CLARK USA INC /DE/, 10-K405, 1999-03-31

CLARK USA INC /DE/
10-K405, 1999-03-31
PETROLEUM REFINING

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

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(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
[X] OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 1-13514

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CLARK USA, INC.
(Exact name of registrant as specified in its charter)

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Delaware 43-1495734
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

8182 Maryland Avenue 63105-3721
St. Louis, Missouri (Zip Code)
(Address of Principal Executive
Offices)

Registrant's Telephone Number, Including Area Code: (314) 854-9696

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

All of the common equity of the registrant is held by affiliates. Number of
shares of registrant's common stock, $.01 par value, outstanding as of
February 28, 1999:

<TABLE>
<CAPTION>
Class Shares Outstanding
----- ------------------
<S> <C>
Common Stock 13,767,829
Class F Common Stock 6,101,010
</TABLE>

Documents incorporated by reference:
None

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CLARK USA, INC.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----

PART I

<C> <S> <C>
Items 1 and 2. Business; Properties..................................... 2

Item 3. Legal Proceedings........................................ 14

Item 4. Submission of Matters to a Vote of Security Holders...... 16

PART II

Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters..................................... 16

Item 6. Selected Financial Data.................................. 17

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 18

Item 8. Financial Statements and Supplementary Data.............. 28

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 28

PART III

Item 10. Directors and Executive Officers of the Registrant....... 29

Item 11. Executive Compensation................................... 31

Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................. 35

Item 13. Certain Relationships and Related Transactions........... 35

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K................................................ 36

Signatures............................................................... 68
</TABLE>
<PAGE>

FORWARD-LOOKING STATEMENTS

Certain statements in this document are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These statements are subject to the safe
harbor provisions of this legislation. Words such as "expects," "intends,"
"plans," "projects," "believes," "estimates" and similar expressions typically
identify such forward-looking statements.

Even though the Company believes its expectations regarding future events
are based on reasonable assumptions, forward-looking statements are not
guarantees of future performance. There are many reasons why actual results
could, and probably will, differ from those contemplated in the Company's
forward-looking statements. These include changes in:

. Industry-wide refining margins

. Crude oil and other raw material costs, embargoes, industry expenditures
for the discovery and production of crude oil, and military conflicts
between (or internal instability in) one or more oil-producing countries

. Market volatility due to world and regional events

. Availability and cost of debt and equity financing

. Labor relations

. U.S. and world economic conditions (including recessionary trends,
inflation and interest rates)

. Supply and demand for refined petroleum products

. Reliability and efficiency of the Company's operating facilities. There
are many hazards common to operating oil refining and distribution
facilities (including equipment malfunctions, plant construction/ repair
delays, explosions, fires, oil spills and the impact of severe weather)

. Actions taken by competitors (including both pricing and expansion or
retirement of refinery capacity)

. Civil, criminal, regulatory or administrative actions, claims or
proceedings (both domestic and international), and regulations dealing
with protection of the environment (including refined petroleum product
composition and characteristics)

. Other unpredictable or unknown factors not discussed

Because of all of these uncertainties, and others, you should not place
undue reliance on the Company's forward-looking statements.

1
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PART I

Item 1 and 2. Business; Properties

General

Clark USA, Inc. (together with its subsidiaries, "Clark USA" or the
"Company") is one of the five largest independent refiners of petroleum
products in the United States based on rated crude oil throughput capacity.
Clark USA's principal operating subsidiary, Clark Refining & Marketing, Inc.
("Clark R&M") has over 547,000 barrels per day (one barrel equals 42 U.S.
gallons) of rated crude oil throughput capacity and 672 company-operated
retail outlets in six Midwestern states (as of December 31, 1998). In February
1999, the Company announced its intention to solicit offers to purchase its
retail and wholesale marketing operations and certain distribution terminals
in order to focus on what it believes is its higher potential return refining
operations.

Clark USA was incorporated in Delaware in 1988 as AOC Holdings, Inc.
although the Clark brand name has been in existence since 1932. Its principal
executive offices are at 8182 Maryland Avenue, St. Louis, Missouri, 63105 and
its telephone number is (314) 854-9696.

Clark USA's common equity is privately-held and controlled by Blackstone
Capital Partners III Merchant Banking Fund L.P. and its affiliates
("Blackstone") through a 78.5% voting interest (68.0% economic interest).
Blackstone acquired its interest in Clark USA from Trizec Hahn Corporation
(formerly The Horsham Corporation, "TrizecHahn") in November 1997. Clark USA's
other principal shareholder is an affiliate of Occidental Petroleum
Corporation ("Oxy") with a 19.9% voting interest (30.7% economic interest).
Oxy acquired its interest in Clark USA in November 1995 in exchange for rights
to future crude oil deliveries that the Company subsequently sold. Much of the
debt of Clark USA and Clark R&M is publicly traded.

Business Strategy

The Company has focused its business strategy towards improving the
productivity of existing assets, selectively adding scale through acquisition,
optimizing capital investments through a rigorous project review and
implementation process, while maintaining significant liquidity and financial
flexibility. The Company has implemented this strategy by promoting an
entrepreneurial culture where employee incentives are aligned with performance
objectives.

. Improving Productivity. The Company continues to implement relatively no or
low-cost initiatives designed to increase production, sales volumes and
production yields and to improve its sales mix while reducing input costs
and operating expenses. Examples of these types of initiatives include
improvements at the Port Arthur refinery, increased yields and crude oil
throughput capability at its Illinois refineries and improved monthly fuel
volumes, convenience product sales and margins in the retail division.

. Adding Scale Through Acquisitions. The Company intends to continue to
selectively add scale to its refining operations through the acquisition of
low-cost, quality assets. Since 1994, the Company has almost quadrupled its
refining capacity with the acquisition of a Port Arthur, Texas refinery in
1995 and a Lima, Ohio refinery in 1998. The Company believes current
industry conditions may offer similar opportunities in the future.

. Optimizing Capital Investment. The Company emphasizes an entrepreneurial
approach to perceived mandatory expenditures, such as those required to
comply with reformulated and low-sulfur fuel regulations. For example, the
Company may seek to comply with such regulations through the access of
alternative markets for existing products if adequate returns on capital
investment are not assured. Discretionary capital expenditures are managed
by linking capital investment to internally generated cash flow. The
Company seeks to minimize investment risk, while maximizing project returns
and most projects in the past three years have generated paybacks of less
than four years.

. Promoting Entrepreneurial Culture. The Company emphasizes an
entrepreneurial management approach that uses employee incentives to
enhance financial performance and safety. All of the Company's employees

2
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participate in its performance management, profit sharing or other
incentive plans, and the Company has a stock incentive plan for certain key
employees.

. Maintaining Strong Liquidity and Financial Flexibility. Earnings in the
Company's industry have been volatile. As a result of this volatility the
Company has historically maintained significant liquidity and utilized
long-term financing when possible while retaining some prepayment
flexibility. As of December 31, 1998, the Company had cash and short-term
investments of approximately $154 million and no long-term debt maturities
prior to 2003.

Refining Division

Overview

The refining division operates one refinery in Texas, one refinery in Ohio
and two refineries in Illinois with a combined crude oil throughput capacity
of approximately 547,000 barrels per day ("bpd"). The Company also owns 17
product terminals located in its Midwest and Gulf Coast market areas, two
crude oil terminals, an LPG terminal and crude oil pipeline interests. The
following table shows the rated crude oil throughput capacities of the
Company's four refineries in barrels per day as of December 31, 1998:

<TABLE>
<S> <C>
Port Arthur, Texas................................................ 232,000
Lima, Ohio........................................................ 170,000
Blue Island, Illinois............................................. 80,000
Hartford, Illinois................................................ 65,000
-------
Total......................................................... 547,000
=======
</TABLE>

The Company's principal refined products are gasoline, on and off-road
diesel fuel, jet fuel, residual oil and petroleum coke. Gasoline, on-road (low
sulfur) diesel fuel and jet fuel are principally used for transportation
purposes. Off-road (high sulfur) diesel fuel is principally used as a fuel for
agriculture and trains. Residual oil (slurry oil and vacuum tower bottoms) is
used mainly for heavy industrial fuel (e.g., power generation) and in the
manufacturing of roofing flux or for asphalt used in highway paving. Petroleum
coke is a by-product of the coking process and is a coal-like substance that
can be burned for power generation. The Company also produces many unfinished
petrochemical products that are sold to neighboring chemical plants at the
Port Arthur and Lima refineries. Most of the Company's products are sold in
the eastern half of the U.S.

The Company currently sells gasoline and diesel fuel on an unbranded basis
to approximately 475 distributors and chain retailers through Company-owned
terminals and third-party facilities. The Company believes these sales offer
higher profitability than spot market alternatives. Wholesale sales are also
made to the transportation, agricultural and commercial sectors, including
airlines, railroads, barge lines and other industrial end-users. Fuel sales to
all channels of trade focus on maximizing netback realizations (revenue less
all distribution and working capital investment costs).

Port Arthur Refinery

The Port Arthur refinery is located in Port Arthur, Texas, approximately 90
miles east of Houston, on a 4,000-acre site. The Port Arthur refinery was
acquired from Chevron U.S.A. Inc. in February 1995. The Port Arthur refinery
has 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 West Texas Intermediate ("WTI"). The Port Arthur refinery's Texas
Gulf Coast location provides access to numerous cost-effective domestic and
international crude oil sources that can be accessed by waterborne delivery or
through the West Texas Gulf pipeline. The Port Arthur refinery can produce
conventional gasoline, up to 55% summer and 75% winter reformulated gasoline
("RFG"), 100% low-sulfur diesel fuel and jet fuel. The refinery's products can
be sold in the Mid-continent and Eastern U.S. as well as in export markets.
These markets can be accessed through the Explorer, Texas Eastern and Colonial
pipelines or by ship or barge.

3
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The Company has agreements to sell to Chevron up to 27,000 bpd of gasoline
and up to 2,100 bpd of low-sulfur diesel at market prices from the Port Arthur
refinery through February 28, 2000. This contract is cancelable upon 90 days'
notice by either party. The Company also has an agreement to exchange certain
refined products and chemicals at market prices with Chevron Chemical Company,
which exchanged amounts averaged approximately 24,700 bpd during 1996, 1997
and 1998. This contract is cancelable upon 18 months notice by either party or
by mutual agreement.

Since acquiring the Port Arthur refinery, the Company increased crude oil
throughput capability from approximately 178,000 bpd to its current 232,000
bpd and immediately lowered operating expenses by approximately 50c per
barrel. The Port Arthur refinery has generated annual average Operating
Contribution (as defined herein) of over $95 million in its three full years
of the Company's ownership.

Port Arthur Upgrade Project

In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company which provides the
Company with the foundation necessary to continue developing a project to
upgrade the Port Arthur refinery to process primarily lower-cost, heavy sour
crude oil. Under the agreement, 150,000 to 210,000 bpd of heavy, sour Maya
crude oil would be purchased for use at the Port Arthur refinery. The supply
contract would also assist in stabilizing gross margins and cash flows from
the project. The contract period would run for a minimum of eight years from
the completion of the project, which could be as early as January 2001. The
Port Arthur refinery has several important characteristics that make it
attractive for this type of arrangement. Its Gulf Coast location provides
excellent access to waterborne Mexican crude oil. Additionally, the refinery
already has much of the infrastructure (docks, tanks, utilities) and
processing capability necessary to support an upgraded operation.

The project is currently projected to cost approximately $600-$700 million
and is designed to include construction of an 80,000 bpd delayed coker and a
35,000 bpd hydrocracking unit and the expansion of crude unit capacity to
approximately 250,000 bpd. If the project is completed, the Port Arthur
refinery will have the ability to process heavy, sour crude oil up to an
estimated 80% of its capacity. Although the Company and its shareholders are
currently evaluating alternatives for financing the project, it is expected
that the financing will be on a non-recourse basis to the Company. The crude
oil supply agreement with PMI and the construction work-in-process are
expected to be transferred for value to a non-recourse entity that will likely
be an affiliate of, but not controlled by, the Company and its subsidiaries.
The Company expects to enter into agreements with this affiliate pursuant to
which the Company would provide certain operating, maintenance and other
services and would purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company is
expected to earn fair market value fees for providing such services and will
pay fair market prices for such products. These arrangements are expected in
the aggregate to be beneficial to the Company.

4
<PAGE>

The average daily feedstocks and production of the Port Arthur refinery for
the years ended December 31, 1996, 1997 and 1998 were as follows:

Port Arthur Refinery Feedstocks and Production

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1996 1997(a) 1998
----------- ----------- -----------
Bpd % Bpd % Bpd %
----- ----- ----- ----- ----- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil.................. 30.1 14.5% 23.0 11.1% 14.8 6.6%
Light Sour Crude Oil................... 100.7 48.3 95.4 46.2 87.9 39.5
Heavy Sweet Crude Oil.................. 65.4 31.4 15.6 7.6 2.3 1.0
Heavy Sour Crude Oil................... 3.6 1.7 72.6 35.1 114.3 51.4
Unfinished & Blendstocks............... 8.5 4.1 -- -- 3.3 1.5
----- ----- ----- ----- ----- -----
Total.............................. 208.3 100.0% 206.6 100.0% 222.6 100.0%
===== ===== ===== ===== ===== =====
Production
Gasoline
Unleaded............................... 56.9 27.0 54.6 25.6 78.5 35.1
Premium Unleaded....................... 33.5 15.9 30.5 14.3 20.4 9.1
----- ----- ----- ----- ----- -----
90.4 42.9 85.1 39.9 98.9 44.2
Other Products
Low-Sulfur Diesel Fuel................. 47.7 22.6 59.6 27.9 58.3 26.0
Jet Fuel............................... 30.5 14.5 22.2 10.4 23.7 10.6
Petrochemical Products................. 18.4 8.7 26.0 12.2 24.1 10.8
Others................................. 23.8 11.3 20.6 9.6 18.9 8.4
----- ----- ----- ----- ----- -----
120.4 57.1 128.4 60.1 125.0 55.8
----- ----- ----- ----- ----- -----
Total.............................. 210.8 100.0% 213.5 100.0% 223.9 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
- --------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
of approximately one month on selected units.

Lima Refinery

The Lima refinery is located in Lima, Ohio, approximately halfway between
Toledo and Dayton, on a 650-acre site. The first refinery on the site was
constructed in 1886 to take advantage of what was to become the world's
greatest oil producing area until 1910. Most of the processing units in the
Lima refinery have been rebuilt since 1970, making the Lima refinery
relatively young among Midwest refineries.

In 1996, British Petroleum ("BP") unsuccessfully attempted to sell the Lima
refinery and announced they would close the refinery in two years. Despite
such announcement, BP continued to invest at near historical levels for
maintenance operating expenses and mandatory capital expenditures at the Lima
refinery during 1997. The Company acquired the Lima refinery, related terminal
facilities and non-hydrocarbon inventory from affiliates of BP in August 1998
for $175 million plus approximately $35 million for hydrocarbon inventory and
$7 million for assumed liabilities principally related to employee benefits
(the "Lima Acquisition").

The Lima refinery is highly automated and modern with a Nelson complexity
rating of 8.7 and an estimated replacement cost of $1.2 billion. The Lima
refinery is large enough to realize economies of scale and other efficiencies.
The Midwest location of the refinery has historically provided it with a
transportation cost advantage and less gross margin volatility than refineries
in other regions since demand for refined products has exceeded supply in the
region.

5
<PAGE>

The Lima refinery was designed to process light, sweet crude oil, but the
refinery does have coking capability allowing it to upgrade lower-valued
products. The Lima refinery obtains 100% of its crude oil supply by pipeline
from a variety of domestic and foreign sources. The Mid-Valley, Salem-Stoy-
Lima (SSL) and Marathon pipeline systems provide final delivery capability to
the refinery. These pipelines allow ultimate connection to the Capline,
Louisiana Offshore Oil Port, Mobil, Ozark, IPL, West Texas Gulf and other
pipeline systems. The Lima refinery can produce conventional gasoline, diesel
fuel, jet fuel and certain specialty chemical products. Products can be
distributed through the Buckeye and Inland Pipeline systems and by rail, truck
or an adjacent terminal. The Buckeye system allows access to markets in
Northern/Central Ohio, Indiana, Michigan and Western Pennsylvania. The Inland
Pipeline System is a private intra-state system jointly owned by BP, Shell,
Unocal and Sun and available solely for their use.

The average daily feedstocks and production of the Lima refinery from the
acquisition date of August 10, 1998 through December 31, 1998 were as follows:

Lima Refinery Feedstocks and Production

<TABLE>
<CAPTION>
Year Ended
December 31, 1998 (a)
-----------------------
Bpd %
----------- -----------
(barrels per day in
thousands)
<S> <C> <C>
Feedstocks
Light Sweet Crude Oil................................ 53.3 105.3%
Light Sour Crude Oil................................. -- --
Other................................................ (2.7) (5.3)
---------- -----------
Total............................................ 50.6 100.0
========== ===========
Production
Gasoline
Unleaded............................................. 24.0 46.5
Premium Unleaded..................................... 5.6 10.8
---------- -----------
29.6 57.3
Other Products
Diesel Fuel.......................................... 10.7 20.7
Jet Fuel............................................. 5.3 10.2
Petrochemical Products............................... -- --
Others............................................... 6.1 11.8
22.1 42.7
---------- -----------
Total............................................ 51.7 100.0%
========== ===========
</TABLE>
- --------
(a) Includes feedstocks and production since the acquisition date of August
10,1998

Illinois Refineries

The Illinois refineries are connected by product pipelines, increasing
their flexibility relative to stand-alone operations. Both refineries are
situated on major water transportation routes that provide flexibility to
receive crude oil or intermediate feedstocks by barge when economical. The
Company believes that the Midwest location of these refineries has provided
relatively high refining margins with less volatility than comparable
operations located in other regions of the U.S., principally because demand
for refined products has exceeded production in the region. This excess demand
has been satisfied by imports from other regions, providing Midwest refineries
with a transportation advantage.

Blue Island Refinery

The Blue Island refinery is located on the Cal-Sag canal in Blue Island,
Illinois, approximately 17 miles south of Chicago on a 170-acre site. The Blue
Island refinery was designed to process light, sweet crude oil, but

6
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can process up to 25% light sour crude oil. 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 Blue
Island refinery has among the highest capabilities to produce gasoline
relative to the other refineries in its market area. During most of the year,
gasoline is the most profitable refinery product. The Blue Island refinery can
produce conventional gasoline, up to 60% RFG, high sulfur diesel fuel and
residual fuel. It can also produce 30% low-sulfur diesel fuel when market
prices warrant and based on the clean fuels attainment of the Company's total
refining system. Products can be distributed through the Wolverine, West
Shore, Badger, Transmontaigne and Marathon pipeline systems or by barge.

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 fluid catalytic cracking
("FCC") unit operation and introduced the capability to produce RFG.

The average daily feedstocks and production of the Blue Island refinery for
the years ended December 31, 1996, 1997 and 1998 were as follows:

Blue Island Refinery Feedstocks and Production

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1996 (a) 1997 1998 (a)
---------- ---------- ----------
Bpd % Bpd % Bpd %
---- ----- ---- ----- ---- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil..................... 57.9 84.2% 51.7 72.3% 48.5 74.9%
Light Sour Crude Oil...................... 10.5 15.3 18.1 25.4 14.8 22.8
Unfinished & Blendstocks.................. 0.4 0.5 1.7 2.3 1.5 2.3
---- ----- ---- ----- ---- -----
Total................................. 68.8 100.0% 71.5 100.0% 64.8 100.0%
==== ===== ==== ===== ==== =====
Production
Gasoline
Unleaded.................................. 34.1 50.9 37.7 52.5 36.7 56.9
Premium Unleaded.......................... 8.0 11.6 8.4 11.7 6.5 10.1
---- ----- ---- ----- ---- -----
42.1 62.5 46.1 64.2 43.2 67.0
Other Products
Diesel Fuel............................... 15.6 22.5 14.9 20.7 13.2 20.3
Others.................................... 10.3 15.0 10.8 15.1 8.2 12.7
---- ----- ---- ----- ---- -----
25.9 37.5 25.6 35.8 21.4 33.0
---- ----- ---- ----- ---- -----
Total................................. 68.0 100.0% 71.7 100.0% 64.6 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
- --------
(a) Output during 1996 and 1998 was reduced by significant planned and
unplanned downtime.

Hartford Refinery

The Hartford refinery is located on the Mississippi River in Hartford,
Illinois, approximately 17 miles northeast of St. Louis, on a 400-acre site.
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 60% 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 priced at a
significant discount to light sweet crude oil. The Hartford refinery has
access to foreign and domestic crude oil supplies through the Capline/Capwood
pipeline systems

7
<PAGE>

and access to Canadian crude oil through the Express pipeline and the
Mobil/IPL pipeline system. The Hartford refinery can produce conventional
gasoline, high sulfur diesel fuel, residual fuel and petroleum coke. Products
can be distributed through the Marathon/Wabash and Explorer pipeline systems
or by barge.

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 an average of less than one during 1998.

The average daily feedstocks and production of the Hartford refinery for
the years ended December 31, 1996, 1997 and 1998 were as follows:

Hartford Refinery Feedstocks and Production

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1996 1997(a) 1998
---------- ---------- -----------
Bpd % Bpd % Bpd %
---- ----- ---- ----- ---- -----
(barrels per day in thousands)
<S> <C> <C> <C> <C> <C> <C>
Feedstocks
Light Sweet Crude Oil.................... 10.2 15.5% 7.1 10.9% 8.2 12.9%
Light Sour Crude Oil..................... 53.5 81.4 37.3 57.9 35.1 55.0
Heavy Sour Crude Oil..................... 0.5 0.7 14.2 22.1 21.7 34.0
Unfinished & Blendstocks................. 1.5 2.4 5.9 9.1 (1.2) (1.9)
---- ----- ---- ----- ---- -----
Total................................ 65.7 100.0% 64.5 100.0% 63.8 100.0
==== ===== ==== ===== ==== =====
Production
Gasoline
Unleaded................................. 29.7 44.9 31.5 49.0 29.6 45.7
Premium Unleaded......................... 4.7 7.1 2.5 4.0 2.8 4.3
---- ----- ---- ----- ---- -----
34.4 52.0 34.0 53.0 32.4 50.0
Other Products
High-Sulfur Diesel Fuel.................. 24.4 36.9 19.6 30.5 20.9 32.3
Others................................... 7.4 11.1 10.5 16.5 11.5 17.7
---- ----- ---- ----- ---- -----
31.8 48.0 30.1 47.0 32.4 50.0
---- ----- ---- ----- ---- -----
Total................................ 66.2 100.0% 64.1 100.0% 64.8 100.0%
==== ===== ==== ===== ==== =====
</TABLE>
- --------
(a) The 1997 results reflect maintenance turnaround downtime of approximately
one month on selected units.

Terminals and Pipelines

The Company owns 15 refined product terminals with a combined capacity of
approximately 3.9 million barrels throughout its upper Midwest market area.
The Company owns a 1.1 million barrel crude oil terminal associated with the
Lima refinery and also owns a crude oil and refined product terminal, a
refined product terminal and an LPG terminal with a combined capacity of
approximately 7.1 million barrels associated with the Port Arthur refinery in
Texas. The Company also enters into refined product exchange agreements with
unaffiliated companies to broaden its geographical distribution capabilities.

The Company owns and operates a common carrier pipeline system that
connects its Port Arthur refinery with three Company-owned terminals, and
holds a minority interest in a pipeline that connects its Hartford refinery
with the Capline system. It also owns proprietary refined products pipelines
from the Blue Island refinery to its terminal in Hammond, Indiana, and from
the Port Arthur refinery to its LPG terminal in Fannett, Texas.

