse outcome of any
one or more of these matters could have a material effect on quarterly or
annual operating results or cash flows when resolved in a future period.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Clark Refining & Marketing, Inc.:
We have reviewed the accompanying consolidated balance sheet of Clark
Refining & Marketing, Inc. and Subsidiaries (the "Company") as of June 30,
1998, and the related consolidated statements of earnings and of cash flows
for the six-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquires of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1997, and the related consolidated statements of earnings, stockholder's
equity, and cash flows for the year then ended (not presented herein); and in
our report dated February 6, 1998, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1997
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
St. Louis, Missouri July 31, 1998
(except for Note 6 as to which the date is August 10, 1998)
F-20
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REFERENCE JUNE 30,
NOTE 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 175.4
Short-term investments................................. 14.9
Accounts receivable.................................... 2 88.5
Receivable from affiliates............................. 5.2
Inventories............................................ 267.5
Prepaid expenses and other............................. 16.1
--------
Total current assets................................. 567.6
PROPERTY, PLANT AND EQUIPMENT............................ 574.4
OTHER ASSETS............................................. 3 63.1
--------
$1,205.1
========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... $ 213.4
Payable to affiliates.................................. 15.5
Accrued expenses and other............................. 4 56.9
Accrued taxes other than income........................ 48.0
--------
Total current liabilities............................ 333.8
LONG-TERM DEBT........................................... 582.4
OTHER LONG-TERM LIABILITIES.............................. 58.1
CONTINGENCIES............................................ 8 --
STOCKHOLDER'S EQUITY:
Common stock ($.01 par value per share; 1,000 shares
authorized and 100 shares issued and outstanding)..... --
Paid-in capital........................................ 239.7
Retained earnings (deficit)............................ (8.9)
--------
Total stockholder's equity........................... 230.8
--------
$1,205.1
========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
REFERENCE -----------------------
NOTE 1997 1998
--------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET SALES AND OPERATING REVENUES.............. $ 2,168.6 $ 1,797.8
EXPENSES:
Cost of sales............................... (1,874.7) (1,483.8)
Operating expenses.......................... (211.5) (218.2)
General and administrative expenses......... (29.0) (35.1)
Depreciation................................ (19.2) (19.7)
Amortization................................ 3 (8.6) (11.8)
Inventory write-down to market.............. 2 -- (30.9)
Equity pipelines............................ 4.1 3.3
--------- ---------
(2,138.9) (1,796.2)
--------- ---------
OPERATING INCOME.............................. 29.7 1.6
Interest expense and finance income, net.... 3, 4 (17.5) (22.0)
--------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES........... 12.2 (20.4)
Income tax provision........................ 5 (7.0) (0.2)
--------- ---------
NET EARNINGS (LOSS)........................... $ 5.2 $ (20.6)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1997 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................. $ 5.2 $(20.6)
Adjustments:
Depreciation....................................... 19.2 19.7
Amortization....................................... 12.1 12.9
Share of earnings of affiliates, net of dividends.. (0.1) 1.5
Inventory write-down to market..................... -- 30.9
Other.............................................. 0.3 1.0
Cash reinvested in working capital--
Accounts receivable, prepaid expenses and other.... 50.8 4.1
Inventories........................................ (12.2) (36.4)
Accounts payable, accrued expenses, taxes other
than income and other............................. (68.4) (21.1)
------ ------
Net cash used in operating activities............ 6.9 (8.0)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment....... (39.9) (34.5)
Expenditures for turnaround.......................... (30.0) (11.1)
Proceeds from disposals of property, plant and
equipment........................................... 2.2 13.9
------ ------
Net cash used in investing activities............ (67.7) (31.7)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments.............................. (1.5) (5.1)
Capital contribution received (returned)............. -- (9.5)
------ ------
Net cash used in financing activities............ (1.5) (14.6)
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............. (62.3) (54.3)
CASH AND CASH EQUIVALENTS, beginning of period......... 319.4 229.7
------ ------
CASH AND CASH EQUIVALENTS, end of period............... $257.1 $175.4
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
(TABULAR DOLLAR AMOUNTS IN MILLIONS OF US DOLLARS)
1. BASIS OF PREPARATION
The unaudited consolidated balance sheet of Clark Refining & Marketing, Inc.
and Subsidiaries (the "Company") as of June 30, 1998, and the related
consolidated statements of earnings and cash flows for the six-month periods
ended June 30, 1997 and 1998, have been reviewed by independent accountants.
Clark Port Arthur Pipeline Company and Clark Investments, Inc. are included in
the consolidated results of the Company. In the opinion of the management of
the Company, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial statements have been
included therein. The results of this interim period are not necessarily
indicative of results for the entire year.
The financial statements have been prepared in accordance with the
instructions to Form 10-Q. Accordingly, certain information and disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. These
unaudited financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997.
The Company's earnings and cash flow from operations are primarily dependent
upon processing crude oil and selling quantities of refined petroleum products
at margins sufficient to cover operating expenses. Crude oil and refined
petroleum products are commodities, and factors largely out of the Company's
control can cause prices to vary, in a wide range, over a short period of
time. This potential margin volatility can have a material effect on financial
position, current period earnings and cash flow.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," effective January 1, 1998, with no
effect on the Company's financial statements for the six-month period ending
June 30, 1997 and 1998.
2. INVENTORIES
The carrying value of inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C>
Crude oil........................................................ $122.9
Refined and blendstocks.......................................... 158.2
LIFO inventory value excess over market.......................... (50.1)
Convenience products............................................. 19.9
Warehouse stock and other........................................ 16.6
------
$267.5
======
</TABLE>
The write-down of inventory carrying value to market for the six-month
period ended June 30, 1998 was $30.9 million (1997--nil), respectively.
3. OTHER ASSETS
Amortization of deferred financing costs for the six-month period ended June
30, 1998 was $1.0 million (1997--$3.5 million) and was included in "Interest
and finance costs, net".
F-24
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
Amortization of refinery maintenance turnaround costs for the six-month
period ended June 30, 1998 was $11.8 million (1997--$8.6 million).
4. INTEREST AND FINANCE COSTS, NET
Interest and finance costs, net, consisted of the following:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Interest expense.................................... $ 21.3 $ 27.0
Financing costs..................................... 3.5 0.8
Interest and finance income......................... (6.7) (4.8)
--------- ---------
18.1 23.0
Capitalized interest................................ (0.6) (1.0)
--------- ---------
Interest and finance costs, net................... $ 17.5 $ 22.0
========= =========
</TABLE>
Cash paid for interest expense for the six-month period ended June 30, 1998
was $26.7 million (1997--$21.4 million). Accrued interest payable at June 30,
1998 of $8.9 million was included in "Accrued expenses and other".
5. INCOME TAXES
The Company made net cash tax payments for the six-month period ended June
30, 1998 of $0.9 million (1997--$0.9 million).
6. LIMA REFINERY ACQUISITION
On August 10, 1998, the Company acquired British Petroleum's ("BP") 170,000
barrel per day refinery and related terminals located in Lima, Ohio (the "Lima
Acquisition") for $175 million plus inventory currently estimated at
approximately $40 million. The Company funded the Lima Acquisition and related
costs with $5 million of cash on hand and the proceeds of a private placement
to institutional investors of $110 million 8 5/8% Senior Notes due 2008 and
$115 million floating rate term loan due 2004.
In connection with the financing of the Lima Acquisition, the Company's
parent, Clark USA, Inc., received consents from the holders of its 10 7/8%
Senior Notes and its 11 1/2% Cumulative Exchangeable Preferred Stock to permit
the Company to increase the amount of its authorized working capital and
letter of credit facility to the greater of $700 million or the amount
available under a defined borrowing base and to allow the incurrence of up to
$250 million of additional indebtedness to fund the Lima Acquisition.
Also in connection with the Lima Acquisition, the Company amended its
revolving credit facility, to increase its size to the lesser of $700 million
or the amount available under a borrowing base, as defined, representing
specified percentages of cash, investments, accounts receivable, inventory and
other working capital items.
7. EQUITY PIPELINES
During July 1998, the Company sold its interests in Westshore Pipeline
Company and Wolverine Pipeline Company for net proceeds of approximately $17
million, resulting in an after-tax book gain of
F-25
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
approximately $12 million. The Company has signed definitive agreements to
sell its interests in Chicap Pipeline Company and Southcap Pipeline Company,
subject to regulatory approval, for net proceeds of approximately $57 million
which would result in an after-tax book gain of approximately $56 million.
Although the Company expects to close the remaining two transactions by
September 1998, there can be no assurance that it will be able to do so by
such time or at all.
8. CONTINGENCIES
The Company is subject to various legal proceedings related to governmental
regulations and other actions arising out of the normal course of business,
including legal proceedings related to environmental matters. While it is not
possible at this time to establish the ultimate amount of liability with
respect to such contingent liabilities, the Company is of the opinion that the
aggregate amount of any such liabilities, for which provision has not been
made, will not have a material adverse effect on their financial position,
however, an adverse outcome of any one or more of these matters could have a
material effect on quarterly or annual operating results or cash flows when
resolved in a future period.
9. ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement
establishes new standards for reporting information about operating segments
in annual financial statements and requires selected operating segment
information to be reported in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This statement
becomes effective for the Company's financial statements beginning with the
year ended December 31, 1998 at which time restatement of prior period segment
information presented for comparative purposes is required. Interim period
information is not required until the second year of application, at which
time comparative information is required.
In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement becomes effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. The Company is currently evaluating this new
standard, the impact it may have on the Company's accounting and reporting,
and planning for when to adopt the standard.
F-26
<PAGE>
OPINION AND SUMMARY REPORT OF TURNER, MASON & COMPANY
ACQUISITION OF
BP'S LIMA REFINERY
BY CLARK
John R. Auers
George B. Grey, IV
Joseph A. Loftus
Malcolm M. Turner
June 27, 1998
A-1
<PAGE>
TURNER, MASON & COMPANY
Consulting Engineers
June 27, 1998
Clark Refining & Marketing, Inc.
Turner, Mason & Company (TM&C) is retained by Clark Refining & Marketing,
Inc. ("Clark") to review the proposed acquisition of BP's 168,000 barrel per
day (B/D) petroleum refinery located at Lima, Ohio by Clark and develop
certain opinions related to this transaction. The Lima refinery is a large
single-train, high conversion plant utilizing relatively modern process units
and ancillary facilities. Noticeable deficiencies include the lack of diesel
desulfurization and alkylation process units. Most industry observers were
surprised two years ago when BP was unsuccessful in a well publicized effort
to sell the Lima refinery to a third party and announced in December 1996 that
operations would cease in late 1998. If this were to happen, a strong
consensus would conclude that the Lima refinery would probably be the best
non-operating refinery in the U.S. Thus, Clark's efforts to reverse BP's plans
(which are tied to a decision to implement a major capital improvement program
at its Toledo refinery and become a net product purchaser in Ohio) is viewed
by TM&C as opportunistic. TM&C estimates the replacement cost of the Lima
refinery at about $1.2 billion. The $175 million purchase price for the fixed
assets equates to just under 15% of replacement cost, and this level is toward
the lower range of recent U.S. refinery transactions.
The time frame for TM&C work has been exceptionally shortened for this
engagement. Both BP and Clark staff personnel have provided extensive historic
financial and operating data for our study, and we have relied on this
information exclusively without independent verification. TM&C staff did have
the opportunity to make a short visit to inspect the Lima refinery, and we are
satisfied with the level of our due diligence efforts for the purposes at
hand. It should be understood that TM&C opinions regarding the mechanical
condition of the refinery and BP's environmental compliance and potential
liabilities and costs related thereto are outside the scope of our engagement.
To construct estimates of Clark's ability to operate the Lima refinery in a
manner to generate acceptable cash flows, TM&C has independently developed
refinery yield estimates and operating costs for such a scenario. Although
BP's past performance at Lima is relevant, Clark is inherently a much
different company with varying capabilities and operating philosophies. At
Port Arthur, Clark has proven its ability to make major improvements in the
financial performance and refinery operations of its predecessor, Chevron. In
our opinion, however, it is not reasonable to expect a duplication of these
productivity improvements at Lima. We do anticipate relative improvements
through Clark's "leaner and meaner" refining and marketing concepts, but we
recognize that the BP management at Lima, in fact, was successful in reducing
manpower, lowering overall operating costs and achieving almost 100% saleable
product yields. BP's profitability has been respectable in a cyclical
competitive industry with a basic refinery charging relatively expensive high
quality crude oils. Nonetheless, we expect Clark management will be successful
to a degree in its efforts to increase crude throughput and reduce operating
costs, compared to BP. Also, we expect Clark to benefit from improved future
margins prevailing in the refining industry.
Using tests and methodologies employed by our firm for many years in
numerous refinery transactions, we have developed the opinion that it is
reasonable to expect Clark to operate the Lima refinery competitively and
achieve financial performance corresponding with an annual average earnings
before interest, taxes and depreciation ("EBITD") of approximately $60
million. (Turnaround maintenance amortization is estimated at $7 million;
therefore, the corresponding EBITDA is $67 million.) This estimate is based on
the calculations, assumptions and methodologies contained in this report.
A-2
<PAGE>
The Lima refinery is well served by both crude and products pipelines. It is
our opinion that Clark will not be handicapped by limited crude supply
sources. In contrast, Clark will have the opportunity to utilize optimum
domestic and foreign sources for its Lima refinery operations. The situation
may be somewhat different concerning products, depending on the future supply
arrangements Clark is able to achieve with BP and other area competitors, such
as Sun and Marathon/Ashland. It is TM&C's opinion that there could be some
initial competitive disruptions in the first few years following the
acquisition, but ultimately the product supply balances will normalize, and
Clark should be able to realize fair market values for its products, even at
increased throughputs. Currently, there is a plentiful supply of products in
Ohio. With the expectation of the Lima refinery closing, others are generating
plans to fill this void. It is TM&C's opinion that there could be some early
refinery margin repercussions if competitors, particularly Marathon/Ashland,
react aggressively to the Lima purchase. It is our understanding that
Marathon/Ashland has plans to deliver significant volumes from its
Catlettsburg refinery to the Columbus area with the construction of a new
pipeline. Ultimately, this will simply change the balance of imports/exports
in the Ohio region, but overall supply/demand relationships will not be
greatly altered. We do not expect any major pipeline projects to bring
products from Gulf Coast refineries to this region, as contemplated earlier
following BP's announcement of the Lima refinery closing.
It should be noted that TM&C's gross margin projections are based on Clark's
operating the Lima refinery as a wholesale refiner with virtually no end-user
marketing efforts. We assume that the primary products--gasoline, diesel, jet
fuel and LPG products--will be sold on a bulk basis, essentially at the
refinery gate or into product pipelines. Eventually, Clark is expected to
expand its marketing strengths into this area and achieve relatively higher-
than-assumed product prices, but that is a future eventuality and not relevant
for our assignment. Along with our bulk wholesale product disposition approach
is the assumption that there are virtually no selling and marketing expenses
with this venture. Because BP has been so dominant in this area, we believe
that Clark's near-term success will depend on its ability to work out
beneficial commercial arrangements with BP (or other refiner/marketers).
We have noted that there should be natural concern that BP has possibly
neglected routine maintenance at the Lima refinery in order to avoid
unnecessary expenses prior to closure. A major turnaround (which will cost
approximately $30 million) will be required in 1999. During our brief visit to
the Lima refinery, senior BP management assured us that routine maintenance
has been continued during the past two years, essentially on a "business as
usual" basis without regard to the imminent closure. In any case, it will be
prudent for Clark to anticipate in its planning some "catch up" maintenance
expenses for a couple of years. However, TM&C did not include any
extraordinary maintenance expenses in our estimates because the limited scope
of our assignment and time availability prevented establishing any reasonable
basis to do so.
With respect to capital expenditures, Clark estimates that it will face
annual average expenditures of approximately $20 million for sustaining
(defensive) capital. TM&C believes that this estimate may be conservative, as
it exceeds industry averages for refineries of this size, complexity and
apparent mechanical condition. On the other hand, there will undoubtedly be
several capital projects undertaken that provide economic payout. It appears
to us that a new alkylation unit will be readily justified unless BP or some
other nearby refinery offers a very attractive purchase arrangement for
Clark's alky feed production (which is now being processed at BP's Toledo
refinery). Similarly, we expect that Clark will be able to justify a diesel
HDS unit to make low sulfur diesel and avoid dumping surplus high sulfur
diesel and No. 2 fuel production. We are aware of available shut-down process
units--both alkylation and HDS--that could be considered by Clark if economics
point this direction. Capital requirements for these units might be reduced to
the $20 million range with such an approach.
Finally, it is TM&C's opinion that the Lima refinery will be faced with a
sulfur in gasoline issue in about 2004, or perhaps sooner. Both API and NPRA
have recommended to EPA that Ohio and surrounding states be required to market
gasoline with maximum sulfur content of 150 ppm. EPA and
A-3
<PAGE>
others are considering even lower sulfur levels, in some cases as low as 50
ppm sulfur. It seems highly likely that the Lima refinery's current capability
of about 230 ppm sulfur in gasoline will be inadequate. We have not undertaken
a specific assessment of this problem but believe that hydrotreating heavy cat
gasoline will be the likely solution. Capital costs might be in the range of
$10 million if this route is required.
The following report and tables provide details of our analysis in each of
the key areas considered in this engagement.
TURNER, MASON & COMPANY
A-4
<PAGE>
REFINERY PROFILE
HISTORY
A petroleum refinery was built on the current location in Lima, Ohio around
the turn of the century by the Standard Oil Company, and was known as the
Solar refinery. Standard Oil was forced to break up in 1911 by U.S. anti-trust
legislation, creating several smaller companies, among them Standard Oil of
Ohio (SOHIO). SOHIO acquired the Lima refinery in 1931. Previously, SOHIO had
built a refinery in Toledo (1919), about 75 miles north of Lima. These two
refineries have historically operated as a system, with several intermediate
streams being exchanged.
In 1987, SOHIO was purchased by British Petroleum (BP), a U.K.-based major
integrated oil company with worldwide operations, and it has operated the Lima
refinery since that time. In 1996, BP attempted to sell the refinery but was
unsuccessful in securing a satisfactory offer. As a result, plans were made to
cease operations at the plant as of year-end 1998.
PROCESS UNITS
Over the years, significant expansions and modifications have taken place at
the Lima refinery. As a result, most of the operating units at the refinery
are relatively modern and technologically up-to-date. The crude unit was
constructed in 1969-70 with an original design capacity of 150,000 barrels per
day (B/D). Since then, it has been expanded to a current capability of 168,000
B/D. A gas oil hydrocracker (24,000 B/D capacity), naphtha hydrotreater
(60,000 B/D capacity) and reformer (54,000 B/D capacity) were also built at
the same time as the crude unit, and together with the crude unit, are
collectively referred to as the Lima Integrated Unit (LIU).
The FCC (cat cracker) and delayed coker units were both built in 1949 during
an earlier expansion of the refinery. However, they have been significantly
modified since that time. The FCC was expanded and modernized most recently in
1994 and has a current capacity of 36,000 B/D. The coker was converted from a
crude coker to a delayed coker in 1970 and has been steadily upgraded and
expanded from the 1970 design capacity of 13,000 B/D to a current capacity of
about 22,500 B/D. The most recent upgrade (in 1994) included the addition of a
new, state-of-the-art feed furnace.
Other major units at the refinery include an 18,500 B/D C5/C6 isomerization
unit, a 25,500 B/D aromatics extraction unit, a 5,500 B/D toluene
hydrodealkylation unit (THDA), a 1.2 million SCFH hydrogen purification unit
(HPU), a 54 tons per day sulfur recovery unit (SRU) and a 1,200 B/D Trolumen
unit. The isomerization, aromatics, THDA and HPU units were all built during a
major petrochemical expansion in 1984.
Table 1 summarizes all the major process units at the refinery. TM&C has
estimated total replacement cost of the refinery to be about $1.2 billion,
with an estimated complexity rating of 8.9.
ASSETS FOR SALE
The assets included for sale are:
. 650 acres of a 900-acre industrial site at Lima, Ohio;
. All the oil refining related structures, equipment and machinery at the
site;
. An adjacent product terminal (Vine Street terminal);
. Four crude oil tanks located just south of the refinery;
. On-site and in-transit crude oil inventories;
. On-site refined and intermediate products inventories; and
. All assignable contracts and permits.
BP intends to accept all existing environmental liabilities at the refinery
as of the sale date.
A-5
<PAGE>
HISTORIC FINANCIAL AND OPERATING PERFORMANCE
Because Lima is just one of several refineries operated by BP Oil US,
audited financial statements for Lima as a standalone refinery are not
prepared as a normal course of business. However, as part of the effort by BP
to sell the refinery in 1996, certain financial and operating data were
prepared for Lima for the years 1991-95. In addition, Clark prepared estimates
for refinery net margins for the years 1996 and 1997 using actual refinery
yield and operating cost data and the same pricing methodology used by BP in
generating the 1991-95 estimates. Tables 2 through 8 show the estimated
refinery gross margins for those years.
CRUDE SUPPLY
Table 9 summarizes the crude slate processed at the refinery during the
1991-97 time period. The refinery is limited to running mostly light to medium
gravity, low sulfur crude oils. West Texas Intermediate (WTI) has been the
mainstay of the crude slate, averaging about 70% of the total. WTI typically
has a gravity of 38-40 API with a sulfur content of 0.3%. The only other crude
oil that has been run in significant volumes is Cabinda from Angola, which
averaged about 8% of the total for the whole period. In recent years, the
refinery has processed upwards of 15% Cabinda. Like WTI, Cabinda is also very
low in sulfur but is heavier at 32 API. Most of the remaining crudes that have
been processed at the refinery have been light sweet crudes such as LLS, North
Sea, Nigerian and Cusiana. The refinery has run up to about 10,000 B/D of
medium sour crudes such as ANS, Eugene Island and WTS.
The refinery receives all its crude oil supply via pipeline. There is an
extensive network of crude oil pipelines that can deliver crude from Texas,
Louisiana and the mid-continent. Most of the WTI is shipped from Longview,
Texas via the Mid-Valley Pipeline. Foreign crude oil can be accessed through
the LOOP/LOCAP system and then into Capline to Patoka, Illinois. A Marathon
pipeline makes deliveries from this point to Lima. Canadian crude oil can be
brought into the refinery via the Interprovincial Pipeline to Chicago and then
to Patoka via a Mobil pipeline. Given this configuration of pipeline options,
it is our opinion that crude oil supply logistics are unlikely to limit the
refinery's future ability to run crude oil.
PRODUCTS
The refinery produces a full range of products. Distribution to market or to
subsequent processing facilities is accomplished via several pipelines, by
rail, by truck, or through the adjacent product terminal (Vine Street).
Products shipped by rail include:
<TABLE>
<S> <C>
. Petroleum coke .Benzene
.Propylene .Butanes
.Caustic .Decanted oil
Products shipped by truck include:
.LPG .Trolumen
.Vacuum bottoms and decanted oil .Sulfur
</TABLE>
CRUDE UNIT OPERATING RATES
As stated earlier, the refinery has a nameplate crude capacity of 168,000
B/D. Over the three-year period 1995-97, the crude unit utilization has
averaged about 152,000 B/D, or about 91%. Most downstream units have had
relatively low operating rates, with the exception of the FCC, which has
averaged about 95% of capacity. A summary of historic utilization rates at the
refinery process units is shown in Table 10.
A-6
<PAGE>
OPERATING EXPENSES
BP has supplied operating cost information for the 1991-97 time period which
has been summarized in Table 11. Variable operating costs (including fuel,
power, catalyst and other costs) have averaged $33.7 million per year. Non-
turnaround fixed costs have ranged from about $61 million to $68 million per
year during this time period. In addition, turnaround costs have averaged $7.1
million per year. Total operating costs (including turnaround expenses) have
averaged almost $106 million per year, or $1.99 per barrel of crude processed.
CHEMICAL PLANT NEIGHBORS
An acrylonitrile plant, owned and operated by BP Chemicals is adjacent to
the refinery, as well as a nitrogen based chemical plant owned by Arcadian
Chemical and operated by BP Chemicals. In addition, the Hampshire Chemical
plant processes by-products from the BP Chemical plant.
The refinery interfaces with this chemicals complex through shared
infrastructure and through feedstock supply arrangements. A significant aspect
of infrastructure sharing is an electric utility substation that services the
complex. Also, propylene produced by the refinery is sold exclusively to BP
Chemical, and BP Chemical distributes and markets all benzene and surplus
toluene produced by the refinery. Arcadian Corporation purchases pipeline
natural gas on behalf of the complex.
BP provides numerous shared support services to the Lima and Toledo
refineries such as commercial operations and planning, technical support,
accounting and control, procurement, human resources, etc. Such services are
not individually allocated to each refinery, but are accounted for in a
general overhead charge allocated to each site. Thus, meaningful historical
costs for these services are not available.
TOLEDO/LIMA REFINERY TIES
Even though BP's refinery in Toledo is located about 75 miles away from
Lima, the two refineries have been operated as a system, with economic
optimization based on the system rather than the individual sites. The
integration includes exchanges of intermediates and unfinished products
including alky feed, gas oil, and distillate blendstocks.
The recent and continuing upgrade of the Toledo refinery (the Repositioning
Project) is altering levels of transfers. Agreements covering the continuation
of transfers are not known to TM&C and would need to be renegotiated at the
completion of the Repositioning Project, which is expected in April/May 1999.
However, this does not apply to the exchange of propylene. All propylene
produced by the Toledo refinery must be sent to the Lima Refinery for either
processing, storage or sale, and an agreement for the continuation of this
arrangement is expected to be negotiated subsequent to the signing of the
Purchase Agreement.
CAPITAL EXPENDITURES
Over the past several years, annual capital expenditures have been in the
range of $20-$40 million. Expenditures for basic care and maintenance have
ranged from $1-$5 million per year, while health, safety and environment (HSE)
expenditures were in the range of $5-$18 million per year. The last full
maintenance turnaround occurred in 1994, at a cost of approximately $30
million. Another plant-wide turnaround is scheduled for 1999, and Clark's
operating plan estimates the cost of this turnaround to be approximately $30
million. Sustaining capital during this period has included significant
expenditures on benzene National Emissions Standards for Hazardous Air
Pollutants (NESHAP) and the wastewater system. Clark has estimated overall
sustaining capital requirements to average approximately $20 million per year
from 1999 through 2001, including $4 million per year for refinery maximum
achievable control technology (MACT) II compliance. These estimates appear to
be
A-7
<PAGE>
conservative relative to industry averages for refineries of this size and
complexity. The following is a summary (in millions of dollars) of historic
and projected capital expenditures:
<TABLE>
<CAPTION>
DISCRETIONARY SUSTAINING TOTAL
------------- ---------- -----
<S> <C> <C> <C>
1991.......................................... $ 8.9 $22.8 $31.7
1992.......................................... 13.3 14.3 27.6
1993.......................................... 11.7 11.4 23.1
1994.......................................... 24.5 14.0 38.5
1995.......................................... 8.9 7.7 16.6
1996.......................................... 1.3 8.3 9.6
1997.......................................... -- 10.9 10.9
Average....................................... 10.0 12.8 22.8
Projected..................................... 20.7
</TABLE>
A more detailed summary for the 1991-95 period is contained in Table 12.
PROJECTED OPERATIONS UNDER CLARK OWNERSHIP
In preparing an independent forecast of expected EBITD generated by the
refinery under the ownership of Clark, TM&C completed the following tasks:
. A price forecast for the Lima refinery was generated, covering all expected
product sales and feedstock purchases.
. A set of operating assumptions and limitations were prepared that are
consistent with our view of how the refinery would be operated by Clark.
. The operating assumptions and prices were used to generate a set of refinery
yields, through use of a linear programming (LP) model.
. Refinery operating costs were projected consistent with the LP results and
with Lima's historical experience.
PRICING BASIS
The feedstock and product pricing assumptions which we developed are
summarized in Table 13. Refined product prices are based on the United States
Gulf Coast (USGC). The USGC represents a large percentage of the U.S. refining
capacity, and it is the incremental product supplier to much of the U.S.,
including the Midwest and the East Coast. Consequently, the USGC establishes
price trends and relationships which are reflected throughout the country and
include the markets where the Lima refinery competes.
The USGC price forecast used is one that TM&C has developed for use in
refining studies in which we are currently involved. A key piece of this
forecast is the $3 WTI crack spread which we used. It is about the same as the
average 1991-97 crack of $3.03. Figure 1 summarizes the actual WTI crack
spread from 1991 through 1997.
In our price forecast, the Lima location differential for light clean
products (gasolines, jet fuel and No. 2 diesel) above the USGC is 2.5c per
gallon. This is somewhat less than the pipeline tariff of about 3.0c per
gallon and also less than local rack differentials to the USGC, which
generally have been about 4.0c per gallon.
NO ALKYLATION UNIT
Two other key product price assumptions which we made involve alky feed and
incremental No. 2 HS diesel. The Lima refinery is somewhat unusual in that it
has an FCC unit which produces alkylation unit feedstock but lacks an
alkylation unit. The BP refinery in Toledo has an oversized alkylation unit
A-8
<PAGE>
and has historically processed the alky feed produced at Lima. Upon completion
of the Repositioning Project at the Toledo refinery, its appetite for alky
feed is expected to go down. Lima's alternative for alky feed sales would
include other refiners with alkylation units or as a gasoline blendstock in
its own gasoline pool. In the latter disposition, alky feed essentially
displaces normal butane. Therefore, we have valued this stream at a normal
butane price.
NO DIESEL HDS UNIT
Because of Lima's lack of a diesel HDS unit and Toledo's excess capacity,
significant volumes of No. 2 diesel blending components produced at Lima have
been processed at Toledo since the advent of low sulfur diesel regulations in
late 1993. Under Clark's ownership, the Lima refinery will have to blend all
of these components into HS No. 2 diesel and produce higher volumes of this
product into a market which is already over-supplied. Our price assumption
penalizes the production of this incremental (above historical levels) HS No.
2 diesel by 4.0c per gallon.
The crude prices shown in Table 13 are also consistent with recent TM&C
studies. The base price for WTI crude of $18 per barrel (Cushing Spot) is
above current levels, but reflects a reasonable future outlook for analyses.
In any case, the absolute WTI level is not as important as the price
relationship to other crudes and products. The transportation charge of $1 per
barrel for WTI from Midland reflects transit to Longview on the Mesa and West
Texas Gulf pipeline systems and transit to Lima from Longview on the Mid-
Valley Pipeline. Cabinda and Eugene Island are both assumed to move on Capline
from St. James to Patoka and on the Marathon pipeline to Lima.
FEEDSTOCK AND PRODUCT ASSUMPTIONS
Table 14 summarizes the feedstock and product volume limitations assumed in
our projection. As shown, we have fixed the crude slate to only three crudes:
WTI, Cabinda and Eugene Island. This slate is consistent quality-wise with
what has been historically run at the Lima refinery. The availabilities of the
crude in the stated volumes are not a problem, and although not "optimized",
the selected slate fits in well with the refinery's capabilities and unit
limitations. The only other feedstocks made available are normal butane (which
is supplied as desired for gasoline blending purposes) and low purity
propylene produced at the BP Toledo refinery (which is subject to negotiation
for Lima receiving approximately 3,900 B/D). Most products were limited to
historically demonstrated volumes.
PROJECTED YIELDS
To estimate future refinery yields, TM&C used a version of the LP planning
model for the Lima refinery which BP has provided to Clark. Clark conducted a
validation process to test the ability of the LP to match actual refinery
yields. We reviewed Clark's validation methodology and conclude that the LP is
adequate for our work.
Applying the price set and assumptions summarized in Tables 13 and 14, we
generated an LP case which represents annualized refinery operation in a non-
turnaround year. The resultant yields and estimated gross margin of $168.2
million are shown in Table 15.
Table 16 summarizes the process unit operating rates for this case. Although
somewhat higher than recent actual throughputs for some units (such as the
coker, reformer, hydrocracker and isomerization units), the projected rates
are below stream day capacities and are very achievable, in our opinion. It
should be noted that BP has been operating over the last two years with a view
that the refinery would be shutting down at the end of 1998. Therefore, BP has
not attempted to maximize rates to the extent we would expect Clark to do so.
A-9
<PAGE>
Product yields and some other key parameters are compared to historical
operations in Table 17. The projected case results are reasonably consistent
with history. Although overall product yield is slightly above the seven-year
average, it is below the 101.0% that the Lima refinery has achieved since
1995. We discussed this issue with refinery management and learned that the
refinery staff has focused on and made significant progress in reducing oil
losses from various sources (flaring, oil to the sewer, etc.). In light of
this, the projected product yield should be conservative.
OPERATING COSTS
Table 18 summarizes the operating cost estimate for the projected case. As
shown, we have estimated total cash operating costs of $106.2 million
annually, or $1.88 per barrel of crude oil processed. This compares with the
seven-year historic average of $105.7 million and $1.99, respectively (which
was shown in Table 11).
The fuel balance was derived from our estimate of the required fuel produced
and consumed by the refinery, taking into account process unit operating rates
and severities and the historic overall energy efficiency of the plant. The
fuel balance is very similar to 1995 performance, during which refinery
operations were most similar to the projected operation. Estimates for other
variable costs were also made based on historic operational results provided
by BP, adjusted to reflect the refinery operating rates in the future case.
The fixed cost estimate is slightly less than the seven-year average of $72
million which BP has incurred. With recent manpower cutbacks and increased
maintenance efficiencies, fixed costs have been running at a level
significantly below our estimate. Although it is very possible that these
lower costs can be sustained by Clark in its operation of the refinery, we
have not given full credit for this in our projections.
EBITD OUTLOOK
TM&C's EBITD projections that result from combining gross margin and
operating costs estimates developed as stated are presented in Table 19. As
shown, we have projected a five-year average EBITD of $58.8 million per year
(and, assuming an average turnaround amortization of $7.0 million, an EBITDA
of $65.8 million per year). A 30-day plant-wide turnaround is assumed for
1999, resulting in lower EBITD for that year. Note that we used Clark's
estimate of $1.2 million per year for G&A expenses, a figure based on its
expectation to absorb the Lima refinery operation readily into the existing
St. Louis organization.
TM&C BACKCAST
TM&C has traditionally tested forecasts of refinery cash-generating
performances with simple backcast comparisons. This differs from a typical
review of a company's financials in that past deficiencies in operating
capabilities are eliminated by using current proved unit capacities, yields
and operating costs. Simply put, this backcast methodology assesses what the
current refinery could have hypothetically been expected to do under prior
years' margins and price relationships.
For the period 1991-97, TM&C has estimated product revenues, cost of sales
and resulting gross margins using this backcast methodology. These results are
summarized in Table 20, with the backcast period average gross margin being
about $164 million. Backcast gross margins range from $137.4 million in 1996
to $218.6 million in 1991. This compares with BP's estimated actual gross
margin during the same period of about $159 million and the TM&C projected
gross margin of about $168 million. Accordingly, this analysis indicates that
even though there have been numerous changes in the Lima refinery's processing
capabilities and prevailing industry competitive factors, the projected
results are reasonable by this test.
A-10
<PAGE>
MARGIN SENSITIVITIES
Of general interest is an approximation of expected impacts resulting from
both controllable and noncontrollable changes in the industry and at the
refinery. TM&C has developed the estimated gross margin sensitivities shown in
Table 21 for several such events. Because the Lima refinery is a "remotely
located Gulf Coast refinery", it is necessarily dependent on Gulf Coast crack
spreads. This conclusion is emphasized by noting that a change of 25c per
barrel in the Gulf Coast crack spread affects TM&C's estimated gross margin
about $12 million annually. In addition, we conclude that the Lima refinery
economics are quite sensitive to throughput rates, with a 10,000 B/D increase
producing a gross margin improvement of about $10 million annually. Several
other sensitivity measurements shown in Table 21 are significantly less
important.
A-11
<PAGE>
TABLE 1
LIMA REFINERY
PROCESS UNIT SUMMARY
<TABLE>
<CAPTION>
DATE ORIGINAL CURRENT
BUILT/ CAPACITY CAPACITY
UPGRADED MB/D* MB/D* COMMENTS
--------- -------- -------- --------
<S> <C> <C> <C> <C>
PROCESS UNIT
Crude................... 1969/1994 150.0 168.0 Winter capacity is 173 MB/D
Vacuum.................. 1969/1994 42.0 54.0
Naphtha HDS............. 1969 47.8 60.0
Reformer................ 1969 47.0 54.0
Gas Oil Hydrocracker.... 1969/1996 20.7 24.0 24 MB/D on gasoline; 26 MB/D
on kerosene
Aromatics............... 1984 24.4 25.5
THDA.................... 1984 5.5 5.5
Isomerization........... 1984/1986 16.7 18.5
FCC..................... 1949/1994 16.0 36.0 36 MB/D at 79% conversion; 40 MB/D
at 75% conversion
Coker**................. 1949/1995 30.0 22.5 22.5 MB/D at 18-hour cycle
HPU..................... 1984 1.2 MMSCF/H 90% H2
SRU..................... 1974/1996 33 ltpd 54 ltpd
Trolumen................ 1964/1995 1.1 1.2 Decanted oil feed
</TABLE>
- --------
* Thousand barrels per day.
** Originally a 30 MB/D Kellogg crude coker. Modified in 1970 to Foster Wheeler
delayed coker @ 13 MB/D with subsequent upgrades to 22.5 MB/D.
A-12
<PAGE>
TABLE 2
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1991 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD** $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline................. 65.7 27.59 47,000 473.1
Conventional Midgrade 89...................... 67.3 28.26 8,900 91.6
Conventional Premium 92....................... 69.2 29.05 14,800 156.7
Blend Components.............................. 67.8 28.48 (500) (5.3)
Jet A......................................... 62.8 26.38 17,900 172.0
Kerosene...................................... 64.2 26.96 600 5.8
No. 2 HS Diesel............................... 60.7 25.50 13,600 126.3
No. 2 Diesel Supreme.......................... 61.5 25.85 13,300 125.3
Benzene....................................... 106.8 44.84 4,400 71.8
Toluene....................................... 83.2 34.95 1,000 12.7
Net Butane.................................... (39.8) (16.72) 200 (1.2)
Isobutane..................................... 47.2 19.82 4,000 28.9
Alky Feed..................................... 39.4 16.54 4,200 25.3
Mixed LPG..................................... 35.8 15.04 4,600 25.3
Propylene (Chemical Grade).................... 49.0 20.59 4,400 33.0
FCC Feed (LS)................................. 58.9 24.75 4,000 36.1
FCC Slurry Oil................................ 12.18 1,100 4.9
Trolumen...................................... 45.88 200 3.3
Coke (Anode Grade), FOEB...................... 14.16 3,100 16.0
Sulfur, LT.................................... 25.00 40 0.4
------- -------
Total Products.............................. 146,840 1,402.0
FEEDSTOCKS
Crude Oil..................................... 22.33 141,400 1,152.9
Toledo Vacuum Bottoms......................... 12.96 400 1.9
Toledo Low Purity C3=......................... 16.97 3,100 19.2
Purchased Reformate/Other..................... 25.38 1,300 12.0
------- -------
Total Feedstocks............................ 146,200 1,186.0
Gross Margin.................................. 4.05 216.0
</TABLE>
- --------
*Data source: BP
** Barrels per calendar day.
A-13
<PAGE>
TABLE 3
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1992 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline..................... 59.2 24.87 43,000 391.4
Conventional Midgrade 89.......................... 61.3 25.74 9,400 88.6
Conventional Premium 92........................... 63.6 26.71 8,600 84.1
Conventional Premium 93........................... 63.5 26.65 6,300 61.5
Conventional Regular 84 (Subgrade)................ 59.6 25.03 900 8.2
Blend Components.................................. 66.1 27.77 700 7.1
Jet A............................................. 59.2 24.88 17,900 163.1
Kerosene.......................................... 54.7 22.98 600 5.0
No. 2 HS Diesel................................... 57.3 24.05 13,700 120.6
No. 2 Diesel Supreme.............................. 56.8 23.84 13,700 119.5
Benzene........................................... 91.1 38.26 4,600 64.4
Toluene........................................... 75.2 31.59 700 8.1
Net Butane........................................ 4.9 2.05 500 0.4
Isobutane......................................... 46.6 19.57 3,900 27.9
Alky Feed......................................... 34.2 14.35 4,000 21.0
Mixed LPG......................................... 34.0 14.29 4,600 24.1
Propylene (Chemical Grade)........................ 33.8 14.20 4,500 23.4
FCC Feed (LS)..................................... 52.7 22.13 5,000 40.5
FCC Slurry Oil.................................... 11.48 1,100 4.6
Trolumen.......................................... 40.17 200 2.9
Coke (Anode Grade), FOEB.......................... 11.80 3,200 13.8
Sulfur, LT........................................ 25.00 40 0.4
------- -------
Total Products.................................. 147,140 1,280.6
FEEDSTOCKS
Crude Oil......................................... 21.27 140,500 1,094.1
Toledo Vacuum Bottoms............................. 12.08 600 2.6
Toledo Low Purity C3=............................. 12.32 3,100 14.0
Purchased Reformate/Other......................... 22.01 2,800 22.6
------- -------
Total Feedstocks................................ 147,040 1,133.3
Gross Margin...................................... 2.74 147.3
</TABLE>
- --------
*Data source: BP
A-14
<PAGE>
TABLE 4
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1993 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline................... 53.7 22.55 44,100 363.0
Conventional Midgrade 89........................ 54.5 22.88 6,600 55.3
Conventional Premium 92......................... 55.7 23.40 2,400 20.5
Conventional Premium 93......................... 57.1 23.97 14,500 126.6
Conventional Regular 84 (Subgrade).............. 42.6 17.88 1,700 11.1
Blend Components................................ 48.5 20.35 1,700 12.6
Jet A........................................... 55.5 23.31 18,500 157.4
Kerosene........................................ 56.4 23.69 800 6.9
No. 2 HS Diesel................................. 52.0 21.83 15,000 119.8
No. 2 Diesel Supreme............................ 54.0 22.69 10,600 88.1
Light Cycle Oil................................. 47.6 19.98 5,100 37.2
Benzene......................................... 80.0 33.58 3,800 46.7
Toluene......................................... 61.0 25.62 100 0.9
Net Butane...................................... 20.7 8.69 400 1.3
Isobutane....................................... 40.3 16.94 3,600 22.5
Alky Feed....................................... 32.0 13.43 3,700 18.3
Mixed LPG....................................... 33.1 13.90 4,500 23.0
Propylene (Chemical Grade)...................... 28.8 12.10 4,300 19.2
FCC Feed (LS)................................... 49.1 20.64 2,500 18.8
FCC Slurry Oil.................................. 10.04 1,240 4.5
Trolumen........................................ 32.20 300 3.5
Coke (Anode Grade), FOEB........................ 11.41 3,100 13.1
Sulfur, LT...................................... 25.00 40 0.4
------- -------
Total Products................................ 148,540 1,170.7
FEEDSTOCKS
Crude Oil....................................... 19.14 143,800 1,004.3
Toledo Vacuum Bottoms........................... 11.27 (200) (0.8)
Toledo Low Purity C3=........................... 10.86 2,900 11.5
Purchased Reformate/Other....................... 19.53 2,800 20.0
------- -------
Total Feedstocks.............................. 149,300 1,035.0
Gross Margin.................................... 2.49 135.7
</TABLE>
- --------
*Data Source: BP
A-15
<PAGE>
TABLE 5
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1994 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline..................... 51.4 21.58 32,400 255.2
Conventional Midgrade 89.......................... 48.4 20.31 1,100 8.1
Conventional Premium 92........................... 58.6 24.60 3,600 32.3
Conventional Premium 93........................... 56.5 23.74 16,800 145.6
Reformulated Regular.............................. 52.7 22.14 600 4.8
Reformulated Premium 93........................... 58.0 24.34 300 2.7
Conventional Regular 84 (Subgrade)................ 49.4 20.76 9,400 71.2
Blend Components.................................. 57.3 24.08 900 7.9
Jet A............................................. 56.9 23.90 13,000 113.4
Kerosene.......................................... 52.4 22.00 1,200 9.6
Water White (Kerosene)............................ 47.1 19.77 4,900 35.4
No. 2 HS Diesel................................... 49.0 20.59 13,100 98.5
No. 2 Diesel Supreme.............................. 50.3 21.14 5,600 43.2
Light Cycle Oil + Unfinished Diesel............... 45.9 19.29 6,800 47.9
Benzene........................................... 90.8 38.14 3,500 48.7
Toluene........................................... 73.2 30.76 500 5.6
Net Butane........................................ 22.8 9.58 1,100 3.8
Isobutane......................................... 36.3 15.26 3,000 16.7
Alky Feed......................................... 27.4 11.51 3,400 14.3
Mixed LPG......................................... 31.7 13.32 4,100 19.9
Propylene (Chemical Grade)........................ 39.3 16.50 4,600 27.7
FCC Feed (LS)..................................... 46.7 19.62 5,000 35.8
FCC Slurry Oil.................................... 9.28 1,200 4.0
Trolumen.......................................... 30.13 500 5.5
Coke (Anode Grade), FOEB.......................... 7.28 3,000 8.0
Sulfur, LT........................................ 25.00 40 0.4
------- -------
Total Products.................................. 139,640 1,066.2
FEEDSTOCKS
Crude Oil......................................... 17.83 135,100 879.2
Toledo Low Purity C3=............................. 14.12 3,200 16.5
Purchased Reformate/Other......................... 20.30 3,000 22.2
------- -------
Total Feedstocks................................ 141,300 917.9
Gross Margin...................................... 2.88 148.3
</TABLE>
- --------
*Data source: BP
A-16
<PAGE>
TABLE 6
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1995 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline................... 52.9 22.23 44,000 357.0
Conventional Premium 92......................... 57.5 24.17 5,900 52.0
Conventional Premium 93......................... 58.8 24.71 13,800 124.5
Reformulated Regular............................ 59.0 24.76 800 7.2
Reformulated Premium 93......................... 64.5 27.08 600 5.9
Conventional Regular 84 (Subgrade).............. 50.5 21.19 14,100 109.1
Blend Components................................ 35.0 14.70 (400) (2.1)
Jet A........................................... 52.7 22.14 16,600 134.1
Kerosene........................................ 53.9 22.62 900 7.4
Water White (Kerosene).......................... 47.6 19.98 5,900 43.0
No. 2 HS Diesel................................. 49.3 20.71 14,600 110.4
No. 2 Diesel Supreme............................ 50.7 21.29 5,200 40.4
Unfinished Diesel + Light Cycle Oil............. 46.4 19.49 7,700 54.8
Benzene......................................... 80.8 33.92 3,200 39.6
Toluene......................................... 72.0 30.23 600 6.6
Net Butane...................................... 24.8 10.40 900 3.4
Isobutane....................................... 40.3 16.94 3,500 21.6
Alky Feed....................................... 30.9 12.98 4,700 22.3
Mixed LPG....................................... 34.0 14.26 5,000 26.0
Propylene (Chemical Grade)...................... 69.3 29.10 5,900 62.7
FCC Feed (LS)................................... 47.0 19.72 4,400 31.7
FCC Slurry Oil.................................. 10.16 1,000 3.7
Trolumen........................................ 28.39 400 4.1
Coke (Anode Grade), FOEB........................ 8.99 3,000 9.8
Sulfur, LT...................................... 25.00 40 0.4
------- -------
Total Products................................ 162,340 1,275.6
FEEDSTOCKS
Crude Oil....................................... 19.22 154,600 1,084.7
Toledo Vac Bottoms.............................. 9.91 (200) (0.7)
Toledo Low Purity C3=........................... 22.51 4,000 32.9
Purchased Reformate/Other....................... 21.33 2,500 19.5
------- -------
Total Feedstocks.............................. 160,900 1,136.4
Gross Margin.................................... 2.37 139.2
</TABLE>
- --------
*Data Source: BP
A-17
<PAGE>
TABLE 7
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1996 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline................... 63.3 26.57 54,000 525.1
Conventional Premium 92......................... 66.0 27.72 2,100 21.3
Conventional Premium 93......................... 66.1 27.76 13,600 138.1
Reformulated Regular............................ 67.0 28.12 1,300 13.4
Reformulated Premium 93......................... 69.6 29.25 500 5.4
Conventional Regular 84 (Subgrade).............. 62.3 26.15 5,000 47.8
Blend Components................................ 61.6 25.88 (1,400) (13.3)
Jet A........................................... 65.2 27.38 17,200 172.4
Kerosene........................................ 65.2 27.38 600 6.0
Water White (Kerosene).......................... 59.2 24.86 3,800 34.6
No. 2 HS Diesel................................. 61.6 25.86 16,800 159.0
No. 2 Diesel Supreme............................ 62.6 26.29 5,600 53.9
Light Gas Oil (Unfinished Diesel)............... 57.8 24.27 5,000 44.4
Light Cycle Oil................................. 57.8 24.27 2,700 24.0
Benzene......................................... 86.7 36.41 2,000 26.6
Toluene......................................... 71.0 29.84 1,000 10.9
Net Butane...................................... 40.7 17.11 400 2.5
Isobutane....................................... 44.4 18.64 2,800 19.1
Alky Feed....................................... 41.5 17.45 4,000 25.5
Mixed LPG....................................... 43.9 18.43 4,400 29.7
Propylene (Chemical Grade)...................... 48.0 20.14 5,800 42.8
FCC Feed (LS)................................... 57.4 24.10 4,500 39.7
FCC Slurry Oil.................................. 13.48 1,300 6.4
Trolumen........................................ 35.35 400 5.2
Coke (Anode Grade), FOEB........................ 12.88 3,200 15.1
Sulfur, LT...................................... 25.00 40 0.4
------- -------
Total Products................................ 156,640 1,456.0
FEEDSTOCKS
Crude Oil....................................... 22.96 149,000 1,252.2
Toledo Vacuum Bottoms........................... 13.41 300 1.5
Toledo Low Purity C3=........................... 16.74 3,900 23.9
Purchased Reformate/Other....................... 28.15 2,100 21.6
------- -------
Total Feedstocks.............................. 155,300 1,299.2
Gross Margin.................................... 2.76 156.8
</TABLE>
- --------
* Data source: Clark
A-18
<PAGE>
TABLE 8
LIMA REFINERY
CALCULATED REFINERY GROSS MARGIN*
1997 OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline................... 60.7 25.49 55,000 511.7
Conventional Premium 92......................... 63.9 26.84 1,100 10.8
Conventional Premium 93......................... 64.0 26.89 13,400 131.5
Reformulated Regular............................ 64.4 27.03 2,000 19.7
Reformulated Premium 93......................... 67.6 28.38 600 6.2
Conventional Regular 84 (Subgrade).............. 59.7 25.07 11,400 104.3
Blend Components................................ 59.0 24.80 (900) (8.1)
Jet A........................................... 59.3 24.89 16,800 152.6
Kerosene........................................ 59.3 24.89 300 2.7
Water White (Kerosene).......................... 53.7 22.55 3,700 30.5
No. 2 HS Diesel................................. 56.0 23.53 20,100 172.6
No. 2 Diesel Supreme............................ 57.0 23.96 5,400 47.2
Light Gas Oil (Unfinished Diesel)............... 51.6 21.68 3,700 29.3
Light Cycle Oil................................. 51.6 21.68 4,000 31.7
Benzene......................................... 92.8 38.96 1,500 21.3
Toluene......................................... 76.0 31.90 200 2.3
Isobutane....................................... 40.3 16.91 3,300 20.4
Alky Feed....................................... 37.4 15.72 4,200 24.1
Mixed LPG....................................... 39.2 16.48 4,500 27.1
Propylene (Chemical Grade)...................... 43.3 18.19 6,000 39.8
FCC Feed (LS)................................... 53.9 22.65 2,000 16.5
FCC Slurry Oil.................................. 12.31 1,100 4.9
Trolumen........................................ 35.35 400 5.2
Coke (Anode Grade coke), FOEB................... 11.71 3,100 13.2
Sulfur, LT...................................... 25.00 40 0.4
------- -------
Total Products................................ 162,940 1,417.9
FEEDSTOCKS
Crude Oil....................................... 21.37 153,400 1,196.6
Toledo Vacuum Bottoms........................... 12.42 200 0.9
Toledo Low Purity C3=........................... 14.78 3,900 21.0
Purchased Butane................................ 15.38 1,100 6.2
Purchased Reformate/Other....................... 24.19 2,500 22.1
------- -------
Total Feedstocks.............................. 161,100 1,246.8
Gross Margin.................................... 2.91 171.1
</TABLE>
- --------
* Data source: Clark
A-19
<PAGE>
TABLE 9
LIMA REFINERY
HISTORIC CRUDE SLATE
(THOUSANDS OF BARRELS PER DAY)
<TABLE>
<CAPTION>
WT. %
(degrees)API SULFUR 1991 1992 1993 1994 1995 1996 1997 AVERAGE
------------ ------ ----- ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WTI..................... 39.0 0.3 110.6 100.5 105.0 96.5 107.8 91.1 98.3 101.4
ANS..................... 27.6 1.1 5.4 5.2 5.6 8.0 5.3 7.1 4.6 5.9
LLS..................... 38.7 0.1 7.0 4.8 5.5 10.8 7.5 5.7 5.7 6.7
Eugene Island........... 34.1 0.7 0.0 0.5 0.8 1.8 1.5 2.4 3.5 1.5
West Texas Sour......... 34.2 1.3 0.0 0.0 0.0 0.2 0.6 0.2 0.3 0.2
Other Domestic.......... 37.5 0.3 5.8 0.5 1.2 0.1 2.2 1.8 2.9 2.1
Cusiana................. 36.3 0.3 0.0 3.9 6.6 6.6 1.1 1.8 4.0 3.4
Bonito Sour............. 30.0 1.0 0.0 0.0 0.0 0.2 0.0 0.6 2.4 0.5
Cabinda................. 32.0 0.2 0.6 3.6 6.7 6.3 15.4 24.5 22.6 11.4
Rabi.................... 34.3 0.1 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.1
Zaire................... 31.3 0.1 0.0 0.0 0.0 0.0 0.0 0.9 0.9 0.3
North Sea............... 38.2 0.4 9.4 12.4 7.8 2.6 4.6 2.4 1.0 5.7
Nigerian................ 30.4 0.2 2.6 9.1 5.2 2.4 8.6 10.0 7.2 6.4
----- ----- ----- ----- ----- ----- ----- -----
Total................. 141.3 140.5 143.8 135.1 154.6 149.0 153.4 145.5
API Gravity, (degrees).. 37.9 38.1 37.3 37.1 37.3 36.4 36.8 37.3
Sulfur, Wt. %........... 0.3 0.3 0.3 0.4 0.3 0.3 0.3 0.3
</TABLE>
A-20
<PAGE>
TABLE 10
LIMA REFINERY
HISTORIC UNIT OPERATING RATES
<TABLE>
<CAPTION>
AVERAGE
CAPACITY -------------------
MB/D 1995 1996 1997 MB/D % UTILIZATION
-------- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Crude Distillation............... 168.0 154.6 149.0 153.4 152.3 90.7
Coking........................... 22.5 15.5 17.0 18.5 17.0 75.6
FCC.............................. 36.0 34.6 32.9 35.4 34.3 95.3
Hydrocracking.................... 24.0 21.9 18.3 19.4 19.9 82.8
Naphtha HDS...................... 60.0 49.9 48.5 52.1 50.2 83.6
Catalytic Reforming.............. 54.0 48.4 38.9 45.0 44.1 81.7
Aromatics Extraction............. 25.5 21.3 17.6 18.6 19.2 76.7
C5/C6 Isomerization.............. 18.5 13.9 10.3 12.2 12.1 65.6
</TABLE>
A-21
<PAGE>
TABLE 11
LIMA REFINERY
HISTORIC CASH OPERATING COSTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 AVERAGE
------ ------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VARIABLE
Fuel.................... 6,337 10,064 8,393 6,678 8,372 17,300 16,735 10,554
Power................... 15,051 15,194 14,880 14,705 15,201 15,500 14,180 14,959
Catalyst................ 1,362 1,545 1,780 1,585 2,081 2,000 1,796 1,736
Other Variable.......... 5,735 6,057 6,192 6,602 7,505 6,500 6,470 6,437
------ ------- ------- ------- ------ ------- ------- -------
Total Variable........ 28,485 32,860 31,245 29,570 33,159 41,300 39,181 33,686
$/Barrel of Crude....... 0.55 0.64 0.59 0.60 0.59 0.76 0.70 0.63
FIXED
Turnaround Maintenance.. 2,082 3,508 5,814 30,094 908 5,900 1,653 7,137
Other Fixed............. 61,671 64,133 64,058 66,491 65,436 68,100 64,339 64,890
------ ------- ------- ------- ------ ------- ------- -------
Total Fixed........... 63,753 67,641 69,872 96,585 66,344 74,000 65,992 72,027
$/Barrel of Crude....... 1.24 1.32 1.33 1.96 1.18 1.36 1.18 1.36
TOTAL OPERATING COSTS 92,238 100,501 101,117 126,155 99,503 115,300 105,173 105,712
$/Barrel of Crude....... 1.79 1.95 1.93 2.56 1.76 2.12 1.88 1.99
</TABLE>
A-22
<PAGE>
TABLE 12
BP LIMA REFINERY
HISTORIC CAPITAL EXPENDITURES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
1991-95
-------------
1991 1992 1993 1994 1995 TOTAL AVERAGE
---- ---- ---- ---- ---- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
MAJOR PAYOUT PROJECTS
Refinery Automation..................... 2.0 8.4 2.7 0.1 13.2 2.6
Vacuum Tower Revamp..................... 0.2 5.0 1.1 6.3 1.3
Coke Drum Overhead Piping............... 1.1 1.1 0.2
Refinery Information System............. 0.1 0.1 0.0
Light Ends Optimization................. 0.5 0.5 0.1
Coker Unit Improvements................. 0.7 0.7 0.1
Conversion Unit Optimization............ 0.5 0.5 0.1
DHT Project............................. 0.8 0.8 0.2
Coker Furnace........................... 1.5 5.0 6.5 1.3
Multivariable Control................... 0.5 0.5 0.1
HPU C3 Recovery......................... 0.1 0.1 0.0
FCC Unsaturates Gas Plant............... 3.0 3.0 0.6
Gasoline Blender Upgrade................ 1.3 0.3 1.6 0.3
Low Pressure Reformer................... 0.1 0.1 0.0
Reformer Recycle Gas Dryer.............. 0.1 0.1 0.0
Crude Unit Debottleneck................. 0.8 0.8 0.2
FCC Reactor Cyclone Revisions........... 11.5 0.1 11.6 2.3
Trolumen Instrumentation Upgrade........ 1.1 1.1 0.2
Total Other Payout Projects............. 6.9 2.9 2.1 4.4 2.4 18.7 3.7
---- ---- ---- ---- ---- ----- ----
Subtotal Payout Projects.............. 8.9 13.3 11.7 24.5 8.9 67.3 13.5
NON-PAYOUT AND RELIABILITY PROJECTS
Tank Rationalizations................... 0.6 0.8 1.4 0.2 1.9 4.9 1.0
Power Boiler............................ 2.2 2.5 4.7 0.9
Coker Gas Compressor.................... 1.7 1.3 3.0 0.6
Total Other Projects.................... 0.8 0.4 0.1 0.6 1.5 3.4 0.7
---- ---- ---- ---- ---- ----- ----
Subtotal Reliability Projects......... 5.3 5.0 1.5 0.8 3.4 16.0 3.2
ENVIRONMENTAL PROJECTS
Benzene NESHAPs......................... 8.4 6.8 2.8 3.2 21.2 4.2
Oily Wastewater......................... 3.4 0.3 6.4 2.5 12.6 2.5
Firewater System........................ 1.8 0.8 2.6 0.5
Process Safety Management............... 0.2 0.1 0.3 0.1
East Area Flare Rectification........... 4.5 1.8 6.3 1.3
CO Boiler Seal Pot...................... 1.6 1.5 0.3
L5 Landfill Rectification............... 0.4 1.4 1.8 0.4
Total Other Projects.................... 3.7 1.3 0.7 1.1 1.1 7.9 1.6
---- ---- ---- ---- ---- ----- ----
Subtotal Environmental Projects....... 17.5 9.3 9.9 13.3 4.3 54.2 10.8
Total Capital Spending.............. 31.7 27.6 23.1 38.6 16.6 137.5 27.5
</TABLE>
A-23
<PAGE>
TABLE 13
TM&C PRICING BASIS
WTI AT $18/BARREL AND GULF COAST CRACK SPREAD AT $3/BARREL
<TABLE>
<CAPTION>
LIMA REFINERY
---------------------------------
TRANSPORTATION/ REFINERY
MARKET(1) FEES PRICE
------------- ------------------ -------------
c/GAL. $/BBL. c/GAL. $/BBL. c/GAL. $/BBL. REMARKS
------ ------ ------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
CRUDES
WTI (Midland)........... 17.85 1.00 18.85 WTI (Cushing)--$0.15/bbl.
LLS (St. James)......... 18.20 0.91 19.11 WTI (Cushing) + $0.20/bbl.
Eugene Island
(St. James)............ 17.00 0.91 17.91 WTI (Cushing)--$1.00/bbl.
Angola Cabinda (FOB).... 15.50 2.70 18.20 WTI (Cushing)--$2.50/bbl.
OTHER FEEDSTOCKS
Normal Butane........... 37.3 15.68 5.5 2.31 42.8 17.99 Mont Belvieu + 5.5c/gal.
Toledo Low Purity
Propylene.............. 34.8 14.63 Formula (per proposed BP agreement)
Natural Gas ($/FOEB).... 12.60 4.00 16.60 Gulf Coast + $4.00/FOEB
PRODUCTS
Conventional
Regular 87............. 51.3 21.56 2.5 1.05 53.8 22.61 Gulf Coast + 2.5c/gal.
Conventional Regular 84
(Subgrade)............. 51.8 21.77 Conventional regular--2.0c/gal.
Conv. Premium 93........ 55.3 23.24 2.5 1.05 57.8 24.29 Conventional regular + 4.0c/gal.
Jet A-54................ 49.6 20.83 2.5 1.05 52.1 21.88 Gulf Coast + 2.5c/gal.
Kerosene................ 53.1 22.30 Jet A-54 + 1.0c/gal.
No. 2 HS Diesel......... 47.3 19.88 2.5 1.05 49.8 20.93 Gulf Coast + 2.5c/gal.
No. 2 HS Diesel
Incremental............ 45.8 19.25 No. 2 diesel HS--4.0c/gal.
No. 2 HS Diesel
Supreme................ 50.8 21.35 No. 2 diesel HS + 1.0c/gal.
Benzene................. 93.3 39.20 (10.0) (4.20) 83.3 35.00 Gulf Coast--10.0c/gal. (transportation)
Toluene................. 77.3 32.48 (10.0) (4.20) 67.3 28.28 Gulf Coast--10.0c/gal. (transportation)
Normal Butane........... 37.3 15.68 37.3 15.68 Mont Belvieu
Isobutane............... 40.3 16.94 40.3 16.94 Mont Belvieu
Alky Feed............... 37.3 15.68 37.3 15.68 Mont Belvieu normal butane
Mixed LPG............... 31.3 13.16 3.0 1.26 34.3 14.42 Mont Belvieu propane + 3.0c/gal.
