<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY , 1998
REGISTRATION NO. 333-42457
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
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. [_]
----------------
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- Not Applicable
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 JANUARY , 1998
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 the 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 Offering (as defined herein), 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 Offering 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.
(Continued)
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 Prospectus is January , 1998.
<PAGE>
(Continuation of Cover Page)
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, the Company believes that the New 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 (as defined herein) thereof (other than (i) a broker-dealer who
purchases such New Exchangeable Preferred Stock directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such Holder that is an "affiliate" of the Company,
within the meaning of Rule 405 under the Securities Act,) without compliance
with the registration and prospectus delivery provisions of the Securities
Act; provided that the Holder is acquiring such New Exchangeable Preferred
Stock in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in any
distribution of the New 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, meeting the requirements under the Securities Act,
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........................................... 52
Business.................................................................. 53
Management................................................................ 74
Security Ownership of Certain Owners and Management....................... 80
Certain Transactions...................................................... 80
Description of the New Exchangeable Preferred Stock....................... 82
Description of the Exchange Debentures.................................... 93
Book Entry; Delivery and Form............................................. 114
Description of Certain Debt Instruments................................... 116
Description of Other Capital Stock........................................ 123
Certain Federal Income Tax Consequences................................... 126
Plan of Distribution...................................................... 133
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.
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; and
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. See additional operating cash flow disclosures in
"Selected Consolidated Financial and Other Data."
The Company's Illinois refineries, Blue Island (near Chicago, Illinois) and
Hartford (near St. Louis, Missouri), are supplied by common carrier crude oil
pipelines and are located on inland waterways with barge access. The refineries
have access to multiple sources of foreign and domestic crude oil and benefit
from crude oil input flexibility. Recent pipeline expansions, including the new
capacity of the Express Pipeline and expanded capacity on the Interprovincial
Pipeline, have served to increase the availability of lower cost crude oil to
the Company's Illinois refineries. The two refineries are connected by product
pipelines, increasing flexibility relative to stand alone operations. The
Company's product terminals allow efficient distribution of refinery production
through pipeline systems. The Company believes that the Midwest location of
these refineries 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 for convenience products versus the industry
average of approximately $24. 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 its
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 $19 million
principally for engineering costs specific to the DHDS Project.
The Company expects to record several other charges to earnings in the fourth
quarter of 1997 that management considers "unusual". The Company anticipates
recording a noncash accounting charge of approximately $20 million to reflect
the decline in the value of petroleum inventories below carrying value caused
by a substantial decrease in petroleum prices at the end of 1997. In addition,
as discussed herein, the Company has incurred fees and expenses of
approximately $11 million related to the Equity Recapitalization and will
record an extraordinary item of approximately $20 million related to the Debt
Refinancing and Repayment. The Company also is evaluating the adequacy of its
accruals due to developments in pending legal and environmental actions and
currently expects to increase these accruals in the fourth quarter of 1997. See
"Business--Environmental Matters" and "Business--Legal Proceedings."
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 such shares of Class
E Common Stock were subsequently reclassified into the Old Exchangeable
Preferred Stock 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 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.
8
<PAGE>
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."
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 $125.0 million (the "Term Loan").
Borrowings under the Loan Agreement are senior unsecured obligations of Clark.
THE DEBT OFFERING
On November 21, 1997, Clark sold $100.0 million aggregate principal amount of
8 3/8% Senior Notes due 2007 (the "Old Senior Notes") and $175.0 million
aggregate principal amount of its 8 7/8% Senior Subordinated Notes due 2007
(the "Old Senior Subordinated Notes" together with Senior Notes, the "Old
Notes") (the "Debt Offering"). On or about January , 1998, Clark commenced an
offer to exchange an equal principal amount of its 8 3/8% New Senior Notes (the
"New Senior Notes" and together with the Old Senior Notes, the "Senior Notes")
and 8 7/8% New Senior Subordinated Notes ("New Senior Subordinated Notes" and
together with the Old Senior Subordinated Notes, the "Senior Subordinated
Notes") for its outstanding Old Senior Notes and Old Senior Subordinated Notes,
respectively. The New Senior Notes and the New Senior Subordinated Notes are
referred to herein as the "New Notes."
A portion of the net proceeds of the Debt Offering and the Term Loan were
used to redeem, on December 24, 1997, all $225.0 million aggregate principal
amount of Clark's outstanding 10 1/2% Senior Notes due 2001 (the "10 1/2%
Notes") at a price of $1,032.96 for each $1,000.00 principal amount of 10 1/2%
Notes outstanding, representing the redemption premium and accrued interest.
The remaining net proceeds of the Debt Offering and the Term Loan, estimated to
be approximately $149.1 million, were used to substantially replenish Clark'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
9
<PAGE>
its existing cash (the "Special Dividend") which enabled the Company to
repurchase for $206.6 million, $259.2 million (principal amount at maturity) of
its Senior Secured Zero Coupon Notes due 2000, Series A (the "Zero Coupon
Notes"), pursuant to a tender offer (the "Tender Offer"). The Company will
redeem the remaining Zero Coupon Notes on or about February 15, 1998. As a
result of the Blackstone Transaction, $175.0 million of Clark's 9 1/2% Senior
Notes due 2004 (the "9 1/2% Notes") have become subject to a repurchase offer
which expires on March 9, 1998.
The transactions described in the preceding three paragraphs are referred to
herein as the "Debt Refinancing and Repayment."
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 (i) a broker-dealer who
purchases such New Exchangeable Preferred Stock
directly from the Company to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (ii) any such Holder that
is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act; provided that the Holder is acquiring such
New Exchangeable Preferred Stock in its ordinary
course of business and is not participating, and
has no arrangement or understanding with any
person to participate, in any distribution of the
New 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 for the purpose
of distributing the New Exchangeable Preferre
d Stock cannot rely on the interpretation of
the staff of the
10
<PAGE>
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."
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."
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
11
<PAGE>
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 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
5:00 p.m. 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
12
<PAGE>
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..............
First Chicago Trust Company of New York is
serving as Exchange Agent in connection with the
Exchange Offer.
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 the 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 herein) of one or more
Equity Offering 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 Offering.
13
<PAGE>
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 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
14
<PAGE>
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 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 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
15
<PAGE>
option, use the net proceeds of one or more
Equity Offering 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 Offering.
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 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.
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)
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- --------
(a) Certain reclassifications were made to prior periods to conform to current
period presentation.
(b) Amortization includes amortization of turnaround costs and organizational
costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $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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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 9 1/2%
Notes, New Senior Notes and New Senior Subordinated Notes permit the
incurrence of additional indebtedness by the Company subject to certain
limitations specified therein.
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. As a result of
the losses for the years ended December 31, 1992, 1993, 1995 and 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. The
Company may experience net losses in the future. 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 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 cash, cash equivalents and short-term investments as of
September 30, 1997 totalled $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 obligations when they become due and would therefore be
required to refinance all or a portion of such obligations at or prior to
their maturity.
In connection with the Port Arthur Refinery acquisition, 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 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 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
23
<PAGE>
nonpayment default 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 believes that it has generated additional regular tax
net operating loss carryforwards and AMT net operating loss carryforwards in
their tax year which ended December 31, 1997. These NOLs would expire
beginning in 2009 through 2012. The Internal Revenue Service (the "IRS") 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. Pursuant to such indenture, the
Company has offered to purchase the 9 1/2% Notes, such offer to expire on
March 9, 1998, 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. There can be no assurance that the holders of a material portion
of the 9 1/2% Notes will not tender their 9 1/2% Notes in response to the
required repurchase offer. In the event a material portion of the 9 1/2% 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 New 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 (the "Purchase Agreement"),
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."
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
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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
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 dividend and/or 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 will not receive any proceeds
from the issuance of the New Exchangeable Preferred Stock offered in the
Exchange Offer.
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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 such Holders without restrictions or
limitations under the Securities Act. A copy of the Registration Agreement has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The term "Holder" with respect to the Exchange Offer
means any person (i) in whose name Old 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 or (ii) whose Old
Exchangeable Preferred Stock is held of record by DTC who desires to deliver
such Old Exchangeable Preferred Stock by book-entry transfer at DTC.
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that New
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 thereof (other than (i) a broker-dealer
who purchases such New Exchangeable Preferred Stock directly from the Company
to resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act; provided that the Holder is acquiring such New Exchangeable Preferred
Stock in the ordinary course of its business and is not participating, and has
no arrangement or understanding with any person to participate, in any
distribution 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. 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
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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 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 rights and preferences of the New Exchangeable Preferred Stock will be
identical in all material respects to the rights and preferences of the Old
Exchangeable Preferred Stock except that the New Exchangeable Preferred Stock
has been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof.
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 January 16, 1998.
Holders of Old Exchangeable Preferred Stock do not have any appraisal or
dissenters' rights under the General Corporation Law of Delaware 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 Exchange Agent and
forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce such
Letter of Transmittal against such participant.
Book-Entry Delivery of the Old Exchangeable Preferred Stock. Within two
business days after the date of this Exchange Offer, the Exchange Agent will
establish an account with respect to the Old Exchangeable Preferred Stock at
DTC for purposes of the Exchange Offer. Any financial institution that is a
participant in the DTC system may make book-entry delivery of Old Exchangeable
Preferred Stock by causing DTC to transfer such Old Exchangeable Preferred
Stock into the Exchange Agent's account in accordance with DTC's procedure for
such transfer. Although delivery of Old Exchangeable Preferred Stock may be
effected through book-entry at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or (in the case of a book-
entry transfer through the DTC Automatic Tender Offer Program ("ATOP")) an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must be transmitted to and received by the Exchange Agent at or
prior to 5:00 p.m., New York City time, on the Expiration Date at one of its
addresses set forth in "--Exchange Agent." DELIVERY OF SUCH DOCUMENTS TO DTC
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
The method of delivery of Old 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
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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.
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
power 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.
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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, 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
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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
First Chicago Trust Company of New York 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:
First Chicago Trust Company of New York First Chicago Trust Company of New York
Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 14 Wall Street
Suite 4660 8th Floor
Jersey City, NJ 07303-2569 Suite 4680
New York, NY 10005
Confirm by Telephone:
(201) 324-0137
By Hand:
First Chicago Trust Company of New York
Attention: Tenders & Exchanges
c/o The Depository Trust Company
55 Water Street DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Facsimile:
(201) 222-4720
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.
34
<PAGE>
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
$150,000. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old 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. The 9
1/2% Notes are subject to a repurchase offer by the Company, which expires
on March 9, 1998, as a result of the Blackstone Transaction. See "Risk
Factors--Change of Control Provisions in New and Existing Preferred Stock
and Indebtedness."
(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 includes 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 $19 million
principally for engineering costs specific to the DHDS Project.
The Company expects to record several other charges to earnings in the
fourth quarter of 1997 that management considers "unusual". The Company
anticipates recording a noncash accounting charge of approximately $20 million
to reflect the decline in the value of petroleum inventories below carrying
value caused by a substantial decrease in petroleum prices at the end of 1997.
In addition, as discussed herein, the Company has incurred fees and expenses
of approximately $11 million related to the Equity Recapitalization and will
record an extraordinary item of approximately $20 million related to the Debt
Refinancing and Repayment. The Company also is evaluating the adequacy of its
accruals due to developments in pending legal and environmental actions and
currently expects to increase these accruals in the fourth quarter of 1997.
See "Business--Environmental Matters" and "Business--Legal Proceedings."
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 million to $10 million.
43
<PAGE>
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.
(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.
44
<PAGE>
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.
45
<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.
46
<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.
47
<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>
48
<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
49
<PAGE>
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 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.
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
50
<PAGE>
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 December 24, 1997, Clark redeemed
all $225.0 million of the 10 1/2% Notes outstanding at a price of $1,032.96
for each $1,000.00 principal amount of the notes. As a result of the
Blackstone Transaction, the $175.0 million of 9 1/2% Notes are subject to a
repurchase offer which expires on March 9, 1998. See "Risk Factors--Change of
Control Provisions in New and Existing Preferred Stock and Indebtedness."
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.
51
<PAGE>
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>
52
<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."
53
<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.
54
<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.
55
<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 when compared to light sweet crude oil such as WTI.
The Port Arthur refinery has the ability to produce jet fuel, 100% low-sulfur
diesel fuel, 55% summer RFG and 75% winter RFG. The refinery's Texas Gulf
Coast location provides access to numerous cost effective domestic and
international crude oil sources, and its products can be sold in the
Midcontinent and Eastern U.S. as well as in export markets.
Since acquiring the Port Arthur Refinery in early 1995, the Company has
increased crude oil throughput capability from approximately 178,000 bpd to
its current 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.
56
<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.
57
<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.
58
<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 begun negotiating to sell its
interests in the Southcap, Chicap, Wolverine and West Shore pipelines.
However, there can be no assurance that such negotiations will be concluded,
and if concluded, will be consummated.
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
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<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 by mutual agreement.
The Port Arthur refinery's products can be sold in the Midcontinent and
Eastern U.S. as well as export markets. These markets can be accessed through
the Explorer, Texas Eastern and Colonial pipelines or by ship or barge. The
Company's Illinois refineries can distribute their products through various
common carrier and proprietary pipelines which connect the 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.
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<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
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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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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
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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 the first quartile, in terms of operating costs in
its regions, that 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%.
Simultaneously 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.
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<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.
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<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
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<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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<PAGE>
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 and is operating 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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<PAGE>
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 legal and environmental-related obligations that may result from the
matters noted above and obligations associated with certain retail sites. The
Company is evaluating the adequacy of its accrual due to developments in
pending legal and environmental actions and currently expects to increase this
accrual in the fourth quarter of 1997.
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.
As of September 30, 1997, the Company has accrued a total of $15.8 million
for environmental-related and legal obligations that may result from the
matters noted above and obligations associated with certain retail sites. The
Company is evaluating the adequacy of its accrual due to developments in
pending legal and environmental actions and currently expects to increase this
accrual in the fourth quarter of 1997.
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.
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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 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 UNEXERCISED
SHARES ACQUIRED UNEXERCISED 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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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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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 of Control occurs within two years prior to the
scheduled expiration date, then the expiration date will be automatically
extended until the second anniversary of the Change of Control date. The
Blackstone Transaction 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 provide for gross-up payments to be
made to the employee to cover certain penalty taxes in connection with a
Change of 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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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 as follows:
10,771,005.354 shares by Blackstone, 1,918,994.646 shares by Blackstone
Offshore Capital Partners III L.P. and 810,000 shares by Blackstone Family
Investment Partnership III L.P., of each of which Blackstone Management
Associates III L.L.C. is the general partner having voting and dispositive
power.
(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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The business relationships described above between the Company and
TrizecHahn were on terms no less favorable in any respect than those which
could have been obtained through dealings with third parties.
