<PAGE>

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

                                   FORM 10-K

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

(Mark
One)

  [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 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 of               (I.R.S. Employer
    Incorporation or Organization)               Identification No.)

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

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

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

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

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

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

   Number of shares of registrant's common stock, $.01 par value, outstanding
as of March 31, 2000: 100, all of which are owned by Clark Refining Holdings
Inc.

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<PAGE>

                                CLARK USA, INC.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----

                                     PART I

 <C>            <S>                                                        <C>
 Items 1 and 2. Business; Properties.....................................    2
 Item 3.        Legal Proceedings........................................   14
 Item 4.        Submission of Matters to a Vote of Security Holders......   16

                                    PART II

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

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

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

 Item 8.        Financial Statements and Supplementary Data..............   27

 Item 9.        Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure.....................   27

                                    PART III

 Item 10.       Directors and Executive Officers of the Registrant.......   27

 Item 11.       Executive Compensation...................................   29

 Item 12.       Security Ownership of Certain Beneficial Owners and
                 Management..............................................   34

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

                                    PART IV

 Item 14.       Exhibits, Financial Statement Schedules and Reports on
                 Form 8-K................................................   35

 Signatures...............................................................  66
</TABLE>
<PAGE>

                          FORWARD-LOOKING STATEMENTS

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

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

  . industry-wide refining margins;

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

  . market volatility due to world and regional events;

  . availability and cost of debt and equity financing;

  . labor relations;

  . U.S. and world economic conditions;

  . 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. Such hazards include equipment malfunctions, plant
    construction/repair delays, explosions, fires, oil spills and the impact
    of severe weather;

  . actions taken by competitors which may include both pricing and expansion
    or retirement of refinery capacity;

  . civil, criminal, regulatory or administrative actions, claims or
    proceedings, and regulations dealing with protection of the environment,
    including refined petroleum product composition and characteristics;

  . other unpredictable or unknown factors not discussed.

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

                                       1
<PAGE>

                                    PART I

Item 1 and 2. Business; Properties

General

   Clark USA, Inc. and subsidiaries ("Clark USA" or the "Company") is
currently one of the five largest independent refiners of petroleum products
in the United States based on rated crude oil throughput capacity. Clark USA's
principal operating subsidiary, Clark Refining & Marketing, Inc. ("Clark R&M")
has over 547,000 barrels per day of rated crude oil throughput capacity at its
two Illinois, one Texas and one Ohio refineries. In July 1999, Clark R&M sold
its 672 company-operated retail outlets to a company controlled by Apollo
Management L.C. ("Apollo"), and in November 1999, Clark R&M sold 15
distribution terminals to Equilon Enterprises, L.L.C. and its subsidiary
("Equilon"). Both transactions are part of a strategy to focus on refining
operations, which the Company believes will offer higher potential future
returns.

   Clark USA was incorporated in Delaware in 1988 as AOC Holdings, Inc. Its
principal executive offices are at 8182 Maryland Avenue, St. Louis, Missouri,
63105 and its telephone number is (314) 854-9696. As part of the transaction
with Apollo, the Clark trade name was sold. As a result, the Company will
change its name in 2000.

   In 1999, pursuant to a share exchange agreement, all the shares of Clark
USA were exchanged on a one-for-one basis for the shares of Clark Refining
Holdings Inc. ("Clark Holdings") resulting in Clark Holdings being the sole
shareholder of Clark USA. Clark Holdings' equity is privately-held and
controlled by Blackstone Capital Partners III Merchant Banking Fund L.P. and
its affiliates ("Blackstone") through a 78.7% voting interest (75.3% economic
interest) as of December 31, 1999. Originally, Blackstone acquired an interest
in Clark USA from TrizecHahn Corporation (formerly The Horsham Corporation,
"TrizecHahn") in November 1997. Clark Holdings' other principal shareholder is
an affiliate of Occidental Petroleum Corporation ("Oxy") with a 19.9% voting
interest (23.4% economic interest) as of December 31, 1999. Oxy acquired an
interest in Clark USA in November 1995 in exchange for rights to future crude
oil deliveries that the Company subsequently sold. Blackstone and Oxy
exchanged their Clark USA shares for Clark Holdings shares in May 1999 to
facilitate, among other things, the construction and financing of a project
initiated by the Company to upgrade its Port Arthur, Texas refinery to be able
to process more lower-cost, heavy sour crude oil. The Company sold a
substantial portion of this project in August 1999 to Port Arthur Coker
Company L.P., a subsidiary of Clark Holdings. Much of the debt of Clark USA
and Clark R&M is publicly traded.

Business Strategy

   The Company is focused on becoming a world class refiner to capture the
manufacturing value created in refining crude oil into gasoline, diesel fuel,
jet fuel, and other petroleum products. Demand for these products has grown at
consistent rates since the mid-1980's and the Company believes that the excess
capacity resulting from the oil crisis of the 1970's and early 1980's have now
been almost fully absorbed. Clark USA has a disciplined business approach with
a strategy that has been consistently focused towards the following:

 .  Improving Productivity with Minimum Capital

   The Company continues to implement relatively no or low-cost initiatives
designed to increase production, sales volumes and production yields and to
improve its sales mix while reducing input costs and operating expenses.
Examples of these types of initiatives include improvements at the Port Arthur
refinery, other than the heavy oil upgrade project, increased yields and crude
oil throughput capability at its Illinois refineries and the creation of value
within the retail marketing business and subsequent harvesting of that value
to be deployed into expected higher return uses.

                                       2
<PAGE>

 .  Adding Scale Through Acquisitions at Fractions of Replacement Costs

   The Company intends to continue to seek to add scale to its refining
operations through the selective acquisition of low-cost, quality assets.
Since 1994, the Company has almost quadrupled its refining capacity with the
acquisition of the Port Arthur refinery in 1995 and the Lima refinery in 1998.
The Company believes there may be additional acquisition opportunities in the
future due to continued consolidation in the industry.

 .  Optimizing Capital Investment through a Rigorous Project Review and
   Implementation Process

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

 .  Maintaining Strong Liquidity and Financial Flexibility

   Earnings in the Company's industry have been volatile. As a result of this
volatility the Company has historically maintained significant liquidity and
utilized long-term financing when possible while retaining some prepayment
flexibility. As of December 31, 1999, the Company had cash and short-term
investments of approximately $308 million and no material long-term debt
maturities prior to 2003.

 .  Promoting Entrepreneurial Culture

   An overall approach in optimizing the above strategies and enhancing
financial performance and safety is to promote an entrepreneurial culture
where employee incentives are aligned with performance objectives. All of the
Company's employees participate in its performance management, profit sharing
or other incentive plans, and the Company has a stock incentive plan for
certain key employees.

Overview

   In addition to four refineries the Company owns a product terminal, two
crude oil terminals, an LPG terminal and crude oil pipeline interests. The
following table shows the rated crude oil throughput capacities of the
Company's four refineries in barrels per day as of December 31, 1999:

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

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

   The Company currently sells gasoline and diesel fuel on an unbranded basis
to approximately 525 distributors and chain retailers through third-party
facilities. The Company believes these sales offer higher profitability than
spot market alternatives. Wholesale sales are also made to the transportation,
agricultural and commercial sectors, including airlines, railroads, barge
lines and other industrial end-users. Fuel sales to all

                                       3
<PAGE>

channels of trade focus on maximizing netback realizations (revenue less all
distribution and working capital investment costs).

 Port Arthur Refinery

   The Port Arthur refinery is located in Port Arthur, Texas, approximately 90
miles east of Houston, on a 4,000-acre site. The Port Arthur refinery was
acquired from Chevron U.S.A. Inc. in February 1995. The Port Arthur refinery
has the ability to process 100% sour crude oil, including up to 20% heavy
crude oil, and has coking capabilities. Heavy sour crude oil has historically
been available at substantially lower cost when compared to light sweet crude
oil such as West Texas Intermediate ("WTI"). The Port Arthur refinery's Texas
Gulf Coast location provides access to numerous cost-effective domestic and
international crude oil sources that can be accessed by waterborne delivery or
through Sun Pipe Line. The Port Arthur refinery can produce conventional
gasoline, 100% low-sulfur diesel fuel and jet fuel. The refinery's products
can be sold in the Mid-continent and Eastern U.S. as well as in export
markets. These markets can be accessed through the Explorer, Texas Eastern and
Colonial pipelines or by ship or barge.

   The Company has an agreement to exchange certain refined products and
chemicals at market prices with Chevron Chemical Company, which exchanged
amounts averaged approximately 24,000 bpd from 1996 through 1999. This
contract is cancelable upon 18 months notice by either party or by mutual
agreement.

   Since acquiring the Port Arthur refinery, the Company increased crude oil
throughput capability from approximately 178,000 bpd to its current 232,000
bpd and immediately lowered operating expenses by approximately 50c per
barrel.

   The average daily feedstocks and production of the Port Arthur refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:

                Port Arthur Refinery Feedstocks and Production

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                          -------------------------------------
                                           1997 (a)       1998        1999 (a)
                                          -----------  -----------  -----------
                                           Bpd    %     Bpd    %     Bpd    %
                                          ----- -----  ----- -----  ----- -----
                                            (barrels per day in thousands)
<S>                                       <C>   <C>    <C>   <C>    <C>   <C>
Feedstocks
  Light Sweet Crude Oil (b)..............  32.3  15.6%  17.0   7.6%  10.4   5.0%
  Light and Medium Sour Crude Oil (b).... 138.6  66.8  176.5  79.3  154.7  75.1
  Heavy Sweet Crude Oil (b)..............   2.0   1.0    --    --     0.8   0.4
  Heavy Sour Crude Oil (b)...............  33.6  16.2   25.7  11.6   34.1  16.6
  Unfinished & Blendstocks...............   0.8   0.4    3.4   1.5    6.1   2.9
                                          ----- -----  ----- -----  ----- -----
    Total................................ 207.3 100.0% 222.6 100.0% 206.0 100.0%
                                          ===== =====  ===== =====  ===== =====
Production
  Gasoline
  Unleaded...............................  54.6  26.2   78.5  35.6   75.9  36.4
  Premium Unleaded.......................  30.5  14.7   20.4   9.2   15.6   7.5
                                          ----- -----  ----- -----  ----- -----
                                           85.1  40.9   98.9  44.8   91.5  43.9
  Other Products
  Low-Sulfur Diesel Fuel.................  58.2  27.9   58.4  26.4   60.4  29.0
  Jet Fuel...............................  22.3  10.7   19.4   8.8   18.1   8.7
  Petrochemical Products.................  26.0  12.5   24.7  11.2   21.0  10.0
  Others.................................  16.5   8.0   19.3   8.8   17.5   8.4
                                          ----- -----  ----- -----  ----- -----
                                          123.0  59.1  121.8  55.2  117.0  56.1
                                          ----- -----  ----- -----  ----- -----
    Total................................ 208.1 100.0% 220.7 100.0% 208.5 100.0%
                                          ===== =====  ===== =====  ===== =====
</TABLE>

                                       4
<PAGE>

--------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
    of approximately one month on selected units and in 1999, reflect
    unplanned maintenance downtime.

(b) Light crude oil has an API gravity of greater than 35.0 degrees, medium
    crude oil ranges from 25.9 to 35.0 degrees API and heavy crude oil has an
    API gravity of less than 25.9 degrees. Sweet crude oil has a sulfur
    content of less than 0.5% by weight while sour crude oil's sulfur content
    exceeds 0.5% by weight.

 Port Arthur Upgrade Project

   In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company. As a result of this
contract, the Company began developing a project to upgrade the Port Arthur
refinery to process primarily lower-cost, heavy sour crude oil of the type to
be purchased from PMI. The heavy oil upgrade project includes the construction
of new coking, hydrocracking and sulfur removal capability, and the expansion
of the existing crude unit to approximately 250,000 barrels per day. In August
1999, the Company sold for $157.1 million the construction work-in-progress on
the new processing units to Port Arthur Coker Company L.P., an affiliate that
is not controlled by the company or its subsidiaries. The Company also sold
for $2.2 million the oil supply agreement with PMI and environmental permits
which had already been obtained by the Company to Port Arthur Coker Company
L.P. The assets were sold at cost, which approximated fair market value. As
part of the project the Company is undertaking the upgrading of existing units
at the Port Arthur refinery, including the expansion of the crude unit. The
Company's portion of the project is expected to cost approximately $120
million, of which $50.7 million was expended through December 31, 1999. As of
December 31, 1999, the Company had a letter of credit to the benefit of Foster
Wheeler USA for $86.9 million to collateralize its obligations related to the
Port Arthur heavy oil upgrade project.

   The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001. The
Company entered into agreements with Port Arthur Coker Company L.P. pursuant
to which the Company will provide certain operating, maintenance and other
services and purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company will
receive compensation under these agreements at fair market value that is
expected to be, in the aggregate, favorable to the Company.

 Lima Refinery

   The Lima refinery is located in Lima, Ohio, approximately halfway between
Toledo and Dayton, on a 650-acre site. Most of the processing units in the
Lima refinery have been rebuilt since 1970, making the Lima refinery
relatively young among Midwest refineries.

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

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

   The Lima refinery was designed to process light, sweet crude oil, but the
refinery does have coking capability allowing it to upgrade lower-valued
products. The Lima refinery obtains 100% of its crude oil supply

                                       5
<PAGE>

by pipeline from a variety of domestic and foreign sources. The Mid-Valley,
Salem-Stoy-Lima (SSL) and Marathon pipeline systems provide final delivery
capability to the refinery. These pipelines allow ultimate connection to the
Capline, Louisiana Offshore Oil Port, Mobil, Ozark, Interprovincial, West
Texas Gulf and other pipeline systems. The Lima refinery can produce
conventional gasoline, high sulfur diesel fuel, jet fuel and certain specialty
chemical products. Products can be distributed through the Buckeye and Inland
Pipeline systems and by rail, truck or non-owned terminal. The Buckeye system
allows access to markets in Northern/Central Ohio, Indiana, Michigan and
Western Pennsylvania. The Inland Pipeline System is a private intra-state
system jointly owned by BP, Shell, Unocal and Sun and available solely for
their use. Clark has access to this private system through BP.

   The average daily feedstocks and production of the Lima refinery from the
acquisition date of August 10, 1998 through December 31, 1998 and for the full
year ended December 31, 1999 were as follows:

                    Lima Refinery Feedstocks and Production

<TABLE>
<CAPTION>
                                                   August 10,
                                                       to         Year Ended
                                                    December     December 31,
                                                    31, 1998        1999 (a)
                                                   ------------  --------------
                                                    Bpd     %     Bpd      %
                                                   -----  -----  ------- ------
                                                    (barrels     (barrels per
                                                   per day in        day in
                                                   thousands)      thousands)
<S>                                                <C>    <C>    <C>     <C>
Feedstocks
  Light Sweet Crude Oil........................... 136.0  105.3%  120.7   103.6%
  Other...........................................  (6.9)  (5.3)   (4.2)   (3.6)
                                                   -----  -----  ------  ------
    Total......................................... 129.1  100.0%  116.5   100.0%
                                                   =====  =====  ======  ======
Production
  Gasoline
  Unleaded........................................  61.3   47.0    55.2    46.8
  Premium Unleaded................................  14.3   10.9    14.3    12.1
                                                   -----  -----  ------  ------
                                                    75.6   57.9    69.5    58.9
  Other Products
  Diesel Fuel.....................................  27.3   21.0    19.9    16.8
  Jet Fuel........................................  13.4   10.3    17.7    15.0
  Others..........................................  14.0   10.8    11.0     9.3
                                                   -----  -----  ------  ------
                                                    54.7   42.1    48.6    41.1
                                                   -----  -----  ------  ------
    Total......................................... 130.3  100.0%  118.1   100.0%
                                                   =====  =====  ======  ======
</TABLE>
--------
(a)  Feedstocks and production in 1999 reflect maintenance turnaround downtime
    and unplanned downtime.

 Illinois Refineries

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

 Blue Island Refinery

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

                                       6
<PAGE>

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

   Since 1992, the Company has increased the crude oil throughput capability
at the Blue Island refinery by approximately 10,000 bpd, introduced light sour
crude oil as a lower-cost feedstock, improved the fluid catalytic cracking
("FCC") unit operation and introduced the capability to produce RFG.

   The average daily feedstocks and production of the Blue Island refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:

                Blue Island Refinery Feedstocks and Production

<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                             ----------------------------------
                                                1997      1998 (a)      1999
                                             ----------  ----------  ----------
                                             Bpd    %    Bpd    %    Bpd    %
                                             ---- -----  ---- -----  ---- -----
                                              (barrels per day in thousands)
<S>                                          <C>  <C>    <C>  <C>    <C>  <C>
Feedstocks
  Light Sweet Crude Oil..................... 51.7  70.1% 48.5  74.9% 53.4  72.9%
  Light Sour Crude Oil...................... 18.1  24.6  14.8  22.8  18.1  24.7
  Unfinished & Blendstocks..................  3.9   5.3   1.5   2.3   1.7   2.4
                                             ---- -----  ---- -----  ---- -----
    Total................................... 73.7 100.0% 64.8 100.0% 73.2 100.0%
                                             ==== =====  ==== =====  ==== =====
Production
  Gasoline
  Unleaded.................................. 39.9  54.0  36.7  56.8  40.0  54.7
  Premium Unleaded..........................  8.4  11.3   6.5  10.1   7.6  10.4
                                             ---- -----  ---- -----  ---- -----
                                             48.3  65.3  43.2  66.9  47.6  65.1
  Other Products
  Diesel Fuel............................... 14.9  20.1  13.1  20.3  16.5  22.6
  Others.................................... 10.7  14.6   8.2  12.8   9.0  12.3
                                             ---- -----  ---- -----  ---- -----
                                             25.6  34.7  21.3  33.1  25.5  34.9
                                             ---- -----  ---- -----  ---- -----
    Total................................... 73.9 100.0% 64.5 100.0% 73.1 100.0%
                                             ==== =====  ==== =====  ==== =====
</TABLE>
--------
(a) Feedstocks and production during 1998 were reduced by significant planned
    and unplanned downtime.

 Hartford Refinery

   The Hartford refinery is located on the Mississippi River in Hartford,
Illinois, approximately 17 miles northeast of St. Louis, on a 400-acre site.
The Hartford refinery includes a coker unit and, consequently, has the ability
to process a variety of crude oil including lower-cost, heavy sour crude oil
into higher-value products such as gasoline and diesel fuel. The Hartford
refinery has the capability to process approximately 60% heavy sour crude oil
and 25% medium sour crude oil. This upgrading capability allows the refinery
to benefit from higher margins if heavy sour crude oil is priced at a
significant discount to light sweet crude oil. The Hartford refinery has
access to foreign and domestic crude oil supplies through the Capline/Capwood
pipeline systems and access to Canadian crude oil through the Express pipeline
and the Mobil/IPL pipeline system. The Hartford

                                       7
<PAGE>

refinery can produce conventional gasoline, high sulfur diesel fuel, residual
fuel and petroleum coke. Products can be distributed through the
Marathon/Wabash and Explorer pipeline systems or by barge.

   Since 1992, the Company has increased the crude oil throughput capability
at the Hartford refinery by approximately 10,000 bpd, improved overall liquid
recovery by approximately 3%, improved FCC unit yields by approximately 3%,
increased higher-valued crude unit yields by approximately 2,000 bpd and
dramatically reduced combined "recordable" and "days away from work" rates
from 27 in 1990 to an average of less than three during 1999.

   The average daily feedstocks and production of the Hartford refinery for
the years ended December 31, 1997, 1998 and 1999 were as follows:

                  Hartford Refinery Feedstocks and Production

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                            -----------------------------------
                                             1997(a)       1998       1999(a)
                                            ----------  -----------  ----------
                                            Bpd    %    Bpd     %    Bpd    %
                                            ---- -----  ----  -----  ---- -----
                                             (barrels per day in thousands)
<S>                                         <C>  <C>    <C>   <C>    <C>  <C>
Feedstocks
  Light Sweet Crude Oil....................  4.2   6.8%  8.2   12.9% 10.8  17.9%
  Light Sour Crude Oil..................... 24.9  40.8  35.1   55.0  44.0  72.6
  Heavy Sour Crude Oil..................... 29.5  48.3  21.7   34.0   4.6   7.6
  Unfinished & Blendstocks.................  2.5   4.1  (1.2)  (1.9)  1.1   1.9
                                            ---- -----  ----  -----  ---- -----
    Total.................................. 61.1 100.0% 63.8  100.0% 60.5 100.0%
                                            ==== =====  ====  =====  ==== =====
Production
Gasoline
  Unleaded................................. 28.7  47.4  29.5   46.7  30.7  50.4
  Premium Unleaded.........................  2.5   4.1   2.8    4.4   2.4   4.0
                                            ---- -----  ----  -----  ---- -----
                                            31.2  51.5  32.3   51.1  33.1  54.4
  Other Products
  High-Sulfur Diesel Fuel.................. 19.3  32.0  20.9   32.9  21.6  35.6
  Others................................... 10.0  16.5  10.1   16.0   6.1  10.0
                                            ---- -----  ----  -----  ---- -----
                                            29.3  48.5  31.0   48.9  27.7  45.6
                                            ---- -----  ----  -----  ---- -----
    Total.................................. 60.5 100.0% 63.3  100.0% 60.8 100.0%
                                            ==== =====  ====  =====  ==== =====
</TABLE>
--------
(a) Feedstocks and production in 1997 reflect maintenance turnaround downtime
    of approximately one month on selected units and in 1999 reflect unplanned
    maintenance downtime.