8
<PAGE>

In 1998, the Company sold minority interests in the Southcap and Chicap
crude oil pipelines, and the Wolverine and West Shore product pipelines, after
determining they were not strategic. The Company's shipping rights are assured
due to the pipelines' operation as common carrier pipelines and the Company's
historical throughput on these pipelines. In February 1999, the Company
announced it was soliciting offers for the sale of certain refined product
terminals.

Crude Oil Supply

The majority of the Company's crude oil supply requirements are acquired on
the spot market from unaffiliated foreign and domestic sources. In addition to
the contract with PMI related to the Port Arthur heavy sour crude oil upgrade
project, the Company has several crude oil supply contracts that total
approximately 176,800 bpd with several third-party suppliers, including PMI,
Bay Oil and Mobil Oil Corporation. 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 following table shows the Company's
daily average sources of crude oil in 1998:

Sources of Crude Oil Supply

<TABLE>
<CAPTION>
1998
--------------------
Bpd %
-------------- -----
(in thousands)
<S> <C> <C>
United States....................................... 53.9 13.4%
Latin America....................................... 163.9 40.9
Canada.............................................. 47.8 11.9
West Africa......................................... 18.4 4.6
Middle East......................................... 78.5 19.6
North Sea........................................... 35.6 8.9
Other............................................... 2.8 0.7
----- -----
Total........................................... 400.9 100.0%
===== =====
</TABLE>

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.

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 non-attainment 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.

The Company anticipates that the EPA will announce a Proposed Rule that
will establish national fuel standards for sulfur specifications in gasoline.
The Company believes that the EPA will recommend that sulfur levels in
gasoline be reduced to coincide with the introduction of 2004 motor vehicles.
This proposal would likely require the Company to make some level of capital
investments at it refineries to reduce the sulfur levels in its gasoline.
Until the announcement and evaluation of the Proposed Rule, the Company is
unable to determine the specific impact of the proposal on the Company.

9
<PAGE>

Expenditures required to comply with existing reformulated fuels
regulations are primarily discretionary, subject to market conditions and
economic justification. The reformulated fuels programs impose restrictions on
properties of fuels to be refined and marketed, including those pertaining to
gasoline volatility, oxygenated content, detergent addition and sulfur
content. The regulations regarding these fuel properties vary in markets in
which the Company operates, based on attainment of air quality standards and
the time of the year. The Company's Port Arthur, Blue Island and Hartford
refineries have the capability to produce up to approximately 60%, 60% and
25%, respectively, of their gasoline production in RFG. Each refinery's
maximum RFG production may be limited based on the clean fuels attainment of
the Company's total refining system. The Port Arthur refinery has the
capability to produce 100% low-sulfur diesel fuel.

Market Environment

The Company's feedstocks and refined products are principally commodities
and, as such, are significantly affected by a variety of factors beyond its
control, including the supply of, and demand for, crude oil, gasoline and
other refined products which, in turn, depend on, among other factors, changes
in domestic and foreign economies, weather conditions, political affairs,
crude oil production levels, the rate of industry investments, the
availability of imports, the marketing of competitive fuels and the extent of
government regulations. The Company's results are also impacted by seasonal
fluctuations with generally stronger earnings recorded during the higher
transportation-demand periods of the spring and summer and weaker earnings
recorded during the fall and winter.

The Company believes that it is well positioned to benefit from potential
long-term improvements in refining industry profitability. The Company
believes refining industry improvement may result from (i) increased demand
for gasoline and distillate fuel, (ii) domestic refinery crude oil
distillation utilization rates nearing maximum sustainable rates, (iii)
reduced growth in conversion capacity, and (iv) increased availability of
lower cost heavy sour crude oil. Conversion refers to the ability to extract
more higher valued products, such as gasoline and distillate fuel, out of the
same barrel of crude oil.

The Company believes industry improvement has occurred since 1995 and
particularly in 1997 as indicated by the Company's record 1997 Operating
Contribution and improvement in certain key industry market indicators.

According to the U.S. Department of Energy, Energy Information
Administration ("EIA"), U.S. demand for gasoline and distillate fuel grew from
9.4 million bpd in 1980 to 11.9 million bpd in 1998, averaging growth of 1.5%
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 15.9 million bpd in 1998, according to the Oil & Gas Journal,
as 137 refineries closed between 1980 and 1998. However, during this period,
conversion capacity increased to meet the growing demand for transportation
fuels. From the early 1990s until 1996, growth in conversion capacity exceeded
demand growth. According to the Oil and Gas Journal and the American Petroleum
Institute, since the early 1990s, industry capital spending, especially non-
environmental capital spending, much of which was for increased conversion
capacity, has decreased as indicated in the table below. The Company believes
this decrease is due to reduced industry profitability caused by overcapacity.
The Company believes "excess" conversion capacity may have reached equilibrium
with demand in 1996.

<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
(in billions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total capital expenditures..... $4.4 $6.1 $6.1 $5.4 $5.1 $4.9 $3.9 $3.9 $3.9
Environmental capital
expenditures.................. 1.3 1.8 3.3 3.2 3.1 2.2 0.8 N/A N/A
</TABLE>

10
<PAGE>

According to the EIA, U.S. crude oil distillation utilization rates have
steadily increased from approximately 75% in 1980 to approximately 95% in
1998. 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
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. The
availability and associated discounts for heavy sour crude oil were reduced in
1998 due to low absolute crude oil prices.

Retail Division

The Clark brand began during the 1930s with the opening of a store in
Milwaukee, Wisconsin. The brand then expanded throughout the Midwest. By the
early 1970s, there were more than 1,800 Clark retail stores with a strong
market reputation for the sale of high-octane gasoline at discount prices. In
line with the general industry trends, stores were rationalized during the
1970s and 1980s. The Company acquired the Clark brand and retail assets in
1988.

In February 1999, the Company announced that it would solicit buyers for
its marketing operation. The assets offered include all company-operated
retail stores, the Clark trade name, certain wholesale sales activities and
several distribution terminals. This action was taken to allow the Company to
focus its financial resources and management attention on the continued
improvement and expansion of its refining business, which it believes will
generate higher future returns.

The Company's retail presence is focused in the Great Lakes region of the
U.S. where Company-operated stores market value-oriented gasoline and
convenience products. As of December 31, 1998, the Company had 672 Company-
operated retail locations, nearly all of which operated under the Clark brand
name. The Company operates a high proportion of its locations and believes
this 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. As of December 31, 1998, an additional 191 Clark-branded retail
stores were owned and operated by independent jobbers.

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. The Company has acquired 130 stores since 1994.
Simultaneously with growing the Company's market share in core markets through
acquisitions, the Company has divested 305 stores in non-core markets.

In 1998, the Company's core market monthly gasoline sales per store
averaged 113,500 gallons, which exceeded the 1997 national industry average of
86,400 gallons, while monthly sales per square foot averaged approximately $53
for convenience products versus the industry average of approximately $26. The
Company believes that it is in the first quartile in terms of operating costs
in its regions, which provides it with an important competitive advantage.
Chicago, Central Illinois, Southern Michigan, Cleveland, Milwaukee and Toledo
are currently the Company's six highest volume core metropolitan markets, with
market shares of 4% to 12%.

11
<PAGE>

The geographic distribution of Company-operated retail stores by state as
of December 31, 1998, was as follows:

Geographical Distribution of Retail Stores

<TABLE>
<CAPTION>
Company- Independently-
Operated Operated Total
-------- -------------- -----
<S> <C> <C> <C>
Illinois.................................... 229 42 271
Michigan.................................... 202 26 228
Ohio........................................ 109 51 160
Indiana..................................... 78 11 89
Wisconsin................................... 53 15 68
Missouri.................................... 1 46 47
--- --- ---
Total................................... 672 191 863
=== === ===
</TABLE>

The Company has continued 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. The following table shows a profile of Company-operated stores as
of December 31, 1998:

Profile of Company-Operated Retail Stores
(Percent of total company-operated stores)

<TABLE>
<S> <C>
Owned............................................................... 73.4%
Canopy.............................................................. 95.4
Full Convenience Store (1200+ square feet).......................... 26.3
Mini-mart (400-1199 square feet).................................... 58.0
Multi-Product Dispenser............................................. 74.6
Pay-at-the-Pump..................................................... 13.1
Automated Teller Machine............................................ 79.2
Car Wash............................................................ 1.2
Branded Fast Food................................................... 1.5
</TABLE>

As a result of productivity initiatives and recent acquisitions, the
Company has increased core market monthly convenience product sales per store
by over 60% to $34,100, increased the mix of higher margin non-cigarette
convenience products from 32% to 42% of total convenience product sales, and
improved monthly convenience product gross margin per store by 80% to $9,000
since 1992.

The Company implemented a number of environmental projects at its retail
stores. These projects included the response to the September 1988 regulations
related to the design, construction, installation, repair and testing of
underground storage tanks ("UST"). These regulations provided for a ten-year
transition period through 1998. As of December 31, 1998, all current locations
met the December 1998 federal UST compliance standards.

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.

12
<PAGE>

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 higher 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 wholesale distribution
system are product price and quality, reliability and availability of supply
and location of distribution points.

The principal competitive factors affecting the Company's retail 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 that sell
motor fuel, is expected to continue.

Environmental Matters

Compliance Matters

Operators of refineries and gasoline stores are subject to comprehensive
and frequently changing federal, state and local environmental laws and
regulations, including those governing emissions of air pollutants, discharges
of wastewater and stormwater, and the handling and disposal of non-hazardous
and hazardous waste. Federal, state and local laws and regulations
establishing numerous requirements and providing penalties for violations
thereof affect nearly all of the operations of the Company. Included among
such laws and regulations are the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"). Also
significantly affecting the Company are the rules and regulations of the
Occupational Safety and Health Administration. Many of these laws authorize
the imposition of civil and criminal sanctions upon companies that fail to
comply with applicable statutory or regulatory requirements. As discussed
below, federal and state agencies have filed various enforcement actions
alleging that the Company has violated a number of environmental laws and
regulations. The Company nevertheless believes that, in all material respects,
its existing operations are in compliance with such laws and regulations.

The Company's operations are large and complex. The numerous environmental
regulations to which the Company is subject are complicated, sometimes
ambiguous, and often changing. In addition, the Company may not have detected
certain violations of environmental laws and regulations because the
conditions that constitute such violations may not be apparent. It is
therefore possible that certain of the Company's operations are not currently
in compliance with state or federal environmental laws and regulations.
Accordingly, the Company may be required to make additional expenditures to
comply with existing environmental requirements. Such expenditures, along with
compliance with environmental requirements, could have a material adverse
effect on the Company's financial condition, results of operations, cash flow
or liquidity.

Regulations issued by the EPA in 1988 with respect to USTs required 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 Company completed this work on schedule and
implemented a program to continue to remediate soil and groundwater in
accordance with appropriate standards. The Company also implemented measures,
including tightness testing and monitoring, to prevent the release of
petroleum to soil or groundwater.

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 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

13
<PAGE>

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, the Company's various operations also are subject to liability for
the remediation of contaminated soil and groundwater. Under CERCLA and
analogous state laws, certain persons may be liable as a result of the release
or threatened release of hazardous substances (including petroleum) into the
environment. Such persons include the current owner or operator of property
where such releases or threatened releases have occurred, any persons who
owned or operated such property during the time that hazardous substances were
released at such property, and persons who arranged for the disposal of
hazardous substances at such property. Liability under CERCLA is strict.
Courts have also determined that liability under CERCLA is, in most cases
where the government is the plaintiff, joint and several, meaning that any
responsible party could be held liable for all costs necessary for
investigating and remediating a release or threatened release of hazardous
substances. As a practical matter, liability at most CERCLA (and similar)
sites is shared among all the solvent "potentially responsible parties"
("PRPs"). The most relevant factors in determining the probable liability of a
party at a CERCLA site usually are the cost of investigation and remediation,
the relative amount of hazardous substances contributed by the party to the
site and the number of solvent PRPs. While the Company maintains property and
casualty insurance in the normal course of its business, such insurance does
not typically cover remediation and certain other environmental expenses.

The release or discharge of petroleum and other hazardous materials can
occur at refineries, terminals and retail stores. The Company has identified a
variety of potential environmental issues at its refineries, terminals and
retail stores. In addition, each refinery has areas on-site that may contain
hazardous waste or hazardous substance contamination and which may have to be
addressed in the future at substantial cost. Many of the terminals may also
require remediation due to the age of tanks and facilities and as a result of
current or past activities at the terminal properties including several
significant spills and past on-site waste disposal practices.

Legal and Governmental Proceedings

The Company is also the subject of various environmental-related legal
proceedings. See "--Legal Proceedings."

Employees

Currently the Company employs approximately 6,700 people, approximately 18%
of who were covered by collective bargaining agreements at the Blue Island,
Hartford, Lima and Port Arthur refineries. The Port Arthur refinery contract
expires in January 2002, the Hartford refinery contract expires in February
2002 and the Blue Island and Lima refinery contracts expire in August 2002. In
addition, the Company has union contracts for certain employees at its
Hammond, Indiana, and St. Louis, Missouri, terminals. Relationships with the
unions have been good and the Company has never experienced a work stoppage as
a result of labor disagreements.

Item 3. Legal Proceedings

As a result of its activities, the Company is the subject of a number of
legal and administrative proceedings relating to environmental matters. The
Company is required by the Commission to disclose all matters that could be
material or that involve a governmental authority and could reasonably involve
monetary sanctions of $100,000 or greater.

14
<PAGE>

Hartford Federal Enforcement. In February 1999, the Company was served with
a complaint in the matter, United States v. Clark Refining & Marketing, Inc.,
alleging violations of the Clean Air Act, and regulations promulgated
thereunder, in the operation and permitting of the Hartford refinery fluid
catalytic cracking unit. No estimate can be made at this time of the Company's
potential liability, if any, as a result of this matter.

Hartford State Enforcement. In 1996, the matter People of the State of
Illinois v. Clark Refining & Marketing, Inc. PCB No. 95-163 was substantially
settled by the parties. Remaining issues are being discussed and resolution is
anticipated. No estimate of any liability with respect to this remaining
element of the complaint can be made at this time.

Blue Island Federal Enforcement. The Blue Island refinery is the subject of
federal investigations concerning potential violations of certain
environmental laws and regulations. In March 1997, the EPA initiated a
multimedia investigation at the Blue Island refinery. The investigation
included an on-site visit, requests for information and meetings. In March
1997, the Company received a Grand Jury subpoena requesting certain documents
relating to wastewater discharges. In September 1998, the Company was served
with a complaint in the matter, United States v. Clark Refining & Marketing,
Inc., alleging that the Company has operated the refinery in violation of
certain federal laws relating to air pollution, water pollution and solid
waste management. The Company filed an answer denying the material allegations
of the lawsuit. No estimate can be made of the Company's potential liability,
if any, as a result of these matters.

Blue Island State Enforcement. People ex rel. Ryan v. Clark Refining &
Marketing, Inc., is currently pending in the Circuit Court of Cook County,
Illinois alleging operation of the Blue Island refinery in violation of
environmental laws. The allegations originate from a fire that occurred in the
Isomax unit in March 1995, a release of hydrogen fluoride in May 1995 from a
processing unit, other releases into the air that occurred in the past three
years, and releases of wastewater and stormwater to the Cal Sag Channel. The
Company has filed an answer denying the material allegations in the lawsuit.
No estimate of any liability with respect to this matter can be made at this
time.

St. Louis Terminal. In January 1994, a gasoline spill occurred at the
Company's St. Louis terminal. In May 1997, the Company received correspondence
from the State of Missouri seeking the payment of a penalty of less than
$200,000 related to this matter.

Sashabaw Road. In May 1993, the Company received correspondence from the
Michigan Department of Natural Resources ("MDNR") indicating that the MDNR
believes that the Company may be a potentially responsible party in connection
with groundwater contamination in the vicinity of one of its retail stores on
Sashabaw Road in Oakland County, Michigan. In July 1994, MDNR commenced suit
against the Company and is currently seeking $300,000 to resolve the matter.

Port Arthur and Lima Refineries. The original refineries on the sites of
the Port Arthur and Lima refineries began operating in the late 1800s and
early 1900s prior to modern environmental laws and methods of operation. While
the Company believes as a result there is extensive contamination at these
sites, the Company is unable to estimate the cost of remediating such
contamination. Under the purchase agreement between the Company and Chevron
related to the Port Arthur refinery, Chevron will be obligated to perform the
required remediation of more than 97% of pre-closing contamination. The
Company estimates its obligation at approximately $8 million. Under the
purchase agreement between the Company and BP, BP indemnified the Company for
all environmental and other liabilities and obligations arising from the
ownership and operation of the Lima refinery prior to closing, subject to the
terms and limitations in the purchase agreement. As a result of these
acquisitions, the Company may become jointly and severally liable under CERCLA
for the costs of investigation and remediation at these sites. In the event
that Chevron or BP is unable (as a result of bankruptcy or otherwise) or
unwilling to perform the required remediation at these sites, the Company may
be required to do so. The cost of any such remediation could be substantial
and could be beyond the Company's financial ability. In June 1997, the
Company, Chevron and the State of Texas entered into an Agreed Order that
substantially confirmed the relative obligations of the Company and Chevron.

15
<PAGE>

As of December 31, 1998, the Company had accrued a total of $31.0 million
for legal and environmental-related obligations that may result from the
matters noted above, other legal and environmental matters and obligations
associated with certain retail sites. While it is not possible at this time to
estimate the ultimate amount of liability with respect to the legal
proceedings described above, the Company is of the opinion that the aggregate
amount of any such liability will not have a material adverse effect on its
financial position. However, an adverse outcome of any one or more of these
matters could have a material effect on quarterly or annual operating results
or cash flows when resolved in a future period.

In addition to the specific matters discussed above, the Company has also
been named in various other suits and claims. While it is not possible to
estimate with certainty the ultimate legal and financial liability with
respect to these other legal proceedings, the Company believes the outcome of
these other suits and claims will not have a material adverse effect on the
Company's financial position, operating results or cash flow.

Item 4. Submission of Matters to a Vote of Security-Holders

Inapplicable

Item 5. Market for Registrant's Common Stock and Related Shareholder Matters

Inapplicable

16
<PAGE>

Item 6. Selected Financial Data

The selected consolidated financial data set forth below for the Company as
of December 31, 1997 and 1998 and for each of the three years in the period
ended December 31, 1998 are derived from the audited financial statements
included elsewhere herein. The selected financial data set forth below for the
Company as of December 31, 1994, 1995 and 1996 and for each of the two years
in the period ended December 31, 1995 are derived from audited financial
statements not included herein. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
included elsewhere herein.

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(in millions, except ratios and operating data)
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Data:
Net sales and operating
revenues.............. $ 2,441.2 $ 4,486.8 $ 5,073.1 $ 4,336.8 $ 4,042.9
Cost of sales.......... (2,086.6) (4,015.2) (4,557.0) (3,703.4) (3,388.0)
Operating expenses (a). (225.8) (375.6) (420.0) (433.9) (470.8)
General and
administrative
expenses (a).......... (51.3) (52.3) (59.4) (66.9) (75.6)
Depreciation and
amortization (b)...... (37.4) (43.5) (48.5) (61.3) (68.3)
Inventory recovery of
(write-down) to market
value................. 26.5 -- -- (19.2) (87.1)
Recapitalization, asset
write-offs and other
charges............... -- -- -- (51.8) 3.2
Gain on sale of
pipeline interests.... -- -- -- -- 69.3
--------- --------- --------- --------- ---------
Operating income
(loss)................ $ 66.6 $ 0.2 $ (11.8) $ 0.3 $ 25.6
Interest and financing
costs, net (c)........ (53.7) (59.2) (47.5) (80.1) (70.5)
Other expense.......... (1.1) -- -- -- --
--------- --------- --------- --------- ---------
Earnings (loss) from
continuing operations
before taxes,
extraordinary items... $ 11.8 $ (59.0) $ (59.3) $ (79.8) $ (44.9)
Income tax (provision)
benefit............... (4.0) 21.9 3.1 (7.6) 15.2
--------- --------- --------- --------- ---------
Earnings (loss) from
continuing operations
before extraordinary
items and cumulative
effect of change in
accounting principles
...................... $ 7.8 $ (37.1) $ (56.2) $ (87.4) $ (29.7)
========= ========= ========= ========= =========
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments........... $ 155.0 $ 149.8 $ 354.8 $ 251.0 $ 154.0
Total assets........... 891.7 1,364.9 1,432.8 1,275.6 1,509.7
Long-term debt......... 553.3 765.0 781.4 765.9 980.6
Exchangeable preferred
stock................. -- -- -- 64.8 72.5
Stockholders' equity... 56.2 154.2 214.4 38.4 2.2
Selected Financial Data:
Cash flows from
operating activities.. $ 56.3 $ (81.5) $ 22.4 $ 76.9 $ (61.4)
Cash flows from
investing activities.. (2.2) (240.1) 218.5 (125.6) (230.7)
Cash flows from
financing activities.. (6.5) 298.9 (4.7) (55.1) 205.5
Expenditures for
turnaround............ 11.2 6.5 13.9 47.4 28.3
Expenditures for
property, plant and
equipment............. 100.4 42.2 45.0 83.7 130.9
Refinery acquisition
expenditures.......... 13.5 71.8 -- -- 175.0
Operating Data:
Refining Division:
Port Arthur Refinery
(acquired February
1995)
Production (m bpd)..... -- 207.7 210.8 213.5 223.9
Gross margin (per bbl)
(a)................... -- $ 2.28 $ 2.78 $ 3.84 $ 3.48
Operating expenses (mm)
(a)................... -- 121.6 164.7 170.7 172.7
Midwest Refineries
(Lima acquired August
1998)
Production (m bpd)..... 140.3 136.5 134.2 135.8 181.1
Gross margin (per bbl)
(a)................... $ 3.35 $ 2.51 $ 2.56 $ 3.79 $ 2.95
Operating expenses (mm)
(a)................... 115.0 130.2 126.6 123.2 168.8
Refining contribution
to operating income
(mm).................. 40.1 (0.6) 27.9 169.9 110.9
Retail Division (a):
Number of stores
(average) (d)......... 553 595 620 666 672
Gasoline volume (mm
gals)................. 763.3 838.1 858.7 912.4 902.6
Gasoline volume (m gals
per month per store
("pmps"))............. 115.0 117.4 115.4 115.8 113.5
Gasoline gross margin
(cents/gal)........... 11.3c 11.9c 10.6c 10.5c 12.0c
Convenience product
sales (mm)............ $ 158.0 $ 189.9 $ 201.8 $ 244.3 $ 274.6
Convenience product
sales (pmps).......... 23.8 26.6 27.1 30.6 34.1
Convenience product
gross margin and other
income (mm)........... 39.8 46.5 52.2 64.6 72.3
Convenience product
gross margin (pmps)... 6.0 6.5 7.0 8.1 9.0
Operating expenses (mm)
(a)................... 70.6 90.3 101.8 118.4 120.6
Non-core stores,
business development
and other............. 9.1 6.9 4.7 2.0 (2.4)
Retail contribution to
operating income (mm). 44.4 45.2 25.2 21.8 35.1
</TABLE>

17
<PAGE>

- --------
(a) Certain reclassifications have been made to prior periods to conform to
current period presentation.
(b) Amortization includes amortization of turnaround costs.
(c) Interest and financing costs, net, included amortization of debt issuance
costs of $1.8 million, $6.5 million, $10.2 million, $10.2 million and $2.8
million for the years ended December 31, 1994, 1995, 1996, 1997 and 1998,
respectively. Interest and financing costs, net, also included interest on
all indebtedness, net of capitalized interest and interest income.
(d) Ten stores included in 1997 and 1998 operated exclusively as convenience
stores and did not sell fuel.