In connection with the Blackstone Transaction, affiliates of Blackstone
received fees of $7.0 million, and the Company reimbursed Blackstone for 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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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 herein and not
otherwise defined previously in this Prospectus are set forth under
"Description of the Exchange Debentures--Certain Definitions" or 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, 63,000 shares of Old 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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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 (as defined herein) and the Zero Coupon Note
Indenture (as defined herein) 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 Offering 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 Offering 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
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<PAGE>
notice 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 indenture governing Clark's 9 1/2% Notes contains and any agreement
governing debt that may refinance the 9 1/2% 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 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
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 the
Exchange 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 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 Offering 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 Offering 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
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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 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
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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.
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 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
and Clark's 9 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
and the 9 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:
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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 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
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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 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 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,
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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 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
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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 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 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 assets 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."
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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 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
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 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. 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.
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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 (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
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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 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 IRS, 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
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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.
The Exchange Indenture and provisions of the Trust Indenture Act
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claim as security or otherwise. The Trustee is permitted
to engage in other transactions with the Company or any Affiliate; provided,
however, that if it acquires any conflicting interest (as defined in the
Exchange Indenture or in the Trust Indenture Act), it must eliminate such
conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
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
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from Restricted Subsidiaries and any accounts receivable that are more than 90
days past due) as of such date, plus (ii) 90% of the market value of inventory
owned by the Company and its Restricted Subsidiaries as of such date, plus
(iii) 100% of the cash and Cash Equivalents owned by the Company and its
Restricted Subsidiaries as of such date that are, as of such date, held in one
or more separate accounts under the direct control of the agent bank under the
Credit Agreement and that are as of such date pledged to secure working
capital borrowings under the Credit Agreement, 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, 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 Blackstone, or a Person, a majority
of whose voting equity is owned by Blackstone, becomes the Beneficial Owner,
directly or indirectly, of shares of stock of the Company, Clark or any
Subsidiary of the Company or Blackstone 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.
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"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 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
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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.
"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
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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.
"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
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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 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
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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.
"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
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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.
"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) Blackstone, (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.
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"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 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
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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 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 Certificate to the respective accounts of persons
who have accounts with such depository 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
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Preferred Stock for exchange as described below) only at the direction of one
or more participants to 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 depository for the Global Certificate and a successor depository
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 Clark's ratio of cash to the face amount of
outstanding letters of credit and 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 (as defined)
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.
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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 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 $5.0 million and
continuance beyond any applicable grace period; (vi) certain acts of
bankruptcy or insolvency; (vii) the occurrence of certain events under ERISA;
(viii) certain judgments, writs or warrants of attachment of similar process
remaining undischarged, unvacated, unbonded, or unstayed for a period of 10
days; (ix) the occurrence of a change of control; (x) the loss of material
licenses of permits; 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, Clark entered into a Loan Agreement with certain
lenders and Goldman Sachs Credit Partners L.P., as Agent, pursuant to which
Clark borrowed $125.0 million. The proceeds of the Term Loan were used,
together with the net proceeds from the Old Notes to redeem Clark's
outstanding 10 1/2% Notes. The remaining net proceeds were used to replenish
Clark's cash reserves.
Borrowings under the Loan Agreement are senior unsecured obligations of
Clark. 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. Clark 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, Clark 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 contained in the Senior Note Indenture and the Senior
Subordinated Indenture (both as defined herein).
Lenders under the Loan Agreement will have customary voting, participation,
indemnification and assignment rights.
9 1/2% NOTES
The 9 1/2% Notes are governed by an indenture, dated as of September 15,
1992 (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 $100.0
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 $175.0 million of 9 1/2% Notes
are subject to a repurchase offer which expires on March 9, 1998.
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 $100.0 million and ranking pari passu in right of
payment with all senior debt of Clark.
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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.
In addition, Clark may, at its option, use the net proceeds of one or more
Equity Offering 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 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 Subordinated 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.
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.
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In addition, Clark may, at its option, use the net proceeds of one or more
Equity Offering 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
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 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).
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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.
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
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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.
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.
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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")
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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.
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, IRS 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 IRS with
respect to the position of the Company discussed below. There can be no
assurance that the IRS 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
OID. 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.
128
<PAGE>
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
129
<PAGE>
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 OID 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 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.
130
<PAGE>
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 IRS 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 of cash received (except to the extent
that cash received is attributable to accrued, but previously
131
<PAGE>
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.
132
<PAGE>
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 IRS that he or she has
failed to report properly payments of interest and dividends and the IRS 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 IRS. 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.
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 180 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
133
<PAGE>
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.
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.
134
<PAGE>
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 $11 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 $19 million principally for engineering costs
specific to the DHDS Project.
The Company also anticipates recording in the fourth quarter of 1997 a
noncash charge of approximately $20 million to reflect the decline in the
value of petroleum inventories below carrying value caused by a substantial
decrease in petroleum price at the end of 1997. The Company is also evaluating
the adequacy of its accruals due to developments in pending legal and
environmental actions and currently expects to increase these accruals in the
fourth quarter of 1997.
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 Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Clayton, State of Missouri on January 16, 1998.
Clark USA, Inc.
/s/ Paul D. Melnuk
By: _________________________________
Its: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated and on January 16, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Paul D. Melnuk
- -------------------------------------------
Paul D. Melnuk President and Chief Executive Officer;
Director (Principal Executive Officer)
/s/ Maura J. Clark*
- -------------------------------------------
Maura J. Clark Executive Vice President--Corporate
Development and Chief Financial Officer
(Principal Financial Officer)
/s/ Dennis R. Eichholz*
- -------------------------------------------
Dennis R. Eichholz Controller and Treasurer
(Principal Accounting Officer)
/s/ Marshall A. Cohen*
- -------------------------------------------
Marshall A. Cohen Director
/s/ David A. Stockman*
- -------------------------------------------
David A. Stockman Director
/s/ John R. Woodard*
- -------------------------------------------
John R. Woodard Director
/s/ David I. Foley*
- -------------------------------------------
David I. Foley Director
/s/ Stephen I. Chazen*
- -------------------------------------------
Stephen I. Chazen Director
</TABLE>
/s/ Paul D. Melnuk
*By: ___________________________
Paul D. Melnuk
Attorney-in-fact
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))
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 tax mat-
ters
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))
10.25 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
10.52 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))
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))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
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))
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))
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<C> <S> <C>
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>
- --------
+Previously filed.
<PAGE>
EXHIBIT 4.2
INDENTURE, dated as of October 1, 1997 between Clark USA, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 8182 Maryland
Avenue, St. Louis, Missouri, 63105, and Bankers Trust Company, a New York
banking corporation, as Trustee (herein called the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of 63,000
Shares of 11 1/2% of Senior Cumulative Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock") which, subject to certain conditions, is
exchangeable for the Company's 11 1/2% Subordinated Exchange Debentures due 2009
(the "Securities") of substantially the tenor and amount hereinafter set forth,
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary to make the Securities, when executed by the
Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
Section 1.01. Definitions
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean
<PAGE>
such accounting principles as are generally accepted and consistently
applied in the United States which are in effect on the date of this
Indenture; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Act," when used with respect to any Holder, has the meaning specified
in Section 1.04.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"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 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.
2
<PAGE>
"Asset Disposition Trigger Date" has the meaning as specified in
Section 9.18.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 5.14 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and set forth in an Officers' Certificate delivered to the
Trustee.
"Borrowing Base" means, as of any date, an amount equal to the sum
of (i) 95% of the accounts receivable owned by the Company and its Restricted
Subsidiaries (excluding any accounts receivable from Restricted Subsidiaries and
any accounts receivable that are more than 90 days past due) as of such date,
plus (ii) 90% of the market value of inventory owned by the Company and its
Restricted Subsidiaries as of such date, plus (iii) 100% of the cash and Cash
Equivalents owned by the Company and its Restricted Subsidiaries as of such date
that are, as of such date, held in one or more separate accounts under the
direct control of the agent bank under the Credit Agreement and that are as of
such date pledged to secure working capital borrowings under the Credit
Agreement, 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.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, City of New York, are authorized or obligated by law, regulation or
executive order to close.
"Capital Lease" means, at the time any determination thereof is to
be made, any lease of property, real or personal or mixed, in respect of which
the present value of the minimum rental commitment would be capitalized on a
balance sheet of the lessee in accordance with GAAP.
"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
3
<PAGE>
other equivalents (however designated) of corporate stock and (iii) in the case
of a partnership, partnership interests (whether general or limited).
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's or S&P and, in each case, maturing within six
months after the date of acquisition.
"Change of Control" means any transaction the result of which is
that any Person (an "Acquiring Person") other than 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.
"Change of Control Triggering Event" means the occurrence of a Change
of Control on or after October 1, 2005.
"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.
"Clark Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of April 19, 1995, 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.
"Closing Date" means the date on which the closing of the sale of the
Exchangeable Preferred Stock occurs.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the
4
<PAGE>
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Adjusted Net Worth" of any Person means the total
amount of consolidated stockholder's equity (par value plus additional paid-in
capital 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 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
5
<PAGE>
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.
"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
6
<PAGE>
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.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at the date of the execution of the Indenture located at Four
Albany Street, New York, New York 10006, Attention: Corporate Trust and Agency
Group or at any other time at such other address as the Trustee may designate
from time to time by notice to the Noteholders.
"Corporation" means a corporation, association, company, joint-stock
company, partnership, limited liability company or business trust.
"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, 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.
"Defaulted Interest" has the meaning specified in Section 2.12.
"Definitive Securities" means Securities that are in the form of the
Securities set forth in Article Two hereof, that do not include the information
called for by Section 2.06(g)(i).
"Depository" means, with respect to Securities issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depository with respect to the Securities, until a successor shall have been
appointed and become such Depository pursuant to the applicable provisions of
this Indenture, and, thereafter, "Depository" shall mean or include such
successor.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Capital Stock" means any Capital Stock of the Company
that, either by its terms or by the terms of any security into which it is
convertible or exchangeable, is, or upon the happening of any event or passage
of time would be, required to be redeemed or purchased, 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 any offering of Capital Stock of the Company.
7
<PAGE>
"Event of Default" has the meaning as specified in Section 4.01.
"Excess Proceeds" has the meaning as specified in Section 9.18.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Exchange Offer" means the offer that may be made by the Company
pursuant to the Registration Rights Agreement to exchange Exchangeable Preferred
Stock for the Securities.
"Existing Indebtedness" means any outstanding Indebtedness of the
Company and its Subsidiaries as of the Closing 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 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 Closing Date.
"Global Security" means a Security that contains the additional
language referred to in footnote 1 to the form of Security attached hereto as
Exhibit A.
"Guaranty" means a guaranty (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Gulf Merger Agreement" means the Agreement and Plan of Merger, dated
as of November 3, 1995, among the Company, Gulf Resources Corporation and GFR,
Inc.
"Gulf 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
8
<PAGE>
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.
"Gulf Oil Purchase Contract" means the Crude Oil Purchase Contract
between GFR, Inc. and Gulf Resources Corporation.
"Gulf Pledge Agreement" means the Pledge Agreement among the Company,
Gulf Resources Corporation and Gulf Resources Holdings, Inc.
"Gulf Stockholders' Agreement" means the Stockholders' Agreement
among the Company, Gulf Resources Corporation and Gulf Resources Holdings, Inc.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" with respect to any Person, means any indebtedness,
including, in the case of the Company, the indebtedness evidenced by the
Securities, 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.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument, and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"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
9
<PAGE>
or scheduled to be paid or accrued by such Person during such period, determined
in accordance with GAAP.
"Interest Payment Date" means each April 1 and October 1, or if any
such day is not a Business Day, on the next succeeding Business Day.
"Interest Swap Obligations" means, when used with reference to any
Person, the obligations of such person under (i) interest rate swap agreements,
interest rate exchange agreements, interest rate cap agreements, and interest
rate collar agreements, (ii) currency swap agreements and currency exchange
agreements and (iii) other similar agreements or arrangements, which are, in
each such case, designed solely to protect such Person against fluctuations in
interest rates or currency exchange rates.
"Investment" means, when used with reference to any Person, any
direct or indirect advances, loans or other extensions of credit or capital
contributions by such Person to (by means of transfers of property to others or
payments for property or services for the account or use of 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 Price" of any Security means, in connection with the original
issuance of such Security, the price paid by the first buyer of such Security.
"Junior Subordinated Indebtedness" means any Indebtedness of the
Company which is subordinated in right of payment to the Securities 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).
"Material Asset" means, with respect to the Company or any Restricted
Subsidiary of the Company, any asset, related group of assets, business or
division of the Company or any Restricted Subsidiary of the Company (including
any capital stock of any Restricted Subsidiary of the Company) which (i) for the
most recent fiscal year of the Company, accounted or would have accounted for
more than 3% of the consolidated revenues of the Company or (ii) as at the end
of such fiscal year, represented or would have represented more than 3% of the
consolidated assets of the Company or has a fair market value in excess of $10
million, all as shown (x) with respect to any sale or disposition, on the
consolidated financial
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statements of the Company for such fiscal year or such shorter period as such
assets, business or division were owned by the Company or any Restricted
Subsidiary of the Company and (y) with respect to any acquisition, on
consolidated pro forma financial statements of the Company for the four full
Quarters for which financial information in respect thereof is available
immediately prior to such acquisition, giving effect thereto on a pro forma
basis as if such acquisition had occurred at the beginning of such four full
Quarters.
"Maturity" means, with respect to any Securities, the date on which
the principal of such Securities becomes due and payable as provided in the
Indenture, whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Moody's" means Moody's Investor Service, Inc. and its successors.
"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.
"Obligations" means any principal (and premium, if any), interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Occidental/Gulf Payments" means all payments (other than the initial
purchase price of $220.0 million under the Oxy Oil Purchase Contract and the
initial purchase price of $26.9 million under the Gulf Oil Purchase Contract) to
Occidental Petroleum Corporation, a Delaware corporation, Gulf Resources
Corporation, a Panamanian corporation, and/or any of
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their Affiliates, and/or any issuance to Occidental Petroleum Corporation or
Gulf Resources Corporation of any equity interest in the Company, in each case,
pursuant to the Occidental Merger Agreement, the Gulf Merger Agreement, the Oxy
Oil Purchase Contract, the Gulf Oil Purchase Contract, the Oxy Stockholders'
Agreement, the Gulf Stockholders' Agreement and the Gulf Pledge Agreement, as
each is in effect on the date hereof.
"Occidental Merger Agreement" means the Agreement and Plan of Merger,
dated as of November 3, 1995, among the Company, Occidental C.O.B. Co., Inc. and
Occidental C.O.B. Partners.
"Occidental Transaction" means the transactions contemplated by the
Occidental Merger Agreement.