 Terminals and Pipelines

   In December 1999, the Company sold 15 refined product terminals to Equilon.
The Company owns one refined product terminal associated with the Blue Island
refinery and a 1.1 million-barrel crude oil terminal associated with the Lima
refinery. The Company also owns a crude oil terminal and an LPG terminal with
a combined capacity of approximately 7.2 million barrels associated with the
Port Arthur refinery in Texas. The Company enters into refined product
exchange agreements with unaffiliated companies to broaden its geographical
distribution capabilities in the Midwest, and through the transaction with
Equilon can potentially expand its distribution points nationally through
Equilon's terminal network.

   The Company owns and operates a common carrier pipeline system that
connects its Port Arthur refinery with three terminals. It also owns
proprietary refined products pipelines from the Port Arthur refinery to its
LPG terminal in Fannett, Texas.

                                       8
<PAGE>

 Crude Oil Supply

   The majority of the Company's crude oil supply requirements are acquired on
the spot market from unaffiliated foreign and domestic sources. The Company
has several crude oil supply contracts that total approximately 220,000 bpd
with third-party suppliers, including PMI, Bayoil Supply and Trading Limited,
Husky Oil Operations Limited, and Koch Petroleum Group, L.P. These contracts
are generally cancelable upon one to three months' notice by either party, but
are intended to remain in place for the foreseeable future. The following
table shows the Company's average daily sources of crude oil in 1999:

                          Sources of Crude Oil Supply

<TABLE>
<CAPTION>
                                                                     1999
                                                               ----------------
                                                                  Bpd       %
                                                               ---------- -----
                                                                  (in
                                                               thousands)
      <S>                                                      <C>        <C>
      United States...........................................   106.7     23.6%
      Latin America...........................................   150.0     33.2
      Canada..................................................    21.9      4.9
      West Africa.............................................    93.6     20.7
      Middle East.............................................    66.5     14.7
      North Sea...............................................     2.6      0.6
      Other...................................................    10.3      2.3
                                                                 -----    -----
          Total...............................................   451.6    100.0%
                                                                 =====    =====
</TABLE>

 Clean Air Act/Reformulated Fuels

   In December 1999, the United States Environmental Protection Agency
("USEPA") published the Tier II Motor Vehicle Emission Standards Final Rule
for all passenger vehicles, establishing standards for sulfur content in
gasoline. The ruling mandates that the sulfur content of gasoline at any
refinery not exceed 30 parts per million after January 1, 2006. Starting in
2004, the USEPA will begin a program to phase in new low sulfur gasoline
requirements. Currently the sulfur content in the Company's gasoline pool
averages approximately 385 parts per million. These regulations will likely
require the Company to make some level of capital investments at its
refineries to reduce the sulfur levels in its gasoline. The Company is
evaluating its options under the new regulations and does not currently have
an estimate of how much of a capital outlay will be required for compliance.

   Under the Clean Air Act, the USEPA promulgated regulations mandating low-
sulfur diesel fuel for all on-road consumers and RFG for ozone non-attainment
areas, including Chicago, Milwaukee and Houston in the Company's direct market
area.

   The USEPA has drafted a proposed regulation which, it is believed, would
require a significant reduction in the sulfur content of diesel fuel by the
year 2006. The proposed regulation has not yet been released to the public and
is currently under the review of the White House Office of Management and
Budget. The USEPA anticipates that the regulation will be formally proposed
later this spring and formally promulgated as a final rule before the end of
the year 2000. Until the regulation is formally proposed and promulgated, and
the exact nature of the USEPA's proposal becomes known, the Company cannot
assess the impact, if any, of the regulation on our operations.

   The Clean Air Act requires the USEPA to review national ambient air quality
standards for certain pollutants every five years. In July 1997, after such a
review, the USEPA adopted more stringent national standards for ground level
ozone (smog) and particulate matter (soot). These standards, when implemented,
are likely to increase significantly the number of non-attainment areas and
thus require additional pollution controls, more extensive use of RFG, and
possibly new diesel fuel standards. Efforts are being made to influence the
legislative

                                       9
<PAGE>

branch to repeal the new standards under the Congressional Review Act. A
lawsuit filed by the U.S. Chamber of Commerce, the American Trucking
Association and the National Coalition of Petroleum Retailers is challenging
the implementation of these standards. As a result, it is too early to
determine what impact that this ruling could have on the Company.

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

Market Environment

   The profitability of an oil refinery is determined, in large part, by
refining margins, the spread between prices for refined products such as
gasoline, diesel fuel, and costs of crude oil. The refining margin is driven
by the supply and demand for petroleum commodities. Refinery profitability is
also influenced by the equipment configuration of the refinery, the refinery's
operating cost structure and the refinery's access to crude oil and refined
product markets.

   Demand for light refined products (gasoline, diesel, kerosene/jet fuel)
grew at an annual rate of 4.2% from 1960 to 1973, according to the U.S.
Department of Energy. However, demand for light refined products declined by
0.5% per year from 1973 to 1983. The Company believes that the combination of
high oil prices for petroleum products due to the oil shocks of the early and
late 1970's, environmental regulations favoring cleaner burning fuels, and
gains in fuel efficiency caused consumption of light refined products to
decrease. From 1983 to 1998, light refined product demand increased at a rate
of 1.6% per year and from 1993 to 1998, at 2.1% per year. The Company believes
the renewed growth in light refined product demand is due to the expansion of
U.S. vehicle fleet miles driven, increased seat miles flown on the U.S.
airlines, and the reduced improvement in vehicle fuel efficiency due to
consumer preference for light trucks and sport-utility vehicles.

   Demand for heavy refined products (residual and other heavy oil) grew at an
annual rate of 4.0% from 1960 to 1978, according to the U.S. Department of
Energy. The Company believes that the introduction of regulations restricting
the use of residual oil in the late 1970's drastically reduced demand for
residual oil, as demand decreased from 3 million barrels per day in 1978 to
0.9 million barrels per day in 1998, an annual decrease of 5.9%. During this
same period, overall heavy refined product demand has decreased at only
approximately 1% per year.

   From 1965 through 1978, crude oil distillation capacity utilization rates
averaged approximately 89%, according to the American Petroleum Institute. The
Company believes that sagging demand for light and heavy refined products was
the primary cause of the utilization rates falling to 69% in 1981. U.S. crude
oil distillation capacity decreased from 18.1 million barrels per day in 1980
to 16.4 million barrels per day in 1999, according to the Oil & Gas Journal,
as more than 40% of the refineries in the United States closed during this
period. As a result of this decrease in capacity and the renewed increase in
demand, U.S. crude oil distillation capacity utilization rates increased from
69% in the early 1980s to 95% in 1998 and averaged approximately 93% in 1999.
The Company believes U.S. crude oil distillation utilization rates may be
approaching long-term sustainable maximums due to the requirements for routine
maintenance and the likelihood of unplanned downtime.

   The Company believes the annual growth in refined product demand in the
U.S. will average 1-2%, in line with the recent trends, due to the continuing
expansion of the U.S. vehicle fleet miles driven and increased seat-miles
flown on U.S. airlines with an offset for modest improvements in vehicles
efficiency.

                                      10
<PAGE>

   Crude oil represents a refinery's largest single operating cost and is
available in a range of prices depending on the equipment required for
processing the crude oil, its potential yield of refined products, and the
cost of transporting the crude oil to the refinery. Lighter and/or sweeter
crude oil is priced higher then heavy and/or sour crude oil because it is
easier to process and yields a higher-valued slate of products such as
gasoline, diesel fuel, jet fuel, and petrochemicals.

   The economies of crude oil selection compares the discounts offered for
lower quality crude oil to the gain on making higher value products instead of
residual oil. The refining margin of a heavy coking refinery is highly
sensitive to the dollar per barrel price difference between heavy sour crude
oil, such as Maya, and light sweet crude oil, such as West Texas Intermediate.
This difference is often referred to as the "heavy/light differential". This
measurement provides a reliable indication of the profitability advantage of a
heavy coking refinery because a wider heavy /light differential typically
results in lower cost feedstocks and a higher resulting refinery margin. From
1988 through 1999 the six-month moving average of the heavy/light differential
ranged from a high of $8.90 to a low of $3.76 with 1999 averaging $4.75 per
barrel.

   In the late 1980's, conversion capacity, the ability to extract more
higher-valued products from the same barrel of crude oil, was fully utilized
with little or no excess capacity. As a result, returns on investment for
refiners motivated new investments in conversion. By the early 1990s, the rate
of addition of conversion capacity considerably exceeded the needed level.
Many producers added this capacity with the intention of processing heavy sour
crude oil into low sulfur diesel and reformulated gasoline. Many refiners
found that the most economic way of accomplishing this was to combine various
refinery modifications made in response to regulatory changes with expansions
of conversion capacity. Since conversion capacity is generally the most
profitable component of a refinery, many refiners believed that increasing it
was the most effective way to maximize returns on product quality improvement
investments. However, because so many refiners recognized the potential
benefit of increasing conversion capacity, an overbuilding of capacity
resulted. The overabundance of conversion capacity drove up demand for heavy
feedstock and resulted in a narrowing of the heavy/light differential through
1995.

   Recovery in the heavy/light differential occurred in 1996 and 1997. The
Company believes that while this recovery was due in part to temporary
refinery operating problems at several major refinery units, which decreased
the availability of conversion capacity, this recovery was primarily driven by
the rising output of heavy sour crude oil in the Western Hemisphere. This
increasing production of heavy sour crude oil resulted in severe price
competition and residual fuel oil oversupply. The differentials reached a peak
late in 1997 and early 1998 due to these factors. In April 1998, the trends
began to reverse and the heavy/light differential began to narrow. This
reversal was brought about by the confluence of a number of factors. These
include the effects of the Asian financial crisis, which reduced demand for
refined products and opened up capacity worldwide. In addition, low crude oil
prices and high natural gas prices in the U.S. caused demand for residual fuel
to increase rather dramatically. At the same time, export demand for residual
fuel increased sharply due to El Nino related hydropower shortages in Mexico.

   Although the rate increase in conversion capacity fell sharply after 1994,
several major projects are currently underway. In addition, several conversion
projects are linked to supplies of heavy sour crude oil from Venezuela and
Mexico and the Company believes these projects will absorb increases in heavy
sour crude oil production. Net additions in recent years have been at a rate
of 2% per year in the United States and nearly 4% worldwide.

   The Company believes heavy sour crude oil production cuts in 1999 by
Mexico, Canada, Venezuela and other OPEC members caused the heavy/light
differential to narrow. At the same time, new conversion capacity was being
brought on and was absorbing excess heavy feedstock, thereby strengthening
heavy feedstock prices and further narrowing the differential. In addition,
high natural gas prices coupled with low residual oil prices encouraged the
burning of residual fuel, thereby squeezing the heavy feedstock balance and
narrowing the heavy/light differential even further.


                                      11
<PAGE>

   The Company believes the heavy/light differential will begin to widen again
as many of the key factors determining the heavy/light differential are
expected to turn favorable:

  . as the world economy, particularly Asia, improves, demand will grow
    rapidly;

  . crude oil prices will increase as demand increases;

  . crude oil productions increases, particularly heavy sour crude oil, as
    demand for OPEC crude oil increases since OPEC crude oil is generally
    heavier;

  . Venezuela, Mexico, and Canada are expected to expedite heavy oil
    production; and

  . light product demand and supply of heavy sour crude oil will likely
    increase faster than conversion capacity can be added.

Sale of Retail Division

   In July 1999, the Company sold its retail marketing division in a
recapitalization transaction to Clark Retail Enterprises ("CRE"), which is
controlled by Apollo Management L.P., for net cash proceeds of approximately
$215 million. A subsidiary of the Company's parent, Clark Holdings, holds a
six-percent equity interest in CRE. The retail marketing division sold
included all Company and independently operated Clark branded stores and the
Clark trade name. In general, CRE assumed unknown environmental liabilities at
the retail stores they acquired up to $50,000 per site, as well as
responsibility for any post closing contamination. Subject to certain risk
sharing arrangements, the Company retained responsibility for all pre-
existing, known contamination. As part of the sale agreement, the Company also
entered into a market-based supply agreement for refined products that expires
in July 2001 and may be canceled with 90 days notice by the buyer. Since the
supply agreement is market-based the Company does not expect the expiration of
the supply agreement to have a material adverse effect on the results of
operations or financial position.

Competition

   The oil industry is highly competitive. Many of the Company's principal
competitors are integrated multinational oil companies that are substantially
larger and better known than the Company. Because of their diversity,
integration of operations, larger capitalization and greater resources, these
major oil companies may be better able to withstand volatile market
conditions, more effectively compete on the basis of price and more readily
obtain crude oil in times of shortages.

   The principal competitive factors affecting the Company are crude oil and
other feedstock costs, refinery efficiency, refinery reliability, refinery
product mix and product distribution and transportation costs. Certain of the
Company's larger competitors have refineries which are larger and, as a
result, could have lower per-barrel costs or higher margins per barrel of
throughput. The Company has no crude oil reserves and is not engaged in
exploration and production activities. The Company obtains nearly all of its
crude oil requirements on the spot market from unaffiliated sources. The
Company believes that it will be able to obtain adequate crude oil and other
feedstocks at generally competitive prices for the foreseeable future. The
principal competitive factors affecting the Company's wholesale distribution
system are product price and quality, reliability and availability of supply
and location of distribution points.

Environmental Matters

 Compliance Matters

   As the current operator of refineries and the former operator of gasoline
stores, the Company is subject to comprehensive and frequently changing
federal, state and local environmental laws and regulations, including those
governing emissions of air pollutants, discharges of wastewater and
stormwater, and the handling and disposal of non-hazardous and hazardous
waste. Federal, state and local laws and regulations establishing numerous
requirements and providing penalties for violations thereof affect nearly all
of the current and former

                                      12
<PAGE>

operations of the Company. Included among such laws and regulations are the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act
and the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"). Also significantly affecting the Company are
the rules and regulations of the Occupational Safety and Health
Administration. Many of these laws authorize the imposition of civil and
criminal sanctions upon companies that fail to comply with applicable
statutory or regulatory requirements. As discussed below, federal and state
agencies have filed various enforcement actions alleging that the Company has
violated a number of environmental laws and regulations. The Company
nevertheless believes that, in all material respects, its existing operations
are in compliance with such laws and regulations.

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

   The Company anticipates that, in addition to expenditures necessary to
comply with existing environmental requirements, it will incur costs in the
future to comply with new requirements. The Company cannot predict what
environmental legislation or regulations will be enacted in the future or how
existing or future laws or regulations will be administered or interpreted
with respect to products or activities to which they have not previously been
applied. Compliance with more stringent laws or regulations, as well as more
vigorous enforcement policies of the regulatory agencies or stricter
interpretation of existing laws which may develop in the future, could have an
adverse effect on the financial position or operations of the Company and
could require substantial additional expenditures by the Company for the
installation and operation of pollution control systems and equipment. See "--
Legal Proceedings."

 Remediation Matters

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

   The release or discharge of petroleum and other hazardous materials can
occur at refineries and terminals. The Company has identified a variety of
potential environmental issues at its refineries, terminals, and previously
owned retail stores. In addition, each refinery has areas on-site that may
contain hazardous waste or hazardous substance contamination and which may
have to be addressed in the future at substantial cost. The terminal sites

                                      13
<PAGE>

may also require remediation due to the age of tanks and facilities and as a
result of current or past activities at the terminal properties including
several significant spills and past on-site waste disposal practices.

 Legal And Governmental Proceedings

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

Employees

   Currently, the Company employs approximately 2,100 people, with
approximately 60% covered by collective bargaining agreements at the Blue
Island, Hartford, Lima and Port Arthur refineries. The Port Arthur and
Hartford refinery contracts expire in February 2002, the Lima refinery
contract expires in August 2002, and the Blue Island contract expires in
September 2002. Relationships with the unions have been good and the Company
has never experienced a work stoppage as a result of labor disagreements.

Item 3. Legal Proceedings

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

   Hartford Federal Enforcement. In February 1999, the Company was served with
a complaint in the matter United States v. Clark Refining & Marketing, Inc.,
alleging violations of the Clean Air Act, and regulations promulgated
thereunder, in the operation and permitting of the Hartford refinery fluid
catalytic cracking unit. In July 1999, the Company was served with a civil
administrative complaint filed by the USEPA, alleging certain violations of
the Emergency Planning and Community Right-to-Know Act, and regulations
promulgated thereunder, with respect to certain record-keeping and reporting
requirements relating to the Hartford refinery. The administrative complaint
seeks a civil penalty of $498,000. No estimate can be made at this time of the
Company's potential liability, if any, as a result of these matters.

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

   Blue Island Federal Enforcement. The Blue Island refinery is the subject of
federal investigations concerning potential violations of certain
environmental laws and regulations. In March 1997, the USEPA initiated a
multimedia investigation at the Blue Island refinery. The investigation
included an on-site visit, requests for information and meetings. In March
1997, the Company received a Grand Jury subpoena requesting certain documents
relating to wastewater discharges. The United States Attorney has interviewed
a number of current and former Blue Island refinery employees. The
investigation is ongoing and the Company has cooperated fully in the matter.
In September 1998, the Company was served with a complaint in the matter,
United States v. Clark Refining & Marketing, Inc., alleging that the Company
has operated the refinery in violation of certain federal laws relating to air
pollution, water pollution and solid waste management. The Company filed an
answer denying the material allegations of the lawsuit. The parties are
negotiating the terms and conditions of a potential consent decree which would
resolve this matter. While substantial progress has been made on a conceptual
level, there is no assurance that a consent decree will be successfully
negotiated, nor can any estimate be made at this time of the Company's
potential liability, if any, as a result of these matters.

   Blue Island State Enforcement. People ex rel. Ryan v. Clark Refining &
Marketing, Inc., is currently pending in the Circuit Court of Cook County,
Illinois alleging operation of the Blue Island refinery in violation of

                                      14
<PAGE>

environmental laws. The allegations originate from a fire that occurred in the
Isomax unit in March 1995, a release of hydrogen fluoride in May 1995 from a
processing unit, other releases into the air that occurred in the past three
years, and releases of wastewater and stormwater to the Cal Sag Channel. The
Company has filed an answer denying the material allegations in the lawsuit.
The Illinois Attorney General has also intervened in the federal USEPA case,
discussed above. The Company is seeking to settle this case and the USEPA case
as a consolidated matter. The parties are negotiating the terms and conditions
of a consent decree settling this matter. No estimate of any liability with
respect to this matter can be made at this time.

   Sashabaw Road. In May 1993, the Company received correspondence from the
Michigan Department of Natural Resources ("MDNR") indicating that the MDNR
believes that the Company may be a potentially responsible party in connection
with groundwater contamination in the vicinity of one of its previously owned
retail stores on Sashabaw Road in Oakland County, Michigan. In July 1994, MDNR
commenced suit against the Company alleging that a retail location caused
groundwater contamination necessitating the installation of a new $600,000
drinking water system. Michigan is seeking reimbursement of this cost.
Although some contamination from the Company site may have occurred, the
Company contends that numerous other sources were responsible and that a total
reimbursement demand from the Company is excessive. Mediation resulted in a
$200,000 finding against the Company, which the Company was willing to pay in
settlement, but the state refused any settlement less than $500,000. The
matter was tried in November 1999. The parties are awaiting a decision.

   Port Arthur Natural Resource Damage Assessment. On June 7, 1999, Clark USA
and Chevron received a notice from a number of Federal and Texas agencies that
a study would be conducted to determine whether any natural resource damage
occurred as a result of the operation of the Port Arthur refinery. The Company
will cooperate with the government agencies in this investigation.

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

   As of December 31, 1999, the Company had accrued a total of $36.8 million
for legal and environmental-related obligations that may result from the
matters noted above, other legal and environmental matters and obligations
associated with certain retail sites. While it is not possible at this time to
estimate the ultimate amount of liability with respect to the legal
proceedings described above, the Company is of the opinion that the aggregate
amount of any such liability, in excess of amounts previously accrued, will
not have a material adverse effect on its financial position. However, an
adverse outcome of any one or more of these matters could have a material
effect on quarterly or annual operating results or cash flows when resolved in
a future period.

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

                                      15
<PAGE>

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

   Inapplicable

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

   Inapplicable

                                       16
<PAGE>

Item 6. Selected Financial Data

   The selected consolidated financial data set forth below for the Company as
of December 31, 1998 and 1999 and for each of the three years in the period
ended December 31, 1999 are derived from the audited financial statements
included elsewhere herein. The selected consolidated financial data set forth
below for the Company as of December 31, 1995, 1996 and 1997 and for each of
the two years in the period ended December 31, 1996 are derived from audited
financial statements not included herein. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and
related notes included elsewhere herein.