(based on Ferrelgas contract)
Propylene (Chemical Gulf Coast--27.4c/gal. (per proposed
Grade);................ 70.0 29.40 (27.4) (11.51) 42.6 17.89 BP agreement)
FCCU Slurry Oil......... 9.00 Gulf Coast No. 6 (3%)--$2.00/bbl.
(historical relationship)
Trolumen................ 31.00 Gulf Coast No. 6 (3%) + $20.00/bbl.
(historical relationship)
Coke (Anode Grade),
$/FOEB................. 12.00 Equivalent to $60 per ton
Sulfur, $/T............. 28.50 Historical average
</TABLE>
- -------
(1) Product and other feedstock market prices are Gulf Coast spot lows.
A-24
<PAGE>
TABLE 14
LIMA REFINERY PROJECTED OPERATION
FEEDSTOCK AND PRODUCT LIMITATIONS
<TABLE>
<CAPTION>
TYPE OF
MB/D LIMIT
----- -------
<S> <C> <C>
CRUDES
WTI............................................................... 115.0 Fixed
Eugene Island..................................................... 10.0 Fixed
Angola Cabinda.................................................... 30.0 Fixed
OTHER FEEDSTOCKS
Normal Butane..................................................... -- Open
Toledo Low Purity Propylene....................................... 3.9 Fixed
Natural Gas....................................................... -- Open
PRODUCTS
Conventional Regular 87........................................... -- Open
Conventional Regular 84 (Subgrade)................................ 12.0 Fixed
Conventional Premium 93........................................... 17.0 Maximum
Jet A-54.......................................................... 20.0 Maximum
Kerosene.......................................................... 0.8 Maximum
No. 2 HS Diesel................................................... 18.0 Maximum
No. 2 HS Diesel Incremental....................................... -- Open
No. 2 HS Diesel Supreme........................................... 5.0 Maximum
Benzene........................................................... -- Open
Toluene........................................................... 1.0 Maximum
Normal Butane..................................................... -- Open
Isobutane......................................................... -- Open
Alky Feed......................................................... -- Open
Mixed LPG......................................................... -- Open
Propylene (Chemical Grade)........................................ -- Open
FCCU Slurry Oil................................................... -- Open
Trolumen.......................................................... 0.5 Maximum
Coke (Anode Grade)................................................ -- Open
Sulfur............................................................ -- Open
</TABLE>
A-25
<PAGE>
TABLE 15
LIMA REFINERY
ESTIMATED REFINERY GROSS MARGIN
TM&C PROJECTED OPERATIONS
<TABLE>
<CAPTION>
c/GAL. $/BBL. BPCD $MM
------ ------ ------- -------
<S> <C> <C> <C> <C>
PRODUCTS
Conventional Regular Gasoline..................... 53.8 22.61 53,967 445.4
Conventional Premium 93........................... 57.8 24.29 17,000 150.7
Conventional Regular Subgrade (84)................ 51.8 21.77 12,000 95.4
Jet A............................................. 52.1 21.88 20,000 159.7
Kerosene.......................................... 53.1 22.30 800 6.5
No. 2 HS Diesel................................... 49.8 20.93 18,000 137.5
No. 2 HS Diesel Incremental....................... 45.8 19.25 5,166 36.3
No. 2 Diesel Supreme.............................. 50.8 21.35 5,000 39.0
Benzene........................................... 70.3 35.00 1,635 20.9
Toluene........................................... 67.3 28.28 1,000 10.3
Normal Butane..................................... 37.3 15.68 638 3.7
Isobutane......................................... 40.3 16.94 4,742 29.3
Alky Feed......................................... 37.3 15.68 4,059 23.2
Mixed LPG......................................... 34.3 14.42 5,157 27.1
Propylene (Chemical Grade)........................ 42.6 17.89 5,433 35.5
FCC Slurry Oil.................................... 9.00 1,064 3.5
Trolumen.......................................... 31.00 500 5.7
Coke (Anode Grade), FOEB.......................... 12.00 3,394 14.9
Sulfur, LT........................................ 28.50 39 0.4
------- -------
Total Liquid Products........................... 159,555 1,244.9
FEEDSTOCKS
WTI............................................... 18.85 115,000 791.2
Eugene Island..................................... 17.91 10,000 65.4
Angola Cabinda.................................... 18.20 30,000 199.3
Toledo Low Purity C3=............................. 14.63 3,900 20.8
------- -------
Total Feedstocks................................ 158,900 1,076.7
Gross Margin...................................... 2.84 168.2
</TABLE>
A-26
<PAGE>
TABLE 16
LIMA REFINERY
TM&C PROJECTED UNIT OPERATING RATES
<TABLE>
<CAPTION>
%
MB/D UTILIZATION
----- -----------
<S> <C> <C>
Crude Distillation............................................ 155.0 90.7
Coking........................................................ 20.3 88.7
FCC........................................................... 35.0 95.6
Hydrocracking................................................. 22.5 92.2
Naphtha HDS................................................... 51.7 84.8
Catalytic Reforming........................................... 52.0 94.7
Aromatics Extraction.......................................... 16.6 65.3
C5/C6 Isomerization........................................... 18.0 95.7
</TABLE>
A-27
<PAGE>
TABLE 17
LIMA REFINERY
FEEDSTOCK AND PRODUCT VOLUMES
HISTORIC VS. TM&C PROJECTED CASE OPERATIONS
<TABLE>
<CAPTION>
VOL. % OF
FEEDSTOCKS
------------------
AVERAGE TM&C
HISTORIC PROJECTED
1991-97 CASE
-------- ---------
<S> <C> <C>
PRODUCT YIELDS
Gasolines.................................................... 48.2 52.2
Middle Distillates........................................... 32.4 30.8
LPGs......................................................... 11.3 12.6
Benzene/Toluene.............................................. 2.6 1.7
Coke......................................................... 2.0 2.1
FCC Feed/Other............................................... 3.6 1.0
----- -----
Total...................................................... 100.1 100.4
OTHER PARAMETERS
% Premium Gasoline........................................... 23.3 20.5
% WTI in Crude Slate......................................... 69.7 74.2
Crude API gravity............................................ 37.3 37.3
Crude Sulfur, Wt. %.......................................... 0.3 0.3
</TABLE>
A-28
<PAGE>
TABLE 18
LIMA REFINERY PROJECTED OPERATION
OPERATING COSTS SUMMARY
<TABLE>
<CAPTION>
$/BBL.
FOEB/D $MM/YEAR CRUDE
------ -------- ------
<S> <C> <C> <C>
VARIABLE COSTS
Fuel
Consumed............................................... 11,700 -- --
Produced............................................... 9,700 -- --
Net Purchase........................................... 2,000 12.2 0.22
Power.................................................... 15.0 0.26
Catalyst................................................. -- 2.0 0.04
Other Variable........................................... -- 7.0 0.12
----- ----
Total................................................ -- 36.2 0.64
FIXED COSTS.............................................. -- 70.0 1.24
----- ----
TOTAL OPERATING COSTS.................................... -- 106.2 1.88
</TABLE>
- --------
Notes:
Fuel cost assumed @ $16.70 per FOEB ($2.65 per MMBTU).
Power cost assumed @ $0.03 per KWH.
Fixed Costs estimate includes turnaround maintenance amortization of $7
million.
A-29
<PAGE>
TABLE 19
LIMA REFINERY PROJECTED OPERATION
ESTIMATED EBITD
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
1999(1) 2000 2001 2002 2003
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Product Revenues....................... 1,142.6 1,244.9 1,244.9 1,244.9 1,244.9
Cost of Sales.......................... 988.2 1,076.7 1,076.7 1,076.7 1,076.7
Refinery Gross Margin.................. 154.4 168.2 168.2 168.2 168.2
Refinery Operating Expenses(2)......... 103.2 106.2 106.2 106.2 106.2
Refinery Net Margin.................... 51.2 62.0 62.0 62.0 62.0
Refinery G&A(3)........................ 1.2 1.2 1.2 1.2 1.2
EBITD.................................. 50.0 60.8 60.8 60.8 60.8
</TABLE>
- --------
(1) 1999 includes a 30-day plant-wide turnaround.
(2)See Table 18.
(3)Estimate by Clark.
A-30
<PAGE>
TABLE 20
LIMA REFINERY
BACKCAST COMPARISONS(1)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
REFINERY
ACKCASTB PRODUCT COST OF GROSS
PERIOD REVENUES SALES MARGIN
- -------- -------- ------- --------
<S> <C> <C> <C>
1991................................................. 1,482.8 1,264.2 218.6
1992................................................. 1,384.4 1,216.5 167.9
1993................................................. 1,245.0 1,092.6 152.4
1994................................................. 1,183.2 1,035.3 147.9
1995................................................. 1,253.9 1,113.6 140.3
1996................................................. 1,453.5 1,316.1 137.4
1997................................................. 1,403.8 1,218.0 185.8
Average.............................................. 1,343.8 1,179.5 164.3
BP Actual Gross Margin (1991-97 Average)............. 159.2
TM&C Projected Gross Margin.......................... 168.2
</TABLE>
- --------
(1) TM&C projected refinery yields with actual historical prices and
relationships.
A-31
<PAGE>
TABLE 21
LIMA REFINERY
ESTIMATED GROSS MARGIN SENSITIVITIES
(MILLION OF DOLLARS PER YEAR)
<TABLE>
<CAPTION>
DELTA GROSS MARGIN
------------------
<S> <C>
. Change 3:2:1 Crack Spread By $0.25 Per Barrel.............. +/-12.1
. Increase Crude Throughput By 10,000 BPCD................... +10.4
. Do Not Make Trolumen....................................... -3.9
. Change Premium Spread By 1.0c Per Gallon................... +/-2.6
. Change Anode Coke Price By $10/Ton......................... +/-2.5
. Change Alky Feed Price by $1.00 Per Barrel................. +/-1.5
. Change Gasoline/Diesel Spread By 1.0c Per Gallon........... +/-0.6
</TABLE>
A-32
<PAGE>
FIGURE 1
WTI 3:2:1 GULF COAST CRACK SPREAD
(DOLLAR PER BARREL)
91 4.15
92 3.25
93 2.90
94 2.59
95 2.38
96 2.71
97 3.24
TM&C 3.00
A-33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law and Article Six of the
Registrant's Bylaws provide for indemnification of the Registrant's directors
and officers in a variety of circumstances, which may include liabilities
under the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
A list of exhibits is set forth in the Exhibit Index appearing elsewhere
in this Registration Statement and is incorporated herein by reference.
(b) FINANCIAL STATEMENT SCHEDULES*
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Clark Refining & Marketing, Inc.
Report of Independent Accountants...................................... F-2
</TABLE>
- --------
*Schedules other than those listed above have been omitted because of the
absence of the conditions under which they are required or because the
required information is presented in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Clayton, State of Missouri on September 25, 1998.
Clark Refining & Marketing, Inc.
/s/ William C. Rusnack
By: _________________________________
President, Chief Executive Officer
and Chief Operating Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints William C. Rusnack, Maura J. Clark and
Katherine D. Knocke, and each of them singly, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities (including his
capacity as a director and officer of Clark Refining & Marketing, Inc.) to
sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his
or their substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities indicated and on September 25, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ William C. Rusnack
- -------------------------------------------
William C. Rusnack President, Chief Executive Officer and
Chief Operating Officer; Director
(Principal Executive Officer)
/s/ Maura J. Clark
- -------------------------------------------
Maura J. Clark Executive Vice President--Corporate
Development and Chief Financial Officer
(Principal Financial Officer)
/s/ Dennis R. Eichholz
- -------------------------------------------
Dennis R. Eichholz Controller and Treasurer
(Principal Accounting Officer)
/s/ Marshall A. Cohen
- -------------------------------------------
Marshall A. Cohen Director; Chairman of the Board
/s/ David A. Stockman
- -------------------------------------------
David A. Stockman Director
/s/ Glenn H. Hutchins
- -------------------------------------------
Glenn H. Hutchins Director
/s/ David I. Foley
- -------------------------------------------
David I. Foley Director
</TABLE>
II-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Clark Refining &
Marketing, Inc. (Incorporated by reference to Exhibit
3.1 filed with Clark Oil & Refining Corporation
Registration Statement on Form S-1 (Registration No. 33-
28146))
3.2 Certificate of Amendment to Certificate of Incorporation
of Clark Refining & Marketing, Inc. (Incorporated by
reference to Exhibit 3.2 filed with Clark Oil & Refining
Corporation Annual Report on Form 10-K (Registration No.
1-11392))
3.3 By-laws of Clark Refining & Marketing, Inc. (Incorporated
by reference to Exhibit 3.2 filed with Clark Oil &
Refining Corporation Registration Statement on Form S-1
(Registration No. 33-28146))
*4.1 Indenture dated as of August 10, 1998 between Clark
Refining & Marketing, Inc. and Bankers Trust Company, as
Trustee, including the form of the 8 5/8% Senior Notes
due 2008
4.2 Indenture between Clark Refining & Marketing, Inc.
(formerly Clark Oil & Refining Corporation) and
NationsBank of Virginia, N.A. including the form of 9
1/2% Senior Notes due 2004 (Incorporated by reference to
Exhibit 4.1 filed with Clark Oil & Refining Corporation
Registration Statement on Form S-1 (File No. 33-50748))
4.3 Supplemental Indenture between Clark Refining &
Marketing, Inc. and NationsBank of Virginia, N.A., dated
February 17, 1995 (Incorporated by reference to Exhibit
4.6 filed with Clark USA, Inc. Annual Report on Form 10-
K for the year ended December 31, 1994 (File No. 33-
59144))
4.4 Indenture between Clark Refining & Marketing, Inc. and
Bankers Trust Company, dated as of November 21, 1997,
including the form of 8 3/8% Senior Notes due 2007
(Incorporated by reference to Exhibit 4.5 filed with
Clark Refining & Marketing, Inc. Registration Statement
on Form S-4 (Registration No. 333-42431))
4.5 Indenture between Clark Refining & Marketing, Inc. and
Marine Midland Bank, dated as of November 21, 1997,
including the form of 8 7/8% Senior Subordinated Notes
due 2007 (Incorporated by reference to Exhibit 4.6 filed
with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
4.6 Supplemental Indenture between Clark Refining &
Marketing, Inc. and Marine Midland Bank, dated as of
November 21, 1997 (Incorporated by reference to Exhibit
6.1 filed with Clark Refining & Marketing, Inc.
Registration Statement on Form S-4 (Registration No.
333-42431))
*4.7 Exchange and Registration Rights Agreement, dated August
10, 1998, between Clark Refining & Marketing, Inc. and
Goldman, Sachs & Co., J.P. Morgan Securities, Inc.,
Salomon Brothers Inc and Wasserstein Perella Securities,
Inc.
*4.8 Form of 8 5/8% New Senior Notes due 2008 (included in
Exhibit 4.1)
*5.1 Opinion of Simpson Thacher & Bartlett as to the legality
of the notes
*8.1 Opinion of Simpson Thacher & Bartlett as to certain tax
matters
</TABLE>
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EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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10.10 Credit Agreement, dated as of September 25, 1997, among
Clark Refining & Marketing, Inc., Bankers Trust Company,
as Administrative Agent, The Toronto-Dominion Bank, as
Syndication Agent, BankBoston, N.A., as Documentation
Agent, and the other financial institutions party
thereto. (Incorporated by reference to Exhibit 10.10
filed with Clark Refining & Marketing, Inc. Current
Report on Form 8-K, dated October 1, 1997 (File No. 1-
11392))
10.11 Amendment No. 1 to Credit Agreement, dated as of October
29, 1997, among Clark Refining & Marketing, Inc.,
Bankers Trust Company, as Administrative Agent and
Collateral Agent, The Toronto-Dominion Bank, as
Syndication Agent, and BankBoston, N.A., as
Documentation Agent, and the other financial
institutions party thereto (incorporated by reference to
Exhibit 10.11 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration
No. 333-42431))
10.12 Amendment No. 2 to Credit Agreement, dated as of November
7, 1997, among Clark Refining & Marketing, Inc., Bankers
Trust Company, as Administrative Agent and Collateral
Agent, The Toronto-Dominion Bank, as Syndication Agent,
and BankBoston, N.A., as Documentation Agent, and the
other financial institutions party thereto (incorporated
by reference to Exhibit 10.12 filed with Clark Refining
& Marketing, Inc. Registration Statement on Form S-4
(Registration No. 333-42431))
*10.13 Amendment No. 3 to Credit Agreement, dated as of July 24,
1998, among Clark Refining & Marketing, Inc., Bankers
Trust Company, as Administrative Agent and Collateral
Agent, The Toronto-Dominion Bank, as Syndication Agent,
and BankBoston, N.A., as Documentation Agent, and the
other financial institutions party thereto.
10.14 Credit Agreement, dated as of November 21, 1997, among
Clark Refining & Marketing, Inc., Goldman, Sachs Credit
Partners L.P., as Arranger and Syndication Agent, and
State Street Bank and Trust Company of Missouri, N.A.,
as Payment Agent, the financial institutions listed on
the signature pages thereof, and Goldman Sachs Credit
Partners, as Administrative Agent (Incorporated by
reference to Exhibit 10.13 filed with Clark Refining &
Marketing, Inc. Registration Statement on Form S-4
(Registration No. 333-42431))
*10.15 First Amended and Restated Credit Agreement, dated as of
August 10, 1998, among Clark Refining & Marketing, Inc.,
as Borrower, Goldman Sachs Credit Partners L.P., as
Arranger, Syndication Agent and Administrative Agent,
and State Street Bank & Trust Company of Missouri, N.A.,
as Paying Agent
10.20 Clark Refining & Marketing, Inc. Stock Option Plan
(Incorporated by reference to Exhibit 10.5 filed with
Clark Registration Statement on Form S-1 (Registration
No. 33-43358))
10.21 Clark Refining & Marketing, Inc. Savings Plan, as amended
and restated effective as of October 1, 1989
(Incorporated by reference to Exhibit 10.6 filed with
Clark Oil & Refining Corporation Annual Report on Form
10-K for the year ended December 31, 1989 (Commission
File No. 1-11392))
10.22 Employment Agreement of Paul D. Melnuk (Incorporated by
reference to Exhibit 10.2 filed with Clark Refining &
Marketing, Inc. Current Report on Form 8-K, dated
October 1, 1997 (File No. 1-11392))
**10.23 Employment Agreement of William C. Rusnack
</TABLE>
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EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
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10.24 Memorandum of Agreement, dated as of July 8, 1997,
between Clark Refining & Marketing, Inc. and Bradley D.
Aldrich (Incorporated by reference to Exhibit 10.23
filed with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
10.25 Memorandum of Agreement, dated as of July 8, 1997,
between Clark Refining & Marketing, Inc. and Brandon K.
Barnholt (Incorporated by reference to Exhibit 10.24
filed with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
10.26 Memorandum of Agreement, dated as of July 8, 1997,
between Clark Refining & Marketing, Inc. and Maura J.
Clark (Incorporated by reference to Exhibit 10.25 filed
with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
10.27 Memorandum of Agreement, dated as of July 8, 1997,
between Clark Refining & Marketing, Inc. and Edward J.
Stiften (Incorporated by reference to Exhibit 10.26
filed with Clark Refining & Marketing, Inc. Registration
Statement on Form S-4 (Registration No. 333-42431))
10.30 Amended and Restated Asset Sale Agreement, dated as of
August 16, 1994 between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.3 filed with Clark USA, Inc. Current
Report on Form 8-K, dated February 27, 1995
(Registration No. 33-59144))
10.31 Chemical Facility Lease with Option to Purchase, dated as
of August 17, 1994 between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.9.2 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No. 33-
84192))
10.32 Sublease of Chemical Facility Lease, dated as of August
16, 1994, between Chevron U.S.A. Inc. and Clark Refining
& Marketing, Inc., (Incorporated by reference to Exhibit
10.9.3 filed with Clark USA, Inc. Registration Statement
on Form S-1 (Registration No. 33-84192))
10.33 PADC Facility Lease with Option to Purchase, dated as of
August 16, 1994, between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.9.4 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No. 33-
84192))
10.34 Supply Agreement for the Chemical Facility, dated as of
August 16, 1994, between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.9.5 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No. 33-
84192))
10.35 Services Agreement for the Chemical Facility, dated as of
August 16, 1994, between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.9.6 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No. 33-
84192))
10.36 Supply Agreement for the PADC Facility, dated as of
August 16, 1994, between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc., (Incorporated by reference
to Exhibit 10.9.7 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No. 33-
84192))
</TABLE>
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EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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10.37 Services Agreement for the PADC Facility, dated as of
August 16, 1994, between Chevron U.S.A. Inc. and Clark
Refining & Marketing, Inc. (Incorporated by reference to
Exhibit 10.9.8 filed with Clark USA, Inc. Registration
Statement on Form S-1 (Registration No. 33-84192))
10.60 Clark Refining & Marketing, Inc. Stock Option Plan
(Incorporated by reference to Exhibit 10.5 filed with
Clark Registration Statement on Form S-1 (Registration
No. 33-43358))
10.61 Clark Refining & Marketing, Inc. Savings Plan, as amended
and restated effective as of October 1, 1989
(Incorporated by reference to Exhibit 10.6 filed with
Clark Oil & Refining Corporation Annual Report on Form
10-K for the year ended December 31, 1989 (Commission
File No. 1-11392))
10.70 Stock Purchase and Redemption Agreement, dated as of
December 30, 1992, among AOC Limited Partnership, P.
Anthony Novelly, Samuel R. Goldstein, G & N Investments,
Inc., TrizecHahn Corporation, AOC Holdings, Inc. and
Clark Oil & Refining Corporation (Incorporated by
reference to Exhibit 10.11 filed with Clark R & M
Holdings, Inc. Registration Statement on Form S-4 (File
No. 33-59144))
*12.1 Computation of Ratio of Earnings to Fixed Charges
*15.1 Awareness Letter of Deloitte & Touche LLP
*21.1 Subsidiaries of the Company
*23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Simpson Thacher & Bartlett (included in
Exhibit 5.1)
*23.3 Consent of Deloitte & Touche LLP
*23.4 Consent of Turner, Mason & Company
*24.1 Power of Attorney (included on signature page)
*25.1 Statement of Eligibility and Qualification on Form T-1 of
Bankers Trust Company
*99.1 Form of Letter of Transmittal from Clark Refining &
Marketing, Inc. to its noteholders relating to the
exchange offer
*99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
II-6
<PAGE>
EXHIBIT 4.10
________________________________________________________________________________
Clark Refining & Marketing, Inc.
To
Bankers Trust Company
Trustee
_______________________
INDENTURE
Dated as of August 10, 1998
8 5/8% Senior Notes due 2008
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture
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PARTIES..................................................................... 1
RECITALS OF THE COMPANY..................................................... 1
ARTICLE 1. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION......... 1
Section 1.01. Definitions.................................................. 1
Section 1.02. Compliance Certificates and Opinions......................... 23
Section 1.03. Form of Documents Delivered to Trustee....................... 24
Section 1.04. Acts of Holders; Record Dates................................ 24
Section 1.05. Notices, Etc., to Trustee and Company........................ 25
Section 1.06. Notice to Holders; Waiver.................................... 26
Section 1.07. Conflict with Trust Indenture Act............................ 26
Section 1.08. Effect of Headings and Table of Contents..................... 27
Section 1.09. Successors and Assigns....................................... 27
Section 1.10. Separability Clause.......................................... 27
Section 1.11. Benefits of Indenture........................................ 27
Section 1.12. Governing Law................................................ 27
Section 1.13. Legal Holidays............................................... 27
Section 1.14. No Recourse Against Others................................... 27
ARTICLE 2. THE SECURITIES.................................................. 28
Section 2.01. Form and Dating.............................................. 28
Section 2.02. Execution and Authentication................................. 29
Section 2.03. Registrar and Paying Agent................................... 30
Section 2.04. Paying Agent to Hold Money in Trust.......................... 30
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Section 2.05. Holder Lists........................................................................30
Section 2.06. Transfer and Exchange...............................................................31
Section 2.07. Replacement Securities..............................................................44
Section 2.08. Outstanding Securities..............................................................45
Section 2.09. Treasury Securities.................................................................45
Section 2.10. Temporary Securities................................................................45
Section 2.11. Cancellation........................................................................46
Section 2.12. Defaulted Interest..................................................................46
ARTICLE 3. SATISFACTION AND DISCHARGE.............................................................46
Section 3.01. Satisfaction and Discharge of Indenture.............................................46
Section 3.02. Application of Trust Money..........................................................47
ARTICLE 4. REMEDIES...............................................................................48
Section 4.01. Events of Default...................................................................48
Section 4.02. Acceleration of Maturity; Rescission and Annulment..................................50
Section 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee.....................51
Section 4.04. Trustee May File Proofs of Claim....................................................51
Section 4.05. Trustee May Enforce Claims Without Possession of Securities.........................52
Section 4.06. Application of Money Collected......................................................52
Section 4.07. Limitation on Suits.................................................................52
Section 4.08. Unconditional Right of Holders to Receive Principal, Premium and Interest...........53
Section 4.09. Restoration of Rights and Remedies..................................................53
Section 4.10. Rights and Remedies Cumulative......................................................53
Section 4.11. Delay or Omission Not Waiver........................................................54
Section 4.12. Control by Holders..................................................................54
Section 4.13. Waiver of Past Defaults.............................................................54
Section 4.14. Undertaking for Costs...............................................................55
Section 4.15. Waiver of Stay, Extension or Usury Laws.............................................55
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ARTICLE 5. THE TRUSTEE............................................................................55
Section 5.01. Certain Duties and Responsibilities.................................................55
Section 5.02. Notice of Defaults..................................................................56
Section 5.03. Certain Rights of Trustee...........................................................56
Section 5.04. Not Responsible for Recitals or Issuance of Securities..............................57
Section 5.05. May Hold Securities.................................................................57
Section 5.06. Money Held in Trust.................................................................57
Section 5.07. Compensation and Reimbursement......................................................57
Section 5.08. Disqualification; Conflicting Interests.............................................58
Section 5.09. Corporate Trustee Required; Eligibility.............................................59
Section 5.10. Resignation and Removal; Appointment of Successor...................................59
Section 5.11. Acceptance of Appointment by Successor..............................................60
Section 5.12. Merger, Conversion, Consolidation or Succession to Business.........................60
Section 5.13. Preferential Collection of Claims Against Company...................................61
Section 5.14. Appointment of Authenticating Agent.................................................61
ARTICLE 6. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY......................................64
Section 6.01. Company to Furnish Trustee Names and Addresses of Holders...........................64
Section 6.02. Preservation of Information; Communications to Holders..............................64
Section 6.03. Reports by Trustee..................................................................64
Section 6.04. Reports by Company..................................................................64
ARTICLE 7. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...................................65
Section 7.01. Company May Consolidate, Etc., Only on Certain Terms................................65
Section 7.02. Successor Substituted...............................................................65
ARTICLE 8. SUPPLEMENTAL INDENTURES................................................................66
Section 8.01. Supplemental Indentures Without Consent of Holders..................................66
Section 8.02. Supplemental Indentures with Consent of Holders.....................................66
Section 8.03. Execution of Supplemental Indentures................................................67
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Section 8.04. Effect of Supplemental Indentures...................................................67
Section 8.05. Conformity with Trust Indenture Act.................................................68
Section 8.06. Reference in Securities to Supplemental Indentures..................................68
Section 8.07. Notice of Supplemental Indentures...................................................68
ARTICLE 9. COVENANTS..............................................................................68
Section 9.01. Payment of Principal, Premium and Interest..........................................68
Section 9.02. Maintenance of Office or Agency.....................................................68
Section 9.03. Money for Securities Payments to Be Held in Trust...................................69
Section 9.04. Statement by Officers as to Default.................................................70
Section 9.05. Existence...........................................................................71
Section 9.06. Provision of Financial Information..................................................71
Section 9.07. Limitation on Restricted Payments...................................................71
Section 9.08. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.............................................................73
Section 9.09. Limitation on Transactions with Shareholders and Affiliates.........................74
Section 9.10. Limitation on Indebtedness..........................................................75
Section 9.11. Limitation on Issuance of Guarantees of Indebtedness................................76
Section 9.12. Limitation on Liens.................................................................76
Section 9.13. Limitation on Certain Asset Dispositions............................................76
Section 9.14. Restrictions on Secured Indebtedness................................................77
Section 9.15. Restrictions on Sales and Leasebacks...............................................78
Section 9.16. Waiver of Certain Covenants.........................................................79
Section 9.17. Effect of Investment Grade Rating...................................................79
ARTICLE 10. REDEMPTION OF SECURITIES..............................................................79
Section 10.01. Right of Redemption................................................................79
Section 10.02. Applicability of Article...........................................................80
Section 10.03. Election to Redeem; Notice to Trustee..............................................80
Section 10.04. Selection by Trustee of Securities to Be Redeemed..................................80
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Section 10.05. Notice of Redemption...............................................................81
Section 10.06. Deposit of Redemption Price........................................................81
Section 10.07. Securities Payable on Redemption Date..............................................82
Section 10.08. Securities Redeemed in Part........................................................82
Section 10.09. Offer to Purchase..................................................................82
ARTICLE 11.........................................................................................83
ARTICLE 12. CHANGE OF CONTROL TRIGGERING EVENT....................................................84
Section 12.01. Change of Control Triggering Event.................................................84
ARTICLE 13. DEFEASANCE AND COVENANT DEFEASANCE....................................................84
Section 13.01. Company's Option to Effect Defeasance or Covenant Defeasance.......................84
Section 13.02. Defeasance and Discharge...........................................................84
Section 13.03. Covenant Defeasance................................................................85
Section 13.04. Conditions to Defeasance or Covenant Defeasance....................................85
Section 13.05. Deposited Money and U.S. Government Obligations to be Held in Trust;
Other Miscellaneous Provisions.....................................................87
Section 13.07. Reinstatement......................................................................88
</TABLE>
EXHIBITS
--------
Exhibit A FORM OF SECURITY
Exhibit B CERTIFICATE OF TRANSFER
Exhibit C CERTIFICATE OF EXCHANGE
Exhibit D CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
v
<PAGE>
8 5/8% SENIOR NOTES DUE 2008
INDENTURE, dated as of August 10, 1998 between Clark Refining &
Marketing, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Company"), having its principal office at
8182 Maryland Avenue, St. Louis, Missouri, 63105, and Bankers Trust Company, a
New York banking corporation, as Trustee (herein called the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of its 8 5/8%
Senior Notes due 2008 (the "Initial Notes") which, subject to certain
conditions, are exchangeable for the Company's 8 5/8% Senior Notes due 2008
which are registrable under the Securities Act (the "Exchange Notes" and,
together with the Initial Notes, the "Notes" or the "Securities") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE 1.
----------
DEFINITIONS AND OTHER PROVISIONS
--------------------------------
OF GENERAL APPLICATION
----------------------
Section 1.01. Definitions
-----------
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting
<PAGE>
principles" with respect to any computation required or permitted hereunder
shall mean such accounting principles as are generally accepted and
consistently applied in the United States which are in effect on the date
of this Indenture; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"9 1/2% Notes" means the Company's 9 1/2% Senior Notes due 2004.
"10 7/8% Notes" means the 10 7/8% Senior Notes due 2005 of Clark USA.
"8 3/8% Notes" means the 8 3/8% Senior Notes due 2007 of the Company.
"8 7/8% Senior Subordinated Notes" means the 8 7/8% Senior Subordinated
Notes due 2007 of the Company.
"144A Global Note" means a global note in the form of Exhibit A hereto bearing
the Global Note Legend and the Private Placement Legend and deposited with or on
behalf of, and registered in the name of, the Depository or its nominee that
will be issued in a denomination equal to the outstanding principal amount of
the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Act", when used with respect to any Holder, has the meaning specified in
Section 1.04.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amended and Restated Term Loan Agreement" means the amended and restated term
loan agreement, dated as of August 10, 1998, among the Company, certain lenders,
Goldman Sachs Credit Partners L.P., as agent, as amended from time to time.
"AOC Payment" means all payments made to AOC Limited Partnership, a limited
partnership organized under the laws of the State of Missouri, constituting
"Additional
2
<PAGE>
Redemption Consideration" required to be paid by Clark USA pursuant to Section
2.4 of the Stock Purchase and Redemption Agreement.
"Applicable Procedures" means, with respect to any transfer or exchange of or
for beneficial interests in any Global Security, the rules and procedures of the
Depository, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Disposition" by any Person means any transfer, conveyance, sale, lease
or other disposition by such Person or any of its Restricted Subsidiaries
(including a consolidation or merger or other sale of any such Restricted
Subsidiaries with, into or to another Person in a transaction in which such
Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a
disposition by a Restricted Subsidiary of such Person to such Person or a
Restricted Subsidiary of such Person or by such Person to a Restricted
Subsidiary of such Person) of (i) shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests of a Restricted Subsidiary of
such Person, (ii) substantially all of the assets of such Person or any of its
Restricted Subsidiaries representing a division or line of business or (iii)
other assets or rights of such Person or any of its Restricted Subsidiaries
outside of the ordinary course of business, which in the case of either clause
(i), (ii) or (iii), whether in a single transaction or a series of related
transactions, result in Net Available Proceeds in excess of $10 million;
provided that (x) any transfer, conveyance, sale, lease or other disposition of
assets securing the Credit Agreement in connection with the enforcement of the
security interests therein and (y) any sale of crude oil, vacuum tower bottoms,
refined products or other inventory shall not be deemed an Asset Disposition
hereunder.
"Asset Disposition Trigger Date" has the meaning as specified in Section 9.13.
"Attributable Indebtedness" means the total net amount of rent required to be
paid during the remaining primary term of any particular lease under which any
person is at the time liable, discounted at the rate per annum equal to the
weighted average interest rate borne by the Notes.
"Authenticating Agent" means any Person authorized by the Trustee pursuant to
Section 5.15 to act on behalf of the Trustee to authenticate Securities of one
or more series.
"Blackstone" means Blackstone Capital Partners III Merchant Banking Fund L.P.
and its affiliates.
"Blackstone Transaction" means the acquisition of 13,500,000 shares of common
stock of Clark USA previously held by Trizec Hahn Corporation and certain of its
subsidiaries.
"Board Resolution" means a copy of a resolution certified by the Secretary or
an Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and set forth in an Officers' Certificate delivered to the Trustee.
3
<PAGE>
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
95% of the accounts receivable owned by the Company and its Restricted
Subsidiaries (excluding any accounts receivable from Restricted Subsidiaries and
any accounts receivable that are more than 90 days past due) as of such date,
plus (ii) 90% of the market value of inventory owned by the Company and its
Restricted Subsidiaries as of such date, plus (iii) 100% of the cash and Cash
Equivalents owned by the Company and its Restricted Subsidiaries as of such date
that are, as of such date, held in one or more separate accounts under the
direct control of the agent bank under the Credit Agreement and that are as of
such date pledged to secure working capital borrowings under the Credit
Agreement.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the Borough of Manhattan,
City of New York, are authorized or obligated by law, regulation or executive
order to close.
"Capital Lease" means, at the time any determination thereof is to be made,
any lease of property, real or personal or mixed, in respect of which the
present value of the minimum rental commitment would be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capitalized Lease Obligation" of any Person means any lease of any
property (whether real, personal or mixed) by such Person as lessee which, in
conformity with GAAP, is required to be accounted for as a Capital Lease on the
balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of any association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock and (iii) in the case of a partnership, partnership interests
(whether general or limited).
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications specified
in clause (iii) above and (v) commercial paper having the highest rating
obtainable from Moody's or S&P and, in each case, maturing within six months
after the date of acquisition.
"Cedel Bank" means Cedel Bank, SA.
"Change of Control" means any transaction the result of which is that any
Person (an "Acquiring Person") other than Blackstone, or a Person a majority of
whose voting equity is owned by Blackstone, becomes the Beneficial Owner,
directly or indirectly, of shares of stock of the Company or Clark USA entitling
such Acquiring Person to exercise 50% or more of the total
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voting power of all classes of stock of the Company or Clark USA, as the case
may be, entitled to vote in elections of directors. The term "Beneficial Owner"
shall be determined in accordance with Rule 13d-3 under the Exchange Act.
"Change of Control Triggering Event" means the occurrence of a Change of
Control resulting in a Rating Decline.
"Chevron Payment" means that certain contingent payment obligation of Clark
USA to Chevron U.S.A. Inc. based on industry refining margins and the volume of
refined oil products produced at the Port Arthur Refinery over a five-year
period, pursuant to Section 3.1(d) of the Asset Purchase Agreement, dated as of
August 18, 1994, between Clark USA and Chevron U.S.A. Inc., as amended.
"Clark USA" means Clark USA, Inc., a Delaware corporation and the direct
parent of the Company.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Adjusted Net Worth" of any Person means the total amount of
consolidated stockholder's equity (par value plus additional paid-in capital
(including all Capital Stock except as excluded below) plus retained earnings or
minus accumulated deficit) of such Person as reflected on the consolidated
balance sheet of such Person and its Restricted Subsidiaries for the most recent
Quarter prior to the event requiring such determination to be made, after
excluding (to the extent otherwise included therein and without duplication) the
following (the amount of such stockholder's equity and deductions therefrom to
be computed, except as noted below, in accordance with GAAP consistently
applied): (i) any amount receivable but not paid from sales of Capital Stock of
such Person or its Restricted Subsidiaries determined on a consolidated basis;
(ii) any revaluation or other write-up in book value of assets subsequent to the
date hereof (other than write-ups of oil inventory previously written down and
other than reevaluations or write-ups upon the acquisition of assets acquired in
a transaction to be accounted for by purchase accounting under GAAP); (iii)
treasury stock; (iv) an amount equal to the excess, if any, of the amount
reflected on the books and records of such Person or its Restricted Subsidiaries
for the securities of any Person which is not a Restricted Subsidiary of such
Person over the lesser of
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cost or market value (as determined in good faith by the board of directors of
such Person or such Restricted Subsidiary); (v) Disqualified Capital Stock; (vi)
equity securities of such Person or its Restricted Subsidiaries which are not
Disqualified Capital Stock but which are exchangeable for or convertible into
debt securities of such Person or such Restricted Subsidiary, as the case may
be, other than at the option of such Person or such Restricted Subsidiary except
to the extent that the exchange or conversion rights in such other equity
securities cannot, under any circumstances, be exercised prior to Maturity;
(vii) the cumulative foreign currency translation adjustment, if any; and (viii)
write-offs of non-cash items in an amount not to exceed $80 million.
"Consolidated Net Operating Income" means, when used with reference to any
Person, for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP, provided that (i) the Net Income of any Person which is
not a Subsidiary of such Person or is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to such Person or its Restricted Subsidiaries, (ii) the Net
Income of any Unrestricted Subsidiary shall be excluded (except to the extent
distributed to the Company or one of its Subsidiaries), (iii) the Net Income of
any Person acquired in a pooling of interests transaction for any period prior
to the date of such acquisition shall be excluded, (iv) extraordinary gains and
losses and gains and losses from the sale of assets outside the ordinary course
of such Person's business shall be excluded, (v) the cumulative effect of
changes in accounting principles in the year of adoption of such changes shall
be excluded and (vi) the tax effect of any of the items described in clauses (i)
through (v) above shall be excluded.
"Consolidated Net Tangible Assets" of a Person means the consolidated total
assets of such Person and its Restricted Subsidiaries determined in accordance
with GAAP, less the sum of (i) all current liabilities and current liability
items, and (ii) all goodwill, trade names, trademarks, patents, organization
expense, unamortized debt discount and expense and other similar intangibles
properly classified as intangibles in accordance with GAAP.
"Consolidated Operating Cash Flow" means with respect to any Person,
Consolidated Net Operating Income of such Person and its Restricted Subsidiaries
without giving effect to gains and losses on securities transactions (net of
related taxes) for the period described below, increased by the sum of (i)
consolidated Fixed Charges of such Person and its Restricted Subsidiaries which
reduced Consolidated Net Operating Income for such period, (ii) consolidated
income tax expense (net of taxes relating to gains and losses on securities
transactions) of such Person and its Restricted Subsidiaries which reduced
Consolidated Net Operating Income for such period, (iii) consolidated
depreciation and amortization expense (including amortization of purchase
accounting adjustments) of such Person and its Restricted Subsidiaries and other
noncash items to the extent any of which reduced Consolidated Net Operating
Income for such period, (iv) expenses incurred in connection with the Blackstone
Transaction in an amount not to exceed $9 million, and (v) any annual management
monitoring, consulting and advisory fees and related expenses paid to Blackstone
and its affiliates in an amount not to exceed $2 million, less noncash items
which increased Consolidated Net Operating Income for such period, all as
determined for such Person and its consolidated Restricted Subsidiaries in
accordance with
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GAAP for the four full Quarters for which financial information in respect
thereof is available immediately prior to the Transaction Date.
"Consolidated Operating Cash Flow Ratio" means, with respect to any Person,
the ratio of (i) Consolidated Operating Cash Flow of such Person and its
Restricted Subsidiaries for the four Quarters for which financial information in
respect thereof is available immediately prior to the Transaction Date to (ii)
the aggregate Fixed Charges of such Person and its Restricted Subsidiaries for
such four Quarters, such Fixed Charges to be calculated on the basis of the
amount of the Indebtedness and Capitalized Lease Obligations of such Person and
its Restricted Subsidiaries outstanding on the Transaction Date and assuming the
continuation of market interest rate levels prevailing on the Transaction Date
in any calculation of interest rates in respect of floating interest rate
obligations; provided, however, that if such Person or any Restricted Subsidiary
of such Person shall have acquired, sold or otherwise disposed of any Material
Asset or engaged in an Equity Offering during the four full Quarters for which
financial information in respect thereof is available immediately prior to the
Transaction Date or during the period from the end of such fourth full Quarter
to and including the Transaction Date, the calculation required in clause (i)
above will be made giving effect to such acquisition, sale or disposition or the
other investment of the Net Available Proceeds of such Equity Offering on a pro
forma basis as if such acquisition, sale, disposition or investment had occurred
at the beginning of such four full Quarter period without giving effect to
clause (iii) of the definition of "Consolidated Net Operating Income" (that is,
including in such calculation the Net Income for the relevant prior period of
any Person acquired in a pooling of interests transaction, notwithstanding the
provisions of said clause (iii)); provided, further, that Fixed Charges of such
Person during the applicable period shall not include the amount of consolidated
interest expense which is directly attributable to Indebtedness to the extent
such Indebtedness is reduced by the proceeds of the incurrence of such
Indebtedness which gave rise to the need to calculate the Consolidated Operating
Cash Flow Ratio. Any such pro forma calculation may include adjustments
appropriate, in the reasonable determination of the Company as set forth in an
Officer's Certificate, to (i) reflect operating expense reductions reasonably
expected to result from the acquisition by the Company of such Material Asset or
(ii) eliminate the effect of any extraordinary accounting event with respect to
any acquired Person on Consolidated Net Operating Income.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Indenture is located at Four Albany
Street, New York, New York 10006, Attention: Corporate Trust and Agency Services
or at any other time at such other address as the Trustee may designate from
time to time by notice to the Noteholders.
"Credit Agreement" means that certain Credit Agreement, dated as of
September 25, 1997, by and among the Company and the financial institutions
party thereto, including any related notes, recorded or otherwise perfected
under applicable law (including any conditional sale or other title guarantees,
collateral documents, instruments and agreements executed in connection
therewith), and in each case as amended, modified, extended, renewed, refunded,
replaced or refinanced from time to time.
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"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 2.12.
"Definitive Securities" means certificated Securities that are in the form
of the Securities set forth in Article Two hereof, that do not include the
information called for by Section 2.06(g)(ii).
"Depository" means, with respect to Securities issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such Depository pursuant to the applicable provisions of
this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Capital Stock" means any Capital Stock of the Company that,
either by its terms or by the terms of any security into which it is convertible
or exchangeable, is, or upon the happening of any event or passage of time would
be, required to be redeemed or purchased (other than pursuant to an offer to
repurchase such Capital Stock following a change of control, which offer may not
be completed until 45 days after completion of the Offer described in Section
12.01), including at the option of the holder, in whole or in part, or has, or
upon the happening of an event or passage of time would have, a redemption,
sinking fund or similar payment due, on or prior to August 15, 2008.
"Equity Offering" means any public or private sale of Capital Stock
(including options, warrants or rights with respect thereto) of the Company or
of Clark USA.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Event of Default" has the meaning as specified in Section 4.01.
"Excess Proceeds" has the meaning as specified in Section 9.13.
"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.
"Exchange Debentures" means the 11 1/2% Subordinated Exchange Debentures
due 2009 which may be exchanged for the Exchangeable Preferred Stock of Clark
USA, at the option of Clark USA.
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"Exchange Offer" means the offer that may be made by the Company pursuant
to the Registration Rights Agreement to exchange Initial Notes for Exchange
Notes.
"Exchangeable Preferred Stock" means the 11 1/2% Senior Cumulative
Exchangeable Preferred Stock of Clark USA.
"Excluded Contribution" means the net cash proceeds received by the Company
after the Issue Date from (a) contributions to its common equity capital and (b)
the sale (other than to a Subsidiary or to any Company or Subsidiary management
equity plan or stock option plan or any other management or employee benefit
plan or agreement) of Capital Stock of the Company (other than Disqualified
Capital Stock), in each case, designated as Excluded Contributions pursuant to
an Officers' Certificate.
"Existing Indebtedness" means any Indebtedness of the Company and its
Subsidiaries incurred on or outstanding as of the Issue Date and in any event
Indebtedness evidenced by the Credit Agreement, the Amended and Restated Term
Loan Agreement, the 9 1/2% Notes, 8 3/8% Notes, and the 8 7/8% Senior
Subordinated Notes, whether or not outstanding on the Issue Date.
"Fixed Charges" of any Person means, for any period, the sum of (i)
consolidated Interest Expense of such Person and its Restricted Subsidiaries,
plus (ii) all but the principal component of rentals in respect of consolidated
Capitalized Lease Obligations of such Person and its Restricted Subsidiaries
paid, accrued or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period, and determined in accordance with
GAAP plus (iii) all cash dividend payments (excluding items eliminated in
consolidation) on any series of preferred stock of such Person. For purposes of
this definition, (a) interest on Indebtedness which accrues on a fluctuating
basis for periods succeeding the date of determination shall be deemed to accrue
at a rate equal to the average daily rate of interest in effect during such
immediately preceding Quarter, and (b) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the chief financial officer, treasurer or controller of such
Person to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP (including Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entities as have been approved by a significant segment of the accounting
profession, which were in effect on November 21, 1997.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Securities issued under this
Indenture.
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"Global Security" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Article 2 hereof.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Gulf Merger Agreement" means the Agreement and Plan of Merger, dated as of
November 3, 1995, among the Company, Gulf Resources Corporation and GFR, Inc.
"Gulf Oil Purchase Contract" means the Crude Oil Purchase Contract between
GFR, Inc. and Gulf Resources Corporation.
"Gulf Payments" means all payments (other than the initial purchase price
of $26.9 million under the Gulf Oil Purchase Contract) to Gulf Resources
Corporation, a Panamanian corporation, and/or any of its Affiliates, in each
case, pursuant to the Gulf Merger Agreement, the Gulf Oil Purchase Contract, the
Gulf Stockholders' Agreement and the Gulf Pledge Agreement, as each is in effect
on the date hereof.
"Gulf Pledge Agreement" means the Pledge Agreement among the Company, Gulf
Resources Corporation and Gulf Resources Holdings, Inc.
"Gulf Stockholders' Agreement" means the Stockholders' Agreement among the
Company, Gulf Resources Corporation and Gulf Resources Holdings, Inc.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"IAI Global Note" means the Global Security in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depository or its nominee
and that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" with respect to any Person, means any indebtedness,
including, in the case of the Company, the indebtedness evidenced by the Notes,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the balance deferred and unpaid
of the purchase price of any property (including pursuant to Capital Leases)
(except any such balance that constitutes a trade payable in the ordinary course
of business that is not overdue by more than 90 days from the invoice date or is
being contested in good faith), if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared on a consolidated basis in accordance with GAAP, and shall also
include, to the extent not otherwise included, the Guaranty of Indebtedness of
other Persons not included in the financial statements of the Company, the
maximum fixed redemption or repurchase price
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of Disqualified Capital Stock (or if not redeemable or subject to repurchase,
the issue price) and the maximum fixed redemption or repurchase price (or if not
redeemable or subject to repurchase, the issue price) of Preferred Stock issued
by any Restricted Subsidiary of the Company to any Person other than to the
Company or a Restricted Subsidiary.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument, and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Security through a Participant.
"Initial Purchaser" means an entity that purchases Securities directly from
the Company on the Issue Date.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Expense" of any Person means, for any period, the aggregate
amount of interest expense in respect of Indebtedness (excluding (a) the Chevron
Payment, (b) the AOC Payment, (c) the Gulf Payments and (d) the amortization of
debt issuance expense relating to the Securities, the 8 3/8 % Notes, the 8 7/8 %
Senior Subordinated Notes and the Indebtedness under the Amended and Restated
Term Loan Agreement, but including without limitation or duplication (i)
amortization of debt issuance expense with respect to other Indebtedness, (ii)
amortization of original issue discount on any Indebtedness and (iii) the
interest portion of any deferred payment obligation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financings and the net cost associated with Interest Swap
Obligations) paid, accrued or scheduled to be paid or accrued by such Person
during such period, determined in accordance with GAAP.
"Interest Payment Date" means each February 15 and August 15, or if any
such day is not a Business Day, on the next succeeding Business Day.
"Interest Swap Obligations" means, when used with reference to any Person,
the obligations of such person under (i) interest rate swap agreements, interest
rate exchange agreements, interest rate cap agreements, and interest rate collar
agreements, (ii) currency swap agreements and currency exchange agreements and
(iii) other similar agreements or arrangements, which are, in each such case,
designed solely to protect such Person against fluctuations in interest rates or
currency exchange rates.
"Investment" means, when used with reference to any Person, any direct or
indirect advances, loans or other extensions of credit or capital contributions
by such Person to (by means of transfers of property to others or payments for
property or services for the account or use of
11
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others, or otherwise), or purchases or acquisitions by such Person of Capital
Stock, bonds, notes, debentures or other securities issued by, any other Person
or any Guaranty or assumption of any liability (contingent or otherwise) by such
Person of any Indebtedness or Obligations of any other Person and all other
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP.
"Investment Grade" means (i) a Moody's rating of Baa3 or higher and an S&P
rating of at least BB+ or (ii) a Moody's Rating of Ba1 or higher and an S&P
Rating of at least BBB- or, in each case, if Moody's or S&P shall change their
rating system, equivalent ratings.
"Investment Grade Rating Event" means the assignment of an Investment Grade
rating by Moody's or S&P.
"Issue Date" means August 10, 1998.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind (except for taxes not yet
owing) in respect of such asset, whether or not filed, retention agreement, any
lease in the nature thereof, any option or other agreement to sell and, with
respect to which, any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Material Asset" means, with respect to the Company or any Restricted
Subsidiary of the Company, any asset, related group of assets, business or
division of the Company or any Restricted Subsidiary (including any capital
stock of any Restricted Subsidiary) which (i) for the most recent fiscal year of
the Company, accounted or would have accounted for more than 3% of the
consolidated revenues of the Company or (ii) as at the end of such fiscal year,
represented or would have represented more than 3% of the consolidated assets of
the Company or had a fair market value in excess of $10 million, all as shown
(x) with respect to any sale or disposition, on the consolidated financial
statements of the Company for such fiscal year or such shorter period as such
assets, business or divisions were owned by the Company or any Restricted
Subsidiary and (y) with respect to any acquisition, on consolidated pro forma
financial statements of the Company for the four full Quarters for which
financial information in respect thereof is available immediately prior to such
acquisition, giving effect thereto on a pro forma basis as if such acquisition
had occurred at the beginning of such four full Quarters.
"Maturity" means, with respect to any Notes, the date on which the
principal of such Notes becomes due and payable as provided herein, whether at
the Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Available Proceeds" means cash or readily marketable cash equivalents
received (including by way of sale or discounting of a note, installment
receivable or other receivable, but excluding any other consideration received
in the form of assumption by the acquiree of Indebtedness or other obligations
relating to such properties or assets or received in any other noncash form) net
of (i) all legal and accounting expenses, commissions and other fees and
expenses incurred and all federal, state, provincial, foreign and local taxes
required to be accrued as a liability as a consequence of such issuance, and
(ii) all payments made by such Person or its Subsidiaries on any Indebtedness
which must, in order to obtain a necessary consent to such issuance or by
applicable law, be repaid out of the proceeds from such issuance.
"Net Income" of any Person for any period means the net income (loss) from
continuing operations of such Person for such period, determined in accordance
with GAAP.
"Non-Recourse Debt" means Indebtedness as to which neither the Company nor
any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Obligations" means any principal (and premium, if any), interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offer" has the meaning as specified in Section 10.09.
"Officers' Certificate" means a certificate signed by at least two officers
of the Company, one signature being that of the Chairman of the Board, a Vice
Chairman of the Board, the President or a Vice President, and the other
signature being that of the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee. One of the
officers signing an Officers' Certificate given pursuant to Section 9.04 shall
be the principal executive, financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and whose opinion is reasonably acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and segregated
in trust by the Company (if the
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Company shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 2.07 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder,
Securities owned by the Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which
a Responsible Officer of the Trustee actually knows to be so owned shall be
so disregarded. Securities so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such
other obligor.
"Participant" means, with respect to the Depository, Euroclear or Cedel, a
Person who has an account with the Depository, Euroclear or Cedel, respectively
(and, with respect to The Depository Trust Company, shall include Euroclear and
Cedel).
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company. The Company initially appoints the Trustee as Paying Agent.
"Permitted Indebtedness" means Indebtedness incurred by the Company or its
Restricted Subsidiaries (i) to renew, extend, refinance or refund Indebtedness
that is permitted to be incurred pursuant to the Consolidated Operating Cash
Flow Ratio test set forth in Section 9.10 or clauses (ii) through (iv) and (xi)
below; provided, however, that such Indebtedness does not exceed the principal
amount of the Indebtedness so renewed, extended, refinanced or refunded plus the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of any
premium reasonably determined by the Company or such Restricted Subsidiary as
necessary to accomplish such refinancing by means of a tender offer or privately
negotiated repurchase, plus the expenses of the Company or such Restricted
Subsidiary incurred in connection with such refinancing; and provided, however,
that Indebtedness the proceeds of which are used to refinance or refund such
Indebtedness shall only be permitted if (A) in the case of any refinancing or
refunding of Indebtedness that is pari passu with the Notes the refinancing or
refunding Indebtedness is made pari passu with the Notes or subordinated to the
Notes, (B) in the case of any refinancing or refunding of Indebtedness that is
subordinated to the Notes the refinancing or refunding
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Indebtedness is made subordinated to the Notes at least to the same extent as
such Indebtedness being refinanced or refunded was subordinated to the Notes and
(C) in the case of the refinancing or refunding of Indebtedness that is
subordinated to the Notes, the refinancing or refunding Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, (x) does not provide for payments of principal of such
Indebtedness at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance, retirement
or repurchase thereof by the Company or such Restricted Subsidiary (including
any redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of acceleration
of such Indebtedness upon an event of default thereunder), in each case prior to
the final stated maturity of the Indebtedness being refinanced or refunded and
(y) does not permit redemption or other retirement (including pursuant to an
offer to purchase made by the Company or such Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refinanced or refunded (other than a
redemption or other retirement at the option of the holder of such Indebtedness
(including pursuant to an offer to purchase made by the Company or such
Restricted Subsidiary), which is conditioned upon the change of control of the
Company or such Restricted Subsidiary); (ii) arising from time to time under the
Credit Agreement in an aggregate principal amount which, together with any
obligations under clause (xi) below, do not exceed the greater of (a) $700
million at any one time outstanding less the aggregate amount of all proceeds of
all Asset Dispositions that have been applied since the Issue Date to
permanently reduce the outstanding amount of such Indebtedness and (b) the
amount of the Borrowing Base as of such date (calculated on a pro forma basis
after giving effect to such borrowing and the application of the proceeds
therefrom); (iii) outstanding or incurred on the Issue Date; (iv) evidenced by
trade letters of credit incurred in the ordinary course of business not to
exceed $20 million in the aggregate at any time; (v) between or among the
Company and/or its Restricted Subsidiaries other than Restricted Subsidiaries
owned in any part by the Principal Shareholders; (vi) which is Subordinated
Indebtedness; (vii) arising out of Sale and Leaseback Transactions or
Capitalized Lease Obligations relating to computers and other office equipment
and elements, catalysts or other chemicals used in connection with the refining
of petroleum or petroleum by-products; (viii) the proceeds of which are used to
make the Chevron Payment, the AOC Payment and the Gulf Payments; (ix) arising
out of Interest Swap Obligations; (x) in connection with capital projects
qualifying under Section 142(a) (or any successor provision) of the Internal
Revenue Code of 1986, as amended, in an amount not to exceed $75 million in the
aggregate at any time; (xi) obligations of the Company or any Restricted
Subsidiary in connection with any Qualified Securitization Transaction in an
amount which, together with any amount under clause (ii) above, does not exceed
the greater of (a) $700 million at any one time outstanding less the aggregate
amount of all proceeds of all Asset Dispositions that have been applied since
the Issue Date to permanently reduce the outstanding amount of such Indebtedness
and (b) the amount of the Borrowing Base as of such date (calculated on a pro
forma basis after giving effect to such borrowing and the application of the
proceeds therefrom); (xii) any guarantee by the Company of Indebtedness of any
of its Restricted Subsidiaries so long as the incurrence of such Indebtedness is
permitted to be incurred under Section 9.10; (xiii) Indebtedness or preferred
stock of Persons that are acquired by the Company or any of its Restricted
Subsidiaries or merged into the Company or a Restricted Subsidiary in accordance
with the terms of this Indenture; provided that such Indebtedness or preferred
stock is
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not incurred in contemplation of such acquisition or merger; and provided
further that after giving effect to such acquisition or merger either (A) the
Company would be permitted to incur at least $1.00 of additional Indebtedness
under the Consolidated Operating Cash Flow Ratio test set forth in Section 9.10
or (B) the Company's Consolidated Operating Cash Flow Ratio is equal to or
greater than such ratio immediately prior to such acquisition or merger; (xiv)
in an amount not greater than twice the aggregate amount of cash contributions
made to the capital of the Company; (xv) in exchange for, or the proceeds of
which are used to refund or refinance the 10-7/8% Notes; provided, however, that
after giving effect to such exchange, refunding or refinancing, the
Consolidating Operating Cash Flow Ratio exceeds 1.75 to 1.0 and such
Indebtedness shall be subordinated to the Securities to at least the same extent
as the 8-7/8% Senior Subordinated Notes are subordinated to the Securities; and
(xvi) in addition to Indebtedness permitted by clauses (i) through (xv) above,
Indebtedness not to exceed on a consolidated basis for the Company and its
Restricted Subsidiaries at any time $75 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with the Company, provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iii) Liens on property existing at the time of acquisition thereof by
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens existing on the Issue Date; (vi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(vii) Liens imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary course
of business with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings if a reserve or other appropriate
provisions, if any, as shall be required by GAAP shall have been made therefor;
(viii) zoning restrictions, easements, licenses, covenants, reservations,
restrictions on the use of real property or minor irregularities of title
incident thereto that do not, in the aggregate, materially detract from the
value of the property or the assets of the Company or impair the use of such
property in the operation of the Company's business; (ix) judgment Liens to the
extent that such judgments do not cause or constitute a Default or an Event of
Default; (x) Liens to secure the payment of all or a part of the purchase price
of property or assets acquired or the construction costs of property or assets
constructed in the ordinary course of business on or after the Issue Date,
provided that (a) such property or assets are used in the Principal Business of
the Company, (b) at the time of incurrence of any such Lien, the aggregate
principal amount of the obligations secured by such Lien shall not exceed the
lesser of the cost or fair market value of the assets or property (or portions
thereof) so acquired or constructed, (c) each such Lien shall encumber only the
assets or property (or portions thereof) so acquired or constructed and shall
attach to such assets or property within 180 days of the purchase or
construction thereof and (d) any Indebtedness secured by such Lien shall have
been permitted to be incurred under the covenant set forth in Section 9.10; (xi)
Liens incurred in the ordinary course of business of the
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Company with respect to obligations that do not exceed 5% of Consolidated Net
Tangible Assets at any one time outstanding; (xii) Liens incurred in connection
with Interest Swap Obligations; (xiii) Liens on any Securitization Program
Assets in connection with any Qualified Securitization Transaction; and (xiv)
Liens to secure obligations owing from time to time under the Credit Agreement
and Guaranties thereof.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, estate, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment" has the meaning specified in the third paragraph of
Exhibit A attached hereto.
"Port Arthur Refinery" means the refinery in Port Arthur, Texas and certain
other assets acquired from Chevron U.S.A., Inc.
"Preferred Stock" means any share of Capital Stock of any Person in respect
of which the holder thereof is entitled to receive payment before any other
payment is made with respect to any other Capital Stock of such Person.
"Preferred Stock Dividends" means, with respect to any Person for any
period, the amount of regularly scheduled dividends accrued, accruable, paid or
payable during such period, whether in cash or otherwise, with respect to any
Preferred Stock of such Person.
"Principal Business" means, with respect to the Company and its Restricted
Subsidiaries, (i) the business of the acquisition, processing, marketing,
refining, storage and/or transportation of hydrocarbons and/or royalty or other
interests in crude oil or associated products related thereto, (ii) the
acquisition, operation, improvement, leasing and other use of convenience
stores, retail service stations, truck stops and other public accommodations in
connection therewith, (iii) any business currently engaged in by the Company or
its Restricted Subsidiaries on the Issue Date, and (iv) any activity or business
that is a reasonable extension, development or expansion of, or reasonably
related to, any of the foregoing.
"Principal Property" means (i) any refinery and related pipelines,
terminalling and processing equipment or (ii) any other real property or
marketing assets or related group of such assets of the Company having a fair
market value in excess of $20 million.
"Principal Shareholders" means (i) Blackstone, (ii) Occidental Petroleum
Corporation and (iii) Affiliates of the Persons described in the foregoing
clauses (i) through (ii), other than the Company and its Subsidiaries.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Initial Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
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"Purchase Date" has the meaning as specified in Section 10.09.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Subsidiary pursuant
to which the Company or any Subsidiary may sell, convey, grant a security
interest in or otherwise transfer to a Securitization Special Purpose Entity,
and such Securitization Special Purpose Entity may sell, convey, grant a
security interest in, or otherwise transfer to any other Person, any
Securitization Program Assets (whether now existing or arising in the future).
"Quarter" means a fiscal quarterly period of the Company.
"Rating Agencies" means (i) S&P and Moody's or (ii) if S&P or Moody's or
both of them are not making ratings of the Notes publicly available, a
nationally recognized U.S. rating agency or agencies, as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
"Rating Category" means (i) with respect to S&P, any of the following
categories (any of which may include a "+" or "-"); AAA, AA, A, BBB, BB, B, CCC,
CC, C and D (or equivalent successor categories); (ii) with respect to Moody's,
any of the following categories (any of which may include a "1," "2" or "3");
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories),
and (iii) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.