"Offer" has the meaning as specified in Section 10.09.
"Officers' Certificate"' means a certificate signed by at least two
officers of the Company, one signature being that of the Chairman of the Board,
a Vice Chairman of the Board, the President or a Vice President, and the other
signature being that of the Treasurer, an Assistant Treasurer, the Secretary or
an Assistant Secretary, of the Company, and delivered to the Trustee. One of
the officers signing an Officers' Certificate given pursuant to Section 9.05
shall be the principal executive, financial or accounting officer of the
Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Securities which have been paid pursuant to Section 2.07 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice,
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consent or waiver hereunder, Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor.
"Oxy Oil Marketing Contract" means the Crude Oil Marketing Contract
between the Company and Occidental Crude Sales, Inc. (International).
"Oxy Oil Purchase Contract" means the Crude Oil Purchase Contract
between the Company and Occidental C.O.B. Partners.
"Oxy Stockholders' Agreement"' means the Stockholders' Agreement
between the Company and Occidental C.O.B. Partners.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company. The Company initially appoints the Trustee as Paying Agent.
"Permitted Indebtedness" means Indebtedness incurred by the Company
or its Restricted Subsidiaries (i) to renew, extend, refinance or refund
Indebtedness that is permitted to be incurred pursuant to 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 Securities
the refinancing or refunding Indebtedness is made pari passu with the Securities
or subordinated to the Securities, (B) in the case of any refinancing or
refunding of Indebtedness that is subordinated to the Securities the refinancing
or refunding of Indebtedness is made subordinated to the Securities at least to
the same extent as such Indebtedness being refinanced or refunded was
subordinated to the Securities and (C) in the case of the refinancing or
refunding of Indebtedness that is subordinated to the Securities, 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
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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
Securities 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 million at any one time outstanding less the aggregate amount of all
proceeds of all asset dispositions that have been applied since the Closing Date
to permanently reduce the outstanding amount of such Indebtedness and (b) the
amount of the Borrowing Base as of such date (calculated on a pro forma basis
after giving effect to such borrowing and the application of the proceeds
therefrom); (iii) outstanding on the Closing Date; (iv) evidenced by trade
letters of credit incurred in the ordinary course of business not to exceed $20
million in the aggregate at any time; (v) between or among the Company and/or
its Restricted Subsidiaries other than Restricted Subsidiaries owned in any part
by the Principal Shareholders; (vi) which is 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 Company
and its Restricted Subsidiaries at any time $50 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company, provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iii) Liens on property existing at the time of acquisition thereof by
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (iv) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens existing on the Closing Date; (vi) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(vii) Liens imposed by law, such as mechanics', carriers', warehousemen's,
materialmen's, and vendors' Liens, incurred in good faith in the ordinary course
of business with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings if a reserve or other appropriate
provisions, if any, as shall be required by GAAP shall have been made therefor;
(viii) zoning restrictions, easements, licenses, covenants, reservations,
restrictions on the use of real property or minor irregularities of title
incident thereto that do not, in the
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aggregate, materially detract from the value of the property or the assets of
the Company or impair the use of such property in the operation of the Company's
business; (ix) judgment Liens to the extent that such judgments do not cause or
constitute a Default or an Event of Default; (x) Liens to secure the payment of
all or a part of the purchase price of property or assets acquired or the
construction costs of property or assets constructed in the ordinary course of
business on or after the Closing Date, provided that (a) such property or assets
are used in the Principal Business of the Company, (b) at the time of incurrence
of any such Lien, the aggregate principal amount of the obligations secured by
such Lien shall not exceed the lesser of the cost or fair market value of the
assets or property (or portions thereof) so acquired or constructed, (c) each
such Lien shall encumber only the assets or property (or portions thereof) so
acquired or constructed and shall attach to such assets or property within 180
days of the purchase or construction thereof and (d) any Indebtedness secured by
such Lien shall have been permitted to be incurred under Section 1014 hereof;
(xi) Liens incurred in the ordinary course of business of the Company with
respect to obligations that do not exceed 5% of Consolidated Net Tangible Assets
at any one time outstanding; and (xii) Liens incurred in connection with
Interest Swap Obligations.
"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.
"Place of Payment" has the meaning specified in Paragraph 3 of Exhibit
A attached hereto.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Preferred Stock" means any share of Capital Stock of any Person in
respect of which the holder thereof is entitled to receive payment before any
other payment is made with respect to any other Capital Stock of such Person.
"Preferred Stock Dividends" means, with respect to any Person for any
period, the amount of regularly scheduled dividends accrued, accruable, paid or
payable during such period, whether in cash or otherwise, with respect to any
Preferred Stock of such Person.
"Principal Business" means, with respect to the Company and its
Restricted Subsidiaries, (i) the business of the acquisition, processing,
marketing, refining, storage and/or transportation of hydrocarbons and/or
royalty or other interests in crude oil or associated products related thereto,
(ii) the acquisition, operation, improvement, leasing and other use of
convenience stores, retail service stations, truck stops and other public
accommodations in connection therewith, (iii) any business currently engaged in
by the Company or its Restricted Subsidiaries on the Closing Date, and (iv) any
activity or business that is a reasonable extension, development or expansion
of, or reasonably related to, any of the foregoing.
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"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.
"Purchase Date" has the meaning as specified in Section 10.09.
"Quarter" means a fiscal quarterly period of the Company.
"Redemption Date," when used with respect to any Security 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 Security to be
redeemed, means the price at which it is to be redeemed pursuant to the Exchange
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the March 15 or September 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Responsible Officer" shall mean when used with respect to the
Trustee, any officer within the Corporate Trust Office including any Vice
President, Managing Director, Assistant Vice President, Secretary, Assistant
Secretary or Assistant Treasurer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge and familiarity
with the particular subject.
"Restricted Debt Prepayment" means any purchase, redemption,
defeasance (including, but not limited to, in-substance or legal defeasance) or
other acquisition or retirement for value (collectively a "prepayment"),
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
Securities) which is subordinate in right of payment to the 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 million
in the aggregate at any one time outstanding.
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"Restricted Payment" means (i) any Stock Payment, (ii) any Restricted
Investment, or (iii) any Restricted Debt Prepayment. Notwithstanding the
foregoing, Restricted Payments shall not include (a) payments by the Company to
any Restricted Subsidiary of the Company, (b) payments by any Restricted
Subsidiary of the Company to the Company or any other Restricted Subsidiary of
the Company, (c) the Chevron Payment, (d) the AOC Payment and (e) the Gulf
Payments.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or
indirect Subsidiary of an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation and its successors.
"Sale and Leaseback Transaction" of any Person means an arrangement
with any lender or investor or to which such lender or investor is a party
providing for the leasing by such Person of any property or asset of such Person
which has been or is being sold or transferred by such Person more than 365 days
after the acquisition thereof or the completion of construction or commencement
of operation thereof to such lender or investor or to any Person to whom funds
have been or are to be advanced by such lender or investor on the security of
such property or asset. The stated maturity of such arrangement shall be the
date of the last payment of rent or any other amount due under such arrangement
prior to the first date on which such arrangement may be terminated by the
lessee without payment of a penalty.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Custodian" means the Trustee, as custodian with respect to
the Global Securities, or any successor entity thereto.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 2.03.
"Senior Debt" has the meaning as specified in Section 11.02.
"Shareholder/Affiliate Transaction" has the meaning as specified in
Section 9.11.
"Special Interest" has the meaning as specified in Paragraph 1 of
Exhibit A attached hereto.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Company with the consent of the Trustee pursuant to
Paragraph 3 of Exhibit A attached hereto.
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"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.
"Subsidiary" of any Person means (i) a corporation more than 50% of
the total voting power of all classes of the outstanding voting stock of which
is owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and the power to direct the policies, management and affairs
thereof.
"Surviving Person" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"Transaction Date" means the date on which the Indebtedness giving
rise to the need to calculate the Consolidated Operating Cash Flow Ratio was
incurred or the date on which, pursuant to the terms of this Indenture, the
transaction giving rise to the need to calculate the Consolidated Operating Cash
Flow Ratio occurred.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.06(g)(i) hereof.
"TrizecHahn" means the Trizec Hahn Corporation.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the Closing Date; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939 as
so amended.
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"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted 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 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 Sections 9.12 and 9.13
hereof, and (ii) no Default or Event of Default would be in existence following
such designation.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"Wholly Owned U.S. Restricted Subsidiary" of any Person means a Wholly
Owned Restricted Subsidiary of such Person which is organized under the laws of
any state in the United States or of the District of Columbia.
Section 1.02. Compliance Certificates and Opinions
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates
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and opinions as may be required under the Trust Indenture Act. Each such
certificate or opinion shall be given in the form of an Officers' Certificate,
if to be given by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of the Trust Indenture
Act and any other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 1.04. Acts of Holders; Record Dates.
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(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 5.01) shall be conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining the
Holders entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the Company prior to
the first solicitation of a Holder made by any Person in respect of any such
action, or, in the case of any such vote, prior to such vote, the record date
for any such action or vote shall be the 30th day (or, if later, the date of the
most recent list of Holders required to be provided pursuant to Section 6.01)
prior to such first solicitation or vote, as the case may be. With regard to any
record date, only the Holders on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
Section 1.05. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust and Agency Group, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail with first-class postage prepaid, if
mailed; when receipt acknowledged, if sent by facsimile; and the next business
day after timely delivery to the courier, if sent by recognized overnight
courier guaranteeing next-day delivery; provided that notice to the Trustee
shall be deemed given only when received by the Trustee.
Section 1.06. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail with first-class postage prepaid, if
mailed; when receipt acknowledged, if sent by facsimile; and the next business
day after timely delivery to the courier, if sent by recognized overnight
courier guaranteeing next-day delivery.
Section 1.07. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act, the latter provision shall control. If any
provision of this Indenture modifies or
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excludes any provision of the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
Section 1.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.10. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
Section 1.12. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF).
Section 1.13. Legal Holidays.
In any case where any Redemption Date, Purchase Date or Stated
Maturity of any Security shall not be a Business Day, then (notwithstanding any
other provision of this Indenture or of the Securities) payment of principal
(and premium, if any) need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Redemption Date, Purchase Date or at the Stated Maturity.
Section 1.14. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture for any claim based on, in respect of or
by reason of such obligations or their
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creation. Each Holder by accepting a Security waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Securities.
ARTICLE 2
---------
THE SECURITIES
--------------
Section 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Security shall be dated the date of its authentication. The
Securities will be issued in registered form, without coupons. Securities issued
in exchange for 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
Exchangeable Preferred Stock will receive certificates representing the entire
amount of Securities to which such holder's shares of Exchangeable Preferred
Stock entitle such holder; provided that the Company may pay cash in lieu of
issuing a Security in a principal amount less than $1,000. The aggregate
principal amount of the Securities shall be limited to the liquidation
preference of the Exchangeable Preferred Stock, plus, without duplication,
accumulated and unpaid dividends, on the date or dates on which it is exchanged
for Securities (plus any additional Securities issued in lieu of cash interest).
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
Securities issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnote 1
thereto). Securities issued in definitive form shall be substantially in the
form of Exhibit A attached hereto (but without including the text referred to in
footnote 1 thereto). Each Global Security shall represent such of the
outstanding Securities as shall be specified therein and each shall provide that
it shall represent the aggregate amount of outstanding Securities from time to
time endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee or the
Security Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.04 hereof
Section 2.02. Execution and Authentication.
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Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities
and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time a Security is authenticated, the Security shall nevertheless
be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Securities for original issue up to the aggregate
principal amount stated in paragraph 1 of the Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional paying agent. The Company may change
any Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Security Custodian with respect to the Global
Securities.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages,
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if any, or interest on the Securities, and will notify the Trustee of any
default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to
the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Securities.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Securities and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented by a Holder to the Registrar with a
request:
(x) to register the transfer of the Definitive Securities;
or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Securities presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing; and
(ii) in the case of a Definitive Security that is a Transfer
Restricted Security, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being delivered
to the Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
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(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an effective registration statement
under the Securities Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B hereto) and an Opinion of Counsel from such
Holder or the transferee reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with the Securities
Act.
(b) Transfer of a Definitive Security for a Beneficial Interest
in a Global Security. A Definitive Security may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, a certification from the Holder thereof (in substantially the form of
Exhibit B hereof ) to the effect that such Definitive Security is being
transferred by such Holder to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions from the Holder thereof directing the
Trustee to make, or to direct the Security Custodian to make, an endorsement on
the Global Security to reflect an increase in the aggregate principal amount of
the Securities represented by the Global Security,
in which case the Trustee shall cancel such Definitive Security in accordance
with Section 2.11 hereof and cause, or direct the Security Custodian to cause,
in accordance with the standing instructions and procedures existing between the
Depository and the Security Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased accordingly. If no
Global Securities are then outstanding, the Company shall issue and, upon
receipt of an authentication order in accordance with Section 2.02 hereof, the
Trustee shall authenticate a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be
effected through the Depository, in accordance with this Indenture and the
procedures of the Depository therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
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(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Any Person having a beneficial interest in a Global
Security may upon request exchange such beneficial interest for a Definitive
Security. Upon receipt by the Trustee of written instructions or such other form
of instructions as is customary for the Depository, from the Depository or its
nominee on behalf of any Person having a beneficial interest in a Global
Security, and, in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being transferred
to the Person designated by the Depository as being the beneficial owner, a
certification to that effect from such Person (in substantially the form of
Exhibit B hereto); or
(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an effective registration statement
under the Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being transferred
in reliance on another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and to the
Registrar to the effect that such transfer is in compliance with the Securities
Act,
in which case the Trustee or the Security Custodian, at the
direction of the Trustee, shall, in accordance with the standing
instructions and procedures existing between the Depository and
the Security Custodian, cause the aggregate principal amount of
Global Securities to be reduced accordingly and, following such
reduction, the Company shall execute and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the
Trustee shall authenticate and deliver to the transferee a
Definitive Security in the appropriate principal amount.
(ii) Definitive Securities issued in exchange for a
beneficial interest in a Global Security pursuant to this Section 2.06(d) shall
be registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such Definitive
Securities to the Persons in whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global
Security may not be transferred as a whole
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except by the Depository to a nominee of the Depository or by a nominee of
the Depository to the Depository or another nominee of the Depository or by
the Depository or any such nominee to a successor Depository or a nominee
of such successor Depository.
(f) Authentication of Definitive Securities in Absence of Depository.
If at any time:
(i) the Depository for the Securities notifies the Company
that the Depository is unwilling or unable to continue as Depository for the
Global Securities and a successor Depository for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive Securities
under this Indenture, then the Company shall execute, and the Trustee shall,
upon receipt of an authentication order in accordance with Section 2.02 hereof,
authenticate and deliver, Definitive Securities in an aggregate principal amount
equal to the principal amount of the Global Securities in exchange for such
Global Securities.
