<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1997
REGISTRATION NO. 33-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CLARK USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2911 43-1495734
(STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
(I.R.S. EMPLOYER
IDENTIFICATION 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 USA, 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:
RICHARD S. MILLARD, ESQ.
EDWARD S. BEST, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312) 782-0600
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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
11 1/2% New Senior Cumulative
Exchangeable Preferred Stock.... 63,000 shares 100% $63,000,000 $18,585.00
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11 1/2% Subordinated Exchange
Debentures due 2009 (1)......... $63,000,000 N/A N/A N/A
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</TABLE>
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(1) Issuable at the option of the Registrant in exchange for all the
outstanding shares of 11 1/2% New Senior Cumulative Exchangeable Preferred
Stock for which no separate consideration is required.
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>
CLARK USA, INC.
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-4 ITEM AND CAPTION LOCATION OR PROSPECTUS CAPTION
------------------------- ------------------------------
<S> <C>
1. Forepart of Registration Outside Front Cover Page of Prospectus;
Statement and Outside Front Cross-Reference Sheet
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page of Prospectus; Out-
Cover Pages of Prospectus side Back Cover Page of Prospectus; Avail-
able Information
3. Risk Factors, Ratio of Earn- Prospectus Summary; Summary Financial Data;
ings to Fixed Charges and Other Risk Factors
Information
4. Terms of the Transaction Prospectus Summary; The Exchange Offer: De-
scription of New Notes; Certain Federal
Income Tax Considerations
5. Pro Forma Financial Informa- Pro Forma Financial Information
tion
6. Material Contacts with the Not Applicable
Company Being Acquired
7. Additional Information Re- Not Applicable
quired for Reoffering by Persons
and Parties Deemed to be Under-
writers
8. Interests of Named Experts and Not Applicable
Counsel
9. Disclosure of Commission Posi- Not Applicable
tion on Indemnification for Se-
curities Act Liabilities
10. Information with Respect to S- Not Applicable
3 Registrants
11. Incorporation of Certain In- Not Applicable
formation by Reference
12. Information with Respect to S- Not Applicable
2 or S-3 Registrants
13. Incorporation of Certain In- Not Applicable
formation by Reference
14. Information with Respect to Business; Selected Financial Data; Quar-
Registrants Other Than S-3 or S- terly Financial Information; Management's
2 Registrants Discussion and Analysis of Financial Con-
dition and Results of Operations; Manage-
ment; Certain Transactions; Financial
Statements
15. Information with Respect to S- Not Applicable
3 Companies
16. Information with Respect to S- Not Applicable
2 or S-3 Companies
17. Information with Respect to Not Applicable
Companies Other Than S-2 or S-3
Companies
18. Information if Proxies, Con- Not Applicable
sents or Authorizations are to
be Solicited
19. Information if Proxies, Con- Management; Principal Stockholders; Certain
sents or Authorizations are not Transactions; The Exchange Offer
to be Solicited or in an Ex-
change Offer
</TABLE>
<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 TO 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 SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED DECEMBER 17, 1997
PROSPECTUS
CLARK USA, INC.
OFFER TO EXCHANGE ITS 11 1/2% NEW SENIOR CUMULATIVE EXCHANGEABLE
PREFERRED STOCK ($1,000 LIQUIDATION PREFERENCE PER SHARE) WHICH HAS
BEEN REGISTERED UNDER THE SECURITIES ACT FOR ANY AND ALL OF ITS
OUTSTANDING 11 1/2% SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK
($1,000 LIQUIDATION PREFERENCE PER SHARE)
LOGO (R)
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS EXTENDED.
Clark USA, Inc., a Delaware corporation ("Clark USA" and, together with its
subsidiaries, 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") one share of its 11 1/2% New Senior Cumulative Exchangeable Preferred
Stock, liquidation preference $1,000 per share (the "New Exchangeable Preferred
Stock") which has been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each outstanding share of its 11 1/2% Senior
Cumulative Exchangeable Preferred Stock, liquidation preference $1,000 per
share (the "Old Exchangeable Preferred Stock"), of which 63,000 shares are
outstanding. The form and terms of the New Exchangeable Preferred Stock are
identical in all material respects to the form and terms of the Old
Exchangeable Preferred Stock except that the New Exchangeable Preferred Stock
has been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof. The New Exchangeable Preferred Stock
will have the same rights and preferences as the Old Exchangeable Preferred
Stock. The offering of the Old Exchangeable Preferred Stock is referred to
herein as the "Offering". The Old Exchangeable Preferred Stock and the New
Exchangeable Preferred Stock are referred to herein collectively as the
"Preferred Stock". See "The Exchange Offer" and "Description of New
Exchangeable Preferred Stock."
The Company will accept for exchange any and all Old Exchangeable Preferred
Stock 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
Exchangeable Preferred Stock 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."
Dividends on the New Exchangeable Preferred Stock will accrue from October 1,
1997 and will be payable semi-annually commencing April 1, 1998 at a rate per
annum of 11 1/2% of the liquidation preference per share. Dividends may be
paid, at the Company's option, on any dividend payment date occurring on or
prior to October 1, 2002, either in cash or in additional shares of New
Exchangeable Preferred Stock. The liquidation preference of the New
Exchangeable Preferred Stock will be $1,000 per share. The New Exchangeable
Preferred Stock is redeemable at the Company's option, in whole or in part, at
any time on or after October 1, 2002, at the redemption prices set forth
herein, plus accrued and unpaid dividends to the date of redemption. In
addition, prior to October 1, 2000, the Company may, at its option, redeem the
New Exchangeable Preferred Stock, in whole or in part, with the net cash
proceeds from one or more Equity Offerings (as defined), at the redemption
prices set forth herein, plus accrued and unpaid dividends to the redemption
date. The Company is required, subject to certain conditions, to redeem all of
the New Exchangeable Preferred Stock outstanding on October 1, 2009, at a
redemption price equal to 100% of the liquidation preference thereof, plus
accrued and unpaid dividends to the date of redemption. Upon the occurrence of
a Change of Control, the Company will, subject to certain conditions, offer to
purchase all of the then outstanding shares of New Exchangeable Preferred Stock
at a price equal to 101% of the Liquidation Preference thereof, plus accrued
and unpaid dividends to the purchase date.
Subject to certain conditions, the New Exchangeable Preferred Stock is
exchangeable, on any dividend payment date, in whole, but not in part, at the
option of the Company for the Company's 11 1/2% Subordinated Exchange
Debentures due 2009 (including any securities paid in lieu of cash interest, as
described herein, the "Exchange Debentures"). Interest on the Exchange
Debentures will be payable at the rate of 11 1/2% per annum and will accrue
from the date of issuance thereof. Interest on the Exchange Debentures will be
payable semi-annually in cash or at the option of the Company, on or prior to
April 1, 2002, in additional Exchange Debentures, in arrears on each April 1
and October 1, commencing on the first such date after the exchange of the
Exchange Debentures for the New Exchangeable Preferred Stock. The Exchange
Debentures mature on October 1, 2009, and are redeemable, at the option of the
Company, in whole or in part, on and after October 1, 2002, at the redemption
prices set forth herein, plus accrued and unpaid interest to the date of
redemption. In addition, prior to October 1, 2000, the Company may, at its
option, redeem the Exchange Debentures, in whole or in part, with the net cash
proceeds from one or more Equity Offerings at the redemption prices set forth
herein, plus accrued and unpaid interest to the redemption date. Upon the
occurrence of a Change of Control, the Company will, subject to certain
conditions, offer to purchase all of the then outstanding shares of Exchange
Debentures at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the repurchase date.
The Exchange Debentures will be subordinated to all existing and future
Senior Debt of Clark USA and will be structurally subordinated to all existing
and future liabilities of Clark Refining & Marketing, Inc. ("Clark") and other
subsidiaries of Clark USA, and will rank pari passu with or senior to all
future Indebtedness of the Company that expressly provides that it ranks pari
passu with or junior to the Exchange Debentures. As of September 30, 1997 on a
pro forma basis adjusted to give effect to the Equity Recapitalization (as
defined herein), the Debt Refinancing and Repayment (as defined herein) and
fees and expenses associated with the Equity Recapitalization, there was $175.0
million of Senior Debt of Clark USA and $940.5 million of total liabilities of
Clark and other subsidiaries of Clark USA (excluding available borrowings and
letters of credit under Clark's bank credit facility) that would be senior to
the Exchange Debentures, and $13.9 million of other liabilities of the Company
that would have been pari passu with or subordinated to the Exchange
Debentures. See "Capitalization".
Prior to the offering, there has been no public market for the Preferred
Stock. The Company does not intend to list the New Exchangeable Preferred Stock
on any exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the New
Exchangeable Preferred Stock will develop. The Company has agreed to pay the
expenses of the Exchange Offer.
SEE "RISK FACTORS" ON PAGES 19-27 FOR A DISCUSSION OF CERTAIN RISK FACTORS
THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE NEW EXCHANGEABLE PREFERRED
STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION 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>
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 Exchangeable Preferred Stock issued
in exchange for Old Exchangeable Preferred Stock pursuant to the Exchange
Offer may be offered for resale, resold and otherwise transferred by holders
thereof who are not affiliates of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act;
provided that the Holder is acquiring New Exchangeable Preferred Stock in its
ordinary course of business and has no arrangement or understanding with any
person to participate in any distribution (within the meaning of the
Securities Act) of the New Exchangeable Preferred Stock. Persons wishing to
exchange Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock. See "Risk Factors--
Consequences to Non-Tendering Holders of Old Exchangeable Preferred Stock." In
addition, each broker-dealer that receives New Exchangeable Preferred Stock
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
Exchangeable Preferred Stock. 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
Exchangeable Preferred Stock received in exchange for Old Exchangeable
Preferred Stock where such Old Exchangeable Preferred Stock was 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 180 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 EXCHANGEABLE PREFERRED STOCK.
2
<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.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 4
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 19
Use of Proceeds........................................................... 27
The Exchange Offer........................................................ 28
Capitalization............................................................ 36
Selected Consolidated Financial and Other Data............................ 37
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 39
Quarterly Financial Information........................................... 51
Business.................................................................. 52
Management................................................................ 73
Security Ownership of Certain Owners and Management....................... 79
Certain Transactions...................................................... 79
Description of New Exchangeable Preferred Stock........................... 81
Description of the Exchange Debentures.................................... 92
Book Entry; Delivery and Form............................................. 113
Description of Certain Debt Instruments................................... 115
Description of Other Capital Stock........................................ 123
Certain Federal Income Tax Consequences................................... 126
Plan of Distribution...................................................... 134
Legal Matters............................................................. 134
Experts................................................................... 134
Index to Financial Statements and Schedules............................... F-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 shares of the New
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock.
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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Company documents filed with the Commission are incorporated
by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the periods ended March
31, June 30 and September 30, 1997;
3. The Company's Current Report on Form 8-K dated April 7, October 1 and
November 21, 1997.
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.
4
<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. Clark USA is a holding company,
the principal asset of which is Clark.
THE COMPANY
Clark USA is the sixth largest independent refiner and marketer of petroleum
products in the United States ("U.S.") with one Texas Gulf Coast refinery and
two Illinois refineries representing over 350,000 barrels per day ("bpd") of
rated crude oil throughput capacity. The Company is also currently the seventh
largest direct operator of gasoline and convenience stores in the U.S. with
over 800 retail outlets in 10 Midwestern states. Clark's retail network has
conducted operations under the Clark brand name for 65 years. The Company also
markets gasoline, diesel fuel and other petroleum products on a wholesale
branded and unbranded basis.
Since 1992, the Company has focused its business objectives with an
entrepreneurial orientation to cost reduction, productivity improvements,
selective capital investments and growth through acquisitions. Important
initiatives include the equity-financed acquisition of Chevron U.S.A. Inc.'s
("Chevron") Port Arthur, Texas, refinery and certain other assets (the "Port
Arthur Refinery"); the December 1995 acquisition, partially financed with
equity, of an advance crude oil purchase contract from Occidental C.O.B.
Partners ("Oxy"), an affiliate of the Occidental Petroleum Corporation and the
subsequent profitable monetization of that contract; retail acquisitions and
divestitures intended to strengthen the Company's position in key 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 emerging growth opportunities in the marketing and refining sectors.
REFINING
The Company currently operates three refineries and 16 product terminals
located in its Midwest and Gulf Coast market areas, a crude oil and LPG
terminal associated with the Port Arthur refinery and has minority equity
interests in certain crude oil and product pipelines. 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
operating cash flow. Recent improvements in industry conditions and
productivity gains contributed to the refining division's record earnings
before interest, taxes, depreciation and amortization ("EBITDA") of $72.5
million and $78.8 million in the second and third quarters of 1997,
respectively. See additional operating cash flow disclosures in 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 212,000 bpd
and has lowered operating expenses by approximately 50c per barrel. From the
date of the acquisition
5
<PAGE>
through September 30, 1997, the Port Arthur Refinery has generated EBITDA of
approximately $171.0 million.
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 provides relatively high refining margins and less volatility
than comparable operations located in other regions of the U.S. on a historical
basis principally because demand for refined product has exceeded production in
the region. This excess demand has historically been satisfied by imports from
other regions, providing Midwest refineries with a transportation advantage.
MARKETING
The Company markets gasoline and convenience products in ten 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. Clark'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 unique mix of On The Go(R)
convenience products. As of September 30, 1997, the Company had 813 Company-
operated retail locations under the Clark brand name. The Company believes its
high proportion of Company-operated retail stores 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 these stores, 647 were located on
Company-owned real estate (80%) and 166 were leased locations (20%). The
Company's wholesale operation markets petroleum products in both the Midwest
and Gulf Coast regions of the U.S. In 1996, the Company sold approximately 1.0
billion gallons of fuel (representing 40% of refining production) and over
$250.0 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.
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 monthly gasoline
sales per store averaged 104,500 gallons in 1996, which exceeded the 1996
national industry average of 84,500 gallons, while monthly sales per square
foot averaged approximately $49.0 for convenience products versus the industry
average of approximately $24.0. 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 18%. A current trend towards
consolidation in the refining and 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.
The Company currently sells gasoline and diesel fuel on an unbranded basis to
approximately 500 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,
6
<PAGE>
including airlines, railroads, barge lines and other industrial end-users.
During 1997, the Company has continued to expand its new branded jobber
program, increasing to 61 the number of outlets owned and operated by branded
jobbers as of September 30, 1997. As part of its new business franchise
marketing initiative, the Company partnered with a grocery chain to add four
outlets on grocery store parking lots in 1996 and 1997. 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.
Business Strategy
The Company's business strategy focuses on improving productivity, optimizing
capital investments, promoting an entrepreneurial culture, and growing both its
refining and marketing operations to strengthen the Company's business and
financial profile. This strategy is designed to address the commodity-based
nature of the oil refining and marketing industry in which the Company
operates.
. 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
sales mix while reducing input costs and operating expenses. 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 are examples
of these types of initiatives.
. Optimizing Capital Investment. The Company seeks to optimize capital
investments by linking discretionary capital spending to internally
generated cash flow, focusing its efforts first on those productivity
initiatives that require no capital investment and then on those which have
relatively short payback periods. 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 is now implementing several 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 either its performance management, profit sharing or other
incentive plans. In addition, the Company has adopted a stock incentive
plan for certain key employees. Blackstone Capital Partners III Merchant
Banking Fund L.P. and its affiliates ("Blackstone"), the Company's new
majority stockholder, intends to put in place a management incentive
program designed to increase management's ownership of stock of the Company
through direct purchases of such stock and options tied to the financial
performance of the Company.
. Growing Through Opportunistic Acquisitions. The Company intends to
continue to expand its refining and marketing operations through
opportunistic acquisitions which can benefit from its business strategy,
create critical mass, increase market share or access new markets. Since
1994, the Company more than doubled its refining capacity by acquiring the
Port Arthur Refinery and strengthened its Northern Illinois and Southern
Michigan presence by adding 122 retail stores in these core markets.
Blackstone is committed to this strategy.
. Strengthening the Balance Sheet. The Company will continue to seek to
improve its capital structure. The financing of the Port Arthur Refinery
acquisition principally with equity and the partial financing of the
advance crude oil purchase receivable transactions with equity lowered the
Company's leverage in 1995 and 1996. The Company's subsequent profitable
monetization of the advanced crude oil purchase receivable significantly
improved the Company's liquidity. As of September 30, 1997, the Company had
total cash balances of $298.0 million. The Equity Recapitalization and the
Debt Refinancing and Repayment (both as defined herein) are designed
7
<PAGE>
to strengthen the balance sheet of the Company by extending debt
maturities, increasing prepayment flexibility and lowering the overall
borrowing cost.
RECENT DEVELOPMENTS
RECENT RESULTS
For the quarters ended June 30, 1997 and September 30, 1997, the Company
posted record EBITDA of $74.8 million and $81.2 million, respectively,
partially as a result of strong crack spreads and crude oil differentials in
the Company's markets, versus $21.5 million and $8.6 million in the year-
earlier periods. The Company reported EBITDA of $139.7 million for the nine
months ended September 30, 1997, which compared to $31.0 million for the same
period in 1996. The Company would have generated EBITDA of $182.1 million in
the first nine months of 1997 as compared to $10.5 million in the same period
of 1996 after adjusting for a significant fall in crude oil prices in 1997 and
the hypothetical cost of lost production associated with a major maintenance
turnaround at the Port Arthur refinery in the first quarter of 1997. The
Company reported an operating loss of $3.8 million for the three months ended
September 30, 1996, which improved to operating income of $64.6 million for the
same period of 1997. The Company reported an operating loss of $6.0 million for
the first nine months of 1996, which improved to operating income of $95.3
million for the same period of 1997. The Company has historically recorded
seasonally lower earnings in the fourth and first quarters of calendar years
due to lower demand for refined products. See additional operating cash flow
disclosures in Selected Consolidated Financial and Other Data.
In the early 1990s the Company invested $25.0 million in a project initiated
to produce low-sulfur diesel fuel at the Hartford refinery (the "DHDS Project")
which was delayed in 1992 based on internal and third-party analyses that
indicated an oversupply of low-sulfur diesel fuel capacity in the Company's
markets. Based on these analyses, the Company projected relatively narrow price
differentials between low- and high-sulfur diesel products. This projection has
thus far been borne out. High-sulfur diesel fuel is utilized by the railroad,
marine and farm industries. In December 1997, the Company determined that
equipment purchased for the DHDS Project could be better utilized for other
projects at its Hartford and Port Arthur refineries, rather than remaining idle
until low- and high-sulfur diesel fuel differentials widened sufficiently to
justify completing the DHDS Project. As a result, in the fourth quarter of 1997
the Company expects to record a charge to earnings of approximately $15.0
million principally for engineering costs specific to the DHDS Project.
EQUITY RECAPITALIZATION
On October 1, 1997, the Company and its stockholders completed an equity
recapitalization whereby all previously issued shares of Class A Common Stock
of the Company held by certain affiliates (the "Tiger Funds") of Tiger
Management Corporation ("Tiger") (then representing approximately 31% of the
total voting power of all classes of the Company's stock) were reclassified
into a new class of common stock of the Company designated Class E Common Stock
(the "Class E Common Stock"). Trizec Hahn Corporation ("TrizecHahn") then
purchased all of the Class E Common Stock 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
Exchangeable Preferred Stock of the Company and sold to institutional
investors. Subject to certain conditions, the Exchangeable Preferred Stock is
exchangeable in whole but not in part at the option of the Company for $63
million aggregate principal amount of the Company's 11 1/2% Subordinated
Exchange Debentures due 2009.
In addition, the shares of common stock of the Company owned by Oxy were
exchanged for an equal number of shares of a new class of convertible common
stock designated Class F Common Stock (the "Class F Common Stock") of the
Company 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 the Company's voting stock.
The Class F Common Stock is convertible at any time to Common Stock of the
Company, on a one-for-one basis, at the option of any holder other than Oxy and
its affiliates. The Company also issued to Oxy an additional 545,455 shares of
Class F Common Stock in full satisfaction of the Company's obligation to issue
shares under its then existing Stockholders' Agreement with Oxy.
BLACKSTONE TRANSACTION
On November 3, 1997, Blackstone acquired the 13,500,000 shares of Common
Stock of the Company previously held by TrizecHahn and certain of its
subsidiaries (referred to herein as the "Blackstone Transaction"), as a result
of which Blackstone obtained a 65% equity interest (73.3% voting interest) in
the Company. See "Security Ownership of Certain Owners and Management" and
"Certain Transactions."
8
<PAGE>
The transactions described in the preceding three paragraphs are referred to
herein as the "Equity Recapitalization."
BENEFICIAL OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
common stock as of the date of this Prospectus.
<TABLE>
<CAPTION>
TOTAL TOTAL
VOTING ECONOMIC
NAME OF STOCKHOLDER POWER INTEREST
------------------- ------ --------
<S> <C> <C>
Blackstone................................. 73.3% 64.7%
Oxy........................................ 19.9 29.2
Gulf Resources............................. 6.6 5.9
Paul D. Melnuk............................. 0.2 0.2
</TABLE>
THE CREDIT AGREEMENT
On September 25, 1997, Clark entered into a credit agreement (the "Credit
Agreement") which provides for borrowings and letter of credit issuances of up
to the lesser of $400.0 million or the amount of the borrowing base calculated
with respect to Clark's cash and cash equivalents, eligible investments,
eligible receivables and eligible petroleum inventories, provided that a
sublimit for borrowings is limited to the principal amount of $50.0 million.
Obligations under the Credit Agreement are secured by a lien on substantially
all of Clark's cash and cash equivalents, receivables, crude oil, refined
product and other inventories and trademarks and other intellectual property.
See "Description of Certain Debt Instruments--Credit Agreement."
THE LOAN AGREEMENT
On November 21, 1997, Clark entered into a term loan agreement (the "Loan
Agreement") with certain lenders and Goldman Sachs Credit Partners L.P., as
agent, pursuant to which Clark borrowed $125 million (the "Term Loan").
Borrowings under the Loan Agreement are senior unsecured obligations of Clark.
THE DEBT OFFERING
On November 21, 1997, the Company sold $100 million aggregate principal
amount of 8 3/8% Senior Notes due 2007 (the "Senior Notes") and $175 million
aggregate principal amount of its 8 7/8% Senior Subordinated Notes due 2007
(the "Senior Subordinated Notes" together with Senior Notes, the "Old Debt
Notes") (the "Debt Offering"). On or about December , 1997, the Company
commenced an offer to exchange 8 3/8% New Senior Notes (the "New Senior Notes")
and 8 7/8% New Senior Subordinated Notes ("New Senior Subordinated Notes" and
together with the New Senior Notes, the "New Notes") for each $1,000 principal
amount at maturity of its outstanding Senior Notes and Senior Subordinated
Notes, respectively.
A portion of the net proceeds of the Debt Offering and the Term Loan will be
used to redeem on or about December 24, 1997 all $225,000,000 aggregate
principal amount of Clark's outstanding 10 1/2% Senior Notes due 2001 (the "10
1/2% Notes" or the "Old Notes"). The remaining net proceeds of the Debt
Offering and the Term Loan, estimated to be approximately $149.1 million, has
been used to substantially replenish the Company's cash reserves and for
general corporate purposes. Prior to the consummation of the Debt Offering,
Clark returned $215.0 million of capital to Clark USA from its existing cash
(the "Special Dividend") which enabled the Company to repurchase for $206.6
million, $259.2 million (value at maturity) of its Senior Secured Zero Coupon
Notes due 2000, Series A (the "Zero Coupon Notes"), pursuant to an outstanding
tender offer (the "Tender Offer"). The Company intends to call the remaining
Zero Coupon Notes outstanding on or about February 15, 1998. On November 24,
1997, Clark issued notice to the holders of its 10 1/2% Notes that it intends
to redeem on December 24, 1997 all of the outstanding 10 1/2% Notes at a price
of $1,032.96 for each $1,000.00 principal amount of the notes outstanding,
representing the redemption premium and accrued interest. As a result of the
Blackstone Transaction, the $175.0 million of 9 1/2% Notes, and (in the event
of a Rating Decline) $175.0 million of 10 7/8% Notes will be subject to a
repurchase offer.
The transactions described in the preceding three paragraphs are referred to
herein as the "Debt Refinancing and Repayment."
9
<PAGE>
THE EXCHANGE OFFER
THE NEW EXCHANGEABLE PREFERRED STOCK
Registration Agreement...... The Old Exchangeable Preferred Stock was sold by
the Company on October 1, 1997 to Goldman, Sachs
& Co. and BT Alex. Brown Incorporated, as initial
purchasers (the "Initial Purchasers"), which sold
the Old Exchangeable Preferred Stock to
institutional investors. In connection therewith,
the Company executed and delivered for the
benefit of the holders of the Old Exchangeable
Preferred Stock an exchange and registration
rights agreement (the "Registration Agreement")
providing for the Exchange Offer.
The Exchange Offer.......... One share of New Exchangeable Preferred Stock in
exchange for each outstanding share of Old
Exchangeable Preferred Stock. As of the date
hereof, 63,000 shares of Old Exchangeable
Preferred Stock are outstanding. The Company will
issue the New Exchangeable Preferred Stock 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
Exchangeable Preferred Stock issued in exchange
for Old Exchangeable Preferred Stock pursuant to
the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than 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 such New Exchangeable Preferred
Stock is acquired in the ordinary course of such
holder's business and that such holder has no
arrangement or understanding with any person to
participate in the distribution of such New
Exchangeable Preferred Stock. Persons wishing to
exchange Old Exchangeable Preferred Stock in the
Exchange Offer must represent to the Company that
such conditions have been met. Any holder who is
an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose
of distributing the New Exchangeable Preferred
Stock cannot rely on the interpretation of 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 Exchangeable
Preferred Stock. See "Risk Factors--Purpose and
Effect of the Exchange Offer."
Each broker-dealer that receives New Exchangeable
Preferred Stock for its own account pursuant to
the Exchange Offer must acknowledge that it will
deliver a prospectus in
10
<PAGE>
connection with any resale of such New
Exchangeable Preferred Stock. 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 Exchangeable Preferred Stock
received in exchange for Old Exchangeable
Preferred Stock where such Old Exchangeable
Preferred Stock 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 180 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."
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
Offer....................... customary conditions which may be waived by the
Company. See "The Exchange Offer--Conditions."
Procedures for Tendering
Old Exchangeable Preferred
Stock......................
Each holder of Old Exchangeable Preferred Stock
wishing to accept the 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,
together with the Old Exchangeable Preferred
Stock and any other required documentation to the
Exchange Agent at the address set forth herein.
By executing the Letter of Transmittal, each
holder will represent to the Company that, among
other things, the New Exchangeable Preferred
Stock acquired pursuant to the Exchange Offer is
being obtained in the ordinary course of business
of the person receiving such New Exchangeable
Preferred Stock, 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 Exchangeable Preferred
Stock 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.
See "The Exchange Offer--Procedures for
Tendering." Each broker-dealer that receives New
Exchangeable Preferred Stock for its own account
in exchange for Old Exchangeable Preferred Stock,
where such Old Exchangeable Preferred Stock was
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it
11
<PAGE>
will deliver a prospectus in connection with any
resale of such New Exchangeable Preferred Stock.
See "The Exchange Offer--Procedures for
Tendering" and "Plan of Distribution."
Special Procedures for
Beneficial Owners..........
Any beneficial owner whose Old Exchangeable
Preferred Stock is registered 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 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 his Old Exchangeable Preferred Stock,
either make appropriate arrangements to register
ownership of the Old Exchangeable Preferred Stock
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. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery Holders of Old Exchangeable Preferred Stock who
Procedures.................. wish to tender their Old Exchangeable Preferred
Stock and whose Old Exchangeable Preferred Stock
is not immediately available or who cannot
deliver their Old Exchangeable Preferred Stock,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, must
tender their Old Exchangeable Preferred Stock
according to the guaranteed delivery procedures
set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time prior to New
York City time on the Expiration Date.
Acceptance of Old
Exchangeable Preferred
Stock and Delivery of New
Exchangeable Preferred
Stock......................
The Company will accept for exchange any and all
Old Exchangeable Preferred Stock which is
properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration
Date. The New Exchangeable Preferred Stock issued
pursuant 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 Consequences--Consequences of Exchange
Offer to Exchanging and Nonexchanging Holders."
Exchange Agent.............. Bankers Trust Company is serving as Exchange
Agent in connection with the Exchange Offer.
12
<PAGE>
SUMMARY OF TERMS OF NEW EXCHANGEABLE PREFERRED STOCK
The Exchange Offer applies to 63,000 shares of Old Exchangeable Preferred
Stock. The form and terms of the New Exchangeable Preferred Stock are identical
in all material respects to the form and terms of the Old Exchangeable
Preferred Stock except that the New Exchangeable Preferred Stock has been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. See "Description of New Exchangeable
Preferred Stock."
Securities Offered.......... 63,000 Shares of 11 1/2% New Senior Cumulative
Exchangeable Preferred Stock, par value $0.01 per
share.
Liquidation Preference...... $1,000 per share, plus accumulated and unpaid
dividends.
Dividends................... At a rate equal to 11 1/2% per annum of the
liquidation preference per share, payable semi-
annually beginning April 1, 1998 and accumulating
from October 1, 1997 (the "Issue Date"), whether
or not declared by the board of directors of the
Company. The Company, at its option, may pay
declared dividends on any dividend payment date
occurring on or before October 1, 2002 either in
cash or by the issuance of additional shares of
New Exchangeable Preferred Stock (and, at the
Company's option, payment of cash in lieu of
fractional shares) having an aggregate
liquidation preference equal to the amount of
such dividends.
Dividend Payment Dates...... April 1 and October 1, commencing April 1, 1998.
Optional Redemption......... The New Exchangeable Preferred Stock will be
redeemable, at the option of the Company, in
whole or in part, at any time on or after October
1, 2002, at the redemption prices set forth
herein, plus, without duplication, accumulated
and unpaid dividends to the date of redemption.
In addition, prior to October 1, 2000, the
Company may, at its option, use the Net Available
Proceeds (as defined) of one or more Equity
Offerings to redeem New Exchangeable Preferred
Stock, in whole or in part, at the redemption
prices set forth herein, plus, without
duplication, accumulated and unpaid dividends to
the date of redemption; provided that any such
redemption occurs within 90 days following the
closing of such Equity Offerings.
Mandatory Redemption........ The Company is required, subject to certain
conditions, to redeem all of the New Exchangeable
Preferred Stock outstanding on October 1, 2009,
at a redemption price equal to 100% of the
liquidation preference thereof, plus, without
duplication, accumulated and unpaid dividends to
the date of redemption.
Voting...................... The New Exchangeable Preferred Stock will be
nonvoting, except as otherwise required by law
and except in certain circumstances described
herein, including amending certain rights of the
holders of the New Exchangeable Preferred Stock.
In addition, if the Company (i) after October 1,
2002, fails to pay cash dividends in respect of
three or more semi-annual dividend periods
(whether or not consecutive) in the
13
<PAGE>
aggregate; (ii) fails to make a mandatory
redemption; or (iii) fails to comply with certain
covenants, holders of a majority of the
outstanding shares of New Exchangeable Preferred
Stock, with the holders of shares of any Parity
Securities (as defined), issued after the Issue
Date, upon which like voting rights have been
conferred and are then exercisable, voting as a
single class, will be entitled to elect the
lesser of two directors or that number of
directors constituting at least 25% of the
Company's board of directors.
Exchange Provisions......... Exchangeable into the Exchange Debentures (in
whole but not in part), at the Company's option,
subject to certain conditions, on any scheduled
dividend payment date.
Ranking..................... The New Exchangeable Preferred Stock will, with
respect to dividend rights and rights on
liquidation, winding-up and dissolution of the
Company, rank senior to all classes of common
stock of the Company. The New Exchangeable
Preferred Stock will rank at least pari passu
with any future issuances of preferred stock.
Change of Control........... Following a Change of Control occurring after
October 1, 2005, the Company will be required to
offer to purchase all of the New Exchangeable
Preferred Stock at 101% of the aggregate
liquidation value thereof, plus accrued and
unpaid dividends, 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 Exchangeable Preferred
Stock at that time, and certain provisions of the
Company's and Clark's debt agreements may further
limit the Company's ability to make such
purchases. See "Risk Factors--Change of Control
Provisions in New and Existing Preferred Stock
and Indebtedness" and "Description of the New
Exchangeable Preferred Stock."
Certain Restrictive The Certificate of Designations contains certain
Provisions.................. restrictive provisions that, among other things,
limit the ability of the Company and its
subsidiaries to incur additional debt, pay
dividends or make certain other restricted
payments, enter into certain transactions with
affiliates, or merge or consolidate with or sell
all or substantially all of their assets to any
other person.
Exchange Rights............. Holders of New Exchangeable Preferred Stock are
not entitled to any exchange rights (except as
provided herein) with respect to the New
Exchangeable Preferred Stock. Holders of Old
Exchangeable Preferred Stock are entitled to
certain exchange rights pursuant to the
Registration Agreement. Under the Registration
Agreement, the Company is required to offer to
exchange the Old Exchangeable Preferred Stock for
New Exchangeable Preferred Stock having
substantially identical terms and having been
registered under the
14
<PAGE>
Securities Act. This Exchange Offer is intended
to satisfy such obligation. Once the Exchange
Offer is consummated, the Company will have no
further obligations to register any of the Old
Exchangeable Preferred Stock not tendered by the
Holders for exchange. See "Risk Factors--
Consequences to Non-Tendering Holders of Old
Exchangeable Preferred Stock."
Use of Proceeds............. The Company will not receive any cash proceeds
from the Exchange Offer.
THE EXCHANGE DEBENTURES
Issue....................... 11 1/2% Exchange Debentures due October 1, 2009
issuable, at the Company's option, in exchange
for the New Exchangeable Preferred Stock in an
aggregate principal amount equal to the aggregate
liquidation preference of the New Exchangeable
Preferred Stock, plus, without duplication,
accumulated and unpaid dividends to the date
fixed for the exchange thereof (the "Exchange
Date"), plus any additional Exchange Debentures
issued from time to time in lieu of cash
interest.
Maturity.................... October 1, 2009.
Interest Rate and
Payment Dates............... The Exchange Debentures will bear interest at
a rate of 11 1/2% per annum. Interest will
accrue from the date of issuance or from the
most recent interest payment date to which
interest has been paid or provided for or, if
no interest has been paid or provided for,
from the Exchange Date. Interest will be
payable semi-annually in cash (or, at the
option of the Company, on or prior to October
1, 2002, in additional Exchange Debentures)
in arrears on each April 1 and October 1,
commencing with the first such date after the
Exchange Date.
Optional Redemption......... The Exchange Debentures will be redeemable,
at the option of the Company, in whole or in
part, at any time on or after October 1,
2002, at the redemption prices set forth
herein, plus accrued and unpaid interest to
the date of redemption. In addition, prior to
October 1, 2000, the Company may, at its
option, use the net proceeds of one or more
Equity Offerings to redeem, in whole or in
part, the Exchange Debentures (whether issued
in exchange for New Exchangeable Preferred
Stock or in lieu of cash interest payments),
at the redemption price set forth herein,
plus accrued and unpaid interest to the date
of redemption; provided that any such
redemption occurs within 90 days following
the closing of such Equity Offerings.
Ranking..................... The Exchange Debentures will be subordinated
to all existing and future Senior Debt of
Clark USA. In addition, the Exchange
Debentures will be effectively subordinated
to all
15
<PAGE>
existing and future liabilities of Clark and
other subsidiaries of Clark USA. The Exchange
Debentures will rank pari passu or senior to
any class or series of debt that expressly
provides that it ranks pari passu or
subordinate to the Exchange Debentures, as
the case may be. As of September 30, 1997 on
a pro forma basis adjusted to give effect to
the Equity Recapitalization, the Debt
Refinancing and Repayment and fees and
expenses associated with the Equity
Recapitalization, there was $175.0 million of
Senior Debt of Clark USA and $940.5 million
of total liabilities of Clark and other
subsidiaries of Clark USA (excluding
available borrowings and letters of credit
under Clark's bank credit facility) that
would be senior to the Exchange Debentures
and $13.9 million of other liabilities that
would be pari passu with or subordinated to
the Exchange Debentures. See
"Capitalization."
Change of Control........... Following a Change of Control occurring after
October 1, 2005, the Company will be required
to offer to purchase all of the Exchange
Debentures 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 Exchange Debentures at that
time, and certain provisions of the Company's
and Clark's other debt agreements may further
limit the Company's ability to make such
purchases. See "Risk Factors--Change of
Control Provisions in New and Existing
Preferred Stock and Indebtedness" and
"Description of the Exchange Debentures."
Certain Covenants........... The indenture governing the Exchange
Debentures (the "Exchange Indenture") will
contain certain covenants that, among other
things, limit the ability of the Company and
its subsidiaries to incur additional debt,
pay dividends or make certain other
restricted payments, enter into certain
transactions with affiliates, or merge or
consolidate with or sell all or substantially
all of their assets to any other person.
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 cash
proceeds from the issuance of New Exchangeable Preferred Stock in the Exchange
Offer.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the New Exchangeable Preferred Stock.
16
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The selected summary consolidated financial data set forth below for the
Company as of December 31, 1995 and 1996 and for each of the three years in the
period ended December 31, 1996 are derived from the audited financial
statements included elsewhere herein. The selected summary financial data set
forth below for the Company as of December 31, 1992, 1993 and 1994 and for each
of the two years in the period ended December 31, 1993 are derived from the
audited financial statements not included elsewhere 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 herein. The selected summary historical data for the
nine month periods ended September 30, 1996 and 1997 is unaudited.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
DATA:
Net sales and operating
revenues.............. $2,253.5 $2,264.7 $2,441.2 $4,486.8 $5,073.1 $3,724.7 $3,297.2
Cost of sales.......... 1,949.8 1,930.3 2,086.6 4,015.2 4,557.0 3,344.2 2,789.4
Operating expenses (a). 218.6 209.5 225.6 375.5 419.9 305.5 320.1
General and
administrative
expenses (a).......... 38.3 41.4 51.5 52.4 59.5 44.0 48.0
Depreciation and
amortization (b)...... 30.5 35.4 37.4 43.5 48.5 37.0 44.4
Operating income
(loss)................ 16.3 21.6 66.6 0.2 (11.8) (6.0) 95.3
Interest and financing
costs, net (c)........ 28.6 43.7 53.7 59.2 47.5 40.6 58.4
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of change in
accounting principles. 1.1 (6.5) 7.8 (37.1) (56.2) (29.2) 29.4
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
investments........... $ 218.9 $ 232.9 $ 155.0 $ 149.8 $ 354.8 $ 110.6 $ 297.8
Total assets........... 802.0 865.4 891.7 1,364.9 1,432.8 1,417.9 1,402.8
Long-term debt......... 401.5 538.1 553.3 765.0 781.4 776.0 794.8
Stockholders' equity... 66.1 49.5 56.2 154.2 214.4 241.6 243.9
SELECTED FINANCIAL DATA:
EBITDA, as adjusted
(d)................... $ 46.8 $ 83.5 $ 77.5 $ 43.7 $ 36.7 $ 31.0 $ 139.7
Cash flows from
operating activities.. $ 37.3 $ 57.8 $ 56.3 $ (81.5) $ 22.4 $ (14.6) $ 32.2
Cash flows from
investing activities.. (23.8) (40.2) (2.2) (240.1) 218.5 (0.7) (83.1)
Cash flows from
financing activities.. (38.7) 29.7 (6.5) 298.9 (4.7) (4.6) (6.1)
Ratio of earnings to
fixed charges and
preferred stock
dividends (e)......... (f) (f) 1.14x (f) (f) (f) 1.48x
Expenditures for
turnaround............ $ 2.7 $ 20.6 $ 11.2 $ 6.5 $ 13.9 $ 7.2 $ 31.2
Expenditures for
property, plant and
equipment............. 59.5 68.1 100.4 42.2 45.0 23.4 55.7
Refinery acquisition
expenditures.......... -- -- 13.5 71.8 -- -- --
OPERATING DATA:
Refining Division:
Port Arthur Refinery
(acquired February 27,
1995)
Production (m
bbls/day)............. -- -- -- 207.7 210.8 212.0 208.5
Gross margin (per bbl)
(a)................... -- -- -- $ 2.37 $ 2.78 $ 2.49 $ 3.84
Operating expenses (per
bbl) (a).............. -- -- -- 1.90 2.13 2.06 2.23
Blue Island, Hartford
and other refining
Production (m
bbls/day)............. 142.4 134.7 140.3 136.5 134.2 136.2 141.4
Gross margin (per bbl)
(a)................... $ 3.03 $ 3.24 $ 3.48 $ 2.64 $ 2.53 $ 2.66 $ 3.94
Operating expenses (per
bbl) (a).............. 2.17 2.12 2.28 2.61 2.58 2.44 2.40
Refining contribution
to operating income
(mm).................. N/A 45.2 47.8 12.8 26.5 17.7 134.7
Retail Division:
Number of stores
(average) (g)......... 885 860 834 852 823 828 815
Gasoline volume (mm
gals)................. 956.7 1,014.8 1,028.5 1,063.8 1,031.9 777.7 771.1
Gasoline volume (m gals
pmps)................. 90.1 98.6 102.8 104.1 104.5 104.4 106.3
Gasoline gross margin
(cents/gal)........... 10.0c 11.1c 10.9c 11.4c 10.4c 10.6c 10.3c
Convenience product
sales (mm)............ $ 203.4 $ 218.0 $ 231.6 $ 252.6 $ 251.7 $ 193.7 $ 214.3
Convenience product
sales (mpmps)......... 19.2 21.2 23.1 24.7 25.5 26.0 29.2
Convenience product
gross margin and other
income (mm)........... 47.7 54.8 57.2 62.9 65.8 50.3 55.7
Convenience product
gross margin (mpmps).. 4.5 5.3 5.7 6.1 6.6 6.7 7.6
Operating expenses (mm)
(a)................... 96.0 100.1 104.6 121.6 126.2 94.4 99.3
Retail contribution to
operating income (mm). N/A 52.9 45.9 45.4 25.0 24.4 17.6
</TABLE>
(footnotes on following page)
17
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- --------
(a) Certain reclassifications were made to prior periods to conform to current
period presentation.
(b) Amortization included amortization of turnaround costs and organizational
costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $2.9 million, $1.7 million, $1.8 million, $6.5 million and $10.2
million for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
and $7.6 million and $8.0 million for the nine months ended September 30,
1996 and 1997, respectively. Interest and financing costs, net, also
included interest on all indebtedness, net of capitalized interest and
interest income.
(d) 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")). EBITDA, as adjusted, does not reflect cash necessary
or available to fund cash requirements. EBITDA, as adjusted, in 1993 and
1994 excluded the write-off in 1993 and the recovery in 1994 of a $26.5
million inventory valuation adjustment.
(e) The ratio of earnings to combined fixed charges and preferred stock
dividends 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 and preferred stock
dividends. 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. There were no preferred
stock dividends in any of the periods presented. On a pro forma basis as
adjusted to give effect to the Equity Recapitalization, the Debt
Refinancing and Repayment and fees and expenses associated with the Equity
Recapitalization as if such transactions had occurred at the beginning of
each period, earnings would have been insufficient to cover fixed charges
and preferred stock dividends by an estimated $40.7 million and $56.7
million for the nine months ended September 30, 1996 and the year ended
December 31, 1996, respectively. The ratio of earnings to fixed charges and
preferred stock dividends for the nine months ended September 30, 1997
would have been 1.71x on a similar basis.
(f) As a result of the losses for the years ended December 31, 1992, 1993, 1995
and 1996, and for the nine months ended September 30, 1996, earnings were
insufficient to cover fixed charges and preferred stock dividends by $2.5
million, $13.2 million, $61.8 million, $60.5 million and $47.5 million,
respectively.
(g) Ten stores did not sell fuel in 1997.
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<PAGE>
RISK FACTORS
The New Exchangeable Preferred Stock involves certain risks. Prospective
purchasers of the New Exchangeable Preferred Stock should consider the
following risk factors, as well as the other information contained in this
Prospectus.
SUBSTANTIAL LEVERAGE, HISTORY OF NET LOSSES AND INSUFFICIENCY OF EARNINGS TO
COVER FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company has consolidated indebtedness that is substantial in relation to
its stockholders' equity. As of September 30, 1997, the Company had
outstanding long-term indebtedness (including current portions) of
approximately $797.9 million. As of September 30, 1997, on a pro forma basis
after giving effect to the Equity Recapitalization, the Debt Refinancing and
Repayment and fees and expenses associated with the Equity Recapitalization,
the Company would have had outstanding long-term indebtedness (including
current portions) of approximately $768.4 million, New Exchangeable Preferred
Stock with an aggregate liquidation preference of $63.0 million (plus accrued
and unpaid dividends thereon) and stockholders' equity of $150.1 million. See
"Capitalization." The Credit Agreement, the Loan Agreement and the indentures
(the "Indentures") governing Clark USA's $175.0 million aggregate principal
amount of 10 7/8% Senior Notes due 2005 (the "10 7/8% Notes"), Clark's 10 1/2%
Notes, $175.0 million aggregate principal amount of 9 1/2% Notes due 2004 (the
"9 1/2% Notes"), the New Senior Notes and the New Senior Subordinated Notes
limit the incurrence of additional indebtedness by the Company.
The Company had a net loss of $37.1 million and $56.2 million for the years
ended December 31, 1995 and December 31, 1996, respectively, and a net loss of
$29.2 million for the nine months ended September 30, 1996. As a result of the
losses for the years ended December 31, 1992, 1993, 1995 and 1996, and for the
nine months ended September 30, 1996, earnings were insufficient to cover
fixed charges by $2.5 million, $13.2 million, $61.8 million, $60.5 million and
$47.5 million, respectively. Giving effect to the Equity Recapitalization and
the Debt Refinancing and Repayment as if it had occurred on January 1, 1995,
would have increased the deficit of the Company's earnings to cover fixed
charges and preferred stock dividend requirements. 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 Exchangeable Preferred Stock, 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 preferred
stock dividends 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 Indentures, the Credit Agreement and the Loan
Agreement 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 cash dividends on, and to satisfy the
redemption obligations in respect of, the New Exchangeable Preferred Stock 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 anticipates that available cash, together with borrowings
under the Credit Agreement, the Loan 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
19
<PAGE>
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 Loan Agreement, the
Indentures 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.
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 80% 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' 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 on the spot market or that
adequate supplies will be available during times of shortages. See "Business--
Refining--Supply and Distribution." 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 1992, 1993, 1995 and 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." On 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."
INTEREST RATES
The Credit Agreement and the Loan Agreement provide for interest at rates
that fluctuate quarterly and could increase. An increase in interest rates
will increase the Company's interest expense and adversely affect the
Company's income and cash flow available to pay dividends on the New
Exchangeable Preferred Stock and the Company's other indebtedness. See
"Description of Certain Debt Instruments."
20
<PAGE>
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 liquidity (consisting of cash, cash equivalents and short-term
investments) as of September 30, 1997 was $297.8 million. In addition, the
Company's revolving line of credit had $400.0 million available (subject to
customary borrowing conditions) for the issuance of letters of credit and
short-term cash borrowings (subject to a $50.0 million sublimit). On a pro
forma basis after giving effect to the Equity Recapitalization, the Debt
Refinancing and Repayment and the payment of fees and expenses in connection
with the Equity Recapitalization, the Company's cash and short-term
investments as of such date would have been $237.5 million. As a result of the
Equity Recapitalization, and the Debt Refinancing and Repayment annual cash
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. Clark's Credit Agreement is
a revolving line of credit for short-term cash borrowings and for the issuance
of letters of credit in an amount equal to the lesser of $400.0 million or a
borrowing base calculated with reference to cash and cash equivalents,
eligible investments, eligible receivables and eligible petroleum inventories.
As of September 30, 1997, the maximum commitment under Clark's Credit
Agreement was $400.0 million, of which $238.0 million was used for letters of
credit; there were no direct borrowings as of such date. The Credit Agreement
will expire December 31, 1999. To the extent Clark is unable to refinance its
working capital facility on a timely basis and on satisfactory terms, there
can be no assurance that Clark will have adequate liquidity. In addition,
Clark is required to comply with certain financial covenants contained in the
Credit Agreement. There can be no assurance that Clark will remain in
compliance with such covenants if industry conditions weaken and continue for
an extended period of time. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "--Volatility of Refining and Marketing Margins" and Note 7
"Working Capital Facility" to the Consolidated Financial Statements.
The Company also has a number of longer term needs for cash. The Company
estimates that mandatory capital expenditures, including environmental and
regulatory expenditures and other nondiscretionary expenditures, from 1997
through 1999 will be approximately $65.0 million per year. While the Company
expects that cash flows from operations 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
September 30, 1997, did not have any material long-term commitments for
discretionary capital expenditures. If cash flows from operations are
insufficient to support such mandatory and discretionary capital expenditures,
the Company may be required to 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.
Clark USA's 10 7/8% Notes will become due in 2005. Clark's 9 1/2% Notes and
Term Loan will become due in 2004 and its New Senior Notes and New Senior
Subordinated Notes will become due
21
<PAGE>
in 2007. The Company may not have sufficient funds to repay in full the entire
amount of such securities when they become due and would therefore be required
to refinance all or a portion of such securities at or prior to their
maturity.
In connection with the Port Arthur Refinery acquisition, Clark 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.
LIMITATIONS ON ABILITY TO PAY DIVIDENDS
The Indentures prohibit cash dividends, except to the extent, if any, that
the "basket" available for the making of "Restricted Payments" under the
Indentures permits such payments and the Company's Consolidated Net Worth (as
defined) exceeds $220.0 million. These restrictions are expected to continue
through the maturity of the 10 7/8% Notes in 2005 or in connection with any
debt that refinances or replaces the 10 7/8% Notes. After adjusting for the
effect of the Equity Recapitalization, the Debt Refinancing and Repayment and
fees and expense associated with the Equity Recapitalization, the Company's
Consolidated Net Worth was $150.1 million, and its "basket" that would have
been available for making "Restricted Payments" had Consolidated Net Worth
exceeded $220.0 million, was approximately $14.3 million as of September 30,
1997. After October 1, 2002, if the Company is in arrears in the payment of
dividends for three or more semi-annual dividend periods, the holders of the
New Exchangeable Preferred Stock will be permitted to elect the lesser of two
or that number of directors constituting 25% of the board of directors of the
Company.
In addition to the limitations imposed on the payment of dividends by the
Indentures, under Delaware law, the Company is permitted to pay dividends on
its capital stock, including the New Exchangeable Preferred Stock, only out of
its surplus or, in the event that it has no surplus, out of its net profits
for the year in which a dividend is declared, or for the immediately preceding
fiscal year. Surplus is defined as the excess of a company's total assets over
the sum of its total liabilities plus the par value of its outstanding capital
stock. In order to pay dividends in cash, the Company must have surplus or net
profits equal to the full amount of the cash dividend at the time such
dividend is declared. However, for all dividend payment dates through and
including October 1, 2002, the Company may, at its option, pay dividends by
issuing new shares of New Exchangeable Preferred Stock in lieu of paying cash
dividends.
In determining the Company's ability to pay dividends, Delaware law permits
the board of directors of the Company to revalue the Company's assets and
liabilities from time to time to their fair market values in order to create
surplus. The Company cannot predict what the value of its assets or the amount
of its liabilities will be in the future and, accordingly, there can be no
assurance that the Company will be able to pay cash dividends on the New
Exchangeable Preferred Stock.
HOLDING COMPANY STRUCTURE; RESTRICTIONS ON DIVIDENDS FROM SUBSIDIARIES
Substantially all of the operations of the Company are conducted through
Clark, and Clark USA therefore is dependent on the earnings and cash flow of
Clark to meet its debt obligations and to pay dividends. Clark is a separate
legal entity and has no obligation to make any funds available to Clark USA,
whether in the form of loans, dividends or otherwise. As a result of this
structure, the New Exchangeable Preferred Stock and the Exchange Debentures
are effectively subordinated as to the assets and cash flow of Clark to all
existing and future indebtedness of Clark including the 9 1/2% Notes,
22
<PAGE>
the 10 1/2% Notes, the New Senior Notes, the New Senior Subordinated Notes,
the Loan Agreement and the Credit Agreement. Furthermore, Clark may incur
significant levels of trade and other accounts payable that also will have
priority over the New Exchangeable Preferred Stock and the Exchange
Debentures. In the event of a liquidation or reorganization of Clark,
creditors of Clark will be entitled to a claim on the assets of Clark, and
such creditors must be paid in full before any distribution may be made to
Clark USA.
Under the Credit Agreement, the Loan Agreement and the indentures governing
the 9 1/2% Notes, the 10 1/2% Notes, the New Senior Notes and the New Senior
Subordinated Notes, Clark's ability to pay dividends to Clark USA is limited,
and may be further limited by agreements governing any refinancing of such
indebtedness at the Clark level. In addition, in the event of a default by
Clark under any of such agreements, the payment of such dividends by Clark may
be prohibited.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indentures, the Credit Agreement and the Loan Agreement contain certain
covenants that restrict, among other things, the ability of Clark USA and
Clark 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 Clark to satisfy certain
financial condition tests. The ability of Clark USA and Clark to meet these
financial condition tests can be affected by events beyond their control, and
there can be no assurance that Clark USA or Clark will meet those tests. A
breach of any of these covenants could result in a default under the Credit
Agreement, the Loan Agreement or the Indentures. Upon an occurrence of an
event of default under the Credit Agreement, the Loan Agreement or the
Indentures, 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 Clark were unable to
repay those amounts, the lenders thereunder could proceed against the
collateral granted to them to secure that indebtedness. If the Credit
Agreement indebtedness were to be accelerated, there can be no assurance that
the assets of Clark would be sufficient to repay in full that indebtedness and
the other indebtedness of the Company. See "Description of Certain Debt
Instruments."
SUBORDINATION
The payment of dividends on and redemption price of the New Exchangeable
Preferred Stock will be subordinated to all existing and future indebtedness
of the Company. In addition, the payment of principal, premium, if any, and
interest on, and any other amounts owing in respect of, the Exchange
Debentures, if issued, will be contractually subordinated to the prior payment
in full of all existing and future Senior Debt of Clark USA, and will be
structurally subordinated to all indebtedness of Clark and other subsidiaries
of Clark USA. As of September 30, 1997 on a pro forma basis adjusted to give
effect to the Equity Recapitalization and the Debt Refinancing and Repayment,
there was $175.0 million of Senior Debt of Clark USA and $940.5 million of
total liabilities of Clark and other subsidiaries of Clark USA, (excluding
amounts available to be borrowed but not outstanding under the Credit
Agreement), and $13.9 million of other liabilities of the Company. In the
event of the bankruptcy, liquidation, dissolution, reorganization or other
winding up of Clark USA, the assets of Clark USA will be available to pay
obligations on the Exchange Debentures only after all Senior Debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Exchange Debentures. In addition, under certain
circumstances, Clark USA may not pay principal of, premium, if any, or
interest on, or any other amounts owing in respect of, the Exchange
Debentures, or purchase, redeem or otherwise retire the Exchange Debentures,
if a payment default or a nonpayment default
23
<PAGE>
exists with respect to certain Senior Debt, including Senior Debt under the
indentures of Clark USA and, in the case of nonpayment default, if a payment
blockage notice has been received by the Trustee (as defined). See "Description
of the New Exchangeable Preferred Stock" and "Description of the Exchange
Debentures--The Exchange Debentures--Subordination."
CARRYOVER TAX ATTRIBUTES--RESTRICTIONS ON AVAILABILITY
Clark USA files a consolidated U.S. federal income tax return with its
subsidiaries. At December 31, 1996, the Clark USA consolidated tax return group
(the "Group") had available to it approximately $200 million of net operating
loss carryforwards for regular federal income tax purposes, and approximately
$90 million of net operating loss carryforwards for federal alternative minimum
tax ("AMT") purposes (together, the "NOLs"). In addition, the Group had
available to it approximately $14 million in various tax credit carryforwards.
The Group anticipates that it will generate additional regular tax net
operating loss carryforwards and AMT net operating loss carryforwards in their
tax year ending December 31, 1997. These NOLs would expire beginning in 2009
through 2012. The Internal Revenue Service has not examined the Group's tax
returns for all of the years in which the Group reported NOLs and tax credit
carryforwards, and these amounts could therefore be subject to adjustment.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended
(the "Code"), however, restrictions on the utilization of NOLs or credit
carryovers (the "382 Limit") will apply if there is an "ownership change" of a
corporation entitled to use such carryovers. The Blackstone Transaction
resulted in an "ownership change" of the Group for this purpose. Following the
date of this ownership change (the "change date"), the Group will be permitted
to utilize only a specified portion of its NOLs and credit carryovers in any
taxable year or portion thereof following the ownership change. While the Group
has not finally determined the amount of NOLs which it will be permitted to
utilize annually in periods after the change date, the 382 Limit could
significantly reduce the Company's ability to fully utilize the benefit of such
NOLs.
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Exchange
Debentures in favor of other existing or future creditors of the Company. If a
court in a lawsuit on behalf of any unpaid creditor of the Company or a
representative of the Company's creditors were to find that, at the time the
Company issued the Exchange Debentures, the Company (x) intended to hinder,
delay or defraud any existing or future creditor or contemplated insolvency
with a design to prefer one or more creditors to the exclusion in whole or in
part of others or (y) did not receive fair consideration or reasonably
equivalent value for issuing such Exchange Debentures and the Company (i) was
insolvent, (ii) was rendered insolvent by reason of such issuance, (iii) was
engaged or about to engage in a business or transaction for which its remaining
assets constituted unreasonably small capital to carry on its business or (iv)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, such court could void the Company's obligations
under the Exchange Debentures and void such transactions. Alternatively, in
such event, claims of the holders of such Exchange Debentures could be
subordinated to claims of the other creditors of the Company.
CHANGE OF CONTROL PROVISIONS IN NEW AND EXISTING PREFERRED STOCK AND
INDEBTEDNESS
The Change of Control feature of the New Exchangeable Preferred Stock and
Exchange Debentures 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 antitakeover
24
<PAGE>
provisions. Instead, the Change of Control 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 Blackstone Transaction constitutes a "change of control" under the
indenture which governs the 9 1/2% Notes. In addition, under the indenture for
the 10 7/8% Notes, in the event a Rating Decline (as defined therein)
accompanies the change of control resulting from the Blackstone Transaction, a
similar repurchase offer for the 10 7/8% Notes must be made. Pursuant to such
indentures, the Company is required to offer to purchase such Notes at 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to the repurchase date. As of the date hereof, there are $175.0 million
aggregate principal amount of 9 1/2% Notes outstanding and $175.0 million
aggregate principal amount of 10 7/8% Notes outstanding. There can be no
assurance that the holders of a material portion of the 9 1/2% and 10 7/8%
Notes (in the event of a Rating Decline) will not tender their Notes in
response to the required repurchase offer. In the event a material portion of
the 9 1/2% Notes and 10 7/8% Notes is tendered, the Company would be required
to obtain new financing to the extent necessary to satisfy the repurchase
obligation. A failure to obtain the required financing on acceptable terms
would have a material adverse effect on the Company and the Notes.
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 Clark arranged for the disposal of
hazardous substances. Clark 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 the Purchase Agreement
governing the Port Arthur Refinery acquisition, Chevron retained primary
responsibility for remediation of most pre-closing contamination and Clark
retained responsibility for the remediation under the active operating units
(the "Excluded Areas"). If Chevron should be unable to meet its obligations
under the 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 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" and "Business--Legal Proceedings."
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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 73.3% of the total voting power
of all classes of the Company's capital stock. Currently, three of the
Company's six directors are affiliated with Blackstone. Accordingly,
Blackstone is in a position to exert a controlling influence over 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."
LACK OF PUBLIC MARKET
The New Exchangeable Preferred Stock is being offered exclusively to the
holders of the Old Exchangeable Preferred Stock. The Old Exchangeable
Preferred Stock was issued to a small number of sophisticated investors on
November 21, 1997. There is no existing trading market for the New
Exchangeable Preferred Stock, and there can be no assurance regarding the
future development of a market for the New Exchangeable Preferred Stock or the
ability of holders of the New Exchangeable Preferred Stock to sell their New
Exchangeable Preferred Stock or the price at which such holders may be able to
sell their New Exchangeable Preferred Stock. If such a market were to develop,
the New Exchangeable Preferred Stock could trade at prices that may be higher
or lower than the initial offering price of the Old Exchangeable Preferred
Stock 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 Exchangeable Preferred Stock. The Initial Purchasers are not
obligated to do so, however, and any market-making with respect to the New
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock or that an active public market for
the New Exchangeable Preferred Stock will develop. The Company does not intend
to apply for listing or quotation of the New Exchangeable Preferred Stock on
any securities exchange or stock market.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD EXCHANGEABLE PREFERRED STOCK
Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Old Exchangeable Preferred Stock. Thereafter, any
Holder of Old Exchangeable Preferred
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Stock who does not tender its Old Exchangeable Preferred Stock 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
Exchangeable Preferred Stock 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.
