UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-13514
CLARK USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1495734
(State or other jurisdiction (I.R.S. Employer
of 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
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 ( )
Number of shares of registrant's common stock, $.01 par value,
outstanding as of May 14, 1999, 19,934,495, all of which were owned by
Clark Refining Holdings, Inc.
<PAGE> 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Clark USA, Inc:
We have reviewed the accompanying consolidated balance sheet of Clark
USA, Inc. and Subsidiaries (the "Company") as of March 31, 1999, and the
related consolidated statements of operations and cash flows for the
three month periods ended March 31, 1998 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of the Company as of
December 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended
(not presented herein); and in our report dated February 6, 1999, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of December 31, 1998 is
fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Deloitte & Touche LLP
St. Louis, Missouri
May 14, 1999
<PAGE> 2
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share data)
<TABLE>
Reference December 31, March 31,
Note 1998 1999
---------- ------------ ----------
<S> <C> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 148.2 $ 104.3
Short-term investments 4.5 4.8
Accounts receivable 131.3 142.8
Inventories 3 267.7 277.3
Prepaid expenses and other 28.7 27.6
Net assets held for sale 7 140.3 140.6
------------ ----------
Total current assets 720.7 697.4
PROPERTY, PLANT AND EQUIPMENT, NET 628.8 660.7
OTHER ASSETS 4,5 97.6 116.8
------------ ----------
$ 1,447.1 $ 1,474.9
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 250.3 $ 237.1
Accrued expenses and other 5 66.8 75.7
Accrued taxes other than income 25.9 26.9
------------ ----------
Total current liabilities 343.0 339.7
LONG-TERM DEBT 980.2 979.4
OTHER LONG-TERM LIABILITIES 49.2 49.6
COMMITMENTS AND CONTINGENCIES 8 -- --
EXCHANGEABLE PREFERRED STOCK
($.01 par value per share;
5,000,000 shares authorized;
74,504 shares issued) 72.5 74.5
COMMON STOCKHOLDERS' EQUITY:
Common stock
Common, $.01 par value, 13,767,829 issued 0.1 0.1
Class F Common, $.01 par value,
6,101,010 issued 0.1 0.1
Paid in capital 209.0 209.0
Retained deficit (207.0) (177.5)
------------ -----------
Total common stockholders' equity 2.2 31.7
------------ -----------
$ 1,447.1 $ 1,474.9
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 3
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
<TABLE>
For the three months
ended March 31,
----------------------------
Reference
Note 1998 1999
----------- ------------- -------------
<S> <C> <C> <C>
(unaudited) (unaudited)
NET SALES AND OPERATING REVENUES $ 590.1 $ 803.2
EXPENSES:
Cost of sales (497.5) (725.6)
Operating expenses (77.6) (97.1)
General and administrative expenses (12.0) (13.2)
Depreciation (6.4) (8.8)
Amortization 4 (5.9) (5.1)
Inventory recovery (write-down)
to market 3 (22.7) 96.2
------------- -------------
(622.1) (753.6)
------------- -------------
OPERATING INCOME (LOSS) (32.0) 49.6
Interest expense and finance
costs, net 4,5 (16.0) (21.1)
------------- -------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (48.0) 28.5
Income tax (provision) benefit 6 (0.3) 1.1
------------- -------------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (48.3) 29.6
Discontinued operations, net of
income taxes of $1.1 (1998 - $0.2
benefit 7 (0.4) 1.9
------------- -------------
NET EARNINGS (LOSS) $ (48.7) $ 31.5
Preferred stock dividends (1.8) (2.0)
------------- -------------
NET EARNINGS (LOSS) AVAILABLE TO
COMMON STOCK $ (50.5) $ 29.5
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 4
CLARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
<TABLE>
For the three months
ended March 31,
----------------------------
1998 1999
------------- -------------
<S> <C> <C>
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (48.7) $ 31.5
Discontinued operations 0.4 (1.9)
Adjustments:
Depreciation 6.4 8.8
Amortization 6.6 6.6
Inventory (recovery) write-down to market 22.7 (96.2)
Other (4.4) (1.1)
Cash provided by (reinvested in) working capital -
Accounts receivable, prepaid expenses and other 13.6 (10.4)
Inventories (44.5) 86.6
Accounts payable, accrued expenses, taxes
other than income and other (47.7) (3.3)
------------- -------------
Net cash provided by (used in)
operating activities (95.6) 20.6
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments -- (3.2)
Sales and maturities of short-term investments -- 2.9
Expenditures for property, plant and equipment (5.9) (40.7)
Expenditures for turnaround (3.5) (24.3)
Discontinued operations 10.1 1.6
------------- -------------
Net cash provided by (used in)
investing activities 0.7 (63.7)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt payments (7.7) (0.8)
------------- -------------
Net cash used in financing activities (7.7) (0.8)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (102.6) (43.9)
CASH AND CASH EQUIVALENTS, beginning of period 234.3 148.2
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 131.7 $ 104.3
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
FORM 10-Q - PART I
ITEM 1 Financial Statements (continued)
Clark USA, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1999
(tabular dollar amounts in millions of US dollars)
1. Basis of Preparation
The consolidated interim financial statements of Clark USA, Inc. and
Subsidiaries (the "Company") have been reviewed by independent
accountants. In the opinion of the management of the Company, all
adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the financial statements have been included
therein. The financial statements are presented in accordance with the
disclosure requirements for Form 10-Q. These unaudited financial
statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's 1998 Annual
Report on Form 10-K.
In May 1999, all of the shares of Clark USA, Inc. were exchanged for
equivalent shares of Clark Refining Holdings, Inc. which
was newly formed to serve as a holding company.
The Company has made certain reclassifications to the prior period to
conform to current period presentation.
2. Accounting Changes
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 comprehensive income until the hedged transactions
occur and are recognized in earnings. The ineffective portion of a
hedging derivative's change in fair value will 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. Inventories
The carrying value of inventories consisted of the following:
<TABLE>
December 31, March 31,
1998 1999
------------- ------------
<S> <C> <C>
Crude oil $ 165.3 $ 89.7
Refined and blendstocks 186.4 176.1
LIFO inventory value excess over market (105.8) (9.6)
Warehouse stock and other 21.8 21.1
------------- ------------
$ 267.7 $ 277.3
============= ============
</TABLE>
<PAGE> 6
4. Other Assets
Amortization of deferred financing costs for the three-month period
ended March 31, 1999 was $1.4 million (1998- $0.7 million) and was
included in "Interest and finance costs, net."
Amortization of refinery maintenance turnaround costs for the three-
month period ended March 31, 1999 was $5.1 million (1998- $5.9 million).
5. Interest and Finance Costs, net
Interest and finance costs, net, consisted of the following:
<TABLE>
For the three months
ended March 31,
-----------------------
1998 1999
--------- -----------
<S> <C> <C>
Interest expense $ 18.4 $ 23.3
Financing costs 0.6 1.5
Interest and finance income (2.6) (1.7)
--------- -----------
16.4 23.1
Capitalized interest (0.4) (2.0)
--------- -----------
Interest and finance costs, net $ 16.0 $ 21.1
========= ===========
</TABLE>
Cash paid for interest expense for the three-month period ended March
31, 1999 was $19.0 million (1998- $11.9 million). Accrued interest
payable as of March 31, 1999 of $19.2 million (December 31, 1998- $14.9
million) was included in "Accrued expenses and other."
6. Income Taxes
The Company made no net cash income tax payments during the first
quarter of 1999 (1998 - net cash income tax refunds of $5.0 million).
The income tax provision (benefit) related to Discontinued Operations
for the three-month period ended March 31, 1999 was $1.1 million (1998 -
$(0.2) million). The income tax provision (benefit) for Continuing
Operations for the same periods was $(1.1) million and $0.3 million,
respectively, which reflects the intraperiod utilization of net
operating losses.
7. Disposition of Retail Division
In May, 1999, the Company signed a definitive agreement to sell its
retail marketing operation in a recapitalization transaction to a
company controlled by Apollo Management L.P. for cash proceeds of
approximately $230 million. An affiliate of the Company's principal
shareholder will hold a six percent equity interest in the retail
marketing operation. As part of the sale agreement, the Company also
entered into a two-year, market-based supply agreement for refined
products that will be provided to the retail business through the
Company's Midwest refining and distribution network. This network was not
included in the sale. The supply agreement may be cancelled with 90
days notice by the buyer
The sale of the business is expected to close in the third quarter of
1999. The retail marketing operation sold includes all Company-operated retail
stores, approximately 200 independently-operated, Clark-branded stores
and the Clark trade name. Accordingly, the operating results of the
retail marketing operations, including the provision for income taxes,
have been segregated from the Company's continuing operations and
reported as a separate line item as Discontinued Operations in the
Consolidated Statements of Operations for all periods presented.
<PAGE> 7
The retail operations' net sales revenue for the three-month period
ended March 31, 1999 was $202.8 million (1998 - $234.0 million). The
components of "Net assets held for sale" included in the Company's
Consolidated Balance Sheets for March 31, 1999 and December 31, 1998 are
as follows:
<TABLE>
December 31, March 31,
1998 1999
------------ -----------
<S> <C> <C>
Current Assets $ 43.0 $ 48.2
Noncurrent Assets 187.5 182.2
------------ -----------
Total Assets 230.5 230.4
------------ -----------
Current Liabilities 63.4 62.3
Noncurrent Liabilities 26.8 27.5
------------ -----------
Total Liabilities 90.2 89.8
------------ -----------
Net Assets Held For Sale $ 140.3 $ 140.6
============ ===========
</TABLE>
8. Commitments and Contingencies
Clark Refining & Marketing, Inc. ("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. While it is not possible at
this time to establish the ultimate amount of liability with respect to such
contingent liabilities, Clark R&M and the Company are of the opinion
that the aggregate amount of any such liabilities, for which provision
has not been made, will not have a material adverse effect on their
financial position, however, an adverse outcome of any one or more of
these matters could have a material effect on quarterly or annual
operating results or cash flows when resolved in a future period.
In March 1998, the Company announced that it had entered into a
long-term crude oil supply agreement with P.M.I. Comercio
Internacional, S.A. de C.V. ("PMI"), an affiliate of Petroleos
Mexicanos, the Mexican state oil company. The contract provided the
Company with the foundation necessary to continue developing a project
to upgrade its Port Arthur, Texas refinery to process primarily lower-
cost, heavy sour crude oil. The project is expected to cost $600-$700
million and includes 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 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 expects to receive compensation under these agreements at
fair market value that is expected to be favorable to the Company.
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 March 31, 1999, non-cancelable
amounts of approximately $65 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 $200,000 per month to PMI from September 1, 1998 to
the cancellation date. In addition, the Company would be subject to
payment of the non-cancelable commitments and required to record a
charge to earnings for all expenditures to date. Although the financing
is expected to be completed by mid-1999, there can be no assurance that
the financing for the project will be successful or that the project can
be completed as contemplated.
<PAGE> 8
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Clark USA, Inc. (the "Company") owns all of the outstanding capital
stock of Clark Refining & Marketing, Inc. ("Clark R&M"). The Company
also owns all of the outstanding capital stock of Clark Pipe Line
Company. Because Clark R&M is the principal subsidiary of the Company,
a discussion of the Company's results of operations consists principally
of a discussion of Clark R&M's results of operations.
Results of Operations
Financial Highlights
The following table reflects the Company's financial and operating
highlights for the three month periods ended March 31, 1998 and 1999.
All amounts listed are dollars in millions, except per barrel
information. The table provides supplementary data and is not intended
to represent an income statement presented in accordance with generally
accepted accounting principles.
Operating Income:
<TABLE>
For the three months
ended March 31,
-----------------------
1998 1999
----------- ----------
<S> <C> <C>
Port Arthur Refinery
Crude oil throughput (m bbls/day) 222.2 213.0
Production (m bbls/day) 218.9 214.0
Gross margin ($/barrel of production) $ 3.89 $ 2.10
Gulf Coast 3/2/1 crack spread ($/barrel) 2.50 1.21
Operating expenses (45.4) (40.2)
Net margin $ 31.3 $ 0.2
Midwest Refineries and Other
Crude oil throughput (m bbls/day) 109.5 242.4
Production (m bbls/day) 116.1 261.4
Gross margin ($/barrel of production) $ 2.74 $ 1.22
Chicago 3/2/1 crack spread ($/barrel) 2.65 1.79
Operating expenses (32.1) (56.9)
Clark Pipe Line net margin 0.6 0.8
Net margin $ (2.9) $ (27.4)
General and administrative expenses (12.0) (13.2)
----------- ----------
Operating Contribution 16.4 (40.4)
Inventory timing adjustment gain (loss) (a) (13.4) 7.7
Inventory recovery (write-down) to market (22.7) 96.2
Depreciation and amortization (12.3) (13.9)
----------- ----------
Operating income (loss) $ (32.0) $ 49.6
=========== ==========
</TABLE>
(a) Includes gains and losses caused by the 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.
In the first quarter of 1999, the Company recorded net earnings from
continuing operations of $29.6 million versus a loss of $48.3 million
in the same period a year ago. Net earnings in 1999 benefited from an
increase in crude oil prices during the quarter as demonstrated by the
over $4.60 per barrel in WTI crude oil prices along with a larger
increase in refined product prices. This increase resulted in
inventory gains of $103.9 million as compared to inventory losses of
$36.1 million in 1998. In 1999, these inventory gains were made up of
a recovery of previous non-cash inventory writedowns of $96.2 million
<PAGE> 9
(1998 - loss of $22.7 million) and the cash benefit of the price
increases on the lag between crude oil purchases and product sales of
$7.7 million (1998 - loss of $13.4 million).
Net sales and operating revenues increased approximately 36% in the
first three months of 1999 as compared to the same period of 1998. This
increase was due to additional sales volumes principally resulting from
the acquisition of the Lima refinery in August 1998 that were only
partially offset in the period by lower average petroleum prices.
Operating Contribution (earnings before interest, depreciation,
amortization, inventory-related items and taxes) was a loss of $40.4
million in the first quarter of 1999, which was below the Operating
Contribution of $16.4 million in the same period a year ago principally
due to lower refining margins. Gulf Coast refining margin indicators
decreased $1.29 per barrel and Midwest indicators decreased $0.86 per
barrel in the first quarter of 1999 as the third consecutive warmer-
than-normal winter heating season bloated industry inventories. In
addition, discounts for heavy and sour crude oil were compressed
relative to year-ago levels. This compression was due to the low
absolute crude oil prices, reduced Canadian heavy sour crude oil
production, and OPEC production cuts disproportionately affecting heavy
crude oil barrels.
Crude oil throughput and related production in the Company's Midwest
refineries was higher in the first quarter of 1999 principally because
of the addition of the Lima refinery in August 1998. However, the
increase in production resulting from the Lima refinery was partially
offset by a reduction in throughput due to the poor refining margins, a
leak in a major interstate crude oil pipeline supplying the Midwest
refineries and lower throughput associated with a maintenance
turnaround at the Lima refinery. The lower production associated with
the maintenance turnaround resulted in a lost margin opportunity of
approximately $5 million for the quarter. Crude oil throughput and
production was also reduced at the Port Arthur refinery due to the poor
first quarter 1999 refining margins.
Midwest refining operating expenses increased because of the
addition of the Lima refinery. Port Arthur operating expenses were
reduced in the first quarter of 1999 due to lower maintenance and gain
sharing expenses and the positive impact of lower natural gas prices on
fuel costs.
Other Financial Highlights
General and administrative expenses increased in the first quarter of
1999 over the comparable periods of 1998 principally because of costs
related to the addition of the Lima refinery and costs associated with
year 2000 remediation and upgrades. The Company has expended $3.1
million from inception of its year 2000 program through March 31, 1999.
The Company is on target with its year 2000 program that is discussed
in more detail in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
Interest and finance costs, net for the three months ended March 31,
1999 increased over the comparable period in 1998 principally because of
increased debt associated with the acquisition of the Lima refinery.
Depreciation and amortization expense also increased in the three months
ended March 31, 1999 over the comparable period in 1998 principally
because of the acquisition of the Lima refinery.
Sale of Retail Division
In May 1999, the Company signed a definitive agreement to sell its
retail marketing operation in a recapitalization transaction to a
company controlled by Apollo Management L.P. for cash proceeds of
approximately $230 million. See Exhibit 10.0 Asset Contribution and
Recapitalization Agreement. An affiliate of the Company's principal
shareholder will hold a six percent equity interest in the retail
marketing operation. As part of the sale agreement, the Company also
entered into a two-year market-based supply agreement for refined
products that will be provided to the retail business through the
<PAGE> 10
Company's Midwest refining and distribution network. This network was not
included in the sale. The supply agreement may be cancelled with 90
days notice by the buyer. The retail marketing operation is being sold
in order to allow the Company to focus its human and financial resources
on the continued improvement and expansion of its refining business,
which it believes will generate higher future returns.
The retail marketing operations were classified as a discontinued
operation and the results of operations were excluded from continuing
operations in the consolidated statements of operations for the periods
ending March 31, 1998 and 1999. A gain on the sale is expected to be
recognized and the transaction is expected to close in the third
quarter of 1999. The retail marketing operation sold includes all
Company-operated retail stores, approximately 200 independently-
operated, Clark-branded stores and the Clark trade name.
Liquidity and Capital Resources
Net cash used in operating activities, excluding working capital
changes, for the three months ended March 31, 1999 was $52.3 million
compared to cash used of $17.0 million in the year-earlier period.
Working capital as of March 31, 1999 was $357.7 million, a 2.05-to-1
current ratio, versus $377.7 million as of December 31, 1998, a 2.10-to-
1 current ratio. Working capital at December 31, 1998 and March 31,
1999 included the retail division net assets held for sale. Total
working capital decreased in the first quarter of 1999 principally due
to the cash used in operating activities and significant capital
expenditures, which were only partially offset by the positive impact of
increased petroleum prices on inventory.
In general, the Company's short-term working capital requirements
fluctuate with the price and payment terms of crude oil and refined
petroleum products. Clark R&M has in place a credit agreement (the
"Credit Agreement") which provides for borrowings and the issuance of
letters of credit up to the lesser of $700 million, or the amount of a
borrowing base calculated with respect to Clark R&M's cash, short-term
investments, eligible receivables and hydrocarbon inventories. Direct
borrowings under the Credit Agreement are limited to the principal
amount of $150 million. Borrowings under the Credit Agreement are
secured by a lien on substantially all of the Company's cash and cash
equivalents, receivables, crude oil and refined product inventories and
trademarks. The amount available under the borrowing base associated
with such facility at March 31, 1999 was $450 million and approximately
$292 million of the facility was utilized for letters of credit. As of
March 31, 1999, there were no direct borrowings under the Credit
Agreement. The Credit Agreement expires on December 31, 1999 and the
Company expects to amend or replace the agreement by the end of 1999.