(g) Legends.
(i) Except as permitted by the following paragraph (ii),
each Security certificate evidencing Global Securities and Definitive Securities
(and all Securities issued in exchange therefor or substitution thereof) shall
bear legends in substantially the following form:
THE EXCHANGEABLE PREFERRED STOCK EVIDENCED HEREBY AND THE
EXCHANGE DEBENTURES ISSUABLE UPON EXCHANGE OF SUCH
EXCHANGEABLE PREFERRED STOCK HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION
COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER
THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED
INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR (4)
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PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act or pursuant to an
effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security
that is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that does
not bear the first legend set forth in (i) above and rescind any restriction on
the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Security, such Transfer Restricted Security shall not be
required to bear the legend set forth in (i) above, but shall continue to be
subject to the provisions of Section 2.06(c) hereof; provided, however, that
with respect to any request for an exchange of a Transfer Restricted Security
that is represented by a Global Security for a Definitive Security that does not
bear the first legend set forth in (i) above, which request is made in reliance
upon Rule 144, the Holder thereof shall certify in writing to the Registrar that
such request is being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto.
(h) Cancellation and/or Adjustment of Global Securities. At such
time as all beneficial interests in Global Securities have been exchanged
for Definitive Securities, redeemed, repurchased or cancelled, all Global
Securities shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged
for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced accordingly and an endorsement shall be made on such Global
Security, by the Trustee or the Securities Custodian, at the direction of
the Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive Securities
and Global Securities at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection
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therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 10.01, 9.18 and 12.01.
(iii) The Registrar shall not be required to register the
transfer of or exchange any Security selected for redemption in whole or in
part, except the unredeemed portion of any Security being redeemed in part.
(iv) All Definitive Securities and Global Securities issued
upon any registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Definitive
Securities or Global Securities surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer of or to
exchange Securities during a period beginning at the opening of business 15 days
before the day of any selection of Securities for redemption under Section 10.04
hereof and ending at the close of business on the day of selection; or
(B) to register the transfer of or to exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part; or
(C) to register the transfer of or to exchange a
Security between a record date and the next succeeding interest payment date.
(vi) Prior to due presentment for the registration of a
transfer of any Security, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Security is registered as the absolute owner
of such Security for the purpose of receiving payment of principal of and
interest on such Securities, and neither the Trustee, any Agent nor the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Definitive Securities
and Global Securities in accordance with the provisions of Section 2.02 hereof.
Section 2.07. Replacement Securities.
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and the
Company to protect the Company, the Trustee, any Agent and any authenticating
agent from any loss that any of them may suffer if a Security is replaced. The
Company may charge for its expenses in replacing a Security.
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Every replacement Security is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
Section 2.08. Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Security
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 9.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.09. Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Trustee knows are so owned
shall be so disregarded.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon a written
order of the Company signed by two Officers of the Company. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities
and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities.
Holders of temporary Securities shall be entitled to all of the
benefits of this Indenture.
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Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Securities surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Securities (subject to the record retention requirement
of the Exchange Act). Certification of the destruction of all cancelled
Securities shall be delivered to the Company. The Company may not issue new
Securities to replace Securities that it has paid or that have been delivered to
the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 9.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Security and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
ARTICLE 3.
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SATISFACTION AND DISCHARGE
--------------------------
Section 3.01. Satisfaction and Discharge of Indenture.
This Indenture shall, upon the request of the Company, cease to be of
further effect (except as to any surviving rights of registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other than
(i) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 2.07 and (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated
and held in trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 9.03) have been
delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
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(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as trust funds
in trust for such purpose an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee for
cancellation, for principal and any premium and interest to the date of such
deposit (in the case of Securities which have become due and payable) or to the
Stated maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with; and
(4) the Trustee shall have received such other documents and
assurances as the Trustee shall have reasonably requested.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 5.07, the obligations'
of the Trustee to any Authenticating Agent under Section 5.14 and, if money
shall have been deposited with the Trustee pursuant to subclause (B) of clause
(1) of this Section, the obligations of the Trustee under Section 3.02 and the
last paragraph of Section 9.03 shall survive.
Section 3.02. Application of Trust Money.
Subject to provisions of the last paragraph of Section 9.03, all money
deposited with the Trustee pursuant to Section 3.01 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.
ARTICLE 4.
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REMEDIES
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Section 4.01. Events of Default.
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"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security at its Maturity; or
(3) failure by the Company to observe or perform any covenant,
condition on the part of the Company to be performed or observed pursuant
to Section 9.01 hereof; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with), and continuance of such default or
breach for a period of 30 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any
Restricted Subsidiary of the Company (or the payment of which is guaranteed
by the Company or a Restricted Subsidiary of the Company), whether such
Indebtedness or guarantee now exists or shall be created hereafter, if (a)
either (i) such default results from the failure to pay principal (and
premium, if any) upon the expressed maturity of such Indebtedness (after
the expiration of any applicable grace period) or (ii) as a result of such
default the maturity of such Indebtedness has been accelerated prior to its
expressed maturity and (b) the principal (and premium, if any) amount of
such Indebtedness, together with the principal (and premium, if any) amount
of any other such Indebtedness with respect to which the principal (and
premium, if any) amount unpaid upon its expressed maturity (after the
expiration of any applicable grace period), or the maturity of which has
been so accelerated, aggregates $10 million or more; or
(6) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any Subsidiary of the Company and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such judgments (to
the extent not paid or to be paid by insurance) exceeds $10 million; or
(7) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Subsidiary of
the Company in an
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involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a decree
or order adjudging the Company or any Subsidiary of the Company a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
the Company or any Subsidiary of the Company under any applicable Federal
or State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any
Subsidiary of the Company or of any substantial part of the property of the
Company or any Subsidiary of the Company, or ordering the winding up or
liquidation of the affairs of the Company or any Subsidiary of the Company,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 60 consecutive
days; or
(8) the commencement by the Company or any Subsidiary of the Company
of a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by the Company or any Subsidiary of the Company to the entry of a
decree or order for relief in respect of the Company or any Subsidiary of
the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against the Company or any Subsidiary of the Company, or the
filing by the Company or any Subsidiary of the Company of a petition or
answer or consent seeking reorganization or relief under any applicable
Federal or State law, or the consent by the Company or any Subsidiary of
the Company to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any Subsidiary of
the Company or of any substantial part of their respective property, or the
making by the Company or any Subsidiary of the Company of an assignment for
the benefit of creditors, or the admission by either the Company or any
Subsidiary of the Company in writing of an inability to pay debts generally
as they become due, or the taking of corporate action by the Company or any
Subsidiary of the Company in furtherance of any such action.
Section 4.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
clause 4.01(7) or (8)) with respect to the Securities at the time Outstanding
occurs and is continuing, then in every such case the Trustee or the Holders of
not less than 25% in principal amount of the Outstanding Securities may declare
the Default Amount of all of the Securities to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by Holders),
and upon any such declaration such Default Amount shall become immediately due
and payable.
In the event of a declaration of acceleration because an Event of
Default specified in Section 4.01(5) has occurred and is continuing, such
declaration of acceleration shall be automatically annulled if the holders of
the Indebtedness which is the subject of such Event of Default have rescinded
their declaration of acceleration in respect of such Indebtedness within 90-days
thereof and the Trustee has received written notice of such cure, waiver or
rescission and
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no other Event of Default has occurred during such 90-day period which has not
been cured or waived. If an Event of Default specified in clauses (7) or (8) of
Section 4.01 occurs, the Default Amount of Securities then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
At any time after such a declaration of acceleration with respect to
Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, on) any Securities
which have become due otherwise than by such declaration of acceleration
(including any Securities required to have been purchased on the Purchase
Date pursuant to an Offer to purchase made by the Company) and any interest
thereon at the rate or rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest and principal (and premium, if any) at a
rate of ___% per annum, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to the Securities, other than
the non-payment of the principal of Securities which have become due solely
by such declaration of acceleration, have been cured or waived as provided
in Section 4.13.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof or, with respect to any
Security required to have been
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purchased pursuant to an Offer to purchase made by the Company, at the
Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal (and premium, if any) and on any overdue interest, at the rate or
rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company, wherever
situated.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy.
Section 4.04. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take-any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same in accordance with Section 4.06 hereof; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 5.07.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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Section 4.05. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
Section 4.06. Application of Money Collected.
Any money or other property collected by the Trustee pursuant to this
Article shall be applied in the following order, at the date or dates fixed by
the Trustee and, in case of the distribution of such money or other property on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
5.07; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal (and premium, if any) and
interest, respectively.
Section 4.07. Limitation on Suits.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
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(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in aggregate principal amount of the Outstanding Securities;
it being understood and intended that not one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Section 4.08. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 2.12) interest on such Security on the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date or in the case of an Offer to Purchase made by the Company and
required to be accepted as to such Security, on the Purchase Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 4.09. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
Section 4.10. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 2.07, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 4.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Subject to Section
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4.07, every right and remedy given by this Article or by law to the Trustee or
to the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
Section 4.12. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities,
provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 4.13. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities, upon written notice to the Trustee and the Company, may
on behalf of the Holders of all the Securities waive any past default hereunder
with respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security (including any Security which is required to have
been purchased pursuant to an Offer to purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 4.14. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; provided that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.
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Section 4.15. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede pursuant to any such law
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 5.
----------
THE TRUSTEE
-----------
Section 5.01. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act provided, however, that if an Event of Default occurs,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 5.01.
Section 5.02. Notice of Defaults.
If a default occurs hereunder with respect to the Securities, the
Trustee shall give the Holders notice of such default as and to the extent
provided by the Trust Indenture Act; provided, however, that in the case of any
default of the character specified in Section 4.01(4), no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
Section 5.03. Certain Rights of Trustee.
Subject to the provisions of Section 5.01:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
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indebtedness or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, conclusively rely upon an Officers Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity satisfactory
to it against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its sole discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodians and nominees and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(h) the rights and protections afforded to the Trustee under this
Section 5.03 shall be afforded to the Paying Agent, Registrar and
Authenticating Agent if the Trustee is acting in such capacity.
Section 5.04. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the
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validity or sufficiency of this Indenture or of the Securities. The Trustee
shall not be accountable for the use or application by the Company, of
Securities or the proceeds thereof.
Section 5.05. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
5.08 and 5.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent, as the case may be.
Section 5.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
Section 5.07. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to
its gross negligence or bad faith; and
(3) to indemnify the Trustee, its officers, directors, employees and
agents for, and to hold it harmless against, any loss, liability or expense
incurred without gross negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of any litigation,
threatened or otherwise, in connection with the exercise or performance of
any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section 5.07, the Trustee shall have a lien prior to the Securities
upon all property and funds held or collected by the Trustee as such.
The obligations of the Company under this Section 5.07 to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder and shall survive
the satisfaction and discharge of this Indenture or the rejection or termination
of this Indenture under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and funds held or
collected by
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the Trustee as such, except funds held in trust for the benefit of the Holders
of particular Securities or coupons, and the Securities are hereby subordinated
to such senior claim. If the Trustee renders services and incurs expenses
following an Event of Default under Section 4.01(7) or Section 4.01(8) hereof,
the parties hereto and the Holders by their acceptance of the Securities hereby
agree that such expenses are intended to constitute expenses of administration
under any bankruptcy law.
Section 5.08. Administrative Expense
The obligations of the Company under this Section 5.08 to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall constitute additional indebtedness hereunder and shall survive
the satisfaction and discharge of this Indenture or the rejection or termination
of this Indenture under bankruptcy law. Such additional indebtedness shall be a
senior claim to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the Holders of particular Securities or coupons, and the Securities are hereby
subordinated to such senior claim. If the Trustee renders services and incurs
expenses following an Event of Default under Section 4.01(7) or Section 4.01(8)
hereof, the parties hereto and the Holders by their acceptance of the Securities
hereby agree that such expenses are intended to constitute expenses of
administration under any bankruptcy law.
Section 5.09. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. Further, it is
understood that the Trustee shall be entitled to any and all rights that the
Trustee may have in its individual capacity or any other capacity with respect
to any Indebtedness of the Company, and no provision of this Indenture shall be
construed as to limit or diminish any such right.
Section 5.10. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 5.11. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of
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appointment by the successor Trustee in accordance with the applicable
requirements of Section 5.11.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 5.11 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Securities, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 5.08 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 5.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 4.14, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee or
Trustees. If within one year after such resignation, removal or incapability, or
the occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 5.11, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 5.11, any Holder who has been a
bona fide Holder of a Security for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
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(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
Section 5.12. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
including, without limitation, all monies due and owing to the retiring Trustee,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
Section 5.13. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
Section 5.14. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
Section 5.15. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon original issue and upon exchange,
registration of transfer or partial redemption
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thereof or pursuant to Section 2.07, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery an behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the Security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
If an appointment is made pursuant to this Section, the Securities may
have endorsed thereon, in addition to or in lieu of the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
This is one of the Securities described in the within-mentioned
Indenture.
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Bankers Trust Company
As Trustee
By
---------------------------------------
As Authenticating Agent
By
---------------------------------------
Authorized Officer
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ARTICLE 6.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 6.01. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee at
any time, and from time to time as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of the names
and addresses of the Holders as of a date not more than 15 days prior to the
time such list is furnished.
Section 6.02. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 6.01. The Trustee may
destroy any list furnished to it as provided in Section 6.01 upon receipt of a
new list so furnished.
(b) The rights of the Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
Section 6.03. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee in writing when any Securities are listed on any stock
exchange.
Section 6.04. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to the Trust Indenture Act; provided
that any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed
with the Trustee within 15 days after the same is so required to be filed with
the Commission.
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ARTICLE 7.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
Section 7.01. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate or merge with or into (whether or
not the Company is the Surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to another Person unless:
(a) the Surviving Person is a corporation organized and existing under
the laws of the United States, any state thereof or the District of
Columbia;
(b) the Surviving Person (if other than the Company) assumes by
supplemental indenture in a form reasonably satisfactory to the Trustee all
the obligations of the Company under the Securities and this Indenture;
(c) at the time of and immediately after such Disposition no Default
or Event of Default shall have occurred and be continuing;
(d) the Surviving Person will have Consolidated Adjusted Net Worth
(immediately after the Disposition 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;
(e) after giving pro forma effect thereto, 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 the first paragraph of Section 9.12 hereof; and
(f) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Section 7.02. Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer, lease or other disposition
of the properties and assets of the Company substantially as an entirety in
accordance with Section 9.01, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, transfer, lease
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities; provided, however, that the predecessor Company shall
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not be relieved from the obligation to pay principal of and interest on the
Securities, except in the case of a transfer, conveyance, sale or other
disposition (excluding by lease) of all of the Company's assets that meets the
requirements of Section 801 hereof.