TAX CONSEQUENCES OF DEEMED STOCK DISTRIBUTION WITH RESPECT TO THE NEW
EXCHANGEABLE PREFERRED STOCK AND ORIGINAL ISSUE DISCOUNT ON EXCHANGE
DEBENTURES; POTENTIAL FOR TAXATION BEFORE RECEIPT OF CASH
If the redemption price of the New Exchangeable Preferred Stock exceeds the
issue price for the Old Exchangeable Preferred Stock for which it is exchanged
by more than a de minimis amount, such excess may be treated as a constructive
distribution with respect to such Old Exchangeable Preferred Stock and New
Exchangeable Preferred Stock of additional stock over the combined term of
such Old Exchangeable Preferred Stock and New Exchangeable Preferred Stock
using a constant interest rate method similar to that used for accruing
original issue discount. Because the issue price of the New Exchangeable
Preferred Stock distributed in lieu of payments of cash dividends will be
equal to the fair market value of the New Exchangeable Preferred Stock at the
time of distribution, it is possible, depending on its fair market value at
that time, that such New Exchangeable Preferred Stock will be issued with a
redemption premium large enough to be considered a dividend as described
above. In such event, holders would be required to include such premium in
income as a distribution over some period in advance of receiving the cash
attributable to such income, and such New Exchangeable Preferred Stock might
not trade separately, which circumstances together might adversely affect the
liquidity of the New Exchangeable Preferred Stock.
Further, to the extent holders of New Exchangeable Preferred Stock receive
additional shares of New Exchangeable Preferred Stock as a distribution in
respect to such New Exchangeable Preferred Stock, such holders would be
required to include in gross income for federal income tax purposes the fair
market value of such stock, even though such holders have not received such
fair market value in cash.
Finally, the Company may, at its option and under certain circumstances,
exchange the New Exchangeable Preferred Stock for the Exchange Debentures. Any
such exchange will be a taxable event to holders of the New Exchangeable
Preferred Stock. Furthermore, the Exchange Debentures may in certain
circumstances be treated as having been issued with original issue discount
("OID") for federal income tax purposes. In such event, holders of the
Exchange Debentures will be required to include such OID (as ordinary income)
in income over the life of the Exchange Debentures, in advance of the receipt
of the cash attributable to such income. See "Certain Federal Income Tax
Consequences."
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain obligations of the Company
under the Registration Agreement. The Company did not receive any proceeds
from the sale of the Old Exchangeable Preferred Stock and will not receive any
proceeds from the Exchange Offer. The Company will not receive any cash
proceeds from the issuance of the New Exchangeable Preferred Stock offered in
the Exchange Offer. In consideration for issuing the New Exchangeable
Preferred Stock, the Company will receive in exchange Old Exchangeable
Preferred Stock 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 Exchangeable
Preferred Stock except that the New Exchangeable Preferred Stock has been
registered under the Securities Act and, therefore, does not include certain
rights to registration thereunder. The Old Exchangeable Preferred Stock
surrendered in exchange for New Exchangeable Preferred Stock will be retired
and canceled and cannot be reissued. Accordingly, issuance of the New
Exchangeable Preferred Stock will not result in any increase in the
indebtedness of the Company. The Company did not receive any proceeds from the
Offering.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Exchangeable Preferred Stock was sold by the Company on October 1,
1997 to the Initial Purchasers, which placed the Old Exchangeable Preferred
Stock 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 Exchangeable Preferred Stock, the Company
filed with the Commission a registration statement under the Securities Act
with respect to an issue of new notes of the Company identical in all material
respects to the Old Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock the opportunity to exchange
their Old Exchangeable Preferred Stock for a like principal amount of New
Exchangeable Preferred Stock, which will be issued without a restrictive
legend and may be reoffered and resold by the holder 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 in whose name Old Exchangeable Preferred Stock is registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder.
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
Exchangeable Preferred Stock issued pursuant to the Exchange Offer in exchange
for Old Exchangeable Preferred Stock may be offered for resale, resold and
otherwise transferred by any Holder of such New Exchangeable Preferred Stock
(other than 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 such New Exchangeable Preferred Stock is acquired in the
ordinary course of such Holder's business and such Holder has no arrangement
or understanding with any person to participate in the distribution of such
New Exchangeable Preferred Stock. Persons wishing to exchange Old Exchangeable
Preferred Stock 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 Exchangeable Preferred
Stock 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 Exchangeable Preferred Stock without
compliance with the registration and prospectus delivery requirements of the
Securities Act.
In addition, each broker-dealer that receives New Exchangeable Preferred
Stock for its own account in exchange for Old Exchangeable Preferred Stock,
where such Old Exchangeable Preferred Stock was 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 Exchangeable Preferred Stock. See "Plan of Distribution."
As a result of the filing and the effectiveness of the Registration
Statement and the consummation of the Exchange Offer, the Company's obligation
to make certain semi-annual payments with respect to the Old Exchangeable
Preferred Stock will be terminated. The Old Exchangeable Preferred Stock was
issued to a small number of sophisticated investors on October 1, 1997, and
there is no public market for it at present. To the extent Old Exchangeable
Preferred Stock is tendered and accepted in the exchange, the principal amount
of outstanding Old Exchangeable Preferred Stock will decrease
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with a resulting decrease in the liquidity in the market therefor. Following
the consummation of the Exchange Offer, Holders of Old Exchangeable Preferred
Stock will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for the Old Exchangeable Preferred
Stock could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal (together, the "Exchange Offer"), the Company will
accept any and all Old Exchangeable Preferred Stock validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The
Company will issue one share of New Exchangeable Preferred Stock in exchange
for each share of outstanding Old Exchangeable Preferred Stock accepted in the
Exchange Offer. Holders may tender some or all of their Old Exchangeable
Preferred Stock pursuant to the Exchange Offer.
The form and terms of the Old Exchangeable Preferred Stock will be identical
in all material respects to the form and terms of the Old Exchangeable
Preferred Stock except that the Old Exchangeable Preferred Stock has been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof. The Old Exchangeable Preferred Stock will have the same
rights and preferences as the Old Exchangeable Preferred Stock.
As of the date hereof, 63,000 shares of the Old Exchangeable Preferred Stock
are outstanding and there are registered Holders. This Prospectus, together
with the Letter of Transmittal, is being sent to all such registered Holders as
of , 1997.
Holders of Old Exchangeable Preferred Stock 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
Exchangeable Preferred Stock 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 Old
Exchangeable Preferred Stock from the Company.
If any tendered Old Exchangeable Preferred Stock is 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 Exchangeable
Preferred Stock will be returned, without expense, to the tendering Holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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.
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The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Exchangeable Preferred Stock, 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 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 Exchangeable Preferred Stock may tender such Old
Exchangeable Preferred Stock 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
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock, 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 Depositary 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 Notes. Within two business days after the date of
this Offer to Purchase, the Depositary will establish an account with respect
to the Notes at DTC for purposes of the Offer. Any financial institution that
is a participant in the DTC system may make book-entry delivery of Notes by
causing DTC to transfer such Notes into the Depositary's account in accordance
with DTC's procedure for such transfer. Although delivery of Notes may be
effected through book entry at DTC, Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or (in the case of a book-
entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and
any other required documents, must be transmitted to and received by the
Depositary at or prior to 5:00 p.m., New York City time, on the Expiration
Date at one of its addresses set forth on the back cover of this Offer.
Delivery of such documents to DTC does not constitute delivery to the
Depositary.
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 Exchangeable Preferred Stock 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 Exchangeable
Preferred Stock should be sent to the Company.
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Holders may request their respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transactions for such Holders.
Any beneficial owner whose Old Exchangeable Preferred Stock is 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 Exchangeable Preferred Stock, either make
appropriate arrangements to register ownership of the Old Exchangeable
Preferred Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock listed therein, such Old
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock.
If the Letter of Transmittal or any Old Exchangeable Preferred Stock or bond
powers is 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 Exchangeable Preferred
Stock 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 Exchangeable Preferred Stock not properly
tendered or any Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock. 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 Exchangeable Preferred Stock 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
Exchangeable Preferred Stock, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Old Exchangeable Preferred Stock will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Exchangeable Preferred Stock received by the Exchange Agent that is 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 Exchangeable Preferred Stock that remains
outstanding subsequent to the Expiration Date or,
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as set forth below under "--Conditions," to terminate the Exchange Offer and,
to the extent permitted by applicable law, purchase Old Exchangeable Preferred
Stock 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.
By tendering, each Holder will represent to the Company that, among other
things, the New Exchangeable Preferred Stock acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of business of the person
receiving such New Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock for its own account in exchange for
Old Exchangeable Preferred Stock that was 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 Exchangeable Preferred Stock. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Exchangeable Preferred Stock and (i)
whose Old Exchangeable Preferred Stock is not immediately available or (ii) who
cannot deliver their Old Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock and the principal amount of Old
Exchangeable Preferred Stock 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
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock
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 Exchangeable Preferred Stock
according to the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Exchangeable Preferred
Stock may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date.
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To withdraw a tender of Old Exchangeable Preferred Stock 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 Exchangeable
Preferred Stock to be withdrawn (the "Depositor"), (ii) identify the Old
Exchangeable Preferred Stock to be withdrawn (including the certificate number
or numbers and principal amount of such Old Exchangeable Preferred Stock),
(iii) be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Exchangeable Preferred Stock was
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Exchangeable Preferred Stock register the transfer of such Old Exchangeable
Preferred Stock into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Exchangeable Preferred Stock is to be
registered, if different from 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 Exchangeable Preferred Stock so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Exchangeable Preferred Stock will be issued with
respect thereto unless the Old Exchangeable Preferred Stock so withdrawn is
validly retendered. Properly withdrawn Old Exchangeable Preferred Stock may be
retendered by following one of the procedures described above under "Procedures
for Tendering" at any time prior to the Expiration Date.
Any Old Exchangeable Preferred Stock which has been tendered but which is 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 Exchangeable Preferred
Stock for, any New Exchangeable Preferred Stock, and may terminate the Exchange
Offer as provided herein before the acceptance of such Old Exchangeable
Preferred Stock, 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
Exchangeable Preferred Stock and return all tendered Old Exchangeable Preferred
Stock to the tendering Holders, (ii) extend the Exchange Offer and retain
33
<PAGE>
all Old Exchangeable Preferred Stock tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders to withdraw such
Old Exchangeable Preferred Stock (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old
Exchangeable Preferred Stock which has 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.
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for 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
Confirm by Telephone:
(615) 835-3572
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
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 Exchangeable Preferred Stock 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
$300,000.00. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
34
<PAGE>
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Exchangeable Preferred Stock pursuant to the Exchange Offer. If,
however, certificates representing New Exchangeable Preferred Stock or Old
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock
tendered, or if tendered Old Exchangeable Preferred Stock is registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the exchange of Old
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock will be recorded at the same carrying
value as the Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock.
35
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997, and as adjusted to give effect to the Equity
Recapitalization, the Debt Refinancing and Repayment and Fees and expenses
associated with the Equity Recapitalization. The 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
SEPTEMBER 30, 1997
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
<S> <C> <C>
(IN MILLIONS)
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS....... $ 297.8 $ 237.5
========== ========
LONG-TERM DEBT:
Clark (a)
10 1/2% Notes......................................... $ 225.0 $ --
9 1/2% Notes.......................................... 175.0 175.0
Term Loan............................................. -- 125.0
Senior Notes.......................................... -- 100.0
Senior Subordinated Notes............................. -- 175.0
Capital leases and other.............................. 15.3 15.3
---------- --------
Total Clark long-term debt............................ 415.3 590.3
---------- --------
Clark USA
Zero Coupon Notes..................................... 204.5 --
10 7/8% Notes......................................... 175.0 175.0
---------- --------
Total Clark USA long-term debt........................ 379.5 175.0
---------- --------
Total long-term debt.................................... $ 794.8 $ 765.3
---------- --------
EXCHANGEABLE PREFERRED STOCK, 63,000 issued, as
adjusted................................................ -- $ 63.0
STOCKHOLDERS' EQUITY:
Common, $0.01 par value (b)........................... $ 0.2 $ 0.1
Class A Common, $0.01 par value (b)................... 0.1 --
Class F Common, $0.01 par value (b)................... -- 0.1
Paid-in-capital....................................... 296.1 231.0
Advance crude oil purchase receivable from
stockholder.......................................... (26.5) (26.5)
Retained earnings (deficit)........................... (26.0) (54.6)
---------- --------
Total stockholders' equity.......................... $ 243.9 $ 150.1
---------- --------
Total capitalization................................ $ 1,038.7 $ 978.4
========== ========
</TABLE>
- --------
(a) Does not reflect the utilization of $238.0 million at September 30, 1997
under the Credit Agreement to support outstanding letters of credit.
(b) As of September 30, 1997, actual common shares outstanding for Common
Stock, Class A Common Stock and Class F Common Stock were 19,051,818,
10,162,509 and none, respectively. As of September 30, 1997, common shares
outstanding on an as adjusted basis for Common Stock, Class A Common Stock
and Class F Common Stock were 14,759,782, none and 6,101,000,
respectively.
36
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected consolidated financial data set forth below for the Company as
of December 31, 1995 and 1996 and for each of the three years in the period
ended December 31, 1996 are derived from the audited financial statements
included elsewhere herein. The selected financial data set forth below for the
Company as of December 31, 1992, 1993, and 1994 and for each of the two years
in the period ended December 31, 1993 are derived from the audited financial
statements not included elsewhere 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 herein. The selected historical data for the nine
months ended September 30, 1996 and 1997 is unaudited.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
STATEMENT OF EARNINGS
DATA:
Net sales and
operating revenues... $2,253.5 $2,264.7 $2,441.2 $4,486.8 $5,073.1 $3,724.7 $3,297.2
Cost of sales......... 1,949.8 1,930.3 2,086.6 4,015.2 4,557.0 3,344.2 2,789.4
Operating expenses
(a).................. 218.6 209.5 225.6 375.5 419.9 305.5 320.1
General and
administrative
expenses (a)......... 38.3 41.4 51.5 52.4 59.5 44.0 48.0
Inventory (recovery
of) write-down to
market value......... -- 26.5 (26.5) -- -- -- --
Depreciation and
amortization (b)..... 30.5 35.4 37.4 43.5 48.5 37.0 44.4
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)............... $ 16.3 $ 21.6 $ 66.6 $ 0.2 $ (11.8) $ (6.0) $ 95.3
Interest and financing
costs, net (c)....... 28.6 43.7 53.7 59.2 47.5 40.6 58.4
Other income (expense)
(d).................. 14.7 11.4 (1.1) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before taxes,
extraordinary items
and cumulative effect
of change in
accounting
principles........... $ 2.4 $ (10.7) $ 11.8 $ (59.0) $ (59.3) $ (46.6) $ 36.9
Income tax provision
(benefit)............ 1.3 (4.2) 4.0 (21.9) (3.1) 17.4 (7.5)
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of change in
accounting
principles........... $ 1.1 $ (6.5) $ 7.8 $ (37.1) $ (56.2) $ (29.2) $ 29.4
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term
investments.......... $ 218.9 $ 232.9 $ 155.0 $ 149.8 $ 354.8 $ 110.6 $ 297.8
Total assets.......... 802.0 865.4 891.7 1,364.9 1,432.8 1,417.9 1,402.8
Long-term debt........ 401.5 538.1 553.3 765.0 781.4 776.0 794.8
Stockholders' equity.. 66.1 49.5 56.2 154.2 214.4 241.6 243.9
SELECTED FINANCIAL DATA:
EBITDA, as adjusted
(e).................. $ 46.8 $ 83.5 $ 77.5 $ 43.7 $ 36.7 $ 31.0 $ 139.7
Cash flows from
operating activities. 37.3 57.8 56.3 (81.5) 22.4 (14.6) 32.2
Cash flows from
investing activities. (23.8) (40.2) (2.2) (240.1) 218.5 (0.7) (83.1)
Cash flows from
financing activities. (38.7) 29.7 (6.5) 298.9 (4.7) (4.6) (6.1)
<CAPTION>
Ratio of earnings to
fixed charges and
preferred stock
dividends (f)........ (g) (g) 1.14x (g) (g) (g) 1.48x
<S> <C> <C> <C> <C> <C> <C> <C>
Expenditures for
turnaround........... $ 2.7 $ 20.6 $ 11.2 $ 6.5 $ 13.9 $ 7.2 $ 31.2
Expenditures for
property, plant and
equipment............ 59.5 68.1 100.4 42.2 45.0 23.4 55.7
Refinery acquisition
expenditures......... -- -- 13.5 71.8 -- -- --
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
------ ------- ------- ------- ------- ------ ------
(IN MILLIONS, EXCEPT RATIOS AND OPERATING DATA)
OPERATING DATA:
Refining Division
Port Arthur Refinery
(acquired
February 27, 1995)
Production (m
bbls/day)............ -- -- -- 207.7 210.8 212.0 208.5
Gross margin (per bbl)
(a).................. -- -- -- $2.37 $2.78 $2.49 $3.84
Operating expenses
(per bbl) (a)........ -- -- -- 1.90 2.13 2.06 2.23
Blue Island, Hartford
and other refining
Production (m
bbls/day)............ 142.4 134.7 140.3 136.5 134.2 136.2 141.4
Gross margin (per
bbl)................. $3.03 $3.24 $3.48 $2.64 $2.53 $2.66 $3.94
Operating expenses
(per bbl) (a)........ 2.17 2.12 2.28 2.61 2.58 2.44 2.40
Refining contribution
to operating
income (mm).......... N/A 45.2 47.8 12.8 26.5 17.7 134.7
Retail Division:
Number of stores
(average)(h)......... 885 860 834 852 823 828 815
Gasoline volume (mm
gals)................ 956.7 1,014.8 1,028.5 1,063.8 1,031.9 777.7 771.1
Gasoline volume (m
gals pmps)........... 90.1 98.6 102.8 104.1 104.5 104.4 106.3
Gasoline gross margin
(cents/gal).......... 10.0c 11.1c 10.9c 11.4c 10.4c 10.6c 10.3c
Convenience product
sales (mm)........... $203.4 $218.0 $231.6 $252.6 $251.7 $193.7 $214.3
Convenience product
sales (pmps)......... 19.2 21.2 23.1 24.7 25.5 26.0 29.2
Convenience product
gross margin
and other income
(mm)................. 47.7 54.8 57.2 62.9 65.8 50.3 55.7
Convenience product
gross margin (pmps).. 4.5 5.3 5.7 6.1 6.6 6.7 7.6
Operating expenses
(mm) (a)............. 96.0 100.1 104.6 121.6 126.2 94.4 99.3
Retail contribution to
operating income
(mm)................. N/A 52.9 45.9 45.4 25.0 24.4 17.6
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
(b) Amortization included amortization of turnaround costs and organizational
costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $2.9 million, $1.7 million, $1.8 million, $6.5 million and $10.2
million for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
and $7.6 million and $8.0 million for the nine months ended September 30,
1996 and 1997, respectively. Interest and financing costs, net, also
included interest on all indebtedness, net of capitalized interest and
interest income.
(d) Other expense in 1994 included financing costs associated with a withdrawn
debt offering. Other income in 1993 included the final settlement of
litigation with Drexel Burnham Lambert Incorporated ("Drexel") of $8.5
million and a gain from the sale of noncore stores of $2.9 million. Other
income in 1992 included the settlement of litigation with Apex Oil Company
("Apex") and Drexel of $9.2 million and $5.5 million, respectively.
(e) 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 GAAP. EBITDA, as adjusted,
does not reflect cash necessary or available to fund cash requirements.
EBITDA, as adjusted, in 1993 and 1994 excluded the writeoff in 1993 and
the recovery in 1994 of a $26.5 million inventory valuation adjustment.
(f) The ratio of earnings to combined fixed charges and preferred stock
dividends 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 by (ii)
fixed charges and preferred stock dividends, 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. There were no
preferred stock dividends in any of the periods presented. On a pro forma
basis as adjusted to give effect to the Equity Recapitalization, the Debt
Refinancing and Repayment and fees and expenses associated with the Equity
Recapitalization as if such transactions had occurred at the beginning of
each period, earnings would have been insufficient to cover fixed charges
and preferred stock dividends by an estimated $40.7 million and $56.7
million for the nine months ended September 30, 1996 and the year ended
December 31, 1996, respectively. The ratio of earnings to fixed charges
and preferred stock dividends for the nine months ended September 30, 1997
would have been 1.71x on a similar basis.
(g) As a result of the losses for the years ended December 31, 1992, 1993,
1995 and 1996, and for the nine months ended September 30, 1996, earnings
were insufficient to cover fixed charges and preferred stock dividends by
$2.5 million, $13.2 million, $61.8 million, $60.5 million and $47.5
million, respectively.
(h) Ten stores included in 1997 did not sell fuel.
38
<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
Because Clark is the principal operating subsidiary of the Company, a
discussion of the Company's results of operations consists principally of a
discussion of Clark's results of operations. 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
and 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 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: (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(A)
----------------------------------------
<S> <C> <C> <C>
BEFORE PORT AFTER PORT
ARTHUR ARTHUR
EARNINGS SENSITIVITY CHANGE ACQUISITION ACQUISITION
- -------------------- ---------------- ----------- -----------
Refining margins
Sweet crude cracking margin......... $0.10 per barrel $ 5 million $12 million
Sweet sour differentials............ 0.10 per barrel 3 million 9 million
Heavy light differentials........... 0.10 per barrel 1 million 2 million
Retail margin......................... $0.01 per gallon $10 million $10 million
</TABLE>
- --------
(a) Based on an assumed production of approximately 212,000 bpd for the Port
Arthur refinery and 140,000 bpd for the Illinois refineries.
39
<PAGE>
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996:
<TABLE>
<S> <C> <C>
FOR THE NINE
MONTHS
ENDED SEPTEMBER
30,
------------------
1996 1997
-------- --------
(IN MILLIONS,
UNAUDITED)
FINANCIAL RESULTS:
Net sales and operating revenues............................ $3,724.7 $3,297.2
Cost of sales............................................... 3,344.2 2,789.4
Operating expenses (a)...................................... 305.5 320.1
General and administrative expenses (a)..................... 44.0 48.0
Depreciation and amortization............................... 37.0 44.4
Interest expense and financing costs........................ 67.5 69.5
Interest and finance income................................. 26.9 11.1
-------- --------
Earnings (loss) before income taxes......................... (46.6) 36.9
Income tax (provision) benefit.............................. 17.4 (7.5)
-------- --------
Net earnings (loss)......................................... $ (29.2) $ 29.4
======== ========
OPERATING INCOME:
Refining contribution to operating income................... $ 17.7 $ 134.7
Retail contribution to operating income..................... 24.4 17.6
Corporate general and administrative expenses............... 11.1 12.6
-------- --------
31.0 139.7
Depreciation and amortization............................... 37.0 44.4
-------- --------
Operating income (loss)..................................... $ (6.0) $ 95.3
======== ========
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
The Company reported consecutive record net quarterly earnings of $32.3
million and $44.5 million for the second and third quarters of 1997,
respectively, which compared to net losses of $2.6 million and $11.4 million
in the comparable periods of 1996. For the nine months ended September 30,
1997, the Company recorded net earnings of $29.4 million which was improved
over a net loss of $29.2 million in the year-earlier period. The Company
recorded EBITDA of $139.7 million for the first nine months of 1997 versus
$31.0 million in the same period of 1996. Refining division results improved
significantly in the second and third quarters of 1997 over the comparable
periods in the previous year and over the first quarter of 1997 due to good
unit reliability and an improvement in refining industry fundamentals,
particularly crude oil quality differentials. A significant fall in crude oil
prices and the hypothetical cost of lost production associated with a major
maintenance turnaround reduced pre-tax earnings in the first nine months of
1997 by an estimated $42.5 million. An increase in crude oil prices generated
a pre-tax gain of $20.4 million in the first nine months of 1996. After
adjusting for these material items, the Company would have generated EBITDA of
$182.2 million in the first nine months of 1997 versus $10.6 million in the
same period of 1996. The Company recorded an income tax provision of $7.5
million for the first nine months of 1997 primarily for the settlement of
prior-period audit examinations. As compared to 1996, the Company recorded a
lower tax provision for current-year earnings due to its cumulative tax loss
carryforward position. See additional operating cash flow disclosures in
Selected Consolidated Financial and Other Data.
Net sales and operating revenues decreased approximately 11% in the first
nine months of 1997 as compared to the prior year. This decrease was
principally the result of the crude oil price decline, noted above, that
reduced both sales and cost of goods sold. In addition, the major maintenance
turnaround at the Port Arthur refinery reduced the Company's production and
sales of refined products.
40
<PAGE>
REFINING
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN MILLIONS,
EXCEPT PER
BARREL DATA)
<S> <C> <C>
REFINING DIVISION OPERATING STATISTICS:
PORT ARTHUR REFINERY
Crude oil throughput (m bbls/day)...................... 201.7 201.3(a)
Production (m bbls/day)................................ 212.0 208.5(a)
Gross margin ($ per barrel of production).............. $ 2.49 $ 3.84
Operating expenses..................................... 119.7 127.1
Net margin............................................. $ 25.0 $ 91.5
BLUE ISLAND, HARTFORD AND OTHER REFINING
Crude oil throughput (m bbls/day)...................... 135.1 135.6
Production (m bbls/day)................................ 136.2 141.4
Gross margin ($ per barrel of production).............. $ 2.66 $ 3.94
Operating expenses..................................... 91.1 92.6
Net margin............................................. $ 8.2 $ 59.1
Clark Pipe Line net margin............................... 1.7 1.7
Divisional general and administrative expenses........... 17.2 17.6
Contribution to earnings................................. $ 17.7 $ 134.7
</TABLE>
(a) 1997 crude oil throughput and production reflected scheduled downtime on
most processing units for approximately one month during a first quarter
maintenance turnaround.
Despite the large negative impact from the fall in crude oil prices and the
major maintenance turnaround at the Port Arthur refinery discussed in more
detail below, refining contribution for the nine months ended September 30,
1997 was $134.7 million in 1997 versus $17.7 million in 1996. Earnings for the
first nine months of 1997 increased due to improved yields and throughput and
wider crude oil quality differentials. Crude oil quality differential
indicators for light sour crude oil improved from $1.06 per barrel to $1.71
per barrel and the benefit for heavy sour crude oil improved from $4.75 per
barrel to $5.63 per barrel from the first nine months of 1996 to the same
period of 1997. The Company believes these crude oil quality differential
indicators improved primarily due to 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 particularly
benefited from improved access to lower-cost Canadian heavy crude oil. Port
Arthur refinery results were also buoyed by the operational benefits realized
from the first quarter maintenance turnaround. On a comparative basis,
refining gross margin in the first nine months of 1996 was negatively impacted
by crude oil market volatility and backwardation that raised the cost of the
Company's feedstocks.
The fall in crude oil prices and the hypothetical cost of lost production
associated with a major maintenance turnaround reduced pre-tax earnings for
the nine months ended September 30, 1997 by an estimated $42.5 million. A
decrease in crude oil prices of approximately $4.75 per barrel in 1997 had a
negative impact on the Company's pre-tax earnings of approximately $27.2
million, resulting 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, especially in a
backwardated market. In the first nine months of 1996, this policy resulted in
a gain of $20.4 million because crude oil prices increased over $4.80 per
barrel in that period. The Company successfully completed an extensive planned
maintenance turnaround on most units at its Port Arthur refinery in the first
quarter of 1997. The opportunity cost of lost production from essentially the
entire refinery
41
<PAGE>
being out of service for one month was approximately $15.3 million. After
adjusting for these material items, the refining division would have
contributed $177.2 million to operating income in the first nine months of
1997 (1996--loss of $2.7 million).
Port Arthur refinery crude oil throughput and production reached record and
near record levels in the second and third quarters of 1997, but were
relatively flat compared to 1996 levels on a year-to-date basis due to the
planned maintenance turnaround in the first quarter of 1997. Port Arthur
refinery operating expenses for the first nine months of 1997 were higher than
the previous year principally because of higher natural gas prices and higher
incentive compensation due to strong earnings. Natural gas is consumed as a
fuel in the refining process.
RETAIL
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
<CAPTION>
(IN MILLIONS, EXCEPT
PER GALLON AND
PER STORE DATA)
<S> <C> <C>
RETAIL DIVISION OPERATING STATISTICS:
Gasoline volume (mm gals)............................... 777.7 771.1
Gasoline gross margin (cents/gal)....................... 10.6c 10.3c
Gasoline gross margin................................... $ 82.3 $ 79.0
Convenience product sales............................... $ 193.7 $ 214.3
Convenience product margin
and other income....................................... 50.3 55.7
Gain on asset sales..................................... $ 1.8 $ (0.5)
Operating expenses (a).................................. 94.4 99.3
Divisional general and administrative expenses (a)...... 15.6 17.3
Contribution to operating income........................ $ 24.4 $ 17.6
PER MONTH PER STORE:
Company operated stores (average) (b)................... 828 815
Gasoline volume (m gals)................................ 104.4 106.3
Convenience product sales (thousands)................... $ 26.0 $ 29.2
Convenience product gross margin (thousands)............ $ 6.7 $ 7.6
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to confirm to
current period presentation.
(b) Ten stores included in 1997 did not sell fuel.
Retail division contribution to operating income of $7.5 million in the
third quarter of 1997 exceeded its contribution in each of the previous four
quarters. Retail contribution to operating income decreased to $17.6 million
in the first nine months of 1997 from $24.4 million in the same period of
1996. Retail contribution declined on a year-to-date basis primarily because
of weaker same store retail fuel margins in the first half of 1997 and a $1.8
million gain on the sale of stores in the prior year. This was partially
offset by the fuel and convenience product margin contribution from the 48
Michigan stores acquired in early 1997. Retail margins have historically
benefited when crude oil prices fall, but the benefit of the crude oil price
decline in the first half of 1997 was not fully realized because wholesale
prices did not fall as much as crude oil prices and due to highly competitive
retail markets. This trend of tighter retail margins started in the last half
of 1996, but reflected improvement in September 1997 when fuel margins
averaged over 12c per gallon. Certain store operating measures did show
improvement in 1997, including a 13% improvement in convenience product
margins per store on 12% higher sales. Operating expenses increased
principally because of lease expenses and higher operating costs for larger
stores acquired in the last year.
42
<PAGE>
OTHER FINANCIAL HIGHLIGHTS
Corporate and divisional general and administrative expenses increased in
the first nine months of 1997 over the comparable period in 1996 principally
because of accruals for higher incentive compensation resulting from the
Company's stronger earnings.
Interest and finance income for the first nine months of 1997 decreased over
the comparable period of 1996 principally due to the sale in late 1996 of an
advance crude oil purchase receivable. This receivable provided finance income
of $20.9 million in the first nine months of 1996.
Depreciation and amortization expense increased for the nine months ended
September 30, 1997 over the same period in 1996 principally because of the
amortization on the 1997 first quarter Port Arthur refinery maintenance
turnaround.
In the early 1990s the Company invested $25.0 million in a project initiated
to produce low-sulfur diesel fuel at the Hartford refinery which was delayed
in 1992 based on internal and third-party analyses that indicated an
oversupply of low-sulfur diesel fuel capacity in the Company's markets. Based
on these analyses, the Company projected relatively narrow price differentials
between low- and high-sulfur diesel products. This projection has thus far
been borne out. High-sulfur diesel fuel is utilized by the railroad, marine
and farm industries. In December 1997, the Company determined that equipment
purchased for the DHDS Project could be better utilized for other projects at
its Hartford and Port Arthur refineries, rather than remaining idle until low-
and high-sulfur diesel fuel differentials widened sufficiently to justify
completing the DHDS Project. As a result, in the fourth quarter of 1997 the
Company expects to record a charge to earnings of approximately $15.0 million
principally for engineering costs specific to the DHDS Project.
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 could fail or create erroneous results. Some
applications 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. Based on preliminary
information, the Company estimates the cost of such remaining program
conversions or replacements to be approximately $5 to $10 million.
1996 compared with 1995 and 1994:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
<S> <C> <C> <C>
1994 1995 1996
-------- -------- --------
(IN MILLIONS)
FINANCIAL RESULTS: (a)
Net sales and operating revenues.................. $2,441.2 $4,486.8 $5,073.1
Cost of sales..................................... 2,086.6 4,015.2 4,557.0
Operating expenses (b)............................ 225.7 375.5 419.9
General and administrative expenses (b)........... 50.3 52.4 59.5
Depreciation and amortization..................... 37.4 43.5 48.5
Interest and financing costs, net................. 47.1 59.2 58.4
-------- -------- --------
Loss before income taxes (c)...................... (5.9) (59.0) (70.2)
Income tax benefit (c)............................ (2.8) (21.9) (7.3)
-------- -------- --------
Loss before unusual items (c)..................... (3.1) (37.1) (62.9)
Unusual items, after taxes (c).................... 10.9 -- 6.7
-------- -------- --------
Net earnings (loss)............................... $ 7.8 $ (37.1) $ (56.2)
======== ======== ========
OPERATING INCOME:
Refining contribution to operating income......... $ 47.8 $ 12.8 $ 26.5
Retail contribution to operating income........... 45.9 45.4 25.0
Corporate general and administrative expenses..... 15.1 14.5 14.8
Depreciation and amortization..................... 37.4 43.5 48.5
Unusual items (c)................................. 25.4 -- --
-------- -------- --------
Operating income (loss)........................... $ 66.6 $ 0.2 $ (11.8)
======== ======== ========
</TABLE>
- --------
(a) This table provides supplementary data in a format that is not intended to
represent an income statement presented in accordance with GAAP.
43
<PAGE>
(b) Certain reclassifications have been made to prior periods to conform to
current period presentation.
(c) The Company considers certain items in 1994 and 1996 to be "unusual."
Detail on these items is presented below.
The Company reported a net loss of $56.2 million in 1996 compared with a net
loss of $37.1 million in 1995 and net earnings of $7.8 million in 1994.
Excluding an unusual item, discussed below, 1996 net earnings were flat with
1995, while 1995 was below 1994. Improvements in productivity and fundamental
refining industry indicators for crack spreads and crude oil quality
differentials in 1996 were offset by the impact of rising, volatile and high
crude oil prices. Narrow crude oil differentials, an extremely warm 1994-1995
winter and the resulting oversupply of distillates, and market uncertainty
related to the introduction of RFG, reduced 1995 results from 1994 levels. The
late February 1995 acquisition of the 212,000 barrel per day Port Arthur, Texas
refinery increased net sales and operating revenues, cost of goods sold,
operating and general and administrative expenses and depreciation and
amortization. Net sales and operating revenues and cost of goods sold were also
higher in 1996 due to higher hydrocarbon prices as reflected by 20% higher
prices for benchmark WTI crude oil. Interest and financing costs, net,
fluctuated significantly from 1994 to 1996 because of the Port Arthur refinery
acquisition and the acquisition in December 1995 of two advance crude oil
purchase receivables.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
<S> <C> <C> <C>
1994 1995 1996
----- ---- -----
(IN MILLIONS)
UNUSUAL ITEMS:
Recovery of inventory market value write-down............... $26.5 $-- $ --
Other....................................................... (1.1) -- --
----- ---- -----
Impact on operating income.................................. 25.4 -- --
Gain on sale of advance crude oil purchase receivable....... -- -- 10.9
Short-term investment losses................................ (6.6) -- --
Other....................................................... (1.1) -- --
----- ---- -----
Total....................................................... $17.7 $-- $10.9
===== ==== =====
Net of income taxes........................................... $10.9 $-- $ 6.7
===== ==== =====
</TABLE>
Several items which are considered by management as "unusual" are excluded
throughout this discussion of the Company's results of operations. In 1996, in
accordance with the provisions of Statement of Financial Accounting Standards
No. 109, the Company recorded a valuation allowance on its deferred income tax
assets of approximately $18.8 million (not included in the table above). See
Note 12 "Income Taxes" to the Consolidated Financial Statements. The Company
also sold one of its advance crude oil purchase receivables in October 1996
recognizing a gain of $10.9 million that was recorded as finance income. A
noncash accounting charge of $26.5 million was taken in the fourth quarter of
1993 to reflect the decline in the value of petroleum inventories below
carrying value caused by a substantial drop in petroleum prices. Crude oil and
related refined product prices rose in 1994 allowing the Company to recover the
original charge. Accordingly, a reversal of the inventory write-down to market
was recorded in 1994. In 1994, the Company realized losses on the sale of
short-term investments due to an increase in market interest rates.
44
<PAGE>
REFINING
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C> <C> <C>
1994 1995 1996
------- ------- -------
(IN MILLIONS, EXCEPT
OPERATING DATA)
OPERATING STATISTICS:
PORT ARTHUR REFINERY (ACQUIRED FEBRUARY 27, 1995)
Crude oil throughput (m bbls/day).................... -- 198.9 199.8
Production (m bbls/day).............................. -- 207.7 210.8
Gross margin (per barrel of production) (a).......... $ -- $ 2.37 $ 2.78
Operating expenses (per barrel of production) (a).... -- 1.90 2.13
Net margin (a)....................................... $ -- $ 30.0 $ 49.6
BLUE ISLAND, HARTFORD AND OTHER REFINING
Crude oil throughput (m bbls/day).................... 138.2 133.6 132.7
Production (m bbls/day).............................. 140.3 136.5 134.2
Gross margin (per barrel of production) (a).......... $ 3.48 $ 2.64 $ 2.53
Operating expenses (per barrel of production) (a).... 2.28 2.61 2.58
Net margin (a)....................................... $ 61.4 $ 1.5 $ (2.3)
Clark Pipe Line net margin............................. 1.3 1.7 2.3
Divisional general and administrative expenses (a)..... 14.9 20.4 23.1
Contribution to operating income (a)................... $ 47.8 $ 12.8 $ 26.5
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
Refining division contribution to operating income in 1996 was $26.5
million, more than double 1995 levels ($12.8 million), but below 1994 results
($47.8 million). Contribution improved over 1995 principally because of an
improvement in the Port Arthur refinery gross margin resulting from
improvements in operating rates, reliability and yields. The Hartford refinery
realized the benefit from a capital project designed to recover additional
higher value products from processing units. Certain key refining market
indicators also improved in 1996, including gasoline and distillate margins
and crude oil quality differentials. More normal winter weather, and
corresponding demand, contributed to a 2.4% increase in fuels demand from 1995
to 1996. Rising crude oil prices added an estimated $25.3 million to gross
margin. However, these positive market trends were more than offset by reduced
by-product margins and the increased cost of crude oil acquisition activities
caused by volatile and high absolute crude oil prices. Refining results for
1995 were below 1994 levels as refining margins were particularly weak in 1995
and late 1994 due to the warmest Northern Hemisphere winter in 40 years, which
reduced demand for heating oil, and the transition to RFG. Several
geographical areas unexpectedly opted not to switch to RFG which caused
confusion and concern in the marketplace, and caused gasoline prices to fall
relative to the price of crude oil. In addition, unscheduled downtime at the
Blue Island refinery reduced gross margins by an estimated $5.5 million in
1995 and $3.1 million in 1996.
Operating expenses increased at the Port Arthur refinery from 1995 to 1996
principally due to increased refinery fuel costs associated with higher
natural gas prices. Operating expenses increased in 1995 over 1994 principally
due to the addition of the Port Arthur refinery and related terminal expenses
in early 1995 and expenses ($6.5 million) associated with unplanned downtime
at the Blue Island refinery. Reduced throughput at the Company's Illinois
refineries due to poor first quarter 1995 market conditions and scheduled and
unscheduled downtime also contributed to lower production and a higher per
barrel operating costs in 1996 and 1995 as compared with 1994. Divisional
general and administrative expenses increased in 1996 and 1995 principally
because of the inclusion of administrative functions located at the Port
Arthur refinery.
45
<PAGE>
RETAIL
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
<S> <C> <C> <C>
1994 1995 1996
-------- -------- --------
(IN MILLIONS, EXCEPT
OPERATING DATA)
OPERATING STATISTICS:
Gasoline volume (mm gals)...................... 1,028.5 1,063.8 1,031.9
Gasoline gross margin (cents/gal) (a).......... 10.9c 11.4c 10.4c
Gasoline gross margin (a)...................... $ 112.3 $ 121.7 $ 107.0
Convenience product sales...................... $ 231.6 $ 252.6 $ 251.7
Convenience product gross margin and other
income......................................... 57.2 62.9 65.8
Operating expenses (a)......................... $ 104.6 $ 121.6 $ 126.2
Divisional general and administrative expenses. 19.0 17.6 21.6
Contribution to operating income (a)........... $ 45.9 $ 45.4 $ 25.0
PER MONTH PER STORE:
Company operated stores (average).............. 834 852 823
Gasoline volume (m gals)....................... 102.8 104.1 104.5
Convenience product sales (m).................. $ 23.1 $ 24.7 $ 25.5
Convenience product gross margin (m)........... $ 5.7 $ 6.1 $ 6.6
</TABLE>
- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
The retail division contributed $25.0 million to operating income in 1996
(1995--$45.4 million; 1994--$45.9 million). The retail division contribution
was below 1995 levels due mostly to a sharp drop in retail gasoline margins.
This 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. This was particularly the case in the last half of 1996. In
addition, high retail prices impaired sales of higher margin premium gasoline
grades. 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) (noncigarette) products. Operating and general and administrative
expenses increased in 1996 and 1995 over 1994 principally due to operating
leases and other costs related to new store acquisitions and increased costs
related to the expansion of Clark's credit card programs. Year-over-year
credit card sales increased 31% in 1996 and 41% in 1995.
During 1996 and 1997, the retail network continued to be upgraded in the
Company's core Great Lakes' markets. This was achieved by acquiring 10 high-
volume stores in the Chicago market, introducing a branded marketer program
and closing underperforming stores. A further 48-store acquisition was
completed in Michigan in January 1997. In 1995, the Company acquired through
an operating lease 35 retail stores in Central Illinois. In late 1994, the
Company similarly acquired 25 stores in Chicago, Illinois. Four additional
stores related to the Chicago acquisition were added in 1996. Consistent with
the Company's strategy to exit noncore markets, the Company divested 41 stores
in the Kansas, Western Missouri and Minnesota markets in late 1995 and early
1996 and 22 Dayton, Ohio stores were converted to branded marketer locations
in early 1997. As part of its overall growth strategy, the Company expects to
continue to consider retail store growth in both existing and new markets
while also evaluating underperforming markets for possible divestiture. The
Company is actively considering the sale of approximately 150 stores in
outlying noncore locations.
OTHER FINANCIAL MATTERS
Depreciation and amortization expenses increased in 1996 and 1995
principally because of the Port Arthur refinery acquisition and 1994 capital
expenditures.
46
<PAGE>
Interest and financing costs, net, in 1996 were below 1995 principally due
to the finance income recognized related to the advance crude oil purchase
receivables. Interest expense increased in 1996 and 1995 primarily because of
the compounding effect related to the Zero Coupon Notes and the issuance in
December 1995 of $175.0 million of 10 7/8% Notes. Financing costs increased in
1995 and 1996 principally due to higher amortization associated with Clark's
larger working capital facility which was increased to support the crude oil
supply needs of the Port Arthur Refinery and higher amortization of bondholder
consent payments paid in connection with the acquisition of the Port Arthur
Refinery and the advance crude oil purchase receivables. Interest income
improved in 1996 due to $20.9 million of finance income associated with the
advance crude oil purchase receivables and higher levels of cash and cash
equivalents. See Note 8 "Long-Term Debt" and Note 14 "Occidental/Gulf
Transactions" to the Consolidated Financial Statements.
In December 1995, the Company completed separate transactions with Oxy and
Gulf Resources Corporation ("Gulf"). Pursuant to a merger agreement and a
series of related agreements with Oxy, the Company acquired the right to
receive the equivalent of 17.661 million barrels of WTI to be delivered over
six years according to a defined schedule (the "Oxy Transaction"). This
contract was sold at a gain in 1996 for $235.4 million. Pursuant to a merger
agreement and a series of related agreements with Gulf, the Company acquired
the right to receive 3.164 million barrels of certain royalty oil to be
received by Gulf pursuant to certain agreements with the Government of the
Congo (the "Gulf Transaction"). The crude oil was to be delivered over six
years according to a minimum schedule of (in millions of barrels) 0.72, 0.62,
0.56, 0.48, 0.42 and 0.36 in 1996, 1997, 1998, 1999, 2000 and 2001,
respectively. Gulf has not made their required deliveries since July 1996.
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 fuels products has grown by an average of 2% 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. Prices for crude oil have fallen substantially since the end of 1996. In
the long term, the Company believes 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. Historically, the Company has
recorded seasonally lower earnings in the fourth and first quarters of
calendar years due to lower demand for refined products.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
-------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(IN MILLIONS)
FINANCIAL POSITION:
Cash and short-term investments.... $155.0 $149.8 $354.8 $110.6 $297.8
Working capital.................... 164.1 249.8 430.1 451.8 443.0
Property, plant and equipment...... 431.4 550.9 557.3 545.0 575.4
Long-term debt..................... 553.3 765.0 781.4 776.0 794.8
Stockholders' equity............... 56.2 154.2 214.4 241.6 243.9
Operating cash flow................ 47.2 7.6 4.2 10.6 98.2
</TABLE>
47
<PAGE>
Net cash generated by operating activities, excluding working capital
changes ("Operating Cash Flow"), for the nine months ended September 30, 1997
was $98.2 million compared to $10.6 million in the year-earlier period.
Working capital as of September 30, 1997 was $443.0 million, a 2.40 to 1
current ratio, versus $430.1 million as of December 31, 1996, a 2.10 to 1
current ratio. Working capital as of September 30, 1997 increased from the end
of 1996 because of increased operating contribution, partially offset by a
retail store acquisition that was financed with cash and the capital cost of
the Port Arthur refinery turnaround.
Operating Cash Flow for the year ended December 31, 1996 was $4.2 million
compared with $7.6 million in 1995 and $47.2 million in 1994. Operating Cash
Flow declined from 1994 to 1996 principally because of the weaker refining
margin environment and a decline in retail gasoline margins in 1996. Working
capital as of December 31, 1996 was $430.1 million, a 2.10 to 1 current ratio,
versus $249.8 million as of December 31, 1995, a 1.63 to 1 current ratio and
$164.1 million as of December 31, 1994, a 1.68 to 1 current ratio. Working
capital increased in 1996 as a result of the sale of one of the Company's
advance crude oil purchase receivables for net cash proceeds of $235.4
million. An increase was realized in 1995 due to the Port Arthur Refinery
acquisition and partial financing with equity of the refinery's working
capital requirements.
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 (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 used for the issuance of letters of credit primarily for the
purchase of crude oil and other feedstocks and refined products.
On September 25, 1997, Clark entered into a Credit Agreement which provides
for borrowings and letter of credit issuances of up to the lesser of $400.0
million or the amount of the borrowing base calculated with respect to Clark's
cash and cash equivalents, eligible investments, eligible receivables and
eligible petroleum inventories. Direct borrowings are limited to the principal
amount of $50.0 million. Borrowings under the Credit Agreement are secured by
a lien on substantially all of Clark's cash and cash equivalents, receivables,
crude oil, refined product inventories and other inventories and trademarks
and other intellectual property. As of September 30, 1997, there were no
direct borrowings under the Credit Agreement. Clark was in compliance with all
covenants of the Credit Agreement as of September 30, 1997. See "Description
of Certain Debt Instruments--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 Clark 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. Clark is also required to comply with certain financial covenants.
The financial covenants are: (i) maintenance of working capital of at least
$150.0 million at all times; (ii) maintenance of a tangible net worth (as
defined) of at least $300.0 million; and (iii) maintenance of minimum levels
of balance sheet cash (as defined) of $50.0 million at all times. 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 at all times. The Credit Agreement also limits the amount of future
additional indebtedness outside of the cumulative cash flow covenant that may
be incurred by the Company in an amount equal to $25.0 million.
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 (excluding short-term investment activities) in the first nine
months of 1997 were $83.2 million as compared to $19.8 million in the year-
earlier period. The higher investing activities in 1997 resulted
48
<PAGE>
principally from the Port Arthur refinery turnaround ($30.0 million) and the
acquisition and subsequent image conversion of 48 retail stores in Michigan
($21.0 million). Refinery capital expenditures totaled $17.6 million in the
first nine months of 1997 (1996--$12.6 million), most of which related to
discretionary and nondiscretionary projects undertaken in conjunction with the
Port Arthur refinery turnaround. Retail capital expenditures for the first
nine months of 1997, excluding the Michigan acquisition, totaled $15.6 million
(1996--$10.5 million) and were principally for underground storage tank-
related work.
Cash flows provided by investing activities (excluding short-term
investments) in 1996 was $187.4 million as compared to cash flow used in 1995
and 1994 of $224.5 million and $119.1 million, respectively. Cash flow was
generated in 1996 from the sale of one of the advance crude oil purchase
receivables. The increased use of cash in 1995 was principally due to the
acquisition of the advance crude oil purchase receivables from subsidiaries of
Occidental and Gulf and the Port Arthur Refinery acquisition. Capital
expenditures for property, plant and equipment totaled $45.0 million in 1996
(1995--$42.2 million; 1994--$100.4 million) and expenditures for refinery
maintenance turnarounds totaled $13.9 million (1995--$6.5 million; 1994--$11.2
million). Capital expenditures were reduced in 1996 and 1995 in response to
lower Operating Cash Flow. Refining division capital expenditures were $19.4
million in 1996 (1995--$15.9 million, 1994--$59.7 million). Approximately one-
half of 1996 expenditures were discretionary with the balance and most of 1995
expenditures primarily for mandatory maintenance and environmental
expenditures. In 1994, projects included adding the capability to produce RFG
at the Blue Island refinery and a revamp of the FCC and alkylation units at
the Hartford refinery. Retail capital expenditures in 1996 totaled $24.6
million (1995--$25.2 million; 1994--$38.2 million). Approximately one-half of
1996 and 1995 expenditures were for regulatory compliance, principally
underground storage tank-related work and vapor recovery. The remainder of
1996 and 1995 retail capital expenditures were discretionary and primarily
related to new store acquisitions, a reimaging program and miscellaneous store
equipment. In 1994, approximately one-third of retail division capital
expenditures were for regulatory compliance, with the balance for
discretionary projects such as reimaging locations, canopies, expansion of
store interior selling space and systems automation.
In February 1995, the Company acquired the Port Arthur Refinery from Chevron
for approximately $70.0 million, plus inventory and spare parts of
approximately $122.0 million (a $5.0 million deposit was paid in 1994) and the
assumption of certain liabilities estimated at $19.4 million. The purchase
agreement also provided for contingent payments to Chevron of up to $125.0
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's results of operations 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
September 30, 1997, the Company had a cumulative benefit of approximately
$25.0 million applicable to future calculations.
49
<PAGE>
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 expenditures through 2000 will average
approximately $55.0 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
production in RFG. Each refinery's maximum RFG production may be limited based
on the clean fuels attainment of Clark'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 $100 to $110 million for 1997.
This amount includes approximately $21.0 million, net, related to the January
1997 acquisition and subsequent image conversion of 48 retail stores in
Michigan, and expenditures of approximately $30.0 million related to a major
maintenance turnaround at the Port Arthur refinery in the first quarter of
1997. 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 flow used in financing activities was $4.7 million in 1996; $298.9
million was provided by financing activities in 1995 compared to a use of $6.5
million in 1994. In 1995, financing activities reflected the partial financing
of the Port Arthur Refinery acquisition with the sale of stock (the balance
was financed with cash on hand), the issuance of the 10 7/8% Notes in
connection with the advance crude oil purchase transactions, 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. In 1994,
expenditures were made in connection with the acquisition of a new working
capital facility and equity financing for the Port Arthur Refinery
acquisition.
On November 3, 1997, Blackstone acquired the 13,500,000 shares of Common
Stock of the Company previously held by TrizecHahn and certain of its
subsidiaries, as a result of which Blackstone obtained a 65% equity interest
(73.3% voting interest) in the Company.
On November 21, 1997, the Company repurchased for $206.6 million, $259.2
million (value at maturity) of Zero Coupon Notes tendered pursuant to the
Tender Offer. To facilitate the repurchase, Clark returned capital of $215.0
million to the Company. The Company intends to call the remaining Zero Coupon
Notes outstanding on or about February 15, 1998. Subsequently on November 21,
1997, the Company completed the Old Notes Offering and Term Loan receiving net
proceeds of approximately $390 million. On November 24, 1997, Clark issued
notice to the holders of its 10 1/2% Notes that it intends to redeem on
December 24, 1997 all $225.0 million of the notes outstanding at a price of
$1,032.96 for each $1,000.00 principal amount of the notes outstanding,
representing the redemption premium and accrued interest. As a result of the
Blackstone Transaction, the $175.0 million of 9 1/2% Notes, and (in the event
of a Rating Decline) the 10 7/8% Notes will be subject to a repurchase offer.
See "Risk Factors--Change of Control Provisions in Notes and Existing
Indebtedness."
50
<PAGE>
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 other operating philosophies will be
sufficient to provide the Company with adequate liquidity through the next
year, there can be no assurance that refining industry conditions will not be
worse than anticipated. Due to the sale of one of the advance crude oil
purchase receivables the Company had higher cash, cash equivalents and short-
term investments as of September 30, 1997, than it has historically
maintained. These balances are available for investment in current operations,
debt reduction or acquisitions. Future working capital, discretionary capital
expenditures, environmentally mandated spending and acquisitions may require
additional debt or equity capital.
The Company did not receive any proceeds from the Offering and will not
receive any proceeds from the Exchange Offer. The New Exchangeable Preferred
Stock will require the payment of dividends either in cash or in additional
shares in lieu of cash dividends at a rate of 11 1/2% per annum. The Company
will be required to redeem all of the New Exchangeable Preferred Stock on
October 1, 2009.
QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
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>
1997
Net sales.......................... $ 999.2 $1,173.9 $1,124.1
Gross profit....................... 106.3 193.5 208.0
Operating income (loss)............ (28.8) 59.4 64.6
Net earnings (loss)................ (47.4) 32.3 44.5
1996
Net sales.......................... $1,140.2 $1,334.9 $1,249.6 $1,348.4
Gross profit....................... 115.7 135.8 129.1 135.5
Operating income (loss)............ (11.7) 9.5 (3.8) (5.8)
Net earnings (loss)................ (15.2) (2.6) (11.4) (27.0)
1995
Net sales.......................... $ 827.8 $1,337.8 $1,211.8 $1,109.4
Gross profit....................... 69.3 133.3 149.5 119.5
Operating income (loss)............ (26.5) 10.2 23.1 (6.6)
Net earnings (loss)................ (24.6) (2.5) 5.2 (15.2)
</TABLE>
51
<PAGE>
BUSINESS
COMPANY OVERVIEW
Substantially all of the operations of the Company are conducted through
Clark. The Company is the sixth-largest independent refiner and marketer of
petroleum products in the United States, with one Texas refinery and two
Illinois refineries representing over 350,000 bpd of rated crude oil
throughput capacity. The Company is also currently the seventh-largest direct
operator of gasoline and convenience stores in the U.S. with over 800 retail
outlets in 10 Midwestern states. Clark's retail network has conducted
operations under the Clark brand name for 65 years. The Company also markets
gasoline, diesel fuel and other petroleum products on a wholesale branded and
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
The Company was formed in November 1988 by TrizecHahn and AOC Limited
Partnership ("AOC L.P.") to hold all of the capital stock of Clark and certain
other assets. Pursuant to a stockholder agreement (the "Stockholder
Agreement") among AOC L.P., TrizecHahn, the Company and Clark, TrizecHahn
purchased 60% of the equity capital of the Company and AOC L.P. purchased the
remaining 40% interest. The Company's primary business assets were acquired on
November 22, 1988, out of bankruptcy proceedings. The assets acquired
consisted of (i) 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 (ii) certain other assets and liabilities of
the Novelly/Goldstein Partnership (formerly Apex Oil Company), a Missouri
general partnership ("Apex"), the indirect owner of Old Clark and an affiliate
of AOC L.P.
On December 30, 1992, TrizecHahn and the Company entered into a Stock
Purchase and Redemption Agreement (the "AOC Stock Purchase Agreement") with
AOC L.P. to purchase and redeem all of the shares and options to purchase
shares of the Company owned by AOC L.P., resulting in TrizecHahn owning 100%
of the outstanding equity of the Company at that time.
On February 27, 1995, the Company sold $135.0 million of common stock to a
wholly owned subsidiary of TrizecHahn. The TrizecHahn subsidiary immediately
resold $120.0 million of such stock to Tiger, representing an equity ownership
interest of 40% of the Company at that time. The Company used the proceeds of
the sale 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 obligated under certain
circumstances to pay 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
$125.0 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, Oxy acquired approximately 19% of the equity in the
Company in exchange for the delivery of certain amounts of crude oil over a
six-year period ending in 2001. The Company sold the advance crude oil
purchase receivable acquired from Oxy at a gain in October 1996 for net
proceeds of $235.4 million. Also in December 1995, subsidiaries of Gulf
acquired approximately 4% of the equity in the Company in exchange for their
agreement to deliver certain amounts of royalty oil over a six-year period
ending in 2001. See "Business--The Advance Crude Oil Purchase Receivable
Transactions."
52
<PAGE>
On October 1, 1997, the Company and its stockholders completed an equity
recapitalization whereby all previously issued shares of Class A Common Stock
of the Company held by the Tiger Funds of Tiger (then representing
approximately 31% of the total voting power of all classes of the Company's
stock) were reclassified into Class E Common Stock. TrizecHahn then purchased
all of the Class E Common Stock 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 Exchangeable
Preferred Stock of the Company and sold to institutional investors.
In addition, the shares of common stock of the Company 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 the Company's voting stock. The Class F Common Stock
is convertible at any time to Common Stock of the Company, on a one-for-one
basis, at the option of any holder other than Oxy and its affiliates. The
Company also issued to Oxy an additional 545,455 shares of Class F Common
Stock in full satisfaction of the Company's obligation to issue shares under
its then existing Stockholders' Agreement with Oxy.
On November 3, 1997, Blackstone acquired the 13,500,000 shares of Common
Stock of the Company previously held by TrizecHahn and certain of its
subsidiaries, as a result of which Blackstone obtained a 65% equity interest
(73.3% voting interest) in the Company.
BUSINESS STRATEGY
The Company's business strategy focuses on improving productivity,
optimizing capital investments, promoting an entrepreneurial culture and
growing both its refining and marketing operations to strengthen the Company's
business and financial profile. This strategy is designed to address the
commodity-based nature of the oil refining and marketing industry in which the
Company operates.
. 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
sales mix while reducing input costs and operating expenses. 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 are examples
of these types of initiatives.
. Optimizing Capital Investment. The Company optimizes capital investments
by linking discretionary capital spending to internally generated cash
flow, focusing its efforts first on those productivity initiatives that
require no capital investment and then those which have relatively short
payback periods. 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 and a
more robust refining industry environment, the Company is now implementing
several 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. In addition, the Company has adopted a stock incentive
plan for certain key employees. Blackstone intends to put in place a
management incentive program designed to increase management's ownership of
Clark USA stock through direct purchases and options tied to the financial
performance of the Company.
53
<PAGE>
. Growing Through Opportunistic Acquisitions. The Company intends to
continue to expand its refining and marketing operations through
opportunistic acquisitions which can benefit from its business strategy,
create critical mass, increase market share or access new markets. Since
1994, the Company more than doubled its refining capacity by acquiring the
Port Arthur Refinery and strengthened its Northern Illinois and Southern
Michigan presence by adding 122 retail stores in these core markets.
Blackstone is committed to this strategy.
. Strengthening the Balance Sheet. The Company will continue to seek to
improve its capital structure. The financing of the Port Arthur refinery
acquisition principally with equity and the partial financing of the
advance crude oil purchase receivable lowered the Company's leverage in
1995 and 1996. The Company's subsequent profitable monetization of the
advanced crude oil purchase receivable significantly improved the Company's
liquidity. As of September 30, 1997, the Company had total cash balances of
$298.0 million. The Equity Recapitalization and the Debt Refinancing and
Repayment are designed to strengthen the balance sheet of the Company by
extending debt maturities, increasing prepayment flexibility and lowering
the overall borrowing cost.
REFINING
Overview
The refining division currently operates one refinery in Texas and two
refineries in Illinois with a combined crude oil throughput capacity of
approximately 350,000 bpd. The Company also owns 16 product terminals located
in its Midwest and Gulf Coast market areas, a crude oil and LPG terminal
associated with the Port Arthur refinery and crude oil and product pipeline
interests. The Company's refining crude oil throughput capacity ranks it as
one of the six 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 industry is capital intensive and has not
provided adequate returns in recent years. The Company believes this
environment provides the opportunity to implement a contrarian approach. The
refining division's strategy is consistent with the Company's overall business
strategy and 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.
. 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.
. Growth. As part of its growth strategy, the refining division seeks
attractive assets that may be acquired at favorable valuations. The Port
Arthur Refinery acquisition is an example of this type of strategy. The
Company believes current industry conditions may offer similar
opportunities in the future.
54
<PAGE>
Port Arthur Refinery
The Port Arthur refinery is located in Port Arthur, Texas and is situated on
an approximately 4,000 acre site. The refinery has a rated crude oil
throughput capacity of approximately 212,000 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 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 212,000 bpd and has lowered operating expenses by approximately
50c per barrel. From the date of the acquisition through September 30, 1997,
the Port Arthur Refinery has generated EBITDA of approximately $171.0 million.