<TABLE>
<CAPTION>
                                       Year Ended December 31,
                          -----------------------------------------------------
                            1995       1996       1997       1998       1999
                          ---------  ---------  ---------  ---------  ---------
                                   (in millions, except as noted)
<S>                       <C>        <C>        <C>        <C>        <C>
Statement of Earnings
 Data:
 Net sales and operating
  revenues..............  $ 4,071.3  $ 4,657.2  $ 3,880.7  $ 3,581.7  $4,520. 5
 Cost of sales..........   (3,784.3)  (4,315.1)  (3,432.1)  (3,113.2)  (4,099.8)
 Operating expenses.....     (253.9)    (292.3)    (295.0)    (342.8)    (402.8)
 General and
  administrative
  expenses..............      (34.6)     (38.1)     (43.5)     (51.2)     (48.4)
 Depreciation and
  amortization (a)......      (32.4)     (35.8)     (46.8)     (54.5)     (63.1)
 Inventory recovery of
  (write-down) to market
  value.................        --         --       (19.2)     (86.6)     105.8
 Recapitalization, asset
  writeoffs and other
  charges...............        --         --       (41.8)       --         --
 Gain on sale of
  pipeline interests....        --         --         --        69.3        --
                          ---------  ---------  ---------  ---------  ---------
 Operating income
  (loss)................      (33.9)     (24.1)       2.3        2.7       12.2
 Interest and financing
  costs, net (b)........      (59.2)     (47.5)     (80.1)     (70.5)     (80.7)
                          ---------  ---------  ---------  ---------  ---------
 Loss from continuing
  operations before
  taxes and
  extraordinary items         (93.1)     (71.6)     (77.8)     (67.8)     (68.5)
 Income tax (provision)
  benefit...............       34.8        7.8       (7.6)      25.0       12.0
                          ---------  ---------  ---------  ---------  ---------
 Loss from continuing
  operations before
  extraordinary items...      (58.3)     (63.8)     (85.4)     (42.8)     (56.5)
 Discontinued
  operations, net of
  taxes (c )............       21.2        7.6       (2.0)      13.1       32.6
 Extraordinary items....        --         --       (20.7)       --         --
                          ---------  ---------  ---------  ---------  ---------
 Net loss...............  $   (37.1) $   (56.2) $  (108.1) $   (29.7) $   (23.9)
                          =========  =========  =========  =========  =========
Balance Sheet Data:
 Cash, cash equivalents
  and short-term
  investments...........  $   148.3  $   353.3  $   249.2  $   152.6  $   307.6
 Total assets...........    1,274.2    1,378.5    1,194.9    1,450.3    1,533.0
 Long-term debt.........      764.4      780.7      765.3      980.2      969.9
 Exchangeable preferred
  stock.................        --         --        64.8       72.5       81.1
 Stockholder's equity
  (deficit).............      154.2      214.4       38.4        2.2      (33.1)
Selected Financial Data:
 Cash flows from
  operating activities..  $   (81.5) $    22.5  $    76.6  $   (61.0) $    60.4
 Cash flows from
  investing activities..     (240.1)     218.5     (125.6)    (230.7)     110.9
 Cash flows from
  financing activities..      298.9       (4.7)     (55.1)     205.5      (13.2)
 Expenditures for
  turnaround............        6.5       13.9       47.4       28.3       77.9
 Expenditures for
  property, plant and
  equipment (d).........       15.7       20.1       27.4      101.4       57.6
 Refinery acquisition
  expenditures..........       71.8        --         --       175.0        --
Operating Data:
Refining Division:
 Port Arthur Refinery
  (acquired February 27,
  1995)
 Production (000 bbls
  per day)..............      207.7      210.8      213.5      223.9      218.2
 Gross margin (per
  barrel of production).  $    2.28  $    2.78  $    3.84  $    3.48  $    2.06
 Operating expenses.....      121.6      164.7      170.7      172.7      168.1
 Midwest & Other
  Refining
 Production (000 bbls
  per day)..............      136.5      134.2      135.8      181.1      267.1
 Gross margin (per
  barrel of production).  $    2.51  $    2.56  $    3.79  $    2.95  $    1.84
 Operating expenses.....      130.2      126.6      123.2      168.8      233.9
</TABLE>
--------
(a) Amortization includes amortization of turnaround costs.
(b) Interest and financing costs, net, included amortization of debt issuance
    costs of $7.1 million, $2.8 million, $10.2 million, $10.2 and $6.5 million
    for the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
    respectively. Interest and financing costs, net, also included interest on
    all indebtedness, net of capitalized interest and interest income.
(c) Discontinued operations is net of income taxes of benefit of $2.7 million
    (provision of 1998--$9.2 million, 1997--$0.1million, 1996--$4.7 million,
    1995--$12.9 million)
(d) Expenditures for property, plant and equipment in 1999 were net of sale
    proceeds of $157.1 million from Port Arthur Coker Company L.P. for the
    amount the Company had spent on the assets sold.

                                      17
<PAGE>

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

Results of Operations

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

 1999 compared with 1998 and 1997:

Financial Results:

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                      -------------------------
                                                       1997     1998     1999
                                                      -------  -------  -------
                                                      (in millions, except as
                                                              noted)
<S>                                                   <C>      <C>      <C>
Operating Income:
Port Arthur Refinery
Crude oil throughput (000 barrels per day)...........   206.6    219.3    200.0
Production (000 barrels per day).....................   213.5    223.9    218.2
Gross margin (per barrel of production).............. $  3.84  $  3.48  $  2.06
Gulf Coast 3/2/1 crack spread (per barrel)........... $  3.24  $  2.39  $  1.71
Operating expenses...................................  (170.7)  (172.7)  (168.1)
  Net margin......................................... $ 128.6  $ 112.1  $  (4.4)

Midwest Refineries and Other
Crude oil throughput (000 barrels per day)...........   128.5    181.6    251.7
Production (000 barrels per day).....................   135.8    181.1    267.1
Gross margin (per barrel of production).............. $  3.79  $  2.95  $  1.84
Gulf Coast 3/2/1 crack spread (per barrel)........... $  4.04  $  3.33  $  2.83
Clark Pipe Line net margin...........................     2.0      2.0      1.6
Operating expenses...................................  (123.2)  (168.8)  (233.9)
  Net margin......................................... $  67.0  $  28.3  $ (52.5)

General and administrative expenses..................   (43.5)   (51.2)   (48.4)
                                                      -------  -------  -------
  Operating Contribution............................. $ 152.1  $  89.2  $(105.3)

Inventory timing adjustments gain (loss)(a)..........   (42.0)   (14.7)    20.2
Inventory write-down (recovery) to market............   (19.2)   (86.6)   105.8
Gain from LIFO inventory reduction...................     --       --      54.6
Recapitalization, asset write-offs and other costs...   (41.8)     --       --
Gain on sale of minority pipeline interests..........     --      69.3      --
Depreciation and amortization........................   (46.8)   (54.5)   (63.1)
                                                      -------  -------  -------
  Operating income .................................. $   2.3  $   2.7  $  12.2
                                                      =======  =======  =======
</TABLE>
--------
(a) Includes adjustments to inventory costs caused by timing differences
    between when and how crude oil is actually purchased and refined products
    are actually sold, and a daily "market in, market out" operations
    measurement methodology.

   Net sales and operating revenues and cost of sales for the Company were
higher in 1999 than 1997 or 1998 principally because of higher hydrocarbon
prices and production from the Lima refinery that was acquired in August 1998.
The Company reported net losses of $23.9 million in 1999, $29.7 million in
1998 and $108.1 million in 1997. Net earnings in each of the past three years
were impacted by items the Company considers special. Special items benefited
operating income by $180.6 million in 1999, reduced operating income by $32.0
million in 1998 and reduced operating income by $103.0 million in 1997. In
1997, net earnings were reduced by $20.7 million related to an extraordinary
item for early retirement of debt. See Note 9 "Long Term Debt" and

                                      18
<PAGE>

Note 14 "Equity Recapitalization and Change in Control" to the Consolidated
Financial Statements. These special items consisted of the following:

   Inventory Timing Adjustments. An inventory timing adjustment gain of $20.2
million in 1999, and loss of $14.7 million in 1998 and $42.0 million in 1997
were principally due to the timing impact of changes in petroleum prices in
each of the past three years on crude oil purchases and refined product sale
commitments. Petroleum prices fell in 1997 and 1998 as world energy markets
became oversupplied principally as a result of an increase in OPEC production
and reduced demand resulting from the Asian economic slowdown and reduced
heating oil demand. OPEC responded by reducing production in 1999, which
caused prices to increase. These gains and losses resulted from the fact that
feedstock acquisition costs are fixed on average two to three weeks prior to
the manufacture and sale of the finished products. The Company does not
currently hedge this price risk because of the cost of entering into
appropriate hedge-related derivatives and the long-term, continuing nature of
such risk. The Company does hedge price risk when its total volume-related at-
risk position deviates from long-range targets.

   Inventory (Write-down) Recovery to Market. Also as a result of lower
petroleum prices in 1997 and 1998, the Company was required to record non-cash
accounting charges of $19.2 million and $86.6 million, respectively, to
reflect the decline in the value of petroleum inventories below carrying
value. When petroleum prices increased in 1999, the Company fully recovered
these charges.

   Gain from LIFO Inventory Reduction. The Company recorded a LIFO gain in
1999 of $54.6 million resulting from an 8.9 million barrel reduction in
inventory and higher current year liquidation values as compared to LIFO cost.

   Recapitalization, asset write-offs and other costs. Recapitalization, asset
write-offs and other costs totaled a charge of $41.8 million in 1997. This
item included a non-cash charge of $20.3 million principally to write down the
value of an idled refining capital project that was being dismantled for more
productive use. A non-cash charge of $10.8 million was also recorded in 1997
due to a change in strategic direction principally for certain legal,
environmental and other accruals related to existing actions. In addition, the
Company incurred costs of $10.7 million in connection with affiliates of
Blackstone acquiring an indirect controlling interest in the Company.

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

   The Company recorded an Operating Contribution loss or loss before
interest, taxes, depreciation, amortization, inventory-related items, gain on
the sale of minority pipeline interests and recapitalization, asset write-offs
and other costs of $105.3 million in 1999. This compared to a contribution of
$89.2 million in 1998 and $152.1 million in 1997. Operating Contribution
decreased in 1999 and 1998 from previous years principally due to
significantly lower margins for refined products resulting from higher U.S.
refined product inventory levels which depressed prices. These higher
inventory levels resulted from warmer winter weather that reduced heating oil
demand, high industry refinery utilization rates and the impact on world
demand from the Asian economic slowdown that began in late 1997. Oversupply of
crude oil led to low crude oil prices in 1998 and early 1999. In 1999, margins
were further reduced due to higher feedstock costs caused by the reduction in
OPEC production quotas that had the effect of narrowing discounts for heavy
and light sour crude oil. OPEC producers met the barrel denominated quotas by
eliminating the lowest revenue barrels in their production stream. In
addition, Canadian production that was reduced due to the low crude oil prices
in 1998 and early 1999 was slow to return to market.

                                      19
<PAGE>

   The decrease in margins from 1997 to 1999 was reflected in the lower Gulf
Coast and Chicago industry refining margin indicators or 3/2/1 crack spreads
and narrower market discounts for lower quality crude oil. The 3/2/1 crack
spread is an indicator of refining margins based on quoted market prices that
is calculated by subtracting the price for three barrels of WTI crude oil, a
high quality, light sweet crude oil, from the price of two barrels of regular
unleaded gasoline and one barrel of high sulfur diesel fuel, and dividing the
total by three. In addition to the components of refining margins reflected in
the crack spread, benchmark indicators of the discount for lower quality
alternative types of crude oil that may be processed in the Company's
refineries narrowed from 1997 to 1999. Crude oil quality differential market
indicators for light sour crude oil, or West Texas Sour, decreased from $1.71
per barrel in 1997 and $1.56 per barrel in 1998 to $1.30 per barrel in 1999.
Market indicators for heavy sour crude oil discounts, or Mexican Maya,
decreased from $5.63 per barrel in 1997 and $5.68 in 1998 to $4.83 per barrel
in 1999. Discounts for heavy sour Canadian crude oil also narrowed as a result
of low absolute crude oil prices in 1998 and early 1999, which caused this
lower-cost crude oil to become unavailable.

   Major scheduled maintenance turnarounds at the Lima refinery in 1999, Blue
Island refinery in 1998 and Port Arthur and Hartford refineries in 1997
resulted in an opportunity cost from lost production of $23.0 million in 1999,
$17.1 million in 1998 and $19.3 million in 1997. Port Arthur refinery crude
oil throughput rates were reduced below capacity in 1999 due to poor crude
unit distillation margins that favored reduced rates and purchasing partially
refined feedstocks to maintain production from other refinery units.
Production increased in 1999 and 1998 versus the prior years in the Midwest
refineries due to the acquisition in August 1998 of the Lima refinery, which
averaged 118,100 barrels per day in 1999 and 130,300 barrels per day during
the nearly five months in 1998 it was owned by the Company. Production from
Midwest refineries was below capacity in 1999 due to the Lima maintenance
turnaround, leaks in third party pipelines that reduced supplies of crude oil
to the refineries and unplanned downtime. In addition to the benefit of the
Lima refinery, production increased in 1998 due to record rates being achieved
on most major units at the Port Arthur and Hartford refineries, including the
crude, FCC and coker units.

   Operating expenses for the Midwest refineries increased from 1997 to 1998
primarily due to the acquisition of the Lima refinery. Operating expenses for
the Lima refinery were $37.8 million in 1998 and $98.2 million in 1999.
Operating expenses for the Port Arthur refinery were relatively flat from 1997
to 1999. General and administrative expenses decreased in 1999 principally due
to lower incentive compensation payments under the Company's annual incentive
plan. These expenses were higher in 1998 relative to 1997 principally due to
the addition of the Lima refinery, increased employee placement costs and an
increase in information services costs related to year 2000 remediation and
upgrades and increased consulting services.

 Other Financial Matters

   Depreciation and amortization expenses increased in each of the past three
years principally because of the full year impact of the Port Arthur
maintenance turnaround performed in 1997, the acquisition of the Lima refinery
in 1998, the amortization of the initial Lima refinery maintenance turnarounds
performed in 1999 and higher capital expenditures.

   Interest expense and finance income, net increased in 1999 as compared to
1998 due to the full year impact of the issuance in August 1998 of $110
million 8 5/8% Senior Notes due 2008, and the expansion of a $115 million
floating rate term loan due 2004 to finance the Lima refinery acquisition.
Interest expense and finance income, net were lower in 1998 than 1997 due to
reduced borrowing rates and reduced finance cost amortization resulting from
the Company's financing activities in late 1997. In late 1997, the Company
redeemed its 10 1/2% Senior Notes, due 2001 ("10 1/2% Senior Notes") and
repurchased substantially all of its Senior Zero Coupon Bonds due 2000 ("Zero
Coupon Notes"). In late 1997, Clark R&M also issued $100 million 8 3/8% Senior
Notes due 2007 ("8 3/8% Senior Notes"), issued $175 million 8 7/8% Senior
Subordinated Notes due 2007 ("8 7/8% Senior Subordinated Notes"), and entered
into a $125 million floating rate term loan due 2004 ("Floating Rate Loan").
In late 1997, the Company also entered into an amended and restated working
capital facility that was subsequently amended and restated in 1999. See Note
8 "Working Capital Facility" and Note 14 "Equity Recapitalization and Change
in Control" to the Consolidated Financial Statements.

                                      20
<PAGE>

   The income tax benefit on the loss from continuing operations of $12.0
million for 1999 reflected the effect of intraperiod tax allocations resulting
from the utilization of current year operating losses to offset the net gain
on the operations and sale of the discontinued retail division, offset by the
write-down of a net deferred tax asset. The income tax benefit on the loss
from continuing operations of $25.0 million for 1998 reflected the effect of
intraperiod tax allocations resulting from the utilization of current year
operating losses to offset the earnings from operations of the discontinued
retail division. The income tax provision on the loss from continuing
operations of $7.6 million for 1997 reflected the recording of a valuation
allowance against a net deferred tax asset. See Note 13 "Income Taxes" to the
Consolidated Financial Statements.

 Sale of Retail Division

   In July 1999, the Company sold its retail marketing operation in a
recapitalization transaction to a company controlled by Apollo for
approximately $230 million. The retail marketing operation sold included all
Company and independently operated Clark-branded stores and the Clark trade
name. After all transaction costs, the sale generated cash proceeds of
approximately $215 million. See Exhibit 10.0, Asset Contribution and
Recapitalization Agreement filed with the Company's Quarterly Report on Form
10-Q for the period ended March 31, 1999. In general, CRE assumed unknown
environmental liabilities at the retail stores they acquired up to $50,000 per
site, as well as responsibility for any post-closing contamination. Subject to
certain risk sharing arrangements, the Company retained responsibility for all
pre-existing known contamination. A subsidiary of Clark Holdings acquired a
six-percent equity interest in the retail marketing operation. As part of the
sale agreement, the Company also entered into a market-based supply agreement
for refined products that expires in July 2001. The buyer may cancel the
supply agreement with 90 days notice. In 1999, the Company realized $355.9
million in sales under this contract. The retail marketing operation was 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. A pre-tax gain on the sale of $60.6
million ($36.9 million, net of income taxes) was recognized in the third
quarter of 1999.

 Year 2000 Disclosure

   As was widely reported, many computer systems processed dates based on two
digits for the year of a transaction and many feared that computers would be
unable to process dates in the year 2000 and beyond. There were many risks
associated with the year 2000 compliance issue, including, but not limited to,
the possible failure of the Company's systems and hardware with embedded
systems or those of the Company's business partners. The Company began
significant efforts to address its exposures related to the year 2000 issue in
1997. A project team was put in place to assess, remediate or replace, test
and implement computer systems and applications so that such systems and
related processes would continue to operate and properly process information
after December 31, 1999. The Company expended $5.9 million through December
31, 1999 on these efforts. Such costs were expensed as incurred and funded
from operations. The Company also developed contingency plans for these
systems as well as the business processes and operations that they supported.
In addition, the Company communicated with, and evaluated the systems of its
customers, suppliers, financial institutions and others with which it does
business to identify any year 2000 issues. The Company has not experienced any
significant disruptions in its business due to year 2000 problems to date and
is committed to making certain that its systems and processes continue to
function properly in the future.

 Accounting Standard Not Yet Adopted

   In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as

                                      21
<PAGE>

amended, becomes effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company is currently evaluating this new
standard, the impact it may have on the Company's accounting and reporting,
and planning for when to adopt the standard.

 Outlook

   Since most of the Company's products are commodities, supply and demand for
crude oil and refined products have a significant impact on the Company's
results. Demand for transportation fuel products has grown by an average of 1-
2% per year since 1992, primarily as a result of increased miles driven,
little improvement in the fuel efficiency of the U.S. automobile fleet and the
strength of the U.S. economy. Warm winters for the past four years, the Asian
economic slowdown that began in late 1997 and high industry utilization rates
bloated U.S. and world-wide refined product inventories from 1997 to 1999
resulting in downward pressure on margins. However, in late 1999 and early
2000 U.S. refinery utilization rates decreased and lowered U.S. inventory
levels for the primary refinery products, gasoline and diesel fuel to below
10-year averages. Historically, lower U.S. inventory levels have resulted in
higher margins. The Company expects that there will continue to be volatility
in refining margins and the Company's earnings because of the seasonal nature
of refined product demand and the commodity nature of the Company's refined
products. This is especially true in 2000, given the uncertainty over crude
oil production restrictions by OPEC and non-OPEC countries and the impact this
may have on feedstock costs.

Liquidity and Capital Resources

   Net cash provided by operating activities, excluding working capital
changes, or Operating Cash Flow, for the year ended December 31, 1999 was
negative $66.0 million, which compared to cash flow of $24.0 million in 1998
and $33.8 million in 1997. Working capital as of December 31, 1999 was $344.3
million, a 1.77 to 1 current ratio, versus $382.6 million, a 2.12 to 1 current
ratio, at December 31, 1998. Operating Cash Flow decreased in 1999 and 1998 as
compared to 1997 and working capital decreased in 1999 as compared to 1998
principally due to lower refining margins resulting from weak refining market
conditions.

   As part of its overall inventory management and crude acquisition
strategies, the Company routinely buys and sells, in varying degrees, crude
oil in the spot market. Such ongoing activities carry various payment terms
and require the Company to maintain adequate liquidity and working capital
facilities. The Company's short-term working capital requirements fluctuate
with the pricing and sourcing of crude oil. The credit agreement is used for
the issuance of letters of credit primarily for the purchase of crude oil and
other feedstocks and refined products. The Company's liquidity benefited in
1999 from the sale of its retail division, a partially completed coker project
at its Port Arthur refinery and refined product terminal assets. In addition,
during 1999 the Company sold crude oil linefill in the pipeline system
supplying the Lima refinery. The Company has an agreement in place that
requires it to repurchase approximately 2.8 million barrels of crude oil in
this pipeline system in September 2000 at market prices, unless extended by
mutual consent.

   In November 1999, Clark R&M entered into a credit agreement that provides
for borrowings and the issuance of letters of credit expiring on June 30,
2001. The credit agreement allows Clark R&M to borrow the lesser of $620
million, or the amount of a borrowing base calculated with respect to the
Clark R&M's cash and cash equivalents, eligible investments, eligible
receivables and eligible petroleum inventories. Direct cash borrowings under
the facility are limited to $50 million. The facility is secured by liens on
substantially all of the Clark R&M's cash and cash equivalents, receivables,
crude oil, refined product inventories and other inventories and trademarks
and other intellectual property. The amount available under the facility at
December 31, 1999 was $620 million and approximately $435 million of the
facility was utilized for letters of credit. As of December 31, 1999, there
were no direct borrowings under the credit agreement and Clark R&M was in
compliance with all covenants.