Cash flows used in investing activities in the first three months of
1999 were $63.7 million as compared to $0.7 million in the year-earlier
period. Cash flow used in investing activities in 1999 was higher than
the previous year's first quarter principally due to increased scheduled
maintenance turnaround expenditures at the Lima and Port Arthur
refineries ($24.3 million), and increased capital expenditures.
Expenditures for property, plant and equipment totaled $40.7 million
(1998 - $5.9 million) in the first three months of 1999 principally
related to a project to upgrade the Port Arthur refinery to allow it to
process up to 80% heavy sour crude oil ($33.3 million).
In March 1998, the Company announced that it had entered into a
long-term crude oil supply agreement with P.M.I. Comercio
Internacional, S.A. de C.V. ("PMI"), an affiliate of Petroleos
Mexicanos, the Mexican state oil company. The contract provided the
Company with the foundation necessary to continue developing a project
to upgrade its Port Arthur, Texas refinery to process primarily lower-
cost, heavy sour crude oil. The project is expected to cost $600-$700
million and includes 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
<PAGE> 11
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 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 expects to receive compensation under these agreements at
fair market value that is expected to be favorable to the Company.
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 similar provisions, for material, equipment
and services related to this project. As of March 31, 1999, non-
cancelable amounts of approximately $65 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 $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 by mid-1999, there can be no assurance that
the financing for the project will be successful or that the project can
be completed as contemplated.
Cash flows used in financing activities for first quarter of 1999
decreased as compared to the same period in 1998 principally because of
the partial redemption in 1998 of the Company's Senior Secured Zero
Coupon Notes, due 2000 ($3.6 million), and the repurchase in 1998 of
Clark R&M's 9 1/2% Senior Unsecured Notes, due 2004 tendered under its
required Change of Control offer ($3.3 million).
Funds generated from operating activities together with the Company's
existing cash, cash equivalents and short-term investments are expected
to be adequate to fund requirements for working capital and capital
expenditure programs for the next year, excluding the Port Arthur heavy
sour crude oil upgrade project which the Company expects to finance by
mid-1999. Future working capital investments, discretionary or non-
discretionary capital expenditures, or acquisitions may require
additional debt or equity financing.
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
<PAGE> 12
* 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.
PART II - OTHER INFORMATION
ITEM 5 - Other Information
Resignation of Director
Effective May 4, 1998, Glenn H. Hutchins resigned as a director of
the Company and Clark R&M. No replacement was immediately named to
replace Mr. Hutchins.
Sale of Retail Division
In May 1999, the Company signed a definitive agreement to sell its
retail marketing operation in a recapitalization transaction to a
company controlled by Apollo Management L.P. for cash proceeds of
approximately $230 million. See Exhibit 10.0 Asset Contribution and
Recapitalization Agreement. An affiliate of the Company's principal
shareholder will hold a six percent equity interest in the retail
marketing operation. As part of the sale agreement, the Company also
entered into a two-year market-based supply agreement for refined
products that will be provided to the retail business through the
Company's Midwest refining and distribution network. This network was not
included in the sale. The supply agreement may be cancelled with 90
days notice by the buyer. The retail marketing operation is being sold
in order to allow the Company to focus its human and financial resources
on the continued improvement and expansion of its refining business,
which it believes will generate higher future returns.
The retail marketing operations were classified as a discontinued
operation and the results of operations were excluded from continuing
operations in the consolidated statements of operations for the periods
ending March 31, 1998 and 1999. A gain on the sale is expected to be
recognized and the transaction is expected to close in the third
quarter of 1999. The retail marketing operation sold includes all
Company-operated retail stores, approximately 200 independently-
operated, Clark-branded stores and the Clark trade name.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.0 - Asset Contribution and Recapitalization
Agreement
Exhibit 27.0 - Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 13
SIGNATURE
Pursuant to the requirements 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.
(Registrant)
/s/ Dennis R. Eichholz
-------------------------------
Dennis R. Eichholz
Controller and Treasurer
(Authorized Officer
and Chief Accounting Officer)
May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 92,822 131,750
<SECURITIES> 4,792 14,889
<RECEIVABLES> 144,157 89,246
<ALLOWANCES> 1,355 1,376
<INVENTORY> 277,371 250,492
<CURRENT-ASSETS> 697,540 620,054
<PP&E> 840,233 530,119
<DEPRECIATION> 179,574 148,831
<TOTAL-ASSETS> 1,474,981 1,083,618
<CURRENT-LIABILITIES> 339,823 227,634
<BONDS> 979,390 757,721
74,504 66,623
0 0
<COMMON> 199 199
<OTHER-SE> 31,511 (11,338)
<TOTAL-LIABILITY-AND-EQUITY> 1,473,535 1,083,618
<SALES> 802,986 588,812
<TOTAL-REVENUES> 804,865 592,679
<CGS> 725,594 497,372
<TOTAL-COSTS> 726,550 597,955
<OTHER-EXPENSES> 13,314 12,432
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 23,289 18,466
<INCOME-PRETAX> 31,610 (47,943)
<INCOME-TAX> (1,073) 394
<INCOME-CONTINUING> 29,636 (48,337)
<DISCONTINUED> 1,887 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 31,523 (48,721)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
EXHIBIT 10.0
ASSET CONTRIBUTION AND RECAPITALIZATION AGREEMENT
by and among
CLARK USA, INC.
CLARK REFINING & MARKETING, INC.,
OTG, INC.
and
CM ACQUISITION, INC.
dated as of
May 8, 1999
TABLE OF CONTENTS
Page
ARTICLE I - CERTAIN DEFINITIONS 1
ARTICLE II- SALE OF ASSETS; CLOSING 14
Section 2.1 Assets to Be Acquired 14
Section 2.2 Excluded Assets 17
Section 2.3 Assumption of Liabilities 19
Section 2.4 Retained Liabilities 21
Section 2.5 Recapitalization 22
Section 2.6 Additional Closing Deliveries 25
Section 2.7 Time and Place of the Closing 27
Section 2.8 Purchase Price Adjustment 27
Section 2.9 Allocation 30
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER 31
Section 3.1 Organization and Qualification 31
Section 3.2 Authority 32
Section 3.3 Equity Investments 32
Section 3.4 Consents and Approvals; No Violation 32
Section 3.5 Financial Statements 33
Section 3.6 Undisclosed Liabilities 35
Section 3.7 Absence of Certain Changes or Events 35
Section 3.8 Condition of Assets; Assets
Necessary for Business 36
Section 3.9 Personal Property 36
Section 3.10 Real Property 37
Section 3.11 Litigation 39
Section 3.12 Intellectual Property 39
Section 3.13 Licenses 40
Section 3.14 Labor Matters 40
Section 3.15 Employee Benefit Plans; ERISA 41
Section 3.16 Material Contracts 41
Section 3.17 Environmental Matters 43
Section 3.18 Brokers, Finders, etc 44
Section 3.19 Transactions with Affiliates 45
Section 3.20 Compliance with Laws 45
Section 3.21 Insurance 45
Section 3.22 Year 2000 45
Section 3.23 Books of Account 46
Section 3.24 Retail Stores 46
Section 3.25 Jobbers 46
Section 3.26 Taxes 46
Section 3.27 No Implied Representations 47
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER 48
Section 4.1 Organization and Qualification 48
Section 4.2 Authority 48
Section 4.3 Consents and Approvals; No Violation 49
Section 4.4 Litigation 49
Section 4.5 Brokers, Finders, etc 50
Section 4.6 Financial Capability 50
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS 50
Section 5.1 Conduct of Business 50
ARTICLE VI - ADDITIONAL AGREEMENTS 53
Section 6.1 Access to Information 53
Section 6.2 Filings 54
Section 6.3 Consents 54
Section 6.4 Certain Tax Matters 54
Section 6.5 Agreement to Cooperate; Further Assurances 55
Section 6.6 Public Announcements 57
Section 6.7 Confidential Information 57
Section 6.8 WARN 58
Section 6.9 Employment/Employee Benefits Arrangements 58
Section 6.10 Non-Solicitation of Employees;No Transfers 60
Section 6.11 Phase I Environmental 61
Section 6.12 Non-Competition; Clark Name 62
Section 6.13 Transition Services; Supply
Agreement; Software License Agreement 63
Section 6.14 Intercompany Accounts 63
Section 6.15 Real Property Documents 63
Section 6.16 Certain Liabilities 64
Section 6.17 Revolver 65
ARTICLE VII - CONDITIONS 65
Section 7.1 Conditions to Each Party's
Obligations to Effect the
Transactions Contemplated Hereby 65
Section 7.2 Conditions to Obligations of
Buyer to Effect the
Transactions Contemplated Hereby 66
Section 7.3 Conditions to Obligations of Seller and
Retail Sub to Effect the Transactions
Contemplated Hereby 67
ARTICLE VIII - TERMINATION 68
Section 8.1 Termination 68
Section 8.2 Effect of Termination 69
ARTICLE IX - SURVIVAL; INDEMNIFICATION 69
Section 9.1 Survival 70
Section 9.2 Indemnification by Buyer or Seller 70
Section 9.3 Third-Party Claims 73
Section 9.4 Environmental Indemnification. 74
Section 9.5 Termination of Indemnification 77
ARTICLE X - MISCELLANEOUS 77
Section 10.1 Counterparts 77
Section 10.2 Governing Law 77
Section 10.3 Entire Agreement 78
Section 10.4 Expenses 78
Section 10.5 Notices 78
Section 10.6 Assignment 79
Section 10.7 Interpretation 80
Section 10.8 Amendments; Waivers 81
Section 10.9 Severability 81
Section 10.10 Consent to Jurisdiction; Waiver of
Jury Trial 82
Section 10.11 Specific Performance 82
Section 10.12 Bulk Sales 82
Section 10.13 Business Day 83
Section 10.14 Successors and Assigns 83
Section 10.15 Guarantee 83
Section 10.16 Arbitration 83
ASSET CONTRIBUTION AND RECAPITALIZATION AGREEMENT (this
"Agreement"), dated as of May 8, 1999, by and among CLARK USA, INC., a
Delaware corporation ("Clark USA"), CLARK REFINING & MARKETING, INC., a
Delaware corporation and a wholly owned subsidiary of Clark USA ("Seller"),
OTG, INC., a Delaware corporation and a wholly owned subsidiary of Clark USA
("Retail Sub"), and CM ACQUISITION, INC., a Delaware corporation ("Buyer").
WHEREAS, Seller owns or leases the assets used in connection with
the operation of the Business (as hereinafter defined);
WHEREAS, on the terms and subject to the conditions set forth in
this Agreement, Seller desires to contribute, assign and transfer the assets
of the Business to Retail Sub and Retail Sub desires to assume certain of the
obligations and liabilities of Seller related to the Business; and
WHEREAS, the parties hereto desire to effect certain other
transactions as provided herein whereby Buyer will acquire control of Retail
Sub.
NOW THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section I.1 As used in this Agreement the following terms shall
have the following respective meanings:
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority or before
any arbitrator.
"Affiliate" shall mean, with respect to any person, any other
person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with such first
person. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies, whether through the ownership of
securities or partnership or other ownership interests, by contract or
otherwise, and either alone or in conjunction with others. For the avoidance
of doubt, (i) Retail Sub shall be considered an Affiliate of Seller prior to
the Closing and not on or after the Closing, and any reference to "Affiliates
of Seller" shall be deemed to refer to matters relating to Retail Sub to the
extent (and only to the extent) such matters existed prior to the Closing and
(ii) Retail Sub shall be considered an Affiliate of Buyer after the Closing
and not on or prior to the Closing, and any reference to "Affiliates of Buyer"
shall be deemed to refer to matters relating to Retail Sub to the extent (and
only to the extent) such matters existed after the Closing.
"Allocation Schedule" shall have the meaning set forth in Section
2.9.
"Assets" shall have the meaning set forth in Section 2.1.
"Assignment and Assumption Agreement" shall mean an assignment and
assumption agreement in substantially the form attached as Exhibit A hereto
whereby Seller assigns all of its rights under the Assumed Contracts (other
than the Leases and the Subleases) to Retail Sub and Retail Sub assumes
Seller's obligations under the Assumed Liabilities (other than those arising
under the Leases and the Subleases) on the terms set forth therein.
"Assignments of Lease" means those assignments of lease to be
entered into between Retail Sub and Seller on the Closing Date, substantially
in the form of Exhibit B, whereby Seller assigns all of its rights under the
Leases (including the leaseholds created under such Leases) and under the
Subleases to Retail Sub and Retail Sub assumes Seller's obligations under such
Assumed Liabilities on the terms set forth therein.
"Assumed Contracts" shall have the meaning set forth in Section
2.1(c).
"Assumed Liabilities" shall have the meaning set forth in Section
2.3(a).
"Bill of Sale" shall mean a bill of sale in substantially the form
attached as Exhibit C hereto.
"Branded Retail Store" shall mean each Retail Store identified as
"Branded Retail Store: Franchisee operated" on Schedule 1.1(a), including
those Retail Stores identified as "Retail Stores: Non-Branded" on such
Schedule.
"Business" shall mean the retail marketing of gasoline,
convenience store products and other items through gasoline and convenience
stores and independently-operated branded gasoline and convenience stores as
conducted by Seller.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or a legal holiday on which banking institutions in the State of New York are
not required to open.
"Claims" shall have the meaning set forth in Section 2.1(j).
"Closing" shall have the meaning set forth in Section 2.7.
"Closing Balance Sheet" shall have the meaning set forth in
Section 2.8(a).
"Closing Date" shall mean the date at which the
Closing actually occurs.
"Closing Financial Data" shall have the meaning set forth in
Section 2.8(b).
"Closing Working Capital" shall have the meaning set forth in
Section 2.8(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto.
"Corporate Office" means the corporate office of Seller located at
8182 Maryland Avenue, St. Louis, Missouri, that provides certain support to
the Business.
"Debt" of a person means: (i) all obligations of such person for
borrowed money; (ii) all obligations of such person evidenced by bonds,
debentures, notes or other instruments; (iii) all obligations of such person
to pay the deferred purchase price of property or services; (iv) all
capitalized lease obligations of such person and (v) all obligations or
liabilities of others secured by a Lien on any asset owned by such person,
whether or not such obligation or liability is assumed by such person.
"Deeds" means those special warranty deeds to be executed and
delivered by Seller to Retail Sub on the Closing Date, substantially in the
form of Exhibit D, whereby Seller conveys the Owned Real Property to Retail
Sub (which will not contain any covenants in favor of any person other than
Retail Sub unless such covenant is necessary to obtain Title Insurance
Policies as required by the Title Insurer).
"employee benefit plan" shall mean "employee benefit plan" within
the meaning of section 3(3) of ERISA.
"Environmental Claim" shall mean any litigation, administrative
proceeding, claim, action, cause of action, investigation or notice by any
person (including any party hereto) alleging Liability or potential Liability
(including for investigatory costs, cleanup costs, remedial, removal,
containment, restoration or monitoring work, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
to the extent (and only to the extent) arising out of, based on or resulting
from (a) the presence, or release into the environment, at or prior to the
Closing Date, of any Materials of Environmental Concern at, on or beneath any
location utilized in the Business, or any land adjacent thereto or in
connection with any Hazardous Waste Site whether or not owned or operated by
Seller or (b) circumstances forming the basis of any violation or alleged
violation of or non-compliance or alleged non-compliance with any Environ-
mental Law or Environmental Permit at or prior to the Closing Date.
"Environmental Laws" shall mean all applicable Federal, state and
local Laws relating to pollution or protection of the environment (including
ambient air, surface water, ground water, land surface or subsurface strata),
or protection of human health (as relating to the workplace or the
environment) including Laws relating to emissions, discharges, releases or
threatened releases of Materials of Environmental Concern, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern.
"Environmental Permit" means any License required to be obtained
or held under any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Final Closing Working Capital" shall have the meaning set forth
in Section 2.8(d).
"Financial Statements" shall have the meaning set forth in Section
3.5.
"Franchise Contracts" shall mean each contract identified in
Schedule 2.1(c) under "Franchise Contracts" and "Jobber Contracts" pursuant to
which Seller has granted the right to use the Clark name to an owner or
operator of a Branded Retail Store.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States consistently applied.
"Governmental Authority" shall mean any government or state (or
any subdivision thereof), whether domestic, foreign or multinational, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
"Hazardous Waste Site" means any site or location other than on
Real Property, wherever located (including any well, pit, pond, lagoon,
tailings pile, spoil pile, impoundment, ditch, trench, drain, landfill,
warehouse or waste storage container) where Materials of Environmental Concern
have been deposited, stored, treated, reclaimed, disposed of, placed or
otherwise come to be located.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Initial Note Amount" shall mean an amount equal to $230,000,000
minus the Total Equity Amount, subject to adjustment pursuant to Sections
2.5(c), (d) and (e).
"Identified Contamination Site" means any parcel of Real Property
identified under "Environmental Matters: Identified Contamination Sites" on
Schedule 3.17 and any other Real Property at which a release of Materials of
Environmental Concern has been reported to an applicable Governmental
Authority (other than Remediated Sites) prior to the date hereof.
"IRS" shall mean the Internal Revenue Service.
"Jobber" means those independent third persons identified on
Schedule 2.1(c) under "Franchise Contracts" and "Jobber Contracts," who have
entered into Franchise Contracts with Seller for the purpose of selling
Seller's branded products.
"Law" means any law, rule, regulation, order, decree or other
requirement having the force of law.
"Leased Real Property" means all real property on which any of the
Seller Retail Stores or Other Real Property is situated (and including the
improvement, fixtures and fittings thereon and easements, rights-of-way and
appurtenances thereto) and leased or subleased by Seller from another person.
"Leases" means all leases, subleases, concession agreements,
licenses and other rights to occupancy relating to the Leased Real Property to
which Seller is party, whether as a lessee, sublessee or otherwise.