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation

Results of Operations

The following tables provide supplementary data in a format that is not
intended to represent an income statement presented in accordance with
generally accepted accounting principles. Certain reclassifications have also
been made to prior periods to conform to current period presentation. The
Company considers certain items in each of the periods discussed to be special
items. These items are discussed separately.

1998 compared with 1997 and 1996:

Financial Results:

<TABLE>
<CAPTION>
Year Ended December
31,
----------------------
1996 1997 1998
------ ------ ------
(in millions)
<S> <C> <C> <C>
Operating Income:
Refining contribution to operating income............... $ 27.9 $169.9 $110.9
Retail contribution to operating income................. 25.2 21.8 35.1
Corporate general and administrative expenses........... (14.9) (17.9) (21.7)
------ ------ ------
Operating Contribution................................ $ 38.2 $173.8 $124.3
Inventory timing adjustments loss (a)................... (1.5) (41.2) (15.8)
Inventory write-down to market.......................... -- (19.2) (87.1)
Recapitalization, asset write-offs and other costs...... -- (51.8) 3.2
Gain on sale of minority pipeline interests............. -- -- 69.3
Depreciation and amortization........................... (48.5) (61.3) (68.3)
------ ------ ------
Operating income (loss)............................... $(11.8) $ 0.3 $ 25.6
====== ====== ======
</TABLE>
- --------
(a) Includes adjustments to inventory costs caused by timing differences
between when crude oil is actually purchased and refined products are
actually sold, and a daily "market in, market out" operations measurement
methodology for the refining division.

The Company recorded an Operating Contribution (earnings before interest,
taxes, depreciation, amortization, inventory-related items, the gain on the
sale of minority pipeline interests and recapitalization, asset write-offs and
other costs) of $124.3 million in 1998, which was less than the $173.8 million
Operating Contribution achieved in 1997, but improved over $38.2 million in
1996. Operating Contribution was reduced principally due to results from the
refining division where margins for refined products were lower in 1998 than
1997 or 1996 due to excess industry inventories. Inventories increased as a
result of a warmer than normal 1997- 1998 winter heating oil season, high
refinery utilization rates and the impact on world demand from the Asian
economic slowdown. In 1997, Operating Contribution improved over 1996 due to
improved refining industry conditions and strong operations. Net income in
1997 and 1998 was materially reduced by several significant items the Company
considers special. As a result, the Company reported net losses of $37.3
million in 1998, $109.9 million in 1997 and $56.2 million in 1996. Net sales
and operating revenues and cost of goods sold were higher in 1996 than 1997 or
1998 principally because of higher hydrocarbon prices in that period.

18
<PAGE>

Special items totaled $30.4 million in 1998 and $132.9 million in 1997, of
which $112.2 million reduced operating income and $20.7 million was recorded
as an extraordinary item for early retirement of debt. See Note 9 "Long Term
Debt" and Note 14 "Equity Recapitalization and Change in Control" to the
Consolidated Financial Statements. These special items consisted of the
following:

Inventory Timing Adjustments. Inventory timing adjustment losses of $15.8
million in 1998 and $41.2 million in 1997 were principally due to the timing
impact on crude oil purchases, and refined product sale commitments of an over
$5 per barrel decrease in crude oil prices in 1998 and $8 per barrel decrease
in 1997. Petroleum prices fell over the past two years as world energy markets
became oversupplied principally as a result of an increase in OPEC production
and reduced demand resulting from the Asian economic slowdown and the warm
1997-1998 winter. Gains in 1996 resulting from rising crude oil prices were
offset by the volatility of the crude oil market principally related to the
uncertainty associated with Iraq's pending reentry into the world markets.
These gains and losses resulted from the fact that feedstock acquisition costs
are fixed on average two to three weeks prior to the manufacture and sale of
the finished products. The Company does not currently hedge this price risk
because of the cost of entering into appropriate hedge-related derivatives and
the long-term nature of such risk.

Inventory Write-downs to Market. Also as a result of decreasing petroleum
prices, the Company was required to record non-cash accounting charges of
$87.1 million in 1998 and $19.2 million in 1997 to reflect the decline in the
value of petroleum inventories below carrying value.

Recapitalization, asset write-offs and other costs. Recapitalization, asset
write-offs and other costs totaled a gain of $3.2 million in 1998 and a charge
of $51.8 million in 1997. In 1997 this item included a non-cash charge of
$22.8 million principally to write down the value of an idled refining capital
project that was being dismantled for more productive use. A non-cash charge
of $18.3 million was also recorded in 1997 due to a change in strategic
direction principally for certain legal, environmental and other accruals
related to existing actions. In addition, the Company incurred costs of $10.7
million in connection with affiliates of Blackstone acquiring a controlling
interest in the Company.

Gain on sale of minority pipeline interests. In 1997, the Company
determined that its minority interests in the Southcap and Chicap crude oil
pipelines, and the Wolverine and West Shore product pipelines, were not
strategic since the Company's shipping rights are assured due to the
pipelines' operation as common carrier pipelines and the Company's historical
throughput on these pipelines. In 1998, the Company sold its interests in
these pipelines for net proceeds of $76.4 million which resulted in a before
and after-tax book gain of approximately $69.3 million. These pipelines
contributed earnings of approximately $5.3 million in 1998, $8.2 million in
1997 and $9.0 million in 1996 and were recorded as a component of refinery
gross margin for the Midwest refineries.

19
<PAGE>

Refining

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
(in millions, except operating data)
<S> <C> <C> <C>
Operating Statistics:
Port Arthur Refinery
Crude oil throughput (m bpd)....... 199.8 206.6 219.3
Production (m bpd)................. 210.8 213.5 223.9
Gross margin (per barrel of
production)....................... $ 2.78 $ 3.84 $ 3.48
Operating expenses................. (164.7) (170.7) (172.7)
Net margin....................... 49.7 128.6 112.1
Midwest Refineries (Lima acquired
August 1998)
Crude oil throughput (m bpd)....... 132.7 128.5 181.6
Production (m bpd)................. 134.2 135.8 181.1
Gross margin (per barrel of
production)....................... $ 2.56 $ 3.79 $ 2.95
Operating expenses................. (126.6) (123.2) (168.8)
Clark Pipe Line net margin......... 2.3 2.0 2.0
Net margin....................... 1.4 66.9 28.3
Divisional general and administrative
expenses............................ (23.2) (25.6) (29.5)
------------ ------------ ------------
Refining contribution to
operating income................ $ 27.9 $ 169.9 $ 110.9
============ ============ ============
</TABLE>

Refining division contribution to operating income of $110.9 million in
1998 was below the record contribution of $169.9 million in 1997, but much
higher than 1996 contribution ($27.9 million). The principal reason for the
decrease in 1998 was reduced margins on refined products as indicated by a 26%
decrease in the Gulf Coast refining margin indicator (3/2/1 crack spread) and
an 18% decrease in the Chicago refining margin indicator. Refining margins for
the Hartford refinery were further reduced by a decrease in discounts for
heavy sour Canadian crude oil as a result of low absolute crude oil prices
which caused the lower-valued oil to be unavailable.

Contribution increased in 1997 due to improved yields and throughput and
wider crude oil quality differentials. Crude oil quality differential market
indicators for light sour crude oil improved from $1.24 per barrel in 1996 to
$1.71 per barrel in 1997 and $1.56 per barrel in 1998. Market indicators for
benchmark heavy sour crude oil discounts improved from $4.78 per barrel in
1996 to $5.63 per barrel in 1997 and $5.68 in 1998. The Company believes crude
oil quality differential indicators improved primarily due to increased
production of heavy and sour crude oil, increased availability of Canadian
light and heavy sour crude oil from the Express and Interprovincial pipelines,
higher levels of industry refinery maintenance turnarounds and milder winter
weather in the first quarter of 1997 and 1998. Hartford refinery results in
1997 particularly benefited from improved access to lower-cost Canadian heavy
crude oil. Discounts for heavy sour crude oil narrowed throughout 1998 and
averaged $4.90 per barrel in the fourth quarter.

Major scheduled maintenance turnarounds at the Blue Island refinery (1998),
the Port Arthur refinery (1997), and the Hartford refinery (1997 and 1996)
resulted in an opportunity cost from lost production of $17.1 million in 1998,
$19.3 million in 1997 and $7.2 million in 1996. Unscheduled downtime at the
Blue Island refinery in 1996 reduced gross margins by an estimated $3.1
million.

Port Arthur refinery throughput rates increased in both 1997 and 1998 over
the previous year. Results in 1997 were buoyed by the operational benefits
realized from a first quarter maintenance turnaround and in 1998 due to less
scheduled downtime. The Port Arthur refinery achieved record annual throughput
rates on all major units, including the crude, FCC and coker units in 1998.
Production increased in the Midwest refineries due to the acquisition in
August 1998 of the Lima refinery which averaged 131,800 bpd during the nearly
five months it was owned by the Company. Record rates were achieved in 1998 at
the Hartford refinery on most major units, including the crude, FCC and coker
units.

20
<PAGE>

Operating expenses increased from 1996 through 1998 at the Port Arthur
refinery principally due to higher throughput rates and incentive
compensation. Operating expenses for the Midwest refineries continued to
benefit from cost containment programs with the increase in 1998 primarily
attributable to the acquisition of the Lima refinery. Divisional general and
administrative expenses increased in 1997 principally because of higher
incentive pay in 1997 due to a stronger Operating Contribution, and in 1998
due to the addition of the Lima refinery and increased employee placement
costs.

Retail

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
(in millions, except operating data)
<S> <C> <C> <C>
Operating Statistics:
Core Market Stores
Gasoline volume (mm gals).......... 858.7 912.4 902.6
Gasoline gross margin (cents/gal).. 10.6c 10.5c 12.0c
Gasoline gross margin.............. $ 91.4 $ 96.1 $ 108.2
Convenience product sales.......... 201.8 244.3 274.6
Convenience product margin and
other income...................... 52.2 64.6 72.3
Operating expenses................. (101.8) (118.4) (120.6)
Divisional general and
administrative expenses........... (21.3) (22.5) (22.4)
------------ ------------ ------------
Core market store contribution... $ 20.5 $ 19.8 $ 37.5
Non-core stores, business development
and other........................... 4.7 2.0 (2.4)
------------ ------------ ------------
Retail contribution to operating
income.......................... $ 25.2 $ 21.8 $ 35.1
============ ============ ============
Core Market Stores--Per Month Per
Store
Company operated stores
(average)(a)...................... 620 666 672
Gasoline volume (m gals)........... 115.4 115.8 113.5
Convenience product sales
(thousands)....................... $ 27.1 $ 30.6 $ 34.1
Convenience product gross margin
(thousands)....................... 7.0 8.1 9.0
</TABLE>
- --------
(a) Ten stores included in 1997 and 1998 operated as convenience stores only.

Retail division contribution to operating income of $35.1 million in 1998
exceeded the $21.8 million recorded in 1997 and $25.2 million recorded in
1996. Retail fuel margins improved in 1998 over the previous two years as
margins benefited from declining wholesale costs. Contribution from
convenience product sales has also improved over the last three years due to
the addition of larger stores, improved promotions and an improved mix of
higher margin non-tobacco convenience products. Operating and general and
administrative expenses have increased over the last three years principally
because of lease expenses and higher operating costs for larger stores
acquired during this period and the expansion of the Company's branded credit
card program.

In 1998 the Company acquired eight stores in core markets and over the past
three years, 130 stores have been acquired in core markets. Consistent with
the strategy to focus Company-operated locations on core markets, the Company
completed the divestment of 233 stores in non-core markets in 1997 and 1998
with most of these franchised under the Company's branded jobber program.

In February 1999, the Company announced that it would solicit buyers for
its marketing operation. The assets offered include all company-operated
retail stores, the Clark trade name, certain wholesale sales activities and
certain distribution terminals. This action was taken to allow the Company to
focus its financial resources and management attention on the continued
improvement and expansion of its refining business that it believes will
generate higher future returns.

21
<PAGE>

Other Financial Matters

Corporate general and administrative expenses increased in 1998 over 1997
principally because of an increase in information services costs related to
year 2000 remediation and upgrades and increased consulting services. Expenses
increased in 1997 over 1996 principally because of higher incentive
compensation resulting from the Company's stronger Operating Contribution in
that year.

Depreciation and amortization expenses increased in each of the past three
years principally because of amortization of the Port Arthur refinery
maintenance turnaround performed in the first quarter of 1997, the acquisition
of the Lima refinery in 1998 and higher capital expenditures.

Interest and finance costs, net increased in 1997 and 1998 over 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 1996
and a gain on the sale of $10.9 million. Interest and finance costs, net were
lower in 1998 than 1997 due to reduced borrowing rates and reduced financing
cost amortization resulting from the Company's financing activities in late
1997. The benefit of these activities was partially offset by the issuance of
$110 million 8 5/8% Senior Notes, due 2008 and the expansion of a $115 million
floating rate term loan to finance the Lima refinery acquisition. In late
1997, Clark R&M redeemed its 10 1/2% Senior Notes, due 2001 ("10 1/2% Senior
Notes") and the Company repurchased substantially all of its Senior Secured
Zero Coupon Notes, due 2000 ("Zero Coupon Notes"). Clark R&M issued $100
million 8 3/8% Senior Notes due 2007 ("8 3/8% Senior Notes") and $175 million
8 7/8% Senior Subordinated Notes due 2007 ("8 7/8% Senior Subordinated
Notes")\ and entered into a $125 million floating rate term loan due 2004
("Floating Rate Loan"). Clark R&M also entered into an amended and restated
working capital facility. See Note 8 "Working Capital Facility" and Note 14
"Equity Recapitalization and Change in Control" to the Consolidated Financial
Statements.

Year 2000 Readiness Disclosure

The Company is faced with the year 2000 issue as a result of its use of
computer systems that were programmed to identify calendar dates with only the
last two digits of the year. As a result, such programs are unable to
distinguish between the year 1900 and 2000, potentially resulting in
malfunctions, miscalculations or failures of such programs. In addition to its
potential effect on computer systems, the century date change may also result
in malfunctions or failures of non-IT equipment which contain embedded systems
with date sensitive functions.

The Company began significant efforts to address its exposures related to
the year 2000 issue in 1997. A project team was put in place to assess,
remediate or replace, test and implement computer systems and applications so
that such systems and related processes will continue to operate and properly
process information after December 31, 1999.

Many applications and embedded systems have already been replaced or
modified. The Company has committed the financial and human resources expected
to be required to replace or modify the remaining applications and embedded
systems. The Company has expended $2.3 million through December 31, 1998 and
estimates the total cost of program conversions or replacements to be
approximately $5 million to $8 million, and estimates substantial completion
by June 30, 1999. Such costs will be expensed as incurred and funded from
operations. The Company will also develop contingency plans for these systems
as well as the business processes and operations that they support. Such plans
will be drafted during second quarter 1999 and are expected to be completed by
June 30, 1999. The Company reviews the progress of its year 2000 program
weekly and if it is determined that any item is falling behind schedule the
Company has, or will, identify an alternative remediation or replacement
approach.

In addition, the Company is communicating, and evaluating the systems of
its customers, suppliers, financial institutions and others with which it does
business to identify any year 2000 issues. Presently, the Company does not
anticipate that the year 2000 problem will have a material adverse effect on
the operations or financial performance of the Company.

22
<PAGE>

The estimated completion dates and costs of compliance noted above are the
current best estimates of the Company and are believed to be reasonably
accurate. In the event unanticipated problems are encountered which cause the
compliance plan to fall behind schedule, the Company may devote additional
resources to completing the plan and additional costs may be incurred.

If the Company were not able to satisfactorily complete the year 2000
program, potential consequences could include among other things, unit
downtime or damage to the Company's refineries, delays in transporting
refinery feedstocks and refined products, impairment of relationships with
significant customers or suppliers, loss of accounting data or delays in
processing such data and loss of or delays in communications both internal and
external. The occurrence of any or all of these above events could result in a
material adverse effect on the Company's operational or financial results. The
contingency plans described above are intended to mitigate these potential
events if they were to occur.

Although the Company currently believes that it will satisfactorily
complete the year 2000 program as described above, prior to January 1, 2000,
there can be no assurance that the program will be completed by such time or
that the year 2000 problem will not adversely affect the Company and its
business. Likewise, there can be no assurance that the Company's customers,
suppliers, financial institutions and others will be successful in their
efforts to be year 2000 compliant which could also adversely affect the
Company.

Accounting Standard Not Yet Adopted

In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement becomes effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999. The Company is currently evaluating this new
standard, the impact it may have on the Company's accounting and reporting,
and planning for when to adopt the standard.

Outlook

Since most of the Company's products are commodities, supply and demand for
crude oil and refined products have a significant impact on the Company's
results. Demand for fuel products has grown by an average of 2% per year since
1992, primarily as a result of increased miles driven and little improvement
in the fuel efficiency of the U.S. automobile fleet. The Company believes that
capital spending in the refining sector is highly correlated to refining
industry profitability. As a result of the high capital spending levels of the
early 1990s, the industry's ability to produce refined products exceeded
demand in recent years. Since then, industry refinery capital spending has
declined. The Company expects that there will continue to be volatility in
refining margins and the Company's earnings because of the seasonal nature of
refined product demand and the commodity nature of the Company's refined
products. Industry margins in early 1999 remained below historical averages as
the third consecutive warm winter limited demand and resulted in excess
refined product inventories.

Liquidity and Capital Resources

<TABLE>
<CAPTION>
Year Ended December
31,
--------------------
1996 1997 1998
------ ------ ------
(in millions)
<S> <C> <C> <C>
Financial Position:
Cash and short-term investments......................... $354.8 $251.0 $154.0
Working capital......................................... 430.1 283.3 217.0
Property, plant and equipment........................... 557.3 578.0 816.4
Long-term debt.......................................... 781.4 765.9 980.6
Exchangeable preferred stock............................ -- 64.8 72.5
Stockholders' equity.................................... 214.4 38.4 2.2
Operating Cash Flow..................................... 4.2 57.6 46.9
</TABLE>

23
<PAGE>

Net cash provided by operating activities, excluding working capital
changes ("Operating Cash Flow"), for the year ended December 31, 1998 was
$46.9 million compared to $57.6 million in 1997 and $4.2 million in 1996.
Operating Cash Flow decreased in 1998 compared to 1997 due to weaker refining
market conditions, while 1997 was improved over 1996 because of a stronger
refining margin environment and improved refining productivity in that period.
Working capital as of December 31, 1998 was $217.0 million, a 1.55 to 1
current ratio, versus $283.3 million, a 1.82 to 1 current ratio, at December
31, 1997 and $430.1 million, a 2.10 to 1 current ratio, as of December 31,
1996. Working capital decreased in 1998 compared to 1997 principally due to
lower hydrocarbon prices and increased capital spending. Working capital also
decreased during 1997 because of lower inventory carrying values in addition
to the acquisition of 48 retail stores in Michigan and the capital cost of the
Port Arthur and Hartford refinery maintenance turnarounds.

As part of its overall inventory management and crude acquisition
strategies, the Company routinely buys and sells, in varying degrees, crude
oil in the spot market. Such ongoing activities carry various payment terms
and require the Company to maintain adequate liquidity and working capital
facilities. The Company's short-term working capital requirements fluctuate
with the pricing and sourcing of crude oil. Historically, the Company's
internally generated cash flows have been sufficient to meet its needs. The
Credit Agreement is used for the issuance of letters of credit primarily for
the purchase of crude oil and other feedstocks and refined products.

In September 1997, the Company entered into a credit agreement that
provides for borrowings and the issuance of letters of credit. The credit
agreement was amended in August 1998 to increase the facility to the lesser of
$700 million, or the amount of a borrowing base calculated with respect to the
Company's cash and cash equivalents, eligible investments, eligible
receivables and eligible petroleum inventories. Direct borrowings under the
facility are limited to $150 million. The facility is secured by liens on
substantially all of the Company's cash and cash equivalents, receivables,
crude oil, refined product inventories and other inventories and trademarks
and other intellectual property. The amount available under the borrowing base
associated with such facility at December 31, 1998 was $457 million and
approximately $245 million of the facility was utilized for letters of credit.
As of December 31, 1998, there were no direct borrowings under the credit
agreement and the Company was in compliance with all covenants.

The credit agreement contains covenants and conditions that, among other
things, limit dividends, indebtedness, liens, investments, contingent
obligations and capital expenditures. It also requires the Company to maintain
its property and insurance, to pay all taxes and comply with all laws, and to
provide periodic information and conduct periodic audits on behalf of the
lenders. The Company is also required to comply with certain financial
covenants. The financial covenants are (i) maintenance of working capital of
at least $150 million; (ii) maintenance of a tangible net worth (as defined)
of at least $280 million (subject to adjustment); and (iii) maintenance of
minimum levels of balance sheet cash (as defined) of $50 million. The
covenants also provide for a cumulative cash flow test (as defined) from March
31, 1997, which must be greater than zero. The credit agreement also limits
the amount of future additional indebtedness that may be incurred by the
Company to $75 million, subject to certain exceptions.

In August 1998, the Company acquired BP's 170,000 barrel per day Lima, Ohio
refinery, related terminal facilities, and non-hydrocarbon inventories for a
purchase price of approximately $175.0 million plus related acquisition costs
of $11.3 million. Hydrocarbon inventories were purchased for $34.9 million.
The Company assumed liabilities mainly related to employee benefits of $7.0
million. BP retained permanent responsibility for all known pre-existing
environmental liabilities and responsibility for a minimum of twelve years for
pre-existing but unknown environmental liabilities. The total cost of the
acquisition was accounted for using the purchase method of accounting with
$175.0 million allocated to the refinery long-term assets and $53.2 million
allocated to current assets for hydrocarbon and non-hydrocarbon inventories
and catalysts. From 1991 to 1997 the Company believes BP invested an aggregate
of approximately $212 million in the Lima refinery. Based on the Company's due
diligence, it expects mandatory capital expenditures for the Lima refinery to
average approximately $20 million per year for the period from 1999 to 2002
and maintenance turnaround expenditures to cost approximately $30 million once
every five years. The Lima refinery is scheduled to have the first such major
maintenance turnaround in 1999. The Company expects cash flows from the Lima
refinery to be more than adequate to cover incremental financing and mandatory
capital and turnaround costs.

24
<PAGE>

In 1998, the Company sold its minority interests in West Shore Pipeline
Company, Wolverine Pipeline Company, Chicap Pipeline Company and Southcap
Pipeline Company after determining they were not strategic. The Company's
shipping rights are assured due to the pipelines' operation as common carrier
pipelines and the Company's historical throughput on such pipelines. The sale
of the interests in these pipelines generated net proceeds of $76.4 million.
These pipelines contributed earnings of approximately $5.3 million for the
year ended December 31, 1998, $8.2 million in 1997 and $9.0 million in 1996.

Cash flows used in investing activities (excluding short-term investment
activities which the Company manages similar to cash and cash equivalents) in
1998 were $241.1 million compared to $125.6 million in 1997 and cash flow
generated from investing activities of $187.4 million in 1996. Net cash flows
used in investing activities in 1998 were higher than 1997 principally due to
the Lima Acquisition, which was partially offset by proceeds from the sale of
the minority pipeline interests and certain non-core retail stores. Two major
refinery maintenance turnarounds and a large retail store acquisition
increased cash flows used in investing activities in 1997 over 1996. Cash flow
was generated in 1996 from the sale of an advance crude oil purchase
receivable.