"Rating Decline" means that at any time within 90 days (which period shall
be extended so long as the rating of the Notes is under publicly announced
consideration for possible down grade by any Rating Agency) after the date of
public notice of a Change of Control, or of the intention of the Company or of
any Person to effect a Change of Control, the rating of the Notes is decreased
by both Rating Agencies by one or more categories and the ratings on the Notes
following such downgrade is below Investment Grade.
"Receivables" means all rights of the Company or any Subsidiary of the
Company to payments (whether constituting accounts, chattel paper, instruments,
general intangibles or otherwise, and including the right to payment of any
interest or finance charges), which rights are identified in the accounting
records of the Company or such Subsidiary as accounts receivable.
"Redemption Date," when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement, dated as of the Issue Date, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
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"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Permanent Global Note" means a permanent global Security in
the form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depository or its nominee, and issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period and authenticated as provided in Section
2.02 hereof.
"Regulation S Temporary Global Note" means a temporary global Security in
the form of Exhibit A-1 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depository or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the February 1 or August 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Responsible Officer" shall mean when used with respect to the Trustee, any
officer within the Corporate Trust Office including any Vice President, Managing
Director, Assistant Vice President, Secretary, Assistant Secretary or Assistant
Treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge and familiarity with the particular
subject.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in-substance or legal defeasance) or other
acquisition or retirement for value (collectively a "prepayment") (other than in
connection with a concurrent issuance of pari passu or Subordinated
Indebtedness), directly or indirectly, by the Company or a Restricted
Subsidiary, prior to the scheduled maturity on or prior to any scheduled
repayment of principal (and premium, if any) or sinking fund payment, in respect
of Indebtedness of the Company (other than the Notes) which is subordinate in
right of payment to the Notes.
"Restricted Definitive Security" means a Definitive Security bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Security bearing the Private
Placement Legend.
"Restricted Investment" means any direct or indirect Investment by the
Company or any Restricted Subsidiary of the Company in (i) any Affiliate of the
Company which is not a Restricted Subsidiary of the Company and (ii) any
Unrestricted Subsidiary of the Company, other than direct or indirect
investments in (a) Polymer Asphalt L.L.C., a Missouri limited liability company
(b) Bagel Street Holdings, Inc. and (c) any pipeline company in which the
Company or any of its Restricted Subsidiaries now owns or hereafter acquires any
interest;
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provided that the aggregate amount of Investments made by the Company or any of
its Restricted Subsidiaries pursuant to clauses (a), (b) and (c) above shall not
exceed $25 million in the aggregate at any one time outstanding provided, that
no Investment in a Securitization Special Purpose Entity in connection with a
Qualified Securitization Transaction shall be a Restricted Investment.
"Restricted Payment" means (i) any Stock Payment, (ii) any Restricted
Investment, or (iii) any Restricted Debt Prepayment. Notwithstanding the
foregoing, Restricted Payments shall not include (a) payments by the Company to
any Restricted Subsidiary of the Company, (b) payments by any Restricted
Subsidiary of the Company to the Company or any other Restricted Subsidiary of
the Company, (c) the Chevron Payment, (d) the AOC Payment and (e) the Gulf
Payments.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Rating Services and its successors.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 365 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Program Assets" means (a) all Receivables and inventory
which are described as being transferred by the Company or any Subsidiary of the
Company pursuant to documents relating to any Qualified Securitization
Transaction, (b) all Securitization Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in the
foregoing clauses.
"Securitization Related Assets" means (i) any rights arising under the
documentation governing or relating to Receivables (including rights in respect
of Liens securing such Receivables and other credit support in respect of such
Receivables) or to inventory, (ii) any proceeds of such Receivables or inventory
and any lockboxes or accounts in which such
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proceeds are deposited, (iii) spread accounts and other similar accounts (and
any amounts on deposit therein) established in connection with a Qualified
Securitization Transaction, (iv) any warranty, indemnity, dilution and other
intercompany claim arising out of the documents relating to such Qualified
Securitization Transaction and (v) other assets which are customarily
transferred or in respect of which security interests are customarily granted in
connection with asset securitization transactions involving accounts receivable
or inventory.
"Securitization Special Purpose Entity" means a Person (including, without
limitation, a Subsidiary of the Company) created in connection with the
transactions contemplated by a Qualified Securitization Transaction, which
Person engages in no activities other than those incidental to such Qualified
Securitization Transaction.
"Security Custodian" means the Trustee, as custodian with respect to the
Global Securities, or any successor entity thereto.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 2.03.
"Shareholder/Affiliate Transaction" has the meaning as specified in Section
9.09.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Special Interest" has the meaning as specified in the first paragraph of
Exhibit A attached hereto.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Company with the consent of the Trustee pursuant to the third
paragraph of Exhibit A attached hereto.
"Stated Maturity" means August 15, 2008.
"Stock Payment" means, with respect to the Company, any dividend, either in
cash or in property (except dividends payable in Capital Stock of the Company
which is not convertible into Indebtedness), on, or the making by the Company of
any other distribution in respect of, its Capital Stock, now or hereafter
outstanding, or the redemption, repurchase, retirement, defeasance or any
acquisition for value by the Company, directly or indirectly, of its Capital
Stock or any warrants, rights or options to purchase or acquire shares of any
class of its Capital Stock, now or hereafter outstanding (other than in exchange
for the Company's Capital Stock (other than Disqualified Capital Stock) or
options, warrants or other rights to purchase the Company's Capital Stock (other
than Disqualified Capital Stock)).
"Stock Purchase and Redemption Agreement" means that certain Stock Purchase
and Redemption Agreement dated as of December 30, 1992, by and among AOC Limited
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Partnership, P. Anthony Novelly, Samuel R. Goldstein, G&N Investments, Inc., The
Horsham Corporation, the Company and Clark USA.
"Subordinated Indebtedness" means, with respect to the Notes, any
Indebtedness of the Company which is subordinated in right of payment to the
Notes and with respect to which no payments of principal (by way of sinking
fund, mandatory redemption, maturity or otherwise), including, without
limitation, at the option of the holder thereof (other than pursuant to an offer
to repurchase such Subordinated Indebtedness following a change of control,
which offer may not be completed until 45 days after completion of the Offer
described in Section 12.01) are required to be made by the Company at any time
prior to the Stated Maturity of such Notes.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
total voting power of all classes of the outstanding voting stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and the power to direct the policies, management and affairs
thereof.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Transaction Date" means the date on which the Indebtedness giving rise to
the need to calculate the Consolidated Operating Cash Flow Ratio was incurred or
the date on which, pursuant to the terms of this Indenture, the transaction
giving rise to the need to calculate the Consolidated Operating Cash Flow Ratio
occurred.
"Transfer Restricted Securities" means Securities that bear or are required
to bear the legend set forth in Section 2.06(g)(i) hereof.
"TrizecHahn" means the Trizec Hahn Corporation.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the Issue Date; provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee
"Unrestricted Definitive Security" means one or more Definitive Securities
that do not bear and are not required to bear the Private Placement Legend.
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"Unrestricted Global Note" means a permanent Global Security in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depository, representing a series of Securities that do not bear and are not
required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
board of directors of the Company as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; and (b) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Capital Stock (including
options, warrants or other rights to acquire Capital Stock) or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results. The board of directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 9.10 hereof, and
(ii) no Default or Event of Default would be in existence following such
designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"Wholly Owned U.S. Restricted Subsidiary" of any Person means a Wholly
Owned Restricted Subsidiary of such Person which is organized under the laws of
any state in the United States or of the District of Columbia.
Section 1.02. Compliance Certificates and Opinions
------------------------------------
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which such
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.04. Acts of Holders; Record Dates.
-----------------------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or
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instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and shall be conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 6.01)
prior to such first solicitation or vote, as the case may be. With regard to
any record date, only the Holders on such date (or their duly designated
proxies) shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
Section 1.05. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust and Agency Services, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed,
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first-class postage prepaid, to the Company addressed to it at the address
of its principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the Trustee by
the Company.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited, in the mail with first-class postage prepaid; if
mailed; when receipt acknowledged, if sent by facsimile; and the next business
day after timely delivery to the courier, if sent by recognized overnight
courier guaranteeing next-day delivery; provided that notice to the Trustee
shall be deemed given only when received by the Trustee.
Section 1.06. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited, in the mail with first-class postage prepaid, if
mailed; when receipt acknowledged, if sent by facsimile; and the next business
day after timely delivery to the courier, if sent by recognized overnight
courier guaranteeing next-day delivery; provided that notice to the Trustee
shall be deemed given only when received by the Trustee.
Section 1.07. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act, the latter provision shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be.
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Section 1.08. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.09. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.10. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 1.12. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF).
Section 1.13. Legal Holidays.
--------------
In any case where any Redemption Date, Purchase Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of principal
(and premium, if any) need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Redemption Date, Purchase Date or at the Stated Maturity.
Section 1.14. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture for any claim based on, in respect of or
by reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
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ARTICLE 2
---------
THE SECURITIES
--------------
Section 2.01. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication. The
Securities will be issued in registered form, without coupons and only in
denominations of $10,000 and integral multiples of $1,000, provided, however
that prior to the date of the Exchange Offer, all Institutional Accredited
Investors must hold the Securities only in denominations of $100,000 or more and
integral multiples of $1,000.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Global Securities. Notes issued in global form shall be substantially
in the form of Exhibits A and A-1 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global
Securities" attached thereto). Notes issued in definitive form shall be
substantially in the form of Exhibit A or A-1 attached hereto (but without the
Global Note Legend thereon and without the "Schedule of Exchanges of Interests
in the Global Securities" attached thereto). Each Global Security shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Security to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Security Custodian, at the direction
of the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
Temporary Global Securities. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depository, and registered in the name of the Depository or the nominee of
the Depository for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall terminate upon the
last to occur of (i) the 40th day of the Restricted Period and (ii) the receipt
by the Trustee of (a) copies of certificates from Euroclear and Cedel Bank
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein during the Restricted Period pursuant to another
exemption from registration under the
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Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all
as contemplated by Section 2.06(a)(ii) hereof), and (b) an Officers' Certificate
from the Company stating that all conditions precedent to the issuance of the
Regulation S Permanent Global Note have been satisfied. Following the
termination of the Restricted Period, beneficial interests in the Regulation S
Temporary Global Note shall be exchanged for beneficial interests in Regulation
S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depository or its nominee, as the case may
be, in connection with transfers of interest as hereinafter provided.
Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
----------------------------
An Officer shall sign the Securities for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Security no longer holds that
office at the time a Security is authenticated, the Security shall nevertheless
be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Securities for original issue up to the aggregate
principal amount stated in paragraph 1 of the Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Security Registrar")
and an office or
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agency where Securities may be presented for payment ("Paying Agent"). The
Security Registrar shall keep a register of the Securities and of their transfer
and exchange (the "Security Register"). The Company may appoint one or more co-
security registrars and one or more additional paying agents. The term
"Security Registrar" includes any co-security registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Security Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Security Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Security
Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Security
Registrar and Paying Agent and to act as Security Custodian with respect to the
Global Securities.
Section 2.04. Paying Agent to Hold Money in Trust.
-----------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Securities, and will notify the
Trustee in writing of any default by the Company in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Company, the Trustee
shall serve as Paying Agent for the Securities.
Section 2.05. Holder Lists.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Security Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Securities and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Global Securities. A Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository, by a nominee of the Depository to the Depository or to
another nominee of the Depository, the
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<PAGE>
Depository or any such nominee to a successor Depository or a nominee of such
successor Depository. All Global Notes (except the Regulation S Temporary
Global Note) will be exchanged by the Company for Definitive Securities if (i)
the Company delivers to the Trustee written notice from the Depository that it
is unwilling or unable to continue to act as Depository or that it is no longer
a clearing agency registered under the Exchange Act and, in either case, a
successor Depository is not appointed by the Company within 120 days after the
date of such notice from the Depository or (ii) the Company in its sole
discretion determines that the Global Securities (in whole but not in part)
should be exchanged for Definitive Securities and delivers a written notice to
such effect to the Trustee. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Securities shall be issued in such names
as the Depository shall instruct the Trustee. Global Securities also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Security or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Security. A Global Security may not be exchanged for
another Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Security may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Securities. The transfer and exchange of beneficial interests in the Global
Securities shall be effected through the Depository, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Securities also shall
require compliance with either subparagraph (i) or (ii) below, as applicable, as
well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global
Security. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance with
the transfer restrictions set forth in the Private Placement Legend;
provided, however, that transfers of beneficial interests in the Regulation
S Temporary Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Security Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Securities. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above, the
transferor of such beneficial interest must deliver to the Security
Registrar either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depository in accordance with the Applicable
Procedures directing the Depository to credit or cause to be credited a
beneficial interest in another Global Security in an amount equal to the
beneficial interest to be transferred
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<PAGE>
or exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a Participant
or an Indirect Participant given to the Depository in accordance with the
Applicable Procedures directing the Depository to cause to be issued a
Definitive Security in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depository to
the Security Registrar containing information regarding the Person in whose
name such Definitive Security shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event shall
Definitive Securities be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Security
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the
Security Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Securities contained
in this Indenture and the Notes or otherwise applicable under the
Securities Act, the Trustee shall adjust the principal amount of the
relevant Global Securities pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Security Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the Regulation
S Permanent Global Note, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications and
certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may be exchanged
by any holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery
32
<PAGE>
thereof in the form of a beneficial interest in an Unrestricted Global Note
if the exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in
the distribution of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement as defined in and in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in item
(1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of Exhibit
B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D),
if the Security Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Security Registrar and the
Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
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<PAGE>
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Securities.
(v) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Securities. If any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Security or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Security, then, upon receipt by the Security Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Security, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof; or
34
<PAGE>
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Security to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Definitive Security in the appropriate principal
amount. Any Definitive Security issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)
shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions
from the Depository and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Securities to the Persons in
whose names such Notes are so registered. Any Definitive Security
issued in exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c)(i) shall bear the Private
Placement Legend and shall be subject to all restrictions on transfer
contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Security or transferred to a Person who
takes delivery thereof in the form of a Definitive Security.
(vi) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Securities. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Security or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Security only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and the
holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person participating in
the distribution of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement as defined in and in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement as defined in and
in accordance with the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
35
<PAGE>
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Definitive Security that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Security that does
not bear the Private Placement Legend, a certificate from such holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Security
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Security Registrar
to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(vii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Securities. If any holder of a beneficial interest
in an Unrestricted Global Note proposes to exchange such beneficial
interest for a Definitive Security or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive
Security, then, upon satisfaction of the conditions set forth in Section
2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount
of the applicable Global Security to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Security in the appropriate principal amount. Any Definitive
Security issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Security Registrar through instructions from
the Depository and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Securities to the Persons in whose names such
Notes are so registered. Any Definitive Security issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Securities for Beneficial
Interests.
(viii) Restricted Definitive Securities to Beneficial Interests
in Restricted Global Notes. If any Holder of a Restricted Definitive
Securities proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Securities
to a Person who takes delivery thereof in the form of a beneficial interest
in a Restricted Global Note, then, upon receipt by the Security Registrar
of the following documentation:
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(A) if the Holder of such Restricted Definitive Security
proposes to exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Security is being
transferred to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Security is being
transferred to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Security is being
transferred pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Security is being
transferred to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set forth in
Exhibit B hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Security is being
transferred to the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Security is being
transferred pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Security,
increase or cause to be increased the aggregate principal amount
of, in the case of clause (A) above, the appropriate Restricted
Global Note, in the case of clause (B) above, the 144A Global
Note, in the case of clause (C) above, the Regulation S Permanent
Global Note, and in all other cases, the IAI Global Note.
(ix) Restricted Definitive Securities to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Securities
may exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such
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Restricted Definitive Securities to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the Holder of such Definitive Securities proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Securities proposes to
transfer such Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D),
if the Security Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Security Registrar to the
effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall
cancel the Definitive Securities and increase or cause to be
increased the aggregate principal amount of the Unrestricted
Global Note.
(x) Unrestricted Definitive Securities to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Security
may exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Securities to a Person who takes delivery
thereof in the form of a
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beneficial interest in an Unrestricted Global Note at any time. Upon
receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Security and increase or
cause to be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Security to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Securities so transferred.
(a) Transfer and Exchange of Definitive Securities for Definitive
Securities. Upon request by a Holder of Definitive Securities and such Holder's
compliance with the provisions of this Section 2.06(e), the Security Registrar
shall register the transfer or exchange of Definitive Securities. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Security Registrar the Definitive Securities duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Security Registrar duly executed by such Holder or by his attorney, duly
authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Securities to Restricted Definitive
Securities. Any Restricted Definitive Security may be transferred to and
registered in the name of Persons who take delivery thereof in the form of
a Restricted Definitive Security if the Security Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 904, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Security to Unrestricted Definitive
Securities. Any Restricted Definitive Security may be exchanged by the
Holder thereof for an Unrestricted Definitive Security or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and the
Holder, in
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the case of an exchange, or the transferee, in the case of a transfer, certifies
in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2)
a Person participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-
Dealer pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Security Registrar receives the following:
(1) if the Holder of such Restricted Definitive Securities
proposes to exchange such Notes for an Unrestricted Definitive Security, a
certificate from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Securities
proposes to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Security, a certificate from such Holder
in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D),
if the Security Registrar so requests, an Opinion of Counsel
in form reasonably acceptable to the Company to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Securities to Unrestricted
Definitive Securities. A Holder of Unrestricted Definitive Securities may
transfer such Notes to a Person who takes delivery thereof in the form of
an Unrestricted Definitive Security. Upon receipt of a request to register
such a transfer, the Security Registrar shall register the Unrestricted
Definitive Securities pursuant to the instructions from the Holder thereof.
(b) Exchange Offer. Upon the consummation of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not broker-
dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Securities in an
aggregate principal amount equal to the principal
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amount of the Restricted Definitive Securities accepted for exchange in the
Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall
cause the aggregate principal amount of the applicable Restricted Global Notes
to be reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Securities so accepted Definitive Securities in the appropriate principal
amount.
(c) Legends. The following legends shall appear on the face of all
Global Securities and Definitive Securities issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Security and each Definitive Security (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in substantially the
following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT
IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT
OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
(TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES
ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF
THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM THE
HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
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CAN BE OBTAINED FROM THE TRUSTEE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. EACH IAI THAT IS NOT A QIB WILL BE
REQUIRED TO EFFECT ANY TRANSFER OF NOTES OR INTERESTS THEREIN (OTHER THAN
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT) THROUGH ONE OF THE INITIAL
PURCHASERS. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS."
(B) Notwithstanding the foregoing, any Global Security or
Definitive Security issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Security shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation
S Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS
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EXCHANGE FOR BENEFICIAL INTERESTS IN THE REGULATION S PERMANENT GLOBAL
NOTE, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE
HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE
SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(d) Cancellation and/or Adjustment of Global Security. At such time as
all beneficial interests in a particular Global Security have been exchanged for
Definitive Securities or a particular Global Security has been redeemed,
repurchased or canceled in whole and not in part, each such Global Security
shall be returned to or retained and canceled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Security is exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security or for Definitive Securities, the principal amount of Notes
represented by such Global Security shall be reduced accordingly and an
endorsement shall be made on such Global Security by the Trustee or by the
Depository at the direction of the Trustee to reflect such reduction; and if the
beneficial interest is being exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Security, such other Global Security shall be increased accordingly and an
endorsement shall be made on such Global Security by the Trustee or by the
Depository at the direction of the Trustee to reflect such increase.
(e) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Securities
and Definitive Securities upon the Company's order or at the Security
Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Security or to a Holder of a Definitive Security for
any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 8.06, 9.13, 10.08 and 10.09 hereof).
(iii) The Security Registrar shall not be required to register
the transfer of or exchange any Note selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Securities and Definitive Securities issued upon
any registration of transfer or exchange of Global Securities or Definitive
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Definitive Securities surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at the
opening of business
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15 days before the day of any selection of Notes for redemption under
Section 10.04 hereof and ending at the close of business on the day of
selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (c) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, the Security Registrar, any Paying Agent,
Authenticating Agent and the Company may deem and treat the Person in whose
name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Securities and
Definitive Securities in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Security Registrar pursuant to this Section
2.06 to effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Securities.
----------------------
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Paying Agent, the Security
Registrar and any Authenticating Agent from any loss that any of them may suffer
if a Security is replaced. The Company may charge for its expenses in replacing
a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
Section 2.08. Outstanding Securities.
----------------------
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Security
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security.
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If a Security is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 9.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded.
Section 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon a written
order of the Company signed by two Officers of the Company. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities
and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities.
Holders of temporary Securities shall be entitled to all of the
benefits of this Indenture.
Section 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Security Registrar and Paying Agent shall forward to the
Trustee any Securities surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall dispose of such Securities in accordance with the
Trustee's normal procedures as in effect from time to time. Certification of
the destruction of all canceled Securities shall be delivered to the Company.
The Company may not issue new Securities to replace Securities that it has paid
or that have been delivered to the Trustee for cancellation.
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Section 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 9.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3.
----------
SATISFACTION AND DISCHARGE
--------------------------
Section 3.01. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall, upon the request of the Company, cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 and (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 9.03) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
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and the Company, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as trust funds
in trust for such purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of such
deposit (in the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.07, the obligations of
the Trustee to any Authenticating Agent under Section 5.15 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 3.02 and the last
paragraph of Section 9.03 shall survive.
Section 3.02. Application of Trust Money.
--------------------------
Subject to provisions of the last paragraph of Section 9.03, all money
deposited with the Trustee pursuant to Section 3.01 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE 4.
----------
REMEDIES
--------
Section 4.01. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
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(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) failure by the Company to observe or perform any covenant or
condition on the part of the Company to be performed or observed pursuant
to Section 7.01 hereof; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 30 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Restricted Subsidiary
of the Company (or the payment of which is guaranteed by the Company or a
Restricted Subsidiary of the Company), whether such Indebtedness or
guarantee now exists or shall be created hereafter, if (a) either (i) such
default results from the failure to pay principal (and premium, if any)
upon the expressed maturity of such Indebtedness (after the expiration of
any applicable grace period) or (ii) as a result of such default the
maturity of such Indebtedness has been accelerated prior to its expressed
maturity and (b) the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness with respect to which
the principal amount unpaid upon its expressed maturity (after the
expiration of any applicable grace period), or the maturity of which has
been so accelerated, exceeds $25 million; or
(6) a final judgment or final judgments (not subject to appeal) for
the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any Restricted Subsidiary of the
Company and such judgment or judgments remain unstayed, in effect and
unpaid for a period of 60 consecutive days, provided that the aggregate of
all such judgments (to the extent not paid or to be paid by insurance)
exceeds $50 million; or
(7) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company or any
Significant Subsidiary of the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any
Significant Subsidiary of the Company under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any
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Significant Subsidiary of the Company or of any substantial part of the
property of the Company or any Significant Subsidiary of the Company, or
ordering the winding up or liquidation of the affairs of the Company or any
Significant Subsidiary of the Company, and the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
(8) the commencement by the Company or any Significant Subsidiary of
the Company of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company or any Significant Subsidiary of the Company to
the entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Significant Subsidiary of the Company, or the filing by the Company or any
Significant Subsidiary of the Company of a petition or answer or consent
seeking reorganization or relief under any applicable Federal or State law,
or the consent by the Company or any Significant Subsidiary of the Company
to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Significant
Subsidiary of the Company or of any substantial part of their respective
property, or the making by the Company or any Significant Subsidiary of the
Company of an assignment for the benefit of creditors, or the admission by
either the Company or any Significant Subsidiary of the Company in writing
of an inability to pay debts generally as they become due, or the taking of
corporate action by the Company or any Significant Subsidiary of the
Company in furtherance of any such action.
Section 4.02. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
clause 4.01(7) or (8)) with respect to the Securities at the time Outstanding
occurs and is continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Securities may declare
all of the Securities to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by Holders), and upon any such
declaration the Notes shall become immediately due and payable.
In the event of a declaration of acceleration because an Event of
Default specified in Section 4.01(5) has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if the holders of
the Indebtedness which is the subject of such Event of Default have rescinded
their declaration of acceleration in respect of such Indebtedness within 90-days
thereof and the Trustee has received written notice of such cure, waiver or
rescission and no other Event of Default has occurred during such 90-day period
which has not been cured or waived. If an Event of Default specified in clauses
(7) or (8) of Section 4.01 occurs, the Securities then outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
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At any time after such a declaration of acceleration with respect to
Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest, including Special Interest, on all
Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of acceleration
(including any Securities required to have been purchased on the Purchase
Date pursuant to an Offer to purchase made by the Company) and any interest
thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest, including Special Interest, and principal
(and premium, if any) at a rate of 8 5/8% per annum, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to the Securities, other than
the non-payment of the principal of Securities which have become due solely
by such declaration of acceleration, have been cured or waived as provided
in Section 4.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee.
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been purchased pursuant to an Offer to purchase
made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any
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premium and interest and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue principal (and premium, if any) and
on any overdue interest, at the rate or rates prescribed therefor in such
Securities, and, in addition thereto, such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company, wherever
situated.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 4.04. Trustee May File Proofs of Claim.
--------------------------------
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 4.06 hereof; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 5.07.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 4.05. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the
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Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
Section 4.06. Application of Money Collected.
------------------------------
Any money or other property collected by the Trustee pursuant to this
Article shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money or other property on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
5.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal (and premium, if any) and
interest, respectively.
Section 4.07. Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities;
it being understood and intended that not one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb
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or prejudice the rights of any other of such Holders, or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all of such Holders.
Section 4.08. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
---------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 2.12) interest on such Security on the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or in the case of an Offer to Purchase made by the Company and
required to be accepted as to such Security, on the Purchase Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 4.09. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 4.10. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 2.07, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 4.11. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Subject to Section 4.07, every right and remedy given
by this Article or by law to the Trustee or to the Holders may be exercised from
time to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
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Section 4.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities,
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee shall have the right to decline to follow such
direction if a Responsible Officer or Officers of the Trustee shall, in
good faith, determine that the proceeding so directed would involve the
Trustee in personal liability from which it has not been adequately
indemnified.
Section 4.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities, upon written notice to the Trustee and the Company, may
on behalf of the Holders of all the Securities waive any past default hereunder
with respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to an Offer to purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 4.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit
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instituted by the Trustee or Holders of more than 10% in aggregate principal
amount of the outstanding Notes.
Section 4.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede pursuant to any such law
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 5.
----------
THE TRUSTEE
-----------
Section 5.01. Certain Duties and Responsibilities.
-----------------------------------
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act provided, however, that if an Event of Default occurs,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 5.01.
Section 5.02. Notice of Defaults.
------------------
If a default occurs hereunder with respect to the Securities, the
Trustee shall give the Holders notice of such default as and to the extent
provided by the Trust Indenture Act; provided, however, that in the case of any
default of the character specified in Section 4.01(4), no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
Section 5.03. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 5.01:
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(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory
to it against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its sole discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and,
if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodians and nominees and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(h) the rights and protections afforded to the Trustee under this
Section 5.03 shall be afforded to the Paying Agent, Security Registrar and
Authenticating Agent if the Trustee is acting in such capacity.
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Section 5.04. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities. The Trustee shall not be accountable for the
use or application by the Company, of Securities or the proceeds thereof.
Section 5.05. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
5.07 and 5.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent, as the case may be.
Section 5.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 5.07. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel
and any other persons not regularly in its employ), except any such
expense, disbursement or advance as may be attributable to its gross
negligence or bad faith; and
(3) to indemnify the Trustee, its officers, directors, employees and
agents for, and to hold it harmless against, any and all loss, liability,
damage or expense including taxes (excluding income taxes of the Trustee)
incurred without gross negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the Indenture,
the Securities, the issuance of any Securities or series of Securities or
the trust or trusts hereunder, including the costs and expenses of any
litigation, threatened or otherwise, in connection with the exercise or
performance of any of its powers or duties hereunder.
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As security for the performance of the obligations of the Company
under this Section 5.07, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such.
The obligations of the Company under this Section 5.07 to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder and shall survive
the satisfaction and discharge of this Indenture or the rejection or termination
of this Indenture under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the Holders of particular Securities or coupons, and the Securities are hereby
subordinated to such senior claim. If the Trustee renders services and incurs
expenses following an Event of Default under Section 4.01(7) or Section 4.01(8)
hereof, the parties hereto and the Holders by their acceptance of the Securities
hereby agree that such expenses are intended to constitute expenses of
administration under any bankruptcy law.
Section 5.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. Further, it is
understood that the Trustee shall be entitled to any and all rights that the
Trustee may have in its individual capacity or any other capacity with respect
to any Indebtedness of the Company, and no provision of this Indenture shall be
construed as to limit or diminish any such right.
Section 5.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
Section 5.10. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 5.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 5.11 shall
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not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 5.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 5.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 4.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees. If within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Trustee shall be appointed by Act
of the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 5.11, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 5.11, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 1.06. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
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Section 5.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
including, without limitation, all monies due and owing to the retiring Trustee,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 5.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
Section 5.13. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 5.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
2.07, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference
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shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent and a certificate of authentication executed on
behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America, any
State thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
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This is one of the Securities referred to in the within-mentioned
Indenture.
Bankers Trust Company
As Trustee
By:
---------------------------------
As Authenticating Agent
By:
---------------------------------
Authorized Officer
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ARTICLE 6.
----------
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
-------------------------------------------------
Section 6.01. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee at
any time, and from time to time as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of the names
and addresses of the Holders as of a date not more than 15 days prior to the
time such list is furnished.
Section 6.02. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 6.01. The Trustee may
destroy any list furnished to it as provided in Section 6.01 upon receipt of a
new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 6.03. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Securities are listed, with the Commission and with the Company. The
Company will notify the Trustee in writing when any Securities are listed on any
stock exchange.
Section 6.04. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.
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ARTICLE 7.
----------
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
----------------------------------------------------
Section 7.01. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate or merge with or into (whether or
not the Company is the Surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to another Person unless:
(a) the Surviving Person is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia;
(b) the Surviving Person (if other than the Company) assumes by
supplemental indenture in a form reasonably satisfactory to the Trustee all
the obligations of the Company under the Securities and this Indenture;
(c) at the time of and immediately after such transaction no Default
or Event of Default shall have occurred and be continuing;
(d) except with respect to a merger of the Company with or into Clark
USA that does not result in a Rating Decline, after giving pro forma effect
to the transaction either (1) the Surviving Person would be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Operating Cash Flow Ratio test set forth in Section 9.10
hereof or (2) the Consolidated Operating Cash Flow Ratio of the Surviving
Person would be no less than such ratio for the Company immediately prior
to the transaction; and
(e) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Section 7.02. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer, lease or other disposition
of the properties and assets of the Company substantially as an entirety in
accordance with Section 7.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer, lease
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities; provided, however, that the predecessor Company shall not be
relieved from the obligation to pay principal of and interest on the Securities,
except in the
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case of a transfer, conveyance, sale or other disposition (excluding by lease)
of all of the Company's assets that meets the requirements of Section 7.01
hereof.
ARTICLE 8.
----------
SUPPLEMENTAL INDENTURES
-----------------------
Section 8.01. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to secure the Securities; or
(5) to establish the form or terms of Securities as permitted by
Section 2.01; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (7)
shall not adversely affect the interests of the Holders in any material
respect; or
(8) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act.
Section 8.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the
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rights of the Holders under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or
(2) reduce the principal amount of (or the premium), or interest,
including Special Interest, on, any Securities, or
(3) change the place or currency of payment of principal of (or
premium), or interest on, any Securities, or
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Securities, or
(5) reduce the above-stated percentage of Outstanding Securities
necessary to modify or amend the Indenture, or
(6) reduce the percentage of aggregate principal amount of
Outstanding Securities necessary for waiver of compliance of certain
covenants, as set forth in Article 4.13 or 9.16 hereof, or
(7) modify any provisions of this Indenture relating to the
modification and amendment of this Indenture or the waiver of past defaults
or covenants, except as otherwise specified herein.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 8.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 8.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
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Section 8.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 8.06. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
Section 8.07. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.02, the Company
shall give notice to all Holders of such fact, setting forth in general terms
the substance of such supplemental indenture, in the manner provided in Section
1.06. Any failure of the Company to give such notice, or any defect therein,
shall not in any way impair or affect the validity of any such supplemental
indenture.
ARTICLE 9.
----------
COVENANTS
---------
Section 9.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it shall duly and punctually pay
the principal of (and premium, if any) and interest, including Special Interest,
on the Securities in accordance with the terms of the Securities and this
Indenture.
Section 9.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency in the Borough of
Manhattan, City of New York where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company initially appoints
Bankers Trust Company as Paying Agent and Security Registrar. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company terminates the
appointment of a Paying Agent or Security Registrar or otherwise shall fail to
maintain any such required office or agency, the Company shall use its
reasonable best efforts to appoint a successor Paying Agent or Security
Registrar reasonably acceptable to the Trustee. If the Company fails to maintain
a Paying Agent or Security Registrar, the Trustee shall act as such, and the
Company hereby
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appoints the Trustee as its agent to receive all such presentations, surrenders,
notices and demands. The Company shall forward copies of all presentations,
surrenders, notices and demands to the Trustee promptly upon their receipt.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
Section 9.03. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or prior to 11:00 a.m. New York City time on each due date of the
principal of or any premium or interest on any of the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and shall promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or any premium or interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, and upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest, including
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Special Interest, on any Security and remaining unclaimed for two years after
such principal, premium or interest, including Special Interest, has become due
and payable shall be paid to the Company on Company Request, or (if then held by
the Company) shall be discharged from such trust; and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 9.04. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such officer signing such certificate, that to the best of
such officer's knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of such officers' knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of (and
premium, if any) or interest, including Special Interest, if any, on the
Securities are prohibited or if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with respect
thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 9.06 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of Articles Eight or Ten of this Indenture
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any officer becoming aware
of (i) any default or Event of Default or (ii) any event of default under any
other mortgage, indenture or instrument as
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described in Section 4.01(5), an Officers' Certificate specifying such default,
Event of Default or event of default and what action the Company is taking or
proposes to take with respect thereto.
Section 9.05. Existence.
---------
Subject to Article 7, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company.
Section 9.06. Provision of Financial Information.
----------------------------------
So long as the Notes are outstanding, whether or not the Company is
required to be subject to Section 13(a) or 15(d) of the Exchange Act, or any
successor provision thereto, the Company shall file with the Commission the
annual reports, quarterly reports and other documents (including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants) which the Company would have been required to
file with the Commission pursuant to such Section 13(a) or 15(d) or any
successor provision thereto if the Company were so required, such documents to
be filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so required. The Company shall also in any event
(a) within 15 days of each Required Filing Date (i) transmit by mail to all
Holders, as their names and addresses appear in the Security Register, without
cost to such Holders, and (ii) file with the Trustee, in each case, copies of
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act or any successor provisions thereto if the Company
were required to be subject to such Sections and (b) if filing such documents by
the Company with the Commission is not permitted under the Exchange Act,
promptly upon written request supply copies of such documents to any prospective
Holder. In addition, the Company shall, for so long as any Securities remain
outstanding, furnish to all Holders and to prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Section 9.07. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless (i)
at the time of and immediately after giving effect to the proposed Restricted
Payment, no Default or Event of Default shall have occurred and be continuing,
or would occur as a consequence thereof, (ii) either the Company would (a) at
the time of such Restricted Payment and after giving pro forma effect thereto,
have a Consolidated Adjusted Net Worth exceeding $200 million or (b) be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Operating Cash Flow Ratio test set forth in Section 9.10, and (iii)
at the time of and immediately after giving effect to the proposed Restricted
Payment (the value of any such payment if other than cash, as determined in good
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faith by the board of directors of the Company and evidenced by a Board
Resolution), the aggregate amount of all Restricted Payments (including
Restricted Payments permitted by clauses (b), (j), (l) and (m) of the next
succeeding paragraph and excluding the other Restricted Payments permitted by
such paragraph) declared or made subsequent to the Issue Date shall not exceed
the sum of (a) 50% of the aggregate Consolidated Net Operating Income (or, if
such aggregate Consolidated Net Operating Income is a deficit, minus 100% of
such deficit) of the Company for the period (taken as one accounting period)
from April 1, 1998 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time of
such Restricted Payment plus (b) 100% of the aggregate net proceeds, including
cash and the fair market value of property other than cash (as determined in
good faith by the board of directors of the Company and evidenced by a Board
Resolution), received by the Company since April 1, 1998, from any Person other
than a Subsidiary of the Company as a result of the issuance of Capital Stock
(other than any Disqualified Capital Stock) of the Company including such
Capital Stock issued upon conversion of Indebtedness or upon exercise of
warrants and any contributions to the capital of the Company (other than
Excluded Contributions) received by the Company from any such Person plus (c) to
the extent that any Restricted Investment that was made after April 1, 1998, is
sold for cash or otherwise liquidated or repaid for cash, the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any). For purposes of any calculation pursuant to the preceding
sentence which is required to be made within 60 days after the declaration of a
dividend by the Company, such dividend shall be deemed to be paid at the date of
declaration.
The foregoing provisions of this covenant shall not be violated by
reason of (a) the payment of any dividends or distributions payable solely in
shares of the Company's Capital Stock (other than Disqualified Capital Stock) or
in options, warrants or other rights to acquire the Company's Capital Stock
(other than Disqualified Capital Stock), (b) the payment of any dividend within
60 days after the date of declaration thereof if, at such date of declaration,
such payment complied with the provisions described above, (c) the payment of
cash dividends or the making of loans or advances to Clark USA after October 1,
2002, in an amount sufficient to enable Clark USA to make cash payments of
interest or dividends required to be made in respect of the Exchangeable
Preferred Stock or the Exchange Debentures in accordance with the terms thereof
in effect on the Issue Date, (d) the payment of cash dividends or the making of
loans or advances in an amount sufficient to enable Clark USA to make payments
required to be made in respect of the 10-7/8% Notes in accordance with the terms
thereof in effect on the Issue Date, (e) the retirement of any shares of the
Company's Capital Stock in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of,
other shares of its Capital Stock (other than Disqualified Capital Stock) or
options, warrants or other rights to purchase the Company's Capital Stock (other
than Disqualified Capital Stock) and the declaration and payment of dividends on
such new Capital Stock in an aggregate amount no greater than the amount of
dividends declarable and payable on such retired Capital Stock immediately prior
to such retirement, (f) the Chevron Payment, (g) the AOC Payment, (h) the Gulf
Payments, (i) other Restricted Payments in an aggregate amount not to exceed $50
million, (j) the making of any payment in redemption of Capital Stock of the
Company or Clark USA or options to purchase such Capital Stock granted to
officers or employees of the Company or Clark USA pursuant to any stock option,
stock purchase or other stock plan approved by the board of
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directors of the Company or Clark USA in connection with the severance or
termination of officers or employees not to exceed $8 million per annum or the
payment of cash dividends or the making of loans or advances to Clark USA to
permit it to make such payments, (k) the declaration and payment of dividends to
holders of any class or series of preferred stock of the Company and its
Restricted Subsidiaries issued in accordance with Section 9.10, (l) the payment
of dividends on the Company's common stock, following the first public offering
of the Company's or Clark USA's common stock after the Issue Date, of up to 6%
per annum of the net proceeds received by the Company in such public offering or
the payment of funds to Clark USA in amounts necessary to permit Clark USA to
make such payments to the extent the proceeds of such offering were contributed
to the equity capital of the Company; (m) so long as no Default or Event of
Default shall have occurred and be continuing (or would result therefrom), the
payment to Clark USA (in the form of dividends, loans, advances or otherwise) of
100% of the proceeds of Indebtedness incurred pursuant to clause (xv) of the
definition of "Permitted Indebtedness" to redeem, repurchase, defease or
otherwise acquire or retire for value the 10-7/8% Notes; provided, however, that
at the time of such redemption, repurchase, defeasance or other acquisition or
retirement for value, the Consolidated Operating Cash Flow Ratio of the Company,
after giving effect to the incurrence of Indebtedness in connection therewith,
would be greater than 1.75 to 1.0; (n) the payment of dividends or the making of
loans or advances by the Company to Clark USA in an amount not to exceed $2
million in any fiscal year for costs and expenses incurred by Clark USA in its
capacity as a holding company or for services rendered to the Company; (o)
Restricted Investments not to exceed at any one time an aggregate of $75
million; and (p) Restricted Investments made with Excluded Contributions.
The board of directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default or Event of Default. For purposes of making such determination, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated shall be deemed to
be Restricted Payments at the time of such designation and shall reduce the
amount available for Restricted Payments under the first paragraph of this
Section 9.07. All such outstanding Investments shall be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of such
Investments at the time of such designation, (y) the fair market value of such
Investments at the time of such designation, and (z) the original fair market
value of such Investments at the time they were made. Such designation shall
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Section 9.08. Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Restricted Subsidiaries.
------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company (other than a Securitization Special Purpose Entity) to, create
or otherwise cause or suffer to exist or become effective, any consensual
encumbrance or restriction which, by its terms, restricts the ability of any
Restricted Subsidiary of the Company (other than a Securitization Special
Purpose Entity) to (i) pay dividends or make any other distributions on any such
Restricted Subsidiary's Capital Stock or pay any Indebtedness owed to the
Company or any
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Restricted Subsidiary of the Company, (ii) make any loans or advances to the
Company or any Restricted Subsidiary of the Company, or (iii) transfer any of
its property or assets to the Company or any Restricted Subsidiary of the
Company, except for, in the case of clauses (i), (ii) and (iii) above, any
restrictions (a) existing under this Indenture, the Amended and Restated Term
Loan Agreement and any restrictions existing on the Issue Date pursuant to any
agreement relating to Existing Indebtedness of the Company or any Restricted
Subsidiary, (b) pursuant to an agreement relating to Indebtedness incurred by
such Restricted Subsidiary prior to the date on which such Restricted Subsidiary
was acquired by the Company and outstanding on such date and not incurred in
anticipation of becoming a Restricted Subsidiary, (c) imposed by virtue of
applicable corporate law or regulation and relating solely to the payment of
dividends or distributions to stockholders, (d) with respect to restrictions of
the nature described in clause (iii) above, included in a contract entered into
in the ordinary course of business and consistent with past practices that
contains provisions restricting the assignment of such contract, (e) pursuant to
an agreement effecting a renewal, extension, refinancing, refunding or
replacement of Indebtedness referred to in (a) or (b) above; provided, however,
that the provisions contained in such renewal, extension, refinancing, refunding
or replacement agreement relating to such encumbrance or restriction, taken as a
whole, are not materially more restrictive than the provisions contained in the
agreement the subject thereof, as determined in good faith by the board of
directors, or (f) which shall not in the aggregate cause the Company not to have
the funds necessary to pay the principal of, premium, if any, or interest,
including Special Interest, on the Notes at their Stated Maturity.
Section 9.09. Limitation on Transactions with Shareholders and Affiliates.
-----------------------------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, directly or indirectly, conduct any business or enter into
any transaction or series of similar transactions (including, without
limitation, the purchase, sale, transfer, lease or exchange of any property or
the rendering of any service) with (i) any direct or indirect holder of more
than 5% of any class of Capital Stock of the Company or of any Restricted
Subsidiary of the Company (other than transactions between or among the Company
and/or its Restricted Subsidiaries except for Restricted Subsidiaries owned in
any part by the Principal Shareholders) or (ii) any Affiliate of the Company
(other than transactions between or among the Company and/or its Restricted
Subsidiaries except for Restricted Subsidiaries owned in any part by the
Principal Shareholders) (each of the foregoing, a "Shareholder/Affiliate
Transaction") unless the terms of such business, transaction or series of
transactions as favorable to the Company or such Restricted Subsidiary in all
material respects as terms that would be obtainable at the time for a comparable
transaction or series of similar transactions in arm's-length dealings with a
Person which is not such a stockholder or Affiliate and, if such transaction or
series of transactions involves payment for services of such a stockholder or
Affiliate, (x) for amounts greater than $10 million and less than $25 million
per annum, the Company shall deliver an Officers' Certificate to the Trustee
certifying that such Shareholder/Affiliate Transaction complies with this clause
(ii) or (y) for amounts equal to or greater than $25 million per annum, then (A)
a majority of the disinterested members of the board of directors shall in good
faith determine that such payments are fair consideration for the services
performed or to be performed (evidenced by a Board Resolution) or (B) the
Company must receive a favorable opinion from a nationally recognized investment
banking firm chosen by the Company or, if no such investment banking firm is in
a
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position to provide such opinion, a similar firm chosen by the Company (having
expertise in the specific area which is the subject of the opinion), that such
payments are fair consideration for the services performed or to be performed (a
copy of which shall be delivered to the Trustee); provided that the foregoing
requirements shall not apply to (i) Shareholder/Affiliate Transactions involving
the purchase or sale of crude oil, vacuum tower bottoms, refined products or
other inventory, so long as (y) in the case of such transactions involving crude
oil, such transactions are priced in line with the market price of a crude
benchmark and (z) the pricing of each of such transactions are equivalent to the
pricing of comparable transactions with unrelated third parties; and provided
further that the Gulf Payments shall not be deemed a Shareholder/Affiliate
Transaction, (ii) Restricted Payments permitted by the provisions of this
Indenture described in Section 9.07, (iii) payments made in connection with the
Blackstone Transaction, including fees to Blackstone, (iv) payment of annual
management, consulting, monitoring and advisory fees and related expenses to
Blackstone and its Affiliates, (v) payment of reasonable and customary fees paid
to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary, (vi) payments by the
Company or any of its Restricted Subsidiaries to Blackstone and its Affiliates
made for any financial advisory, financing, underwriting or placement services
or in respect of other investment banking activities, including, without
limitation, in connection with acquisitions or divestitures which payments are
approved by a majority of the board of directors of the Company in good faith,
(vii) payments or loans to employees or consultants which are approved by a
majority of the board of directors of the Company in good faith, (viii) any
agreement in effect on the Issue Date and any amendment thereto (so long as any
such amendment is not disadvantageous to the holders of the Notes in any
material respect) or any transaction contemplated thereby, or (ix) any
stockholder agreement or registration rights agreement to which the Company is a
party on the Issue Date and any similar agreements which it may enter into
thereafter; provided that the performance by the Company or any of its
Restricted Subsidiaries of obligations under any future amendment or under such
a similar agreement entered into after the Issue Date shall only be permitted by
this clause (ix) to the extent that the terms of any such amendment or new
agreement are not disadvantageous to the holders of the Notes in any material
respect.
Section 9.10. Limitation on Indebtedness.
--------------------------
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, incur any Indebtedness (including Acquired Debt)
other than (i) the Notes and the obligations outstanding or incurred on the
Issue Date under the Amended and Restated Term Loan Agreement, and (ii)
Permitted Indebtedness, unless after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Company's Consolidated Operating Cash Flow Ratio is greater than 2 to 1.
Notwithstanding the foregoing, the Company's Unrestricted Subsidiaries may incur
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company.
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Section 9.11. Limitation on Issuance of Guarantees of Indebtedness.
----------------------------------------------------
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee or secure the payment of any Indebtedness of the
Company unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to this Indenture providing for the guarantee or security
of the payment of the Notes by such Restricted Subsidiary (other than the grant
of security interests in cash and cash equivalents, receivables and product
inventories to secure obligations under the Credit Agreement). If the
Indebtedness to be guaranteed is subordinated to the Notes, the guarantee or
security of such Indebtedness shall be subordinated to the guarantee or security
of the Notes to the same extent as the Indebtedness to be guaranteed is
subordinated to the Notes under this Indenture. Notwithstanding the foregoing,
any such guarantee or security by a Restricted Subsidiary of the Notes shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon either (i) the release or discharge of such guarantee or
security of payment of such other Indebtedness, except a discharge by or as a
result of payment under such guarantee or security, or (ii) any sale, exchange
or transfer, to any Person not an Affiliate of the Company, of all of the
Company's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provision of this Indenture.
Section 9.12. Limitation on Liens.
-------------------
The Company shall not, directly or indirectly, create, incur, assume
or suffer to exist any Lien (other than Permitted Liens) on any asset now owned
or hereafter acquired, or on any income or profits therefrom, or assign or
convey any right to receive income therefrom to secure any Indebtedness which is
pari passu with or subordinate in right of payment to the Notes, unless the
Notes are secured equally and ratably simultaneously with or prior to the
creation, incurrence or assumption of such Lien for so long as such Lien exists;
provided, that in any case involving a Lien securing Indebtedness which is
subordinated in right of payment to the Notes, such Lien is subordinated to the
Lien securing the Notes to the same extent that such subordinated debt is
subordinated to the Notes.
Section 9.13. Limitation on Certain Asset Dispositions.
----------------------------------------
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such disposition (or
in the case of a lease, over the term of such lease) at least equal to the fair
market value of the shares or assets disposed of (which shall be as determined
in good faith by the Company), and (ii) at least 75% of the consideration for
such disposition consists of cash or Cash Equivalents; provided that the
following shall be deemed to be cash for purposes of this covenant: (1) the
amount of any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto) of the Company
or such Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such
assets, and (2) any notes or other obligations received by the Company or such
Restricted Subsidiary from a transferee that are converted by the Company or
such Restricted Subsidiary into cash within 180 days after such Asset
Disposition; provided, further, that the 75% limitation referred to above in
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clause (ii) shall not apply to (x) any disposition of assets in which the cash
portion of such consideration received therefor on an after-tax basis,
determined in accordance with the foregoing proviso, is equal to or greater than
what the after-tax net proceeds would have been had such transaction complied
with the aforementioned 75% limitation, (y) any disposition of assets (other
than the Port Arthur Refinery) in exchange for assets of comparable fair market
value related to the Principal Business of the Company, provided that in any
such exchange of assets of the Company or a Restricted Subsidiary with a fair
market value in excess of $20 million occurring when Blackstone fails to hold,
directly or indirectly, 30% or more of the total voting power of all classes of
stock of the Company, the Company shall obtain an opinion or report from a
nationally recognized investment banking firm, valuation expert or accounting
firm confirming that the assets received by the Company and such Restricted
Subsidiary in such exchange have a fair market value at least equal to the
assets so exchanged or (z) any disposition of Securitization Program Assets to
any Securitization Special Purpose Entity in exchange for Indebtedness of,
procurement of letters of credit and similar instruments by, or equity or other
interests in, such Securitization Special Purpose Entity.
Within 360 days of the later of (a) the receipt of the Net Available
Proceeds and (b) the date of such Asset Disposition, the Company may elect to
(i) apply the Net Available Proceeds from such Asset Disposition to permanently
redeem or repay Indebtedness of the Company or any Restricted Subsidiary, other
than Indebtedness of the Company which is subordinated to the Notes, or (ii)
apply the Net Available Proceeds from such Asset Disposition to invest in assets
related to the Principal Business of the Company or Capital Stock of any Person
primarily engaged in the Principal Business if, as a result of such acquisition,
such Person becomes a Restricted Subsidiary. Pending the final application of
any such Net Available Proceeds, the Company may temporarily invest such Net
Available Proceeds in any manner permitted by this Indenture. Any Net Available
Proceeds from an Asset Disposition not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds."
As soon as practical, but in no event later than 10 Business Days
after any date (an "Asset Disposition Trigger Date") that the aggregate amount
of Excess Proceeds exceeds $25 million, the Company shall commence an Offer (as
described in Section 10.09) to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds and to purchase or prepay the
maximum amount of other Indebtedness of Clark USA or the Company having similar
rights to be so prepaid or purchased out of such Excess Proceeds, in each case
at an Offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, including Special Interest, to the
date of purchase. To the extent that any Excess Proceeds remain after completion
of an Offer, the Company may use the remaining amount for general corporate
purposes. Upon completion of such Offer, the amount of Excess Proceeds shall be
reset to zero.
Section 9.14. Restrictions on Secured Indebtedness.
------------------------------------
The following provision shall apply only upon and after the occurrence
of an Investment Grade Rating Event. If the Company shall incur, issue, assume
or guarantee any Indebtedness secured by a Lien on any Principal Property of the
Company or on any share of
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stock or Indebtedness of any Restricted Subsidiary (other than a Securitization
Special Purpose Entity), the Company shall secure the Notes equally and ratably
with (or, at the Company's option, prior to) such secured Indebtedness so long
as such Indebtedness shall be so secured, unless the aggregate amount of all
such secured Indebtedness, together with all Attributable Indebtedness of the
Company with respect to any sale and leaseback transactions involving Principal
Properties (with the exception of such transactions which are excluded as
described in clauses (i) through (v) in Section 9.15 below), would not exceed
10% of Consolidated Net Tangible Assets. The above restriction does not apply
to, and there shall be excluded from secured Indebtedness in any computation
under such restriction, Indebtedness secured by: (i) Liens on property of, or on
any share of stock or Indebtedness of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary and Liens on any property acquired
from a corporation which is merged with or into the Company or a Subsidiary,
(ii) Liens in favor of the Company; (iii) Liens in favor of governmental bodies
to secure progress, advance or other payments; (iv) Liens upon any property
acquired after the date of this Indenture, securing the purchase price thereof
or created or incurred simultaneously with (or within 270 days after) such
acquisition to finance the acquisition of such property or existing on such
property at the time of such acquisition, or Liens on improvements after such
date, in each case subject to certain conditions and provided that the principal
amount of the obligation or indebtedness secured by such Lien shall not exceed
100% of the cost or fair value (as determined in good faith by the Company),
whichever shall be lower, of the property at the time of the acquisition,
construction or improvement thereof; (v) Liens securing industrial revenue or
pollution control bonds; (vi) Liens arising out of any final judgment for the
payment of money aggregating not in excess of $25 million which remains
unstayed, in effect and unpaid for a period of 60 consecutive days or Liens
arising out of any judgments which are being contested in good faith; (vii)
Permitted Liens in existence on the date of the Investment Grade Rating Event;
(viii) Liens to secure obligations arising from time to time under the Credit
Agreement including Guaranties thereof; or (ix) any extension, renewal, or
replacement of any Lien referred to in the foregoing clauses (i) through (viii)
inclusive.
Section 9.15. Restrictions on Sales and Leasebacks.
-------------------------------------
The following provision shall apply only upon and after the occurrence
of an Investment Grade Rating Event. The Company may not enter into any sale
and leaseback transaction involving any Principal Property, unless the aggregate
amount of all Attributable Indebtedness of the Company with respect to such
transaction plus all secured Indebtedness (with the exception of secured
Indebtedness which is excluded as described in clauses (i) through (ix) in
Section 9.14 above) would not exceed 10% of Consolidated Net Tangible Assets.
This restriction does not apply to, and there shall be excluded from
Attributable Indebtedness in any computation under such restriction, any sale
and leaseback transaction if: (i) the lease is for a period, including renewal
rights, not in excess of three years; (ii) the sale of the Principal Property is
made within 270 days after its acquisition, construction or improvements; (iii)
the lease secures or relates to industrial revenue or pollution control bonds;
(iv) the transaction is between the Company and a Restricted Subsidiary; or (v)
the Company, within 270 days after the sale is completed, applies to the
retirement of Indebtedness of the Company or a Restricted Subsidiary, or to the
purchase of other property which shall constitute a Principal Property, an
amount not less than the greater of (1) the net proceeds of the sale of the
Principal Property
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leased or (2) the fair market value (as determined by the Company in good faith)
of the Principal Property leased. The amount to be applied to the retirement of
Indebtedness shall be reduced by (x) the principal amount of any debentures or
notes (including the Notes) of the Company or a Restricted Subsidiary
surrendered within 270 days after such sale to the trustee for retirement and
cancellation, (y) the principal amount of Indebtedness, other than the items
referred to in the preceding clause (x), voluntarily retired by the Company or a
Restricted Subsidiary within 270 days after such sale and (z) associated
transaction expenses.
Section 9.16. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 9.06 to 9.15, inclusive, with
respect to the Securities if before the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding Securities shall, by
Act of such Holders, either waive such compliance in such instance or generally
waive compliance with such term, provision or condition, but no such waiver
shall extend to or affect such term, provision or condition except to the extent
so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
term, provision or condition shall remain in full force and effect; provided,
however, with respect to an Offer to purchase as to which an Offer has been
mailed, no such waiver may be made or shall be effective against any Holder
tendering Securities pursuant to such Offer, and the Company may not omit to
comply with the terms of such Offer as to such Holder.
Section 9.17. Effect of Investment Grade Rating.
---------------------------------
Notwithstanding the foregoing, upon the occurrence of an Investment
Grade Rating Event, Sections 7.01(d) and 7.01(e), 9.07, 9.08, 9.09, 9.10, 9.12
and 9.13 shall be of no further force or effect and shall cease to apply to the
Company and, in lieu thereof, Sections 9.14 and 9.15 shall take effect.
ARTICLE 10.
-----------
REDEMPTION OF SECURITIES
------------------------
Section 10.01. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on and after August 15, 2003 at
the Redemption Prices specified in the form of Security attached hereto,
together with accrued and unpaid interest to the Redemption Date.
In addition, the Company may, at its option, use the net cash proceeds
of one or more Equity Offerings to the extent the net cash proceeds thereof are
contributed to the equity capital of the Company to redeem for cash at any time
prior to August 15, 2002 up to 35% in aggregate initial principal amount of the
Securities, in whole or in part, at a redemption price equal to 108.625% of the
aggregate principal amount so redeemed, plus accrued interest, to the
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Redemption Date; provided that at least 65% of the principal amount of
Securities originally issued remain outstanding immediately after such
redemption. Any such redemption will be required to occur on or prior to 120
days after the receipt by the Company of the proceeds of any such Equity
Offering and upon not less than 30 nor more than 60 days' notice mailed to each
holder of Securities to be redeemed at such holder's address appearing in the
Company's Security Register, in principal amounts of $1,000 or an integral
multiple of $1,000.
Section 10.02. Applicability of Article.
------------------------
Redemption of the Securities at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
Section 10.03. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 10.01 shall be evidenced by a Board Resolution, which Board Resolution
shall be delivered to the Trustee at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee). In case of any redemption at the election of the Company of less than
all the Securities, the Company shall notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities to be redeemed upon
delivery of the Board Resolution related to such redemption.
Section 10.04. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or by such method as the Trustee shall deem fair
and appropriate (and in a manner that complies with applicable legal and
securities exchange requirements, if any) and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral multiple
thereof) of the principal amount of Securities of a denomination larger than
$1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
In the event that the Company is required to make an Offer to purchase
pursuant to Sections 10.09 or 9.13 and the amount available for such Offer is
not an integral multiple of $1,000, the Trustee shall promptly refund to the
Company any remaining excess proceeds, which shall be less than $1,000.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
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Section 10.05. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, plus accrued interest,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof to be redeemed and
that, unless the Company defaults in making the redemption payment,
interest thereon will cease to accrue on and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
(7) if any of the Securities are being redeemed in part, that on or
after the redemption date a new Security in principal amount equal to the
unredeemed portion thereof will be issued,
(8) the provision of the Securities pursuant to which the Securities
called for redemption are being redeemed,
(9) the aggregate principal amount of Securities that are being
redeemed, and
(10) the CUSIP number of the Securities that are being redeemed.
Notice of redemption of Securities to be redeemed shall be given by
the Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.
Section 10.06. Deposit of Redemption Price.
---------------------------
Prior to 11:00 a.m. New York City time on any Redemption Date, the
Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 9.03) an amount of money
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sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date.
Section 10.07. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall not bear interest. Upon surrender of any such
Security for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 2.12.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 10.08. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
Section 10.09. Offer to Purchase.
-----------------
Within 30 days following a Change of Control resulting in a Rating
Decline and on any Asset Disposition Trigger Date, the Company shall mail to
each holder of Securities, at such holder's registered address, a notice
stating: (i) that an offer (an "Offer") is being made as a result of a Change of
Control or one or more Asset Dispositions, the length of time the Offer shall
remain open, and the maximum aggregate principal amount of Securities that shall
be accepted for payment pursuant to such Offer, (ii) the purchase price, the
amount of accrued and unpaid interest (including Special Interest) as of the
purchase date, and the purchase date (the "Purchase Date"), (iii) in the case of
a Change of Control, the circumstances and material facts regarding such Change
of Control, to the extent known to the Company (including, but not limited to,
information with respect to pro forma and historical financial information after
giving effect to such Change of Control, and information regarding the Person or
Persons acquiring control) and (iv) such other information required by this
Indenture and applicable laws and regulations.
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On the Purchase Date for any Offer, the Company shall (1) in the case
of an Offer resulting from a Change of Control, accept for payment all
Securities tendered pursuant to such Offer and, in the case of an Offer
resulting from one or more Asset Dispositions, accept for payment the maximum
principal amount of Securities tendered pursuant to such Offer that can be
purchased out of Excess Proceeds from such Asset Dispositions, which amount
shall equal the product of (a) the amount of such Excess Proceeds and (b) a
fraction whose numerator is the aggregate amount of all obligations owing under
Securities tendered pursuant to such offering and whose denominator is the sum
of the aggregate amount of all obligations owing under Securities tendered
pursuant to such offering and the aggregate amount of all obligations owing
under other Indebtedness of Clark USA or the Company tendered pursuant to
similar rights to prepayment or repurchase, (2) deposit with the Paying Agent
the aggregate purchase price of all Securities accepted for payment and any
accrued and unpaid interest, including Special Interest, on such Securities as
of the Purchase Date, and (3) deliver or cause to be delivered to the Trustee
all Securities tendered pursuant to the Offer. If less than all Securities
tendered pursuant to any Offer are accepted for payment by the Company for any
reason, selection of the Securities to be purchased shall be in compliance with
the requirements of the principal national securities exchange, if any, on which
the Securities are listed or, if the Securities are not so listed, by lot or by
such method as the Trustee shall deem fair and appropriate; provided that
Securities accepted for payment in part shall only be purchased in integral
multiples of $1,000. The Paying Agent shall promptly mail to each holder of
Securities accepted for payment an amount equal to the Purchase price for such
Securities plus any accrued and unpaid interest, including Special Interest
thereon, the Trustee shall promptly authenticate and mail to such holder of
Securities accepted for payment in part new Securities equal in principal amount
to any unpurchased portion of the Securities, and any Securities not accepted
for payment in whole or in part shall be promptly returned to the holder
thereof. On and after a Purchase Date, interest shall cease to accrue on the
Securities accepted for payment. The Company shall announce the results of the
Offer to holders of the Securities on or as soon as practicable after the
Purchase Date.
The Company shall comply with all applicable requirements of Rule 14e-
1 under the Exchange Act and all other applicable securities laws and
regulations thereunder, to the extent applicable, in connection with any Offer.
Other than as specifically provided in this Section 10.09, any
purchase pursuant to this Section 10.09 shall be made pursuant to the provisions
of Sections 10.01 through 10.08 hereof.
ARTICLE 11.
-----------
This Article intentionally left blank.
82
<PAGE>
ARTICLE 12.
-----------
CHANGE OF CONTROL TRIGGERING EVENT
----------------------------------
Section 12.01. Change of Control Triggering Event.
----------------------------------
In the event that there shall occur a Change of Control Triggering
Event, then the Company shall make an Offer in accordance with Section 10.09
hereof to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Securities at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest, including
Special Interest to the date of purchase.
ARTICLE 13.