"Liabilities" shall mean, as to any person: (i) all Debts of such
person, (ii) adverse claims against such person, (iii) any contractual
obligation (or provision thereof) enforceable against such person that does
not constitute Debt of such person but which would involve the expenditure of
money by such person if complied with, and (iv) any other liabilities and
obligations, direct, indirect, absolute or contingent of such person, whether
accrued, vested or otherwise, whether known or unknown and whether or not
actually reflected, or required by GAAP to be reflected, in such person's
balance sheets or other books and records.
"Licenses" shall have the meaning set forth in Section 3.13.
"Liens" shall mean, with respect to any Asset, any lien (statutory
or otherwise), mortgage, deed of trust, deed to secure debt, pledge,
assignment, security interest, hypothecation, deposit arrangement, purchase
option, call, or other encumbrance of any kind in respect of such Asset,
whether or not filed, recorded or otherwise perfected under applicable Law.
"Losses" shall mean any and all losses, claims, demands,
Liabilities, obligations, actions, suits, orders, statutory or regulatory
compliance requirements, or proceedings asserted by any person (including
Governmental Authorities), and all damages, costs, expenses, assessments,
judgments, recoveries and deficiencies, including interest, penalties,
investigatory expenses, consultants' fees, and reasonable attorneys' fees and
costs (including costs incurred in enforcing the applicable indemnity), of
every kind and description incurred by or awarded against a party, provided
that "Losses" shall not include any indirect, consequential, incidental,
exemplary or punitive damages or other special damages or lost profits (except
to the extent payable to a third party as a result of a third party claim).
"Material Adverse Effect" shall mean a material adverse effect on
the business, financial condition or results of operations of the Business,
taken as a whole, or on the ability of Seller to consummate the transactions
contemplated hereby.
"Materials of Environmental Concern" shall mean all chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
asbestos, petroleum and petroleum products, petroleum hydrocarbons,
polychlorinated byphenols or any other substance as defined in, or as may
result in Liability or in an investigation or remediation under, Environmental
Laws or which is defined as "hazardous waste" or "hazardous substance" under
any Environmental Law, or which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
regulated by any Governmental Authority under Environmental Laws.
"Motor Vehicles" means all automobiles and trucks owned or leased
by Seller and primarily used in or necessary to the operation of the Business
as currently conducted.
"Neutral Auditors" shall have the meaning set forth in Section
2.8(d).
"Newco" shall mean a new Delaware limited liability company to be
formed by Superholdco that will be a wholly-owned subsidiary of Superholdco.
"Non-Transferred Employee" shall have the meaning set forth in
Section 6.9(a).
"Ordinary Course of Business" means the ordinary course of
business by Seller consistent with past custom and practice, as the same
relates to the Business or any part thereof.
"Other Real Property" means that real property (including the
improvements, fixtures and fittings thereon and easements, rights-of-way,
mineral rights and other appurtenances thereto) listed on Schedule 2.1(a)-1
and 2.1(a)-3 which is not a Retail Store.
"Owned Real Property" means all real property on which any of the
Seller Retail Stores or the Other Real Property is situated (and including the
improvements, fixtures and fittings thereon and easements, rights-of-way and
other appurtenances thereto) and owned by Seller.
"Permitted Liens" means (i) Liens for Taxes that (x) are not yet
due or delinquent or (y) are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accor-
dance with GAAP; (ii) statutory Liens or landlords', carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business with respect to amounts
not yet overdue or amounts being contested in good faith by appropriate
proceedings if a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor; (iii) Liens incurred or
deposits made in connection with workers' compensation, unemployment insurance
and other types of social security benefits; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory
obligations, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of like nature (other than
contracts for the payment of money); (v) easements, rights-of-way,
restrictions and other similar charges or encumbrances (which are not mortgage
or other security interests in respect of Debt) on real property interests
none of which, individually or in the aggregate, materially interfere with the
ordinary conduct of the Business or the use of the Real Property subject
thereto for its current uses; (vi) Leases or Subleases; (vii) with respect to
the Real Property, title defects or irregularities, none of which individually
or in the aggregate materially impair the current use of the Real Property
subject thereto, and (viii) as to any Leased Real Property, any Lien affecting
the interest of the landlord thereunder.
"person" shall mean any individual, corporation, partnership,
joint venture, trust, incorporated organization, other form of business or
legal entity or Governmental Authority.
"PMPA" means the Petroleum Marketing Practices Act.
"Premises" shall have the meaning set forth in Section 2.1(a).
"Prime Rate" means the highest rate published from time to time as
the "Prime Rate" for U.S. bank dollar loans in The Wall Street Journal.
"Real Property" means the Owned Real Property and the Leased Real
Property.
"Real Property Documents" means the Surveys, the Title Commitments
and the Title Insurance Policies pertaining to the Owned Real Property.
"Remediated Site" means any Real Property identified as a
Remediated Site on Schedule 3.17 and any other Real Property which Seller has
determined required remediation under Environmental Law, which remediation has
been completed by Seller as evidenced by the receipt prior to the date hereof
of a no further action letter from an applicable Governmental Authority.
"Required Consents" has the meaning set forth in Section 3.4.
"Resolution Period" shall have the meaning set forth in Section
2.8(c).
"Retail Store" shall mean each gasoline/convenience store
identified on Schedule 1.1(a).
"Retained Liabilities" shall mean all Liabilities and obligations
of Seller and the Business which are not Assumed Liabilities.
"Seller Plans" shall have the meaning set forth in Section 3.15.
"Seller Representatives" shall have the meaning set forth in
Section 6.1.
"Seller Retail Store" shall mean each Retail Store that is not a
Branded Retail Store.
"Seller's Knowledge" means the actual knowledge of William
Rusnack, Brandon Barnholt, Robert Hamer, John Hanner, Brad Burmaster, Maura
Clark, Dennis Eichholz and Richard Keffer, after due inquiry by such
individuals.
"Stub Equity Amount" shall mean 6% of the Total Equity Amount.
"Subleases" means all leases or subleases relating to any of the
Real Property to which Seller is a party as either a lessor or sublessor.
"Supply Agreement" has the meaning set forth in Section 6.13(b).
"Surveys" means the surveys to be delivered to Buyer in accordance
with Section 6.15.
"Taxes" shall mean all Federal, state, local and foreign taxes,
and other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax or penalties applicable
thereto.
"Title Commitments" means those irrevocable commitments for the
Owned Real Property issued by the Title Insurer to issue the Title Insurance
Policies and delivered to Buyer in accordance with Section 6.15.
"Title Insurer" means the title insurance company selected by
Buyer in its reasonable discretion, together with such reinsurers or
coinsurers of such title company as Buyer selects in its reasonable
discretion, to issue the Title Insurance Policies.
"Title Insurance Policies" has the meaning set forth in Section
6.15.
"Total Equity Amount" shall mean any amount elected by Buyer not
less than $40,000,000 and not more than $83,000,000 (which amount shall be set
forth in a written notice delivered to Seller by no later than 20 days prior
to the Closing Date).
"Trademark License Agreement" shall have the meaning set forth in
Section 6.12(b).
"Transfer Documents" means the Assignment and Assumption
Agreement, the Assignments of Lease, the Bill of Sale, the Deeds and all other
assignments, certificates of title and other transfer documents referred to in
Section 2.6(iv) and Section 2.6(v).
"Transferred Employee" shall have the meaning set forth in Section
6.9(a).
"Treasury Regulation" means those regulations promulgated by the
United States Department of the Treasury pursuant to the authority of the Code
or any other revenue law of the United States of America.
"Unknown Site" means any Real Property identified as an Unknown
Site on Schedule 3.17 and which is not a Remediated Site or an Identified
Contamination Site.
"WARN Act" shall mean the U.S. Worker Adjustment and Retraining
Notification Act of 1988.
"Working Capital" shall mean current assets (excluding the
Excluded Assets and the Assets referred to in Section 2.1(h) as Deposits and
Section 2.1(l)) of the Business minus current liabilities (excluding the
Retained Liabilities but including the Reserve Liabilities referred to in
Section 6.16) of the Business, in each case determined in accordance with the
methodology set forth in Section 2.8(a).
Section I.2 "Other Definitional Provisions"
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as
a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States
dollars.
(d) Unless the context requires otherwise, all words used in
this Agreement in any gender shall extend to and include all genders.
(e) Whenever the term "including" is used in this Agreement in
connection with a listing of items included within a prior or subsequent
reference, such listing shall be interpreted to be illustrative only, and
shall not be interpreted as a limitation on or an exclusive listing of the
items included within the prior or subsequent reference.
(f) Other terms may be defined elsewhere in the text of this
Agreement and, unless otherwise indicated, shall have such meaning throughout
this Agreement.
(g) References to any person include such person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement.
(h) Reference to any agreement (including this Agreement),
document or instrument means such agreement, document or instrument as amended
or modified and in effect from time to time in accordance with the terms
thereof and, if applicable, the terms hereof.
(i) General or specific references to any Law means such Law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time.
ARTICLE II
SALE OF ASSETS; CLOSING ARTICLE II
Section II.1 Assets to Be Acquired. Upon the terms and subject to
the satisfaction of the conditions set forth herein, at the Closing, subject
to Section 2.2, Seller shall contribute, convey, assign, transfer and deliver
to Retail Sub, and Retail Sub shall acquire and accept, all right, title and
interest in and to all of the properties, assets and other rights (other than
the Excluded Assets) owned or leased by, or licensed to, Seller on the Closing
Date and used primarily in, or necessary to the operation of, the Business as
currently conducted (the "Assets").
Without limiting the generality of the foregoing, subject to
Section 2.2, the Assets shall include the following:
(a) the Real Property, including all land, leaseholds,
easements and other interests in the Real Property, and the
buildings, fixtures and improvements thereon (collectively, the
"Premises");
(b) all inventory, equipment, machinery, vehicles,
furniture, fixtures, trade fixtures, leasehold improvements,
pumps, office materials and supplies, management information
systems, spare parts and other tangible personal property of every
kind and description owned by Seller and located on any of the
Premises or used primarily in, or necessary to the operation of,
the Business as currently conducted (including those identified in
Schedule 3.9(b);
(c) to the extent assignable under the terms thereof or
applicable Law, (I) the Franchise Contracts and all other
contracts identified on Schedule 2.1(c) and (II) all other
contracts, licenses, leases, purchase orders, sales orders,
invoices, commitments and other agreements (other than employment,
change of control and retention agreements) entered into prior to,
on or after the date hereof by Seller which are primarily related
to the Business as currently conducted which, if entered into
prior to the date hereof, would not have been required to be
disclosed on the Schedule 3.16 (collectively, the "Assumed
Contracts");
(d) all of Seller's rights in and to all copyrights,
trademarks, patents, trade names, logos and other similar
intangible assets owned or licensed by Seller (or in which Seller
otherwise has an interest) and used primarily in, or necessary to
the operation of, the Business as currently conducted, including
the registered trademarks, trade names and logos set forth in
Schedule 2.1(d);
(e) all files, books and other records (including invoices,
lists, supplies, correspondence, memoranda, plats, architectural
plans, surveys, title insurance policies, final working drawings,
plans and specifications, shop drawings, change orders,
environmental reports, maintenance records, soil tests and
engineering reports, creative materials, advertising and
promotional materials, studies, reports and other printed or
written materials) of Seller relating primarily to the Business,
other than duplicate copies thereof, if any, that are maintained
at the Corporate Offices of Seller or any of its Affiliates for
tax, accounting and other purposes;
(f) all of Seller's goodwill in, and going concern value
of, the Business;
(g) all accounts, notes and accounts receivable of the
Business;
(h) all prepaid expenses to the extent relating to the
Business and any Claims (as defined below) to the extent relating
thereto (including any deposits, letters of credit, bonds and
other forms of guaranty or security posted or deposited by Seller
with respect to any License ("Deposits"));
(i) to the extent transferable under applicable Law, all
franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and similar rights obtained from
Governmental Authorities to the extent relating to the Business;
(j) all rights, claims, demands, Actions, refunds, rights of
recovery, rights of set off, rights of recoupment and causes of action
(collectively, "Claims") to the extent arising out of or relating to the
Premises, the other Assets or any of the Assumed Contracts (including
the Leases), including Claims against any funds or financial assurance
programs administered by any Governmental Authority for the remediation
of leaking underground storage tanks relating to the Identified
Contamination Sites and the Unknown Sites and Claims with respect to any
condemnation or eminent domain or similar proceeding against any of the
Real Property;
(k) all insurance proceeds received after the date hereof
to the extent arising out of or related to damage, destruction or
loss of any Assets, which damage or destruction remains
unrepaired, or to the extent any Assets remain unreplaced, at the
Closing Date; and
(l) all security deposits held by Seller with respect to any
Sublease.
Section II.2 Excluded AssetsSection II.2 Excluded Assets.
Notwithstanding anything to the contrary herein, all of Seller's right, title
and interest in all of the following properties, assets and other rights (the
"Excluded Assets") shall be excluded from the Assets:
(a) the corporate books and records of Seller, including
minute books and stock ledgers, and copies of business records
included in the Assets acquired by Retail Sub that are reasonably
required by Seller or any Affiliate of Seller in order to permit
Seller or any of its Affiliates to prepare any Tax return or other
filing or report to be made after the Closing Date;
(b) [intentionally deleted];
(c) any assets of any employee benefit plan and any rights
under any plan or agreement relating to employee benefits,
employment or compensation of Seller;
(d) any rights of Seller or the Business which are
contingent on the satisfaction of Liabilities that are Retained
Liabilities;
(e) all Claims which Seller or any of its Affiliates may
have on or after the date hereof, against any Governmental
Authority for refund or credit of any type with respect to income
Taxes, deferred income Taxes and any other assets to the extent
arising out of or relating to income Taxes;
(f) all Claims which Seller or any of its Affiliates may
have against any person with respect to any Retained Liabilities
or Excluded Assets;
(g) cash and cash equivalents (including marketable securities
and short-term investments) of Seller (other than cash located at the
Premises and other than escrowed funds and security deposits);
(h) insurance policies and any prepaid premiums thereon and
the cash surrender value thereof;
(i) any assets sold or otherwise disposed of not in
violation of any provisions of this Agreement during the period
from the date hereof until the Closing;
(j) any rights of Seller under this Agreement and any
agreement relating hereto between Seller and either Buyer or
Retail Sub entered into on or after the date hereof;
(k) any Claims, recoveries and proceeds under any insurance
policies, to the extent relating to the Excluded Assets or the
Retained Liabilities;
(l) the assets identified on Schedule 2.2(l) hereto;
(m) any Claims against any funds or financial assurance programs
administered by any Governmental Authority for the remediation of
leaking underground storage tanks (other than with respect to any
Identified Contamination Site or Unknown Site);
(n) all assets which are used primarily in Seller's
refining, wholesale marketing or other businesses (other than the
Business), including Seller's refineries, pipeline systems,
tankage and delivery facilities for crude oil and refined
products, terminals and shipping facilities for crude oil and
refined products; and
(o) except as identified on Page 2 of Schedule 3.9(b) as being
located at the Corporate Offices, all furniture, fixtures, equipment,
office materials and supplies, vehicles and other assets located at
Seller's Corporate Offices or exclusively used by or relating to
Seller's Corporate Offices or employees employed at Seller's Corporate
Offices.
Section II.3 Assumption of Liabilities. (a) On and after the Closing
Date, Retail Sub will assume and discharge all Liabilities (i) included in the
calculation of the Final Closing Working Capital, (ii) arising out of or \
relating to the Assets or the conduct of the Business on or after the Closing
Date (including Liabilities relating to the Remediated Sites to the extent
arising out of any violation or alleged violation of or non-compliance or
alleged non-compliance with any Environmental Law or Environmental Permit after
the Closing Date or any release into the environment on or after the Closing
Date of any Materials of Environmental Concern), (iii) subject to the terms and
conditions of Article IX, arising out of Environmental Claims or otherwise
arising under or relating to Environmental Laws and arising out of or relating
to the Assets or the conduct of the Business prior to the Closing Date, in
each case to the extent relating to the Identified Contamination Sites and the
Unknown Sites (excluding any Environmental Claims relating to any Hazardous
Waste Site where Materials of Environmental Concern have been transported for
storage, treatment or disposal prior to the Closing Date), or (iv) specified
in Section 6.9 (collectively, the "Assumed Liabilities").
(b) Except for the Assumed Liabilities specifically assumed by
Retail Sub hereunder, the parties hereto agree that Retail Sub is not assuming
any Liability of Seller or of any Affiliate of Seller (or to which any asset
of Seller is subject) and Retail Sub hereby disclaims any Liabilities of
Seller or of any Affiliate of Seller not so specifically assumed, including
the Retained Liabilities. The parties intend that, except as expressly
provided herein, Retail Sub is not, nor is it to be deemed, a successor of
Seller or of any Affiliate of Seller with respect to any of Seller's or of any
such Affiliate's Liabilities to third persons arising or accruing before, on
or after the Closing Date. Without limiting the generality of the first
sentence of this Section 2.3(b), the term "Retained Liability" includes:
(i) any of Seller's obligations hereunder;
(ii) any Liability to or with respect to Seller's employee
benefit plans except as set forth in Section 6.16;
(iii) any Liability of Seller arising from indebtedness for
borrowed money of Seller (including capital leases but excluding
equipment leases which are not capital leases and excluding Leases which
are capital leases);
(iv) any Liability of Seller for current or deferred income
Taxes owed to any taxing authority (including for the unpaid income
Taxes of any other person, whether under Treasury Regulation 1.1502-6
(or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise) arising out of the
Business for periods or portions thereof ending on or prior to the
Closing Date;
(v) [Intentionally deleted];
(vi) other than as set forth in Section 6.16, any
intercompany Liabilities of the Business to the Seller (other than
payables with respect to the hydrocarbon inventory of the Business,
which payables shall have the price and payment terms set forth on
Schedule 2.3(b)(vi) and shall be paid by Retail Sub after the Closing in
accordance with such terms;
(vii) any Liability of Seller for any bonuses payable to
employees which are contingent on the sale of the Business;
(viii) any obligation of Seller to indemnify any person by
reason of the fact that such person was a director, officer, employee or
agent of Seller or was serving at the request of Seller as a partner,
manager, trustee, director, officer, employee or agent of another entity
prior to the Closing Date (whether such indemnification is for
judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses or otherwise and whether such indemnification is
pursuant to any statute, charter document, bylaw, contractual obligation
or otherwise); and
(ix) except to the extent set forth in Section 6.16, any
product liability claim arising from any product sold by Seller prior to
the Closing Date or the provision of any service by Seller prior to the
Closing Date;
(x) except to the extent set forth in Section 6.16, any
Liability of Seller arising out of or as a consequence of: (a) injury or
death of any individual prior to the Closing, (b) damage to the property
of any third person prior to the Closing or (c) any worker's
compensation claims due to events occurring prior to the Closing; and
(xi) any Liability arising out of any contract which is not
an Assumed Contract or out of a breach prior to the Closing by Seller of
any provision of any Assumed Contract.