Capital expenditures for property, plant and equipment totaled $130.9
million in 1998 (1997--$83.7 million; 1996--$45.0 million) and expenditures
for refinery maintenance turnarounds totaled $28.3 million in 1998 (1997--
$47.4 million; 1996--$13.9 million). Refining division capital expenditures
for property, plant and equipment were $96.5 million in 1998 (1997--$32.0
million, 1996--$19.4 million). Approximately 36% of expenditures in 1998 were
non-discretionary with discretionary expenditures principally for the Port
Arthur refinery heavy oil upgrade project ($41.5 million), expansion of the
Blue Island refinery's vacuum tower ($6.7 million) and the expansion of coker
capacity at the Hartford refinery ($3.6 million). Approximately 50% of 1997
and 1996 expenditures were non-discretionary with discretionary capital
expenditures in 1997 for a project to increase the ability of the Hartford
refinery to process heavy, sour Canadian crude oil ($2.3 million) and
debottlenecking improvements to the Port Arthur refinery's FCC unit ($8.0
million). Retail capital expenditures in 1998 totaled $29.5 million (1997--
$47.7 million; 1996--$24.6 million). Approximately 57% of expenditures in 1998
were non-discretionary and focused on underground storage tank work with
discretionary expenditures principally for car washes and various store
upgrades. Retail capital expenditures increased in 1997 due to the acquisition
and subsequent image conversion of 48 retail stores in Michigan ($21 million).
Approximately one-half of 1996 expenditures were for regulatory compliance,
principally underground storage tank-related work and vapor recovery.

The Company classifies its capital expenditures into two categories, non-
discretionary and discretionary. Non-discretionary capital expenditures are
required to maintain safe and reliable operations, and non-discretionary
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 non-discretionary capital and
turnaround expenditures will average approximately $90 million per year in the
refining division over the next three years. Costs to comply with future
regulations cannot be estimated.

In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI, an affiliate of Petroleos Mexicanos, the Mexican state oil
company, which provides the Company with the foundation necessary to continue
developing a project to upgrade the Port Arthur refinery to process primarily
lower-cost, heavy sour crude oil. The project is expected to cost $600-$700
million and include the construction of additional coking and hydrocracking
capability, and the expansion of crude unit capacity to approximately 250,000
barrels per day. Although the Company and its shareholders are currently
evaluating alternatives for financing the project, it is expected that the
financing will be on a non-recourse basis to the Company. The oil supply
agreement with PMI and the construction work-in-progress are expected to be
transferred for value to a non-recourse entity that will likely be an
affiliate of, but not be controlled by, the Company and its subsidiaries. The
Company expects to enter into agreements with its affiliate pursuant to which
the Company would provide certain operating, maintenance and other services
and would purchase the output from the new coking and hydrocracking equipment
for further processing into finished products. The Company expects to receive
compensation under these agreements at fair market value that is expected to
be favorable to the Company.

25
<PAGE>

In the event the project financing cannot be completed on a non-recourse
basis to the Company as contemplated, the restrictions in the Company's
existing debt instruments would likely prohibit the Company and its
subsidiaries from raising the financing themselves and thus completing the
project. Notwithstanding the foregoing, however, the Company has begun
entering into purchase orders, some of which contain cancellation penalties
and provisions, for material, equipment and services related to this project.
As of December 31, 1998, non-cancelable amounts of approximately $80 million
had accumulated under these purchase orders. Additional purchase orders and
commitments have been made and are expected to continue to be made during
1999. If the project were cancelled, the Company would be required to pay a
termination fee of approximately $200,000 per month to PMI from September 1,
1998 to the cancellation date. In addition, the Company would be subject to
payment of the non-cancelable commitments and required to record a charge to
earnings for all expenditures to date. Although the financing is expected to
be completed in the first half of 1999, there can be no assurance that the
financing for the project will be successful or that the project can be
completed as contemplated.

The Company has a philosophy to link routine capital expenditures to cash
generated from operations. The Company has a total capital and refinery
maintenance turnaround expenditure budget, excluding the Port Arthur refinery
upgrade project, of approximately $130 million for 1999. 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 provided by financing activities in 1998 was $205.5 million and
was principally related to the acquisition of the Lima refinery. The Company
funded the acquisition of the Lima refinery and related costs with cash on
hand and the proceeds of a private placement to institutional investors of
$110 million 8 5/8% Senior Notes due 2008 and a $115 million floating rate
term loan due 2004. Cash flow used in financing activities in 1997 was due to
financing activities during the year that resulted in a net reduction of debt.
In November 1997, the Company repurchased for $206.6 million, $259.2 million
(value at maturity) of Zero Coupon Notes tendered pursuant to a tender offer.
To facilitate the repurchase, Clark R&M returned capital of $215 million to
the Company. Subsequently in 1997, the Company received net proceeds of
approximately $390 million from the issuance of the 8 3/8% Senior Notes, the 8
7/8% Senior Subordinated Notes and a floating rate term loan. On December 24,
1997, Clark R&M redeemed all $225 million of the 10 1/2% Senior Notes
outstanding at a price of $1,032.96 for each $1,000.00 principal amount of the
notes. In early 1998, the Company called the remaining Zero Coupon Notes
outstanding ($3.6 million) and repurchased Clark R&M's 9 1/2% Senior Notes
tendered under its required change of control offer ($3.3 million).

In October 1997, the Company reclassified the common equity interest of
Tiger Management Corporation into the Exchangeable Preferred Stock that was
sold to investors. The Company is required, subject to certain conditions, to
redeem all of the Exchangeable Preferred Stock on October 1, 2009. The
Exchangeable Preferred Stock is exchangeable, subject to certain conditions,
into 11 1/2% Subordinated Exchange Debentures due 2009.

On November 3, 1997, Blackstone acquired the 13.5 million shares of Common
Stock of the Company previously held by TrizecHahn and certain of its
subsidiaries. As a result, Blackstone obtained a controlling interest in the
Company. Clark R&M's credit facility was amended to permit the acquisition by
Blackstone of the Company's Common Stock.

Funds generated from operating activities together with existing cash, cash
equivalents and short-term investments, are expected to be adequate to fund
existing requirements for working capital and capital expenditure programs,
excluding the Port Arthur refinery upgrade project, for the next year. Due to
the commodity nature of its products, the Company's operating results are
subject to rapid and wide fluctuations. While the Company believes that its
maintenance of large cash, cash equivalents and short-term investment balances
and its operating philosophies will be sufficient to provide the Company with
adequate liquidity through the next year, there can be no assurance that
market conditions will not be worse than anticipated. Future working capital,
discretionary capital expenditures, environmentally mandated spending and
acquisitions may require additional debt or equity capital.

26
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in the Company's market risk sensitive instruments
and positions is the potential loss from adverse changes in commodity prices
and interest rates. None of the Company's market risk sensitive instruments
are held for trading.

Commodity Risk

The Company's earnings, cash flow and liquidity are significantly affected
by a variety of factors beyond its control, including the supply of, and
demand for, commodities such as crude oil, gasoline and other refined
products. The demand for these refined products depends on, among other
factors, changes in domestic and foreign economies, weather conditions,
domestic and foreign political affairs, production levels, the availability of
imports, the marketing of competitive fuels and the extent of government
regulation. As a result, crude oil and refined product prices fluctuate
significantly, which directly impact the Company's net sales and operating
revenues and costs of goods sold.

The movement in petroleum prices does not necessarily have a direct long-
term relationship to net earnings. 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 is
required to fix the price of it crude oil purchases approximately two to three
weeks prior to when the crude oil can be processed and sold. As a result, the
Company is exposed to crude oil price movements during such period. In
addition, the market value of the Company's petroleum inventory is currently
below original cost, which has resulted in a writedown of inventory to fair
market value. The Company's earnings will continue to be impacted by these
writedowns, or recovery of writedowns, to market value until market prices
exceed LIFO cost.

Earnings Sensitivity

The following table illustrates the estimated pre-tax earnings impact based
on average historical operating rates, fixed price purchase commitments and
inventory levels resulting from potential changes in several key refining
market margin indicators and crude oil prices described below. This analysis
may differ from actual results.

. Sweet crude oil cracking margins--the spread between gasoline and diesel
fuel prices and input (e.g., a benchmark light sweet crude oil) costs

. Sweet/sour differentials--the spread between a benchmark light sour crude
oil and a benchmark light sweet crude oil

. Heavy/light differentials--the spread between a benchmark light sweet
crude oil and a benchmark heavy sour crude oil

. Fixed price purchase commitments--fixed price purchase commitments for
crude oil required for the two to three weeks prior to when products are
refined and sold.

. Lower of cost or market adjustment--physical inventory subject to lower
of cost or market adjustments while carrying value is below original cost

. Retail margins--the spread between product prices at the retail level and
wholesale product costs

<TABLE>
<CAPTION>
Pre-tax
Assumed Earnings
Change Barrels Impact
------------ ------------- -------------
(per barrel) (in millions) (in millions)
<S> <C> <C> <C>
Refining margins
Sweet crude oil cracking
margin....................... $0.10 200 $20
Sweet/sour differentials...... 0.10 90 9
Heavy/light differentials..... 0.10 30 3
Crude oil prices
Fixed price purchase
commitments.................. 2.00 4 8
Lower of cost or market
adjustment................... 2.00 17 34
Retail margins.................. 0.42 24 10
</TABLE>

27
<PAGE>

The Company utilizes limited risk management tools to mitigate risk
associated with fluctuations in petroleum prices on its normal operating
petroleum inventories. The Company believes this policy is appropriate since
inventories are required to operate the business and are expected to be owned
for an extended period of time. The Company believes the cost of using such
tools to manage short-term fluctuations outweigh the benefits.

The Company occasionally uses several strategies to minimize the impact on
profitability of 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.

A sensitivity analysis was prepared to estimate the Company's exposure to
market risk associated with derivative commodity positions. This analysis may
differ from actual results. The fair value of each derivative commodity
position was based on quoted futures prices. Market risk was estimated based
on a 10% change in prices. As of December 31, 1998, the Company's sensitivity
to market risk associated with derivative commodity instruments was
immaterial.

Interest Rate Risk

The Company's principal interest rate risk is associated with its long-term
debt. The Company manages this rate risk by maintaining a high percentage of
its long-term debt with fixed rates. In addition, the Company has no material
principal payments due prior to 2003, but as of December 31, 1998 had the
flexibility to call $411.7 million of its long term debt, including all of its
floating rate bank term loan. A 1% change in the fair market value of long-
term debt would result in a $9.8 million change in fair value. The Company is
subject to interest rate risk on this floating rate bank term loan and any
direct borrowings under Clark R&M's credit facility. As of December 31, 1998,
$240.0 million of the Company's long-term debt was based on floating interest
rates. There were no borrowings under Clark R&M's credit facility.

Item 8. Financial Statements and Supplementary Data

The information required by this item is incorporated herein by reference
to Part IV Item 14(a) 1 and 2. Financial Statements and Financial Statement
Schedules.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

The information required by this item is incorporated herein by reference
to Part IV Item 14(a) 3. and Exhibit 16.1 and 16.2.

28
<PAGE>

Item 10. Directors and Executive Officers of the Registrant

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 R&M.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
William C. Rusnack.................. 54 President, Chief Executive Officer and
Chief Operating Officer; Director
Maura J. Clark...................... 40 Executive Vice President--Corporate
Development and Chief Financial Officer
Dennis R. Eichholz.................. 45 Controller and Treasurer
John T. Bernbom..................... 54 Secretary
Stephen I. Chazen................... 52 Director
Marshall A. Cohen................... 64 Director; Chairman of the Board
David A. Stockman................... 52 Director
Glenn H. Hutchins................... 43 Director
David I. Foley...................... 31 Director

The following persons, who are not officers or directors of the Company,
serve as executive officers of Clark R&M:

Bradley D. Aldrich.................. 45 Executive Vice President--Refining
Brandon K. Barnholt................. 40 Executive Vice President--Marketing
</TABLE>

The board of directors of the Company currently consists of six directors
who serve until the next annual meeting of stockholders or until a successor
is duly elected. With the exception of Mr. Cohen, directors do not receive any
compensation for their services as such. In 1999, Mr. Cohen received a total
of 65,656 shares of common stock of the Company and options to purchase up to
50,505 shares of common stock of the Company at an exercise price of $9.90 per
share for services rendered. Executive officers of the Company serve at the
discretion of the board of directors of the Company.

William C. Rusnack has served as President, Chief Operating Officer, Chief
Executive Officer and a director of the Company and Clark R&M since April
1998. Mr. Rusnack previously served 31 years with Atlantic Richfield
Corporation ("ARCO") and was involved in all areas of its energy business,
including refining operations, retail marketing, products transportation,
exploration and production, and human resources. He most recently served as
President of ARCO Products Company from 1993 to 1997 and was President of ARCO
Transportation Company from 1990 to 1993. He has served as a director of
Flowserve (a NYSE-listed corporation) since 1993.

Maura J. Clark has served as Executive Vice President--Corporate
Development and Chief Financial Officer of the Company and Clark R&M 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.

Dennis R. Eichholz, who joined the Company in November 1988, has served as
Vice President--Controller of Clark R&M and Controller and Treasurer of the
Company since February 1995. Mr. Eichholz has served as Vice President--
Treasurer of Clark R&M since December 1991.

John T. Bernbom has served as Vice President--Secretary of the Company
since January 1999. Mr. Bernbom has served as chief legal counsel of the
Company since 1995 and Vice President since 1991.

Stephen I. Chazen has been a director since December 1995. Mr. Chazen has
been Executive Vice President--Corporate Development and Chief Financial
Officer of Occidental Petroleum Corporation since February 1999 and Executive
Vice President--Corporate Development since May 1994. Prior to May 1994, Mr.
Chazen served

29
<PAGE>

in various capacities at Merrill Lynch & Co., most recently Managing Director.
Mr. Chazen is serving as Oxy's nominee on the Company's Board of Directors.
Mr. Chazen currently serves on the board of directors of Indspec Chemical
Corporation and on the Governance Committee of Equistar L.P.

Marshall A. Cohen has served as a director of the Company and Clark R&M
since November 3, 1997 and as Chairman since January 27, 1998. Mr. Cohen has
served as Counsel at Cassels Brook & Blackwell since October 1996. Mr. Cohen
previously served as President and Chief Executive Officer of The Molson
Companies Limited from November 1988 to September 1996. Mr. Cohen also serves
as a member of the board of directors of American International Group, Barrick
Gold Corporation, GoldFarb Corporation, Golf Town, Haynes International Inc.,
Lafarge, Republic Engineered Steels, Inc., SMK Speedy International, and
Toronto Dominion Bank.

David A. Stockman has served as a director of the Company and Clark R&M
since November 3, 1997. Mr. Stockman is a Senior Managing Director of The
Blackstone Group L.P., which he joined in 1988. Mr. Stockman also serves as
Co-Chairman of the board of directors of Collins & Aikman Corporation and a
member of the boards of directors of American Axle Manufacturing Inc., Bar
Technologies Inc., The Imperial Home Decor Group Inc., Haynes International
Inc., and Republic Engineered Steels, Inc.

Glenn H. Hutchins has served as a director of the Company and Clark R&M
since May 1998. Mr. Hutchins served as a Senior Managing Director of The
Blackstone Group L.P., from 1994 to 1999. Mr. Hutchins was a Managing Director
of Thomas H. Lee Co. ("THL") from 1987 until 1994 and, while on leave from THL
during parts of 1993 and 1994, was a Special Advisor in the White House. Mr.
Hutchins is a member of the boards of directors of American Axel Manufacturing
Inc., CommNet Cellular Inc., Corp. Banca (Argentina) S.A., Corp. Group. C.V.,
and Haynes International Inc. In 1994, Mr. Hutchins was also appointed
Chairman of the board of directors of the Western N.I.S. Enterprise Fund by
President Clinton.

David I. Foley has served as a director of the Company since November 3,
1997. Mr. Foley is a Vice President at The Blackstone Group L.P., which he
joined in 1995. Prior to joining Blackstone, Mr. Foley was a member of AEA
Investors, Inc. and The Monitor Company. He currently serves on the board of
directors of The Imperial Home Decor Group, Inc., Prime Succession Inc. and
Rose Hills Company.

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.

Brandon K. Barnholt has served as Executive Vice President--Marketing,
since February 1995, and served as Executive Vice President--Retail Marketing
from December 1993 through February 1995, as Vice President--Retail Marketing
from July 1992 through December 1993, and as Managing Director--Retail
Marketing from May 1992 through July 1992.

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.

30
<PAGE>

Item 11. Executive Compensation

The executive officers of the Company are paid by Clark R&M. The following
table sets forth all cash compensation paid by Clark R&M 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, 1998.

<TABLE>
<CAPTION>
Annual Compensation Long-Term
Name and Principal ---------------------- Other Annual Compensation All Other
Position Year Salary Bonus Compensation(a) Payouts(b) Compensation(c)
----------------------- ---- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. Rusnack...... 1998 $300,077 $270,000 $ -- $ -- $ 5,746
President and 1997 -- -- -- -- --
Chief Executive Officer 1996 -- -- -- -- --

Paul D. Melnuk(d)....... 1998 140,579 -- 8,173 -- 8,925
Former President and 1997 407,036 384,050 -- -- 16,239
Chief Executive Officer 1996 325,000 130,000 -- -- 11,199

Bradley D. Aldrich...... 1998 270,000 175,000 15,442 1,130,354 16,214
Executive Vice
President-- 1997 252,611 219,600 -- -- 14,980
Refining 1996 211,779 47,500 -- -- 9,973

Brandon K. Barnholt..... 1998 270,000 175,000 -- 845,878 19,391
Executive Vice
President-- 1997 253,003 154,600 -- -- 15,230
Marketing 1996 211,799 87,500 -- -- 11,452

Maura J. Clark(e)....... 1998 238,847 170,000 -- -- 13,793
Executive Vice
President--Corporate
Development and 1997 220,998 153,300 -- -- --
Chief Financial Officer 1996 36,779 47,500 -- -- --
</TABLE>
- --------
(a) Represents amounts paid for unused vacation.
(b) Represents amounts received by Mr. Aldrich and Mr. Barnholt upon the
exercise of options to acquire TrizecHahn Subordinate Voting Shares
("TrizecHahn Shares") received as compensation from TrizecHahn for
services performed for the Company under the TrizecHahn Amended and
Restated 1987 Stock Option Plan (the "TrizecHahn Option Plan").
(c) Represents amount accrued for the account of such individuals under the
Clark Retirement Savings Plan (the "Savings Plan") and Supplemental
Savings Plan.
(d) Mr. Melnuk resigned as President and Chief Executive Officer in April
1998.
(e) In 1996, Ms. Clark was an employee of TrizecHahn and served the Company
under a management consulting arrangement. Ms. Clark earned approximately
$175,000 in 1996 under such arrangement. As of January 1, 1997, Ms. Clark
became an employee of the Company. The 1996 amounts reflected in this
table are for 1996 compensation paid by the Company in 1997.

Stock Options Granted During 1998

There were no options granted during 1998 to the named executive officers
under the Performance Plan (as defined) for services performed for the
Company.

31
<PAGE>

Year-End Option Values

The following table sets forth information with respect to the number and
value of exercised options to purchase TrizecHahn shares and the number and
value of unexercised options to purchase common stock of the Company held by
the executive officers named in the executive compensation table as of
December 31, 1998.

<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Acquired Unexercised Options Held In-the-Money Options Held
on Exercise Value at December 31, 1998 at December 31, 1998
During Year Ended Realized on ------------------------- -------------------------
Name December 31, 1998 Exercise Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bradley D. Aldrich...... 100,000 $1,130,359 -- 30,000 -- --
Brandon K. Barnholt..... 70,000 845,878 -- 50,000 -- --
</TABLE>

Short-Term Performance Plan

Employees of the Company participate in an annual incentive plan that
places at risk an incremental portion of their total compensation based on
Company, business unit and/or individual performance. The targeted at-risk
compensation increases with the ability of the individual to affect business
performance, ranging from 12% for support personnel to 200% for the Chief
Executive Officer. The other executive officers have the opportunity to earn
an annual incentive equal to 150% of the individual's base salary. The actual
award is determined based on financial performance with individual and
executive team performance evaluated against pre-established operating
objectives designed to achieve planned financial results. For essentially all
other employees, annual incentives are based on specific performance
indicators utilized to operate the business, principally productivity and
profitability measures.

Long-Term Performance Plan

The Company has adopted a Long-Term Performance Plan (the "Performance
Plan"). Under the Performance Plan, designated employees, including executive
officers, of Clark USA and its subsidiaries and other related entities are
eligible to receive awards in the form of stock options, stock appreciation
rights and stock grants. The Performance Plan is intended to promote the
growth and performance of the Company by encouraging employees to acquire an
ownership interest in Clark USA and to provide incentives for employee
performance. An aggregate of 1,250,000 shares of Common Stock may be awarded
under the Performance Plan, either from authorized, unissued shares which have
been reserved for such purpose or from shares purchased on the open market,
subject to adjustment in the event of a stock split, stock dividend,
recapitalization or similar change in the outstanding common stock of Clark
USA. As of December 31, 1998, 323,750 stock options were outstanding under the
Performance Plan.

The Performance Plan is administered by the board of directors'
Compensation Committee. Subject to the provisions of the Performance Plan, the
Compensation Committee is authorized to determine who may participate in the
Performance Plan and the number and types of awards made to each participant,
and the terms, conditions and limitations applicable to each award. Awards may
be granted singularly, in combination or in tandem. Subject to certain
limitations, the board of directors is authorized to amend, modify or
terminate the Performance Plan to meet any changes in legal requirements or
for any other purpose permitted by law.

Payment of awards may be made in the form of cash, stock or combinations
thereof and may include such restrictions as the Compensation Committee shall
determine, including, in the case of stock, restrictions on transfer and
forfeiture provisions. The price at which shares of Common Stock may be
purchased under a stock option may not be less than the fair market value of
such shares on the date of grant. If permitted by the Compensation Committee,
such price may be paid by means of tendering Common Stock, or surrendering
another award, including restricted stock, valued at fair market value on the
date of exercise, or any combination thereof. Further, with Compensation
Committee approval, payments may be deferred, either in the form of
installments or as a future lump sum payment. Dividends or dividend equivalent
rights may be extended to and made part of any award denominated in stock,
subject to such terms, conditions and restrictions as the

32
<PAGE>

Compensation Committee may establish. At the discretion of the Compensation
Committee, a participant may be offered an election to substitute an award for
another award or awards of the same or different type. Stock options initially
have a 10-year term with a three-year vesting schedule and are not exercisable
until Clark USA's Common Stock is publicly traded.

If the employment of a participant terminates, subject to certain
exceptions for retirement, resignation, death or disability, all unexercised,
deferred and unpaid awards will be canceled immediately, unless the award
agreement provides otherwise. Subject to certain exceptions for death or
disability, or employment by a governmental, charitable or educational
institution, no award or other benefit under the Performance Plan is
assignable or transferable, or payable to or exercisable by anyone other than
the participant to whom it was granted.

In the event of a "Change of Control" of Clark USA, with respect to awards
held by Performance Plan participants who have been employed by the Company
for at least six months, (a) all stock appreciation rights which have not been
granted in tandem with stock options will become exercisable in full, (b) the
restrictions applicable to all shares of restricted stock will lapse and such
shares will be deemed fully vested, (c) all stock awards will be deemed to be
earned in full, and (d) any participant who has been granted a stock option
which is not exercisable in full will be entitled, in lieu of the exercise of
such stock options, to obtain cash payment in an amount equal to the
difference between the option price of such stock option and the offer price
(in the case of a tender offer or exchange offer) or the value of common stock
covered by such stock option, determined as provided in the Performance Plan.
The Blackstone Transaction triggered the Change of Control provision under the
Performance Plan. The Company does not expect that the Change of Control will
have a material impact on the Performance Plan.