ARTICLE 8.
SUPPLEMENTAL INDENTURES
Section 8.01. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to secure the Securities; or
(5) to establish the form or terms of Securities as permitted by
Section 2.01; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(7) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture, provided that such action pursuant to this clause (7)
shall not adversely affect the interests of the Holders in any material
respect.
Section 8.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected thereby,
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(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or
(2) reduce the principal amount of (or the premium), or interest on,
any Securities, or
(3) change the place or currency of payment of principal of (or
premium), or interest on, any Securities, or
(4) impair the right to institute suit for the enforcement of any
payment on or with respect to any Securities, or
(5) reduce the above-stated percentage of Outstanding Securities
necessary to modify or amend the Indenture, or
(6) reduce the percentage of aggregate principal amount of Outstanding
Securities necessary for waiver of compliance of certain covenants, as set
forth in Article 4.13 or 9.21 hereof, or
(7) modify any provisions of this Indenture relating to the
modification and amendment of this Indenture or the waiver of past defaults
or covenants, except as otherwise specified herein.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Section 8.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Section 8.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 8.05. Conformity with Trust Indenture Act.
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Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
Section 8.06. Reference in Securities to Supplemental indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
Section 8.07. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.02, the Company
shall give notice to all Holders of such fact, setting forth in general terms
the substance of such supplemental indenture, in the manner provided in Section
1.06. Any failure of the Company to give such notice, or any defect therein,
shall not in any way impair or affect the validity of any such supplemental
indenture.
ARTICLE 9.
----------
COVENANTS
---------
Section 9.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees that it shall duly and punctually pay
the principal of (and premium, if any) and interest on the Securities in
accordance with the terms of the Securities and this Indenture.
Section 9.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency in the Borough of
Manhattan, City of New York where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company initially appoints
Bankers Trust Company as Paying Agent and Security Registrar. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company terminates the
appointment of a Paying Agent or Security Registrar or otherwise shall fail to
maintain any such required office or agency, the Company shall use its
reasonable best efforts to appoint a successor Paying Agent or Security
Registrar reasonably acceptable to the Trustee. If the Company fails to maintain
a Paying Agent or Security Registrar, the Trustee shall act as such, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and
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demands. The Company shall forward copies of all presentations, surrenders,
notices and demands to the Trustee promptly upon their receipt.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
Section 9.03. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
shall, on or prior to 11:00 a.m. New York City time on each due date of the
principal of or any premium or interest on any of the Securities, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal and any premium and interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and shall promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of or any premium or interest on any
Securities, deposit with a Paying Agent a sum sufficient to pay such amount,
such sum to be held as provided by the Trust Indenture Act, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust Indenture Act
applicable to it as a Paying Agent and (ii) during the continuance of any
default by the Company (or any other obligor upon the Securities) in the making
of any payment in respect of the Securities, and upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security and remaining unclaimed for two years after such
principal, premium or interest has become due and payable shall be paid to the
Company on Company Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter,
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as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 9.04. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such officer signing such certificate, that to the best of
such officer's knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of such officers' knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of (and
premium, if any) or interest on the Securities are prohibited or if such event
has occurred, a description of the event and what action the Company is taking
or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the financial statements
delivered pursuant to Section 9.08 shall be accompanied by a written statement
of the Company's independent public accountants (who shall be a firm of
established national reputation reasonably satisfactory to the Trustee) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of Articles Eight or Ten of this Indenture
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any officer becoming aware
of (i) any default or Event of Default or (ii) any event of default under any
other mortgage, indenture or instrument as described in Section 4.01(5), an
Officers' Certificate specifying such default, Event of Default or event of
default and what action the Company is taking or proposes to take with respect
thereto.
Section 9.05. Existence.
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Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
Section 9.06. Maintenance of Properties.
The Company shall cause all properties used or useful in the conduct
of its business or the business of any Subsidiary of the Company to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Subsidiary of the Company and not
disadvantageous in any material respect to the Holders.
Section 9.07. Payment of Taxes and Other Claims.
The Company shall, or shall cause its Subsidiaries to, pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon the Company or any Subsidiary of the Company or upon the income,
profits or property of the Company or any Subsidiary of the Company, and (2) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary of the Company;
provided, however, that the Company and its Subsidiaries shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
Section 9.08. Provision of Financial Information.
Whether or not the Company is required to be subject to Section 13(a)
or 15(d) of the Exchange Act, or any successor provision thereto, the Company
shall file with the Commission the annual reports, quarterly reports and other
documents (including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual information
only, a report thereon by the Company's certified independent accountants) which
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto if the Company
were so required, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so required.
The Company shall also in any event (a) within 15 days of each Required Filing
Date (i) transmit by mail to all Holders, as their names and addresses appear in
the Security Register, without cost to such Holders, and (ii) file with the
Trustee, in each case, copies of the annual reports, quarterly reports and other
documents which
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the Company would have been required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act or any successor provisions thereto
if the Company were required to be subject to such Sections and (b) if filing
such documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request supply copies of such documents to
any prospective Holder. In addition, the Company shall, for so long as any
Securities remain outstanding, furnish to all Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act.
Section 9.09. Limitation on Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, unless (i)
at the time of and immediately after giving effect to the proposed Restricted
Payment, no Default or Event of Default shall have occurred and be continuing,
or would occur as a consequence thereof, 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 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 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 shall not be violated by
reason of (a) the payment of any dividends or distributions payable solely in
shares of the Company's Capital Stock (other than Disqualified 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 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
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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 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 shall only be permitted if such Restricted Payment would
be permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
Section 9.10. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall 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 Closing 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)
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above; provided, however, that the provisions contained in such renewal,
extension, refinancing, refunding or replacement agreement relating to such
encumbrance or restriction, taken as a whole, are not materially more
restrictive than the provisions contained in the agreement the subject thereof,
as determined in good faith by the Board of Directors, or (f) which shall not in
the aggregate cause the Company not to have the funds necessary to pay the
principal of, premium, if any, or interest, including Special Interest, on the
Securities at their Stated Maturity.
Section 9.11. Limitation on Transactions with Shareholders and Affiliates.
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, directly or indirectly, conduct any business or enter into
any transaction or series of similar transactions (including, without
limitation, the purchase, sale, transfer, lease or exchange of any property or
the rendering of any service) with (i) any direct or indirect holder of more
than 5% of any class of Capital Stock of the Company or of any Restricted
Subsidiary of the Company (other than transactions between or among the Company
and/or its Restricted Subsidiaries except for Restricted Subsidiaries owned in
any part by the Principal Shareholders) or (ii) any Affiliate of the Company
(other than transactions between or among the Company and/or its Restricted
Subsidiaries except for Restricted Subsidiaries owned in any part by the
Principal Shareholders) (each of the foregoing, a "Shareholder/Affiliate
Transaction") unless the terms of such business, transaction or series of
transactions (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 million and less than $15 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 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.
Section 9.12. Limitation on Indebtedness.
The Company 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 Securities
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(whether issued in exchange for Exchangeable Preferred Stock or in lieu of cash
interest) 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.
Section 9.13. 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 Securities, 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
Securities unless such Indebtedness constitutes Subordinated Debt.
Section 9.14. Limitation on Sale of Capital Stock of Restricted Subsidiaries.
The Company shall not permit (i) any Person (other than the Company or
any of its Wholly Owned U.S. 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 Section 9.14 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.
Section 9.15. 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.
Section 9.16. Other Agreements.
The Company shall not, and shall not permit any Subsidiary of the
Company to, enter into or become a party (including, without limitation, as an
assignee or successor) to any agreement (including, without limitation, a
refinancing or refunding of the Clark Credit Agreement) that would conflict with
this Indenture.
Section 9.17. Limitation on Liens.
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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
Securities (x) equally and ratably with such Indebtedness as to such property or
assets for so long as such Indebtedness shall be so secured or (y) in the event
such Indebtedness is subordinate in right of payment (other than by reason of
maturity) to the Securities, prior to such Indebtedness as to such property or
assets for so long as such Indebtedness shall be so secured.
Section 9.18. Limitation on Certain Asset Dispositions.
The Company shall not, and shall not permit any Restricted Subsidiary
of the Company to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such disposition (or
in the case of a lease, over the term of such lease) at least equal to the fair
market value of the shares or assets disposed of (which shall be as determined
in good faith by the 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 shall be deemed to be cash for
purposes of this covenant: (1) the amount of any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the 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) shall 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.
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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 Securities, 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 shall be deemed to
constitute "Excess Proceeds."
As soon as practical, but in no event later than 10 Business Days
after any date (an "Asset Disposition Trigger Date") that the aggregate amount
of Excess Proceeds exceeds $20 million, the Company will commence an Offer (as
described below under "Procedures for Offers") to purchase the maximum principal
amount of Securities 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 shall be reset to
zero.
Section 9.19. Limitation on Sale of Capital Stock of Restricted Subsidiaries.
The Company shall 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.
Section 9.20. 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.
Section 9.21. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 9.06 to 9.18, inclusive, with
respect to the Securities if before the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding Securities shall, by
Act of such Holders, either waive such compliance in such
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instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in full force and
effect; provided, however, with respect to an Offer to purchase as to which an
Offer has been mailed, no such waiver may be made or shall be effective against
any Holder tendering Securities pursuant to such Offer, and the Company may not
omit to comply with the terms of such Offer as to such Holder.
ARTICLE 10.
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REDEMPTION OF SECURITIES
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Section 10.01. Right of Redemption.
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time on or after October 1, 2002 at
the Redemption Prices specified in the form of Security hereinbefore set forth,
together with accrued and unpaid interest to the Redemption Date.
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 Securities, 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 proceeds of any such Equity Offering and upon
not less than 30 nor more than 60 days' notice mailed to each holder of
Securities to be redeemed at such holder's address appearing in the Company's
Security Register, in principal amounts of $1,000 or an integral multiple of
$1,000. 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 Securities pursuant to this paragraph.
Section 10.02. Applicability of Article.
Redemption of the Securities at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
Section 10.03. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 10.01 shall be evidenced by a Board Resolution, which Board Resolution
shall be delivered to the Trustee at least 60 days prior to the Redemption Date
fixed by the Company (unless a shorter notice shall be satisfactory to the
Trustee). In case of any redemption at the election of the Company of less than
all the Securities, the Company shall notify the Trustee of such
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Redemption Date and of the principal amount of Securities to be redeemed upon
delivery of the Board Resolution related to such redemption.
Section 10.04. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or by such method as the Trustee shall deem fair
and appropriate (and in a manner that complies with applicable legal and
securities exchange requirements, if any) and which may provide for the
selection for redemption of portions (equal to $1,000 or any integral multiple
thereof) of the principal amount of Securities of a denomination larger than
$1,000.
The Trustee shall promptly notify the Company and each Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
In the event that the Company is required to make an Offer to purchase
pursuant to Sections 10.09 and 9.18 and the amount available for such Offer is
not an integral multiple of $1,000, the Trustee shall promptly refund to the
Company any remaining excess proceeds, which shall be less than $1,000.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
Section 10.05. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, plus accrued interest,
(3) if less than all the Outstanding Securities are to be redeemed,
the identification (and, in the case of partial redemption of any
Securities, the principal amounts) of the particular Securities to be
redeemed,
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price,
(5) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security or portion thereof to be redeemed and
that, unless the
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Company defaults in making the redemption payment, interest thereon will
cease to accrue on and after said date,
(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price.
(7) if any of the Securities are being redeemed in part, that on or
after the redemption date a new Security in principal amount equal to the
unredeemed portion thereof will be issued,
(8) the provision of the Securities pursuant to which the Securities
called for redemption are being redeemed,
(9) the aggregate principal amount of Securities that are being
redeemed, and
(10) the CUSIP number of the Securities that are being redeemed.
Notice of redemption of Securities to be redeemed shall be given by
the Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company.
Section 10.06. Deposit of Redemption Price.
On or prior to 11:00 a.m. New York City time on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 9.03) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date.
Section 10.07. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall not bear interest. Upon surrender of any such
Security for redemption in accordance with said notice, such Security shall be
paid by the Company at the Redemption Price together with accrued interest to
the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 2.12.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
Section 10.08. Securities Redeemed in Part.
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Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
Section 10.09. Offer to Purchase.
Within 30 days following a Change of Control and on any Asset
Disposition Trigger Date, the Company shall mail to each holder of Securities,
at such holder's registered address a notice stating: (i) that an offer (an
"Offer") is being made as a result of a Change of Control or one or more Asset
Dispositions, the length of time the Offer shall remain open, and the maximum
aggregate principal amount of Securities that shall be accepted for payment
pursuant to such Offer, (ii) the purchase price, the amount of accrued and
unpaid interest (including Additional Interest) as of the purchase date, and the
purchase date (the "Purchase Date"), (iii) in the case of a Change of Control,
the circumstances and material facts regarding such Change of Control, to the
extent known to the Company (including, but not limited to, information with
respect to pro forma and historical financial information after giving effect to
such Change of Control, and information regarding the Person or Persons
acquiring control) and (iv) such other information required by the Exchange
Indenture and applicable laws and regulations.
On the Purchase Date for any Offer, the Company shall (1) in the case
of an Offer resulting from a Change of Control, accept for payment all
Securities tendered pursuant to such Offer and, in the case of an Offer
resulting from one or more Asset Dispositions, accept for payment the maximum
principal amount of Securities tendered pursuant to such Offer than can be
purchased out of Excess Proceeds from such Asset Dispositions, (2) deposit with
the Paying Agent the aggregate purchase price of all Securities accepted for
payment and any accrued and unpaid interest, including Additional Interest, on
such Securities as of the Purchase Date, and (3) deliver or cause to be
delivered to the Trustee all Securities tendered pursuant to the Offer. If less
than all Securities tendered pursuant to any Offer are accepted for payment by
the Company for any reason, selection of the Securities to be purchased shall be
in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not so listed, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that Securities accepted for payment in part shall only be
purchased in integral multiples of $1,000. The Paying Agent shall promptly mail
to each holder of Securities accepted for payment an amount equal to the
Purchase price for such Securities plus any accrued and unpaid interest,
including Additional Interest thereon, the Trustee shall promptly authenticate
and mail to such holder of Securities accepted for payment in part new
Securities equal in principal amount to any unpurchased portion of the
Securities, and any Securities not accepted for payment in whole or in part
shall be promptly returned to the holder thereof. On and after a Purchase Date,
interest shall cease to accrue on the Securities accepted for payment. The
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Company shall announce the results of the Offer to holders of the Securities on
or as soon as practicable after the Purchase Date.