The Company has engaged in discussions with numerous parties concerning
possible investments at the Port Arthur refinery. No agreement has been
reached with any other party concerning the form, structure, scope, size,
financing, timing or other aspects of any of such possible investments or
capital improvements. There can be no assurances that any such investments or
capital improvements will or will not be made.
The feedstocks and production of the Port Arthur refinery for the ten months
it was owned in 1995 and for the full year 1996 and the nine months ended
September 30, 1996 and 1997 were as follows:
PORT ARTHUR REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
TEN MONTHS NINE MONTHS ENDED
ENDED YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997(A)
------------ ------------ ------------ ------------
BBLS % BBLS % BBLS % BBLS %
------ ----- ------ ----- ------ ----- ------ -----
(BARRELS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FEEDSTOCKS
Light Sweet Crude Oil.. 22,268 35.0% 11,018 14.5% 12,272 21.3% 7,374 13.0%
Light Sour Crude Oil... 31,518 49.5 36,855 48.3 27,503 47.7 23,895 42.0
Heavy Sweet Crude Oil.. -- -- 23,920 31.4 14,934 25.9 4,993 8.8
Heavy Sour Crude Oil... 7,488 11.8 1,327 1.7 537 0.9 18,677 32.8
Unfinished &
Blendstocks........... 2,349 3.7 3,128 4.1 2,387 4.1 1,919 3.4
------ ----- ------ ----- ------ ----- ------ -----
Total.................. 63,623 100.0% 76,248 100.0% 57,633 100.0% 56,858 100.0%
====== ===== ====== ===== ====== ===== ====== =====
PRODUCTION
Gasoline
Unleaded............... 13,966 21.8 20,840 27.0 16,174 27.8 13,531 23.8
Premium Unleaded....... 13,030 20.4 12,258 15.9 9,240 15.9 8,558 15.0
------ ----- ------ ----- ------ ----- ------ -----
26,996 42.2 33,098 42.9 25,414 43.7 22,089 38.8
Other Products
Low-Sulfur Diesel Fuel. 14,739 23.1 17,443 22.6 12,729 21.9 14,721 25.9
Jet Fuel............... 9,047 14.1 11,166 14.5 8,488 14.6 6,611 11.6
Petrochemical Products. 5,382 8.4 6,751 8.7 4,591 7.9 6,782 11.9
Others................. 7,794 12.2 8,703 11.3 6,869 11.8 6,717 11.8
------ ----- ------ ----- ------ ----- ------ -----
36,962 57.8 44,063 57.1 32,677 56.3 34,831 61.2
------ ----- ------ ----- ------ ----- ------ -----
Total.................. 63,958 100.0% 77,162 100.0% 58,091 100.0% 56,920 100.0%
====== ===== ====== ===== ====== ===== ====== =====
Output/Day............. 207.7 210.8 212.0 208.5
</TABLE>
- --------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
of approximately one month on selected units.
55
<PAGE>
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 provides relatively high refining margins
and less volatility than comparable operations located in other regions of the
U.S. on a historical basis principally because demand for refined products has
exceeded production in the region. This excess demand has historically 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 Canal. The facility was
initially constructed in 1945 and, through a series of improvements and
expansions, has reached a crude oil capacity of 75,000 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 Clark'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, 1994, 1995 and 1996 and the nine months ended September 30,
1996 and 1997 were as follows:
BLUE ISLAND REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995(A) 1996(A) 1996 1997
------------ ------------ ------------ ------------ ------------
BBLS % BBLS % BBLS % BBLS % BBLS %
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(BARRELS IN THOUSANDS)
FEEDSTOCKS
Light Sweet Crude Oil.. 20,780 71.3% 18,975 74.0% 21,203 84.2% 16,583 82.9% 15,163 75.2%
Light Sour Crude Oil... 7,120 24.5 6,318 24.6 3,860 15.3 3,045 15.2 4,649 23.1
Unfinished &
Blendstocks........... 1,233 4.2 347 1.4 132 0.5 379 1.9 341 1.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 29,133 100.0% 25,640 100.0% 25,195 100.0% 20,007 100.0% 20,153 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
PRODUCTION
Gasoline
Unleaded............... 12,571 43.7 12,737 50.1 12,497 50.9 10,107 51.1 10,572 52.4
Premium Unleaded....... 5,558 19.3 3,540 13.9 2,922 11.6 2,461 12.4 2,322 11.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
18,129 63.0 16,277 64.0 15,419 62.5 12,568 63.5 12,894 63.9
Other Products
Diesel Fuel............ 6,376 22.1 5,133 20.2 5,690 22.5 4,175 21.1 4,151 20.6
Others................. 4,293 14.9 4,016 15.8 3,755 15.0 3,047 15.4 3,114 15.5
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
10,669 37.0 9,149 36.0 9,445 37.5 7,222 36.5 7,265 36.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 28,798 100.0% 25,426 100.0% 24,864 100.0% 19,790 100.0% 20,159 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Output/Day............. 78.9 69.7 68.0 72.2 73.8
</TABLE>
- --------
(a) Output during 1995 and 1996 was reduced by significant planned and
unplanned downtime.
56
<PAGE>
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 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 4 in 1996.
The feedstocks and production of the Hartford refinery for the years ended
December 31, 1994, 1995 and 1996 and nine months ended September 30, 1996 and
1997 were as follows:
HARTFORD REFINERY FEEDSTOCKS AND PRODUCTION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
1994(A) 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
BBLS % BBLS % BBLS % BBLS % BBLS %
(BARRELS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FEEDSTOCKS
Light Sweet Crude Oil.. 6,037 26.2% 5,008 20.8% 3,725 15.5% 3,588 20.6% 1,991 10.7%
Light Sour Crude Oil... 7,696 33.4 13,520 56.0 19,588 81.4 13,793 79.1 11,035 59.6
Heavy Sweet Crude Oil.. -- -- -- -- -- -- -- -- 498 2.7
Heavy Sour Crude Oil... 8,800 38.2 4,960 20.6 179 0.7 7 0.0 3,666 19.8
Unfinished &
Blendstocks........... 506 2.2 637 2.6 567 2.4 50 0.3 1,341 7.2
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 23,039 100.0% 24,125 100.0% 24,059 100.0% 17,438 100.0% 18,531 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
PRODUCTION
Gasoline
Unleaded............... 9,777 43.6 11,497 47.2 10,882 44.9 7,714 44.0 9,014 48.8
Premium Unleaded....... 1,732 7.7 1,723 7.1 1,728 7.1 1,327 7.6 782 4.2
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
11,509 51.3 13,220 54.3 12,610 52.0 9,041 51.6 9,796 53.0
Other Products
High-Sulfur Diesel
Fuel.................. 7,801 34.8 8,090 33.2 8,950 36.9 6,513 37.1 5,773 31.3
Others................. 3,106 13.9 3,060 12.5 2,703 11.1 1,981 11.3 2,891 15.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
10,907 48.7 11,150 45.7 11,653 48.0 8,494 48.4 8,664 47.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total.................. 22,416 100.0% 24,370 100.0% 24,263 100.0% 17,535 100.0% 18,460 100.0%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
Output/Day............. 61.4 66.8 66.2 64.0 67.6
</TABLE>
- --------
(a) The 1994 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 14 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.
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<PAGE>
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 September 30, 1997, 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>
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. The Company has engaged an investment bank to
assist it in exploring the possibility of selling its interests in the
Southcap, Chicap, Wolverine and West Shore pipelines.
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 Company has a minority interest in
several of these 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
100,000 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 16 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
58
<PAGE>
through February 28, 1999. This contract is cancelable upon 90 days' notice by
either party. The 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 and 1996. This contract is cancelable upon
18 months notice by either party or 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 14 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 40% 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.
59
<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
Clark'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 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 second and third
quarter EBITDA and improvement in certain key industry market indicators
listed in the table below:
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED
FOR THE YEAR SEPTEMBER
ENDED DECEMBER 31, 30,
----------------------- -----------
(IN DOLLARS PER BARREL)
1993 1994 1995 1996 1996 1997
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Gulf Coast 3/2/1........................... $2.85 $2.61 $2.38 $2.65 $2.64 $3.53
Chicago 3/2/1.............................. 3.40 3.86 3.14 4.02 4.18 4.53
Heavy sour crude oil discount.............. 6.40 4.75 4.03 4.78 4.75 5.63
Light sour crude oil discount.............. 1.60 0.95 1.02 1.24 1.06 1.71
</TABLE>
- --------
Source: Platt's
60
<PAGE>
According 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 11.3 million bpd in 1996, 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 15.3 million bpd in 1996, according to the Oil & Gas Journal, as 132
refineries closed between 1980 and 1996. 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
---- ---- ---- ---- ---- ---- ----
(IN BILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total capital expenditures................... $4.4 $6.1 $6.1 $5.4 $5.1 $4.9 $3.9
Environmental capital expenditures........... 1.3 1.8 3.3 3.2 3.1 2.2 N/A
</TABLE>
According to the EIA, U.S. crude oil distillation utilization rates have
steadily increased from approximately 75% in 1980 to approximately 93% in
1996. 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 ten 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. Clark's retail presence is focused in the
Great Lakes region of the U.S. where Company-operated stores (813 as of
September 30, 1997) market value-oriented gasoline products, cigarettes and a
unique mix of On The Go(R) convenience products. The Company's wholesale
operation markets petroleum products in both the Midwest and Gulf Coast
regions of the U.S. In 1996, the Company sold approximately 1.0 billion
gallons of fuel and over $250.0 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, (ii) realize value from
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<PAGE>
nonstrategic stores, (iii) grow earnings through acquisitions and new
initiatives designed to leverage existing expertise, product knowledge and
market/brand strength, and (iv) control operating and general and
administrative expenses.
. Optimization. The retail division operating strategy centers around
optimizing the productivity of existing assets by maximizing overall gross
margin and controlling expenses. 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
the proper management of controllable expenses, are the most effective ways
to improve core assets.
. 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.
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.
. Promoting Entrepreneurial Culture. The retail division employs a
decentralized, team-oriented culture with training programs and employee
incentives designed to deliver premier customer service. The Company's
store managers have the flexibility to price gasoline and to select and
price convenience products, but also have the responsibility to achieve
acceptable results. 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.
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 122
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 viable by conversion to branded jobber locations. The Company
sold 22 stores in early 1997 which were converted to branded jobber locations.
The Company is actively considering the sale of approximately 150 additional
stores in outlying noncore locations.
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 1800 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
62
<PAGE>
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 September 30, 1997, the Company had 813 Company-operated retail
locations, 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, 647
(80%) were located on Company-owned real estate and 166 (20%) 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 1996, the Company's monthly gasoline sales per store
averaged 104,500 gallons, which exceeded the 1996 national industry average of
84,500 gallons, while monthly sales per square foot averaged approximately $49
for convenience products versus the industry average of approximately $24. 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 18%. A current trend toward consolidation in the
refining and 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. The latter
acquisition increased the Company's market share in Chicago from approximately
9% to 10%. 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%.
Simultaneous with growing the Company's market share in core markets through
acquisitions, the Company continues to evaluate its remaining noncore markets
for possible divestiture. In the past few years, the Company has divested
approximately 100 stores in its Indiana, Kansas, Kentucky, Minnesota, Missouri
and Ohio markets. The Company is actively considering the sale of approximately
150 stores in outlying noncore locations.
The geographic distribution of Company-operated retail stores by state as of
September 30, 1997, was as follows:
GEOGRAPHICAL DISTRIBUTION OF RETAIL STORES
<TABLE>
<S> <C>
Illinois............................................................. 267
Michigan............................................................. 210
Ohio................................................................. 144
Indiana.............................................................. 79
Wisconsin............................................................ 70
Missouri............................................................. 28
Other States (a)..................................................... 15
---
Total................................................................ 813
===
</TABLE>
- --------
(a) Iowa, Kentucky, Pennsylvania and West Virginia.
63
<PAGE>
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 cigarette 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, 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 90% of stores have canopies and
approximately 70% 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 September 30, 1997, had 66 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 1992 to 1996, improved monthly fuel volume per store by 16% to
104,500 gallons, increased monthly convenience product sales per store by 33%
to $25,500, increased the mix of On The Go(R) convenience products from 32% to
42% of total convenience product sales, and improved monthly convenience
product gross margin per store by 47% to $6,600.
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 10-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.
Approximately 71% of current locations meet 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 1997 and 1998, net of costs recovered from state funds, will be
approximately $23.0 million. Costs for complying with future regulations
cannot be estimated.
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.
64
<PAGE>
. 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 this 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 22,000 retail stores or
close to 11% of U.S. outlets over the seven-year period of 1991 to 1997.
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 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 500 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
September 30, 1997, had 61 outlets owned and operated by branded jobbers. As
part of its new business franchise marketing initiative, the Company partnered
with a grocery chain to add four outlets on grocery store parking lots in late
1996 and 1997. 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
65
<PAGE>
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 ADVANCE CRUDE OIL PURCHASE RECEIVABLE TRANSACTIONS
In December 1995, the Company completed separate transactions with Oxy and
Gulf. Pursuant to a merger agreement and a series of related agreements with
affiliates of Occidental, the Company acquired the right to receive the
equivalent of 17.661 million barrels of WTI to be delivered over six years
according to a defined schedule. In connection with this transaction, the
Company 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. The Company
sold the Oxy advance crude oil purchase receivable for net cash proceeds of
$235.4 million in October 1996 after receiving value for approximately 1.5
million barrels during 1996. Pursuant to a merger agreement and a series of
related agreements with Gulf, the Company acquired the right to receive 3.164
million barrels of certain royalty oil to be received by Gulf pursuant to
certain agreements with the Government of the Congo. The crude oil was to be
delivered over six years according to a minimum schedule of (in millions of
barrels) 0.72, 0.62, 0.56, 0.48, 0.42 and 0.36 in 1996, 1997, 1998, 1999, 2000
and 2001, respectively. The Company issued, into escrow, common stock valued at
approximately $26.9 million, or $22 per share (1,222,273 shares), to Gulf.
Gulf, however, has not made their required deliveries since July 1996 and,
therefore, the Company has not released such shares from escrow.
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
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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
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.
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 $23 million, net of costs recovered from state funds, will be
required for 1997 and 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 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
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<PAGE>
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
As a result of its activities, Clark is the subject of a number of legal and
administrative proceedings relating to environmental matters. While it is not
possible at this time to estimate the ultimate amount of liability with
respect to the environmental matters described below, 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.
Hartford Groundwater Contamination. In late 1990, Clark and other area oil
companies were contacted by the Illinois Environmental Protection Agency
("IEPA") and the Illinois Attorney General regarding the presence of gasoline
contamination in the groundwater beneath the northern portion of the Village
of Hartford, Illinois. As a result, Clark installed a gasoline vapor recovery
system in Hartford. No claim has been filed by the state authorities.
Hartford Pollution Control Board Litigation. On June 7, 1995, Clark was served
with a complaint entitled People of the State of Illinois v. Clark Refining &
Marketing, Inc. PCB No. 95-163. This matter was substantially settled in 1996
for $235,000. One issue concerning the exempt status of Clark's wastewater
treatment system is being submitted to an Administrative Law Judge 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.
Hartford FCCU. The EPA has alleged violations of the Clean Air Act, and
regulations promulgated thereunder, in the operation and permitting of the
Hartford refinery fluid catalytic cracking unit ("FCCU") and alleged
modification of the FCCU. On May 19, 1997, the EPA served a Notice of
Violation on Clark, alleging that Clark violated the Prevention of Significant
Deterioration ("PSD") requirements of the Clean Air Act by modifying the FCCU
without obtaining a PSD construction permit and installing the best available
control technology. The government has also requested additional information
from Clark. Clark submitted the requested information and is cooperating with
the government in its investigation. No estimate can be made at this time of
Clark's potential liability, if any, as a result of this matter.
Blue Island Federal Enforcement. The Blue Island refinery is the subject of
several federal investigations concerning potential violations of a number of
environmental laws and regulations as
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discussed below. On September 30, 1996, the EPA served a Notice of Violation
and a Finding of Violation on Clark, alleging that Clark is in violation of
the Clean Air Act national emission standard for hazardous air pollutants for
benzene, and that Clark was in violation of certain detection and record
keeping requirements issued pursuant to the Illinois state implementation
plan. On August 21, 1997, the EPA served a Finding of Violation on Clark
alleging that the sulfur recovery plant at the Blue Island refinery is in
violation of the federal New Source Performance Standard for refineries. No
estimate can be made at this time of Clark's potential liability, if any, as a
result of these matters. Between January and August 1997, the Company received
five demand letters from the EPA each requesting different information about a
variety of water pollution, air pollution and solid waste management practices
and procedures. On March 3, 1997, the EPA initiated a multimedia investigation
at the Blue Island refinery. The investigation is proceeding in stages,
including on-site visits and requests for information. The Company is
cooperating fully and has responded to all requests. On March 25, 1997, Clark
received a Grand Jury subpoena requesting certain documents relating to
wastewater discharges. Clark is cooperating fully and has produced the
documents responsive to the subpoena and a subsequent supplemental subpoena.
No estimate can be made whether any potential for liability exists as a result
of these investigations. However, the results of these investigations may
require significant capital expenditures and may also result in fines and
other penalties imposed on the Company.
Blue Island State Enforcement. State authorities have also charged the Blue
Island refinery with numerous violations of environmental laws. People ex rel
Ryan v. Clark Refining & Marketing, Inc., Cir. Ct. Cook County, III., Case No.
95-CH-2311, is currently pending in the Circuit Court of Cook County,
Illinois. The first count of this lawsuit concerns a fire that occurred in the
Isomax unit at the Blue Island refinery on March 13, 1995, in which two
employees were killed and three other employees were injured. The second count
concerns a release of hydrogen fluoride ("HF") on May 16, 1995, from a
catalyst regeneration portion of the HF unit. At the request of the Illinois
Attorney General, and with Clark's consent, the Circuit Court of Cook County,
Illinois, entered an order requiring Clark to implement certain HF release
mitigation and detection measures that are substantially complete. The next
three counts of the lawsuit concern releases into the air that occurred in the
past three years at the Blue Island refinery. One of those air emissions,
which occurred on October 7, 1994, is also the basis for Rosolowski, et al v.
Clark Refining & Marketing, Inc., Cir. Ct. Cook County, Ill., Case No. 95-L-01
4703. See "--Legal Proceedings." The next five counts of the lawsuit concern
several alleged releases of process wastewater and contaminated stormwater to
the Cal Sag Channel from the Blue Island refinery. Clark has filed an Answer
denying the material allegations in the lawsuit. Following an explosion on
October 19, 1996, in a propane gas line at the Blue Island refinery, the State
of Illinois brought an action seeking a temporary restraining order requiring
the refinery to cease operations temporarily, pending a safety review. On
November 8, 1996, the court denied the requested order. No estimate of any
liability with respect to this matter can be made at this time.
On September 17, 1997, a crude oil tank experienced a leak resulting in the
discharge of crude oil and on November 2, 1997, gasoline leaked from a product
tank into the diked area around the tank. Both tanks were taken out of service
for inspection and repair and Clark notified appropriate government agencies.
On November 7, 1997, state authorities met with Clark to discuss these
incidents and overall storage tank inspection matters. These discussions are
ongoing and no estimate can be made of any liability with respect to the
outcome of the discussions at this time.
Ninth Avenue Site. On January 5, 1995, Clark received a Unilateral
Administrative Order from the EPA pursuant to CERCLA alleging that "Clark Oil
& Refining Corp." is a PRP with respect to shipments of hazardous substances
to a solid waste disposal site known as the Ninth Avenue Site, Gary, Indiana.
The alleged shipments all occurred prior to 1987. The Order instructs Clark
and the
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other approximately ninety PRPs to design and implement certain remedial work
at the site. Clark has informed the EPA that it is not a proper party to this
matter, because its purchase of certain assets of Old Clark was "free and
clear" of all Old Clark liabilities. Information provided with the Order
estimates that the remedial work may cost approximately $25.0 million although
the cost could substantially exceed this estimate. No estimate of Clark's
liability can be made with respect to this proceeding at this time. In
addition, on December 28, 1994, Clark was served with a summons and complaint
brought by certain private parties seeking to recover all past and future
response costs with respect to the Ninth Avenue Site. Clark, along with
approximately eighty other parties, is alleged to be a PRP with respect to that
site on the basis of shipments of hazardous substances allegedly made prior to
1987. Clark moved for summary judgment on the basis, among others, that the
action is barred by the "free and clear" order pursuant to which Clark
purchased certain assets of Old Clark. Clark's motion is pending. No estimate
of any liability with respect to this case can be made at this time.
St. Louis Terminal. In January 1994, a gasoline spill occurred at the Clark St.
Louis terminal. On April 13, 1995, Clark was served with two Grand Jury Records
Subpoenas issued by the Office of the United States Attorney in St. Louis. In
April 1997, the Company was advised of the termination of the United States
Attorney's investigation. In May 1997, the Company received correspondence from
the State of Missouri seeking to resolve any dispute arising from the events of
January 1994 and seeking the payment of a penalty of less than $200,000.
Sashabaw Road. On May 5, 1993 Clark received correspondence from the Michigan
Department of Natural Resources ("MDNR") indicating that the MDNR believes that
Clark may be a PRP in connection with groundwater contamination in the vicinity
of one of its retail stores in the Sashabaw Road area north of Woodhull Lake
and Lake Oakland, Oakland County, Michigan. On July 22, 1994, MDNR commenced
suit against Clark and is currently seeking $300,000 to resolve the matter. No
estimate of any liability with respect to this matter can be made at this time.
Port Arthur Refinery. The original refinery on the site of the Port Arthur
refinery began operating in 1904, 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 most pre-closing contamination, but the Company assumed
responsibility for environmental contamination beneath and within 25 to 100
feet of the facility's active processing units. Based on the estimates of
independent environmental consultants, the Company accrued approximately $7.5
million as part of the Port Arthur refinery acquisition for its cost of
remediation in this area. In addition, as a result of the acquisition, Clark
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, Clark may be required to do so. The cost of any such
remediation could be substantial and could be beyond the Company's financial
ability. On June 24, 1997, Clark, Chevron and the State of Texas entered into
an Agreed Order that substantially confirms the relative obligations of Clark
and Chevron.
As of September 30, 1997, the Company has accrued a total of $15.8 million
for environmental-related obligations that may result from the matters noted
above and obligations associated with certain retail sites.
EMPLOYEES
As of September 30, 1997, the Company employed approximately 7,900 people,
approximately 1,000 of whom were covered by collective bargaining agreements at
the Blue Island, Hartford and Port Arthur refineries. The Hartford and Port
Arthur refinery contracts expire in February 1999 and the Blue
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Island refinery contract expires in August 1999. In addition, the Company has
union contracts for certain employees at its Hammond, Indiana, and St. Louis,
Missouri, terminals which expire March 31, 1998, and March 5, 1998,
respectively. 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
Hartford Groundwater. Clark was named as the defendant in numerous lawsuits
filed in December 1991 in the Circuit Court of the Third Judicial District,
Madison County, Illinois, by plaintiff residents and property owners in the
Village of Hartford, Illinois. These suits sought damages for the presence of
gasoline in the soil and groundwater beneath plaintiff's properties. See
"Business; Properties--Environmental Matters." After many of these suits were
dismissed, the remaining suits were settled by Clark and the Shell Oil Company
at a total cost to Clark of less than $150,000.
Rosolowski et al v. Clark Refining & Marketing, Inc., et al. Cir. Ct. Cook
County, III., Case No. 95-L-014703, is a purported class action lawsuit, filed
on October 11, 1995, relating 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 50 people were taken to area hospitals. Clark was previously sued
by one individual who claimed medical costs as a result of the incident; that
case was settled. The purported class action lawsuit was filed on behalf of
various named individuals and purported plaintiff classes, including residents
of Blue Island, Illinois, and students at Eisenhower High School, 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.
Other Blue Island tort cases, alleging various losses due to emissions from
the Blue Island refinery were filed in September and October, 1996. These
cases, Boucher v. Clark Refining & Marketing, Inc.; Loranger v. Clark Refining
& Marketing, Inc.; Marciano v. Clark Refining & Marketing, Inc.; and Webb v.
Clark Refining & Marketing, Inc. all brought by named individuals, seek damages
of less than $100,000 each.
EEOC v. Clark Refining & Marketing, Inc., Case No. 94 C 2779, is currently
pending in the United States District Court for the Northern District of
Illinois. In this action, the Equal Employment Opportunity Commission (the
"EEOC") has alleged that Clark engaged in age discrimination in violation of
the Age Discrimination in Employment Act through a "pattern and practice" of
discrimination against a class of former retail managers over the age of forty.
The EEOC has identified 40 former managers it believes have been affected by
the alleged pattern and practice. However, two of those managers have since
been dismissed from the case. 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.
On May 5, 1997, a complaint, entitled AOC L.P. et al., vs. TrizecHahn
Corporation, et al., Case No. 97 CH 05543, naming the Company as a defendant
was filed in the Circuit Court of Cook County, Illinois. The Complaint seeks
$21 million, plus continuing interest, related to the sale of equity by the
Company to finance the Port Arthur refinery acquisition. The plaintiff alleges
that sale of such equity triggered a contingent payment to AOC L.P. (the "AOC
L.P. Contingent Payment") pursuant to the agreement related to the December
1992 purchase and redemption of its minority interest. The Company believes no
payment is required. The AOC L.P. Contingent Payment is an amount which will
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not exceed in the aggregate $33.9 million and is contractually payable 89% by
the Company and 11% by TrizecHahn. TrizecHahn has indemnified the Company for
any AOC L.P. Contingent Payment in excess of $7.0 million.
On May 23, 1995, Clark was served with a Petition entitled Anderson, et al
v. Chevron and Clark, filed in Jefferson County, Texas, by 24 individual
plaintiffs who were Chevron employees and who did not receive offers of
employment from Clark at the time of the purchase of the Port Arthur Refinery.
Chevron and the outplacement service retained by Chevron are also named as
defendants. An Amended Petition has now been filed increasing the number of
plaintiffs to 40. Clark filed an Answer denying all material allegations of
the Amended Petition. Subsequent to the filing of the lawsuit, the plaintiffs
have each filed individual charges with the EEOC and the Texas Commission of
Human Rights.
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.
The Company is also the subject of various environmental and other
governmental proceedings. See "Business; Properties--Environmental Matters."
In addition to the specific matters discussed above or under "Business;
Properties--Environmental Matters," 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 flows.
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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. Each individual, except Mr. Chazen serves in the same capacity with
Clark.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul D. Melnuk 43 President and Chief Executive Officer; Chief Operating Officer
(Clark only); Director
Maura J. Clark 39 Executive Vice President--Corporate Development and
Chief Financial Officer
Marshall A. Cohen 62 Director
David A. Stockman 51 Director
John R. Woodard 33 Director
David I. Foley 30 Director
Stephen I. Chazen 51 Director
Dennis R. Eichholz 44 Controller and Treasurer
Katherine D. Knocke 40 Secretary
</TABLE>
The following persons, who are not executive officers or directors of the
Company, serve as executive officers of Clark.
<TABLE>
<S> <C> <C>
Bradley D. Aldrich 43 Executive Vice President--Refining
Brandon K. Barnholt 39 Executive Vice President--Marketing
Edward J. Stiften 43 Executive Vice President, Chief Administrative Officer
</TABLE>
The board of directors of the Company consists of six 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.
Paul D. Melnuk has served as a director and as President of the Company
since September 1992, and as Vice President and Treasurer of the Company from
November 1988 through September 1992. Mr. Melnuk has served as a director of
Clark since October 1992, as President and Chief Executive Officer of Clark
since July 1992, as Chief Operating Officer of Clark since December 1991, as
President of Clark from February 1992 through July 1992, as Executive Vice
President of Clark from December 1991 through February 1992, and has served in
various other capacities since November 1988. Mr. Melnuk served as a director
of TrizecHahn from March 1992 through November 1996. Mr. Melnuk served as
President and Chief Operating Officer of TrizecHahn from March 1992 through
April 1994, and as Executive Vice President and Chief Financial Officer of
TrizecHahn from May 1990 through February 1992.
Maura J. Clark has served as Executive Vice President--Corporate Development
and Chief Financial Officer of the Company and Clark since August 1995. Ms.
Clark previously served as Vice President--Finance at North American Life
Assurance Company, a financial services company, 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.
Marshall A. Cohen has served as a director of the Company and Clark since
November 3, 1997. 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.
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David A. Stockman has served as a director of the Company and Clark since
November 3, 1997. Mr. Stockman has been a member of the general partner of
Blackstone Group Holdings L.P. since 1988. Mr. Stockman is also a Co-Chairman
of the board of directors of Collins & Aikman Corporation and a director of
Haynes International, Inc. and Bar Technologies Inc.
John R. Woodard has served as a director of the Company and Clark since
November 3, 1997. Mr. Woodard joined The Blackstone Group L.P. as a Managing
Director in 1996. Prior thereto, he was a Vice President at Vestar Capital
Partners from 1990 to 1996. He is a member of the board of directors of Prime
Succession, Inc.
David I. Foley has served as a director of the Company and Clark 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 Rose Hills Company.
Stephen I. Chazen has been a director since December 1995. Mr. Chazen has
been Executive Vice President--Corporate Development of Occidental since May
1994. Prior to May 1994, Mr. Chazen served in various capacities at Merrill
Lynch & Co., most recently as Managing Director. Mr. Chazen is serving as
Oxy's nominee on the Company's Board of Directors. See "Security Ownership of
Certain Owners and Management--The Oxy Stockholders' Agreement."
Dennis R. Eichholz, who joined Clark in November 1988, has served as
Controller and Treasurer of the Company and Vice President-Controller and
Treasurer of Clark 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 since
April 1995. Ms. Knocke has served as in-house counsel of Clark 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.
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 of
Clark since February 1995, and served as Executive Vice President--Retail
Marketing from December 1993 through February 1995, as Vice President--Retail
Marketing of Clark from July 1992 through December 1993, and as Managing
Director--Retail Marketing of Clark from May 1992 through July 1992. Mr.
Barnholt previously served as Retail Marketing Manager of Conoco, Inc. from
March 1991 through March 1992.
Edward J. Stiften joined Clark in March 1997 as Executive Vice President,
Chief Administrative Officer. Mr. Stiften was previously in private business
from June 1995 through March 1997. Mr. Stiften served as Subsidiary Executive
Vice President and Acting General Manager of General Dynamics, Inc. from
October 1994 through May 1995, as Corporate Staff Vice President of Internal
Audit from February 1994 through October 1994 and as Corporate Staff Vice
President--Financial Analysis from December 1991 through January 1994.
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.
EXECUTIVE COMPENSATION
The executive officers of Clark USA are not paid by Clark USA. The following
table sets forth all cash compensation paid by Clark to its Chief Executive
Officer and its other executive officers whose
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total annual compensation exceeded $100,000 for each of the years in the three-
year period ended December 31, 1996.
<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.......... 1996 $325,000 $130,000 -- -- $6,816
President and Chief 1995 326,836 75,000 -- 100,000(b) 5,479
Executive Officer 1994 325,893 150,000 -- -- 7,528
Bradley D. Aldrich...... 1996 211,779 47,500 -- -- 6,849
Executive Vice
President-- 1995 176,224 42,500 -- 130,000(b)(c) --
Refining 1994 6,731 60,000 -- -- --
Brandon K. Barnholt..... 1996 211,799 87,500 -- -- 6,802
Executive Vice
President-- 1995 176,273 75,000 -- 50,000(b) 5,329
Marketing 1994 171,846 100,000 -- -- 8,330
Maura J. Clark (d)...... 1996 36,779 47,500 -- -- --
Executive Vice 1995 -- -- -- -- --
President--Corporate 1994 -- -- -- -- --
Development and
Chief Financial Officer
</TABLE>
- --------
(a) Represents amount accrued for the account of such individuals under the
Clark Retirement Savings Plan (the "Savings Plan").
(b) Options issued pursuant to the Performance Plan as described below.
(c) Mr. Aldrich and Mr. Barnholt (granted in 1993) hold options to acquire
TrizecHahn Subordinate Voting Shares ("TrizecHahn Shares") received as
compensation from TrizecHahn for services performed for Clark under the
TrizecHahn Amended and Restated 1987 Stock Option Plan (the "TrizecHahn
Option Plan").
(d) In 1995 and 1996, Ms. Clark was an employee of TrizecHahn and served Clark
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 Clark. The amounts reflected in
this table are for 1996 compensation paid by Clark in 1997.
STOCK OPTIONS GRANTED DURING 1996
There were no options granted during 1996 to the named executive officers
under the Performance Plan (as defined) for services performed for Clark.
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, 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISABLE
SHARES ACQUIRED UNEXERCISABLE OPTIONS HELD IN-THE-MONEY OPTIONS HELD
ON EXERCISE AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 (A)
DURING YEAR ENDED VALUE REALIZED ------------------------------ -------------------------
NAME DECEMBER 31, 1996 ON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- -------------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul D. Melnuk(b)....... -- -- -- 100,000 $ -- $700,000
Bradley D. Aldrich...... -- -- 33,333 96,667 289,000 789,000
Brandon K. Barnholt..... 20,000 $184,700 70,000 50,000 742,000 350,000
</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, 1996. For
the common stock of Clark USA the value is based on the issuance price in
the Oxy Transaction and the Gulf 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 Clark 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 as measured by return on equity 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 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. The Performance Plan is intended to promote the growth and
performance of the Company by encouraging employees to acquire an ownership
interest in the Company 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 the Company. As of
September 30, 1997, 549,000 stock options have been issued 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 the
Company'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 the Company or TrizecHahn (as
defined in the Performance Plan), 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.
Under the Performance Plan, a "Change in Control" includes, without
limitation, with respect to the Company or TrizecHahn, (i) the acquisition
(other than by TrizecHahn) of beneficial ownership of 25% or more of the voting
power of its outstanding securities without the prior approval of at least two-
thirds of its directors then in office, (ii) a merger, consolidation, proxy
contest, sale of assets or reorganization which results in directors previously
in office constituting less than a majority of its directors thereafter, or
(iii) any change of at least a majority of its directors during any period of
two years. The Blackstone Transaction has 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 intends to put in place a management incentive program designed to
increase management's ownership of the Company'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 Clark (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. Clark 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 $9,500 in 1997. 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 Clark's executive officers has historically been determined
by Clark's board of directors. Mr. Melnuk, the Company's and Clark's President
and Chief Executive Officer, is a member
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<PAGE>
of the Company's and Clark's board of directors. Other than reimbursement of
their expenses, neither the Company's nor Clark's directors 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 the Company's parent, Blackstone.
EMPLOYMENT AGREEMENTS
Clark has entered into employment agreements with four of its senior
executives (the "Executive Employment Agreements") and a change of control
agreement with one of its senior executives (the "Change of Control
Agreement"). The Executive Employment Agreements have five-year terms, 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 in 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 in Control date. The
Blackstone Transaction constitutes a Change of Control under the Executive
Employment Agreements and the Change of Control Agreement.
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
Clark.
The Executive Employment Agreements provide separation benefits to the
employee if the employee's employment is terminated by Clark 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, wilful
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 Clark'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 provides for gross-up payments to
be made to the employee to cover certain penalty taxes in connection with a
Change in Control.
The Change of Control Agreement provides for similar benefits; however, the
lump sum payment is two times annual salary and bonus, and instead of
providing for a parachute tax gross-up it limits any payments made under the
Change of Control Agreement so that the payments will not result in a
parachute payment as defined in Section 280g of the Code.
As a condition of receiving the separation benefits under the Executive
Employment Agreements and the Change of Control Agreement, an employee is
required to maintain the confidentiality of information relating to Clark USA
and its affiliates and to release Clark USA and its affiliates from certain
claims.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
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 the Company, 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 OF TOTAL
NAME AND ADDRESS TITLE OF CLASS SHARES PERCENT OF CLASS VOTING POWER(A)
---------------- -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Blackstone Management
Associates III L.L.C. Common 13,500,000 91.5% 73.3%
(b).....................
345 Park Avenue
New York, NY 10154
Paul D. Melnuk ......... Common 37,509 (c) (c)
Occidental Petroleum Class F Common 6,101,010 100.0 19.9
Corporation.............
10889 Wilshire Boulevard
Los Angeles, California
90024
H. M. Salaam (d)........ Common 1,222,273 8.3 6.6
Gulf Resources
Corporation
24-26 Regent's Bridge
Gardens
London SW8 1HB England
All directors and
executive
officers as a group Common 13,537,509 91.7 73.5
(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 by BCP/Clark
Holdings Corporation ("BCP/Clark Holdings"). All of the issued and
outstanding shares of BCP/Clark Holdings are held by Blackstone,
Blackstone Offshore Capital Partners III L.P. and 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.
(c) Less than 1%.
(d) Gulf has informed the Company that H. M. Salaam, Gulf's chairman, may be
deemed to control Gulf.
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
$0.1 million, $0.2 million and $0.2 million in 1994, 1995 and 1996,
respectively. All trade credit guarantees were terminated in August 1996.
The Company paid premiums of $2.0 million in 1994 to HSM Insurance, Inc., an
affiliate of TrizecHahn for providing environmental impairment liability
insurance. No loss claims have been made under the policy. The policy was
terminated on December 31, 1994.
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<PAGE>
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 will
receive fees of $7.0 million, and the Company will reimburse Blackstone for all
out-of-pocket expenses incurred in connection with the Blackstone Transaction
and the Debt Offering. In addition, pursuant to a monitoring agreement, an
affiliate of Blackstone will receive a monitoring fee equal to $2.0 million per
annum (subject to increase relating to inflation and in respect of additional
acquisitions by the Company). 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.
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<PAGE>
DESCRIPTION OF THE NEW EXCHANGEABLE PREFERRED STOCK
THE NEW EXCHANGEABLE PREFERRED STOCK
The summary contained herein of certain provisions of the New Exchangeable
Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Certificate of Designations
relating thereto, a copy of which may be obtained upon request from the
Company. The definitions of certain capitalized terms used in the following
summary are set forth under "Description of the Exchange Debentures--Certain
Definitions" below. Other capitalized terms used herein and not otherwise
defined under "Description of the Exchange Debentures--Certain Definitions"
below are defined in the Certificate of Designations. See "Book-Entry;
Delivery and Form" for additional information regarding the New Exchangeable
Preferred Stock. For purposes of this section, the term the "Company" refers
to Clark USA only and does not include its subsidiaries.
General
The New Exchangeable Preferred Stock will be issued pursuant to the terms of
the Certificate of Designations.
The Company is authorized to issue 5,000,000 shares of preferred stock. As
of the date of this Prospectus, no shares of New Exchangeable Preferred Stock
are outstanding. The Certificate of Incorporation of the Company authorizes
the board of directors, without stockholder approval, to issue shares of
preferred stock in addition to the New Exchangeable Preferred Stock from time
to time in one or more series, with such designations, preferences and
relative participating, optional or other special rights, qualifications,
limitations or restrictions as determined by the board of directors. The board
of directors of the Company adopted resolutions creating a maximum of 250,000
shares of Exchangeable Preferred Stock and the Company filed the Certificate
of Designations with respect thereto with the Secretary of State of the State
of Delaware as required by Delaware law. Of the 250,000 authorized shares of
Exchangeable Preferred Stock, 63,000 shares were issued in the Offering,
63,000 shares are contemplated to be issued in the Exchange Offer, and 124,000
shares will be available for issuance in payment of dividends or otherwise.
Subject to certain conditions, the New Exchangeable Preferred Stock is
exchangeable for Exchange Debentures, in whole but not in part, at the option
of the Company on any Dividend Payment Date. The New Exchangeable Preferred
Stock will be fully paid and nonassessable, and the holders thereof will not
have any subscription or preemptive rights.
Ranking
The New Exchangeable Preferred Stock will, with respect to dividend
distributions and distributions upon the liquidation, winding-up or
dissolution of the Company, rank (i) senior to all classes of common stock of
the Company, and to each other class of capital stock or series of preferred
stock established after the Offer Date by the board of directors of the
Company, the terms of which do not expressly provide that it ranks senior to,
or on a parity with, the New Exchangeable Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up or
dissolution of the Company (collectively referred to with the common stock of
the Company as "Junior Securities"), (ii) subject to certain conditions, on a
parity with any class of capital stock or series of preferred stock issued by
the Company established after the Offer Date by the board of directors of the
Company, the terms of which expressly provide that such class will rank on a
parity with the New Exchangeable Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding-up or dissolution of the
Company (collectively referred to as "Parity Securities"), and (iii) junior to
each other class of capital stock or series of preferred stock issued by the
Company established after the Offer Date by the board of directors of the
Company, the terms of which expressly provide that such class or series will
rank senior to the New Exchangeable Preferred Stock as to dividend
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<PAGE>
distributions and distributions upon the liquidation, winding-up or dissolution
of the Company (collectively referred to as "Senior Securities"). The New
Exchangeable Preferred Stock will be subject to the issuance of series of
Junior Securities, Parity Securities and Senior Securities; provided that the
Company may not issue any new class of Senior Securities (or amend the
provisions of any existing class of capital stock to make such class of capital
stock Senior Securities) without the approval of the holders of at least a
majority of the shares of New Exchangeable Preferred Stock then outstanding,
voting or consenting, as the case may be.
Dividends
Holders of the New Exchangeable Preferred Stock will be entitled to receive,
when, as and if declared by the board of directors of the Company, out of funds
legally available therefor, dividends on the New Exchangeable Preferred Stock
at a rate per annum equal to 11 1/2% of the liquidation preference per share of
the New Exchangeable Preferred Stock, payable semi-annually. All dividends will
be cumulative, whether or not declared, on a daily basis from October 1, 1997,
and will be payable semi-annually in arrears on April 1 and October 1 of each
year, commencing on April 1, 1998, to holders of record on the March 15 and
September 15 immediately preceding the relevant Dividend Payment Date.
Dividends may be paid, at the Company's option, on any Dividend Payment Date
occurring on or prior to October 1, 2002, either in cash or by the issuance of
additional shares of New Exchangeable Preferred Stock (and, at the Company's
option, payment of a whole share (after rounding up) or cash in lieu of a
fractional share) having an aggregate liquidation preference equal to the
amount of such dividends. The liquidation preference of the New Exchangeable
Preferred Stock is $1,000 per share. In the event that, on or prior to October
1, 2002, dividends are declared and paid through the issuance of additional
shares of New Exchangeable Preferred Stock, as provided in the previous
sentence, such dividends shall be deemed paid in full and will not accumulate.
The 10 7/8% Note indenture and the Zero Coupon Note indenture restrict the
Company's ability to pay cash dividends on its Capital Stock and will prohibit
such payments in certain instances, and other future agreements may provide the
same. See "--Description of Certain Indebtedness."
Unpaid dividends accumulating after October 1, 2002 on the New Exchangeable
Preferred Stock for any past dividend period and dividends in connection with
any optional redemption may be declared and paid at any time, without reference
to any regular Dividend Payment Date, to holders of record on such date, not
more than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors of the Company. So long as any shares of New Exchangeable Preferred
Stock are outstanding, the Company shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Securities or
Junior Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Parity Securities or Junior Securities, and shall
not permit any corporation or other entity directly or indirectly controlled by
the Company to purchase or redeem any of the Parity Securities or Junior
Securities or any such warrants, rights, calls or options, except, in any case,
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 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
Stock), unless full cumulative dividends determined in accordance herewith on
the New Exchangeable Preferred Stock have been paid (or are deemed paid) in
full.
Optional Redemption
The New Exchangeable Preferred Stock may be redeemed (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefor) at any time on and after October 1, 2002, in whole or in part,
at the option of the Company, at the redemption prices (expressed as a
percentage of liquidation preference) set forth below, plus, without
duplication, an amount in cash
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<PAGE>
equal to all accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the redemption date) if redeemed during the 12-month
period beginning October 1 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002.............................. 105.750%
2003.............................. 103.833%
2004.............................. 101.917%
2005 and thereafter............... 100.000%
</TABLE>
In addition, the Company may, at its option, use the Net Available Proceeds
of one or more Equity Offerings to redeem for cash, in whole or in part, shares
of New Exchangeable Preferred Stock at a redemption price equal to 107% prior
to October 1, 1998, 108% thereafter but prior to October 1, 1999 and 109%
thereafter but prior to October 1, 2000 of the liquidation preference thereof,
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends (including an amount in cash equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the redemption
date). Any such redemption will be required to occur on or prior to 90 days
after the receipt by the Company of the proceeds of any such Equity Offering.
The Company may not use the Net Available Proceeds of any Equity Offerings
which alone or combined with a related series of transactions result in a
Change of Control to redeem shares of New Exchangeable Preferred Stock pursuant
to this paragraph.
In the event of partial redemptions of New Exchangeable Preferred Stock, the
shares to be redeemed will be determined pro rata, except that the Company may
redeem all shares held by any holders of fewer than ten shares (or shares held
by holders who would hold less than ten shares as a result of such redemption),
as may be determined by the Company. No optional redemption may be authorized
or made unless prior thereto all accumulated and unpaid dividends shall have
been paid in cash or a sum set apart for such payment on the New Exchangeable
Preferred Stock.
The 10 7/8% Note indenture and the Zero Coupon Note indenture restrict the
ability of the Company to redeem the New Exchangeable Preferred Stock. See
"Description of Certain Debt Instruments."
Mandatory Redemption
The New Exchangeable Preferred Stock will also be subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) in whole on October 1, 2009 at
a price equal to the liquidation preference thereof, plus, without duplication,
all accumulated and unpaid dividends to the date of redemption. The 10 7/8%
Note indenture and the Zero Coupon Note indenture restrict the ability of the
Company to redeem the New Exchangeable Preferred Stock and will prohibit any
such redemption in certain instances, and other future agreements or
certificates of designations with respect to Senior Securities or Parity
Securities may contain similar restrictions and/or prohibitions. See
"Description of Certain Debt Instruments."
Procedure for Redemption
On and after a redemption date, unless the Company defaults in the payment of
the applicable redemption price, dividends will cease to accumulate on shares
of New Exchangeable Preferred Stock called for redemption and all rights of
holders of such shares will terminate except for the right to receive the
redemption price, without interest. If a notice of redemption shall have been
given as provided in the succeeding sentence and the funds necessary for
redemption (including an amount in respect of all dividends that will
accumulate to the redemption date) shall have been segregated and irrevocably
set apart by the Company, in trust for the benefit of the holders of the shares
called for redemption, then dividends shall cease to accumulate on the
redemption date on the shares to be redeemed and, at the close of business on
the day when such funds are segregated and set apart, the holders of the shares
to be redeemed shall cease to be stockholders of the Company and shall be
entitled only to receive the redemption price for such shares. The Company will
send a written notice
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<PAGE>
of redemption by first class mail to each holder of record of shares of New
Exchangeable Preferred Stock, not less than 30 days nor more than 60 days prior
to the date fixed for such redemption. Shares of New Exchangeable Preferred
Stock issued and reacquired will, upon compliance with the applicable
requirements of Delaware law, have the status of authorized but unissued shares
of preferred stock of the Company undesignated as to series and may with any
and all other authorized but unissued shares of preferred stock of the Company
be designated or redesignated and issued or reissued, as the case may be, as
part of any series of preferred stock of the Company.
Exchange
The Company may, at its option, on any Dividend Payment Date, exchange all
(but not less than all) of the then outstanding shares of New Exchangeable
Preferred Stock for Exchange Debentures; provided that (i) on the date of such
exchange there are no accumulated and unpaid dividends on the New Exchangeable
Preferred Stock (including the dividend payable on such date) or other
contractual impediments to such exchange; (ii) there shall be legally available
funds sufficient therefor; (iii) immediately after giving effect to such
exchange, no Default or Event of Default (each as defined in the Exchange
Indenture) would exist under the Exchange Indenture, no default or event of
default would exist under the 10 7/8% Note indenture or the Zero Coupon Note
indenture and no default or event of default under any other material
instrument governing debt outstanding at the time would be caused thereby; (iv)
the Exchange Indenture has been qualified under the Trust Indenture Act, if
such qualification is required at the time of exchange; and (v) the Company
shall have delivered a written opinion to the effect that all conditions to be
satisfied prior to such exchange have been satisfied. See "Description of
Certain Debt Instruments."
The holders of outstanding shares of New Exchangeable Preferred Stock will be
entitled to receive, subject to the second succeeding sentence, $1.00 principal
amount of Exchange Debentures for each $1.00 of the liquidation preference of
New Exchangeable Preferred Stock held by them. The Exchange Debentures will be
issued in registered form, without coupons. Exchange Debentures issued in
exchange for New Exchangeable Preferred Stock will be issued in principal
amounts of $1,000 and integral multiples thereof to the extent possible, and
will also be issued in principal amounts less than $1,000 so that each holder
of New Exchangeable Preferred Stock will receive certificates representing the
entire amount of Exchange Debentures to which such holder's shares of New
Exchangeable Preferred Stock entitle such holder; provided that the Company may
pay cash in lieu of issuing an Exchange Debenture in a principal amount less
than $1,000. The Company will send a written notice of exchange by mail to each
holder of record of shares of New Exchangeable Preferred Stock not less than 30
nor more than 60 days before the date fixed for such exchange. On and after the
exchange date, dividends will cease to accrue on the outstanding shares of New
Exchangeable Preferred Stock that are to be exchanged, and all rights of the
holders of New Exchangeable Preferred Stock that is to be exchanged (except the
right to receive the Exchange Debentures, an amount in cash equal to the
accrued and unpaid dividends to the exchange date and, if the Company so
elects, cash in lieu of any Exchange Debenture which is in an amount that is
not an integral multiple of $1,000) will terminate. The Person entitled to
receive the Exchange Debentures issuable upon such exchange will be treated for
all purposes as the registered holder of such Exchange Debentures. See
"Description of the Exchange Debentures."
Liquidation Preference
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Company, holders of the New Exchangeable
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, an amount of cash equal to the
liquidation preference per share of New Exchangeable Preferred Stock ($1,000
per share), plus, without duplication, an amount in cash equal to accumulated
and unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up (including an amount equal to a prorated dividend for the
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period from the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up), before any distribution is made on any Junior
Securities, including, without limitation, common stock of the Company. If upon
any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the amounts payable with respect to the New Exchangeable Preferred
Stock and all other Parity Securities are not sufficient to pay in full the
liquidation payments payable to the holders of the New Exchangeable Preferred
Stock, the holders of the New Exchangeable Preferred Stock and the Parity
Securities will share equally and ratably in any distribution of assets of the
Company first in proportion to the full liquidation preference to which each is
entitled until such preferences are paid in full, and then in proportion to
their respective amounts of accumulated but unpaid dividends. After payment of
the full amount of the liquidation preferences and accumulated and unpaid
dividends to which they are entitled, the holders of shares of New Exchangeable
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Company. However, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
entities shall be deemed to be a liquidation, dissolution or winding-up of the
Company.
The Certificate of Designations does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the New
Exchangeable Preferred Stock, although such liquidation preference will be
substantially in excess of the par value of such shares of New Exchangeable
Preferred Stock. In addition, the Company is not aware of any provision of
Delaware law or any controlling decision of the courts of the State of Delaware
(the state of incorporation of the Company) that requires a restriction upon
the surplus of the Company solely because the liquidation preference of the New
Exchangeable Preferred Stock will exceed its par value. Consequently, there
will be no restriction upon the surplus of the Company solely because the
liquidation preference of the New Exchangeable Preferred Stock will exceed the
par value and there will be no remedies available to holders of the New
Exchangeable Preferred Stock before or after the payment of any dividend, other
than in connection with the liquidation of the Company, solely by reason of the
fact that such dividend would reduce the surplus of the Company to an amount
less than the difference between the liquidation preference of the New
Exchangeable Preferred Stock and its par value.
Voting Rights
Holders of the New Exchangeable Preferred Stock will have no voting rights
with respect to general corporate matters except as provided by Delaware law or
as set forth in the Certificate of Designations. The Certificate of
Designations provides that if (i) after October 1, 2002, dividends on the New
Exchangeable Preferred Stock required to be paid in cash are in arrears and
unpaid for three (3) or more semi-annual dividend periods (whether or not
consecutive) or (ii) the Company fails to redeem the New Exchangeable Preferred
Stock on or before October 1, 2009 or (iii) the Company fails to make a Change
of Control Offer following a Change of Control if such Change of Control Offer
is required and/or fails to purchase shares of New Exchangeable Preferred Stock
from holders who elect to have such shares purchased pursuant to the Change of
Control Offer or (iv) a breach or violation of any of the provisions described
under the captions "--Certain Covenants--Limitation on Restricted Payments,"
"--Limitation on Indebtedness" and "--Limitations on Dividends and Other
Payment Restrictions Affecting Restricted Subsidiaries of the Company" below
occurs and the breach or violation continues for a period of 60 days or more
after the Company receives notice thereof specifying the default from the
holders of at least 25% of the shares of New Exchangeable Preferred Stock then
outstanding or (v) the Company fails to pay at the final stated maturity
(giving effect to any extensions thereof) the principal amount of any
Indebtedness of the Company or any Subsidiary of the Company, or the final
stated maturity of any such Indebtedness is accelerated, if the aggregate
principal amount of such Indebtedness, together with the aggregate principal
amount of any other such Indebtedness in default for failure to pay principal
at the final stated maturity (giving effect to any
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extensions thereof) or which has been accelerated, aggregates $25.0 million or
more at any time, in each case, after a 20-day period during which such
default shall not have been cured or such acceleration rescinded, then the
number of directors constituting the board of directors will be adjusted to
permit the holders of the then outstanding New Exchangeable Preferred Stock,
voting as one class together with the holders of shares of any Parity
Securities issued after the Issue Date upon which like voting rights have been
conferred and are then exercisable, to elect the lesser of two directors and
that number of directors constituting 25% of the members of the board of
directors of the Company. Such voting rights with respect to the New
Exchangeable Preferred Stock will continue until such time as, in the case of
a dividend default, all accumulated and unpaid dividends on the New
Exchangeable Preferred Stock required to be paid in cash are paid in full in
cash and, in all other cases, any failure, breach or default giving rise to
such voting rights is remedied, cured or waived by the holders of at least a
majority of the shares of New Exchangeable Preferred Stock then outstanding,
at which time the term of any directors elected pursuant to the provisions of
this paragraph shall terminate. Each such event described in clauses (i)
through (iv) above is referred to herein as a "Voting Rights Triggering
Event." The voting rights provided herein shall be the holder's exclusive
remedy at law or in equity.
In addition, the Certificate of Designations provides that, except as stated
above under""--Ranking," the Company will not authorize any additional shares
of any class of Senior Securities without the affirmative vote or consent of
holders of at least a majority of the shares of New Exchangeable Preferred
Stock then outstanding which are entitled to vote thereon, voting or
consenting, as the case may be, as one class. The Certificate of Designations
also provides that the Company may not amend its Certificate of Incorporation
so as to affect materially and adversely the specified rights, preferences,
privileges or voting rights of the holders of shares of New Exchangeable
Preferred Stock without the affirmative vote or consent of the holders of at
least a majority of the then outstanding shares of New Exchangeable Preferred
Stock which are entitled to vote thereon, voting or consenting, as the case
may be, as one class. The Certificate of Designations also provides that,
notwithstanding the foregoing, (a) the creation, authorization or issuance of
any shares of Junior Securities or Parity Securities or (b) the increase or
decrease in the amount of authorized Junior Securities or Parity Securities,
shall not require the consent of the holders of New Exchangeable Preferred
Stock and shall not be deemed to affect adversely the rights, preferences,
privileges or voting rights of holders of shares of New Exchangeable Preferred
Stock.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment to the Certificate of Incorporation of the
Company, whether or not entitled to vote thereon by the Certificate of
Incorporation, if the amendment would increase or decrease the par value of
the shares of such class, or alter or change the powers, preferences, or
special rights of the shares of such class so as to affect them adversely;
provided, however, that any increase in the amount of authorized preferred
stock or the creation and issuance of any other class of preferred stock, or
any increase in the amount of authorized shares of such class or of any other
class of preferred stock, in each case ranking on a parity with or junior to
the New Exchangeable Preferred Stock with respect to the payment of dividends
and the distribution of assets upon liquidation, dissolution or winding-up,
will not be deemed to affect adversely such rights, preferences or voting
powers.
Change of Control
In the event that there shall occur a Change of Control occurring after
October 1, 2005, then the Company shall make an Offer (as described under
"Procedures for Offers" below) to purchase all or any part (having a
liquidation preference equal to $1,000 or an integral multiple thereof) of
each holder's New Exchangeable Preferred Stock at a purchase price equal to
101% of the aggregate liquidation preference thereof, plus accrued and unpaid
dividends, including Additional Dividends, to the date of purchase.
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The Change of Control purchase feature of the New Exchangeable Preferred
Stock 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
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 indentures governing Clark's 9 1/2% Notes and Clark's 10 1/2% Notes
contain and any agreement governing debt that may refinance such Notes may
contain "change of control" provisions similar to the Change of Control
provision in the Certificate of Designations. 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 New Exchangeable Preferred Stock
that might be delivered by holders seeking to exercise the purchase right of
any repurchase obligations pursuant to the 9 1/2% Notes and the 10 1/2% Notes
or such other debt obligations to which the New Exchangeable Preferred Stock is
effectively subordinated.
The provisions of the Certificate of Designations would not necessarily
afford holders of the New Exchangeable Preferred Stock protection in the event
of a highly leveraged transaction, reorganization, restructuring, merger or
similar transaction involving the Company that may adversely affect such
holders.
Certain Covenants
The Certificate of Designations contains, among others, the following
covenants:
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 Voting Rights Triggering Event or
event that, with the giving of notice or the passing of time, or both, would
constitute a Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof, and (ii) 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 declared or made subsequent to June
30, 1997, 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 June 30, 1997, 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 June 30, 1997,
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
received by the Company from any such Person plus (c) $50.0 million plus (d) to
the extent that any Restricted Investment that was made after June 30, 1997, is
sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment. 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.
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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 Stock) or in options,
warrants or other rights to acquire the Company's Capital Stock (other than
Disqualified Stock), (b) the payment of dividends in accordance with the terms
of the New Exchangeable Preferred Stock, (c) 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, (d)
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 Stock), (e) the Chevron
Payment, (f) the AOC Payment, (g) the Gulf Payments, (h) the making of any
payment in redemption of Capital Stock of the Company or options to purchase
such Capital Stock granted to officers or employees of the Company pursuant to
any stock option, stock purchase or other stock plan approved by the board of
directors of the Company in connection with the severance or termination of
officers or employees not to exceed $4.0 million per annum, and (i) the
exchange of the New Exchangeable Preferred Stock, in accordance with its
terms, for the Exchange Debentures, and the making of payments of principal
(premium, if any), and interest thereon in accordance with the Exchange
Debenture Indenture.
The board of directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Voting Rights Triggering Event or event that, with the giving of
notice or the passing of time, or both, would constitute a Voting Rights
Triggering Event; provided that in no event shall the business currently
operated by the Company and Clark be transferred to or held by an Unrestricted
Subsidiary. 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, create, issue, incur, assume,
guarantee or become liable for in any other manner, contingently or otherwise,
or extend the maturity of or become responsible for the payment of
(collectively, "incur") any Indebtedness (including Acquired Debt) other than
(i) the Exchange Debentures 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 Certificate of Designations that
would protect the holders of the New Exchangeable Preferred Stock 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 to, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or
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restriction which, by its terms, restricts the ability of any Restricted
Subsidiary of the Company 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 the case of clauses (i), (ii) and
(iii) above, any restrictions (a) existing under the Certificate of
Designations or the Exchange Indenture and any restrictions existing on the
Issue Date pursuant to any agreement relating to Existing Indebtedness of the
Company's Restricted Subsidiaries, (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 redeem the
New Exchangeable Preferred Stock (including payment of liquidation value and
accrued and unpaid dividends, including Additional Dividends) upon any
mandatory redemption thereof.
LIMITATION ON CERTAIN INDEBTEDNESS. The Company may not incur or permit to
exist any Indebtedness that is by its terms both (i) subordinate in right of
payment to any Senior Debt and (ii) senior in right of payment to the Exchange
Debentures, if issued, in each case other than by reason of its maturity. The
Company may not incur or permit to exist any Indebtedness that is by its terms
subordinate in right of payment to the Exchange Debentures unless such
Indebtedness constitutes Subordinated Debt.
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 (a) are set forth in
writing and (b) 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 $15.0 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 $15.0 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
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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 Shareholder/Affiliate Transactions
involving the purchase or sale of crude oil in the ordinary course of the
Company's business, so long as such transactions are priced in line with the
market price of a crude benchmark and the pricing 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.
LIMITATION ON SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company
will not permit (i) any Person (other than the Company or any of its Wholly
Owned Restricted Subsidiaries) to own any Capital Stock of Clark or (ii) any
Person (other than the Company or any of its Restricted Subsidiaries) to own
50% or more of the Capital Stock of any of its Restricted Subsidiaries other
than Clark; provided, however, that this covenant shall not prohibit (a) the
issuance and sale of all, but not less than all, of the issued and outstanding
Capital Stock of any Restricted Subsidiary owned by the Company or any of its
Restricted Subsidiaries in compliance with the other provisions of this
Indenture, (b) the ownership by directors of director's qualifying shares, or
(c) the issuance and sale of nonvoting, nonconvertible preferred stock of any
Restricted Subsidiary, provided that the aggregate amount of all nonvoting,
nonconvertible preferred stock of Restricted Subsidiaries does not exceed 5% of
Consolidated Net Tangible Assets of the Company.