The Company is implementing a new management incentive program designed to
increase management's ownership of Clark USA's stock through direct purchases
and options tied to the financial performance of the Company.

Clark Savings Plan

The Clark Savings Plan, which became effective in 1989, permits employees
to make before-tax and after-tax contributions and provides for employer
incentive matching contributions. Under the Savings Plan, each employee of the
Company (and such other related companies as may adopt the Savings Plan) who
has completed at least six months of service may become a participant.
Participants are permitted to make before-tax contributions to the Savings
Plan, effected through payroll deduction, of from 1% to 15% of their
compensation. The Company makes matching contributions equal to 200% of a
participant's before-tax contributions up to 3% of compensation. Additionally,
for represented employees at the Port Arthur and Lima refineries, the Company
makes matching contributions equal to 100% of a participants before-tax
contributions between 4% and 6% of compensation. Participants are also
permitted to make after-tax contributions through payroll deduction, of from
1% to 5% of compensation, which are not matched by employer contributions;
provided that before-tax contributions and after-tax contributions, in the
aggregate, may not exceed the lesser of 15% of compensation or $10,000 in
1998. All employer contributions are fully vested from the onset of the
employee's eligibility in the plan. Amounts in employees' accounts may be
invested in a variety of permitted investments, as directed by the employee.
Participants' vested accounts are distributable upon a participant's
disability, death, retirement or separation from service. Subject to certain
restrictions, employees may make loans or withdrawals of employee
contributions during the term of their employment.

Compensation Committee Interlocks and Insider Participation

Compensation of the Company's executive officers has historically been
determined by the Company's board of directors. Mr. Rusnack, the Company's
President and Chief Executive Officer, is a member of the Company's board of
directors. Other than reimbursement of their expenses, the Company's directors
do not receive any compensation for their services as directors, except Mr.
Cohen. See Item 10. Directors and Executive

33
<PAGE>

Officers of the Registrant. There are no interlocks between the Company and
other entities involving the Company's executive officers and board members
who serve as executive officers or board members of other entities, except
with respect to Clark USA and Clark USA's principal shareholders, Blackstone
and Oxy.

Employment Agreements

The Company entered into employment agreements with three of its senior
executives (the "Executive Employment Agreements"). The Executive Employment
Agreements have five-year terms, and provide for automatic extension on an
annual basis unless either party gives 90 days' notice of cancellation. The
Executive Employment Agreements provide that if a Change of Control occurs
within two years prior to the scheduled expiration date, then the expiration
date will be automatically extended until the second anniversary of the Change
of Control date. The Blackstone Transaction constituted a Change of Control
under the Executive Employment Agreements.

During the term of the Executive Employment Agreements, the employee is
precluded from soliciting or encouraging proposals regarding the acquisition
of Clark USA or its subsidiaries (or of another material part of the business
of Clark USA), absent explicit approval of the Chief Executive Officer of the
Company.

The Executive Employment Agreements provide separation benefits to the
employee if the employee's employment is terminated by the Company without
"Cause" prior to the expiration date of the agreement. "Cause" is defined to
include the employee's failure to substantially perform his or her duties,
willful misconduct that materially injures Clark USA or its affiliates, or
conviction of a criminal offense involving dishonesty or moral turpitude. The
Executive Employment Agreements also provide that if the employee resigns for
"Good Reason" prior to the expiration date of the agreement, the employee will
receive separation benefits. "Good Reason" is defined to include certain
demotions, reductions in compensation, and relocation.

The separation benefits payable under the Executive Employment Agreements
generally include a lump sum payment of three times annual salary and bonus,
acceleration of stock option exercisability, continuation of the Company's
life, medical, accident and disability arrangements for one year after
termination of employment (subject to the employee's continuing to pay the
employee share of the premiums), payment of the cost of job relocation
counseling, and payment of legal fees in connection with termination.

The Executive Employment Agreements also provide for gross-up payments to
be made to the employee to cover certain penalty taxes in connection with a
Change of Control.

As a condition of receiving the separation benefits under the Executive
Employment Agreements, an employee is required to maintain the confidentiality
of information relating to the Company and its affiliates and to release the
Company and its affiliates from certain claims.

Employment Agreement for William C. Rusnack

The Company has entered into a memorandum of agreement (the "Agreement")
with William C. Rusnack (the "Executive"). The Agreement has a term beginning
on the date that it was executed (the "Agreement Date") and ending on the
fourth anniversary of the Agreement Date (the "Initial Term"), provided, that
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of the Initial Term then the Agreement shall be automatically
renewed for an additional one year renewal term (a "Renewal Term"). Similarly,
if neither the Executive nor the Company gives 30 days notice prior to the
expiration of any Renewal Term, then the Agreement shall be automatically
renewed for an additional one year Renewal Term. In the event of a Change in
Control (as defined therein), the Agreement shall remain in effect until at
least the second anniversary of the Change in Control.

The Agreement also provides that: (i) the Executive shall be Chief
Executive Officer and President of the Company and Clark R&M, (ii) Clark USA
shall use its best efforts to have the Executive elected to its board of
directors and shall vote its shares in favor of electing the Executive to the
Company's board of directors, (iii) the

34
<PAGE>

Executive's base salary shall not be less than $415,000 (the "Salary"), (iv)
the Executive's target bonus (the "Target Bonus") shall be equal to 100% of
the Salary (with a minimum bonus of 50% of Salary for 1998), (v) the Executive
will be provided with welfare benefits and other fringe benefits to the same
extent and on the same terms as those benefits are provided to the Company's
other senior management employees, (vi) the Executive shall participate in the
Company's relocation policy at level 4, and (vii) the Executive shall receive
a gross-up for any parachute excise taxes that may result from any payment,
whether under the Agreement or otherwise.

In the event that Executive's employment is (a) terminated by the Company
without Cause (as defined therein), (b) terminated by the Executive for Good
Reason (as defined therein), or (c) terminates at the end of the Initial Term
(or a Renewal Term) because the Company gave notice preventing the occurrence
of a Renewal Term, then the Executive shall receive from the Company: (i) in
addition to any other compensation and benefits accrued but unpaid, a lump sum
equal to the product of (a) three and (b) the sum of the Salary and Target
Bonus, (ii) relocation and counseling services, and (iii) continued
participation in all life insurance, medical, dental, health and accident and
disability plans, programs or arrangements in which Executive was entitled to
participate immediately prior to his termination for up to one year.

Item 12. 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 Clark USA, as of the date hereof: (i) each person who is
known by the Company to own beneficially more than 5% of the common stock of
the Company, (ii) each director and each executive officer who is the
beneficial owner of shares of common stock of Clark USA, and (iii) all
directors and executive officers as a group.

<TABLE>
<CAPTION>
Number of Percent Percent of Total
Name and Address Title of Class Shares of Class Voting Power(a)
---------------- -------------- ---------- -------- ----------------
<S> <C> <C> <C> <C>
Blackstone Management Common 13,500,000 98.1% 78.5%
Associates III L.L.C.(b)..
345 Park Avenue
New York, NY 10154

Occidental Petroleum Class F Common 6,101,010 100.0 19.9
Corporation...............
10889 Wilshire Boulevard
Los Angeles, California
90024

All directors and executive Common
officers as a group(b).... 13,500,000 98.1 78.5
</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., each of which Blackstone Management
Associates III L.L.C. is the general partner having voting and dispositive
power.

ITEM 13. Certain Relationships and Related Transactions

In connection with the Lima Acquisition, affiliates of Blackstone accrued
fees of $2.1 million. In addition, an affiliate of Blackstone accrues a
monitoring fee equal to $2.0 million per annum. Affiliates of Blackstone may
in the future receive customary fees for advisory services rendered to the
Company. Such fees will be negotiated from time to time with the independent
members of the Company's board of directors on an arm's-length basis and will
be based on the services performed and the prevailing fees then charged by
third parties for comparable services.

In early 1998, Clark USA engaged Oxy to provide certain advisory and
consulting services in connection with ongoing crude oil supplier decisions
and related purchase and hedging strategies. In consideration for these
services, Clark USA issued and delivered to Oxy an additional 101,010 shares
of its Class F Common Stock.

35
<PAGE>

In March 1998, Clark USA settled certain obligations outstanding between
Clark USA and Gulf arising out of the December 1995 advance crude oil purchase
receivable transactions. Clark USA paid Gulf $4 million, released 213,654
escrowed shares of Common Stock to Gulf, and released Gulf from its obligation
to deliver certain amounts of crude oil through 2001. In exchange, Gulf agreed
to release Clark USA from obligations to pay further commissions related to
the Oxy Transaction and agreed to allow Clark USA to cancel 1,008,619 shares
of its Common Stock. In October 1998, Gulf's 213,654 shares were transferred
to Barrick Gold Corporation.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1. and 2. Financial Statements and Financial Statement Schedules

The financial statements and schedule filed as a part of the Report on Form
10-K are listed in the accompanying index to financial statements and
schedule.

3. Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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 Incorporation of Clark
USA, Inc. (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 Incorporation of Clark
USA, Inc. (Incorporated by reference to Exhibit 3.3 filed with
Clark USA, Inc. Registration Statement on Form S-4 (Registration
No. 333-42457))
3.4 Certificate of Amendment to Certificate of Incorporation of Clark
USA, Inc. (Incorporated by reference to Exhibit 3.4 filed with
Clark USA, Inc. Registration Statement on Form S-4 (Registration
No. 333-42457))
3.5 Certificate of Amendment to Certificate of Incorporation of Clark
USA, Inc. (Incorporated by reference to Exhibit 3.5 filed with
Clark USA, Inc. Registration Statement on Form S-4 (Registration
No. 333-42457))
3.6 By-laws of Clark USA, Inc. (Incorporated by reference to Exhibit
3.2 filed with Clark USA, Inc. Current Report on Form 8-K, dated
February 27, 1995 (Registration No. 33-59144))
3.7 Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of 11
1/2% Senior Cumulative Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions thereof (Incorporated
by reference to Exhibit 4.1 filed with Clark USA, Inc. Registration
Statement on Form S-4 (Registration No. 333-42457)
3.8 Certificate of Amendment, dated July 31, 1998, to Certificate of
Designation of the Powers, Preferences and Relative, Participating,
Optional and Other Special Rights of 11 1/2% Senior Cumulative
Exchangeable Preferred Stock and Qualifications, Limitations and
Restrictions thereof.
4.3 Indenture, dated as of October 1, 1997, between Clark USA, Inc. and
Bankers Trust Company, as Trustee, including form of 11 1/2%
Subordinated Exchange Debentures due 2009 (Incorporated by
reference to Exhibit 4.2 filed with Clark USA, Inc. Registration
Statement on Form S-4 (Registration No. 333-42457))
4.4 Supplemental Indenture, dated as of August 10,1998, to Indenture,
dated as of October 1, 1997, between Clark USA, Inc. and Bankers
Trust Company, as Trustee
4.5 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, Senior Notes due December 1, 2005
(Incorporated by reference to Exhibit 4.1 filed with Clark USA,
Inc. Form 8-K, dated December 1, 1995 (File No. 33-59144))
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.6 Supplemental indenture, dated as of August 10, 1998, to indenture,
dated as of December 1, 1995, between Clark USA, Inc. and The Chase
Manhattan Bank, N.A., as Trustee.

10.10 Credit Agreement, dated as of September 25, 1997, among Clark
Refining & Marketing, Inc., Bankers Trust Company, as
Administrative Agent, The Toronto-Dominion Bank, as Syndication
Agent, BankBoston, N.A., as Documentation Agent, and the other
financial institutions party thereto. (Incorporated by reference to
Exhibit 10.10 filed with Clark Refining & Marketing, Inc. Current
Report on Form 8-K, dated October 1, 1997 (File No. 1-11392))

10.11 Amendment No.1 to Credit Agreement, dated as of October 29, 1997,
among Clark Refining & Marketing, Inc., Bankers Trust Company, as
Administrative Agent and Collateral Agent, The Toronto-Dominion
Bank, as Syndication Agent, and BankBoston, N.A., as Documentation
Agent, and the other financial institutions party thereto
(incorporated by reference to Exhibit 10.11 filed with Clark
Refining & Marketing, Inc. Registration Statement on Form S-4
(Registration No. 333-42431))

10.12 Amendment No. 2 to Credit Agreement, dated as of November 7, 1997,
among Clark Refining & Marketing, Inc., Bankers Trust Company, as
Administrative Agent and Collateral Agent, The Toronto-Dominion
Bank, as Syndication Agent, and BankBoston, N.A., as Documentation
Agent, and the other financial institutions party thereto
(incorporated by reference to Exhibit 10.12 filed with Clark
Refining & Marketing, Inc. Registration Statement on Form S-4
(Registration No. 333-42431))

10.13 Amendment No.3 to Credit Agreement, dated as of July 24, 1998,
among Clark Refining & Marketing, Inc., Bankers Trust Company, as
Administrative Agent and Collateral Agent, The Toronto-Dominion
Bank, as Syndication Agent, and BankBoston, N.A., as Documentation
Agent, and the other financial institutions party thereto.
(Incorporated by reference to Exhibit 3.3 filed with Clark Refining
& Marketing, Inc. Registration Statement on Form S-4 (Registration
No. 333-64387)

10.14 Amendment No.4 to Credit Agreement, dated as of October 2, 1998,
among Clark Refining & Marketing, Inc., Bankers Trust Company, as
Administrative Agent and Collateral Agent, The Toronto-Dominion
Bank, as Syndication Agent, and BankBoston, N.A., as Documentation
Agent, and the other financial institutions party thereto.
(Incorporated by reference to Exhibit 3.3 filed with Clark Refining
& Marketing, Inc. Registration Statement on Form S-4 (Registration
No. 333-64387))

10.15 Credit Agreement, dated as of November 21, 1997, among Clark
Refining & Marketing, Inc., Goldman, Sachs Credit Partners L.P., as
Arranger and Syndication Agent, and State Street Bank and Trust
Company of Missouri, N.A., as Payment Agent, the financial
institutions listed on the signature pages thereof, and Goldman
Sachs Credit Partners, as Administrative Agent (Incorporated by
reference to Exhibit 10.13 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-
42431))

10.16 First Amended and Restated Credit Agreement, dated as of August 10,
1998, among Clark Refining & Marketing, Inc., as Borrower, Goldman
Sachs Credit Partners L.P., as Arranger, Syndication Agent and
Administrative Agent, and State Street Bank & Trust Company of
Missouri, N.A., as Paying Agent (Incorporated by reference to
Exhibit 3.3 filed with Clark Refining & Marketing, Inc.
Registration Statement on Form S-4 (Registration No. 333-64387))

10.20 Clark Refining & Marketing, Inc. Stock Option Plan (Incorporated by
reference to Exhibit 10.5 filed with Clark Registration Statement
on Form S-1 (Registration No.33-43358))

10.21 Clark Refining & Marketing, Inc. Savings Plan, as amended and
restated effective as of October 1, 1989 (Incorporated by reference
to Exhibit 10.6 filed with Clark Oil & Refining Corporation Annual
Report on Form 10-K for the year ended December 31,1989 (Commission
File No. 1-11392)).

10.23 Employment Agreement of William C. Rusnack (Incorporated by
reference to Exhibit 3.3 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-
64387)

10.24 Memorandum of Agreement, dated as of July 8, 1997, between Clark
Refining & Marketing, Inc. and Bradley D. Aldrich (Incorporated by
reference to Exhibit 10.23 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-
42431))
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.25 Memorandum of Agreement, dated as of July 8, 1997, between Clark
Refining & Marketing, Inc. and Brandon K. Barnholt (Incorporated by
reference to Exhibit 10.24 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-
42431))

10.26 Memorandum of Agreement, dated as of July 8, 1997, between Clark
Refining & Marketing, Inc. and Maura J. Clark (Incorporated by
reference to Exhibit 10.25 filed with Clark Refining & Marketing,
Inc. Registration Statement on Form S-4 (Registration No. 333-
42431))

10.27 Seconded Amended and Restated Stockholders' Agreement, dated as
November 3, 1997, between Clark USA, Inc. and Occidental C.O.B.
Partners (Incorporated by reference to Exhibit 10.26 filed with
Clark USA, Inc. Registration Statement on Form S-4 (Registration
No. 333-42457))

10.28 Termination Agreement, dated as of October 1, 1997, among
TrizecHahn Corporation, Ontario Limited, Clark USA, Inc., Tiger
Management Corporation and Paul D. Melnuk (Incorporated by
reference to Exhibit 10.40 filed with Clark USA, Inc. Registration
Statement on Form S-4 (Registration No. 333-42457))

10.30 Indenture between Clark Refining & Marketing, Inc. (formerly Clark
Oil & Refining Corporation) and NationsBank of Virginia, N.A.
including the form of 9 1/2% Senior Notes due 2004 (Incorporated by
reference to Exhibit 4.1 filed with Clark Oil & Refining
Corporation Registration Statement on Form S-1 (File No. 33-50748))

10.31 Supplemental Indenture between Clark Refining & Marketing, Inc. and
NationsBank of Virginia, N.A., dated February 17, 1995
(Incorporated by reference to Exhibit 4.6 filed with Clark USA,
Inc. Annual Report on Form 10-K for the year ended December 31,
1994 (File No. 33-59144))

10.32 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
Statement on Form S-4 (File No. 333-42431))

10.33 Indenture between Clark Refining & Marketing, Inc. and Marine
Midland Bank, dated as of November 21, 1997 including the form of 8
7/8% Senior Subordinated Notes due 2007 (Incorporated by reference
to Exhibit 4.6 filed by Clark Refining & Marketing, Inc.,
Registration Statement on Form S-4 (File No. 333-42431))

10.34 Supplemental Indenture between Clark Refining & Marketing, 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))

10.40 Agreement for the Purchase and Sale of Lima Oil Refinery, dated as
of July 1, 1998 between BP Exploration & Oil Inc., The Standard Oil
Company, BP Oil Pipeline Company, BP Chemicals Inc. and Clark
Refining & Marketing, Inc. (Incorporated by reference to Exhibit
2.1 filed with Clark USA, Inc. Current Report on Form 8-K, dated
August 24, 1998 (File No. 1-13514))

10.41 Letter Amendment No. 1, dated August 10, 1998, to Agreement for
Purchase and Sale of Lima Oil Refinery dated July 1, 1998
(Incorporated by reference to Exhibit 2.2 filed with Clark USA,
Inc. Current Report on Form 8-K, dated August 24, 1998 (File No. 1-
13514))

16.1 Letter from Coopers & Lybrand L.L.P. dated April 15, 1997
(Incorporated by reference to Exhibit 16.1 filed with Clark USA,
Inc. Current Report on Form 8-K dated April 7, 1997 (File No.
1-13514))

16.2 Letter from Price Waterhouse LLP dated December 3, 1997
(Incorporated by reference to Exhibit 16.1 filed with Clark USA,
Inc. Current Report on Form 8-K dated November 21, 1997 (File No.
1-13514))

27.0 Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

None

38
<PAGE>

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
Page
----
<S> <C>
Clark USA, Inc. and Subsidiaries:

Annual Financial Statements

Reports of Independent Accountants.................................... 40

Consolidated Balance Sheets as of December 31, 1997 and 1998.......... 42

Consolidated Statements of Net and Other Comprehensive Earnings for
the years ended December 31, 1996, 1997 and 1998..................... 43

Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998.................................................. 44

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1997 and 1998..................................... 45

Notes to Consolidated Financial Statements............................ 46

Financial Statement Schedule

Reports of Independent Accountants.................................... 62

Schedule I--Condensed Information of the Registrant................... 64
</TABLE>

39
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Clark USA, Inc.

We have audited the accompanying consolidated balance sheets of Clark USA,
Inc. and Subsidiaries (the "Company") as of December 31, 1997 and 1998 and the
related consolidated statement of net and other comprehensive earnings,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1997 and 1998, and the results of their operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

Deloitte & Touche LLP

St. Louis, Missouri
February 6, 1999

40
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Clark USA, Inc.:

We have audited the accompanying consolidated statements of net and other
comprehensive earnings, stockholders' equity and cash flows for the year ended
December 31, 1996 of Clark USA, Inc. and Subsidiaries (a Delaware
corporation). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of the operations and the
cash flows of Clark USA, Inc. and Subsidiaries for the year ended December 31,
1996 in conformity with generally accepted accounting principles. We have not
audited the consolidated financial statements of Clark USA, Inc. for any
period subsequent to December 31, 1996.

Coopers & Lybrand L.L.P.