The Company shall comply with all applicable requirements of Rule 14e-
1 under the Exchange Act and all other applicable securities laws and
regulations thereunder, to the extent applicable, in connection with any Offer.
Other than as specifically provided in this Section 10.09, any
purchase pursuant to this Section 10.09 shall be made pursuant to the provisions
of Sections 10.01 through 10.08 hereof.
ARTICLE 11.
-----------
SUBORDINATION
-------------
Section 11.01. Agreement to Subordinate
The Company agrees, and each Securityholder by accepting a Security
agrees, that the indebtedness evidenced by the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article, to
the prior payment in full of all Senior Debt, and that the subordination is for
the benefit of the holders of Senior Debt. The Trustee's fees, expenses and
indemnity payments, as provided for in Section 5.07 hereof, are not to be
subordinated under this Section 11.01.
Section 11.02. Certain Definitions
"Debt" of any person means any indebtedness, contingent or otherwise,
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such person or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, or representing the balance deferred and unpaid of the purchase price of
any property or interest therein, except any such balance that constitutes a
trade payable, if and to the extent such indebtedness would appear as a
liability upon a balance sheet of such person prepared on a consolidated basis
in accordance with generally accepted accounting principles.
"Representative" means the indenture trustee or other trustee, agent
or representative for an issue of Senior Debt.
"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
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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 Securities, (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.
For purposes of this Article 11, a distribution may consist of cash,
securities or other property, by set-off or otherwise.
Section 11.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Debt shall be entitled to receive payment in
full in cash of the principal of and interest (including interest accruing after
the commencement of any such proceeding) to the date of payment on the Senior
Debt before Securityholders shall be entitled to receive any payment of
principal of or interest on Securities; and
(2) until the Senior Debt is paid in full in cash, any distribution
to which Securityholders would be entitled but for this Article shall be made to
holders of Senior Debt as their interests may appear, except that
Securityholders may receive securities that are subordinated to Senior Debt to
at least the same extent as the Securities.
Section 11.04. Default on Senior Debt
Upon the final maturity of any Senior Debt by lapse of time,
acceleration or otherwise, all such Senior Debt shall first be paid in full, or
such payment duly provided for in cash or in a manner satisfactory to the
holders of such Senior Debt, before any payment is made by the Company or any
person acting on behalf of the Company on account of the principal or interest
of the Securities.
The Company may not pay principal of or interest on the Securities and
may not acquire any Securities for cash or property (other than capital stock of
the Company or other securities of the Company that are subordinated to Senior
Debt to at least the same extent as the Securities) if:
(1) a default on Senior Debt occurs and is continuing that
permits holders of such Senior Debt to accelerate its maturity, and
(2) the default is the subject of judicial proceedings or the
Company receives a notice of the default from a person who may give it
pursuant to Section 11.12. If the Company receives any such notice, a
subsequent notice received within nine
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months thereafter relating to the same issue of Senior Debt shall not be
effective for purposes of this Section.
The Company shall resume payments on the Securities and may acquire
them when:
(a) the default is cured or waived, or
(b) 120 days pass after the notice is given if the default
is not the subject of judicial proceedings,
if this Article otherwise permits the payment or acquisition at that time.
Section 11.05. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration. The Company shall pay the Securities when 120 days pass after the
acceleration occurs if this Article permits the payment at that time; provided,
however, that if no Senior Debt is outstanding at the time of such acceleration
the Company shall pay the Securities in accordance with the provisions of
Article 4.
Section 11.06. When Distribution Must Be Paid Over
In the event that the Company shall make any payment to the Trustee on
account of the principal or interest on the Securities at a time when such
payment is prohibited by Section 11.03 or 11.04, such payment shall be held by
the Trustee, in trust for the benefit of, and shall be paid forthwith over and
delivered to, the holders of Senior Debt (pro rata as to each of such holders on
the basis of the respective amounts of Senior Debt held by them) or their
Representative or the trustee under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all Senior Debt in full in
accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
If a distribution is made to Securityholders that because of this
Article should not have been made to them, the Securityholders who receive the
distribution shall hold it in trust for holders of Senior Debt and pay it over
to them as their interests may appear.
Section 11.07. Notice by Company
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of principal of or
interest on the Securities to violate this Article, but failure to give such
notice shall not affect the subordination of the Securities to the Senior Debt
provided in this Article. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 5.07.
Section 11.08. Subrogation
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After all Senior Debt is paid in full and until the Securities are
paid in full, Securityholders shall be subrogated to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Securityholders have been applied to
the payment of Senior Debt. A distribution made under this Article to holders of
Senior Debt which otherwise would have been made to Securityholders is not, as
between the Company and Securityholders, a payment by the Company on Senior
Debt.
Section 11.09. Relative Rights.
This Article defines the relative rights of Securityholders and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
(2) affect the relative rights of Securityholders and creditors
of the Company other than holders of Senior Debt; or
(3) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders of Senior Debt to receive distributions otherwise payable
to Securityholders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default or Event
of Default.
Section 11.10. Subordination May Not Be Impaired by Company
No right of any holder of Senior Debt to enforce the subordination of
the indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
Section 11.11. Distribution or Notice to Representative
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Section 11.12. Rights of Trustee and Paying Agent.
The Trustee or Paying Agent may continue to make payments on the
Securities until it receives written notice of facts that would cause a payment
of principal of or interest on the Securities to violate this Article. Only the
Company, a Representative or a holder of an issue of Senior Debt that has no
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
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ARTICLE 12.
-----------
CHANGE OF CONTROL TRIGGERING EVENT
----------------------------------
Section 12.01. Change of Control Triggering Event.
In the event that there shall occur a Change of Control Triggering
Event, then the Company shall make an Offer in accordance with Section 10.09
hereof to purchase all or any part (equal to $1000 or an integral multiple
thereof) of each Holder's Securities at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the date
of purchase.
ARTICLE 13.
-----------
DEFEASANCE AND COVENANT DEFEASANCE
----------------------------------
Section 13.01. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may at its option by Board Resolution, at any time, elect
to have either Section 13.02 or Section 13.03 applied to the Outstanding
Securities upon compliance with the conditions set forth below in this Article
Thirteen.
Section 13.02. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 13.01
applicable to this Section, the Company shall be deemed to have been discharged
from its obligations with respect to the Outstanding Securities, on and after
the date the conditions set forth below are satisfied (hereinafter,
"defeasance"). For this purpose, such defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by the
Outstanding Securities and to have satisfied all its other obligations under
such Securities and this Indenture insofar as such Securities are concerned (and
the Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (A) the rights of Holders of such
Securities to receive, solely from the trust fund described in Section 13.04 and
as more fully set forth in such Section, payments in respect of the principal of
(and premium, if any) and interest on such Securities when such payments are
due, (B) the Company's obligations with respect to such Securities under
Sections 2.10, 2.06, 2.07, 9.02 and 9.03, (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (D) this Article Thirteen. Subject
to compliance with this Article Thirteen, the Company may exercise its option
under this Section 13.02 notwithstanding the prior exercise of its option under
Section 13.03.
Section 13.03. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 13.01
applicable to this Section, (i) the Company shall be released from its
obligations under Sections 9.04, 9.06 through 9.20, inclusive, Article Ten, and
clauses (i), (ii), (iv) and (v) of Section 7.01 and (ii) the
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occurrence of an event specified in Sections 4.01(3) (with respect to such
clauses of Section 7.01), 501(4) (with respect to any of Sections 9.06 through
9.20, inclusive) 4.01(5) and 4.01(6) shall not be deemed to be an Event of
Default (hereinafter, "covenant defeasance"). For this purpose, such covenant
defeasance means that the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section, Clause or Article, whether directly or indirectly by reason of any
reference elsewhere herein to any such Section, Clause or Article or by reason
of any reference in any such Section, Clause or Article to any other provision
herein or in any other document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
Section 13.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
13.02 or Section 13.03 to the then Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 5.09 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds
in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than one day before the due date of any
payment, money in an amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the
principal of (premium, if any) and each installment of interest on the
Securities on the Stated Maturity of such principal in accordance with
the terms of this Indenture and of such Securities. For this purpose,
"U.S. Government Obligations" means securities that are (x) direct.
obligations of the United States of America for the payment of which
its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or
interest on any such U.S. Government Obligation held by such custodian
for the account of the holder of such depository receipt, provided
that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
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(2) In the case of an election under Section 13.02, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such opinion
shall confirm that, the Holders of the Outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred.
(3) In the case of an election under Section 13.03, the Company
shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the Outstanding Securities will not
recognize gain or loss for Federal income tax purposes as a result of
such deposit and covenant defeasance and will be subject to Federal
income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and covenant
defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Securities, if then listed on any
securities exchange, will not be delisted as a result of such deposit.
(5) No Event of Default or event which with notice or lapse of
time or both would become an Event of Default shall have occurred and
be continuing on the date of such deposit or, insofar as subsections
4.01(7) and (8) are concerned, at any time during the period ending on
the 90th day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of
such period).
(6) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of the Trust Indenture Act).
(7) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the defeasance
under Section 13.02 or the covenant defeasance under Section 13.03 (as
the case may be) have been complied with.
(9) Such defeasance or covenant defeasance shall not result in
the trust arising from such deposit constituting an investment company
as defined in the
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Investment Company Act of 1940, as amended, or such trust shall be
qualified under such act or exempt from regulation thereunder.
(10) The Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the passing of 90 days following
such deposit, the trust funds will not be subject to the effect of any
proceeding or any bankruptcy, insolvency, reorganization, or similar
laws regarding creditors' rights generally.
Section 13.05. Deposited Money and U.S. Government Obligations
to be Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 9.03, all
money and U.S. Government obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee -- collectively, for purposes of
this Section 13.05, the "Trustee") pursuant to Section 13.04 in respect of the
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Securities,
of all sums due and to become due thereon in respect of principal (and premium,
if any) and interest but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and indemnify the Trustee its officers,
directors, employees and agents against any tax, fee or other charge imposed on
or assessed against the U.S. Government Obligations deposited pursuant to
Section 13.04 or the principal and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account of the
Holders of the Outstanding Securities. The indemnity of this Section 13.05 shall
survive the termination of this Indenture or the earlier resignation or removal
of the Trustee.
Anything in this Article Thirteen to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 13.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
Section 13.06. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 13.02 or 13.03 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's obligations under this indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Thirteen until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 13.02 or 13.03;
provided, however, that if the Company makes any payment of principal of (and
premium, if any) or any applicable interest on any Security following the
reinstatement of its obligations, the Company
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shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the money held by the Trustee or the Paying Agent.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CLARK USA, INC.