   The credit agreement contains covenants and conditions that, among other
things, limit dividends, indebtedness, liens, investments and contingent
obligations. It also requires Clark R&M to maintain its property

                                      22
<PAGE>

and insurance, to pay all taxes and comply with all laws, and to provide
periodic information and conduct periodic audits on behalf of the lenders.
Clark R&M is also required to comply with certain financial covenants. The
financial covenants are (i) maintenance of working capital of at least $150
million; (ii) maintenance of a tangible net worth (as defined) of at least
$150 million; and (iii) maintenance of minimum levels of balance sheet cash
(as defined) of $50 million at all times and $75 million at the end of any
month. The covenants also provide for a cumulative cash flow test (as defined)
from October 1, 1999 which must not be less than zero with a beginning balance
of $200 million. The credit agreement also limits the amount of future
additional indebtedness that may be incurred by Clark R&M to $75 million,
subject to certain exceptions.

   Cash flows provided by investing activities in 1999 was $110.9 million with
cash flow uses of $230.7 million in 1998 and $125.6 million in 1997. Net cash
flow was provided by investing activities in 1999 due to the sale of the
retail division of $214.8 million, the sale of the terminals of $33.7 million,
and the sale of the Port Arthur heavy oil upgrade project to Port Arthur Coker
Company L.P. for $157.1 million. Cash used in investing activity was greater
in 1998 than 1997 principally due to the Lima Acquisition, which was partially
offset by proceeds from the sale of the minority pipeline interests.

   Capital expenditures for property, plant and equipment totaled $214.7
million in 1999 (1998--$101.4 million; 1997--$27.4 million). Expenditures for
refinery maintenance turnarounds totaled $77.9 million in 1999 (1998--$28.3
million; 1997--$47.4 million) with the Lima refinery undergoing its first
major turnaround in 1999. Expenditures for property, plant and equipment in
1999, 1998 and 1997 included $164.1 million, $42.6 million and $1.1 million,
respectively related to the Port Arthur heavy oil upgrade project, of which
$157.1 million was sold to Port Arthur Coker Company in August 1999. The
remaining amount related to the Company's portion of the project. The assets
were sold at cost, which approximated fair market value. Expenditures for
property, plant and equipment in 1999 included $27.7 million related to
mandatory capital expenditures (1998--$33.7 million; 1997--$30.9 million).

   In August 1998, the Company acquired BP's 170,000 barrel per day Lima, Ohio
refinery, related terminal facilities, and non-hydrocarbon inventories for a
purchase price of approximately $175.0 million plus related acquisition costs
of $11.3 million. Hydrocarbon inventories were purchased for $34.9 million.
The Company assumed liabilities mainly related to employee benefits of $7.0
million. BP retained permanent responsibility for all known pre-existing
environmental liabilities and responsibility for a minimum of twelve years for
pre-existing but unknown environmental liabilities. The total cost of the
acquisition was accounted for using the purchase method of accounting with
$175.0 million allocated to the refinery long-term assets and $53.2 million
allocated to current assets for hydrocarbon and non-hydrocarbon inventories
and catalysts. From 1991 to 1997 the Company believes BP invested an aggregate
of approximately $212 million in the Lima refinery. Based on the Company's due
diligence, it expects mandatory capital expenditures for the Lima refinery to
average approximately $20 million per year for the period from 2000 to 2002
and maintenance turnaround expenditures to total approximately $60 million
over five years. The Company expects cash flows from the Lima refinery to be
more than adequate to cover incremental financing and mandatory capital and
turnaround costs.

   The Company classifies its capital expenditures into two categories,
mandatory and discretionary. Mandatory capital expenditures are required to
maintain safe and reliable operations, or to comply with regulations
pertaining to ground, water and air contamination and occupational, safety and
health issues. The Company estimates that total mandatory capital and
turnaround expenditures will average approximately $90 million per year over
the next three years. Costs to comply with future regulations cannot be
estimated.

   In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company. As a result of this
contract, the Company began developing a project to upgrade the Port Arthur
refinery to process primarily lower-cost, heavy sour crude oil of the type to
be purchased from PMI. The heavy oil upgrade project includes the construction
of new coking, hydrocracking and sulfur removal capability, and the expansion
of the existing crude unit to approximately 250,000 barrels per day. In August
1999, the Company sold for

                                      23
<PAGE>

$157.1 million the construction work-in-progress on the new processing units
to Port Arthur Coker Company L.P., an affiliate that is not controlled by the
company or its subsidiaries. The Company also sold for $2.2 million the oil
supply agreement with PMI and environmental permits which had already been
obtained by the Company to Port Arthur Coker Company L.P. The assets were sold
at cost, which approximated fair market value. As part of the project the
Company is undertaking the upgrading of existing units at the Port Arthur
refinery, including the expansion of the crude unit. The Company's portion of
the project is expected to cost approximately $120 million, of which $50.7
million was expended through December 31, 1999. As of December 31, 1999, the
Company had a letter of credit to the benefit of Foster Wheeler USA for $86.9
million outstanding to collateralize its obligations related to the Port
Arthur heavy oil upgrade project.

   The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001. The
Company entered into agreements with Port Arthur Coker Company L.P. pursuant
to which the Company will provide certain operating, maintenance and other
services and purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company will
receive compensation under these agreements at fair market value that is
expected to in the aggregate favorable to the Company.

   The Company has a philosophy to link routine capital expenditures to cash
generated from operations. The Company has a total capital and refinery
maintenance turnaround expenditure budget, excluding the Company's portion of
the Port Arthur refinery upgrade project of approximately $93 million in 2000
with another approximately $97 million budgeted for the Company's portion of
the Port Arthur heavy oil upgrade project. Total capital expenditures may be
less than budget if cash flow is lower than expected, and higher than budget
if cash flow is better than expected.

   Cash flow used in financing activities was $13.2 million in 1999 and $55.1
million in 1997 as compared to $205.5 million provided by financing activities
in 1998. Cash flow used in financing activities in 1999 was principally
related to placing the credit agreement, to the final settlement with a
previous minority interest owner, and capital lease payments. In 1997, the
Company received net proceeds of $398 million from the issuance of 8 3/8%
Senior Notes, 8 7/8% Senior Subordinated Notes and a floating rate term loan.
Also in 1997, the Company repurchased for $206.6 million, $259.2 million
(valued at maturity) of Zero Coupon Notes tendered pursuant to a tender offer.
To facilitate the offer Clark R&M returned capital of $215 million to the
Company. In 1997, the Company also redeemed all $225 million of its 10 1/2%
Senior Notes outstanding at a price of $1,032.96 for each $1,000.00 principal
amount of the notes.

   In 1998, the Company funded the acquisition of the Lima refinery and
related costs with cash on hand and the proceeds of a private placement to
institutional investors of $110 million 8 5/8% Senior Notes due 2008 and a
$115 million floating rate term loan due 2004. In 1998, the Company also
called the remaining Zero Coupon Notes outstanding ($3.6 million) and
repurchased Clark R&M's 9 1/2% Senior Notes tendered under its required change
of control offer ($3.3 million).

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

   Clark USA relies on Clark R&M for substantially all of its liquidity in
order to meet its interest and other costs. Clark USA is required to make
interest payments on its 10 7/8% Notes due 2005 of $9.5 million on June 1 and
December 1 of each year and expects its other costs to total less than $1
million per year. Clark USA currently pays dividends on its 11 1/2%
Exchangeable Preferred Stock in-kind. As of December 31, 1999, cash, cash
equivalents and short-term investments owned by Clark USA without restriction
amounted to $21.3 million. However, Clark USA's ability to access Clark R&M's
cash flows from operating activities is limited by covenants governing certain
of Clark R&M's outstanding debt securities. As of December 31, 1999, Clark R&M
was unable under the terms of such debt securities to dividend or otherwise
distribute any additional funds to Clark USA.

                                      24
<PAGE>

Clark USA believes it will have adequate liquidity to meet its working capital
needs for the next year, but, unless such Clark R&M debt securities are
amended or repaid, will require additional liquidity to make its June 1, 2001
interest payment and to fund its needs beyond June 2001. Such debt securities
are currently redeemable at par by Clark R&M.

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

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

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

Commodity Risk

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

   The movement in petroleum prices does not necessarily have a direct long-
term relationship to net earnings. The effect of changes in crude oil prices
on the Company's operating results is determined more by the rate at which the
prices of refined products adjust to reflect such changes. The Company is
required to fix the price of its crude oil purchases approximately two to
three weeks prior to when the crude oil can be processed and sold. As a
result, the Company is exposed to crude oil price movements during such
period. In addition, in 1997 and 1998 the market value of the Company's
petroleum inventory was below original cost, which resulted in a writedown of
inventory to fair market value. The Company expects earnings will continue to
be impacted by these writedowns, or recovery of writedowns, to market value.

 Earnings Sensitivity

   The following table illustrates the estimated pre-tax earnings impact based
on average historical operating rates, fixed price purchase commitments and
inventory levels resulting from potential changes in several key refining
market margin indicators and crude oil prices described below. This analysis
may differ from actual results because the Company produces many other
products and uses many other feedstocks that are not reflected in these
indicators.

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

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


                                      25
<PAGE>

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

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

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

<TABLE>
<CAPTION>
                                                                        Pre-tax
                                                     Assumed  Annual   Earnings
                                                     Change   Barrels   Impact
                                                     ------- --------- ---------
                                                      (per      (in       (in
                                                     barrel) millions) millions)
      <S>                                            <C>     <C>       <C>
      Refining margins
        Sweet crude oil cracking margin.............  $0.10     180       $18
        Sweet/sour differentials....................   0.10      70         7
        Heavy/light differentials...................   0.10      20         2
      Crude oil prices
        Fixed price purchase commitments............   2.00       2         4
        Lower of cost or market adjustment..........   2.00      12        24
</TABLE>

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

   The Company occasionally uses several strategies to minimize the impact on
profitability of volatility in feedstock costs and refined product prices.
These strategies generally involve the purchase and sale of exchange-traded,
energy-related futures and options with a duration of six months or less. In
addition, the Company to a lesser extent uses energy swap agreements similar
to those traded on the exchanges, such as crack spreads and crude oil options,
to better match the specific price movements in the Company's markets as
opposed to the delivery point of the exchange-traded contract. These
strategies are designed to minimize, on a short-term basis, the Company's
exposure to the risk of fluctuations in crude oil prices and refined product
margins. The number of barrels of crude oil and refined products covered by
such contracts varies from time to time. Such purchases and sales are closely
managed and subject to internally established risk standards. The results of
these hedging activities affect refining cost of sales and inventory costs.
The Company does not engage in speculative futures or derivative transactions.

   A sensitivity analysis was prepared to estimate the Company's exposure to
market risk associated with derivative commodity positions. This analysis may
differ from actual results. The fair value of each derivative commodity
position was based on quoted futures prices. As of December 31, 1999, a 10%
change in quoted futures prices would result in a $1.5 million change to the
fair market value of the derivative commodity position and correspondingly the
same change in operating income.

Interest Rate Risk

   The Company's principal interest rate risk is associated with its long-term
debt. The Company manages this rate risk by maintaining a high percentage of
its long-term debt with fixed rates. In addition, the Company has no material
principal payments due prior to 2003, but as of December 31, 1999 had the
flexibility to call $411.7 million of its long term debt, including all of its
floating rate bank term loan. A 1% change in the interest rate on long-term
debt would result in a $9.7 million change in operating income. This
determination is based on 1% of the Company's long-term debt outstanding at
December 31, 1999. The Company is subject to interest rate risk

                                      26
<PAGE>

on this floating rate bank term loan and any direct borrowings under Clark
R&M's credit facility. As of December 31, 1999, $240.0 million of the
Company's long-term debt was based on floating interest rates. There were no
direct cash borrowings under Clark R&M's credit facility.

Item 8. Financial Statements and Supplementary Data

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

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

   Not applicable

Item 10. Directors and Executive Officers of the Registrant

   The directors, executive officers, Controller, Treasurer and Secretary of
the Company and their respective ages and positions are set forth in the table
below.

<TABLE>
<CAPTION>
Name                         Age Position
----                         --- --------
<S>                          <C> <C>
William C. Rusnack..........  55 President and Chief Executive Officer;
                                 Director

Maura J. Clark..............  41 Executive Vice President--Corporate Development
                                 and Chief Financial Officer

Jeffry N. Quinn.............  41 Executive Vice President

Dennis R. Eichholz..........  46 Vice President, Controller and Treasurer

Richard A. Keffer...........  45 Secretary

Marshall A. Cohen...........  65 Director; Chairman of the Board

David I. Foley..............  32 Director

Robert L. Friedman..........  57 Director

Richard C. Lappin...........  55 Director
</TABLE>

   The board of directors of the Company currently consists of five directors
who serve until the next annual meeting of stockholders or until a successor
is duly elected. With the exception of Mr. Cohen, directors do not receive any
compensation for their services as such. In 1999, for his services as a
director of the Company and Clark Holdings, Mr. Cohen received a total of
65,656 shares of common stock of Clark USA, that were subsequently converted
to shares of Clark Holdings, and options to purchase up to 50,505 shares of
common stock of Clark Holdings for services rendered to the Company and Clark
Holdings. Executive officers of the Company serve at the discretion of the
board of directors of the Company.

   William C. Rusnack has served as President, Chief Executive Officer and a
director of the Company since April 1998. Mr. Rusnack has served as President,
Chief Operating Officer, Chief Executive Officer and a director of Clark R&M
since April 1998. Mr. Rusnack has served as President, Chief Operating
Officer, Chief Executive Officer and a director of Clark Holdings since its
formation in April 1999. Mr. Rusnack previously served 31 years with Atlantic
Richfield Corporation ("ARCO") and was involved in all areas of its energy
business, including refining operations, retail marketing, products
transportation, exploration and production, and human resources. He most
recently served as President of ARCO Products Company from 1993 to 1997 and
was President of ARCO Transportation Company from 1990 to 1993. He has served
as a director of Flowserve (a NYSE-listed corporation) since 1993.

                                      27
<PAGE>

   Maura J. Clark has served as Executive Vice President--Corporate
Development and Chief Financial Officer of the Company and Clark R&M since
August 1995. Ms. Clark has served as Executive Vice President--Corporate
Development and Chief Financial Officer of Clark Holdings since its formation
in April 1999. Ms. Clark previously served as Vice President--Finance at North
American Life Assurance Company, a financial services company, from September
1993 through July 1995.

   Jeffry N. Quinn has served as Executive Vice President--Legal, Human
Resources, and Public Affairs of the Clark R&M and Executive Vice-President of
Clark USA and Clark Holdings since March 1, 2000. Mr. Quinn previously served
as Senior Vice President, Law and Human Resources, Secretary & General Counsel
at Arch Coal, Inc., a NYSE-listed coal mining corporation, from 1995 to
February 2000.

   Dennis R. Eichholz, who joined the Company in November 1988, has served as
Vice President--Controller and Treasurer of the Company and Clark R&M since
February 1995. Mr. Eichholz has served as Vice President--Treasurer of Clark
R&M since December 1991. Mr. Eichholz has served as Vice President-Controller
and Treasurer of Clark Holdings since its formation in April 1999.

   Richard A. Keffer has served as Secretary of the Company, Clark R&M, and
Clark Holdings since October 1999. Mr. Keffer has served as legal counsel for
the Company since January 1996. Mr. Keffer previously served as an independent
consultant from June 1995 to January 1996. Mr. Keffer previously served as
assistant general counsel with Pet Incorporated from May 1984 to May 1995.

   Marshall A. Cohen has served as a director of the Company and Clark R&M
since November 1997 and as Chairman since January 27, 1998. Mr. Cohen has also
served as a director of Clark Holdings since its formation in April 1999. Mr.
Cohen has served as Counsel at Cassels Brook & Blackwell since October 1996.
Mr. Cohen previously served as President and Chief Executive Officer of The
Molson Companies Limited from November 1988 to September 1996. Mr. Cohen also
serves as a member of the board of directors of American International Group,
Barrick Gold Corporation, GoldFarb Corporation, Golf Town, Haynes
International Inc., Lafarge, Republic Engineered Steels, Inc., SMK Speedy
International, and Toronto Dominion Bank.

   David I. Foley has served as a director of the Company and Clark R&M since
November 1997. Mr. Foley has also served as a director of Clark Holdings since
its formation in April 1999. Mr. Foley is a Principal at The Blackstone Group
L.P., which he joined in 1995. Prior to joining Blackstone, Mr. Foley was a
member of AEA Investors, Inc. and The Monitor Company. He currently serves on
the board of directors of Rose Hills Company.

   Robert L. Friedman has served as a director of the Company, Clark R&M, and
Clark Holdings since July 1999. Mr. Friedman has served as a Senior Managing
Director of The Blackstone Group L.P. since March 1999. Prior to joining
Blackstone, Mr. Friedman was a partner with Simpson Thacher & Bartlett, a New
York law firm, since 1974. He currently serves on the board of directors of
American Axle & Manufacturing Inc., Corp Group, and Republic Technologies
International Inc.

   Richard C. Lappin, has served as a director of the Company, Clark R&M, and
Clark Holdings since October 1999. Mr. Lappin has served as a Senior Managing
Director of The Blackstone Group L.P. since February 1999. Prior to joining
Blackstone, Mr. Lappin served as President of Farley Industries which included
West Point-Pepperell, Inc., Acme Boot Company, Inc., Tool and Engineering,
Inc., Magnus Metals, Inc. and Fruit of the Loom, Inc. from 1989 to 1998. He
currently serves on the board of directors of American Axle & Manufacturing
Inc., Collins & Aikman Corporation, Haynes International Inc., Imperial Home
Decor Group, Inc., and Republic Technologies International Inc.

   Except as described above, there are no arrangements or understandings
between any director or executive officer and any other person pursuant to
which such person was elected or appointed as a director or executive officer.
There are no family relationships between any director or executive officer
and any other director or executive officer.


                                      28
<PAGE>

Item 11. Executive Compensation

   The following table sets forth all cash compensation paid by the Company to
its Chief Executive Officer and its other executive officers whose total
annual compensation exceeded $100,000 for each of the years in the three-year
period ended December 31, 1999.

<TABLE>
<CAPTION>
                               Annual Compensation                     Long-Term
                              ----------------------   Other Annual   Compensation    All Other
Name and Principal Position   Year  Salary   Bonus   Compensation (a) Payouts (b)  Compensation(c)
----------------------------  ---- -------- -------- ---------------- ------------ ---------------
<S>                           <C>  <C>      <C>      <C>              <C>          <C>
William C. Rusnack......      1999 $454,808 $370,000     $ 1,535       $      --            --
 President and Chief          1998 $300,077 $270,000         --               --     $    5,746
 Executive Officer            1997      --       --          --               --            --

Bradley D. Aldrich (d)..      1999  317,500  175,000      17,500              --        826,344
 Executive Vice               1998  270,000  175,000      15,442        1,130,354        16,214
 President--
 Refining                     1997  252,611  219,600         --               --         14,980

Maura J. Clark..........      1999  300,769  180,000         --               --          2,534
 Executive Vice               1998  238,847  170,000         --               --         13,793
 President--
 Corporate Development        1997  220,998  153,300         --               --            --
 and Chief Financial
 Officer

Brandon K. Barnholt (e).      1999  123,600      --          --               --      3,614,600
 Executive Vice               1998  270,000  175,000         --           845,878        19,391
 President--
 Marketing                    1997  253,003  154,600         --               --         15,230
</TABLE>
--------
(a) Represents amounts paid for unused vacation and relocation expenses.
(b) Represents amounts received by Mr. Aldrich and Mr. Barnholt upon the
    exercise of options to acquire TrizecHahn Subordinate Voting Shares
    ("TrizecHahn Shares") received as compensation from TrizecHahn for
    services performed for the Company under the TrizecHahn Amended and
    Restated 1987 Stock Option Plan (the "TrizecHahn Option Plan").
(c) Represents amount accrued for the account of such individuals under the
    Clark Retirement Savings Plan (the "Savings Plan"), Supplemental Savings
    Plan, and with respect to Mr. Aldrich and Mr. Barnholt, to 1999,
    represents separation benefits paid or accrued with respect to the
    termination of their employment with the Company.
(d) Mr. Aldrich resigned from the Company effective January 31, 2000, and his
    other compensation for 1999 included $825,000 of severance.
(e) Mr. Barnholt's employment was terminated July 7, 1999, due to the sale of
    the retail division, and his other compensation for 1999 represented a
    termination bonus.

Stock Option Grants

   The following table sets forth information concerning grants of stock
options made during the year ended December 31, 1999, to each of the executive
officers.
<TABLE>
<CAPTION>
                                                                  Potential
                                                              Realizable Value
                                                              At Assumed Annual
                                                                  Rates of
                                                                 Stock Price
                                                                Appreciation
                                 Individual Grants(1)        For Option Term(4)
                          ---------------------------------- -------------------
                              Number of        % of Total
                              Securities     Options Granted
                          Underlying Options To Employees In
Name                         Granted (#)       Fiscal Year     5%($)    10%($)
----                      ------------------ --------------- --------- ---------
<S>                       <C>                <C>             <C>       <C>
William C. Rusnack.......     600,000(2)          31.5       3,274,890 8,066,209
Maura J. Clark...........     250,000(3)          13.1       1,364,538 3,360,920
</TABLE>

--------
(1) All options are options to purchase shares of the common stock of Clark
    Refining Holdings, Inc. ("Clark Holdings"), the ultimate parent of the
    Company. All options were granted pursuant to the 1999 Clark Refining
    Holdings Stock Incentive Plan (the "Incentive Plan") which was formally
    adopted on September 28, 1999. The options expire September 30, 2008 and
    are exercisable at a price of $9.90 per share.
(2) 300,000 of the options granted to Mr. Rusnack are time vested as described
    in the following description of the Incentive Plan. The remaining 300,000
    of options are performance vested options and vest seven years from the
    date of the grant or following certain events upon the attainment of
    certain target stock prices as described in the following description of
    the Incentive Plan.