Section II.4 Retained Liabilities. Seller shall retain, and
shall continue to be responsible after the Closing Date for, all Retained
Liabilities.
Section II.5 Recapitalization. (a) Prior to the Closing Date,
Clark USA shall (i) cause to be formed a new Delaware corporation
("Superholdco"), (ii) cause Superholdco to hold all of the outstanding common
stock, par value $.01 per share, of Clark USA, (iii) cause Retail Sub to
distribute or otherwise transfer to Clark USA the capital stock of all
subsidiaries of Retail Sub and transfer to Seller, and Seller
shall assume, all assets and Liabilities of Retail Sub existing prior to the
consummation of the transactions contemplated by Section 2.5(b) and (iv)
contribute the capital stock of Retail Sub to Seller.
(b) On the Closing Date, upon the terms and subject to the
satisfaction of the conditions set forth herein,
(i) Seller shall, and Clark USA shall cause Retail Sub to,
consummate the transactions contemplated by Sections 2.1 and 2.3;
(ii) immediately thereafter, Retail Sub shall distribute as a
dividend to Seller a note (the "Note") in the amount (the "Note Amount")
equal to the Initial Note Amount plus the Estimated Working Capital
Adjustment Amount (as defined below), which Note shall be due and
payable in immediately available funds on the Closing Date immediately
following the consummation of the transactions contemplated by clause
(v) of this Section 2.5(b);
(iii) immediately thereafter, Clark USA shall cause Newco to be
capitalized with cash equity equal to the Stub Equity Amount;
(iv) immediately thereafter, Seller shall sell (A) to Newco, and
Newco shall purchase, 6% of the outstanding common stock of Retail Sub
for cash equal to the Stub Equity Amount and (B) to Buyer, and Buyer
shall purchase or cause to be purchased, 94% of the outstanding common
stock of Retail Sub for cash equal to the Total Equity Amount minus the
Stub Equity Amount, and Newco, Buyer and Retail Sub shall enter into the
Stockholder Agreement in the form of Exhibit E;
(v) immediately thereafter, the parties hereto shall cooperate
to effect the receipt by Retail Sub of the financing contemplated by the
Debt Financing Letter; and
(vi) immediately thereafter, subject to Sections 2.5(c), (d) and
(e), Retail Sub shall pay to Seller the Note Amount in cash in full
satisfaction of the Note.
All cash transfers contemplated by Section 2.5(b) shall be made in immediately
available funds to an account or accounts specified by the receiving party not
later than the second Business Day prior to the Closing Date.
(c) Not later than five Business Days prior to the Closing Date,
Seller shall deliver to Buyer a calculation of its good faith estimate of the
Working Capital as of the close of business of a reasonably recent date (which
shall not be more than 10 Business Days prior to the Closing Date). Such
estimate shall be derived from Seller's books and records and the calculation
thereof shall be in reasonable detail. Buyer shall have the right to review
the computation and work papers and the underlying books and records used in
such calculation. Such estimated Working Capital, with such changes, if any,
as are agreed between Buyer and Seller not later than the Business Day prior
to the Closing Date, shall be referred to as the "Estimated Working Capital."
As used herein, "Estimated Working Capital Adjustment Amount" shall mean a
positive or negative amount equal to the Estimated Working Capital minus
negative $28,900,000 (such number, "Target Working Capital").
(d) If Retail Stores accounting for more than $300,000 of EBITDA
(as defined below) are not transferred to Retail Sub at the Closing due to the
failure to obtain the consent of the lessor of the Lease underlying such
Retail Store for the assignment, sublease or other transfer of such Lease to
Retail Sub (each such store not transferred irrespective of the $300,000
threshold, a "Non-transferred Leased Store"), then, upon Buyer's election,
Retail Sub shall withhold from the Initial Note Amount an amount equal to the
product of (A) 6.1 and (B) the total EBITDA for the Non-transferred Leased
Stores in excess of $300,000. The "EBITDA" for any Retail Store shall mean
the earnings before interest, taxes, depreciation and amortization for such
Retail Store for the fiscal year ended December 31, 1998 calculated in a
manner consistent with the calculation of "Store Contribution" as used in
Seller's internal financial statements. To the extent consistent with
applicable law and the applicable Lease, Buyer may elect, so long as Buyer
agrees to indemnify Seller for any Liabilities arising from such election, to
not withhold the applicable portion, if any, of the Initial Note Amount and
(i) cause Retail Sub to take possession of the applicable Non-transferred
Leased Store or (ii) cause Retail Sub to enter into a management agreement
with Seller whereby Retail Sub shall manage the applicable Non-transferred
Leased Store for a fee equal to all of the cash flow thereof after rental
payments (provided that such fee shall not result in any losses to Seller with
respect to such Non-transferred Leased Store). With respect to any Non-
transferred Leased Store not subject to an election pursuant to the
immediately preceding sentence, if requested by Seller, Retail Sub shall grant
Seller a franchise to operate such store as a Clark branded store for the
remainder of the applicable lease term, which franchise shall provide for the
payment of a nominal franchise fee and otherwise contain customary terms and
conditions. In order to facilitate the obtaining of any consent required from
a lessor, (i) Buyer and Retail Sub agree to make any amendments requested by
such lessor which would not be unreasonably burdensome and also agrees to
accept any rent increases or other economic changes requested by such lessor
if Seller agrees to make Retail Sub whole for such changes and (ii) Seller
shall agree to remain a party to the applicable Lease provided that Retail Sub
indemnifies Seller for all Liability under such Lease. If the consent of the
relevant lessor is obtained or the Non-transferred Leased Store is otherwise
transferred to Retail Sub within 12 months of the Closing Date, Retail Sub
shall immediately release to Seller the portion of the Initial Note Amount
which had been withheld with respect to such Non-transferred Leased Store.
(e) (i) If after the date of this Agreement and prior to the
Closing, any Retail Store is damaged, destroyed or lost by fire or other
casualty or is taken by condemnation or eminent domain proceedings and, as a
result thereof, Retail Sub is prevented from operating such Retail Store in
substantially the same manner as such Retail Store is operated by Seller on
the date hereof, the Initial Note Amount shall be reduced by the replacement
value for such Retail Store net of the proceeds of related Claims against
insurers or Governmental Authorities included in the Assets (other than assets
included in Working Capital) received prior to the Closing. If any such
proceeds are received by Retail Sub after the Closing, Retail Sub shall
promptly remit such proceeds to Seller.
(ii) If any Lease is a capitalized lease under GAAP, the Initial
Note Amount shall be reduced by the amount of indebtedness under such Lease as
of the Closing Date.
Section II.6 Additional Closing DeliveriesSection II.6
Additional Closing Deliveries. At the Closing:
(a) Seller shall deliver:
(i) a duly executed counterpart of the Bill of Sale;
(ii) a duly executed counterpart of the Assignment and
Assumption Agreement;
(iii) subject to Section 2.5(d), the Assignments of Lease
with respect to the Leases of the Leased Real Property and the Subleases
and the Deeds with respect to the Owned Real Property, in each case in
recordable form;
(iv) such other documents to facilitate the transfer of the
Premises and Retail Sub's obtaining the Title Insurance Policies as
Buyer may reasonably request;
(v) all other instruments of conveyance and transfer
(including bills of sale or certificates of title with respect to the
owned Motor Vehicles) sufficient to convey the Assets to Retail Sub;
(vi) certificates of the Secretary of State or comparable
official of Delaware, Illinois, Indiana, Michigan, Missouri, Ohio and
Wisconsin that contain the attestation of such officials to the good
standing of Seller in each such jurisdiction; and
(vii) an affidavit under Code 1445, dated as of the Closing
Date, to the effect that Seller is not a foreign person; and
(viii) all other documents, instruments and writings required
to be delivered by Seller or Newco at or prior to the Closing Date
pursuant to this Agreement.
(b) Retail Sub shall deliver:
(i) a duly executed counterpart of the Bill of Sale;
(ii) a duly executed counterpart of the Assignment and
Assumption Agreement and the Assignments of Lease; and
(iii) all other documents, instruments and writings required
to be delivered by Retail Sub at or prior to the Closing Date pursuant
to this Agreement.
(c) Buyer shall deliver all documents, instruments and writings
required to be delivered by Buyer at or prior to the Closing Date pursuant to
this Agreement.
Section II.7 Time and Place of the Closing. The closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Lewis Rice & Fingersh, L.C., 500 North Broadway, Suite 2000,
St. Louis, Missouri 63102 at 10:00 a.m., St. Louis time, within three Business
Days following the satisfaction or waiver of the conditions contained in this
Agreement, or at such other place, date or time as the parties may mutually
agree in writing, but not later than August 31, 1999. On the Closing Date,
Seller is to surrender possession of all the Assets and the Leased Real
Property to Retail Sub.
Section II.8 Purchase Price Adjustment. (a) As soon as practicable,
but in no event later than the later of 60 days following the Closing Date and
25 Business Days after the information contemplated by clause (ii) of
Section 2.8(b) has been provided, Seller shall prepare a balance sheet of the
Business as of the close of business on the day immediately preceding the
Closing Date (the "Closing Balance Sheet") and a calculation of Working
Capital based on the Closing Balance Sheet ("Closing Working Capital"). The
Closing Balance Sheet shall be prepared in accordance with GAAP and using the
same accounting principles, procedures, policies and methods that were employed
in preparing the Financial Statements; provided that (w) Working Capital
shall be calculated without regard to any LIFO reserve, (x) the assets and
liabilities relating to Lighthouse, Retail Sub and the Branded Jobber
operations not included in the Financial Statements shall be disregarded,
(y) actual prepaid or accrued motor fuel and excise taxes shall be based on
the actual asset or Liability on the date immediately preceding the Closing
Date and (z) hydrocarbon inventory shall be calculated in accordance with
Schedule 2.8(a) and Section 2.8(f). For the avoidance of doubt, the parties
acknowledge that the Working Capital Schedule included in Schedule 3.5(b) may
include items that constitute Excluded Assets or Retained Liabilities that
therefore will not be included in the calculation of Closing Working Capital.
For purposes of the calculation of Closing Working Capital, the actions to be
taken pursuant to Section 6.14 hereof shall be deemed to have been taken on the
date immediately prior to the Closing Date.
(b) During the preparation of the Closing Balance Sheet and the
calculation of Closing Working Capital (the "Closing Financial Data"), and the
period of any dispute within the contemplation of this Section 2.8 and for the
sole purpose of verifying Working Capital, Buyer shall (i) provide Seller and
Seller's authorized representatives with full access to the books, records,
facilities and employees of the Business, (ii) provide Seller, within 15
Business Days after the Closing Date (or as promptly as practicable thereafter
but in no event later than 25 Business Days thereafter), with normal month-end
closing financial information for the period ending on the close of business
on the day immediately preceding the Closing Date and (iii) cooperate fully
with Seller and Seller's authorized representatives, including by providing on
a timely basis all information necessary or useful in preparing the Closing
Financial Data.
(c) Seller shall deliver a copy of the Closing Financial Data to
Buyer promptly after it has been prepared. After receipt of the Closing
Financial Data, Buyer shall have 30 days to review the Closing Financial Data,
together with the workpapers used in the preparation thereof. Buyer and its
authorized representatives shall have full access to all relevant books and
records and employees of Seller to the extent required to complete their
review of the Closing Financial Data. Buyer may dispute items reflected in
the calculation of Closing Working Capital only on the basis that such amounts
were not arrived at in accordance with GAAP or this Agreement. Unless Buyer
delivers written notice to Seller on or prior to the 30th day after Buyer's
receipt of the Closing Financial Data specifying in reasonable detail the
amount, nature and basis of each disputed item, Buyer shall be deemed to have
accepted and agreed to the calculation of Closing Working Capital. If Buyer
so notifies Seller of its objection to the calculation of Closing Working
Capital, Buyer and Seller shall, within 30 days (or such longer period as the
parties may agree) following such notice (the "Resolution Period"), attempt to
resolve their differences and any resolution by them as to any disputed
amounts shall be final, binding and conclusive. No item forming the basis of
any adjustments to the Initial Note Amount pursuant to this Section 2.8 shall
serve as a basis for any claim or the failure of any condition under this
Agreement except as expressly provided in this Section 2.8.
(d) If, at the conclusion of the Resolution Period, there are
any amounts remaining in dispute, then all amounts remaining in dispute shall
be submitted to a firm of nationally recognized independent public accountants
(the "Neutral Auditors") selected by Seller and Buyer within 10 days after the
expiration of the Resolution Period. If Seller and Buyer are unable to agree
on the Neutral Auditors, then each of Seller and Buyer shall have the right to
request the American Arbitration Association to appoint the Neutral Auditors.
Each party agrees to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditors shall be borne pro rata as
between Seller on the one hand and Buyer on the other, in proportion to the
allocation of the dollar amount of the amounts remaining in dispute between
Seller and Buyer made by the Neutral Auditors such that the prevailing party
pays the lesser proportion of the fees and expenses. The Neutral Auditors
shall act as an arbitrator to determine, based solely on the provisions of
this Section 2.8 and the presentations by Seller and Buyer, and not by
independent review, only those issues still in dispute and only as to whether
such amounts were arrived at in accordance with GAAP or this Agreement. The
Neutral Auditors' determination shall be made within 30 days of their
selection, shall be set forth in a written statement delivered to Seller and
Buyer and shall be final, binding and conclusive. The term "Final Closing
Working Capital" shall mean the definitive Closing Working Capital agreed to
(or deemed to be agreed to) by Buyer and Seller in accordance with Section
2.8(c) hereof or the definitive Closing Financial Data resulting from the
determinations made by the Neutral Auditors in accordance with this Section
2.8(d) (in addition to those items theretofore agreed to by Seller and Buyer).
(e) If the Final Closing Working Capital exceeds the Estimated
Working Capital, Retail Sub shall pay Seller the amount of such excess. If
Estimated Working Capital exceeds the Final Closing Working Capital, Seller
shall pay Retail Sub the amount of such excess. Any payment required by this
Section 2.8(e) shall bear interest from the Closing Date through the date of
payment at the Prime Rate and shall be paid by wire transfer of immediately
available funds to the account or accounts specified by the party who is owed
such payment within five Business Days after the Final Closing Working Capital
is determined pursuant to Sections 2.8(c) and (d).
(f) The inventory included in Working Capital will be determined
pursuant to the procedures set forth on Schedule 2.8(a) based on a physical
count of the inventory conducted by Seller. Buyer may at its expense observe
or have its representatives observe and monitor the inventory count.
Section II.9 Allocation. Seller and Buyer shall use reasonable and
good faith efforts to allocate the consideration paid for the Assets among the
Assets for all purposes (including tax purposes) in accordance with an
allocation schedule to be agreed upon by the parties hereto (the "Allocation
Schedule") at or prior to the Closing Date. Seller and Retail Sub will each
file all tax returns, including IRS Form 8594, in a manner consistent with
the Allocation Schedule. Neither Seller nor Retail Sub shall, after filing
IRS Form 8594, revoke or amend IRS Form 8594 without the written consent of
the other. Notwithstanding the preceding, if, in spite of good faith
negotiations, Buyer and Seller are unable to agree to an Allocation Schedule
on or before the Closing Date, the Closing will not be affected thereby.
Rather, Retail Sub and Seller will be free to allocate the consideration paid
for the Assets as such party determines in its sole discretion, and any such
allocation will not be binding on the other parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof as
follows:
Section III.1 Organization and QualificationSection III.1
Organization and Qualification. (a) Each of Clark USA, Seller and Retail Sub
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each of Seller and Retail Sub has the
requisite corporate power and authority to own, lease and operate Seller's
properties (including the Assets) and to carry on Seller's business (including
the Business) as they are now being conducted. Seller is, and Retail Sub will
be at Closing, duly qualified or licensed to do business as a foreign
corporation and is in good standing in the States of Illinois, Indiana,
Michigan, Missouri, Ohio and Wisconsin.
(b) At the Closing, Retail Sub shall not have any Liabilities
(other than those directly related to the consummation of the transactions
contemplated hereby).
(c) As of the Closing, the authorized capital stock of Retail
Sub will consist of 10,000 shares of common stock, of which 10,000 shares
shall be issued and outstanding. Other than this Agreement, there are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any capital stock of Retail Sub, including any rights of
conversion or exchange under any outstanding securities or other instruments,
other than restrictions imposed by Federal and state securities laws. Upon the
consummation of the transactions contemplated hereby, Buyer will acquire title
to 94% of then outstanding shares of common stock of Retail Sub free and clear
of all Liens, other than the restrictions imposed by Federal and state
securities laws and the Stockholders Agreement and Liens arising as a result
of any action taken by Buyer or any of its Affiliates.
Section III.2 Authority. Each of Clark USA, Seller and Retail Sub has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Clark USA, Seller and Retail Sub.
This Agreement has been duly executed and delivered by Clark USA, Seller and
Retail Sub and, assuming the due execution and delivery hereof by Buyer, is a
valid and binding obligation of Clark USA, Seller and Retail Sub, enforceable
against Seller and Retail Sub in accordance with its terms, subject as to
enforcement to (i) bankruptcy, insolvency, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, and (ii) general principles of equity, regardless of whether
enforcement is considered in a proceeding in equity or at law.
Section III.3 Equity Investments. The Assets do not include any
capital stock of any corporation or any direct or indirect equity or
ownership interest of any kind in any person.