LIMITATION ON MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company may 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) if the Company is not the Surviving Person,
the New Exchangeable Preferred Stock shall be converted into or exchanged for
and shall become shares of such successor, transferee or resulting Person,
having in respect of such successor, transferee or resulting Person, the same
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations and restrictions thereon that the New
Exchangeable Preferred Stock had immediately prior to such transaction, (iii)
at the time of and immediately after such transaction no Voting Rights
Triggering Event or event that, with the passing of time or the giving of
notice, or both, would become a Voting Rights Triggering Event shall have
occurred and be continuing, (iv) the Surviving Person will have Consolidated
Adjusted Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
90% of the Consolidated Adjusted Net Worth of the Company immediately preceding
the transaction, and (v) after giving pro forma effect to the transaction, 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 covenant described under "--Certain Covenants--Limitation on
Indebtedness." Upon any such sale of all or substantially all of the assets of
the Company to another Person or any merger or consolidation where the Company
is not the surviving entity, such Person or survivor shall become the obligor
in respect of the New Exchangeable Preferred Stock and the Company will be
relieved of all further obligations and covenants under the Certificate of
Designations.
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 that is expressly by its
terms subordinate or junior in right of payment (other than by reason of
maturity) to any other Indebtedness of the Company.
PROVISION OF FINANCIAL INFORMATION. So long as any of the New Exchangeable
Preferred Stock is 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
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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. In addition, the Company has agreed that, for so long as
any New Exchangeable Preferred Stock remains outstanding, it will furnish to
all holders thereof and to securities analysts and prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144(d)(4) under the Securities Act.
Procedures for Offers
Within 30 days following a Change of Control, the Company will mail to each
holder of New Exchangeable Preferred Stock, 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 and the length of time the Offer shall remain open, (ii) the
purchase price, the amount of accrued and unpaid dividends (including
Additional Dividends) as of the purchase date, and the purchase date (which
will be no earlier than 30 days or later than 70 days from the date such notice
is mailed (the "Purchase Date")), (iii) 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 Certificate of Designations and
applicable laws and regulations.
On the Purchase Date for any Offer, the Company will (1) accept for payment
all New Exchangeable Preferred Stock tendered pursuant to such Offer, and (2)
deposit with the Paying Agent the aggregate purchase price of all New
Exchangeable Preferred Stock accepted for payment and any accrued and unpaid
dividends, including Additional Dividends, on such New Exchangeable Preferred
Stock as of the Purchase Date. The Paying Agent will promptly mail to each
holder of New Exchangeable Preferred Stock accepted for payment an amount equal
to the purchase price for such New Exchangeable Preferred Stock plus any
accrued and unpaid dividends, including Additional Dividends, thereon. On and
after a Purchase Date, dividends will cease to accrue on the New Exchangeable
Preferred Stock accepted for payment. The Company will announce the results of
the Offer to holders of the New Exchangeable Preferred Stock on or as soon as
practicable after the Purchase Date.
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.
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DESCRIPTION OF THE EXCHANGE DEBENTURES
THE EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under an Exchange
Indenture (the "Exchange Indenture"), between the Company and Bankers Trust
Company, as trustee (together with any successor trustee, the "Trustee"). A
copy of the Exchange Indenture may be obtained upon request from the Company.
The following summary of certain provisions of the Exchange Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to all of the provisions of the Exchange Indenture, including the
definitions of certain terms therein. The definitions of certain capitalized
terms used in the following summary are set forth under "--Certain
Definitions" below. The Credit Agreements, the 10 7/8% Note indenture and the
Zero Coupon Note indenture restrict the Company's ability to issue the
Exchange Debentures. See "Description of Certain Debt Instruments." For
purposes of this section, the term the "Company" refers to Clark USA only and
does not include its subsidiaries.
The Exchange Debentures will be general unsecured senior subordinated
obligations of the Company and will be limited in aggregate principal amount
to the liquidation preference of the New Exchangeable Preferred Stock, plus,
without duplication, accumulated and unpaid dividends, on the date or dates on
which it is exchanged for Exchange Debentures (plus any additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be subordinated to all existing and future Senior Debt of the
Company.
The Exchange Debentures will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof
(other than as described in "Description of the New Exchangeable Preferred
Stock--Exchange" or with respect to additional Exchange Debentures issued in
lieu of cash interest as described herein). No service charge will be made for
any registration of transfer or exchange of Exchange Debentures, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. The Exchange Debentures
will not have the benefit of any sinking fund.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar. At the
Company's option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as
shown on the register for the Exchange Debentures. The Trustee will initially
act as Paying Agent and Registrar. The Company may change any Paying Agent and
Registrar without prior notice to holders of the Exchange Debentures. Holders
of the Exchange Debentures must surrender Exchange Debentures to the Paying
Agent to collect principal payments.
The Exchange Debentures will mature on October 1, 2009. Each Exchange
Debenture will bear interest at the rate of 11 1/2% per annum from the
Exchange Date or from the most recent interest payment date to which interest
has been paid or provided for or, if no interest has been paid or provided
for, from the Exchange Date. Interest will be payable semi-annually in cash
(or, on or prior to October 1, 2002, in additional Exchange Debentures, at the
option of the Company) in arrears on each April 1 and October 1 commencing
with the first such date after the Exchange Date to the person in whose name
the Exchange Debenture is registered at the close of business on the March 15
or September 15 next preceding such interest payment date. Interest on the
Exchange Debentures will be computed on the basis of a 360-day year comprised
of twelve 30-day months and the actual number of days elapsed.
Payments by the Company in respect of the Exchange Debentures (including
principal, premium, if any, and interest) 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 Exchange Debentures are expected to trade in Depository's Same-
Day Funds Settlement
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System, and any permitted secondary trading activity in the Exchange Debentures
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 the trading activity in the Exchange Debentures.
Optional Redemption
The Exchange Debentures will be redeemable, at the Company's option, in whole
or in part, at any time on or after October 1, 2002, upon not less than 30 nor
more than 60 days' notice mailed to each holder of Exchange Debentures 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 October 1 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>
2002........................................................... 105.750%
2003........................................................... 103.833%
2004........................................................... 101.917%
2005 and thereafter............................................ 100.000%
</TABLE>
In addition, the Company may, at its option, use the Net Available Proceeds
of one or more Equity Offerings to redeem for cash the aggregate principal
amount of the Exchange Debentures, in whole or in part, whether initially
issued or issued in payment of interest obligations thereon, at a redemption
price equal to 107% prior to October 1, 1998, 108% thereafter but prior to
October 1, 1999, and 109% thereafter but prior to October 1, 2000 of the
aggregate principal amount so redeemed, plus accrued interest to the redemption
date. Any such redemption will be required to occur on or prior to 90 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 Exchange Debentures 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. The Company may not use the Net Available Proceeds
of any Equity Offerings which alone or combined with a related series of
transactions result in a Change of Control to redeem Exchange Debentures
pursuant to this paragraph.
If less than all of the Exchange Debentures are to be redeemed, the Trustee
shall select, in such manner as it shall deem fair and appropriate, the
particular Exchange Debentures to be redeemed or any portion thereof that is an
integral multiple of $1,000.
The 10 7/8% Note indenture and the Zero Coupon Note indenture restrict the
Company's ability to optionally redeem the Exchange Debentures. See
"Description of Certain Debt Instruments."
Subordination
The Exchange Debentures will, to the extent set forth in the Exchange
Indenture, be subordinate in right of payment to the prior payment of all
Senior Debt. Upon any payment or distribution of assets of the Company to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of
Senior Debt will first be entitled to receive payment in full in cash or cash
equivalents of principal of (premium, if any) and interest on, such Senior Debt
before the holders of Exchange Debentures are entitled to receive any payment
of principal of (premium, if any) or interest on, or any obligation to
purchase, the Exchange Debentures. In the event that notwithstanding the
foregoing, the Trustee or the holder of any Exchange Debenture receives any
payment or distribution of assets of the Company of any kind or character
(including any such payment or distribution which may be payable or deliverable
by the reason of the payment of any other indebtedness of the Company being
subordinated to the payment of the Exchange Debentures), before all the Senior
Debt is so paid in full, then such payment or distribution will be required to
be paid over or delivered forthwith
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to the trustee in bankruptcy or other Person making payment or distribution of
assets of the Company for application to the payment of all Senior Debt
remaining unpaid, to the extent necessary to pay the Senior Debt in full in
cash or cash equivalents. However, notwithstanding the foregoing, holders of
the Exchange Debentures may receive shares of stock of the Company or
securities of the Company which are subordinate in right of payment to all
Senior Debt to substantially the same extent as the Exchange Debentures are so
subordinated ("subordinated consideration").
The Company may not make any payments on account of the Exchange Debentures,
or on account of the purchase or redemption or other acquisition of Exchange
Debentures (except for subordinated consideration), if there shall have
occurred and be continuing, a default in the payment of principal of (premium,
if any) or interest on the Senior Debt (a "Senior Payment Default"). If there
shall have occurred and be continuing any default (other than a Senior Payment
Default) with respect to any Senior Debt permitting the holders thereof (or a
trustee on behalf thereof) then to accelerate the maturity thereof (a "Senior
Nonmonetary Default"), and the Company and the Trustee have received written
notice thereof from the Agent Bank under the Credit Agreements or any other
holder of Senior Debt designated by the Company, then the Company may not make
any payments on account of the Exchange Debentures or on account of the
purchase or redemption or other acquisition of Exchange Debentures (except for
subordinated consideration) for a period (a "blockage period") commencing on
the date the Company and the Trustee receive such written notice and ending on
the earlier of (x) 179 days after such date and (y) the date, if any, on which
the Senior Debt to which such default relates is discharged or such default is
waived or otherwise cured. In any event, not more than one blockage period may
be commenced during any period of 360 consecutive days and there shall be a
period of at least 181 consecutive days in each 360-day period when no blockage
period is in effect. No Senior Nonmonetary Default with respect to Senior Debt
that existed or was continuing on the date of the commencement of any blockage
period with respect to the Senior Debt initiating such blockage period will be,
or can be, made the basis for the commencement of a second blockage period,
unless such default has been cured or waived for a period of not less than 90
consecutive days. In the event that, notwithstanding the foregoing, the Company
makes any payment to the Trustee or the holder of any Exchange Debentures
prohibited by the subordination provisions, then such payment will be required
to be paid over and delivered forthwith to the holders of the Senior Debt
remaining unpaid, to the extent necessary to pay in full all the Senior Debt.
By reason of such subordination, in the event of insolvency, creditors of the
Company who are not holders of Senior Debt or of the Exchange Debentures may
recover less, ratably, than holders of Senior Debt and may recover more,
ratably, than the holders of the Exchange Debentures.
"Senior Debt" means (a) the principal of (premium, if any) and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities and
fees relating to, Indebtedness outstanding pursuant to the 10 7/8% Note
indenture and the Zero Coupon Note indenture, (b) payment obligations of the
Company under interest rate swap or similar agreements or foreign currency
hedge, exchange or similar agreements entered into to hedge Indebtedness
Incurred under the 10 7/8% Note indenture and the Zero Coupon Note indenture or
any renewal, refunding, refinancing or extension thereof, (c) all other
Indebtedness for money borrowed of the Company referred to in the definition of
Indebtedness, and (d) all renewals, extensions, modifications, refinancings,
refundings and amendments of any Indebtedness referred to in Clause (a), (b) or
(c) above, unless but only to the extent, in the case of any particular
Indebtedness referred to in Clause (a), (b) or (c) above, (A) such Indebtedness
is owed to a Subsidiary of the Company, (B) the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness is not superior in right of payment to the
Exchange Debentures, (C) such Indebtedness is incurred in violation of the
Exchange Indenture, or (D) such Indebtedness is subordinate in right of payment
in respect to any other Indebtedness of the Company.
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The subordination provisions described above will cease to be applicable to
the Exchange Debentures upon any defeasance or covenant defeasance of the
Exchange Debentures as described under "--Defeasance."
If the Company fails to make any payment on the Exchange Debentures when due
or within any applicable grace period, whether or not on account of payment
blockage provisions, such failure would constitute an Event of Default under
the Exchange Indenture and would enable the holders of the Exchange Debentures
to accelerate the maturity thereof. See "--Events of Default."
A holder of Exchange Debentures, by his acceptance of Exchange Debentures,
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Exchange Indenture and
appoints the Trustee his attorney-in-fact for such purpose.
Change of Control
In the event that there shall occur a Change of Control occurring after
October 1, 2005, 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 Exchange Debentures 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.
The Change of Control purchase feature of the Exchange Debentures 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 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 indentures governing the Company's Zero Coupon Notes and 10 7/8% Notes,
Clark's 9 1/2% Notes and Clark's 10 1/2% Notes contain "change of control"
provisions similar to the Change of Control provision in the Exchange
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 Exchange Debentures that might be delivered by holders seeking to exercise
the purchase right and any repurchase obligations pursuant to the Zero Coupon
Notes, the 10 7/8% Notes, the 9 1/2% Notes and the 10 1/2% Notes, to which the
Exchange Debentures will be subordinated.
The provisions of the Exchange Indenture would not necessarily afford holders
of the Exchange Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving the Company that may adversely affect such holders.
Certain Covenants
The Exchange Indenture contains, among others, the following covenants:
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, and
(ii) at the time of and immediately after giving effect to the proposed
Restricted Payment (the value of any
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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 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 June 30, 1997, 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
June 30, 1997 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 received by the Company from any such Person plus (c) $50.0
million plus (d) to the extent that any Restricted Investment that was made
after June 30, 1997 is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment. 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 Stock) or in options,
warrants or other rights to acquire the Company's Capital Stock (other than
Disqualified Stock), (b) the payment of dividends in accordance with the terms
of the New Exchangeable Preferred Stock, (c) 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, (d)
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 Stock), (e) the Chevron
Payment, (f) the AOC Payment, (g) the Gulf Payments, and (h) the making of any
payment in redemption of Capital Stock of the Company or options to purchase
such Capital Stock granted to officers or employees of the Company pursuant to
any stock option, stock purchase or other stock plan approved by the board of
directors of the Company in connection with the severance or termination of
officers or employees not to exceed $4.0 million per annum.
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; provided that, in no event shall the
business currently operated by the Company and Clark be transferred to or held
by an Unrestricted Subsidiary. 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 Exchange
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Debentures 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 Exchange Indenture that would protect
the holders of the Exchange Debentures 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 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 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 the case of clauses (i), (ii) and (iii) above, any
restrictions (a) existing under the Certificate of Designations or the Exchange
Indenture and any restrictions existing on the Issue Date pursuant to any
agreement relating to Existing Indebtedness of the Company's Restricted
Subsidiaries, (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 Exchange Debentures at their Stated Maturity.
LIMITATION ON CERTAIN INDEBTEDNESS. The Company may not incur or permit to
exist any Indebtedness that is by its terms both (i) subordinate in right of
payment to any Senior Debt and (ii) senior in right of payment to the Exchange
Debentures, if issued, in each case other than by reason of its maturity. The
Company may not incur or permit to exist any Indebtedness that is by its terms
subordinate in right of payment to the Exchange Debentures unless such
Indebtedness constitutes Subordinated Debt.
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
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the Principal Shareholders) (each of the foregoing, a "Shareholder/Affiliate
Transaction") unless the terms of such business, transaction or series of
transactions (a) are set forth in writing and (b) 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 $15.0 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 $15.0 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
Shareholder/Affiliate Transactions involving the purchase or sale of crude oil
in the ordinary course of the Company's business, so long as such transactions
are priced in line with the market price of a crude benchmark and the pricing
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.
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 Board of
Directors and evidenced by a Board Resolution), 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 Exchangeable Debentures) 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 immediately converted by the Company or such Restricted Subsidiary into
cash; provided, further, that the 75% limitation referred to above in clause
(ii) will not apply to 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.
Within 360 days of any 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 Exchange Debentures
or (ii) apply the Net Available Proceeds from such Asset Disposition to invest
in assets related to the Principal Business of the Company. Pending the final
application of any such Net Available Proceeds, the Company may temporarily
invest such Net Available Proceeds in any manner permitted by the Exchange
Indenture. 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 10 Business Days after any
date (an "Asset Disposition Trigger Date") that the aggregate amount of Excess
Proceeds exceeds $20.0 million, the
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Company will commence an Offer (as described below under "--Procedures for
Offers") to purchase the maximum principal amount of Exchange Debentures that
may be purchased out of the Excess Proceeds, 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 SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company
will not permit (i) any Person (other than the Company or any of its Wholly
Owned Restricted Subsidiaries) to own any Capital Stock of Clark, or (ii) any
Person (other than the Company or any of its Restricted Subsidiaries) to own
50% or more of the Capital Stock of any of its Restricted Subsidiaries other
than Clark; provided, however, that this covenant shall not prohibit (a) the
issuance and sale of all, but not less than all, of the issued and outstanding
Capital Stock of any Restricted Subsidiary owned by the Company or any of its
Restricted Subsidiaries in compliance with the other provisions of this
Indenture, (b) the ownership by directors of director's qualifying shares, or
(c) the issuance and sale of nonvoting, nonconvertible preferred stock of any
Restricted Subsidiary, provided that the aggregate amount of all nonvoting,
nonconvertible preferred stock of Restricted Subsidiaries does not exceed 5% of
Consolidated Net Tangible Assets of the Company.
LIMITATION ON LIENS. The Company may not, and may not permit any Subsidiary
of the Company to, incur or suffer to exist any Lien on or with respect to any
property or asserts now owned or hereafter acquired to secure any Indebtedness
of the Company that is expressly by its terms subordinate or junior in right of
payment (other than by reason of maturity) to any other debt of the Company
without making, or causing such Subsidiary to make, effective provision for
securing the Exchange Debentures (x) equally and ratably with such Indebtedness
as to such property or assets for so long as such Indebtedness will be so
secured or (y) in the event such Indebtedness is subordinate in right of
payment (other than by reason of maturity) to the Exchange Debentures, prior to
such Indebtedness as to such property or assets for so long as such
Indebtedness will be so secured.
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 Exchange
Debentures and the Exchange Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee, (iii) at the time of and
immediately after such transaction, no Default or Event of Default shall have
occurred and be continuing, (iv) the Surviving Person will have Consolidated
Adjusted Net Worth (immediately after the transaction but prior to any purchase
accounting adjustments resulting from the transaction) equal to or greater than
90% of the Consolidated Adjusted Net Worth of the Company immediately preceding
the transaction, and (v) after giving pro forma effect to the transaction, 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 covenant described under "--Certain Covenants--Limitations on
Indebtedness."
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 that is expressly by its
terms subordinate or junior in right of payment (other than by reason of
maturity) to any other Indebtedness of the Company.
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PROVISION OF FINANCIAL INFORMATION. So long as any of the Exchange Debentures
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.
Procedures for Offers
Within 30 days following a Change of Control and on any Asset Disposition
Trigger Date, the Company will mail to each holder of Exchange Debentures, 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 Exchange Debentures 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 Exchange 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 Exchange
Debentures 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 Exchange Debentures tendered pursuant to such Offer than
can be purchased out of Excess Proceeds from such Asset Dispositions, (2)
deposit with the Paying Agent the aggregate purchase price of all Exchange
Debentures accepted for payment and any accrued and unpaid interest, including
Additional Interest, on such Exchange Debentures as of the Purchase Date, and
(3) deliver or cause to be delivered to the Trustee all Exchange Debentures
tendered pursuant to the Offer. If less than all Exchange Debentures tendered
pursuant to any Offer are accepted for payment by the Company for any reason,
selection of the Exchange Debentures to be purchased will be in compliance with
the requirements of the principal national securities exchange, if any, on
which the Exchange Debentures are listed or, if the Exchange Debentures are not
so listed, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that Exchange Debentures 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 Exchange Debentures accepted for payment an
amount equal to the Purchase price for such Exchange Debentures plus any
accrued and unpaid interest, including Additional Interest thereon, the Trustee
will promptly authenticate and mail to such holder of Exchange Debentures
accepted for payment in part new Exchange Debentures equal in principal amount
to any unpurchased portion of the Exchange Debentures, and any Exchange
Debentures 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 Exchange Debentures accepted for payment. The Company
will announce the results of the Offer to holders of the Exchange Debentures on
or as soon as practicable after the Purchase Date.
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 Exchange Indenture: (a)
failure to pay any interest on any Exchange Debenture when due, continued for
30 days; (b) failure to pay principal of
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(or premium, if any, on) any Exchange Debenture 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 Exchange Indenture,
continued for 60 days after written notice as provided in the Exchange
Indenture; (e) failure to pay, at final maturity, in excess of $10.0 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 $10.0 million; (f)
the rendering of a final judgment or judgments (not subject to appeal) against
the Company or any of its Subsidiaries in an aggregate principal amount in
excess of $10.0 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 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
Exchange Debentures may accelerate the maturity of all Exchange Debentures;
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 Exchange Debentures 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 Exchange Indenture. For information as to waiver of defaults, see "--
Modification and Waiver."
No holder of any Exchange Debenture will have any right to institute any
proceeding with respect to the Exchange 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 Exchange Debentures 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
Exchange Debentures 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 an Exchange Debenture for
enforcement of payment of the principal of (and premium, if any) or interest on
such Exchange Debenture on or after the respective due dates expressed in such
Exchange Debenture.
Subject to the provisions of the Exchange 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 the Exchange 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 Exchange
Debentures 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 the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Exchange Indenture and as to any default in such performance.
Defeasance
The Exchange 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 Exchange Debentures 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 Exchange
Indenture and the Exchange Debentures, and that the Exchange Debentures shall
no longer be subject to the
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subordination provisions 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 Exchange Debentures.
With respect to clause (B), the obligations under the Exchange 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 Exchange Debentures 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 Exchange Debentures 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 Exchange 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 Exchange Debentures; provided,
however, that no such modification or amendment may, without the consent of the
holder of each outstanding Exchange Debenture affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest on, any
Exchange Debenture, (b) reduce the principal amount of (or the premium), or
interest on, any Exchange Debentures, (c) change the place or currency of
payment of principal of (or premium), or interest on, any Exchange Debentures,
(d) impair the right to institute suit for the enforcement of any payment on or
with respect to any Exchange Debentures, (e) reduce the above-stated percentage
of outstanding Exchange Debentures necessary to modify or amend the Exchange
Indenture, (f) reduce the percentage of aggregate principal amount of
outstanding Exchange Debentures necessary for waiver of compliance with certain
provisions of the Exchange Indenture or for waiver of certain defaults, or (g)
modify any provisions of the Exchange Indenture relating to the modification
and amendment of the Exchange 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
Exchange Debentures may waive compliance by the Company with certain
restrictive provisions of the Exchange Indenture. The holders of a majority in
aggregate principal amount of the outstanding Exchange Debentures may waive any
past default under the Exchange Indenture.
The Trustee
The Exchange 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 Exchange Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under
the Exchange 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 Exchange Indenture and provisions of the TIA 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 Exchange Indenture or in
the TIA), it must eliminate such conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Certificate of Designations for the New Exchangeable Preferred Stock and the
Exchange Indenture. Reference is made to the Certificate of Designations and
the Exchange 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.
"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 the Company
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 Wholly Owned Restricted Subsidiary of such Person or by such
Person to a Wholly Owned 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 pursuant to the contracts governing the Gulf
Transaction shall not be deemed an Asset Disposition hereunder.
"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
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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,
minus (iv) the principal amount of borrowings outstanding as of such date
under the Credit Agreement to the extent that the amount of such borrowings
exceeds the sum of clauses (i) and (ii) above, all of the foregoing calculated
on a consolidated basis in accordance with GAAP.
"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 $500.0 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 TrizecHahn, or a Person, a majority
of whose voting equity is owned by TrizecHahn, becomes the Beneficial Owner,
directly or indirectly, of shares of stock of the Company, Clark or any
Subsidiary of the Company or TrizecHahn that owns, directly or indirectly, any
equity interest in Clark, as the case may be, entitling such Acquiring Person
to exercise 50% or more of the total voting power of all classes of stock of
the Company, Clark or such Subsidiary, 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 the
Company 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 the Company and Chevron U.S.A. Inc., as
amended.
"Clark" means Clark Refining & Marketing, Inc., a Delaware corporation and a
Wholly Owned Subsidiary 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
plus retained earnings or minus accumulated deficit) of such Person as
reflected on the consolidated balance sheet of such Person
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and its Restricted Subsidiaries for the Quarter for which such determination is
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 revaluations 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; and
(vii) the cumulative foreign currency translation adjustment, if any.
"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, whether or not
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, 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.
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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 Quarters for which financial information
in respect thereof is available immediately prior to the Transaction Date to
(ii) the aggregate Fixed Charges and Preferred Stock Dividends 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 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 on a
pro forma basis as if such acquisition, sale or disposition 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.
"Credit Agreement" means that certain Credit Agreement, dated as of
September 25, 1997, by and among Clark 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.
"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, 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 October 1, 2009.
"Equity Offering" means, if shares of New Exchangeable Preferred Stock are
outstanding, any offering of Junior Securities of the Company and, if Exchange
Debentures are outstanding, any offering of Capital Stock of the Company.
"Existing Indebtedness" means any outstanding Indebtedness of the Company
and its Subsidiaries as of the Issue Date and in any event Indebtedness
evidenced by the Credit Agreement 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. 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
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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 are in effect on the Issue Date.
"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, and/or any
issuance to Gulf Resources Corporation of any equity interest in the Company,
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.
"Indebtedness" with respect to any Person, means any indebtedness, including,
in the case of the Company, the indebtedness evidenced by the Exchange
Debentures, if and when issued, 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 Clark to any Person other than
the Company.
"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, 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.
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"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.
"Issue Date" means October 1, 1997.
"Junior Subordinated Indebtedness" means any Indebtedness of the Company
which is subordinated in right of payment to the Exchange Debentures 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) are required to be made by the Company at any time prior
to October 1, 2009.
"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, recorded or otherwise perfected
under applicable law (including any conditional sale or other title 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).
"Maturity" means, with respect to any Exchange Debentures, the date on which
the principal of such Exchange Debentures becomes due and payable as provided
in the Indenture, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Equity Offering or any issuance of Capital
Stock by any Person 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) therefrom by
such Person, 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 (i) 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; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries.
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"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 clauses (ii) through (iv) 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 Exchange Debentures the refinancing or refunding Indebtedness is made pari
passu with the Exchange Debentures or subordinated to the Exchange Debentures,
(B) in the case of any refinancing or refunding of Indebtedness that is
subordinated to the Exchange Debentures the refinancing or refunding of
Indebtedness is made subordinated to the Exchange Debentures at least to the
same extent as such Indebtedness being refinanced or refunded was subordinated
to the Exchange Debentures and (C) in the case of the refinancing or refunding
of Indebtedness that is subordinated to the Exchange Debentures, 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 Exchange Debentures 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 not to exceed the greater of (a) $500.0 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 on the Issue Date; (iv) evidenced by trade letters of credit
incurred in the ordinary course of business not to exceed $20.0 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 Junior Subordinated Debt; (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 Code, in an amount not to
exceed $75.0 million in the aggregate at any time; and (xi) in addition to
Indebtedness permitted by clauses (i) through (x) above, Indebtedness not to
exceed on a consolidated basis for the Company and its Restricted Subsidiaries
at any time $50.0 million.
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"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.
"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 Shareholders" means (i) TrizecHahn Corporation, (ii) Occidental
Petroleum Corporation, (iii) Gulf Resources Corporation and (iv) Affiliates of
the Persons described in the foregoing clauses (i) through (iii), other than
the Company and its Subsidiaries.
"Quarter" means a fiscal quarterly period of the Company.
"Redemption Date," when used with respect to any Exchange Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to the
Exchange Indenture.
"Redemption Price," when used with respect to any Exchange Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to the
Exchange 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"), directly or
indirectly, by the Company or a Restricted Subsidiary of the 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
the Company (other than the Exchangeable Preferred Stock and the Exchange
Debentures) which is subordinate in right of payment to the New Exchangeable
Preferred Stock.
"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 and (b) 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) and (b) above shall not exceed
$25.0 million in the aggregate at any one time outstanding.
"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.
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"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.
"Stated Maturity" means October 1, 2009.
"Stock Payment" means (i) 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 Stock) or
options, warrants or other rights to purchase the Company's Capital Stock
(other than Disqualified Stock)), and (ii) with respect to any Restricted
Subsidiary of the Company, any redemption, repurchase, retirement, defeasance
or any acquisition of its Capital Stock or the Capital Stock of the Company or
any warrants, rights, or options to purchase or acquire shares of any class of
its Capital Stock or the Capital Stock of the Company, now or hereafter
outstanding, except with respect to its Capital Stock or such warrants, rights
or options to purchase or acquire shares of any class of its Capital Stock
owned by the Company or a Restricted Subsidiary of the Company.
"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.
"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.
"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 (other than Clark or any
successor to Clark) that is designated by the board of directors of the
Company as an Unrestricted Subsidiary pursuant to a
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Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) 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; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under
"Limitations on Indebtedness", the Company shall be in default of such
covenant). 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--Limitations 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
The New Exchangeable Preferred Stock initially will be represented by a
single permanent global certificate in definitive, fully registered form (the
"Global Certificate"). The Global Certificate will be deposited on the
effective date with, or on behalf of, DTC and registered in the name of a
nominee of DTC. The Global Certificate will be subject to certain restrictions
on transfer set forth therein and will bear the legend regarding such
restrictions set forth under the heading "Notice to Investors" herein.
The Global Certificate. The Company expects that, pursuant to procedures
established by DTC, (i) upon the issuance of the Global Certificate, DTC or
its custodian will credit, on its internal system, the number of shares of New
Exchangeable Preferred Stock of the individual beneficial interests
represented by such global securities to the respective accounts of persons
who have accounts with such depositary and (ii) ownership of beneficial
interest in the Global Certificate will be shown on, and the transfer of such
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interest of participants) and the records of
participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchasers and ownership of beneficial interests in the Global Certificate
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. QIBs may hold their interests
in the Global Certificate directly through DTC if they are participants in
such system, or indirectly through organizations that are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of the
shares of New Exchangeable Preferred Stock, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the shares of New
Exchangeable Preferred Stock represented by such Global Certificate for all
purposes. No beneficial owner of an interest in the Global Certificate will be
able to transfer that interest except in accordance with DTC's procedures, in
addition to those procedures provided for in the Certificate of Designations.
Payments of the liquidation preference or redemption price and dividends on
(including Additional Dividends) the Global Certificate will be made to DTC or
its nominee, as the case may be, as the registered owner thereof. Neither the
Company nor the Transfer Agent 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 Certificate or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the liquidation preference, redemption price or dividends in respect of the
Global Certificate, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
principal amount of the Global Certificate as shown on the records of DTC or
its nominee. The Company also expects that payments by participants to owners
of beneficial interests in the Global Certificate held through such
participants will be governed by standing instructions and customary practice,
as is now the case with securities held by the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell shares of New Exchangeable Preferred Stock to persons in
states that require physical delivery of the Certificate, or to pledge such
securities, such holder must transfer its interest in the Global Certificate,
in accordance with the normal procedures of DTC and with the procedures set
forth in the Certificate of Designations.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Exchangeable Preferred Stock (including the
presentation of shares of New Exchangeable Preferred Stock for exchange as
described below) only at the direction of one or more participants to
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whose account the DTC interests in the Global Certificates are credited and
only in respect of such shares of New Exchangeable Preferred Stock as to which
such participant or participants has or have given such direction.
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 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 participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others 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").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Transfer Agent will have
any obligations under the rules and procedures governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Certificate and a successor depositary
is not appointed by the Company within 90 days, Certificated Securities will be
issued in exchange for the Global Certificate.
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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
Clark's Credit Agreement provides for revolving loan borrowings and letter
of credit issuances of up to the lesser of $400.0 million or the amount of a
borrowing base calculated with respect to the Company's cash, investments,
eligible receivables and certain eligible hydrocarbon inventories, provided
that revolving loans are limited to the principal amount of $50.0 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 Clark's cash and cash equivalents, receivables, crude oil and refined
product inventories of Clark located at its refineries and terminals and in
transit via pipelines and trademarks.
Outstanding principal balances under the Credit Agreement bear interest at
floating rates equal to the LIBOR Rate plus marginal rates between 0.625% and
2.25% 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 Clark's ratio of cash collateral to the
face amount of outstanding letters of credit and the Clark'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, Clark'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. Clark is also required to comply with certain financial covenants.
The financial covenants are: (i) maintenance of working capital of at least
$150.0 million at all times; (ii) maintenance of a tangible net worth (as
defined) of at least $300.0 million; and (iii) maintenance of minimum levels
of balance sheet cash (as defined) of $50.0 million at all times. 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 at all times. The Credit Agreement also limits the amount of future
additional indebtedness outside of the cumulative cash flow covenant that may
be incurred by the Company in an amount equal to $25.0 million. Under the
Credit Agreement, Clark USA may not exchange the New Exchangeable Preferred
Stock for Exchange Debentures without the consent of banks holding at least
51% of the then outstanding principal amount of loans and letters of credit
under the Credit Agreement.
Events of default under the Credit Agreement include, among other things:
(i) any failure of Clark to pay principal thereunder when due, or to pay
interest or any other amount due within three days
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after the date due; (ii) material inaccuracy of any representation or warranty
given by Clark therein; (iii) breach by Clark of certain covenants contained
therein; (iv) the continuance of a default by Clark 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 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; or (xi) the failure of the liens of the banks to
be first priority perfected liens, subject to certain permitted liens.
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 proceeds of the term loan were used,
together with the net proceeds from the Old Debt Notes to redeem the Company's
outstanding 10 1/2% Notes. The remaining net proceeds were used to replenish
the Company's cash reserves.
Borrowings under the Loan Agreement are senior unsecured obligations of the
Company. One quarter of the borrowings under the Loan Agreement will mature on
November 15, 2003, and the remaining three quarters plus all other amounts
outstanding thereunder will mature on November 15, 2004. 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 Loan Agreement 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 Loan Agreement bear interest at the
LIBOR Rate (as defined in the Loan Agreement) plus a margin of 275 basis
points.
The Loan Agreement contains customary representations and warranties.
Covenants and events of default under the Loan Agreement are substantially
similar to those of the Notes, as described under "Description of the Notes--
Certain Covenants" and "--Events of Default".
Lenders under the Loan Agreement will have customary voting, participation,
indemnification and assignment rights.
10 1/2% Notes
The 10 1/2% Notes are governed by an indenture, dated as of December 1, 1991
(as amended and supplemented, the "10 1/2% Note Indenture").
Interest on the 10 1/2% Notes is payable in cash semi-annually on June 1 and
December 1 of each year. The 10 1/2% Notes do not have the benefit of any
sinking fund obligations, and are not convertible or exchangeable into any
other security.
The 10 1/2% Notes are senior obligations of Clark, ranking pari passu in
right of payment with all other senior debt of Clark.
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The 10 1/2% Notes are currently redeemable at the option of Clark, in whole
or in part from time to time, at 105.250% of principal amount thereof, plus
accrued interest, reducing to 102.625% of principal amount thereof, plus
accrued interest on December 1, 1997, and to 100% of the principal amount
thereof, plus accrued interest, on or after December 1, 1998.
Clark is required to offer to purchase all outstanding 10 1/2% Notes at 101%
of their principal amount, plus accrued interest, in the event of a Change of
Control (as defined in the 10 1/2% Note Indenture, which definition is
substantially similar to that contained in the Exchange Indenture).
Clark is required to make an offer to purchase up to 10% of the principal
amount of the 10 1/2% Notes originally issued at 100% of their principal
amount, plus accrued interest, if Clark's Consolidated Adjusted Net Worth (as
defined) as of the end of any two consecutive fiscal quarters is less than
$100.0 million.
Clark is required to make an offer to purchase all outstanding 10 1/2% Notes
at the applicable redemption price if Clark or a subsidiary makes an Asset
Disposition (as defined in the 10 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 10 1/2% Note Indenture contains certain covenants that, among other
things, limit the ability of Clark 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 Clark, 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.
Events of Default under the 10 1/2% Note Indenture include: (i) failure to
pay any interest on any 10 1/2% Notes when due, continued for 30 days; (ii)
failure to pay principal of or premium, if any, on the 10 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 Clark in the 10 1/2% Note
Indenture, continued for 30 days after written notice as provided in the 10
1/2% Note Indenture; (v) failure to pay at final maturity in excess of $5.0
million principal amount of any indebtedness of Clark or any subsidiary of
Clark, or acceleration of any indebtedness of Clark or any subsidiary of Clark
in an aggregate principal amount in excess of $5.0 million; (vi) the entry of
a final judgment or judgments against Clark 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
Clark or any significant subsidiary.
On November 24, 1997, Clark issued a notice to the holders of its 10 1/2%
Notes that it intends to redeem on December 24, 1997, all $225.0 million of
the 10 1/2% Notes outstanding at a price of $1,032.96 for each $1,000
principal amount of the notes outstanding, preceding the redemption premium
and accrued interest.
9 1/2% Notes
The 9 1/2% Notes are governed by an indenture, dated as of September 15,
1992 (as amended and supplemented, 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 Clark, ranking pari passu in
right of payment with all other senior debt of Clark.
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The 9 1/2% Notes are redeemable at the option of Clark 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.
Clark 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 Exchange Indenture).
Clark 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 Clark's Consolidated Adjusted Net Worth (as
defined) as of the end of any two consecutive fiscal quarters is less than
$100 million.
Clark is required to make an offer to purchase all outstanding 9 1/2% Notes
at the applicable redemption price if Clark 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 Clark 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 Clark, 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.
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 Clark 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 Clark or any subsidiary of Clark, or
acceleration of any indebtedness of Clark or any subsidiary of Clark in an
aggregate principal amount in excess of $5.0 million; (vi) the entry of a
final judgment or judgments against Clark 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
Clark or any significant subsidiary.
As a result of the Blackstone Transaction the $175 million of 9 1/2% Notes,
will be subject to a repurchase offer.
Senior Notes
The Senior Notes are governed by an indenture dated November 21, 1997 (as
amended and supplemented from time to time, the "Senior Note Indenture").
Interest on the Senior Notes accrues at the rate of 8 3/8% per annum and is
payable semiannually in arrears on May 15 and November 15, commencing on May
15, 1998. The Senior Notes are not convertible or exchangeable into any other
security.
The Senior Notes are senior unsecured obligations of Clark, limited in the
aggregate principal amount to $100 million and ranking pari passu in right of
payment with all senior debt of Clark.
The Senior Notes are redeemable at the option of Clark, in whole or in part,
at any time on and after November 15, 2002, in principal amounts of $1,000 or
an integral multiple of $1,000, plus accrued interest thereon to, but
excluding the date of redemption, at 104.187% on November 15, 2002, 102.094%
on November 15, 2003, 100.000% on November 15, 2004 and thereafter.
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In addition, Clark may, at its option, use the net proceeds of one or more
Equity Offerings to the extent the net proceeds thereof are contributed to the
equity capital of Clark to redeem for cash up to 35% in aggregate principal
amount of the Senior Notes originally issued under the Senior Note Indenture
at any time prior to November 15, 2001, at a redemption price equal to
108.375% of the aggregate principal amount so redeemed, plus accrued interest;
provided that at least 65% of the principal amount of Senior Notes originally
issued remain outstanding immediately after such redemption.
Clark is required to make an offer to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of each holder's Senior Notes at a
purchase price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, including Additional Interest (as defined
herein), to the date of purchase.
The Senior Note Indenture contains certain covenants that, among other
things, limit the ability of Clark and its subsidiary 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.
Events of Default, under the Senior Note Indenture include (i) failure to
pay any interest on the Senior Note issued under the Senior Note Indenture
when due, continued for 30 days; (ii) failure to pay principal of (or premium,
if any, on) the Senior Notes issued under the Senior Note Indenture when due;
(iii) failure to perform or comply with the covenant regarding mergers and
consolidations; (iv) failure to perform any other covenant or warranty of
Clark in the Senior Note Indenture, continued for 30 days after written notice
as provided therein; (v) failure to pay, at final maturity, in excess of $25.0
million principal amount of any indebtedness of Clark or its subsidiary, or
acceleration of any indebtedness of Clark or its subsidiary in an aggregate
principal amount in excess of $25.0 million; (vi) the rendering of a final
judgment or judgments (not subject to appeal) against Clark or its subsidiary
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 (vii) certain events in bankruptcy, insolvency or reorganization affecting
Clark or its subsidiary.
Senior Subordinated Notes
The Senior Subordinated Notes are governed by an indenture dated November
21, 1997 (as amended and supplemented from time to time, the "Senior
Subordinated Note Indenture").
Interest on the Senior Subordinated Notes accrues at the rate of 8 7/8% per
annum and is payable semiannually in arrears on May 15 and November 15,
commencing on May 15, 1998. The Senior Note Indenture does not limit the
aggregate principal amount of Senior Subordinated Notes that may be issued
thereunder from time to time in one or more series. The Senior Subordinated
Notes are not convertible or exchangeable into any other security.
The Senior Subordinated Notes are senior subordinated unsecured obligations
of Clark, ranking pari passu in right of payment will all senior debt of
Clark.
The Senior Subordinated Notes are redeemable at the option of Clark, in
whole or in part, at any time on and after November 15, 2002, in principal
amounts of $1,000 or an integral multiple of $1,000, plus accrued interest
thereon to, but excluding the date of redemption, at 104.437% on November 15,
2002, 102.958% on November 15, 2003, 101.479% on November 15, 2004, 100.000%
on November 15, 2005 and thereafter.
In addition, Clark may, at its option, use the net proceeds of one or more
Equity Offerings to the extent the net proceeds thereof are contributed to the
equity capital of Clark to redeem for cash up to 35% in aggregate principal
amount of the Senior Subordinated Notes originally issued under the Senior
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Subordinated Note Indenture at any time prior to November 15, 2001, at a
redemption price equal to 108.875% of the aggregate principal amount so
redeemed, plus accrued interest; provided that at least 50% of the principal
amount of Senior Subordinated Notes originally issued remain outstanding
immediately after such redemption.
Clark is required to make an offer to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of each holder's Senior Subordinated
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.
The Senior Subordinated Note Indenture contains certain covenants that, among
other things, limit the ability of Clark and its subsidiary 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.
Events of Default, under the Senior Subordinated Note Indenture include (i)
failure to pay any interest on the Senior Subordinated Notes issued under the
Senior Subordinated Note Indenture when due, continued for 30 days; (ii)
failure to pay principal of (or premium, if any, on) the Senior Subordinated
Notes issued under the Senior Subordinated Note Indenture when due; (iii)
failure to perform or comply with the covenant in the Senior Subordinated Note
Indenture regarding mergers and consolidations; (iv) failure to perform any
other covenant or warranty of Clark in the Senior Subordinated Note Indenture,
continued for 30 days after written notice as provided therein; (v) failure to
pay, at final maturity, in excess of $25.0 million principal amount of any
indebtedness of Clark or its subsidiary, or acceleration of any indebtedness of
Clark or its subsidiary in an aggregate principal amount in excess of $25.0
million; (vi) the rendering of a final judgment or judgments (not subject to
appeal) against Clark or its subsidiary 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 (vii) certain events in
bankruptcy, insolvency or reorganization affecting Clark or its subsidiary.
Zero Coupon Notes
The Zero Coupon Notes are governed by an indenture, dated as of May 15, 1993
(as amended and supplemented, the "Zero Coupon Note Indenture").
No scheduled cash payments of interest on or principal of the Zero Coupon
Notes are required prior to their maturity. The Zero Coupon Notes do not have
the benefit of any sinking fund obligations, and are not convertible or
exchangeable into any other security.
The Zero Coupon Notes are secured by a pledge of all of the stock of Clark
USA's subsidiaries.
The Zero Coupon Notes are senior obligations of Clark USA, ranking pari passu
in right of payment with all other senior debt of Clark USA.
The Zero Coupon Notes are redeemable at the option of Clark USA at any time
on or after February 15, 1998, in whole or in part from time to time, at a
redemption price equal to accreted value at the redemption date.
Clark USA is required to offer to purchase all outstanding Zero Coupon Notes
at 101% of their accreted value, in the event of a Change of Control (as
defined in the Zero Coupon Note Indenture, which definition is substantially
similar to that contained in the Exchange Indenture).
Clark USA is required to make an offer to purchase up to 10% of the Zero
Coupon Notes originally issued at 100% of their accreted value if Clark USA's
Consolidated Adjusted Net Worth (as defined) as of the end of any two
consecutive fiscal quarters is less than $25.0 million.
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The Zero Coupon Note Indenture contains certain covenants that, among other
things, limit the ability of Clark USA 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 Clark, enter
into certain transactions with their affiliates, engage in speculative
trading, incur additional indebtedness, create liens, dispose of certain
assets and engage in mergers and consolidations.
Events of Default under the Zero Coupon Note Indenture include: (i) failure
to pay any interest on any Zero Coupon Notes when due, continued for 30 days;
(ii) failure to pay principal of or premium, if any, on the Zero Coupon 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 Clark USA in the Zero
Coupon Note Indenture, continued for 30 days after written notice as provided
in the Zero Coupon Note Indenture; (v) failure to pay at final maturity in
excess of $5.0 million principal amount of any indebtedness of Clark USA or
any subsidiary of Clark USA, or acceleration of any indebtedness of Clark USA
or any subsidiary of Clark USA in an aggregate principal amount in excess of
$5.0 million; (vi) the entry of a final judgment or judgments against Clark
USA 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 Clark USA or any subsidiary.
10 7/8% Notes
The 10 7/8% Notes are governed by an indenture, dated as of December 1, 1995
(as amended and supplemented, the "10 7/8% Note Indenture").
Interest on the 10 7/8% Notes is payable in cash semi-annually on June 1 and
December 1 of each year. The 10 7/8% Notes do not have the benefit of any
sinking fund obligations, and are not convertible or exchangeable into any
other security.
The 10 7/8% Notes are senior obligations of Clark USA, ranking pari passu in
right of payment with all other senior debt of Clark USA. The 10 7/8% Notes
are unsecured.
The 10 7/8% Notes are redeemable at the option of Clark USA, in whole or in
part from time to time, on and after December 1, 2000, at 105.43% of principal
amount thereof, plus accrued interest, reducing to 103.625% of principal
amount thereof, plus accrued interest on December 1, 2001, to 101.83% of
principal amount thereof, plus accrued interest on December 1, 2002, and to
100% of the principal amount thereof, plus accrued interest, on or after
December 1, 2003.
Clark USA is required to offer to purchase all outstanding 10 7/8% Notes at
101% of their principal amount, plus accrued interest, in the event of a
Change of Control Triggering Event (as defined in the 10 7/8% Note Indenture,
which definition is substantially similar to that contained in the Exchange
Indenture except that the definition in the 10 7/8% Indenture requires that a
change of control be accompanied by a rating decline).
Clark USA is required to make an offer to purchase all outstanding 10 7/8%
Notes at the applicable redemption price if Clark USA or a restricted
subsidiary makes an Asset Disposition (as defined in the 10 7/8% Note
Indenture) and the sale proceeds are not reinvested. The offer to purchase is
limited to the net proceeds from such Asset Disposition.
The 10 7/8% Note Indenture contains certain covenants that, among other
things, limit the ability of Clark USA and its restricted 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
Clark, enter into certain transactions with their affiliates, incur additional
indebtedness, dispose of the capital stock of restricted subsidiaries, issue
guarantees, create liens, dispose of certain assets and engage in mergers and
consolidations.
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Events of Default under the 10 7/8% Note Indenture include: (i) failure to
pay any interest on any 10 7/8% Notes when due, continued for 30 days; (ii)
failure to pay principal of or premium, if any, on the 10 7/8% 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 Clark USA in the 10 7/8% Note
Indenture, continued for 30 days after written notice as provided in the 10
7/8% Note Indenture; (v) failure to pay at final maturity in excess of $10.0
million principal amount of any indebtedness of Clark USA or any restricted
subsidiary of Clark USA, or acceleration of any indebtedness of Clark USA or
any restricted subsidiary of Clark USA in an aggregate principal amount in
excess of $10.0 million; (vi) the entry of a final judgment or judgments
against Clark USA or any subsidiary in an amount in excess of $10.0 million,
that are not paid, discharged or stayed within 60 days; and (vii) certain
events of bankruptcy, insolvency or reorganization of Clark or any significant
subsidiary.
As a result of the Blackstone Transaction and in the event of a Rating
Decline the $175.0 million of 10 7/8% Notes will be subject to a repurchase
offer.
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DESCRIPTION OF OTHER CAPITAL STOCK
Clark USA's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides that Clark USA's authorized capital
stock consists of 68,554,552 shares of capital stock, consisting of (i)
45,164,597 shares of Common Stock, par value $0.01 per share ("Common Stock"),
(ii) 3,389,955 shares of Class D Common Stock, par value $0.01 per share (the
"Class D Common Stock"), (iii) 9,000,000 shares of Class E Common Stock, par
value $0.01 per share (the "Class E Common Stock"), (iv) 6,000,000 shares of
Class F Common Stock, par value $0.01 per share (the "Class F Common stock")
and (v) 5,000,000 shares of Preferred Stock, par value $0.01 per share,
issuable in series, including 250,000 shares of Exchangeable Preferred Stock.
COMMON STOCK
Voting Rights
Holders of Common Stock and Class F Common Stock are entitled to one vote,
voting together as one class, for each share held on all matters submitted to
a vote of stockholders; provided that holders of Common Stock and Class F
Common Stock shall have no voting rights with respect to any matters reserved
(by law or otherwise) solely for any other class of capital stock; provided
further that if the holders of the Class F Common Stock would otherwise be
entitled to cast votes representing, in the aggregate, more than 19.9% of the
total voting power of all classes of capital stock of Clark USA entitled to
vote, the vote allotted to each share of Class F Common Stock shall be
proportionately reduced so that all outstanding shares of Class F Common Stock
shall be entitled to cast votes representing, in the aggregate, 19.9% of the
total voting power of all classes of capital stock of Clark USA entitled to
vote. Holders of Class D Common Stock and Class E Common Stock are not
entitled to vote on any matters submitted to a vote of stockholders, other
than as provided by law, and such shares shall not be deemed to be outstanding
for purposes of determining the vote required on any matter properly brought
before stockholders of Clark USA for a vote thereon. Accordingly, holders of a
majority of the shares of Common Stock and Class F Common Stock, voting
together, entitled to vote in any election of directors may elect all of the
directors standing for election.
Dividends
Subject to any preferential dividend rights of outstanding Preferred Stock,
holders of Common Stock, Class D Common Stock, Class E Common Stock and Class
F Common Stock are entitled to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available therefor,
provided that the Board of Directors may not declare or pay any dividend or
distribution per share with respect to the Common Stock, Class D Common Stock,
Class E Common Stock or Class F Common Stock unless the same dividend or
distribution per share has been declared or paid, as the case may be, with
respect to each other class of common stock; provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock, the Class E Common Stock and the Class F Common
Stock shall receive an equivalent dividend per share payable in common stock
of the corresponding class.
Conversion
Subject to compliance with any applicable laws related to the acquisition of
voting securities of Clark USA, the holder of any shares of Class D Common
Stock or Class E Common Stock, as the case may be, shall have the right, at
any time and from time to time, to convert any or all of such holder's shares
of Class D Common Stock or Class E Common Stock, as the case may be, into an
equal number of shares of Common Stock; provided, that if as the result of any
proposed conversion by any holder of Class E Common Stock the total voting
power of the "ultimate parent entity" of such holder, as defined in the Hart-
Scott-Rodino Antitrust Improvements Act, as amended (the "HSR Act") would
exceed any "filing threshold", as defined in the HSR Act, then such proposed
conversion shall
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not be effective until all required filings under the HSR Act have been made
and all applicable waiting periods thereunder have expired or been terminated.
The holder of any shares of Class F Common Stock other than Occidental and
its affiliates shall have the right, at any time and from time to time, to
convert any or all of such other holder's shares of Class F Common Stock into
an equal number of shares of Common Stock.
The holders of shares of Common Stock do not have the right to convert such
shares of Common Stock into any other class of capital stock of Clark USA.
In the event Clark USA shall at any time (a) declare a dividend on any shares
of its capital stock or any securities issued in respect thereof, or in
substitution therefor, such dividend being payable in shares of its capital
stock, (b) subdivide its outstanding capital stock, or (c) combine its
outstanding capital stock into a smaller number of shares, the provisions
relating to the conversion of shares of Class D Common Stock, Class E Common
Stock and Class F Common Stock shall be equitably and proportionately adjusted.
Liquidation
Upon the liquidation, dissolution or winding up of Clark USA, the holders of
Common Stock, Class D Common Stock, Class E Common Stock and Class F Common
Stock are entitled to receive ratably the net assets of Clark USA available
after the payment of all debts and other liabilities and subject to the prior
rights of holders of any outstanding Preferred Stock. Holders of Common Stock,
Class D Common Stock, Class E Common Stock and Class F Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares of Class D Common Stock, Class E
Common Stock and Class F Common Stock to be issued in the Equity Restructuring
will be, fully paid and non-assessable.
PREFERRED STOCK
The Certificate of Incorporation provides that the Board of Directors is
authorized, subject to certain limitations prescribed by law, without further
stockholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of Preferred Stock in one or more series and to fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations of
such series. The issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of Clark USA. The rights,
preferences and privileges of holders of Common Stock, Class D Common Stock,
Class E Common Stock and Class F Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which Clark USA may designate and issue in the future.
The Board of Directors has authorized the issuance of 250,000 shares of
Preferred Stock. For a description of the terms of the Preferred Stock, see "--
Description of the Preferred Stock." Clark USA has no present plans to issue
any shares of Preferred Stock other than the New Exchangeable Preferred Stock
and the Exchangeable Preferred Stock.
DELAWARE LAW BUSINESS COMBINATION LAW AND LIMITATION ON DIRECTORS' LIABILITY
Clark USA is subject to the provisions of Section 203 of the Delaware General
Corporation Law ("DGCL"). Subject to certain exceptions, Section 203 prohibits
a publicly-held Delaware corporation
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from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
such status with the approval of the Board of Directors or unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder which is not shared pro rata with the
other stockholders of Clark USA. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15% or more of the corporation's voting
stock.
The Certificate of Incorporation contains certain provisions permitted under
the DGCL relating to the liability of directors. These provisions eliminate a
director's liability for monetary damages for a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions which involve intentional misconduct or a knowing violation of law.
The Certificate of Incorporation and By-Laws also contain provisions
indemnifying the directors and officers of Clark USA to the fullest extent
permitted by the DGCL. Clark USA believes that these provisions will assist
Clark USA in attracting and retaining qualified individuals to serve as
directors.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or discouraging a third party from attempting to
acquire, control of Clark USA.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion is a summary of the material United States federal
income tax consequences relevant to the purchase, ownership and disposition of
the Securities (as defined below) by holders acquiring (i) New Exchangeable
Preferred Stock in exchange for Old Exchangeable Preferred Stock which such
holders acquired from the Initial Purchasers immediately subsequent to the
original issue of such Old Exchangeable Preferred Stock to the Initial
Purchasers and (ii) Exchange Debentures pursuant to the exchange of such New
Exchangeable Preferred Stock for Exchange Debentures, but does not purport to
be a complete analysis of all potential tax effects. For purposes of this
section, the New Exchangeable Preferred Stock and the Exchange Debentures are
sometimes referred to as the "Securities." The discussion is based upon the
Code, Treasury Regulations, Service rulings and pronouncements and judicial
decisions all in effect as of the date hereof, all of which are subject to
change at any time, and any such change may be applied retroactively in a
manner that could adversely affect a holder of the Securities. See "--Possible
Legislative Changes." The discussion does not address all of the federal
income tax consequences that may be relevant to a holder in light of such
holder's particular circumstances or to holders subject to special rules, such
as certain financial institutions, insurance companies, dealers in securities,
foreign corporations, partnerships or other entities organized under foreign
law, nonresident alien individuals, trusts other than U.S. Trusts and persons
holding the Securities as part of a "straddle," "hedge" or "conversion
transaction." For purposes of the preceding sentence, a U.S. Trust is (a) for
taxable years beginning after December 31, 1996, or if the trustee of a trust
elects to apply the following definition to an earlier taxable year ending
after August 20, 1996, any trust if, and only if, (i) a court within the
United States is able to exercise primary supervision over the administration
of the trust and (ii) one or more U.S. persons have the authority to control
all substantial decisions of the trust and (b) for all other taxable years,
any trust whose income is includible in gross income for U.S. federal income
tax purposes regardless of its source. Moreover, the effect of any applicable
state, local or foreign tax laws is not discussed. This discussion deals only
with Securities held as "capital assets" within the meaning of Section 1221 of
the Code.
The Company has not sought and will not seek any rulings from the Service
with respect to the position of the Company discussed below. There can be no
assurance that the Service will not take a different position concerning the
tax consequences of the purchase, ownership or disposition of the Securities
or that any such positions would not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSEQUENCES DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER
TAX LAWS.
CONSEQUENCES OF EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of Old Exchangeable Preferred Stock for New Exchangeable
Preferred Stock pursuant to the Exchange Offer will not be taxable to the
exchanging holders for Federal income tax purposes. As a result (i) an
exchanging holder will not recognize any gain or loss on the exchange; (ii)
the holding period for the New Exchangeable Preferred Stock will include the
holding period for the Old Exchangeable Preferred Stock; and (iii) the basis
of the New Exchangeable Preferred Stock will be the same as the basis for the
Old Exchangeable Preferred Stock.
The Exchange Offer will result in no Federal income tax consequences to a
nonexchanging holder.
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CLASSIFICATION OF NEW EXCHANGEABLE PREFERRED STOCK AND EXCHANGE DEBENTURES
Although the characterization of an instrument as debt or equity is a facts
and circumstances determination that cannot be predicted with certainty, the
New Exchangeable Preferred Stock should be treated as equity and the Exchange
Debentures should be treated as debt for federal income tax purposes.
Accordingly, the Company intends to treat the New Exchangeable Preferred Stock
as equity and the Exchange Debentures as debt for federal income tax purposes,
and the remainder of this discussion assumes that such treatment will be
respected.
NEW EXCHANGEABLE PREFERRED STOCK
Distributions on New Exchangeable Preferred Stock. Distributions on New
Exchangeable Preferred Stock, whether paid in cash or in additional shares of
New Exchangeable Preferred Stock, will be taxable as ordinary dividend income
to the extent that the cash amount or the fair market value of any New
Exchangeable Preferred Stock distributed on the New Exchangeable Preferred
Stock does not exceed the Company's current and accumulated earnings and
profits (as determined for federal income tax purposes). To the extent that the
amount of such distributions paid on the New Exchangeable Preferred Stock
exceeds the Company's current and accumulated earnings and profits (as
determined for federal income tax purposes), the distributions will be treated
as a return of capital, thus reducing the holder's adjusted tax basis in such
New Exchangeable Preferred Stock. The amount of any such excess distribution
that is greater than the holder's adjusted basis in the New Exchangeable
Preferred Stock will be taxed as capital gain. The recently enacted Taxpayer
Relief Act of 1997 made certain changes to the Code with respect to taxation of
capital gains of taxpayers other than corporations. In general, the maximum tax
rate for non-corporate taxpayers on long-term capital gains has been lowered to
20% from the previous 28% rate for most capital assets (including the
Securities) held for more than 18 months. For taxpayers in the 15% regular tax
bracket, the maximum tax rate on long-term capital gains is now 10%. Capital
gain on such assets having a holding period of more than one year but not more
than 18 months will be subject to a maximum tax rate of 28%. There can be no
assurance that the Company will have sufficient earnings and profits (as
determined for federal income tax purposes) to cause distributions on New
Exchangeable Preferred Stock to be treated as dividends for federal income tax
purposes. For purposes of the remainder of this discussion, the term "dividend"
refers to a distribution paid out of allocable earnings and profits, unless the
context indicates otherwise.
A stockholder's initial tax basis in any additional shares of New
Exchangeable Preferred Stock distributed by the Company will be equal to the
fair market value of such additional shares on their date of distribution. A
stockholder's holding period for such additional shares will commence with
their distribution, and will not include his holding period for the shares of
New Exchangeable Preferred Stock with respect to which the additional shares
are distributed.
To the extent that dividends are treated as ordinary income, dividends
received by corporate holders will be eligible for the 70% dividends-received
deduction under Section 243 of the Code, subject to limitations generally
applicable to the dividends-received deduction, including those contained in
Sections 246 and 246A of the Code and the provisions for computation of
adjusted current earnings for purposes of the corporate alternative minimum
tax. The 70% dividends-received deduction may be reduced if a holder's shares
of New Exchangeable Preferred Stock are debt financed. Under Section 246(c) of
the Code, the 70% dividends-received deduction will not be available with
respect to stock that is held for 45 days or less during the 90-day period
beginning on the date which is 45 days before the date on which such stock
becomes ex-dividend with respect to such dividend (90 days or less during the
180-day period beginning on the date which is 90 days before the date on which
such stock becomes ex-dividend with respect to such dividend in the case of a
dividend on preferred stock attributable to a period or periods aggregating
more than 366 days). The length of time that a holder is deemed to have held
stock for these purposes is reduced by periods during which the holder's risk
of
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loss with respect to the stock is diminished by reason of the existence of
certain options, contracts to sell, short sales or similar transactions.