St. Louis, Missouri
February 4, 1997

41
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)

<TABLE>
<CAPTION>
December 31,
Reference ------------------
Note 1997 1998
--------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... 2 $ 236.1 $ 149.5
Short-term investments......................... 4 14.9 4.5
Accounts receivable............................ 4 93.8 132.3
Inventories.................................... 2, 5 261.5 294.0
Prepaid expenses and other..................... 21.1 33.5
-------- --------
Total current assets....................... 627.4 613.8
PROPERTY, PLANT AND EQUIPMENT, NET............... 2, 6 578.0 816.4
OTHER ASSETS..................................... 2, 7 70.2 79.5
-------- --------
$1,275.6 $1,509.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................... 2, 8 $ 219.1 $ 267.0
Accrued expenses and other..................... 9, 11 72.9 78.8
Accrued taxes other than income................ 2 52.1 51.0
-------- --------
Total current liabilities.................. 344.1 396.8
LONG-TERM DEBT................................... 9 765.9 980.6
OTHER LONG-TERM LIABILITIES...................... 12 62.4 57.6
COMMITMENTS AND CONTINGENCIES.................... 19 -- --
EXCHANGEABLE PREFERRED STOCK
($.01 par value per share; 5,000,000 shares
authorized; 70,453 shares issued).............. 14 64.8 72.5
STOCKHOLDERS' EQUITY:
Common stock
Common, $.01 par value, 13,767,829 issued.... 14 0.1 0.1
Class F Common, $.01 par value, 6,101,010
issued...................................... 14, 15 0.1 0.1
Paid-in capital................................ 14, 15 230.0 209.0
Advance crude oil purchase receivable from
stockholder................................... 15 (26.5) --
Retained earnings (deficit).................... (165.3) (207.0)
-------- --------
Total stockholders' equity................. 38.4 2.2
-------- --------
$1,275.6 $1,509.7
======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

42
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET AND OTHER COMPREHENSIVE EARNINGS
(dollars in millions)

<TABLE>
<CAPTION>
For the year ended December 31,
Reference ----------------------------------
Note 1996 1997 1998
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES AND OPERATING
REVENUES........................ 2 $ 5,073.1 $ 4,336.8 $ 4,042.9
EXPENSES:
Cost of sales.................. (4,557.0) (3,703.4) (3,388.0)
Operating expenses............. (420.0) (433.9) (470.8)
General and administrative
expenses...................... (59.4) (66.9) (75.6)
Depreciation................... 2 (37.4) (40.8) (42.6)
Amortization................... 2, 7 (11.1) (20.5) (25.7)
Inventory write-down to
market........................ 5 -- (19.2) (87.1)
Recapitalization, asset write-
offs and other charges........ 15 -- (51.8) 3.2
---------- ---------- ----------
(5,084.9) (4,336.5) (4,086.6)
GAIN ON SALE OF PIPELINE
INTERESTS....................... 3 -- -- 69.3
---------- ---------- ----------
OPERATING INCOME (LOSS).......... (11.8) 0.3 25.6
Interest and finance costs,
net........................... 9 (47.5) (80.1) (70.5)
---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.............. (59.3) (79.8) (44.9)
Income tax (provision)
benefit....................... 2, 13 3.1 (7.6) 15.2
---------- ---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM... (56.2) (87.4) (29.7)
Extinguishment of debt......... 9 -- (20.7) --
---------- ---------- ----------
NET LOSS......................... (56.2) (108.1) (29.7)
Preferred stock dividends...... 14 -- (1.8) (7.6)
---------- ---------- ----------
NET LOSS AVAILABLE TO COMMON
STOCK........................... $ (56.2) $ (109.9) $ (37.3)
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

43
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)

<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (56.2) $ (108.1) $ (29.7)
Extraordinary item......................... -- 20.7 --
Adjustments:
Depreciation............................. 37.4 40.8 42.6
Amortization............................. 21.5 30.7 28.7
Accretion of Zero Coupon Notes........... 19.2 18.9 0.1
Share of earnings of affiliates, net of
dividends............................... (0.1) (1.3) 0.4
Deferred income taxes.................... (7.7) -- (7.9)
Gain on sale of pipeline interests....... -- -- (69.3)
Inventory write-down to market........... -- 19.2 87.1
Recapitalization, asset write-offs and
other charges........................... -- 33.5 (4.9)
Sale of advanced crude oil purchase
receivable.............................. (10.9) -- --
Other.................................... 1.0 3.2 (0.2)
Cash provided by (reinvested in) working
capital--
Accounts receivable, prepaid expenses and
other................................... 12.5 73.5 (47.4)
Inventories.............................. 13.3 (3.1) (120.0)
Accounts payable, accrued expenses, taxes
other than income and other............. (7.6) (51.1) 59.1
--------- ---------- ----------
Net cash provided by (used in)
operating activities.................. 22.4 76.9 (61.4)
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments........ -- (3.0) (3.2)
Sales and maturities of short-term
investments............................... 31.1 3.0 13.6
Expenditures for property, plant and
equipment................................. (45.0) (83.7) (130.9)
Expenditures for turnaround................ (13.9) (47.4) (28.3)
Refinery acquisition expenditures.......... -- -- (175.0)
Proceeds from disposals of property, plant
and equipment............................. 4.4 5.5 16.7
Proceeds from sale of pipeline interests... -- -- 76.4
Advance crude oil purchase receivable...... 241.9 -- --
--------- ---------- ----------
Net cash provided by (used in)
investing activities.................. 218.5 (125.6) (230.7)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments.................... (2.9) (441.0) (10.3)
Proceeds from issuance of long-term debt... -- 398.0 224.7
Proceeds from sale of common stock......... -- -- 0.2
Stock issuance costs....................... -- (2.3) --
Deferred financing costs................... (1.8) (9.8) (9.1)
--------- ---------- ----------
Net cash provided by (used in)
financing activities.................. (4.7) (55.1) 205.5
--------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................. 236.2 (103.8) (86.6)
CASH AND CASH EQUIVALENTS, beginning of
year........................................ 103.7 339.9 236.1
--------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of year....... $ 339.9 $ 236.1 $ 149.5
========= ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

44
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in millions)

<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------------------------
1996 1997 1998
------------------ -------------------- -------------------
Shares Amount Shares Amount Shares Amount
---------- ------- ----------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK
Common, $.01 par,
Authorized shares--
54,164,597
Balance January 1........ 19,051,818 $ 0.2 19,051,818 $ 0.2 14,759,782 $ 0.1
Stock
issuance/cancellation. -- -- -- -- (991,953) --
Converted shares....... -- -- (4,292,036) (0.1) -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... 19,051,818 0.2 14,759,782 0.1 13,767,829 0.1
---------- ------- ----------- ------- ---------- -------
Class A Common
Balance January 1........ 9,033,333 0.1 10,162,509 0.1 -- --
Stock issuance......... 2,088 -- -- -- -- --
Converted shares....... 1,127,088 -- (10,162,509) (0.1) -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... 10,162,509 0.1 -- -- -- --
---------- ------- ----------- ------- ---------- -------
Class B Common
Balance January 1........ 562,500 -- -- -- -- --
Stock issuance......... -- -- -- -- -- --
Converted shares....... 562,500 -- -- -- -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- -- -- -- -- --
---------- ------- ----------- ------- ---------- -------
Class C Common
Balance January 1........ 564,588 -- -- -- -- --
Stock issuance......... -- -- -- -- -- --
Converted shares....... 564,588 -- -- -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- -- -- -- -- --
---------- ------- ----------- ------- ---------- -------
Class E Common
Balance January 1........ -- -- -- -- -- --
Stock issuance......... -- -- -- -- -- --
Converted shares....... -- -- 9,000,000 0.1 -- --
Canceled............... -- -- (9,000,000) (0.1) -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- -- -- -- -- --
---------- ------- ----------- ------- ---------- -------
Class F Common, $.01
par, Authorized
shares--7,000,000
Balance January 1........ -- -- -- -- 6,000,000 0.1
Stock issuance......... -- -- 545,455 -- 101,010 --
Converted shares....... -- -- 5,454,545 0.1 -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- -- 6,000,000 0.1 6,101,010 0.1
---------- ------- ----------- ------- ---------- -------
PAID-IN CAPITAL
Balance January 1........ -- 300.1 -- 296.1 -- 230.0
Stock
issuance/cancellation. -- (4.0) -- (3.2) -- (21.0)
Redemption of common
stock................. -- -- -- (62.9) -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- 296.1 -- 230.0 -- 209.0
---------- ------- ----------- ------- ---------- -------
ADVANCE CRUDE OIL PURCHASE
RECEIVABLE FROM
STOCKHOLDER
Balance January 1........ -- (146.9) -- (26.5) -- (26.5)
Advance crude oil
purchase receivable
from stockholder...... -- 120.4 -- -- -- --
Stock
issuance/cancellation. -- -- -- -- -- 26.5
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- (26.5) -- (26.5) -- --
---------- ------- ----------- ------- ---------- -------
RETAINED EARNINGS
Balance January 1........ -- 0.7 -- (55.5) -- (165.3)
Net loss............... -- (56.2) -- (109.9) -- (37.3)
Stock
issuance/cancellation. -- -- -- -- -- (4.4)
Change in unrealized
short-term investment
gains and losses...... -- -- -- 0.1 -- --
---------- ------- ----------- ------- ---------- -------
Balance December 31...... -- (55.5) -- (165.3) -- (207.0)
---------- ------- ----------- ------- ---------- -------
TOTAL STOCKHOLDERS'
EQUITY................... 29,214,327 $ 214.4 20,759,782 $ 38.4 19,868,839 $ 2.2
========== ======= =========== ======= ========== =======
</TABLE>

The accompanying notes are an integral part of these statements.

45
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 1996, 1997, and 1998
(Tabular dollar amounts in millions of US dollars)

1. Nature of Business

Clark USA, Inc., a Delaware holding company ("Clark USA" or "the Company")
is engaged through its subsidiaries in crude oil refining, wholesale and
retail marketing of refined petroleum products and retail marketing of
convenience store items in the Central United States.

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

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Clark USA and its wholly-owned subsidiaries, principally Clark Refining &
Marketing, Inc. ("Clark R&M"), Clark Pipe Line Company, and OTG, Inc., all
Delaware corporations. The Company consolidates the assets, liabilities, and
results of operations of subsidiaries in which the Company has a controlling
interest. Investments in companies in which less than a controlling interest
is held are generally accounted for by the equity method. All significant
intercompany accounts and transactions have been eliminated.

Use of Estimates

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.

Cash and Cash Equivalents

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.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
under the last-in, first-out "LIFO" method for all hydrocarbon inventories
including crude oil, refined products, and blendstocks. The cost of
convenience products is determined under the retail LIFO method, and the cost
of warehouse stock and other inventories is determined under the first-in,
first-out method "FIFO".

Hedging Activity

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

46
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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.

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 groups 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 reflected in current operating 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 Company reviews long-lived assets for impairments whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

Deferred Turnaround

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 to five years. Turnaround
costs, which are included in "Other assets", are amortized over the period to
the next scheduled turnaround, beginning the month following completion. The
amortization is presented in "Amortization" on the statements of net and other
comprehensive earnings.

Environmental Costs

Environmental liabilities are recorded when environmental assessments
and/or remedial efforts are probable and can be reasonably estimated.
Reimbursements for underground storage remediation are also recorded when
probable and can be reasonably estimated.

Environmental expenditures are expensed or capitalized depending upon their
future economic benefit. Costs that improve a property as compared with the
condition of the property when originally constructed or acquired and costs
that prevent future environmental contamination are capitalized. Costs that
return a property to its condition at the time of acquisition or original
construction are expensed.

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. Deferred taxes are classified as current or noncurrent depending on
the classification of the assets and liabilities to which the temporary
differences relate. Deferred taxes arising from temporary differences that are
not related to a specific asset or liability are classified as current or
noncurrent depending on the periods in which the temporary differences are
expected to reverse. The Company records a valuation allowance when necessary
to reduce the net deferred tax asset to an amount expected to be realized.

47
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Excise Taxes

Federal excise and state motor fuel taxes collected on the sale of products
and remitted to governmental agencies were $374.7 million for the year ended
December 31, 1998 (1997--$411.5 million; 1996--$411.6 million) and are not
included in "Net sales and operating revenue," "Cost of Sales," or "operating
expenses."

Stock Based Compensation Plan

The Company accounts for stock-based compensation issued to employees in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB Opinion No. 25") which generally requires
recognizing compensation cost based upon the intrinsic value at the date
granted of the equity instrument awarded. The Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options and other equity instruments based on the fair value of those
instruments, but alternatively allows companies to disclose such impact in
their footnotes. The Company has elected to adopt the footnote disclosure
method.

New Accounting Standards

The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income", effective January 1, 1998, with no
effect on the Company's financial statements for the three years ending
December 31, 1996, 1997, and 1998. This statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements.

The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (see Note 17 "Segment Reporting"). This
statement requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods issued to
shareholders.

The Company adopted SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" (see Note 12 "Employee Benefit Plans").
This statement standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures previously required.

The Company adopted Statement of Position ("SOP") No. 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use". The
SOP provides guidance on accounting for the costs of computer software
developed or obtained for internal use. This statement allows for
capitalization of internal labor costs for certain information system
projects. The Company's previous accounting policy was consistent with the
requirements of this SOP, and therefore, the adoption of this SOP did not
represent an accounting change.

In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
Company is required to adopt this statement effective January 1, 2000. SFAS
No. 133 will require the Company to record all derivatives on the balance
sheet at fair value. Changes in derivative fair value will either be
recognized in earnings as offsets to the changes in fair value of related
hedged assets, liabilities, and firm commitments or, for forecasted
transactions, deferred and recorded as a component of other stockholders'
equity until the hedged transactions occur and are recognized in earnings. The
ineffective portion of a hedging derivative's change in fair value will

48
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

be recognized in earnings immediately. The Company is currently evaluating
when it will adopt this standard and the impact of the standard on the
Company. The impact of SFAS No. 133 will depend on a variety of factors,
including future interpretive guidance, the future level of hedging activity,
the types of hedging instruments used, and the effectiveness of such
instruments.

3. Acquisition and Disposition

In August 1998, the Company purchased BP Amoco PLC's, formerly British
Petroleum, ("BP"), 170,000 barrel per day Lima, Ohio refinery, related
terminal facilities, and non-hydrocarbon inventories for a purchase price of
$175.0 million plus related acquisition costs of $11.3 million (the "Lima
Acquisition"). Hydrocarbon inventories were purchased for $34.9 million. The
Company assumed liabilities mainly related to employee benefits of $7.0
million. BP retained permanent responsibility for all known pre-existing
environmental liabilities and responsibility for a minimum of twelve years for
pre-existing but unknown environmental liabilities. The total cost of the
acquisition was accounted for using the purchase method of accounting with
$175.0 million allocated to the refinery long-term assets and $53.2 million
allocated to current assets for hydrocarbon and non-hydrocarbon inventories
and catalysts. Clark R&M funded the Lima Acquisition with existing cash and
the proceeds from the issuance of $110 million 8 5/8% Senior Notes due 2008
and $115 million floating rate term loan due 2004 (see Note 9 "Long-Term
Debt").

In 1998, the Company sold minority interests in West Shore Pipeline
Company, Wolverine Pipeline Company, Chicap Pipeline Company and Southcap
Pipeline Company for net proceeds of $76.4 million that resulted in a before
and after-tax gain of $69.3 million. Income from these interests for the year
ended December 31, 1998 was $5.3 million (1997--$8.2 million; 1996--$9.0
million).

4. Financial Instruments

Short-term Investments

Short-term investments consist of investments, including United States
government security funds, maturing more than three months from date of
purchase. The Company invests only in AA rated or better fixed income
marketable securities or the short-term rated equivalent. 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 stockholders' equity. Realized gains and losses are
presented in "Interest and finance costs, net" and are computed using the
specific identification method. As of December 31, 1998, short-term
investments consisted of U.S. debt securities of $4.5 million (1997--$14.9
million). In 1998 and 1997, $4.5 million and $9.9 million, respectively, of
the U.S. debt securities were pledged as collateral for the Company's self-
insured workers compensation programs, certain retail leases, and in 1997 for
futures positions.

For the years ended December 31, 1996, 1997 and 1998, there were no
material unrealized or realized gains or losses on the short-term investments.
The amortized cost of short-term investments as of December 31, 1998 was $4.5
million, with $2.9 million maturing in one year or less, and $1.6 million
maturing after one year through two years.

Derivative Instruments

Clark R&M enters into crude oil and refined products futures and options
contracts to limit risk related to hydrocarbon price fluctuations created by a
potentially volatile market. As of December 31, 1998, Clark R&M's open
contracts represented 1.2 million barrels of crude oil and refined products,
and had terms extending into September 1999. As of December 31, 1997, Clark
R&M's open contracts represented 2.3 million barrels of crude oil and refined
products and had terms extending into July 1998. As of December 31, 1998, the
Company had

49
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

net unrealized gains on open futures and options contracts of $1.3 million
(1997--net unrealized losses of $1.9 million) all of which have been
recognized and reflected as a component of operating income.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the credit quality of the Company's
customer base and industry collateralization practices. The Company conducts
ongoing evaluations of its customers and requires letters of credit or other
collateral as appropriate. Trade receivable credit losses for the three years
ended December 31, 1998 were not material. As of December 31, 1998, the
Company had $11.4 million (1997--$20.6 million) due from Chevron USA Products
Co. ("Chevron"). Sales to Chevron in 1998 totaled $340.1 million (1997--$455.7
million; 1996--$455.8 million).

The Company does not believe that is has a significant credit risk on its
derivative instruments which are transacted through the New York Mercantile
Exchange or with counterparties meeting established collateral and credit
criteria.

5. Inventories

The carrying value of inventories consisted of the following:

<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------ -------
<S> <C> <C>
Crude oil................................................ $ 86.2 $ 165.3
Refined products and blendstocks......................... 156.6 192.4
LIFO inventory value excess over market.................. (19.2) (106.3)
Convenience products..................................... 22.4 20.8
Warehouse stock and other................................ 15.5 21.8
------ -------
$261.5 $ 294.0
====== =======
</TABLE>

6. Property, Plant, and Equipment

Property, plant, and equipment consisted of the following:

<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Real property.......................................... $ 26.7 $ 46.8
Refineries............................................. 443.7 699.3
Retail stores.......................................... 244.0 224.1
Product terminals and pipelines........................ 67.1 71.0
Other.................................................. 10.9 17.0
------- --------
792.4 1,058.2
Accumulated depreciation and amortization.............. (214.4) (241.8)
------- --------
$ 578.0 $ 816.4
======= ========
</TABLE>

As of December 31, 1998, property, plant, and equipment included $113.1
million (1997--$48.7 million) of construction in progress, of which $43.7
million related to a project at the Port Arthur refinery that includes
construction of additional coking and hydrocracking capability and expansion
of the crude unit capacity to approximately 250,000 barrels per day. This
project is scheduled to be completed by January 2001. Capital lease assets of
$20.3 million (1997--$21.4 million) were included in property, plant, and
equipment as of December 31, 1998.

50
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7. Other Assets

Other assets consisted of the following:
<TABLE>
<CAPTION>
December
31,
-----------
1997 1998
----- -----
<S> <C> <C>
Deferred financing costs..................................... $17.7 $23.3
Deferred turnaround costs.................................... 43.9 46.5
Deferred tax asset........................................... -- 7.9
Other........................................................ 8.6 1.8
----- -----
$70.2 $79.5
===== =====
</TABLE>

The company incurred deferred financing costs of $9.0 million associated
with the financing of the Lima Acquisition. Amortization of deferred financing
costs for the year ended December 31, 1998 was $2.8 million (1997--$10.2
million; 1996--$10.2 million) and is included in "Interest and finance costs,
net".

8. Working Capital Facility

In August 1998, Clark R&M amended its September 1997, secured revolving
credit facility increasing capacity from the original $400 million to $700
million. 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 $700
million or the amount available under a defined borrowing base calculated with
respect to Clark R&M's cash and cash equivalents, eligible investments,
eligible receivables and eligible petroleum inventories ($457.0 million as of
December 31, 1998). Direct borrowings under the credit facility are limited to
$150 million at interest rates ranging from London Interbank Offer Rate
("LIBOR") plus 62.5 basis points to LIBOR plus 225 basis points depending on
the attainment of certain financial ratios. Clark R&M uses the facility
primarily for the issuance of letters of credit to secure purchases of crude
oil. Clark R&M 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 of December 31, 1998, $244.8 million (1997--$272.1 million) of
the line of credit was utilized for letters of credit, of which $98.3 million
supported commitments for future deliveries of petroleum products. There were
no direct cash borrowings under any revolving credit facility as of December
31, 1998 and 1997.

9. Long-Term Debt
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
8 5/8% Senior Notes due August 15, 2008
("8 5/8% Senior Notes")................................... $ -- $109.7
8 3/8% Senior Notes due November 15, 2007
("8 3/8% Senior Notes")................................... 99.3 99.3
8 7/8% Senior Subordinated Notes due November 15, 2007
("8 7/8% Senior Subordinated Notes")...................... 173.8 173.9
Floating Rate Term Loan due November 15, 2003 and 2004
("Floating Rate Loan").................................... 125.0 240.0
9 1/2% Senior Notes due September 15, 2004 ("9 1/2% Senior
Notes")................................................... 175.0 171.7
10 7/8% Senior Notes due December 1, 2005
("10 7/8% Senior Notes").................................. 175.0 175.0
Senior Secured Zero Coupon Notes, due February 15, 2000
("Zero Coupon Notes")..................................... 3.5 --
Obligations under capital leases and other notes........... 17.6 14.3
------ ------
769.2 983.9
Less current portion..................................... 3.3 3.3
------ ------
$765.9 $980.6
====== ======
</TABLE>

51
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The estimated fair value of long-term debt as of December 31, 1998, was
$921.6 million (1997--$793.9 million), determined using quoted market prices
for these issues.

The 8 5/8% Senior Notes were issued by Clark R&M in August 1998, at a
discount of 0.234% and are unsecured. The 8 5/8% Senior Notes are redeemable
at the option of the Company beginning August 2003, at a redemption price of
104.312% of principal, which decreases to 100% of principal amount in 2005. Up
to 35% in aggregate principal amount of the notes originally issued are
redeemable at the option of the Company out of the net proceeds of one or more
equity offerings at any time prior to August 15, 2002, at a redemption price
equal to 108.625% of principal.

The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes were issued by
Clark R&M in November 1997, at a discount of 0.734% and 0.719%, respectively.
These notes are unsecured, with the 8 7/8% Senior Subordinated Notes
subordinated in right of payment to all unsubordinated indebtedness of the
Company. The 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes are
redeemable at the option of the Company beginning November 2002, at a
redemption price of 104.187% of principal and 104.437% of principal,
respectively, which decreases to 100% of principal amount in 2004 and 2005,
respectively. Up to 35% in aggregate principal amount of the notes originally
issued are redeemable at the option of the Company out of the net proceeds of
one or more equity offerings at any time prior to November 15, 2001, at a
redemption price equal to 108.375% of principal for the 8 3/8% Senior Notes
and 108.875% of principal for the 8 7/8% Senior Notes.

Clark R&M borrowed $125.0 million in November 1997, and an additional
$115.0 million in August 1998, under a floating rate term loan agreement
expiring in 2004. Of the principal outstanding, 25% must be repaid in 2003.
The Floating Rate Loan is a senior unsecured obligation of Clark R&M and bears
interest at LIBOR plus a margin of 275 basis points. The loan may be repaid in
whole or in part at any time at the redemption price of 101.25% of principal
through November 1999 and at 100% of principal thereafter.

The 9 1/2% Senior Notes were issued by Clark R&M in September 1992 and are
unsecured. The 9 1/2% Senior Notes are currently redeemable at the Company's
option at a redemption price of 102.375% of principal, decreasing to 100% of
principal in September 1999.

In December 1995, Clark USA issued the 10 7/8% Senior Notes in connection
with the Oxy and Gulf transactions (see Note 15 "Oxy/Gulf Transactions").
These notes are redeemable at the Company's option beginning December 1, 2000
at a redemption price of 105% of principal, which decreases to 100% of
principal in 2003.

In February 1993, Clark USA issued Zero Coupon Notes with a value at
maturity of $264 million. In November 1997, Clark USA repurchased for $206.6
million, $259.2 million at maturity of its Zero Coupon Notes. To facilitate
this transaction, Clark R&M returned capital to the Company of $215.0 million.
In 1998, the remaining balance was repurchased. Non-cash interest expense of
$0.1 million was recorded in 1998 (1997--$18.9 million, 1996--$19.2 million)
for the Zero Coupon Notes.

The Clark R&M 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 incurrence of
debt, redemption 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. Clark R&M must maintain a minimum net worth of $100 million.

The scheduled maturities of long-term debt during the next five years are
(in millions): 1999--$3.3 (included in "Accrued expenses and other"); 2000--
$11.0; 2001--$0.0; 2002--$0.0; 2003--$31.3; 2004 and thereafter--$940.4.

52
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Extinguishment of Debt

In 1997, the Company redeemed its 10 1/2% Senior Notes and repurchased
substantially all of the Zero Coupon Notes. As a result, the Company recorded
an extraordinary loss of $20.7 million for the redemption and repurchase
premiums ($8.4 million), the write-off of deferred financing costs ($10.9
million) and other related costs ($1.4 million).

Interest and finance costs, net

Interest and finance costs, net, included in the statements of net and
other comprehensive earnings, consisted of the following:

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Interest expense.................................. $ 81.1 $ 82.6 $ 80.6
Finance costs..................................... 10.2 14.2 2.9
Interest and finance income....................... (42.8) (15.3) (10.0)
------ ------ ------
48.5 81.5 73.5
Capitalized interest.............................. (1.0) (1.4) (3.0)
------ ------ ------
Interest and finance costs, net................... $ 47.5 $ 80.1 $ 70.5
====== ====== ======
</TABLE>

Cash paid for interest expense in 1998 was $75.7 million (1997--$63.8
million; 1996--$62.0 million). Accrued interest payable as of December 31,
1998 of $14.9 million (December 31, 1997--$10.3 million) was included in
"Accrued expenses and other." Included in Interest and finance income for 1996
was $31.8 million of finance income, including a $10.9 million gain on sale,
related to the advance crude oil purchase receivable (see Note 15
"Occidental/Gulf Transactions").

10. Lease Commitments

The Company leases certain retail store property and equipment, refinery
equipment, office space, and office equipment. Retail leases have lease terms
extending as far as 2017, and typically have escalation clauses based on a set
amount or increases in the Consumer Price Index. The lease terms for refinery
equipment and office space and equipment 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, 1998, net future minimum lease payments under non-cancelable
operating leases were as follows (in millions): 1999--$15.5; 2000--$14.7;
2001--$14.0; 2002--$12.8; 2003--$12.5; and $111.4 in the aggregate thereafter.
Rental expense during 1998 was $18.4 million (1997--$17.0 million; 1996--$16.5
million).