-----------
DEFEASANCE AND COVENANT DEFEASANCE
----------------------------------
Section 13.01. Company's Option to Effect Defeasance or Covenant Defeasance.
------------------------------------------------------------
The Company may at its option by Board Resolution, at any time, elect
to have either Section 13.02 or Section 13.03 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
Thirteen.
Section 13.02. Defeasance and Discharge.
------------------------
Upon the Company's exercise of the option provided in Section 13.01
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities, on and after
the date the conditions set forth below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall
be deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 13.05 hereof and the other Sections of this
Indenture referred to in (A) and (B) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of such Securities to receive, solely from the trust fund described in
Section 13.04 and as more fully set forth in such Section, payments in respect
of the principal of (and premium, if any) and interest, including Special
Interest, on such Securities when such payments are due, (B) the Company's
obligations with respect to such Securities under Article 2 and Section 9.02
hereof, (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (D) this Article Thirteen. Subject to compliance with this
Article Thirteen, the Company may exercise its option under this Section 13.02
notwithstanding the prior exercise of its option under Section 13.03.
83
<PAGE>
Section 13.03. Covenant Defeasance.
-------------------
Upon the Company's exercise of the option provided in Section 13.01
applicable to this Section, (i) the Company shall be released from its
obligations under Sections 9.06 through 9.15, inclusive and Section 9.17,
Section 10.09, Article 12, and Article 7 hereof and (ii) the occurrence of an
event specified in Sections 4.01(3), 4.01(4) (with respect to any of Sections
9.06 through 9.15, inclusive and 9.17, Section 10.09 and Article 12), 4.01(5)
and 4.01(6) shall not be deemed to be an Event of Default (hereinafter,
"covenant defeasance"), and the Securities shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, such covenant defeasance means that
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section, Clause or
Article, whether directly or indirectly by reason of any reference elsewhere
herein to any such Section, Clause or Article or by reason of any reference in
any such Section, Clause or Article to any other provision herein or in any
other document shall not constitute a Default or an Event of Default under
Section 4.01 hereof, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
Section 13.04. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
13.02 or Section 13.03 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 5.10 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of (premium, if any) and each installment of interest,
including Special Interest, on the Securities on the Stated Maturity
of such principal in accordance with the terms of this Indenture and
of such Securities. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United
84
<PAGE>
States of America, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also include
a depository receipt issued by a bank (as defined in Section 3(a)(2)
of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian
for the account of the holder of such depository receipt, provided
that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
(2) In the case of an election under Section 13.02, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the
date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the
Outstanding Securities will not recognize gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
(3) In the case of an election under Section 13.03, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit and covenant defeasance and will be subject to Federal
income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and covenant
defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Securities, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as subsections
4.01(7) and (8) are concerned, at any time during the period ending on
the 90th day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period).
(6) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act
85
<PAGE>
(assuming all Securities are in default within the meaning of the
Trust Indenture Act).
(7) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 13.02 or the covenant defeasance under Section 13.03 (as
the case may be) have been complied with.
(9) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
as defined in the Investment Company Act of 1940, as amended, or such
trust shall be qualified under such act or exempt from regulation
thereunder.
(10) The Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the passing of 90 days
following such deposit, the trust funds will not be subject to the
effect of any proceeding or any bankruptcy, insolvency,
reorganization, or similar laws regarding creditors' rights generally.
Section 13.05. Deposited Money and U.S. Government Obligations to be Held in
-------------------------------------------------------------
Trust; Other Miscellaneous Provisions.
--------------------------------------
Subject to the provisions of the last paragraph of Section 9.03, all
money and U.S. Government obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 13.05, the "Trustee") pursuant to Section 13.04 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Securities,
of all sums due and to become due thereon in respect of principal (and premium,
if any) and interest, including Special Interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee its officers,
directors, employees and agents against any tax, fee or other charge imposed on
or assessed against the U.S. Government Obligations deposited pursuant to
Section 13.04 or the principal and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of the Outstanding Securities. The indemnity of this Section 13.05
shall survive the termination of this Indenture or the earlier resignation or
removal of the Trustee.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 13.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
86
<PAGE>
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance or
covenant defeasance.
Section 13.07. Reinstatement.
-------------
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 13.02 or 13.03 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Thirteen until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 13.02 or 13.03;
provided, however, that if the Company makes any payment of principal of (and
premium, if any) or any applicable interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or the Paying Agent.
87
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, as of the day and year first above written.
CLARK REFINING & MARKETING, INC.
By___________________________
Attest:
_______________________________
Bankers Trust Company
as Trustee
Susan Johnson
By___________________________________
Authorized Signatory
Attest:
______________________________
<PAGE>
EXHIBIT A
(Face of Security)
CLARK REFINING & MARKETING, INC.
8 5/8% SENIOR NOTES DUE 2008
No. 181900AJ0 $_________
Clark Refining & Marketing, Inc., a corporation duly organized and
existing under the laws of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum set forth above or such other principal sum indicated on the
Schedule attached hereto (which shall not exceed $110,000,000) in United States
Dollars on August 15, 2008, and to pay interest at the rate of 8 5/8% per annum
from the Issue Date or from the most recent Interest Payment Date to which
interest has been paid or duly provided for in cash in arrears on each February
15 and August 15 to the person whose name the Security is registered at the
close of business on the February 1 or August 1 next preceding such Interest
Payment Date, until the principal hereof is paid or made available for payment;
provided, however, in the event that (i) the Company has not filed the
registration statement relating to the Exchange Offer within 90 days following
the Issue Date, or (ii) such registration statement has not become effective
within 180 days following the Issue Date, (iii) the resale registration
statement has not become effective within 105 days of the date on which the
obligation to file such resale registration statement arose, or (iv) the
Exchange Offer has not been consummated within 30 business days after the
effectiveness deadline of the Exchange Offer Registration Statement, (v) the
Company has not filed the resale registration statement within 45 days after the
obligation to file such resale registration statement arose, or (vi) any
registration statement required by the Registration Rights Agreement is filed
and declared effective but shall thereafter cease to be effective (except as
specifically permitted therein) without being succeeded within 30 days by an
additional registration statement filed and declared effective (any such event
referred to in clauses (i) through (vi), the ''Registration Default''), then, as
liquidated damages for such Registration Default, subject to the Registration
Rights Agreement, special cash interest ("Special Interest"), in addition to
Base Interest, shall accrue and be payable at a per annum rate of 0.25%. If the
Company has not completed the Exchange Offer by the 270th day following the
Closing (or, if applicable, the Shelf Registration has not become effective by
the 150th day after the obligation to file it arose), the Special Interest shall
accrue and be payable at a per annum rate of 0.5% until the Company has
completed such Exchange Offer (or until such Shelf Registration has become
effective).
Any accrued and unpaid interest on this Security upon the issuance of
an Exchange Note in exchange for this Security shall cease to be payable to the
Holder hereof but such accrued and unpaid interest shall be payable on the next
Interest Payment Date for such Exchange Note to the Holder thereof on the
related Regular Record Date.
A-1
<PAGE>
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date at the
office or agency of the Company at New York, New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purchase (any such location being called a "Place of Payment"); provided,
however, that at the option of the Company payment of interest may be made by
check to the address of the Person entitled thereto as such address shall appear
on the Security Register. Interest shall be payable in cash. Any such interest
not so punctually paid or duly provided, and interest on such defaulted interest
at the interest rate borne by the Securities, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date and
shall be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a special
record date ("Special Record Date") for the payment of such defaulted interest
to be fixed by the Company with the consent of the Trustee, notice whereof shall
be given to Holders of Securities not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements (if applicable) of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such securities exchange, all as more fully provided in said Indenture.
If this Security is a Global Security, all payments in respect of this
Security will be payable to the Global Security Holder in its capacity as the
registered Holder under the Indenture. If this Security is not a Global
Security, payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City and State of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, or at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
however, that payment by wire transfer of immediately available funds will be
required with respect to principal of, premium, if any, and interest on, all
Global Securities and all other Securities the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: August 10, 1998
CLARK REFINING & MARKETING, INC.
By __________________________
Name:
Title:
Certificate of Authentication
This is one of the 8 5/8% Senior Notes due 2008 referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By: _________________________
Authorized Signatory
A-3
<PAGE>
(Back of Security)
THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION
OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
A-4
<PAGE>
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. EACH IAI THAT IS NOT A QIB WILL BE
REQUIRED TO EFFECT ANY TRANSFER OF NOTES OR INTERESTS THEREIN (OTHER THAN
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT) THROUGH ONE OF THE INITIAL
PURCHASERS. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
This Security is one of a duly authorized issue of securities of the
Company designated as its 8 5/8 % Senior Notes due 2008 (herein called the
"Securities"), issued and to be issued in one or more series under an Indenture,
dated as of August 10, 1998 (as it may from time to time be supplemented or
amended by one or more supplemental indentures, herein called the "Indenture"),
between the Company and Bankers Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company and the Trustee of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This issue of Securities is limited in aggregate principal amount to
$110,000,000.
The Securities are subject to redemption at the option of the Company,
in whole or in part at any time on or after August 15, 2003, upon not less than
30 nor more than 60 days' notice mailed to each holder of Securities to be
redeemed at such holder's address appearing on the Company' Securities
Registrar, in principal amounts of $1,000 or an integral multiple of $1,000, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing on August 15 of each
of the years set forth below, plus, in each case, interest accrued thereon to,
but excluding, the date of redemption.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.312%
2004 102.156%
2005 and thereafter 100.000%
</TABLE>
In addition, the Company may, at its option, use the net cash proceeds
of one or more Equity Offerings to the extent the net cash proceeds thereof are
contributed to the equity capital of the Company to redeem for cash up to 35% in
aggregate principal amount of the Securities originally issued under the
Indenture at any time prior to August 15, 2002, at a redemption price equal to
108.625% of the aggregate principal amount so redeemed, plus accrued interest,
including Special Interest, to the Redemption Date; provided that at least 65%
of the principal amount of Securities originally issued remain outstanding
immediately after such redemption. Any such redemption shall be required to
occur on or prior to 120 days after the
A-5
<PAGE>
receipt by the Company of the Net Available Proceeds of such Equity Offering and
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Securities to be redeemed at such holder's address appearing in the Company's
Security Register, in principal amounts of $1,000 or an integral multiple of
$1,000.
If less than all of the Securities are to be redeemed at any time, the
Trustee shall select, in such manner as it shall deem fair and appropriate, the
particular Securities to be redeemed; provided that Securities redeemed in part
will only be redeemed in integral multiples of $1,000.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Available Proceeds are available to the Company as a result of Asset
Dispositions or (ii) a Change of Control Triggering Event occurs, the Company
shall be required to make an Offer to purchase for some or all of the Securities
in accordance with the terms of the Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
In the event of redemption or purchase pursuant to a mandatory offer
to purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the Holders of all Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. The Indenture also provides that, without
notice to or consent of any Holder, the Company and the Trustee may enter into
one or more supplemental indentures to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated securities in addition to or
in place of certificated Securities, or make any other change, in each case,
that does not adversely affect the rights of any Holder of a Security in any
material respect. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and
A-6
<PAGE>
unconditional, to pay the principal of (and premium, if any) and interest,
including Special Interest, if any, on this Security at the times, place and
rate, and in the coin or currency, herein prescribed.
As provided in the Indenture, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of (and premium, if any) and interest, including Special
Interest, if any, on this Security are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $10,000 and integral multiples of $1,000, provided, however
that prior to the date of the Exchange Offer, all Institutional Accredited
Investors must hold the Securities only in denominations of $100,000 or more and
integral multiples of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Securities are exchangeable for a like
aggregate principal amount of Securities of a different authorized denomination,
as requested by the Holder surrendering the same.
No service charge shall be made to the Holder for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No director, officer, employee, stockholder or incorporator, as such,
of the Company shall have any liability for any obligations of the Company under
the Securities or the Indenture for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Interest on this Security shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Sections 10.09 and 9.13 of the Indenture, check the
box: [_]
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Sections 10.09 and 9.13 of the Indenture, state the
amount (which must be $1,000 or integral multiples thereof):
$____________________.
Dated: ___________ Your Signature: _________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee: ___________________________________
(Signature must be guaranteed by a member firm
of a national securities exchange or a commercial
bank or trust company)
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _________ Your Signature: _________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee:
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF SECURITIES
The following exchanges of a part of this Global Note for another Global
Note or for Definitive Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Security authorized officer of
Date of Exchange Principal Amount of Principal Amount of following such decrease Trustee or Security
- ---------------- this Global Security this Global Security (or increase) Custodian
------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-10
<PAGE>
EXHIBIT A-1
(Face of Temporary Global Security)
CLARK REFINING & MARKETING, INC.
8 5/8% SENIOR NOTES DUE 2008
No. U1793BAD3 $___________
Clark Refining & Marketing, Inc., a corporation duly organized and
existing under the laws of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of up to $110,000,000 in United States Dollars on August 15, 2008,
and to pay interest at the rate of 8 5/8% per annum from the Issue Date or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for in cash in arrears on each February 15 and August 15 to the person
whose name the Security is registered at the close of business on the February 1
or August 1 next preceding such Interest Payment Date, until the principal
hereof is paid or made available for payment; provided, however, in the event
that (i) the Company has not filed the registration statement relating to the
Exchange Offer within 90 days following the Issue Date, or (ii) such
registration statement has not become effective within 180 days following the
Issue Date, (iii) the resale registration statement has not become effective
within 105 days of the date on which the obligation to file such resale
registration statement arose, or (iv) the Exchange Offer has not been
consummated within 30 business days after the effectiveness deadline of the
Exchange Offer Registration Statement, (v) the company has not filed the resale
registration statement within 45 days after the obligation to file such resale
registration statement arose, or (vi) any registration statement required by the
Registration Rights Agreement is filed and declared effective but shall
thereafter cease to be effective (except as specifically permitted therein)
without being succeeded within 30 days by an additional registration statement
filed and declared effective (any such event referred to in Clauses (i) through
(vi), the ''Registration Default''), then, as liquidated damages for such
Registration Default, subject to the Registration Rights Agreement, special cash
interest ("Special Interest"), in addition to Base Interest, shall accrue and be
payable at a per annum rate of 0.25%. If the Company has not completed the
Exchange Offer by the 270th day following the Closing (or, if applicable, the
Shelf Registration has not become effective by the 150th day after the
obligation to file it arose), the Special Interest shall accrue and be payable
at a per annum rate of 0.5% until the Company has completed such Exchange Offer
(or until such Shelf Registration has become effective).
Any accrued and unpaid interest on this Security upon the issuance of
an Exchange Note in exchange for this Security shall cease to be payable to the
Holder hereof but such accrued and unpaid interest shall be payable on the next
Interest Payment Date for such Exchange Note to the Holder thereof on the
related Regular Record Date.
A-1-1
<PAGE>
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the February 1 or August 1 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date at the
office or agency of the Company at New York, New York maintained for such
purpose and at any other office or agency maintained by the Company for such
purchase (any such location being called a "Place of Payment"); provided,
however, that at the option of the Company payment of interest may be made by
check to the address of the Person entitled thereto as such address shall appear
on the Security Register. Interest shall be payable in cash. Any such interest
not so punctually paid or duly provided, and interest on such defaulted interest
at the interest rate borne by the Securities, to the extent lawful, shall
forthwith cease to be payable to the Holder on such Regular Record Date and
shall be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a special
record date ("Special Record Date") for the payment of such defaulted interest
to be fixed by the Company with the consent of the Trustee, notice whereof shall
be given to Holders of Securities not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements (if applicable) of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such securities exchange, all as more fully provided in said Indenture.
If this Security is a Global Security, all payments in respect of this
Security will be payable to the Global Security Holder in its capacity as the
registered Holder under the Indenture. If this Security is not a Global
Security, payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City and State of New York, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts, or at the option of the Company, payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register; provided,
however, that payment by wire transfer of immediately available funds will be
required with respect to principal of, premium, if any, and interest on, all
Global Securities and all other Securities the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: August 10, 1998
CLARK REFINING & MARKETING, INC.
By __________________________
Name:
Title:
Certificate of Authentication
Dated: August 10, 1998
This is one of the 8 5/8% Senior Notes due 2008 referred to in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By: __________________________
Authorized Signatory
A-1-3
<PAGE>
(Back of Temporary Global Note)
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR BENEFICIAL INTERESTS IN THE
REGULATION S PERMANENT GLOBAL NOTE, ARE AS SPECIFIED IN THE INDENTURE (AS
DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON.
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITORY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITORY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING
A-1-4
<PAGE>
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION OF TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. EACH IAI THAT IS NOT A QIB WILL BE REQUIRED TO
EFFECT ANY TRANSFER OF NOTES OR INTERESTS THEREIN (OTHER THAN PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT) THROUGH ONE OF THE INITIAL PURCHASERS. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS."
This Security is one of a duly authorized issue of securities of the
Company designated as its 8 5/8 % Senior Notes due 2008 (herein called the
"Securities"), issued and to be issued in one or more series under an Indenture,
dated as of August 10, 1998 (as it may from time to time be supplemented or
amended by one or more supplemental indentures, herein called the "Indenture"),
between the Company and Bankers Trust Company, as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company and the Trustee of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This issue of Securities is limited in aggregate principal amount to
$110,000,000.
The Securities are subject to redemption at the option of the Company,
in whole or in part at any time on or after August 15, 2003, upon not less than
30 nor more than 60 days' notice mailed to each holder of Securities to be
redeemed at such holder's address appearing on the Company' Securities
Registrar, in principal amounts of $1,000 or an integral multiple of $1,000, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing on August 15 of each
of the years set forth below, plus, in each case, interest accrued thereon to,
but excluding, the date of redemption.
A-1-5
<PAGE>
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003 104.312 %
2004 102.156 %
2005 and thereafter 100.000 %
</TABLE>
In addition, the Company may, at its option, use the net cash proceeds
of one or more Equity Offerings to the extent the net cash proceeds thereof are
contributed to the equity capital of the Company to redeem for cash up to 35% in
aggregate principal amount of the Securities originally issued under the
Indenture at any time prior to August 15, 2002, at a redemption price equal to
108.625% of the aggregate principal amount so redeemed, plus accrued interest,
including Special Interest, to the Redemption Date; provided that at least 65%
of the principal amount of Securities originally issued remain outstanding
immediately after such redemption. Any such redemption shall be required to
occur on or prior to 120 days after the receipt by the Company of the Net
Available Proceeds of such Equity Offering and upon not less than 30 nor more
than 60 days' notice mailed to each holder of Securities to be redeemed at such
holder's address appearing in the Company's Security Register, in principal
amounts of $1,000 or an integral multiple of $1,000.
If less than all of the Securities are to be redeemed at any time, the
Trustee shall select, in such manner as it shall deem fair and appropriate, the
particular Securities to be redeemed; provided that Securities redeemed in part
will only be redeemed in integral multiples of $1,000.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Available Proceeds are available to the Company as a result of Asset
Dispositions or (ii) a Change of Control Triggering Event occurs, the Company
shall be required to make an Offer to purchase for some or all of the Securities
in accordance with the terms of the Indenture.
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
In the event of redemption or purchase pursuant to a mandatory offer
to purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the
A-1-6
<PAGE>
Holders of all Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. The Indenture also provides that, without
notice to or consent of any Holder, the Company and the Trustee may enter into
one or more supplemental indentures to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated securities in addition to or
in place of certificated Securities, or make any other change, in each case,
that does not adversely affect the rights of any Holder of a Security in any
material respect. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest, including Special Interest, if any, on this Security at the times,
place and rate, and in the coin or currency, herein prescribed.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
As provided in the Indenture, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of (and premium, if any) and interest, including Special
Interest, if any, on this Security are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form without coupons in
denominations of $10,000 and integral multiples of $1,000, provided, however
that prior to the date of the Exchange Offer, all Institutional Accredited
Investors must hold the Securities only in denominations of $100,000 or more and
integral multiples of $1,000. As provided in the Indenture and subject to
certain limitations therein set forth, Securities are exchangeable for a like
aggregate principal amount of Securities of a different authorized denomination,
as requested by the Holder surrendering the same.
This Regulation S Temporary Global Note is exchangeable in whole or in
part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in Regulation S) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
Regulation S Temporary Global Note.
A-1-7
<PAGE>
No service charge shall be made to the Holder for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No director, officer, employee, stockholder or incorporator, as such,
of the Company shall have any liability for any obligations of the Company under
the Securities or the Indenture for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Interest on this Security shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
A-1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Sections 10.09 and 9.13 of the Indenture, check the
box: [_]
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Sections 10.09 and 9.13 of the Indenture, state the
amount (which must be $1,000 or integral multiples thereof): $_________________.
Dated: ___________ Your Signature: _________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee: ___________________________________
(Signature must be guaranteed by a member firm
of a national securities exchange or a commercial
bank or trust company)
A-1-9
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _________ Your Signature: _________________________________
(Sign exactly as name appears on the other side of this Security)
Signature Guarantee:
A-1-10
<PAGE>
SCHEDULE OF EXCHANGES OF SECURITIES
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note or for Definitive Securities, or of
other Restricted Global Notes or Definitive Securities for an interest in this
Regulation S Temporary Global Note, have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Security authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Security
Date of Exchange this Global Security this Global Security (or increase) Custodian
- ------------------- ----------------------- ----------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 631105
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Clark Refining & Marketing, Inc. 8 5/8 % Senior Notes Due 2008
Reference is hereby made to the Indenture with respect to the above-
referenced securities, dated as of August 10, 1998 (the "Indenture"), between
Clark Refining & Marketing, Inc., as issuer (the "Company"), and Bankers Trust
Company, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of U.S. $_________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [_] Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [_] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Permanent Global Note or a Definitive Note pursuant to Regulation
S. The Transfer is being effected pursuant to and in accordance with Rule 903
or Rule 904 under the Securities Act and,
B-1
<PAGE>
accordingly, the Transferor hereby further certifies that (i) the Transfer is
not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Permanent Global Note,
the Regulation S Temporary Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. [_] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [_] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial
B-2
<PAGE>
interests in a Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in the form of Exhibit D to the Indenture
and (2) if such Transfer is in respect of a principal amount of Notes at the
time of transfer of less than U.S. $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has attached to
this certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [_] Check if Transfer is pursuant to Rule 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) [_] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, or Rule
904 and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any State of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
B-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------
[Insert Name of Transferor]
By: ____________________________
Name:
Title:
Dated: _______________, ____
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _________), or
(ii) [_] Regulation S Global Note (CUSIP _________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ________), or
(ii) [_] Regulation S Global Note (CUSIP ________), or
(iii) [_] IAI Global Note (CUSIP ________); or
(iv) [_] Unrestricted Global Note (CUSIP ________); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 631105
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Clark Refining & Marketing, Inc. 8 5/8 % Senior Notes Due 2008
(CUSIP ______________)
Reference is hereby made to the Indenture with respect to the above-
referenced securities, dated as of August 10, 1998 (the "Indenture"), between
Clark Refining & Marketing, Inc., as issuer (the "Company"), and Bankers Trust
Company, as trustee. Capitalized terms used but not defined herein shall have
the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of U.S.
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) [_] Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
C-1
<PAGE>
(b) [_] Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(c) [_] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [_] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) [_] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
C-2
<PAGE>
(b) [_] Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
___ 144A Global Note, ____ Regulation S Global Note, ___ IAI Global Note with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
---------------------------------
[Insert Name of Owner]
By:______________________________
Name:
Title:
Dated: ________________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 631105
Bankers Trust Company
Four Albany Street
New York, New York 10006
Re: Clark Refining & Marketing, Inc. 8 5/8 % Senior Notes Due 2008
Reference is hereby made to the Indenture with respect to the
above-referenced securities, dated as of August 10, 1998 (the
"Indenture"), between Clark Refining & Marketing, Inc., as issuer (the
"Company"), and Bankers Trust Company, as trustee. Capitalized terms
used but not defined herein shall have the meanings given to them in
the Indenture.
In connection with our proposed purchase of U.S. $____________
aggregate principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect
D-1
<PAGE>
of a principal amount of Notes, at the time of transfer of less than U.S.
$250,000, an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such transfer is in compliance with the Securities Act, (D)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the provisions of Rule 144(k) under the
Securities Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing the
Definitive Note or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect. We further understand that any subsequent
transfer by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by us
for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
----------------------------------------
[Insert Name of Accredited Investor]
By:_____________________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT 4.70
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
8 5/8% SENIOR NOTES DUE 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of August 10, 1998,
among Clark Refining & Marketing, Inc., a Delaware corporation (the "Company"),
and the purchasers set forth on Schedule I to the Notes Purchase Agreement
(collectively, the "Purchasers"), of an aggregate of $110,000,000 principal
amount of 8 5/8% Senior Notes due 2008 (the "Senior Notes") of the Company. The
Company proposes to issue and sell to the Purchasers upon the terms set forth in
the Notes Purchase Agreement the Securities (as defined herein). As an
inducement to the Purchasers to enter into the Notes Purchase Agreement and in
satisfaction of a condition to the obligations of the Purchasers thereunder, the
Company agrees with the Purchasers for the benefit of holders (as defined
herein) from time to time of the Registrable Securities (as defined herein) as
follows:
Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest" shall mean the interest, if any, that would otherwise
accrue on the Securities under the terms thereof and the Indenture, without
giving effect to the provisions of this Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing" shall mean the date of the closing of the issuance and sale
of the Securities pursuant to the Notes Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time," in the case of (i) an Exchange Registration, shall
mean the time and date as of which the Commission declares an Exchange
Registration Statement effective or as of which an Exchange Registration
Statement otherwise becomes effective and (ii) a Shelf Registration, shall
mean the time and date as of which the Commission declares a Shelf
Registration Statement effective or as of which a Shelf Registration
Statement otherwise becomes effective.
<PAGE>
"Electing Holder" shall mean any holder of Registrable Securities that
has returned a completed and signed Notice and Questionnaire to the Company
in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
successor thereto, as the same shall be amended from time to time.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Registration" shall have the meaning assigned thereto in
Section 3(c) hereof.
"Exchange Registration Statement" shall have the meaning assigned
thereto in Section 2(a) hereof.
"Exchange Securities" shall have the meaning assigned thereto in
Section 2(a) hereof.
The term "holder" shall mean each of the Purchasers and other persons
who acquire Registrable Securities from time to time (including any
successors or assigns), in each case for so long as such person owns any
Registrable Securities.
"Indenture" shall mean the indenture, dated as of August 10, 1998,
between the Company and Bankers Trust Company, as Trustee, with respect to
the Senior Notes (the "Indenture") as the same shall be amended from time
to time.
"Notes Purchase Agreement" shall mean the Purchase Agreement, dated
August 4, 1998, among the Purchasers and the Company relating to the
Securities.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association, partnership,
organization, business, individual, government or political subdivision
thereof or governmental agency.
"Registrable Securities" shall mean the Securities; provided, however,
that a Security shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, the Security has been
exchanged for an Exchange Security in an Exchange Offer as contemplated in
Section 2(a) hereof; (ii) in the circumstances contemplated by Section 2(b)
hereof, a Shelf Registration Statement registering such Security under the
Securities Act has been declared or becomes effective and such Security has
been sold or otherwise transferred by the holder thereof pursuant to and in
a manner contemplated by such effective Shelf Registration Statement; (iii)
such Security is sold pursuant to Rule 144 under circumstances in which any
legend borne by such Security relating to restrictions on transferability
thereof, under the Securities Act or
2
<PAGE>
otherwise, is removed by the Company or pursuant to the applicable
Indenture; (iv) such Security is eligible to be sold pursuant to paragraph
(k) of Rule 144; or (v) such Security shall cease to be outstanding.
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Company within the meaning of Rule 405, (ii) a holder who acquires
Exchange Securities outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in any Exchange Offer for the purpose of distributing Exchange
Securities and (iv) a holder that is a broker-dealer, but only with respect
to Exchange Securities received by such broker-dealer pursuant to an
Exchange Offer in exchange for Registrable Securities acquired by the
broker-dealer directly from the Company.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities" shall mean the Senior Notes to be issued and sold to the
Purchasers, and securities issued in exchange therefor or in lieu thereof
pursuant to the Indenture.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned thereto
in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in Section
2(c) hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause, as the case may be, of this Exchange
and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of similar import
3
<PAGE>
refer to this Exchange and Registration Rights Agreement as a whole and not to
any particular Section or other subdivision.
2 Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to use its
reasonable best efforts to file under the Securities Act, as soon as
practicable, but no later than 90 days after the Closing, a registration
statement relating to an offer to exchange (such registration statement, an
"Exchange Registration Statement", and such offer, an "Exchange Offer") any and
all of the Securities for a like aggregate principal amount at maturity of debt
securities issued by the Company, which debt securities are substantially
identical to the Securities of such Series, respectively, (and are entitled to
the benefits of a trust indenture which is substantially identical to the
Indenture and which has been qualified under the Trust Indenture Act), except
that they have been registered pursuant to an effective registration statement
under the Securities Act and do not contain provisions for the additional
interest contemplated in Section 2(c) below (such new debt securities
hereinafter called "Exchange Securities"). The Company agrees to use its
reasonable best efforts to cause such Exchange Registration Statement to become
effective under the Securities Act as soon as practicable after the Closing. The
Exchange Offer will be registered under the Securities Act on the appropriate
form and will comply with all applicable tender offer rules and regulations
under the Exchange Act. The Company further agrees to use its reasonable best
efforts to commence the Exchange Offer promptly after such registration
statement has become effective, hold such Exchange Offer open for at least 20
business days and issue Exchange Securities for all Registrable Securities that
have been properly tendered and not withdrawn on or prior to the expiration of
such Exchange Offer. Such Exchange Offer will be deemed to have been
"completed" only if the securities received by holders other than Restricted
Holders in such Exchange Offer for such Registrable Securities are, upon
receipt, transferable by each such holder without need for further compliance
with Section 5 of the Securities Act and the Exchange Act (except for the
requirement to deliver a prospectus included in the Exchange Registration
Statement applicable to resales by any broker-dealer of Exchange Securities
received by such broker-dealer pursuant to an Exchange Offer in exchange for
Registrable Securities other than those acquired by the broker-dealer directly
from the Company), and without material restrictions under the blue sky or
securities laws of a substantial majority of the States of the United States of
America. Such Exchange Offer shall be deemed to have been completed upon the
earlier to occur of (i) the Company having exchanged the applicable Exchange
Securities for all outstanding Registrable Securities of such Series pursuant to
the Exchange Offer and (ii) the Company having exchanged, pursuant to such
Exchange Offer, Exchange Securities for all Registrable Securities that have
been properly tendered and not withdrawn before the expiration of such Exchange
Offer, which shall be on a date that is at least 20 business days following the
commencement of such Exchange Offer. The Company agrees (x) to include in the
Exchange Registration Statement a prospectus for use in connection with any
resales of such Exchange Securities by a broker-dealer, other than resales of
such Exchange Securities received by a broker-dealer pursuant to an Exchange
Offer in exchange for
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<PAGE>
Registrable Securities acquired by the broker-dealer directly from the Company,
and (y) to keep such Exchange Registration Statement effective for a period (the
"Resale Period") beginning when such Exchange Securities are first issued in
such Exchange Offer and ending upon the earlier of the expiration of the 90th
day after such Exchange Offer has been completed or such time as such broker-
dealers no longer own any Registrable Securities. With respect to such Exchange
Registration Statement, each broker-dealer that holds such Exchange Securities
received in such Exchange Offer in exchange for Registrable Securities not
acquired by it directly from the Company shall have the benefit of the rights of
indemnification and contribution set forth in Sections 6(a), (c), (d) and (e)
hereof.
(b) If, prior to the time the Exchange Offer is completed, existing
Commission interpretations are changed such that the Securities received by
holders other than Restricted Holders in such Exchange Offer for Registrable
Securities are not or would not be, upon receipt, transferable by each such
holder without need for further compliance with Section 5 of the Securities Act
(except for the requirement to deliver a prospectus included in the Exchange
Registration Statement applicable to resales by broker-dealers of Exchange
Securities received by such broker-dealer pursuant to an Exchange Offer in
exchange for Registrable Securities other than those acquired by the broker-
dealer directly from the Company) or if such Exchange Offer has not been
consummated within 225 days following the Closing, in lieu of conducting the
Exchange Offer contemplated by Section 2(a) the Company shall use its reasonable
best efforts to file under the Securities Act as soon as practicable, but no
later than 45 days after the date on which the obligation to file such "shelf"
registration statement arises, a "shelf" registration statement providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, a "Shelf
Registration" and such registration statement, a "Shelf Registration
Statement"). In addition, in the event that the Purchasers shall not have
resold all of the Securities initially purchased by them from the Company
pursuant to the Notes Purchase Agreement prior to the consummation of the
applicable Exchange Offer, the Company shall file under the Securities Act as
soon as practicable a Shelf Registration Statement in respect such Securities.
The Company agrees to use its reasonable best efforts (i) to cause the Shelf
Registration Statement to become or be declared effective no later than 105 days
following the date on which the obligation to file such Shelf Registration
Statement arose and to keep such Shelf Registration Statement continuously
effective (subject to the provisions of the last sentence of this Section 3(b))
in order to permit the prospectus forming a part thereof to be usable by holders
for resales of such Registrable Securities for a period ending on the earlier of
the second anniversary of the effective date thereof or such time as there are
no longer any Registrable Securities outstanding, provided, however, that no
holder shall be entitled to be named as a selling securityholder in such Shelf
Registration Statement or to use the prospectus forming a part thereof for
resales of applicable Registrable Securities unless such holder is an Electing
Holder, and (ii) after the Effective Time of such Shelf Registration Statement,
promptly upon the request of any holder of Registrable Securities that is not
then an Electing Holder, to take any action reasonably necessary to enable such
5
<PAGE>
holder to use the prospectus forming a part thereof for resales of Registrable
Securities, including, without limitation, any action necessary to identify such
holder as a selling securityholder in the Shelf Registration Statement,
provided, however, that nothing in this clause (ii) shall relieve any such
holder of the obligation to return a completed and signed Notice and
Questionnaire to the Company in accordance with Section 3(d)(iii) hereof. The
Company further agrees (subject to the provisions of the last sentence of this
Section 3(b)) to supplement or make amendments to the Shelf Registration
Statement, as and when required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Company agrees to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission. Notwithstanding the
requirement to keep such Shelf Registration Statement continuously effective,
the Company may suspend the effectiveness of a Shelf Registration Statement for
up to 45 consecutive days once during any 90-day period and up to three times
during any 365-day period, but no more than an aggregate of 90 days during any
365-period if, (a)(i) an event occurs and is continuing as a result of which the
Shelf Registration Statement would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading and (ii) the
Company determines in good faith that the disclosure of such event at such time
would have a material adverse effect on the business, operations or prospects of
the Company or (b) the disclosure otherwise relates to a pending material
business transaction or other corporate development.
(c) In the event that (i) the Company has not filed the Exchange
Registration Statement or Shelf Registration Statement on or before the date on
which such registration statement is required to be filed pursuant to Section
2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement has not
become effective or been declared effective by the Commission within 180 days of
the Closing, or (iii) such Shelf Registration Statement has not become effective
within 105 days of the date on which the obligation to file such Shelf
Registration Statement arose, or (iv) the Exchange Offer has not been completed
within 30 business days after the effectiveness deadline of the Exchange
Registration Statement relating to such Exchange Offer (if such Exchange Offer
is then required to be made) or (v) any Exchange Registration Statement or Shelf
Registration Statement required by Section 2(a) or 2(b) hereof is filed and
declared effective but shall thereafter either be withdrawn by the Company or
shall become subject to an effective stop order issued pursuant to Section 8(d)
of the Securities Act suspending the effectiveness of such registration
statement (except as specifically permitted herein) without being succeeded
within 30 days by an additional registration statement filed and declared
effective (each such event referred to in clauses (i) through (v), a
"Registration Default" and each period during which a Registration Default has
occurred and is continuing, a "Registration Default Period"), then, as
liquidated damages for such Registration Default, notwithstanding the provisions
of Section 9(b), special cash interest ("Special Interest"), in addition to Base
Interest, shall accrue and be payable at a per annum rate of 0.25%. If the
Company has not completed the Exchange Offer by the
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270th day following the Closing (or, if applicable, the Shelf Registration has
not become effective by the 150th day after the obligation to file it arose),
the Special Interest shall accrue and be payable at a per annum rate of 0.5%
until the Company has completed such Exchange Offer (or until such Shelf
Registration has become effective).
(d) The Company shall take all reasonable actions necessary or advisable to
be taken by it to ensure that the transactions contemplated herein are effected
as so contemplated.
(e) Any reference herein to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time and any reference herein to any post-
effective amendment to a registration statement as of any time shall be deemed
to include any document incorporated, or deemed to be incorporated, therein by
reference as of such time.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:
(a) If the Company files a registration statement pursuant to Section 2(a)
or Section 2(b), at or before the Effective Time of any Exchange Offer or any
Shelf Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act.
(b) If the Company files a registration statement pursuant to Section 2(a)
or Section 2(b), in the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
registration of Exchange Securities as contemplated by Section 2(a) (an
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) use its reasonable best efforts to prepare and file with the
Commission, as soon as practicable but no later than 90 days after the
Closing, an Exchange Registration Statement on any form which may be
utilized by the Company and which shall permit the Exchange Offer and
resales of Exchange Securities by broker-dealers during the Resale Period
to be effected as contemplated by Section 2(a), and use its reasonable best
efforts to cause such Exchange Registration Statement to become effective
as soon as practicable thereafter;
(ii) as soon as practicable use its reasonable best efforts to prepare
and file with the Commission such amendments and supplements to such
Exchange
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<PAGE>
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Registration Statement for the periods and purposes contemplated in Section
2(a) hereof and as may be required by the applicable rules and regulations
of the Commission and the instructions applicable to the form of such
Exchange Registration Statement, and promptly provide each broker-dealer
holding Exchange Securities with such number of copies of the prospectus
included therein (as then amended or supplemented), in conformity in all
material respects with the requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder,
as such broker-dealer reasonably may request prior to the expiration of the
Resale Period, for use in connection with resales of such Exchange
Securities;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration statement,
and confirm such advice in writing, (A) when such Exchange Registration
Statement or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed (delivery of a copy
of the filed Exchange Registration Statement or amendment to the Initial
Purchasers shall be sufficient notice for purposes of this clause (A)),
and, with respect to such Exchange Registration Statement or any post-
effective amendment, when the same has become effective, (B) of the
issuance by the Commission of any stop order suspending the effectiveness
of such Exchange Registration Statement or the initiation of any
proceedings for that purpose, (C) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Exchange Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose or (D) at any time during the Resale Period
when a prospectus is required to be delivered under the Securities Act,
that such Exchange Registration Statement, prospectus, prospectus amendment
or supplement or post-effective amendment does not conform in all material
respects to the applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission thereunder or
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(iv) in the event that the Company would be required, pursuant to
Section 3(c)(iii)(D) above, to notify any broker-dealers holding Exchange
Securities, without unreasonable delay prepare and furnish to each such
holder a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to purchasers of such Exchange
Securities during the Resale Period, such prospectus shall conform in all
material respects to the applicable requirements of the Securities Act and
the Trust Indenture Act and the rules and regulations of the Commission
thereunder and shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated
8
<PAGE>
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(v) use its reasonable best efforts to (A) register or qualify the
Exchange Securities under the securities laws or blue sky laws of such
jurisdictions as are contemplated by Section 2(a), if such registration or
qualification is required by such laws, no later than the commencement of
the Exchange Offer, (B) keep such registrations or qualifications in effect
and comply with such laws so as to permit the continuance of offers, sales
and dealings therein in such jurisdictions until the expiration of the
Resale Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding such Exchange
Securities to consummate the disposition thereof in such jurisdictions;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction wherein
it would not otherwise be required to qualify but for the requirements of
this Section 3(c)(vi), (2) consent to general service of process in any
such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws or any agreement between it and its stockholders;
(vi) use its reasonable best efforts to obtain the consent or approval
of each governmental agency or authority, whether federal, state or local,
which may be required to effect the Exchange Registration, the Exchange
Offer and the offering and sale of the Exchange Securities by broker-
dealers during the Resale Period;
(vii) provide a CUSIP number for all Exchange Securities, not later
than the Effective Time;
(viii) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but no later than eighteen months after the effective date of
such Exchange Registration Statement, an earning statement of the Company
and its subsidiaries complying with Section 11(a) of the Securities Act
(including, at the option of the Company, Rule 158 thereunder);
(ix) prior to the consummation of the Exchange Offer, cause to be
delivered to the Trustee for the benefit of holders an opinion of outside
counsel to the effect that the Exchange Securities when issued and
authenticated in accordance with the terms of the Indenture, the
Registration Rights Agreement and the Exchange Offer, will constitute valid
and legally binding obligations of the Company entitled to the benefits
provided by the Indenture.
(d) In connection with the Company's obligations with respect to any Shelf
Registration, if applicable, the Company shall, as soon as practicable (or as
otherwise specified):
9
<PAGE>
(i) use its reasonable best efforts to prepare and file with the
Commission, as soon as practicable but in any case within the time periods
specified in Section 2(b), a Shelf Registration Statement on any form which
may be utilized by the Company and which shall register all of the
Registrable Securities for resale by the holders thereof in accordance with
such method or methods of disposition as may be specified by such of the
holders (subject to clause (xv) below) as, from time to time, may be
Electing Holders and use its reasonable best efforts to cause such Shelf
Registration Statement to become effective as soon as practicable but in
any case within the time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective Time of the
Shelf Registration Statement, mail the Notice and Questionnaire to the
holders of Registrable Securities; no holder shall be entitled to be named
as a selling securityholder in such Shelf Registration Statement as of the
Effective Time, and no holder shall be entitled to use the prospectus
forming a part thereof for resales of such Registrable Securities at any
time, unless such holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth
therein; provided, however, holders of such Registrable Securities shall
have at least 28 calendar days from the date on which the Notice and
Questionnaire is first mailed to such holders to return a completed and
signed Notice and Questionnaire to the Company;
(iii) after the Effective Time of the Shelf Registration Statement,
upon the request of any holder of Registrable Securities that is not then
an Electing Holder, promptly send a Notice and Questionnaire to such
holder; provided that the Company shall not be required to take any action
to name such holder as a selling securityholder in such Shelf Registration
Statement or to enable such holder to use the prospectus forming a part
thereof for resales of such Registrable Securities until such holder has
returned a completed and signed Notice and Questionnaire to the Company;
(iv) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Shelf Registration Statement and the
prospectus included therein as may be necessary to effect and maintain the
effectiveness of such Shelf Registration Statement for the period specified
in Section 2(b) hereof (subject to the provisions of the last sentence of
Section 3(b)) and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the form
of such Shelf Registration Statement, and furnish to the Electing Holders
copies of any such supplement or amendment simultaneously with or prior to
its being used or filed with the Commission;
(v) provide (A) the Electing Holders, (B) any underwriters (which
term, for purposes of this Exchange and Registration Rights Agreement,
shall include a person deemed to be an underwriter within the meaning of
Section 2(11)
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<PAGE>
of the Securities Act), if any, thereof, (C) any sales or placement agent
therefor, (D) counsel for any such underwriter or agent and (E) not more
than one counsel for all the Electing Holders the opportunity to
participate in the preparation of such Shelf Registration Statement, each
prospectus included therein or filed with the Commission and each amendment
or supplement thereto;
(vi) for a reasonable period prior to the filing of such Shelf
Registration Statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal place
of business or such other reasonable place for inspection by the persons
referred to in Section 3(d)(v) who shall certify to the Company in writing
that they have a current intention to sell the Registrable Securities
pursuant to the Shelf Registration such financial and other information and
books and records of the Company, and cause the officers, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries, as shall be reasonably necessary, in the
judgment of the respective counsel referred to in such Section, to conduct
a reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such party shall be required
to maintain in confidence and not to disclose to any other person any
information or records reasonably designated by the Company as being
confidential, until such time as (A) such information becomes a matter of
public record (whether by virtue of its inclusion in such registration
statement or otherwise), (B) such person shall be required so to disclose
such information pursuant to a subpoena or order of any court or other
governmental agency or body having jurisdiction over the matter (subject to
the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement) or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to such
Shelf Registration Statement or an amendment or supplement to such
prospectus in order that such Shelf Registration Statement, prospectus,
amendment or supplement, as the case may be, complies with applicable
requirements of the federal securities laws and the rules and regulations
of the Commission and does not contain an untrue statement of a material
fact or omit to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(vii) promptly notify each of the Electing Holders, any sales or
placement agent therefor and any underwriter thereof (which notification
may be made through any managing underwriter that is a representative of
such underwriter for such purpose) and confirm such advice in writing, (A)
when such Shelf Registration Statement or the prospectus included therein
or any prospectus amendment or supplement or post-effective amendment has
been filed, and, with respect to such Shelf Registration Statement or any
post-effective amendment, when the same has become effective, (B) of any
comments by the Commission and by the blue sky or securities commissioner
or regulator of any state with
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<PAGE>
respect thereto or any request by the Commission for amendments or
supplements to such Shelf Registration Statement or prospectus or for
additional information, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of such Shelf Registration Statement or
the initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company contemplated
by Section 3(d)(xv) or Section 5 cease to be true and correct in all
material respects, (E) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose or (F) if at any time when a prospectus is
required to be delivered under the Securities Act, such Shelf Registration
Statement, prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(viii) use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of such registration statement or
any post-effective amendment thereto at the earliest practicable date;
(ix) if requested by any managing underwriter or underwriters, any
placement or sales agent or any Electing Holder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as is
required by the applicable rules and regulations of the Commission and as
such managing underwriter or underwriters, such agent or such Electing
Holder specifies should be included therein relating to the terms of the
sale of such Registrable Securities, including information with respect to
the principal amount at maturity of such Registrable Securities being sold
by such Electing Holder or agent or to any underwriters, the name and
description of such Electing Holder, agent or underwriter, the offering
price of such Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of the
offering of the Registrable Securities to be sold by such Electing Holder
or agent or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(x) furnish upon written request to each Electing Holder, each
placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in Section 3(d)(v) an
executed copy (or, in the case of an Electing Holder, a conformed copy) of
such Shelf Registration Statement,
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<PAGE>
each such amendment and supplement thereto (in each case including all
exhibits thereto (in the case of an Electing Holder of the Registrable
Securities, upon request) and documents incorporated by reference therein)
and such number of copies of such Shelf Registration Statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such Electing Holder, agent or underwriter, as
the case may be) and of the prospectus included in such Shelf Registration
Statement (including each preliminary prospectus and any summary
prospectus), in conformity in all material respects with the applicable
requirements of the Securities Act and the Trust Indenture Act and the
rules and regulations of the Commission thereunder, and such other
documents, as such Electing Holder, agent, if any, and underwriter, if any,
may reasonably request in order to facilitate the offering and disposition
of the Registrable Securities owned by such Electing Holder, offered or
sold by such agent or underwritten by such underwriter and to permit such
Electing Holder, agent and underwriter to satisfy the prospectus delivery
requirements of the Securities Act; and the Company hereby consents to the
use of such prospectus (including such preliminary and summary prospectus)
and any amendment or supplement thereto by each such Electing Holder and by
any such agent and underwriter, in each case in the form most recently
provided to such person by the Company, in connection with the offering and
sale of the Registrable Securities covered by the prospectus (including
such preliminary and summary prospectus) or any supplement or amendment
thereto;
(xi) use its reasonable best efforts to (A) register or qualify the
Registrable Securities to be included in such Shelf Registration Statement
under such securities laws or blue sky laws of such jurisdictions as any
Electing Holder and each placement or sales agent, if any, therefor and
underwriter, if any, thereof shall reasonably request, (B) keep such
registrations or qualifications in effect and comply with such laws so as
to permit the continuance of offers, sales and dealings therein in such
jurisdictions during the period the Shelf Registration is required to
remain effective under Section 2(b)) above and for so long as may be
necessary to enable any such Electing Holder, agent or underwriter to
complete its distribution of the Securities pursuant to such Shelf
Registration Statement (subject to the provisions of the last sentence of
Section 3(b)) and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent, if any,
and underwriter, if any, to consummate the disposition in such
jurisdictions of such Registrable Securities; provided, however, that the
Company shall not be required for any such purpose to (1) qualify as a
foreign corporation in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section 3(d)(xi), (2)
consent to general service of process in any such jurisdiction or (3) make
any changes to its certificate of incorporation or by-laws or any agreement
between it and its stockholders;
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<PAGE>
(xii) use its reasonable best efforts to obtain the consent or
approval of each governmental agency or authority, whether federal, state
or local, which may be required to effect the Shelf Registration or the
offering or sale in connection therewith or to enable the selling holder or
holders to offer, or to consummate the disposition of, their Registrable
Securities;
(xiii) cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing such Registrable Securities to be sold, which
certificates shall be printed, lithographed or engraved, or produced by any
combination of such methods, and which shall not bear any restrictive
legends; and, in the case of an underwritten offering, enable such
Registrable Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two business days
prior to any sale of such Registrable Securities;
(xiv) provide a CUSIP number for all Registrable Securities, not
later than the Effective Time;
(xv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including customary provisions relating
to indemnification and contribution, and take such other actions in
connection therewith as any Electing Holders aggregating at least 20% in
aggregate principal amount at maturity of Registrable Securities at the
time outstanding shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities:
(xvi) whether or not an agreement of the type referred to in Section
3(d)(xv) hereof is entered into and whether or not any portion of the
offering contemplated by the Shelf Registration is an underwritten offering
or is made through a placement or sales agent or any other entity, (A) make
such representations and warranties to the Electing Holders and the
placement or sales agent, if any, therefor and the underwriters, if any,
thereof in form, substance and scope as are customarily made in connection
with an offering of securities pursuant to any appropriate agreement or to
a registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Company in customary
form and covering such matters, of the type customarily covered by such an
opinion, as the managing underwriters, if any, or as any Electing Holders
of at least 20% in aggregate principal amount at maturity of the
Registrable Securities at the time outstanding may reasonably request,
addressed to such Electing Holder or Electing Holders and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof and
dated the effective date of such Shelf Registration Statement (and if such
Shelf Registration Statement contemplates an underwritten offering of a
part or all of the Registrable Securities, dated the date of the closing
under the underwriting agreement relating thereto) (it
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<PAGE>
being agreed that the matters to be covered by such opinion shall include
the due incorporation and good standing of the Company and its
subsidiaries; the qualification of the Company and its subsidiaries to
transact business as foreign corporations; the due authorization, execution
and delivery of the relevant agreement of the type referred to in Section
3(d)(xv) hereof; the due authorization, execution, authentication and
issuance, and the validity and enforceability, of the Securities; the
absence of material legal or governmental proceedings involving the
Company; the absence of a breach by the Company or any of its subsidiaries
of, or a default under, material agreements binding upon the Company or any
subsidiary of the Company; the absence of governmental approvals required
to be obtained in connection with the Shelf Registration, the offering and
sale of the Registrable Securities, this Exchange and Registration Rights
Agreement or any agreement of the type referred to in Section 3(d)(xv)
hereof, except such approvals, if any, as may be required under state
securities or blue sky laws; the material compliance as to form of such
Shelf Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the Commission
thereunder, respectively; and, as of the date of the opinion and of the
Shelf Registration Statement or most recent post-effective amendment
thereto, as the case may be, the absence from such Shelf Registration
Statement and the prospectus included therein, as then amended or
supplemented, and from the documents incorporated by reference therein (in
each case other than the financial statements and other financial
information contained therein) of an untrue statement of a material fact or
the omission to state therein a material fact necessary to make the
statements therein not misleading (in the case of such documents, in light
of the circumstances existing at the time that such documents were filed
with the Commission under the Exchange Act)); (C) obtain a "cold comfort"
letter or letters from the independent certified public accountants of the
Company addressed to the selling Electing Holders, the placement or sales
agent, if any, therefor or the underwriters, if any, thereof, dated (i) the
effective date of such Shelf Registration Statement and (ii) the effective
date of any prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such prospectus (and, if such Shelf
Registration Statement contemplates an underwritten offering pursuant to
any prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the latest
such statements included in such prospectus, dated the date of the closing
under the underwriting agreement relating thereto), such letter or letters
to be in customary form and covering such matters of the type customarily
covered by letters of such type; (D) deliver such documents and
certificates, including officers' certificates, as may be reasonably
requested by any Electing Holders of at least 20% in aggregate principal
amount
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<PAGE>
at maturity of the Registrable Securities at the time outstanding or the
placement or sales agent, if any, therefor and the managing underwriters,
if any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in Section
5(a) hereof and the compliance with or satisfaction of any agreements or
conditions contained in the underwriting agreement or other agreement
entered into by the Company; and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are provided in
Section 6 hereof;
(xvii) notify in writing each holder of Registrable Securities of any
proposal by the Company to amend or waive any provision of this Exchange
and Registration Rights Agreement pursuant to Section 9(h) hereof and of
any amendment or waiver effected pursuant thereto, each of which notices
shall contain the text of the amendment or waiver proposed or effected, as
the case may be;
(xviii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate as
a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Rules of Fair Practice and the By-
Laws of the National Association of Securities Dealers, Inc. ("NASD") or
any successor thereto, as amended from time to time) thereof, whether as a
holder of such Registrable Securities or as an underwriter, a placement or
sales agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such Rules and By-
Laws, including by (A) if such Rules or By-Laws shall so require, engaging
a "qualified independent underwriter" (as defined in such Rules and By-Laws
(or any successor thereto)) to participate in the preparation of the
applicable Shelf Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereto
and, if any portion of the offering contemplated by such Shelf Registration
Statement is an underwritten offering or is made through a placement or
sales agent, to recommend the yield of such Registrable Securities, (B)
indemnifying any such qualified independent underwriter to the extent of
the indemnification of underwriters provided in Section 6 hereof (or to
such other customary extent as may be requested by such underwriter) and
(C) providing such information to such broker-dealer as may be required in
order for such broker-dealer to comply with the requirements of the Rules
of Fair Practice of the NASD; and
(xix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as soon as
practicable but in any event not later than eighteen months after the
effective date of such Shelf Registration Statement, an earning statement
of the Company and its subsidiaries complying with Section 11(a) of the
Securities Act (including, at the option of the Company, Rule 158
thereunder).
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(e) In the event that the Company would be required, pursuant to Section
3(d)(vii)(F) above, to notify the Electing Holders, the placement or sales
agent, if any, and the managing underwriters, if any, the Company shall without
delay prepare and furnish to each of the Electing Holders, to each placement or
sales agent, if any, and to each such underwriter, if any, a reasonable number
of copies of a prospectus supplemented or amended so that, as thereafter
delivered to purchasers of Registrable Securities, such prospectus shall conform
in all material respects to the applicable requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the Commission
thereunder and shall not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
Each Electing Holder agrees that upon receipt of any notice from the Company
pursuant to Section 3(d)(vii)(F) hereof, such Electing Holder shall forthwith
discontinue the disposition of Registrable Securities pursuant to the Shelf
Registration Statement until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Company, such
Electing Holder shall deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the information
required to be provided by each Electing Holder in its Notice Questionnaire, the
Company may require such Electing Holder to furnish to the Company such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Registrable Securities as may be required in
order to comply with the Securities Act. Each such Electing Holder agrees to
notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Electing Holder to the Company or of
the occurrence of any event in either case as a result of which any prospectus
relating to such Shelf Registration contains or would contain an untrue
statement of a material fact regarding such Electing Holder or such Electing
Holder's intended method of disposition of such Registrable Securities or omits
to state any material fact regarding such Electing Holder or such Electing
Holder's intended method of disposition of such Registrable Securities required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing, and promptly to furnish to the
Company any additional information required to correct and update any previously
furnished information or required so that such prospectus shall not contain,
with respect to such Electing Holder or the disposition of such Registrable
Securities, an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
(g) Until the expiration of two years after the Closing, the Company will
not, and will not permit any of its "affiliates" (as defined in Rule 144) to,
resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.
17
<PAGE>
4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid promptly all
expenses incident to the Company's performance of or compliance with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD registration, filing and review fees and expenses including fees and
disbursements of counsel for the placement or sales agent or underwriters in
connection with such registration, filing and review, (b) all fees and expenses
in connection with the qualification of the Securities for offering and sale
under the state securities and blue sky laws referred to in Section 3(d)(xi)
hereof and determination of their eligibility for investment under the laws of
such jurisdictions as any managing underwriters or the Electing Holders may
designate, including any fees and disbursements of counsel for the Electing
Holders (subject to the limitations of clause (i) below) or underwriters in
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Securities for
delivery and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Securities to be disposed of (including certificates
representing the Securities), (d) messenger, telephone and delivery expenses
relating to the offering, sale or delivery of Securities and the preparation of
documents referred in clause (c) above, (e) fees and expenses of the Trustee
under the Indenture, any agent of the Trustee and any counsel for the Trustee
and of any collateral agent or custodian, (f) internal expenses (including all
salaries and expenses of the Company's officers and employees performing legal
or accounting duties), (g) fees, disbursements and expenses of counsel and
independent certified public accountants of the Company (including the expenses
of any opinions or "cold comfort" letters required by or incident to such
performance and compliance), (h) reasonable fees, disbursements and expenses of
any "qualified independent underwriter" engaged pursuant to Section 3(d)(xviii)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount at
maturity of the Registrable Securities held by Electing Holders (which counsel
shall be reasonably satisfactory to the Company), (j) any fees charged by
securities rating services for rating the Securities, and (k) fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
18
<PAGE>
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, each Purchaser and
each of the holders from time to time of Registrable Securities that:
(a) The compliance by the Company with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any subsidiary of the Company is a party or by which the
Company or any subsidiary of the Company is bound or to which any of the
property or assets of the Company or any subsidiary of the Company is subject,
nor will such action result in any violation of the provisions of the
certificate of incorporation, as amended, or the by-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any subsidiary of the Company or
any of their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the consummation by the Company of the transactions
contemplated by this Exchange and Registration Rights Agreement, except the
registration under the Securities Act of the Securities, qualification of the
Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications, if any, as may be required
under state securities or blue sky laws in connection with the offering and
distribution of the Securities.
(b) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Company.
6. Indemnification.
(a) Indemnification by the Company. The Company shall indemnify and hold
harmless each of the holders of Registrable Securities included in an Exchange
Registration Statement, each of the Electing Holders of Registrable Securities
included in a Shelf Registration Statement and each person who participates as a
placement or sales agent or as an underwriter in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder, agent or underwriter may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Registration Statement or Shelf Registration Statement, as the case may
be, under which such Registrable Securities were registered under the Securities
Act, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such holder, Electing Holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
19
<PAGE>
statements therein not misleading, and the Company shall, and it hereby agrees
to, reimburse such holder, such Electing Holder, such agent and such underwriter
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable to any such
person in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
or preliminary, final or summary prospectus, or amendment or supplement thereto,
in reliance upon and in conformity with written information furnished to the
Company by such person expressly for use therein;
(b) Indemnification by the Electing Holders and any Agents and Underwriters.
The Company may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement with respect thereto, that the Company
shall have received an undertaking reasonably satisfactory to it from the
Electing Holder of such Registrable Securities and from each underwriter named
in any such underwriting agreement, severally and not jointly, to (i) indemnify
and hold harmless the Company, and all other holders of Registrable Securities,
against any losses, claims, damages or liabilities to which the Company or such
other holders of Registrable Securities may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, or any preliminary, final or summary prospectus contained therein or
furnished by the Company to any such Electing Holder, agent or underwriter, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Electing Holder or underwriter expressly for use therein, and (ii) reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that no such Electing Holder shall be
required to undertake liability to any person under this Section 6(b) for any
amounts in excess of the dollar amount of the proceeds to be received by such
Electing Holder from the sale of such Electing Holder's Registrable Securities
pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under subsection (a) or (b) above of written notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party other than under the indemnification
20
<PAGE>
provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such
action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, such indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party shall not be liable to such indemnified party for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such
21
<PAGE>
holder from the sale of any Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) exceeds the amount of any damages
which such holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The holders' and any
underwriters' obligations in this Section 6(d) to contribute shall be several in
proportion to the principal amount at maturity of Registrable Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each officer, director and partner of each holder,
agent and underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who, with his consent,
is named in any registration statement as about to become a director of the
Company) and to each person, if any, who controls the Company within the meaning
of the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities covered
by the Shelf Registration are to be sold pursuant to an underwritten offering,
the managing underwriter or underwriters thereof shall be designated by Electing
Holders holding at least a majority in aggregate principal amount at maturity of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Company.
(b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder that no such holder may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. Rule 144.
22
<PAGE>
The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange Act, the Company shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission
under the Securities Act) and the rules and regulations adopted by the
Commission thereunder, and shall take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation hereafter adopted
by the Commission.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants, covenants
and agrees that it has not granted, and shall not grant, registration rights
with respect to Registrable Securities or any other securities which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there would be
no adequate remedy at law if the Company fails to perform any of its obligations
hereunder and that the Purchasers and the holders from time to time of the
Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Company under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any state thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand, if delivered personally or by courier, or
three days after being deposited in the mail (registered or certified mail,
postage prepaid, return receipt requested) as follows: If to the Company, to it
at 8182 Maryland Avenue, St. Louis, Missouri 63105, Attention: Secretary, with a
copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017 Attention: Wilson S. Neely, and if to a holder, to the address of such
holder set forth in the security register or other records of the Company, or to
such other address as the Company or any such holder may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Exchange and
Registration Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and the holders from time to
time of the Registrable Securities and the respective successors and assigns of
the parties hereto and such holders. In the event that any transferee of any
holder of Registrable Securities shall
23
<PAGE>
acquire Registrable Securities, in any manner, whether by gift, bequest,
purchase, operation of law or otherwise, such transferee shall, without any
further writing or action of any kind, be deemed a beneficiary hereof for all
purposes and such Registrable Securities shall be held subject to all of the
terms of this Exchange and Registration Rights Agreement, and by taking and
holding such Registrable Securities such transferee shall be entitled to receive
the benefits of, and be conclusively deemed to have agreed to be bound by all of
the applicable terms and provisions of this Exchange and Registration Rights
Agreement. If the Company shall so request, any such successor, assign or
transferee shall agree in writing to acquire and hold the Registrable Securities
subject to all of the applicable terms hereof.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Exchange and Registration
Rights Agreement or made pursuant hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities, any director, officer or
partner of such holder, any agent or underwriter or any director, officer or
partner thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to the
Notes Purchase Agreement and the transfer and registration of Registrable
Securities by such holder and the consummation of any Exchange Offer.
(f) LAW GOVERNING. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of Securities) or delivered pursuant hereto which form a part hereof
contain the entire understanding of the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Exchange and Registration Rights Agreement may be amended and the
observance of any term of this Exchange and Registration Rights Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and the
holders of at least a majority in aggregate principal amount at maturity of each
Series of the Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by
any amendment or waiver effected pursuant to this Section 9(h), whether or not
any notice,
24
<PAGE>
writing or marking indicating such amendment or waiver appears on such
Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying on any business
day by any holder of Registrable Securities of the same Series for proper
purposes only (which shall include any purpose related to the rights of the
holders of Registrable Securities under the Securities, the Indenture and this
Agreement) at the offices of the Company at the address thereof set forth in
Section 9(c) above and at the office of the Trustee under the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
25
<PAGE>
Agreed to and accepted as of the date referred to above.