Section 246(c) also denies the 70% dividends-received deduction to the extent
that a corporate holder is under an obligation, with respect to substantially
similar or related property, to make payments corresponding to the dividend
received. The Clinton Administration has proposed legislation which would, if
enacted, affect the availability of the dividends-received deduction for
dividends on New Exchangeable Preferred Stock. See "--Possible Legislative
Changes."
Under Section 1059 of the Code, the tax basis of New Exchangeable Preferred
Stock that has been held by a corporate shareholder for two years or less
(ending on the earliest of the date on which the Company declares, announces or
agrees to the amount or payment of an actual or constructive dividend) is
reduced (but not below zero) by the non-taxed portion of an "extraordinary
dividend" for which a dividends-received deduction is allowed, with such
reduction treated as occurring at the beginning of the ex-dividend date of such
dividend; provided, however, that in the case of certain redemptions of New
Exchangeable Preferred Stock, amounts of redemption proceeds that are treated
as a dividend (as described below under "--Redemption, Sale or Exchange of New
Exchangeable Preferred Stock") are treated as an extraordinary dividend without
regard to the period of time such stock was held. To the extent a corporate
holder's tax basis would have been reduced below zero but for the foregoing
limitation, such holder must treat such amount as gain recognized on the sale
or exchange of such New Exchangeable Preferred Stock for the taxable year in
which such dividend is received. Generally, in the case of New Exchangeable
Preferred Stock, an "extraordinary dividend" would be a dividend that (i)
equals or exceeds 5% of the holder's adjusted basis in such stock (treating all
dividends having ex-dividend dates within an 85-day period as a single
dividend); or (ii) exceeds 20% of the holder's adjusted basis in such stock
(treating all dividends having ex-dividend dates within a 365-day period as a
single dividend). If an election is made by the holder, under certain
circumstances the fair market value of New Exchangeable Preferred Stock as of
the day before the ex-dividend date may be substituted for the holder's
adjusted basis in applying these tests.
Special rules exist with respect to extraordinary dividends that are
"qualified preferred dividends," which are any fixed dividends payable with
respect to any share of stock which (i) provides for fixed preferred dividends
payable not less frequently than annually; and (ii) is not in arrears as to
dividends at the time the holder acquires such stock. A qualified preferred
dividend does not include any dividend payable with respect to any share if the
actual rate of return of such stock for the period the stock has been held by
the holder receiving the dividend exceeds 15%.
Redemption Premium on New Exchangeable Preferred Stock. If the redemption
price of redeemable preferred stock exceeds its issue price by more than a de
minimis amount, such excess may be treated as a constructive distribution of
additional stock on preferred stock over the term of the preferred stock using
a constant interest rate method similar to that described below for accruing
original issue discount. See the discussion below under "--Exchange
Debentures--Original Issue Discount." Such excess will generally be considered
de minimis as long as it is less than the redemption price of the preferred
stock multiplied by 1/4 of 1% multiplied by the number of complete years until
the issuer must redeem the preferred stock.
The Old Exchangeable Preferred Stock for which the New Exchangeable Preferred
Stock is being exchanged by holders was issued by the Company to the Initial
Purchasers immediately preceding the purchase of such Old Exchangeable
Preferred Stock in exchange for common stock of the Company. Although the
applicable law is not entirely clear, the issue price of such Old Exchangeable
Preferred Stock, and of the New Exchangeable Preferred Stock being exchanged
therefor, for purposes of determining whether there will be constructive
distributions of additional stock on the New Exchangeable Preferred Stock
should be equal to the fair market value of the Old Exchangeable Preferred
Stock at the time such stock was issued in exchange for the common stock of the
Company.
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The Company believes that such fair market value should be considered to be the
same amount as the purchase price paid by holders for the Old Exchangeable
Preferred Stock. In such event and assuming that the holders' purchase price of
such Old Exchangeable Preferred Stock was equal to its liquidation preference,
there should be no redemption premium on the New Exchangeable Preferred Stock
exchanged for such Old Exchangeable Preferred Stock subject to the rules
discussed above.
Because the issue price of the New Exchangeable Preferred Stock distributed
in lieu of payments of cash dividends will be equal to its fair market value at
the time of distribution, however, it is possible, depending on its fair market
value at that time, that such New Exchangeable Preferred Stock will be issued
with a redemption premium large enough to be considered a dividend under the
above rules. In such event, as noted above, holders would be required to
include such premium in income as a distribution over some period in advance of
receiving the cash attributable to such income and such New Exchangeable
Preferred Stock might not trade separately, which circumstances together might
adversely affect the liquidity of the New Exchangeable Preferred Stock.
In addition to the mandatory redemption feature, the New Exchangeable
Preferred Stock is also redeemable (either in whole or in part, except only in
whole when exchanged for Exchange Debentures) at the option of the Company
under certain circumstances. Furthermore, each holder of the New Exchangeable
Preferred Stock has the right to require the Company to repurchase all or part
of its New Exchangeable Preferred Stock upon the occurrence of a Change of
Control in certain circumstances. Although such optional redemption or holder
put may result in constructive distributions to the holders under certain
circumstances, the Company believes that neither the optional redemption nor
the holder put of the New Exchangeable Preferred Stock will be subject to those
rules.
Redemption, Sale or Exchange of New Exchangeable Preferred Stock. A
redemption of shares of New Exchangeable Preferred Stock in exchange for
Exchange Debentures or for cash, and a sale of New Exchangeable Preferred Stock
will be taxable events.
A redemption of shares of New Exchangeable Preferred Stock for cash will
generally be treated as a sale or exchange if the holder does not own, actually
or constructively within the meaning of Section 318 of the Code, any stock of
the Company other than the New Exchangeable Preferred Stock. If a holder does
own, actually or constructively, such other stock (including stock redeemed), a
redemption of New Exchangeable Preferred Stock may be treated as a dividend to
the extent of the Company's current and accumulated earnings and profits (as
determined for federal income tax purposes). Such dividend treatment would not
be applied if the redemption is "substantially disproportionate" with respect
to the holder under Section 302(b)(2) of the Code or is "not essentially
equivalent to a dividend" with respect to a holder under Section 302(b)(1) of
the Code. A distribution to a holder will be "not essentially equivalent to a
dividend" if it results in a "meaningful reduction" in the holder's stock
interest in the Company. For these purposes, a redemption of New Exchangeable
Preferred Stock for cash that results in a reduction in the proportionate
interest in the Company (taking into account any constructive ownership) of a
holder whose relative stock interest in the Company is minimal and who
exercises no control over corporate affairs should be regarded as a meaningful
reduction in the holder's stock interest in the Company.
If the redemption of the New Exchangeable Preferred Stock for cash is not
treated as a distribution taxable as a dividend or if the New Exchangeable
Preferred Stock is sold, the redemption or sale would result in capital gain or
loss equal to the difference between the amount of cash and the fair market
value of other proceeds received in such sale or redemption and the holder's
adjusted tax basis in the New Exchangeable Preferred Stock sold or redeemed.
For a description of the treatment of capital gain, see "--Distributions on New
Exchangeable Preferred Stock."
A redemption of New Exchangeable Preferred Stock in exchange for Exchange
Debentures will be subject to the same general rules as a redemption for cash,
except that the holder would have
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capital gain or loss equal to the difference between the issue price of the
Exchange Debentures received and the holder's adjusted tax basis in the New
Exchangeable Preferred Stock redeemed. The issue price of the Exchange
Debentures would be determined in the manner described below for purposes of
computing original issue discount on the Exchange Debentures. See the
discussion below under "--Exchange Debentures--Original Issue Discount."
If a redemption of New Exchangeable Preferred Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution will
be measured by the amount of cash or the issue price of the Exchange Debentures
received by the holder. The holder's adjusted tax basis in the redeemed New
Exchangeable Preferred Stock will be transferred to any remaining stock
holdings in the Company. If the holder does not retain any stock ownership in
the Company, the holder may lose such basis entirely. Under the "extraordinary
dividend" provision of Section 1059 of the Code, a corporate holder may, under
certain circumstances, be required to reduce its basis in its remaining shares
of stock of the Company (and possibly recognize gain upon such distribution) to
the extent the holder claims the 70% dividends-received deduction with respect
to the dividend.
EXCHANGE DEBENTURES
Original Issue Discount. If the New Exchangeable Preferred Stock is exchanged
for Exchange Debentures at a time when the stated redemption price at maturity
of the Exchange Debentures exceeds their issue price by more than a de minimis
amount, the Exchange Debentures will be treated as having OID equal to the
entire amount of such excess. OID will generally be considered de minimis as
long as it is less than the stated redemption price at maturity of the Exchange
Debentures multiplied by 1/4 of 1% multiplied by the number of complete years
to maturity. If the Exchange Debentures are deemed to be traded on an
established securities market at any time during the 60-day period ending 30
days after their issue date, the issue price of the Exchange Debentures will be
their fair market value as determined as of their issue date. Subject to
certain limitations described in the Treasury Regulations, the Exchange
Debentures will be deemed to be traded on an established securities market if,
among other things, price quotations are readily available from dealers,
brokers or traders. Similarly, if the New Exchangeable Preferred Stock, but not
the Exchange Debentures issued and exchanged therefor, is deemed to be traded
on an established securities market at the time of the exchange, then the issue
price of each Exchange Debenture should be the fair market value of the New
Exchangeable Preferred Stock exchanged therefor at the time of the exchange.
The New Exchangeable Preferred Stock will generally be deemed to be traded on
an established securities market if it appears on a system of general
circulation that provides a reasonable basis to determine fair market value
based either on recent price quotations or recent sales transactions. In the
event that neither the New Exchangeable Preferred Stock nor the Exchange
Debentures are deemed to be traded on an established securities market, the
issue price of the Exchange Debentures will be their stated principal amount
or, in the event the Exchange Debentures do not bear "adequate stated interest"
within the meaning of Section 1274 of the Code, their "imputed principal
amount," which is generally the sum of the present values of all payments due
under the Exchange Debentures, discounted from the date of payment to their
issue date at the appropriate "applicable federal rates."
The stated redemption price at maturity of the Exchange Debentures would
equal the total of all payments required to be made thereon, other than
payments of qualified stated interest. Qualified stated interest generally is
stated interest that is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually at a single fixed rate.
Therefore, Exchange Debentures that are issued when the Company has the option
to pay interest thereon for certain periods in additional Exchange Debentures
should be treated as having been issued without any qualified stated interest.
Accordingly, the sum of all interest payable pursuant to the stated interest
rate on such Exchange Debentures over the entire term should be treated as OID
and accrued into income under a
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constant yield method by the holder, and the holder should not treat the
receipt of stated interest on the Exchange Debentures as interest for federal
income tax purposes.
A holder will be required to include OID in income periodically over the term
of an Exchange Debenture before receipt of the cash or other payment
attributable to such income. In general, a holder must include in gross income
for federal income tax purposes the sum of the daily portions of OID with
respect to the Exchange Debentures for each day during the taxable year or
portion of a taxable year on which such holder holds the Exchange Debenture
("Accrued OID"). The daily portion is determined by allocating to each day of
any accrual period within a taxable year a pro rata portion of an amount equal
to the adjusted issue price of the Exchange Debenture at the beginning of the
accrual period multiplied by the yield to maturity of the Exchange Debenture.
For purposes of computing OID, the Company will use six-month accrual periods
which end on April 1 and October 1 of each calendar year. The adjusted issue
price of an Exchange Debenture at the beginning of any accrual period is the
issue price of the Exchange Debenture increased by the Accrued OID for all
prior accrual periods (less any cash payments on the Exchange Debenture other
than qualified stated interest). Under these rules, holders will have to
include in gross income increasingly greater amounts of OID in each successive
accrual period. Each payment made under an Exchange Debenture (except for
payments of qualified stated interest) will be treated first as a payment of
OID to the extent of OID that has accrued as of the date of payment and has not
been allocated to prior payments and second as a payment of principal.
An additional Exchange Debenture (a "Secondary Debenture") issued in payment
of interest with respect to an initially issued Exchange Debenture (an "Initial
Debenture") will not be considered as a payment made on the Initial Debenture
and will be aggregated with the Initial Debenture for purposes of computing and
accruing OID on the Initial Debenture. As between the Initial Debenture and the
Secondary Debenture, the Company will allocate the adjusted issue price of the
Initial Debenture between the Initial Debenture and the Secondary Debenture in
proportion to their respective principal amounts. That is, upon its issuance of
a Secondary Debenture with respect to an Initial Debenture, the Company intends
to treat the Initial Debenture and the Secondary Debenture as initially having
the same adjusted issue price and inherent amount of OID per dollar of
principal amount. The Initial Debenture and the Secondary Debenture derived
therefrom will be treated as having the same yield to maturity. Similar
treatment will be applied when additional Exchange Debentures are issued on
Secondary Debentures.
In the event the Exchange Debentures are not issued with OID, because they
are issued at a time when the Company does not have the option to pay interest
thereon in additional Exchange Debentures, and the redemption price of the
Exchange Debentures does not exceed their issue price by more than a de minimis
amount, stated interest should be included in income by a holder in accordance
with his method of accounting.
Bond Premium. If the New Exchangeable Preferred Stock is exchanged for
Exchange Debentures at a time when the issue price of the Exchange Debentures
exceeds the amount payable at the maturity date (or earlier call date, if
appropriate) of the Exchange Debentures, such excess will reduce the holder's
interest and OID income on the Exchange Debentures as amortizable bond premium
over the term of the Exchange Debentures (taking into account earlier call
dates, as appropriate), under a yield-to-maturity formula, only if an election
by the holder under Section 171 of the Code is made or is already in effect. An
election under Section 171 is available only if the Exchange Debentures are
held as capital assets. This election is revocable only with the consent of the
Service and applies to all obligations owned or subsequently acquired by the
holder. To the extent the excess reduces the interest and OID income as
amortizable bond premium, the holder's adjusted tax basis in the Exchange
Debentures will be reduced.
Redemption or Sale of Exchange Debentures. Generally, any redemption or sale
of Exchange Debentures by a holder would result in taxable gain or loss equal
to the difference between the amount
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of cash received (except to the extent that cash received is attributable to
accrued, but previously unpaid, interest) and the holder's tax basis in the
Exchange Debentures. The tax basis of a holder who receives an Exchange
Debenture in exchange for New Exchangeable Preferred Stock will generally be
equal to the issue price of the Exchange Debenture on the date the Exchange
Debenture is issued plus any OID on the Exchange Debenture included in the
holder's income prior to sale or redemption of the Exchange Debenture, reduced
by any amortizable bond premium applied against the holder's income prior to
sale or redemption of the Exchange Debenture and payments on the Exchange
Debenture other than payments of "qualified stated interest." Such gain or loss
would be capital gain or loss.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO CORPORATE HOLDERS
If the yield to maturity on the Exchange Debentures were to equal or exceed
the sum of the revelant applicable federal rate (the "AFR") plus five
percentage points, in certain circumstances, the Exchange Debentures would
constitute "applicable high yield discount obligations" ("AHYDOs"). If the
Exchange Debentures were to constitute AHYDOs, the Company would not be
entitled to deduct OID that accrues with respect to such Exchange Debentures
until amounts attributable to OID are paid in cash. Therefore, a portion of the
tax deductions that would otherwise be available to the Company in respect of
the Exchange Debentures would be deferred, which, in turn, would reduce the
after-tax cash flows of the Company. If the yield to maturity of the Exchange
Debentures were to exceed the sum of the relevant AFR plus six percentage
points (such excess constituting the "Excess Yield"), the "disqualified
portion" of the OID accruing on the Exchange Debentures would be characterized
as a non-deductible dividend with respect to the Company and also may be
treated as a dividend distribution solely for purposes of the dividends-
received deduction of Sections 243, 246 and 246A of the Code with respect to
holders which are corporations. In general, the "disqualified portion" of OID
for any accrual period will be equal to the product of (i) a percentage
determined by dividing the Excess Yield by the yield to maturity; and (ii) the
OID for the accrual period. Subject to otherwise applicable limitations, such a
corporate holder would be entitled to a dividends-received deduction with
respect to the disqualified portion of the accrued OID if the Company has
sufficient current or accumulated "earnings and profits." To the extent that
the Company's earnings and profits are insufficient, any portion of the OID
that otherwise would have been recharacterized as a dividend for purposes of
the dividends-received deduction will continue to be taxed as ordinary OID
income in accordance with the rules described above in "--Exchange Debentures--
Original Issue Discount." It is impossible to determine at the present time
whether the Exchange Debentures will have a yield to maturity that equals or
exceeds the sum of the AFR plus five or six percentage points.
POSSIBLE LEGISLATIVE CHANGES
On a number of recent occasions, most recently in February, 1997, the Clinton
Administration has proposed tax law changes that, if enacted into law
substantially as proposed, would affect the tax treatment of corporate holders
of New Exchangeable Preferred Stock or Exchange Debentures that are treated as
AHYDOs. In particular, the Clinton Administration has proposed to eliminate the
70% dividends-received deduction for certain debt-like preferred stock,
effective for stock issued more than 30 days after the date of enactment of
such legislation. The Clinton Administration also has proposed to reduce the
70% dividends-received deduction to 50% for dividends paid or accrued more than
30 days after such date of enactment, and would modify in certain respects the
holding period requirement for qualifying for the dividends-received deduction.
It cannot be predicted with certainty whether these proposals will be
introduced in Congress as proposed legislation, or, if introduced, whether, or
in what form, such proposed legislation may be enacted and, if enacted, what
the effective date or dates would be. Corporate holders of New Exchangeable
Preferred Stock or Exchangeable Debentures are urged to consult their own tax
advisors regarding the possible effects of this proposed legislation.
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BACKUP WITHHOLDING
A holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to "reportable payments" on the Securities. This
withholding generally applies only if the holder (i) fails to furnish his or
her social security or other taxpayer identification number ("TIN"); (ii)
furnishes an incorrect TIN; (iii) is notified by the Service that he or she
has failed to report properly payments of interest and dividends and the
Service has notified the Company that the holder is subject to backup
withholding; or (iv) fails, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
his or her correct number and that he or she is not subject to backup
withholding. Any amount withheld from payment to a holder under the backup
withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to
the Service. Certain holders (including, among others, corporations and
foreign individuals who comply with certain certification requirements) are
not subject to backup withholding. Holders should consult their tax advisors
as to their qualifications for exemption from backup withholding and the
procedure for obtaining such an exemption.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the treatment
of holders that acquire the Securities other than by having acquired the Old
Exchangeable Preferred Stock from the Initial Purchasers immediately after the
time of original issuance of such stock and exchanging such stock hereunder
for New Exchangeable Preferred Stock or by receiving the Exchange Debentures
in exchange for such New Exchangeable Preferred Stock, including those
provisions of the Code relating to the treatment of "market discount" and
"acquisition premium." For example, the market discount provisions of the Code
may require a subsequent purchaser of an Exchange Debenture at a market
discount to treat all or a portion of any gain recognized upon sale or other
disposition of the Exchange Debenture as ordinary income and to defer a
portion of any interest expense that would otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such an Exchange
Debenture until the holder disposes of the Exchange Debenture in a taxable
transaction.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Exchangeable Preferred Stock 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 Exchangeable
Preferred Stock. 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
Exchangeable Preferred Stock received in exchange for Old Exchangeable
Preferred Stock where such Old Exchangeable Preferred Stock was 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 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 Exchangeable
Preferred Stock by broker-dealers. New Exchangeable Preferred Stock 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
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock. Any
broker-dealer that resells New Exchangeable Preferred Stock that was 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 Exchangeable Preferred
Stock may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Exchangeable
Preferred Stock 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 180 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 Exchangeable Preferred Stock 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 Exchangeable Preferred
Stock will be passed upon for the Company by Mayer, Brown & Platt, and for the
Initial Purchasers by Latham & Watkins.
EXPERTS
The Company's consolidated balance sheets as of December 31, 1995 and 1996,
and the consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996
included in this Prospectus have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Clark USA, Inc. and Subsidiaries:
Annual Financial Statements
Report of Independent Accountants .................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 ......... F-3
Consolidated Statements of Earnings for the years ended December 31,
1994, 1995 and 1996.................................................. F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996.................................................. F-5
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996..................................... F-6
Notes to Consolidated Financial Statements............................ F-7
Interim Financial Statements
Consolidated Balance Sheet as of September 30, 1997................... F-20
Consolidated Statements of Earnings for the nine months ended
September 30, 1996 and 1997.......................................... F-21
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1996 and 1997.......................................... F-22
Notes to Consolidated Financial Statements............................ F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Clark USA, Inc.:
We have audited the accompanying consolidated balance sheets of Clark USA,
Inc. and Subsidiaries (a Delaware corporation), as of December 31, 1995 and
1996 and the related consolidated statements of earnings, stockholder's equity
and cash flows for each of the three years in the period ended December 31,
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 USA, Inc.
and Subsidiaries as of December 31, 1995 and 1996 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
February 4, 1997
F-2
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REFERENCE DECEMBER 31, DECEMBER 31,
ASSETS NOTE 1995 1996
- ------ --------- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................ 2 $ 103,729 $ 339,963
Short-term investments................... 2,3 46,116 14,881
Accounts receivable...................... 2 179,763 171,714
Inventories.............................. 2,4 290,444 277,095
Prepaid expenses and other............... 22,228 17,353
Advance crude oil purchase receivable.... 2,14 6,565 --
---------- ----------
Total current assets................... 648,845 821,006
PROPERTY, PLANT AND EQUIPMENT.............. 2,5 550,872 557,256
ADVANCE CRUDE OIL PURCHASE RECEIVABLE...... 2,14 99,345 --
OTHER ASSETS............................... 2,6 65,860 54,541
---------- ----------
$1,364,922 $1,432,803
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable......................... 7 $ 307,528 $ 294,736
Accrued expenses and other............... 8,9 46,301 49,691
Accrued taxes other than income.......... 45,242 46,485
---------- ----------
Total current liabilities.............. 399,071 390,912
LONG-TERM DEBT............................. 8,9 765,030 781,362
DEFERRED INCOME TAXES...................... 2,12 7,677 --
OTHER LONG-TERM LIABILITIES................ 11 38,937 46,141
CONTINGENCIES.............................. 16 -- --
STOCKHOLDERS' EQUITY:
Common Stock.............................
Common $.01 par value, 19,051,818
issued................................ 13,14,15 190 190
Class A Common, $.01 par value,
10,162,509 issued..................... 13,15 90 102
Class B Common......................... 13,15 6 --
Class C Common......................... 13,14,15 6 --
Paid-in capital.......................... 13,14 300,057 296,094
Advance crude oil purchase receivable
from
stockholders............................ 2,14 (146,890) (26,520)
Retained earnings (deficit).............. 3,7 748 (55,478)
---------- ----------
Total stockholders' equity............. 154,207 214,388
---------- ----------
$1,364,922 $1,432,803
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
REFERENCE ---------------------------------------
NOTE 1994 1995 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES AND OPERATING
REVENUES.................... $2,441,211 $4,486,859 $5,073,062
EXPENSES:
Cost of sales.............. (2,086,639) (4,015,215) (4,557,011)
Operating expenses......... (225,616) (375,545) (419,868)
General and administrative
expenses.................. (51,445) (52,353) (59,502)
Depreciation............... 2 (26,592) (31,490) (37,348)
Amortization............... 2,6 (10,797) (12,001) (11,127)
Recovery of inventory 26,500 -- --
market value write-down... 4 ---------- ---------- ----------
(2,374,589) (4,486,604) (5,084,856)
---------- ---------- ----------
OPERATING INCOME (LOSS)...... 66,622 255 (11,794)
Interest and finance costs, (54,829) (59,232) (47,500)
net....................... 8 ---------- ---------- ----------
EARNINGS (LOSS) BEFORE INCOME
TAXES....................... 11,793 (58,977) (59,294)
Income tax (provision) (3,980) 21,874 3,130
benefit................... 2,12 ---------- ---------- ----------
NET EARNINGS (LOSS).......... $ 7,813 $ (37,103) $ (56,164)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................... $ 7,813 $ (37,103) $ (56,164)
Adjustments:
Depreciation............................ 26,592 31,490 37,348
Amortization............................ 12,627 18,603 21,465
Accretion of Zero Coupon Notes.......... 15,490 17,048 19,167
Realized loss on sales of investments... 6,625 -- --
Shares of earnings of affiliates, net of
dividends.............................. (468) (1,413) (136)
Deferred income taxes................... 3,721 (22,450) (7,678)
Recovery of inventory market value
write-down............................. (26,500) -- --
Sale of advance crude oil purchase
receivable............................. -- -- (10,869)
Other................................... 1,271 1,385 1,062
Cash provided by (reinvested in) working
capital--
Accounts receivable, prepaid expenses,
and other.............................. (12,650) (109,083) 12,519
Inventories............................. 22,995 (138,978) 13,266
Accounts payable, accrued expenses,
taxes other than income and other...... (1,185) 159,010 (7,598)
---------- ---------- ----------
Net cash provided by (used in)
operating activities................. 56,331 (81,491) 22,382
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments..... (120,426) (41,500) --
Sales of short-term investments......... 237,345 25,942 31,135
Expenditures for property, plant and
equipment.............................. (100,372) (42,164) (45,039)
Expenditures for turnaround............. (11,191) (6,525) (13,862)
Refinery acquisition expenditures....... (13,514) (71,776) --
Proceeds from disposals of property,
plant and equipment.................... 5,941 1,866 4,359
Advance crude oil purchase receivable... -- (105,910) 241,916
---------- ---------- ----------
Net cash provided by (used in)
investing activities................. (2,217) (240,067) 218,509
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments................. (585) (1,620) (2,835)
Proceeds from issuance of long-term
debt................................... -- 175,000 --
Proceeds from capital lease
transactions........................... -- 24,301 --
Proceeds from sale of common stock...... -- 135,500 --
Stock issuance costs.................... -- (1,541) --
Deferred financing costs................ (5,904) (32,737) (1,822)
---------- ---------- ----------
Net cash provided by (used in)
financing activities................. (6,489) 298,903 (4,657)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ 47,625 (22,655) 236,234
CASH AND CASH EQUIVALENTS, beginning of
period..................................... 78,759 126,384 103,729
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.... $ 126,384 $ 103,729 $ 339,963
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------
1994 1995 1996
--------------- ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
COMMON, $0.1 par, Autho-
rized shares--39,875
Balance January 1........ -- $ -- -- $ -- 19,051 $ 190
Stock issuance........... -- -- 16,329 163 -- --
Converted shares......... -- -- 2,722 27 -- --
------- ------- ------ -------- ------ --------
Balance December 31...... -- -- 19,051 190 19,051 190
------- ------- ------ -------- ------ --------
CLASS A COMMON, $.01 par,
Authorized shares--
10,163
Balance January 1........ -- -- -- -- 9,033 90
Stock issuance........... -- -- 9,033 90 -- --
Converted shares......... -- -- -- -- 1,130 12
------- ------- ------ -------- ------ --------
Balance December 31...... -- -- 9,033 90 10,163 102
------- ------- ------ -------- ------ --------
CLASS B COMMON, $.01 par,
Authorized shares--563
Balance January 1........ -- -- -- -- 563 6
Stock issuance........... -- -- 563 6 -- --
Converted shares......... -- -- -- -- (563) (6)
------- ------- ------ -------- ------ --------
Balance December 31...... -- -- 563 6 -- --
------- ------- ------ -------- ------ --------
CLASS C COMMON, $.01 par,
Authorized shares--565
Balance January 1........ -- -- -- -- 565 6
Stock issuance........... -- -- 565 6 -- --
Converted shares......... -- -- -- -- (565) (6)
------- ------- ------ -------- ------ --------
Balance December 31...... -- -- 565 6 -- --
------- ------- ------ -------- ------ --------
CLASS D COMMON, $.01 par,
Authorized shares--3,390
Balance January 1........ -- -- -- -- -- --
Stock issuance........... -- -- 2,722 27 -- --
Converted shares......... -- -- (2,722) (27) -- --
------- ------- ------ -------- ------ --------
Balance December 31...... -- -- -- -- -- --
------- ------- ------ -------- ------ --------
PAID-IN CAPITAL
Balance January 1........ -- 19,500 -- 19,500 -- 300,057
Stock issuance........... -- -- -- 280,557 -- (3,963)
------- ------- ------ -------- ------ --------
Balance December 31...... -- 19,500 -- 300,057 -- 296,094
------- ------- ------ -------- ------ --------
ADVANCE CRUDE OIL PURCHASE
RECEIVABLE FROM
STOCKHOLDERS
Balance January 1........ -- -- -- -- -- (146,890)
Advance crude oil pur-
chase receivable -- -- -- (146,890) -- 120,370
from stockholders....... ------- ------- ------ -------- ------ --------
Balance December 31...... -- -- -- (146,890) -- ( 26,520)
------- ------- ------ -------- ------ --------
RETAINED EARNINGS
Balance January 1........ -- 30,038 -- 36,651 -- 748
Net earnings (loss)...... -- 7,813 -- (37,103) -- (56,164)
Change in unrealized
short-term
investment gains and -- (1,200) -- 1,200 -- (62)
losses.................. ------- ------- ------ -------- ------ --------
Balance December 31...... -- 36,651 -- 748 -- (55,478)
------- ------- ------ -------- ------ --------
TOTAL STOCKHOLDERS' EQUI- -- $56,151 29,212 $154,207 29,214 $214,388
TY....................... ======= ======= ====== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(TABULAR DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
1. GENERAL
Clark USA, Inc., a Delaware corporation ("Clark USA" or the "Company"), is a
holding company. The subsidiaries of Clark USA are Clark Refining & Marketing,
Inc. ("Clark") and Clark Pipe Line Company, both Delaware corporations.
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
The Company 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"). The Company 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
$12.1 million and $12.9 million as of December 31, 1995 and 1996,
respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables and the advance crude
oil purchase receivable (see Note 14 "Occidental/Gulf Transactions"). 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, 1996, the Company had $36.4 million (1995--$17.0 million) due
from Chevron USA Products Co. ("Chevron"). Sales to Chevron in 1996 totaled
$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, 1996, total petroleum inventory
F-7
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
quantities were reduced, resulting in a LIFO liquidation, the effect of which
increased pretax earnings by $2.4 million. There was no such effect in the
years ended December 31, 1994 and 1995.
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, 1996, Clark's open contracts
represented 0.7 million barrels of crude oil and refined products, and had
terms extending into February, 1997. As of December 31, 1995, Clark's open
contracts represented 1.7 million barrels of crude oil and refined products,
and had terms extending into December, 1996.
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, 1996, the Company had net unrealized gains on
open futures and options contracts of $1.2 million (1995--unrealized loss of
$0.4 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.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 121 concerning "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The standard requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable with future cash flows. The Company adopted this standard
beginning January 1, 1996 which did not have any effect on the financial
statements. The Company believes that if a project initiated to produce low-
sulfur diesel fuel at the Hartford refinery ("DHDS Project"), which was
delayed in 1992 due to an expectation of narrow differentials between low- and
high-sulfur diesel fuel, does not proceed due to continued relatively narrow
price differentials between low- and high-sulfur diesel fuel, future cash
flows from the asset would not likely support the carrying value which was
approximately $24.1 million as of December 31, 1996. Effective January 1,
1996, the Company began to depreciate the DHDS Project over 30 years.
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
F-8
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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.
Advance Crude Oil Purchase Receivable
The Company has an advance crude oil purchase receivable from Gulf Resources
Corporation ("Gulf") and had an advance crude oil purchase receivable from
Occidental Petroleum Corporation ("Occidental") prior to its sale on October
4, 1996 (see Note 14 "Occidental/Gulf Transactions"). These advance crude oil
purchase receivables were accounted for as financial instruments and were
recorded at cost as of December 31, 1996. To the extent the advance crude oil
purchase receivables were acquired by the issuance of stock, they were
presented as a reduction to Stockholders' Equity. The proceeds from the
issuance of stock were recognized as the principal portion of the receivable
was amortized. Income and the reduction of principal related to the notes were
recognized according to the interest method of amortization with gross
proceeds allocated between principal recovery and financing income.
Income Taxes
Clark USA and its subsidiaries file a consolidated U.S. federal income tax
return. The Company provides for deferred taxes under the asset and liability
method in accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") (see Note 12 "Income Taxes").
Deferred taxes are classified as current, included in prepaid or accrued
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. In accordance with
the provision of SFAS 109, 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. 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
1996 were $6.4 million (1995--$5.5 million; 1994--$3.4 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.
F-9
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Short-term investments consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------------------------------ ------------------------------
UNREALIZED AGGREGATE AGGREGATE
AMORTIZED GAIN FAIR AMORTIZED UNREALIZED FAIR
MAJOR SECURITY TYPE COST (LOSS) VALUE COST GAIN(LOSS) VALUE
- ------------------- --------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
U.S. Debt Securities.... $46,116 $ -- $46,116 $14,981 $(100) $14,881
</TABLE>
The net unrealized position as of December 31, 1996, included gains of $0.0
million and losses of $0.1 million (1995--gains of $0.1 million and losses of
$0.1 million).
The contractual maturities of the short-term investments as of December 31,
1996 were:
<TABLE>
<CAPTION>
AMORTIZED AGGREGATE
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less.................................... $ 3,019 $ 3,002
Due after one year through five years...................... 11,962 11,879
------- -------
$14,981 $14,881
======= =======
</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, 1996, the proceeds from sales of short-term
investments were $31.1 million with no realized gains or losses recorded for
the period. For the same period in 1995 and 1994, the proceeds from the sale
of short-term investments were $25.9 million and $237.3 million, respectively,
with no realized gains or losses in 1995 and $6.6 million realized losses in
1994. Realized gains and losses are presented in "Interest and financing
costs, net" and are computed using the specific identification method.
The change in the net unrealized holding gains or losses on Available-for-
Sale securities for the year ended December 31, 1996, was a loss of $0.1
million ($0.1 million after taxes). For the same period in 1995, there was a
net unrealized holding gain of $1.9 million ($1.2 million after taxes), and in
1994, there was a net unrealized holding loss of $1.9 million ($1.2 million
after taxes).
Cash and cash equivalents included $30.0 million of debt securities whose
cost approximated market value as of December 31, 1996 (1995--$55.5 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>
1995 1996
-------- --------
<S> <C> <C>
Crude oil.................................................... $ 90,635 $105,786
Refined products and blendstocks............................. 163,915 136,747
Convenience products......................................... 20,532 17,643
Warehouse stock and other.................................... 15,362 16,919
-------- --------
$290,444 $277,095
======== ========
</TABLE>
F-10
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The market value of the crude and refined product inventories as of December
31, 1996 was approximately $81.7 million above the carrying value (1995--$5.4
million above the carrying value). In the first half of 1994, crude oil and
related refined product prices rose substantially, allowing the reversal of
the inventory write-down to market which was recorded in 1993 due to falling
crude oil and product prices.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land........................................................ $ 20,015 $ 19,659
Refineries.................................................. 418,675 434,623
Retail stores............................................... 187,921 210,033
Product terminals and pipelines............................. 60,965 64,388
Other....................................................... 11,346 12,051
-------- --------
698,922 740,754
Accumulated depreciation and amortization................... (148,050) (183,498)
-------- --------
$550,872 $557,256
======== ========
</TABLE>
As of December 31, 1996, property, plant and equipment included $43.8
million (1995--$52.2 million) of construction in progress. Capital lease
assets at cost of $25.3 million (1995--$25.3 million) were included in
property, plant and equipment as of December 31, 1996.
6. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred financing costs....................................... $42,187 $29,849
Deferred turnaround costs...................................... 14,243 16,978
Investment in non-consolidated affiliates...................... 6,291 6,427
Other.......................................................... 3,139 1,287
------- -------
$65,860 $54,541
======= =======
</TABLE>
Amortization of deferred financing costs for the year ended December 31,
1996 was $10.2 million (1995--$6.5 million; 1994--$1.8 million). Amortization
of turnaround costs for the year ended December 31, 1996 was $11.1 million
(1995--$12.0 million; 1994--$10.8 million).
7. WORKING CAPITAL FACILITY
At all times during 1996, Clark had in place a working capital facility
which provided a revolving line of credit principally for the issuance of
letters of credit which are used primarily for securing purchases of crude
oil, other feedstocks and refined products, and for limited cash borrowings.
This facility is collateralized by substantially all of Clark's current assets
and certain intangibles. The amount of the facility is the lesser of $400
million or the amount available under a defined borrowing base, representing
specified percentages of cash, investments, accounts receivable, inventory and
other working capital items ($489.5 million as of December 31, 1996). Clark is
required to comply with certain financial covenants including maintaining
defined levels of working capital, cash, tangible net
F-11
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
worth, maximum indebtedness to tangible net worth and a minimum ratio of
adjusted cash flow to debt service. As of December 31, 1996, $298.5 million
(1995--$221.0 million) of the line of credit was utilized for letters of
credit, of which $78.4 million (1995--$91.4 million) supported commitments for
future deliveries of petroleum products. There were no direct cash borrowings
under the facility as of December 31, 1996 and 1995.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
10 1/2% Senior Notes due December 1, 2001 ("10 1/2% Notes").. $225,000 $225,000
9 1/2% Senior Notes due September 15, 2004 ("9 1/2% Notes").. 175,000 175,000
10 7/8% Senior Notes due December 1, 2005 ("10 7/8% Notes").. 175,000 175,000
Senior Secured Zero Coupon Notes, due February 15, 2000
("Zero Coupon Notes")....................................... 169,589 188,756
Obligations under capital leases and other notes............. 23,498 20,673
-------- --------
768,087 784,429
Less current portion....................................... 3,057 3,067
-------- --------
$765,030 $781,362
======== ========
</TABLE>
The estimated fair value of long-term debt as of December 31, 1996 was
$803.6 million (1995--$799.1 million), determined using quoted market prices
for these issues. The capital leases and other notes have a market value which
approximates cost.
The 9 1/2% Notes and 10 1/2% Notes were issued by Clark in September 1992
and December 1991, respectively, and are unsecured. The 9 1/2% Notes and 10
1/2% Notes are redeemable at the Company's option beginning September 1997 and
December 1996, respectively, at a redemption price which starts at 105.25% and
decreases to 100% of principal two years later.
In December 1995, Clark USA issued the 10 7/8% Notes in connection with the
Occidental and Gulf transactions (see Note 14 "Occidental/Gulf Transactions").
These notes are redeemable at the Company's option beginning December 1, 2000,
at a redemption price of 105% which decreases to 100% of principal in 2003.
Thirty-five percent of the notes are redeemable at 111% of principal at the
Company's option from the net proceeds of a public offering made prior to
December 1, 1998.
In February 1993, Clark USA issued Zero Coupon Notes with a value at
maturity of $264 million. The notes are collateralized by the capital stock
owned by Clark USA of each of its subsidiaries (of which Clark is the
principal subsidiary) and have a yield to maturity of 11% per annum. The Zero
Coupon Notes are redeemable at the Company's option at any time on or after
February 15, 1998, at a price equal to their accreted value to the redemption
date. Non-cash interest expense of $19.2 million was recorded in 1996 (1995--
$17.2 million, 1994--$15.5 million) for the Zero Coupon Notes.
The Clark and Clark USA 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 level of debt,
provisions related to change of control and incurrence of liens. Clark USA
must have a net worth of $220 million before any dividends could be paid. In
addition, Clark must maintain a minimum net worth of $100 million and Clark
USA must maintain a minimum net worth of $25 million.
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 the London Interbank Offer Rate (LIBOR).
F-12
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The scheduled maturities of long-term debt during the next five years are
(in thousands): 1997--$3,067 (included in "Accrued expenses and other");
1998--$3,828; 1999--$3,737; 2000--$270,375; 2001--$225,012; 2002 and
thereafter--$350,057.
Interest and financing costs
Interest and financing costs, net, included in the statements of earnings,
consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Interest expense.................................. $56,537 $60,985 $81,159
Financing costs................................... 1,832 6,476 10,150
Interest and finance income....................... (2,231) (6,825) (42,776)
------- ------- -------
56,138 60,636 48,533
Capitalized interest.............................. (2,409) (1,404) (1,033)
------- ------- -------
Interest and financing costs, net................. $53,729 $59,232 $47,500
======= ======= =======
</TABLE>
Cash paid for interest expense in 1996 was $62.0 million (1995--$42.2
million; 1994--$40.3 million). Accrued interest payable as of December 31,
1996 of $8.4 million (December 31, 1995--$8.4 million) is included in "Accrued
expenses and other." Included in interest and finance income for 1996 is $31.8
million of finance income, inclusive of the $10.9 million gain on sale,
related to the advance crude oil purchase receivables.
9. LEASE COMMITMENTS
The Company leases premises and equipment under lease arrangements, many of
which are non-cancelable. The Company leases store property and equipment with
lease terms extending to 2015, some of which have escalation clauses based on
a set amount of increases in the Consumer Price Index. The Company 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 the Company pay taxes,
insurance, and maintenance expenses related to the leased assets. As of
December 31, 1996 future minimum lease payments under capital leases and non-
cancelable operating leases were as follows (in millions): 1997--$17.2; 1998--
$16.8; 1999--$15.8; 2000--$17.8; 2001--$9.8; and $122.0 in the aggregate
thereafter. Rental expense during 1996 was $16.5 million (1995--$10.3 million;
1994--$12.3 million).
10. RELATED PARTY TRANSACTIONS
Transactions of significance with related parties not disclosed elsewhere in
the footnotes are detailed below:
HSM Insurance Inc.
The Company paid premiums of $2.0 million in 1994 to HSM Insurance, Inc., an
affiliate of TrizecHahn Corporation (formerly the Horsham Corporation)
("TrizecHahn"), the Company's 46% shareholder, for providing environmental
impairment liability insurance. No loss claims have been made under the
policy. The policy was terminated on December 31, 1994.
F-13
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Management Services and Trade Credit Guarantees
TrizecHahn and Clark have 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 $0.1 million,
$0.2 million and $0.2 million in 1994, 1995 and 1996, respectively. The last
trade credit guarantee was terminated in August, 1996.
AOC L.P.--Contingent Consideration
In 1992, the Company and TrizecHahn purchased the outstanding shares held by
the minority shareholders, AOC L.P. for consideration including "Contingent
Consideration" of up to an aggregate of $24 million (increasing at 9% per
annum through 1996--$33.9 million as of December 31, 1996) based on exceeding
certain cash flow levels, the sale of certain assets or the sale of equity
above certain escalating valuation levels during the years 1993 through 1996.
The sale of equity by the Company to finance the Port Arthur refinery
acquisition triggered a calculation of a potential contingent payment to AOC
L.P. The Company believes that no payment is due based, in part, upon the
value of shares sold. The Company believes the Occidental and Gulf mergers do
not trigger an obligation on the Company to calculate or make a payment to AOC
L.P. Despite the Company's calculations of the amount of the AOC L.P.
contingent payment related to the Port Arthur Refinery financing and the
Company's belief related to the Occidental and Gulf transactions, AOC L.P. has
asserted that an amount is payable. There can be no assurance that the
Company's position related to the Port Arthur Refinery financing or Occidental
and Gulf mergers will prevail. TrizecHahn has agreed to indemnify the Company
for any contingent payment payable to AOC L.P. in excess of $7 million.
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>
1995 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $12,045 $11,889
Fully eligible plan participants......................... 1,288 873
Other plan participants.................................. 20,025 16,687
------- -------
Total.................................................. 33,358 29,449
Accrued postretirement benefit cost...................... -- --
Plan assets at fair value................................ -- --
Unrecognized net (gain)/loss............................. (1,921) (216)
Unrecognized prior service cost.......................... -- 635
------- -------
Accrued postretirement benefit liability................. $31,437 $29,868
======= =======
</TABLE>
The components of net periodic postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service Costs.......................................... $ 415 $ 999 $1,074
Interest Costs......................................... 1,271 2,174 2,095
------ ------ ------
Net periodic postretirement benefit cost............... $1,686 $3,173 $3,169
====== ====== ======
</TABLE>
F-14
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A discount rate of 7.50% (1995--7.25%) was assumed as well as a 4.25% (1995--
4.25%) rate of increase in the compensation level. For measuring the expected
postretirement benefit obligation, the health care cost trend rate ranged from
7.25% to 10.25% in 1996, 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, 1996, by $4.3 million and increase the annual aggregate service
and interest costs by $0.6 million.
12. INCOME TAXES
The Company 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>
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Earnings (loss) before provision for income taxes... $11,793 $(58,977) $(59,294)
======= ======== ========
Current provision (benefit)-Federal................. $ -- $ -- $ (291)
State............................................... -- -- 4,801
------- -------- --------
-- -- 4,510
Deferred provision (benefit)-Federal................ 2,147 (21,892) (843)
State............................................... 1,833 18 (6,797)
------- -------- --------
3,980 (21,874) (7,640)
------- -------- --------
Income tax provision (benefit)...................... $ 3,980 $(21,874) $ (3,130)
======= ======== ========
</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>
1994 1995 1996
------ -------- --------
<S> <C> <C> <C>
Federal taxes computed at 35%...................... $4,128 $(20,642) $(20,753)
State taxes, net of federal effect................. 1,192 (3,622) (1,297)
Nontaxable dividend income......................... (1,453) (2,172) (2,416)
Valuation allowance................................ -- -- 18,834
Other items, net................................... 113 4,562 2,502
------ -------- --------
Income tax provision (benefit)..................... $3,980 $(21,874) $ (3,130)
====== ======== ========
</TABLE>
F-15
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
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, 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment................................ $79,373 $85,625
Turnaround costs............................................. 5,559 4,939
Inventory.................................................... 19,204 18,008
Other........................................................ 4,852 28
------- -------
108,988 108,600
------- -------
Deferred tax assets:
Alternative minimum tax credit............................... 19,376 17,514
Trademarks................................................... 4,491 4,376
Environmental and other future costs......................... 22,958 18,992
Tax loss carryforwards....................................... 52,359 80,606
Other........................................................ 2,127 5,946
------- -------
101,311 127,434
------- -------
Valuation allowance............................................ -- (18,834)
------- -------
Net deferred tax liability..................................... $ 7,677 $ --
======= =======
</TABLE>
As of December 31, 1996, the Company has made payments of $17.5 million
under the Federal alternative minimum tax system which are available to reduce
future regular income tax payments. As of December 31, 1996, the Company had a
Federal net operating loss carryforward of $216.3 million and Federal tax
credit carryforwards in the amount of $1.5 million. Such operating loss and
tax credit carryforwards have carryover periods of 15 years and are available
to reduce future tax liabilities through the years ending December 31, 2011
and 2010, respectively.
The Company recorded a valuation allowance of $18.8 million as of December
31, 1996 (1995-None). In calculating the increase in the valuation allowance,
the Company assumed as future taxable income only future reversals of existing
taxable temporary differences.
During 1996, the Company made a Federal tax payment of $2.7 million in
settlement of an Internal Revenue Service evaluation for tax years ended
December 31, 1991 and December 31, 1992 and made net cash state tax payments
of $0.7 million. (1995--net cash tax payments of $0.6 million; 1994--net cash
tax refunds of $2.9 million).
Section 382 of the Internal Revenue Code restricts the utilization of net
operating losses upon the occurrence of an ownership change, as defined. An
ownership change that restricts future operating loss utilization occurred
during 1995, but based upon and to the extent of future taxable income from
reversals of existing taxable temporary differences management believes such
limitation will not restrict the Company's ability to significantly utilize
the net operating losses over the 15 year carryforward period.
13. ACQUISITION OF PORT ARTHUR REFINERY
On February 27, 1995, Clark purchased Chevron U.S.A. Inc.'s ("Chevron") Port
Arthur, Texas refinery, acquiring the refinery assets and certain related
terminals, pipelines, and other assets for a purchase price of approximately
$70 million (excluding acquired hydrocarbon and non-hydrocarbon
F-16
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
inventories of $121.7 million and assumed liabilities of $19.4 million) plus
related acquisition costs of $14.9 million and accrued liabilities of $5.7
million. The total assumed and accrued liabilities of $25.1 million were
considered non-cash activity for purposes of the Statement of Cash Flows. The
total cost of the acquisition was accounted for using the purchase method of
accounting with $110.0 million allocated to the refinery long-term assets and
$121.7 million charged to current assets for hydrocarbon and non-hydrocarbon
inventories.
The purchase agreement also provides for contingent payments to Chevron of
up to $125 million over a five year period from the closing date of the
acquisition in the event refining industry margin indicators exceed certain
escalating levels. These contingent payments are calculated annually and the
appropriate liability, if any, will be recorded at that time. As of December
31, 1996 and 1995, Clark had no obligation to Chevron relating to the
contingent payment agreement. While Chevron retained primary responsibility
for required remediation of most pre-closing environmental contamination,
Clark assumed responsibility for environmental contamination beneath and
within 25 to 100 feet of the facility's active processing units. Clark accrued
$7.5 million as part of the acquisition for the expected cost of remediating
pipe trenches and the recovery of free phase hydrocarbons in its
responsibility area of the Port Arthur refinery.
On February 27, 1995, the Company obtained a portion of the funds necessary
to finance the Port Arthur acquisition from a subsidiary of its major
shareholder, TrizecHahn. The Company sold 9,000,000 shares of Class A Common
Stock, 562,500 shares of Class B Common Stock and 562,500 shares of Class C
Common stock for an aggregate consideration of $135 million. Subsequently, the
TrizecHahn subsidiary sold 8,000,000 shares of Class A Common Stock and
500,000 shares of Class C Common Stock to Tiger Management Corporation for
$120 million. The Company subsequently contributed $150 million to Clark for
the purchase of the Port Arthur refinery.
14. OCCIDENTAL/GULF TRANSACTIONS
In December 1995, the Company completed separate transactions with
Occidental and Gulf. Pursuant to a merger agreement and a series of related
agreements with Occidental, the Company acquired the right to receive the
equivalent of 17.661 million barrels of WTI to be delivered over six years
according to a defined schedule. In connection with this transaction, the
Company issued common stock (considered a non-cash activity for the purpose of
the Statement of Cash Flows) valued at approximately $120 million, or $22 per
share (5,454,545 shares), and paid $100 million in cash to Occidental.
Pursuant to a merger agreement and a series of related agreements with Gulf,
the Company acquired the right to receive 3.164 million barrels of certain
royalty oil to be received by Gulf pursuant to agreements among Gulf, an
Occidental subsidiary and the Government of the Congo. The crude oil was to be
delivered over six years according to a minimum schedule of (in millions of
barrels) 0.72, 0.62, 0.56, 0.48, 0.42 and 0.36 in 1996, 1997, 1998, 1999, 2000
and 2001, respectively. The Company issued common stock valued at
approximately $26.9 million, or $22 per share (1,222,273 shares), to Gulf. In
addition, the Company paid upfront fees of $9.4 million and will pay
commissions over the future delivery periods of up to approximately $7 million
to an affiliate of Gulf.
On October 4, 1996, Clark sold the Occidental advance crude oil purchase
receivable after receiving value for approximately 1.5 million barrels during
1996. The advance crude oil purchase receivable was sold for net cash proceeds
of $235.4 million. The effect of the sale increased net Stockholders' Equity
by approximately $110.6 million. The Company realized a gain on the sale of
$10.9 million. For the year ended December 31, 1996, the Company recorded
finance income of $31.8 million, inclusive of the gain on sale, which was
reflected in "Interest and financing costs, net." The advance crude oil
purchase receivable from Gulf continues to be held by the Company. However,
Gulf has not made their required deliveries since July, 1996 and the Company
has not recorded any finance income subsequent to their last delivery.
F-17
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company entered into certain futures contracts as hedges of the oil
price risk associated with the advance crude oil purchase receivables. Gains
or losses on these contracts were recognized in earnings as a component of
financing income as realized. Unrealized gains or losses were carried as an
adjustment of the carrying amount of the advance crude oil purchase
receivables. As of December 31, 1995, approximately 7.4 million barrels of the
advance crude oil purchase receivables were hedged for the period from 1996 to
1998 at prices ranging from $16.95 per barrel to $18.00 per barrel. All open
contracts were sold as part of the Occidental advance crude oil purchase
receivable sale in October, 1996.
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). Stock granted under this plan
is priced at the fair market value at the date of grant.
During 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, 1996, 549,000 stock options
were outstanding (1995--549,000) at an exercise price of $15 per share.
16. CONTINGENCIES
Clark 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") has alleged that Clark
had engaged in age discrimination in violation of the Age Discrimination in
Employment Act. The Action involves 38 former managers it believes 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.
A Petition entitled Anderson, et al. vs. Chevron and Clark, was filed in
Jefferson County, Texas by forty individual plaintiffs who were Chevron
employees who did not receive offers of employment by Clark at the time of
purchase of the Port Arthur Refinery. Chevron and the outplacement service
retained by Chevron are also named as defendants. Subsequent to the filing of
the lawsuit, the plaintiffs have each filed individual charges with the EEOC
and the Texas Commission of Human Rights.
F-18
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 owed 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 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>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED, DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
REFERENCE SEPTEMBER 30,
NOTE 1997
ASSETS --------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................ $ 282,967
Short-term investments............................... 14,818
Accounts receivable.................................. 108,285
Inventories.......................................... 2 335,248
Prepaid expenses and other........................... 18,107
----------
Total current assets............................... 759,425
PROPERTY, PLANT AND EQUIPMENT.......................... 575,404
OTHER ASSETS........................................... 3,8 67,975
----------
$1,402,804
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 211,250
Accrued expenses and other........................... 4, 5 60,103
Accrued taxes other than income...................... 45,031
----------
Total current liabilities.......................... 316,384
LONG-TERM DEBT......................................... 8 794,837
OTHER LONG-TERM LIABILITIES............................ 47,729
CONTINGENCIES.......................................... 6 --
STOCKHOLDERS' EQUITY:
Common Stock
Common, $.01 par value, 19,051,818 issued............ 8 190
Class A Common, $.01 par value, 10,162,509 issued.... 102
Paid-in capital...................................... 8 296,094
Advance crude oil purchase receivable from
stockholders........................................ (26,520)
Retained earnings (deficit).......................... 8 (26,012)
----------
Total stockholders' equity......................... 243,854
----------
$1,402,804
==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-20
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
REFERENCE ----------------------
NOTE 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
NET SALES AND OPERATING REVENUES.............. $3,724,723 $3,297,152
EXPENSES:
Cost of sales............................... (3,344,179) (2,789,395)
Operating expenses.......................... (305,571) (320,095)
General and administrative expenses......... (43,971) (47,999)
Depreciation................................ (28,175) (30,291)
Amortization................................ 3 (8,835) (14,095)
---------- ----------
(3,730,731) (3,201,875)
---------- ----------
OPERATING INCOME (LOSS)....................... (6,008) 95,277
Interest and financing costs, net........... 3,4 (40,608) (58,356)
---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES........... (46,616) 36,921
Income tax benefit (provision).............. 5 17,422 (7,497)
---------- ----------
NET EARNINGS (LOSS)........................... $ (29,194) $ 29,424
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-21
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED SEPTEMBER
30,
------------------
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS OPERATING ACTIVITIES:
Net earnings (loss)...................................... $(29,194) $ 29,424
Adjustments:
Depreciation........................................... 28,175 30,291
Amortization........................................... 16,600 22,205
Accretion of Zero Coupon Notes......................... 14,182 15,785
Share of earnings of affiliates, net of dividends...... (139) (104)
Deferred income taxes.................................. (18,366) --
Other, net............................................. (617) 628
Cash provided by (reinvested in) working capital--
Accounts receivable, prepaid expenses and other....... 15,266 60,342
Inventories............................................ 5,252 (57,879)
Accounts payable, accrued expenses, taxes other than (45,736) (68,492)
income and other...................................... -------- --------
Net cash provided by (used in) operating activi- (14,577) 32,200
ties.............................................. -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments...................... 85 131
Sales of short-term investments.......................... 19,000 --
Expenditures for property, plant and equipment........... (23,368) (55,704)
Expenditures for turnaround.............................. (7,174) (31,230)
Proceeds from disposals of property, plant and equipment. 3,890 3,691
Advance crude oil purchase receivable.................... 6,887 --
-------- --------
Net cash used in investing activities.............. (680) (83,112)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments.................................. (3,253) (2,310)
Deferred financing costs................................. (1,383) (3,774)
-------- --------
Net cash used in financing activities.............. (4,636) (6,084)
-------- --------
NET DECREASES IN CASH AND CASH EQUIVALENTS................. (19,893) (56,996)
CASH AND CASH EQUIVALENTS, beginning of period............. 103,729 339,963
-------- --------
CASH AND CASH EQUIVALENTS, end of period................... $ 83,836 $282,967
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-22
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
(TABULAR DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS)
1. BASIS OF PREPARATION
The unaudited consolidated balance sheet of Clark USA, Inc. and Subsidiaries
(the "Company") as of September 30, 1997, and the related consolidated
statements of earnings and cash flows for the nine month periods ended
September 30, 1996 and 1997, have been reviewed by independent accountants.
Clark Refining & Marketing, Inc. ("Clark"), a subsidiary of the Company, makes
up the majority of the consolidated financial information. 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.
Certain reclassifications have been made to the operating and general and
administrative expenses in the 1996 financial statements to conform to current
year presentation.
Certain information and disclosures normally included in 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, 1996.
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. INVENTORIES
The carrying value of inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Crude oil................................................... $ 108,574
Refined and blendstocks..................................... 186,275
Convenience products........................................ 22,899
Warehouse stock and other................................... 17,500
---------
$ 335,248
=========
</TABLE>
The market value of the crude oil and refined product inventories as of
September 30, 1997, was approximately $35.0 million above the carrying value.
3. OTHER ASSETS
Amortization of deferred financing costs for the nine-month period ended
September 30, 1997 was $8.0 million (1996--$7.6 million) and was included in
"Interest and financing costs, net."
Amortization of refinery maintenance turnaround costs for the nine-month
period ended September 30, 1997, was $14.1 million (1996--$8.8 million).
F-23
<PAGE>
4. INTEREST EXPENSE AND FINANCE INCOME, NET
Interest and financing costs, net, consisted of the following:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
1996 1997
------- -------
<S> <C> <C>
Interest expense........................................... $60,662 $62,346
Financing costs............................................ 7,626 8,048
Interest and finance income................................ (26,926) (11,066)
------- -------
41,362 59,328
Capitalized interest....................................... (754) (972)
------- -------
$40,608 $58,356
======= =======
</TABLE>
Accrued interest payable as of September 30, 1997, of $14.9 million was
included in "Accrued expenses and other."
5. INCOME TAXES
The income tax provision of $7.5 million for the nine month period ended
September 30, 1997, was primarily related to the resolution of an Internal
Revenue Service examination for the years 1993 and 1994. The resolution had the
effect of accelerating the recognition of certain net taxable temporary
differences and, as a result, required a concurrent $5.0 million increase in
the valuation allowance related to the Company's net deferred tax asset. Of the
provision, $2.0 million represented associated interest.
6. CONTINGENCIES
On May 5, 1997, a complaint, entitled AOC Limited Partnership ("AOC L.P.") et
al., vs. TrizecHahn Corporation, et al., Case No. 97 CH 05543 naming the
Company as a defendant was filed in the Circuit Court of Cook County, Illinois.
The Complaint seeks $21 million, plus continuing interest, related to the sale
of equity by the Company to finance the Port Arthur refinery acquisition. The
sale of such equity triggered a calculation of a potential contingent payment
to AOC L.P. (the "AOC L.P. Contingent Payment") pursuant to the agreement
related to the December 1992 purchase and redemption of its minority interest.
According to the Company's calculation, no payment is required. The Complaint
disputes the Company's method of calculation. The AOC L.P. Contingent Payment
is an amount which shall not exceed in the aggregate $33.9 million and is
contractually payable 89% by the Company and 11% by TrizecHahn. TrizecHahn has
indemnified the Company for any AOC L.P. Contingent Payment in excess of $7
million. At this time no estimate can be made as to the Company's potential
liability, if any, with respect to this matter.
Clark and the Company are subject to various other 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, Clark 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.
7. WORKING CAPITAL FACILITY
On September 25, 1997, Clark entered into a new $400 million revolving credit
facility. The credit facility, which expires on December 31, 1999, provides for
borrowings and the issuance of letters of credit of up to the lesser of $400
million or the amount available under a defined borrowing base calculated with
respect to Clark's cash and cash equivalents, eligible investments, eligible
receivables
F-24
<PAGE>
and eligible petroleum inventories. Direct borrowings under the credit facility
are limited to $50 million. Clark will use the facility primarily for the
issuance of letters of credit to secure purchases of crude oil. Clark 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.
8. SUBSEQUENT EVENT
On October 1, 1997, the Company reclassified all shares of Class A Common
Stock held by Tiger Management to a new Class E Common Stock. Subsequently,
Trizec Hahn Corporation purchased all of the Class E Common Stock for $7.00 per
share in cash totaling $63 million. The new Class E Common Stock was then
converted into 63,000 shares ($1,000 liquidation preference per share) of 11
1/2% Senior Cumulative Exchangeable Preferred Stock, par value $0.01 per share
which was sold on October 1, 1997 for face value to qualified institutional
buyers in reliance on Rule 144A under the Securities Act of 1933.