                                      29
<PAGE>

(3) 140,000 of the options granted to Ms. Clark are time vested. 50,000 of
    such time vested options were granted as fully vested options while the
    remainder vest as described in the following description of the Incentive
    Plan. The remaining 110,000 of the options are performance vested options
    and vest seven years from the date of the grant or following certain
    events upon the attainment of certain target stock prices as described in
    the following description of the Incentive Plan.
(4) For the purposes of determining the potential realizable value since the
    date of the grant, the date of formal adoption of the Incentive Plan,
    September 28, 1999, has been used.

Year-End Stock Option Values

   The following table sets forth information with respect to the number and
value of unexercised stock options of Clark Holdings held by the named
executive officers as of December 31, 1999.

<TABLE>
<CAPTION>
                                                Number of Securities      Value Of Unexercised
                           Shares              Underlying Unexercised    In-The-Money Options At
                         Acquired On  Value     Options At FY-End(#)            FY-End($)
                          Exercise   Realized ------------------------- -------------------------
Name                         (#)       ($)    Exercisable/Unexercisable Exercisable/Unexercisable
----                     ----------- -------- ------------------------- -------------------------
<S>                      <C>         <C>      <C>                       <C>
William C. Rusnack......     -0-       -0-         150,000/450,000               -0-/-0-
Maura J. Clark..........     -0-       -0-          95,000/155,000               -0-/-0-
Bradley D. Aldrich(1)...     -0-       -0-              --/--                    -0-/-0-
Brandon K. Barnholt(2)..     -0-       -0-          50,000/--                    -0-/-0-
</TABLE>
--------
(1) As of December 31, 1999, Mr. Aldrich held 30,000 options that were
    previously granted under the 1995 Clark USA Incentive Plan. These options
    were cancelled and terminated as part of Mr. Aldrich's separation
    agreement relating to his resignation from the Company effective January
    31, 2000.
(2) As of December 31, 1999, Mr. Barnholt held 50,000 options that were
    previously granted under the 1995 Clark USA Long-Term Performance Plan at
    an exercise price of $15.00 per share. Pursuant to the terms and
    conditions of the termination of employment with the Company as part of
    the sale of the retail business on July 8, 1999, it was agreed that Mr.
    Barnholt's options can be exercised until the earlier of July 8, 2004 or
    the expiration of the term thereof. A grant of an option to purchase
    50,000 shares of Clark Holdings under the Incentive Plan was approved
    effective April 11, 2000 by the Board of Directors of Clark Holdings, and
    the options granted under the 1995 Clark USA Long-Term Performance Plan
    were terminated.

Short-Term Performance Plan

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

Long-Term Performance Plan

   In 1999, the 1995 Clark USA Long-Term Performance Plan was terminated, and
Clark Holdings adopted the Clark Refining Holdings Inc. 1999 Stock Option
Incentive Plan ("Incentive Plan"). Under the Incentive Plan, employees of
Clark Holdings and its subsidiaries are eligible to receive awards of options
to purchase shares of common stock of Clark Holdings. The Incentive Plan is
intended to attract and retain executives and other selected employees whose
skills and talents are important to the operations of Clark Holdings and its
subsidiaries, including the Company. Options on an aggregate amount of
2,215,250 shares of Clark Holdings' Common Stock may be awarded under the
Incentive Plan, either from authorized, unissued shares which have been
reserved for

                                      30
<PAGE>

such purpose or from authorized, issued shares acquired by or on behalf of
Clark Holdings. The current aggregate amount of stock available to be awarded
is subject to a stock dividend or split, reorganization, recapitalization,
merger, consolidation, spin-off, combination or exchange of stock. In 1999,
options for the purchase of 1,752,500 shares of the common stock of Clark
Holdings were granted at an exercise price of $9.90 per share and options for
the purchase of 152,500 shares of the common stock of Clark Holdings were
granted at an exercise price of $15.00 per share. As of December 31, 1999,
1,752,500 stock options for the purchase of the common stock of Clark Holdings
were outstanding at an exercise price of $9.90 per share and 152,500 stock
options were outstanding at an exercise price of $15.00 per share under the
Incentive Plan.

   The Board of Directors of Clark Holdings ("Board") administers the
Incentive Plan, but may delegate certain responsibilities to the Compensation
Committee of the Board. Subject to the provisions of the Incentive Plan, the
Board is authorized to determine who may participate in the Incentive Plan and
the number and types of awards made to each participant, and the terms,
conditions, requirements, and limitations applicable to each award. Awards may
be granted singularly or in combination. Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives to,
grants or rights under any other employee plan of Clark Holdings and its
subsidiaries. Subject to certain limitations, the Board is authorized to
amend, modify or terminate the Incentive Plan to meet any changes in legal
requirements or for any other purpose permitted by law.

   For options granted in 1999, including grants to the named executive
officers, there are two vesting options, time vesting and performance vesting,
under the Incentive Plan. Under time vesting, options are vested 50% at the
date of grant and 25% on each January 1 thereafter. Under performance vesting,
options are fully vested on and after the seventh anniversary of the date of
grant; or following a public offering of the common stock or upon a change in
control, the vesting is accelerated based on the achievement of certain per
share prices of the common stock. The accelerated vesting schedule is as
follows:

<TABLE>
<CAPTION>
            Average Closing Price Per Share of
                   Capital Stock for Any              % of Shares With Respect to
                 180 Consecutive Days; or                    Which Option
                  Change in Control Price                   is Exercisable
            ----------------------------------        ---------------------------
      <S>                                             <C>
         Below $12.00................................              0%
         $12.00-$14.99...............................             10%
         $15.00-$17.99...............................             20%
         $18.00-$19.99...............................             30%
         $20.00-$24.99...............................             50%
         $25.00-$29.99...............................             75%
         Above $29.99................................            100%
</TABLE>

   The change in control price is defined as the highest price per share
received by any holder of the common stock from the purchaser(s) in a
transaction or series of transactions that result in a Change in Control. All
options expire no more than ten years after the date of its grant.

   If the employment of a participant terminates, subject to certain
exceptions for death, disability, or cause (as defined in the applicable
employment agreement), all shares not exercisable will be canceled
immediately, unless the award agreement provides otherwise. All exercisable
shares will terminate 90 days after the participant's termination of
employment. Subject to certain exceptions for death or disability, no award or
other benefit under the Incentive Plan is assignable or transferable, or
payable to or exercisable by anyone other than the participant to whom it was
granted.

   In the event of a "Change of Control" of Clark Holdings, the Board with
respect to any award may take such actions that cause (i) the acceleration of
the award, (ii) the payment of a cash amount in exchange for the cancellation
of an award and/or (iii) the requiring of the issuance of substitute awards
that will substantially preserve the value, rights, and benefits of any
affected awards.

                                      31
<PAGE>

Clark Savings Plan

   The Clark Savings Plan, which became effective in 1989, permits employees
to make before-tax and after-tax contributions and provides for employer
incentive matching contributions. Under the Savings Plan, each employee of the
Company (and such other related companies as may adopt the Savings Plan) who
has completed at least six months of service may become a participant.
Participants are permitted to make before-tax contributions to the Savings
Plan, effected through payroll deduction, of from 1% to 15% of their
compensation. The Company makes matching contributions equal to 200% of a
participant's before-tax contributions up to 3% of compensation. Additionally,
for represented employees at the Port Arthur and Lima refineries, the Company
makes matching contributions equal to 100% of a participants before-tax
contributions above 3% and 6% of compensation. Participants are also permitted
to make after-tax contributions through payroll deduction, of from 1% to 5% of
compensation, which are not matched by employer contributions; provided that
before-tax contributions and after-tax contributions, in the aggregate, may
not exceed the lesser of 15% of compensation or $10,500 in 2000. All employer
contributions, except those for union represented employees, are fully vested
from the onset of the employee's eligibility in the plan. Amounts in
employees' accounts may be invested in a variety of permitted investments, as
directed by the employee. Participants' vested accounts are distributable upon
a participant's disability, death, retirement or separation from service.
Subject to certain restrictions, employees may make loans or withdrawals of
employee contributions during the term of their employment.

Compensation Committee Interlocks and Insider Participation

   Compensation of the Company's executive officers has historically been
determined by the Company's board of directors. Mr. Rusnack, the Company's
President and Chief Executive Officer, is a member of the Company's board of
directors. Other than reimbursement of their expenses, the Company's directors
do not receive any compensation for their services as directors, except Mr.
Cohen. See Item 10. Directors and Executive Officers of the Registrant. There
are no interlocks between the Company and other entities involving the
Company's executive officers and board members who serve as executive officers
or board members of other entities, except with respect to Clark R&M, Clark
USA, Sabine River Holding Corp., Neches River Holding Corp., Port Arthur
Finance Corp., Clark Holdings, and Clark Holdings' principal shareholders,
Blackstone and Oxy.

Employment Agreement for William C. Rusnack

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

   The Agreement also provides that: (i) the Executive shall be Chief
Executive Officer and President of the Company and Clark R&M, (ii) the
Executive's base salary shall not be less than $415,000 (the "Salary"), (iii)
the Executive's bonus opportunity shall be equal to 200% of the Salary and his
target bonus (the "Target Bonus") shall be equal to 100% of the Salary, (iv)
the Executive will be provided with welfare benefits and other fringe benefits
to the same extent and on the same terms as those benefits are provided to the
Company's other senior management employees, (v) the Executive shall
participate in the Company's relocation policy at level 4, and (vi) the
Executive shall receive a gross-up for any parachute excise taxes that may
result from any payment, whether under the Agreement or otherwise.


                                      32
<PAGE>

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

Employment Agreement for Maura J. Clark

   On July 8, 1997, the Company entered into an employment agreement with
Maura J. Clark (the "Agreement") which expires in five years with a provision
for automatic extension on an annual basis unless either party gives 90 days'
notice of cancellation. The Agreement provides that if a Change of Control
occurs within two years prior to the scheduled expiration date, then the
expiration date will be automatically extended until the second anniversary of
the Change of Control date.

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

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

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

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

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

Employment Agreement for Jeffry N. Quinn

   The Company has entered into an employment agreement (the "Agreement") with
Jeffry N. Quinn (the "Executive"). The Agreement expires on February 28, 2003,
provided that if neither the Executive nor the Company gives 60 days notice
prior to the expiration of the primary term or any extension thereof then the
Agreement shall automatically extend for an additional one year period (a
"Renewal Term").

   The Agreement also provides that: (i) the Executive shall serve as
Executive Vice President-Legal, Human Resources, and Public Affairs and
General Counsel of the Company and Executive Vice President of Clark USA and
Clark Holdings, (ii) the Executive's base salary shall not be less than
$282,500 (the "Salary"), (iii) the Executive's bonus opportunity shall be
equal to 150% of the Salary and his target bonus (the "Target Bonus")

                                      33
<PAGE>

shall be equal to 100% of the Salary (with a minimum bonus of $100,000 for
2000), (iv) the Executive shall receive a one-time signing bonus of $125,000,
(v) the Executive will be provided with welfare benefits and other fringe
benefits to the same extent and on the same terms as those benefits are
provided to the Company's other senior management employees, and (vi) the
Executive shall be granted an option to purchase 120,000 shares of common
stock of Clark Holdings under the Incentive Plan. The Executive is subject to
specified confidentiality requirements pertaining to the business of the
Company during employment and two-years following termination. The Executive
is also restricted from solicitation of business from clients or customers of
the Company and restricted from making employment offers to Company employees
for twelve months following termination of the Executive.

   In the event that Executive's employment is (a) terminated by the Company
without Cause (as defined therein), (b) terminated by the Executive for Good
Reason (as defined therein), or (c) terminates at the end of the Initial Term
(or a Renewal Term) because the Company gave notice preventing the occurrence
of a Renewal Term, then the Executive shall receive from the Company, in
addition to any other compensation and benefits accrued but unpaid, a lump sum
equal to the product of (a) two and (b) the sum of the Salary and Target
Bonus. In the event the above termination situations occur in relation to a
Change in Control, the Executive shall receive from the Company, in addition
to any other compensation and benefits accrued but unpaid, a lump sum equal to
the product of (a) three and (b) the sum of the Salary and Target Bonus.

Item 12. Security Ownership of Certain Owners and Management

   All of the Company's common stock is owned by Clark Holdings. The following
table and the accompanying notes set forth certain information concerning the
beneficial ownership of the Common Stock and Class F Common Stock of Clark
Holdings, as of the date hereof: (i) each person who is known by the Company
to own beneficially more than 5% of the common stock of Clark Holdings, (ii)
each director and each executive officer who is the beneficial owner of shares
of common stock of Clark Holdings, and (iii) all directors and executive
officers as a group.

<TABLE>
<CAPTION>
                                                                        Percent
                                                                          of
                                                                Percent  Total
                                                     Number of    of     Voting
          Name and Address            Title of Class   Shares    Class  Power(a)
          ----------------            -------------- ---------- ------- -------
<S>                                   <C>            <C>        <C>     <C>
Blackstone Management Associates III
 L.L.C.(b)..........................  Common         20,940,828   96.6%  77.4%
 345 Park Avenue, New York, NY 10154
Marshall A. Cohen(c)................  Common            116,161    0.5    0.4
William C. Rusnack(c)...............  Common            225,000    1.1    0.9
Maura J. Clark(c)...................  Common            117,500    0.5    0.4
Occidental Petroleum Corporation....  Class F Common  6,101,010  100.0   19.9
 10889 Wilshire Boulevard
 Los Angeles, California 90024
All directors and executive officers
 as a group(d)......................  Common            458,661    2.1    1.7
</TABLE>
--------
(a) Represents the total voting power of all shares of common stock
    beneficially owned by the named stockholder.
(b) The 20,940,828 shares held by Blackstone are directly held as follows:
    16,707,667.576 shares by Blackstone Capital Partners III Merchant Banking
    Fund L.P, 2,976,705.546 shares by Blackstone Offshore Capital Partners III
    L.P. and 1,256,455.151 shares by Blackstone Family Investment Partnership
    III L.P., each of which Blackstone Management Associates III L.L.C. is the
    general partner having voting and dispositive power.
(c) Includes shares under option for which the individual holds or will have
    the right to hold within the next 60 days after March 31, 2000. The shares
    are as follows: Mr. Cohen--50,505; Mr. Rusnack--225,000; and Ms. Clark--
    117,500.
(d) Richard C. Lappin and Robert L. Friedman, both directors of Clark
    Holdings, are members of Blackstone Management Associates III L.L.C.,
    which has investment and voting control over the shares held or controlled
    by Blackstone and as such may be deemed to share beneficial ownership of
    the shares held or controlled by Blackstone. Messrs. Peter G. Peterson and
    Stephen A. Schwarzman are the founding members of Blackstone and as such
    may also be deemed to share beneficial ownership of the shares held or
    controlled by Blackstone. Stephen I. Chazen, a director of Clark Holdings,
    is an executive officer of Occidental Petroleum Corporation and to the
    extent he may be deemed to be a control person of Occidental Petroleum
    Corporation may be deemed to be a beneficial owner of shares of common
    stock owned by Occidental Petroleum Corporation. Each of such persons
    disclaims beneficial ownership of such shares.

                                      34
<PAGE>

Item 13. Certain Relationships and Related Transactions

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

   During 1999, the Company received capital of $39.5 million from Clark R&M
to facilitate Clark USA's payment of interest on its debt.

   As of December 31, 1999, the Company had a payable to Clark Holdings for
management fees paid by Clark Holdings on the Company's behalf of $3.8
million.

   In conjunction with the supply agreement with CRE, the Company's billings
to CRE in 1999 totaled $482.5 million of which $355.9 million were product
sales and $126.6 million were Federal excise and state motor fuel taxes that
the Company collected and then remitted to governmental agencies. The taxes
were not included in "Net sales and operating revenue", "Cost of sales", or
"Operating expenses". The Company had a $44.0 million receivable from CRE as
of December 31, 1999.

   At December 31, 1999, the Company had a net outstanding receivable of $0.4
million from Port Arthur Coker Company L.P. for services rendered and fees
paid on behalf of Port Arthur Coker Company L.P.

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

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

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

3. Exhibits

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
 3.1     Restated Certificate of Incorporation of Clark USA, Inc. (Incorporated
          by reference to Exhibit 3.1 filed with Clark R&M Holdings
          Registration Statement on Form S-4 (Registration No. 33-59144))

 3.2     Certificate of Amendment to Certificate of Incorporation of Clark USA,
          Inc. (Incorporated by reference to Exhibit 3.3 filed with Clark USA,
          Inc. Registration Statement on Form S-4 (Registration No. 33-81005))

 3.3     Certificate of Amendment to Certificate of Incorporation of Clark USA,
          Inc. (Incorporated by reference to Exhibit 3.3 filed with Clark USA,
          Inc. Registration Statement on Form S-4 (Registration No. 333-42457))

 3.4     Certificate of Amendment to Certificate of Incorporation of Clark USA,
          Inc. (Incorporated by reference to Exhibit 3.4 filed with Clark USA,
          Inc. Registration Statement on Form S-4 (Registration No. 333-42457))

 3.5     Certificate of Amendment to Certificate of Incorporation of Clark USA,
          Inc. (Incorporated by reference to Exhibit 3.5 filed with Clark USA,
          Inc. Registration Statement on Form S-4 (Registration No. 333-42457))

 3.6     By-laws of Clark USA, Inc. (Incorporated by reference to Exhibit 3.2
          filed with Clark USA, Inc. Current Report on Form 8-K, dated February
          27, 1995 (Registration No. 33-59144))

 3.7     Certificate of Designations of the Powers, Preferences and Relative,
          Participating, Optional and Other Special Rights of 11 1/2% Senior
          Cumulative Exchangeable Preferred Stock and Qualifications,
          Limitations and Restrictions thereof (Incorporated by reference to
          Exhibit 4.1 filed with Clark USA, Inc. Registration Statement on Form
          S-4 (Registration No. 333-42457))

</TABLE>

                                      35
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
 3.8     Certificate of Amendment, dated July 31, 1998, to Certificate of
          Designation of the Powers, Preferences and Relative, Participating,
          Optional and Other Special Rights of 11 1/2% Senior Cumulative
          Exchangeable Preferred Stock and Qualifications, Limitations and
          Restrictions thereof. (Incorporated by reference to Exhibit 3.8 filed
          with the Clark USA, Inc. Form 10-K, dated December 31, 1998
          (Commission File No. 1-13514))

 4.3     Indenture, dated as of October 1, 1997, between Clark USA, Inc. and
          Bankers Trust Company, as Trustee, including form of 11 1/2%
          Subordinated Exchange Debentures due 2009 (Incorporated by reference
          to Exhibit 4.2 filed with Clark USA, Inc. Registration Statement on
          Form S-4 (Registration No. 333-42457))

 4.4     Supplemental Indenture, dated as of August 10, 1998, to Indenture,
          dated as of October 1, 1997, between Clark USA, Inc. and Bankers
          Trust Company, as Trustee (Incorporated by reference to Exhibit 4.4
          filed with the Clark USA, Inc. Form 10-K, dated December 31, 1998
          (Commission File No. 1-13514))

 4.5     Indenture, dated as of December 1, 1995, between Clark USA, Inc. and
          The Chase Manhattan Bank, N.A., as Trustee, including the form of 10
          7/8% Series B, Senior Notes due December 1, 2005 (Incorporated by
          reference to Exhibit 4.1 filed with Clark USA, Inc. Form 8-K, dated
          December 1, 1995 (File No. 33-59144))

 4.6     Supplemental Indenture, dated as of August 10, 1998, to Indenture,
          dated as of December 1, 1995, between Clark USA, Inc. and The Chase
          Manhattan Bank, N.A., as Trustee. (Incorporated by reference to
          Exhibit 4.6 filed with the Clark USA, Inc. Form 10-K, dated December
          31, 1998 (Commission File No. 1-13514))

 10.10   Amended and Restated Credit Agreement, dated as of November 19, 1999,
          among Clark Refining & Marketing, Inc. Bankers Trust Company, as
          Administrative and Collateral Agent, The Toronto-Dominion Bank, as
          Syndication Agent, BankBoston, N.A., as Documentation Agent, and the
          other financial institutions party thereto. (Incorporated by
          reference to Exhibit 10.10 filed with the Clark Refining & Marketing,
          Inc. Form 10-K, dated December 31, 1999 (Commission File No. 1-
          11392))

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

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

 10.20   Clark Refining Holdings Inc. 1999 Stock Incentive Plan (Incorporated
          by reference to Exhibit 10.20 filed with the Clark Refining &
          Marketing, Inc. Form 10-K, dated December 31, 1999 (Commission File
          No. 1-11392))