CLARK REFINING & MARKETING, INC.
By: /s/ M J Clark
----------------------------------
Name: Maura J. Clark
Title: Executive Vice President,
Corporate Development and
Chief Financial Officer
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES, INC.
SALOMON BROTHERS INC
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ Goldman, Sachs & Co.
----------------------------------
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
26
<PAGE>
Exhibit A
CLARK REFINING & MARKETING, INC.
INSTRUCTION TO DTC PARTICIPANTS
-------------------------------
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]/1/
--------------------------------
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in the Clark Refining &
Marketing, Inc. (the "Company") 8 5/8% Senior Notes due 2008 (the "Securities")
are held.
The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.
It is important that beneficial owners of the Securities receive a copy of
the enclosed materials as soon as possible as their rights to have the
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Clark Refining &
Marketing, Inc. 8182 Maryland Avenue, St. Louis, Missouri 63105, Attention:
Secretary, phone: (314) 854-1510.
- -----------------
/1/ Not less then 28 calendar days from date of mailing.
A-1
<PAGE>
Clark Refining & Marketing, Inc.
Notice of Registration Statement
and
Selling Securityholder Questionnaire
------------------------------------
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement
(the "Exchange and Registration Rights Agreement") between Clark Refining &
Marketing, Inc. (the "Company") and the Purchasers named therein. Pursuant to
the Exchange and Registration Rights Agreement, the Company has filed with the
United States Securities and Exchange Commission (the "Commission") a
registration statement on Form S-1 or S-3 (the "Shelf Registration Statement")
for the registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the "Securities Act"), of the Company's 8 5/8% Senior Notes due 2008
(the "Securities"). A copy of the Exchange and Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities (as defined below) is
entitled to have the Registrable Securities beneficially owned by it included in
the Shelf Registration Statement. In order to have Registrable Securities
included in the Shelf Registration Statement, this Notice of Registration
Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire")
must be completed, executed and delivered to the Company's counsel at the
address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE].
Beneficial owners of Registrable Securities who do not complete, execute and
return this Notice and Questionnaire by such date (i) will not be named as
selling securityholders in the Shelf Registration Statement and (ii) may not use
the Prospectus forming a part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.
The term "Registrable Securities" is defined in the Exchange and
Registration Rights Agreement.
A-2
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Exchange and Registration
Rights Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Company and represents and warrants that such information is accurate and
complete:
A-3
<PAGE>
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
________________________________________________________________________
(b) Full Legal Name of Registered Holder (if not the same as in (a) above) of
Registrable Securities Listed in Item (3) below:
________________________________________________________________________
(c) Full Legal Name of DTC Participant (if applicable and if not the same as
(b) above) Through Which Registrable Securities Listed in Item (3) below
are Held:
________________________________________________________________________
(2) Address for Notices to Selling Securityholder:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Telephone: _______________________
Fax: _______________________
Contact Person: ______________________
(3) Beneficial Ownership of Securities:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Securities.
(a) Principal amount at maturity of Registrable Securities beneficially
owned: __________
CUSIP No(s). of such Registrable Securities: ___________________________
A-4
<PAGE>
(b) Principal amount at maturity of Securities other than Registrable
Securities beneficially owned: __________
CUSIP No(s). of such other Securities:
(c) Principal amount at maturity of Registrable Securities which the
undersigned wishes to be included in the Shelf Registration Statement:
________________________________
CUSIP No(s). of such Registrable Securities to be included in the Shelf
Registration Statement: __________
(4) Beneficial Ownership of Other Securities of the Company:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other securities
of the Company, other than the Securities listed above in Item (3).
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5 % or more)
has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to time
directly by the undersigned Selling Securityholder or, alternatively, through
underwriters, broker-dealers or agents. Such Registrable Securities may be sold
in one or more transactions affixed prices, at prevailing market prices at the
time of sale, at varying prices determined at the time of sale, or at negotiated
prices. Such sales may be effected in transactions (which may involve crosses or
block transitions) (i) on any national securities exchange or quotation service
on which the Registered Securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable Securities
or other vise, the Selling Securityholder may enter into hedging transactions
with broker-dealers, which may in turn engage in short sales of the Registrable
Securities in the course of hedging the positions they assume. The Selling
A-5
<PAGE>
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to close out such short positions, or loan or pledge
Registrable Securities to broker-dealers that in turn may sell such securities.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
provisions of the Exchange Act and the rules and regulations thereunder,
particularly Regulation M (which governs manipulation, stabilization and trading
activity during a distribution of securities).
In the event that the Selling Securityholder transfers all or any portion
of the Registrable Securities listed in Item (3) above after the date on which
such information is provided to the Company, the Selling Securityholder agrees
to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of
the information contained herein in its answers to Items (1) through (6) above
and the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company, and any underwriters in an underwritten
offering of such Selling Securityholder's Registrable Securities listed in
Item(3) above, in connection with the preparation of the Shelf Registration
Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section
3(d) of the Exchange and Registration Rights Agreement to provide such
information as may be required by law for inclusion in the Shelf Registration
Statement, the Selling Securityholder agrees to promptly notify the Company of
any inaccuracies or changes in the information provided herein which may occur
subsequent to the date hereof at any time while the Shelf Registration Statement
remains in effect. All notices hereunder and pursuant to the Exchange and
Registration Rights Agreement shall be made in writing, by hand-delivery, first-
class mail, or air courier guaranteeing overnight delivery as follows:
(i) To the Company:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Secretary
(314) 854-1510
(ii) With a copy to:
Simpson Thacher & Bartlett
A-6
<PAGE>
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely
(212) 455-3189
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company's counsel, the terms of this Notice
and Questionnaire, and the representations and warranties contained herein,
shall be binding on, shall inure to the benefit of and shall be enforceable by
the respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above. This Agreement shall be governed in all respects by the laws of the
State of New York.
A-7
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: ____________________
_______________________________________________________
Selling Securityholder
Print/type full legal name of beneficial
owner of Registrable Securities)
By:____________________________________________________
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Wilson S. Neely
Telephone: (212) 455-3189
Facsimile: (212) 455-2502
A-8
<PAGE>
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Clark Refining & Marketing, Inc.
c/o Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Trust Officer
Re: Clark Refining & Marketing, Inc. (the "Company") 8 5/8% Senior
--------------------------------------------------------------
Notes dues 2008
---------------
Dear Sirs:
Please be advised that ____________________ has transferred $______________
aggregate principal amount at maturity of the above-referenced Notes pursuant to
an effective Registration Statement on Form [____] (File No. 333-____ ) filed by
the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus
dated_______, 199_ or in supplements thereto, and that the aggregate principal
amount at maturity of the Notes transferred are the Notes listed in such
Prospectus opposite such owner's name.
Dated:
Very truly yours,
_______________________________
(Name)
By:_____________________________
(Authorized Signature)
B-1
<PAGE>
Exhibit 5.1
[Simpson Thacher & Bartlett Letterhead]
September 24, 1998
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Ladies and Gentlemen:
We have acted as special counsel for Clark Refining & Marketing, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the issuance by the
Company of $110,000,000 aggregate principal amount of its 8 5/8% New Senior
Notes due 2008 (the "New Notes"). The New Notes are to be offered by the Company
in exchange (the "Exchange") for $110,000,000 aggregate principal amount of its
outstanding 8 5/8% Senior Notes due 2008 (the "Old Notes"). The Old Notes have
been, and the News Notes will be, issued under an Indenture dated as of August
10, 1998 (the "Indenture"), between the Company and Bankers Trust Company, as
Trustee (the "Trustee").
We have examined the Registration Statement and the Indenture which has
been filed with the Commission as an Exhibit to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified
<PAGE>
Clark Refining &
Marketing, Inc. -2- September 24, 1998
or otherwise identified to our satisfaction, of such corporate records,
agreements, documents and other instruments and such certificates or comparable
documents of public officials and of officers and representatives of the
Company, and have made such other and further investigations, as we have deemed
relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals and the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, assuming that the Indenture is the valid and legally binding
obligation of the Trustee, when (i) the Indenture has been duly qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and (ii)
the New Notes have been duly executed, authenticated, issued and delivered in
accordance with the provisions of the Indenture upon the Exchange, we are of the
opinion that the New Notes will constitute valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their terms.
Our opinion set forth in the preceding sentence is subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York and we do not express
<PAGE>
Clark Refining &
Marketing, Inc. -3- September 24, 1998
any opinion herein concerning any law other than the law of the State of New
York.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 8.1
[Simpson Thacher & Bartlett Letterhead]
September 24, 1998
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Ladies and Gentlemen:
We have acted as special counsel for Clark Refining & Marketing, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the issuance by the
Company of $110,000,000 aggregate principal amount of its 8-5/8% New Senior
Notes due 2008 (the "New Notes"), which are to be offered by the Company in
exchange for $110,000,000 aggregate principal amount of its outstanding 8-5/8%
Senior Notes, due 2008 (the "Old Notes").
We have examined the Registration Statement and the Indenture which has
been filed with the Commission as an Exhibit to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
<PAGE>
Clark Refining & Marketing, Inc. -2- September 24, 1998
In such examination, we have assumed that the Indenture has been duly
authorized, executed and delivered by the Trustee. In addition, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we hereby confirm that the statements set forth in the
Registration Statement under the caption "Certain United States Federal Income
Tax Consequences of the Exchange" insofar as they purport to constitute
summaries of United States federal tax law or legal conclusions with respect
thereto are accurate in all material respects.
We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any law other than the law of the State of New
York and the federal law of the United States. This opinion is rendered to you
solely in connection with the above-described transaction and may not be relied
upon for any other purpose without our prior written consent.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 10.13
CLARK REFINING & MARKETING, INC.
AMENDMENT NO. 3
TO CREDIT AGREEMENT
This AMENDMENT NO. 3 (the "Amendment") is dated as of July 24, 1998 and
entered into by and among Clark Refining & Marketing, Inc., a Delaware
corporation (the "Company"), Bankers Trust Company, a New York Banking
corporation, as Administrative Agent and Collateral Agent, The Toronto-Dominion
Bank, a Canadian chartered bank, as Syndication Agent, and BankBoston, N.A., a
national banking association, as Documentation Agent, and the other financial
institutions party hereto (the "Banks"). This Amendment amends the Credit
Agreement (as amended, restated, supplemented or otherwise modified, the "Credit
Agreement") dated as of September 25, 1997 by and among the parties hereto.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the parties hereto entered into the Credit Agreement, which
provides for a loan facility to the Company;
WHEREAS, the parties hereto desire to make certain amendments to the Credit
Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows;
Article I
AMENDMENTS TO THE CREDIT AGREEMENT
1.01 Amendments to Section 1.01 of the Credit Agreement.
(a) The following definitions shall be inserted in Section 1.01 of the
Credit Agreement:
"British Petroleum" means, collectively, BP Exploration & Oil
Inc., an Ohio corporation, The Standard Oil Company, an Ohio corporation,
BP Oil Pipeline Company, a Delaware corporation and BP Chemicals Inc., an
Ohio corporation.
<PAGE>
"1998 Floating and Fixed Rate Notes" means the senior Floating
and Fixed Rate Notes or loans to be issued under the 1998 Floating and
Fixed Rate Note Indentures in an aggregate amount not to exceed
$250,000,000 for the purposes described in, and otherwise in accordance
with, Section 8.05(j).
"1998 Floating and Fixed Rate Note Indentures" means each of the
indentures and/or credit agreements to be entered into by the Company
pursuant to which the 1998 Floating and Fixed Rate Notes are to be issued.
"Lima Acquisition" means the acquisition by the Company of the
Lima, Ohio Oil Refinery, Vine Street Terminal and certain assets and
liabilities associated therewith from British Petroleum.
(b) The definition of "Borrowing Base" shall be amended by deleting
clauses (e) and (f) in their entirety and the following clauses (e) and (f)
shall be inserted in lieu thereof:
"(e) 80% of Eligible Petroleum Inventory,
(f) 80% of Eligible Petroleum Inventory-Not-Received, and".
(c) The definition of "Cumulative Cash Flow" shall be amended by inserting
after the words "Floating and Fixed Rate Notes" in clause (b)(v) thereof the
words "or the 1998 Floating and Fixed Rate Notes".
(d) The definition of "Eligible Petroleum Inventory" shall be amended by
deleting the amount "$125,000,000" from clause (a) thereof and inserting the
amount "$300,000,000" in lieu thereof.
(e) Clause (e) of the definition of "Eligible Petroleum Inventory-Not-
Received" shall be deleted in its entirety and the following clause (e) shall be
inserted in lieu thereof:
"(e) the Company's obligations to pay the purchase price of such
Inventory is supported by (A) a Commercial Letter of Credit Issued under
this Agreement which Commercial Letter of Credit requires the original bill
of lading (or other original "document of title" (as defined in the UCC))
relating to such Petroleum Inventory to be delivered to the applicable
Issuing Bank or its designee in connection with a drawing under such
Commercial Letter of Credit, or (B) a Standby Letter of Credit Issued under
this Agreement which Standby Letter of Credit provides that the beneficiary
thereunder is not permitted to make any drawing thereunder until the
beneficiary has delivered a certificate to the Issuing Bank certifying that
delivery of such Petroleum Inventory has been made by the beneficiary (to
be paid for by such drawing) to the Company and payment therefor is past
due and owing, and (i) such Petroleum Inventory, in the case of subclause
(B) of this clause (e), is to be delivered to the Company not more than
thirty (30) days from the date such Petroleum
-2-
<PAGE>
Inventory was shipped to the Company by the seller thereof and, if
delivered to a carrier, such carrier is an Eligible Carrier and (ii) for
purposes of inclusion of such Petroleum Inventory in the Borrowing Base,
such Petroleum Inventory shall be valued at an amount not to exceed the
maximum drawing amount of such Letter of Credit supporting the purchase
price thereof."
(f) Clause (j) of the definition of "Eligible Receivables" shall be
deleted in its entirety and the following clause (j) shall be inserted in lieu
thereof:
"(j) are due from a customer to the extent that such Accounts
due from such customer and its Affiliates do not exceed in the aggregate an
amount equal to (i) if such customer is a Person listed on Schedule 1.01(d)
(as such schedule may be amended from time to time with the approval of the
Administrative Agent), 25% of the aggregate of all Accounts at such time
and (ii) otherwise, 10% of the aggregate of all Accounts at such time;
provided that notwithstanding clause (i) above, Accounts due from Chevron
U.S.A. Inc. and its Affiliates may exceed 25% of the aggregate of all
Accounts at such time but shall not, if in excess of 25% of the aggregate
Accounts due at such time, have a face amount in the aggregate in excess of
$50,000,000 (it being understood that only such portions which exceed the
limit set forth above will be excluded from Eligible Receivables) and there
shall be no limit on Accounts due from British Petroleum and its Affiliates
which may be included as Eligible Receivables so long as, to the extent
that the amount of such receivables exceeds $50,000,000, such excess is
supported by a letter of credit from a financially sound financial
institution, on a dollar-for-dollar basis, for the benefit of the Company
(it being understood that only such portion of such excess which is not so
supported will be excluded from Eligible Receivables); and provided,
further, that notwithstanding anything herein to the contrary, there shall
be excluded from Accounts and the aggregate of all Accounts in the above
calculations, Accounts generated from the sale of West Texas Intermediate -
Cushing and due from certain Account Debtors (as previously disclosed, in
writing, to the Agents and as may be changed, from time to time, with the
approval of the Administrative Agent) so long as, to the extent that the
amount of such receivables from any such Account Debtor exceeds the
Company's internal credit policy limit (as previously disclosed, in
writing, to the Agents and as may be changed, from time to time, with the
approval of the Administrative Agent) in respect of such Account Debtor,
such excess is supported by a letter of credit from a financially sound
financial institution, on a dollar-for-dollar basis, for the benefit of the
Company (it being understood that only such portion of such excess which is
not so supported will be excluded from Eligible Receivables)".
(g) Clause (B) of the last paragraph of the definition of "Eligible
Receivables" shall be amended by inserting the parenthetical "(other than, for
the three-month period
-3-
<PAGE>
beginning on the closing date of the Lima Acquisition, in respect of amounts due
to British Petroleum and its Affiliates)" after the words "in respect thereof,".
(h) The definition of "Institutional Finance Documents" shall be amended by
(i) deleting the words "9-1/2% Note Indentures" and inserting the words "9-1/2%
Note Indenture" in lieu thereof and (ii) inserting after the words "the Floating
and Fixed Rate Note Indentures" therein the words "the 1998 Floating and Fixed
Rate Notes, the 1998 Floating and Fixed Rate Note Indentures".
1.02 Amendment to Section 2.01. Clause (b) of Section 2.01 of the
Credit Agreement shall be amended by deleting the amount "$50,000,000" therein
and inserting the amount "$150,000,000" in lieu thereof.
1.03 Amendment to Section 2.06. Clause (a)(i)(x) of Section 2.06 of
the Credit Agreement shall be amended by deleting the amount "$50,000,000"
therein and inserting the amount "$150,000,000" in lieu thereof.
1.04 Amendment to Section 2.11. Section 2.11 of the Credit Agreement
shall be amended by deleting the text thereof in its entirety and inserting
"[Intentionally Omitted]" in lieu thereof.
1.05 Amendment to Section 6.24. Section 6.24 of the Credit Agreement
shall be amended by (a) inserting the words "1998 Floating and Fixed Rate Note
Indentures" at the end of the heading thereof; and (b) deleting the words
"Indenture or" on the last line thereof and inserting the word "Indentures," in
lieu thereof; and (c) inserting before the period at the end thereof the words
", the 1998 Floating and Fixed Rate Note Indentures or the 1998 Floating and
Fixed Rate Notes".
1.06 Amendment to Section 7.02. Section 7.02(e) of the Credit
Agreement shall be amended by inserting the words "(each a "Borrowing Base
Measurement Date")" after the words "such Sunday or month end" in the first
sentence thereof; by inserting the sentence "Notwithstanding the foregoing, the
Borrower may deliver a Borrowing Base Certificate at any time, setting forth, on
an itemized basis, the Borrowing Base, as of the close of business on any day
(an "Interim Borrowing Base Measurement Date") following the Borrowing Base
Measurement Date in respect of the most recently delivered Borrowing Base
Certificate (it being understood that all items of the Borrowing Base shall be
itemized as of such Interim Borrowing Base Measurement Date and such date shall
be prior to the date of such Borrowing Base Certificate and the next Borrowing
Base Measurement Date) and otherwise in accordance with this Section 7.02(e)"
after the first sentence thereof; and by inserting the sentence "Notwithstanding
the foregoing, the Company shall, prior to the closing of the Lima Acquisition,
deliver a pro forma Borrowing Base Certificate, which certificate shall give
effect to the Lima Acquisition on a pro forma basis and such Borrowing Base
Certificate shall remain effective until the close of business on the date on
which the Borrowing Base Certificate immediately succeeding the next required
Borrowing Base Certificate is required to be delivered hereunder" at the end
thereof.
-4-
<PAGE>
1.07 Amendment to Section 8.01. The following clause (s) shall be
inserted after clause (r) of Section 8.01 of the Credit Agreement:
"(s) Liens on assets (other than assets of the same type as the
Collateral) securing Indebtedness acquired in connection with the
acquisition of such assets; provided, that such Indebtedness is permitted
to be incurred under Section 8.05(k) hereof and provided, further, that
such liens existed at the time of such acquisition and were not created in
anticipation of such acquisition."
1.08 Amendment to Section 8.03. The following clause (c) shall be
inserted after clause (b) of Section 8.03 of the Credit Agreement:
"(c) any Restricted Subsidiary may merge with any Person to effectuate
an acquisition of such Person; provided, that such acquisition is permitted
pursuant to Section 8.04."
1.09 Amendment to Section 8.04.
(a) The first sentence of Section 8.04 of the Credit Agreement shall be
amended by inserting the words "unless such Restricted Subsidiary becomes a co-
borrower or a guarantor hereunder pursuant to an amendment to this Agreement and
the other Loan Documents (including if necessary, execution of a guarantee) in
form and substance satisfactory to the Administrative Agent to reflect such
Restricted Subsidiary becoming a co-borrower or guarantor hereunder (it being
understood that upon becoming such an obligor, exceptions to covenants which
apply to the Company shall apply to such Restricted Subsidiary and the assets of
such Restricted Subsidiary shall be included in the calculation of the Borrowing
Base on the same basis as are those of the Company and any amendments to this
Agreement or the other Loan Documents shall reflect the foregoing)" after the
words "consent of the Majority Banks," and the words "or any other Restricted
Subsidiary which may be formed or acquired after the date of this Agreement that
becomes a co-borrower or guarantor under this Agreement pursuant to an amendment
to this Agreement and the other Loan Documents (including if necessary,
execution of a guarantee) in form and substance satisfactory to the
Administrative Agent to reflect such Restricted Subsidiary becoming a borrower
hereunder (it being understood that upon becoming such an obligor, exceptions to
covenants which apply to the Company shall apply to such Restricted Subsidiary
and the assets of such Restricted Subsidiary shall be included in the
calculation of the Borrowing Base on the same basis as are those of the Company
and any amendments to this Agreement or the other Loan Documents shall reflect
the foregoing)" at the end thereto.
(b) Clause (i) of Section 8.04 of the Credit Agreement shall be amended by
deleting the amount "$60,000,000" therein and inserting the amount "$75,000,000"
in lieu thereof.
(c) The following clauses (i) and (j) shall be inserted after clause (h) of
Section 8.04 of the Credit Agreement and clause (i) shall be re-lettered as
clause (k):
-5-
<PAGE>
"(i) the Lima Acquisition;"
"(j) acquisitions made solely with one or more equity issuances of, or
capital contributions to, the Company (or the net cash proceeds therefrom)
and existing cash of the Company (provided that after giving effect to any
such acquisition, the Company and its Restricted Subsidiaries have not
incurred any additional indebtedness, other than acquired indebtedness
otherwise permitted under Section 8.05); provided that (a) the seller with
respect to such acquisition has provided an indemnity (including with
respect to costs and expenses) for substantially all liabilities with
respect to environmental matters (including costs and expenses with respect
to remediation), subject to reasonable minimum amounts acceptable to the
Administrative Agent, covering all periods prior to the date of closing for
any such acquisition and such seller has, in the good faith judgment of the
Company, a credit worthiness to support such indemnity and which indemnity
shall survive for a period of at least six years following the closing date
of such acquisition, (b) an independent consultant, acceptable to the
Agents, in their sole discretion, projects in writing that after giving
effect to any debt service requirements applicable to any acquired
indebtedness in respect of any such acquisition, the earnings before
interest, tax, depreciation and amortization less capital expenditures
required for maintenance purposes with respect to the assets being acquired
shall be greater than zero for the two years immediately succeeding such
acquisition and (c) after giving effect to any such acquisition, the
aggregate amount of the Borrower's Cash, Cash Equivalents and Qualifying
Investments is not less than $100,000,000; and".
1.10 Amendment to Section 8.05.
(a) Clause (g) of Section 8.05 of the Credit Agreement shall be deleted in
its entirety and the following clause (g) shall be inserted in lieu thereof:
"(g) Indebtedness incurred to refinance in whole or in part the 9-1/2%
Notes, the Floating and Fixed Rate Notes and/or the 1998 Floating and Fixed
Rate Notes and to pay any applicable premiums and expenses; provided, that
the terms of such Indebtedness are no less favorable, in the aggregate (as
determined by the Agents, in their sole discretion), to the Company or the
Banks than are contained in the 9-1/2% Note Indenture and/or the applicable
Floating and Fixed Rate Note Indenture and/or the applicable 1998 Floating
and Fixed Rate Note Indenture".
(b) Clause (h) of Section 8.05 of the Credit Agreement shall be amended by
inserting after the words "Floating and Fixed Rate Note Indentures" therein the
words "and the 1998 Floating and Fixed Rate Note Indentures".
(c) The following clause (j) shall be inserted after clause (i) of Section
8.05 of the Credit Agreement and clause (j) shall be re-lettered as clause (k):
"(j) Indebtedness of the Company, in an aggregate amount not to exceed
$250,000,000 (in the form of floating and fixed rate notes or loans),
incurred to finance the Lima Acquisition, the payment of related fees and
expenses, which
-6-
<PAGE>
Indebtedness shall be on terms substantially similar to the terms of the
Floating and Fixed Rate Notes; and".
(d) Clause (k) of Section 8.05 of the Credit Agreement shall be amended by
deleting the amount "$25,000,000" therein and inserting the amount "$75,000,000"
in lieu thereof, by deleting the word "unsecured" in the proviso thereto and by
inserting at the end thereof the words "and that at the time of incurrence of
any Indebtedness pursuant to this clause (k), not more than $25,000,000 of all
Indebtedness outstanding under this clause (k) matures concurrently with or
before the maturity of the Obligations owing hereunder; and provided, further
that Indebtedness incurred in accordance with this clause (k) may be secured if
the liens securing such Indebtedness are permitted under Section 8.01(s)
hereof".
1.11 Amendment to Section 8.06. Section 8.06 of the Credit Agreement
shall be amended by inserting the following proviso at the end thereof:
"provided, that this Section 8.06 shall not prohibit payments by the Borrower
which have been approved by a majority of the board of directors of the
Borrower, to the Fund Affiliates or any advisor thereof in connection with any
underwriting or placement services or in respect of other investment banking
activities, including without limitation, acquisitions or divestitures.
1.12 Amendments to Section 8.11.
(a) Clause (iii) and clause (b) of the first proviso in Section 8.11 of the
Credit Agreement shall be amended by inserting after the words "Floating and
Fixed Rate Notes" each place where such words appear therein, the words "or the
1998 Floating and Fixed Rate Notes".
(b) Section 8.11 of the Credit Agreement shall be amended by deleting the
words "which bear a fixed interest rate" from clause (c) of the first proviso
thereof and by inserting the following clause (d) at the end of the first
proviso thereof:
"(d) in addition to clauses (b) and (c) above, prepay or redeem
not more than 35% of the aggregate principal amount of the 1998 Floating
and Fixed Rate Notes originally issued, with the proceeds received from the
issuance of Capital Stock of the Company or Holdings in accordance with the
terms of such Notes as in effect on the dates of their respective
indentures or credit agreements".
1.13 Amendments to Section 8.16. Clause (b) of Section 8.16 of the
Credit Agreement shall be amended by deleting the last sentence thereof.
1.14 Amendments to Section 8.18. Section 8.18 of the Credit
Agreement shall be amended by inserting after the words "Floating and Fixed Rate
Notes," therein the words "any of the 1998 Floating and Fixed Rate Notes," and
inserting after the words "the Floating and Fixed Rate Note Indentures" therein
the words "the 1998 Floating and Fixed Rate Note Indentures,".
-7-
<PAGE>
1.15 Amendments to Section 9.01.
(a) Section 9.01(n) of the Credit Agreement shall be amended by inserting
the words "(it being understood that the amendment pursuant to and in accordance
with the Consent Solicitation Statement dated July 6, 1998 shall not be deemed
to increase the obligations of Holdings or the Company or to be otherwise
materially adverse to Holdings, the Company or the Banks" after the words "or
the Banks" therein.
(b) Section 9.01(o) of the Credit Agreement shall be amended by inserting
the following proviso at the end thereof "provided that the incurrence of
Indebtedness by Holdings to refinance in whole the Holdings Notes and to pay any
applicable premiums and expenses, which indebtedness shall be on terms no less
favorable, in the aggregate (as determined by the Agents in their sole
discretion), to the Banks, Holdings or the Company than the terms of the
Holdings Notes shall not be an Event of Default under clause (n) or (o) above".
1.16 Amendment to Section 11.01. Section 11.01 shall be amended by
inserting the words "Except as otherwise expressly provided," at the beginning
of the first sentence thereof.
1.17 Replacement of Schedule 1.01(a). Schedule 1.01(a) attached hereto
shall be attached to the Credit Agreement as Schedule 1.01(a) (Commitments) to
the Credit Agreement and shall replace the existing Schedule 1.01(a).
1.18 Adjustments of Commitments. Each Bank's participation in letters
of credit under the Credit Agreement shall be automatically adjusted such that
their participation shall be in accordance with their pro rata commitments as
reflected on Schedule 1.01(a) (as amended hereby) to the Credit Agreement.
1.19 Payment of Investment Banking Fees. The Company is hereby
permitted to pay investment banking fees to the Fund Affiliates and any advisor
thereof in connection with the Lima Acquisition.
Article II
EFFECTIVENESS OF AMENDMENTS
This Amendment shall become effective on the opening of business in
New York on the Business Day on which the Administrative Agent has notified the
Company and the Banks that the Administrative Agent has executed a counterpart
signature page of this Amendment, has received executed counterpart signature
pages of this Amendment from the Company and the Majority Banks, and upon the
satisfaction of the following conditions precedent and the prior receipt by the
Administrative Agent of all of the following (and in the case of any agreements,
documents, opinions and certificates, in sufficient copies for the
Administrative Agent and each Bank) dated the Effective Date or such other date
satisfactory to the Administrative Agent in form and substance satisfactory to
the Administrative Agent:
-8-
<PAGE>
(a) Amendment and Notes. This Amendment and Notes drawn to the order of
each requesting Bank providing any portion of the increased available amounts
under the Credit Agreement, executed by each party thereto;
(b) Payment of Fees and Expenses. Evidence of payment by the Company of
all accrued and unpaid Fees and Expenses to the extent then due and payable on
the Effective Date and invoiced, together with any reasonable estimate of
reasonable fees and expenses of outside counsel incurred or to be incurred by it
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Company and such
counsel); including, without limitation, any such costs, fees, commissions and
expenses arising under or referenced in the Fee Letter;
(c) Collateral. The Collateral Agent shall have received a first priority
security interest (subject to exceptions similar to those in the Credit
Agreement) in the assets (of the same type as the Collateral granted to the
secured parties under, and pursuant to, the Collateral Documents executed in
connection with the Credit Agreement) acquired by the Company in connection with
the Acquisition;
(d) Solvency Certificate. A certificate signed by a Responsible Officer,
dated as of the Effective Date, stating that, after giving effect to the
transactions contemplated by the Amendment, the Acquisition and the related debt
financing (the "Debt Financing") thereof, the Company is Solvent;
(e) Acquisition and Debt Financing. The Acquisition and the Debt Financing
shall have been consummated and the terms thereof (including the purchase price
and the documentation relating thereto) shall be substantially as set forth in
the acquisition agreement and the offering memorandum previously delivered to
the Agents (in each case, with such other changes as are acceptable to the
Agents (such acceptance not be unreasonably withheld);
(f) Amendments of Other Documentation. The obtaining of any amendments or
waivers to any material debt or preferred stock of the Parent, the Company or
any of their respective subsidiaries necessary to permit the Amendment, the
Acquisition and the Debt Financing without violating the terms of such debt or
preferred stock or resulting in a requirement that such debt or preferred stock
be repurchased, redeemed, repaid, defeased or otherwise retired (collectively,
"Repaid") or in any holder thereof being entitled to require that the issuer
thereof cause such debt or preferred stock to be Repaid, including Parent's
10 7/8% Series B Senior Notes Due 2005 and 11 1/2% Senior Cumulative
Exchangeable Preferred Stock on substantially the same terms as set forth in the
Consent Solicitation Statement previously delivered to the Agents (with such
other changes as are acceptable to the Agents, (such acceptance not to be
unreasonably withheld).
(g) Consents, Approval, Etc.. All necessary orders, permits, licenses,
authorizations, approvals, consents and waivers by any Governmental Authority or
other Person (including, without limitation, the consent of certain customers,
if required, under any Material Contracts) in connection with this Amendment,
the Acquisition or the Debt Financing other than approvals, permits and filings
which are not material to the completion of the transactions or are not
otherwise material to the Parent and its
-9-
<PAGE>
subsidiaries, taken as a whole or the Company and its subsidiaries, taken as a
whole. Each of the aforementioned orders, permits, licenses, authorizations,
approvals, consents and waivers by Governmental Authorities or other Persons
shall be in full force and effect and shall be in form and substance
satisfactory to the Agents;
(h) Legal Opinions.
(i) an opinion of Simpson Thacher & Bartlett, counsel to the
Company, addressed to the Administrative Agent and the Banks, in form and
substance satisfactory to the Administrative Agent; and
(ii) such other opinions of counsel covering matters, and in form
and substance acceptable to the Agents;
(i) No Material Adverse Change. Since December 31, 1997, in the opinion of
the Agents, there shall not have occurred any material adverse change with
respect to the condition (financial or otherwise), operations, assets,
liabilities or prospects of Parent and its subsidiaries, taken as a whole and
the Company and its subsidiaries, taken as a whole; and
(j) Other Conditions and Documents. Such other customary approvals,
opinions, documents or materials relating to corporate matters as the Agents may
reasonably request.
Notwithstanding the foregoing, Sections 1.01(b) of this Amendment
shall not be effective until the opening of business in New York on the Business
Day on which the Administrative Agent has notified the Company and the Banks
that the Administrative Agent has received executed counterpart signature pages
of this Amendment from each Bank and upon satisfaction of all other conditions
set forth in this Section 2.
Article III
MISCELLANEOUS
3.01 Reference to and Effect on the Credit Agreement and the Other
Loan Documents.
(a) This Amendment modifies the Credit Agreement to the extent set forth
herein, is hereby incorporated by reference into the Credit Agreement and is
made a part thereof. On and after the effective date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words
of like import referring to the Credit Agreement shall mean and be a reference
to the Credit Agreement as amended by this Amendment.
-10-
<PAGE>
(b) Except as specifically amended by this Amendment, the Credit Agreement
and the other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
(c) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Administrative Agent,
any Bank or any Issuing Bank under, the Credit Agreement or any of the other
Loan Documents.
3.02 Representations and Warranties; No Default or Event of Default.
On the date of effectiveness of any of the amendments herein (after giving
effect to the consummation of the transactions contemplated by this Amendment to
have occurred on or prior to such date), the Company shall be deemed to have
certified to the Banks that, after giving effect to the amendments contained
herein that become effective on such date all of the representations and
warranties contained in the Credit Agreement are true and correct on and as of
the date thereof with the same effect as if made on and as of such date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date and
except to the extent (x) the representations and warranties set forth in Section
6.05 of the Credit Agreement relate to any litigation which has been
specifically disclosed to the Banks and which has been added to Schedule 6.05 to
the Credit Agreement with the written approval of the Majority Banks and (y) the
representation and warranty set forth in Section 6.25 of the Credit Agreement
relates to any event or condition which has been specifically disclosed to the
Banks and which has been added to Schedule 6.25 to the Credit Agreement with the
written approval of the Majority Banks).
3.03 Headings. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
3.04 Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
3.05 Counterparts. This Amendment 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 an original, but all such
counterparts together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-11-
<PAGE>
Schedule 1.01
-------------
<TABLE>
<CAPTION>
Lender Commitment
<S> <C>
Bankers Trust Company $162,500,000
ABN Amro Bank N.V. 22,500,000
Bank of Scotland 25,000,000
BankBoston, N.A. 102,500,000
Comerica Bank 25,000,000
Credit Lyonnais New York Branch 25,000,000
Den Norske Bank ASA 22,500,000
The First National Bank of Chicago 22,500,000
The Fuji Bank, Limited 15,000,000
Green Tree Financial Servicing Corporation 25,000,000
Hibernia National Bank 22,500,000
Mercantile Bank National Association 15,000,000
Mitsubishi Trust & Banking Corp. 15,000,000
The Sanwa Bank Limited 15,000,000
Standard Chartered Bank 22,500,000
Toronto-Dominion (Texas), Inc. 115,000,000
Union Bank California, N.A. 25,000,000
Wells Fargo Bank (Texas), Inc. 22,500,000
------------
Total $700,000,000
============
</TABLE>
-18-
<PAGE>
EXHIBIT 10.15
================================================================================
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF AUGUST 10, 1998
AMONG
CLARK REFINING & MARKETING, INC.,
as Borrower,
THE LENDERS LISTED HEREIN,
as Lenders,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Arranger,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent,
STATE STREET BANK AND TRUST COMPANY OF MISSOURI, N.A.,
as Paying Agent
AND
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Administrative Agent
================================================================================
CO-MANAGERS:
BT ALEX BROWN INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
LEHMAN BROTHERS INC.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
WASSERSTEIN PERELLA SECURITIES, INC.
================================================================================
<PAGE>
CLARK REFINING & MARKETING, INC.
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1.
DEFINITIONS............................................................ 1
1.1 Certain Defined Terms.................................................. 1
1.2 Accounting Terms.......................................................28
1.3 Other Definitional Provisions and Rules of Construction................28
1.4 Compliance Certificates and Opinions...................................28
1.5 Form of Documents Delivered to Agents..................................29
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.............................29
2.1 Commitments; Making of Loans; the Register; Notes......................29
2.2 Interest on the Loans..................................................32
2.3 Fees...................................................................34
2.4 Repayments and Prepayments; General Provisions Regarding Payments......34
2.5 Use of Proceeds........................................................39
2.6 Special Provisions Governing Eurodollar Rate Loans.....................39
2.7 Increased Costs; Taxes; Capital Adequacy...............................41
2.8 Obligation of Lenders to Mitigate......................................45
2.9 Removal or Replacement of a Lender.....................................46
SECTION 3.
CONDITIONS TO EFFECTIVENESS............................................47
3.1 Company Documents......................................................47
3.2 Issuance of 1998 Senior Notes..........................................48
3.3 Indentures.............................................................48
3.4 Legal Opinions.........................................................48
3.5 Fees...................................................................49
3.6 Notice of Borrowing....................................................49
3.7 Officers' Certificate Regarding Certain Conditions.....................49
SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES...............................49
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries...........................................................50
4.2 Authorization of Borrowing, etc........................................50
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.3 Valid Issuance of 1998 Senior Notes....................................51
4.4 No Material Adverse Change.............................................51
4.5 Title to Properties; Liens.............................................52
4.6 Litigation.............................................................52
4.7 Insurance of Properties................................................52
4.8 Performance of Agreements..............................................52
4.9 Securities Activities..................................................53
4.10 Accountants............................................................54
4.11 Environmental Protection...............................................54
4.12 Employee Matters.......................................................54
4.13 Disclosure.............................................................54
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS........................................55
5.1 Financial Statements and Other Reports.................................55
5.2 Corporate Existence, etc...............................................56
5.3 Payment of Taxes and Claims; Tax Consolidation.........................56
5.4 Maintenance of Properties..............................................57
5.5 Compliance with Laws, etc..............................................57
SECTION 6.
COMPANY'S NEGATIVE COVENANTS...........................................57
6.1 Indebtedness...........................................................57
6.2 Prohibition on Liens and Related Matters...............................58
6.3 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries of Company...........................58
6.4 Restrictions on Guaranties.............................................59
6.5 Limitations on Restricted Payments.....................................59
6.6 Limitation on Merger, Consolidation, Sales of Assets...................61
6.7 Limitation on Certain Asset Dispositions...............................62
6.8 Transactions with Shareholders and Affiliates..........................64
6.9 Restrictions on Secured Indebtedness...................................65
6.10 Restrictions on Sales and Leasebacks...................................66
6.11 Other Agreements.......................................................67
6.12 Effect of Investment Grade Rating......................................67
SECTION 7.
EVENTS OF DEFAULT......................................................67
7.1 Failure to Make Payments When Due......................................67
7.2 Default in Other Agreements............................................67
7.3 Breach of Certain Covenants............................................68
7.4 Other Defaults Under Loan Documents....................................68
7.5 Involuntary Bankruptcy; Appointment of Receiver, etc...................68
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.6 Voluntary Bankruptcy; Appointment of Receiver, etc.................... 68
7.7 Judgments and Attachments............................................. 69
7.8 Breach of Warranty.................................................... 69
SECTION 8.
AGENTS................................................................ 70
8.1 Appointment........................................................... 70
8.2 Powers and Duties; General Immunity................................... 71
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness...................................................... 73
8.4 Right to Indemnity.................................................... 73
8.5 Successor Administrative Agent........................................ 73
8.6 Successor Paying Agent................................................ 74
SECTION 9.
MISCELLANEOUS......................................................... 74
9.1 Assignments and Participations in Loans............................... 74
9.2 Expenses.............................................................. 77
9.3 Indemnity............................................................. 77
9.4 Ratable Sharing....................................................... 78
9.5 Amendments and Waivers................................................ 79
9.6 Notices............................................................... 80
9.7 Survival of Representations, Warranties and Agreements................ 80
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative................. 80
9.9 Marshalling; Payments Set Aside....................................... 80
9.10 Severability.......................................................... 81
9.11 Obligations Several; Independent Nature of Lenders' Rights............ 81
9.12 Headings.............................................................. 81
9.13 Applicable Law........................................................ 81
9.14 Successors and Assigns................................................ 81
9.15 Consent to Jurisdiction and Service of Process........................ 82
9.16 Waiver of Jury Trial.................................................. 82
9.17 Confidentiality....................................................... 83
9.18 Counterparts; Effectiveness........................................... 83
Signature pages.......................................................S-1
</TABLE>
(iii)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTE
III [INTENTIONALLY DELETED]
IV FORM OF OPINION OF O'MELVENY & MYERS LLP
V FORM OF ASSIGNMENT AGREEMENT
VI FORM OF CERTIFICATE RE NON-BANK STATUS
SCHEDULES
2.1A EXISTING LENDERS' PRO RATA SHARES
2.1B RESTATEMENT LENDERS' PRO RATA SHARE OF COMMITMENTS
(iv)
<PAGE>
CLARK REFINING & MARKETING, INC.
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
This FIRST AMENDED AND RESTATED CREDIT AGREEMENT is dated as of August
10, 1998, and entered into by and among CLARK REFINING & MARKETING, INC., a
Delaware corporation ("Company"), GOLDMAN SACHS CREDIT PARTNERS L.P., as
arranger (in such capacity, "Arranger"), GOLDMAN SACHS CREDIT PARTNERS L.P.
("GSCP"), as syndication agent (in such capacity, "Syndication Agent"),
STATE STREET BANK AND TRUST COMPANY OF MISSOURI, N.A. ("State Street"), as
payment agent (the "Paying Agent"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and
collectively as "Lenders"), and GOLDMAN SACHS CREDIT PARTNERS ("GSCP"), as
administrative agent for Lenders (in such capacity, "Administrative Agent").
R E C I T A L S
---------------
WHEREAS, Company, Existing Lenders and Agents have entered into that
certain Credit Agreement dated as of November 21, 1997 (the "1997 Credit
Agreement") pursuant to which Existing Lenders made Loans to Company in the
aggregate principal amount of $125,000,000 on and subject to the terms and
conditions set forth in the 1997 Credit Agreement; and
WHEREAS, Company desires to amend and restate the 1997 Credit
Agreement in order to, among other things, provide for a new Commitment of up to
$115,000,000 and make certain other amendments as provided herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders and Agents agree to
amend and restate the 1997 Credit Agreement in its entirety as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
1
<PAGE>
"Acquired Debt" means with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or
in contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a
Lien encumbering any asset acquired by such specified Person.
"Adjusted Eurodollar Rate" means, for each Interest Period during
which any Eurodollar Loan is outstanding subsequent to the initial Interest
Period, the rate determined by Company (notice of such rate to be sent to
the Paying Agent by Company on the date of determination thereof) equal to
the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the offered rates for deposits in U.S. dollars with maturities comparable
to such Interest Period, as set forth on the Reuters Screen LIBO Page as of
11:00 a.m., London time, on the Interest Rate Determination Date for such
Interest Period; provided, however, that if only one such offered rate
appears on the Reuters Screen LIBO Page, the Adjusted Eurodollar Rate for
such Interest Period shall mean such offered rate. If such rate is not
available at 11:00 a.m., London time, on the Interest Rate Determination
Date for such Interest Period, then the Adjusted Eurodollar Rate for such
Interest Period shall mean the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%) of the interest rates per annum at
which deposits in amounts equal to US $1,000,000 are offered by the
Reference Banks to leading banks in the London Interbank Market for a
period comparable to such Interest Period as of 11:00 a.m., London time, on
the Interest Rate Determination Date for such Interest Period. If on any
Interest Rate Determination Date, at least two of the Reference Banks
provide such offered quotations, then the Adjusted Eurodollar Rate for such
Interest Period shall be determined in accordance with the preceding
sentence on the basis of the offered quotation of those Reference Banks
providing such quotations.
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 8.5.
"Affected Lender" has the meaning assigned to that term in
subsection 2.6B.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
2
<PAGE>
"Agent" means, individually, each of Arranger, Syndication Agent,
Paying Agent and Administrative Agent and "Agents" means Arranger,
Syndication Agent, Paying Agent and Administrative Agent, collectively.
"Agreement" means this First Amended and Restated Credit Agreement
dated as of August 10, 1998, as it may be amended, supplemented or
otherwise modified from time to time.
"AOC Payment" means all payments made to AOC Limited Partnership, a
limited partnership organized under the laws of the State of Missouri,
constituting "Additional Redemption Consideration" required to be paid by
Holdings pursuant to Section 2.4 of the Stock Purchase and Redemption
Agreement.
"Arranger" has the meaning assigned to that term in the introduction
to this Agreement.
"Asset Disposition" by any Person means any transfer, conveyance,
sale, lease or other disposition by such Person or any of its Restricted
Subsidiaries (including a consolidation or merger or other sale of any such
Restricted Subsidiaries with, into or to another Person in a transaction in
which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but
excluding a disposition by a Restricted Subsidiary of such Person to such
Person or a Restricted Subsidiary of such Person or by such Person to a
Restricted Subsidiary of such Person) of (i) shares of Capital Stock (other
than directors' qualifying shares) or other ownership interests of a
Restricted Subsidiary of such Person, (ii) substantially all of the assets
of such Person or any of its Restricted Subsidiaries representing a
division or line of business or (iii) other assets or rights of such Person
or any of its Restricted Subsidiaries outside of the ordinary course of
business, which in the case of either clause (i), (ii) or (iii), whether in
a single transaction or a series of related transactions, result in Net
Available Proceeds in excess of $10,000,000; provided that (x) any
transfer, conveyance, sale, lease or other disposition of assets securing
the Existing Credit Agreement in connection with the enforcement of the
security interests therein and (y) any sale of crude oil, vacuum tower
bottoms, refined products or other inventory shall not be deemed an Asset
Disposition hereunder.
"Asset Disposition Trigger Date" has the meaning assigned to that
term in subsection 6.7.
"Assignment Agreement" means an Assignment Agreement in
substantially the form of Exhibit V annexed hereto.
"Attributable Indebtedness" means the total net amount of rent
required to be paid during the remaining primary term of any particular
lease under which any Person is at the time liable, discounted at the rate
per annum equal to the weighted average interest rate borne by the Loans.
3
<PAGE>
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means the per annum rate, at any time, equal to the sum
of (i) the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1%
in excess of the Federal Funds Effective Rate plus (ii) 1.75%.
"Base Rate Loans" means Loans bearing interest at rates determined
by reference to the Base Rate.
"Blackstone" means Blackstone Capital Partners III Merchant Banking
Fund L.P. and its Affiliates.
"Blackstone Transaction" means the acquisition of 13,500,000 shares
of common stock of Holdings previously held by Trizec Hahn Corporation and
certain of its Subsidiaries.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of Company to have been duly adopted by
the board of Directors and to be in full force and effect on the date of
such certification, as set forth in an Officers' Certificate delivered to
the Administrative Agent.
"Borrowing Base" means, as of any date, an amount equal to the sum
of (i) 95% of the accounts receivable owned by Company and its Restricted
Subsidiaries (excluding any accounts receivable from Restricted
Subsidiaries and any accounts receivable that are more than 90 days past
due) as of such date, plus (ii) 90% of the market value of inventory owned
by Company and its Restricted Subsidiaries as of such date, plus (iii) 100%
of the cash and Cash Equivalents owned by Company and its Restricted
Subsidiaries as of such date that are, as of such date, held in one or more
separate accounts under the direct control of the agent bank under the
Existing Credit Agreement and that are as of such date pledged to secure
working capital borrowings under the Existing Credit Agreement.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New York or the state in
which the Funding and Payment Office is located or is a day on which
banking institutions located in such states are authorized or required by
law or other governmental action to close, and (ii) with respect to all
notices, determinations, fundings and payments in connection with the
Adjusted Eurodollar Rate or any Eurodollar Rate Loans, any day that is a
Business Day described in clause (i) above and that is also a day for
trading by and between banks in Dollar deposits in the London interbank
market.
"Capital Lease" means, at the time any determination thereof is to
be made, any lease of property, real or personal or mixed, in respect of
which the present value
4
<PAGE>
of the minimum rental commitment would be capitalized on a balance sheet of
the lessee in accordance with GAAP.
"Capitalized Lease Obligation" of any Person means any lease of any
property (whether real, personal or mixed) by such Person as lessee which,
in conformity with GAAP, is required to be accounted for as a Capital Lease
on the balance sheet of that Person.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of any association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock and (iii) in the case of a partnership,
partnership interests (whether general or limited).
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of
$500,000,000 and a Keefe Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's or S&P and, in each case, maturing within
six months after the date of acquisition.
"Certificate re Non-Bank Status" means a certificate substantially
in the form of Exhibit VI annexed hereto delivered by a Lender to Paying
Agent pursuant to subsection 2.7B(iii).
"Change of Control" means any transaction the result of which is
that any Person (an "Acquiring Person") other than Blackstone, or a
Person a majority of whose voting equity is owned by Blackstone, becomes
the "Beneficial Owner" (as determined in accordance with Rule 13d-3 of
the Exchange Act), directly or indirectly, of shares of stock of Company or
Holdings entitling such Acquiring Person to exercise 50% or more of the
total voting power of all classes of stock of Company or Holdings, as the
case may be, entitled to vote in elections of directors.
"Change of Control Triggering Event" means the occurrence of a
Change of Control resulting in a Rating Decline.
"Chevron Payment" means that certain contingent payment obligation
of Holdings to Chevron U.S.A. Inc. based on industry refining margins and
the volume of refined oil products produced at the Port Arthur Refinery
over a five-year period,
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pursuant to Section 3.1(d) of the Asset Purchase Agreement, dated as of
August 18, 1994, between Holdings and Chevron U.S.A. Inc., as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this Agreement such commission is not existing
and performing the duties now assigned to it under the Trust indenture Act,
the body performing such duties at such time.
"Commitment" means the commitment of a Restatement Lender to make a
Restatement Loan to Company on the Restatement Closing Date pursuant to
subsection 2.1A, and "Commitments" means such commitments of all
Restatement Lenders in the aggregate.
"Company" has the meaning assigned to that term in the introduction
to this Agreement until a successor Person shall have become such pursuant
to the applicable provisions of this Agreement, and thereafter "Company"
shall mean such successor Person.
"Consolidated Adjusted Net Worth" of any Person means the total
amount of consolidated stockholder's equity (par value plus additional
paid-in capital (including all Capital Stock except as excluded below) plus
retained earnings or minus accumulated deficit) of such Person as reflected
on the consolidated balance sheet of such Person and its Restricted
Subsidiaries for the most recent Fiscal Quarter prior to the event
requiring such determination to be made, after excluding (to the extent
otherwise included therein and without duplication) the following (the
amount of such stockholder's equity and deductions therefrom to be
computed, except as noted below, in accordance with GAAP consistently
applied): (i) any amount receivable but not paid from sales of Capital
Stock of such Person or its Restricted Subsidiaries determined on a
consolidated basis; (ii) any revaluation or other write-up in book value of
assets subsequent to the date hereof (other than write-ups of oil inventory
previously written down and other than reevaluations or write-ups upon the
acquisition of assets acquired in a transaction to be accounted for by
purchase accounting under GAAP); (iii) treasury stock; (iv) an amount equal
to the excess, if any, of the amount reflected on the books and records of
such Person or its Restricted Subsidiaries for the securities of any Person
which is not a Restricted Subsidiary of such Person over the lesser of cost
or market value (as determined in good faith by the board of directors of
such Person or such Restricted Subsidiary); (v) Disqualified Capital Stock;
(vi) equity securities of such Person or its Restricted Subsidiaries which
are not Disqualified Capital Stock but which are exchangeable for or
convertible into debt securities of such Person or such Restricted
Subsidiary, as the case may be, other than at the option of such Person or
such Restricted Subsidiary except to the extent that the exchange or
conversion rights in such other equity securities cannot, under any
circumstances, be exercised prior to
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November 15, 2004; and (vii) the cumulative foreign currency translation
adjustment, if any; and (viii) write-offs of non-cash items in an amount
not to exceed $80,000,000.
"Consolidated Net Operating Income" means, when used with reference
to any Person, for any period, the aggregate of the Net Income of such
Person and its Restricted Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP, provided that (i) the Net Income
of any Person which is not a Subsidiary of such Person or is accounted for
by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid to such Person or its
Restricted Subsidiaries, (ii) the Net Income of any Unrestricted Subsidiary
shall be excluded (except to the extent distributed to Company or one of
its Subsidiaries), (iii) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) extraordinary gains and losses and
gains and losses from the sale of assets outside the ordinary course of
such Person's business shall be excluded, (v) the cumulative effect of
changes in accounting principles in the year of adoption of such changes
shall be excluded and (vi) the tax effect of any of the items described in
clauses (i) through (v) above shall be excluded.
"Consolidated Net Tangible Assets" of a Person means the
consolidated total assets of such Person and its Restricted Subsidiaries
determined in accordance with GAAP, less the sum of (i) all current
liabilities and current liability items, and (ii) all goodwill, trade
names, trademarks, patents, organization expense, unamortized debt discount
and expense and other similar intangibles properly classified as
intangibles in accordance with GAAP.
"Consolidated Operating Cash Flow" means with respect to any Person,
Consolidated Net Operating Income of such Person and its Restricted
Subsidiaries without giving effect to gains and losses on securities
transactions (net of related taxes) for the period described below,
increased by the sum of (i) consolidated Fixed Charges of such Person and
its Restricted Subsidiaries which reduced Consolidated Net Operating Income
for such period, (ii) consolidated income tax expense (net of taxes
relating to gains and losses on securities transactions) of such Person and
its Restricted Subsidiaries which reduced Consolidated Net Operating Income
for such period, (iii) consolidated depreciation and amortization expense
(including amortization of purchase accounting adjustments) of such Person
and its Restricted Subsidiaries and other noncash items to the extent any
of which reduced Consolidated Net Operating Income for such period, (iv)
expenses incurred in connection with the Blackstone Transaction in an
amount not to exceed $9,000,000, and (v) any annual management monitoring,
consulting and advisory fees and related expenses paid to Blackstone and
its Affiliates in an amount not to exceed $2,000,000, less noncash items
which increased Consolidated Net Operating Income for such period, all as
determined for such Person and its consolidated Restricted Subsidiaries in
accordance with GAAP for the four full Fiscal Quarters for which financial
information in respect thereof is available immediately prior to the
Transaction Date.
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"Consolidated Operating Cash Flow Ratio" means, with respect to any
Person, the ratio of (i) Consolidated Operating Cash Flow of such Person and its
Restricted Subsidiaries for the four Fiscal Quarters for which financial
information in respect thereof is available immediately prior to the Transaction
Date to (ii) the aggregate Fixed Charges of such Person and its Restricted
Subsidiaries for such four Fiscal Quarters, such Fixed Charges to be calculated
on the basis of the amount of the Indebtedness and Capitalized Lease Obligations
of such Person and its Restricted Subsidiaries outstanding on the Transaction
Date and assuming the continuation of market interest rate levels prevailing on
the Transaction Date in any calculation of interest rates in respect of floating
interest rate obligations; provided, however, that if such Person or any
Restricted Subsidiary of such Person shall have acquired, sold or otherwise
disposed of any Material Asset or engaged in an Equity Offering during the four
full Fiscal Quarters for which financial information in respect thereof is
available immediately prior to the Transaction Date or during the period from
the end of such fourth full Fiscal Quarter to and including the Transaction
Date, the calculation required in clause (i) above will be made giving effect to
such acquisition, sale or disposition or the other investment of the Net
Available Proceeds of such Equity Offering on a pro forma basis as if such
acquisition, sale, disposition or investment had occurred at the beginning of
such four full Fiscal Quarter period without giving effect to clause (iii) of
the definition of "Consolidated Net Operating Income" (that is, including in
such calculation the Net Income for the relevant prior period of any Person
acquired in a pooling of interests transaction, notwithstanding the provisions
of said clause (iii)); provided, further, that Fixed Charges of such Person
during the applicable period shall not include the amount of consolidated
interest expense which is directly attributable to Indebtedness to the extent
such Indebtedness is reduced by the proceeds of the incurrence of such
Indebtedness which gave rise to the need to calculate the Consolidated Operating
Cash Flow Ratio. Any such pro forma calculation may include adjustments
appropriate, in the reasonable determination of Company as set forth in an
Officer's Certificate, to (i) reflect operating expense reductions reasonably
expected to result from the acquisition by Company of such Material Asset or
(ii) eliminate the effect of any extraordinary accounting event with respect to
any acquired Person on Consolidated Net Operating Income.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Capital Stock" means any Capital Stock of Company that,
either by its terms or by the terms of any security into which it is convertible
or exchangeable, is, or upon the happening of any event or passage of time would
be, required to be redeemed or purchased (other than pursuant to an offer to
repurchase such Capital Stock following a Change of Control, which offer may not
be completed until 45 days after Company prepays the Loans, if required by
Lenders, pursuant to
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subsection 2.4B(ii)(b)), including at the option of the holder, in whole or
in part, or has, or upon the happening of an event or passage of time would
have, a redemption, sinking fund or similar payment due, on or prior to
November 15, 2004.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of
any other country or a political subdivision thereof; provided that (x)
such bank is acting through a branch or agency located in the United States
or (y) such bank is organized under the laws of a country that is a member
of the Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act)
which extends credit or buys loans as one of its businesses including
insurance companies, mutual funds and lease financing companies; and (B)
any Lender, any Affiliate of any Lender and, with respect to any Lender
that is an investment fund that invests in commercial loans, any other
investment fund that invests in commercial loans and that is managed or
advised by the same investment advisor as such Lender or by an Affiliate of
such investment advisor; provided that no Affiliate of Holdings shall be an
Eligible Assignee.
"Equity Offering" means any public or private sale of Capital Stock
(including options, warrants or rights with respect thereto) of Company or
of Holdings.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 7.
"Excess Proceeds" has the meaning assigned to that term in subjection
6.7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Exchange Debentures" means the 11-1/2% Subordinated Exchange
Debentures due 2009 which may be exchanged for the Exchangeable Preferred
Stock of Holdings at the option of Holdings.
"Exchangeable Preferred Stock" means the 11-1/2% Senior Cumulative
Exchangeable Preferred Stock of Holdings.
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"Excluded Contribution" means the net cash proceeds received by
Company after the Restatement Closing Date from (a) contributions to its
common equity capital and (b) the sale (other than to a Subsidiary or to
any Company or Subsidiary management equity plan or stock option plan or
any other management or employee benefit plan or agreement) of Capital
Stock of Company (other than Disqualified Capital Stock), in each case,
designated as Excluded Contributions pursuant to an Officers' Certificate.
"Existing Credit Agreement" means that certain Credit Agreement,
dated as of September 25, 1997, by and among Company and the financial
institutions party thereto, including any related notes, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title guarantees, collateral documents, instruments and agreements
executed in connection therewith), and in each case as amended by that
certain Amendment No. 1 dated as of October 29, 1997, that certain
Amendment No. 2 dated as of November 7, 1997 and that certain Amendment No.
3 dated as of July 24, 1997, and as further amended, modified, extended,
renewed, refunded, replaced or refinanced from time to time.
"Existing Indebtedness" means any Indebtedness of Company and its
Subsidiaries incurred or outstanding as of the Restatement Closing Date and
in any event Indebtedness evidenced by the Existing Credit Agreement
whether or not outstanding on the Restatement Closing Date.
"Existing Lenders" means those Lenders party to this Agreement as of
the Restatement Closing Date who were party to the 1997 Credit Agreement.
"Existing Loans" has the meaning assigned to that term in 2.1A.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Administrative
Agent from three Federal funds brokers of recognized standing selected by
Administrative Agent.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
ending on December 31 of each calendar year.
"Fixed Charges" of any Person means, for any period, the sum of (i)
consolidated Interest Expense of such Person and its Restricted
Subsidiaries, plus
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(ii) all but the principal component of rentals in respect of consolidated
Capitalized Lease Obligations of such Person and its Restricted
Subsidiaries paid, accrued or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period, and determined
in accordance with GAAP plus (iii) all cash dividend payments (excluding
items eliminated in consolidation) on any series of preferred stock of such
Person. For purposes of this definition, (a) interest on Indebtedness
which accrues on a fluctuating basis for periods succeeding the date of
determination shall be deemed to accrue at a rate equal to the average
daily rate of interest in effect during such immediately preceding Fiscal
Quarter, and (b) interest on a Capitalized Lease Obligation shall be deemed
to accrue at an interest rate reasonably determined in good faith by the
chief financial officer, treasurer or controller of such Person to be the
rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP (including Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board).
"Fixed Rate Senior Notes" means the senior notes due November 15,
2007 issued by Company pursuant to the Fixed Rate Senior Note Indenture.
"Fixed Rate Senior Note Indenture" means the Indenture dated as of
November 21, 1997 between Company and Bankers Trust Company, as trustee,
pursuant to which the Fixed Rate Senior Notes are issued, as such Indenture
may hereafter be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"Funding Date" means the date of the funding of a Loan.
"Funding and Payment Office" means (i) the office of Paying Agent or
(ii) such other office of Paying Agent as may hereafter be designated from
time to time in a written notice delivered by Paying Agent to Company and
each Lender.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entities as have been approved by a significant
segment of the accounting profession, which were in effect on the 1997
Closing Date.
"GSCP" has the meaning assigned to that term in the introduction to
this Agreement.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) direct or
indirect, in any manner (including, without limitation, letters of credit
and reimbursement agreements in respect thereto), of all or any part of any
Indebtedness.
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"Gulf" means Gulf Resources Corporation, a Panamanian corporation.
"Gulf Merger Agreement" means the Agreement and Plan of Merger,
dated as of November 3, 1995, among Company, Gulf and GFR, Inc.
"Gulf Oil Purchase Contract" means the Crude Oil Purchase Contract
between GFR, Inc. and Gulf.
"Gulf Payments" means all payments (other than the initial purchase
price of $26,900,000 under the Gulf Oil Purchase Contract) to Gulf and/or
any of its Affiliates, in each case, pursuant to the Gulf Merger Agreement,
the Gulf Oil Purchase Contract, the Gulf Stockholders' Agreement and the
Gulf Pledge Agreement, as each is in effect on the date hereof.
"Gulf Pledge Agreement" means the Pledge Agreement among Company,
Gulf and Gulf Resources Holdings, Inc.
"Gulf Stockholder's Agreement" means the Stockholders' Agreement
among Company, Gulf and Gulf Resources Holdings, Inc.
"Hazardous Material" means (i) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, (ii) any ``hazardous waste'' as defined
by the Resource Conservation and Recovery Act, as amended, (iii) any
petroleum or petroleum product, (iv) any polychlorinated biphenyl, and (v)
any pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance regulated under or within the meaning of any
other law relating to protection of human health or the environment or
imposing liability or standards of conduct concerning any such chemical
material, waste or substance.