Section III.4 Consents and Approvals; No Violation. Except as set
forth in Schedule 3.4 (the "Required Consents"), neither the execution and
delivery by Clark USA, Seller nor Retail Sub of this Agreement nor the
consummation by Clark USA, Seller or Retail Sub of the transactions
contemplated hereby will (i) conflict with or result in a breach of any
provision of the charter or bylaws of Clark USA, Seller or Retail Sub, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except (A) pursuant to the HSR
Act, and (B) which, if not obtained or made, would not prevent or delay in
any material respect the consummation of the transactions contemplated by this
Agreement or otherwise prevent Clark USA, Seller or Retail Sub from performing
its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Material Adverse Effect, (iii) require
the consent or approval of any person (other than a Governmental Authority) or
violate or conflict with, or result in a breach of any provision of,
constitute a default (or an event which with notice or lapse of time or both
would become a default) or give to any third party any right of termination,
cancellation, amendment or acceleration under, or result in the creation of a
Lien on any of the Assets under, any of the terms, conditions or provisions of
any contract or license to which Clark USA, Seller or Retail Sub is a party or
by which the Assets are bound, or (iv) violate or conflict with any order,
writ, injunction, decree, statute, rule or regulation applicable to Clark USA,
Seller or Retail Sub or the Business, except in the case of clause (iii) or
(iv) any consents and approvals the failure of which to obtain and any
violations, conflicts, breaches and defaults which, individually or in the
aggregate, would not materially impair the conduct of the Business or result
in material Liabilities.
Section III.5 Financial Statements. (a) Schedule 3.5(a) contains
the audited statements of net assets of the Business as of December 31, 1997
and 1998 and the related audited statements of operations and cash flows for
each of the years ended December 31, 1998 and 1997 (the "Financial Statements").
The Financial Statements have been prepared in accordance with GAAP except as
set forth therein, consistently applied, from the books and records of Seller,
present fairly in all material respects the financial position and results of
operations of the Business as of the dates and for the periods indicated. The
transfer pricing for gasoline inventory used in the Financial Statements is
Opis-low. The amount of collection allowances reflected in the Financial
Statements for the year ended December 31, 1998 was $4,106,778.
(b) The monthly Working Capital Schedule attached as Schedule
3.5(b) has been prepared in good faith and in a manner consistent with the
Financial Statements except as set forth on such Working Capital Schedule,
subject to normal year-end adjustments. Notwithstanding any other provision
of this Agreement and not subject to any dollar or time limitation contained
in Article IX, Buyer and Retail Sub hereby acknowledge and agree that the only
remedy for a breach of the representation and warranty set forth in the
immediately preceding sentence shall be a recomputation of the Target Working
Capital with appropriate pro forma adjustments to Schedule 3.5(b) to correct
any such breaches (including any breaches discovered by Seller), that a claim
for such remedy may be made no later than April 30, 1999, and that any pursuit
of such remedy by Buyer or Retail Sub after the Closing may result in a
payment to or from Retail Sub.
(c) The summary income statement data for the three months ended
March 31, 1999 attached as Schedule 3.5(c) have been prepared in a manner
consistent with the Financial Statements, subject to normal year-end
adjustments, and presents fairly in all material respects the results of
operations of the Retail Stores.
(d) Jobber supply volume for the year ended December 31, 1998
was 118 million gallons. Assuming a supply agreement comparable to the Supply
Agreement had been in effect and pro forma volumes of 200 million gallons,
$1.8 million represents Seller's good-faith estimate of the pro forma
operating contribution of Seller's branded jobber program for the year ended
December 31, 1998.
Section III.6 Undisclosed Liabilities. Except (i) as specifically
disclosed herein or in the Schedules hereto, (ii) as reflected, reserved
against or otherwise disclosed in the Financial Statements or (iii) for
Liabilities incurred in the Ordinary Course of Business since December 31,
1998, the Business does not have any Liabilities that would be required to
be reflected on a balance sheet for the Business prepared in accordance with
GAAP.
Section III.7 Absence of Certain Changes or Events. Except as set
forth in Schedule 3.7 hereto, since December 31, 1998, the Business has been
conducted in the ordinary course consistent with past practice and there has
not been:
(a) any event, occurrence or state of circumstances or
facts which has resulted in a Material Adverse Effect;
(b) except for sales of inventory in the Ordinary Course of
Business, any sale, lease, transfer, license or other disposal of
any material assets of Seller used primarily in, or necessary to
the operation of, the Business other than obsolete, worn-out or
surplus equipment or property;
(c) except in the Ordinary Course of Business any increase
in, or commitment or plan adopted to increase, the wages,
salaries, compensation, pension or other benefits or payments to
employees of the Business;
(d) any material change in any method of accounting or
accounting policy or practice used by Seller which is applicable
to the Business;
(e) except in the Ordinary Course of Business, any
compromise, settlement or waiver of any material Action,
Liabilities, Claims or rights relating to the Business; or
(f) any agreement or arrangement (not already consummated,
terminated or expired) granting any rights to purchase or lease
any of the Assets other than in the Ordinary Course of Business or
requiring the consent of any party to the transfer, assignment or
lease of any of the Assets.
Section III.8 Condition of Assets; Assets Necessary for Business.
Except as would not have a Material Adverse Effect, all tangible Assets are in
good operating condition and state of repair (ordinary wear and tear excepted)
and are suitable for the purposes for which they are currently used by Seller.
The Assets constitute all of the rights, assets and properties of Seller and
its Affiliates used in or necessary for the operation of the Business as
currently conducted, other than the Excluded Assets. There are no outstanding
options or similar rights to purchase any of the Premises or any of the other
material Assets.
Section III.9 Personal Property
(a) Except as set forth in Schedule 3.9(a) and except for
personal property of which Seller is a lessee, all the personal property
included in the Assets is owned by Seller free and clear of all Liens other
than Permitted Liens and Liens that will be released at or prior to the
Closing. Immediately after the Closing, Buyer will have good and valid title
to all the personal property included in the Assets, other than leased
personal property, free and clear of any Lien other than Permitted Liens and
Liens created by, or arising as a result of the ownership of the Assets by,
Buyer.
(b) Except as set forth in Schedule 3.9(b) and except for goods
in transit and assets disposed of after the date hereof and prior to the
Closing in accordance with the terms of this Agreement, all of the fixtures,
plants, buildings, improvements, machinery, equipment, inventory, vehicles,
construction in progress and other tangible personal property included in the
Assets are located on the Premises.
(c) The completion of sale or other disposition of the inventory
included in the Assets by Seller in the Ordinary Course of Business would not
require the consent of any person under, and will not constitute a breach or
default under, any contract to which Seller is a party.
Section III.10 Real Property
(a) All Leases and other agreements that are included in the
Assets pursuant to which Seller leases or otherwise occupies real property as
a tenant, are set forth in Schedule 2.1(a)-1 and all Subleases and other
agreements that are included in the Assets pursuant to which Seller subleases
any real property as lessor or sublessor are set forth on Schedule 2.1(a)-2.
True copies of the Leases and Subleases have previously been delivered to
Buyer or will be delivered to Buyer within 2 Business Days after the date
hereof. With respect to each Lease and Sublease, except as set forth in
Schedule 3.10(a), (i) each Lease and Sublease may be assigned by Seller to
Buyer, (ii) each Lease and Sublease is in full force and effect and
constitutes a valid and binding obligation of Seller and, to Seller's
Knowledge, the other parties thereto, (iii) Seller has not received any notice
from the other party to any Lease or Sublease of the termination thereof, (iv)
there is no material default or event which, with notice or lapse of time or
both, would constitute a material default on the part of Seller (or, to
Seller's Knowledge, on the part of any other party thereto) and (v) subject to
the receipt of applicable Required Consents, Seller has, and immediately after
the Closing Retail Sub will have, good title to the leasehold estates in each
parcel of Leased Real Property that is the subject of each such Lease, free
and clear of any Lien, except for Permitted Liens and Liens created by, or
arising as a result of the ownership of the Assets by, Retail Sub.
(b) Schedule 2.1(a)-3 contains an accurate and complete list of
all real property owned by Seller and used primarily in, or necessary to the
operation of, the Business as currently conducted (other than the Excluded
Assets). Legal descriptions of the Real Properties, to the extent available,
will be delivered to Buyer within ten Business Days after the date hereof.
Seller has, and immediately after the Closing Retail Sub will have, good, fee
simple title to all Owned Real Property free and clear of any Liens, except
for Permitted Liens.
(c) As of the date hereof, except as set forth on Schedule
3.10(c), there is no pending or, to Seller's Knowledge, threatened
condemnation, expropriation, eminent domain or similar proceeding affecting
all or any part of the Premises, and Seller has not received any written
notice of any of the same.
(d) Except as would not materially impair the operation of any
Retail Store, (i) all Premises and all buildings, structures, fixtures and
improvements thereon conform, including usage by Seller, with all applicable
contractual requirements and building, zoning, subdivision, land use, fire and
other Laws pertaining to or affecting real property, (ii) there are no
persons in possession of any of the Real Property other than Seller and other
than tenants under the Subleases, (iii) no building or other improvement which
is part of any of the Real Property encroaches, in any respect, upon any
property owned by any adjacent landowner or upon any real property interest
held by any other person with respect to any of the Real Property (including
easements on the Real Property) or upon any setback lines or similar
restrictions and no asset of any other person encroaches upon the Real
Property, (iv) all water, sewer, gas, electricity, telephone and other
utilities serving the Real Property are supplied directly to the Real Property
by facilities of public utilities and are adequate for the conduct of the
Business and (v) each parcel of Real Property abuts on and has direct
vehicular access to a public road, or has limited access to a public road via
a permanent irrevocable, appurtenant easement benefitting such parcel, and
access to such Real Property is provided by paved public rights-of-way with
adequate curb cuts available.
Section III.11 Litigation. Except as set forth in Schedule 3.11,
there is no claim, suit, arbitration, action or proceeding pending or, to
Seller's knowledge, threatened, against or affecting Seller or the Business
which, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, nor is there any judgment, decree, order, injunction,
writ or ruling of any Governmental Authority or any arbitrator outstanding
against Seller which, individually or in the aggregate, has had or which would
reasonably be expected to result in a material Assumed Liability.
Section III.12 Intellectual Property. Schedule 2.1(d) sets forth a
true, correct and complete list of all registered copyrights, patents,
trademarks, trade names and logos (or applications therefor) owned or licensed
by Seller and used primarily in, or necessary to the operation of, the Business
as currently conducted. Except as set forth on Schedule 3.12, Seller possesses
adequate rights, licenses or other authority to use all copyrights, patents,
trademarks and trade names, necessary to conduct the Business as currently
conducted. Except as set forth in Schedule 3.12, Seller has not received any
notice with respect to any alleged infringement or unlawful or improper use of
any copyright, patent, trademark, trade name, or other intangible property
right owned or alleged to be owned by others and used in connection with
the Business.
Section III.13 Licenses. Except as set forth in Schedule 3.13, Seller
possesses or has been granted all licenses, permits, franchises and other
authorizations of any Governmental Authority (collectively, "Licenses") that
are material to the operation of the Business as currently conducted. Except
as set forth in Schedule 3.13 and except as would not, individually or in the
aggregate, result in a material Assumed Liability, all such Licenses are in
full force and effect and no proceeding is pending or, to Seller's Knowledge,
threatened seeking the revocation or limitation of any such License.
Section III.14 Labor Matters. Except as set forth in Schedule 3.14,
(i) there is no labor strike, slowdown, work stoppage, lockout or other
material labor dispute pending or, to Seller's Knowledge, threatened against
or affecting the Business and, during the past five years, there has not been
any such action; (ii) Seller is not a party to or bound by any collective
bargaining or guild agreement or work rules or practices agreed to with any
labor organization or employee association applicable to employees of the
Business; (iii) none of the employees of the Business is represented by any
guild or labor organization and Seller has no knowledge of any current union
organizing activities among the employees of the Business; (iv) as of the date
hereof, there are no unfair labor practice charges or complaints relating to
the Business pending or, to Seller's Knowledge, threatened before the National
Labor Relations Board or any similar state or foreign agency; (v) there is no
material grievance or arbitration proceeding arising out of any collective
bargaining agreement or other grievance procedure relating to the Business'
employees; and (vi) Seller is in material compliance with all applicable
Federal, state and local labor and employment laws and regulations.
Section III.15 Employee Benefit Plans; ERISA.
(a) Except as set forth in Schedule 3.15 (the plans disclosed on
Schedule 3.15, being the "Seller Plans"), Seller does not sponsor or
contribute to any material employee benefit plan, severance, change-in-control
or employment plan, program or agreement, stock option, bonus plan, or
incentive plan or program. Schedule 3.15 contains a description of Seller's
severance policy. Copies or descriptions of the Seller Plans have been
delivered to the Buyer.
(b) Each Seller Plan has been administered and is in compliance
with the terms of such Seller Plan and all applicable laws, rules and
regulations where any noncompliance would result in a material Assumed
Liability.
Section III.16 Material Contracts.
(a) Schedule 3.16 lists as of the date hereof all written contracts,
agreements, commitments and personal property leases which primarily relate
to the Business (other than the Leases and related agreements) and which
meet the criteria specified in the paragraphs below:
(i) involve future expenditures or receipts or other
performance with respect to goods or services having a total value
in excess of $250,000;
(ii) involve a lease, sublease, installment purchase
or similar arrangement for the use of personal property which
involves a total consideration in excess of $250,000;
(iii) any employment agreement;
(iv) any retention or severance agreement or sale
bonus agreement;
(v) any collective bargaining agreement or union
contract;
(vi) involve a consulting relationship which involve
total consideration in excess of $50,000 during the term of such
agreement;
(vii) any agreement with or for the benefit of any
Affiliate of Seller;
(viii) contain commitments of suretyship, guaranty or
indemnification (except for guarantees, warranties and indemnities
provided by Seller in the Ordinary Course of Business);
(ix) involve the development of any of the Premises
or provide for improvements thereto;
(x) contain covenant not to compete or other
limitation on ability of Seller to engage in any line of business;
(xi) Franchise Contracts; or
(xii) involve payments to or by Seller in respect of
the Business over the term in excess of $250,000 which may not be
terminated on 30 days or less notice without penalty.
(b) Except as otherwise indicated in Schedule 3.16 and except as
would not result in a material Liability, with respect to the contracts
required to be disclosed on Schedule 3.16, (i) Seller is not in default of any
obligation under any of such contracts, (ii) to Seller's Knowledge, no other
party to any of such contracts is in default of any obligation thereunder,
(iii) there does not exist under any provision thereof any event that, with
the giving of notice or the lapse of time or both, would constitute a default
thereunder, except for the failure to obtain any necessary consents, and (iv)
each such contract is a valid and binding obligation of Seller and is in full
force and effect and, to Seller's Knowledge, each such contract is a valid and
binding obligation of the other parties thereto.
(c) No party to any Assumed Contract is an Affiliate of Seller.
Section III.17 Environmental Matters. (a) Except as would not,
individually or in the aggregate, have a Material Adverse Effect and except
as set forth in Schedule 3.17:
(i) Seller is in compliance with all Environmental Laws
applicable to the Business or the Assets, including Subtitle I of the
Resource Conservation and Recovery Act and its implementing regulations
and any analogous state statutes or regulations. Seller has obtained,
and is in compliance with, all Environmental Permits and other
authorizations of Governmental Authorities, including underground
storage tank registrations, required under Environmental Laws regarding
the Business or the Assets. Seller has not received any written
communication from any Governmental Authority or any other person that
alleges that the Business is not in compliance with such Environmental
Laws or is otherwise subject to Liability under Environmental Laws.
(ii) There is no litigation or administrative proceeding
under any Environmental Law or any other Environmental Claim pending or,
to Seller's Knowledge, threatened relating to the Business or the
Assets.
(iii) Materials of Environmental Concern have not been
released or threatened to be released at or from any of the Assets or
any real property formerly owned or operated by the Seller in connection
with the Business.
(iv) In regard to the Business and the Assets, Seller has
not entered into, and is not subject to, any judgment, order or legally
binding agreement relating to compliance with, or liability under,
Environmental Laws or the investigation, monitoring or remediation of
releases or threatened releases of Materials of Environmental Concern.
(v) Seller has made available to Buyer all material written
environmental assessments or reports in the custody or control of Seller
relating to the Business and the Assets regarding compliance with, or
liability under, Environmental Laws, including any investigative reports
regarding the release of Materials of Environmental Concern at or from
the Assets or any real property formerly owned or operated by the Seller
in connection with the Business.
(vi) Seller has filed or caused to be filed all reports
required under Environmental Laws to be filed with respect to all of the
Real Property and the facilities thereon and, to the extent required
under Environmental Laws, has generated and maintained all required
data, documentation and records under all Environmental Laws with
respect thereto.
(vii) All underground storage tanks at the Seller Retail
Stores are in compliance with 40 CFR CH1 280.21.
(b) As of the date hereof, no part of any of the Real Property
has been listed, or to Seller's Knowledge proposed for listing, on the
National Priorities List of the United States Environmental Protection Agency
or any similar listing maintained by any state or local regulatory agency of
sites where Materials of Environmental Concern releases might have occurred.
Section III.18 Brokers, Finders, etc. Neither Seller nor any of
its Affiliates have employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees, commissions or similar
payments in connection with the transactions contemplated by this Agreement,
other than those payable to Credit Suisse First Boston or to Affiliates of
Seller, all of which will be paid by Seller.
Section III.19 Transactions with Affiliates. Except as set forth in
Schedule 3.19, there are no agreements or other transactions relating to the
Business between Seller and any of its Affiliates other than transactions which
are on commercial arm's length terms.
Section III.20 Compliance with Laws. The conduct of the Business
complies in all material respects with all material federal, state and local
Laws.
Section III.21 Insurance. The material Assets which are of an
insurable character and are used or useful in the Business are insured against
loss or damage by fire or other material risks, and Seller maintains liability
insurance to the extent and in the manner and covering such material risks as
is customary for companies engaged in a business similar to the Business or
owning assets similar to the Assets. All material insurance policies with
third party insurers relating to the Business are identified on Schedule 3.21.
The coverage under such insurance policies is in full force and effect, and
no notice of cancellation or nonrenewal thereunder has been received by Seller.
Section III.22 Year 2000. Seller has taken reasonable actions to
facilitate the Assets and Business being Year 2000 compliant. For purposes of
this Section, "Year 2000 compliant" means, with respect to Seller's information
technology, the information technology is designed to be used prior to, during
and after the calendar year 2000 A.D., and the information technology used
during each such time period will accurately receive, provide and process
date/time data (including calculating, comparing and sequencing) from, into and
between the 20th and 21st centuries, including the years 1999 and 2000, and
leap-year calculations and will not malfunction, cease to function or provide
invalid or incorrect results as a result of date/time data, to the extent that
other information technology used in combination with the information
technology being acquired, properly exchanges date/time data with it. For
purposes of this Section, "information technology" includes computer software,
computer firmware, computer hardware (whether general or specific purpose) and
other similar or related items of automated, computerized or software systems
that are used or relied on by Seller in the conduct of the Business.