In connection with the above transactions all remaining shares of Class A
Common Stock were converted to Common Stock. In addition, Common Stock held by
affiliates of Occidental Petroleum ("Oxy") was converted to a new Class F
Common Stock which has voting rights limited to 19.9% of the total voting power
of all classes of the Company's voting stock, but is convertible into Common
Stock by any holder other than affiliates of Occidental Petroleum. Oxy was also
issued an additional 545,455 shares of Class F Common Stock in full
satisfaction of certain terms in the Oxy Stockholders' Agreement.
On November 3, 1997, an affiliate of Blackstone Capital Partners III Merchant
Banking Fund L.P. ("Blackstone") acquired the 13,500,000 shares of Common Stock
of the Company previously held by Trizec Hahn Corporation and certain of its
subsidiaries, as a result of which Blackstone obtained a 65% controlling
interest in the Company. This transaction triggered the Change of Control
covenant in the Company's Senior Secured Zero Coupon Notes, due 2000 ("Zero
Coupon Notes") and Clark's 9 1/2% Senior Notes, due 2004 and 10 1/2% Senior
Notes, due 2001 ("10 1/2% Notes") and may trigger the Change of Control
covenant in the Company's 10 7/8% Senior Notes, 2005 if it results in a Rating
Decline (as defined). Under such covenants, noteholders would have the right to
require the Company and Clark to repurchase their notes at 101% of face value
or, in the case of the Zero Coupon Notes, accreted value. However, market
quotations for these notes were higher than 101% on November 4, 1997 and as a
result, the Company does not believe this Change of Control will have a
material adverse effect on the Company. Clark's credit facility was amended to
permit the acquisition by Blackstone of the Company's Common Stock.
In addition, the Blackstone transaction caused an "ownership change" of the
Company's consolidated tax return group (the "Group") under Section 382 of the
Internal Revenue Code of 1986, as amended. The result of the ownership change
is that utilization of the Group's tax attribute carryovers will be limited in
tax periods subsequent to the ownership change. While the Group has not finally
determined the effect of the limitation, the Company does not expect that the
book value of the Group's tax attribute carryovers would be incrementally
reduced. The Company expects to make a final determination by the end of the
year.
On November 21, 1997, the Company completed a $400 million private debt
placement that was designed to lower interest costs, extend debt maturities and
create future repayment flexibility. In addition, total debt outstanding will
be reduced by approximately $30 million.
Clark Refining & Marketing, Inc. ("Clark"), the Company's wholly-owned
subsidiary, issued in a private placement to institutional investors $100
million (issued at 99.266%) of 8 3/8% Senior Notes Due 2007 and $175 million
(issued at 99.281%) of 8 7/8% Senior Subordinated Notes Due 2007 (the
F-25
<PAGE>
"Notes"). The Notes are not callable in the first five years, but up to 35% of
the aggregate principal amount may be repurchased at a redemption price of
108.375% of the principal amount with the proceeds from certain equity
offerings.
Company also borrowed $125 million under a floating rate term loan agreement
expiring 2004. Twenty-five percent of the principal outstanding must be paid
in 2003. The floating rate term loan is a senior unsecured obligation of Clark
and bears interest at the LIBOR Rate (as defined in the Loan Agreement) plus a
margin of 275 basis points. The loan may be repaid in whole or in part at any
time at a redemption price of 102.50% of the principal amount in the first
year, 101.25% of the principal amount in the second year and at 100% of the
principal amount thereafter.
Proceeds from the above financings will be used for general corporate
purposes and to redeem on December 24, 1997 all $225 million of Clark's
outstanding 10 1/2% Senior Notes Due 2001. The redemption price will be 102
5/8% plus accrued interest, or $1,032.96 for each $1,000 principal amount of
the notes outstanding.
Separately, on November 21, 1997 the Company repurchased for $206.6 million,
$259.2 million (value at maturity) of notes tendered under the Company's
recent tender offer for its $263.7 million (value at maturity) outstanding
Senior Secured Zero Coupon Notes Due 2000. To facilitate the repurchase, Clark
returned capital of $215 million to the Company.
As a result of the aforementioned transactions, the Company expects to
record an extraordinary charge to earnings for redemption premiums and
unamortized deferred financing costs of approximately $19.6 million on a pre-
tax basis and pay fees and expenses of $9.0 million associated with the
Blackstone transaction.
In the early 1990s the Company invested $25.0 million in a projected
initiated to produce low-sulfur diesel fuel at the Hartford refinery (the
"DHDS Project") which was delayed in 1992 based on internal and third-party
analyses that indicated an oversupply of low-sulfur diesel fuel capacity in
the Company's markets. Based on these analyses, the Company projected
relatively narrow price differentials between low- and high-sulfur diesel
products. This projection has thus far been borne out. High sulfur diesel fuel
is utilized by the railroad, marine and farm industries. In December 1997, the
Company determined that equipment purchased for the DHDS Project could be
better utilized for other projects at its Hartford and Port Arthur refineries,
rather than remaining idle until low- and high-sulfur diesel fuel
differentials widened sufficiently to justify completing the DHDS Project. As
a result, in the fourth quarter of 1997 the Company expects to record a charge
to earnings of approximately $15.0 million principally for engineering costs
specific to the DHDS Project.
F-26
<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 USA, Inc.
Report of Independent Accountants...................................... S-1
I--Condensed Information of the Registrant............................. S-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 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Clayton,
State of Missouri on December 16, 1997.
Clark USA, Inc.
Paul D. Melnuk
By: _________________________________
Its: President and Chief Executive
Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Paul D. Melnuk, 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 USA, 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 has been signed by the following persons in the
capacities indicated and on December 16, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Paul D. Melnuk
- -------------------------------------------
Paul D. Melnuk President and Chief Executive Officer;
Director (Principal Executive Officer)
Maura J. Clark
- -------------------------------------------
Maura J. Clark Executive Vice President--Corporate
Development and Chief Financial Officer
(Principal Financial Officer)
Dennis R. Eichholz
- -------------------------------------------
Dennis R. Eichholz Controller and Treasurer
(Principal Accounting Officer)
Marshall A. Cohen
- -------------------------------------------
Marshall A. Cohen Director
David A. Stockman
- -------------------------------------------
David A. Stockman Director
John R. Woodard
- -------------------------------------------
John R. Woodard Director
David I. Foley
- -------------------------------------------
David I. Foley Director
Stephen I. Chazen
- -------------------------------------------
Stephen I. Chazen Director
</TABLE>
II-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Clark USA, Inc.:
In connection with our audits of the consolidated financial statements of
Clark USA, Inc. and Subsidiaries as of December 31, 1995 and 1996, and for
each of the three years in the period ended December 31, 1996, which financial
statements are included in the Prospectus, we have also audited the financial
statement schedule listed in Item 14 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L. L. P.
St. Louis, Missouri
February 4, 1997
S-1
<PAGE>
CLARK USA, INC.
SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
-------- --------
ASSETS
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................... $ 43,162 $ 18,272
Accounts receivable............................................ 106 151
Income taxes receivable........................................ 397 3,339
Prepaid expenses and other..................................... -- --
Receivables from affiliates.................................... 8,656 10,215
Advance crude oil purchase receivable.......................... 6,565 --
-------- --------
Total current assets......................................... 58,886 31,977
Investments in affiliated companies.............................. 305,236 536,718
Advance crude oil purchase receivable............................ 99,345 --
Deferred income taxes............................................ 15,362 989
Other............................................................ 21,931 15,414
-------- --------
$500,760 $585,098
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accrued expenses and other..................................... $ 1,859 $ 1,875
Payables to affiliates......................................... 105 650
-------- --------
Total current liabilities.................................. 1,964 2,525
Long-term debt................................................... 344,589 363,756
Other Long-term liabilities...................................... -- 4,367
Stockholders' equity:
Common stock
Common, $.01 par value, 19,051,818 issued.................... 190 190
Class A Common, $.01 par value, 10,162,509 issued............ 90 102
Class B Common, convertible, $.01 par value.................. 6 --
Class C Common, convertible, $.01 par value.................. 6 --
Paid-in capital................................................ 300,057 296,094
Advance crude oil purchase receivable from stockholders........ (146,890) (26,520)
Retained earnings.............................................. 748 (55,416)
-------- --------
Total stockholders' equity................................. 154,207 214,450
-------- --------
$500,760 $585,098
======== ========
</TABLE>
See accompanying note to non-consolidated financial statements
S-2
<PAGE>
CLARK USA, INC.
SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Revenues:
Equity in net earnings (loss) of affiliates....... $19,022 $(24,443) $(37,117)
Expenses:
General and administrative expenses............... 6 72 333
Interest and financing costs, net................. 17,239 19,404 8,843
------- -------- --------
Earnings (loss) before provision for taxes.......... 1,777 (43,919) (46,293)
Income tax (provision) benefit.................... 6,036 6,816 (9,871)
------- -------- --------
Net earnings (loss)................................. $ 7,813 $(37,103) $(56,164)
======= ======== ========
</TABLE>
See accompanying note to non-consolidated financial statements
S-3
<PAGE>
CLARK USA, INC.
SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................. $ 7,813 $(37,103) $(56,164)
Non-cash items:
Equity in net (earnings) loss of affiliates... (19,022) 24,443 37,117
Amortization.................................. 16,144 18,281 22,790
Deferred income taxes......................... (6,037) (6,816) 14,372
Sale of advanced crude oil purchase
receivable................................... -- -- (10,869)
Cash provided by (reinvested in) working capital
Accounts receivable, prepaid expenses and
other........................................ 291 1,465 (45)
Receivables from and payables to affiliates... (1,301) (2,943) (1,076)
Accounts payable, accrued liabilities and
other........................................ (66) 1,683 16
Income taxes payable.......................... 3,641 561 (2,881)
------- -------- --------
Net cash provided by (used in) operating
activities................................. 1,463 (429) 3,260
------- -------- --------
Cash flows from investing activities:
Contribution to subsidiary...................... -- (165,610) (33,600)
Dividend from subsidiary........................ -- 4,515 --
Advance crude oil purchase receivable........... -- (105,910) 6,516
------- -------- --------
Net cash used in investing activities....... -- (267,005) (27,084)
------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt........ -- 175,000 --
Deferred financing costs........................ (1,100) (19,112) (1,066)
Proceeds from sale of stock..................... -- 135,500 --
Stock issuance costs............................ -- (1,541) --
------- -------- --------
Net cash provided by (used in) investing
activities................................. (1,100) 289,847 (1,066)
------- -------- --------
Increase (decrease) in cash, cash equivalents and
short-term investments........................... 363 22,413 (24,890)
Cash, cash equivalents and short-term investments,
beginning of period.............................. 20,386 20,749 43,162
------- -------- --------
Cash, cash equivalents and short-term investments,
end of period.................................... $20,749 $ 43,162 $ 18,272
======= ======== ========
</TABLE>
See accompanying note to non-consolidated financial statements
S-4
<PAGE>
SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NOTE TO NON-CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1. BASIS OF PRESENTATION
These unaudited non-consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, except that they are
prepared on a non-consolidated basis for the purpose of complying with Article
12 of regulation S-X. Accordingly, they do not include all of the information
and disclosures required by generally accepted accounting principles for
complete financial statements. Clark USA's non-consolidated operations include
100% equity interest in Clark Refining & Marketing, Inc. and Clark Pipe Line
Company.
For further information, refer to the consolidated financial statements,
including the notes thereto, included in this Form S-4.
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
2.1 Agreement and Plan of Merger, dated as of November 3,
1995, among Clark USA, Inc., Gulf Resources Corpora-
tion and GFR, Inc. (Incorporated by reference to Ex-
hibit 2.1 filed with Clark USA, Inc. Form 8-K, dated
December 1, 1995 (File No. 33-59144))
2.2 Agreement and Plan of Merger, dated as of November 3,
1995, among Clark USA, Inc., Occidental C.O.B. Part-
ners, Occidental C.O.B., Inc. and OXY USA, Inc. (In-
corporated by reference to Exhibit 2.2 filed with
Clark USA, Inc. Form 8-K, dated December 1, 1995 (File
No. 33-59144))
3.1 Restated Certificate of Incorporation of Clark USA,
Inc. (Incorporated by reference to Exhibit 3.1 filed
with Clark R & M Holdings Registration Statement on
Form S-4 (Registration No. 33-59144))
3.2 Certificate of Amendment to Certificate of Incorpora-
tion (Incorporated by reference to Exhibit 3.3 filed
with Clark USA, Inc. Registration Statement on Form S-
4 (Registration No. 33-81005))
3.3 Certificate of Amendment of Certificate of Incorpora-
tion of Clark USA, Inc.
3.4 Certificate of Amendment to Certificate of Incorpora-
tion of Clark USA, Inc.
3.5 Certificate of Amendment to Certificate of Incorpora-
tion of Clark USA, Inc.
3.6 By-laws of Clark USA, Inc. (Incorporated by reference
to Exhibit 3.2 filed with Clark USA, Inc. Current Re-
port on Form 8-K, dated February 27, 1995 (Registra-
tion No. 33-59144))
4.1 Certificate of Designations of the Powers, Preferences
and Relative, Participating, Optional and Other Spe-
cial Rights of 11 1/2% Senior Cumulative Exchangeable
Preferred Stock and Qualifications, Limitations and
Restrictions thereof
4.2* Indenture, dated as of October 1, 1997, between Clark
USA, Inc. and Bankers Trust Company, as Trustee, in-
cluding form of 11 1/2% Subordinated Exchange Deben-
tures due 2009
4.3 Exchange and Registration Rights Agreement, dated as of
October 1, 1997, among Clark USA, Inc., Goldman, Sachs
& Co. and BT Alex. Brown Incorporated
4.4 Indenture, dated as of December 1, 1995, between Clark
USA, Inc. and The Chase Manhattan Bank, N.A., as
Trustee, including the form of 10 7/8% Series B, Se-
nior Notes due December 1, 2005 (Incorporated by ref-
erence to Exhibit 4.1 filed with Clark USA, Inc. Form
8-K, dated December 1, 1995 (File No. 33-59144))
4.5 Indenture, dated as of May 15, 1993, between Clark USA,
Inc. and Bankers Trust Company, as Trustee, and Bank-
ers Trust Company, as Collateral Agent, including the
form of Senior Secured Zero Coupon Notes due February
15, 2000 (Incorporated by reference to Exhibit 4.2
filed with Clark R & M Holdings, Inc. Registration
Statement on Form S-4 (Registration No. 33-59144))
4.6 Supplemental Indenture, dated as of February 17, 1995,
among Clark USA, Inc., Bankers Trust Company, as
Trustee, and Bankers Trust Company, as Collateral
Agent (Incorporated by reference to Exhibit 4.2 filed
with Clark USA, Inc. Annual Report on Form 10-K for
the year ended December 31, 1994) (File No. 33-59144))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
4.7 Supplemental Indenture, dated as of November 21, 1995,
among Clark USA, Inc., Bankers Trust Company, as
Trustee, and Bankers Trust Company, as Collateral
Agent (Incorporated by reference to Exhibit 4.2 filed
with Clark USA, Inc. Form 8-K, dated December 1, 1995
(File No. 33-59144))
5.1 Opinion of Mayer, Brown & Platt as to the legality of
the preferred stock
8.1 Opinion of Mayer, Brown & Platt as to certain matters
10.10 Credit Agreement dated as of September 25, 1997 among
Clark Refining & Marketing, Inc., Bankers Trust Compa-
ny, as Administrative Agent, The Toronto-Dominion
Bank, as Syndication Agent, BankBoston, N.A., as Docu-
mentation Agent, and the other financial institutions
party thereto (Incorporated by reference to Exhibit
10.1 filed with Clark Refining & Marketing, Inc., Cur-
rent Report on Form 8-K, dated October 1, 1997 (File
No. 33-59144))
10.11 Amendment No. 1 to Credit Agreement, dated as of Octo-
ber 29, 1997, among Clark Refining & Marketing, Inc.,
Bankers Trust Company, as Administrative Agent and
Collateral Agent, The Toronto-Dominion Bank, as Syndi-
cation Agent, BankBoston, NA., as Documentation Agent,
and the other financial institutions party thereto
(Incorporated by reference to Exhibit 10.11 filed with
Clark Refining & Marketing, Inc., Registration State-
ment on Form S-4 (File No. 333-42431))
10.12 Amendment No. 2 to Credit Agreement, dated as of Novem-
ber 7, 1997, among Clark Refining & Marketing, Inc.,
Bankers Trust Company, as Administrative Agent and
Collateral Agent, The Toronto-Dominion Bank, as Syndi-
cation 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., Registra-
tion Statement on Form S-4 (File No. 333-42431))
10.13 Credit Agreement, dated as of November 21, 1997, among
Clark Refining & Marketing, Inc., Goldman Sachs Credit
Partners L.P., as Arranger and Syndication Agent,
State Street Bank and Trust Company of Missouri, N.A.,
as Payment Agent, the financial institutions listed on
the signature pages thereof, as Lenders, and Goldman
Sachs Credit Partners, as Administrative Agent (Incor-
porated by reference to Exhibit 10.13 filed with Clark
Refining & Marketing, Inc., Registration Statement on
Form S-4 (File No. 333-42431))
10.20 Pledge Agreement, dated as of December 1, 1995, from
Gulf Resources Corporation and Gulf Resources Hold-
ings, Inc. to Clark USA, Inc. (Incorporated by refer-
ence to Exhibit 10.4 filed with Clark USA, Inc. Form
8-K, dated December 1, 1995 (File No. 33-59144))
10.21 Stockholders' Agreement, dated as of December 1, 1995,
among Clark USA, Inc., Gulf Resources Corporation,
Gulf Resources Holdings, Inc., TrizecHahn Corporation,
1096153 Ontario Limited, Clark Holdings Limited, The
Jaguar Fund, N.V., Puma (a Limited Partnership), Tiger
(a Limited Partnership), and Occidental C.O.B. Part-
ners (Incorporated by reference to Exhibit 10.5 filed
with Clark USA, Inc. Form 8-K, dated December 1, 1995
(File No. 33-59144))
10.22 Crude Oil Purchase Contract, dated as of December 1,
1995, between Gulf Resources Corporation and GFR, Inc.
(Incorporated by reference to Exhibit 10.6 filed with
Clark USA, Inc. Form 8-K, dated December 1, 1995 (File
No. 33-59144))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.23 Consulting Agreement, dated as of February 11, 1995,
between Clark USA, Inc. and Universal Exchange Corpo-
ration (Incorporated by reference to Exhibit 10.7
filed with Clark USA, Inc. Form 8-K, dated December 1,
1995 (File No. 33-59144))
10.24 Crude Oil Marketing Contract, dated as of December 1,
1995, between Clark USA, Inc. and Occidental Crude
Sales, Inc. (International) (Incorporated by reference
to Exhibit 10-8 filed with Clark USA, Inc. Form 8-K,
dated December 1, 1995 (File No. 33-59144))
10.25 Registration Rights Agreement, dated December 1, 1995
(Incorporated by reference to Exhibit 10.14 filed with
Clark USA, Inc. Registration Statement on Form S-4
(File No. 33-81005))
10.26 Seconded Amended and Restated Stockholders' Agreement,
dated as November 3, 1997, between Clark USA, Inc. and
Occidental C.O.B. Partners
10.40 Termination Agreement, dated as of October 1, 1997,
among TrizecHahn Corporation, Ontario Limited, Clark
USA, Inc., Tiger Management Corporation and Paul D.
Melnuk
10.50 Indenture between Clark Refining & Marketing, Inc.
(formerly Clark Oil & Refining Corporation) and
NationsBank of Virginia, N.A. (formerly Sovran Bank,
N.A.) including the form of 10 1/2% Senior Notes due
2001 (Incorporated by reference to Exhibit 4.1 filed
with Clark Oil & Refining Corporation Registration
Statement on Form S-1 (File No. 33-43358))
10.51 Supplemental Indenture between Clark Refining & Market-
ing, Inc. and NationsBank of Virginia, N.A., dated
February 17, 1995 (Incorporated by reference to Ex-
hibit 4.4 filed with Clark USA, Inc. Annual Report on
Form 10-K for the year ended December 31, 1994) (File
No. 33-59144))
10.52 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 Corpo-
ration Registration Statement on Form S-1 (File No.
33-50748))
10.53 Supplemental Indenture between Clark Refining & Market-
ing, Inc. and NationsBank of Virginia, N.A., dated
February 17, 1995 (Incorporated by reference to Ex-
hibit 4.6 filed with Clark USA, Inc. Annual Report on
Form 10-K for the year ended December 31, 1994 (File
No. 33-59144))
10.54 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 by
Clark Refining & Marketing, Inc., Registration State-
ment on Form S-4 (File No. 333-42431))
10.55 Indenture between Clark Refining & Marketing, Inc. and
Marine Midland Bank, dated as of November 21, 1997 in-
cluding the form of 8 7/8% Senior Subordinated Notes
due 2007 (Incorporated by reference to Exhibit 4.6
filed by Clark Refining & Marketing, Inc., Registra-
tion Statement on Form S-4 (File No. 333-42431))
10.56 Supplemental Indenture between Clark Refining & Market-
ing, Inc. and Marine Midland Bank, dated November 21,
1997 (Incorporated by reference to Exhibit 4.61 filed
by Clark Refining & Marketing, Inc., Registration
Statement on Form S-4 (File No. 333-42431))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.57 Exchange and Registration Rights Agreement, dated No-
vember 21, 1997, between Clark Refining & Marketing,
Inc., Goldman, Sachs & Co., BT Alex. Brown Incorporat-
ed, Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jen-
rette Securities Corporation and Lehman Brothers Inc.
(Incorporated by reference to Exhibit 4.7 filed by
Clark Refining & Marketing, Inc., Registration State-
ment on Form S-4 (File No. 333-42431))
10.60 Clark Refining & Marketing, Inc. Stock Option Plan (In-
corporated 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))
10.62 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 Oc-
tober 1, 1997 (File No. 33-59144))
10.63 Employment Agreement of Bradley D. Aldrich (Incorpo-
rated by reference to Exhibit 10.23 filed by Clark Re-
fining & Marketing, Inc. Registration Statement on
Form S-4 (File No. 333-42431))
10.64 Employment Agreement of Brandon K. Barnholt (Incorpo-
rated by reference to Exhibit 10.24 filed by Clark Re-
fining & Marketing, Inc. Registration Statement on
Form S-4 (File No. 333-42431))
10.65 Employment Agreement of Maura J. Clark (Incorporated by
reference to Exhibit 10.25 filed by Clark Refining &
Marketing, Inc. Registration Statement on Form S-4
(File No. 333-42431))
10.66 Employment Agreement of Edward J. Stiften (Incorporated
by reference to Exhibit 10.26 filed by Clark Refining
& Marketing, Inc. Registration Statement on Form S-4
(File No. 333-42431))
10.70 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 Re-
port on Form 8-K, dated February 27, 1995 (Registra-
tion No. 33-59144))
10.71 Chemical 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 ref-
erence to Exhibit 10.9.2 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No.
33-84192))
10.72 Sublease of Chemical Facility Lease, dated as of August
16, 1994, between Chevron U.S.A. Inc. and Clark Refin-
ing & 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))
10.73 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 ref-
erence to Exhibit 10.9.4 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No.
33-84192))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
10.74 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. Registra-
tion Statement on Form S-1 (Registration No. 33-
84192))
10.75 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 ref-
erence to Exhibit 10.9.6 filed with Clark USA, Inc.
Registration Statement on Form S-1 (Registration No.
33-84192))
10.76 Supply Agreement for the PADC Facility, dated as of Au-
gust 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. Registra-
tion Statement on Form S-1 (Registration No. 33-
84192))
10.77 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. Registra-
tion Statement on Form S-1 (Registration No. 33-
84192))
10.78 Stock Purchase and Redemption Agreement, dated as of
December 30, 1992, among AOC Limited Partnership, P.
Anthony Novelly, Samuel R. Goldstein, G & N Invest-
ments, Inc., TrizecHahn Corporation, AOC Holdings,
Inc. and Clark Oil & Refining Corporation (Incorpo-
rated 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
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Mayer, Brown & Platt (included in Exhibit
5.1)
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 USA, Inc. to
its shareholder relating to the exchange offer
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
*To be filed by Amendment
<PAGE>
Exhibit 3.3
Certificate of Amendment
of
Certificate of Incorporation
of
Clark USA, Inc.
_____________________________________________
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
_____________________________________________
I, Maura Clark, Executive Vice President of CLARK USA, INC., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certify as follows:
FIRST: That the Restated Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on the 28th day
of December, 1994 and that Certificates of Amendment thereto were filed with the
Secretary of State of the State of Delaware on the 23rd day of February, 1995,
and the 3rd day of November, 1995 (as so amended, the "Certificate of
Incorporation").
SECOND: That Article 4 of the Certificate of Incorporation of the
Corporation has been amended to read in its entirety as follows:
<PAGE>
ARTICLE 4. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 68,554,552 shares,
consisting of (a) 63,554,552 shares of common stock, par value $.01 per
share, of which (i) 51,164,597 shares shall be designated "Common Stock,"
(ii) 3,389,955 shares shall be designated "Class D Common Stock," and (iii)
9,000,000 shares shall be designated "Class E Common Stock" and (b)
5,000,000 shares of "Preferred Stock," par value $.01 per share.
A. Preferred Stock.
1. Issuance. The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more Classes, to establish the number of shares
to be included in each such Class, and to fix the designations, powers,
preferences and rights of the shares of each such Class, and any
qualifications, limitations or restrictions thereof.
B. Common Stock.
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Common Stock shall be entitled to receive
the same dividends or distributions per share, whether payable in cash, in
property or in shares of capital stock, as may be declared and paid on the
Class D Common Stock and the Class E Common Stock and the Board of
Directors may not declare or pay any dividend or distribution with respect
to the Common Stock unless the same dividend or distribution per share has
been declared or paid, as the case may be, with respect to the Class D
Common Stock, the Class E Common Stock; provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class E Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. At every annual or special meeting of stockholders
of the Corporation, every share of Common Stock shall entitle the holder
thereof to one vote for each share of Common Stock standing in his or her
name on the books of the Corporation; provided that the holders of Common
Stock shall have no voting rights with respect to matters reserved (by law
or by agreement with the Corporation) solely for any other class of capital
stock.
3. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of
2
<PAGE>
the Corporation and of the preferential amounts, if any, to which the
holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably, on a
share-for-share basis, with the holders of Class D Common Stock and Class E
Common Stock in the remaining assets of the Corporation.
C. Class D Common Stock
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class D Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock and the Class E Common Stock and the Board of
Directors may not declare or pay any dividend or distribution with respect
to the Class D Common Stock unless the same dividend or distribution per
share has been declared or paid, as the case may be, with respect to the
Common Stock and the Class E Common Stock provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class E Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. Holders of shares of Class D Common Stock shall
not be accorded any voting rights in respect thereof and such shares shall
not be deemed to be outstanding for purposes of determining the vote
required on any matter properly brought before the stockholders of the
Corporation for a vote thereon.
3. Conversion. (a) The Company shall have the right, at any time and
from time to time, to convert any or all of the shares of Class D Common
Stock into an equal number of shares of Common Stock. The method of
selection of such shares shall be determined by the Board of Directors of
the Company in its sole discretion.
(b) Following an initial public offering of Common Stock, any
person who is not an affiliate of Occidental Petroleum Corporation to whom
shares of Class D Common Stock have been directly or indirectly transferred
by Occidental Petroleum Corporation in an arm's-length transaction shall
have the right, at any time and from time to time, to convert any or all of
such shares of Class D Common Stock into an equal number of shares of
Common Stock.
(c) Following an initial public offering of Common Stock, any
person who is not an affiliate of Gulf Resources Corporation to whom shares
of Class D Common Stock have been directly or indirectly transferred by
Gulf Resources Corporation in an arm's-length transaction shall have the
right, at any time and from time
3
<PAGE>
to time, to convert any or all of such shares of Class D Common Stock into
an equal number of shares of Common Stock.
4. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation and of
the preferential amounts, if any, to which the holders of Preferred Stock
shall be entitled, the holders of all outstanding shares of Class D Common
Stock shall be entitled to share ratably, on a share-for-share basis, with
the holders of Common Stock and Class E Common Stock in the remaining
assets of the Corporation.
5. Anti-Dilution. In the event the Company shall at any time (a)
declare a dividend on any shares of capital stock of the Company or any
securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any
recapitalization, merger, consolidation, exchange or other similar
reorganization (a "Recapitalization"), such dividend being payable in
shares of capital stock of the Company, (b) subdivide the outstanding
capital stock of the Company, (c) combine the outstanding capital stock of
the Company into a smaller number of shares, or (d) issue any shares of
capital stock in a Recapitalization, the number of shares of Class D Common
Stock then outstanding shall be proportionately adjusted so that the
relative equity percentage ownership of the Company and the relative voting
power represented by each such share shall be preserved as nearly as
practicable.
D. Class E Common Stock.
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class E Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock and Class D Common Stock and the Board of
Directors may not declare or pay any dividend or distribution with respect
to the Class E Common Stock unless the same dividend or distribution per
share has been declared or paid, as the case may be, with respect to the
Common Stock and the Class D Common Stock provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class E Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. Holders of shares of Class E Common Stock shall
not be accorded any voting rights in respect thereof and such shares shall
not be deemed to be outstanding for purposes of determining the vote
required on any matter properly brought before the stockholders of the
Corporation for a vote thereon.
4
<PAGE>
3. Conversion. Subject to compliance with any applicable laws
related to the acquisition of voting securities of the Corporation, the
holder of any shares of Class E Common Stock shall have the right, at any
time and from time to time, to convert any or all of such holder's shares
of Class E Common Stock into an equal number of shares of Common Stock;
provided, that if as the result of any proposed conversion by any holder of
Class E Common Stock the total voting power of the "ultimate parent entity"
of such holder, as defined in the Hart-Scott-Rodino Antitrust Improvements
Act, as amended (the "HSR Act") would exceed any "filing threshold", as
defined in the HSR Act, then such proposed conversion shall not be
effective until all required filings under the HSR Act have been made and
all applicable waiting periods thereunder have expired or been terminated.
4. Anti-Dilution. In the event the Corporation shall at any time (a)
declare a dividend on any shares of capital stock of the Corporation or any
securities issued in respect thereof, or in substitution therefor, such
dividend being payable in shares of capital stock of the Corporation, (b)
subdivide the outstanding capital stock of the Corporation, or (c) combine
the outstanding capital stock of the Corporation into a smaller number of
shares, the provisions relating to the conversion of shares of Class E
Common Stock into Common Stock shall be equitably and proportionately
adjusted.
5. Liquidation, Dissolution or Winding Up. In the event of any
Liquidation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Class E Common Stock shall be entitled to share
ratably, on a share-for-share basis, with the holders of Common Stock and
Class D Common Stock in the remaining assets of the Corporation.
5
<PAGE>
E. Reclassification. All Shares of Class A Common Stock issued and
outstanding immediately prior to the filing of this Certificate of
Amendment with the Secretary of State of the State of Delaware are hereby
reclassified and, without any further action on the part of the Corporation
or the holder of such shares, shall hereafter be deemed to have become the
corresponding number of shares of Class E Common Stock.
F. Amendment of this Article. The Corporation may not amend, alter, change
or repeal in any manner adverse to the holders of the Class D Common Stock,
or the Class E Common Stock the rights or preferences of the holders of the
Class D Common Stock, or the Class E Common Stock contained in this Article
4 without the consent of the holders of 95% of the Class D Common Stock or
the Class E Common Stock, as the case may be.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
written consent of the holders of a majority of all outstanding shares of each
class entitled to vote thereon in accordance with the provisions of Section 228
of the General Corporation Law.
6
<PAGE>
IN WITNESS WHEREOF, I the undersigned has signed this Certificate this 1st
day of October, 1997.
CLARK USA, INC.
By:
-------------------------------
Name: Maura J. Clark
Title: Executive Vice President &
Chief Financial Officer
Attested By:
- ----------------------------
Name: Katherine D. Knocke
Title: Secretary
7
<PAGE>
Exhibit 3.4
Certificate of Amendment
of
Certificate of Incorporation
of
Clark USA, Inc.
_____________________________________________
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
_____________________________________________
I, Maura Clark, Executive Vice President of CLARK USA, INC., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certify as follows:
FIRST: That the Restated Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on the 28th day
of December, 1994 and that Certificates of Amendment thereto were filed with the
Secretary of State of the State of Delaware on the 23rd day of February, 1995,
the 3rd day of November, 1995 and the 1st day of October, 1997 (as so amended,
the "Certificate of Incorporation").
SECOND: That Article 4 of the Certificate of Incorporation of the
Corporation has been amended to read in its entirety as follows:
<PAGE>
ARTICLE 4. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 68,554,552 shares,
consisting of (a) 63,554,552 shares of common stock, par value $.01 per
share, of which (i) 45,164,597 shares shall be designated "Common Stock,"
(ii) 3,389,955 shares shall be designated "Class D Common Stock," (iii)
9,000,000 shares shall be designated "Class E Common Stock" and (iv)
6,000,000 shares shall be designated "Class F Common Stock", and (b)
5,000,000 shares of "Preferred Stock," par value $.01 per share.
A. Preferred Stock.
1. Issuance. The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more Classes, to establish the number of shares
to be included in each such Class, and to fix the designations, powers,
preferences and rights of the shares of each such Class, and any
qualifications, limitations or restrictions thereof.
B. Common Stock.
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Common Stock shall be entitled to receive
the same dividends or distributions per share, whether payable in cash, in
property or in shares of capital stock, as may be declared and paid on the
Class D Common Stock, the Class E Common Stock and the Class F Common
Stock, and the Board of Directors may not declare or pay any dividend or
distribution with respect to the Common Stock unless the same dividend or
distribution per share has been declared or paid, as the case may be, with
respect to the Class D Common Stock, the Class E Common Stock and the
Class F Common Stock; provided, that with respect to dividends payable only
in shares of common stock, each of the Common Stock, the Class D Common
Stock, the Class E Common Stock and the Class F Common Stock shall receive
an equivalent dividend per share payable in common stock of the
corresponding class.
2. Voting Rights. At every annual or special meeting of stockholders
of the Corporation, every share of Common Stock shall entitle the holder
thereof to one vote, voting together with the holders of Class F Common
Stock, in person or by proxy, for each share of Common Stock standing in
his or her name on the books of the Corporation; provided that the holders
of Common Stock shall have no voting rights with respect to matters
reserved (by law or by agreement with the Corporation) solely for any other
class of capital stock.
3. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation and of
the preferential amounts, if any, to which the holders of
2
<PAGE>
Preferred Stock shall be entitled, the holders of all outstanding shares of
Common Stock shall be entitled to share ratably, on a share-for-share
basis, with the holders of Class D Common Stock, Class E Common Stock and
Class F Common Stock in the remaining assets of the Corporation.
C. Class D Common Stock
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class D Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock, the Class E Common Stock and the Class F Common
Stock, and the Board of Directors may not declare or pay any dividend or
distribution with respect to the Class D Common Stock unless the same
dividend or distribution per share has been declared or paid, as the case
may be, with respect to the Common Stock, the Class E Common Stock and the
Class F Common Stock; provided, that with respect to dividends payable only
in shares of common stock, each of the Common Stock, the Class D Common
Stock, the Class E Common Stock and the Class F Common Stock shall receive
an equivalent dividend per share payable in common stock of the
corresponding class.
2. Voting Rights. Holders of shares of Class D Common Stock shall
not be accorded any voting rights in respect thereof and such shares shall
not be deemed to be outstanding for purposes of determining the vote
required on any matter properly brought before the stockholders of the
Corporation for a vote thereon.
3. Conversion. (a) The Company shall have the right, at any time and
from time to time, to convert any or all of the shares of Class D Common
Stock into an equal number of shares of Common Stock. The method of
selection of such shares shall be determined by the Board of Directors of
the Company in its sole discretion.
(b) Following an initial public offering of Common Stock, any
person who is not an affiliate of Occidental Petroleum Corporation to whom
shares of Class D Common Stock have been directly or indirectly transferred
by Occidental Petroleum Corporation in an arm's-length transaction shall
have the right, at any time and from time to time, to convert any or all of
such shares of Class D Common Stock into an equal number of shares of
Common Stock.
(c) Following an initial public offering of Common Stock, any
person who is not an affiliate of Gulf Resources Corporation to whom shares
of Class D Common Stock have been directly or indirectly transferred by
Gulf Resources Corporation in an arm's-length transaction shall have the
right, at any time and from time to time, to convert any or all of such
shares of Class D Common Stock into an equal number of shares of Common
Stock.
3
<PAGE>
4. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation and of
the preferential amounts, if any, to which the holders of Preferred Stock
shall be entitled, the holders of all outstanding shares of Class D Common
Stock shall be entitled to share ratably, on a share-for-share basis, with
the holders of Common Stock, Class E Common Stock and Class F Common Stock
in the remaining assets of the Corporation.
5. Anti-Dilution. In the event the Company shall at any time (a)
declare a dividend on any shares of capital stock of the Company or any
securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any
recapitalization, merger, consolidation, exchange or other similar
reorganization (a "Recapitalization"), such dividend being payable in
shares of capital stock of the Company, (b) subdivide the outstanding
capital stock of the Company, (c) combine the outstanding capital stock of
the Company into a smaller number of shares, or (d) issue any shares of
capital stock in a Recapitalization, the number of shares of Class D Common
Stock then outstanding shall be proportionately adjusted so that the
relative equity percentage ownership of the Company and the relative voting
power represented by each such share shall be preserved as nearly as
practicable.
D. Class E Common Stock.
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class E Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock, Class D Common Stock and the Class F Common
Stock, and the Board of Directors may not declare or pay any dividend or
distribution with respect to the Class E Common Stock unless the same
dividend or distribution per share has been declared or paid, as the case
may be, with respect to the Common Stock, the Class D Common Stock and the
Class F Common Stock; provided, that with respect to dividends payable only
in shares of common stock, each of the Common Stock, the Class D Common
Stock, the Class E Common Stock and the Class F Common Stock shall receive
an equivalent dividend per share payable in common stock of the
corresponding class.
2. Voting Rights. Holders of shares of Class E Common Stock shall
not be accorded any voting rights in respect thereof and such shares shall
not be deemed to be outstanding for purposes of determining the vote
required on any matter properly brought before the stockholders of the
Corporation for a vote thereon.
3. Conversion. Subject to compliance with any applicable laws
related to the acquisition of voting securities of the Corporation, the
holder of any shares of Class E Common Stock shall have the right, at any
time and from time to time, to convert any or
4
<PAGE>
all of such holder's shares of Class E Common Stock into an equal number of
shares of Common Stock; provided, that if as the result of any proposed
conversion by any holder of Class E Common Stock the total voting power of
the "ultimate parent entity" of such holder, as defined in the Hart-Scott-
Rodino Antitrust Improvements Act, as amended (the "HSR Act") would exceed
any "filing threshold", as defined in the HSR Act, then such proposed
conversion shall not be effective until all required filings under the HSR
Act have been made and all applicable waiting periods thereunder have
expired or been terminated.
4. Anti-Dilution. In the event the Corporation shall at any time (a)
declare a dividend on any shares of capital stock of the Corporation or any
securities issued in respect thereof, or in substitution therefor, such
dividend being payable in shares of capital stock of the Corporation, (b)
subdivide the outstanding capital stock of the Corporation, or (c) combine
the outstanding capital stock of the Corporation into a smaller number of
shares, the provisions relating to the conversion of shares of Class E
Common Stock into Common Stock shall be equitably and proportionately
adjusted.
5. Liquidation, Dissolution or Winding Up. In the event of any
Liquidation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Class E Common Stock shall be entitled to share
ratably, on a share-for-share basis, with the holders of Common Stock,
Class D Common Stock and Class F Common Stock in the remaining assets of
the Corporation.
D. Class F Common Stock
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class F Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock, the Class D Common Stock and the Class E Common
Stock, and the Board of Directors may not declare or pay any dividend or
distribution with respect to the Class F Common Stock unless the same
dividend or distribution per share has been declared or paid, as the case
may be, with respect to the Common Stock, the Class D Common Stock and the
Class E Common Stock; provided, that with respect to dividends payable only
in shares of common stock, each of the Common Stock, the Class D Common
Stock, the Class E Common Stock and the Class F Common Stock shall receive
an equivalent dividend per share payable in common stock of the
corresponding class.
2. Voting Rights. At every annual or special meeting of stockholders
of the Corporation, every share of Class F Common Stock shall entitle the
holder thereof to one vote (subject to adjustment as provided below),
voting together with the holders of Common Stock, on all matters submitted
to a vote of the holders of Common Stock or
5
<PAGE>
Class F Common Stock, in person or by proxy, in the same manner and with
the same effect as the holders of Common Stock; provided that the holders
of Class F Common Stock shall have no voting rights with respect to matters
reserved (by law or by agreement with the Corporation) solely for any other
class of capital stock; and provided further, that if the holders of the
Class F Common Stock would otherwise be entitled to cast votes
representing, in the aggregate, more than 19.9% of the total voting power
of all classes of capital stock of the Corporation entitled to vote, then
the vote allotted to each share of Class F Common Stock shall be
proportionately reduced so that all outstanding shares of Class F Common
Stock shall be entitled to cast votes representing, in the aggregate, 19.9%
of the total voting power of all classes of capital stock of the
Corporation entitled to vote.
3. Conversion. Any shares of Class F Common Stock that are owned
beneficially or of record by Occidental Petroleum Corporation and its
affiliates shall have no conversion rights. Any holder of any shares of
Class F Common Stock other than Occidental Petroleum Corporation and its
affiliates shall have the right, at any time and from time to time, to
convert any or all of such other holder's shares of Class F Common Stock
into an equal number of shares of Common Stock.
4. Antidilution. In the event the Corporation shall at any time (a)
declare a dividend on any shares of capital stock of the Corporation or any
securities issued in respect thereof, or in substitution therefor, such
dividend being payable in shares of capital stock of the Corporation, (b)
subdivide the outstanding capital stock of the Corporation, or (c) combine
the outstanding capital stock of the Corporation into a smaller number of
shares, the provisions relating to the conversion of shares of Class F
Common Stock into Common Stock shall be equitably and proportionately
adjusted.
5. Liquidation, Dissolution or Winding Up. In the event of any
Liquidation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Class F Common Stock shall be entitled to share
ratably, on a share-for-share basis, with the holders of Common Stock,
Class D Common Stock and Class E Common Stock in the remaining assets of
the Corporation.
E. Amendment of this Article. The Corporation may not amend, alter, change
or repeal in any manner adverse to the holders of the Class D Common Stock,
Class E Common Stock or Class F Common Stock the rights or preferences of
the holders of the Class D Common Stock, Class E Common Stock or Class F
Common Stock contained in this Article 4 without the consent of the holders
of 95% of the Class D Common Stock, Class E Common Stock or the Class F
Common Stock, as the case may be.
6
<PAGE>
THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
written consent of the holders of a majority of all outstanding shares of each
class entitled to vote thereon in accordance with the provisions of Section 228
of the General Corporation Law.
7
<PAGE>
IN WITNESS WHEREOF, I the undersigned has signed this Certificate this 1st
day of October, 1997.
CLARK USA, INC.
By:_____________________
Name: Maura J. Clark
Title: Executive Vice President &
Chief Financial Officer
Attested By:
____________________________
Name: Katherine D. Knocke
Title: Secretary
8
<PAGE>
Exhibit 3.5
PAGE 1
State of Delaware
Office of the Secretary of State
---------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "CLARK USA, INC.", FILED IN THIS OFFICE ON THE FIRST DAY OF OCTOBER, A.D.
1997, AT 11:15 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL]
AUTHENTICATION: 8680762
DATE: 10-01-97
<PAGE>
Certificate of Amendment
of
Certificate of Incorporation
of
Clark USA, Inc.
_____________________________________________
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
_____________________________________________
I, Maura Clark, Executive Vice President of CLARK USA, INC., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certify as follows:
FIRST: That the Restated Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on the 28th day
of December, 1994 and that Certificates of Amendment thereto were filed with the
Secretary of State of the State of Delaware on the 23rd day of February, 1995,
the 3rd day of November, 1995 and on two occasions on the 1st day of October,
1997 (as so amended, the "Certificate of Incorporation").
SECOND: That Article 4 of the Certificate of Incorporation of the
Corporation has been amended to read in its entirety as follows:
<PAGE>
ARTICLE 4. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 68,554,552 shares,
consisting of (a)63,554,552 shares of common stock, par value $.01 per
share, of which (i) 54,164,597 shares shall be designated "Common Stock,"
(ii) 3,389,955 shares shall be designated "Class D Common Stock," and (iii)
6,000,000 shares shall be designated "Class F Common Stock", and (b)
5,000,000 shares of "Preferred Stock," par value $.01 per share.
A. Preferred Stock.
---------------
1. Issuance. The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more Classes, to establish the number of shares
to be included in each such Class, and to fix the designations, powers,
preferences and rights of the shares of each such Class, and any
qualifications, limitations or restrictions thereof.
B. Common Stock.
------------
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Common Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable
either in cash, in property or in shares of capital stock. The Board of
Directors may not declare or pay any dividend or distribution with respect
to the Common Stock unless the same dividend or distribution per share has
been declared or paid, as the case may be, with respect to the Class D
Common Stock and the Class F Common Stock; provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class F Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. At every annual or special meeting of stockholders
of the Corporation, every share of Common Stock shall entitle the holder
thereof to one vote, voting together with the holders of Class F Common
Stock, in person or by proxy, for each share of Common Stock standing in
his or her name on the books of the Corporation; provided that the holders
of Common Stock shall have no voting rights with respect to matters
reserved (by law or by agreement with the Corporation) solely for any other
class of capital stock.
3. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation and of
the preferential amounts, if any, to which the holders of Preferred Stock
shall be entitled, the holders of all outstanding shares of Common Stock
shall be entitled to share ratably, on a share-for-share basis, with the
holders of Class D Common Stock and Class F Common Stock in the remaining
assets of the Corporation.
2
<PAGE>
C. Class D Common Stock
---------------------
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class D Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock and the Class F Common Stock, and the Board of
Directors may not declare or pay any dividend or distribution with respect
to the Class D Common Stock unless the same dividend or distribution per
share has been declared or paid, as the case may be, with respect to the
Common Stock and the Class F Common Stock; provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class F Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. Holders of shares of Class D Common Stock shall
not be accorded any voting rights in respect thereof and such shares shall
not be deemed to be outstanding for purposes of determining the vote
required on any matter properly brought before the stockholders of the
Corporation for a vote thereon.
3. Conversion. (a) The Company shall have the right, at any time and
from time to time, to convert any or all of the shares of Class D Common
Stock into an equal number of shares of Common Stock. The method of
selection of such shares shall be determined by the Board of Directors of
the Company in its sole discretion.
(b) Following an initial public offering of Common Stock, any
person who is not an affiliate of Occidental Petroleum Corporation to whom
shares of Class D Common Stock have been directly or indirectly transferred
by Occidental Petroleum Corporation in an arm's-length transaction shall
have the right, at any time and from time to time, to convert any or all of
such shares of Class D Common Stock into an equal number of shares of
Common Stock.
(c) Following an initial public offering of Common Stock, any
person who is not an affiliate of Gulf Resources Corporation to whom shares
of Class D Common Stock have been directly or indirectly transferred by
Gulf Resources Corporation in an arm's-length transaction shall have the
right, at any time and from time to time, to convert any or all of such
shares of Class D Common Stock into an equal number of shares of Common
Stock.
4. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation (a "Liquidation"), after payment or provision
for payment of the debts and other liabilities of the Corporation and of
the preferential amounts, if any, to which the holders of Preferred Stock
shall be entitled, the holders of all outstanding shares of Class D Common
Stock shall be entitled to share ratably, on a share-for-share basis, with
the
3
<PAGE>
holders of Common Stock and Class F Common Stock in the remaining assets of
the Corporation.
5. Anti-Dilution. In the event the Company shall at any time (a)
declare a dividend on any shares of capital stock of the Company or any
securities issued in respect thereof, or in substitution therefor, in
connection with any stock split, dividend or combination, or any
recapitalization, merger, consolidation, exchange or other similar
reorganization (a "Recapitalization"), such dividend being payable in
shares of capital stock of the Company, (b) subdivide the outstanding
capital stock of the Company, (c) combine the outstanding capital stock of
the Company into a smaller number of shares, or (d) issue any shares of
capital stock in a Recapitalization, the number of shares of Class D Common
Stock then outstanding shall be proportionately adjusted so that the
relative equity percentage ownership of the Company and the relative voting
power represented by each such share shall be preserved as nearly as
practicable.
D. Class F Common Stock
--------------------
1. Dividends. Subject to the preferential rights, if any, of the
Preferred Stock, the holders of Class F Common Stock shall be entitled to
receive the same dividends or distributions per share, whether payable in
cash, in property or in shares of capital stock, as may be declared and
paid on the Common Stock and the Class D Common Stock, and the Board of
Directors may not declare or pay any dividend or distribution with respect
to the Class F Common Stock unless the same dividend or distribution per
share has been declared or paid, as the case may be, with respect to the
Common Stock and the Class D Common Stock; provided, that with respect to
dividends payable only in shares of common stock, each of the Common Stock,
the Class D Common Stock and the Class F Common Stock shall receive an
equivalent dividend per share payable in common stock of the corresponding
class.
2. Voting Rights. At every annual or special meeting of stockholders
of the Corporation, every share of Class F Common Stock shall entitle the
holder thereof to one vote (subject to adjustment as provided below),
voting together with the holders of Common Stock, on all matters submitted
to a vote of the holders of Common Stock or Class F Common Stock, in person
or by proxy, in the same manner and with the same effect as the holders of
Common Stock; provided that the holders of Class F Common Stock shall have
no voting rights with respect to matters reserved (by law or by agreement
with the Corporation) solely for any other class of capital stock; and
provided further, that if the holders of the Class F Common Stock would
otherwise be entitled to cast votes representing, in the aggregate, more
than 19.9% of the total voting power of all classes of capital stock of the
Corporation entitled to vote, then the vote allotted to each share of Class
F Common Stock shall be proportionately reduced so that all outstanding
shares of Class F Common Stock shall be entitled to cast votes
representing, in the aggregate, 19.9% of the total voting power of all
classes of capital stock of the Corporation entitled to vote.
4
<PAGE>
3. Conversion. Any shares of Class F Common Stock that are owned
beneficially or of record by Occidental Petroleum Corporation and its
affiliates shall have no conversion rights. Any holder of any shares of
Class F Common Stock other than Occidental Petroleum Corporation and its
affiliates shall have the right, at any time and from time to time, to
convert any or all of such other holder's shares of Class F Common Stock
into an equal number of shares of Common Stock.
4. Antidilution. In the event the Corporation shall at any time (a)
declare a dividend on any shares of capital stock of the Corporation or any
securities issued in respect thereof, or in substitution therefor, such
dividend being payable in shares of capital stock of the Corporation, (b)
subdivide the outstanding capital stock of the Corporation, or (c) combine
the outstanding capital stock of the Corporation into a smaller number of
shares, the provisions relating to the conversion of shares of Class F
Common Stock into Common Stock shall be equitably and proportionately
adjusted.
5. Liquidation, Dissolution or Winding Up. In the event of any
Liquidation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Class F Common Stock shall be entitled to share
ratably, on a share-for-share basis, with the holders of Common Stock and
Class D Common Stock in the remaining assets of the Corporation.
D. Reclassification. All shares of Class E Common Stock issued and
outstanding immediately prior to the filing of this Certificate of
Amendment with the Secretary of State of the State of Delaware are hereby
reclassified and, without any further action on the part of the Corporation
or the holder of such shares, shall hereafter be deemed to have become an
aggregate of 63,000 shares of Preferred Stock to be known as "Exchangeable
Preferred Stock," the terms of which shall be set forth in the Certificate
of Designations with respect to the Exchangeable Preferred Stock in the
form of Exhibit A hereto.
E. Amendment of this Article. The Corporation may not amend, alter,
change or repeal in any manner adverse to the holders of the Class D Common
Stock or Class F Common Stock the rights or preferences of the holders of
the Class D Common Stock or Class F Common Stock contained in this Article
4 without the consent of the holders of 95% of the Class D Common Stock or
the Class F Common Stock, as the case may be.
THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
written consent of the holders of
5
<PAGE>
a majority of all outstanding shares of each class entitled to vote thereon in
accordance with the provisions of Section 228 of the General Corporation Law.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this Certificate this 1st
day of October, 1997.
CLARK USA, INC.
/s/ Maura J. Clark
By:_________________________________
Name: Maura J. Clark
Title: Executive Vice President &
Chief Financial Officer
Attested By:
/s/ Katherine D. Knocke
__________________________
Name: Katherine D. Knocke
Title: Secretary
7
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 11 1/2% SENIOR CUMULATIVE
EXCHANGEABLE PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
- --------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation law of the State of Delaware
- --------------------------------------------------------------------------------
Clark USA, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Amended and Restated Certificate
of Incorporation, as amended (hereinafter referred to as the "Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, at a meeting
held on September 18, 1997, duly approved and adopted the following resolution
(the "Certificate of Designations"):
RESOLVED, that, pursuant to the authority vested in the Board of Directors
by its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of 11 1/2% Senior Cumulative Exchangeable
Preferred Stock, par value $0.01 per share, with a stated value of $1,000 per
share, consisting of 250,000 shares, having the designations, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in the
Certificate of Incorporation and in this Certificate of Designations as follows:
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Corporation a class of Preferred Stock
designated as the "11 1/2% Senior Cumulative Exchangeable Preferred Stock." The
number of shares constituting such series shall be 250,000 and are referred to
as the "Exchangeable Preferred Stock," of which 63,000 shares of Exchangeable
Preferred Stock shall be initially issued, with an additional 124,000 shares
reserved for issuance in accordance with paragraph (c)(i) hereof and with the
remaining shares issuable as otherwise permitted hereunder or under applicable
law. The liquidation preference of the Exchangeable Preferred Stock shall be
$1,000 per share.
(b) Rank. The Exchangeable Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Corporation, rank (i) senior to all classes of Common Stock of the
Corporation and to each other class of Capital Stock of the Corporation or
series of Preferred Stock of the Corporation hereafter
<PAGE>
established the terms of which do not expressly provide that it ranks senior to,
or on a parity with, the Exchangeable Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up or dissolution
of the Corporation (collectively referred to, together with all classes of
Common Stock of the Corporation, as "Junior Securities"); (ii) subject to
certain conditions, on a parity with the Existing Preferred Stock and any class
of Capital Stock of the Corporation or series of Preferred Stock of the
Corporation hereafter established the terms of which expressly provide that such
class or series will rank on a parity with the Exchangeable Preferred Stock as
to dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Corporation (collectively referred to as "Parity
Securities"); and (iii) junior to each other class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter
established the terms of which expressly provide that such class or series will
rank senior to the Exchangeable Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up or dissolution of the Corporation
(collectively referred to as "Senior Securities").
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding shares
of Exchangeable Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available
therefor, distributions in the form of dividends on each share of
Exchangeable Preferred Stock, at a rate per annum equal to 11 1/2% of the
liquidation preference per share of the Exchangeable Preferred Stock,
payable semi-annually. All dividends shall be cumulative, whether or not
declared, on a daily basis from the date of issuance of the Exchangeable
Preferred Stock and shall be payable semi-annually in arrears on each
Dividend Payment Date, commencing April 1, 1998. Dividends declared may be
paid, at the Corporation's option, on any Dividend Payment Date occurring
on or prior to October 1, 2002, either in cash or by the issuance of
additional shares of Exchangeable Preferred Stock (and, at the
Corporation's option, payment of a whole share (after rounding up) or cash
in lieu of a fractional share) having an aggregate liquidation preference
equal to the amount of such dividends. In the event that on or prior to
October 1, 2002, dividends are declared and paid through the issuance of
additional shares of Exchangeable Preferred Stock, as provided in the
previous sentence, such dividends shall be deemed paid in full and shall
not accumulate. Each dividend shall be payable to the Holders of record as
they appear on the stock books of the Corporation on the Dividend Record
Date immediately preceding the related Dividend Payment Date. Dividends
shall cease to accumulate in respect of the Exchangeable Preferred Stock on
the Exchange Date or on the date of their earlier redemption (including a
Special Redemption) unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect of
the Exchangeable Preferred Stock on such Exchange Date or shall have failed
to pay the relevant redemption price on the date fixed for redemption.
2
<PAGE>
(ii) All dividends paid with respect to shares of the Exchangeable
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any dividends
on shares of the Exchangeable Preferred Stock at any time.
(iv) Dividends accruing after October 1, 2002, on the Exchangeable
Preferred Stock for any past Dividend Period and dividends in connection
with any optional redemption pursuant to paragraph (e)(i) may be declared
and paid at any time, without reference to any regular Dividend Payment
Date, to Holders of record on such date, not more than forty-five (45) days
prior to the payment thereof, as may be fixed by the Board of Directors.
(v) Dividends payable on the Exchangeable Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period
for which payable.
(vi) So long as any shares of Exchangeable Preferred Stock are
outstanding, the Corporation shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any Parity Securities or
Junior Securities or any warrants, rights, calls or options exercisable for
or convertible into any Parity Securities or Junior Securities, and shall
not permit any corporation or other entity directly or indirectly
controlled by the Corporation to purchase or redeem any Parity Securities
or Junior Securities or any such warrants, rights, calls or options,
except, in any case, in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the
Corporation) of, other shares of the Corporation's Capital Stock (other
than Disqualified Capital Stock) or options, warrants or other rights to
purchase shares of Capital Stock (other than Disqualified Stock) of the
Corporation, unless full cumulative dividends determined in accordance
herewith on the Exchangeable Preferred Stock have been paid (or are deemed
paid) in full.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders of
shares of Exchangeable Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution
to its stockholders, an amount in cash equal to the liquidation preference
for each share outstanding, plus, without duplication, an amount in cash
equal to accumulated and unpaid dividends thereon to the date fixed for
liquidation,
3
<PAGE>
dissolution or winding-up (including an amount equal to a prorated dividend
for the period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding-up), before any distribution shall be
made or any assets distributed to the holders of any Junior Securities
including, without limitation, Common Stock of the Corporation. Except as
provided in the preceding sentence, Holders of Exchangeable Preferred Stock
shall not be entitled to any distribution in the event of any liquidation,
dissolution or winding-up of the affairs of the Corporation. If upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the amounts payable with respect to the Exchangeable Preferred
Stock and all other Parity Securities are not sufficient to pay in full the
liquidation payments payable to the Holders of outstanding shares of the
Exchangeable Preferred Stock and all Parity Securities, then the holders of
all such shares shall share equally and ratably in such distribution of
assets first in proportion to the full liquidation preference to which each
is entitled until such preferences are paid in full, and then in proportion
to their respective amounts of accumulated but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption.
(A) The Corporation may, at the option of the Board of Directors,
redeem, to the extent of funds legally available therefor, at any time
on and after October 1, 2002, in whole or in part, in the manner
provided for in paragraph (e)(iii) hereof, any or all of the shares of
the Exchangeable Preferred Stock, at the redemption prices (expressed
as a percentage of the liquidation preference) set forth below, plus,
without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the
"Optional Redemption Price") if redeemed during the 12-month period
beginning October 1 of each of the years set forth below:
<TABLE>
<CAPTION>
<S> <C>
2002....................... 105.750%
2003....................... 103.833%
2004....................... 101.917%
2005 and thereafter........ 100.000%
</TABLE>
4
<PAGE>
; provided that no redemption pursuant to this paragraph (e)(i)(A)
shall be authorized or made unless prior thereto all accumulated and
unpaid dividends are declared and paid in full, or declared and a sum
in cash set apart sufficient for such payment, on the Exchangeable
Preferred Stock for all Dividend Periods terminating on or prior to
the Redemption Date.
(B) In addition to the foregoing paragraph (e)(i)(A), the
Corporation may, at its option, use the Net Available Proceeds of one
or more Equity Offerings to redeem for cash, in whole or in part,
shares of Exchangeable Preferred Stock in the manner provided for in
paragraph (e)(iii) hereof, at a redemption price equal to 107% prior
to October 1, 1998, 108% thereafter but prior to October 1, 1999 and
109% thereafter but prior to October 1, 2000 of the liquidation
preference thereof, plus, without duplication, an amount in cash equal
to all accumulated and unpaid dividends to the Redemption Date
(including, without limitation, an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately
prior to the Redemption Date to the Redemption Date) (the "Equity
Offering Redemption Price"). Any such redemption pursuant to this
paragraph (e)(i)(B) must occur on or prior to ninety (90) days after
the receipt by the Corporation of the proceeds of any such Equity
Offering. The Corporation may not use the Net Available Proceeds of
any Equity Offerings which alone or combined with a related series of
transactions result in a Change of Control to redeem shares of
Exchangeable Preferred Stock pursuant to this paragraph.
(C) In the event of a redemption pursuant to paragraph (e)(i)(A)
or (e)(i)(B) hereof of only a portion of the then outstanding shares
of the Exchangeable Preferred Stock, the Corporation shall effect such
redemption on a pro rata basis according to the number of shares held
by each Holder of the Exchangeable Preferred Stock, except that the
Corporation may redeem such shares held by Holders of fewer than 10
shares (or shares held by Holders who would hold less than 10 shares
as a result of such redemption), as may be determined by the
Corporation.