11. Related Party Transactions

Management Services

As of December 31, 1998, the Company had a payable to The Blackstone Group
("Blackstone"), an affiliate of its principal shareholder, of $3.2 million
(December 31, 1997--$2.0 million) for annual monitoring fees and transaction
fees related to the Lima Acquisition. The Company has an agreement with an
affiliate of Blackstone under which Blackstone would receive a monitoring fee
equal to $2.0 million per annum (subject to increases 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

53
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

negotiated from time to time with the independent members of the Company's
board of directors on an arm's-length basis and will be based on the services
performed and the prevailing fees then charged by third parties for comparable
services.

In connection with the Blackstone Transaction in 1997 (see Note 14 "Equity
Recapitalization and Change in Control"), affiliates of Blackstone received
fees of $7.0 million, and the Company reimbursed Blackstone for $1.7 million
of out-of-pocket expenses related to the Blackstone Transaction and the
issuance of the 8 3/8% Senior Notes and 8 7/8% Senior Subordinated Notes.

12. Employee Benefit Plans

Postretirement Benefits Other Than Pensions

Clark R&M provides health insurance in excess of social security and an
employee paid deductible amount, and life insurance to most retirees once they
have reached a specified age and specified years of service.

The following table sets forth the changes in the benefit obligation for
the unfunded post retirement health and life insurance plans for 1997 and
1998:

<TABLE>
<CAPTION>
December
31,
------------
1997 1998
----- -----
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year..................... $29.4 $27.2
Service costs............................................... 1.1 1.2
Interest costs.............................................. 1.8 2.0
Actuarial loss (gain)....................................... (4.0) 2.3
Benefits paid............................................... (1.1) (1.4)
Lima acquisition............................................ -- 4.8
----- -----
Benefit obligation at end of year........................... 27.2 36.1
Unrecognized net gain....................................... 3.7 1.4
Unrecognized prior service benefit.......................... 0.6 0.5
----- -----
Accrued postretirement benefit liability.................... $31.5 $38.0
===== =====
</TABLE>

The components of net periodic postretirement benefit costs are as follows:

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Service costs............................................. $1.1 $1.1 $1.2
Interest costs............................................ 2.1 1.8 2.0
---- ---- ----
Net periodic postretirement benefit cost.................. $3.2 $2.8 $3.2
==== ==== ====
</TABLE>

In measuring the expected postretirement benefit obligation, the Company
assumed a discount rate of 7.00% (1997--7.50%) as well as a 4.00% (1997--
4.00%) rate of increase in the compensation level, and utilized a health care
cost trend ranging from 7.25% to 8.25% in 1998, grading down to an ultimate
rate of 5.25% in 2003. 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, 1998, by $7.8 million and
increase the annual aggregate service and interest costs by $0.7 million. The
effect of decreasing the average health care cost trend rates by one
percentage point would decrease the accumulated postretirement benefit
obligation as of December 31, 1998, by $6.5 million and decrease the annual
aggregate service and interest costs by $0.6 million.

54
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Employee Savings Plan

The Clark Refining & Marketing, Inc. Retirement Savings Plan and separate
Trust (the "Plan"), a defined contribution plan, covers substantially all
employees of Clark R&M. Under terms of the Plan, Clark R&M matches the amount
of employee contributions, subject to specified limits. Company contributions
to the Plan during 1998 were $7.3 million (1997--$6.5 million; 1996--$6.4
million).

13. 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>
1996 1997 1998
------ ------- ------
<S> <C> <C> <C>
Earnings (loss) before provision for income
taxes:
Continuing operations....................... $(59.3) $ (79.8) $(44.9)
Extraordinary item.......................... -- (20.7) --
Preferred stock dividend.................... -- (1.8) (7.6)
------ ------- ------
$(59.3) $(102.3) $(52.5)
====== ======= ======
Income tax provision (benefit):
Continuing operations....................... $ (3.1) $ 7.6 $(15.2)
Extraordinary item.......................... -- -- --
Preferred stock dividend.................... -- -- --
------ ------- ------
$(3.1) $ 7.6 $(15.2)
====== ======= ======
Current provision (benefit)--Federal........ $ (0.3) $ 5.9 $ (7.6)
--State....................................... 4.8 1.7 0.3
------ ------- ------
4.5 7.6 (7.3)
------ ------- ------
Deferred provision (benefit)--Federal....... (0.8) -- (7.9)
--State....................................... (6.8) -- --
------ ------- ------
(7.6) -- (7.9)
------ ------- ------
Income tax provision (benefit).............. $ (3.1) $ 7.6 $(15.2)
====== ======= ======
</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>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Federal taxes computed at 35%.................... $(20.8) $(35.8) $(18.4)
State taxes, net of federal effect............... (1.3) 1.2 0.2
Nontaxable dividend income....................... (2.4) (1.9) (2.2)
Valuation allowance.............................. 18.8 43.9 1.0
Other items, net................................. 2.6 0.2 4.2
------ ------ ------
Income tax provision (benefit)................... $ (3.1) $ 7.6 $(15.2)
====== ====== ======
</TABLE>

55
<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:

<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment........................... $ 96.5 $110.4
Turnaround costs........................................ 13.1 14.1
Other................................................... 0.8 3.6
------ ------
110.4 128.1
------ ------
Deferred tax assets:
Alternative minimum tax credit.......................... 12.6 19.3
Trademarks.............................................. 4.5 4.5
Environmental and other future costs.................... 20.3 23.4
Tax loss carryforwards.................................. 114.5 92.8
Inventory............................................... 3.1 45.2
Other................................................... 18.1 14.5
------ ------
173.1 199.7
------ ------
Valuation allowance....................................... (62.7) (63.7)
------ ------
Net deferred tax asset.................................... $ -- $ 7.9
====== ======
</TABLE>

As of December 31, 1998, the Company has made net cumulative payments of
$19.3 million under the Federal alternative minimum tax system, which are
available to reduce future regular income tax payments. As of December 31,
1998, the Company had a Federal net operating loss carryforward of $233.9
million and Federal business tax credit carryforwards in the amount of $3.7
million. Such operating losses and tax credit carryforwards have carryover
periods of 15 years (20 years for losses and credits originating in 1998 and
years thereafter) and are available to reduce future tax liabilities through
the year ending December 31, 2018.

The valuation allowance as of December 31, 1998 was $63.7 million (1997--
$62.7 million). In calculating the increase in the valuation allowance, the
Company assumed as future taxable income only future reversals of existing
taxable temporary differences and available tax planning strategies.

Section 172 of the Internal Revenue Code ("Code") allows a 10-year
carryback period for specified liability losses, as defined. During 1997 and
1998, the Company filed federal and state refund claims based upon the
carryback of $85.6 million of specified liability losses. The carryback of
specified liability losses has reduced the Company's Federal net operating
loss carryforward as of December 31, 1998 to $233.9 million. The refund
claims, if fully recovered, would provide a current tax benefit of $18.2
million. In addition, the refund claims, if fully recovered, would
recharacterize $15.2 million of deferred tax assets from tax loss
carryforwards to alternative minimum tax credit carryforwards. However,
Section 172 of the Code is an unsettled area of the law and the refund claims
are currently under audit examination. Of the total potential current tax
benefit, the Company has recognized $7.6 million.

During 1998, the Company received net federal cash refunds of $10.2 million
(1997--tax payment of $5.0 million; 1996--tax payment of $2.7 million) and
made net cash state tax payments of $1.3 million (1997--$2.7 million; 1996--
$0.7 million).

56
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Section 382 of the Code restricts the utilization of net operating losses
and other carryover tax attributes upon the occurrence of an ownership change,
as defined. Such an ownership change occurred during 1997 as a result of the
purchase of a majority interest in the Company by an affiliate of Blackstone
(see Note 14 "Equity Recapitalization and Change in Control"). However, based
upon the existence of future taxable income from reversals of existing taxable
temporary differences and available tax planning strategies, management
believes such limitation will not restrict the Company's ability to
significantly utilize the net operating losses over the allowable carryforward
periods.

14. Equity Recapitalization and Change in Control

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,
TrizecHahn 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
("Exchangeable Preferred Stock"), which was sold on October 1, 1997 for face
value. The Exchangeable Preferred Stock is redeemable at the Company's option,
in whole or part, on or after October 1, 2002 at the redemption price of
105.75% of principal. The Company is required, subject to certain conditions,
to redeem all of the Exchangeable Preferred Stock on October 1, 2009. The
Exchangeable Preferred Stock is exchangeable, subject to certain conditions at
the option of the Company into 11 1/2% Subordinated Exchange Debentures due
2009.

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 Corporation ("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 Oxy. 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, Blackstone acquired the 13,500,000 shares of Common
Stock of the Company previously held by TrizecHahn and certain of its
subsidiaries (the "Blackstone Transaction"), as a result of which Blackstone
obtained a controlling interest in the Company.

In 1997, the Company recorded a charge to operations in the amount of $51.8
million for recapitalization expenses, asset write-offs, and other charges
incurred in connection with the Company's equity recapitalization and change
in control. The total charge includes $22.8 million of asset write-offs
principally related to an investment in a project initiated to produce low-
sulfur diesel fuel at the Hartford refinery (the "DHDS Project"); $10.7
million of transaction, advisory, and monitoring fees related to the
Blackstone Transaction; and $18.3 million resulting from a change in strategic
direction primarily for certain environmental, legal and other accruals
related to existing actions.

In 1992, the DHDS Project was delayed based on internal and third party
analysis that indicated an oversupply of low-sulfur diesel fuel capacity in
the Company's market. Based on the analysis, the Company projected relatively
narrow price differentials between low and high sulfur products. In December
1997, subsequent to the Blackstone Transaction, the Company determined that
certain equipment purchased for the DHDS Project would yield a higher value
being utilized at the Hartford and Port Arthur refineries, rather than
remaining idle until the diesel fuel differentials widened sufficiently to
justify completing the DHDS Project. As a result of this decision, the
equipment was written down to its fair market value.

57
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

15. Occidental/Gulf Transactions

In December 1995, the Company completed separate transactions with Oxy and
Gulf Resources Corporation ("Gulf"). In relation to these transactions the
Company recorded advance crude oil purchase receivables that were accounted
for as financial instruments and were recorded at cost. Income and the
reduction of principal related to the receivables were recognized according to
the interest method of amortization with gross proceeds allocated between
principal recovery and financing income. In October 1996, Clark R&M sold the
Oxy advance crude oil purchase receivable for net cash proceeds of $235.4
million. The effect of the sale increased net Stockholders' Equity by
approximately $110.6 million and the Company realized a gain on the sale of
$10.9 million.

Pursuant to a merger agreement and a series of related agreements with
Gulf, the Company acquired the right to receive the equivalent of 3.164
million barrels of Djeno crude oil to be delivered through 2001. In connection
with this transaction, the Company issued common stock valued at approximately
$26.9 million, or $22 per share (1,222,273 shares), to Gulf. These shares were
escrowed as collateral for future deliveries. In March 1998, the Company
settled the obligations outstanding between the Company and Gulf arising out
of these transactions. The Company paid Gulf $4 million, released 213,654
escrowed shares of Common Stock to Gulf, and released Gulf from its obligation
to deliver certain amounts of crude oil through 2001. In exchange, Gulf agreed
to release the Company from obligations to pay further commissions related to
these transactions and agreed to allow the Company to cancel the remaining
1,008,619 shares of its escrowed Common Stock.

16. 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 fully vested
within 3 years of the grant date, or with a change of control, as defined in
the Plan. Also upon change of control, participants are entitled to a cash
payment in an amount equal to the difference between the option price and
either the final offer price in a tender or exchange offer or a price
determined by the Compensation Committee. The Blackstone Transaction
constituted a change in control under the Plan, which caused all granted
shares to become fully vested, but did not invoke any cash payments. 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. Stock granted under this plan is priced at the fair market value at
the date of grant.

No stock options have been granted under the Performance Plan since 1995.
As of December 31, 1998, 323,750 stock options were outstanding (1997--
531,500; 1996--549,000) at an exercise price of $15 per share. No shares were
exercised in 1998 or 1997, and 207,750 and 17,500 shares were forfeited in
1998 and 1997, respectively. As of December 31, 1998, 323,750 shares were
fully vested (1997--531,500).

58
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

17. Segment Reporting

The following tables set forth financial data by operating segments for the
years ended December 31, 1998, 1997, and 1996:

<TABLE>
<CAPTION>
Refining Retail Other Elimination Total
-------- -------- ------ ----------- --------
<S> <C> <C> <C> <C> <C>
1998
Outside revenue.............. $3,103.6 $ 939.3 $ -- $ -- $4,042.9
Intersegment revenues........ 478.1 -- -- (478.1) --
-------- -------- ------ ------- --------
Total revenues........... $3,581.7 $ 939.3 $ -- $(478.1) $4,042.9
======== ======== ====== ======= ========
Operating contribution....... $ 110.9 $ 35.1 $(21.7) $ -- $ 124.3
Inventory timing adjustments
(a)......................... (15.8) -- -- (15.8)
Inventory write-down to
market...................... -- -- (87.1) -- (87.1)
Depreciation and
amortization................ (53.0) (13.8) (1.5) -- (68.3)
Recapitalization, asset
write-offs and other costs.. -- -- 3.2 -- 3.2
Gain on sale of equity
pipeline.................... -- -- 69.3 -- 69.3
-------- -------- ------ ------- --------
Operating income (loss)...... $ 42.1 $ 21.3 $(37.8) $ -- 25.6
======== ======== ====== =======
Net interest expense......... (70.5)
Income tax benefit........... 15.2
Dividend on preferred stock.. (7.6)
--------
Net loss available to common
stock....................... $ (37.3)
========
Total assets................. $1,204.7 $ 235.6 $ 87.5 $ (18.1) $1,509.7
======== ======== ====== ======= ========
Capital expenditures......... $ 96.5 $ 29.5 $ 4.9 $ -- $ 130.9
======== ======== ====== ======= ========
1997
Outside revenue.............. $3,185.0 $1,151.8 $ -- $ -- $4,336.8
Intersegment revenues........ 695.6 -- -- (695.6) --
-------- -------- ------ ------- --------
Total revenues........... $3,880.6 $1,151.8 $ -- $(695.6) $4,336.8
======== ======== ====== ======= ========
Operating contribution....... $ 169.9 $ 21.8 $(17.9) $ -- $ 173.8
Inventory timing adjustments
(a)......................... (41.2) -- -- -- (41.2)
Inventory write-down to
market...................... -- -- (19.2) -- (19.2)
Depreciation and
amortization................ (45.0) (14.5) (1.8) -- (61.3)
Recapitalization, asset
write-offs and other costs.. -- -- (51.8) -- (51.8)
-------- -------- ------ ------- --------
Operating income (loss)...... $ 83.7 $ 7.3 $(90.7) $ -- 0.3
======== ======== ====== =======
Net interest expense......... (80.1)
Income tax provision......... (7.6)
Extinguishment of debt....... (20.7)
Dividend on preferred stock.. (1.8)
--------
Net loss available to common
stock....................... $ (109.9)
========
Total assets................. $ 793.0 $ 249.8 $260.8 $ (28.0) $1,275.6
======== ======== ====== ======= ========
Capital expenditures......... $ 32.0 $ 47.7 $ 4.0 $ -- $ 83.7
======== ======== ====== ======= ========
</TABLE>

59
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Refining Retail Other Elimination Total
-------- -------- ------ ----------- --------
<S> <C> <C> <C> <C> <C>
1996
Outside revenue.............. $3,944.4 $1,128.7 $ -- $ -- $5,073.1
Intersegment revenues........ 712.9 -- -- (712.9) --
-------- -------- ------ ------- --------
Total revenues........... $4,657.3 $1,128.7 $ -- $(712.9) $5,073.1
======== ======== ====== ======= ========
Operating contribution....... $ 27.9 $ 25.2 $(14.9) $ -- $ 38.2
Inventory timing adjustments
(a)......................... (1.5) -- -- -- (1.5)
Depreciation and
amortization................ (34.3) (12.7) (1.5) -- (48.5)
-------- -------- ------ ------- --------
Operating income (loss)...... $ (7.9) $ 12.5 $(16.4) $ -- (11.8)
======== ======== ====== =======
Net interest expense......... (47.5)
Income tax provision......... 3.1
--------
Net loss..................... $ (56.2)
========
Capital expenditures......... $ 19.4 $ 24.6 $ 1.0 $ -- $ 45.0
======== ======== ====== ======= ========
</TABLE>
- --------
(a) The inventory timing adjustments represent timing differences between when
crude oil is actually purchased and refined products are actually sold and
a daily "market in, market out" operations measurement methodology for the
refining division.

Clark USA's operating segments reflect the format that Clark USA's
management uses to make operating decisions and assess performance. The
refining segment includes the processing, storage and sale of refined products
including intersegment sales to the retail segment. The retail segment
includes the sale of fuel and convenience products at retail stores. All of
the Company's refining and retail operations are within the Central United
States.

18. Subsequent Events

In February 1999, the Company announced that it would solicit buyers for
its marketing operation. The assets offered include all company-operated
retail stores, the Clark trade name, certain wholesale sales activities and
certain distribution terminals. This action was taken to allow the Company to
focus its financial resources and management attention on the continued
improvement and expansion of its refining business that it believes will
generate higher future returns.

19. Commitments and Contingencies

Clark R&M 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:

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.

60
<PAGE>

CLARK USA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Clark R&M is the subject of a purported class action lawsuit related to an
on-site electrical malfunction at Clark R&M'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 R&M offered to reimburse the medical
expenses incurred by persons receiving treatment. The purported class action
lawsuit was filed on behalf of various named individuals and purported
plaintiff classes, including residents of Blue Island, Illinois and Eisenhower
High School students, alleging claims based on common law nuisance,
negligence, willful and wanton negligence and the Illinois Family Expense Act
as a result of this incident. Plaintiffs seek to recover damages in an
unspecified amount for alleged medical expenses, diminished property values,
pain and suffering and other damages. Plaintiffs also seek punitive damages in
an unspecified amount.

While it is not possible at this time to establish the ultimate amount of
liability with respect to these contingent liabilities, the Company is of the
opinion that the aggregate amount of any such liabilities, for which provision
has not been made, will not have a material adverse effect on 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.

61
<PAGE>

INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
Clark USA, Inc:

We have audited the consolidated financial statements of Clark USA, Inc. as
of and for the years ended December 31, 1997 and 1998, and have issued our
report thereon dated February 6, 1999; such consolidated financial statements
and report are included elsewhere in this Form 10-K. Our audits also included
the financial statement schedule listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

Deloitte & Touche LLP

St. Louis, Missouri
February 6, 1999

62
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
Clark USA, Inc.:

Our report on the financial statements of Clark USA, Inc. and Subsidiaries
is included elsewhere in this Form 10-K. In connection with our audit of such
consolidated financial statements, we have also audited the financial statement
schedule for the year ended December 31, 1996 listed in Part IV, Item 14(a)(2)
of this Form 10-K.

In our opinion, the financial statement schedule referred to above, 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. We have not audited the consolidated financial statements
of Clark USA, Inc. for any period subsequent to December 31, 1996.

Coopers & Lybrand L.L.P.

St. Louis, Missouri
February 4, 1997

63
<PAGE>

CLARK USA, INC.

SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)

<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 2.1 $ --
Accounts receivable........................................ -- --
Income taxes receivable.................................... 2.5 --
Receivables from affiliates................................ 18.9 22.7
------- -------
Total current assets................................... 23.5 22.7
Investments in affiliated companies.......................... 263.7 229.1
Deferred income taxes........................................ 0.2 0.2
Other........................................................ 4.2 3.8
------- -------
$ 291.6 $ 255.8
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses and other................................. $ 3.1 $ 2.5
Payables to affiliates..................................... 1.4 2.2
------- -------
Total current liabilities.............................. 4.5 4.7
Long-term debt............................................... 178.6 175.0
Other long-term liabilities.................................. 5.3 1.4
Exchangeable Preferred Stock
($.01 par value per share; 5,000,000 shares authorized;
70,453 shares issued)...................................... 64.8 72.5
Stockholders' equity
Common stock
Common, $.01 par value, 13,767,829 issued................ 0.1 0.1
Class F Common, convertible, $.01 par value, 6,101,010
issued.................................................. 0.1 0.1
Paid-in capital............................................ 230.0 209.0
Advance crude oil purchase receivable from stockholders.... (26.5) --
Retained earnings (deficit)................................ (165.3) (207.0)
------- -------
Total stockholders' equity............................. 38.4 2.2
------- -------
$ 291.6 $ 255.8
======= =======
</TABLE>

See accompanying note to non-consolidated financial statements.

64
<PAGE>

CLARK USA, INC.

SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED STATEMENTS OF NET AND OTHER COMPREHENSIVE EARNINGS
(dollars in millions)

<TABLE>
<CAPTION>
For the year ended
December 31,
-----------------------
1996 1997 1998
------ ------- ------
<S> <C> <C> <C>
Revenues:
Equity in net loss of affiliates.................... $(37.1) $ (59.0) $(18.6)
Expenses:
General and administrative expenses................. 0.3 0.5 1.3
Recapitalization, asset write-offs and other
charges............................................ -- 1.8 2.9
Interest and finance costs, net..................... 8.9 40.4 19.6
------ ------- ------
Loss before income taxes and extraordinary item....... (46.3) (101.7) (42.4)
Income tax (provision) benefit...................... (9.9) 3.6 12.7
------ ------- ------
Loss before extraordinary item........................ (56.2) (98.1) (29.7)
Extinguishment of debt.............................. -- (10.0) --
------ ------- ------
Net loss.............................................. (56.2) (108.1) (29.7)
Preferred stock dividends........................... -- (1.8) (7.6)
------ ------- ------
Net loss available to common stock.................... $(56.2) $(109.9) $(37.3)
====== ======= ======
</TABLE>

See accompanying note to non-consolidated financial statements.

65
<PAGE>

CLARK USA, INC.

SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NON-CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)

<TABLE>
<CAPTION>
For the year ended December 31,
-----------------------------------
1996 1997 1998
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $ (56.2) $ (108.1) $ (29.7)
Extraordinary item...................... -- 10.0 --
Non-cash items:
Equity in net loss of affiliates...... 37.1 59.0 18.6
Amortization.......................... 22.8 22.0 0.6
Deferred income taxes................. 14.4 0.8 --
Sale of advanced crude oil purchase
receivable........................... (10.9) -- --
Other................................. -- 1.0 --
Cash reinvested in working capital
Accounts receivable, prepaid expenses
and other............................ -- (2.3) 2.5
Receivables from and payables to af-
filiates............................. (1.1) (8.0) (4.8)
Accounts payable, accrued liabilities
and other............................ -- 1.3 (0.7)
Income taxes payable.................. (2.8) 3.3 --
---------- ----------- ----------
Net cash provided by (used in) oper-
ating activities................... 3.3 (21.0) (13.5)
---------- ----------- ----------
Cash flows from investing activities:
Advance crude oil purchase receiv-
able................................. 6.5 -- --
---------- ----------- ----------
Net cash provided by investing ac-
tivities........................... 6.5 -- --
---------- ----------- ----------
Cash flows from financing activities:
Long-term debt payments............... -- (206.9) (3.7)
Net contribution received (returned).. (33.6) 214.0 15.2
Stock issuance costs.................. -- (2.3) --
Deferred financing costs.............. (1.1) -- (0.1)
---------- ----------- ----------
Net cash provided by (used in) in-
vesting activities................. (34.7) 4.8 11.4
---------- ----------- ----------
Decrease in cash and cash equivalents..... (24.9) (16.2) (2.1)
Cash and cash equivalents, beginning of
period................................... 43.2 18.3 2.1
---------- ----------- ----------
Cash and cash equivalents, end of period.. $ 18.3 $ 2.1 $ 0.0
========== =========== ==========
</TABLE>

See accompanying note to non-consolidated financial statements.