Section III.23 Books of Account. Seller has and maintains an
internal accounting system sufficient in all material respects to permit
preparation of financial statements in accordance with GAAP.
Section III.24 Retail Stores. The Seller Retail Stores, the service
stations and convenience stores operated by the Jobbers and those service
stations and convenience stores (if any) set forth on Schedule 2.2(l)
constitute all service stations and convenience stores operated in the Business.
Seller has not entered into any commitment or agreement for the expansion or
closing of any of the Retail Stores. All service stations or convenience
stores owned by Seller and not used in the Business are set forth on Schedule
2.2(l).
Section III.25 Jobbers. Schedule 1.1(a) sets forth under the heading
"Franchisee Operated": (i) each party to any Franchise Contracts with Seller
and (ii) the location at which each Jobber operates a service station or
convenience store pursuant to such Franchise Contract. Seller is in material
compliance with PMPA with respect to each such Jobber, and Seller has not
terminated any other Franchise Contract no longer in effect in violation of
PMPA. The consummation of the transactions contemplated hereunder will not
result in a violation of PMPA or a termination of any Franchise Contract.
Seller has delivered or made available to Buyer complete and correct copies
of all Franchise Contracts currently in effect.
Section III.26 Taxes. There are no
Liens for Taxes upon the Assets except for statutory Liens for Taxes not yet
due or taxes being contested in good faith. With respect to the Business and
for all tax years for which the statute of limitations has not yet expired,
Seller has collected, and remitted, or will remit on a timely basis, such
amounts to the appropriate taxing authority, or has been furnished properly
completed exemption certificates and has maintained all such records and
supporting documents in the manner required by all applicable sales, motor
fuel and use tax statutes and regulations. None of the Assets is an asset or
property that is or will be required to be treated as (i) described in
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in
effect immediately before the enactment of the Tax Reform Act of 1986 or (ii)
tax-exempt use property within the meaning of Section 168(h)(1) of the Code.
Except as set forth on Schedule 3.26 and except with respect to income taxes,
no Governmental Authority is conducting an audit of Seller with respect to the
Business nor has any Governmental Authority asserted any claim in writing for
the assessment of any additional liability with respect to such taxes other
than income taxes. Schedule 3.26 sets forth all collection allowances which
Seller receives with respect to Taxes on the purchase and sale of any
inventory in the Business. The transfer of the Assets by Seller to Retail Sub
followed by the immediate sale of shares of Retail Sub common stock to Newco
and Buyer pursuant to Section 2.5(b), shall be treated by the parties as a
transaction that does not qualify for tax treatment under Section 351 of the
Code, and Seller shall report the transaction as such on its tax returns.
Section III.27 No Implied Representations. Notwithstanding anything
contained in this Article III or any other provision of this Agreement, it is
the explicit intent of each party hereto that Seller is making no
representation or warranty whatsoever, express or implied, beyond those
expressly given in this Agreement, including any implied warranty or
representation as to the value, condition, merchantability or suitability as
to any of the Assets. In furtherance and not in limitation of the foregoing,
it is expressly understood by each party hereto that any cost estimates,
projections, predictions or other information contained or referred to in the
offering materials or other documents that have been provided or made available
to Buyer are not and shall not be deemed to be representations or warranties
of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the date
hereof as follows:
Section IV.1 Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its properties, and to carry on its business as it is now
being conducted. Buyer is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a material adverse effect on the business, financial condition
or results of operations of Buyer or on the ability of Buyer to satisfy its
obligations hereunder (a "Buyer Material Adverse Effect").
Section IV.2 Authority. Buyer has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and, assuming the due execution and delivery hereof by
Seller, is a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, subject as to enforcement to (i) bankruptcy,
insolvency, reorganization, moratorium and other similar laws now or hereafter
in effect relating to or affecting creditors' rights generally, and (ii)
general principles of equity, regardless of whether enforcement is considered
in a proceeding in equity or at law.
Section IV.3 Consents and Approvals; No Violation.
Neither the execution and delivery by Buyer of this Agreement nor the
consummation by Buyer of the transactions contemplated hereby will (i) conflict
with or result in a breach of any provision of the charter or bylaws of Buyer,
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any Governmental Authority, except (A) pursuant to the HSR
Act, or (B) which, if not obtained or made, would not prevent or delay in any
material respect the consummation of the transactions contemplated by this
Agreement or otherwise prevent Buyer from performing its obligations under this
Agreement in any material respect or have, individually or in the aggregate, a
Buyer Material Adverse Effect or (iii) violate or conflict with any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer other
than such violations and conflicts, which, individually or in the aggregate,
would not have a Buyer Material Adverse Effect.
Section IV.4 Litigation There is no claim, suit, arbitration, action
or proceeding pending or, to Buyer's knowledge, threatened, against or affecting
Buyer which, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on Buyer's ability to consummate the transactions
contemplated hereby, nor is there any judgment, decree, order, injunction, writ
or ruling of any Governmental Authority or any arbitrator outstanding against
Buyer which, individually or in the aggregate, has had or which would reasonably
be expected to have a material adverse effect on Buyer's ability to consummate
the transactions contemplated hereby.
Section IV.5 Brokers, Finders, etc. Neither Buyer nor any of its
directors, officers or employees have employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement, except those payable to Celera Strategic Resource Partners, LLC or
Affiliates of Buyer, which will be paid by Retail Sub.
Section IV.6 Financial Capability. Buyer has received a legally
binding executed commitment from Apollo Management IV, L.P. for $52 million
in the form previously delivered to Seller (the "Equity Commitment Letter"),
which provides that Seller is a third party beneficiary thereof. Buyer
has received a legally binding executed commitment from external financing
sources for $190,000,000 in the form previously delivered to Seller (the
"Debt Commitment Letter").
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section V.1 Conduct of Business. From the date hereof through the
Closing Date, except as may be expressly permitted or contemplated by this
Agreement or as otherwise agreed to in writing by Buyer, Seller shall cause
the Business to be conducted in the usual, regular and Ordinary Course of
Business and shall use commercially reasonable efforts to preserve intact the
Business, keep available the services of the Business' employees and preserve
its relationships with customers, suppliers, licensees, licensors, distributors,
agents and others having business dealings with the Business. From the date
hereof through the Closing Date, Seller shall (i) maintain in all material
respects the Business' inventory (including motor fuel, gasoline convenience
items, supplies, parts and other materials) and keep the Business' books of
account, records and files, in each case in the Ordinary Course of Business,
and (ii) use all reasonable efforts to maintain in full force and effect
property damage, liability and other insurance with respect to the Assets and
the Business providing coverage against such risks and in at least the amounts
as provided by the insurance policies currently maintained by Seller, (iii)
maintain the Assets, taken as a whole, in the Ordinary Course of Business and
in all material respects in as favorable a condition as the same are in on
the date hereof, except for normal wear and tear; (iv) reapply for necessary
Licenses in the Ordinary Course of Business; (v) replace, to the extent in
accordance with past practice, inoperable, worn-out, obsolete or destroyed
Assets; (vi) make timely payments on accounts payable and other Liabilities
of the Business in the Ordinary Course of Business; (vii) deliver or cause
to be delivered to Buyer, promptly after receipt of the same, copies of all
written notices of any material violation of or material non-compliance with
any Law issued by any Governmental Authority with respect to the Business or
any of the Assets and received by Seller or by any Affiliate of Seller after
the date of this Agreement; (viii) deliver or cause to be delivered to Buyer,
promptly after receipt or delivery (as applicable) of same, copies of all
written notices ofmaterial violation of or material defaults under any Assumed
Contract and received by Seller or by any Affiliate of Seller or delivered
by Seller or by any Affiliate of Seller after the date of this Agreement; (ix)
use reasonable commercial efforts to obtain the renewal or extension of any
Leases that are scheduled to expire prior to Closing and (x) make capital
expenditures so that the total capital expenditures for the Business (other
than for environmental remediation and other than those relating to the
replacement of casualty, damage or destruction of Assets) between January 1,
1999 and the Closing Date are at least $3,250,000. Without limiting the
generality of the foregoing, during the period from the date hereof to the
Closing Date, except as set forth in Schedule 5.1, Seller shall not:
(a sell, lease, transfer, mortgage or otherwise encumber any As-
sets, other than in the Ordinary Course of Business;
(b enter into any contract of employment, collective bargaining
agreement, guild contract or other labor contract, or permit any
increases or changes in the compensation or benefits of any employees of
the Business except for annual salary increases in the Ordinary Course
of Business, except as otherwise required by applicable Law;
(c enter into any contract, license or other agreement that
contains any provision that, as a result of the consummation of the
transactions contemplated by this Agreement, would (assuming that the
other party's consent or approval is not obtained, to the extent
required) result in any penalty, additional payments or forfeiture that
would be payable or suffered by Buyer at or after the Closing Date;
(d relocate any of the employees of the Business to any other
business, division or operation of Seller or its Affiliates;
(e sell, assign or create any right, title or interest in or to
the Real Property or the Leases included in the Assets;
(f acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business, any
person or any division thereof or (ii) any assets that are material,
individually or in the aggregate, to the Business (excluding inventory
purchased in the Ordinary Course of Business);
(g except with Buyer's prior written consent, which consent may
not be unreasonably withheld or delayed, amend, terminate or waive any
material rights under any contract or enter into any contract, in each
case which is identified on Schedule 3.16 or would be required to be
identified on Schedule 3.16 if entered into after the date hereof;
(h engage in any discussions, or solicit or encourage any
discussions, regarding the sale, purchase or lease of any of the
material Assets or the Business (other than sales, purchases and leases
of Assets in the Ordinary Course of Business), including by merger or
consolidation; or
(i agree or commit to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section VI.1 Access to Information. Upon reasonable notice Seller
shall afford to Buyer and its officers, employees, accountants, counsel,
financial advisors and other representatives, access during normal business
hours throughout the period prior to the Closing Date to all of the
properties, books and records and employees relating to the Business, and,
during such period, Seller shall furnish to Buyer such information concerning
the Business in Seller's possession as Buyer may reasonably request. Unless
otherwise required by Law, Buyer will hold any such information which is
nonpublic in confidence until such time as such information otherwise becomes
publicly available through no wrongful act of Buyer. All requests for such
access shall be made to such representatives of Seller as Seller shall
designate in writing to Buyer (the "Seller Representatives"), which Seller
Representatives shall be solely responsible for coordinating all such access.
Neither Buyer nor its representatives shall contact any of the employees,
customers, suppliers or franchisees of Seller without specific authorization
from the Seller Representatives.
Section VI.2 Filings. As promptly as practicable after the date of
this Agreement, Seller and Buyer shall make or cause to be made all filings
and submissions under Laws applicable to Seller and Buyer, if any, as may be
required for the consummation of the transactions contemplated by this
Agreement. Buyer and Seller shall coordinate and cooperate in exchanging
such information and providing such reasonable assistance as may be requested
by either of them in connection with the filings and submissions contemplated
by this Section 6.2.
Section VI.3 Consents. Each of the parties
hereto shall use all reasonable efforts to obtain as soon as practicable
consents of all Governmental Authorities and other persons necessary for the
consummation of the transactions contemplated by this Agreement; provided
that, no party shall be required to make any payment to any party to any
agreement of the Business in connection with the obtaining of such consents.
If any consents are required from third person (other than Governmental
Authorities), Seller and Buyer shall jointly communicate with such third
persons in obtaining such consents.
Section VI.4 Certain Tax MattersSection VI.4 Certain Tax
Matters.
(a Seller and Retail Sub shall each pay one-half of all sales,
transfer and similar Taxes arising from, or attributable or related to, the
sale, transfer or assignment to Retail Sub (or any of Retail Sub's
subsidiaries) of any of the Assets pursuant to this Agreement.
(b The parties hereto shall provide each other with (i) such
assistance as may be reasonably requested in connection with the preparation
of any Tax return, any audit, or any claim of refund or credit in respect of
Taxes and (ii) any records or other information relevant to such Tax returns,
audits, or claims.
(c If, and to the extent that, Buyer or Retail Sub receives any
Tax refund or credit due to Seller pursuant to this Agreement and which was
not included as an Asset in the Final Closing Working Capital, Buyer shall
promptly reimburse Seller in an amount equal to such refund or credit.
Section VI.5 Agreement to Cooperate; Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
of the parties hereto shall use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including providing information
and using all reasonable efforts to obtain all necessary or appropriate
waivers, consents and approvals, and effecting all necessary registrations and
filings (including under the HSR Act). After the Closing Date, Buyer and
Retail Sub shall, at reasonable times, permit Seller to make reasonable
examination of the books and records of the Business relating to time periods
ending at or prior to the Closing Date and shall permit Seller to make copies
of the relevant portions of such books and records at Seller's expense, in
each case to the extent necessary for Seller or its Affiliates to comply with
applicable legal, Tax or accounting requirements. After the Closing Date,
Seller shall, at reasonable times, permit Buyer and Retail Sub to make
reasonable examinations of the books and records of the Business still in the
possession of Seller and relating to time periods ending at or prior to the
Closing Date and shall permit Buyer and Retail Sub to make copies of the
relevant portions of such books and records at their expense, in each case to
the extent necessary for Buyer, Retail Sub or their Affiliates to comply with
applicable legal, Tax or accounting requirements.
(b) In case at any time after the Closing Date any further action
is necessary or desirable to transfer any of the Assets to Retail Sub or
otherwise to carry out the purposes of this Agreement, the proper officers and
directors of Retail Sub and Seller shall execute such further documents
(including assignments, acknowledgments and consents and other instruments of
transfer) and shall take such further action as shall be necessary or
desirable to effect such transfer and to otherwise carry out the purposes of
this Agreement, in each case to the extent not inconsistent with applicable
Law. Seller shall cooperate with, and use all reasonable efforts to assist,
Buyer in obtaining UCC termination statements and mortgage releases. Seller
shall cooperate with Buyer in identifying Licenses relating to the Business
and provide reasonable assistance to Buyer in effecting the transfer or
obtaining thereof. To the extent that any contract or other agreement
contemplated to be assigned to and assumed by Retail Sub hereunder may not be
assumed by or assigned to Retail Sub as the result of any failure to obtain
the Required Consent of any third person or to the extent the assumption or
assignment thereof would constitute a breach thereof or a violation of any
applicable law, this Agreement shall not constitute an assumption and
assignment thereof nor an attempted assumption and assignment thereof. To the
extent any such consent has not been obtained as of the Closing, Seller shall,
during the remaining term of such contract or other agreement, use all
reasonable efforts, to (i) obtain such consent and (ii) to cooperate with
Buyer in any reasonable and lawful arrangement designed to provide the
benefits and obligations of such contract or other agreement to Retail Sub.
(c) Prior to Closing, Buyer shall use all reasonable efforts to
assist and otherwise facilitate Retail Sub obtaining the financing referred to
in the Debt Financing Letter. Seller shall cooperate with and provide
reasonable assistance to Buyer and Retail Sub in connection with Buyer's
obligations under this Section 6.5(c).
Section VI.6 Public Announcements.
The parties shall consult with each other prior to issuing any
press release or making any public announcement with respect to this
Agreement, or the transactions contemplated hereby, and shall not issue any
such press release or public announcement prior to such consultation or to
which the other party shall reasonably object, except as may be required by
applicable Law, court process or by obligations of such party or its
Affiliates pursuant to any listing agreement with any national securities
exchange.
Section VI.7 Confidential Information.
Buyer shall not disclose any information received by Buyer from
or with respect to Seller or Retail Sub that is confidential or proprietary in
nature, unless (a) such information is or becomes generally available to the
public (other than as a result of the disclosure thereof in violation of this
Section 6.7), (b) was already known to Buyer on a non-confidential basis prior
to its disclosure to Buyer by Seller or any of their Affiliates or (c) is or
becomes available to Buyer from a third party not known by Buyer, after due
inquiry, to be under an obligation of confidentiality to Seller or any of its
Affiliates. If this Agreement terminates, any documents furnished to Buyer by
Seller or any of its Affiliates shall promptly be returned to Seller or, at
the option of Seller, destroyed by Buyer (such destruction to be certified by
Buyer to Seller). After the Closing, except as required by law or legal
process or in connection with Seller's discharge of the Retained Liabilities
and its obligations under Article IX, Seller and Clark USA shall not disclose
any information regarding Buyer, Retail Sub or the Business or the Assets that
is confidential or proprietary in nature unless such information is or becomes
generally available to the public (other than as a result of the disclosure
thereof in violation of this Section 6.7) and Seller gives Buyer notice of its
intention to disclose such information. This provision is in addition to and
not in substitution of any confidentiality agreement executed by any party
hereto.
Section VI.8 WARN. Retail Sub agrees to assume
responsibility for giving all notices required by the WARN Act, or any similar
state law or regulation, to assume liability for any alleged failure to give
such notice, and to indemnify and hold harmless Seller and its Affiliates for
any and all claims asserted under the WARN Act or any similar state law or
regulation because of a "plant closing" or a "mass layoff" occurring at the
Business on or after the Closing Date (other than at the Corporate Office).
For purposes of this Agreement, the Closing Date is the "effective date" for
purposes of the WARN Act.
Section VI.9 Employment and Employee Benefits Arrangements.
(a Effective as of the Closing Date, Buyer shall cause Retail
Sub to offer at will employment to all of Seller's employees employed at the
Retail Stores and Seller's employees identified on Schedule 6.9 (including
those on leaves of absence, whether short-term, long-term, family, maternity,
disability, paid, unpaid or other) ("Retail Employees") (each such Retail
Employee who accepts such offer of employment, a "Transferred Employee" and
each such Retail Employee who does not accept such offer of employment, a
"Non-Transferred Employee"). Buyer shall cause Retail Sub to for one year
from the Closing Date provide Transferred Employees with salary and wages
that, in the aggregate, are no less favorable than the salary and wages
provided to Seller's employees as of the date of this Agreement. Retail Sub
shall be liable for, and indemnify and hold Seller harmless from, all
severance benefits or other amounts (including all amounts payable under or
with respect to any employment contracts and any damages with respect thereto)
that are due and payable to Non-Transferred Employees as a result of the
termination of their employment or to any Transferred Employees as a result of
the transactions contemplated by this Agreement.