(ii) Mandatory Redemption. On October 1, 2009, the Corporation shall
redeem, to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the
Exchangeable Preferred Stock then outstanding at a redemption price equal
to 100% of the liquidation preference per share, plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per share
(including, without limitation, an amount equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Mandatory Redemption Price").
5
<PAGE>
(iii) Procedures for Redemption.
(A) At least thirty (30) days and not more than sixty (60) days
prior to the date fixed for any redemption of the Exchangeable
Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record
on the record date fixed for such redemption of the Exchangeable
Preferred Stock at such Holder's address as it appears on the stock
books of the Corporation; provided that no failure to give such notice
nor any deficiency therein shall affect the validity of the procedure
for the redemption of any shares of Exchangeable Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Corporation
has failed to give said notice or to whom such notice was defective.
The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A), (e)(i)(B) or (e)(ii) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption
Price or the Equity Offering Redemption Price, as the case may
be;
(3) whether all or less than all the outstanding shares of
the Exchangeable Preferred Stock are to be redeemed and the total
number of shares of the Exchangeable Preferred Stock being
redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price designated,
his certificate or certificates representing the shares of
Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Corporation defaults in the payment of
the Optional Redemption Price, the Mandatory Redemption Price or
the Equity Offering Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock shall surrender
the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Corporation, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional
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<PAGE>
Redemption Price, Mandatory Redemption Price or Equity Offering
Redemption Price, as the case may be, for such shares shall be payable
in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Exchangeable Preferred Stock called for redemption
shall cease to accumulate on the Redemption Date, and all rights of
the Holders of redeemed shares shall terminate with respect thereto on
the Redemption Date, other than the right to receive the Optional
Redemption Price, the Mandatory Redemption Price or the Equity
Offering Redemption Price, as the case may be, without interest;
provided, however, that if a notice of redemption shall have been
given as provided in paragraph (iii)(A) above and the funds necessary
for redemption (including an amount in respect of all dividends that
will accrue to the Redemption Date) shall have been irrevocably
deposited in trust for the equal and ratable benefit of the Holders of
the shares to be redeemed, then, at the close of business on the day
on which such funds are segregated and set aside, the Holders of the
shares to be redeemed shall cease to be stockholders of the
Corporation and shall be entitled only to receive the Optional
Redemption Price, the Mandatory Redemption Price or the Equity
Offering Redemption Price, as the case may be, without interest.
(f) Voting Rights.
(i) The Holders of Exchangeable Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraph (ii) and (iii)
below, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Corporation.
(ii) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend its Certificate of
Incorporation so as to: (A) affect materially and adversely the specified
rights, preferences, privileges or voting rights of Holders of shares of
Exchangeable Preferred Stock; or (B) authorize the issuance of additional
shares of any class of Senior Securities (or amend the provisions of any
existing class of Capital Stock to make such class of Capital Stock Senior
Securities), without the affirmative vote or consent of Holders of at least
a majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in
person or by proxy, either in writing or by resolution adopted at an annual
or special meeting.
7
<PAGE>
Notwithstanding the previous sentence (1) the creation, authorization or
issuance of any shares of any Junior Securities or Parity Securities or (2)
the increase or decrease in the amount of authorized Capital Stock of any
class constituting Junior Securities or Parity Securities, including
Preferred Stock constituting Junior Securities or Parity Securities, shall
not require the consent of Holders of Exchangeable Preferred Stock and
shall not be deemed to affect adversely the rights, preferences, privileges
or voting rights of Holders of Exchangeable Preferred Stock.
(iii) (A) If (1) after October 1, 2002, dividends on the
Exchangeable Preferred Stock required to be paid in cash are in
arrears and unpaid for three (3) or more semi-annual Dividend Periods
(whether or not consecutive) (a "Dividend Default"); or (2) the
Corporation fails to redeem all of the then outstanding shares of
Exchangeable Preferred Stock on or before October 1, 2009; or (3) the
Corporation fails to make a Change of Control Offer following a Change
of Control if such Change of Control Offer is required by paragraph
(h) hereof and/or fails to purchase shares of Exchangeable Preferred
Stock from Holders who elect to have such shares purchased pursuant to
the Change of Control Offer; (4) the Corporation breaches or violates
one of the provisions set forth in any of paragraphs (l)(i)
(Limitation on Indebtedness), (l)(iii) (Limitation on Restricted
Payments) or (l)(iv) (Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries of the Corporation)
hereof and the breach or violation continues for a period of sixty
(60) days or more after the Corporation receives notice thereof
specifying the default from the Holders of at least 25% of the shares
of Exchangeable Preferred Stock then outstanding, or (5) the
Corporation fails to pay at the final stated maturity (giving effect
to any extensions thereof) the principal amount of any Indebtedness of
the Corporation or any Subsidiary of the Corporation, or the final
stated maturity of any such Indebtedness is accelerated, if the
aggregate principal amount of such Indebtedness, together with the
aggregate principal amount of any other such Indebtedness in default
for failure to pay principal at the final stated maturity (giving
effect to any extensions thereof) or which has been accelerated,
aggregates $25 million or more at any time, in each case, after a 20-
day period during which such default shall not have been cured or such
acceleration rescinded, then in the case of any of clauses (1) - (5)
the number of directors constituting the Board of Directors shall be
adjusted by the number, if any, necessary to permit the Holders of
Exchangeable Preferred Stock, voting as one class together with the
holders of shares of any Parity Securities issued after the Issue Date
upon which like voting rights have been conferred and are then
exercisable (each such Parity Securities with such exercisable voting
rights and, after the occurrence of a Voting Rights Triggering Event
(as defined below), each share of Exchangeable Preferred Stock,
individually a "Triggered Security" and collectively the "Triggered
Securities"), to elect the lesser of two directors and that number of
directors constituting 25% of
8
<PAGE>
the members of the Board of Directors. Each such event described in
clauses (1) - (5) is a "Voting Rights Triggering Event." Upon
occurrence of such Voting Rights Triggering Event, Holders of a
majority of the issued and outstanding shares of Exchangeable
Preferred Stock, voting as one class together with the holders of any
other Triggered Securities, shall have the right to elect the lesser
of two directors or that number of directors constituting 25% of the
members of the Board of Directors at a meeting therefor called and at
every subsequent meeting at which the terms of office of the directors
so elected by the holders of the Triggered Securities expire (other
than as described in subparagraph (f)(iii)(B) below). The voting
rights provided herein shall be the exclusive remedy at law or in
equity of the holders of the Exchangeable Preferred Stock for any
Voting Rights Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock, to
elect members of the Board of Directors as set forth in subparagraph
(f)(iii)(A) above shall continue until such time as (x) in the event
such right arises due to a Dividend Default, all accumulated dividends
that are required to be paid in cash and that are in arrears on the
Exchangeable Preferred Stock are paid in full in cash; and (y) in all
other cases, the failure, breach or default giving rise to such Voting
Rights Triggering Event is remedied, cured or waived by the Holders of
at least a majority of the shares of Exchangeable Preferred Stock then
outstanding and entitled to vote thereon, at which time (1) the
special right of the Holders of Exchangeable Preferred Stock so to
vote as a class for the election of directors and (2) the term of
office of each of the directors elected by the Holders of the
Triggered Securities shall each terminate and the remaining directors
shall constitute the entire Board of Directors. At any time after
voting power to elect directors shall have become vested and be
continuing in the Holders of Exchangeable Preferred Stock pursuant to
this paragraph (f)(iii), or if vacancies shall exist in the offices of
directors elected by the Holders of Exchangeable Preferred Stock, a
proper officer of the Corporation may, and upon the written request of
the holders of record of at least twenty-five percent (25%) of the
shares of Triggered Securities then outstanding addressed to the
secretary of the Corporation shall, call a special meeting of the
holders of Triggered Securities, for the purpose of electing the
directors which such Holders are entitled to elect. If such meeting
shall not be called by a proper officer of the Corporation within
twenty (20) days after personal service of said written request upon
the secretary of the Corporation, or within twenty (20) days after
mailing the same within the United States by certified mail, addressed
to the secretary of the Corporation at its principal executive
offices, then the holders of record of at least twenty-five percent
(25%) of the outstanding shares of Triggered Securities may designate
in writing one of their number to call such meeting at the reasonable
expense of the Corporation, and such meeting may be called by the
Person so designated upon
9
<PAGE>
the notice required for the annual meetings of stockholders of the
Corporation and shall be held at the place for holding the annual
meetings of stockholders. Any holder of Triggered Securities so
designated shall have, and the Corporation shall provide, access to
the lists of stockholders to be called pursuant to the provisions
hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Exchangeable Preferred Stock shall have the
right, voting together as a separate class with the holders of shares
of any other Triggered Securities, to elect directors as aforesaid,
the presence in person or by proxy of the holders of outstanding
shares representing at least a majority of the voting power of the
Triggered Securities shall be required to constitute a quorum of such
Triggered Securities.
(D) Any vacancy occurring in the office of a director elected by
the holders of Triggered Securities may be filled by the remaining
directors elected by the holders of Triggered Securities unless and
until such vacancy shall be filled by the holders of Triggered
Securities.
(iv) In any case in which the holders of Triggered Securities shall be
entitled to vote pursuant to this paragraph (f) or pursuant to Delaware
law, each Holder of Exchangeable Preferred Stock entitled to vote with
respect to such matter shall be entitled to one vote for each $1,000 in
liquidation preference of Triggered Securities.
(g) Exchange.
(i) Requirements.
The outstanding shares of Exchangeable Preferred Stock are
exchangeable, in whole but not in part, on a pro rata basis, at the option
of the Corporation, at any time on any Dividend Payment Date, for the
Corporation's 11 1/2% Exchange Debentures due 2009 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the Indenture,
dated as of October 1, 1997, between the Corporation and Bankers Trust
Company, as trustee (the "Exchange Indenture"), a copy of which is on file
with the secretary of the Corporation; provided, however, that any such
exchange may only be made if on or prior to the date of such exchange (1)
the Corporation has paid (or is deemed to have paid) all accumulated
dividends on the Exchangeable Preferred Stock (including the dividends
payable on the date of exchange) and there shall be no contractual
impediment to such exchange; (2) there shall be legally available funds
sufficient therefor; (3) immediately after giving effect to such exchange,
no Default or Event of Default (each as defined in the Exchange Indenture)
would exist under the Exchange Indenture and no default or event of default
would exist under the Existing
10
<PAGE>
Note Indentures and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time would be caused
thereby; (4) that the Exchange Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, if required at the time of such
exchange; and (5) the Corporation shall have delivered a written opinion to
the effect that all conditions to be satisfied prior to such exchange have
been satisfied. The exchange rate shall be $1.00 principal amount of
Exchange Debentures for each $1.00 of liquidation preference of
Exchangeable Preferred Stock, including, to the extent necessary, Exchange
Debentures in principal amounts less than $1,000; provided that the
Corporation shall have the right, at its option, to pay cash in an amount
equal to the principal amount of that portion of any Exchange Debenture
that is not an integral multiple of $1,000 instead of delivering an
Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange.
(A) At least thirty (30) days and not more than sixty (60) days
prior to the date fixed for exchange, written notice (the "Exchange
Notice") shall be given by first-class mail, postage prepaid, to each
Holder of record on the record date fixed for such exchange of the
Exchangeable Preferred Stock at such Holder's address as the same
appears on the stock books of the Corporation; provided that no
failure to give such notice nor any deficiency therein shall affect
the validity of the procedure for the exchange of any shares of
Exchangeable Preferred Stock to be exchanged except as to the Holder
or Holders to whom the Corporation has failed to give said notice or
to whom such notice was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his certificate
or certificates representing the shares of Exchangeable Preferred
Stock to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date
whether or not certificates for shares of Exchangeable Preferred
Stock are surrendered for exchange on such Exchange Date unless
the Corporation shall default in the delivery of Exchange
Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on such
Exchange Date.
11
<PAGE>
(B) On or before the Exchange Date, each Holder of Exchangeable
Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The
Corporation shall cause the Exchange Debentures to be executed on the
Exchange Date and, upon surrender in accordance with the Exchange
Notice of the certificates for any shares of Exchangeable Preferred
Stock so exchanged, duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), such shares shall be
exchanged by the Corporation into Exchange Debentures. The
Corporation shall pay interest on the Exchange Debentures at the rate
and on the dates specified therein from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Exchange Indenture
shall have been duly executed and delivered by the Corporation and the
trustee thereunder and (2) all Exchange Debentures necessary for such
exchange shall have been duly executed by the Corporation and
delivered to the trustee under the Exchange Indenture with irrevocable
instructions to authenticate the Exchange Debentures necessary for
such exchange, then the rights of the Holders of Exchangeable
Preferred Stock so exchanged as stockholders of the Corporation shall
cease (except the right to receive Exchange Debentures, an amount in
cash equal to the amount of accrued and unpaid dividends to the
Exchange Date and, if the Corporation so elects, cash in lieu of any
Exchange Debenture not an integral multiple of $1,000 and/or $1.00),
and the Person or Persons entitled to receive the Exchange Debentures
issuable upon exchange shall be treated for all purposes as the
registered holder or holders of such Exchange Debentures as of the
Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g): (A) the Corporation shall not be entitled
to exchange the Exchangeable Preferred Stock for Exchange Debentures if
such exchange, or any term or provision of the Exchange Indenture or the
Exchange Debentures, or the performance of the Corporation's obligations
under the Exchange Indenture or the Exchange Debentures, shall violate any
applicable law or if, at the time of such exchange, the Corporation is
insolvent or if it would be rendered insolvent by such exchange; and (B) in
the event that the Exchange Indenture is amended other than as would be (or
is) permitted by Section 901 thereof if any Exchange Debentures were (or
are) outstanding, the Corporation shall not have the right to exchange the
Exchangeable Preferred Stock then outstanding for Exchange Debentures
unless prior to such exchange the Corporation obtains the affirmative vote
or consent of holders of at least a majority in liquidation preference of
the Exchangeable Preferred Stock then outstanding (or, in the case of
provisions of the Exchange Indenture so amended would require the unanimous
consent of the holder of Exchange Debentures, the affirmative vote or
consent of all holders of the Exchangeable
12
<PAGE>
Preferred Stock then outstanding).
(h) Change of Control.
(i) Upon the occurrence of a Change of Control after October 1, 2005,
the Corporation shall notify the Holders of the Exchangeable Preferred
Stock in writing of such occurrence and shall make an offer to purchase
(the "Change of Control Offer") all or any part (having a liquidation
preference equal to $1,000 or an integral multiple thereof) of each
holder's then outstanding shares of Exchangeable Preferred Stock at a
purchase price of 101% of the aggregate liquidation preference thereof
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including, without limitation, an amount in
cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Change of Control Payment Date to the Change
of Control Payment Date).
(ii) Within 30 days following the consummation of a transaction
resulting in a Change of Control, the Corporation shall send, by first
class mail, postage prepaid, a notice to each Holder of Exchangeable
Preferred Stock at such Holder's address as it appears on the stock books
of the Corporation, which notice shall govern the terms of the Change of
Control Offer. The notice to the Holders shall contain all instructions
and materials necessary to enable such Holders to tender Exchangeable
Preferred Stock pursuant to the Change of Control Offer. Such notice shall
state
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that
all Exchangeable Preferred Stock validly tendered and not withdrawn
will be accepted for payment;
(B) the purchase price (including the amount of accumulated and
unpaid dividends, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 70 days from the date such notice
is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not tendered
will continue to accumulate dividends;
(D) that, unless the Corporation defaults in making payment
therefor, any share of Exchangeable Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to
accumulate dividends after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will
be required to surrender the certificate or certificates representing
such shares properly endorsed
13
<PAGE>
for transfer together with such customary documents as the Corporation
and the transfer agent may reasonably require, in the manner and at
the place specified in the notice prior to the close of business on
the Business Day prior to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if
the Corporation receives, not later than five (5) Business Days prior
to the Change of Control Payment Date, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the
number of shares of Exchangeable Preferred Stock the Holder delivered
for purchase and a statement that such Holder is withdrawing his
election to have such shares of Exchangeable Preferred Stock
purchased;
(G) that Holders whose shares of Exchangeable Preferred Stock are
purchased only in part will be issued a new certificate representing
the unpurchased shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of
Control.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Exchangeable Preferred Stock in connection with a Change
of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A)
accept for payment the shares of Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the Holders of
shares so accepted the purchase price therefor in cash and (C) cancel and
retire each surrendered certificate. Unless the Corporation defaults in the
payment for the shares of Exchangeable Preferred Stock tendered pursuant to
the Change of Control Offer, dividends will cease to accumulate with
respect to the shares of Exchangeable Preferred Stock tendered and all
rights of Holders of such tendered shares will terminate, except for the
right to receive payment therefor, on the Change of Control Payment Date.
(v) If the purchase of the Exchangeable Preferred Stock would violate
or constitute a default under the Existing Note Indentures, then,
notwithstanding anything to the contrary contained above, prior to
complying with the foregoing provisions, but in any event within 30 days
following the consummation of a transaction resulting in a Change of
Control, the Corporation shall, to the extent needed to permit such
purchase of the Exchangeable Preferred Stock, either (A) repay in full all
such Indebtedness under the Existing Notes or (B) obtain the requisite
consents, if any, under the Existing Note Indentures required to permit the
repurchase of Exchangeable Preferred Stock required by this paragraph (h).
Until the requirements of the immediately preceding sentence are
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<PAGE>
satisfied, the Corporation shall not make, and shall not be obligated to
make, any Change of Control Offer; provided that the Corporation's failure
to comply with the provisions of this paragraph (h)(v) shall constitute a
Voting Rights Triggering Event.
(i) Conversion or Exchange. The Holders of shares of Exchangeable Preferred
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of Exchangeable
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares as Exchangeable Preferred Stock must be in
compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Indebtedness. The Corporation shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create,
issue, incur, assume, guarantee or become liable for in any other manner,
contingently or otherwise, or extend the maturity of or become responsible
for the payment of (collectively, "incur") any Indebtedness (including
Acquired Debt) other than (i) the Exchange Debentures and (ii) Permitted
Indebtedness, unless after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Corporation's Consolidated Operating Cash Flow Ratio is greater than 2 to
1. Notwithstanding the foregoing, the Corporation'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 Corporation.
(ii) Limitation on Certain Indebtedness. The Corporation shall not
incur or permit to exist any Indebtedness that is by its terms both (i)
subordinate in right of payment to any Senior Debt and (ii) senior in right
of payment to the Exchange Debentures, if issued, in each case other than
by reason of its maturity. The Corporation shall not incur or permit to
exist any Indebtedness that is by its terms subordinate in right of payment
to the Exchange Debentures unless such Indebtedness constitutes
15
<PAGE>
Subordinated Debt.
(iii) Limitation on Restricted Payments. The Corporation 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
Voting Rights Triggering Event or event that, with the giving of notice or
the passing of time, or both, would constitute a Voting Rights Triggering
Event shall have occurred and be continuing or would occur as a consequence
thereof, and (ii) 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
Corporation and evidenced by a Board Resolution), the aggregate amount of
all Restricted Payments declared or made subsequent to June 30, 1997, 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 Corporation for the period
(taken as one accounting period) from June 30, 1997, to the end of the
Corporation'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 Corporation and evidenced by a Board
Resolution), received by the Corporation since June 30, 1997, from any
Person other than a Subsidiary of the Corporation as a result of the
issuance of Capital Stock (other than any Disqualified Capital Stock) of
the Corporation including such Capital Stock issued upon conversion of
Indebtedness or upon exercise of warrants and any contributions to the
capital of the Corporation received by the Corporation from any such Person
plus (c) $50 million plus (d) to the extent that any Restricted Investment
that was made after June 30, 1997, is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment. 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
Corporation, such dividend shall be deemed to be paid at the date of
declaration.
The foregoing shall not be violated by reason of (a) the payment of
any dividends or distributions payable solely in shares of the
Corporation's Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire the Corporation's Capital Stock (other
than Disqualified Stock), (b) the payment of dividends in accordance with
the terms of the Exchangeable Preferred Stock, (c) 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, (d) the retirement of any shares of the Corporation's Capital Stock
in exchange for, or out of the proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Corporation) of, other shares of
its Capital Stock (other than Disqualified Capital Stock) or options,
warrants or
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other rights to purchase the Corporation's Capital Stock (other than
Disqualified Stock), (e) the Chevron Payment, (f) the AOC Payment, (g) the
Gulf Payments, (h) the making of any payment in redemption of Capital Stock
of the Corporation or options to purchase such Capital Stock granted to
officers or employees of the Corporation pursuant to any stock option,
stock purchase or other stock plan approved by the board of directors of
the Corporation in connection with the severance or termination of officers
or employees not to exceed $4 million per annum and (i) the exchange of the
Exchangeable Preferred Stock, in accordance with its terms, for the
Exchange Debentures, and the making of payments of principal (premium, if
any), and interest thereon in accordance with the Exchange Debenture
Indenture.
The board of directors of the Corporation may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not
cause a Voting Rights Triggering Event or event that, with the giving of
notice or the passing of time, or both, would constitute a Voting Rights
Triggering Event; provided that in no event shall the business currently
operated by the Corporation and Clark be transferred to or held by an
Unrestricted Subsidiary. For purposes of making such determination, all
outstanding Investments by the Corporation 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.
(iv) Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries of the Corporation. The Corporation shall not, and
shall not permit any Restricted Subsidiary of the Corporation 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 Corporation to (i) pay dividends or make
any other distributions on any such Restricted Subsidiary's Capital Stock
or pay any Indebtedness owed to the Corporation or any Restricted
Subsidiary of the Corporation, (ii) make any loans or advances to the
Corporation or any Restricted Subsidiary of the Corporation, or (iii)
transfer any of its property or assets to the Corporation or any Restricted
Subsidiary of the Corporation, except for, in the case of clauses (i), (ii)
and (iii) above, any restrictions (a) existing hereunder or under the
Exchange Indenture and any restrictions existing on the Issue Date pursuant
to any agreement relating to Existing Indebtedness of the Corporation's
Restricted Subsidiaries, (b) pursuant to an agreement relating to
Indebtedness incurred by such Restricted
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Subsidiary prior to the date on which such Restricted Subsidiary was
acquired by the Corporation 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 Corporation not to have
the funds necessary to redeem the Exchangeable Preferred Stock (including
payment of liquidation value and accrued and unpaid dividends, including
Additional Dividends) upon any mandatory redemption thereof.
(v) Limitation on Transactions with Shareholders and Affiliates. The
Corporation shall not, and shall not permit any Restricted Subsidiary of
the Corporation 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 Corporation or of any
Restricted Subsidiary of the Corporation (other than transactions between
or among the Corporation and/or its Restricted Subsidiaries except for
Restricted Subsidiaries owned in any part by the Principal Shareholders) or
(ii) any Affiliate of the Corporation (other than transactions between or
among the Corporation 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 (a) are set
forth in writing and (b) are as favorable to the Corporation 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 $15 million per annum, the
Corporation 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 $15 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 Corporation must receive a favorable opinion
from a nationally recognized investment banking firm chosen by the
Corporation or, if no such
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investment banking firm is in a position to provide such opinion, a similar
firm chosen by the Corporation (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 Shareholder/Affiliate Transactions involving the purchase or
sale of crude oil in the ordinary course of the Corporation's business, so
long as such transactions are priced in line with the market price of a
crude benchmark and the pricing 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.
(vi) Limitation on Sale of Capital Stock of Restricted Subsidiaries.
The Corporation shall not permit (i) any Person (other than the Corporation
or any of its Wholly-Owned Restricted Subsidiaries) to own any Capital
Stock of Clark, or (ii) any Person (other than the Corporation or any of
its Restricted Subsidiaries) to own 50% or more of the Capital Stock of any
of its Restricted Subsidiaries other than Clark; provided, however, that
this provision shall not prohibit (a) the issuance and sale of all, but not
less than all, of the issued and outstanding Capital Stock of any
Restricted Subsidiary owned by the Corporation or any of its Restricted
Subsidiaries in compliance with the other provisions of this Indenture, (b)
the ownership by directors of director's qualifying shares or (c) the
issuance and sale of nonvoting, nonconvertible preferred stock of any
Restricted Subsidiary, provided that the aggregate amount of all nonvoting,
nonconvertible preferred stock of Restricted Subsidiaries does not exceed
5% of Consolidated Net Tangible Assets of the Corporation.
(vii) Provision of Financial Information. So long as any of the
Exchangeable Preferred Stock is outstanding, the Corporation will file with
the Commission the annual reports, quarterly reports and other documents
that the Corporation would have been required to file with the Commission
pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Corporation
were subject to such Sections, and the Corporation will provide to all
Holders copies of such reports and documents. In addition, the Corporation
has agreed that, for so long as any Exchangeable Preferred Stock remains
outstanding, it will furnish to all holders thereof and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144(d)(4) under the Securities
Act.
(viii) Mergers, Consolidations and Certain Sales of Assets. The
Corporation shall not consolidate or merge with or into (whether or not the
Corporation 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)
if the
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Corporation is not the Surviving Person, the Exchangeable Preferred
Stock shall be converted into or exchanged for and shall become shares of
such successor, transferee or resulting Person, having in respect of such
successor, transferee or resulting Person, the same powers, preferences and
relative, participating, optional or other special rights and
qualifications, limitations and restrictions thereon that the Exchangeable
Preferred Stock had immediately prior to such transaction, (iii) at the
time of and immediately after such transaction no Voting Rights Triggering
Event or event that, with the passing of time or the giving of notice, or
both, would become a Voting Rights Triggering Event shall have occurred
and be continuing, (iv) the Surviving Person will have Consolidated
Adjusted Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from the transaction) equal to or
greater than 90% of the Consolidated Adjusted Net Worth of the Corporation
immediately preceding the transaction, and (v) after giving pro forma
effect to the transaction, 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 (l)(i) above. Upon any such
sale of all or substantially all of the assets of the Corporation to
another Person or any merger or consolidation where the Corporation is not
the surviving entity, such Person or survivor shall become the obligor in
respect of the Exchangeable Preferred Stock and the Corporation will be
relieved of all further obligations and covenants hereunder.
(ix) Limitation on Issuance of Guarantees of Indebtedness. The
Corporation shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee or secure the payment of any Indebtedness of the
Corporation that is expressly by its terms subordinate or junior in right
of payment (other than by reason of maturity) to any other Indebtedness of
the Corporation.
(m) Definitions. As used in this Certificate of Designations, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"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
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contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"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
the Corporation 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 transition 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 Wholly Owned 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
pursuant to the contracts governing the Gulf Transaction shall not be
deemed an Asset Disposition hereunder.
"Board of Directors" shall have the meaning ascribed to it in the
introductory paragraph of this Certificate of Designations.
"Borrowing Base" means, as of any date, an amount equal to the sum of
(i) 95% of the accounts receivable owned by the Corporation 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 Corporation and its Restricted Subsidiaries as of such date, plus
(iii) 100% of the cash and Cash Equivalents owned by the Corporation 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, minus (iv) the
principal amount of borrowings outstanding as of such date under the Credit
Agreement to the extent that the amount of such borrowings exceeds the sum
of clauses (i) and (ii) above, all of the foregoing calculated on a
consolidated basis in accordance with GAAP.
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"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by
law 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.
"Certificate of Incorporation" shall have the meaning ascribed to it
in the introductory paragraph of this Certificate of Designations.
"Change of Control" means any transaction the result of which is that
any Person (an "Acquiring Person") other than TrizecHahn, or a Person, a
majority of whose voting equity is owned by TrizecHahn, becomes the
Beneficial Owner, directly or indirectly, of shares of stock of the
Corporation, Clark or any Subsidiary of the Corporation or TrizecHahn that
owns, directly or indirectly, any equity interest in Clark, as the case may
be, entitling such Acquiring Person to exercise 50% or more of the total
voting power of
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all classes of stock of the Corporation, Clark or such Subsidiary, 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 Offer" has the meaning ascribed to it in Section
(h)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
in paragraph (h)(ii)(B) hereof.
"Chevron Payment" means that certain contingent payment obligation of
the Corporation 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 the Corporation and Chevron
U.S.A. Inc., as amended.
"Clark" means Clark Refining & Marketing, Inc., a Delaware corporation
and a Wholly Owned Subsidiary of the Corporation.
"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 instrument such Commission is not existing
and performing the duties now assigned to it, then the body performing such
duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of such Person, to shares of Capital Stock of any
other class of such Person.
"Consolidated Adjusted Net Worth" of any Person means the total amount
of consolidated stockholder's equity (par value plus additional paid-in
capital 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 Quarter for which such determination is
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 revaluations 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
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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; and (vii) the cumulative foreign currency translation
adjustment, if any.
"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, whether or not distributed to the Corporation 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
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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, 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 and Preferred Stock
Dividends 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 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 on a pro forma basis as if such acquisition, sale or
disposition 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.
"Corporation" has the meaning ascribed to it in the introductory
paragraph of this Certificate of Designations.
"Credit Agreement" means that certain Second Amended and Restated
Credit Agreement, dated as of September 25, 1997, by and among Clark 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, renewed,
refunded, replaced or refinanced from time to time.
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"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
Corporation 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,
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 October 1, 2009.
"Dividend Default" shall have the meaning ascribed to it in paragraph
(f)(iii) hereof.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each semi-annual period commencing on a Dividend Payment Date and ending
one day before the next Dividend Payment Date.
"Dividend Record Date" means March 15 and September 15 of each year.
"Equity Offering" means any offering of Junior Securities.
"Equity Offering Redemption Price" shall have the meaning ascribed to
it in paragraph (e)(i)(B) hereof.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Exchange Date" means the date of issuance of any Exchange Debentures
in accordance with paragraph (g) hereof.
"Exchange Debentures" means the Corporation's 11 1/2% Exchange
Debentures due 2009 that the Corporation may issue at its election in
exchange for the Exchangeable Preferred Stock in accordance with the terms
of the Exchangeable Preferred Stock.
"Exchange Indenture" shall have the meaning ascribed to it in
paragraph (g)(i) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
(g)(ii)(A)
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hereof.
"Exchangeable Preferred Stock" shall have the meaning ascribed to it
in paragraph (a) hereof.
"Existing Indebtedness" means any outstanding Indebtedness of the
Corporation and its Subsidiaries as of the Issue Date.
"Existing Note Indentures" means the indentures governing the
Corporation's 10-7/8% Series B Senior Notes due 2005 and the Corporation's
Senior Secured Zero Coupon Notes due 2000, Series A.
"Existing Notes" means the Corporation's 10-7/8% Series B Senior Notes
due 2005 and the Corporation's Senior Secured Zero Coupon Notes due 2000,
Series A.
"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. 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 are in effect on the Issue
Date.
"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.
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"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, and/or any issuance to Gulf Resources Corporation of any equity
interest in the Corporation, 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 Oil Purchase Contract" means that certain Crude Oil Purchase
Contract, dated as of December 1, 1995, between the Gulf Resources
Corporation ("Gulf") and GFR, Inc. ("Gulf Sub").
"Gulf Merger Agreement" means that certain Agreement and Plan of
Merger, dated as of November 3, 1995, among the Corporation, Gulf and Gulf
Sub.
"Gulf Pledge Agreement" means that certain Pledge Agreement, dated as
of December 1, 1995, from Gulf Sub and Gulf to the Corporation.
"Gulf Stockholders' Agreement" means that certain Stockholders'
Agreement, dated as of December 1, 1995, among the Corporation, Gulf, Gulf
Sub, the Horsham Corporation, 1096153 Ontario Limited, Clark Holdings
Limited, The Jaguar Fund, N.V., Puma (a Limited Partnership), Tiger (a
Limited Partnership), and Occidental C.O.B. Partners.
"Gulf Transaction" means the transactions contemplated by the Gulf
Merger Agreement.
"Holder" means a holder of shares of Exchangeable Preferred Stock as
reflected in the stock books of the Corporation.
"Indebtedness" with respect to any Person, means any indebtedness,
including, in the case of the Corporation, the indebtedness evidenced by
the Exchange Debentures, if and when issued, 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 Corporation, the maximum fixed redemption or repurchase
price of Disqualified Capital Stock (or if not
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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 Clark to any
Person other than the Corporation.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on March 31, 1998.
"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, 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.
"Issue Date" means October 1, 1997.
"Junior Subordinated Indebtedness" means any Indebtedness of the
Corporation which is subordinated in right of payment to the Exchange
Debentures 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) are required to be
made by the Corporation at any time prior to October 1, 2009.
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"Junior Securities" shall have the meaning ascribed to it in paragraph
(b)(i) hereof.
"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, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title 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).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(ii) hereof.
"Maturity" means, with respect to any Exchange Debentures, the date on
which the principal of such Exchange Debentures becomes due and payable as
provided in the Indenture, whether at the Stated Maturity or by declaration
of acceleration, call for redemption or otherwise.
"Net Available Proceeds" from any Equity Offering or any issuance of
Capital Stock by any Person 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) therefrom by such Person, 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 (i) as to which neither the
Corporation 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; and (ii) no
default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Corporation or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause
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the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the
Corporation or any of its Restricted Subsidiaries.
"Obligations" means any principal (and premium, if any), interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Optional Redemption Price" shall have the meaning ascribed to it in
paragraph (e)(i)(A) hereof.
"Parity Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Permitted Indebtedness" means Indebtedness incurred by the
Corporation or its Restricted Subsidiaries (i) to renew, extend, refinance
or refund Indebtedness that is permitted to be incurred pursuant to clauses
(ii) through (iv) 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 Corporation 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 Corporation 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
Exchange Debentures the refinancing or refunding Indebtedness is made pari
passu with the Exchange Debentures or subordinated to the Exchange
Debentures, (B) in the case of any refinancing or refunding of Indebtedness
that is subordinated to the Exchange Debentures the refinancing or
refunding of Indebtedness is made subordinated to the Exchange Debentures
at least to the same extent as such Indebtedness being refinanced or
refunded was subordinated to the Exchange Debentures and (C) in the case of
the refinancing or refunding of Indebtedness that is subordinated to the
Exchange Debentures, 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 Corporation 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
Exchange Debentures and (y) does not permit redemption or other retirement
(including
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pursuant to an offer to purchase made by the Corporation 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 Corporation or such Restricted Subsidiary), which
is conditioned upon the change of control of the Corporation or such
Restricted Subsidiary); (ii) arising from time to time under the Credit
Agreement or any refinancings, renewals, extensions, refundings or
replacements thereof or extensions of credit to finance working capital
requirements in an aggregate principal amount not to exceed the greater of
(a) $500 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 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 Corporation and/or its Restricted Subsidiaries
other than Restricted Subsidiaries owned in any part by the Principal
Shareholders; (vi) which is Junior 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; and (xi) in addition to Indebtedness
permitted by clauses (i) through (x) above, Indebtedness not to exceed on a
consolidated basis for the Corporation and its Restricted Subsidiaries at
any time $50 million.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock Corporation, trust, estate,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however
designated) that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of such Person, to shares of Capital Stock of any
other class of such Person.
"Principal Shareholders" means (i) TrizecHahn, (ii) Occidental
Petroleum Corporation,(iii) Gulf Resources Corporation and (iv) Affiliates
of the Persons described in the foregoing clauses (i) through (iii), other
than the Corporation and its Subsidiaries.
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"Quarter" means a fiscal quarterly period of the Corporation.
"Redemption Date," with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable
Preferred Stock are redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e)(iii)(A) hereof.
"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"), directly or indirectly, by the Corporation or a Restricted
Subsidiary of the Corporation, 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 Corporation (other than the
Exchangeable Preferred Stock and the Exchange Debentures) which is
subordinate in right of payment to the Exchangeable Preferred Stock.
"Restricted Investment" means any direct or indirect Investment by the
Corporation or any Restricted Subsidiary of the Corporation in (i) any
Affiliate of the Corporation which is not a Restricted Subsidiary of the
Corporation and (ii) any Unrestricted Subsidiary of the Corporation, other
than direct or indirect investments in (a) Polymer Asphalt L.L.C., a
Missouri limited liability Corporation and (b) any pipeline Corporation in
which the Corporation or any of its Restricted Subsidiaries now owns or
hereafter acquires any interest; provided that the aggregate amount of
Investments made by the Corporation or any of its Restricted Subsidiaries
pursuant to clauses (a) and (b) above shall not exceed $25 million in the
aggregate at any one time outstanding.
"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
Corporation to any Restricted Subsidiary of the Corporation, (b) payments
by any Restricted Subsidiary of the Corporation to the Corporation or any
other Restricted Subsidiary of the Corporation, (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.
"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
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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.
"Senior Securities" shall have the meaning ascribed to it in paragraph
(b) hereof.
"Stated Maturity" means October 1, 2009.
"Stock Payment" means (i) with respect to the Corporation, any
dividend, either in cash or in property (except dividends payable in
Capital Stock of the Corporation which is not convertible into
Indebtedness), on, or the making by the Corporation 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 Corporation, 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 Corporation's Capital Stock (other than
Disqualified Stock) or options, warrants or other rights to purchase the
Corporation's Capital Stock (other than Disqualified Stock)), and (ii) with
respect to any Restricted Subsidiary of the Corporation, any redemption,
repurchase, retirement, defeasance or any acquisition of its Capital Stock
or the Capital Stock of the Corporation or any warrants, rights, or options
to purchase or acquire shares of any class of its Capital Stock or the
Capital Stock of the Corporation, now or hereafter outstanding, except with
respect to its Capital Stock or such warrants, rights or options to
purchase or acquire shares of any class of its Capital Stock owned by the
Corporation or a Restricted Subsidiary of the Corporation.
"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 Corporation and Clark.
"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
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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.
"Triggered Securities" shall have the meaning ascribed to it in
paragraph (f)(iii)(A) hereof.
"TrizecHahn" means TrizecHahn Corporation, an Ontario 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.
"Unrestricted Subsidiary" means any Subsidiary (other than Clark or
any successor to Clark) that is designated by the board of directors of the
Corporation 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; (b) is not party to any agreement, contract,
arrangement or understanding with the Corporation or any Restricted
Subsidiary of the Corporation unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the
Corporation or such Restricted Subsidiary than those that might be obtained
at the time from Persons who are not Affiliates of the Corporation; (c) is
a Person with respect to which neither the Corporation 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; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Corporation or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive
officer of the Corporation or any of its Restricted Subsidiaries and has at
least one executive officer that is not a director or executive officer of
the Corporation or any of its Restricted Subsidiaries. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary and any
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Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of the Corporation as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under
"Limitations on Indebtedness", the Corporation shall be in default of such
covenant). The board of directors of the Corporation 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 Corporation of any
outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted
under "Limitations on Indebtedness", and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
in paragraph (f)(iii)(A) hereof.
"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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IN WITNESS WHEREOF, the undersigned has signed this Certificate this 1st
day of October, 1997.
CLARK USA, INC.
By:
-----------------------------
Name: Maura J. Clark
Title: Executive Vice President &
Chief Financial Officer
Attested By:
- -------------------------
Name: Katherine D. Knocke
Title: Secretary
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EXHIBIT 4.3
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of October 1, 1997,
among Clark USA, Inc., a Delaware corporation (the "Company"), and Goldman,
Sachs & Co., and BT Alex. Brown Incorporated (collectively, the "Purchasers"),
of 9,000,000 shares of Class E Common Stock of the Company (the "Common
Shares").
Trizec Hahn Corporation (the "Selling Shareholder") proposes to sell to the
Purchasers upon the terms set forth in the Purchase Agreement (as defined
herein) the Common Shares, which will be reclassified and converted into 63,000
shares of 11 1/2% Senior Cumulative Exchangeable Preferred Stock ($1,000
liquidation preference per share) of the Company (the "Preferred Shares"). The
Preferred Shares are exchangeable at the Company's option on the terms set forth
in the Certificate of Designations (as defined herein) for the Company's 11 1/2%
Subordinated Exchange Debentures due 2009 (the "Exchange Debentures"). As an
inducement to the Purchasers to enter into the 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:
1. Certain Definitions.
For purposes of this Exchange and Registration Rights Agreement, the
following terms shall have the following respective meanings:
"Base Interest or Dividend" shall mean the interest or dividend, if
any, that would otherwise accrue on the Securities under the terms thereof,
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.
"Certificate of Designations" shall mean the Certificate of
Designations establishing the terms of the Securities, filed with the
Secretary of State of the State of Delaware on October 1, 1997.
"Closing" shall mean the date of the closing of the issuance and sale
of the Securities pursuant to the 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 the Exchange
Registration Statement
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effective or as of which the Exchange Registration Statement otherwise
becomes effective and (ii) a Shelf Registration, shall mean the time and
date as of which the Commission declares the Shelf Registration Statement
effective or as of which the Shelf Registration Statement otherwise becomes
effective.
"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 October 1, 1997,
between the Company and Bankers Trust Company, as Trustee, as the same
shall be amended from time to time.
"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.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
September 26, 1997, among the Purchasers, the Selling Shareholder, Clark
Refining and Marketing, Inc. and the Company relating to the Securities.
"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 (provided that any
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Exchange Security received by a broker-dealer in an Exchange Offer in
exchange for a Registrable Security that was not acquired by the broker-
dealer directly from the Company will also be a Registrable Security
through and including the earlier of the 90th day after the Exchange Offer
is completed or such time as such broker-dealer no longer owns such
Security); (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 otherwise, is removed by the Company
or pursuant to the 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 the 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 Preferred Shares or the Exchange
Debentures to be issued in exchange therefor pursuant to the Certificate of
Designations, as applicable.
"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.
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"Special Dividends" shall have the meaning assigned thereto in Section
2(c) 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 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, the
"Exchange Registration Statement", and such offer, the "Exchange Offer") any and
all of the Securities for a like number or aggregate principal amount of
securities of the Company, which securities are substantially identical to the
Securities, respectively, (and which, in the case of Exchange Debentures, are
entitled to the benefits of the Indenture, which will have 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 or dividends contemplated in Section 2(c)
below (such new securities hereinafter called "Exchange Securities"). The
Company agrees to use its reasonable best efforts to cause the 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 best efforts to commence the Exchange Offer promptly after
such registration statement has become effective, hold the 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 the Exchange Offer. The Exchange Offer will be deemed to have been
"completed" only if the securities received by holders other than Restricted
Holders in the Exchange Offer for 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
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the United States of America. The Exchange Offer shall be deemed to have been
completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Securities for all outstanding Registrable Securities pursuant to the
Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange
Offer, Exchange Securities for all Registrable Securities that have been
properly tendered and not withdrawn before the expiration of the Exchange Offer,
which shall be on a date that is at least 20 business days following the
commencement of the Exchange Offer. The Company agrees (x) to include in the
Exchange Registration Statement a prospectus for use in connection with any
resales of Exchange Securities by a broker-dealer, other than resales of
Exchange Securities received by a broker-dealer pursuant to an Exchange Offer in
exchange for 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 Exchange Securities are first
issued in the Exchange Offer and ending upon the earlier of the expiration of
the 180th day after the 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 Exchange
Securities received in an 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 the 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 the Exchange Offer has not been consummated within 180
days following the Closing, in lieu of conducting the Exchange Offer
contemplated by Section 2(a) the Company shall file under the Securities Act as
soon as practicable, but no later than the later of 30 days after the time such
obligation to file arises and 90 days after the Closing, 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,
the "Shelf Registration" and such registration statement, the "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 Purchase Agreement prior to the consummation of the
Exchange Offer, the Company shall file under the Securities Act as soon as
practicable a Shelf Registration Statement. 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 180 days following the Closing and to
keep such Shelf Registration Statement continuously effective in order to permit
the prospectus forming a part thereof to be usable by holders for resales of
Registrable Securities for a period ending on the earlier of the second
anniversary of the effective date
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<PAGE>
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 the Shelf Registration Statement or to use the
prospectus forming a part thereof for resales of Registrable Securities unless
such holder is an Electing Holder, and (ii) after the Effective Time of the
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 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 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.
(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 or
Shelf Registration Statement has not become effective or been declared effective
by the Commission within 180 days of the Closing, or (iii) the Exchange Offer
has not been completed within 30 business days after the initial effective date
of the Exchange Registration Statement relating to the Exchange Offer (if the
Exchange Offer is then required to be made) or (iv) 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 immediately by an additional registration statement filed and
declared effective (each such event referred to in clauses (i) through (iv), 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, subject to the provisions of
Section 9(b), special interest or dividends ("Special Interest" or "Special
Dividends"), as the case may be, in addition to Base Interest or Dividends,
shall accrue and be payable at a per annum rate of 0.5%. If the Company has not
completed the Exchange Offer (or, if applicable, the Shelf Registration has not
become effective) by the 270th day following the Closing, the Special Interest
or Special Dividends, as the case may be, shall accrue and be payable at a per
annum rate of 1.0% until the Company has completed the Exchange Offer (or until
the Shelf Registration has become effective).
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<PAGE>
(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) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture under
the Trust Indenture Act.
(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) (the
"Exchange Registration"), if applicable, the Company shall, as soon as
practicable (or as otherwise specified):
(i) 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 best efforts to cause such Exchange Registration Statement to become
effective as soon as practicable thereafter;
(ii) as soon as practicable prepare and file with the Commission such
amendments and supplements to such Exchange 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 rules and
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<PAGE>
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 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, and, with respect to
such Exchange 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
respect thereto or any request by the Commission for amendments or
supplements to such Exchange Registration Statement or prospectus or for
additional information, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of such Exchange 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 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 Exchange Securities
for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose or (F) 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 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)(F) 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 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;
(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
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<PAGE>
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 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 Exchange Securities by broker-dealers
during the Resale Period;
(vii) provide a CUSIP number for all Exchange Securities, not later
than the applicable 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).
(d) In connection with the Company's obligations with respect to the Shelf
Registration, if applicable, the Company shall, as soon as practicable (or as
otherwise specified):
(i) 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 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 the Shelf Registration Statement as of the
Effective Time, and no
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<PAGE>
holder shall be entitled to use the prospectus forming a part thereof for
resales of 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
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 the Shelf Registration
Statement or to enable such holder to use the prospectus forming a part
thereof for resales of 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 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) the 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) 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 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
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<PAGE>
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 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 rules and regulations of the Commission thereunder or contains an
untrue statement of a material fact or omits
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<PAGE>
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 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 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, each such amendment and supplement thereto (in each
case including all exhibits thereto (in the case of an Electing Holder of
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 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
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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 Securities pursuant to such Shelf Registration
Statement 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;
(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 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 the Registrable Securities;
(xiv) provide a CUSIP number for all Registrable Securities, not
later than the applicable 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
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therewith as any Electing Holders aggregating at least 20% in aggregate
principal amount at maturity of the 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 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
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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 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
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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 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).
(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 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 applicable
to such Registrable Securities 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
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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.
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
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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) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xviii)
hereof, (i) 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.
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) Each registration statement covering Registrable Securities and each
prospectus (including any preliminary or summary prospectus) contained therein
or furnished pursuant to Section 3(d) or Section 3(c) hereof and any further
amendments or supplements to any such registration statement or prospectus, when
it becomes effective or is filed with the Commission, as the case may be, and,
in the case of an underwritten offering of Registrable Securities, at the time
of the closing under the underwriting agreement relating thereto, will 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 will 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; and at all times subsequent to the Effective
Time when a prospectus would be required to be delivered under the Securities
Act, other than from (i) such time as a notice has been given to holders of
Registrable Securities pursuant to Section 3(d)(vii)(F) or Section 3(c)(iii)(F)
hereof until (ii) such time as the Company furnishes an amended or supplemented
prospectus pursuant to Section 3(e) or Section 3(c)(iv) hereof, each such
registration statement, and each prospectus (including any summary prospectus)
contained therein or furnished pursuant to Section 3(d) or Section 3(c) hereof,
as then amended or supplemented, will 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 will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated
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<PAGE>
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company by a
holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred to
in Section 5(a) hereof, when they become or became effective or are or were
filed with the Commission, as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as applicable, and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.
(c) 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.
(d) 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
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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 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
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<PAGE>
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 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
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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 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.
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(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.
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. Upon the request of any holder of Registrable Securities in
connection with that holder's sale pursuant to Rule 144, the Company shall
deliver to such holder a written statement as to whether it has complied with
such requirements.
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,
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Missouri 63105, Attention: Secretary, with a copy to Mayer, Brown & Platt, 190
South LaSalle Street, Chicago, Illinois 60603, Attention: Richard S. Millard,
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 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
Purchase Agreement and the transfer and registration of Registrable Securities
by such holder and the consummation of an 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
24
<PAGE>
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 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,
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 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 USA, INC.
By:_________________________________
Name:
Title:
GOLDMAN, SACHS & CO.
BT ALEX. BROWN INCORPORATED
By:_________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
26
<PAGE>
Exhibit A
CLARK USA, 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 USA, Inc. (the
"Company") _____% Senior Cumulative Exchangeable Preferred Stock or __%
Subordinated Exchange Debentures due 2009 (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 USA, 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 USA, 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 USA, 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 [ ] (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 _____% Senior Cumulative Exchangeable Preferred Shares or ___%
Subordinated Exchange Debentures due 2009 (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
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
Securityholder may also sell Registrable Securities short and deliver
Registrable Securities to
A-5
<PAGE>
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 USA, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Secretary
(314) 854-1510
(ii) With a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
A-6
<PAGE>
Attention: Richard S. Millard
(312) 701-7161
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:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Richard S. Millard
Telephone: (312) 701-7161
Facsimile: (312) 701-7711
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Clark USA, Inc.
c/o [Name of Trustee]
[Address]
Attention: Trust Officer
Re: Clark USA, Inc. (the "Company") _____% Senior Cumulative
Exchangeable Preferred Stock and ___% Subordinated Exchange Debentures
due 2009
A-8
<PAGE>
Dear Sirs:
Please be advised that ____________________ has transferred $______________
aggregate principal amount at maturity of the above-referenced Preferred Stock
or Exchange Debentures 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 Preferred Stock or Exchange Debentures 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 Preferred
Stock or the Exchange Debentures transferred are the Preferred Stock or Exchange
Debentures listed in such Prospectus opposite such owner's name.
Dated:
Very truly yours,
_______________________________
(Name)
By:____________________________
(Authorized Signature)
B-2
<PAGE>
Exhibit 5.1
___________ ____, 1998
Clark USA, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Re: Clark USA, Inc.
Registration Statement on Form S-4
----------------------------------
Dear Ladies and Gentlemen:
We have represented Clark USA, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-4 (the "Registration Statement") relating to
the Company's 11 1/2% New Senior Cumulative Exchangeable Preferred Stock (the
"New Exchangeable Preferred Stock"), to be issued under the Exchange and
Registration Rights Agreement (the "Registration Agreement"), providing for the
Exchange Offer.
In connection with our representation, we have examined such corporate
and other records, instruments, certificates and documents as we consider
necessary to enable us to express the opinions set forth below.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware.
2. The Registration Agreement constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the enforceability of creditors' rights generally and
to court decisions with respect thereto and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3. The New Exchangeable Preferred Stock, upon the due execution,
authentication, issuance and delivery thereof in accordance with the
Registration Agreement, will constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Registration Agreement, and
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the
enforceability of creditors' rights generally and to court decisions with
respect thereto and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to this firm in such Registration
Statement.
Very truly yours,
Mayer, Brown & Platt
<PAGE>
Exhibit 8.1
__________ ___, 1998
Clark USA, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63015
Re: Clark USA, Inc.
Registration Statement on Form S-4
----------------------------------
Dear Ladies and Gentlemen:
We have represented Clark USA, a Delaware corporation (the "Company"),
in connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of a Registration
Statement on Form S-4 (the "Registration Statement") relating to the Company's
11 1/2% New Senior Cumulative Exchangeable Preferred Stock to be issued under
the Exchange and Registration Rights Agreement, providing for the Exchange
Offer.
In connection with our representation, we have examined such corporate
and other records, instruments, certificates and documents as we consider
necessary to enable us to express the opinions set forth below.
Based upon and subject to the foregoing, and having regard for legal
considerations which we deem relevant, we hereby confirm, and adopt as our
opinion, the statements contained in the Prospectus contained in the above-
referenced Registration Statement on Form S-4 under the caption "Certain Federal
Income Tax Considerations."
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to this firm in such Registration
Statement.
Very truly yours,
Mayer, Brown & Platt
<PAGE>
EXHIBIT 10.26
SECONDED AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
between
CLARK USA, INC.
and
OCCIDENTAL C.O.B. PARTNERS
Dated as of November 3, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms........................................ 1
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board..................................... 6
SECTION 2.02. Removal...................................................... 6
SECTION 2.03. Vacancies.................................................... 7
ARTICLE III
TRANSFER OF SHARES
SECTION 3.01. General Restriction.......................................... 7
SECTION 3.02. Legends...................................................... 7
SECTION 3.03. Certain Restrictions on Transfer............................. 8
SECTION 3.04. Right of First Refusal....................................... 9
SECTION 3.05. Transferees to Execute Agreement............................. 11
SECTION 3.06. [RESERVED]
SECTION 3.07. [RESERVED]
SECTION 3.08. Improper Sale or Encumbrance................................. 12
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. Registration Rights.......................................... 12
SECTION 4.02. Incidental Registration...................................... 14
SECTION 4.03. Registration Procedures...................................... 15
SECTION 4.04. Preparation, Reasonable Investigation........................ 18
SECTION 4.05. Indemnification.............................................. 19
SECTION 4.06. Contribution................................................. 21
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 4.07. Certain Information........................................ 23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 5.01. Representations and Warranties of Each Party............... 23
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices.................................................... 24
SECTION 6.02. Public Announcements....................................... 25
SECTION 6.03. Headings................................................... 25
SECTION 6.04. Severability............................................... 25
SECTION 6.05. Entire Agreement........................................... 25
SECTION 6.06. Assignment................................................. 26
SECTION 6.07. Parties in Interest........................................ 26
SECTION 6.08. Amendment.................................................. 26
SECTION 6.09. Governing Law.............................................. 26
SECTION 6.10. Counterparts............................................... 26
SECTION 6.11. Specific Performance....................................... 26
SECTION 6.12. Termination................................................ 27
</TABLE>
<PAGE>
SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT, dated as of November
3, 1997 (this "Agreement"), between CLARK USA, INC., a Delaware corporation (the
"Company"), and OCCIDENTAL C.O.B. PARTNERS, a Delaware general partnership ("Oxy
Partners" and, together with the Company, the "Parties").
WHEREAS, the Company and Oxy Partners have entered into a Stockholders'
Agreement dated as of December 1, 1995;
WHEREAS, the Company and Oxy Partners have entered into an Amended and
Restated Stockholders' Agreement dated as of October 1, 1997 (the "First Amended
and Restated Stockholders' Agreement");
WHEREAS, the Company and Oxy Partners desire to amend and restate the First
Amended and Restated Stockholders' Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the following meanings:
"Accepting Party" has the meaning specified in Section 3.04(b).
"affiliate" of a specified Person means a Person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
"Agreement" means this Second Amended and Restated Stockholders' Agreement.
"beneficial owner" or "beneficially own" has the meaning given such term in
Rule 13d-3 under the Exchange Act as in effect on the date hereof; provided that
beneficial ownership under Rule 13d-3(1)(i) shall be determined based on whether
a Person has a right to acquire beneficial ownership within 60 days or
thereafter.
"Board" means the Board of Directors of the Company.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which
<PAGE>
2
banks are required or authorized by law to be closed in the City of New York.
"Capital Stock" means, with respect to any Person at any time, any and all
shares, interests, participation or other equivalents (however designated,
whether voting or non-voting) of capital stock, partnership interests (whether
general or limited) or equivalent ownership interests in or issued by such
Person and any and all warrants, options or other rights to purchase or acquire
any of the foregoing.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or any
political subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at the time
of acquisition, having the highest rating obtainable from any of Standard &
Poor's Corporation, Moody's Investors Service, Inc. or Duff & Phelps Credit
Rating Co. or (c) commercial paper maturing not more than one year from the date
of issuance thereof and, at the time of acquisition, having the highest rating
obtainable from either Standard & Poor's Corporation or Moody's Investors
Service, Inc.
"Cause" has the meaning specified in Section 2.02(c).
"Clark Capital Stock" means the Common Stock, Class A Common Stock, Class D
Common Stock, Class E Common Stock, Class F Common Stock and Preferred Stock.
"Class A Common Stock" means the Class A Common Stock, par value $.01 per
share, of the Company.
"Class D Common Stock" means the Class D Common Stock, par value $.01 per
share, of the Company.
"Class E Common Stock" means the Class E Common Stock, par value $.01 per
share, of the Company.
"Class F Common Stock" means the Class F Common Stock, par value $.01 per
share, of the Company.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Clark USA, Inc., a Delaware corporation.
"control" (including the terms "controlled by" and "under common control
with"), with
<PAGE>
3
respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, as trustee or executor, by contract
or otherwise.
"Director" means a member of the Board.
"Encumbrance" means any security interest, lien, claim, pledge, limitation
on voting rights, charge or other encumbrance of any nature whatsoever.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fully Diluted Shares" as of any date means the aggregate of (i) the number
of Shares issued and outstanding as of such date (other than Shares held in the
treasury of the Company or held by any Subsidiary of the Company) and (ii) the
number of Shares issuable as of such date upon (x) the exercise of any then
exercisable outstanding options, warrants or similar instruments (other than any
such instruments held by the Company or any Subsidiary of the Company) and (y)
the exercise of any then exercisable conversion or exchange rights (other than
any such rights held by the Company or any Subsidiary of the Company).
"Governmental Entity" means any administrative, governmental or regulatory
authority or body or any court or tribunal, domestic or foreign.
"Laws" means any federal, state, local or foreign law, statute, ordinance,
rule, regulation, order, judgment or decree.
"Marketable Securities" means securities that are (a) (i) securities of or
other interests in any Person that are traded on a national securities exchange,
reported on by NASDAQ or otherwise actively traded over-the-counter or (ii) debt
securities of a Person that has debt or equity securities that are so traded or
so reported on and in which a nationally recognized securities firm has agreed
to make a market, and (b) not subject to restrictions on transfer as a result of
any applicable contractual provisions or the provisions of the Securities Act or
any other applicable Law.
"Minimum Sale Price" has the meaning specified in Section 3.04(d).
"NASDAQ" means the National Association of Securities Dealers, Inc.
National Market System.
"Nominee" has the meaning specified in Section 2.03(a).
<PAGE>
4
"Notice of Acceptance" has the meaning specified in Section 3.04(b).
"Offer" has the meaning specified in Section 3.04(a).
"Offer Notice" has the meaning specified in Section 3.04(a).
"Offer Notice Date" has the meaning specified in Section 3.04(b).
"Offer Period" has the meaning specified in Section 3.04(b).
"Offer Price" has the meaning specified in Section 3.04(a).
"Offered Shares" has the meaning specified in Section 3.04(a).
"Other Stockholders" means all of the stockholders of the Company, except
for Oxy Partners, who shall agree to be bound by Article II hereof.
"Oxy Director" has the meaning specified in Section 2.01.
"Oxy Partners" means Occidental C.O.B. Partners, a Delaware general
partnership
"Oxy Shares" means the Shares owned from time to time by Oxy Partners and
any Person to whom any of such shares are transferred from time to time.
"Oxy Sub" means Occidental C.O.B. Co., Inc., a Delaware corporation.
"Parties" means the Company and Oxy Partners.
"Permitted Assignees" has the meaning specified in Section 3.04(b).
"Permitted Transferee" means (a) the Company or any Subsidiary of the
Company, (b) Oxy Partners or (c) any affiliate of Oxy Partners; provided,
however, that any such affiliate shall cease to be a Permitted Transferee in the
event it shall cease to be an affiliate of Oxy Partners.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Preferred Stock" means the preferred stock, par value $0.01 per share, of
the Company.
"Prospective Seller" has the meaning specified in Section 3.04(a).
<PAGE>
5
"Prospective Transferee" has the meaning specified in Section 3.05(a).
"Public Offering" means an underwritten public offering of equity
securities of the Company pursuant to a registration statement that has been
declared effective by the SEC under the Securities Act, in which such equity
securities are widely distributed and after which such equity securities are
traded on a national securities exchange or reported on by NASDAQ.
"Recapitalization" means any stock split, dividend or combination, or any
recapitalization, merger, consolidation, exchange or other similar
reorganization.
"Restricted Shares" means all Shares other than (a) Shares that have been
registered under a registration statement pursuant to the Securities Act, (b)
Shares with respect to which a Sale has been made in reliance on and in
accordance with Rule 144 and (c) Shares with respect to which the holder thereof
shall have delivered to the Company either (i) an opinion, in form and substance
reasonably satisfactory to the Company, of counsel, who shall be reasonably
satisfactory to the Company, or (ii) a "no action" letter from the staff of the
SEC, to the effect that subsequent transfers of such Shares may be effected
without registration under the Securities Act or compliance with Rule 144.
"Rule 144" means Rule 144 (or any successor provision) under the Securities
Act.
"Rule 144 Transaction" means any Sale of Oxy Shares made in reliance upon
Rule 144 (as in effect on the date hereof) that complies with paragraphs (d),
(e), (f) and (g) thereof (as in effect on the date hereof); provided that, if,
at the time of such Sale, the seller would otherwise be entitled to rely upon
paragraph (k) of Rule 144 in connection with such Sale, the number of Oxy Shares
included in such Sale, together with all other Sales of Oxy Shares by such
seller and its affiliates within any three-month period that includes the date
of such Sale, shall not exceed 1,500,000 Oxy Shares.