 10.21   Clark Refining & Marketing, Inc. Stock Option Plan (Incorporated by
          reference to Exhibit 10.5 filed with Clark Registration Statement on
          Form 5-1 (Registration No. 33-43358))

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


                                       36
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
 10.23   Amendment to the Clark Refining & Marketing, Inc. Savings Plan dated
          July 06, 1999 (Incorporated by reference to Exhibit 10.22 filed with
          the Clark Refining & Marketing, Inc. Form 10-K, dated December 31,
          1999 (Commission File No. 1-11392))

 10.24   Amendment to the Clark Refining & Marketing, Inc. Savings Plan dated
          December 30, 1999 (Incorporated by reference to Exhibit 10.23 filed
          with the Clark Refining & Marketing, Inc. Form 10-K, dated December
          31, 1999 (Commission File No. 1-11392))

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

 10.26   Employment Agreement, dated as of March 1, 2000 between Clark Refining
          & Marketing, Inc. and Jeffry N. Quinn (Incorporated by reference to
          Exhibit 10.25 filed with the Clark Refining & Marketing, Inc. Form
          10-K, dated December 31, 1999 (Commission File No. 1-11392))

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

 10.28   Agreement for the Purchase and Sale of Lima Oil Refinery, dated as of
          July 1, 1998 between BP Exploration & Oil Inc., The Standard Oil
          Company, BP Oil Pipeline Company, BP Chemicals Inc. and Clark
          Refining & Marketing, Inc. (Incorporated by Reference to Exhibit 2.1
          filed with Clark Refining & Marketing, Inc. Current Report on Form 8-
                                                                               K, dated August 21, 1998 (File 1-11392))
 10.29   Letter Amendment No. 1, dated August 10, 1998, to Agreement for
          Purchase and Sale of Lima Oil Refinery dated July 1, 1998
          (Incorporated by reference to Exhibit 2.2 filed with Clark Refining &
          Marketing, Inc. Current Report on Form 8-K, dated August 21, 1998
          (File No. 1-11392))

 10.30   Services and Supply Agreement between Clark Refining & Marketing, Inc.
          and Port Arthur Coker Company L.P. dated August 19, 1999.
          (Incorporated by reference to Exhibit 10.32 filed with the Clark
          Refining & Marketing, Inc. Form 10-K, dated December 31, 1999
          (Commission File No. 1-11392))

 10.31   Product Purchase Agreement between Clark Refining & Marketing, Inc.
          and Port Arthur Coker Company L.P. dated August 19, 1999.
          (Incorporated by reference to Exhibit 10.33 filed with the Clark
          Refining & Marketing, Inc. Form 10-K, dated December 31, 1999
          (Commission File No. 1-11392))

 10.32   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. (Incorporated by reference
          to Exhibit 10.0 filed with Clark Refining & Marketing, Inc. Form 10-Q
          for the quarter ended March 31, 1999 (Commission File No. 1-11392))

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

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

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


                                       37
<PAGE>

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

 10.37   Indenture between Clark Refining & Marketing, Inc. and Bankers Trust
          Company, dated as of November 21, 1997 including the form of 8 3/8%
          Senior Notes due 2007 (Incorporated by reference to Exhibit 4.5
          filed by Clark Refining & Marketing, Inc., Registration Statement on
          Form S-4 (File No. 333-42431))

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

 10.39   Supplemental Indenture between Clark Refining & Marketing, Inc. and
          Marine Midland Bank, dated November 21, 1997 (Incorporated by
          reference to Exhibit 4.61 filed by Clark Refining & Marketing, Inc.,
          Registration Statement on Form S-4 (File No. 333-42431))

 27.0    Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

   None


                                       38
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Clark USA, Inc. and Subsidiaries:
  Annual Financial Statements
    Independent Auditors' Report..........................................  40
    Consolidated Balance Sheets as of December 31, 1998 and 1999..........  41
    Consolidated Statements of Operations for the years ended December 31,
     1997, 1998 and 1999.................................................. 42
    Consolidated Statements of Cash Flows for the years ended December 31,
     1997, 1998 and 1999..................................................  43
    Consolidated Statements of Stockholder's Equity for the years ended
     December 31, 1997, 1998 and 1999.....................................  44
    Notes to Consolidated Financial Statements............................  45
  Financial Statement Schedule
    Independent Auditors' Report..........................................  61
    Schedule I--Condensed Information of the Registrant...................  62
</TABLE>

                                       39
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

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

   We have audited the accompanying consolidated balance sheets of Clark USA,
Inc. and Subsidiaries (the "Company") as of December 31, 1998 and 1999 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

   In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1998 and 1999, and the results of their operations and their cash flows for
each of the years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States of America.

                                          Deloitte & Touche LLP

St. Louis, Missouri
February 16, 2000

                                      40
<PAGE>

                        CLARK USA, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                    (dollars in millions except share data)

<TABLE>
<CAPTION>
                                                              December 31,
                                                  Reference ------------------
                                                    Note      1998      1999
                                                  --------- --------  --------
<S>                                               <C>       <C>       <C>
                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents......................      2    $  148.1  $  306.2
  Short-term investments.........................      4         4.5       1.4
  Accounts receivable............................    2,4       131.7     197.6
  Inventories....................................    2,5       267.7     252.2
  Prepaid expenses and other.....................               31.5      37.2
  Net assets held for sale.......................      3       142.0       --
                                                            --------  --------
    Total current assets.........................              725.5     794.6
PROPERTY, PLANT, AND EQUIPMENT, NET..............    2,6       628.9     616.8
OTHER ASSETS.....................................    2,7        95.9     121.6
                                                            --------  --------
                                                            $1,450.3  $1,533.0
                                                            ========  ========
      LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
  Accounts payable...............................    2,8    $  250.3  $  335.0
  Accrued expenses and other.....................      9        66.8      75.8
  Accrued taxes other than income................               25.8      39.5
                                                            --------  --------
     Total current liabilities...................              342.9     450.3

LONG-TERM DEBT...................................      9       980.2     969.9
OTHER LONG-TERM LIABILITIES......................     12        52.5      64.8

EXCHANGEABLE PREFERRED STOCK
  ($.01 par value per share; 250,000 shares
   authorized; 78,789 shares issued).............               72.5      81.1

STOCKHOLDER'S EQUITY:
 Common Stock
  Common, $.01 par value, 54,164,597 authorized,
   13,767,829 issued and outstanding in 1998; 100
   authorized, issued, and outstanding in 1999...                0.1       --
  Class F Common, $.01 par value, 7,000,000
   authorized, 6,101,010 issued and outstanding
   in 1998; zero authorized, issued, and
   outstanding in 1999...........................                0.1       --
  Paid-in capital................................              209.0     206.4
  Retained earnings (deficit)....................             (207.0)   (239.5)
                                                            --------  --------
    Total stockholder's equity (deficit).........                2.2     (33.1)
                                                            --------  --------
                                                            $1,450.3  $1,533.0
                                                            ========  ========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       41
<PAGE>

                        CLARK USA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (dollars in millions)

<TABLE>
<CAPTION>
                                                  For the year ended December
                                                              31,
                                        Reference -----------------------------
                                          Note      1997       1998      1999
                                        --------- ---------  --------  --------
<S>                                     <C>       <C>        <C>       <C>
NET SALES AND OPERATING REVENUES......            $ 3,880.7  $3,581.7  $4,520.5
EXPENSES:
  Cost of sales.......................             (3,432.1) (3,113.2) (4,099.8)
  Operating expenses..................               (295.0)   (342.8)   (402.8)
  General and administrative expenses.                (43.5)    (51.2)    (48.4)
  Depreciation........................      2         (26.3)    (28.8)    (36.1)
  Amortization........................     2,7        (20.5)    (25.7)    (27.0)
  Inventory recovery (write-down) to
   market.............................      5         (19.2)    (86.6)    105.8
  Recapitalization, asset write-offs,
   and other charges..................     14         (41.8)      --        --
                                                  ---------  --------  --------
                                                   (3,878.4) (3,648.3) (4,508.3)
GAIN ON SALE OF PIPELINE INTERESTS....      3           --       69.3       --
                                                  ---------  --------  --------
OPERATING INCOME......................                  2.3       2.7      12.2
  Interest expense and finance income,
   net................................      9         (80.1)    (70.5)    (80.7)
                                                  ---------  --------  --------
LOSS FROM CONTINUING OPERATIONS BEFORE
 INCOME TAXES AND EXTRAORDINARY ITEMS.                (77.8)    (67.8)    (68.5)
  Income tax (provision) benefit......    2,13         (7.6)     25.0      12.0
                                                  ---------  --------  --------
LOSS FROM CONTINUING OPERATIONS BEFORE
 EXTRAORDINARY ITEMS..................                (85.4)    (42.8)    (56.5)
  Discontinued operations, net of
   income tax benefit of $2.7 (1998--
   $9.8 tax provision, 1997--$0.0)....      3          (2.0)     13.1      (4.3)
  Gain on disposal of discontinued
   operations, net of taxes of $23.7..      3           --        --       36.9
  Extinguishment of debt..............      9         (20.7)      --        --
                                                  ---------  --------  --------
NET LOSS..............................               (108.1)    (29.7)    (23.9)
  Preferred stock dividends...........                 (1,8)     (7.6)     (8.6)
                                                  ---------  --------  --------
NET LOSS AVAILABLE TO COMMON STOCK....            $  (109.9) $  (37.3) $ (32.51)
                                                  =========  ========  ========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       42
<PAGE>

                        CLARK USA, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in millions)

<TABLE>
<CAPTION>
                                                         For the year ended
                                                            December 31,
                                                       -------------------------
                                                        1997     1998     1999
                                                       -------  -------  -------
<S>                                                    <C>      <C>      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...........................................  $(108.1) $ (29.7) $ (23.9)
  Discontinued operations............................      2.0    (13.1)     4.3
  Extraordinary item.................................     20.7      --       --
  Adjustments:
    Depreciation.....................................     26.3     28.8     36.1
    Amortization.....................................     30.7     28.7     34.1
    Accretion of Zero Coupon Notes...................     18.9      0.1      --
    Deferred income taxes............................      1.0    (10.9)     8.2
    Gain on sale of assets...........................      --     (69.3)   (36.9)
    Inventory recovery (write-down) to market........     19.3     86.6   (105.8)
    Recapitalization, asset write-offs, and other
     charges.........................................     23.0      --       --
    Other............................................      --       2.8     17.9
  Cash provided by (reinvested in) working capital--
    Accounts receivable, prepaid expenses and other..     69.5    (47.2)   (61.7)
    Inventories......................................      2.4   (125.6)   122.6
    Accounts payable, accrued expenses, taxes other
     than income and other...........................    (67.0)    73.5     90.7
                                                       -------  -------  -------
      Net cash provided by (used in) operating
       activities of continuing operations...........     38.7    (75.3)    85.6
      Net cash provided by (used in) operating
       activities of discontinued operations.........     37.9     14.3    (25.2)
                                                       -------  -------  -------
      Net cash provided by (used in) operating
       activities....................................     76.6    (61.0)    60.4
                                                       -------  -------  -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for property, plant, and equipment....    (27.4)  (101.4)  (214.7)
  Expenditures for turnaround........................    (47.4)   (28.3)   (77.9)
  Refinery acquisition expenditures..................      --    (175.0)     --
  Proceeds from sale of assets.......................      0.1     76.4    248.5
  Proceeds from sale of assets to Port Arthur Coker
   Company L.P.......................................      --       --     157.1
  Purchases of short-term investments................     (3.0)    (3.2)    (3.2)
  Sales and maturities of short-term investments.....      3.0     13.6      2.9
  Discontinued operations............................    (50.9)   (12.8)    (1.8)
                                                       -------  -------  -------
      Net cash provided by (used in) investing
       activities....................................   (125.6)  (230.7)   110.9
                                                       -------  -------  -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Long-term debt payments............................   (441.0)   (10.3)    (3.3)
  Proceeds from issuance of long-term debt...........    398.0    224.7      --
  Proceeds from issuance of stock....................      --       0.2      0.6
  Repurchase of common stock.........................      --       --      (3.5)
  Stock issuance costs...............................     (2.3)     --       --
  Deferred financing costs...........................     (9.8)    (9.1)    (7.0)
                                                       -------  -------  -------
      Net cash provided by (used in) financing
       activities....................................    (55.1)   205.5    (13.2)
                                                       -------  -------  -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.   (104.1)   (86.2)   158.1
CASH AND CASH EQUIVALENTS, beginning of year.........    338.4    234.3    148.1
                                                       -------  -------  -------
CASH AND CASH EQUIVALENTS, end of year...............  $ 234.3  $ 148.1  $ 306.2
                                                       =======  =======  =======
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       43
<PAGE>

                        CLARK USA, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                             (dollars in millions)

<TABLE>
<CAPTION>
                                          For the year ended December 31,
                             ---------------------------------------------------------------
                                    1997                  1998                 1999
                             --------------------  -------------------  --------------------
                               Shares     Amount     Shares    Amount     Shares     Amount
                             -----------  -------  ----------  -------  -----------  -------
<S>                          <C>          <C>      <C>         <C>      <C>          <C>
COMMON STOCK
  Common, $.01 par,
   Authorized
   shares--100
  Balance January 1........   19,051,818  $   0.2  14,759,782  $   0.1   13,767,829  $   0.1
    Stock
     issuance/cancellation.          --       --     (991,953)     --        65,656      --
    Converted shares.......   (4,292,036)    (0.1)        --       --   (13,833,385)    (0.1)
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......   14,759,782      0.1  13,767,829      0.1          100      --
                             -----------  -------  ----------  -------  -----------  -------
  Class A Common
  Balance January 1........   10,162,509      0.1         --       --           --       --
    Stock issuance.........          --       --          --       --           --       --
    Converted shares.......  (10,162,509)    (0.1)        --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......          --       --          --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
  Class E Common
  Balance January 1........          --       --          --       --           --       --
    Stock issuance.........          --       --          --       --           --       --
    Converted shares.......    9,000,000      0.1         --       --           --       --
    Canceled...............   (9,000,000)    (0.1)        --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......          --       --          --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
  Class F Common, $.01 par,
   Authorized shares--zero
  Balance January 1........          --       --    6,000,000      0.1    6,101,010      0.1
    Stock issuance.........      545,455      --      101,010      --           --       --
    Converted shares.......    5,454,545      0.1         --       --    (6,101,010)    (0.1)
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......    6,000,000      0.1   6,101,010      0.1          --       --
                             -----------  -------  ----------  -------  -----------  -------
PAID-IN CAPITAL
  Balance January 1........          --     296.1         --     230.0          --     209.0
    Stock
     issuance/cancellation.          --      (3.2)        --     (21.0)         --      (2.8)
    Redemption of common
     stock.................          --     (62.9)        --       --           --       --
    Converted shares.......          --       --          --       --           --       0.2
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......          --     230.0         --     209.0          --     206.4
                             -----------  -------  ----------  -------  -----------  -------
ADVANCE CRUDE OIL PURCHASE
 RECEIVABLE FROM
 STOCKHOLDER
  Balance January 1........          --     (26.5)        --     (26.5)         --       --
    Advance crude oil
     purchase receivable
     from stockholder......          --       --          --       --           --       --
    Stock
     issuance/cancellation.          --       --          --      26.5          --       --
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......          --     (26.5)        --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
RETAINED EARNINGS (DEFICIT)
  Balance January 1........          --     (55.5)        --    (165.3)         --    (207.0)
    Net loss...............          --    (109.9)        --     (37.3)         --     (32.5)
    Stock
     issuance/cancellation.          --       --          --      (4.4)         --       --
    Change in unrealized
     short-term investment
     gains and losses......          --       0.1         --       --           --       --
                             -----------  -------  ----------  -------  -----------  -------
  Balance December 31......          --    (165.3)        --    (207.0)         --    (239.5)
                             -----------  -------  ----------  -------  -----------  -------
TOTAL STOCKHOLDER'S EQUITY    20,759,782  $  38.4  19,868,839  $   2.2          100  $ (33.1)
                             ===========  =======  ==========  =======  ===========  =======
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       44
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For the years ended December 31, 1997, 1998, and 1999
                (Tabular dollar amounts in millions of dollars)

1. Nature of Business

   Clark USA Inc., a Delaware corporation ("Clark USA" or "the Company") is a
wholly owned subsidiary of Clark Refining Holdings Inc. ("Clark Holdings").
The Company's principal operations include the refining of crude oil into
gasoline, diesel fuel, jet fuel and other petroleum products. The Company also
sold petroleum products and convenience store items in retail stores in the
central United States until July 8, 1999 when the Company sold these retail
marketing operations. Accordingly, the retail marketing operation's net assets
(liabilities) have been segregated from the continuing operations in the
Balance Sheets, and its operating results are segregated and reported as
discontinued operations in the accompanying consolidated statements of
operations and cash flows.

   The Company's earnings and cash flow from operations are primarily
dependent upon processing crude oil and selling quantities of refined
petroleum products at margins sufficient to cover operating expenses. Crude
oil and refined petroleum products are commodities, and factors largely out of
the Company's control can cause prices to vary, in a wide range, over a short
period of time. This potential margin volatility can have a material effect on
financial position, current period earnings, and cash flow.

2. Summary of Significant Accounting Policies

 Principles of Consolidation

   The accompanying consolidated financial statements include the accounts of
Clark Refining & Marketing, Inc., Clark Pipeline Company and OTG, Inc., all
Delaware Corporations. The Company consolidates the assets, liabilities, and
results of operations of subsidiaries in which the Company has a controlling
interest. Investments in companies in which the Company owns 20 percent to 50
percent voting control are generally accounted for by the equity method. All
significant intercompany accounts and transactions have been eliminated.

 Use of Estimates

   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

 Cash and Cash Equivalents

   The Company considers all highly liquid investments, such as time deposits,
money market instruments, commercial paper and United States and foreign
government securities, purchased with an original maturity of three months or
less, to be cash equivalents.

 Inventories

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

                                      45
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Hedging Activity

   The Company considers all futures and options contracts to be part of its
risk management strategy. Unrealized gains and losses on open contracts are
recognized as a product cost component unless the contract can be identified
as a price risk hedge of specific inventory positions or open commitments, in
which case the unrealized gain or loss is deferred and recognized as an
adjustment to the carrying amount of petroleum inventories or accounts payable
if related to open commitments. Deferred gains and losses on these contracts
are recognized as an adjustment to product cost when such inventories are sold
or consumed.

 Property, Plant, and Equipment

   Property, plant, and equipment additions are recorded at cost. Depreciation
of property, plant, and equipment is computed using the straight-line method
over the estimated useful lives of the assets or group of assets. The Company
capitalizes the interest cost associated with major construction projects
based on the effective interest rate on aggregate borrowings. The useful lives
of the plant and equipment used for depreciation are as follows:

<TABLE>
      <S>                                                         <C>
      Process units, buildings, and oil storage & movement....... 25 to 30 years
      Office equipment and furniture.............................       10 years
      Computer and computer equipment............................   3 to 5 years
      Autos......................................................        3 years
</TABLE>

   Expenditures for maintenance and repairs are expensed. Major replacements
and additions are capitalized. Gains and losses on assets depreciated on an
individual basis are reflected in current operating income. Upon disposal of
assets depreciated on a group basis, unless unusual in nature or amount,
residual cost less salvage is charged against accumulated depreciation.

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

 Deferred Turnaround

   A turnaround is a periodically required standard procedure for maintenance
of a refinery that involves the shutdown and inspection of major processing
units and generally occurs approximately every three to five years. Turnaround
costs include actual direct and contract labor, and material costs incurred
for the overhaul, inspection, and replacement of major components of refinery
processing and support units performed during turnaround. Turnaround costs,
which are included in "Other assets", are amortized over the period until the
next scheduled turnaround, beginning the month following completion. The
amortization of the turnaround costs is presented as "Amortization" on the
statements of operations.

 Environmental Costs

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

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

                                      46
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Income Taxes

   Clark USA files a consolidated U.S. federal income tax return with Clark
Holdings but computes its provision on a separate company basis. Deferred
taxes are classified as current or noncurrent depending on the classification
of the assets and liabilities to which the temporary differences relate.
Deferred taxes arising from temporary differences that are not related to a
specific asset or liability are classified as current or noncurrent depending
on the periods in which the temporary differences are expected to reverse. The
Company records a valuation allowance when necessary to reduce the net
deferred tax asset to an amount expected to be realized.

 Stock Based Compensation Plan

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

 Fair Value of Financial Instruments

   Cash and cash equivalents, accounts receivable, and accounts payable
approximate fair value due to the short-term nature of these items. See
Footnote 9 "Long-Term Debt" for determination of fair value of long-term debt.

 New Accounting Standards

   In June 1998, the FASB adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended, becomes effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company is currently evaluating this
new standard, the impact it may have on the Company's accounting and
reporting, and planning for when to adopt the standard.

3. Acquisition and Disposition

   In July 1999, the Company sold its retail marketing division in a
recapitalization transaction to Clark Retail Enterprises ("CRE"), which is
controlled by Apollo Management L.P., for net cash proceeds of approximately
$215.0 million. A subsidiary of the Company's indirect parent, Clark Holdings,
holds a six percent equity interest in CRE. The retail marketing division sold
included all Company and independently-operated Clark branded stores and the
Clark trade name. In general, the buyer assumed unknown environmental
liabilities at the retail stores they acquired up to $50,000 per site, as well
as responsibility for any post closing contamination. Subject to certain risk
sharing arrangements, the Company retained responsibility for all pre-
existing, known contamination. As part of the sale agreement, the Company also
entered into a two-year market-based supply agreement for refined products
that may be canceled with 90 days notice by the buyer.