(b Buyer will cause Retail Sub to (i) waive all limitations as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the employees of the
Business under any welfare plan that such employees may be eligible to
participate in after the Closing, (ii) provide each such employee with credit
for any co-payments and deductibles paid prior to the Closing in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
plans that such employees are eligible to participate in after the Closing and
(iii) provide each employee with credit for all service with Seller and its
Affiliates under each employee benefit plan, program, or arrangement of the
Buyer or its Affiliates in which such employees are eligible to participate;
provided, however, that in no event shall the employees be entitled to any
credit to the extent that it would result in a duplication of benefits with
respect to the same period of service.
(c) Seller shall retain responsibility for and continue to pay
all medical, life insurance, disability and other welfare plan expenses and
benefits for each Transferred Employee with respect to claims incurred by such
employees or their covered dependents prior to the Closing Date. Expenses and
benefits with respect to claims incurred by Transferred Employees or their
covered dependents on or after the Closing Date shall be the responsibility of
Retail Sub in accordance with any employee benefit plan, program or
arrangement of Retail Sub in which such employees are eligible to participate.
For purposes of this paragraph, a claim is deemed incurred when the services
that are the subject of the claim are performed; in the case of life
insurance, when the death occurs, in the case of long-term disability
benefits, when the disability occurs and, in the case of a hospital stay, when
the employee first enters the hospital.
(d) With respect to any accrued but unused vacation time to which
any Transferred Employee is entitled pursuant to the vacation policy
applicable to such employee immediately prior to the Closing Date (the
"Vacation Policy"), to the extent accrued in the Final Closing Working
Capital, Retail Sub shall allow such employee to use such accrued vacation;
provided, however, that if Retail Sub deems it necessary to disallow such
employee from taking such accrued vacation, Retail Sub shall be liable for and
pay in cash to each such employee an amount equal to such vacation time in
accordance with terms of the Vacation Policy; provided, further, that Retail
Sub shall be liable for and pay in cash an amount equal to such accrued
vacation time to any Transferred Employee whose employment terminates for any
reason prior to the close of business on the last calendar day of the year
during which the Closing Date occurs.
(e) Nothing herein expressed or implied shall confer upon any of
the employees of Seller, Buyer, or any of their Affiliates, any rights or
remedies, including any right to employment, or continued employment for any
specified period, of any nature or kind whatsoever under or by reason of the
Agreement.
Section VI.10 Non-Solicitation of Employees; No Transfers.
(a Each of Clark USA and Seller agrees that it will not, for a
period commencing on the date hereof and ending on the second anniversary of
the Closing Date, without the prior written consent of Buyer, directly or
indirectly, solicit the employment of any person who is at that time an
employee, representative or officer of the Business and who was prior to the
Closing an employee of Seller and had a salary in excess of $50,000 per year.
(b Except as set forth in Section 6.9(a), each of Buyer and
Retail Sub agrees that neither it nor any of its subsidiaries will, for a
period commencing on the date hereof and ending on the second anniversary of
the Closing Date, without the prior written consent of Seller, directly or
indirectly solicit the employment of any person who is at that time an
employee, representative or officer of Seller or any of its Affiliates and who
has a salary in excess of $50,000 per year.
Section VI.11 Phase I Environmental Inspection.
Buyer shall have until 45 days after the date
hereof to perform at its expense a phase I environmental inspection on the
Retail Stores and the real property on which they are situated. The phase I
inspection shall not include any drilling or other subsurface testing or
activity. Buyer acknowledges that it is prohibited from conducting any
drilling or other subsurface testing or activity at the Retail Stores and the
retail property on which they are situated. Buyer shall give Seller no less
than forty-eight (48) hours notice prior to undertaking any inspection so that
Seller or its representatives may be present during the inspection. Any
environmental inspection shall be conducted in a manner so as not to damage
any of the Retail Stores or the real property on which they are situated. If
any damage is caused, Buyer agrees to immediately repair and restore the
Retail Stores and the real property on which they are situated to their former
condition. Buyer agrees to indemnify, defend and hold Seller harmless from
and against any and all Claims, demands and causes of action for personal
injury (including death) or loss to persons or property (including Buyer and
its agents, servants, employees, customers, contractors and the property of
any of them) and/or costs and expenses (including interest, penalties and
reasonable attorneys' fees) arising from such entry upon, use or occupancy of
the Retail Stores; provided that Buyer has no obligation to indemnify, defend
or hold Seller harmless with respect to any matter arising out of Seller's own
negligence or willful misconduct. Buyer shall furnish Seller with a copy of
each report setting forth the results of any phase I inspection performed by
Buyer if the Closing does not occur. Buyer shall keep all information
regarding the environmental condition of the Retail Stores confidential and
shall not submit a copy of any report to any third party other than Buyer's
attorneys and accountants unless specifically required to do so by applicable
law, and if so required, shall simultaneously provide to Seller a copy of any
information submitted to such third party.
Section VI.12 Non-Competition; Clark Name.
(a) Neither Seller nor Seller's Affiliates (which,
for purposes of this Section 6.12(a), shall not include any controlling
Affiliate of Clark USA other than Superholdco) shall, for a period of three
years after the Closing Date, directly or indirectly, engage in the United
States in the (i) convenience store business or (ii) the gasoline or petroleum
products retailing business (such businesses, "Subject Businesses"); provided
that, Seller and its Affiliates, without violating this covenant, may acquire
any company (including by means of a merger or consolidation) or business and
operate and expand such company or business, in each case which is not
primarily engaged in the Subject Businesses at the time of such acquisition.
(b) At the Closing, the parties hereto shall enter into the
Trademark License Agreement in the form of Exhibit G (the "Trademark License
Agreement"), pursuant to which Retail Sub shall grant Seller and its
Affiliates a temporary royalty-free license to use the words "Clark Refining"
in their corporate and trade names in their other current businesses (other
than the Business) for a period of one year after the Closing Date. Seller
will not sell branded gasoline under the "Clark" name.
Section VI.13 Transition Services; Supply Agreement;
Software License Agreement.
(a) At the Closing, Seller and Retail Sub shall
enter into a transition services agreement (the "Transition Services
Agreement") in the form of Exhibit H pursuant to which Seller will provide to
the Business the services listed therein for a period of six months.
(b) At the Closing, Seller and Retail Sub shall enter into a
hydrocarbon supply agreement (the "Supply Agreement") incorporating the terms
set forth on Exhibit F (which sets forth the principal business terms
thereof). After the date hereof and prior to the Closing Date, Buyer and
Seller shall negotiate in good faith and use all reasonable efforts to agree
to the form of such Supply Agreement as promptly as practicable.
(c) At the Closing, the Seller shall provide Retail Sub a
perpetual royalty-free license to use the software identified on Schedule
6.13.
Section VI.14 Intercompany Accounts.
Immediately prior to the Closing, all intercompany receivables or
payables then existing between the Business, on the one hand, and the other
businesses of Seller and Affiliates of Seller, on the other hand, shall be
canceled (except to the extent included in Final Closing Working Capital), and
the Closing Financial Data prepared pursuant to Section 2.8 hereof shall be
prepared accordingly.
Section VI.15 Real Property Documents.
Within 45 days after the date of this Agreement, Buyer will, at
Buyer's expense, obtain in form and substance reasonably satisfactory to Buyer
the following with respect to the Real Property:
(a) ALTA/ASCM land surveys (the "Surveys") with respect to the
Owned Real Property; and
(b) the Title Commitments issued by the Title Insurer to Buyer
for ALTA Form B Owner's Title Insurance Policies in minimum amounts to be
determined by Buyer as of the Closing Date covering all of the Owned Real
Property, showing ownership of the Owned Real Property, subject only to the
Permitted Liens. By way of extended coverage or special endorsement, each
such Title Commitment will obligate the Title Insurer to issue an endorsement
deleting all policy general exceptions and an access endorsement (to the
extent available under state title insurance Laws or not expressly part of the
title policy coverage) to all portions of the Owned Real Property (including
an access endorsement that specifically guarantees ingress and egress to each
of the Owned Real Property). In addition, Seller shall reasonably assist
Buyer in obtaining for each such Title Commitment insurance against violations
of restrictive covenants and a zoning endorsement and such other endorsements
as Buyer may require, in each case reasonably satisfactory to Buyer. All such
endorsements and insurance are to be in such form as is reasonably
satisfactory to Buyer (the "Title Insurance Policies"). Seller will provide
to the Title Insurer such affidavits and other documents as the Title Insurer
may reasonably request to issue such Title Insurance Policies, including
access endorsements (but shall not be required to execute any documents under
which it would have liability in order to procure other endorsements). Seller
acknowledges that Buyer may also wish to obtain leasehold title policies
covering the Leased Real Property and Seller will reasonably cooperate with
the title insurer so that such policies may be issued; provided however, that
Seller shall not be required to cause evidence of any lease to be placed of
record or expend any monies.
Section VI.16 Certain Liabilities.
On and after the Closing, Retail Sub shall agree to indemnify
Seller for its Liabilities under such Seller employee benefit plans,
Liabilities under Section 2.3(b)(ix) and (x) and Liabilities for Taxes (other
than income Taxes) as would be reflected as a current liability on Seller's
balance sheet (collectively "Reserve Liabilities"). Retail Sub shall have no
obligation under this Section 6.16 in excess of the amount ("Reserve Cap")
which are shown as a current liability with respect to Reserve Liabilities in
the calculation of Closing Working Capital. In the calculation of Closing
Working Capital it will be assumed that Retail Sub's obligations under this
Section 6.16 is a current liability in the amount of the Reserve Cap. Retail
Sub will pay to Seller or Seller's designee, any amounts due under Reserve
Liabilities at such time as such payments must be made by Seller or Seller's
designee. On the first year anniversary of the Closing Date, Retail Sub shall
pay to Seller the excess of the Reserve Cap over all payments made by Retail
Sub under this Section 6.16 over the prior year. After such payment, Retail
Sub's obligations under this Section 6.16 will terminate.
Section VI.17 Revolver.
It is the understanding of the parties hereto that Buyer will use
commercially reasonable efforts to obtain by Closing a senior working
capital facility for Retail Sub.
ARTICLE VII
CONDITIONS
Section VII.1 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby.
The respectiveobligations of each party to effect the transactions contemplated
by this Agreement shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a The waiting periods (and any extensions thereof) applicable
to the transactions contemplated by this Agreement under the HSR Act
shall have been terminated or shall have expired;
(b No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent
jurisdiction which prevents the consummation of the transactions
contemplated hereby or imposes material conditions with respect thereto
shall have been issued and remain in effect (each party agreeing to use
all reasonable efforts to have any such injunction, order or decree
lifted); and
(c No action shall have been taken, and no Law shall have been
enacted, by any state or Federal government or governmental agency which
would prevent the consummation of the transactions contemplated by this
Agreement or impose material conditions with respect thereto.
Section VII.2 Conditions to Obligations of Buyer to Effect the
Transactions Contemplated Hereby. The obligations of Buyer to effect the
transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions unless and only to the extent waived in writing by Buyer:
(a) (i) Seller shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date; (ii) the representations and warranties of
Seller contained in this Agreement (other than in Section 3.10 (b), (c)
and (d)) (x) shall be true and correct in all material respects at and
as of the date hereof and (y) shall be true and correct at and as of the
Closing Date except as would not have a Material Adverse Effect as if
made at and as of the Closing Date, except to the extent that any such
representation or warranty expressly relates to another date (in which
case, as of such date); (iii) the representations and warranties of
Seller contained in Sections 3.10(b), (c) and (d) shall be true and
correct at and as of the date hereof except as would not have a Material
Adverse Effect and shall be true and correct at and as of the Closing
Date except as would not have a Material Adverse Effect as if made at
and as of the Closing Date, except to the extent that any such
representation or warranty expressly relates to another date (in which
case, as of such date); and (iv) Buyer shall have received a certificate
signed on behalf of Seller by an executive officer thereof to the effect
of clauses (i), (ii) and (iii);
(b) All consents required to assign or transfer any of the
Assumed Contracts (other than the Leases) shall have been obtained,
other than any such consent which, if not obtained, would not reasonably
be likely to have a Material Adverse Effect.
(c) Retail Sub shall have received financing in the amount and on
the terms at least as favorable to Retail Sub as those set forth in the
Debt Commitment Letter and on such other terms as are reasonably
satisfactory to Buyer.
(d) Buyer has received the Real Property Documents in accordance
with the standards and pursuant to the procedures provided in Section
6.15, except as would not have a Material Adverse Effect.
(e) Seller and Retail Sub shall have entered into the Supply
Agreement in the form reasonably satisfactory to Buyer and Seller and
the Transition Services Agreement.
(f) Newco shall have been capitalized in accordance with Section
2.5 and shall have entered into the Stockholders Agreement.
(g) The lenders under Seller's senior credit facility shall have
consented to the transactions contemplated hereby and shall have
released all Liens on any of the Assets securing such senior credit
facility.
(h) Seller shall have paid the sale bonus and severance bonus to
Brandon K. Barnholt, Robert Hamer and John Hammer (collectively, the
"Executives") pursuant to that letter agreement dated May 8, 1999 among
Seller and the Executives, provided that the condition set forth in this
paragraph (h) shall have no force and effect if such Executives have not
executed and delivered an unconditional release of Seller's obligations
to such Executives.
Section VII.3 Conditions to Obligations of Seller and Retail Sub to
Effect the Transactions Contemplated Hereby. The obligations of Seller and
Retail Sub to effect the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing Date of the
following additional conditions:
(a Buyer shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and the representations and warranties of
Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of
the Closing Date, except to the extent that any such representation or
warranty expressly relates to another date (in which case, as of such
date) and Seller shall have received a certificate signed on behalf of
Buyer by an executive officer thereof to such effect.
(b) Retail Sub shall have obtained debt financing in an amount
sufficient to pay the Note Amount.
(c) The lenders under Seller's senior credit facility shall have
consented to the transactions contemplated hereby and shall have
released all Liens on any of the Assets securing such senior credit
facility.
ARTICLE VIII
TERMINATION
Section VIII.1 Termination.
This Agreement may be terminated at any time prior to the Closing by:
(a the mutual written consent of Seller and Buyer;
(b either Seller or Buyer if (i) the transactions contemplated
hereby shall not have been consummated on or before August 31, 1999;
(ii) the lenders under Seller's senior credit facility shall not have
consented to the transactions contemplated hereby by May 21, 1999 (provided
that this Agreement may not be terminated pursuant to this clause (ii) after
such consent has been obtained); or (iii) any court of competent
jurisdiction in the United States or any State shall have
issued an order, judgment or decree (other than a temporary
restraining order) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have
become final and nonappealable;
provided, that the right to terminate this Agreement under
Section 8.1(b)(i) hereof shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing Date to occur on or before such
date.
Section VIII.2 Effect of Termination. (a) In the event of termination
of this Agreement by either Buyer or Seller as provided in Section 8.1
hereof, this Agreement shall forthwith become void (except as set forth in
this Section 8.2, in Sections 6.6 and 6.7, and Article X (other than Section
10.6 and 10.12) hereof, which shall survive the termination) and there shall
be no liability on the part of Buyer or Seller or their respective officers
or directors except for any breach of any of its obligations under Sections
6.6 and 6.7 and Article X (other than Sections 10.6 and 10.12) hereof.
Notwithstanding the foregoing, no party hereto shall be relieved from
liability for any wilful breach of this Agreement.
(b) If this Agreement has been terminated pursuant to Section
8.1(b)(ii) and, prior to December 31, 1999, Seller enters into an agreement
with another party to sell the Business, upon consummation of such sale,
Seller shall pay Buyer $7 million.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
Section IX.1 Survival. The representations and warranties set forth in
Articles III and IV shall survive the Closing until April 30, 2001 (other
than those contained in the last sentence of Section 3.10(b) and clause (iii)
of Section 3.10(d) (the "Title Representations") which shall survive until
the fifth anniversary of the Closing Date and other than those contained in
Section 3.1(b) which shall survive in perpetuity).
Section IX.2 Indemnification by Buyer or Seller.
(a From and after the Closing Date, Retail Sub shall indemnify
and hold harmless Seller, Seller's Affiliates, each of their respective
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing from and against any and all
Losses suffered or incurred by any such indemnified person arising from
(i) any breach of, or inaccuracy in, any representation or warranty of Buyer
contained in Article IV or in any certificate relating thereto delivered
pursuant to Section 7.3(a), (ii) any breach of any covenant of Buyer contained
in this Agreement and (iii) all Assumed Liabilities; provided that, Retail Sub
shall not have any obligation under the preceding clauses (i) or (ii) unless
the aggregate Losses under such clauses exceed on a cumulative basis $4
million in which case Retail Sub shall be liable for amounts only in excess of
such amount; provided further that, Retail Sub shall not have any obligation
under the preceding clauses (i) or (ii) in excess of $50 million in the
aggregate on a cumulative basis.
(b From and after the Closing Date, Seller shall indemnify and
hold harmless Retail Sub, Buyer, Buyer's Affiliates, each of their respective
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing from and against any and all
Losses suffered or incurred by any such indemnified person arising from
(i) any breach of, or inaccuracy in, (A) any representation or warranty of
Seller contained in Article III other than Sections 3.5(b) and 3.10(b), (c)
and (d) (which representations and warranties in Article III, other than those
contained in Sections 3.5, 3.7(a), 3.8, 3.14(i) and 3.17, shall be deemed to
have been made without any materiality or Material Adverse Effect
qualification) or in any certificate relating thereto delivered pursuant to
Section 7.2(a) and (B) any representation or warranty of Seller contained in
Section 3.10(b), (c) and (d) or in any certificate relating thereto delivered
pursuant to Section 7.2(a); (ii) any breach of any of covenant of Seller
contained in this Agreement (other than Section 6.15) (iii) subject to
Section 9.4, any Environmental Claims relating to Identified Contamination
Sites (other than Losses arising from the release after the Closing of
Materials of Environmental Concern), (iv) subject to Section 9.4, any
Environmental Claims related to Unknown Sites (other than Losses arising from
the release after the Closing of Materials of Environmental Concern) and
(v) all Retained Liabilities (including Liens arising out of Retained
Liabilities); provided that, (w) except with respect to any breach of the
representations and warranties contained in Section 3.1(b), Seller shall not
have any obligation under the preceding clauses (i)(A) and (ii) (other than
with respect to any breach of clause (x) of Section 5.1) unless the aggregate
Losses under such clauses exceed on a cumulative basis $4 million in which
case Seller shall be liable for amounts only in excess of such amount, (x)
Seller shall not have any obligation under the preceding clause (i)(B) unless
the aggregate Losses under such clause with respect to such breaches exceed on
a cumulative basis $1 million in which case Seller shall be liable for amounts
only in excess of such amount, (y) with respect to the first $5 million of
Losses with respect to Identified Contamination Sites under the preceding
clauses (i)(A) and (iii), Seller shall be responsible for 50% of such Losses
(except that, if Losses exceed $2 million in the first year after the Closing
Date, Seller shall be responsible for all Losses for such first year in excess
of $1 million) and Seller shall be responsible for all Losses in excess of
such $5 million plus any Losses in excess of $1 million for such first year
and (z) Seller shall not have any obligation with respect to any particular
Unknown Site under the preceding clauses (i)(A) and (iv) unless the aggregate
Losses with respect to such Unknown Site under such clauses exceed on a
cumulative basis $50,000, in which case Seller shall be liable for amounts
only in excess of such amount; provided further that, except with respect to
any breach of the Title Representations or the representations and warranties
contained in Section 3.1(b), Seller shall not have any obligation under the
preceding clauses (i) and (ii) in excess of $50 million in the aggregate on a
cumulative basis.