"Holdings" means Clark USA, Inc., a Delaware corporation and the
direct parent of Company.
"Holdings Note Indenture" means that certain Indenture, dated as of
December 1, 1995 between Holdings and Chase Manhattan Bank, N.A., as
trustee relating to the 10-7/8% Notes, due December 1, 2005, as the same
may hereafter be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"Holdings 10-7/8% Notes" means the 10-7/8% Notes due December 1,
2005 of Holdings issued pursuant to the Holdings Note Indenture dated as of
December 1, 1995.
"Indebtedness" with respect to any Person, means any indebtedness,
including, in the case of Company, the Loans, the indebtedness evidenced by
the Existing
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Credit Agreement, the 9-1/2% Senior Notes, and the New Notes, in each case,
whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing the balance
deferred and unpaid of the purchase price of any property (including
pursuant to Capital Leases) (except any such balance that constitutes a
trade payable in the ordinary course of business that is not overdue by
more than 90 days from the invoice date or being contested in good faith),
if and to the extent any of the foregoing indebtedness would appear as a
liability upon a balance sheet of such Person prepared on a consolidated
basis in accordance with GAAP, and shall also include, to the extent not
otherwise included, the Guaranty of Indebtedness of other Persons not
included in the financial statements of Company, the maximum fixed
redemption or repurchase of Disqualified Capital Stock (or if not
redeemable or subject to repurchase, the issue price) and the maximum fixed
redemption or repurchase price (or if not redeemable or subject to
repurchase, the issue price) of Preferred Stock issued by any Restricted
Subsidiary of Company to any Person other than Company or a Restricted
Subsidiary.
"Indemnitee" has the meaning assigned to that term in subsection 9.3.
"Interest Expense" of any Person means, for any period, the
aggregate amount of interest expense in respect of Indebtedness (excluding
(a) the Chevron Payment, (b) the AOC Payment, (c) the Gulf Payments and (d)
the amortization of debt issuance expense relating to the Loans and the New
Notes, but including without limitation or duplication (i) amortization of
debt issuance expense with respect to other Indebtedness, (ii) amortization
of original issue discount on any Indebtedness and (iii) the interest
portion of any deferred payment obligation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financings and the net cost associated with Interest Swap
Obligations) paid, accrued or scheduled to be paid or accrued by such
Person during such period, determined in accordance with GAAP.
"Interest Payment Date" means (i) with respect to any Base Rate
Loan, each February 15, May 15, August 15 and November 15 of each year, and
(ii) with respect to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan.
"Interest Period" means with respect to any Eurodollar Rate Loan,
the period from and including a scheduled Interest Payment Date through the
day next preceding the following scheduled Interest Payment Date.
"Interest Rate Determination Date" means, with respect to any
Interest Period, the second Business Day prior to the first day of such
Interest Period.
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"Interest Swap Obligations" means, when used with reference to any
Person, the obligations of such person under (i) interest rate swap
agreements, interest rate exchange agreements, interest rate cap
agreements, and interest rate collar agreements, (ii) currency swap
agreements and currency exchange agreements and (iii) other similar
agreements or arrangements, which are, in each such case, designed solely
to protect such Person against fluctuations in interest rates or currency
exchange rates.
"Investment" means, when used with reference to any Person, any
direct or indirect advances, loans or other extensions of credit or capital
contributions by such Person to (by means of transfers of property to
others or payments for property or services for the account or use of
others, or otherwise), or purchases or acquisitions by such Person of
Capital Stock, bonds, notes, debentures or other securities issued by, any
other Person or any Guaranty or assumption of any liability (contingent or
otherwise) by such Person of any Indebtedness or any principal (and
premium, if any), interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness, of any other Person and all other
items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"Investment Grade Rating" means (i) a Moody's Rating of Baa3 or
higher and an S&P Rating of at least BB+ or (ii) an S&P Rating of BBB- or
higher and a Moody's Rating of at least Ba1 or, in each case, if Moody's or
S&P shall change their rating system, equivalent ratings.
"Investment Grade Rating Event" means the first day on which the
Fixed Rate Senior Notes and the 1998 Senior Notes or the Loans are assigned
an Investment Grade Rating.
"Lender" and "Lenders" means the persons identified as "Lenders"
and listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 9.1.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind (except for taxes not
yet owing) in respect of such asset, whether or not filed, retention
agreement, any lease in the nature thereof, any option or other agreement
to sell and, with respect to which, any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.
"Lima Acquisition" has the meaning assigned to that term in
subsection 2.5A.
"Loan Documents" means this Agreement and the Notes.
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<PAGE>
"Loan Exposure" means, with respect to any Lender as of any date of
determination (i) prior to the funding of Loans by such Lender, that
Lender's Commitment and (ii) after the funding of Loans by such Lender, the
outstanding principal amount of the Loan of that Lender.
"Loans" means the Loans (including the Existing Loans and the
Restatement Loans) made by Lenders to Company pursuant to subsection 2.1A.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Material Adverse Effect" means a material adverse effect upon (i)
the business, operations, properties, assets, in each case taken as a
whole, or financial condition of Company and its Subsidiaries taken as a
whole or (ii) the ability of Company and its Subsidiaries taken as a whole
to perform, or of Agents or Lenders to enforce, the Obligations.
"Material Asset" means, with respect to Company or any Restricted
Subsidiary of Company, any asset, related group of assets, business or
division of Company or any Restricted Subsidiary of Company (including any
capital stock of any Restricted Subsidiary of Company) which (i) for the
most recent fiscal year of Company, accounted or would have accounted for
more than 3% of the consolidated revenues of Company or (ii) as at the end
of such fiscal year, represented or would have represented more than 3% of
the consolidated assets of Company or had a fair market value in excess of
$10,000,000 all as shown (x) with respect to any sale or disposition, on
the consolidated financial statements of Company for such fiscal year or
such shorter periods as such assets, business or division were owned by
Company or any Restricted Subsidiary of Company and (y) with respect to any
acquisition, on consolidated pro forma financial statements of Company for
the four full Fiscal Quarters for which financial information in respect
thereof is available immediately prior to such acquisition, giving effect
thereto on a pro forma basis as if such acquisition had occurred at the
beginning of such four full Fiscal Quarters.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Available Proceeds" means cash or readily marketable cash
equivalents received (including by way of sale or discounting of a note,
installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiree of
Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form) net of (i) all legal and accounting
expenses, commissions and other fees and expenses incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such issuance, and (ii) all payments made by
such Person or its Subsidiaries on any Indebtedness which must, in order to
obtain a necessary consent
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<PAGE>
to such issuance or by applicable law, be repaid out of the proceeds from
such issuance.
"Net Income" of any Person for any period means the net income
(loss) from continuing operations of such Person for such period,
determined in accordance with GAAP.
"New Notes" means (i) the Fixed Rate Senior Notes and the
Subordinated Notes and (ii) the 1998 Senior Notes, collectively.
"9-1/2% Senior Notes" means the senior notes due September 15, 2004
issued by Company pursuant to the 9-1/2% Senior Note Indenture.
"9-1/2% Senior Note Indenture" means the Indenture dated as of
September 15, 1992 between Company and Bank of New York, N.A., as trustee,
pursuant to which the 9-1/2% Senior Notes were issued, as such Indenture
may hereafter be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"1998 Offering Circular" means the offering circular dated August 4,
1998 and prepared by Company in connection with the issuance of the 1998
Senior Notes.
"1998 Purchase Agreement" means the Purchase Agreement dated August
4, 1998 between the 1998 Purchasers and Company relating to the issuance
and purchase of the 1998 Senior Notes.
"1998 Purchasers" means Goldman, Sachs & Co., J.P. Morgan
Securities, Inc., Salomon Brothers Inc. and Wasserstein Perella Securities,
Inc.
"1998 Senior Notes" means the senior notes due August 15, 2008
issued by Company pursuant to the 1998 Senior Notes Indenture.
"1998 Senior Notes Indenture" means the Indenture dated as of August
10, 1998 between the Company and Bankers Trust Company, as trustee,
pursuant to which the 1998 Senior Notes are issued, as such Indenture may
hereafter be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"1997 Closing Date" means November 21, 1997, the date on which the
initial Loans were made under the 1997 Credit Agreement.
"1997 Credit Agreement" has the meaning assigned to that term in the
Recitals to this Agreement.
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"Non-Recourse Debt" means Indebtedness as to which neither Company
nor any of its Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender.
"Notes" means (i) the promissory notes of Company issued pursuant to
subsection 2.1E on the Restatement Closing Date, in the case of Existing
Lenders amending and restating the "Notes" issued to Existing Lenders
under the 1997 Credit Agreement, and (ii) any promissory notes issued by
Company pursuant to the last sentence of subsection 9.1B(i) in connection
with assignments of the Commitments or Loans of any Lenders, in each case
substantially in the form of Exhibit II annexed hereto, as they may be
amended, supplemented or otherwise modified from time to time.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by Company to Paying Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Obligations" means all obligations of every nature of Company from
time to time owed to Agents, Lenders or any of them under the Loan
Documents, whether for principal, interest, fees (including prepayment fees
under subsec tions 2.4B(i)(b) and 2.4B(ii)(b)), expenses, indemnification
or otherwise.
"Offering Circular" means the offering circular dated November 17,
1997 and prepared by Company in connection with the issuance of the Fixed
Rate Senior Notes and the Subordinated Notes.
"Officers' Certificate" means a certificate signed by at least two
officers of Company, one signature being that of the Chairman of the Board,
a Vice Chairman of the Board, the President or a Vice President, and the
other signature being that of the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary, of Company, and delivered to the
Administrative Agent. One of the officers signing an Officers' Certificate
given pursuant to subsection 5.1B shall be the principal executive,
financial or accounting officer of Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for Company, and whose opinion is reasonably satisfactory to Paying
Agent.
"Paying Agent" has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Paying Agent appointed pursuant to subsection 8.6.
"Permitted Indebtedness" means Indebtedness incurred by Company or
its Restricted Subsidiaries (i) to renew, extend, refinance or refund
Indebtedness that
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is permitted to be incurred pursuant to the Consolidated Operating Cash
Flow Ratio test set forth in subsection 6.1 or clauses (ii) through (iv)
and (xi) below; provided, however, that such Indebtedness does not exceed
the principal amount of the Indebtedness so renewed, extended, refinanced
or refunded plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by Company or
such Restricted Subsidiary as necessary to accomplish such refinancing by
means of a tender offer or privately negotiated repurchase, plus the
expenses of Company or such Restricted Subsidiary incurred in connection
with such refinancing; and provided, however, that Indebtedness the
proceeds of which are used to refinance or refund such Indebtedness shall
only be permitted if (A) in the case of any refinancing or refunding of
Indebtedness that is pari passu with the Obligations, the refinancing or
refunding Indebtedness is made pari passu with the Obligations or
subordinated to the Obligations, (B) in the case of any refinancing or
refunding of Indebtedness that is subordinated to the Obligations, the
refinancing or refunding Indebtedness is made subordinated to the
Obligations at least to the same extent as such Indebtedness being
refinanced or refunded was subordinated to the Obligations and (C) in the
case of the refinancing or refunding of Indebtedness that is subordinated
to the Obligations, the refinancing or refunding Indebtedness by its terms,
or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, (x) does not provide for payments of principal of
such Indebtedness at the stated maturity thereof or by way of a sinking
fund applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by Company or such Restricted Subsidiary
(including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by
virtue of acceleration of such Indebtedness upon an event of default
thereunder), in each case prior to the final stated maturity of the
Indebtedness being refinanced or refunded and (y) does not permit
redemption or other retirement (including pursuant to an offer to purchase
made by Company or such Restricted Subsidiary) of such Indebtedness at the
option of the holder thereof prior to the final stated maturity of the
Indebtedness being refinanced or refunded (other than a redemption or other
retirement at the option of the holder of such Indebtedness (including
pursuant to an offer to purchase made by Company or such Restricted
Subsidiary), which is conditioned upon the change of control of Company or
such Restricted Subsidiary); (ii) arising from time to time under the
Existing Credit Agreement in an aggregate principal amount which, together
with any obligations under clause (xi) below, do not exceed the greater of
(a) $700,000,000 at any one time outstanding less the aggregate amount of
all proceeds of all Asset Dispositions that have been applied since the
Restatement Closing Date to permanently reduce the outstanding amount of
such Indebtedness and (b) the amount of the Borrowing Base as of such date
(calculated on a pro forma basis after giving effect to such borrowing and
the application of the proceeds therefrom); (iii) outstanding or incurred
on the Restatement Closing Date; (iv) evidenced by trade letters of credit
incurred in the ordinary course of business not to exceed $20,000,000 in
the aggregate at any time; (v) between or among
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Company and/or its Restricted Subsidiaries other than Restricted
Subsidiaries owned in any part by the Principal Shareholders; (vi) which is
Subordinated Indebtedness; (vii) arising out of Sale and Leaseback
Transactions or Capitalized Lease Obligations relating to computers and
other office equipment and elements, catalysts or other chemicals used in
connection with the refining of petroleum or petroleum by-products; (viii)
the proceeds of which are used to make the Chevron Payment, the AOC Payment
and the Gulf Payments; (ix) arising out of Interest Swap Obligations; (x)
in connection with capital projects qualifying under Section 142(a) (or any
successor provision) of the Internal Revenue Code of 1986, as amended, in
an amount not to exceed $75,000,000 in the aggregate at any time; (xi)
obligations of Company or any Restricted Subsidiary in connection with any
Qualified Securitization Transaction in an amount which, together with any
amount under clause (ii) above, does not exceed the greater of (a)
$700,000,000 at any one time outstanding less the aggregate amount of all
proceeds of all Asset Dispositions that have been applied since the
Restatement Closing Date to permanently reduce the outstanding amount of
such Indebtedness and (b) the amount of the Borrowing Base as of such date
(calculated on a pro forma basis after giving effect to such borrowing and
the application of the proceeds therefrom); (xii) any guarantee by Company
of Indebtedness of any of its Restricted Subsidiaries so long as the
incurrence of such Indebtedness is permitted to be incurred under
subsection 6.1; (xiii) Indebtedness or preferred stock of Persons that are
acquired by Company or any of its Restricted Subsidiaries or merged into
Company or a Restricted Subsidiary in accordance with subsection 6.6;
provided that such Indebtedness or preferred stock is not incurred in
contemplation of such acquisition or merger; and provided further that
after giving effect to such acquisition or merger either (A) Company would
be permitted to incur at least $1.00 of additional Indebtedness under the
Consolidated Operating Cash Flow Ratio test set forth in subsection 6.1 or
(B) Company's Consolidated Operating Cash Flow Ratio is equal to or greater
than such ratio immediately prior to such acquisition or merger; (xiv) in
an amount not greater than twice the aggregate amount of cash contributions
made to the capital of Company; (xv) in exchange for, or the proceeds of
which are used to refund or refinance the 10-7/8% Notes; provided, however,
that after giving effect to such exchange, refunding or refinancing, the
Consolidated Operating Cash Flow Ratio exceeds 1.75 to 1.0 and such
Indebtedness shall be subordinated to the Obligations to at least the same
extent as the Subordinated Notes are subordinated to the Obligations, and
(xvi) in addition to Indebtedness permitted by clauses (i) through (xv)
above, Indebtedness not to exceed on a consolidated basis for Company and
its Restricted Subsidiaries at any time $75,000,000.
"Permitted Liens" means (i) Liens in favor of Company; (ii) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with Company, provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
Company; (iii) Liens on property existing at the time of acquisition
thereof by Company, provided that such Liens were
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in existence prior to the contemplation of such acquisition; (iv) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (v) Liens existing on the Restatement Closing
Date; (vi) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (vii) Liens
imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary
course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have
been made therefor; (viii) zoning restrictions, easements, licenses,
covenants, reservations, restrictions on the use of real property or minor
irregularities of title incident thereto that do not, in the aggregate,
materially detract from the value of the property or the assets of Company
or impair the use of such property in the operation of Company's business;
(ix) judgment Liens to the extent that such judgments do not cause or
constitute a Potential Event of Default or an Event of Default; (x) Liens
to secure the payment of all or a part of the purchase price of property or
assets acquired or the construction costs of property or assets constructed
in the ordinary course of business on or after the Restatement Closing
Date, provided that (a) such property or assets are used in the Principal
Business of Company, (b) at the time of incurrence of any such Lien, the
aggregate principal amount of the obligations secured by such Lien shall
not exceed the lesser of the cost or fair market value of the assets or
property (or portions thereof) so acquired or constructed, (c) each such
Lien shall encumber only the assets or property (or portions thereof) so
acquired or constructed and shall attach to such assets or property within
180 days of the purchase or construction thereof and (d) any Indebtedness
secured by such Lien shall have been permitted to be incurred pursuant to
subsection 6.1; (xi) Liens incurred in the ordinary course of business of
Company with respect to obligations that do not exceed 5% of Consolidated
Net Tangible Assets at any one time outstanding; (xii) Liens incurred in
connection with Interest Swap Obligations; (xiii) Liens on any
Securitization Program Assets in connection with any Qualified
Securitization Transaction and; (xiv) Liens to secure obligations owing
from time to time under the Existing Credit Agreement and Guaranties
thereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, estate, limited liability
company, unincorporated organization or government or any agency or
political subdivision thereof.
"Port Arthur Refinery" means the refinery in Port Arthur, Texas, and
certain other assets acquired from Chevron U.S.A., Inc.
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"Potential Event of Default" means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.
"Preferred Stock" means any share of Capital Stock of any Person in
respect of which the holder thereof is entitled to receive payment before
any other payment is made with respect to any other Capital Stock of such
Person.
"Preliminary 1998 Offering Circular" means the preliminary offering
circular dated July 23, 1998 and prepared by Company in connection with the
issuance of the 1998 Senior Notes.
"Prime Rate" means the rate that Administrative Agent announces from
time to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. Administrative Agent
or any other Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.
"Principal Business" means, with respect to Company and its
Restricted Subsidiaries, (i) the business of the acquisition, processing,
marketing, refining, storage and/or transportation of hydrocarbons and/or
royalty or other interests in crude oil or associated products related
thereto, (ii) the acquisition, operation, improvement, leasing and other
use of convenience stores, retail service stations, truck stops and other
public accommodations in connection therewith, (iii) any business currently
engaged in by Company or its Restricted Subsidiaries on the Restatement
Closing Date, and (iv) any activity or business that is a reasonable
extension, development or expansion of, or reasonably related to, any of
the foregoing.
"Principal Property" means (i) any refinery and related pipelines,
terminalling and processing equipment or (ii) any other real property or
marketing assets or related group of such assets of Company having a fair
market value in excess of $20,000,000.
"Principal Shareholders" means (i) Blackstone, (ii) Occidental
Petroleum Corporation and (iii) Affiliates of the Persons described in the
foregoing clauses (i) and (ii), other than Company and its Subsidiaries.
"Pro Rata Share" means (i) with respect to a Restatement Lender's
Commitment, the Pro Rata Share set forth on Schedule 2.1B and (ii) with
respect to each Lender for all other purposes, the percentage obtained by
dividing (x) the Loan Exposure of that Lender by (y) the aggregate Loan
Exposure of all Lenders, as such percentage may be adjusted by assignments
permitted pursuant to subsection 9.1. The initial Pro Rata Share of each
Lender after giving effect to the making of the
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Restatement Loans is set forth opposite the name of the Lender in Schedule
2.1A annexed hereto.
"Purchase Agreement" means the Purchase Agreement dated November 14,
1997 between the Purchasers and Company relating to the issuance and
purchase of the Fixed Rate Senior Notes and the Subordinated Notes.
"Purchasers" means BT Alex Brown Incorporated, Bear, Stearns & Co.
Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Lehman
Brothers Inc., and Goldman, Sachs & Co.
"Qualified Securitization Transaction" means any transaction or
series of transactions that may be entered into by Company or any of its
Subsidiaries pursuant to which Company or any of its Subsidiaries may sell,
convey, grant a security interest in or otherwise transfer to a
Securitization Special Purpose Entity, and such Securitization Special
Purpose Entity may sell, convey, grant a security interest in, or otherwise
transfer to any other Person, any Securitization Program Assets (whether
now existing or arising in the future).
"Rating Agencies" means (i) S&P and Moody's or (ii) if S&P or
Moody's or both of them are not making ratings of the New Notes and the
Loans publicly available, a nationally recognized U.S. rating agency or
agencies, as the case may be, selected by Company, which will be
substituted for S&P or Moody's or both, as the case may be.
"Rating Category" means (i) with respect to S&P, any of the
following categories (any of which may include a "+" or "-"): AAA, AA,
A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); (ii)
with respect to Moody's, any of the following categories (any of which may
include a "1," "2" or "3"): Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D
(or equivalent successor categories), and (iii) the equivalent of any such
categories of S&P or Moody's used by another Rating Agency, if applicable.
"Rating Decline" means that at any time within 90 days (which period
shall be extended so long as the rating of the Loans or any of the Fixed
Rate Senior Notes or the 1998 Senior Notes, as the case may be, is under
publicly announced consideration for possible down grade by any Rating
Agency) after the date of public notice of a Change of Control, or of the
intention of Company or of any Person to effect a Change of Control, the
rating of (i) the Loans, if at such time the Loans are rated by the Rating
Agencies, or (ii) any of the Fixed Rate Senior Notes or the 1998 Senior
Notes, if at such time the Loans are not rated by the Rating Agencies, is
decreased by both Rating Agencies by one or more categories and the ratings
on the Loans or any of the Fixed Rate Senior Notes or the 1998 Senior
Notes, as the case may be, following such downgrade is below Investment
Grade.
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"Receivables" means all rights of Company or any Subsidiary of
Company to payments (whether constituting accounts, chattel paper,
instruments, general intangibles or otherwise, and including the right to
payment of any interest or finance charges), which rights are identified in
the accounting records of Company or such Subsidiary as accounts
receivable.
"Reference Banks" means each of Barclays Bank PLC, London Branch,
the Bank of Tokyo, Ltd., London Branch, Bankers Trust Company, London
Branch, and National Westminster Bank PLC, London Branch, and any such
replacement bank thereof as listed on the Reuters Screen LIBO Page and
their respective successors, and if any such banks are not at the
applicable time providing interest rates as contemplated within the
definition of the "Adjusted Eurodollar Rate," Reference Banks shall mean
the remaining bank or banks so providing such rates. In the event that
less than two of such banks are providing such rates, Company shall use
reasonable efforts to appoint additional Reference Banks so that there are
at least two such banks providing such rates; provided, however, that such
banks appointed by Company shall be London offices of leading banks engaged
in the Eurodollar Market.
"Register" has the meaning assigned to that term in subsection 2.1D.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Requisite Lenders" means Lenders having or holding more than 50% of
the aggregate Loan Exposure of all Lenders.
"Restatement Closing Date" means the date on or before August 10,
1998, on which the conditions to the effectiveness of this Agreement set
forth in Section 3 are satisfied.
"Restatement Lender" has the meaning assigned to that term in
subsection 2.1A.
"Restatement Loan" has the meaning assigned to that term in
subsection 2.1A.
"Restricted Debt Prepayment" means any purchase, redemption,
defeasance (including, but not limited to, in-substance or legal
defeasance) or other acquisition or retirement for value (collectively a
"prepayment") (other than in connection with a concurrent issuance of
pari passu or Subordinated Indebtedness) directly or indirectly, by Company
or a Restricted Subsidiary of Company, prior to the scheduled maturity on
or prior to any scheduled repayment of principal (and premium, if any) or
sinking fund payment, in respect of Indebtedness of Company (other than the
Obligations) which is subordinate in right of payment to the Obligations.
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"Restricted Investment" means any direct or indirect Investment by
Company or any Restricted Subsidiary of Company in (i) any Affiliate of
Company which is not a Restricted Subsidiary of Company and (ii) any
Unrestricted Subsidiary of Company, other than direct or indirect
investments in (a) Polymer Asphalt L.L.C., a Missouri limited liability
company, (b) Bagel Street Holdings, Inc. and (c) any pipeline company in
which Company or any of its Restricted Subsidiaries now owns or hereafter
acquires any interest; provided that the aggregate amount of Investments
made by Company or any of its Restricted Subsidiaries pursuant to clauses
(a), (b) and (c) above shall not exceed $25,000,000 in the aggregate at any
one time outstanding provided, that no Investment in a Securitization
Special Purpose Entity in connection with a Qualified Securitization
Transaction shall be a Restricted Investment.
"Restricted Payment" means (i) any Stock Payment, (ii) any
Restricted Investment, or (iii) any Restricted Debt Prepayment.
Notwithstanding the foregoing, Restricted Payments shall not include (a)
payments by Company to any Restricted Subsidiary of Company, (b) payments
by any Restricted Subsidiary of Company to Company or any other Restricted
Subsidiary of Company, (c) the Chevron Payment, (d) the AOC Payment and (e)
the Gulf Payments.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not (i) an Unrestricted Subsidiary or (ii) a direct
or indirect Subsidiary of an Unrestricted Subsidiary.
"Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuter Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service for the purpose of displaying
London Interbank Offered Rates of leading banks).
"S&P" means Standard & Poor's Rating Services and its successors.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such
Person which has been or is being sold or transferred by such Person more
than 365 days after the acquisition thereof or the completion of
construction or commencement of operation thereof to such lender or
investor or to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such property or asset. The
stated maturity of such arrangement shall be the date of the last payment
of rent or any other amount due under such arrangement prior to the first
date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
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"Securitization Program Assets" means (a) all Receivables and
inventory which are described as being transferred by Company or any
Subsidiary of Company pursuant to documents relating to any Qualified
Securitization Transaction, (b) all Securitization Related Assets, and (c)
all collections (including recoveries) and other proceeds of the assets
described in the foregoing clauses.
"Securitization Related Assets" means (i) any rights arising under
the documentation governing or relating to Receivables (including rights in
respect of Liens securing such Receivables and other credit support in
respect of such Receivables) or to inventory, (ii) any proceeds of such
Receivables or inventory and any lockboxes or accounts in which such
proceeds are deposited, (iii) spread accounts and other similar accounts
(and any amounts on deposit therein) established in connection with a
Qualified Securitization Transaction, (iv) any warranty, indemnity,
dilution and other intercompany claim arising out of the documents relating
to such Qualified Securitization Transaction and (v) other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable or inventory.
"Securitization Special Purpose Entity" means a Person (including,
without limitation, a Subsidiary of Company) created in connection with the
transactions contemplated by a Qualified Securitization Transaction, which
Person engages in no activities other than those incidental to such
Qualified Securitization Transaction.
"Shareholder/Affiliate Transaction" has the meaning assigned to that
term in subsection 6.8.
"Significant Subsidiary" of a Person means any Restricted Subsidiary
of the referent Person that would be a "significant subsidiary" as defined
in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the
Securities Act, as such Regulation is in effect on the Restatement Closing
Date.
"State Street" has the meaning assigned to that term in the
Introduction to this Agreement.
"Stock Payment" means, with respect to Company, any dividend, either
in cash or in property (except dividends payable in Capital Stock of
Company which is not convertible into Indebtedness), on, or the making by
Company of any other distribution in respect of, its Capital Stock, now or
hereafter outstanding, or the redemption, repurchase, retirement,
defeasance or any acquisition for value by Company, directly or indirectly,
of its Capital Stock or any warrants, rights or options to purchase or
acquire shares of any class of its Capital Stock, now or hereafter
outstanding (other than in exchange for Company's Capital Stock (other than
Disqualified Capital Stock) or options, warrants or other rights to
purchase Company's Capital Stock (other than Disqualified Capital Stock)).
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"Stock Purchase and Redemption Agreement" means that certain Stock
Purchase and Redemption Agreement dated as of December 30, 1992, by and
among AOC Limited Partnership, P. Anthony Novelly, Samuel R. Goldstein, G&N
Investments, Inc., The Horsham Corporation, Company and Holdings.
"Subordinated Indebtedness" means (i) the Indebtedness of Company
evidenced by the Subordinated Notes and (ii) any other Indebtedness of
Company which is subordinated in right of payment to the Obligations and
with respect to which no payments of principal (by way of sinking fund,
mandatory redemption, maturity or otherwise, including, without limitation,
at the option of the holder thereof (other than pursuant to an offer to
repurchase such Subordinated Indebtedness following a change of control,
which offer may not be completed until 45 days after Company prepays the
Loans, if required by Lenders, pursuant to subsection 2.4B(ii)(b)) are
required to be made by Company at any time prior to November 15, 2004.
"Subordinated Notes" means the senior subordinated notes due
November 15, 2007 issued by Company pursuant to the Subordinated Note
Indenture.
"Subordinated Note Indenture" means the Indenture dated as of
November 21, 1997 between Company and Marine Midland Bank, as trustee,
pursuant to which the Subordinated Notes are issued, as such Indenture may
hereafter be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof and thereof.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the total voting power of all classes of the outstanding voting stock of
which is owned, directly or indirectly, by such Person or by one or more
other Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, or one or more other Subsidiaries of such Person or such
Person and one or more other Subsidiaries thereof, directly or indirectly,
has at least a majority ownership and the power to direct the policies,
management and affairs thereof.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature and whatever
called, by whomsoever, on whomsoever and wherever imposed, levied,
collected, withheld or assessed; provided that "Tax on the overall net
income" of a Person shall be construed as a reference
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to a tax imposed by the jurisdiction in which that Person is organized or
in which that Person's principal office (and/or, in the case of a Lender,
its lending office) is located or in which that Person (and/or, in the case
of a Lender, its lending office) is deemed to be doing business on all or
part of the net income, profits or gains (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to
relate to a particular jurisdiction, or otherwise) of that Person (and/or,
in the case of a Lender, its lending office).
"10-1/2% Senior Notes" means the senior notes due December 1, 2001
issued by Company pursuant to the 10-1/2% Senior Note Indenture.
"Transaction Date" means the date on which the Indebtedness giving
rise to the need to calculate the Consolidated Operating Cash Flow Ratio
was incurred or the date on which, pursuant to the terms of this Agreement,
the transaction giving rise to the need to calculate the Consolidated
Operating Cash Flow Ratio occurred.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the Restatement Closing Date; provided, however, that in the event
the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the board of directors of Company as an Unrestricted Subsidiary pursuant to
a duly adopted board resolution; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; and (b)
is a Person with respect to which neither Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Capital Stock (including options, warrants or other rights to
acquire Capital Stock) or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels
of operating results. The board of directors of Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation (i) shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall
only be permitted if (1) such Indebtedness is permitted under subsection
6.1, and (2) no Potential Event of Default or Event of Default would be in
existence following such designation, and (ii) such designation shall
otherwise be permitted pursuant to that last paragraph of subsection 6.5.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock
or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or more Wholly
Owned Restricted Subsidiaries of such Person or by such Person and one or
more Wholly Owned Restricted Subsidiaries of such Person.
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"Wholly Owned U.S. Restricted Subsidiary" of any Person means a Wholly
Owned Restricted Subsidiary of such Person which is organized under the
laws of any state in the United States or of the District of Columbia.
1.2 Accounting Terms.
----------------
All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP.
1.3 Other Definitional Provisions and Rules of Construction.
-------------------------------------------------------
A. Any of the terms defined herein may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
B. References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.
C. The use in any of the Loan Documents of the word "include" or
"including", when following any general statement, term or matter, shall not
be construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as "without limitation" or
"but not limited to" or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
fall within the broadest possible scope of such general statement, term or
matter.
1.4 Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by Company to the Administrative Agent or
Paying Agent to take any action under any provision of this Agreement or the
other Loan Documents, Company shall furnish to the Administrative Agent or
Paying Agent, as applicable, such certificates and opinions as may be required
to be delivered under equivalent circumstances to the trustee under the 1998
Senior Notes Indenture pursuant to the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirements set forth in this Agreement.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Agreement shall include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
1.5 Form of Documents Delivered to Agents.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of Company may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which such
certificate or opinion is based are erroneous. Any such certificate or Opinion
of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of
Company stating that the information with respect to such factual matters is in
the possession of Company unless such counsel knows that the certificate or
opinion or representation with respect to such matters is erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
A. Commitments. Immediately prior to the Restatement Closing Date, under
the 1997 Credit Agreement the aggregate principal amount of the outstanding
Loans made by Existing Lenders thereunder was $125,000,000 (collectively, the
"Existing Loans"), the proceeds of which were to be used by Company for the
purposes identified in the 1997 Credit Agreement. The amount of each Existing
Lender's Pro Rata Share on the
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Restatement Closing Date of the Existing Loans is set forth opposite its name on
Schedule 2.1A annexed hereto. On the Restatement Closing Date, the aggregate
outstanding principal amount of the Existing Loans shall be automatically deemed
to be part of the Loans made by Lenders and outstanding hereunder for all
purposes of this Agreement, the Notes and the other Loan Documents. Subject to
the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Company herein set forth, each Lender listed
on Schedule 2.1B annexed hereto (each, a "Restatement Lender") hereby
severally agrees to lend to Company on the Restatement Closing Date an amount
not exceeding its Pro Rata Share of the aggregate amount of the Commitments to
be used for the purposes identified in subsection 2.5A (collectively, the
"Restatement Loans"). The amount of each Restatement Lender's Commitment is set
forth opposite its name on Schedule 2.1B annexed hereto and the aggregate amount
of the Commitments is $115,000,000. Each Restatement Lender's Commitment shall
expire immediately and without further action on August 12, 1998 if the
Restatement Loans are not made on or before that date. Company may make only one
borrowing under the Commitments. Amounts repaid or prepaid on the Loans may not
be reborrowed.
B. Borrowing Mechanics. Company shall deliver to Administrative Agent a
Notice of Borrowing no later than 10:00 A.M. (New York City time) at least one
Business Days in advance of the proposed Restatement Closing Date. The Notice of
Borrowing shall specify (i) the proposed Restatement Closing Date (which shall
be a Business Day) and (ii) the amount of Loans requested. Loans may be
continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the
manner provided in subsection 2.6. In lieu of delivering the above-described
Notice of Borrowing, Company may give Administrative Agent telephonic notice by
the required time of any proposed borrowing under this subsec tion 2.1B;
provided that such notice shall be promptly confirmed in writing by delivery of
a Notice of Borrowing to Paying Agent on or before the Restatement Closing Date.
Neither Administrative Agent nor any Lender shall incur any liability to
Company in acting upon any telephonic notice referred to above that
Administrative Agent reasonably believes to have been given by a duly authorized
officer or other person authorized to borrow on behalf of Company or for
otherwise acting in good faith under this subsec tion 2.1B, and upon funding of
Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Except as otherwise provided in subsection 2.6, a Notice of Borrowing for a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. Promptly after receipt by Administrative Agent
of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in
lieu thereof), Administrative Agent shall notify each Restatement Lender of the
proposed borrowing. Each Restatement Lender shall make the amount of its
Restatement Loan available to Administrative Agent, in same day funds in
Dollars, at the office of Administrative Agent,
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not later than 12:00 Noon (New York City time) on the Restatement Closing Date.
Upon satisfaction or waiver of the conditions precedent specified in Section 3,
Administrative Agent shall make the proceeds of such Restatement Loans available
to Company on the Restatement Closing Date by causing an amount of same day
funds in Dollars equal to the proceeds of all such Restatement Loans received by
Administrative Agent from Restatement Lenders to be credited to the account of
Company as specified in the Notice of Borrowing.
Unless Administrative Agent shall have been notified by any Restatement
Lender prior to the Restatement Closing Date that such Restatement Lender does
not intend to make available to Administrative Agent the amount of such
Restatement Lender's Restatement Loan requested on the Restatement Closing Date,
Administrative Agent may assume that such Restatement Lender has made such
amount available to Paying Agent on the Restatement Closing Date and Paying
Agent may, in its sole discretion, but shall not be obligated to, make available
to Company a corresponding amount on the Restatement Closing Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Restatement Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Restatement Lender together with
interest thereon, for each day from the Restatement Closing Date until the date
such amount is paid to Administrative Agent, at the customary rate set by
Administrative Agent for the correction of errors among banks for three Business
Days and thereafter at the Base Rate. Nothing in this subsection 2.1C shall be
deemed to relieve any Restatement Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that Company may have against
any Restatement Lender as a result of any default by such Restatement Lender
hereunder.
D. The Register.
(i) Paying Agent shall maintain, at its address referred to in
subsection 9.6, a register for the recordation of the names and addresses
of Lenders and the Commitment and Loan of each Lender from time to time
(the "Register"). The Register shall be available for inspection by Company
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(ii) Paying Agent shall record in the Register the Commitment and
the Loan from time to time of each Lender and each repayment or prepayment
in respect of the principal amount of the Loan of each Lender. Any such
recordation shall be conclusive and binding on Company and each Lender,
absent manifest error; provided that failure to make any such recordation,
or any error in such recordation, shall not affect any Lender's Commitment
or Company's Obligations in respect of any applicable Loan.
(iii) Each Lender shall record on its internal records (including the
Note held by such Lender) the amount of the Loan made by it and each
payment in respect thereof; provided that in the event of any inconsistency
between the Register and any Lender's records, the recordations in the
Register shall govern.
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(iv) Company, Administrative Agent, Paying Agent and Lenders shall
deem and treat the Persons listed as Lenders in the Register as the holders
and owners of the corresponding Commitments and Loans listed therein for
all purposes hereof, and no assignment or transfer of any such Commitment
or Loan shall be effective, in each case unless and until an Assignment
Agreement effecting the assignment or transfer thereof shall have been
accepted by Paying Agent and recorded in the Register and a copy thereof
delivered to Company as provided in subsection 9.1B(ii). Prior to such
recordation, all amounts owed with respect to the applicable Commitment or
Loan shall be owed to the Lender listed in the Register as the owner
thereof, and any request, authority or consent of any Person who, at the
time of making such request or giving such authority or consent, is listed
in the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding Commitment
or Loan.
(v) Company hereby designates Paying Agent to serve as Company's
agent solely for purposes of maintaining the Register as provided in this
subsection 2.1D, and Company hereby agrees that, to the extent Paying Agent
serves in such capacity, Paying Agent and its officers, directors,
employees, agents and affiliates shall constitute Indemnitees for all
purposes under subsection 9.3.
E. Notes. Company shall execute and deliver to each Lender (or to
Administra tive Agent for that Lender) on the Restatement Closing Date a Note
substantially in the form of Exhibit II annexed hereto to evidence that Lender's
Loan, in the principal amount of that Lender's Loan and with other appropriate
insertions, and in the case of Existing Lenders such Notes are issued in
substitution for and shall amend and restate the Notes issued under the 1997
Credit Agreement, it being understood and agreed that such Notes are not issued
in payment, satisfaction or cancellation of outstanding Indebtedness under the
Existing Credit Agreement.
2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through payment of such Loan (whether by acceleration or
otherwise) at the sum of the Adjusted Eurodollar Rate plus 2.75% per annum. The
basis for determining the interest rate with respect to any Loan may be changed
from time to time pursuant to subsection 2.6.
B. Interest Periods. The Interest Period applicable to each Eurodollar
Rate Loan shall be a three month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan shall
commence on the Funding Date in respect of such Loan, in the case of a Loan
initially made as a Eurodollar Rate Loan, or on (a) the day on which the
next preceding Interest Period applicable thereto expires or (b) only in
the circumstances provided in subsection 2.6D(ii) (where all Eurodollar
Rate Loans have theretofore
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been converted into Base Rate Loans), on the business Day specified in
subsec tion 2.6D(ii);
(ii) the initial Interest Period applicable to any Eurodollar Rate
Loan made on the Restatement Closing Date shall expire on the same date on
which the Interest Period applicable to the Existing Loans on the
Restatement Closing Date expires;
(iii) each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(iv) if an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day
of a calendar month;
(vi) no Interest Period with respect to any portion of the Loans
shall extend beyond November 15, 2004;
(vii) no Interest Period with respect to any portion of the Loans
shall extend beyond a date on which Company is required to make a scheduled
payment of principal of the Loans unless the sum of (a) the aggregate
principal amount of Loans that are Base Rate Loans plus (b) the aggregate
principal amount of Loans that are Eurodollar Rate Loans with Interest
Periods expiring on or before such date equals or exceeds the principal
amount required to be paid on the Loans on such date; and
(viii) except in the case of the initial Interest Period for the
Restatement Loans, there shall be no more than one Interest Period
outstanding at any time.
C. Interest Payments. Interest on each Loan shall be payable in arrears
on and to each Interest Payment Date applicable to that Loan, upon any
prepayment of that Loan (to the extent accrued on the amount being prepaid) and
at maturity (including final maturity).
D. Computation of Interest. Interest on the Loans shall be computed (i)
in the case of Base Rate Loans, on the basis of a 365-day year or 366-day year,
as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis
of a 360-day year, in each case for the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
the making of such Loan or the first day of an Interest Period applicable to
such Loan or, with respect to a Base Rate Loan being
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converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar
Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the
date of payment of such Loan or the expiration date of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted to
a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such
Eurodollar Rate Loan, as the case may be, shall be excluded; provided that if a
Loan is repaid on the same day on which it is made, one day's interest shall be
paid on that Loan.
E. Defaulted Interest. If Company defaults in a payment of interest on
the Loans, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on demand on the defaulted interest, to the
Lenders at the rate otherwise payable hereunder with respect to the applicable
Loans. Payment or acceptance of the increased rates of interest provided for in
this subsection 2.2E is not a permitted alternative to timely payment and shall
not constitute a waiver of any Event of Default or otherwise prejudice or limit
any rights or remedies of Agents or any Lender.
2.3 Fees.
Company agrees to pay to Paying Agent and Administrative Agent such fees in
the amounts and at the times separately agreed upon between Company and Paying
Agent and Administrative Agent.
2.4 Repayments and Prepayments; General Provisions Regarding Payments.
A. Scheduled Payments of Loans. Company shall make principal payments on
the Loans in installments on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
=========================================
Scheduled
Date Repayment of Loans
=========================================
<S> <C>
November 15, 2003 $ 31,250,000
-----------------------------------------
November 15, 2004 $208,750,000
-----------------------------------------
TOTAL: $240,000,000
=========================================
</TABLE>
; provided that notwithstanding anything in this Agreement to the contrary,
principal payments made by Company on the scheduled installments of
principal of the Loans due on November 15, 2003 shall be applied 100% to
the repayment of the Existing Loans; provided, further that the scheduled
installments of principal of the Loans set forth above shall be reduced in
connection with any voluntary or mandatory prepay ments of the Loans in
accordance with subsection 2.4B(iii); and provided, further that the Loans
and all other amounts owed hereunder with respect to the Loans shall be
paid in full no later than November 15, 2004, and the final installment
payable by Company in respect of the Loans on such date shall be in an
amount, if such amount
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is different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Loans. For
purposes of giving effect to the first proviso of this subsection 2.4A,
Paying Agent shall designate on its books and records the holders of the
Existing Loans from time to time.
B. Prepayments.
(i) Voluntary Prepayments.
(a) Company may, upon not less than one Business Day's prior
written or telephonic notice, in the case of Base Rate Loans, and
three Business Days' prior written or telephonic notice, in the case
of Eurodollar Rate Loans, in each case given to Paying Agent by 12:00
Noon (New York City time) on the date required and, if given by
telephone, promptly confirmed in writing to Paying Agent (which
original written or telephonic notice Paying Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time
and from time to time prepay any Loans on any Business Day in whole
or in part in an aggregate minimum amount of $1,000,000 and integral
multiples of $100,000 in excess of that amount. Notice of prepayment
having been given as aforesaid, the principal amount of the Loans
specified in such notice shall become due and payable on the
prepayment date specified therein. Any such voluntary prepayment
shall be applied as specified in subsection 2.4B(iii).
(b) Prepayment Fees. If any portion of the Loan is prepaid
pursuant to clause (a) of subsection 2.4B(i) on or prior to the second
anniversary of the 1997 Closing Date (other than pursuant to subsec
tion 2.9B(i)), Company shall pay to Paying Agent, for distribution to
Lenders in accordance with their Pro Rata Shares, a fee equal to (x)
2.50% of the principal amount of Loans so prepaid during the period
commencing on the 1997 Closing Date and ending on the day prior to the
first anniversary of the 1997 Closing Date and (y) 1.25% of the
principal amount of Loans so prepaid during the period commencing on
the first anniversary of the 1997 Closing Date and ending on the
second anniversary of the 1997 Closing Date.
(ii) Mandatory Prepayments. The Loans shall be prepaid in the
amounts and under the circumstances set forth below, all such prepayments
to be applied as set forth below or as more specifically provided in
subsection 2.4B(iii):
(a) Prepayments From Net Asset Sale Proceeds. Upon any Asset
Disposition Trigger Date, Company shall offer to prepay the Loans in
accordance with the procedures set forth in subsection 2.4B(iii)(d)
and, upon completion of such offer, shall prepay the Loans to the
extent required pursuant to such subsection.
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(b) Prepayments Upon Change of Control. No later than 30 days
following the date on which a Change of Control Triggering Event
occurs, Company shall offer to prepay the principal amount of the
Loans and all other amounts outstanding hereunder (including interest,
fees and expenses) pursuant to the provisions of subsection
2.4B(iii)(d) and, upon completion of such offer, shall prepay the
Loans and such other amounts to the extent required pursuant to such
subsection.
(c) Prepayment Fees. If any portion of the Loan is prepaid
pursuant to clause (b) of subsection 2.4B(ii), Company shall pay to
Paying Agent, for distribution to Lenders in accordance with their Pro
Rata Shares, a fee equal to 1.00% of the principal amount of Loans so
prepaid.
(iii) Application of Prepayments.
(a) Application of Voluntary Prepayments. Any voluntary prepay
ments of the Loans pursuant to subsection 2.4B(i) shall be applied to
reduce the scheduled installments of principal of the Loans in the
order specified in the applicable notice of prepayment (or if no such
order is specified, on a pro rata basis in accordance with the
respective outstanding principal amounts of each such installment).
(b) Application of Mandatory Prepayments. Any mandatory
prepayments of the Loans pursuant to subsection 2.4B(ii) shall be
applied to reduce the scheduled installments of principal of the Loans
in the order specified in the applicable notice of prepayment (or if
no such order is specified, on a pro rata basis in accordance with the
respective outstanding principal amounts of each such installment).
(c) Application of Prepayments to Base Rate Loans and Eurodollar
Rate Loans. Any prepayment of the Loans shall be applied first to
Base Rate Loans to the full extent thereof before application to
Eurodollar Rate Loans, in each case in a manner which minimizes the
amount of any payments required to be made by Company pursuant to
subsection 2.6C.
(d) Mandatory Offer to Prepay Loans. Within 30 days following a
Change of Control resulting in a Rating Decline, and on any Asset
Disposition Trigger Date, (1) Company shall send written notice to
Paying Agent and each Lender stating (A) that an offer is being made
to prepay the Loans pursuant to this subsection 2.4B(iii)(d) (an
"Optional Prepayment"), (B) the payment date in respect of such
Optional Prepayment (the "Optional Prepayment Date"), which Optional
Prepayment Date shall be no earlier than 30 days nor later than 70
days from the date such notice is sent, (C) in the case of a
prepayment pursuant to subsection 2.4B(ii)(a), (1) the aggregate
amount of Excess Proceeds available (as determined pursuant to subsec-
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tion 6.7) to prepay the Loans and, to the extent required pursuant to
the applicable indenture, to redeem the New Notes, the 9-1/2% Senior
Notes, and the Holdings 10-7/8% Notes and any other Indebtedness of
Holdings or Company entitled to receive such offer of redemption or
repayment (collectively, the "Offer Notes"), and (2) the aggregate
outstanding principal amount under each series of Offer Notes as of
the date of such notice, (D) in the case of a Change of Control, the
circumstances and material facts regarding such Change of Control, to
the extent known to Company (including information with respect to pro
forma and historical financial information after giving effect to such
Change of Control, and information regarding the Person or Persons
acquiring control), and (E) such other information required by this
Agreement and applicable laws and regulations and (F) that each Lender
has the option to accept all or a portion of such Optional Prepayment.
Each Lender may exercise such option by giving written notice to
Company and Paying Agent of its election to do so on or before the
third Business Day (the "Cutoff Date") prior to the Optional
Prepayment Date (it being understood that any Lender which does not
notify Company and Paying Agent of its election to exercise such
option on or before the Cutoff Date shall be deemed to have elected,
as of the Cutoff Date, not to accept such Optional Prepayment). In the
case of an Optional Prepayment under subsection 2.4B(ii)(a), (x) on
the Business Day next succeeding the related Cutoff Date, Company
shall notify the Paying Agent of the aggregate principal amount of
Offer Notes (plus accrued interest and premium, if any, through the
Optional Prepayment Date) tendered for purchase pursuant to the offer
procedures in respect of Excess Proceeds under each applicable
indenture and (y) on the Business Day next preceding the related
Optional Prepayment Date, Paying Agent shall notify Company and each
Lender that has exercised its option to receive a prepayment in
respect thereof (each, a "Receiving Lender"), of the amount of such
Optional Prepayment to be paid to such Receiving Lender, which amount
shall be equal to (A) a fraction the numerator of which is the
aggregate amount of the Loans (plus accrued interest through the
Optional Prepayment Date) tendered by such Receiving Lender for
prepayment and the denominator of which is the aggregate principal
amount of all Loans (plus accrued interest through the Optional
Prepayment Date) tendered for prepayment plus the aggregate principal
amount of all Offer Notes (plus accrued interest and premium, if any,
through the Optional Prepayment Date) tendered for redemption pursuant
to the offer procedures in respect of Excess Proceeds under each
applicable indenture multiplied by (B) the aggregate amount of Excess
Proceeds available for prepayment under subsection 6.7. On the
Optional Prepayment Date, Company shall pay to Paying Agent the amount
of the Optional Prepayment, which amount shall be applied to prepay
the Loans (plus accrued interest through the Optional Prepayment Date)
of the Receiving Lenders (which prepayment shall be applied to the
scheduled installments of principal of the Loans in accordance with
subsection 2.4B(iii)(b) and which prepayment shall
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<PAGE>
result in a corresponding adjustment to the Pro Rata Share of each
Lender pursuant to the operation of the definition thereof).
C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Paying Agent not later than 1:00 p.m. (New York City time) on the date due
at the Funding and Payment Office for the account of Lenders; funds
received by Paying Agent after that time on such due date shall be deemed
to have been paid by Company on the next succeeding Business Day. Company
hereby authorizes Paying Agent to (but Paying Agent shall have no
obligation to) charge its accounts with Paying Agent in order to cause
timely payment to be made to Paying Agent of all principal, interest, fees
and expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. All
payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments (and, in any event, any payment in respect
of any Loan on a date when interest is due and payable with respect to such
Loan) shall be applied to the payment of interest before application to
principal.
(iii) Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such
payments relate, in each case proportionately to Lenders' respective Pro
Rata Shares. Paying Agent shall promptly distribute to each Lender, at its
primary address set forth below its name on the appropriate signature page
hereof or at such other address as such Lender may request, its Pro Rata
Share of all such payments received by Paying Agent. Notwithstanding the
foregoing provisions of this subsection 2.4C(iii), if, pursuant to the
provisions of subsection 2.6B, any Affected Lender makes Base Rate Loans in
lieu of its Pro Rata Share of any Eurodollar Rate Loans, Paying Agent shall
give effect thereto in apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing
of the Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of the
Loan evidenced by that Note and
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<PAGE>
all principal payments previously made thereon and of the date to which
interest thereon has been paid; provided that the failure to make (or any
error in the making of) a notation of the Loan made under such Note shall
not limit or otherwise affect the obligations of Company hereunder or under
such Note with respect to such Loan or any payments of principal or
interest on such Note.
2.5 Use of Proceeds.
---------------
A. Loans. The proceeds of the Loans (other than the Restatement Loans),
together with the proceeds of the New Notes (other than the 1998 Senior Notes),
shall have been applied by Company (i) to redeem or repay the 10-1/2% Senior
Notes, (ii) to replenish Company's cash reserves or (iii) for other general
corporate purposes. The proceeds of the Restatement Loans shall be used by
Company, together with the proceeds of the 1998 Senior Notes, to fund a portion
of the purchase price of an oil refinery to be acquired by Company in Lima, Ohio
and related assets (the "Lima Acquisition") and to pay certain fees and expenses
related to the Lima Acquisition.
B. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by Company or any of its Subsidiaries in any manner
that might cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the
Exchange Act, in each case as in effect on the date or dates of such borrowing
and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Inability to Determine Applicable Interest Rate. In the event that
Paying Agent shall have determined (which determination shall be final and
conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans, that by reason of
circumstances affecting the London interbank market adequate and fair means do
not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, Paying Agent
shall on such date give notice (by telefacsimile or by telephone confirmed in
writing) to Company and each Lender of such determination, whereupon (i) no
Loans may be made as, or converted to, Eurodollar Rate Loans until such time as
Paying Agent notifies Company and Lenders that the circumstances giving rise to
such notice no longer exist and (ii) on the last day of the then current
Interest Period, all Eurodollar Rate Loans shall be automatically converted to
Base Rate Loans, until such time as the Paying Agent notifies Company and
Lenders that the circumstances giving rise to such notice by the Paying Agent no
longer exist, in which event, subsection 2.6E shall apply.
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B. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have reasonably determined (which
determination shall be made only after consultation with Company and Paying
Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans
(i) has become unlawful as a result of compliance by such Lender in good faith
with any law, treaty, governmental rule, regulation, guideline or order (or
would conflict with any such treaty, governmental rule, regulation, guideline or
order not having the force of law even though the failure to comply therewith
would not be unlawful) or (ii) has become impracticable, or would cause such
Lender material hardship, as a result of contingencies occurring after the date
of this Agreement which materially and adversely affect the London interbank
market or the position of such Lender in that market, then, and in any such
event, such Lender shall be an "Affected Lender" and it shall on that day give
notice (by telefacsimile or by telephone confirmed in writing) to Company and
Paying Agent of such determination (which notice Paying Agent shall promptly
transmit to each other Lender). Thereafter (a) the obligation of the Affected
Lender to convert Loans to Eurodollar Rate Loans pursuant to subsection 2.6D
shall be suspended until such notice shall be withdrawn by the Affected Lender,
(b) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate
Loans (the "Affected Loans") shall be terminated at the earlier to occur of
the expiration of the Interest Period then in effect with respect to the
Affected Loans or when required by law, and (c) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination until
such time as the circumstances described in this subsection 2.6B shall no longer
be applicable in which event, subsection 2.6D shall apply.
C. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including any interest paid by that
Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate
Loans and any loss, expense or liability sustained by that Lender in connection
with the liquidation or re-employment of such funds) which that Lender may
sustain: (i) if for any reason (other than a default by that Lender or such
Lender's becoming an Affected Lender) a borrowing of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on the date specified therefor pursuant to
this Agreement, (ii) if any prepayment (including any prepayment pursuant to
subsection 2.4B(i)(a) or other principal payment or any conversion of any of its
Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar
Rate Loans is not made on any date specified in a notice of prepayment given by
Company, or (iv) as a consequence of any other default by Company in the
repayment of its Eurodollar Rate Loans when required by the terms of this
Agreement.
D. Conversion of Base Rate Loans. In the event that any Base Rate Loan
is outstanding at any time when the relevant circumstances described in
subsections 2.6A or 2.6B,as the case may be, cease to be applicable, the
respective Lender or Lenders or Paying Agent (as applicable) shall give prompt
notice thereof to Company and Paying Agent (as
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applicable) and, subject to the provisions of subsection 2.6G, (i) if any
Eurodollar Rate Loans are outstanding at that time from Lenders who were not
affected by such circumstances or as a result of the application of the
following clause (ii)), then on the last day of the Interest Period then
applicable thereto, the Base Rate Loans of the respective affected Lender or
Lenders to which the circumstances described above have ceased to be applicable
shall be converted into (and thereafter shall form a part of) the Eurodollar
Rate Loans (until such time, if any, as subsection 2.6A or 2.6B shall thereafter
become applicable) and (ii) if no Eurodollar Rate Loans remain outstanding at
such time, then on the third Business Day thereafter the Base Rate Loans of the
respective Lender or Lenders to which the circumstances described above shall
cease to be applicable shall be converted into Eurodollar Rate Loans (with an
Interest Period of three months beginning on said third Business Day).
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to the definition of Adjusted
Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan
and having a maturity comparable to the relevant Interest Period and through the
transfer of such Eurodollar deposit from an offshore office of that Lender to a
domestic office of that Lender in the United States of America; provided,
however, that each Lender may fund each of its Eurodollar Rate Loans in any
manner it sees fit and the foregoing assumptions shall be utilized only for the
purposes of calculating amounts payable under this subsection 2.6 and under
subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of an Event of Default and upon the written direction of
Requisite Lenders delivered to Paying Agent and Company, all Eurodollar Rate
Loans shall be converted to Base Rate Loans after the expiration of any Interest
Period then in effect for each respective Loan.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B (which shall be controlling with respect to the matters
covered thereby), in the event that any Lender shall reasonably determine that
any law, treaty or governmental rule, regulation or order, or any change therein
or in the interpretation, administration or application thereof (including the
introduction of any new law, treaty or governmental rule, regulation or order),
or any determination of a court or governmental authority, in each case that
becomes effective after the date hereof, or compliance by such Lender with any
guideline, request or directive issued or made after the date hereof by any
central bank or
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other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve (including any
marginal, emergency, supplemental, special or other reserve), special
deposit, compulsory loan, FDIC insurance or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender (other than any such
reserve or other requirements with respect to Eurodollar Rate Loans that
are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a Tax
matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining its Loan hereunder or to reduce any
amount received or receivable by such Lender (or its applicable lending office)
with respect thereto; then, in any such case, Company shall promptly pay to such
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its
sole discretion shall determine) as may be necessary to compensate such Lender
for any such increased cost or reduction in amounts received or receivable
hereunder. Such Lender shall deliver to Company (with a copy to Paying Agent) a
written statement, setting forth in reasonable detail the basis for calculating
the additional amounts owed to such Lender under this subsection 2.7A, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company under
this Agreement and the other Loan Documents shall (except to the extent
required by law) be paid free and clear of, and without any deduction or
withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America or any political subdivision in or
of the United States of America or any other jurisdiction from or to which
a payment is made by or on behalf of Company or by any federation or
organization of which the United States of America or any such jurisdiction
is a member at the time of payment.
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(ii) Grossing-up of Payments. If Company or any other Person is
required by law to make any deduction or withholding on account of any such
Tax from any sum paid or payable by Company to Paying Agent or any Lender
under any of the Loan Documents:
(a) Company shall notify Paying Agent of any such requirement or
any change in any such requirement as soon as Company becomes aware of
it;
(b) Company shall pay any such Tax before the date on which
penalties attach thereto, such payment to be made (if the liability to
pay is imposed on Company) for its own account or (if that liability
is imposed on Paying Agent or such Lender, as the case may be) on
behalf of and in the name of Paying Agent or such Lender;
(c) the sum payable by Company in respect of which the relevant
deduction, withholding or payment is required shall be increased to
the extent necessary to ensure that, after the making of that
deduction, withholding or payment, Paying Agent or such Lender, as the
case may be, receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment been
required or made; and
(d) within 30 days after paying any sum from which it is required
by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b)
above to pay, Company shall deliver to Paying Agent evidence
satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the relevant
taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after
the date hereof (in the case of each Lender listed on the signature pages
hereof) or after the date of the Assignment Agreement pursuant to which
such Lender became a Lender (in the case of each other Lender) in any such
requirement for a deduction, withholding or payment as is mentioned therein
shall result in an increase in the rate of such deduction, withholding or
payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to
such Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
-----------------------------------------------
(a) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Paying Agent for
transmission to Company, on or prior to the Restatement
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Closing Date (in the case of each Lender listed on the signature pages
hereof) or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the
determination of Company or Paying Agent (each in the reasonable
exercise of its discretion), (1) two original copies of Internal
Revenue Service Form 1001 or 4224 (or any successor forms), properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required under the Internal
Revenue Code or the regulations issued thereunder to establish that
such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such Lender
of principal, interest, fees or other amounts payable under any of the
Loan Documents or (2) if such Lender is not a "bank" or other Person
described in Section 881(c)(3) of the Internal Revenue Code and cannot
deliver either Internal Revenue Service Form 1001 or 4224 pursuant to
clause (1) above, a Certificate re Non-Bank Status together with two
original copies of Internal Revenue Service Form W-8 (or any successor
form), properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required under
the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to any payments to
such Lender of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees,
from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or
change in circumstances renders such forms, certificates or other
evidence obsolete or inaccurate in any material respect, that such
Lender shall promptly (1) deliver to Paying Agent for transmission to
Company two new original copies of Internal Revenue Service Form 1001
or 4224, or a Certificate re Non-Bank Status and two original copies
of Internal Revenue Service Form W-8, as the case may be, properly
completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or
establish that such Lender is not subject to deduction or withholding
of United States federal income tax with respect to payments to such
Lender under the Loan Documents or (2) notify Paying Agent and Company
of its inability to deliver any such forms, certificates or other
evidence.
(c) Company shall not be required to pay any additional amount to
any Non-US Lender under clause (c) of subsection 2.7B(ii) if such
Lender shall have failed to satisfy the requirements of clause (a) or
(b)(1) of this subsection 2.7B(iii); provided that if such Lender
shall have satisfied the requirements of subsection 2.7B(iii)(a) on
the Restatement Closing Date (in
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the case of each Lender listed on the signature pages hereof) or on
the date of the Assignment Agreement pursuant to which it became a
Lender (in the case of each other Lender), nothing in this subsection
2.7B(iii)(c) shall relieve Company of its obligation to pay any
additional amounts pursuant to clause (c) of subsection 2.7B(ii) in
the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is
no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender
is not subject to withholding as described in subsection 2.7B(iii)(a).
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loan or Commitment or other obligations hereunder to a level below
that which such Lender or such controlling corporation could have achieved but
for such adoption, effectiveness, phase-in, applicability, change or compliance
(taking into consideration the policies of such Lender or such controlling
corporation with regard to capital adequacy), then from time to time, within
five Business Days after receipt by Company from such Lender of the statement
referred to in the next sentence, Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such controlling
corporation on an after-tax basis for such reduction. Such Lender shall deliver
to Company (with a copy to Paying Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional amounts, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
2.8 Obligation of Lenders to Mitigate.
---------------------------------
Each Lender agrees that, as promptly as practicable after the officer of
such Lender responsible for administering the Loan of such Lender becomes aware
of the occurrence of an event or the existence of a condition that would cause
such Lender to become an Affected Lender or that would entitle such Lender to
receive payments under subsection 2.7, it will, to the extent not inconsistent
with the internal policies of such Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, fund or maintain the
Commitment of such Lender or the Loan of such Lender through another lending
office of such Lender, or (ii) take such other measures as such Lender may deem
reasonable, if as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise
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be required to be paid to such Lender pursuant to subsection 2.7 would be
materially reduced and if, as determined by such Lender in its sole discretion,
the making, funding or maintaining of such Commitment or Loan through such other
lending office or in accordance with such other measures, as the case may be,
would not otherwise materially adversely affect such Commitment or Loan or the
interests of such Lender.