   The retail marketing operations were classified as discontinued and the
results of operations were excluded from continuing operations in the
consolidated statement of operations and cash flows. The net sales revenue
from the retail marketing operation for the year ended December 31, 1999 was
$485.1 million (1998--$939.3

                                      47
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

million; 1997--$1,151.8 million). "Net assets held for sale" included in the
consolidated balance sheet as of December 31, 1998 consisted of the following:

<TABLE>
      <S>                                                                 <C>
      Current Asset...................................................... $ 42.6
      Noncurrent Assets..................................................  187.5
                                                                          ------
          Total Assets................................................... $230.1
                                                                          ======
      Current Liabilities................................................ $ 63.4
      Noncurrent Liabilities.............................................   24.7
                                                                          ------
          Total Liabilities.............................................. $ 88.1
                                                                          ------
      Net Assets Held for Sale........................................... $142.0
                                                                          ======
</TABLE>

   In December 1999, the Company sold 15 distribution terminals to Equilon
Enterprises L.L.C. and a subsidiary ("Equilon") for net cash proceeds of $34
million. The Company now has exchange and through-put agreements at many of
these terminal locations as well as new locations for the distribution of
refined products.

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

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

4. Financial Instruments

 Short-term Investments

   Short-term investments consist of investments, including United States
government security funds, maturing more than three months from date of
purchase. The Company invests only in AA rated or better fixed income
marketable securities or the short-term rated equivalent. The Company's short-
term investments are all considered Available-for-Sale and are carried at fair
value. Realized gains and losses are presented in "Interest and finance costs,
net" and are computed using the specific identification method. As of December
31, 1999, short-term investments consisted of U.S. Debt Securities of $1.4
million and were pledged as collateral for the Company's self-insured workers
compensation programs (1998--$4.5 million pledged as collateral for the
Company's self-insured workers compensation programs and certain retail
leases).

   For the years ended December 31, 1997, 1998 and 1999, there were no
material unrealized or realized gains or losses on the short-term investments.
The amortized cost of short-term investments as of December 31, 1999 was $1.5
million maturing in one year or less.


                                      48
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Derivative Financial Instruments

   The Company enters into crude oil and refined products futures and options
contracts to limit risk related to hydrocarbon price fluctuations created by a
potentially volatile market. As of December 31, 1999, the Company's open
contracts represented 2.5 million barrels of crude oil and refined products,
and had terms extending into June 2000. As of December 31, 1998, the Company's
open contracts represented 1.2 million barrels of crude oil and refined
products and had terms extending into September 1999. As of December 31, 1999,
the Company had net unrealized gain on open futures and options contracts of
$6.6 million (1998--net unrealized gains of $1.3 million) all of which were
recognized and reflected as a component of operating income.

 Concentration of Credit Risk

   Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade receivables. Credit risk on trade
receivables is minimized as a result of the credit quality of the Company's
customer base and industry collateralization practices. The Company conducts
ongoing evaluations of its customers and requires letters of credit or other
collateral as appropriate. Trade receivable credit losses for the three years
ended December 31, 1999 were not material.

   As of December 31, 1999, the Company had $24.5 million (1998--$11.4
million) due from Chevron USA Products Co. ("Chevron"). Sales to Chevron in
1999 totaled $392.5 million (1998--$340.1 million; 1997--$455.7 million).

   In conjunction with the supply agreement with CRE, the Company's billings
to CRE in 1999 totaled $482.5 million of which $355.9 million were product
sales and $126.6 million were Federal excise and state motor fuel taxes that
the Company collected and then remitted to governmental agencies. The taxes
were not included in "Net sales and operating revenue", "Cost of sales", or
"Operating expenses". The Company had $44.0 million receivable from CRE as of
December 31, 1999.

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

5. Inventories

   The carrying value of inventories consisted of the following:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                ---------------
                                                                 1998     1999
                                                                -------  ------
      <S>                                                       <C>      <C>
      Crude oil................................................ $ 165.3  $ 95.1
      Refined products and blendstocks.........................   186.4   134.6
      LIFO inventory value excess over market..................  (105.8)    --
      Warehouse stock and other................................    21.8    22.5
                                                                -------  ------
                                                                $ 267.7  $252.2
                                                                =======  ======
</TABLE>

   With the sale of the retail marketing operations as well as an overall
reduction in refining-related inventories, inventory volumes decreased
creating a LIFO liquidation that impacted earnings by $54.6 million.

   Any reserve for LIFO inventory value in excess over market is reversed if
physical inventories turn and prices recover. The reserve recorded in 1998 was
fully reversed in 1999. As of December 31, 1999, the market value of crude
oil, refined products, and blendstocks inventories was approximately $78.3
million above carrying value.

                                      49
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6. Property, Plant, and Equipment

   Property, plant, and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                                December 31,
                                                               ----------------
                                                                1998     1999
                                                               -------  -------
      <S>                                                      <C>      <C>
      Real property........................................... $  12.4  $   8.6
      Refineries..............................................   699.3    752.8
      Product terminals and pipelines.........................    71.0     22.2
      Other...................................................    17.1     17.9
                                                               -------  -------
                                                               $ 799.8  $ 801.5
      Accumulated depreciation and amortization...............  (170.9)  (184.7)
                                                               -------  -------
                                                               $ 628.9  $ 616.8
                                                               =======  =======
</TABLE>

   As of December 31, 1999, property, plant, and equipment included $112.7
million of construction in progress, of which $50.7 million related to an
upgrade to the Port Arthur refinery including increasing crude unit capacity
to approximately 250,000 barrels per day. The upgrade at the Port Arthur
refinery is being done in conjunction with the construction of additional
coking and hydrocracking capability at the Port Arthur refinery site by Port
Arthur Coker Company L.P. This project is scheduled to be complete by January
2001. The remaining $62.0 million of construction in progress related to
refinery unit upgrades of $25.0 million and other projects such as information
system, piping, metering, tank, utility, and control room modifications and
upgrades of $37.0 million. All of these projects were being prepared for their
intended use and were not being depreciated as of December 31, 1999.

   As of December 31, 1998, property, plant, and equipment included $90.1
million of construction in progress, of which $43.7 million related to an
upgrade to the Port Arthur refinery as described above. The remaining $46.4
million of construction in progress related to refinery unit upgrades of $20.7
million and other projects, such as information system, tank, utility, and
control room modifications and upgrades of $25.7 million.

   Capital lease assets, net of depreciation, of $18.9 million (1998--$20.1
million) were included in property, plant, and equipment as of December 31,
1999.

7. Other Assets

   Other assets consisted of the following :

<TABLE>
<CAPTION>
                                                                   December 31,
                                                                   ------------
                                                                   1998   1999
                                                                   ----- ------
      <S>                                                          <C>   <C>
      Deferred financing costs.................................... $23.3 $ 23.5
      Deferred turnaround costs...................................  46.5   97.3
      Deferred tax asset..........................................  24.2    --
      Other.......................................................   1.9    0.8
                                                                   ----- ------
                                                                   $95.9 $121.6
                                                                   ===== ======
</TABLE>

   The Company incurred deferred financing costs of $7.0 million in 1999
associated with the new working capital facility (See Footnote 8--"Working
Capital Facility").

                                      50
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


8. Working Capital Facility

   In November 1999, Clark R&M entered into a secured revolving credit
facility expiring June 30, 2001, that replaced an existing secured revolving
credit facility, that provides for borrowings and the issuance of letters of
credit of up to the lesser of $620 million or the amount available under a
defined borrowing base calculation. The defined borrowing base calculation
takes into consideration Clark R&M's cash and eligible cash equivalents,
eligible investments, eligible receivables, eligible petroleum inventories,
paid but unexpired letters of credit, and net obligations on swap contracts
that totaled $690.8 million as of December 31, 1999. Clark R&M uses the
facility primarily for the issuance of letters of credit to secure purchases
of crude oil. As of December 31, 1999, $435.4 million (1998--$244.8 million)
of the line of credit was utilized for letters of credit, of which $183.7
million supported commitments for future deliveries of petroleum products. The
credit facility also allows for the issuance of additional cash-secured
letters of credit outside the $620 million committed facility of up to $50
million as collateral for the Port Arthur upgrade project and up to $20
million as collateral for non-hydrocarbon items such as Marine Preservation
Association dues and insurance bonds. As of December 31, 1999, letters of
credit for $50.0 million and $10.8 million were outstanding for the Port
Arthur upgrade project and the non-hydrocarbon items, respectively.

   Clark R&M is required to comply with certain financial covenants including
maintaining defined levels of working capital, cash, cash equivalents and
qualifying investments, tangible net worth, and cumulative cash flow. Direct
cash borrowings under the credit facility are limited to $50 million and would
be subject to interest rates related to prime lending rates in both the United
States of America and Eurodollar markets plus an applicable margin. This
margin ranges from 75 to 325 basis points depending on a matrix of the
Standard & Poor's and Moody's ratings of the Company's debt and the Company's
average cash, as defined, as a percentage of average outstanding letters of
credit under the facility. There were no direct cash borrowings under any
revolving credit facility as of December 31, 1999 and 1998.

9. Long-Term Debt

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                  -------------
                                                                   1998   1999
                                                                  ------ ------
      <S>                                                         <C>    <C>
      8 5/8% Senior Notes due August 15, 2008 ("8 5/8% Senior
       Notes")................................................... $109.7 $109.8
      8 3/8% Senior Notes due November 15, 2007 ("8 3/8% Senior
       Notes")...................................................   99.3   99.4
      8 7/8% Senior Subordinated Notes due November 15, 2007 ("8
       7/8% Senior Subordinated Notes")..........................  173.9  174.0
      Floating Rate Term Loan due November 15, 2003 and 2004
       ("Floating Rate Loan")....................................  240.0  240.0
      9 1/2% Senior Notes due September 15, 2004 ("9 1/2% Senior
       Notes")...................................................  171.7  171.7
      10 7/8% Senior Notes due December 1, 2005 ("10 7/8% Senior
       Notes")...................................................  175.0  175.0
      Obligations under capital leases and other notes...........   13.9   10.5
                                                                  ------ ------
                                                                   983.5  980.4
        Less current portion.....................................    3.3   10.5
                                                                  ------ ------
                                                                  $980.2 $969.9
                                                                  ====== ======
</TABLE>

   The estimated fair value of long-term debt as of December 31, 1999 was
$548.4 million (1998--$921.6 million), determined using quoted market prices
for these issues.

   The 8 5/8% Senior Notes were issued by Clark R&M in August 1998, at a
discount of 0.234% and are unsecured. The 8 5/8% Senior Notes are redeemable
at the option of the Company beginning August 2003, at a

                                      51
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

redemption price of 104.312% of principal, which decreases to 100% of
principal amount in 2005. Up to 35% in aggregate principal amount of the notes
originally issued are redeemable at the option of the Company out of the net
proceeds of one or more equity offerings at any time prior to August 15, 2002,
at a redemption price equal to 108.625% of principal.

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

   Clark R&M borrowed $125.0 million in November 1997, and an additional
$115.0 million in August 1998, under a floating rate term loan agreement
expiring in 2004. In 2003, $31.3 million of the outstanding principal amount
is due with the remainder of the outstanding principal due in 2004. The
Floating Rate Loan is a senior unsecured obligation of Clark R&M and bears
interest of LIBOR plus a margin of 275 basis points. The loan may be repaid in
whole or in part at 100% of principal amount.

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

   In December 1995, Clark USA issued the 10 7/8% Senior Notes in connection
with a series of transactions giving the Company the right to receive a stated
amount of crude oil deliveries and subsequent sales over several years. The
deliveries were partially financed from the issuance of the 10 7/8% Senior
Notes and partially from equity contributions from Occidental Petroleum
Corporation and Gulf Resources Corporation. These notes are redeemable at the
Company's option beginning December 1, 2000 at a redemption price of 105% of
principal, which decreases to 100% of principal in 2003.

   The Clark R&M and Clark USA note indentures contain certain restrictive
covenants including limitations on the payment of dividends, limitations on
the payment of amounts to related parties, limitations on the incurrence of
debt, redemption provisions related to change of control, and incurrence of
liens. Clark USA must have a net worth of $220 million before any dividends
could be paid. Clark R&M must maintain a minimum net worth (as defined) of
$100 million.

   The scheduled maturities of long-term debt during the next five years are
(in millions): 2000--$10.5 (included in "Accrued expenses and other"); 2001
and 2002--$0.0; 2003--$117.0; 2004 and thereafter--$854.7.

 Extinguishment of Debt

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

                                      52
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Interest and finance costs, net

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

<TABLE>
<CAPTION>
                                                          1997    1998    1999
                                                         ------  ------  ------
      <S>                                                <C>     <C>     <C>
      Interest expense.................................. $ 82.6  $ 80.6  $ 92.6
      Finance costs.....................................   14.2     2.9     7.3
      Interest and finance income.......................  (15.3)  (10.0)  (10.2)
                                                         ------  ------  ------
                                                         $ 81.5  $ 73.5  $ 89.7
      Capitalized interest..............................   (1.4)   (3.0)   (9.0)
                                                         ------  ------  ------
      Interest and finance costs, net................... $ 80.1  $ 70.5  $ 80.7
                                                         ======  ======  ======
</TABLE>

   Cash paid for interest expense in 1999 was $92.6 million (1998--$75.7
million; 1997--$63.8 million). Accrued interest payable as of December 31,
1999 of $15.2 million (December 31, 1998--$14.9 million) was included in
"Accrued expenses and other."

10. Lease Commitments

   The Company leases refinery equipment, catalyst, tank cars, office space,
and office equipment with lease terms ranging from 1 to 8 years with the
option to purchase some of the equipment at the end of the lease term at fair
market value. The leases generally provide that the Company pay taxes,
insurance, and maintenance expenses related to the leased assets. As of
December 31, 1999, net future minimum lease payments under non-cancelable
operating leases were as follows (in millions): 2000--$7.2; 2001--$5.8; 2002--
$4.3; 2003--$3.5; 2004--$1.5; and $1.5 in the aggregate thereafter. Rental
expense during 1999 was $12.6 million (1998--$10.6 million; 1997--$10.4
million).

11. Related Party Transactions

   Related party transactions that are not discussed elsewhere in the
footnotes are as follows:

 Clark Refining Holdings Inc.

   As of December 31, 1999, Clark R&M had a payable to Clark Holdings for
management fees paid by Clark Holdings on Clark R&M's behalf of $3.8 million.

 Management Services

   As of December 31, 1999, the Company had a payable to The Blackstone Group
("Blackstone"), an affiliate of its principal shareholder, of $0.6 million
(December 31, 1998--$3.2 million for annual monitoring fees and transaction
fees related to the Lima Acquisition) for annual monitoring fees. The Company
has an agreement with an affiliate of Blackstone under which Blackstone would
receive a monitoring fee equal to $2.0 million per annum subject to increases
relating to inflation and in respect of additional acquisitions by the
Company. Affiliates of Blackstone may in the future receive customary fees for
advisory services rendered to the Company. Such fees will be negotiated from
time to time with the independent members of the Company's board of directors
on an arm's-length basis and will be based on the services performed and the
prevailing fees then charged by third parties for comparable services.

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

                                      53
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


12. Employee Benefit Plans

 Postretirement Benefits Other Than Pensions

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

   The following table sets forth the changes in the benefit obligation for
the unfunded post retirement health and life insurance plans for 1998 and
1999:

<TABLE>
<CAPTION>
                                                                    December
                                                                       31,
                                                                   ------------
                                                                   1998   1999
                                                                   -----  -----
      <S>                                                          <C>    <C>
      Change in benefit obligation
      Benefit obligation at beginning of year..................... $25.2  $35.0
      Service costs...............................................   1.1    1.5
      Interest costs..............................................   2.1    2.8
      Actuarial loss..............................................   3.3    1.6
      Benefits paid...............................................  (1.5)  (1.5)
      Lima acquisition............................................   4.8    --
                                                                   -----  -----
      Benefit obligation at end of year........................... $35.0  $39.4
                                                                   -----  -----
      Unrecognized net gain.......................................   0.5    --
      Unrecognized prior service benefit..........................   0.2    0.2
                                                                   -----  -----
      Accrued postretirement benefit liability.................... $35.7  $39.6
                                                                   =====  =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                              1997 1998   1999
                                                              ---- -----  -----
      <S>                                                     <C>  <C>    <C>
      Service costs.......................................... $0.8 $ 1.1  $ 1.5
      Interest costs.........................................  1.7   2.1    2.8
      Amortization of prior service costs....................  --   (0.2)  (0.1)
                                                              ---- -----  -----
      Net periodic postretirement benefit cost............... $2.5 $ 3.0  $ 4.2
                                                              ==== =====  =====
</TABLE>

   In measuring the expected postretirement benefit obligation, the Company
assumed a discount rate of 7.50% (1998--7.00%), a rate of increase in the
compensation level of 4.00% (1998--4.00%), and a health care cost trend
ranging from 7.75% to 6.75% in 1999 to an ultimate rate of 5.25% in 2002. The
effect of increasing the average health care cost trend rates by one
percentage point would increase the accumulated postretirement benefit
obligation as of December 31, 1999, by $6.5 million and increase the annual
aggregate service and interest costs by $0.8 million. The effect of decreasing
the average health care cost trend rates by one percentage point would
decrease the accumulated postretirement benefit obligation, as of December 31,
1999, by $7.8 million and decrease the annual aggregate service and interest
costs by $1.0 million.

 Employee Savings Plan

   The Clark USA Inc. Retirement Savings Plan and separate Trust (the "Plan"),
a defined contribution plan, covers substantially all employees of Clark.
Under terms of the Plan, Clark R&M matches the amount of employee
contributions, subject to specified limits. Company contributions to the Plan
during 1999 were $8.4 million (1998--$6.4 million; 1997-- $5.4 million).


                                      54
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. Income Taxes

   The Company provides for deferred taxes under the asset and liability
approach, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.

   The income tax provision (benefit) is summarized as follows:

<TABLE>
<CAPTION>
                                                      1997     1998    1999
                                                     -------  ------  ------
      <S>                                            <C>      <C>     <C>
      Earnings (loss) before provision for income
       taxes:
        Continuing operations....................... $ (77.8) $(67.8) $(68.5)
        Extraordinary item..........................   (20.7)    --      --
        Preferred stock dividend....................    (1.8)   (7.6)   (8.6)
                                                     -------  ------  ------
                                                     $(100.3) $(75.4) $(77.1)
                                                     =======  ======  ======
      Income tax provision (benefit):
        Continuing operations....................... $   7.6  $(25.0) $(12.0)
        Extraordinary item..........................     --      --      --
        Preferred stock dividend....................     --      --      --
                                                     -------  ------  ------
                                                     $   7.6  $(25.0) $(12.0)
                                                     =======  ======  ======
        Current provision (benefit)--Federal........ $   5.1  $(13.8) $(17.9)
        --State.....................................     1.5    (0.4)   (2.3)
                                                     -------  ------  ------
                                                         6.6   (14.2)  (20.2)
                                                     -------  ------  ------
        Deferred provision (benefit)--Federal.......     0.9   (10.4)    8.1
        --State.....................................     0.1    (0.4)    0.1
                                                     -------  ------  ------
                                                         1.0   (10.8)    8.2
                                                     -------  ------  ------
        Income tax provision (benefit).............. $   7.6  $(25.0) $(12.0)
                                                     =======  ======  ======
</TABLE>

   A reconciliation between the income tax provision computed on pretax income
at the statutory federal rate and the actual provision for income taxes is as
follows:

<TABLE>
<CAPTION>
                                                         1997    1998    1999
                                                        ------  ------  ------
      <S>                                               <C>     <C>     <C>
      Federal taxes computed at 35%.................... $(34.5) $(23.7) $(24.0)
      State taxes, net of federal effect...............    1.2    (0.5)   (1.4)
      Nontaxable dividend income.......................   (1.9)   (2.2)    --
      Valuation allowance..............................   43.9     1.0    12.2
      Other items, net.................................   (1.1)    0.4     1.2
                                                        ------  ------  ------
      Income tax provision (benefit)................... $  7.6  $(25.0) $(12.0)
                                                        ======  ======  ======
</TABLE>

                                      55
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following represents the approximate tax effect of each significant
temporary difference giving rise to deferred tax liabilities and assets:

<TABLE>
<CAPTION>
                                                                December 31,
                                                                --------------
                                                                 1998    1999
                                                                ------  ------
      <S>                                                       <C>     <C>
      Deferred tax liabilities:
        Property, plant and equipment.......................... $ 85.1  $ 88.0
        Turnaround costs.......................................   14.1    33.6
        Inventory..............................................    --      6.8
        Other..................................................    3.5     2.6
                                                                ------  ------
                                                                $102.7  $131.0
                                                                ------  ------
      Deferred tax assets:
        Alternative minimum tax credit......................... $ 19.3  $ 21.7
        Environmental and other future costs...................   19.5    30.4
        Tax loss carryforwards.................................   92.8   145.3
        Inventory..............................................   44.8     --
        Other..................................................   14.3     9.2
                                                                ------  ------
                                                                 190.7   206.6
                                                                ------  ------
      Valuation allowance......................................  (63.7)  (75.9)
                                                                ------  ------
      Net deferred tax liability............................... $(24.3) $ (0.3)
                                                                ======  ======
</TABLE>

   As of December 31, 1999, the Company has made net cumulative payments of
$21.7 million under the Federal alternative minimum tax system which are
available to reduce future regular income tax payments. As of December 31,
1999, the Company had a Federal net operating loss carryforward of $374.6
million and Federal business tax credit carryforwards in the amount of $4.2
million. Such operating losses and tax credit carryforwards have carryover
periods of 15 years (20 years for losses and credits originating in 1998 and
years thereafter) and are available to reduce future tax liabilities through
the year ending December 31, 2019. The tax credit carryover periods will begin
to terminate with the year ending December 31, 2003 and the net operating loss
carryover periods will begin to terminate with the year ending December 31,
2010.