(c) With respect to any Losses indemnifiable under this Article
IX, the indemnifying person's obligations with respect to such Losses will be
reduced by (i) any amounts received by the indemnified person from
Governmental Authorities or third parties in connection with such Losses,
including Losses related to Environmental Claims ("Reimbursements"), or
(ii) the amount of any net reduction in cash Tax payable by the indemnified
person with respect to such Losses through and including the tax year in which
the indemnification payment is made. The indemnifying person shall use
commercially reasonable efforts or, in the case of environmental
Reimbursements, diligent efforts (the expenses of which shall be considered
Losses for purposes of the relevant indemnity claim) to pursue Reimbursements
that may reduce or eliminate Losses. If any indemnified person receives any
Reimbursement or realizes any net reduction in cash Tax payable after an
indemnification payment is made which relates thereto, the indemnified person
shall promptly repay to the indemnifying person such amount of the
indemnification payment as would not have been paid had the Reimbursement or
net cash Tax reduction reduced the original payment at such time or times as
and to the extent that such Reimbursement or net cash Tax reduction are
actually realized. With respect to environmental reimbursements due from
Governmental Authorities, Seller shall have the right to monitor and audit at
Seller's expense Retail Sub's books and records relating to such
Reimbursements and shall receive from Retail Sub on a quarterly basis a
reasonably detailed site by site summary of the status of both received and
pending Reimbursements and any other information Seller may reasonably request
relating to such Reimbursements. In addition, if the allocation of
responsibilities for Environmental Claims pursuant to this Agreement would
materially jeopardize the receipt of such reimbursements from Governmental
Authorities, the parties hereto agree to restructure such allocation of
responsibilities so as to minimize the loss of such reimbursements while
preserving the same economic agreement among the parties.
(d) The rights and obligations set forth in Article 9 shall be
the sole and exclusive remedies of the parties hereto (other than claims for
fraud and intentional misrepresentation) with respect to any disputes relating
to any subject matter governed by Article 9. In addition, with respect to any
dispute concerning any Deed, the title of any Asset or the existence of any
Lien, the indemnification provided by clause (i)(B) of Section 9.2(b) shall be
the sole and exclusive remedy of Retail Sub, Buyer, Buyer's Affiliates and
their assigns. All indemnification payments under this Article IX will be
deemed adjustments to the Initial Note Amount.
Section IX.3 Third-Party Claims. If a Claim by a third party is made
against an indemnified person hereunder, and if such indemnified person
intends to seek indemnity with respect thereto under this Article, such
indemnified person shall promptly notify the indemnifying person in writing
of such Claims setting forth such Claims in
reasonable detail, provided that failure of such indemnified person to give
prompt notice as provided herein shall not relieve the indemnifying person of
any of its obligations hereunder, except to the extent that the indemnifying
person is prejudiced by such failure. The indemnifying person shall have
thirty (30) days after receipt of such notice to undertake, through counsel of
its own choosing, and at its own expense, the settlement or defense thereof,
and the indemnified person shall cooperate with it in connection therewith;
provided, however, that the indemnified person may participate in such
settlement or defense through counsel chosen by such indemnified person,
provided that the fees and expenses of such counsel shall be borne by such
indemnified person. If the indemnifying person shall assume the defense of a
Claim, it shall not settle such Claim without the prior written consent of the
indemnified person, (i) unless such settlement includes as an unconditional
term thereof the giving by the claimant of a release of the indemnified person
from all Liability with respect to such Claim or (ii) if such settlement
involves the imposition of equitable remedies or the imposition of any
material obligations on such indemnified person other than financial
obligations for which such indemnified party will be indemnified hereunder.
If the indemnifying person shall assume the defense of a claim, the fees of
any separate counsel retained by the indemnified person shall be borne by such
indemnified person unless there exists a material conflict between them as to
their respective legal defenses (other than one that is of a monetary nature),
in which case the indemnified person shall be entitled to retain separate
counsel, the reasonable fees and expenses of which shall be reimbursed by the
indemnifying person.
Section IX.4 Environmental Indemnification
(a) Subject to the terms and conditions hereof, on and after the
Closing Date, Retail Sub shall conduct the remediation of releases of
Materials of Environmental Concern on the Real Property. It is the intent of
the parties hereto that, to the extent permitted by Environmental Laws, Losses
subject to indemnification pursuant to Sections 9.2(b)(iii), 9.2(b)(iv) or
9.2(b)(v) hereof or subject to indemnification pursuant to Section 9.2(b)(i)
hereof and relating to breaches of the representations and warranties included
in section 3.17 hereof shall in each case be minimized. Consistent with such
objective, the investigation, monitoring and remediation of releases of
Materials of Environmental Concern shall be conducted in a commercially
reasonable manner by Retail Sub in the same manner as if the indemnification
obligations of Seller did not exist, including agreeing where appropriate to
deed restrictions limiting the future uses of the owned Premises to industrial
or commercial purposes.
(b) Retail Sub shall promptly advise the Seller of any material
release of Materials of Environmental Concern at any of the Premises occurring
after the Closing Date. Regarding any matter asserted to be subject to
indemnification hereunder, Buyer and Retail Sub shall promptly provide Seller
with copies of all material communications with Governmental Authorities with
jurisdiction over Environmental Laws; provided that, the failure to promptly
provide such material will not affect Seller's indemnification obligations
hereunder except to the extent and only to the extent Seller is prejudiced by
such failure. Furthermore, Buyer and Retail Sub shall use all reasonable
efforts (subject to regulatory timing constraints) to allow Seller a
reasonable opportunity to review and comment on any material planned
environmental investigation, monitoring or remediation asserted to be subject
to indemnification hereunder or relating to any matter asserted to be subject
to indemnification hereunder. Regarding any environmental investigation,
monitoring or remediation of any of the Premises which is asserted to be
subject to indemnification hereunder, Retail Sub shall, to the extent
consistent with its obligations under Section 9.4(a) hereof, use reasonable
efforts to obtain a no further action letter or any similar determination by a
Governmental Authority, if available, that no further remedial action is at
that time required under Environmental Laws regarding that particular
Premises. Such no further action letter or similar determination will be
sought as promptly as reasonably practicable after Buyer and Retail Sub have
completed any required remediation.
(c) Seller's obligations under Section 9.2(b)(iii) hereof
regarding any particular Identified Contamination Site shall terminate upon
the issuance by a Governmental Authority of a no further action letter or any
other similar determination by a Governmental Authority that no further
monitoring, investigation or remediation action is at that time required under
Environmental Laws regarding that particular Identified Contamination Site;
provided that, Seller's obligations shall not terminate with respect to any
matter as to which Retail Sub shall have, before such termination, previously
made a claim by delivering a notice (stating in reasonable detail the basis of
such claim) to Seller. Seller's obligations under Section 9.2(iv) hereof
regarding any particular Unknown Site shall terminate on the earlier date of
either (i) the fifth anniversary of the Closing Date or (ii) the issuance by a
Governmental Authority of a no further action letter or any other similar
determination by a Governmental Authority that no further monitoring,
investigation or remedial action is at that time required under Environmental
Laws regarding that particular Unknown Site; provided that, Seller's
obligations shall not terminate with respect to any matter as to which Retail
Sub shall have, before such termination, previously made a claim by delivering
a notice (stating in reasonable detail the basis of such claim) to Seller.
(d) Seller will pay its indemnification obligations relating to
environmental matters in accordance with this Article IX promptly (and in any
event within 30 days) after receiving a reasonably detailed invoice therefor.
Section IX.5 Termination of IndemnificationSection IX.5
Termination of Indemnification. The obligations to indemnify and hold
harmless a party hereto, (a) pursuant to Section 9.2(a)(i) and 9.2(b)(i) shall
terminate when the applicable representation or warranty terminates pursuant
to Section 9.1, (b) pursuant to Section 9.2(a)(ii) and 9.2(b)(ii) (in each
case only with respect to agreements and covenants required to be performed
prior to the Closing) shall terminate on the first anniversary of the Closing
Date, (c) pursuant to Sections 9.2(a)(ii) and 9.2(b)(ii) (in each case only
with respect to agreements and covenants required to be performed at or after
the Closing) and Sections 9.2(a)(iii) and 9.2(b)(v) shall not terminate and
(d) pursuant to Section 9.2(b)(iii) and (iv) shall terminate as provided in
Section 9.4; provided, however, that as to clause (a) or (b) above such
obligation to indemnify and hold harmless shall not terminate with respect to
any item as to which the person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
indemnifying party.
ARTICLE X
MISCELLANEOUS
Section X.1 Counterparts. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
Agreement, and shall become effective when or more counterparts have
been signed by each of the parties and delivered to the other party.
Section X.2 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED ENTIRELY IN THAT STATE.
Section X.3 Entire Agreement. This Agreement (including the
documents referred to herein) (a) constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement
and (b) is not intended to confer upon any person other than the parties
rights or remedies.
Section X.4 Expenses. Except as set forth
in this Agreement, whether or not the transactions contemplated by this
Agreement are consummated, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses. In the event any party
hereto brings suit to construe or enforce the terms hereof, or raises this
Agreement as a defense in a suit brought by another party hereto, the
prevailing party in such suit shall be entitled to recover its reasonable
attorneys' fees and expenses.
Section X.5 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally, sent by documented overnight delivery service or, to the
extent receipt is confirmed, telecopy, to the appropriate address or telecopy
number set forth below (or at such other address or telecopy number for a
party as shall be specified by like notice):
(a) If to Seller:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: Chief Financial Officer
Telecopy Number: (314) 854-1570
with a copy to:
Clark Refining & Marketing, Inc.
8182 Maryland Avenue
St. Louis, Missouri 63105
Attention: General Counsel
Telecopy Number: (314) 854-1455
and
Simpson Thacher & Bartlett
425 Lexington Ave.
New York, New York 10017
Attention: Richard Capelouto, Esq.
Telecopy Number: (212) 455-2502
(b) If to Buyer, to:
CM Acquisition, Inc.
c/o Apollo Management, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Robert A. Katz
Telecopy Number: (212) 261-4102
with a copy to:
Lewis Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 68102
Attention: Douglas D. Hommert
Telecopy Number: (314) 241-6056
Section X.6 Assignment. Neither this Agreement nor any of the rights,
interest or obligations under this Agreement shall be assigned, in whole or in
part, by operation of Law or otherwise by either of the parties hereto without
the prior written consent of the other party; provided that, this Section 10.6
shall not prevent any party hereto from entering into any merger or
consolidation with any other person. Notwithstanding the foregoing, Buyer may
assign all or any of its rights and obligations under this Agreement to any
Affiliate of Buyer or all or any rights of Retail Sub to one or more
subsidiaries of Retail Sub to be formed on or after the Closing Date, in each
case without the consent of Seller but no such assignment shall relieve Buyer
or Retail Sub of any of their respective obligations hereunder.
Notwithstanding the foregoing, after the Closing Date, no party hereto may sell
all or substantially all of its assets unless the transferee of such assets
assumes all of the obligations of such party hereunder (without relieving the
obligations of such party).
Section X.7 Interpretation.
The table of contents and headings contained in this Agreement are inserted for
convenience of reference only and shall not affect in anyway the meaning or
interpretation of this Agreement. All references to a Section, Articles,
Schedule or Exhibit contained herein mean Sections or Articles of this
Agreement unless otherwise stated. It is understood and agreed that the
specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
Schedules is not intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact of the setting of such amounts or the fact of
the inclusion of such items in any dispute or controversy between the parties
as to whether any obligation, item or matter not described herein or included
in a Schedule is or is not material for purposes of this Agreement.
Information provided in one Schedule shall suffice, without repetition or
cross-reference, as a disclosure of such information in any other relevant
Schedule, if the disclosure in respect of such one Schedule is sufficient on
its face without further inquiry reasonably to inform the reader of the
information required to be disclosed in respect of such other Schedules to
avoid a misrepresentation under the relevant counterpart of Sections of the
Agreement. Without limiting the generality of the immediately preceding
sentence, the mere listing (or inclusion of a copy) of a document or other
item in a Schedule will not be deemed adequate to disclose an exception to a
representation or warranty made herein unless the representation or warranty
has to do with the existence of the document or other item itself.
Section X.8 Amendments; Waivers
(a) This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by Buyer and Seller.
(b) The failure of either party hereto to comply with any
representation, warranty, covenant or agreement contained in this Agreement
may be waived only by a written instrument signed by the party granting such
waiver. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained in this Agreement, and no failure by
any party to take any action with respect to any breach of this Agreement or
default by any other party shall constitute a waiver of such party's right to
enforce any provision hereof or to take any such action. The waiver by either
party hereto of a breach of any provision hereunder shall not operate as a
waiver of any prior or subsequent breach of the same or any other provision
hereunder.
Section X.9 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the
remaining provisions hereof.
Section X.10 Consent to Jurisdiction; Waiver of Jury Trial.
(a) Each party hereto irrevocably submits to the non exclusive
jurisdiction of (i) the Court of Appeals of the State of New York and (ii)
the United States District Court for the Southern District of New York for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT.
Section X.11 Specific Performance. Buyer and Seller agree that the
Business and the Assets constitute unique property. There is no adequate
remedy at law for the damage which either party might sustain for failure
of the other party to consummate the transactions contemplated by this
Agreement pursuant to the terms of this Agreement. Each party agrees that,
in the event of a breach of this Agreement, the non-breaching party shall
be entitled to specific performance by the breaching party of its obligations
hereunder.
Section X.12 Bulk Sales. (a) Buyer and Retail Sub each hereby waives
compliance by Seller with any bulk sales laws (excluding any applicable bulk
sales or transferee provision of any state Tax Law) which may be applicable.
Seller agrees to indemnify and hold Buyer and Retail Sub harmless against any
and all Losses incurred by Buyer and Retail Sub as a result of any failure to
comply with any such bulk sales laws.
(b) Seller and Buyer will provide, if applicable, any and all
information to the other and take any and all actions necessary for Seller and
Buyer to comply with any bulk sales provisions under Law relating to Taxes to
eliminate all transferee liability to Buyer. By way of illustration, but not
limitation, Seller or Buyer (as applicable as required by Law) is to give all
requisite notices or requests to the relevant taxing authorities as soon as
possible after the date hereof in order to comply with applicable state Tax
notice or request requirements, and will deliver to the other any certificate
as to Taxes due by Seller issued by such taxing authorities.
Section X.13 Business Day. If any day on which any payment is required
to be made hereunder, or on which any notice must be sent, or on which any time
period described herein commences or ends is not a Business Day, then such day
will be deemed for all purposes of this Agreement to fall on the next succeeding
day which is a Business Day.
Section X.14 Successors and Assigns. All provisions of this Agreement
are binding upon, inure to the benefit of and are enforceable by or against the
parties hereto and their respective heirs, executors, administrators or other
legal representatives and permitted successors and assigns.
Section X.15 Guarantee. Clark USA hereby
guarantees the performance by Seller of all of its obligations hereunder.
Section X.16 Arbitration. Except as set forth in Section 2.8 and
Section 10.11, any Claim arising out of or related to this Agreement, or a
breach hereof, is to be settled by arbitration in accordance with the
procedures set forth on Schedule 10.16. Notice of demand for arbitration
must be filed in writing with the other parties hereto in accordance with
Schedule 10.16. Subject to Sections 9.2(a) and 9.2(b), a demand for
arbitration is to be made within a reasonable time after the Claim
has arisen, but in no event later than the date when institution of legal or
equitable proceedings based on such Claim would be barred by the applicable
statute of limitations. The award rendered by the arbitrators, including as
to legal fees, is final, and judgment may be entered upon it in accordance
with Law in any court of competent jurisdiction.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties as of the day 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
CLARK REFINING & MARKETING, INC.
By: /s/ Maura J. Clark
Name: Maura J. Clark
Title: Executive Vice President, Corporate Development
and Chief Financial Officer
OTG, INC.
By: /s/ Maura J. Clark
Name: Maura J. Clark
Title: Executive Vice President, Corporate Development
and Chief Financial Officer
CM ACQUISITION, INC.
By: /s/ Robert A. Katz
Name: Robert A. Katz
Title: President
SCHEDULES
Schedule Name
1.1(a) Retail Stores
2.1(a)-1 Leases
2.1(a)-2 Subleases
2.1(a)-3 Owned Real Property
2.1(c) Contracts
2.1(d) Intellectual Property
2.2(l) Certain Excluded Assets
2.3(b)(vi) Hydrocarbon Payables Terms
2.8(a) Hydrocarbon Inventory Valuation
3.4 Seller Required Consents
3.5(a) Financial Statements
3.5(b) Working Capital Schedule
3,5(c) Summary Income Statement
3.7 Certain Events
3.9(a) Encumbered Personal Property
3.9(b) Location of Personal Property
3.10(a) Real Property Leases
3.10(c) Condemnation Proceedings
3.11 Litigation
3.12 Intellectual Property Matters
3.13 Licenses
3.14 Labor Matters
3.15 Employee Benefit Plans
3.16 Material Contracts
3.17 Environmental Matters
3.19 Transactions with Affiliates
3.21 Insurance
3.26 Taxes
5.1 Conduct of Business
6.9 Certain Seller Employees
6.13 Software
10.16 Arbitration
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of Assignment of Lease
Exhibit C Form of Bill of Sale
Exhibit D Form of Deed
Exhibit E Form of Stockholders Agreement
Exhibit F Terms of Supply Agreement
Exhibit G Form of Trademark License Agreement
Exhibit H Form of Transition Services Agreement