"Sale" means any sale, assignment, transfer, distribution or other
disposition of Shares or of a participation therein, whether voluntarily or by
operation of law.
"SEC" means the Securities and Exchange Commission, and any successor
commission or agency having similar powers.
"Securities Act" means the Securities Act of 1933, as amended.
"Share" means any share of Clark Capital Stock and any securities issued in
respect thereof, or in substitution therefor, in connection with any
Recapitalization.
"Stockholder" means each Person (other than the Company) who shall be a
party to this
<PAGE>
6
Agreement, whether in connection with the execution and delivery hereof as of
the date hereof, pursuant to Section 3.05, or otherwise (other than any Person
who is a signatory to this Agreement solely for purposes of being bound by
Article II), so long as such Person shall beneficially own any Shares or any
options, warrants or similar rights to acquire Shares.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, joint venture, association or other
entity controlled by such Person directly or indirectly through one or more
intermediaries.
"Third Party" means, with respect to any Stockholder, any other Person
other than a Permitted Transferee.
"Trading Day" has the meaning specified in Section 3.04(g).
ARTICLE II
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board. So long as Oxy Partners and its
affiliates own in the aggregate at least 10% of the Fully Diluted Shares, Oxy
Partners shall be entitled to designate one Director for election to the Board
(the "Oxy Director"). Each Other Stockholder then entitled to vote for the
election of Directors to the Board shall vote all voting Shares owned or held of
record by such Person at any meeting of stockholders of the Company, or execute
a written consent with respect to all such Shares owned or held of record by
such Person, in favor of the election of the Oxy Director as a Director. In the
event Oxy Partners and its affiliates shall at any time not own in the aggregate
at least 10% of the Fully Diluted Shares, Oxy Partners and such affiliates shall
cause the Oxy Director to tender his or her written resignation as a Director to
the Secretary of the Company as soon as practicable.
SECTION 2.02. Removal. (a) Upon the written request of Oxy Partners, each
Other Stockholder shall vote all of his, her or its voting Shares in favor of
the removal of the Oxy Director. Each of the Other Stockholders agrees that, if,
at any time, he, she or it is then entitled to vote for the removal of
Directors, he, she or it will not vote any of his, her or its voting Shares in
favor of the removal of the Oxy Director unless such removal shall be for Cause
(as defined below) or Oxy Partners shall have consented to or directed such
removal in writing.
(b) Upon the written request of an Other Stockholder that designated a
Director, each Stockholder shall vote all of his, her or its voting Shares in
favor of the removal of such Director. Each Stockholder agrees that, if, at any
time, he, she or it is then entitled to vote for the removal of Directors, he,
she or it will not vote any of his, her or its voting Shares in favor of the
removal
<PAGE>
7
of a Director designated by any of the Other Stockholders unless the Other
Stockholder that designated such Director to the Board shall have consented to
or directed such removal in writing.
(c) Removal for "Cause" shall mean removal of a Director because of such
Director's (a) willful and continued failure to substantially perform his or her
duties as a Director, (b) willful conduct which is significantly injurious to
the Company, monetarily or otherwise, (c) conviction for, or guilty plea to, a
felony or a crime involving moral turpitude or (d) abuse of illegal drugs or
other controlled substances or habitual intoxication.
SECTION 2.03. Vacancies. (a) If, as a result of death, disability,
retirement, resignation, removal (with or without Cause) or otherwise, there
shall exist or occur any vacancy on the Board due to the absence of a Director
who shall have been designated pursuant to Section 2.01, and the requirements of
Section 2.01 shall remain satisfied in all respects, (i) Oxy Partners may
designate, in a writing executed by Oxy Partners, another individual to fill
such vacancy and to serve as a Director (the "Nominee") and (ii) each Other
Stockholder then entitled to vote for the election of Directors shall vote his,
her or its voting Shares at any meeting of stockholders of the Company, or
execute a written consent with respect to all such Shares, as the case may be,
in favor of the election of the Nominee as a Director.
(b) If, as a result of death, disability, retirement, resignation, removal
(with or without Cause) or otherwise, there shall exist or occur any vacancy on
the Board due to the absence of a Director who shall have been designated by one
of the Other Stockholders, (i) the Other Stockholder who designated such
director may designate, in a writing executed by such Other Stockholder, a
Nominee and (ii) each Stockholder shall vote his, her or its voting Shares at
any meeting of stockholders of the Company, or execute a written consent with
respect to all such Shares, as the case may be, in favor of the election of the
Nominee as a Director.
ARTICLE III
TRANSFER OF SHARES
SECTION 3.01. General Restriction. No Stockholder shall, directly or
indirectly, make or solicit any Sale of, or create, incur, assume or suffer to
exist any Encumbrance with respect to, any Oxy Share beneficially owned by such
Stockholder, except in compliance with the Securities Act and the rules and
regulations thereunder and this Agreement.
SECTION 3.02. Legends. (a) The Company shall affix to each certificate
evidencing Oxy Shares issued to Stockholders a legend in substantially the
following form:
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8
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS SUCH
TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY. THE SECURITIES
EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AS SET FORTH IN AN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED AS OF OCTOBER 1, 1997, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY
OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF
THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH."
(b) In the event that any Oxy Shares shall cease to be Restricted Shares,
the Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Oxy Shares without the first paragraph
of the legend required by Section 3.02(a) endorsed thereon.
(c) In the event that any Oxy Shares shall cease to be subject to the
restrictions on transfer set forth in this Agreement as provided in Section
3.03(b), the Company shall, upon the written request of the holder thereof,
issue to such holder a new certificate evidencing such Oxy Shares without the
second paragraph of the legend required by Section 3.02(a) endorsed thereon.
SECTION 3.03. Certain Restrictions on Transfer. (a) Each Stockholder agrees
that it will not, directly or indirectly, make or solicit any Sale of, or
create, incur, assume or suffer to exist any Encumbrance (other than a pledge or
hypothecation of Oxy Shares to one or more bona fide financial institutions and
any foreclosure thereof, in each case subject to Section 3.05) with respect to,
any Oxy Share beneficially owned by such Stockholder other than (i) any Sale to
a Permitted Transferee, (ii) any Sale for cash, Cash Equivalents or Marketable
Securities that is made in compliance with the procedures, and subject to the
limitations, set forth in Section 3.04, (iii) any Sale pursuant to a Public
Offering or (iv) any Sale in a Rule 144 Transaction. Notwithstanding the
foregoing, except as otherwise expressly provided in this Agreement, all Sales
permitted by the foregoing clauses (i) and (ii) shall be subject to, and shall
not be made other than in compliance with, the provisions of Sections 3.01, 3.02
and 3.05.
(b) The restrictions on transfer set forth in this Agreement shall cease
to apply (i) as to any particular Oxy Shares at such time as such Oxy Shares are
sold pursuant to a Public Offering or a Rule 144 Transaction and (ii) upon the
termination of this Agreement.
<PAGE>
9
SECTION 3.04. Right of First Refusal. (a) If any Stockholder receives from
a Third Party dealing at arm's length a bona fide offer to purchase for cash,
Cash Equivalents or Marketable Securities (an "Offer") any of the Oxy Shares
owned or held by such Stockholder, and such Stockholder intends to sell such Oxy
Shares to such Third Party, such Stockholder (for purposes of this Section 3.04,
the "Prospective Seller") shall provide the Company written notice of such Offer
(an "Offer Notice"). The Offer Notice shall identify the Third Party making the
Offer, the number and class (or classes) of Oxy Shares with respect to which the
Prospective Seller has such an Offer (the "Offered Shares"), the price per
Offered Share at which a sale is proposed to be made, determined in accordance
with Section 3.04(g) ("Offer Price"), the form of consideration in which the
Offer Price is proposed to be paid, and all other material terms and conditions
of the Offer.
(b) The receipt of an Offer Notice by the Company from a Prospective
Seller (the date of such receipt being referred to herein as the "Offer Notice
Date") shall constitute an offer by such Prospective Seller to sell to the
Company and any assignee or assignees of the Company ("Permitted Assignees") the
Offered Shares at the Offer Price in cash. Such offer shall be irrevocable
during the Offer Period (as hereinafter defined). The Company and any Permitted
Assignees shall have the right to accept such offer as to any or all of the
Offered Shares by giving a written notice of acceptance (the "Notice of
Acceptance") to the Prospective Seller prior to the expiration of the Offer
Period (the Company or any Permitted Assignee so accepting such offer, an
"Accepting Party"); provided, however, that the Company and any Permitted
Assignees shall provide a single Notice of Acceptance to the Prospective Seller
and such Notice of Acceptance must accept the offer as to all of the Offered
Shares on the same terms and conditions as the Offer (other than as expressly
set forth herein). If the Company or any Permitted Assignee so accepts the
Prospective Seller's offer, such Person will purchase for cash from the
Prospective Seller, and the Prospective Seller will sell to such Accepting
Party, such number of Offered Shares as to which such Accepting Party shall have
accepted the Prospective Seller's offer (which must total, as to all Accepting
Parties, all of the Offered Shares). The price per Offered Share to be paid by
such Accepting Party shall be the Offer Price. The Notice of Acceptance shall
specify (i) each Accepting Party's acceptance of the Prospective Seller's offer
and (ii) the number of Offered Shares to be purchased by each Accepting Party.
"Offer Period" means (i) in the event the Third Party making the Offer is
engaged in the refining business, the twenty Business Day period commencing on
the date the Offer Notice is received by the Company, or (ii) in all other
cases, the ten Business Day period commencing on the date the Offer Notice is
received by the Company.
(c) The consummation of such purchases by and sales to the Accepting
Parties shall take place on such date, not later than 90 days after receipt of
the Offer Notice by the Company (or such longer period as may be specified in
the Offer Notice), as the Accepting Parties and the Prospective Seller shall
select. Upon the consummation of such purchase and sale, the Prospective Seller
shall (i) deliver to the Accepting Party certificates evidencing the Offered
<PAGE>
10
Shares purchased and sold duly endorsed in blank or accompanied by written
instruments of transfer in form satisfactory to such Accepting Party duly
executed by the Prospective Seller, and (ii) assign all its rights under this
Agreement with respect to the Offered Shares purchased and sold pursuant to an
instrument of assignment reasonably satisfactory to such Accepting Party.
(d) In the event that (i) the Company shall have received an Offer Notice
from a Prospective Seller but the Prospective Seller shall not have received
from the Company and its Permitted Assignees a Notice of Acceptance with respect
to all the Offered Shares prior to the expiration of the Offer Period or (ii) an
Accepting Party shall have given a Notice of Acceptance to the Prospective
Seller but such Accepting Party shall have failed to consummate, other than as a
result of the fault of the Prospective Seller, a purchase of the Offered Shares
with respect to which such Notice of Acceptance was given within 90 days after
receipt of the Offer Notice by the Company (or such longer period as may be
specified in the Offer Notice), such Prospective Seller shall have the right
thereafter to make a sale of the Offered Shares so long as all the Offered
Shares that are sold by the Prospective Seller (which number of Offered Shares
shall be not less than the number of Offered Shares specified in such Offer
Notice) are sold for cash, Cash Equivalents or Marketable Securities (i) within
180 days after the date of receipt of such Offer Notice by the Company, (ii) at
an amount not less than the Minimum Sale Price (as hereinafter defined) and
(iii) to the Third Party that made the Offer. "Minimum Sale Price" means (x) if
the Prospective Seller's right to sell the Offered Shares results from the event
described in clause (i) of the preceding sentence, (A) an amount equal to 97
percent of the Offer Price set forth in the Offer Notice if such sale is
consummated within 30 days after the expiration of the Offer Period or (B) an
amount equal to 95 percent of the Offer Price set forth in the Offer Notice if
such sale is consummated thereafter, or (y) if the Prospective Seller's right to
sell the Offered Shares results from the event described in clause (ii) of the
preceding sentence, an amount equal to 90 percent of the Offer Price set forth
in the Offer Notice.
(e) In the event (i) that the Company shall have received an Offer Notice
from a Prospective Seller, (ii) the Prospective Seller shall not have received a
Notice of Acceptance for all the Offered Shares prior to the expiration of the
Offer Period and (iii) such Prospective Seller shall not have sold the remaining
Offered Shares before the expiration of the 180-day period in accordance with
paragraph (d) above, then such Prospective Seller shall not give another Offer
Notice for a period of 120 days after the last day of such 180-day period.
(f) Anything in this Section 3.04 or in Section 3.03(a) to the contrary
notwithstanding, the provisions of this Section 3.04 shall not be applicable to
Sales of Clark Capital Stock described in clauses (i), (iii) and (iv) of Section
3.03(a).
(g) For the purpose of determining the Offer Price with respect to an
Offer that contemplates the payment of consideration in the form of Cash
Equivalents or Marketable Securities, the value of such Cash Equivalents or
Marketable Securities shall be determined as
<PAGE>
11
set forth in this Section 3.04(g). The value of Cash Equivalents shall be the
fair market value of such Cash Equivalents as of the Offer Notice Date as
determined by a nationally recognized investment banking firm selected by the
Company and reasonably acceptable to the Prospective Seller. The value of
Marketable Securities shall be, if such securities are listed or admitted to
trading on a national securities exchange, the average of the last sale prices
for such securities during the twenty consecutive Trading Days preceding the
Offer Notice Date, as reported in the principal consolidated transaction
reporting system for securities listed on the principal national securities
exchange on which such securities are listed or admitted to trading or, if such
securities are not listed or admitted to trading on any national securities
exchange, the average during the twenty consecutive Trading Days preceding the
Offer Notice Date of the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use, or, if on any such date such shares are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in such
shares selected by a majority of the Directors. If no market maker is making a
market in such securities at such time, the fair value of such securities on the
Offer Notice Date shall be determined in good faith by a nationally recognized
investment banking firm selected by the Company and reasonably acceptable to the
Prospective Seller (the fees and expenses of which shall be paid one-half by the
Company and one-half by the Prospective Seller). If such securities are not
publicly held or not so listed or traded, the value of such securities shall
mean the fair value of such securities as of the Offer Notice Date as determined
in good faith by a nationally recognized investment banking firm selected by the
Company and reasonably acceptable to the Prospective Seller (the fees and
expenses of which shall be paid one-half by the Company and one-half by the
Prospective Seller), whose determination shall be conclusive for all purposes.
The term "Trading Day" shall mean, if such securities are listed or admitted to
trading on any national securities exchange, a day on which the principal
national securities exchange on which such shares are listed or admitted to
trading is open for the transaction of business or, if such shares are not so
listed or admitted, a Business Day.
SECTION 3.05. Transferees to Execute Agreement. (a) Each Stockholder agrees
that it will not, directly or indirectly, make any Sale of, or create, incur,
assume or suffer to exist any Encumbrance with respect to, any Oxy Shares
beneficially owned by such Stockholder unless, contemporaneously with or prior
to the consummation of any such Sale or the creation, incurrence, assumption or
existence of such Encumbrance, the Person to whom such Sale is proposed to be
made or the Person in whose favor such Encumbrance is proposed to be created,
incurred, assumed or suffered to exist, in any case, (a "Prospective
Transferee"), executes and delivers to the Company its written agreement, in
form and substance reasonably satisfactory to the Company, whereby such
Prospective Transferee (i) confirms that, with respect to the Oxy Shares that
are the subject of such Sale or Encumbrance, it shall be deemed to be a
Stockholder for purposes of this Agreement and agrees to be bound by all the
terms of this Agreement, and (ii) represents and warrants that, upon the
consummation of such Sale or the creation, incurrence,
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12
assumption or existence of such Encumbrance, such agreement is a legal, valid
and binding obligation of such Prospective Transferee enforceable against such
Prospective Transferee in accordance with its terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to enforceability, to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Upon the
execution and delivery by such Prospective Transferee of the agreement referred
to in the preceding sentence, such Prospective Transferee shall be deemed a
Stockholder for purposes of this Agreement and shall have the rights and be
subject to the obligations of a Stockholder under this Agreement, in each case
with respect to the Oxy Shares beneficially owned by such Prospective Transferee
or in respect of which such Encumbrance shall have been created, incurred,
assumed or suffered to exist.
(b) Anything in this Section 3.05 or in Section 3.03 to the contrary
notwithstanding, the provisions of this Section 3.05 will not be applicable to
any Sale of Oxy Shares pursuant to a Public Offering or a Rule 144 Transaction.
SECTION 3.06. [RESERVED].
SECTION 3.07. [RESERVED].
SECTION 3.08. Improper Sale or Encumbrance. Any attempt not in compliance
with this Agreement to make any Sale of, or create, incur or assume any
Encumbrance with respect to, any Oxy Shares shall be null and void and of no
force and effect, the purported transferee shall have no rights or privileges in
or with respect to the Company, and the Company shall not give any effect in the
Company's stock records to such attempted Sale or Encumbrance.
ARTICLE IV
ADDITIONAL AGREEMENTS
SECTION 4.01. Registration Rights. (a) If the Company is a Public Company,
upon the written request of Oxy Partners or any Permitted Transferee of Oxy
Partners requesting that the Company effect the registration under the
Securities Act of all or part of the Oxy Shares held by such Person and
specifying the intended method of disposition thereof, the Company shall
promptly give written notice of such requested registration to all other holders
of Shares, and thereupon will, as expeditiously as possible, use its
commercially reasonable efforts to effect the registration under the Securities
Act of the Oxy Shares that the Company has been so requested to register by such
holder, provided that (i) the Company shall be obligated to register Oxy Shares
pursuant to this Section 4.01(a) on only one occasion, (ii) the Company shall
not be
<PAGE>
13
obligated to file a registration statement relating to any registration request
under this Section 4.01(a) if with respect thereto the managing underwriter, the
SEC, the Securities Act or the rules and regulations thereunder, or the form on
which the registration statement is to be filed, would require the conduct of an
audit other than the regular audit conducted by the Company at the end of its
fiscal year, in which case the filing may be delayed until the completion of
such regular audit (unless the holders of the Oxy Shares to be registered agree
to pay the expenses of the Company in connection with such an audit other than
the regular audit); provided, however, that the work required to be performed to
enable the Company's auditors to issue their consent or a "cold comfort" letter
shall not be deemed to be an audit, and (iii) if the Company, in its sole
discretion, determines that the filing of a registration statement in the near
future pursuant to this Section 4.01 would interfere with any financing,
acquisition, corporate reorganization or other similar transaction involving the
Company or any Subsidiary of the Company or that such registration would require
disclosure of non-public information that the Company deems advisable not to
disclose, then the Company's obligation to file a registration statement shall
be deferred for a period not to exceed 180 days.
(b) If any registration requested pursuant to this Section 4.01 that is
proposed by the Company to be effected by the filing of a registration statement
on Form S-3 (or any successor or similar short-form registration statement)
shall be in connection with an underwritten public offering, and if the managing
underwriter shall advise the Company in writing that, in its opinion, the use of
another form of registration statement is of material importance to the success
of such proposed offering, then such registration shall be effected on such
other form.
(c) A registration requested pursuant to this Section 4.01 shall not be
deemed to have been effected unless it has become effective and, even in that
event, such registration shall not be deemed to have been effected if within 180
days after it has become effective, the offering of Oxy Shares pursuant to such
registration is interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court (unless such stop
order, injunction or other order or requirement arises out of or in connection
with an action or failure to act or misstatement or omission by the Person
requesting such registration).
(d) If a requested registration pursuant to this Section 4.01 involves an
underwritten offering, Oxy Partners shall have the right to select the lead
underwriter or underwriters and managers to administer the offering, which shall
be nationally recognized investment banking firms reasonably satisfactory to the
Company, and the Company shall have the right to select a co-manager for the
offering.
(e) If a requested registration pursuant to this Section 4.01 involves an
underwritten offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested to be included
in such registration (including securities issued or to be issued by the Company
that are not Oxy Shares) should be limited because the inclusion of
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14
all of such securities is likely to adversely impact the purchase price obtained
for such securities, the Company shall include in such registration securities
in the following order of priority: first, Oxy Shares requested to be included
in such registration pursuant to this Section 4.01 and second, any other
securities of the Company.
(f) For purposes of this Agreement, the Company shall be deemed to be a
"Public Company" if, as of any date of determination, any Shares shall have been
sold in a Public Offering and any Shares are registered under the Exchange Act.
SECTION 4.02. Incidental Registration. If the Company at any time proposes
to register any Shares under the Securities Act for Sale in a Public Offering,
whether or not for its own account, on a form and in a manner that would permit
registration of Oxy Shares under the Securities Act for Sale in such Public
Offering, the Company shall give prompt written notice to all holders of Oxy
Shares of its intention to do so, specifying the form and manner and the other
relevant facts involved in such proposed registration (including, without
limitations the identity of the managing underwriter). Upon the written request
of any holder of Oxy Shares delivered to the Company within ten days after such
notice shall have been given to such holder (which request shall specify the
number of Oxy Shares intended to be disposed of by such holder and the intended
method of disposition thereof), the Company shall use its commercially
reasonable efforts to effect the registration under the Securities Act, as
expeditiously as is reasonable, of all Oxy Shares that the Company has been so
requested to register by the holders of Oxy Shares, to the extent requisite to
permit the Sale of the Oxy Shares to be so registered in such Public Offering;
provided, however, that:
(a) if, at any time after giving such written notice of its intention to
register any of such Shares proposed to be registered by the Company and prior
to the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
such Shares, the Company may, at its election, give written notice of such
determination to each holder of Oxy Shares that has requested to register Oxy
Shares and thereupon the Company shall be relieved of its obligation to register
any Oxy Shares in connection with such registration;
(b) if the managing underwriter of such Public Offering shall advise the
Company that, in its judgment, the number of Shares proposed to be included in
such Public Offering should be limited because the inclusion of Oxy Shares is
likely to adversely impact the purchase price obtained for the Shares initially
proposed to be included in such Public Offering by the Company (whether or not
for its own account), then the Company shall promptly advise each holder of such
Oxy Shares thereof and may require, by written notice to each such holder
accompanying such advice, that, to the extent necessary to meet such limitation,
the number of Oxy Shares to be included in such registration shall be reduced,
and all holders of Oxy Shares proposing to sell Shares in such Public Offering
shall share pro rata in the number of Shares to be
<PAGE>
15
excluded from such offering, such sharing to be based on the respective numbers
of Shares as to which they have requested registration; and
(c) the Company shall not be obligated to effect any registration of Oxy
Shares under this Section 4.02 that is incidental to the registration of any of
its Shares or other securities in connection with any merger, acquisition,
exchange offer, dividend reinvestment plan or stock option, stock purchase,
savings or other employee benefit plan.
SECTION 4.03. Registration Procedures. (a) If and whenever the Company
is required to use its commercially reasonable efforts to effect the
registration of any Oxy Shares as provided in Section 4.01 or 4.02, the Company
will as expeditiously as is reasonably practicable:
(i) prepare and file with the SEC on any appropriate form a registration
statement with respect to such Oxy Shares and use its commercially reasonable
efforts to cause such registration statement to become effective;
(ii) prepare and file with the SEC such amendments (including post-
effective amendments) and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act and the rules and regulations thereunder with respect to the
disposition of all Oxy Shares and other securities covered by such registration
statement until the earlier of (A) such time as all such Oxy Shares and other
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement and (B) the expiration of 180 days from the date such registration
statement first becomes effective (or such other period as may be agreed upon by
the Company and the managing underwriter);
(iii) furnish to each seller of such Oxy Shares such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements of
the Securities Act and the rules and regulations thereunder, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as such seller may reasonably request in order to facilitate
the sale or disposition of such Oxy Shares;
(iv) use its commercially reasonable efforts to register or qualify all Oxy
Shares covered by such registration statement under such other securities or
"blue sky" laws of such U.S. jurisdictions as each seller shall reasonably
request, and do any and all other acts and things that may be necessary to
enable such seller to consummate the disposition in such jurisdictions of its
Oxy Shares covered by such registration statement, except that the Company shall
not for any
<PAGE>
16
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified, or to subject
itself to taxation in respect of doing business in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(v) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification provisions in
favor of underwriters and other persons in addition to, or in substitution for
the provisions of Section 4.06, and take such other actions as sellers of a
majority of Oxy Shares or the underwriters, if any, reasonably request in order
to expedite or facilitate the disposition of such Oxy Shares;
(vi) furnish to each seller of Oxy Shares (x) a signed counterpart,
addressed to such seller, of any opinion of counsel for the Company, dated the
date of the closing under the underwriting agreement with respect to such Public
Offering, and (y) a signed counterpart, if requested by such seller, managing
underwriter or other seller of securities included in such registration,
addressed to such seller, of any "cold comfort" letter signed by the independent
public accountants in customary form and covering matters of the type
customarily covered by "cold comfort" letters as the managing underwriter or
seller of such Oxy Shares shall reasonably request (provided that Oxy Shares
constitute at least 25% of the securities covered by such registration
statement, unless such a "cold comfort" letter or letters are provided to the
Company, managing underwriter or other selling holders in connection with such
registration);
(vii) immediately notify each seller of Oxy Shares covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act and the rules and regulations
thereunder, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes 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 the
light of the circumstances then existing or if it is necessary to amend or
supplement such prospectus to comply with law, and at the request of any such
seller prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Oxy Shares or other securities,
such prospectus shall not include 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 the light of the circumstances then
existing and shall otherwise comply in all material respects with law and so
that such prospectus, as amended or supplemented, will comply with law;
(viii) otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement which
shall satisfy the provisions of Section 11(a) of the Securities Act and the
rules and regulations thereunder;
<PAGE>
17
(ix) use its commercially reasonable efforts to list such Oxy Shares on
each securities exchange or quotation system on which Shares are then listed or
quoted, if such Oxy Shares are not already so listed or quoted and if such
listing is then permitted under the rules of such exchange or quotation system,
and provide a transfer agent and registrar for such Oxy Shares not later than
the effective date of such registration statement;
(x) cooperate with the holders of Oxy Shares covered by the registration
statement and the managing underwriter or agent, if any, to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing securities to be sold under the registration statement,
and enable such securities to be in such denominations and registered in such
names as the managing underwriter or agent, if any, or such holders may request;
(xi) notify counsel for the holders of Oxy Shares included in such
registration statement and the managing underwriter or agent, immediately (i)
when the registration statement, or any post-effective amendment to the
registration statement, shall have become effective, or any supplement to the
prospectus or any amendment prospectus shall have been filed, (ii) of the
receipt of any comments from the SEC, (iii) of any request of the SEC to amend
the registration statement or amend or supplement the prospectus or for
additional information, and (iv) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the registration statement for offering or
sale in any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(xii) make every commercially reasonable effort to prevent the issuance
of any stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary prospectus and,
if any such order is issued, to obtain the withdrawal of any such order at the
earliest possible moment;
(xiii) if requested by the managing underwriter or agent or any holder of
Oxy Shares covered by the registration statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or agent or such holder reasonably requests to be included
therein, including, without limitation, with respect to the number of Oxy Shares
being sold by such holder to such underwriter or agent, the purchase price being
paid therefor by such underwriter or agent and with respect to any other terms
of the underwritten offering of the Oxy Shares to be sold in such offering; and
make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or posteffective amendment;
(xiv) cooperate with each seller of Oxy Shares and each underwriter or
agent participating in the disposition of such Oxy Shares and their respective
counsel in connection
<PAGE>
18
with any filings required to be made with the National Association of Securities
Dealers, Inc.; and
(xv) issue to any underwriter to which any holder of Oxy Shares may sell
such Oxy Shares in connection with any such registration (and to any direct or
indirect transferee of any such underwriter) certificates evidencing Oxy Shares
without the legends described in Section 3.02(a).
The Company may require each seller of Oxy Shares as to which any registration
is being effected to furnish the Company with such information regarding such
seller and the distribution of such Oxy Shares as the Company may from time to
time reasonably request in writing in connection therewith.
(b) Each holder of Oxy Shares agrees, if so required by the managing
underwriters, not to effect any public sale or distribution (including any sale
pursuant to Rule 144) of Shares (other than as part of such Public Offering)
within 7 days prior to the anticipated effective date of the registration
statement with respect to such underwritten public offering or 180 days after
the effective date of such registration statement.
(c) The Company agrees, if so required by the managing underwriters in
connection with such Public Offering of Oxy Shares pursuant to Section 4.01 or
Section 4.02, not to effect any public sale or distribution of any of its equity
securities or securities convertible into or exchangeable or exercisable for any
of such equity securities within the seven days prior to the anticipated
effective date of the registration statement with respect to such Public
Offering or 180 days after the effective date of such registration statement,
except as part of such Public Offering or except in connection with a dividend
reinvestment plan, a stock option, stock purchase, savings or other employee
benefit plan, or an acquisition, merger or exchange offer.
SECTION 4.04. Preparation, Reasonable Investigation. In connection with
the preparation and filing of a registration statement pursuant to Section 4.01
or Section 4.02, the Company will give the holders of Oxy Shares on whose behalf
such Oxy Shares are to be so registered and their underwriters, if any, and
their respective counsel, accountants and other agents the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have issued a report on its financial
statements as shall be necessary, in the opinion of such holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
<PAGE>
19
SECTION 4.05. Indemnification. (a) In the event of any registration of
Oxy Shares pursuant to Section 4.01 or Section 4.02, the Company shall indemnify
and hold harmless the seller of any Oxy Shares covered by such registration
statement, its directors and officers, general and limited partners (and
directors and officers thereof and, if such seller is a portfolio or investment
fund, its investment advisors), each other Person who participates as an
underwriter in the Public Offering of such Oxy Shares, each officer and director
of each such underwriter, and each other Person, if any, who controls such
seller or any such underwriter within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages, liabilities and expenses
(including, without limitation, reasonable attorneys' fees and any and all
reasonable expenses incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim, and any and all amounts
paid in settlement of any such claim or litigation) to which such seller or any
such director or officer or participating or controlling Person may become
subject under the Securities Act, the Exchange Act, the rules and regulations
thereunder or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Oxy Shares were
registered under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(iii) any failure by the Company to comply with the requirements of the
Securities Act, the Exchange Act, any state securities laws or any rule or
regulation promulgated under any of the foregoing, and the Company will
reimburse such seller, and each such director, officer, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon (i) an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company for use in the preparation thereof by such seller or underwriter, as the
case may be, or (ii) an untrue statement or alleged untrue statement or omission
or alleged omission made in any preliminary prospectus but notified to such
seller and underwriter prior to any sale of Oxy Shares and subsequently
corrected by the Company in any final prospectus, amendment or supplement made
available to such seller or underwriter but which final prospectus, amendment or
supplement was not used by such seller or underwriter in the sale of Oxy Shares
that gave rise to such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such seller or
any such director, officer, underwriter or controlling Person and shall survive
the transfer of such Oxy Shares by such seller.
<PAGE>
20
(b) The Company may require, as a condition to including any Oxy Shares in
any registration statement filed pursuant to Section 4.01 or Section 4.02, that
the Company shall have received an undertaking satisfactory to it from (i) the
prospective seller of such Oxy Shares, to indemnify and hold harmless the
Company, each underwriter of such Shares, each officer and director of each such
underwriter and each other Person, if any, who controls the Company or any such
underwriter within the meaning of Section 15 of the Securities Act, and (ii)
each underwriter of such Oxy Shares, to indemnify and hold harmless the Company,
each officer and director of the Company, each prospective seller, each officer
and director of each prospective seller and each other Person, if any, who
controls the Company or any such prospective seller within the meaning of
Section 15 of the Securities Act, against any losses, claims, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and any and all reasonable expenses incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim, and any
and all amounts paid in settlement of any such claim or litigation) to which
such Person or any such director or officer or participating or controlling
Person may become subject under the Securities Act, the Exchange Act, the rules
and regulations thereunder or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the registration statement under
which such Oxy Shares were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, or any document incorporated by reference
therein, in reliance upon and in conformity with written information furnished
to the Company for use in the preparation thereof by the party from whom
indemnification is sought hereunder, (ii) any 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 reliance upon and in conformity with
written information furnished to the Company for use in the preparation thereof
by the party from whom indemnification is sought hereunder, or (iii) any failure
by the party from whom indemnification is sought to comply with the requirements
of the Securities Act, the Exchange Act, any state securities laws or any rule
or regulation promulgated under any of the foregoing and the indemnifying party
will reimburse each indemnified party, and each such director, officer,
underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling Person and shall
survive the transfer of such Oxy Shares by such seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding (including any governmental
investigation) involving a claim referred to in Section 4.05(a) or (b), such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as
<PAGE>
21
provided herein shall not relieve the indemnifying party of its obligations
under the preceding provisions of this Section 4.05, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim (in
which case, the indemnifying party shall not be liable for the fees and expenses
of more than one counsel for all sellers of Oxy Shares and more than one counsel
for the underwriters in connection with any one action or separate but similar
or related actions), the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that it may wish with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof, the giving by the claimant or plaintiff to such indemnified party
of a release, in form and substance reasonably satisfactory to such indemnified
party, from all liability in respect to such claim or litigation. No indemnified
party will consent to the entry of any judgment or enter into any settlement
with respect to such claim or litigation without the written consent of the
indemnifying party.
SECTION 4.06. Contribution. (a) If the indemnification provided for in
Section 4.05 is unavailable to the indemnified parties in respect of any losses,
claims, damages or liabilities referred to therein, then each indemnifying party
and the Company shall contribute to the amounts paid or payable by such
indemnified parties as a result of such losses, claims, damages or liabilities
(i) as between the Company and the holders of Oxy Shares covered by a
registration statement, on the one hand, and the underwriters, on the other, in
such proportion as is appropriate to reflect the relative benefits received by
the Company and such holders, on the one hand, and the underwriters, on the
other, from the Public Offering of the Oxy Shares, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Company and such
holders, on the one hand, and of the underwriters, on the other, in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations, and (ii)
as between the Company, on the one hand, and each holder of Oxy Shares covered
by a registration statement, on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of each such holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and such
holders, on the one hand, and the underwriters, on the other, shall be deemed to
be in the same proportion as the total proceeds from the Public Offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company and such holders bear to the total underwriting discounts and
<PAGE>
22
commissions received by the underwriters. The relative fault of the Company and
such holders, on the one hand, and of the underwriters, on the other, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and such holders
or by the underwriters. The relative fault of the Company, on the one hand, and
of each such holder, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(b) The Company and the holders of Oxy Shares agree that it would not be
just and equitable if contribution pursuant to this Section 4.06 were determined
by pro rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the next preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the next preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 4.06, no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Oxy
Shares underwritten by it and distributed to the public were offered to the
public pursuant to such Public Offering exceeds the amount of any damages that
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no holder of Oxy
Shares shall be required to contribute any amount in excess of the amount by
which the total price at which the Oxy Shares of such holder were offered to the
public pursuant to such Public Offering exceeds the amount of any damages that
such holder 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. Each holder's obligation to
contribute pursuant to this Section 4.06 is several in the proportion that the
proceeds of the Public Offering received by such holder bears to the total
proceeds of the Public Offering received by all the holders of Oxy Shares and
not joint.
SECTION 4.07. Certain Information. In the event that and so long as the
Company shall be a Public Company, it shall file all reports and other
information required to be filed by Section 13 or 15(d) under the Exchange Act,
as the case may be, within the respective time periods prescribed thereby for
the filing of such reports and other information, as shall be necessary in order
that the conditions to the availability of Rule 144 in connection with any Sale
of Oxy Shares by a Stockholder shall be met.
<PAGE>
23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 5.01. Representations and Warranties of Each Party. Each Party
hereby makes the following representations and warranties to the other Parties:
(a) Organization and Qualification. Such entity is a corporation or a
general partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization.
(b) Authority. Such entity has all requisite corporate or partnership
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by such entity and the
consummation by it of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate or partnership action and
no other proceedings on the part of such entity are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by such entity
and, assuming the due authorization, execution and delivery by the other
parties thereto, constitutes a legal, valid and binding obligation of such
entity, enforceable against such entity in accordance with its terms.
(c) No Conflict; Required Filings and Consents. (i) The execution of
and delivery of this Agreement by such entity do not, and the performance
this Agreement by such entity will not, (A) conflict with or violate the
Certificate of Incorporation, By-Laws or similar organizational documents
of such entity, (B) conflict with or violate any Laws applicable to such
entity or by which any of its properties or assets is bound or (C) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any of the properties or assets
of such entity pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which such entity is a party or by which such entity or any
of its properties is bound, except in any case for such conflicts,
violations, breaches, defaults or other effects which would not prevent or
materially delay the performance by such entity of its obligations
hereunder.
(ii) The execution and delivery of this Agreement by such entity do
not, and the performance of this Agreement by such entity will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity.
<PAGE>
24
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 6.01):
(a) If to the Company:
Clark USA, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105-3721
Telecopier No.: (314) 854-1599
Attention: Maura Clark, Executive Vice President, Corporate
Development and Chief Financial Officer
With copies to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Telecopier No.: (312) 701-7711
Attention: Richard S. Millard, Esq.
(b) If to Oxy Partners:
c/o Occidental Petroleum Corporation
10889 Wilshire Blvd.
Los Angeles, California 90024
Telecopier No.: (310) 443-6812
Attention: Stephen I. Chazen
Executive Vice President, Corporate Development
With a copy to:
Occidental Petroleum Corporation
<PAGE>
25
10889 Wilshire Blvd.
Los Angeles, California 90024
Telecopier No.: (310) 443-6333
Attention: General Counsel
SECTION 6.02. Public Announcements. The Parties shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and, except as may be required by Law or any
listing agreement with any securities exchange, shall not issue any such press
release or make any such public statement without the consent of the other
parties.
SECTION 6.03. Headings. The descriptive headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 6.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 6.05. Entire Agreement. This Agreement constitutes the entire
agreement among the Parties and supersedes all prior agreements and
undertakings, both written and oral, among the Parties, or any of them, with
respect to the subject matter hereof.
SECTION 6.06. Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and shall inure to the benefit of the Parties
and their respective successors and permitted assigns; provided, however, that
this Agreement shall not inure to the benefit of any Prospective Transferee
unless such Prospective Transferee shall have complied with the terms of Section
3.05. No Stockholder may assign any of its rights hereunder to any Person other
than a transferee that has complied with the requirements of Section 3.05 in all
respects.
SECTION 6.07. Parties in Interest. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person other than the Parties
and their respective successors and assigns any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
<PAGE>
26
SECTION 6.08. Amendment. (a) Any term of this Agreement may be amended and
the observance of any such term may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of the Company and Oxy Partners.
(b) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 6.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed entirely within that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in a New York state or federal court sitting in the City of
New York, and the Parties hereby irrevocably submit to the exclusive
jurisdiction of such courts in any such action or proceeding and irrevocably
waive the defense of an inconvenient forum to the maintenance of any such action
or proceeding.
SECTION 6.10. Counterparts. This Agreement may be executed (by original or
telecopied signature) in one or more counterparts, and by the different Parties
in separate counterparts, each of which when so executed shall be deemed to be
an original but all of which taken together shall constitute one and the same
agreement.
SECTION 6.11. Specific Performance. The Parties agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 6.12. Termination. This Agreement shall terminate on the tenth
anniversary of the date hereof. After the eighth anniversary hereof the Parties
shall use their commercially reasonable efforts to extend the terms of this
Agreement for an additional ten year period.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
CLARK USA, INC.
By: _________________________
Name:
Title:
OCCIDENTAL C.O.B. PARTNERS
By OXY USA, Inc.,
its managing partner
By: _________________________
Name:
Title:
The undersigned hereby agrees to be bound by the provisions of Article II
hereof.
BCP/CLARK HOLDINGS CORPORATION
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT 10.40
TERMINATION AGREEMENT
---------------------
TERMINATION AGREEMENT, dated as of October 1, 1997 (this "Agreement"),
among TRIZEC HAHN CORPORATION, an Ontario corporation (the "Purchaser"), 1096153
ONTARIO LIMITED, an Ontario corporation ("1096153"), CLARK USA, INC., a Delaware
corporation (the "Company"), TIGER MANAGEMENT CORPORATION, a Delaware
corporation ("Tiger") and PAUL D. MELNUK ("Melnuk").
WHEREAS, (i) the Purchaser (as successor to The Horsham Corporation),
1096153, the Company and Tiger are parties to a Stock Purchase Agreement, dated
as of February 27, 1995 (the "1995 Stock Purchase Agreement"), and (ii) the
Company, Tiger, 1096153 and Melnuk are parties to a Registration Rights
Agreement, dated as of February 27, 1995 (the "1995 Registration Rights
Agreement"); and
WHEREAS, the Company, The Jaguar Fund, N.V. ("Jaguar"), Puma (a limited
partnership) ("Puma"), Tiger (a limited partnership) (together with Jaguar and
Puma, the "Sellers"), Tiger and the Purchaser have entered into a Class A Common
Stock Reclassification Agreement, dated as of September 19, 1997, pursuant to
which, among other things, the Sellers, Tiger and the Company have agreed to
terminate the 1995 Stock Purchase Agreement (other than Sections 4.9 and 7.1(a)
thereof) and the 1995 Registration Rights Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Company and the Purchasers hereby agree
as follows:
1. Termination of 1995 Stock Purchase Agreement and 1995 Registration
Rights Agreement. (a) The 1995 Stock Purchase Agreement and the 1995
Registration Rights Agreement are hereby terminated.
(b) Notwithstanding the foregoing, Sections 4.9 and 7.1(a) of the 1995
Stock Purchase Agreement shall not be terminated hereby and shall continue in
full force and effect in accordance with their terms.
2. Further Action. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, do or cause to be
done all things necessary, proper or advisable under applicable law, and execute
and deliver such documents and other papers, as may be required to make
effective the provisions of this Agreement.
3. Headings. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
2
4. Governing Law. This Agreement shall be governed by the laws of the
State of New York.
5. Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile signature), and by the different parties
hereto in separate counterparts, each of which when executed shall be deemed to
be an original but all of which taken together shall constitute one and the same
agreement.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
TRIZEC HAHN CORPORATION
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
1096153 ONTARIO LIMITED
By: ________________________________
Name:
Title:
CLARK USA, INC.
By: ________________________________
Name:
Title:
TIGER MANAGEMENT CORPORATION
By: ________________________________
Name:
Title:
<PAGE>
4
___________________________________
Paul D. Melnuk
<PAGE>
CLARK USA, INC. AND SUBSIDIARIES
EXHIBIT 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for
Fixed Charges
Pretax earnings from
continuing operations $ 2,382 ($10,652) $11,793 ($58,977) ($69,284) ($46,616) $ 36,921
Fixed charges 50,792 58,994 62,469 70,894 96,816 72,382 74,642
Capitalized interest (5,108) (2,776) (2,409) (1,404) (1,033) (754) (972)
Other (a) 182 197 (468) (1,413) (136) (139) (103)
------- -------- ------- -------- -------- -------- --------
$48,248 $45,763 $71,385 $ 9,100 $36,353 $24,873 $110,488
======= ======== ======= ======== ======== ======== ========
Fixed Charges
Gross interest expense
(b) $49,444 $56,327 $58,389 $67,461 $91,309 $68,288 $ 70,394
Interest factor
attributable to rent
expense 1,348 2,667 4,100 3,433 5,507 4,094 4,248
------- -------- ------- -------- -------- -------- --------
$50,792 $58,994 $62,469 $70,894 $96,816 $72,382 $ 74,642
======= ======== ======= ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges 0.95x 0.78x 1.14x 0.13x 0.38x 0.34x 1.48x
</TABLE>
- -------
(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.
<PAGE>
EXHIBIT 21.1
Clark Refining & Marketing, Inc., a Delaware corporation, is registered to
do business in the following states:
Delaware
Kentucky
South Dakota
North Dakota
Arkansas
Nebraska
Oklahoma
West Virginia
Indiana
Kansas
Mississippi
Wisconsin
Illinois
Pennsylvania
Tennessee
Minnesota
Michigan
Louisiana
Ohio
New York
Texas
Missouri
<PAGE>
EXHIBIT 23.1
To the Board of Directors of
Clark USA, 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 and financial statement schedule of Clark USA, Inc. We also consent
to the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
December 12, 1997
<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)
NEW YORK 13-4941247
(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 USA, INC.
(Exact name of obligor as specified in its charter)
Delaware 43-1495734
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification no.)
8182 MARYLAND AVENUE
ST. LOUIS, MO 63105
(Address of principal executive offices (Zip Code)
11 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009
(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
September 17, 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
February 18, 1997, Incorporated herein by reference to Exhibit
4 filed with Form T-1 Statement, Registration No. 333-24509-
01.
-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 September 30, 1997. 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 15th day
of December, 1997.
BANKERS TRUST COMPANY
By: /s/ Kevin Weeks
-----------
Kevin Weeks
Assistant Vice President
-4-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 09/30/97 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 September 30, 1997
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> <C>
ASSETS //////////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin (1)................................ 0081 1,526,000 1.a.
b. Interest-bearing balances (2)......................................................... 0071 2,591,000 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 3,903,000 2.b.
3. Federal funds sold and securities purchased under agreements to resell..................... 1350 29,339,000 3.
4. Loans and lease financing receivables: //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 19,343,000 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses RCFD 3123 723,000 ////////////////// 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 18,620,000 4.d.
5. Trading Assets (from schedule RC-D)........................................................ 3545 43,032,000 5.
6. Premises and fixed assets (including capitalized leases)................................... 2145 766,000 6.
7. Other real estate owned (from Schedule RC-M)............................................... 2150 186,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)....................................................................... 2130 59,000 8.
9. Customers' liability to this bank on acceptances outstanding............................... 2155 703,000 9.
10. Intangible assets (from Schedule RC-M)..................................................... 2143 84,000 10.
11. Other assets (from Schedule RC-F).......................................................... 2160 5,343,000 11.
12. Total assets (sum of items 1 through 11)................................................... 2170 106,152,000 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>
Legal Title of Bank: Bankers Trust Company Call Date: 09/30/97 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 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
- --------------------------- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES / / / / / / / / / / / / / /
13. Deposits: / / / / / / / / / / / / / /
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) RCON 2200 22,016,000
(1) Noninterest-bearing(1)......................RCON 6631 2,272,000...... / / / / / / / / / / / / / /
(2) Interest-bearing............................RCON 6636 19,744,000...... / / / / / / / / / / / / / /
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E / / / / / / / / / / / / / /
part II)............................................................................ RCFN 2200 26,396,000
(1) Noninterest-bearing.........................RCFN 6631 1,304,000...... / / / / / / / / / / / / / /
(2) Interest-bearing............................RCFN 6636 25,092,000...... / / / / / / / / / / / / / /
14. Federal funds purchased and securities sold under agreements to repurchase RCFD 2800 11,779,000
15. a. Demand notes issued to the U.S. Treasury.............................................. RCON 2840 0
b. Trading liabilities (from Schedule RC-D).............................................. RCFD 3548 23,059,000
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): / / / / / / / / / / / / / /
a. With a remaining maturity of one year or less......................................... RCFD 2332 6,391,000
b. With a remaining maturity of more than one year through three years.................. A547 369,000
c. With a remaining maturity of more than three years.................................... A548 3,176,000
17. Not Applicable. / / / / / / / / / / / / / /
18. Bank's liability on acceptances executed and outstanding................................... RCFD 2920 703,000
19. Subordinated notes and debentures (2)...................................................... RCFD 3200 1,250,000
20. Other liabilities (from Schedule RC-G)..................................................... RCFD 2930 5,222,000
21. Total liabilities (sum of items 13 through 20)............................................. RCFD 2948 100,361,000
22. Not Applicable / / / / / / / / / / / / / /
/ / / / / / / / / / / / / /
EQUITY CAPITAL / / / / / / / / / / / / / /
23. Perpetual preferred stock and related surplus.............................................. RCFD 3838 1,000,000
24. Common stock............................................................................... RCFD 3230 1,202,000
25. Surplus (exclude all surplus related to preferred stock)................................... RCFD 3839 540,000
26. a. Undivided profits and capital reserves................................................ RCFD 3632 3,409,000
b. Net unrealized holding gains (losses) on available-for-sale securities................ RCFD 8434 15,000
27. Cumulative foreign currency translation adjustments........................................ RCFD 3284 (375,000)
28. Total equity capital (sum of items 23 through 27).......................................... RCFD 3210 5,791,000
29. Total liabilities and equity capital (sum of items 21 and 28).............................. RCFD 3300 106,152,000
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 describes the most comprehensive level of auditing work performed for ---Number---
the bank by independent external auditors as of any date during 1996........ RCFD 6724 N/A
-----------------------------
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>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Bank 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 September 17, 1997, providing for an increase in
authorized capital stock from $2,001,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,201,666,670 consisting of 120,166,667 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 26th day of September 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 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."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Two Billion, Two Hundred and One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($2,201,666,670),
divided into One Hundred Twenty Million, One Hundred Sixty-Six
Thousand, Six Hundred Sixty-Seven (120,166,667) 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>
6. 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
17th day of September, 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 17th day
of September, 1997.
Josephine A. Monti
- -----------------------------------
Notary Public
JOSEPHINE A. MONTI
Notary Public State of New York
No. 52-4519901
Qualified in New York County
Commission Expires October 19, 1997
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
11 1/2% Senior Cumulative Exchangeable Preferred Stock
of
Clark USA, Inc.
Pursuant to the Prospectus dated _________ __, 1998
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
__________, 1998 UNLESS EXTENDED.
================================================================================
To: Bankers Trust Company, as Exchange Agent
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
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.
The undersigned acknowledges that he or she has received the Prospectus,
dated ________ __, 1998 (the "Prospectus"), of Clark USA, Inc. (the "Company")
and this Letter of Transmittal (the "Letter of Transmittal"), which together
constitute the Company's offer (the "Exchange Offer") to exchange its 11 1/2%
New Senior Cumulative Exchangeable Preferred Stock, $1,000 liquidation
preference per share (the "New Exchangeable Preferred Stock"), for each
outstanding share of its 11 1/2% Senior Cumulative Exchangeable Preferred Stock,
liquidation preference $1,000 per share (the "Old Exchangeable Preferred
Stock"), of which 63,000 shares are outstanding. The rights and preferences of
the New Exchangeable Preferred Stock are the same as the rights and preferences
of the Old Exchangeable Preferred Stock, except that the New Exchangeable
Preferred Stock has 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,
<PAGE>
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.
This Letter of Transmittal is to be used by Holders of Old Exchangeable
Preferred Stock of the Company. This Letter of Transmittal is to be used by such
Holders if (i) certificates representing the Old Exchangeable Preferred Stock
are to be physically delivered to the Depositary herewith by such Holders or
(ii) tender of Old Exchangeable Preferred Stock is to be made by book-entry
transfer to the Depositary's account at DTC pursuant to the procedures set forth
under the caption "The Exchange Offer--Procedure for Tendering Old Exchangeable
Preferred Stock in the Exchange Offer, and instructions are not being
transmitted through the DTC Automated Tender Offer Program ("ATOP").
Holders of Old Exchangeable Preferred Stock who are tendering by book-entry
transfer to the Depositary'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 to the Depositary's account at DTC.
DTC will then send an Agent's Message to the Depositary 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 a Letter of Transmittal by the participant
identified in the Agent's Message.
Delivery of documents to DTC does not constitute delivery to the
Depositary.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Exchangeable Preferred Stock is registered on the books of the
Company or any other person who has obtained a properly completed bond power
from the registered holder. 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 Exchangeable Preferred Stock must complete this letter in its
entirety.
2
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<TABLE>
<CAPTION>
DESCRIPTION OF 11 1/2% SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate Principal Amount
Principal Tendered (must
Names and Address(es) of Amount be in Integral
Registered Holder(s) Certificate Represented by Multiple
(Please fill in, if blank) Number(s) Certificate(s) of $1,000)*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
</TABLE>
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 11 1/2% Senior Cumulative Exchangeable Preferred
Stock 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 one share.
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
====================================================================================================================================
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6) (See Instructions 4, 5 and 6)
<S> <C>
To be completed ONLY if certificates for Old Exchangeable To be completed ONLY if certificates for Old Exchangeable
Preferred Stock in a principal amount not tendered, or New Preferred Stock in a principal amount not tendered, or New
Exchangeable Preferred Stock issued in exchange for Old Exchangeable Preferred Stock issued in exchange for Old
Exchangeable Preferred Stock accepted for exchange, are to be Exchangeable Preferred Stock accepted for exchange, are to be
issued in the name of someone other than the undersigned. sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Issue certificate(s) to: Deliver certificate(s) to:
Name: _________________________________________________________ Name: ________________________________________________________
(Please Print) (Please Print)
Address: ______________________________________________________ Address: _____________________________________________________
____________________________________________________________ ____________________________________________________________
(Include Zip Code) (Include Zip Code)
____________________________________________________________ ____________________________________________________________
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
====================================================================================================================================
</TABLE>
4
<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 Exchangeable Preferred
Stock indicated above. Subject to and effective upon the acceptance for exchange
of the principal amount of Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent 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 Exchangeable Preferred
Stock with full power of substitution to (i) deliver certificates for such Old
Exchangeable Preferred Stock to the Company and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company and
(ii) present such Old Exchangeable Preferred Stock for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Exchangeable Preferred Stock, 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 Exchangeable
Preferred Stock 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
Exchangeable Preferred Stock acquired in exchange for Old Exchangeable Preferred
Stock tendered hereby will have been acquired in the ordinary course of business
of the person receiving such New Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock 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. 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 Exchangeable Preferred Stock tendered hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Exchangeable Preferred Stock when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
If any tendered Old Exchangeable Preferred Stock is not accepted for
exchange pursuant to the Exchange Offer for any reason, certificates for any
such unaccepted Old Exchangeable Preferred Stock 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 Exchangeable Preferred
Stock 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.
Unless otherwise indicated under "Special Registration Instructions",
please issue the certificates representing the New Exchangeable Preferred Stock
issued in exchange for the Old Exchangeable Preferred Stock accepted for
exchange and any certificates for Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock issued in exchange for the Old
Exchangeable Preferred Stock accepted for exchange and any certificates for Old
Exchangeable Preferred Stock not tendered or not exchanged (and
5
<PAGE>
accompanying documents, as appropriate) to the undersigned at the address shown
below the undersigned's signature(s). In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the New Exchangeable Preferred Stock
issued in exchange for the Old Exchangeable Preferred Stock accepted for
exchange in the name(s) of, and return any certificates for Old Exchangeable
Preferred Stock 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 Exchangeable Preferred Stock from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the Old
Exchangeable Preferred Stock so tendered.
6
<PAGE>
Holders who wish to tender their Old Exchangeable Preferred Stock and (i)
whose Old Exchangeable Preferred Stock is not immediately available or (ii) who
cannot deliver their Old Exchangeable Preferred Stock, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Old Exchangeable Preferred Stock
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.
<TABLE>
<CAPTION>
PLEASE SIGN HERE WHETHER OR NOT
OLD EXCHANGEABLE PREFERRED STOCK ARE BEING PHYSICALLY TENDERED HEREBY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 Exchangeable Preferred Stock
or 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 Exchangeable Preferred Stock to which this Letter of
Transmittal relate 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: __________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
(Title)
__________________________________________________________________________________________________________________________________
(Name of Firm)
Dated: _________________________, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Exchangeable
Preferred Stock. The tendered Old Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock, 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 Exchangeable Preferred Stock
should be sent to the Company.
Holders who wish to tender their Old Exchangeable Preferred Stock and
(i) whose Old Exchangeable Preferred Stock is not immediately available or (ii)
who cannot deliver their Old Exchangeable Preferred Stock, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date must tender their Old Exchangeable Preferred Stock
according to the guaranteed delivery procedures set forth in the Prospectus.
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution; (ii) 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 Exchangeable Preferred Stock and the principal
amount of Old Exchangeable Preferred Stock 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 Exchangeable
Preferred Stock and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) 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 Exchangeable Preferred Stock in proper form for
transfer, must be received by the Exchange Agent within five 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." Any Holder who wishes to tender his Old Exchangeable Preferred
Stock 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 Exchangeable Preferred Stock 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 Exchangeable Preferred Stock, and
withdrawal of tendered Old Exchangeable Preferred Stock 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
Exchangeable Preferred Stock not properly tendered or any Old Exchangeable
Preferred Stock 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
Exchangeable Preferred Stock. 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 Exchangeable
Preferred Stock 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 notification of defects or irregularities with respect to tenders
of Old Exchangeable Preferred Stock, nor shall any of them incur any liability
for failure to give such notification. Tenders of Old Exchangeable Preferred
Stock will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any Old Exchangeable Preferred Stock received by the
Exchange Agent that is 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.
8
<PAGE>
2. Tender by Holder. Only a Holder of Old Exchangeable Preferred
Stock may tender such Old Exchangeable Preferred Stock in the Exchange Offer.
Any beneficial owner of Old Exchangeable Preferred Stock 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 his
or her Old Exchangeable Preferred Stock, either make appropriate arrangements to
register ownership of the Old Exchangeable Preferred Stock in such owner's name
or obtain a properly completed bond power from the registered holder.
3. 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 Exchangeable
Preferred Stock tendered hereby, the signature must correspond with the name(s)
as written on the face of the Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock tendered and
the certificate or certificates for New Exchangeable Preferred Stock issued in
exchange therefor is to be issued (or any untendered principal amount of Old
Exchangeable Preferred Stock is to be reissued) to the registered holder, then
such holder need not and should not endorse any tendered Old Exchangeable
Preferred Stock, nor provide a separate bond power. In any other case, such
holder must either properly endorse the Old Exchangeable Preferred Stock
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 Exchangeable
Preferred Stock listed, such Old Exchangeable Preferred Stock 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 Exchangeable Preferred Stock.
If this Letter of Transmittal (or facsimile hereof) or any Old
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock 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 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 Exchangeable Preferred Stock 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 Exchangeable
Preferred Stock is tendered for the account of an Eligible Institution.
4. Special Registration and Delivery Instructions. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to which
New Exchangeable Preferred Stock or substitute Old Exchangeable Preferred Stock
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. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
5. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Exchangeable Preferred Stock pursuant to the
Exchange Offer. If, however, certificates representing New Exchangeable
Preferred Stock or Old Exchangeable Preferred Stock for principal amounts not
tendered or accepted for exchange are
9
<PAGE>
to be delivered to, or are to be registered in the name of, any person other
than the registered holder of the Old Exchangeable Preferred Stock tendered
hereby, or if tendered Old Exchangeable Preferred Stock is 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
Exchangeable Preferred Stock 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 Exchangeable Preferred Stock listed
in this Letter of Transmittal.
6. 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 Exchangeable Preferred Stock tendered.
7. Mutilated, Lost, Stolen or Destroyed Old Exchangeable Preferred
Stock. Any tendering Holder whose Old Exchangeable Preferred Stock have been
mutilated, lost, stolen or destroyed should contact the Exchange Agent at the
address indicated herein for further instructions.
8. 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
<PAGE>
(DO NOT WRITE IN SPACE BELOW)
=============================================================================
Old Exchangeable Old Exchangeable
Preferred Stock Preferred Stock
Certificate Surrendered Tendered Accepted
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
Delivery Prepared by ________________ Checked By __________ Date _______________
11
<PAGE>
EXHIBIT 99.2
CLARK USA, INC.
Notice of Guaranteed Delivery
of
11-1/2% Senior Cumulative Exchangeable Preferred Stock
As set forth in the Prospectus, dated ____ __, 1998 (as the same may
be amended from time to time, the "Prospectus") of Clark USA, 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 one share of its
11-1/2% New Senior Cumulative Exchangeable Preferred Stock, liquidation
preference $1,000 per share (the "New Exchangeable Preferred Stock"), which has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for each share of its outstanding 11-1/2% Senior Cumulative Exchangeable
Preferred Stock liquidation preference $1,000 per share (the "Old Exchangeable
Preferred Stock"), if (i) certificates representing the Old Exchangeable
Preferred Stock 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 is:
BANKERS TRUST COMPANY
<TABLE>
<S> <C>
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 Grassmerre 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
</TABLE>
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 Exchangeable Preferred Stock 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.
<PAGE>
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.
SIGNATURES
Signature of Owner
Signature of Owner (if more than one)
Dated: , 1998
Name(s):
(Please Print)
Address:
(Include Zip Code)
Area Code and
Telephone No.:
Capacity (full title), if signing in a repre-
sentative capacity:
Taxpayer Identification or
Social Security No.:
Principal Amount of Old Exchangeable
Preferred Stock Exchanged: $
-----------------------
Certificate Nos. of Old Exchangeable
Preferred Stock (if available)
- -----------------------------------------------
- -----------------------------------------------
Total $
---------------------------------------
IF OLD EXCHANGEABLE PREFERRED STOCK
WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY
TRUST COMPANY ("DTC") ACCOUNT NO.:
Account No.:
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) that the above named person(s) "own(s)" the Old Exchangeable
Preferred Stock tendered hereby within the meaning of Rule 10b-4 under the
Securities Exchange Act of 1934, (b) that such tender of Old Exchangeable
Preferred Stock 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 Exchangeable Preferred Stock 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.
Authorized Signature
Name of Firm:
Address:
Name:
Title:
2
<PAGE>
Area Code and Telephone No.: Date:
NOTE: DO NOT SEND OLD EXCHANGEABLE PREFERRED STOCK WITH THIS FORM. ACTUAL
SURRENDER OF OLD EXCHANGEABLE PREFERRED STOCK MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, THE LETTER OF TRANSMITTAL.
3