   The valuation allowance as of December 31, 1999 was $75.9 million (1997--
$63.7 million). In calculating the increase in the valuation allowance, the
Company assumed as future taxable income only future reversals of existing
taxable temporary differences and available tax planning strategies.

   Section 172 of the Internal Revenue Code ("Code") allows a 10-year
carryback period for specified liability losses, as defined. During 1997, 1998
and 1999 the Company filed federal and state refund claims based upon the
carryback of $104.0 million of specified liability losses arising in years
1994 through 1998. During 1999 the Internal Revenue Service ("IRS") concluded
an audit examination, subject to Joint Committee review, of the taxable years
ended December 31, 1995 and 1996. As part of the audit examination, the IRS
reduced the amount of the federal refund claims arising from the carryback of
specified liability losses arising in years 1994, 1995 and 1996. The carryback
of specified liability losses has reduced the Company's federal net operating
loss carryforward as of December 31, 1999 to $374.6 million. The Internal
Revenue Service has not yet audited the refund claims arising from the
carryback of specified liability losses arising in years 1997 and 1998. The
unaudited refund claims, if fully recovered, would provide a current tax
benefit of $9.3 million. In addition, the unaudited refund claims, if fully
recovered, would recharacterize $7.6 million of deferred tax assets from tax
loss carryforwards to alternative minimum tax credit carryforwards. However,
Section 172 of the Code is an unsettled area of the law and the unaudited
refund claims are expected to come under audit examination. Of the total
unaudited potential current tax benefit, the Company has recognized $4.1
million.

                                      56
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   During 1999, the Company made net federal cash payments of $0.3 million
(1998--$10.2 million net cash refunds; 1997--$5.0 million net cash payments)
and received net state cash refunds of $0.4 million (1998--$1.3 million net
cash payments; 1997--$2.7 million net cash payments).

   The income tax benefit on the loss from continuing operations of $12.0
million for 1999 reflected the effect of intraperiod tax allocations resulting
from the utilization of current year operating losses to offset the net gain
on the operations and sale of the discontinued retail division, offset by the
write-down of a net deferred tax asset.

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

14. Equity Recapitalization and Change in Control

   Pursuant to a share exchange agreement dated April 27, 1999, all the shares
of Clark USA were exchanged on a one-for-one basis for shares of Clark
Holdings resulting in Clark Holdings being the sole shareholder of Clark USA.

   On November 3, 1997, Blackstone acquired the 13.5 million shares of Common
Stock of Clark USA previously held by TrizecHahn and certain of its
subsidiaries (the "Blackstone Transaction"), as a result of which Blackstone
obtained a controlling interest in Clark USA. In 1997, the Company recorded a
charge to operations in the amount of $41.8 million for recapitalization
expenses, asset write-offs, and other charges incurred in connection with the
Company's equity recapitalization and change in control. The total charge
included $20.3 million of asset write-offs principally related to an
investment in a project initiated to produce low-sulfur diesel fuel at the
Hartford refinery (the "DHDS Project"); $10.7 million of transaction,
advisory, and monitoring fees related to the Blackstone Transaction; and $10.8
million resulting from a change in strategic direction primarily for certain
environmental, legal and other accruals related to existing actions.

   In 1992, the DHDS Project was delayed based on internal and third party
analysis that indicated an oversupply of low-sulfur diesel fuel capacity in
the Company's market. Based on the analysis, the Company projected relatively
narrow price differentials between low and high sulfur products. The Company
intended to complete the DHDS Project when differentials between low and high
sulfur diesel fuel prices widened. From 1992 to 1996 the Company performed a
cash flow analysis each year assuming the project would be completed to
determine whether the DHDS Project was impaired as defined under Statement of
Financial Standard No. 121 "Impairment of Long-lived Assets and Long-lived
Assets to Be Disposed of". In December 1997, subsequent to the Blackstone
Transaction, the Company determined that certain equipment purchased for the
DHDS Project would yield a higher value being utilized at the Hartford and
Port Arthur refineries, rather than remaining idle until the diesel fuel
differentials widened sufficiently to justify completing the DHDS Project. As
a result of this decision, the equipment was written down to its fair market
value as determined utilizing estimated used equipment market values, and
engineer costs were determined to have no value due to the engineering being
only useful for a DHDS unit.

15. Gulf Transaction

   In December 1995, pursuant to a merger agreement and a series of related
agreements with Gulf Resources Corporation ("Gulf"), the Company acquired the
right to receive the equivalent of 3.164 million barrels of Djeno

                                      57
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

16. Stock Option Plans

   In 1999, the 1995 Clark USA Long-Term Performance Plan (the "Performance
Plan") was terminated, and Clark Holdings adopted the Clark Refining Holdings
Inc. 1999 Stock Option Incentive Plan ("Incentive Plan"). Under the Incentive
Plan, employees of Clark Holdings and its subsidiaries are eligible to receive
awards of options to purchase shares of common stock of Clark Holdings. The
Incentive Plan is intended to attract and retain executives and other selected
employees whose skills and talents are important to the operations of Clark
Holdings and its subsidiaries. On an aggregate amount of 2,215,250 shares of
Clark Holdings' Common Stock may be awarded under the Incentive Plan, either
from authorized, unissued shares which have been reserved for such purpose or
from authorized, issued shares acquired by or on behalf of the Company. The
current aggregate amount of stock available to be awarded is subject to a
stock dividend or split, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of stock. In 1999, options
for the purchase of 1,752,500 shares of the common stock of Clark Holdings
were granted at an exercise price of $9.90 per share and options for the
purchase of 152,500 shares of the common stock of Clark Holdings were granted
at an exercise price of $15.00 per share. As of December 31, 1999, 1,752,500
stock options for the purchase of the common stock of Clark Holdings were
outstanding at an exercise price of $9.90 per share and 152,500 stock options
were outstanding at an exercise price of $15.00 per share under the Incentive
Plan. Stock granted under this plan was priced at the fair market value at the
date of grant as determined based on the latest third party sales price
available.

   For options granted in 1999, there are two vesting options, time vesting
and performance vesting, under the Incentive Plan. Under time vesting, options
are vested 50% at the date of grant, 25% on each January 1 thereafter. Under
performance vesting, options are fully vested on and after the seventh
anniversary of the date of option; or following a public offering of the
common stock or upon a change in control, the vesting is accelerated based on
the achievement of certain per share prices of the common stock. The
accelerated vesting schedule was as follows:

<TABLE>
<CAPTION>
      Average Closing Price Per Share of
            Capital Stock for Any                  % of Shares With Respect to
           180 Consecutive Days; or                       Which Option
           Change in Control Price                       is Exercisable
      ----------------------------------           ---------------------------
      <S>                                          <C>
                 Below $12.00                                    0%
                $12.00-$14.99                                   10%
                $15.00-$17.99                                   20%
                $18.00-$19.99                                   30%
                $20.00-$24.99                                   50%
                $25.00-$29.99                                   75%
                 Above $29.99                                  100%
</TABLE>

The change in control price is defined as the highest price per share received
by any holder of the common stock from the purchaser(s) in a transaction or
series of transactions that result in a Change in Control. All options expire
no more than ten years after the date of its grant.

                                      58
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In the event of a "Change of Control" of Clark Holdings, the Board with
respect to any award may take such actions (i) the acceleration of the award,
(ii) the payment of a cash amount in exchange for the cancellation of an award
and/or (iii) the requiring of the issuance of substitute awards that will
substantially preserve the value, rights, and benefits of any affected awards.

   Under SFAS 123 No. 123, "Accounting for Stock-Based Compensation", the
granting of the 1,905,000 options for shares of Clark Holdings would have
impacted operating income as of December 31, 1999, by less than $1.0 million.

   Under the Clark USA Long-Term Performance Plan which was terminated in
1999, 323,750 stock options were outstanding as of December 31, 1998 (1997--
531,500) at an exercise price of $15 per share. No shares were granted under
this plan in 1998 or 1997.

16. Contingencies

   Clark USA is subject to various legal proceedings related to governmental
regulations and other actions arising out of the normal course of business,
including legal proceedings related to environmental matters. Among those
actions and proceedings are the following:

   Clark R&M is the subject of a purported class action lawsuit related to an
on-site electrical malfunction at Clark R&M's Blue Island Refinery on October
7, 1994, which resulted in the release to the atmosphere of used catalyst
containing low levels of heavy metals, including antimony, nickel and
vanadium. This release resulted in the temporary evacuation of certain areas
near the refinery, including a high school, and approximately fifty people
were taken to area hospitals. Clark USA offered to reimburse the medical
expenses incurred by persons receiving treatment. The purported class action
lawsuit was filed on behalf of various named individuals and purported
plaintiff classes, including residents of Blue Island, Illinois and Eisenhower
High School students, alleging claims based on common law nuisance,
negligence, willful and wanton negligence and the Illinois Family Expense Act
as a result of this incident. Plaintiffs seek to recover damages in an
unspecified amount for alleged medical expenses, diminished property values,
pain and suffering and other damages. Plaintiffs also seek punitive damages in
an unspecified amount.

   As of December 31, 1999, the Company had accrued a total of $36.8 million
for legal and environmental-related obligations that may result from the
matter above and other legal and environmental matters and obligations
associated with certain previously owned retail sites. While it is not
possible at this time to establish the ultimate amount of liability with
respect to the Company's contingent liabilities, the Company is of the opinion
that the aggregate amount of any such liabilities, for which provision has not
been made, will not have a material adverse effect on their financial
position; however, an adverse outcome of any one or more of these matters
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period.

   In March 1998, the Company entered into a long-term crude oil supply
agreement with PMI Comercio Internacional, S. A. de C.V. ("PMI"), an affiliate
of Petroleos Mexicanos, the Mexican state oil company. As a result of this
contract, the Company began developing a project to upgrade the Port Arthur
refinery to process primarily lower-cost, heavy sour crude oil of the type to
be purchased from PMI. The heavy oil upgrade project includes the construction
of new coking, hydrocracking and sulfur removal capability, and the expansion
of the existing crude unit to approximately 250,000 barrels per day. In August
1999, the Company sold for $157.1 million the construction work-in-progress on
the new processing units to Port Arthur Coker Company L.P., an affiliate that
is not controlled by the company or its subsidiaries. The Company also sold
for $2.2 million the oil supply agreement with PMI and environmental permits
which had already been obtained by the Company to

                                      59
<PAGE>

                        CLARK USA INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Port Arthur Coker Company L.P. The assets were sold at cost, which
approximated fair market value. As part of the project the Company is
undertaking the upgrading of existing units at the Port Arthur refinery,
including the expansion of the crude unit. The Company's portion of the
project is expected to cost approximately $120 million, of which $50.7 million
was expended through December 31, 1999. As of December 31, 1999, the Company
had a letter of credit to the benefit of Foster Wheeler USA for $86.9 million
outstanding to collateralize its obligations related to the Port Arthur heavy
oil upgrade project.

   The heavy oil upgrade project is expected to be mechanically complete by
November 2000 with start-up of the project in the first quarter of 2001. The
Company entered into agreements with Port Arthur Coker Company L.P. pursuant
to which the Company will provide certain operating, maintenance and other
services and purchase the output from the new coking and hydrocracking
equipment for further processing into finished products. The Company will
receive compensation under these agreements at fair market value that is
expected to in the aggregate favorable to the Company. At December 31, 1999,
the Company had a net outstanding receivable of $0.4 million from Port Arthur
Coker Company for services rendered and fees paid on behalf of Port Arthur
Coker Company.

   In December 1999, the United States Environmental Protection Agency
("USEPA") published the Tier II Motor Vehicle Emission Standards Final Rule
for all passenger vehicles, establishing standards for sulfur content in
gasoline. The ruling mandates that the sulfur content of gasoline produced at
any refinery not exceed 30 parts per million after January 1, 2006. Starting
in 2004, the USEPA will begin a program to phase in new low sulfur gasoline
requirements. Currently the sulfur content in the Company's gasoline pool
averages approximately 385 parts per million. These regulations will likely
require the Company to make some level of capital investments at its
refineries to reduce the sulfur levels in its gasoline. The Company is
evaluating its options under the new regulations and does not currently have
an estimate of how much of a capital outlay will be required for compliance.

   The USEPA has drafted a proposed regulation which, it is believed, would
require a significant reduction in the sulfur content of diesel fuel by the
year 2006. The proposed regulation has not yet been released to the public and
is currently under the review of the White House Office of Management and
Budget. The USEPA anticipates that the regulation will be formally proposed
later this spring and formally promulgated as a final rule before the end of
the year 2000. Until the regulation is formally proposed and promulgated, and
the exact nature of the USEPA's proposal becomes known, the Company cannot
assess the impact, if any, of the regulation on our operations.

   During 1999, the Company sold crude oil linefill in the pipeline system
supplying the Lima refinery. The Company has an agreement in place that
requires it to repurchase approximately 2.8 million barrels of crude oil in
this pipeline system in September 2000 at market prices, unless extended by
mutual consent.

                                      60
<PAGE>

                         INDEPENDENT AUDITORS' REPORT
                        ON FINANCIAL STATEMENT SCHEDULE

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

   We have audited the consolidated financial statements of Clark USA, Inc. as
of December 31, 1998 and 1999, and for each of the years in the period ended
December 31, 1999, and have issued our report thereon dated February 16, 2000;
such consolidated financial statements and report are included elsewhere in
this Form 10-K. Our audits also included the financial statement schedule of
Clark USA, Inc. listed in Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

                                          Deloitte & Touche LLP

St. Louis, Missouri
February 16, 2000

                                      61
<PAGE>

                                CLARK USA, INC.

              SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
                       PARENT COMPANY ONLY BALANCE SHEETS
                  (dollars in millions except per share data)

<TABLE>
<CAPTION>
                                                              December 31,
                                                             ----------------
                                                              1998     1999
                                                             -------  -------
<S>                                                          <C>      <C>
                           ASSETS
Current Assets:
  Cash and cash equivalents................................. $   --   $  20.9
  Receivables from affiliates...............................    22.7     18.4
                                                             -------  -------
      Total current assets..................................    22.7     39.3
Investments in affiliated companies.........................   229.1    189.4
Deferred income taxes.......................................     0.2      0.2
Other.......................................................     3.8      3.3
                                                             -------  -------
                                                             $ 255.8  $ 232.2
                                                             =======  =======
            LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accrued expenses and other................................ $   2.5  $   2.1
  Income taxes payable......................................     --       0.1
  Payables to affiliates....................................     2.2      7.0
                                                             -------  -------
      Total current liabilities.............................     4.7      9.2
Long-term debt..............................................   175.0    175.0
Other long-term liabilities.................................     1.4      --
Exchangeable Preferred Stock ($.01 par value per share;
 5,000,000 shares authorized; 78,789 shares issued).........    72.5     81.1
Stockholder's equity:
  Common stock
    Common, $.01 par value, 100 issued......................     0.1      --
    Class F Common, convertible, $.01 par value, zero
     issued.................................................     0.1      --
  Paid-in capital...........................................   209.0    206.4
  Retained earnings (deficit)...............................  (207.0)  (239.5)
                                                             -------  -------
      Total stockholder's equity (deficit)..................     2.2    (33.1)
                                                             -------  -------
                                                             $ 255.8  $ 232.2
                                                             =======  =======
</TABLE>


       See accompanying note to parent company only financial statements.

                                       62
<PAGE>

                                CLARK USA, INC.

              SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
                  PARENT COMPANY ONLY STATEMENTS OF OPERATIONS
                             (dollars in millions)

<TABLE>
<CAPTION>
                                                        For the year ended
                                                           December 31,
                                                       -----------------------
                                                        1997     1998    1999
                                                       -------  ------  ------
<S>                                                    <C>      <C>     <C>
Revenues:
  Equity in net loss of affiliates.................... $ (59.0) $(18.6) $ (0.6)
Expenses:
  General and administrative expenses.................     0.5     1.3     0.2
  Recapitalization, asset write-offs, and other
   charges............................................     1.8     2.9     --
  Interest and finance costs, net.....................    40.4    19.6    19.2
                                                       -------  ------  ------
Loss before income taxes and extraordinary item.......  (101.7)  (42.4)  (20.0)
  Income tax (provision) benefit......................     3.6    12.7    (3.9)
                                                       -------  ------  ------
Loss before extraordinary item........................   (98.1)  (29.7)  (23.9)
  Extinguishment of debt..............................   (10.0)    --      --
                                                       -------  ------  ------
Net loss..............................................  (108.1)  (29.7)  (23.9)
  Preferred stock dividends...........................    (1.8)   (7.6)   (8.6)
                                                       -------  ------  ------
Net loss available to common stock.................... $(109.9) $(37.3) $(32.5)
                                                       =======  ======  ======
</TABLE>



       See accompanying note to parent company only financial statements.

                                       63
<PAGE>

                                CLARK USA, INC.

              SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
                  PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
                             (dollars in millions)

<TABLE>
<CAPTION>
                                                         For the year ended
                                                            December 31,
                                                        -----------------------
                                                         1997     1998    1999
                                                        -------  ------  ------
<S>                                                     <C>      <C>     <C>
Cash flows from operating activities:
  Net loss............................................. $(108.1) $(29.7) $(23.9)
  Extraordinary item...................................    10.0     --      --
  Adjustments:
    Equity in net loss of affiliates...................    59.0    18.6     0.6
    Amortization.......................................    22.0     0.6     0.6
    Deferred income taxes..............................     0.8     --      --
    Other..............................................     1.0     --     (1.3)
  Cash reinvested in working capital
    Accounts receivable, prepaid expenses and other....    (2.3)    2.5     --
    Receivables from and payables to affiliates........    (8.0)   (4.8)    9.0
    Accounts Pavable, accrued liabilities and other....     1.3    (0.7)   (0.3)
    Income taxes payable...............................     3.3     --      0.1
                                                        -------  ------  ------
      Net cash used in operating activities............   (21.0)  (13.5)  (15.2)
                                                        -------  ------  ------
Cash flows from financing activities:
  Long-term debt payments..............................  (206.9)   (3.7)   (3.5)
  Net contribution received............................   214.0    15.2    39.0
  Stock issuance costs.................................    (2.3)    --      --
  Proceeds from sale of stock..........................     --      --      0.6
  Deferred financing costs.............................     --     (0.1)    --
                                                        -------  ------  ------
      Net cash provided by financing activities........     4.8    11.4    36.1
                                                        -------  ------  ------
Net increase (decrease) in cash and cash equivalents...   (16.2)   (2.1)   20.9
Cash and cash equivalents, beginning of year...........    18.3     2.1     --
                                                        -------  ------  ------
Cash and cash equivalents, end of year................. $   2.1  $  --   $ 20.9
                                                        =======  ======  ======
</TABLE>


       See accompanying note to parent company only financial statements.

                                       64
<PAGE>

                                CLARK USA, INC.

              SCHEDULE I--CONDENSED INFORMATION OF THE REGISTRANT
               NOTE TO PARENT COMPANY ONLY FINANCIAL STATEMENTS
             For the years ended December 31, 1997, 1998, and 1999

1. Basis of presentation

   These unaudited parent company only financial statements have been prepared
in accordance with generally accepted accounting principles, except that they
are prepared on a non-consolidated basis for the purpose of complying with
Article 12 of regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for complete financial statements. Clark USA's non-consolidated
operations include 100% equity interest in Clark Refining & Marketing, Inc.,
Clark Pipe Line Company, and OTG, Inc.

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

                                      65
<PAGE>

                                  SIGNATURES

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

                                          Clark USA, Inc.

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

April 04, 2000

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

<TABLE>
<CAPTION>
             Signature                           Title                    Date
             ---------                           -----                    ----
<S>                                  <C>                           <C>
     /s/ William C. Rusnack          Director, Chief Executive       April 04, 2000
____________________________________  Officer and President
         William C. Rusnack

     /s/ Marshall A. Cohen           Director and Chairman of the    April 04, 2000
____________________________________  Board
         Marshall A. Cohen

       /s/ David I. Foley            Director                        April 04, 2000
____________________________________
           David I. Foley

     /s/ Robert L. Friedman          Director                        April 04, 2000
____________________________________
         Robert L. Friedman

     /s/ Richard C. Lappin           Director                        April 04, 2000
____________________________________
         Richard C. Lappin

       /s/ Maura J. Clark            Executive Vice President,       April 04, 2000
____________________________________  Corporate Development and
           Maura J. Clark             Chief Financial Officer
                                      (Principal Financial
                                      Officer)

     /s/ Dennis R. Eichholz          Controller and Treasurer        April 04, 2000
____________________________________  (Principal Accounting
         Dennis R. Eichholz           Officer)
</TABLE>

April 04, 2000

                                      66