2.9 Removal or Replacement of a Lender.
----------------------------------
A. Anything contained in this Agreement to the contrary notwithstanding,
in the event that:
(i) (a) any Lender (an "Increased-Cost Lender") shall give notice to
Company that such Lender is an Affected Lender or that such Lender is
entitled to receive payments under subsection 2.7, (b) the circumstances
which have caused such Lender to be an Affected Lender or which entitle
such Lender to receive such payments shall remain in effect, and (c) such
Lender shall fail to withdraw such notice within five Business Days after
Company's request for such withdrawal; or
(ii) (a) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of
this Agreement as contemplated by clauses (i) through (iv) of the first
proviso to subsection 9.5A, the consent of Requisite Lenders shall have
been obtained but the consent of one or more of such other Lenders (each a
"Non-Consenting Lender") whose consent is required shall not have been
obtained, and (b) the failure to obtain Non-Consenting Lenders' consents
does not result solely from the exercise of Non-Consenting Lenders' rights
(and the withholding of any required consents by Non-Consenting Lenders)
pursuant to the second proviso to subsection 9.5A;
then, and in each such case, Company shall have the right, at its option, to
remove or replace the applicable Increased-Cost Lender or Non-Consenting Lender
(the "Terminated Lender") to the extent permitted by subsection 2.9B.
B. Company may, by giving written notice to Paying Agent and any
Terminated Lender of its election to do so:
(i) elect to prepay on the date of delivery of such notice by the
Terminated Lender any outstanding Loans made by such Terminated Lender,
together with accrued and unpaid interest thereon and any other amounts
payable to such Terminated Lender hereunder pursuant to subsection 2.6 or
subsection 2.7 or otherwise; provided that Company shall not be required
to pay any prepayment fee pursuant to subsection 2.4B(i)(b) in connection
with any such prepayment; or
(ii) elect to cause such Terminated Lender (and such Terminated Lender
hereby irrevocably agrees) to assign its outstanding Loans in full to one
or more Eligible Assignees (each a "Replacement Lender") in accordance
with the provisions
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of subsection 9.1B; provided that (a) on the date of such assignment,
Company shall pay any amounts payable to such Terminated Lender pursuant to
subsection 2.6 or subsection 2.7 or otherwise as if it were a prepayment
and (b) in the event such Terminated Lender is a Non-Consenting Lender,
each Replacement Lender shall consent, at the time of such assignment, to
each matter in respect of which such Terminated Lender was a Non-Consenting
Lender.
C. Upon the prepayment of all amounts owing to any Terminated Lender
pursuant to clause (i) of subsection 2.9B, such Terminated Lender shall no
longer constitute a "Lender" for purposes of this Agreement; provided that any
rights of such Terminated Lender to indemnification under this Agreement
(including under subsections 2.6C, 2.7, 9.2 and 9.3) shall survive as to such
Terminated Lender.
SECTION 3.
CONDITIONS TO EFFECTIVENESS
The effectiveness of this Agreement and the obligations of the Restatement
Lenders to make the Restatement Loans are subject to the prior or concurrent
satisfaction of the following conditions:
3.1 Company Documents.
-----------------
On or before the Restatement Closing Date, Company shall deliver or cause
to be delivered to Lenders (or to Administrative Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Restatement
Closing Date:
(i) Certified copies of its Certificate of Incorporation, together
with a good standing certificate from the Secretary of State of the State
of Delaware and, to the extent generally available, a certificate or other
evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of such state, each
dated a recent date prior to the Restatement Closing Date;
(ii) Copies of its Bylaws, certified as of the Restatement Closing
Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and authorizing
the execution, delivery and performance of this Agreement and the other
Loan Documents, certified as of the Restatement Closing Date by its
corporate secretary or an assistant secretary as being in full force and
effect without modification or amendment;
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(iv) Signature and incumbency certificates of its officers executing
this Agreement and the other Loan Documents; and
(v) Executed originals of this Agreement, the Notes (duly executed in
accordance with subsection 2.1E, drawn to the order of each Lender and with
appropriate insertions) and the other Loan Documents.
3.2 Issuance of 1998 Senior Notes.
-----------------------------
On or prior to the Restatement Closing Date, Company shall have issued and
sold the 1998 Senior Notes in an aggregate face amount of not less than
$110,000,000. The 1998 Senior Notes shall be unsecured and shall have terms,
including without limitation, maturity, interest rates and covenants
substantially as set forth in the 1998 Senior Notes Indenture with such changes
thereto, if any, that have been approved by Arranger and Administrative Agent.
Company shall deliver to Administrative Agent true and complete copies of all
documentation relating to the 1998 Senior Notes, all of which shall be in form
and substance satisfactory to Arranger and Administrative Agent.
3.3 Indentures.
----------
On or before the Restatement Closing Date, (i) Administrative Agent and
Arranger shall have received executed or conformed copies of the 1998 Senior
Notes Indenture and any amendments thereto on or before the Restatement Closing
Date, the terms and conditions of which shall be in all respects substantially
as described in the 1998 Offering Circular, (ii) such indenture shall be in full
force and effect and no term or condition thereof shall have been amended,
modified or waived after the execution thereof, except as provided in a written
amendment thereto delivered to and approved by Administrative Agent, (iii)
neither Company nor any of its Subsidiaries shall have failed in any material
respect to perform any material obligation or covenant required by such
indenture to be performed with or complied with by it on or before the
Restatement Closing Date and (iv) Administrative Agent shall have received an
Officers' Certificate from Company in form and substance satisfactory to
Administrative Agent to the effects set forth in clauses (i), (ii) and (iii)
above.
3.4 Legal Opinions.
--------------
A. Opinions of Company's Counsel. Lenders shall have received originally
executed copies of one or more favorable written opinions of Simpson Thacher &
Bartlett, special counsel for Company, and John Bernbom, General Counsel of the
Company, each in form and substance reasonably satisfactory to Administrative
Agent and its counsel dated the Restatement Closing Date.
B. Opinions of Arranger's Counsel. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP,
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counsel to Administrative Agent, dated as of the Restatement Closing Date,
substantially in the form of Exhibit IV annexed hereto and as to such other
matters as Arranger acting on behalf of Lenders may reasonably request.
3.5 Fees.
Company shall have paid to Administrative Agent, for distribution (as
appropriate) to Administrative Agent and Paying Agent the fees payable on the
Restatement Closing Date referred to in subsection 2.3.
3.6 Notice of Borrowing.
Paying Agent shall have received before the Restatement Closing Date, in
accordance with the provisions of subsection 2.1B, an originally executed Notice
of Borrowing signed by the chief executive officer, the chief financial officer
or the treasurer of Company.
3.7 Officers' Certificate Regarding Certain Conditions.
The following conditions shall be satisfied and Company shall have
delivered to Administrative Agent an Officers' Certificate, in form and
substance satisfactory to Administrative Agent, to that effect:
A. Representations and Warranties. The representations and warranties of
Company contained herein and in the other Loan Documents shall be true and
correct in all material respects on and as of the Restatement Closing Date to
the same extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date.
B. No Event of Default. No event shall have occurred and be continuing
as of the Restatement Closing Date, or would result from the consummation of the
borrowing of the Loans thereon, that would constitute an Event of Default or a
Potential Event of Default.
C. Performance of Agreements. Company shall have performed in all
material respects all agreements and satisfied all conditions which this
Agreement provides shall be performed or satisfied by it on or before the
Restatement Closing Date.
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SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Loans hereunder, Company represents and warrants to each Lender, on the date of
this Agreement and on the Restatement Closing Date, that the following
statements are true and correct:
4.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Company and each of its Subsidiaries has
been duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its organization, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the 1998 Offering Circular, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, except where the
failure to be so qualified in any such jurisdiction would not reasonably be
expected to have a Material Adverse Effect.
B. Capitalization. Company has an authorized capitalization as set forth
in the 1998 Offering Circular, and all of the issued shares of Capital Stock of
Company have been duly and validly authorized and issued and are fully paid and
non-assessable and are owned beneficially and of record by Holdings; and all of
the issued shares of Capital Stock of each Subsidiary of Company have been duly
and validly authorized and issued, are fully paid and non-assessable and are
owned directly or indirectly by Company, free and clear of all liens,
encumbrances, equities or claims.
4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary corporate
action on the part of Company. Company has full power and authority to execute
and deliver, perform its obligations under, and consummate the transactions
contemplated by, this Agreement, the 1998 Senior Notes Indenture, and the 1998
Senior Notes, including, without limitation, the corporate power and authority
to issue, sell and deliver the Notes and the 1998 Senior Notes.
B. No Conflicts. The execution, delivery and performance of the Loan
Documents, the issuance of the Notes, the issue and sale of the 1998 Senior
Notes and the compliance by Company with all of the provisions of the Loan
Documents, the 1998 Senior Notes, the 1998 Senior Notes Indenture and the 1998
Purchase Agreement and the consummation of the transactions herein and therein
contemplated (i) have been duly authorized by all necessary corporate action
(including any requisite shareholder approval) and (ii) will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
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sale/leaseback agreement, loan agreement or other similar financing agreement or
instrument or other agreement or instrument to which Company or any of its
Subsidiaries is a party or by which Company or any of its Subsidiaries is bound
or to which any of the property or assets of Company or any of its Subsidiaries
is subject (other than conflicts, breaches, violations or defaults which in the
aggregate would not reasonably be expected to have a Material Adverse Effect),
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of Company or any of its Subsidiaries or
any statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over Company or any of its Subsidiaries or any of
their properties; and no consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or body is
required for the execution, delivery and performance of the Loan Documents, the
issuance of the Notes, the issue and sale of the 1998 Senior Notes and the
compliance by Company with all of the provisions of the Loan Documents, the 1998
Senior Notes, the 1998 Senior Notes Indenture and the 1998 Purchase Agreement
and the consummation of the transactions herein and therein contemplated except
(1) such as have been obtained under the Trust Indenture Act, (2) such consents,
approvals, authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of the 1998 Senior Notes by the 1998 Purchasers, (3) such
approvals, registrations and qualifications as may be required under the
Securities Act, the Trust Indenture Act, and state securities or Blue Sky laws
connection with the Exchange Offers contemplated by the 1998 Offering Circular
or in connection with the Exchange and Registration Rights Agreement (as defined
in the 1998 Purchase Agreement), and (4) such consents, approvals,
authorizations, registrations or qualifications as have been obtained or made.
C. Binding Obligation. Each of the Loan Documents has been duly executed
and delivered by Company and is the legally valid and binding obligation of
Company, enforce able against Company in accordance with its respective terms,
subject to the effect of bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and to
general principles of equity (whether considered in a proceeding in equity or at
law);
4.3 Valid Issuance of 1998 Senior Notes.
1998 Senior Notes. The 1998 Senior Notes have been duly authorized and,
when issued and delivered pursuant to the 1998 Purchase Agreement and duly
authenticated by the trustee under the 1998 Senior Notes Indenture, under which
they are to be issued, will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations of Company
entitled to the benefits provided by the 1998 Senior Notes Indenture; the 1998
Senior Notes Indenture has been duly authorized and will be in a form which
would meet the requirements for qualification under the Trust Indenture Act and,
when executed and delivered by Company and the trustee thereunder (assuming the
due authorization, execution and delivery by such trustee), the 1998 Senior
Notes Indenture will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization and other laws of
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general applicability relating to or affecting creditors' rights and to general
principles of equity (whether considered in a proceeding in equity or at law);
and the 1998 Senior Notes and the 1998 Senior Notes Indenture will conform to
the descriptions thereof in the 1998 Offering Circular.
4.4 No Material Adverse Change.
Company and its Subsidiaries taken as a whole have not sustained since the
date of the latest audited financial statements included in the 1998 Offering
Circular any material loss or interference with its business from fire,
explosion, flood or other calamity, covered by insurance, or from any labor
dispute or court or governmental action, order or decree, which in any case
would reasonably be expected to have a Material Adverse Effect, otherwise than
as set forth or contemplated in the 1998 Offering Circular; and, since the
respective dates as of which information is given in the 1998 Offering Circular,
there has not been any change in the Capital Stock or any increase in the long-
term debt of Company and its Subsidiaries on a consolidated basis, or any
adverse change in or affecting the financial position, stockholders' equity or
results of operations of Company and its Subsidiaries on a consolidated basis
which in any case could reasonably be expected to have a Material Adverse
Effect, otherwise than as set forth or contemplated in the 1998 Offering
Circular.
4.5 Title to Properties; Liens.
Company and each of its Subsidiaries has good and valid title in fee simple
to all real property and good and valid title to all personal property owned by
it, in each case free and clear of all liens, encumbrances and defects except
such as are described in the 1998 Offering Circular or such as would not
reasonably be expected to have a Material Adverse Effect; and any real property
and buildings held under lease by Company or any Subsidiary are held under
valid, subsisting and enforceable leases with such exceptions as would not
reasonably be expected to have a Material Adverse Effect.
4.6 Litigation.
Other than as set forth or contemplated in the 1998 Offering Circular,
there are no legal or governmental proceedings pending to which Company or any
of its Subsidiaries is a party or of which any property of Company or any of its
Subsidiaries is the subject which would individually or in the aggregate
reasonably be expected to have a Material Adverse Effect; and, to the best
knowledge of Company's responsible officers or as otherwise disclosed in the
1998 Offering Circular, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
4.7 Insurance of Properties.
Company and its Subsidiaries maintain (and there is outstanding and duly in
force on the date hereof, and will be outstanding and duly in force at the
Restatement Closing Date) insurance covering their properties. operations,
personnel and business which insures
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against such losses and risks as are adequate in Company's business judgment to
protect Company and its Subsidiaries and their businesses.
4.8 Performance of Agreements.
None of Company or any of its Subsidiaries is in violation of its
Certificate of Incorporation or By-laws, or in default in the performance or
observance of any obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other instrument to which it
is a party or by which it or any of its properties is bound, other than defaults
that, singly or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
4.9 Securities Activities.
A. Company is subject to Section 13 or 15(d) of the Exchange Act.
B. None of the transactions contemplated by this Agreement, the 1998
Purchase Agreement, or the 1998 Senior Notes Indenture (including, without
limitation, the use of the proceeds from the sale of the Notes and the 1998
Senior Notes) will violate or result in a violation of Section 7 of the Exchange
Act, or any regulation promulgated thereunder, including, without limitation,
Regulations T, U, and X of the Board of Governors of the Federal Reserve System.
C. Prior to the date hereof, neither Company nor any of its Affiliates
has taken any action which is designed to or which has constituted or which
might have been expected to cause or result in stabilization or manipulation of
the price of any security of Company in connection with the offerings of the
1998 Senior Notes.
D. Within the preceding six months, neither Company nor any other Person
acting on behalf of Company has offered or sold to any Person any 1998 Senior
Notes, or any securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the 1998 Senior Notes, other than 1998
Senior Notes to be resold by the 1998 Purchasers under the 1998 Purchase
Agreement.
E. (i) Company has not issued any securities of the same class (within
the meaning of Rule 144A(d)(3) under the Securities Act) as any of the 1998
Senior Notes which are listed on a national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system; (ii) Company is not an "investment company" within the
meaning of, or is registered or otherwise required to be registered under, the
United States Investment Company Act of 1940, as amended; (iii) none of Company
or any of its Subsidiaries or Affiliates or any Person acting on their behalf
has sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of any security (as defined in the Securities Act) which is or will be
integrated with the sale of any of the 1998 Senior Notes in a manner at would
require the registration, under the Securities Act of any of the 1998 Senior
Notes and none of Company or any of
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its Subsidiaries or Affiliate or any Person acting on their behalf (other than
the 1998 Purchasers, as to whom Company makes no representation, warranty or
agreement) has offered or sold or will offer or sell any 1998 Senior Notes by
means of any general solicitation or general advertising within the meaning of
Rule 502(c) under the Securities Act; and (iv) none of Company or any of its
Subsidiaries or affiliates or any Person acting on its or their behalf (other
than the 1998 Purchasers, as to whom Company makes no representation, warranty
or agreement), has engaged or will engage in any directed selling efforts within
the meaning of Regulation S with respect to the 1998 Senior Notes, and Company
and its Subsidiaries and affiliates and all Persons acting on its or their
behalf (other than the 1998 Purchasers, as to whom Company makes no
representation, warranty or agreement) have complied with and will comply with
the "offering restriction" within the meaning of Rule 902.
F. There is no "substantial U.S. market interest" as defined in Rule
902(n) of Regulation S for the 1998 Senior Notes or any security of the same
class as the 1998 Senior Notes.
4.10 Accountants.
PricewaterhouseCoopers L.L.P., who certified the consolidated financial
statements of Company for Fiscal Year 1996, and Deloitte & Touche L.L.P., who
certified the consolidated financial statements of Company for Fiscal Year 1997
and are currently serving as Company's independent public accountants, are each
independent public accountants within the meaning of Rule 101 of the AICPA's
Code of Professional Conduct, and its interpretations and rulings.
4.11 Environmental Protection.
Except as set forth in the 1998 Offering Circular, Company and its
Subsidiaries are in compliance with all applicable existing federal, state and
local laws and regulations relating to protection of human health or the
environment or imposing liability or standards of conduct concerning any
Hazardous Material, except for such instances of noncompliance which, either
singly or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect.
4.12 Employee Matters.
Except as described in the 1998 Offering Circular, no labor dispute with
the employees of Company or any of its Subsidiaries exists or, to the knowledge
of Company is imminent that would reasonably be expected to have a Material
Adverse Effect.
4.13 Disclosure.
The Preliminary 1998 Offering Circular and the 1998 Offering Circular and
any amendments or supplements thereto did not and will not, as of their
respective dates,
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contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in the Preliminary 1998 Offering Circular or the 1998 Offering Circular in
reliance upon and in conformity with information furnished in writing to Company
by or on behalf of a 1998 Purchaser expressly for use therein.
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
Obligations, unless Requisite Lenders shall otherwise give prior written
consent:
5.1 Financial Statements and Other Reports.
A. Provision of Financial Information. So long as any Loans are
outstanding, whether or not Company is required to be subject to Section 13(a)
or 15(d) of the Exchange Act, or any successor provision thereto, Company shall
file with the Commission the annual reports, quarterly reports and other
documents (including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by Company's certified independent
accountants) which Company would have been required to file with the Commission
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
Company were so required, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which Company
would have been required so to file such documents if Company were so required.
Company shall also in any event (i) within 15 days of each Required Filing Date
(a) transmit by mail to all Lenders without cost to such Lenders, and (b) file
with the Paying Agent, in each case, copies of the annual reports, quarterly
reports and other documents which Company would have been required to file with
the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act or any
successor provisions thereto if Company were required to be subject to such
Sections and (ii) if filing such documents by Company with the Commission is not
permitted under the Exchange Act, promptly upon written request supply copies of
such documents to any prospective Lender.
B. Statement by Officers as to Default.
(i) Company shall deliver to the Paying Agent for distribution to
Lenders, within 120 days after the end of each Fiscal Year, an Officers'
Certificate stating that a review of the activities of Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing officers with a view to determining whether
Company has kept, observed, performed and fulfilled its obligations under
this Agreement, and further stating, as to each such officer signing
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such certificate, that to the best of such officer's knowledge Company has
kept, observed, performed and fulfilled each and every covenant contained
in this Agreement and is not in default in the performance or observance of
any of the terms, provisions and conditions hereof (or, if a Potential
Event of Default or Event of Default shall have occurred, describing all
such Potential Events of Default or Events of Default of which such officer
may have knowledge and what action Company is taking or proposes to take
with respect thereto) and that to the best of such officers' knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of (and premium, if any) or interest, if any, on
the Loans are prohibited or if such event has occurred, a description of
the event and what action Company is taking or proposes to take with
respect thereto.
(ii) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the financial
statements delivered pursuant to subsection 5.1A shall be accompanied by a
written statement of Company's independent public accountants (who shall be
a firm of established national reputation reasonably satisfactory to Paying
Agent) that in making the examination necessary for certification of such
financial statements nothing has come to their attention which would lead
them to believe that Company has violated any provisions of subsection 2.4B
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(iii) Company shall, so long as any of the Obligations are
outstanding, deliver to the Paying Agent for distribution to Lenders,
forthwith upon any officer becoming aware of (a) any Potential Event of
Default or Event of Default or (b) any event of default under any other
mortgage, indenture or instrument as described in subsection 7.2, an
Officers' Certificate specifying such Potential Event of Default, Event of
Default or event of default and what action Company is taking or proposes
to take with respect thereto.
C. Other Information. Company shall deliver to Paying Agent and Lenders
the information required to be delivered to the trustee and holders under
Section 6.04 of the 1998 Senior Notes Indenture as in effect on the Restatement
Closing Date, in the manner and on the terms specified therein.
5.2 Corporate Existence, etc.
Except as permitted under subsection 6.6, Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that Company shall not be required to preserve any such right or franchise if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of Company.
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5.3 Payment of Taxes and Claims; Tax Consolidation.
Company shall, or shall cause its Restricted Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon Company or any Restricted Subsidiary of Company or upon the income,
profits or property of Company or any Restricted Subsidiary of Company, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of Company or any Restricted Subsidiary of
Company; provided, however, that Company and its Restricted Subsidiaries shall
not be required to pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
5.4 Maintenance of Properties.
Company shall cause all properties used or useful in the conduct of its
business or the business of any Restricted Subsidiary of Company to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of Company, desirable in the conduct of its
business or the business of any Restricted Subsidiary of Company.
5.5 Compliance with Laws, etc.
Company shall comply, and shall cause each of its Restricted Subsidiaries
to comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, noncompliance with which would reasonably
be expected to cause, individually or in the aggregate, a material impairment of
the ability of Company and its Restricted Subsidiaries, taken as a whole, to (a)
make payments of principal and interest on the Obligations as and when due, or
(b) continue doing business as a going concern.
SECTION 6.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as the Commitments hereunder
shall remain in effect and until payment in full of all of the Loans and other
Obligations, unless Requisite Lenders shall otherwise give prior written
consent:
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6.1 Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, incur any Indebtedness (including Acquired Debt), other
than:
(i) the Obligations;
(ii) the 1998 Senior Notes and Permitted Indebtedness; and
(iii) other Indebtedness; provided that after giving effect to the
incurrence of any such Indebtedness and the receipt and application of the
proceeds therefrom, Company's Consolidated Operating Cash Flow Ratio is
greater than 2 to 1.
Notwithstanding anything in this subsection 6.1 to the contrary, Company's
Unrestricted Subsidiaries may incur Non-Recourse Debt; provided, however, that
if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of Company and shall be subject to the
other restrictions of this subsection 6.1.
6.2 Prohibition on Liens and Related Matters.
Company shall not directly or indirectly, create, incur, assume or suffer
to exist any Lien (other than Permitted Liens) on any asset now owned or
hereafter acquired, or on any income or profits therefrom, or assign or convey
any right to receive income therefrom to secure any Indebtedness which is pari
passu with or subordinate in right of payment to the Obligations, unless the
Obligations are secured equally and ratably simultaneously with or prior to the
creation, incurrence or assumption of such Lien for so long as such Lien exists;
provided, that in any case involving a Lien securing Indebtedness which is
subordinated in right of payment to the Obligations, such Lien is subordinated
to the Lien securing the Obligations to the same extent that such subordinated
debt is subordinated to the Obligations.
6.3 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries of Company.
Company shall not, and shall not permit any Restricted Subsidiary of
Company (other than a Securitization Special Purpose Entity) to, create or
otherwise cause or suffer to exist or become effective, any consensual
encumbrance or restriction which, by its terms, restricts the ability of any
Restricted Subsidiary of Company (other than a Securitization Special Purpose
Entity) to (i) pay dividends or make any other distributions on any such
Restricted Subsidiary's Capital Stock or pay any Indebtedness owed to Company or
any Restricted Subsidiary of Company, (ii) make any loans or advances to Company
or any Restricted Subsidiary of Company, or (iii) transfer any of its property
or assets to Company or any Restricted Subsidiary of Company, except for, in the
case of clauses (i), (ii) and (iii) above, any restrictions (a) existing
hereunder and any restrictions existing or created on the
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Restatement Closing Date pursuant to the 1998 Senior Note Indenture and any
agreement relating to Existing Indebtedness of Company or any Restricted
Subsidiary, (b) pursuant to an agreement relating to Indebtedness incurred by
such Restricted Subsidiary prior to the date on which such Restricted Subsidiary
was acquired by Company and outstanding on such date and not incurred in
anticipation of becoming a Restricted Subsidiary, (c) imposed by virtue of
applicable corporate law or regulation and relating solely to the payment of
dividends or distributions to stockholders, (d) with respect to restrictions of
the nature described in clause (iii) above, included in a contract entered into
in the ordinary course of business and consistent with past practices that
contains provisions restricting the assignment of such contract, (e) pursuant to
an agreement effecting a renewal, extension, refinancing, refunding or
replacement of Indebtedness referred to in (a) or (b) above; provided, however,
that the provisions contained in such renewal, extension, refinancing, refunding
or replacement agreement relating to such encumbrance or restriction, taken as a
whole, are not materially more restrictive than the provisions contained in the
agreement the subject thereof, as determined in good faith by the board of
directors of Company, or (f) which shall not in the aggregate cause Company not
to have the funds necessary to pay the principal of, premium, if any, or
interest, on the Obligations as they mature.
6.4 Restrictions on Guaranties.
Company shall not permit any Restricted Subsidiary, directly or indirectly,
to guarantee or secure the payment of any Indebtedness of Company unless such
Restricted Subsidiary simultaneously executes and delivers to Administrative
Agent and Lenders such guarantees, security agreements and other documents or
instruments providing for the guarantee or security of the payment of the
Obligations by such Restricted Subsidiary (other than the grant of security
interests in cash and cash equivalents, receivables and product inventories to
secure obligations under the Existing Credit Agreement). If the Indebtedness to
be guaranteed is subordinated to the Obligations, then the guarantee or security
of such Indebtedness shall be subordinated to the guarantee or security of the
Obligations to the same extent as the Indebtedness to be guaranteed is
subordinated to the Obligations under this Agreement. Notwithstanding the
foregoing, any such guarantee or security by a Restricted Subsidiary of the
Obligations shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon either (i) the release or discharge
of such guarantee or security of payment of such other Indebtedness, except a
discharge by or as a result of payment under such guarantee or security, or (ii)
any sale, exchange or transfer, to any Person not an Affiliate of Company, of
all of Company's Capital Stock in, or all or substantially all the assets of,
such Restricted Subsidiary, which sale, exchange or transfer is made in
compliance with the provisions of this Agreement.
6.5 Limitations on Restricted Payments.
Company shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, make any Restricted Payment, unless (i) at the time
of and immediately after giving effect to the proposed Restricted Payment, no
Potential Event of Default or Event of Default shall have occurred and be
continuing, or would occur as a consequence thereof,
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(ii) either Company would (a) at the time of such Restricted Payment and after
giving pro forma effect thereto, have a Consolidated Adjusted Net Worth
exceeding $200,000,000 or (b) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Operating Cash Flow Ratio test set
forth in subsection 6.1(iii), and (iii) at the time of and immediately after
giving effect to the proposed Restricted Payment (the value of any such payment
if other than cash, as determined in good faith by the board of directors of
Company and evidenced by a Board Resolution), the aggregate amount of all
Restricted Payments (including Restricted Payments permitted by clauses (b),
(j), (l) and (m) of the next succeeding paragraph and excluding the other
Restricted Payments permitted by such paragraph) declared or made subsequent to
the Restatement Closing Date shall not exceed the sum of (a) 50% of the
aggregate Consolidated Net Operating Income (or, if such aggregate Consolidated
Net Operating Income is a deficit, minus 100% of such deficit) of Company for
the period (taken as one accounting period) from April 1, 1998 to the end of
Company's most recently ended Fiscal Quarter for which internal financial
statements are available at the time of such Restricted Payment plus (b) 100% of
the aggregate net proceeds, including cash and the fair market value of property
other than cash (as determined in good faith by the board of directors of
Company and evidenced by a Board Resolution), received by Company since April 1,
1998, from any Person other than a Subsidiary of Company as a result of the
issuance of Capital Stock (other than any Disqualified Capital Stock) of Company
including such Capital Stock issued upon conversion of Indebtedness or upon
exercise of warrants and any contributions to the capital of Company (other than
Excluded Contributions) received by Company from any such Person plus (c) to the
extent that any Restricted Investment that was made after April 1, 1998 is sold
for cash or otherwise liquidated or repaid for cash, the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any). For purposes of any calculation pursuant to the preceding sentence which
is required to be made within 60 days after the declaration of a dividend by
Company, such dividend shall be deemed to be paid at the date of declaration.
The foregoing provisions of this subsection 6.5 shall not be violated by
reason of (a) the payment of any dividends or distributions payable solely in
shares of Company's Capital Stock (other than Disqualified Capital Stock) or in
options, warrants or other rights to acquire Company's Capital Stock (other than
Disqualified Capital Stock), (b) the payment of any dividend within 60 days
after the date of declaration thereof if, at such date of declaration, such
payment complied with the provisions described above, (c) the payment of cash
dividends or the making of loans or advances to Holdings after October 1, 2002,
in an amount sufficient to enable Holdings to make cash payments of interest or
dividends required to be made in respect of the Exchangeable Preferred Stock or
the Exchange Debentures in accordance with the payment terms thereof in effect
on the Restatement Closing Date (d) the payment of cash dividends or the making
of loans or advances in an amount sufficient to enable Holdings to make payments
required to be made in respect of the 10-7/8% Notes in accordance with the
payment terms thereof in effect on the Restatement Closing Date, (e) the
retirement of any shares of Company's Capital Stock in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a Subsidiary
of Company) of, other shares of its Capital Stock (other than Disqualified
Capital
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Stock) or options, warrants or other rights to purchase Company Capital Stock
(other than Disqualified Capital Stock) and the declaration and payment of
dividends on such new Capital Stock in an aggregate amount no greater than the
amount of dividends declarable and payable on such retired Capital Stock
immediately prior to such retirement, (f) the Chevron Payment, (g) the AOC
Payment, (h) the Gulf Payments, (i) other Restricted Payments in an aggregate
amount not to exceed $50,000,000, (j) the making of any payment in redemption of
Capital Stock of Company or Holdings or options to purchase such Capital Stock
granted to officers or employees of Company or Holdings pursuant to any stock
option, stock purchase or other stock plan approved by the board of directors of
Company or Holdings in connection with the severance or termination of officers
or employees not to exceed $8,000,000 per annum or the payment of cash dividends
or the making of loans or advances to Holdings to permit it to make such
payments, (k) the declaration and payment of dividends to holders of any class
or series of preferred stock of Company and its Restricted Subsidiaries issued
in accordance with the provisions of subsection 6.1, (l) the payment of
dividends on Company's common stock, following the first public offering of
Company's common stock or Holdings's common stock after the Restatement Closing
Date, of up to 6% per annum of the net proceeds received by Company in such
public offering or the payment of funds to Holdings in amounts necessary to
permit Holdings to make such payments to the extent the proceeds of such
offering were contributed to the equity capital of Company, (m) so long as no
Potential Event of Default or Event of Default shall have occurred and be
continuing (or would result therefrom), the payment to Holdings (in the form of
dividends, loans, advances or otherwise) of 100% of the proceeds of Indebtedness
incurred pursuant to clause (xv) of the definition of "Permitted Indebtedness"
to redeem, repurchase, defease or otherwise acquire or retire for value the
10-7/8% Notes; provided, however, that at the time of such redemption,
repurchase, defeasance or other acquisition or retirement for value, the
Consolidated Operating Cash Flow Ratio of Company, after giving effect to the
incurrence of Indebtedness in connection therewith, would be greater than 1.75
to 1.0, (n) the payment of dividends or the making of loans or advances by
Company to Holdings in an amount not to exceed $2,000,000 in any Fiscal Year for
costs and expenses incurred by Holdings in its capacity as a holding company or
for services rendered to Company; (o) Restricted Investments not to exceed at
any one time an aggregate of $75,000,000, and (p) Restricted Investments made
with Excluded Contributions.
The board of directors of Company may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Potential
Event of Default or Event of Default. For purposes of making such determination,
all outstanding Investments by Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated shall be deemed to
be Restricted Payments at the time of such designation and shall reduce the
amount available for Restricted Payments under the first paragraph of this
subsection 6.5. All such outstanding Investments shall be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of such
Investments at the time of such designation, (y) the fair market value of such
Investments at the time of such designation, and (z) the original fair market
value of such Investments at the time they were made. Such designation shall
only be permitted if such Restricted
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Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
6.6 Limitation on Merger, Consolidation, Sales of Assets.
A. Company may Consolidate only on Certain Terms. Company shall not
consolidate or merge with or into (whether or not Company is the Surviving
Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions to another Person unless (i) the Surviving Person is a corporation
organized and existing under the laws of the United States, any state thereof or
the District of Columbia, (ii) the Surviving Person (if other than Company)
assumes all of the obligations of Company under the this Agreement, the Notes
and the other Loan Documents pursuant to documentation in form reasonably
satisfactory to Administrative Agent, (iii) at the time of and immediately after
such transaction, no Potential Event of Default or Event of Default shall have
occurred and be continuing, (iv) except with respect to a merger of Company with
or into Holdings that does not result in a Rating Decline, after giving pro
forma effect to the transaction, either (a) the Surviving Person would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Operating Cash Flow Ratio test set forth in subsection 6.1(iii) or
(b) the Consolidated Operating Cash Flow Ratio of the Surviving Person would be
no less than such ratio for Company immediately prior to such transaction and
(v) Company has delivered to Agents and Lenders an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, conveyance,
transfer or lease, and, if an amendment or waiver hereto is required in
connection with such transaction, such amendment or waiver complies with this
subsection 6.6 and that all conditions precedent herein provided for relating to
such transaction have been complied with.
B. Successor Substituted. Upon any consolidation of Company with, or
merger of Company into, any other Person or any conveyance, transfer, lease or
other disposition of the properties and assets of Company substantially as an
entirety in accordance with subsection 6.6, the successor Person formed by such
consolidation or into which Company is merged or to which such conveyance,
transfer, lease or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, Company under this
Agreement and the other Loan Documents with the same effect as if such successor
Person had been named as Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and covenants
under this Agreement and the other Loan Documents; provided, however, that the
predecessor Company shall not be relieved from the obligation to pay principal
of and interest on the Loans, except in the case of a transfer, conveyance, sale
or other disposition (excluding by lease) of all of Company's assets that meets
the requirements of subsection 6.6A.
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6.7 Limitation on Certain Asset Dispositions.
Company shall not, and shall not permit any Restricted Subsidiary of
Company to, make any Asset Disposition unless (i) Company or such Restricted
Subsidiary receives consideration at the time of such disposition (or in the
case of a lease, over the term of such lease) at least equal to the fair market
value of the shares or assets disposed of (which shall be as determined in good
faith by Company), and (ii) at least 75% of the consideration for such
disposition consists of cash or Cash Equivalents; provided that the following
shall be deemed to be cash for purposes of this covenant: (1 ) the amount of any
liabilities (as shown on Company's or such Restricted Subsidiary's most recent
balance sheet or in the notes thereto) of Company or such Restricted Subsidiary
(other than liabilities that are by their terms subordinated to the Loans) that
are assumed by the transferee of any such assets, and (2) any notes or other
obligations received by Company or such Restricted Subsidiary from a transferee
that are converted by Company or such Restricted Subsidiary into cash within 180
days after such Asset Disposition; provided, further, that the 75% limitation
referred to above in clause (ii) shall not apply to (x) any disposition of
assets in which the cash portion of such consideration received therefor on an
after-tax basis, determined in accordance with the foregoing proviso, is equal
to or greater than what the after-tax net proceeds would have been had such
transaction complied with the aforementioned 75% limitation, (y) any disposition
of assets (other than the Port Arthur Refinery) in exchange for assets of
comparable fair market value related to the Principal Business of Company,
provided that in any such exchange of assets of Company or a Restricted
Subsidiary with a fair market value in excess of $20,000,000 occurring when
Blackstone fails to hold, directly or indirectly, 30% or more of the total
voting power of all classes of Capital Stock of Company, Company shall obtain an
opinion or report from a nationally recognized investment banking firm,
valuation expert or accounting firm confirming that the assets received by
Company and such Restricted Subsidiary in such exchange have a fair market value
at least equal to the assets so exchanged or (z) any disposition of
Securitization Program Assets to any Securitization Special Purpose Entity in
exchange for Indebtedness of, procurement of letters of credit and similar
instruments by, or equity or other interests in, such Securitization Special
Purpose Entity.
Within 360 days of the later of (a) the receipt of the Net Available
Proceeds and (b) the date of such applicable Asset Disposition, Company may
elect to (i) apply the Net Available Proceeds from such Asset Disposition to
permanently redeem or repay Indebtedness of Company or any Restricted
Subsidiary, other than Indebtedness of Company which is subordinated to the
Obligations, or (ii) apply the Net Available Proceeds from such Asset
Disposition to invest in assets related to the Principal Business of Company or
Capital Stock of any Person primarily engaged in the Principal Business if, as a
result of such acquisition, such Person becomes a Restricted Subsidiary. Pending
the final application of any such Net Available Proceeds, Company may
temporarily invest such Net Available Proceeds in any manner permitted by this
Agreement. Any Net Available Proceeds from an Asset Disposition not applied or
invested as provided in the first sentence of this paragraph shall be deemed to
constitute "Excess Proceeds".
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As soon as practical, but in no event later than ten Business Days after
any date (an "Asset Disposition Trigger Date") that the aggregate amount of
Excess Proceeds exceeds $25,000,000, Company shall offer to prepay the Loans
pursuant to subsection 2.4B(ii)(a) by commencing an offer pursuant to subsection
2.4B(iii)(d) to prepay the maximum amount of Loans and to purchase the maximum
amount of other Indebtedness of Company or Holdings having similar rights to be
so prepaid or purchased out of Excess Proceeds, in each case at an offer price
in cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest to the date of prepayment or purchase, as applicable. To the
extent that any Excess Proceeds remain after completion of such offer, Company
may use the remaining amount for general corporate purposes. Upon any completion
of any such offer pursuant to subsection 2.4B(iii)(d), the amount of Excess
Proceeds shall be reset to zero.
6.8 Transactions with Shareholders and Affiliates.
Company shall not, and shall not permit any Restricted Subsidiary of
Company to, directly or indirectly, conduct any business or enter into any
transaction or series of similar transactions (including, without limitation,
the purchase, sale, transfer, lease or exchange of any property or the rendering
of any service) with (i) any direct or indirect holder of more than 5% of any
class of Capital Stock of Company or of any Restricted Subsidiary of Company
(other than transactions between or among Company and/or its Restricted
Subsidiaries except for Restricted Subsidiaries owned in any part by the
Principal Shareholders), or (ii) any Affiliate of Company (other than
transactions between or among Company and/or its Restricted Subsidiaries except
for Restricted Subsidiaries owned in any part by the Principal Shareholders)
(each of the foregoing, a "Shareholder/Affiliate Transaction") unless the terms
of such business, transaction or series of transactions are as favorable to
Company or such Restricted Subsidiary in all material respects as terms that
would be obtainable at the time for a comparable transaction or series of
similar transactions in arm's-length dealings with a Person which is not such a
stockholder or Affiliate and, if such transaction or series of transactions
involves payment for services of such a stockholder or Affiliate, (x) for
amounts greater than $10,000,000 and less than $25,000,000 per annum, Company
shall deliver an Officers' Certificate to the Administrative Agent certifying
that such Shareholder/Affiliate Transaction complies with clause (b) above or
(y) for amounts equal to or greater than $25,000,000 per annum, then (A) a
majority of the disinterested members of the board of directors shall in good
faith determine that such payments are fair consideration for the services
performed or to be performed (evidenced by a Board Resolution) or (B) Company
must receive a favorable opinion from a nationally recognized investment banking
firm chosen by Company or, if no such investment banking firm is in a position
to provide such opinion, a similar firm chosen by Company (having expertise in
the specific area which is the subject of the opinion), that such payments are
fair consideration for the services performed or to be performed (a copy of
which shall be delivered to the Administrative Agent); provided that the
foregoing requirements of this subsection 6.8 shall not apply to:
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(i) Shareholder/Affiliate Transactions involving the purchase or
sale of crude oil, vacuum tower bottoms, refined products or other
inventory, so long as (y) in the case of such transactions involving crude
oil, such transactions are priced in line with the market price of a crude
benchmark, and (z) the pricing of each of such transactions is equivalent
to the pricing of comparable transactions with unrelated third parties; and
provided further that the Gulf Payments shall not be deemed a
Shareholder/Affiliate Transaction,
(ii) Restricted Payments permitted by the provisions of subsection
6.5;
(iii) payments made in connection with the Blackstone Transaction,
including fees to Blackstone;
(iv) payment of annual management, consulting, monitoring and
advisory fees and related expenses to Blackstone and its Affiliates;
(v) payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors, employees or
consultants of Company or any Restricted Subsidiary;
(vi) payments by Company or any of its Restricted Subsidiaries to
Blackstone and its Affiliates made for any financial advisory, financing,
underwriting or placement services or in respect of other investment
banking activities, including, without limitation, in connection with
acquisitions or divestitures which payments are approved by a majority of
the board of directors of Company in good faith;
(vii) payments or loans to employees or consultants which are
approved by a majority of the board of directors of Company in good faith;
(viii) any agreement in effect on the Restatement Closing Date and
any amendment thereto (so long as any such amendment is not disadvantageous
to the Lenders in any material respect) or any transaction contemplated
thereby; or
(ix) any stockholder agreement or registration rights agreement to
which Company is a party on the Restatement Closing Date and any similar
agreements which it may enter into thereafter; provided that the
performance by Company or any of its Restricted Subsidiaries of obligations
under any future amendment or under such a similar agreement entered into
after the Restatement Closing Date shall only be permitted by this clause
(ix) to the extent that the terms of any such amendment or new agreement
are not disadvantageous to the Lenders in any material respect.
6.9 Restrictions on Secured Indebtedness.
From and after the occurrence of an Investment Grade Rating Event, if
Company shall incur, issue, assume or guarantee any Indebtedness secured by a
Lien on any Principal
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Property of Company or on any share of stock or Indebtedness of any Restricted
Subsidiary (other than a Securitization Special Purpose Entity), Company shall
secure the Obligations equally and ratably with (or, at Company's option, prior
to) such secured Indebtedness so long as such Indebtedness shall be so secured,
unless the aggregate amount of all such secured Indebtedness, together with all
Attributable Indebtedness of Company with respect to any Sale and Leaseback
Transactions involving Principal Properties (with the exception of such
transactions which are excluded as described in clauses (i) through (v) under
subsec tion 6.10), would not exceed 10% of Consolidated Net Tangible Assets. The
above restriction does not apply to, and there will be excluded from secured
Indebtedness in any computation under such restriction, Indebtedness secured by:
(i) Liens on property of, or on any share of stock or Indebtedness of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary and Liens on any property acquired from a corporation which is merged
with or into Company or a Subsidiary, (ii) Liens in favor of Company; (iii)
Liens in favor of governmental bodies to secure progress, advance or other
payments; (iv) Liens upon any property acquired after the date of this
Agreement, securing the purchase price thereof or created or incurred
simultaneously with (or within 270 days after) such acquisition to finance the
acquisition of such property or existing on such property at the time of such
acquisition, or Liens on improvements after such date, in each case subject to
certain conditions and provided that the principal amount of the obligation or
Indebtedness secured by such Lien shall not exceed 100% of the cost or fair
value (as determined in good faith by Company), whichever shall be lower, of the
property at the time of the acquisition, construction or improvement thereof;
(v) Liens securing industrial revenue or pollution control bonds, (vi) Liens
arising out of any final judgment for the payment of money aggregating not in
excess of $25,000,000 which remains unstayed, in effect and unpaid for a period
of 60 consecutive days or Liens arising out of any judgments which are being
contested in good faith, (vii) Permitted Liens in existence on the date of the
Investment Grade Rating Event, (viii) Liens to secure obligations arising from
time to time under the Existing Credit Agreement including Guaranties thereof,
or (ix) any extension, renewal, or replacement of any Lien referred to in the
foregoing clauses (i) through (viii) inclusive.
6.10 Restrictions on Sales and Leasebacks.
From and after the occurrence of an Investment Grade Rating Event, Company
shall not enter into any Sale and Leaseback Transaction involving any Principal
Property, unless the aggregate amount of all Attributable Indebtedness of
Company with respect to such transaction plus all secured Indebtedness (with the
exception of secured Indebtedness which is excluded as described in clauses (i)
through (ix) under subsection 6.9) would not exceed 10% of Consolidated Net
Tangible Assets. This restriction does not apply to, and there shall be excluded
from Attributable Indebtedness in any computation under such restriction, any
Sale and Leaseback Transaction if: (i) the lease is for a period, including
renewal rights, not in excess of three years; (ii) the sale of the Principal
Property is made within 270 days after its acquisition, construction or
improvements; (iii) the lease secures or relates to industrial revenue or
pollution control bonds; (iv) the transaction is between Company and a
Restricted Subsidiary; or (v) Company, within 270 days after the sale is
completed, applies
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to the retirement of Indebtedness of Company or a Restricted Subsidiary, or to
the purchase of other property which will constitute a Principal Property, an
amount not less than the greater of (1) the net proceeds of the sale of the
Principal Property leased or (2) the fair market value (as determined by Company
in good faith) of the Principal Property leased. The amount to be applied to the
retirement of Indebtedness shall be reduced by (x) the principal amount of any
debentures or notes (including the New Notes) of Company or a Restricted
Subsidiary surrendered within 270 days after such sale to the applicable trustee
for retirement and cancellation, (y) the principal amount of Indebtedness, other
than the items referred to in the preceding clause (x), voluntarily retired by
Company or a Restricted Subsidiary within 270 days after such sale and (z)
associated transaction expenses.
6.11 Other Agreements.
Company shall not, and shall not permit any Restricted Subsidiary of
Company to, enter into or become a party (including as an assignee or successor)
to any agreement (including a refinancing or refunding of the Existing Credit
Agreement) that would conflict with this Agreement or the other Loan Documents.
6.12 Effect of Investment Grade Rating.
Notwithstanding the foregoing, upon the occurrence of any Investment Grade
Rating Event, subsections 6.1, 6.2, 6.3, 6.5, 6.6A(iv), 6.6A(v), 6.7 and 6.8
shall be of no further force or effect and shall cease to apply to Company and,
in lieu thereof, subsections 6.9 and 6.10 shall take effect.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur:
7.1 Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan or any
prepayment fee under subsection 2.4B(i)(b) or 2.4B(ii)(c) when due, whether at
stated maturity, by acceleration, by notice of voluntary prepayment, by
mandatory prepayment or otherwise; or failure by Company to pay any interest on
any Loan within 30 days after the date due; or
7.2 Default in Other Agreements.
A default occurs under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Company or any Restricted Subsidiary of
Company (or the payment of which is guaranteed by Company or a Restricted
Subsidiary of Company), whether such
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Indebtedness or guarantee now exists or shall be created hereafter, if (a)
either (i) such default results from the failure to pay principal (and premium,
if any) upon the expressed maturity of such Indebtedness (after the expiration
of any applicable grace period) or (ii) as a result of such default the maturity
of such Indebtedness has been accelerated prior to its expressed maturity and
(b) the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness with respect to which the principal amount
unpaid upon its expressed maturity (after the expiration of any applicable grace
period), or the maturity of which has been so accelerated, exceeds $25,000,000;
or
7.3 Breach of Certain Covenants.
Failure of Company to observe or perform any covenant or condition on the
part of Company to be performed or observed pursuant to Section 6.6 hereof; or
7.4 Other Defaults Under Loan Documents.
Company shall default in the performance, or breach, of any covenant of
Company in this Agreement or any other Loan Document (other than a covenant a
default in whose performance or whose breach is elsewhere in this Section 7
specifically dealt with), and continuance of such default or breach for a period
of 30 days after there has been given, by registered or certified mail, to
Company by Paying Agent or to Company and Paying Agent by Lenders having or
holding at least 25% of the aggregate Loan Exposure of all Lenders a written
notice specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
7.5 Involuntary Bankruptcy; Appointment of Receiver, etc.
The entry by a court having jurisdiction in the premises of (A) a decree or
order for relief in respect of Company or any Significant Subsidiary of Company
in an involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging Company or any Significant Subsidiary of Company a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of Company or any
Significant Subsidiary of Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official of Company or any Significant Subsidiary of Company or of
any substantial part of the property of Company or any Significant Subsidiary of
Company, or ordering the winding up or liquidation of the affairs of Company or
any Significant Subsidiary of Company, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
7.6 Voluntary Bankruptcy; Appointment of Receiver, etc.
The commencement by Company or any Significant Subsidiary of Company of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency,
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reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by Company or any
Significant Subsidiary of Company to the entry of a decree or order for relief
in respect of Company or any Significant Subsidiary of Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against Company or any Significant Subsidiary of
Company, or the filing by Company or any Significant Subsidiary of Company of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by Company or any Significant
Subsidiary of Company to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of Company or any Significant Subsidiary
of Company or of any substantial part of their respective property, or the
making by Company or any Significant Subsidiary of Company of an assignment for
the benefit of creditors, or the admission by either Company or any Significant
Subsidiary of Company in writing of an inability to pay debts generally as they
become due, or the taking of corporate action by Company or any Significant
Subsidiary of Company in furtherance of any such action; or
7.7 Judgments and Attachments.
A final judgment or final judgments (not subject to appeal) for the payment
of money are entered by a court or courts of competent jurisdiction against
Company or any Restricted Subsidiary of Company and such judgment or judgments
remain unstayed, in effect and unpaid for a period of 60 consecutive days;
provided that the aggregate of all such judgments (to the extent not paid or to
be paid by insurance) exceeds $50,000,000; or
7.8 Breach of Warranty.
Any representation, warranty, certification or other statement made by
Company or any of its Restricted Subsidiaries in any Loan Document or in any
statement or certificate given by Company or any of its Restricted Subsidiaries
in writing pursuant hereto or thereto or in connection herewith or therewith
shall be false in any material respect on the date as of which made;
THEN (i) upon the occurrence of any Event of Default described in subsection 7.5
or 7.6, each of (a) the unpaid principal amount of and accrued interest on the
Loans and (b) all other Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Company, and the obligation of
each Lender to make any Loan shall thereupon terminate, and (ii) upon the
occurrence and during the continuation of any other Event of Default, Paying
Agent shall, upon the written request or with the written consent of Lenders
having or holding not less than 25% of the aggregate Loan Exposure of all
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) and (b) above to be, and the same shall forthwith
become, immediately due
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and payable, and the obligation of each Lender to make any Loan shall thereupon
terminate.
In the event of a declaration of acceleration because an Event of Default
specified in subsection 7.2 has occurred and is continuing, such declaration of
acceleration shall be automatically annulled if the holders of the Indebtedness
which is the subject of such Event of Default have rescinded their declaration
of acceleration in respect of such Indebtedness within 90 days thereof and the
Paying Agent has received written notice of such cure, waiver or rescission and
no other Event of Default has occurred during such 90 day period which has not
been cured or waived.
At any time after a declaration of acceleration with respect to the
Obligations has been made and before a judgment or decree for payment of the
money due has been obtained by Paying Agent and Lenders, Requisite Lenders, by
written notice to Company and Paying Agent, may rescind and annul such
declaration and its consequences if:
(1) Company has paid,
(A) all overdue interest on the Loans,
(B) the principal of (and premium, if any, on) any Loans which
have become due otherwise than by such declaration of acceleration
(including any Loans required to have been prepaid on the Optional Purchase
Date pursuant to an offer by Company to prepay Loans pursuant to subsection
2.4B(iii)(d)) and any interest thereon at the rate or rates prescribed
hereunder in respect of such Loans,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest, and principal (and premium, if any) at the
rate otherwise payable hereunder with respect to the applicable Loans;
(D) all sums paid or advanced by the Lenders hereunder and the
reasonable compensation, expenses, disbursements and advances of Agents and
their counsel; and
(2) all Events of Default other than the non-payment of the principal
of Loans which have become due solely by such declaration of acceleration,
have been cured or waived.
The provisions of this paragraph are intended merely to bind Lenders to a
decision which may be made at the election of Requisite Lenders and are not
intended, directly or indirectly, to benefit Company, and such provisions shall
not at any time be construed so as to grant Company the right to require Lenders
to rescind or annul any acceleration hereunder or to preclude any Agent or
Lenders from exercising any of the rights or remedies available to them under
any of the Loan Documents, even if the conditions set forth in this paragraph
are met.
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SECTION 8.
AGENTS
8.1 Appointment.
GSCP is hereby appointed Arranger and Syndication Agent hereunder, and each
Lender hereby authorizes Arranger and Syndication Agent to act as its agent in
accordance with the terms of this Agreement and the other Loan Documents. GSCP
is hereby appointed Administrative Agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Administrative Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. State Street is hereby appointed Paying Agent hereunder and under the
other Loan Documents and each Lender hereby authorizes Paying Agent to act as
its agent in accordance with the terms of this Agreement and the other Loan
Documents. Each Agent hereby agrees to act upon the express conditions contained
in this Agreement and the other Loan Documents, as applicable. Except as
expressly provided in subsections 8.5 and 8.6, the provisions of this Section 8
are solely for the benefit of Agents and Lenders and Company shall have no
rights as a third party beneficiary of any of the provisions thereof. In
performing its functions and duties under this Agreement, each Agent shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Company or any of its Subsidiaries. Each of Arranger and Syndication Agent,
without consent of or notice to any party hereto, may assign any and all of its
rights or obligations hereunder to any of its Affiliates. As of the Restatement
Closing Date, all obligations of Arranger and Syndication Agent hereunder shall
terminate.
8.2 Powers and Duties; General Immunity.
A. Powers; Duties Specified. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers,
rights and remedies hereunder and under the other Loan Documents as are
specifically delegated or granted to such Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Each Agent shall have only those duties and responsibilities that are
expressly specified in this Agreement and the other Loan Documents. Each Agent
may exercise such powers, rights and remedies and perform such duties by or
through its agents or employees. No Agent shall have, by reason of this
Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon any Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations,
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warranties, recitals or statements made herein or therein or made in any written
or oral statements or in any financial or other statements, instruments, reports
or certificates or any other documents furnished or made by any of Agent to
Lenders or by or on behalf of Company to any Agent or any Lender in connection
with the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall any Agent be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, neither Paying
Agent nor Administrative Agent shall have any liability arising from
confirmations of the amount of outstanding Loans.
C. Exculpatory Provisions. None of Agents nor any of their respective
officers, partners, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by any Agent under or in connection with any of
the Loan Documents except to the extent caused by such Agent's gross negligence
or willful misconduct. Each Agent shall be entitled to refrain from any act or
the taking of any action (including the failure to take an action) in connection
with this Agreement or any of the other Loan Documents or from the exercise of
any power, discretion or authority vested in it hereunder or thereunder unless
and until such Agent shall have received instructions in respect thereof from
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 9.5) and, upon receipt of such instructions from
Requisite Lenders (or such other Lenders, as the case may be), such Agent shall
be entitled to act or (where so instructed) refrain from acting, or to exercise
such power, discretion or authority, in accordance with such instructions.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against any Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 9.5). Without limiting the generality of the foregoing and the
applicability thereof to the Paying Agent, the Paying Agent shall not be charged
with notice or knowledge of any matter unless actually known to an officer
working in its corporate trust group or unless written notice thereof has been
received by it in accordance with the provisions of this Agreement. Unless
otherwise expressly provided, the Paying Agent shall not have any responsibility
with respect to reports, notices, certificates or other documents filed with it
hereunder except to make them available for inspection at reasonable times by
the Lenders.
D. Agent Entitled to Act as Lender. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon,
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any Agent in its individual capacity as a Lender hereunder. With respect to its
participation in the Loans, each Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include each Agent (other than the Paying Agent) in its
individual capacity. Any Agent and its Affiliates may accept deposits from, lend
money to and generally engage in any kind of banking, trust, financial advisory
or other business with Company or any of its Affiliates as if it were not
performing the duties specified herein, and may accept fees and other
consideration from Company for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Company and its
Subsidiaries in connection with the making of the Loans hereunder and that it
has made and shall continue to make its own appraisal of the creditworthiness of
Company and its Subsidiaries. No Agent shall have any duty or responsibility,
either initially or on a continuing basis, to make any such investigation or any
such appraisal on behalf of Lenders or to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter, and no Agent
shall have any responsibility with respect to the accuracy of or the
completeness of any information provided to Lenders.
8.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in exercising its powers, rights and remedies or performing its duties
hereunder or under the other Loan Documents or otherwise in its capacity as such
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
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8.5 Successor Administrative Agent.
Administrative Agent may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Company, and Administrative Agent may be
removed at any time with or without cause by an instrument or concurrent
instruments in writing delivered to Company and Administrative Agent and signed
by Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders shall have the right, upon ten Business Days' notice to
Company, to appoint a successor Administrative Agent reasonably acceptable to
Company; provided that such acceptance of Company shall not be required so long
as any Potential Event of Default or Event of Default has occurred continuing.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Administrative Agent and the retiring or
removed Administrative Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
8.6 Successor Paying Agent.
Paying Agent may resign at any time by giving 30 days' prior written notice
thereof to Lenders and Company, and Paying Agent may be removed at any time with
or without cause upon 30 days' prior written notice by Administrative Agent in
an instrument in writing delivered to Company and Paying Agent. Upon any such
notice of resignation or any such removal, Administrative Agent shall have the
right, upon ten Business Days' notice to Company, to appoint a successor Paying
Agent reasonably acceptable to Company; provided that such acceptance of Company
shall not be required, so long as any Potential Event of Default or Event of
Default has occurred and is continuing. Upon the acceptance of any appointment
as Paying Agent hereunder by a successor Paying Agent, that successor Paying
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring or removed Paying Agent and the retiring
or removed Paying Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Paying Agent's resignation
or removal hereunder as Paying Agent, the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Paying Agent under this Agreement.
SECTION 9.
MISCELLANEOUS
9.1 Assignments and Participations in Loans.
A. General. Subject to subsection 9.1B, each Lender shall have the right
at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii)
sell participations to any
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Person in, all or any part of its Commitment or the Loan made by it or any other
interest herein or in any other Obligations owed to it; provided that no such
sale, assignment, transfer or participation shall, without the consent of
Company, require Company to file a registration statement with the Securities
and Exchange Commission or apply to qualify such sale, assignment, transfer or
participation under the securities laws of any state; and provided, further that
no such sale, assignment or transfer described in clause (i) above shall be
effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been delivered to Paying Agent and Company and
recorded in the Register as provided in subsection 9.1B(ii). Except as otherwise
expressly provided in this subsection 9.1, no Lender shall, as between Company
and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitment or the Loan or other Obligations owed to such
Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan or
other Obligation may (a) be assigned in any amount to another Lender, or to
an Affiliate of the assigning Lender or another Lender, with the giving of
notice to Company and Paying Agent or (b) be assigned in an aggregate
amount of not less than $1,000,000 (or such lesser amount as shall
constitute the aggregate amount of the Commitment, Loan and other
Obligations of the assigning Lender) to any other Eligible Assignee
(treating any two or more investment funds that invest in commercial loans
and that are managed or advised by the same investment advisor or by an
Affiliate of such investment advisor as a single Eligible Assignee). To the
extent of any such assignment in accordance with either clause (a) or (b)
above, the assigning Lender shall be relieved of its obligations with
respect to its Commitment, Loan or other Obligations or the portion thereof
so assigned. The parties to each such assignment shall execute and deliver
to Paying Agent, for its acceptance and recording in the Register and
delivery of a copy thereof to Company, an Assignment Agreement and such
forms, certificates or other evidence, if any, with respect to United
States federal income tax withholding matters as the assignee under such
Assignment Agreement may be required to deliver to Paying Agent pursuant to
subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance and
recordation, from and after the effective date specified in such Assignment
Agreement, (y) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (z) the assigning Lender thereunder
shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment Agreement, relinquish its rights
(other than any rights which survive the termination of this Agreement
under subsection 9.7B) and be released from its obligations under this
Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto). The
Commitments hereunder shall be modified to
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reflect the Commitment of such assignee and any remaining Commitment of
such assigning Lender and, if any such assignment occurs after the issuance
of the Notes hereunder, the assigning Lender shall, upon the effectiveness
of such assignment or as promptly thereafter as practicable, surrender its
Note to Paying Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and to the assigning Lender, substantially in the
form of Exhibit II annexed hereto with appropriate insertions, to reflect
the outstanding Loans of the assignee and/or the assigning Lender.
(ii) Acceptance by Paying Agent; Recordation in Register. Upon its
receipt of an Assignment Agreement executed by an assigning Lender and an
assignee representing that it is an Eligible Assignee, together with any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to
deliver to Paying Agent pursuant to subsection 2.7B(iii)(a), Paying Agent
shall (a) accept such Assignment Agreement by executing a counterpart
thereof as provided therein, (b) record the information contained therein
in the Register, and (c) give prompt notice thereof to Company. Paying
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 9.1B(ii).
(iii) Representation of Lenders. Each Lender initially party to
this Agreement hereby represents, and each Person that becomes a Lender
pursuant to an assignment permitted by this subsection 9.1B upon its
becoming a Lender under this Agreement shall be deemed to represent, that
it is a commercial lender, other financial institution or other
"accredited investor" (as defined in Regulation D under the Securities Act)
which makes or acquires loans in the ordinary course of its business and is
acquiring the Loans without a view to distribution of the Loans within the
meaning of the federal securities laws, and that it will make or acquire
Loans for its own account in the ordinary course of such business; provided
that, subject to the provisions of this subsection 9.1, the disposition of
any promissory notes or other evidences of or interests in Indebtedness
held by such Lender shall at all times be within its exclusive control.
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the regularly scheduled maturity of any
portion of the principal amount of or interest on any Loan allocated to such
participation or (ii) a reduction of the principal amount of or the rate of
interest payable on any Loan allocated to such participation, and all amounts
payable by Company hereunder (including amounts payable to such Lender pursuant
to subsections 2.6C and 2.7) shall be determined as if such Lender had not sold
such participation. Company and each Lender hereby acknowledge and agree that,
solely for purposes of subsection 9.4, (a) any participation will give rise to a
direct obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
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D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
9.1, any Lender may assign and pledge all or any portion of its Loan, the other
Obligations owed to such Lender, and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank, and with the consent of Company and Administrative Agent any Lender which
is an investment fund may pledge all or any portion of its Notes or Loans to its
trustee in support of its obligations to such trustee; provided that (i) no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any such assignment and pledge and (ii) in
no event shall such Federal Reserve Bank or trustee be considered to be a
"Lender" or be entitled to require the assigning Lender to take or omit to take
any action hereunder.
E. Information. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 9.17.
F. Representations of Lenders. Each Lender listed on the signature pages
hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loan for its own account in the ordinary course of its business and
without a view to distribution of such Loan within the meaning of the Securities
Act or the Exchange Act or other federal securities laws (it being understood
that, subject to the provisions of this subsection 9.1, the disposition of such
Loan or any interests therein shall at all times remain within its exclusive
control). Each Lender that becomes a party hereto pursuant to an Assignment
Agreement shall be deemed to agree that the representations and warranties of
such Lender contained in Section 2(c) of such Assignment Agreement are
incorporated herein by this reference. Each Lender hereby acknowledges that the
Notes, Loans and other obligations hereunder as are commercial loans and not
securities.