By___________________________
Paul D. Melnuk
President and Chief Executive Officer
Attest:
_______________________________ (SEAL)
Bankers Trust Company
as Trustee
By___________________________________
Authorized Signatory
Attest:
_____________________________ (SEAL)
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TABLE OF CONTENTS
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture
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PARTIES.................................................................... 1
RECITALS OF THE COMPANY.................................................... 1
ARTICLE 1. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION........ 1
Section 1.01. Definitions................................................. 1
Section 1.02. Compliance Certificates and Opinions........................ 20
Section 1.03. Form of Documents Delivered to Trustee...................... 20
Section 1.04. Acts of Holders; Record Dates............................... 21
Section 1.05. Notices, Etc., to Trustee and Company....................... 22
Section 1.06. Notice to Holders; Waiver................................... 22
Section 1.07. Conflict with Trust Indenture Act........................... 23
Section 1.08. Effect of Headings and Table of Contents.................... 23
Section 1.09. Successors and Assigns...................................... 23
Section 1.10. Separability Clause......................................... 23
Section 1.11. Benefits of Indenture....................................... 23
Section 1.12. Governing Law............................................... 23
Section 1.13. Legal Holidays.............................................. 23
Section 1.14. No Recourse Against Others.................................. 24
ARTICLE 2. THE SECURITIES................................................. 24
Section 2.01. Form and Dating............................................. 24
Section 2.02. Execution and Authentication................................ 25
Section 2.03. Registrar and Paying Agent.................................. 25
Section 2.04. Paying Agent to Hold Money in Trust......................... 26
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Section 2.05. Holder Lists..................................................... 26
Section 2.06. Transfer and Exchange............................................ 26
Section 2.07. Replacement Securities........................................... 32
Section 2.08. Outstanding Securities........................................... 32
Section 2.09. Treasury Securities.............................................. 32
Section 2.10. Temporary Securities............................................. 33
Section 2.11. Cancellation..................................................... 33
Section 2.12. Defaulted Interest............................................... 33
ARTICLE 3. SATISFACTION AND DISCHARGE.......................................... 33
Section 3.01. Satisfaction and Discharge of Indenture.......................... 34
Section 3.02. Application of Trust Money....................................... 35
ARTICLE 4. REMEDIES............................................................ 35
Section 4.01. Events of Default................................................ 35
Section 4.02. Acceleration of Maturity; Rescission and Annulment............... 37
Section 4.03. Collection of Indebtedness and Suits for Enforcement by Trustee.. 38
Section 4.04. Trustee May File Proofs of Claim................................. 39
Section 4.05. Trustee May Enforce Claims Without Possession of Securities...... 39
Section 4.06. Application of Money Collected................................... 39
Section 4.07. Limitation on Suits.............................................. 40
Section 4.08. Unconditional Right of Holders to Receive Principal, Premium and
Interest....................................................... 40
Section 4.09. Restoration of Rights and Remedies............................... 40
Section 4.10. Rights and Remedies Cumulative................................... 41
Section 4.11. Delay or Omission Not Waiver..................................... 41
Section 4.12. Control by Holders............................................... 41
Section 4.13. Waiver of Past Defaults.......................................... 41
Section 4.14. Undertaking for Costs............................................ 42
Section 4.15. Waiver of Stay, Extension or Usury Laws.......................... 42
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ARTICLE 5. THE TRUSTEE..................................................... 42
Section 5.01. Certain Duties and Responsibilities......................... 42
Section 5.02. Notice of Defaults.......................................... 43
Section 5.03. Certain Rights of Trustee................................... 43
Section 5.04. Not Responsible for Recitals or Issuance of Securities...... 44
Section 5.05. May Hold Securities......................................... 44
Section 5.06. Money Held in Trust......................................... 44
Section 5.07. Compensation and Reimbursement.............................. 44
Section 5.08. Administrative Expense...................................... 45
Section 5.09. Disqualification; Conflicting Interests..................... 45
Section 5.10. Corporate Trustee Required; Eligibility..................... 46
Section 5.11. Resignation and Removal; Appointment of Successor........... 46
Section 5.12. Acceptance of Appointment by Successor...................... 47
Section 5.13. Merger, Conversion, Consolidation or Succession to Business. 48
Section 5.14. Preferential Collection of Claims Against Company........... 48
Section 5.15. Appointment of Authenticating Agent......................... 48
ARTICLE 6. HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY............... 50
Section 6.01. Company to Furnish Trustee Names and Addresses of Holders... 50
Section 6.02. Preservation of Information; Communications to Holders...... 50
Section 6.03. Reports by Trustee.......................................... 50
Section 6.04. Reports by Company.......................................... 50
ARTICLE 7. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE............ 51
Section 7.01. Company May Consolidate, Etc., Only on Certain Terms........ 51
Section 7.02. Successor Substituted....................................... 51
ARTICLE 8. SUPPLEMENTAL INDENTURES......................................... 52
Section 8.01. Supplemental Indentures Without Consent of Holders.......... 52
Section 8.02. Supplemental Indentures with Consent of Holders............. 52
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Section 8.03. Execution of Supplemental Indentures........................ 53
Section 8.04. Effect of Supplemental Indentures........................... 53
Section 8.05. Conformity with Trust Indenture Act......................... 54
Section 8.06. Reference in Securities to Supplemental indentures.......... 54
Section 8.07. Notice of Supplemental Indentures........................... 54
ARTICLE 9. COVENANTS...................................................... 54
Section 9.01. Payment of Principal, Premium and Interest.................. 54
Section 9.02. Maintenance of Office or Agency............................. 54
Section 9.03. Money for Securities Payments to Be Held in Trust........... 55
Section 9.04. Statement by Officers as to Default......................... 56
Section 9.05. Existence................................................... 57
Section 9.06. Maintenance of Properties................................... 57
Section 9.07. Payment of Taxes and Other Claims........................... 57
Section 9.08. Provision of Financial Information.......................... 57
Section 9.09. Limitation on Restricted Payments........................... 58
Section 9.10. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries......................... 59
Section 9.11. Limitation on Transactions with Shareholders
and Affiliates............................................ 60
Section 9.12. Limitation on Indebtedness.................................. 61
Section 9.13. Limitation on Certain Indebtedness.......................... 61
Section 9.14. Limitation on Sale of Capital Stock of
Restricted Subsidiaries................................... 61
Section 9.15. Limitation on Issuance of Guarantees of Indebtedness........ 61
Section 9.16. Other Agreements............................................ 61
Section 9.17. Limitation on Liens......................................... 62
Section 9.18. Limitation on Certain Asset Dispositions.................... 62
Section 9.19. Limitation on Sale of Capital Stock of
Restricted Subsidiaries................................... 63
Section 9.20. Limitation on Issuance of Guarantees of Indebtedness........ 63
Section 9.21. Waiver of Certain Covenants................................. 63
ARTICLE 10. REDEMPTION OF SECURITIES...................................... 64
</TABLE>
iv
<PAGE>
Section 10.01. Right of Redemption......................................... 64
Section 10.02. Applicability of Article.................................... 64
Section 10.03. Election to Redeem; Notice to Trustee....................... 64
Section 10.04. Selection by Trustee of Securities to Be Redeemed........... 65
Section 10.05. Notice of Redemption........................................ 65
Section 10.06. Deposit of Redemption Price................................. 66
Section 10.07. Securities Payable on Redemption Date....................... 66
Section 10.08. Securities Redeemed in Part................................. 67
Section 10.09. Offer to Purchase........................................... 67
ARTICLE 11. SUBORDINATION.................................................. 68
Section 11.01. Agreement to Subordinate.................................... 68
Section 11.02. Certain Definitions......................................... 68
Section 11.03. Liquidation; Dissolution; Bankruptcy........................ 69
Section 11.04. Default on Senior Debt...................................... 69
Section 11.05. Acceleration of Securities.................................. 70
Section 11.06. When Distribution Must Be Paid Over......................... 70
Section 11.07. Notice by Company........................................... 70
Section 11.08. Subrogation................................................. 71
Section 11.09. Relative Rights............................................. 71
Section 11.10. Subordination May Not Be Impaired by Company................ 71
Section 11.11. Distribution or Notice to Representative.................... 71
Section 11.12. Rights of Trustee and Paying Agent.......................... 71
ARTICLE 12. CHANGE OF CONTROL TRIGGERING EVENT............................. 72
Section 12.01. Change of Control Triggering Event.......................... 72
ARTICLE 13. DEFEASANCE AND COVENANT DEFEASANCE............................. 72
Section 13.01. Company's Option to Effect Defeasance or Covenant Defeasance. 72
Section 13.02. Defeasance and Discharge..................................... 72
v
<PAGE>
Section 13.03. Covenant Defeasance......................................... 73
Section 13.04. Conditions to Defeasance or Covenant Defeasance............. 73
Section 13.05. Deposited Money and U.S. Government Obligations............. 75
Section 13.06. Reinstatement............................................... 76
EXHIBITS
--------
Exhibit A FORM OF SECURITY
EXHIBIT B CERTIFICATE OF TRANSFER
vi
<PAGE>
- -------------------------------------------------------------------------------
Clark USA, Inc.
TO
Bankers Trust Company
Trustee
---------------------------
INDENTURE
Dated as of October 1, 1997
11 1/2% Subordinated Exchange Debentures due 2009
- -------------------------------------------------------------------------------
<PAGE>
EXHIBIT A
(Face of Security)
CLARK USA, INC.
11 1/2% OF SUBORDINATED EXCHANGE
DEBENTURES DUE 2009
No. __________ $________
Clark USA, Inc., a corporation duly organized and existing under the
laws of Delaware (herein called the "Company," which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to Bankers Trust Company, or registered assigns, the principal
sum of $63,000,000 in United States Dollars on October 1, 2009, and to pay
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 duly
provided for or, in cash (or, on or prior to October 1, 2002, in additional
Securities, 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
whose name the Security is registered at the close of business on the March 15
or September 15 next preceding such interest payment date, until the principal
hereof is paid or made available for payment; provided, however, in the event
that (i) the Company has not filed the registration statement relating to the
Exchange Offer within 90 days following the Closing Date, or (ii) such
registration statement (or, if applicable, the Resale Registration) has not
become effective within 180 days following the Closing Date, or (iii) the
Exchange Offer has not been consummated within 30 business days after the
effective date of the Exchange Offer Registration Statement, or (iv) any
registration statement required by the Registration Rights Agreement is filed
and declared effective but shall thereafter cease to be effective (except as
specifically permitted therein) without being succeeded immediately by an
additional registration statement filed and declared effective (any such event
referred to in Clauses (i) through (iv), the "Registration Default"), then the
per annum interest rate on the Exchangeable Debentures will increase by 0.5%
("Special Interest") for the period from the occurrence of the Registration
Default until such time as no Registration Default is in effect (at which time
the interest rate will be reduced to its initial rate). If the Company has not
consummated the Exchange Offer (or, if applicable, the Resale Registration has
not become effective), within 270 days following the Closing Date, then the per
annum dividend rate on the Securities will increase by an additional 0.5% for so
long as the Company has not consummated the Exchange Offer (or until such Resale
Registration becomes effective).
Any accrued and unpaid interest on this Security upon the issuance of
an Exchange Security in exchange for this Security shall cease to be payable to
the Holder hereof
A-1
<PAGE>
but such accrued and unpaid interest shall be payable on the next Interest
Payment Date for such Exchange Security to the Holder thereof on the related
Regular Record Date.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 15 or September 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date at the
office or agency of the Company at [ ] maintained for such purpose and at
any other office or agency maintained by the Company for such purchase (any such
location being called a "Place of Payment"); provided, however, that at the
Option of the Company payment of interest may be made by check to the address of
the Person entitled thereto as such address shall appear on the Security
Register. Interest shall be payable in cash, except that on each Interest
Payment Date interest may be paid, at the Company's option, by the issuance of
additional Securities in an amount equal to the amount of such interest. Any
such interest not so punctually paid or duly provided, and interest on such
defaulted interest at the interest rate borne by the Securities, to the extent
lawful, shall forthwith cease to be payable to the Holder on such Regular Record
Date and shall be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a special
record date ("Special Record Date") for the payment of such defaulted interest
to be fixed by the Company with the consent of the Trustee, notice whereof shall
be given to Holders of Securities not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements (if applicable) of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such securities exchange, all as more fully provided in said Indenture.
If this Security is a Global Security, all payments in respect of this
Security will be payable to the Global Security Holder in its capacity as the
registered Holder under the Indenture. If this Security is not a Global
Security, payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the [ ], in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, or at the option of the Company, payment of interest may be made
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register; provided, however, that payment by wire
transfer of immediately available funds will be required with respect to
principal of, premium, if any, and interest on, all Global Securities and all
other Securities the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent.
A-2
<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: October 1, 1997
[SEAL] CLARK USA, INC.
Attest:
By
- ---------------------------- -----------------------------
Name: Name:
Title: Title:
A-3
<PAGE>
(Back of Security)
[Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
THE EXCHANGEABLE PREFERRED STOCK EVIDENCED HEREBY AND THE EXCHANGE
DEBENTURES ISSUABLE UPON EXCHANGE OF SUCH EXCHANGEABLE PREFERRED STOCK HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)
(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (4) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES.
This Security is one of a duly authorized issue of securities of the Company
designated as its 11 1/2% Subordinated Exchange Debentures due 2009 (herein
called the "Securities"), issued and to be issued in one or more series under an
Indenture, dated as of October 1, 1997 (as it may from time to time be
supplemented or amended by one or more supplemental indentures, herein called
the "Indenture"), between the Company, and Bankers Trust Company, as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of
- -----------
/1/ This paragraph should be included only if the Security is issued in global
form.
A-4
<PAGE>
the Company and the Trustee of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The aggregate
principal amount of the Securities shall be limited to the liquidation
preference of the Exchangeable Preferred Stock, plus, without duplication,
accumulated and unpaid dividends, on the date or dates on which it is exchanged
for Securities (plus any additional Securities issued in lieu of cash interest).
The Securities are subject to redemption at the option of the Company,
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 Securities to be
redeemed at such holder's address appearing on the Company' Securities
Registrar, in principal amounts of $1,000 or an integral multiple of $1,000, at
the following redemption prices (expressed as percentages of the principal
amount) if redeemed during the 12-month period commencing on October 1 of each
of the years set forth below, plus, in each case, accrued 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 Securities, 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 proceeds of any such Equity Offering and
upon not less than 30 nor more than 60 days' notice mailed to each holder of
Securities to be redeemed at such holder's address appearing in the Company's
Security Register, in principal amounts of $1,000 or an integral multiple of
$1,000. 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 Securities pursuant to this paragraph.
If less than all of the Securities are to be redeemed at any time,
selection of the Securities to be redeemed will be made by the Company in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed or, if the Securities are not listed
on a securities exchange, by lot or by any other method as the Trustee shall
deem fair and appropriate; provided that Securities redeemed in part will only
be redeemed in integral multiples of $1,000.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Available Proceeds are available to the Company as a result of Asset
Dispositions or (ii) a Change of Control Triggering Event occurs, the Company
shall be required to make an Offer to purchase for some or all of the Securities
in accordance with the terms of the Indenture.
A-5
<PAGE>
The Indenture contains provisions for defeasance at any time of (i)
the entire indebtedness of this Security or (ii) certain restrictive covenants
and Events of Default with respect to this Security, in each case upon
compliance with certain conditions set forth therein.
In the event of redemption or purchase pursuant to a mandatory offer
to purchase of this Security in part only, a new Security or Securities for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the principal of
the Securities may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities at the time Outstanding, on
behalf of the Holders of all Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. The Indenture also provides that, without
notice to or consent of any Holder, the Company and the Trustee may enter into
one or more supplemental indentures to, among other things, cure any ambiguity,
defect or inconsistency, provide for uncertificated securities in addition to or
in place of certificated Securities, or make any other change, in each case,
that does not adversely affect the rights of any Holder of a Security in any
material respect. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future Holders of
this Security and of any Security issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture, the transfer of this Security is
registerable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of (and premium, if any) and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Security Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
A-6
<PAGE>
The Securities are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiples thereof (other than
Securities issued in lieu of cash interest pursuant to paragraph 3 of the
Securities). As provided in the Indenture and subject to certain limitations
therein set forth, Securities are exchangeable for a like aggregate principal
amount of Securities of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made to the Holder for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
No director, officer, employee, stockholder or incorporator, as such,
of the Company shall have any liability for any obligations of the Company under
the Securities or the Indenture for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Interest on this Security shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
conflicts of law principles thereof).
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased in its entirety
by the Company pursuant to Sections 10.09 and 9.18 of the Indenture, check the
box: [_]
If you want to elect to have only a part of this Security purchased by
the Company pursuant to Sections 10.09 and 9.18 of the Indenture, state the
amount (which must be $1,000 or integral multiples thereof):
$____________________.
Dated: ___________ Your Signature: _______________________________________
(Sign exactly as name appears on the other side of this
Security)
Signature Guarantee: ________________________________________________
(Signature must be guaranteed by a member firm
of a national securities exchange or a commercial
bank or trust company)
A-8
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: Your Signature:
--------- --------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/2/
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of Amount of of this Global authorized
decrease in increase in Security officer of
Principal Amount Principal Amount following such Trustee or
Date of of this Global of this Global decrease Security
Exchange Security Security (or increase) Custodian
- -------- ---------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
</TABLE>
- -----------
/2/ This should be included only if the Security is issued in global form.
A-10
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
This Certificate relates to $_____ principal amount of Securities held
in *________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations in an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
or
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with such request and in respect of each such Security, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Securities and as provided in Section 2.06 of
such Indenture, the transfer of this Security does not require registration
under the Securities Act of 1933, as amended (the "Securities Act") because:*
[_] Such Security is being acquired for the Transferor's own account, without
transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[_] Such Security is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act in reliance on Rule 144A (in
satisfaction of Section 2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the
Indenture) or pursuant to an exemption from registration in accordance with
Rule 904 under the Securities Act (in satisfaction of Section
2.06(a)(ii)(B) or Section 2.06(d)(i)(B) of the Indenture.)
[_] Such Security is being transferred in accordance with Rule 144 under the
Securities Act, or pursuant to an effective registration statement under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[_] Such Security is being transferred in reliance on and in compliance with an
exemption from the registration requirements of the Securities Act, other
than Rule 144A, 144 or Rule 904 under the Securities Act, and any
applicable state securities laws. An Opinion of Counsel to the effect that
such transfer does not require registration under the Securities Act
accompanies this Certificate (in satisfaction of Section 2.06(a)(ii)(C) or
Section 2.06(d)(i)(C) of the Indenture).
B-1
<PAGE>
_________________________________________
[INSERT NAME OF TRANSFEROR]
Dated: ______________________________ By:
_____________________________________
*Check applicable box.