66
<PAGE>

CLARK USA, INC.

SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
NOTE TO NON-CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 1996, 1997 and 1998

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., Clark Pipe Line
Company, and OTG, Inc.

For further information, refer to the consolidated financial statements,
including the notes thereto, included in this Form 10-K.

67
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Clark USA, Inc.

/s/ William C. Rusnack
By: _________________________________
William C. Rusnack
President and Chief Executive
Officer

March 29, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

Signature Title Date

/s/ William C. Rusnack Director, Chief March 29, 1999
- ------------------------------------- Executive Officer
William C. Rusnack and President

/s/ Stephen I. Chazen Director March 29, 1999
- -------------------------------------
Stephen I. Chazen

/s/ Marshall A. Cohen Director and March 29, 1999
- ------------------------------------- Chairman of the
Marshall A. Cohen Board

/s/ David I. Foley Director March 29, 1999
- -------------------------------------
David I. Foley

/s/ Glenn H. Hutchins Director March 29, 1999
- -------------------------------------
Glenn H. Hutchins

/s/ David A. Stockman Director March 29, 1999
- -------------------------------------
David A. Stockman

/s/ Maura J. Clark Executive Vice March 29, 1999
- ------------------------------------- President,
Maura J. Clark Corporate
Development and
Chief Financial
Officer (Principal
Financial Officer)

/s/ Dennis R. Eichholz Controller and March 29, 1999
- ------------------------------------- Treasurer
Dennis R. Eichholz (Principal
Accounting Officer)

<PAGE>

Exhibit 3.8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CLARK USA, INC.

----------------------------------------------

Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware

----------------------------------------------

I, Maura J. Clark, Executive Vice President of CLARK USA, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), hereby certify as follows:

FIRST: That the Restated Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on December 28,
1994 and that Certificates of Amendment thereto were filed with the Secretary of
State of Delaware on February 23, 1995; November 3, 1995; on three (3) occasions
on October 1, 1997; and on January 15, 1998 (as so amended, the "Certificate of
Incorporation").

SECOND: That Paragraph (m) entitled "Definitions" of the Certificate of
Designations of the Corporation dated October 1, 1997, which forms a part of the
Certificate of Incorporation of the Corporation, has been amended to read as
follows:

(1) by deleting the definition of "Permitted Indebtedness" and
substituting in lieu thereof the following:

refinanced or the amount of any premium reasonably determined by the
Corporation or such Restricted Subsidiary as necessary to accomplish such
refinancing by means of a tender offer or privately negotiated repurchase,
plus the expenses of the Corporation or such Restricted Subsidiary incurred
in connection with such refinancing; and provided, however, that
Indebtedness the proceeds of which are used to refinance or refund such
Indebtedness shall only be permitted if (A) in the case of any refinancing
or refunding of Indebtedness that is pari passu with the Exchange
Debentures the Refinancing or refunding Indebtedness is made pari passu
with the Exchange Debentures or subordinated to the Exchange Debentures,
(B) in the case of any refinancing or refunding of Indebtedness that is
subordinated to the Exchange Debentures the refinancing or refunding of
Indebtedness is made subordinated to the Exchange Debentures at least to
the same extent as such Indebtedness being refinanced or refunded was
subordinated to the Exchange Debentures and (C) in the case of the
refinancing or refunding of Indebtedness that is subordinated to the
Exchange Debentures, the refinancing or refunding Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, (x) does not provide for payments of principal
of such Indebtedness at the stated maturity thereof or by way of a sinking
fund applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof by the Corporation or such Restricted
Subsidiary (including any redemption, retirement or repurchase which is
contingent upon events or circumstances, but excluding any retirement
required by virtue of acceleration of such Indebtedness upon an event of
default thereunder), in each case prior to the final Stated Maturity of the
Exchange Debentures and (y) does not permit redemption or other retirement
(including pursuant to an offer to purchase made by the Corporation or such
Restricted Subsidiary) of such Indebtedness at the option of the holder
thereof prior to the final stated maturity of the Indebtedness being
refinanced or refunded, other than a redemption or other retirement at the
option of the holder of such Indebtedness (including pursuant to an offer
to purchase made by the Corporation or such Restricted Subsidiary), which
is conditioned upon the change of control of the Corporation or such
Restricted Subsidiary); (ii) arising from time to time under the Credit
Agreement or any refinancings, renewals, extensions, refundings or
replacements thereof or extensions of credit to finance working capital
requirements in an aggregate principal amount not to exceed the greater of
(a) $700 million at any one time outstanding less the aggregate amount of
all proceeds of all asset dispositions that have been applied since the
Issue Date to permanently reduce the outstanding amount of such
Indebtedness and (b) the amount of the Borrowing Base on such date
(calculated on a pro forma basis after giving effect to such borrowing and
the application of the proceeds therefrom); (iii) outstanding on the Issue
Date; (iv) evidenced by trade letters of credit incurred in the ordinary
course of business not to exceed $20 million in the aggregate at any time;
(v) between or among the Corporation and/or its Restricted Subsidiaries
other than Restricted Subsidiaries owned in any part by the Principal
Shareholders; (vi) which is Junior Subordinated Indebtedness; (vii) arising
out of Sale and Leaseback Transactions or Capitalized Lease Obligations
relating to computers and other office equipment and elements, catalysts or
other chemicals used in connection with the refining of petroleum or
petroleum by-products; (viii) the proceeds of which are used to make the
Chevron Payment, the AOC Payment and the Gulf Payments; (ix) arising out of
Interest Swap Obligations; (x) in connection with capital projects
qualifying under Section 142(a) (or any successor provision) of the
Internal Revenue Code of 1986, as amended, in an amount not to exceed $75
million in the aggregate at any time; (xi) to finance the Lima Acquisition,
in an amount not to exceed $250 million; and (xii) in addition to
Indebtedness permitted by clauses (i) through (xi) above, Indebtedness not
to exceed on a consolidated basis for the Corporation and its Restricted
Subsidiaries at any time $50 million."; and

(2) by adding the following definition in appropriate alphabetical
order:

"'Lima Acquisition' means the acquisition by Clark Refining &
Marketing, Inc. of the Lima Oil Refinery located in Lima, Ohio, and certain
related inventory, spare parts and other assets, pursuant to the Agreement
for the Purchase and Sale of Lima Oil Refinery, dated as of July 1, 1998,
among Clark Refining & Marketing, Inc. and BP Exploration & Oil Inc., The
Standard Oil Company, BP Oil Pipeline Company and BP Chemicals Inc."
<PAGE>

THIRD: That such amendment has been duly adopted in accordance with the
provisions of the General Corporation Law of the State of Delaware by the
written consent of the holders of a majority of all outstanding shares of each
class entitled to vote thereon in accordance with the provisions of Section 228
of the General Corporation Law.

IN WITNESS WHEREOF, the undersigned has signed the Certificate this 31st
day of July, 1998.

CLARK USA, INC.

By: /s/ Maura J. Clark
-------------------------------------------
Maura J. Clark
Executive Vice President - Corporate
Development and Chief Financial Officer

Attested By:

/s/ Katherine D. Knocke
- -----------------------------------------------
Katherine D. Knocke
Secretary

<PAGE>

Exhibit 4.4

================================================================================

CLARK USA, INC.

11 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2009

-------------------------------------

SUPPLEMENTAL INDENTURE

Dated as of August 10, 1998

INDENTURE

Dated as of October 1, 1997

-------------------------------------

BANKERS TRUST COMPANY,

Trustee

================================================================================
<PAGE>

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
August 10, 1998, by and between CLARK USA, INC., a Delaware corporation (the
"Company"), having its principal office at 8182 Maryland Avenue, St. Louis,
Missouri 63105-3721, and Bankers Trust Company, as trustee (the "Trustee") under
the Indenture (as defined below), having its Corporate Trust and Agency Office
at Four Albany Street, New York, New York 10006. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Indenture.

WHEREAS, the Company and the Trustee previously duly executed, and the
Company duly delivered to the Trustee, an Indenture dated as of October 1, 1997
(the "Indenture"), relating to the Company's 11 1/2% Subordinated Exchange
Debentures due 2009 (the "Securities") into which the Company's 11 1/2% Senior
Cumulative Exchangeable Preferred Stock (the "Preferred Stock") is exchangeable;

WHEREAS, pursuant to Section 8.02 of the Indenture, the Company and
the Trustee have obtained the consent of the Holders of not less than a majority
of the outstanding shares of Preferred Stock to the amendments made hereby;

WHEREAS, the Board of Directors of the Company has authorized the
execution of this Supplemental Indenture and its delivery to the Trustee;

WHEREAS, the Company has delivered an Opinion of Counsel to the
Trustee pursuant to Sections 1.02 and 8.03 of the Indenture; and

WHEREAS, all other actions necessary to make this Supplemental
Indenture a legal, valid and binding obligation of the parties hereto in
accordance with its terms and the terms of the Indenture have been performed;

NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Trustee hereby mutually covenant and
agree for the equal and proportionate benefit of all Holders of the Securities
as follows:

ARTICLE I
AMENDMENTS

Upon execution of this Supplemental Indenture, the terms of the
Securities and the Indenture shall be amended as follows:

SECTION I.1. Section 1.01 of the Indenture shall be amended as
follows:

(a) by deleting the definition of "Permitted Indebtedness" and
substituting in lieu thereof the following:

"'Permitted Indebtedness' means Indebtedness incurred by the
Corporation or its Restricted Subsidiaries (i) to renew, extend, refinance
or refund Indebtedness that is permitted to be incurred pursuant to clauses
(ii) through (iv) and clause (xi) below; provided, however, that such
Indebtedness does not exceed the principal amount of the Indebtedness so
renewed, extended, refinanced or refunded plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Corporation or such Restricted Subsidiary as
necessary to accomplish such refinancing by means of a tender offer or
privately negotiated repurchase, plus the expenses of the Corporation or
such Restricted Subsidiary incurred in connection with such refinancing;
and provided, however, that Indebtedness the proceeds of which are used to
refinance or refund such Indebtedness shall only be permitted if (A) in the
case of any refinancing or refunding of Indebtedness that is pari passu
with the Exchange Debentures the Refinancing or refunding Indebtedness is
made pari passu with the Exchange Debentures or subordinated to the
Exchange Debentures, (B) in the case of any refinancing or refunding of
Indebtedness that is subordinated to the Exchange Debentures the
refinancing or refunding of Indebtedness is made subordinated to the
Exchange Debentures at least to the same extent as such Indebtedness being
refinanced or refunded was subordinated to the Exchange Debentures and (C)
in the case of the refinancing or refunding of

<PAGE>

Indebtedness that is subordinated to the Exchange Debentures, the
refinancing or refunding Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, (x)
does not provide for payments of principal of such Indebtedness at the
stated maturity thereof or by way of a sinking fund applicable thereto or
by way of any mandatory redemption, defeasance, retirement or repurchase
thereof by the Corporation or such Restricted Subsidiary (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Indebtedness upon an event of default thereunder), in
each case prior to the final Stated Maturity of the Exchange Debentures and
(y) does not permit redemption or other retirement (including pursuant to
an offer to purchase made by the Corporation or such Restricted Subsidiary)
of such Indebtedness at the option of the holder thereof prior to the final
stated maturity of the Indebtedness being refinanced or refunded, other
than a redemption or other retirement at the option of the holder of such
Indebtedness (including pursuant to an offer to purchase made by the
Corporation or such Restricted Subsidiary), which is conditioned upon the
change of control of the Corporation or such Restricted Subsidiary); (ii)
arising from time to time under the Credit Agreement or any refinancings,
renewals, extensions, refundings or replacements thereof or extensions of
credit to finance working capital requirements in an aggregate principal
amount not to exceed the greater of (a) $700 million at any one time
outstanding less the aggregate amount of all proceeds of all asset
dispositions that have been applied since the Issue Date to permanently
reduce the outstanding amount of such Indebtedness and (b) the amount of
the Borrowing Base on such date (calculated on a pro forma basis after
giving effect to such borrowing and the application of the proceeds
therefrom); (iii) outstanding on the Issue Date; (iv) evidenced by trade
letters of credit incurred in the ordinary course of business not to exceed
$20 million in the aggregate at any time; (v) between or among the
Corporation and/or its Restricted Subsidiaries other than Restricted
Subsidiaries owned in any part by the Principal Shareholders; (vi) which is
Junior Subordinated Indebtedness; (vii) arising out of Sale and Leaseback
Transactions or Capitalized Lease Obligations relating to computers and
other office equipment and elements, catalysts or other chemicals used in
connection with the refining of petroleum or petroleum by-products; (viii)
the proceeds of which are used to make the Chevron Payment, the AOC Payment
and the Gulf Payments; (ix) arising out of Interest Swap Obligations; (x)
in connection with capital projects qualifying under Section 142(a) (or any
successor provision) of the Internal Revenue Code of 1986, as amended, in
an amount not to exceed $75 million in the aggregate at any time; (xi) to
finance the Lima Acquisition, in an amount not to exceed $250 million; and
(xii) in addition to Indebtedness permitted by clauses (i) through (xi)
above, Indebtedness not to exceed on a consolidated basis for the
Corporation and its Restricted Subsidiaries at any time $50 million."

(b) by adding the following definition in appropriate alphabetical
order:

ARTICLE II
MISCELLANEOUS

SECTION II.1. For all purposes of this Supplemental Indenture, except
as otherwise herein expressly provided or unless the context otherwise requires:
(A) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture and (B) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture as a whole and not
any particular Article, Section or other subdivision.

SECTION II.2. Upon execution of this Supplemental Indenture, the
Indenture shall be modified in accordance herewith, but except as expressly
amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and
effect.

<PAGE>

for all purposes, and every holder of Securities heretofore or hereafter
authenticated and delivered under the Indenture shall be bound hereby.

SECTION II.4. This Supplemental Indenture shall become effective as
of the date first above written.

SECTION II.5. The Trustee accepts the amendment to the Indenture
effected by this Supplemental Indenture and agrees to execute the trust created
by the Indenture, as hereby amended, but only upon the terms and conditions set
forth in the Indenture, as hereby amended, including the terms and provisions
defining and limiting the liabilities and responsibilities of the Trustee, which
terms and provisions shall in like manner define and limit the Trustee's
liabilities in the performance of the trust created by the Indenture, as hereby
amended. Without limiting the generality of the foregoing, the Trustee has no
responsibility for the correctness of the recitals of fact herein contained
which shall be taken as the statements of the Company and makes no
representations as to the validity or sufficiency of this Supplemental
Indenture, except as to the due and valid execution hereof by the Trustee, and
shall incur no liability or responsibility in respect of the validity thereof.
The Trustee's execution of this Supplemental Indenture should not be construed
to be an approval or disapproval of the advisability of the amendments to the
Indenture provided herein.

SECTION II.6. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN SAID STATE.

SECTION II.7. This Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, and all of such counterparts shall together constitute one and the
same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.

CLARK USA, INC.

By: Maura J. Clark
------------------------------------------------
Name: Maura J. Clark
Title: Executive Vice President-Corporate
Development and Chief Financial Officer

BANKERS TRUST COMPANY, as Trustee

By: Susan Johnson
------------------------------------------------
Name: Susan Johnson
Title: Assistant Vice President

<PAGE>

Exhibit 4.6

================================================================================

CLARK USA, INC.

$175,000,000

10 7/8% SERIES B SENIOR NOTES DUE 2005

---------------------------------

SUPPLEMENTAL INDENTURE

Dated as of August 10, 1998

INDENTURE

Dated as of December 1, 1995

---------------------------------

THE CHASE MANHATTAN BANK,

Trustee
<PAGE>

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
August 10, 1998, by and between CLARK USA, INC., a Delaware corporation (the
"Company"), having its principal office at 8182 Maryland Avenue, St. Louis,
Missouri 63105-3721, and The Chase Manhattan Bank, as trustee (the "Trustee")
under the Indenture (as defined below), having its Corporate Trust Office at 450
West 33rd Street, New York, New York 10001-2697. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Indenture.

WHEREAS, the Company and the Trustee previously duly executed, and the
Company duly delivered to the Trustee, an Indenture dated as of December 1, 1995
(the "Indenture"), relating to $175,000,000 aggregate principal amount at
maturity of the Company's 10 7/8% Series B Senior Notes due 2005 (the "Notes");

WHEREAS, pursuant to Section 902 of the Indenture, the Company and the
Trustee have obtained the consent of the Holders of not less than a majority in
principal amount of the outstanding Notes to the amendments made hereby;

WHEREAS, the Board of Directors of the Company has authorized the
execution of this Supplemental Indenture and its delivery to the Trustee;

WHEREAS, the Company has delivered an Opinion of Counsel to the
Trustee pursuant to Sections 102 and 903 of the Indenture; and

ARTICLE I
AMENDMENTS

Upon execution of this Supplemental Indenture, the terms of the Notes
and the Indenture shall be amended as follows:

SECTION I.1. Section 101 of the Indenture shall be amended as follows:

(a) by deleting the definition of "Permitted Indebtedness" and
substituting in lieu thereof the following:

(x) does not provide for payments of principal of such Indebtedness at the
stated maturity thereof or by way of a sinking fund applicable thereto or
by way of any mandatory redemption, defeasance, retirement or repurchase
thereof by the Corporation or such Restricted Subsidiary (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Indebtedness upon an event of default thereunder), in
each case prior to the final Stated Maturity of the Exchange Debentures and
(y) does not permit redemption or other retirement (including pursuant to
an offer to purchase made by the Corporation or such Restricted Subsidiary)
of such Indebtedness at the option of the holder thereof prior to the final
stated maturity of the Indebtedness being refinanced or refunded, other
than a redemption or other retirement at the option of the holder of such
Indebtedness (including pursuant to an offer to purchase made by the
Corporation or such Restricted Subsidiary), which is conditioned upon the
change of control of the Corporation or such Restricted Subsidiary); (ii)
arising from time to time under the Credit Agreement or any refinancings,
renewals, extensions, refundings or replacements thereof or extensions of
credit to finance working capital requirements in an aggregate principal
amount not to exceed the greater of (a) $700 million at any one time
outstanding less the aggregate amount of all proceeds of all asset
dispositions that have been applied since the Issue Date to permanently
reduce the outstanding amount of such Indebtedness and (b) the amount of
the Borrowing Base on such date (calculated on a pro forma basis after
giving effect to such borrowing and the application of the proceeds
therefrom); (iii) outstanding on the Issue Date; (iv) evidenced by trade
letters of credit incurred in the ordinary course of business not to exceed
$20 million in the aggregate at any time; (v) between or among the
Corporation and/or its Restricted Subsidiaries other than Restricted
Subsidiaries owned in any part by the Principal Shareholders; (vi) which is
Junior Subordinated Indebtedness; (vii) arising out of Sale and Leaseback
Transactions or Capitalized Lease Obligations relating to computers and
other office equipment and elements, catalysts or other chemicals used in
connection with the refining of petroleum or petroleum by-products; (viii)
the proceeds of which are used to make the Chevron Payment, the AOC Payment
and the Gulf Payments; (ix) arising out of Interest Swap Obligations; (x)
in connection with capital projects qualifying under Section 142(a) (or any
successor provision) of the Internal Revenue Code of 1986, as amended, in
an amount not to exceed $75 million in the aggregate at any time; (xi) to
finance the Lima Acquisition, in an amount not to exceed $250 million; and
(xii) in addition to Indebtedness permitted by clauses (i) through (xi)
above, Indebtedness not to exceed on a consolidated basis for the
Corporation and its Restricted Subsidiaries at any time the greater of (a)
$25 million and (b) the dollar amount represented by the product of 1.25
million and the settlement price on the New York Mercantile Exchange of the
spot month for a barrel of West Texas Intermediate crude oil (or, if such
price cannot be obtained, the applicable price shown in the then most
recently published Platt's Oilgram Price Report or, if such publication is
not published at any time, or if it does not include such prices, then in
any comparable industry publication including such prices), which amount
shall be calculated by the Company as of the last day of each calendar
quarter using the price per barrel as determined under (b) above as of such
date and shall be in effect for the next succeeding calendar quarter."

(b) by deleting the definition of "Permitted Liens" and substituting
in lieu thereof the following:

"'Permitted Liens' means (i) Liens in favor of the Company; (ii) Liens
on property of a Person existing at the time such Person is merged into or
consolidated with the Company, provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or
consolidated with the Company; (iii) Liens on property existing at the time
of acquisition thereof by the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (iv) Liens to
secure the performance of statutory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (v) Liens existing on the Issue Date; (vi)
Liens for taxes, assessments or governmental charges or claims that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity
with GAAP shall have been made therefor; (vii) Liens imposed by law, such
as mechanics', carriers', warehousemen's, materialmen's, and vendors'
Liens, incurred in good faith in the ordinary course of business with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings if a reserve or other appropriate provisions, if
any, as shall be required by GAAP shall have been made therefor; (viii)
zoning restrictions, easements, licenses, covenants, reservations,
restrictions on the use of real property or minor irregularities of title
incident thereto that do not, in the aggregate, materially detract from the
value of the property or the assets of the Company or impair the use of
such property in the operation of the Company's business; (ix) judgment
<PAGE>

Liens to the extent that such judgments do not cause or constitute a
Default or an Event of Default; (x) Liens to secure the payment of all or a
part of the purchase price of property or assets acquired or the
construction costs of property or assets constructed in the ordinary course
of business on or after the Issue Date, provided that (a) such property or
assets are used in the Principal Business of the Company, (b) at the time
of incurrence of any such Lien, the aggregate principal amount of the
obligations secured by such Lien shall not exceed the lesser of the cost or
fair market value of the assets or property (or portions thereof) so
acquired or constructed, (c) each such Lien shall encumber only the assets
or property (or portions thereof) so acquired or constructed and shall
attach to such assets or property within 180 days of the purchase or
construction thereof and (d) any Indebtedness secured by such Lien shall
have been permitted to be incurred under 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; (xii) Liens incurred in connection with Interest
Swap Obligations; and (xiii) Liens to secure obligations owing from time to
time under the Clark Credit Agreement and guaranties thereof."

" 'Lima Acquisition' means the acquisition by Clark Refining &
Marketing, Inc. of the Lima Oil Refinery located in Lima, Ohio, and certain
related inventory, spare parts and other assets, pursuant to the Agreement
for the Purchase and Sale of Lima Oil Refinery, dated as of July 1, 1998,
among Clark Refining & Marketing, Inc. and BP Exploration & Oil Inc., The
Standard Oil Company, BP Oil Pipeline Company and BP Chemicals Inc."

ARTICLE II
MISCELLANEOUS

SECTION II.3. Upon execution, this Supplemental Indenture shall form a
part of the Indenture and the Supplemental Indenture and the Indenture shall be
read, taken and construed as one and the same instrument for all purposes, and
every holder of Notes heretofore or hereafter authenticated and delivered under
the Indenture shall be bound hereby.

SECTION II.4. This Supplemental Indenture shall become effective as of
the date first above written.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.

CLARK USA, INC.

By: /s/ Maura J. Clark
----------------------------------------------
Name: Maura J. Clark
Title: Executive Vice President-Corporate
Development and Chief Financial Officer

THE CHASE MANHATTAN BANK, as Trustee

By: R. J. Halleran
----------------------------------------------
Name: R. J. Halleran
Title: Second Vice President

<PAGE>

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