9.2 Expenses.
Company agrees to pay promptly (i) the reasonable fees and reasonable
out-of-pocket expenses and disbursements of counsel to Arranger and counsel to
Paying Agent (in each case including allocated costs of internal counsel) in
connection with any consents, amendments, waivers or other modifications thereto
and any other documents or matters requested by Company; (ii) all other actual
and reasonable costs and expenses incurred by Arranger or Paying Agent in
connection with the negotiation, preparation and execution of any consents,
amendments, waivers or other modifications to the Loan Documents and the
transactions contemplated thereby; and (iii) after the occurrence of an Event of
Default, all costs and expenses, including reasonable attorneys' fees (including
allocated costs of internal counsel), incurred by Agents and Lenders in
enforcing any Obligations of or in collecting any payments due from Company
hereunder or under the other Loan Documents by reason of such Event of Default
or in connection with any refinancing or restructuring of the credit
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arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
9.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend (by counsel selected by Company and reasonably
acceptable to Agent), indemnify, pay and hold harmless Agents and Lenders, and
the officers, partners, directors, employees, agents and affiliates of Agents
and Lenders (collectively called the "Indemnitees"), from and against any and
all Indemnified Liabilities (as hereinafter defined); provided that Company
shall not have any obligation to any Indemnitee hereunder with respect to any
Indemnified Liabilities to the extent such Indemnified Liabilities arise
primarily from the gross negligence or willful misconduct of that Indemnitee.
As used herein, "Indemnified Liabilities" means, collectively, any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for
Indemnitees (subject to any restrictions in the preceding paragraph) in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any reasonable fees
or expenses incurred by Indemnitees in enforcing this indemnity), whether
direct, indirect or consequential and whether based on any federal, state or
foreign laws, statutes, rules or regulations, on common law or equitable cause
or on contract or otherwise, that may be imposed on, incurred by, or asserted
against any such Indemnitee, in any manner relating to or arising out of (i)
this Agreement or the other Loan Documents or the transactions contemplated
hereby or thereby (including Lenders' agreement to make the Loans hereunder or
the use or intended use of the proceeds thereof, or any enforcement of any of
the Loan Documents) or (ii) any commitment letter delivered by Arranger to
Company in connection with the credit facilities established hereunder.
To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 9.3 are applicable by their terms but may
be unenforceable in whole or in part because they are violative of any law or
public policy, Company shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Indemnitees or any of them.
9.4 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, by counterclaim or cross action or by the enforcement of any right
under the Loan Documents or otherwise,
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or as adequate protection of a deposit treated as cash collateral under the
Bankruptcy Code, receive payment or reduction of a proportion of the aggregate
amount of principal, interest, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the
"Aggregate Amounts Due" to such Lender) which is greater than the proportion
received by any other Lender in respect of the Aggregate Amounts Due to such
other Lender, then the Lender receiving such proportionately greater payment
shall (i) notify Administrative Agent and each other Lender of the receipt of
such payment and (ii) apply a portion of such payment to purchase participations
(which it shall be deemed to have purchased from each seller of a participation
simultaneously upon the receipt by such seller of its portion of such payment)
in the Aggregate Amounts Due to the other Lenders so that all such recoveries of
Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered from such Lender upon the bankruptcy or reorganization of Company or
otherwise, those purchases shall be rescinded and the purchase prices paid for
such partici pations shall be returned to such purchasing Lender ratably to the
extent of such recovery, but without interest. Company expressly consents to the
foregoing arrangement and agrees that any holder of a participation so purchased
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder with respect
thereto as fully as if that holder were owed the amount of the participation
held by that holder.
9.5 Amendments and Waivers.
A. No amendment, modification, termination or waiver of any
provision of the Loan Documents, or consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that no such amendment, modification, termination,
waiver or consent shall, without the consent of each Lender (with Obligations
directly affected in the case of the following clause (i)): (i) extend the
scheduled final maturity of any Loan or Note, or waive, reduce or postpone any
scheduled repayment set forth in subsection 2.4A, or reduce the rate of interest
on any Loan or extend the time for payment of any such interest, or reduce the
principal amount of any Loan or the amount of any prepayment fees payable
hereunder, (ii) amend, modify, terminate or waive any provision of this
subsection 9.5, or (iii) reduce the percentage specified in the definition of
"Requisite Lenders" or the percentage of Lenders required in respect of any
action under Section 7, or (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to any Obligations; provided,
further that no such amendment, modification, termination or waiver shall (1)
increase the Commitments of any Lender over the amount thereof then in effect
without the consent of such Lender (it being understood that no amendment,
modification or waiver of any condition precedent, covenant, Potential Event of
Default or Event of Default shall constitute an increase in the Commitment of
any Lender, and that no increase in the available portion of any Commitment of
any Lender shall constitute an increase in such Commitment of such Lender); or
(2) amend, modify, terminate or waive any provision of Section 8 or subsection
2.3 as the same applies to each Agent, or any other provision of this Agreement
as the
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same applies to the rights or obligations of any Agent, in each case without the
consent of such Agent.
B. Paying Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on Company in any case shall entitle Company to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
subsection 9.5 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Company, on Company.
9.6 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile, or three Business
Days after depositing it in the United States mail with postage prepaid and
properly addressed; provided that notices to any Agent shall not be effective
until received. For the purposes hereof, the address of each party hereto shall
be as set forth under such party's name on the signature pages hereof or (i) as
to Company and any Agent, such other address as shall be designated by such
Person in a written notice delivered to the other parties hereto and (ii) as to
each other party, such other address as shall be designated by such party in a
written notice delivered to Paying Agent and Company.
9.7 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
hereunder.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Company set forth in subsections 2.3, 2.6C, 2.7,
9.2 and 9.3 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and
9.4 shall survive the payment of the Loans and the termination of this
Agreement.
9.8 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Agents or any Lender in the
exercise of any power, right or privilege hereunder or under any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies
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existing under this Agreement and the other Loan Documents are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
9.9 Marshalling; Payments Set Aside.
No Agent nor any Lender shall be under any obligation to marshal any
assets in favor of Company or any other party or against or in payment of any or
all of the Obligations. To the extent that Company makes a payment or payments
to any Agent or Lenders (or to any Agent for the benefit of Lenders), and such
payment or payments or the proceeds of such enforcement or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or setoff had
not occurred.
9.10 Severability.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
9.11 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
9.12 Headings.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.13 Applicable Law.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
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ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.14 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 9.1). Neither Company's
rights or obligations hereunder nor any interest therein may be assigned or
delegated by Company without the prior written consent of all Lenders.
9.15 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN
ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 9.6;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PARTY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN
THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.15 RELATING TO
JURISDICTION AND VENUE SHALL BE BINDING AND EN-
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FORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
9.16 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver
is intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims and all other common law and
statutory claims. Each party hereto acknowledges that this waiver is a material
inducement to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and that each will continue to
rely on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 9.16 AND EXECUTED BY EACH OF
THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
9.17 Confidentiality.
Each Lender shall hold as confidential all non-public information obtained
pursuant to the requirements of this Agreement which has been identified as
confidential by Company in accordance with such Lender's customary procedures
for handling confidential information of this nature and in accordance with
prudent lending or investing practices, it being understood and agreed by
Company that in any event a Lender may make disclosures to (a) Affiliates of
such Lender or disclosures reasonably required by any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer by such Lender of its Loan or any participations therein, (b) to such
of its respective officers, directors, employees, agents, affiliates and
representatives as need to know such information, (c) to the extent requested by
any regulatory authority, (d) to the extent otherwise required by applicable
laws and regulations or by any subpoena or similar legal process or disclosures
required by the National Association of Insurance Commissioners, (e) in
connection with any suit, action or proceeding relating to the enforcement of
its rights hereunder or under the other Loan Documents or (f) to the extent such
information (i) is publicly available
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other than as a result of a breach of this subsection 9.17 or (ii) becomes
available to any Agent or any Lender on a nonconfidential basis from a source
other than Company.
9.18 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements hereto
or in connection herewith 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 an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon (i) the execution of a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent and Paying Agent of written or telephonic notification of
such execution and authorization of delivery thereof and (ii) satisfaction of
the conditions precedent set forth in Section 3.
[Remainder of page intentionally left blank]
84
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
COMPANY:
CLARK REFINING & MARKETING, INC.
By: /s/ Maura J. Clark
------------------------------
Name: Maura J. Clark
Title: Executive Vice President and CFO
Notice Address:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: President
Telephone: (314) 854-9696
Facsimile: (314) 854-1570
S-1
<PAGE>
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, and as Arranger, Syndication Agent and
Administrative Agent
By: /s/ A. Kearns
------------------------
Authorized Signatory
Notice Address:
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
Attention: John Makrinos
Telephone: (212) 902-5977
Facsimile: (212) 357-4597
S-2
<PAGE>
STATE STREET BANK AND TRUST COMPANY OF MISSOURI, N.A.,
as Paying Agent
By: /s/ Robert A. Clasquin
-----------------------------
Robert A. Clasquin
Assistant Vice President
Notice Address:
State Street Bank and Trust Company of Missouri, N.A.
1 Metropolitan Square, 39th Floor
211 North Broadway
St. Louis, Missouri 63107
Attention: Robert A. Clasquin
Telephone: (314) 206-3016
Facsimile: (314) 206-3055
S-3
<PAGE>
EXHIBIT I
---------
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Pursuant to that certain First Amended and Restated Credit Agreement dated
as of August 10, 1998, as amended, supplemented or otherwise modified to the
date hereof (said Credit Agreement, as so amended, supplemented or otherwise
modified, being the "Credit Agreement", the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Clark Refining & Marketing, Inc., a Delaware corporation ("Company"), the
financial institutions listed therein as Lenders ("Lenders"), State Street
Bank and Trust Company of Missouri, N.A., as paying agent (the "Paying
Agent"), and Goldman Sachs Credit Partners L.P., as Arranger, Syndication Agent
and Administrative Agent, this represents Company's request to borrow from
Lenders, in accordance with their applicable Pro Rata Shares, as follows:
1. Date of borrowing: ___________________, _________
-----------------
2. Amount of borrowing: $___________________
-------------------
3. Interest rate: Eurodollar Rate Loans with an initial Interest Period
------------- determined in accordance with the Credit Agreement
4. The borrowing shall be deposited into the account of Company as
follows:
The proceeds of such Loans are to be deposited in Company's account at
Paying Agent.
The undersigned officer, to the best of his or her knowledge, and Company
certify that:
(i) The representations and warranties of Company contained in the
Credit Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof to the same extent as though
made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties were true and correct in all
material respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result from the
consummation of the borrowing contemplated hereby that would constitute an
Event of Default or a Potential Event of Default; and
I-1
<PAGE>
(iii) Company has performed in all material respects all agreements
and satisfied all conditions which the Credit Agreement provides shall be
performed or satisfied by it on or before the date hereof.
DATED: ____________________ CLARK REFINING & MARKETING, INC.
By:__________________________________________
Name:
Title:
I-2
<PAGE>
EXHIBIT II
[FORM OF NOTE]
CLARK REFINING & MARKETING, INC.
PROMISSORY NOTE DUE NOVEMBER 15, 2004
$[1] New York, New York
November 21, 1997
FOR VALUE RECEIVED, CLARK REFINING & MARKETING, INC., a Delaware
corporation ("Company"), promises to pay to [2] ("Payee") or its registered
assigns the principal amount of [3] ($[1]) in the installments referred to
below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
First Amended and Restated Credit Agreement dated as of August 10, 1998 by and
among Company, the financial institutions listed therein as Lenders, State
Street Bank and Trust Company of Missouri, N.A., as Paying Agent, and Goldman
Sachs Credit Partners L.P., as Arranger, Syndication Agent and Administrative
Agent, (said Credit Agreement, as it may be amended, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
Company shall make principal payments on this Note in the installments as
set forth in the Credit Agreement, commencing on November 15, 2003 and ending on
November 15, 2004. Each such installment shall be due on the date specified in
the Credit Agreement and in an amount determined in accordance with the
provisions thereof; provided that the last such installment shall be in an
amount sufficient to repay the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon.
This Note is one of Company's "Notes" in the aggregate principal amount
of $[4] and is issued pursuant to and entitled to the benefits of the Credit
Agreement, to which reference is hereby made for a more complete statement of
the terms and conditions under
- ---------------------------
[1] Insert amount of Lender's Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Loan in words.
[4] Insert aggregate amount of all Loans in numbers.
II-1
<PAGE>
which the Loan evidenced hereby was made and is to be repaid. [Insert for
Existing Lenders only: This Note is an amendment and restatement of the Note (as
defined in the 1997 Credit Agreement) which was issued by Company to Payee in
accordance with the terms of the 1997 Credit Agreement.]
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Paying Agent, recorded in the Register and
a copy thereof delivered to the Company as provided in subsection 9.1B(ii) of
the Credit Agreement, Company and Paying Agent shall be entitled to deem and
treat Payee as the owner and holder of this Note and the Loan evidenced hereby.
Payee hereby agrees, by its acceptance hereof, that before disposing of this
Note or any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; provided, however, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(ii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner provided
in the Credit Agreement.
II-2
<PAGE>
This Note is subject to restrictions on transfer or assignment as provided
in subsections 9.1 and 9.14 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this Note
or the Credit Agreement shall alter or impair the obligations of Company, which
are absolute and unconditional, to pay the principal of and interest on this
Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 9.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed and
delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
CLARK REFINING & MARKETING, INC.
By: ____________________________
Name:
Title:
II-3
<PAGE>
EXHIBIT III
[FORM OF OPINION OF MAYER, BROWN & PLATT]
November 21, 1997
Goldman Sachs Credit Partners L.P.,
as Arranger, Syndication Agent
and Administrative Agent
85 Broad Street
New York, New York 10004
State Street Bank and Trust
Company of Missouri, N.A.
as Paying Agent,
1 Metropolitan Square, 39th Floor
211 North Broadway
St. Louis Missouri 63102
and
The Lenders party from time
to time to the Credit Agreement
referred to below
Re: Credit Agreement dated as of November 21, 1997 among Clark Refining &
Marketing, Inc., the financial institutions listed therein as Lenders,
State Street Bank and Trust Company of Missouri, N.A., as paying
agent, and Goldman Sachs Credit Partners L.P., as Arranger,
Syndication Agent and Administrative Agent
Ladies and Gentlemen:
We have acted as counsel to Clark Refining & Marketing, Inc., a Delaware
corporation ("Company"), in connection with that certain Credit Agreement
dated as of November 21, 1997 (the "Credit Agreement") among Company, the
financial institutions listed therein as Lenders ("Lenders"), and State Street
Bank and Trust Company of Missouri, N.A., as paying agent, and Goldman Sachs
Credit Partners L.P., as Arranger, Syndication Agent and Administrative Agent
("Agent"). This opinion is rendered to you in compliance with subsection 3.6A
of the Credit Agreement. Capitalized terms used herein without definition have
the same meanings as in the Credit Agreement.
In our capacity as such counsel, we have examined originals, or copies
identified to our satisfaction as being true copies, of such records, documents
or other instruments as in
III-1
<PAGE>
our judgment are necessary or appropriate to enable us to render the opinions
expressed below. These records, documents and instruments included the
following:
(a) The Credit Agreement;
(b) The Notes delivered today (the "Notes");
(c) The Certificate of Incorporation of Company, as amended to date;
(d) The Bylaws of Company, as amended to date;
(e) All records of proceedings and actions of the Board of Directors
of Company relating to the Credit Agreement and the transactions
contemplated thereby;
(f) The Certificate of Incorporation of Clark Pipeline Company, as
amended to date;
(g) The Bylaws of Clark Pipeline Company, as amended to date;
(h) The Fixed Rate Senior Note Indenture;
(i) The Subordinated Note Indenture (and, together with the Fixed Rate
Senior Note Indenture, the "Indentures");
(j) The Preliminary Offering Circular dated November 6, 1997 prepared
by Company in connection with the issuance of the New Notes;
(k) The Offering Circular dated November __, 1997 prepared by Company
in connection with the issuance of the New Notes;
(l) The New Notes;
(m) The Registration Rights Agreement; and
(n) The Purchase Agreement.
Our opinion is limited to the laws of the State of New York the State
of Illinois, the General Corporation Law of the State of Delaware and the
federal law of the United States of America. In rendering our opinion, we are
relying, as to certain matters, on information contained in certificates of
officers of Company. We believe that we, Agents and Lenders are justified in
relying upon such certificates and on certificates and reports of public
officials. A copy of each such certificate is attached hereto as Annex A.
III-2
<PAGE>
On the basis of the foregoing, and in reliance thereon, and subject to the
limitations, qualifications and exceptions set forth below, we are of the
opinion that:
(i) Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Offering Circular;
(ii) Company has an authorized equity capitalization as set forth in
the Offering Circular, and all of the issued shares of capital stock of
Company have been duly and validly authorized and issued and are fully paid
and non-assessable, and all of the issued shares of Company are owned
beneficially and of record by Clark USA, Inc.;
(iii) Company has been duly qualified as a foreign corporation for
the transition of business and is in good standing under the laws of each
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any
such jurisdiction;
(iv) Clark Pipe Line Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation with power and authority (corporate and
other) to own in properties and conduct its business as described in the
Offering Circular; and all of the issued shares of capital stock of such
Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable, and are owed directly or indirectly by Clark USA, Inc.,
free and clear of all liens, encumbrances, equities or claims;
(v) To the best of our knowledge and other than as set forth in the
Offering Circular, there are no legal or governmental proceedings pending
or threatened to which Company or any of its Subsidiaries is a party or of
which any property of Company or any of its Subsidiaries is the subject
which, if determined adversely to Company or any of its Subsidiaries, would
individually or in the aggregate have a material adverse effect on the
consolidated financial position, stockholders' equity or results of
operations of Company and its Subsidiaries;
(vi) Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Purchase Agreement,
the Indentures, the Credit Agreement and the Notes, including the corporate
power and authority to issue, sell and deliver the New Notes and to issue
the Notes;
(vii) The Purchase Agreement has been duly authorized, executed and
delivered by Company;
III-3
<PAGE>
(viii) All of the New Notes have been duly authorized, executed,
issued and delivered and (assuming the due authentication thereof by the
trustee in accordance with the terms of the applicable Indenture)
constitute valid and legally binding obligations of Company entitled to the
benefits provided by the applicable Indenture; and the New Notes and the
Indentures conform in all material respect to the descriptions thereof in
the Offering Circular;
(ix) The Indentures have been duly authorized, executed and delivered
Company and (assuming the due authorization, execution and delivery thereof
by the trustee party thereto) constitute valid and legally binding
obligations of Company enforceable in accordance with their terms, subject
to the effect of bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights, and to
general principles of equity (whether considered in a proceeding in equity
or at law);
(x) The Credit Agreement has been duly authorized, executed and
delivered Company and (assuming the due authorization, execution and
delivery thereof by the Agents and Lenders) constitutes valid and legally
binding obligations of Company enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights,
and to general principles of equity (whether considered in a proceeding in
equity or at law);
(xi) All of the Notes have been duly authorized, executed, issued and
delivered and constitute valid and legally binding obligations of Company
enforceable in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights, and to general
principles of equity (whether considered in a proceeding in equity or at
law);
(xii) Each of the Indentures is in a form which would meet the
requirements for qualification under the Trust Indenture Act;
(xiii) The issuance and sale of the New Notes, the issuance of the
Notes and the compliance by Company with all of the provisions of the New
Notes, the New Notes, the Credit Agreement, the Purchase Agreement and the
Registration Rights Agreement and the consummation of the transactions
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, sale/leaseback agreement,
loan agreement or other financing agreement or any other agreement or
instrument known to such counsel to which Company or any of its
Subsidiaries is a party or by which Company or any of its Subsidiaries is
bound or to which any of the property or assets of Company or any of its
Subsidiaries is subject, nor will such actions result in any violation of
the provisions of the Certificate of Incorporation or By-laws of Company or
any statute, order, rule or regulation known to such counsel
III-4
<PAGE>
of any court or governmental agency or body having jurisdiction over
Company or any of its Subsidiaries or any of their properties;
(xiv) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body is
required for the issuance and sale of the New Notes, the issuance of the
Notes or the consummation by Company of the transactions contemplated by
the Credit Agreement, the Purchase Agreement or the Indentures (assigning
the offer and sale of the New Notes by Company to the Purchasers and
reorder and resale of the New Notes by the Purchasers in the manner
contemplated in the Purchase Agreement and the Offering Circular), except
(1) such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and resale of the New Notes by the
Purchasers, (2) such consents, approvals, authorizations, registrations or
qualifications as may be required under the Act, the Trust Indenture Act or
state securities or Blue sky laws in connection with the Exchange Offers
contemplated by the Offering Circular or in connection with the
Registration Rights Agreement, and (3) such consents, approvals,
authorizations, registrations or qualifications as have been obtained or
made;
(xv) Neither the registration of the Senior Notes under the Act, nor
the qualification of an indenture under the Trust Indenture Act of 1939
with respect thereto, is required for the offer and sale of the New Notes
by Company to the Purchasers or the reorder and resale of the New Notes by
the Purchasers in the manner contemplated in the Purchase Agreement and the
Offering Circular, other than any registration or qualification that may be
required in connection with the Exchange Offer contemplated by the Offering
Circular or in connection with the Registration Rights Agreement;
(xvi) Neither the registration of the Subordinated Notes under the
Act, nor the qualification of an indenture under the Trust Indenture Act of
1939 with respect thereto, is required for the offer and sale of the
Subordinated Notes by Company to the Purchasers or the reoffer and resale
of the Subordinated Notes by the Purchasers in the manner contemplated in
the Purchase Agreement and the Offering Circular, other than any
registration or qualification that may be required in connection with the
Exchange Offer contemplated by the Offering Circular or in connection with
the Registration Rights Agreement;
(xvii) Company is not an "investment company" within the meaning
of, or is registered or otherwise required to be registered under, the
Investment Company Act;
(xviii) The statements in the Offering Circular under the captions
"Description of Certain Debt Instruments," "Description of the Notes,"
"Registration Covenant; Exchange Offer," "Certain U.S. Federal Income
Tax Considerations" and "Underwriting," insofar as such statements
constitute summaries of the provisions of
III-5
<PAGE>
Company's existing debt, the New Notes, the Purchase Agreement and
Registration Rights Agreement, or insofar as such statements purport to
summarize federal laws of the United States referred to thereunder, as the
case may be, fairly summarize the matters referred to therein;
(xix) The making of the Loans and the application of the proceeds
thereof as provided in the Credit Agreement do not violate Regulation G, T,
U or X of the Board of Governors of the Federal Reserve System;
(xx) It is not necessary in connection with the execution and delivery
of the Notes to Lenders to register the Notes or the Loans under the
Securities Act of 1933, as amended, or to qualify any indenture in respect
thereof under the Trust Indenture Act of 1939, as amended; and
(xxi) All Obligations under the Credit Agreement are within the
definition of "Senior Debt" contained in the subordination provisions of
the Senior Subordinat ed Notes.
This opinion is rendered only to Agents and Lenders and is solely for their
benefit in connection with the above transactions. This opinion may not be
relied upon by Agents or Lenders for any other purpose, or quoted to or relied
upon by any other person, firm or corporation for any purpose without our prior
written consent.
Very truly yours,
III-6
<PAGE>
EXHIBIT IV
[FORM OF OPINION OF O'MELVENY & MYERS LLP]
[O'M&M Letterhead]
August
1998
317,790-145
[doc ID]
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
State Street Bank and Trust
Company of Missouri, N.A.
as Paying Agent,
1 Metropolitan Square, 39th Floor
211 North Broadway
St. Louis Missouri 63102
and
The Lenders Party to the Credit
Agreement Referenced Below
Re: Loans to Clark Refining & Marketing, Inc.
-----------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Goldman Sachs Credit Partners L.P., as Arranger
and Syndication Agent, and Bankers Trust Company, as Administrative Agent (in
such capacity, "Agent"), in connection with the preparation and delivery of a
First Amended and Restated Credit Agreement dated as of August 10, 1998 (the
"Credit Agreement") among Clark Refining & Marketing, Inc., a Delaware
corporation ("Company"), the financial institutions listed therein as lenders,
State Street Bank and Trust Company of Missouri, N.A., as paying agent, and
Goldman Sachs Credit Partners L.P., as Arranger, Syndication Agent and
Administrative Agent ("Agent") and in connection with the preparation and
delivery of certain related documents.
IV-1
<PAGE>
Page 2 -- Goldman Sachs Credit Partners L.P. -- August , 1998
We have participated in various conferences with representatives of Company
and Agent and conferences and telephone calls with Simpson Thacher & Bartlett,
counsel to Company, and with your representatives, during which the Credit
Agreement and related matters have been discussed, and we have also participated
in the meeting held on the date hereof (the ``Closing'') incident to the funding
of the initial loans made under the Credit Agreement. We have reviewed the
forms of the Credit Agreement and the exhibits thereto, including the forms of
the promissory notes annexed thereto (the ``Notes''), and the opinions of
Simpson Thacher & Bartlett (the ``Opinion'') and the officers' certificates and
other documents delivered at the Closing. We have assumed the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
or copies and the due authority of all persons executing the same, and we have
relied as to factual matters on the documents that we have reviewed.
Although we have not independently considered all of the matters covered by
the Opinion to the extent necessary to enable us to express the conclusions
therein stated, we believe that the Credit Agreement and the exhibits thereto
are in substantially acceptable legal form and that the Opinion and the
officers' certificates and other documents delivered in connection with the
execution and delivery of, and as conditions to the making of the initial loans
under, the Credit Agreement and the Notes are substantially responsive to the
requirements of the Credit Agreement.
Respectfully submitted,
IV-2
<PAGE>
EXHIBIT V
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and
between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to that certain Credit Agreement described in the Schedule
of Terms (said Credit Agreement, as amended, supplemented or otherwise modified
to the date hereof and as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Credit Agreement", the terms defined
therein and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the Schedule
of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitment and outstanding Loan, if any, which represents, as of the
Settlement Date, the percentage interest specified in Item 3 of the Schedule of
Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "Assigned Share").
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loan included within the Assigned Share, such payment to be made by
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants that Item 3 of the Schedule of
Terms correctly sets forth the amount of the Commitment, the outstanding Loan
and the Pro Rata Share corresponding to the Assigned Share.
V-1
<PAGE>
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents, and shall be deemed to have made all of the covenants and agreements
contained in the Loan Documents, arising out of or otherwise related to the
Assigned Share, and (ii) Assignor shall be absolutely released from any of such
obligations, covenants and agreements assumed or made by Assignee in respect of
the Assigned Share. Assignee hereby acknowledges and agrees that the agreement
set forth in this Section 1(d) is expressly made for the benefit of Company,
Agent, Assignor and the other Lenders and their respective successors and
permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitment, the outstanding Loan
and the Pro Rata Share corresponding to the Assigned Share as set forth in Item
3 of the Schedule of Terms, and (iii) from and after the Settlement Date, Paying
Agent shall make all payments under the Credit Agreement in respect of the
Assigned Share (including all payments of principal and accrued but unpaid
interest with respect thereto) (A) in the case of any such interest that shall
have accrued prior to the Settlement Date, to Assignor, and (B) in all other
cases, to Assignee; provided that Assignor and Assignee shall make payments
directly to each other to the extent necessary to effect any appropriate
adjustments in any amounts distributed to Assignor and/or Assignee by Agent
under the Loan Documents in respect of the Assigned Share in the event that, for
any reason whatsoever, the payment of consideration contemplated by Section 1(b)
occurs on a date other than the Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and beneficial
owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by Assignor to Assignee or by or on behalf
of Company or any of its Subsidiaries to Assignor or Assignee in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall Assignor be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the
V-2
<PAGE>
Loans or as to the existence or possible existence of any Event of Default or
Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee; that
it has experience and expertise in the making of loans such as the Loans; that
it has acquired the Assigned Share for its own account in the ordinary course of
its business and without a view to distribution of the Loans within the meaning
of the Securities Act or the Exchange Act or other federal securities laws (it
being understood that, subject to the provisions of subsection 9.1 of the Credit
Agreement, the disposition of the Assigned Share or any interests therein shall
at all times remain within its exclusive control); and that it has received,
reviewed and approved a copy of the Credit Agreement (including all Exhibits and
Schedules thereto).
(d) Assignee represents and warrants that it has received from Assignor
such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty
or responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including,
V-3
<PAGE>
if applicable, any party required to evidence its consent to or acceptance of
this Agreement) against whom enforcement of such change, waiver, discharge or
termination is sought.
(c) Unless otherwise specifically provided herein, any notice or other
communica tion herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 9.6 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) in the
event Assignee is a Non-US Lender (as defined in subsection 2.7B(iii)(a) of the
Credit Agreement), the delivery by Assignee to Paying Agent of such forms,
certificates or other evidence with respect to United States federal income tax
withholding matters as Assignee may be required to deliver to Paying Agent
pursuant to said subsection 2.7B(iii)(a), (iii) the execution of a counterpart
hereof by Paying Agent as evidence of its acceptance hereof in accordance with
subsection 9.1B(ii) of
V-4
<PAGE>
the Credit Agreement, (iv) the receipt by Paying Agent of originals or
telefacsimiles of the counterparts described above and authorization of delivery
thereof, (v) the delivery of a copy hereof to Company, and (vi) the recordation
by Paying Agent in the Register of the pertinent information regarding the
assignment effected hereby in accordance with subsection 9.1B(ii) of the Credit
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
V-5
<PAGE>
SCHEDULE OF TERMS
1. Borrower: Clark Refining & Marketing, Inc.
2. Name and Date of Credit Agreement: First Amended and Restated Credit
Agreement dated as of August 10, 1998 by and among Clark Refining &
Marketing, Inc., the financial institutions listed therein as Lenders,
State Street Bank and Trust Company of Missouri, N.A., as paying agent,
and Goldman Sachs Credit Partners L.P., as Arranger, Syndication Agent
and Administrative Agent.
3. Amounts:
(a) Aggregate Commitments of all Lenders: $
--------
(b) Assigned Share/Pro Rata Share: %
--------
(c) Amount of Assigned Share of Commitments: $
--------
(d) Amount of Assigned Share of Loans: $
--------
4. Settlement Date: ,
------------ ----
5. Payment Instructions:
ASSIGNOR: ASSIGNEE:
------------------------------ ------------------------------
------------------------------ ------------------------------
------------------------------ ------------------------------
Attention: Attention:
------------------- -------------------
Reference: Reference:
------------------- -------------------
6. Notice Addresses:
ASSIGNOR: ASSIGNEE:
------------------------------ ------------------------------
------------------------------ ------------------------------
------------------------------ ------------------------------
------------------------------ ------------------------------
7. Signatures:
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignor as Assignee
By: By:
-------------------------- --------------------------
Title: Title:
----------------------- -----------------------
V-6
<PAGE>
Accepted in accordance with subsection 9.1B(ii) of the Credit Agreement
STATE STREET BANK AND TRUST COMPANY OF
MISSOURI, N.A., as Paying Agent
By:
----------------------------------
Title:
-------------------------------
V-7
<PAGE>
EXHIBIT VI
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain First Amended and Restated Credit
Agreement dated as of August 10, 1998 (said Credit Agreement, as amended,
supplemented or otherwise modified to the date hereof, being the "Credit
Agreement") by and among Clark Refining & Marketing, Inc., a Delaware
corporation, the financial institutions listed therein as Lenders, State Street
Bank and Trust Company of Missouri, N.A., as paying agent, and Goldman Sachs
Credit Partners L.P., as Arranger, Syndication Agent and Administrative Agent.
Pursuant to subsection 2.7B(iii) of the Credit Agreement, the undersigned hereby
certifies that it is not a "bank" or other Person described in Section 881(c)(3)
of the Internal Revenue Code of 1986, as amended.
[NAME OF LENDER]
By:
-----------------------------------
Name:
Title:
VI-1
<PAGE>
SCHEDULE 2.1
LENDERS' COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
Lender Commitment Pro Rata Share
====================================================================
<S> <C> <C>
Goldman Sachs Credit Partners L.P. $125,000,000 100%
--------------------------------------------------------------------
TOTAL $100%
====================================================================
</TABLE>
Schedule 2.1-1
<PAGE>
CLARK REFINING & MARKETING, INC. AND SUBSIDIARY
Exhibit 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
------- ------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges
Pretax earnings from continuing
operations $ 855 $27,806 ($41,200) ($52,441) ($26,278) $12,162 ($20,396)
Fixed charges 43,205 44,690 50,827 54,956 61,366 28,085 30,601
Capitalized interest (2,776) (2,409) (1,404) (1,033) (1,392) (647) (993)
Other (a) 197 (468) (1,413) (136) (1,289) (120) 1,621
------- ------- -------- -------- -------- ------- --------
$41,481 $69,619 $6,810 $1,346 $32,407 $39,480 $10,833
======= ======= ======== ======== ======== ======= ========
Fixed Charges
Gross interest expense (b) $42,072 $42,157 $47,394 $49,455 $55,729 $24,904 $27,790
Interest factor attributable to rent
expense 1,133 2,533 3,433 5,501 5,637 3,181 2,811
------- ------- -------- -------- -------- ------- --------
$43,205 $44,690 $50,827 $54,956 $61,366 $28,085 $30,601
======= ======= ======== ======== ======== ======= ========
Ratio of Earnings to Fixed Charges 0.96 1.56 0.13 0.02 0.53 1.41 0.35
----------------
(a) Represents adjustments to recognize only distributed earnings for less than
50% owned companies accounted for under the equity method.
(b) Represents interest expense on long-term and short-term debt and
amortization of debt discount and debt issue costs.
=================================================================================================================
Coverage of FC by Earnings ($1,724) $24,929 ($44,017) ($53,610) ($28,959) $11,395 ($19,768)
</TABLE>
<PAGE>
Exhibit 15.1
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
September 25, 1998
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Clark Refining & Marketing, Inc. and subsidiaries for the six
month period ended June 30, 1998, as indicated in our reports dated July 31,
1998; because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above is being used in this
Registration Statement.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
September 25, 1998
<PAGE>
EXHIBIT 21.1
Clark Port Arthur Pipeline Company, a Delaware corporation.
Clark Investments, Inc., a Nevada corporation.
<PAGE>
Exhibit 23.1
[Letterhead of PricewaterhouseCoopers LLP]
To the Board of Directors of
Clark Refining & Marketing, Inc.:
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 4, 1997 on our audits of the consolidated financial
statements of Clark Refining & Marketing, Inc. We also consent to the reference
to our Firm under the caption "Experts".
PricewaterhouseCoopers LLP
St. Louis, Missouri
September 25, 1998
<PAGE>
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Clark Refining &
Marketing, Inc. on Form S-4 of our report dated February 6, 1998, appearing in
the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
September 25, 1998
<PAGE>
Exhibit 23.4
TURNER, MASON & COMPANY
Consulting Engineers
CONSENT OF TURNER, MASON & COMPANY
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Clark Refining & Marketing, Inc. ("Clark")
of our Opinion and Summary Report dated June 27, 1998 relating to the
Acquisition of BP's Lima Refinery by Clark, which appears in such Prospectus.
Turner, Mason & Company
By: /s/ M. M. Turner
------------------------
Dallas, Texas
September 23, 1998
Suite 2920, L.B. 38 . 2121 San Jacinto . Dallas, Texas 75201
Telephone: 214/754-0898 Fax: 214/754-5915 - Data: 214/754-8738
<PAGE>
EXHIBIT 25.1
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2) ______________
------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 13-3386485
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
--------------------------
CLARK REFINING & MARKETING, INC.
(Exact name of Registrant as specified in its charter)
Delaware 43-1491230
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
8182 MARYLAND AVENUE
ST. LOUIS, MISSOURI 63105
(314) 854-9696
(Address, including zip code of principal executive offices)
8 5/8 SENIOR NOTES DUE 2008
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment
of the Organization Certificate of Bankers Trust Company
dated June 21, 1995 - Incorporated herein by reference
to Exhibit 1 filed with Form T-1 Statement, Registration
No. 33-65171, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated
March 20, 1996, incorporate by referenced to Exhibit 1
filed with Form T-1 Statement, Registration No. 333-
25843 and Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated June 19,
1997, copy attached.
Exhibit 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed with
Form T-1 Statement, Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise corporate trust
powers - Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No. 33-
21047.
Exhibit 4 - Existing By-Laws of Bankers Trust Company, as amended on
November 18, 1997. Copy attached.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration
No. 22-18864.
Exhibit 7 - The latest report of condition of Bankers Trust Company
dated as of June 30, 1998. Copy attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 21st day
of September, 1998.
BANKERS TRUST COMPANY
By: Susan Johnson
------------------------
/s/ Susan Johnson/s/
Assistant Vice President
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section 8005 of the
Banking Law," dated June 19, 1997, providing for an increase in authorized
capital stock from $1,601,666,670 consisting of 100,166,667 shares with a par
value of $10 each designated as Common Stock and 600 shares with a par value of
$1,000,000 each designated as Series Preferred Stock to $2,001,666,670
consisting of 100,166,667 shares with a par value of $10 each designated as
Common Stock and 1,000 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York,
this 27th day of June in the Year of our Lord
------ ------
one thousand nine hundred and ninety-seven.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into One
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 600 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667)
shares with a par value of $10 each designated as Common Stock and 1000
shares with a par value of One Million Dollars ($1,000,000) each designated
as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 19th
day of June, 1997.
James T. Byrne, Jr.
-------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
-------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
-------------------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
Sandra L. West
------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
NOVEMBER 18, 1997
Bankers Trust Company
New York
<PAGE>
BY-LAWS
of
Bankers Trust Company
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be held
at the office of the Company in the Borough of Manhattan, City of New York, on
the third Tuesday in January of each year, for the election of directors and
such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as secretary
of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate powers
exercised by a Board of Directors consisting of such number of directors, but
not less than ten nor more than twenty-five, as may from time to time be fixed
by resolution adopted by a majority of the directors then in office, or by the
stockholders. In the event of any increase in the number of directors,
additional directors may be elected within the limitations so fixed, either by
the stockholders or within the limitations imposed by law, by a majority of
directors then in office. One-third of the number of directors, as fixed from
time to time, shall constitute a quorum. Any one or more members of the Board
of Directors or any Committee thereof may participate in a meeting of the Board
of Directors or Committee thereof by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
<PAGE>
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who shall have attained age 72 shall be eligible to be elected or re-
elected a director. Such director may, however, remain a director of the
Company until the next annual meeting of the stockholders of Bankers Trust New
York Corporation (the Company's parent) so that such director's retirement will
coincide with the retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board
of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for the
balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence, such
other director as the Board of Directors from time to time may designate shall
preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time
to time on the third Tuesday of the month. If the day appointed for holding
such regular meetings shall be a legal holiday, the regular meeting to be held
on such day shall be held on the next business day thereafter. Special meetings
of the Board of Directors may be called upon at least two day's notice whenever
it may be deemed proper by the Chairman of the Board or, the Chief Executive
Officer or, in their absence, by such other director as the Board of Directors
may have designated pursuant to Section 3 of this Article, and shall be called
upon like notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of not
less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may act
only by the concurrent vote of not less than one-third of its members, at least
one of whom must be a director other than an officer. Any one or more directors,
even though not members of the Executive Committee, may attend any meeting of
the Committee, and the member or members of the Committee present, even though
less than a quorum, may designate any one or more of such directors as a
substitute or substitutes for any absent member or members of the Committee, and
each such substitute or substitutes shall be counted for quorum, voting, and all
other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from time
to time fix a quorum for meetings of the Committee. Such Committee shall
conduct the annual directors' examinations of the Company as required by the New
York State Banking Law; shall review the reports of all examinations made of the
Company by public authorities and report thereon to the Board of Directors; and
shall report to the Board of Directors such other matters as it deems advisable
with respect to the Company, its various departments and the conduct of its
operations.
In the performance of its duties, the Audit Committee may employ or retain, from
time to time, expert assistants, independent of the officers or personnel of the
Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals thereof
shall meet at other times on call of the Chairman.
<PAGE>
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice Chairmen,
one or more Executive Vice Presidents, one or more Senior Managing Directors,
one or more Managing Directors, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, one or more General Managers, a
Secretary, a Controller, a Treasurer, a General Counsel, one or more Associate
General Counsels, a General Auditor, a General Credit Auditor, and one or more
Deputy Auditors, who need not be directors. The officers of the corporation may
also include such other officers or assistant officers as shall from time to
time be elected or appointed by the Board. The Chairman of the Board or the
Chief Executive Officer or, in their absence, the President, the Senior Vice
Chairman or any Vice Chairman, may from time to time appoint assistant officers.
All officers elected or appointed by the Board of Directors shall hold their
respective offices during the pleasure of the Board of Directors, and all
assistant officers shall hold office at the pleasure of the Board or the
Chairman of the Board or the Chief Executive Officer or, in their absence, the
President, the Senior Vice Chairman or any Vice Chairman. The Board of
Directors may require any and all officers and employees to give security for
the faithful performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer
of the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer by
law or by these By-Laws, or which usually attach or pertain to such office. The
other officers shall have, subject to the supervision and direction of the Board
of Directors or the Executive Committee or the Chairman of the Board or, the
Chief Executive Officer, the powers vested by law or by these By-Laws in them as
holders of their respective offices and, in addition, shall perform such other
duties as shall be assigned to them by the Board of Directors or the Executive
Committee or the Chairman of the Board or the Chief Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these By-
Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records
and premises of the Company and shall delegate such authority to his
subordinates. He shall have the duty to report to the Audit Committee on all
matters concerning the internal audit
<PAGE>
program and the adequacy of the system of internal controls of the Company which
he deems advisable or which the Audit Committee may request. Additionally, the
General Auditor shall have the duty of reporting independently of all officers
of the Company to the Audit Committee at least quarterly on any matters
concerning the internal audit program and the adequacy of the system of internal
controls of the Company that should be brought to the attention of the directors
except those matters responsibility for which has been vested in the General
Credit Auditor. Should the General Auditor deem any matter to be of special
immediate importance, he shall report thereon forthwith to the Audit Committee.
The General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved from
time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of the
Board, the Chief Executive Officer or any person authorized for this purpose by
the Chief Executive Officer, shall appoint or engage all other employees and
agents and fix their compensation. The employment of all such employees and
agents shall continue during the pleasure of the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive Officer
or any such authorized person; and the Board of Directors, the Executive
Committee, the Chairman of the Board, the Chief Executive Officer or any such
authorized person may discharge any such employees and agents at will.
<PAGE>
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018
of the New York Banking Law, indemnify any person who is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by or
in the right of the Company to procure a judgment in its favor and an action by
or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is servicing or
served in any capacity at the request of the Company by reason of the fact that
he, his testator or intestate, is or was a director or officer of the Company,
or is serving or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement, and costs, charges and expenses,
including attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final adjudication
adverse to the director or officer establishes that (i) his acts were committed
in bad faith or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so adjudicated, or (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief Executive
Officer or the
<PAGE>
President, and (ii) only if and to the extent that, after making such efforts as
the Chairman of the Board, the Chief Executive Officer or the President shall
deem adequate in the circumstances, such person shall be unable to obtain
indemnification from such other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement
of expense pursuant to this Article V (i) is a contract right pursuant to which
the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant is
not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Section 1 shall be entitled to indemnification only as provided in Sections 1
and 3, notwithstanding any provision of the New York Banking Law to the
contrary.
<PAGE>
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the Company
and such officers as the Chairman of the Board, the Chief Executive Officer or
the Secretary may from time to time direct in writing, to be affixed to
certificates of stock and other documents in accordance with the directions of
the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the books
of the Company by the registered holder in person, or by power of attorney, duly
executed, witnessed and filed with the Secretary or other proper officer of the
Company, on the surrender of the certificate or certificates of such shares
properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE>
I, Susan Johnson, Assistant Vice President of Bankers Trust Company, New York,
New York, hereby certify that the foregoing is a complete, true and correct copy
of the By-Laws of Bankers Trust Company, and that the same are in full force and
effect at this date.
/s/ Susan Johnson
--------------------------
ASSISTANT TREASURER
DATED: September 21, 1998
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: 0 0 6 2 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS / / / / / / / / / / / / / / / / / /
1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin (1).............. 0081 1,868,000 1.a.
b. Interest-bearing balances (2)....................................... 0071 2,041,000 1.b.
2. Securities: / / / / / / / / / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A).......... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........ 1773 7,419,000 2.b.
3. Federal funds sold and securities purchased under agreements to resell.. 1350 41,837,000 3.
4. Loans and lease financing receivables: / / / / / / / / / / / / / / / / / /
a. Loans and leases, net of unearned income (from Schedule RC-C)
RCFD 2122 20,707,000 / / / / / / / / / / / / / / / / / / 4.a
b. LESS: Allowance for loan and lease losses.... RCFD 3123 629,000 / / / / / / / / / / / / / / / / / / 4.b
c. LESS: Allocated transfer risk reserve........ RCFD 3128 0 / / / / / / / / / / / / / / / / / / 4.c
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus 4.b and 4.c).................. 2125 20,078,000 4.d.
5. Trading Assets (from schedule RC-D)..................................... 3545 49,665,000 5.
6. Premises and fixed assets (including capitalized leases)................ 2145 848,000 6.
7. Other real estate owned (from Schedule RC-M)........................... 2150 180,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)................................................... 2130 92,000 8.
9. Customers' liability to this bank on acceptances outstanding........... 2155 512,000 9.
10. Intangible assets (from Schedule RC-M)................................. 2143 270,000 10.
11. Other assets (from Schedule RC-F)...................................... 2160 6,442,000 11.
12. Total assets (sum of items 1 through 11)............................... 2170 131,252,000 12.
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/98 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: DCERT: 00623 Page RC-2
City, State Zip: New York, NY 10006 12
FDIC Certificate No.: |0|0|6|2|3|
-----------
Schedule RC--Continued
-----------------------------------
Dollar Amounts in Thousands | //////// Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES |/////////////////////////// |
13. Deposits: | ////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E.
part 1)........................................................................ RCON 2200 26,791,000 | 13.a.
(1) Noninterest-bearing (1)..........................RCON 6631 3,362,000 | ////////////////////// | 13.a.(1)
(2) Interest-bearing.................................RCON 6636 23,429,000 | ////////////////////// | 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule | ////////////////////// |
RC-E, part II)................................................................. RCFN 2200 22,089,000 13.b.
(1) Noninterest-bearing..............................RCFN 6631 1,810,000 | ////////////////////// | 13.b.(1)
(2) Interest-bearing.................................RCFN 6636 20,279,000 | ////////////////////// | 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 19,274,000 | 14.
15. a. Demand notes issued to the U.S. Treasury....................................... RCON 2840 0 | 15.a.
b. Trading liabilities (from Schedule RC-D)....................................... RCFD 3548 30,729,000 | 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): | ///////////// |
a. With a remaining maturity of one year or less.................................. RCFD 2332 7,891,000 | 16.a.
b. With a remaining maturity of more than one year through three years............ A547 3,576,000 | 16.b.
c. With a remaining maturity of more than three years............................. A548 2,872,000 | 16.c.
17. Not Applicable. | ////////////////////// | 17.
18. Bank's liability on acceptances executed and outstanding.......................... RCFD 2920 512,000 | 18.
19. Subordinated notes and debentures (2)............................................. RCFD 3200 1,534,000 | 19.
20. Other liabilities (from Schedule RC-G)............................................ RCFD 2930 9,202,000 | 20.
21. Total liabilities (sum of items 13 through 20).................................... RCFD 2948 124,470,000 | 21.
22. Not Applicable. | ////////////////////// | 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus..................................... RCFD 3838 1,000,000 | 23.
24. Common stock...................................................................... RCFD 3230 2,001,000 | 24.
25. Surplus (exclude all surplus related to preferred stock).......................... RCFD 3839 540,000 | 25.
26. a. Undivided profits and capital reserves......................................... RCFD 3632 3,693,000 | 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities......... RCFD 8434 (71,000) | 26.b.
27. Cumulative foreign currency translation adjustments............................... RCFD 3284 (381,000) | 27.
28. Total equity capital (sum of items 23 through 27)................................. RCFD 3210 6,782,000 | 28.
29. Total liabilities and equity capital (sum of items 21 and 28)..................... RCFD 3300 131,252,000 | 29.
-------------------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best Number
describes the most comprehensive level of auditing work performed for the bank by -----------------------------
independent external auditors as of any date during 1997.................................... RCFD 6724 N/A | M.1.
-----------------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Including total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
8 5/8% SENIOR NOTES DUE 2008
OF
CLARK REFINING & MARKETING, INC.
Pursuant to the Prospectus dated , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 UNLESS EXTENDED.
TO: BANKERS TRUST COMPANY, AS EXCHANGE AGENT FOR THE 8 5/8% SENIOR NOTES
By Registered or Certified Mail: By Overnight Courier:
BT Services Tennessee, Inc. BT Services Tennessee, Inc.
Attn: Reorganization Unit Corporate Trust & Agency Group
P.O. Box 292737 Attn: Reorganization Unit
Nashville, Tennessee 37229-2737 648 Grassmere Park Road
Nashville, Tennessee 37211
By Hand:
Bankers Trust Company
Corporate Trust & Agency Group
Attn: Reorganization Department
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
By Facsimile:
(615) 835-3701
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of
Transmittal is completed.
<PAGE>
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1998 (the "Prospectus"), of Clark Refining & Marketing, Inc.
(the "Company") and this Letter of Transmittal (the "Letter of Transmittal")
which may be amended from time to time, which together constitute the
Company's offer (the "Exchange Offer") to exchange (i) its 8 5/8% New Senior
Notes due August 15, 2008 (the "New Notes") for an equal principal amount of
its 8 5/8% Senior Notes due August 15, 2008 (the "Old Notes"). The form and
terms of the New Notes are the same as the form and terms of the Old Notes,
except that the New Notes have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and hence will not bear legends
restricting the transfer thereof. The term "Expiration Date" shall mean 5:00
p.m., New York City time, on [ ], 1998 unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the term shall mean the
latest date and time to which the Exchange Offer is extended. Capitalized
terms used but not defined herein have the meaning given to them in the
Prospectus.
The Letter of Transmittal is to be used by Holders of Old Notes if (i)
certificates representing the Old Notes are to be physically delivered to the
Exchange Agent herewith by such Holder or (ii) tender of Old Notes is to be
made by book-entry transfer to the Exchange Agent's account at the Depository
Trust Company ("DTC") pursuant to the procedures set forth in the Prospectus
under the caption "The Exchange Offer--Procedures for Tendering" by any
financial institution that is a participant in the DTC system and whose name
appears on a security position listing as the owner of Old Notes and
instructions are not being transmitted through the DTC Automated Tender Offer
Program ("ATOP"), or (iii) tender of the Old Notes is to be made according to
the guaranteed delivery procedures described in the Prospectus under the
caption "The Exchange Offer--Guaranteed Delivery Procedures."
Holders of Old Notes who are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptance to DTC, which will verify the
acceptance and execute a book-entry delivery of the Exchange Agent's account
at DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of this Letter of Transmittal
by the participant identified in the Agent's Message. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC
has received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce such
Letter of Transmittal against such participant.
Delivery of this Letter of Transmittal or other documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person (i) in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder or (ii) whose Old Notes are held of record by DTC who desires to
deliver such Old Notes by book-entry transfer to DTC. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange Offer.
Holders who wish to tender their Old Notes must complete this letter in its
entirety.
2
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE APPLICABLE BOX OR BOXES ENTITLED
"DESCRIPTION OF OLD NOTES" AND BY SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOXES BELOW.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE APPLICABLE BOX OR BOXES
DESCRIPTION OF OLD NOTES
<TABLE>
- -------------------------------------------------------
<CAPTION>
NAMES AND
ADDRESS(ES)
OF PRINCIPAL
REGISTERED AGGREGATE AMOUNT TENDERED
HOLDER(S) PRINCIPAL (MUST
(PLEASE AMOUNT BE IN INTEGRAL
FILL IN, IF CERTIFICATE REPRESENTED BY MULTIPLES
BLANK) NUMBER(S)* CERTIFICATE(S) OF $1,000)**
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
<S> <C> <C> <C>
Total
- -------------------------------------------------------
</TABLE>
*Need not be completed by Holders tendering by book-entry transfer.
**Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers
and principal amounts on a separate signed schedule and affix the list to
this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount. All other
tenders must be integral multiples of $1,000.
3
<PAGE>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered, principal amount not tendered,
or New Notes issued in exchange or New Notes issued in exchange
for Old Notes accepted for for Old Notes accepted for
exchange, are to be issued in exchange, are to be sent to
the name of someone other than someone other than the
the undersigned, or if the Old undersigned, or to the
Notes tendered by book-entry undersigned at an address other
transfer that are not accepted than that shown above.
for exchange are to be credited
to an account at DTC.
Deliver certificate(s) to:
Issue certificate(s) to: Name: ___________________________
(PLEASE PRINT)
Name: ___________________________
(PLEASE PRINT) Address: ________________________
Address: ________________________ ---------------------------------
(INCLUDE ZIP CODE)
---------------------------------
(INCLUDE ZIP CODE) ---------------------------------
(TAX IDENTIFICATION OR SOCIAL
--------------------------------- SECURITY NO.)
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
4
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPANT BROKER-DEALER") AND WISH TO RECEIVE ADDITIONAL COPIES OF THE
PROSPECTUS AND/OR OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Deliver Prospectuses to:
(QUANTITY)
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Attention __________________________________________________________________
Telephone __________________________________________________________________
Facsimile __________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
5
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the
order of, the Company all right, title and interest in and to the Old Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent also acts as the agent of the Company) with respect to the
tendered Old Notes with full power of substitution to (i) deliver certificates
for such Old Notes to the Company, or transfer ownership of such Old Notes on
the account books maintained by DTC, and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Company and (ii)
present such Old Notes for transfer on the books of the Company and receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Old Notes, all in accordance with the terms of the Exchange Offer. The power
of attorney granted in this paragraph shall be deemed to be irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course
of business of the person receiving such New Notes, whether or not such person
is the undersigned, that neither the Holder nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Company. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes, it represents that the Old Notes to be exchanged for New
Notes were acquired as a result of market-making activities or other trading
activities and not acquired directly from the Company, and it acknowledges
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the assignment, transfer and purchase
of the Old Notes tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
6
<PAGE>
Unless otherwise indicated under "Special Registration Instructions," please
issue the certificates representing the New Notes issued in exchange for the
Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged, in the name(s) of the undersigned. Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificates for Old Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s), unless, in either
event, tender is being made through DTC. In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the New Notes issued in exchange
for the Old Notes accepted for exchange in the name(s) of, and return any
certificates for Old Notes not tendered or not exchanged to, the person(s) so
indicated. The undersigned understands that the Company has no obligation
pursuant to the "Special Registration Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or any other documents required hereby to the Exchange Agent,
or who cannot complete the procedure for book-entry transfer, prior to the
Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding
the completion of this Letter of Transmittal printed below.
7
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X ________________________________________________ Date: _______________
X ________________________________________________ Date: _______________
SIGNATURE(S) OF REGISTERED HOLDER(S) OR
AUTHORIZED SIGNATORY
Area Code and Telephone Number: ________________________________________________
The above lines must be signed by the registered Holder(s) as their name(s)
appear(s) on the Old Notes or, if the Old Notes are tendered by a participant
in DTC, as such participant's name appears on a security position listing as
the owner of the Old Notes, or as such participants by person(s) authorized to
become registered Holder(s) by a properly completed bond power from the
registered Holder(s), a copy of which must be transmitted with this Letter of
Transmittal. If the Old Notes to which this Letter of Transmittal relates are
held of record by two or more joint Holders, then all such Holders must sign
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the
Company, submit evidence satisfactory to the Company of such person's authority
so to act. See Instruction 4 regarding the completion of this Letter of
Transmittal printed below.
Name(s): _______________________________________________________________________
(PLEASE PRINT)
- --------------------------------------------------------------------------------
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
Dated: , 1998
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The tendered Old
Notes (or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of all Old Notes delivered electronically), as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile hereof and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the Expiration Date. The
method of delivery of the tendered Old Notes, this Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder and, except as otherwise provided below, the delivery will be
deemed made only when actually received by the Exchange Agent. Instead of
delivery by mail, it is recommended that the Holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Old Notes should be sent to the
Company.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, (iii) who are
ATOP members but elect not to use ATOP, or (iv) who are not ATOP members, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in the Prospectus. Pursuant to
such procedure: (a) such tender must be made by or through an Eligible
Institution (as defined in Instruction 4); (b) prior to the Expiration Date,
the Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder, the certificate number or numbers of such Old Notes and the principal
amount of Old Notes tendered, stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, this Letter of Transmittal (or facsimile hereof) together
with the certificate(s) representing the Old Notes (or a confirmation of
electronic delivery of book-entry delivery into the Exchange Agent's account
at DTC) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (c) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of electronic delivery of book-entry delivery into the Exchange
Agent's account at DTC), must be received by the Exchange Agent within five
(5) New York Stock Exchange trading days after the Expiration Date, all as
provided in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures" or Holder must properly complete and duly execute an ATOP
ticket in accordance with DTC procedures. Any Holder who wishes to tender his
Old Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request
to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders
who wish to tender their Old Notes according to the guaranteed delivery
procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give
9
<PAGE>
notification of defects or irregularities with respect to tenders of Old
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering Holders, unless otherwise provided in
this Letter of Transmittal, as soon as practicable following the Expiration
Date.
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old Notes in
the Exchange Offer. Any beneficial owner of Old Notes who is not the
registered Holder and who wishes to tender should arrange with such Holder to
execute and deliver this Letter of Transmittal on such owner's behalf or must,
prior to completing and executing this Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered Holder.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in integral
multiples of $1,000. If less than the entire principal amount of any Old Notes
is tendered, the tendering Holder should fill in the principal amount tendered
in the fourth column of the box entitled "Description of Old Senior Notes" or
the box entitled "Description of Old Senior Subordinated Notes" above. The
entire principal amount of any Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Old Notes is not tendered, then Old Notes for the
principal amount of Old Notes not tendered and a certificate or certificates
representing New Notes issued in exchange for any Old Notes accepted will be
sent to the Holder at his or her registered address, unless a different
address is provided in the appropriate box on this Letter of Transmittal,
promptly after the Old Notes are accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof)
is signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes or, if the Old Notes are tendered by a participant in DTC, as such
participant's name appears on a security position listing as the owner of the
Old Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
holder, then such Holder need not and should not endorse any tendered Old
Notes, nor provide a separate bond power. In any other case, such Holder must
either properly endorse the Old Notes tendered or transmit a properly
completed separate bond power with this Letter of Transmittal with the
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers in each case
signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange or the National
10
<PAGE>
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (an "Eligible Institution"). Signatures on
this Letter of Transmittal need not be guaranteed if (a) this Letter of
Transmittal is signed by the registered Holder(s) of the Old Notes tendered
herewith and such Holder(s) have not completed the box set forth herein
entitled "Special Registration Instructions" or the box entitled "Special
Delivery Instructions" or (b) such Old Notes are tendered for the account of
an Eligible Institution.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Old Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be registered in the name of, any person other than the registered Holder
of the Old Notes tendered hereby, or if tendered Old Notes are registered in
the name of any person other than the person signing this Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or on any other
persons) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with this Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
7. WAIVER OF CONDITIONS. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address specified
in the Prospectus. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
10. BROKER-DEALER REQUESTS FOR PROSPECTUSES. Brokers and dealers that are
required under Federal securities laws to deliver a Prospectus in connection
with resales of New Notes should complete the applicable box to obtain copies
of the Prospectus and any amendments and supplements to the Prospectus to
enable them to comply with such prospectus delivery requirements. If you
require additional copies of the Prospectus or any amendments or supplements
thereto, please call Bruce Steinke (314-854-1424) of the Company.
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE SURRENDERED OLD NOTES TENDERED OLD NOTES ACCEPTED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Delivery Prepared by ____________________ Checked By ____________________ Date
11
<PAGE>
EXHIBIT 99.2
CLARK REFINING & MARKETING, INC.
NOTICE OF GUARANTEED DELIVERY
OF
8 5/8% SENIOR NOTES DUE 2008
As set forth in the Prospectus, dated , 1998 (as the same may be
amended from time to time, the "Prospectus") of Clark Refining & Marketing,
Inc. (the "Company") under the caption "The Exchange Offer--Guaranteed
Delivery Procedures," this form or one substantially equivalent hereto must be
used to accept the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount at maturity of its 8 5/8% New Senior Notes due August 15,
2008 (the "New Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for each $1,000 principal amount at
maturity of its outstanding 8 5/8% Senior Notes due August 15, 2008 (the "Old
Notes") if (i) certificates representing the Old Notes to be exchanged are not
lost but are not immediately available or (ii) time will not permit all
required documents to reach the Exchange Agent prior to the Expiration Date.
This form may be delivered by an Eligible Institution by mail or hand delivery
or transmitted, via facsimile, to the Exchange Agent at its address set forth
below not later than 5:00 p.m., New York City time, on , 1998. All
capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Prospectus.
The Exchange Agent for the 8 5/8% Senior Notes is:
BANKERS TRUST COMPANY
By Registered or Certified Mail: By Overnight Courier:
BT Services Tennessee, Inc. BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group
P.O. Box 292737 Nashville, Tennessee Reorganization Unit
37229-2737 648 Grassmere Park Road
Nashville, Tennessee 37211
By Hand: By Facsimile:
Attn: Reorganization Department (615) 835-3701
Bankers Trust Company
Corporate Trust & Agency Group
Receipt & Delivery Window
123 Washington Street, 1st Floor
New York, New York 10006
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tender(s) for exchange to the Company, upon the terms
and subject to the conditions set forth in the Prospectus and Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless extended by
the Company. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date
to which the Exchange Offer is so extended by the Company.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
Principal Amount of Old Notes
SIGNATURES Exchanged: $ ________________________
Certificate Nos. of Old Notes (if
----------------------------------- available)
SIGNATURE OF OWNER
-------------------------------------
-------------------------------------
----------------------------------- Total $ _____________________________
SIGNATURE OF OWNER (IF MORE THAN IF OLD NOTES WILL BE DELIVERED BY
ONE) BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ACCOUNT
Dated: _____________________ , 1998 NO.:
Name(s): __________________________ Account No.: ________________________
--------------------------
(PLEASE PRINT)
Address: __________________________
--------------------------
--------------------------
(INCLUDE ZIP CODE)
Area Code and
Telephone No.: ____________________
Capacity (full title), if signing
in a representative
capacity: _________________________
Taxpayer Identification or
Social Security No.: ______________
2
<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national security exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby guarantees that (a) the above named person(s) "own(s)" the Old Notes
tendered hereby within the meaning of Rule 10b-4 under the Securities Exchange
Act of 1934, (b) such tender of Old Notes complies with Rule 10b-4 and (c)
within five New York Stock Exchange trading days from the date of this Notice
of Guaranteed Delivery, certificates representing the Old Notes tendered
hereby, in proper form for transfer, or, in the case of a book-entry transfer,
confirmation of a book-entry transfer into the Exchange Agent's account at
DTC, together, in each case, with a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), will be delivered by the
undersigned to the Exchange Agent.
Name of Firm: _______________________
-------------------------------------
Address: ____________________________ AUTHORIZED SIGNATURE
Name: _______________________________
- -------------------------------------
Title: ______________________________
Area Code and Telephone No.: ________
Date: _______________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF TRANSMITTAL.
3