B-2
<PAGE>
Exhibit 5.1
January 16, 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,
/s/ Mayer, Brown & Platt
Mayer, Brown & Platt
<PAGE>
Exhibit 8.1
[LETTERHEAD OF MAYER, BROWN & PLATT]
January 16, 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 acted as counsel to 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 ("New
Exchangeable Preferred Stock") to be issued under the Exchange and Registration
Rights Agreement providing for the Exchange Offer. Capitalized terms used
herein but not otherwise defined are used as defined in the Registration
Statement.
In connection with the registration of the New Exchangeable Preferred Stock
you have requested our opinion concerning the information in the Registration
Statement under the heading "CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS."
In formulating our opinion, we have reviewed and relied upon the
Registration Statement, other documents and information provided by you, and
such applicable provisions of law including the Internal Revenue Code of 1986,
as amended (the "Code") and other records, instruments, certificates and
documents as we have considered necessary or desirable to enable us to express
the opinion set forth below. For purposes of our opinion, we have not made an
independent investigation of the facts set forth in such documents including the
Registration Statement. We have consequently relied upon representations that
the information presented therein or otherwise forwarded to us accurately and
completely describe all material facts. No facts have come to our attention,
however that would cause us to question the accuracy or completeness of such
facts or documents in or material used.
In rendering this opinion, we have assumed that the transactions
contemplated by the foregoing documents will be consummated in accordance with
the operative documents, and that such documents accurately reflect the material
facts of such transactions. In addition, the opinion set forth below is based
on the correctness of the assumption that there has been no change in the Code,
the regulations promulgated thereunder by the Treasury Department, and the
interpretation of the Code and such regulations by the courts and the Internal
Revenue Service, all as they are in effect and exist at the date of this letter.
With respect to this assumption it should be noted that statutes, regulations,
judicial decisions and administrative interpretations are subject to change at
any time and, in some circumstances, with retroactive effect. A material change
that is made after the date hereof in any of the foregoing bases for our
opinion, could affect our conclusion.
Based upon and subject to the foregoing, it is our opinion that the
information in the Registration Statement under the heading "CERTAIN U.S.
FEDERAL INCOME TAX CONSIDERATIONS", to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by us and is correct in all material
respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
Mayer, Brown & Platt
<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."
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
January 16, 1998
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/2% SENIOR CUMULATIVE EXCHANGEABLE PREFERRED STOCK
OF
CLARK USA, INC.
Pursuant to the Prospectus dated January , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
, 1998 UNLESS EXTENDED.
TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK, AS EXCHANGE AGENT
By Registered or Certified Mail: By Overnight Courier:
First Chicago Trust Company of New First Chicago Trust Company of New
York York
Tenders & Exchanges Tenders & Exchanges
PO Box 2569 14 Wall Street
Suite 4660 8th Floor
Jersey City, NJ 07303-2569 Suite 4680
New York, NY 10005
Confirm by Telephone:
(201) 324-0137
By Hand:
First Chicago Trust Company of New York
Attention: Tenders & Exchanges
c/o The Depository Trust Company
55 Water Street DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
By Facsimile:
(201) 222-4720
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 January , 1998 (the "Prospectus"), of Clark USA, Inc. (the "Company")
and this Letter of Transmittal which may be amended from time to time (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
<PAGE>
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, extends the Exchange Offer, in which case the term shall mean the
latest date and time to which the Exchange Offer is extended. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
The Letter of Transmittal is to be used by Holders of Old Exchangeable
Preferred Stock if (i) certificates representing the Old Exchangeable Preferred
Stock are to be physically delivered to the Exchange Agent herewith by such
Holder or (ii) tender of Old Exchangeable Preferred Stock is to be made by
book-entry transfer to the Exchange Agent's account at the Depository Trust
Company ("DTC") pursuant to the procedures set forth in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering" by any financial
institution that is a participant in the DTC system and whose name appears on a
security position listing as the owner of Old Exchangeable Preferred Stock, and
instructions are not being transmitted through the DTC Automated Tender Offer
Program ("ATOP"), or (iii) if tender of the Old Exchangeable Preferred Stock is
to be made according to the guaranteed delivery procedures described in the
Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures."
Holders of Old Exchangeable Preferred Stock who are tendering by book-entry
transfer to the Exchange Agent's account at DTC can execute the tender through
ATOP for which the transaction will be eligible. DTC participants that are
accepting the Exchange Offer must transmit their acceptance to DTC, which will
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms
of the Exchange Offer as to execution and delivery of a Letter of Transmittal
by the participant identified in the Agent's Message. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC
has received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal and that the Company may enforce such Letter of
Transmittal against such participant.
Delivery of this Letter of Transmittal or other documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person (i) in
whose name Old 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 or (ii) whose Old Exchangeable Preferred Stock is
held of record by DTC who desires to deliver such Old Exchangeable Preferred
Stock by book-entry transfer to DTC. The undersigned has completed, executed
and delivered this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer. Holders who wish to tender
their Old Exchangeable Preferred Stock must complete this letter in its
entirety.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
EXCHANGEABLE PREFERRED STOCK" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO
HAVE TENDERED THE OLD EXCHANGEABLE PREFERRED STOCK AS SET FORTH IN SUCH BOX
BELOW.
2
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
DESCRIPTION OF OLD EXCHANGEABLE PREFERRED STOCK
<TABLE>
- -------------------------------------------------------
<CAPTION>
NAMES AND
ADDRESS(ES)
OF PRINCIPAL
REGISTERED AGGREGATE AMOUNT TENDERED
HOLDER(S) PRINCIPAL (MUST
(PLEASE AMOUNT BE IN INTEGRAL
FILL IN, IF CERTIFICATE REPRESENTED BY MULTIPLE
BLANK) NUMBER(S)* CERTIFICATE(S) OF $1,000)**
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
<S> <C> <C> <C>
Total
- -------------------------------------------------------
</TABLE>
*Need not be completed by Holders tendering by book-entry transfer.
**Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old 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>
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3, 4 AND 5) (SEE INSTRUCTIONS 3, 4 AND 5)
To be completed ONLY if To be completed ONLY if
certificates for Old certificates for Old
Exchangeable Preferred Stock in Exchangeable Preferred Stock in
a principal amount not tendered, a principal amount not tendered,
or New Exchangeable Preferred or New Exchangeable Preferred
Stock issued in exchange for Old Stock issued in exchange for Old
Exchangeable Preferred Stock Exchangeable Preferred Stock
accepted for exchange, are to be accepted for exchange, are to be
issued in the name of someone sent to someone other than the
other than the undersigned, or under-
if the Old Exchange- signed, or to the undersigned at
able Preferred Stock tendered by an address other than that shown
book-entry transfer that are not above.
accepted for exchange are to be
credited to an account at DTC.
Deliver certificate(s) to:
Issue certificate(s) to: Name: ___________________________
(PLEASE PRINT)
Name: ___________________________
(PLEASE PRINT) Address: ________________________
Address: ________________________ ---------------------------------
(INCLUDE ZIP CODE)
---------------------------------
(INCLUDE ZIP CODE) ---------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
---------------------------------
(TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
4
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_]CHECK HERE IF TENDERED OLD EXCHANGEABLE PREFERRED STOCK IS BEING DELIVERED
BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD EXCHANGEABLE PREFERRED STOCK IS BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer ________________
Name of Tendering Institution ______________________________________________
DTC Account Number _________________________________________________________
Transaction Code Number ____________________________________________________
[_]CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD
EXCHANGEABLE PREFERRED STOCK IS TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
[_]CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD EXCHANGEABLE
PREFERRED STOCK FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPANT BROKER-DEALER") AND WISH TO RECEIVE
ADDITIONAL COPIES OF THE PROSPECTUS AND/OR OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Deliver Prospectuses to:
(QUANTITY)
Name _______________________________________________________________________
Address ____________________________________________________________________
----------------------------------------------------------------------------
Attention __________________________________________________________________
Telephone __________________________________________________________________
Facsimile __________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
5
<PAGE>
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old 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
as its agent and attorney-in-fact (with full knowledge that the Exchange Agent
also acts as the agent of the Company) with respect to the tendered Old
Exchangeable Preferred Stock with full power of substitution to (i) deliver
certificates for such Old Exchangeable Preferred Stock to the Company, or
transfer ownership of such Old Exchangeable Preferred Stock on the account
books maintained by DTC, and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company and (ii) present such
Old 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. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New
Exchangeable Preferred Stock. If the undersigned is a broker-dealer that will
receive New Exchangeable Preferred Stock, it represents that the Old
Exchangeable Preferred Stock to be exchanged for New Exchangeable Preferred
Stock was acquired as a result of market-making activities or other trading
activities and not acquired directly from the Company, and it acknowledges
that it will deliver a prospectus in connection with any resale of such New
Exchangeable Preferred Stock; however, by so acknowledging and by delivering a
prospectus the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
assignment, transfer and purchase of the Old 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
6
<PAGE>
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 (or in either such event in the
case of Old Exchangeable Preferred Stock tendered by DTC, by credit to the
undersigned's account at DTC). 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 accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s), unless, in either event, tender is being made through DTC. In the
event that both "Special Registration Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
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.
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, or
who cannot complete the procedure for book-entry transfer, 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.
7
<PAGE>
PLEASE SIGN HERE WHETHER OR NOT
OLD EXCHANGEABLE PREFERRED STOCK IS BEING PHYSICALLY TENDERED HEREBY
X ________________________________________________ Date: _______________
X ________________________________________________ Date: _______________
SIGNATURE(S) OF REGISTERED HOLDER(S) OR
AUTHORIZED SIGNATORY
Area Code and Telephone Number: ________________________________________________
The above lines must be signed by the registered Holder(s) as their name(s)
appear(s) on the Old Exchangeable Preferred Stock or, if the Old Exchangeable
Preferred Stock is tendered by a participant in DTC, as such participant's name
appears on a security position listing as the owner of 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 3 regarding the completion of this Letter of Transmittal printed
below.
Name(s): _______________________________________________________________________
(PLEASE PRINT)
- --------------------------------------------------------------------------------
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 3)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
- --------------------------------------------------------------------------------
(TITLE)
- --------------------------------------------------------------------------------
(NAME OF FIRM)
Dated: , 1998
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD EXCHANGEABLE PREFERRED
STOCK. The tendered Old Exchangeable Preferred Stock (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of all Old
Exchangeable Preferred Stock delivered electronically), as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
hereof and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. The method of delivery of
the tendered Old 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, (ii) who
cannot deliver their Old Exchangeable Preferred Stock, (iii) who are ATOP
members but elect not to use ATOP, or (iv) who are not ATOP members, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent prior to the Expiration Date must tender their Old Exchangeable
Preferred Stock according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedure: (a) such tender must be made by or
through an Eligible Institution (as defined in Instruction 3); (b) prior to
the Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the certificate number or numbers of such Old
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 (or
a confirmation of electronic delivery of book-entry delivery into the Exchange
Agent's account at DTC) and any other required documents will be deposited by
the Eligible Institution with the Exchange Agent; and (c) such properly
completed and executed Letter of Transmittal (or facsimile hereof), as well as
all other documents required by this Letter of Transmittal and the
certificate(s) representing all tendered Old Exchangeable Preferred Stock in
proper form for transfer (or a confirmation of electronic delivery of book-
entry delivery into the Exchange Agent's account at DTC), must be received by
the Exchange Agent within five (5) New York Stock Exchange trading days after
the Expiration Date, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures" or the Holder must properly
complete and duly execute an ATOP ticket in accordance with DTC 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
9
<PAGE>
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.
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 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.
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 or, if the Old Exchangable
Preferred Stock is tendered by a participant in DTC, as such participant's
name appears on a security position listing as the owner of the Old
Exchangable 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 3 must be guaranteed by an Eligible
Institution.
10
<PAGE>
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 (or in the case of tender of Old Exchangeable
Preferred Stock through DTC, if different from DTC). In the case of issuance
in a different name, the taxpayer identification or social security number of
the person named must also be indicated.
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 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 5, 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. See "The
Exchange Offer--Conditions" in the Prospectus.
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.
9. BROKER-DEALER REQUESTS FOR PROSPECTUSES. Brokers and dealers that are
required under Federal securities laws to deliver a Prospectus in connection
with resales of New Exchangable Preferred Stock should complete the applicable
box to obtain copies of the Prospectus and any amendments and supplements to
the Prospectus to enable them to comply with such prospectus
11
<PAGE>
delivery requirements. If you require additional copies of the Prospectus or
any amendments or supplements thereto, please call Bruce Steinke (314-854-1424)
of the Company.
(DO NOT WRITE IN SPACE BELOW)
OLD EXCHANGEABLE PREFERRED STOCK OLD EXCHANGEABLE PREFERRED STOCK
CERTIFICATE SURRENDERED TENDERED ACCEPTED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Delivery Prepared by ____________________ Checked By _____________________ Date
12
<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 January , 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 shall have the meanings ascribed to them in the
Prospectus.
The Exchange Agent is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Registered or Certified Mail: By Overnight Courier:
First Chicago Trust Company of First Chicago Trust Company of New York
New York Tenders & Exchanges
Tenders & Exchanges 14 Wall Street
P.O. Box 2569 8th Floor
Suite 4660 Suite 4680
Jersey City, NJ 07303-2569 New York, NY 10005
Confirm by Telephone:
(201) 324-0137
By Hand: By Facsimile:
First Chicago Trust Company of (201) 222-4720
New York
Attention: Tenders & Exchanges
c/o The Depository Trust Company
55 Water Street DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
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."
<PAGE>
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1998, unless extended by
the Company. With respect to the Exchange Offer, "Expiration Date" means such
time and date, or if the Exchange Offer is extended, the latest time and date
to which the Exchange Offer is so extended by the Company.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
Principal Amount of Old Exchangeable
SIGNATURES Preferred Stock Exchanged: $ ________
----------------------------------- Certificate Nos. of Old Exchangeable
SIGNATURE OF OWNER Preferred Stock (if available)
-------------------------------------
----------------------------------- -------------------------------------
SIGNATURE OF OWNER (IF MORE THAN
ONE)
Total $ _____________________________
Dated: , IF OLD EXCHANGEABLE PREFERRED STOCK
1998 WILL BE DELIVERED BY BOOK-ENTRY
TRANSFER, PROVIDE THE DEPOSITORY
TRUST COMPANY ("DTC") ACCOUNT NO.:
Name(s): __________________________
----------------------------
(PLEASE PRINT) Account No.: ________________________
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.: ______________
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<PAGE>
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national security exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby guarantees that (a) 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.
Name of Firm: _______________________ -------------------------------------
AUTHORIZED SIGNATURE
Address: ____________________________
Name: _______________________________
- -------------------------------------
Title: ______________________________
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.
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