SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 2000 Commission File
Number 333-45093
HUNTWAY REFINING COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4680045
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
25129 The Old Road, Suite 322
Newhall, California
(Address of Principal Executive Offices)
91381
(Zip Code)
Registrant's Telephone Number Including Area Code: (661) 286-1582
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 .
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of August 11, 2000, was 15,004,771.
QUARTERLY REPORT ON FORM 10-Q
HUNTWAY REFINING COMPANY
For the Quarter Ended June 30, 2000
INDEX
Part I. Financial Information Page
Condensed Consolidated Balance Sheets as
of June 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of
Operations for the Three and Six Months
Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
June 30, 2000 and 1999 5
Condensed Consolidated Statement of
Capital for the Six Months
Ended June 30, 2000 6
Notes to Condensed Consolidated
Financial Statements 7
Management's Discussion and Analysis
of Results of Operations and
Financial Condition 9
Quantitative and Qualitative Disclosures
About Market Risk 14
Part II. Other Information 15
HUNTWAY REFINING COMPANY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2000 1999
Unaudited Audited
CURRENT ASSETS:
Cash and Cash Equivalents $2,612,000 $10,445,000
Accounts Receivable - Net 15,748,000 8,444,000
Inventories 14,440,000 2,754,000
Prepaid Expenses 958,000 1,309,000
Total Current Assets 33,758,000 22,952,000
PROPERTY - Net 66,260,000 64,398,000
OTHER ASSETS - Net 2,090,000 2,059,000
GOODWILL - Net 1,558,000 1,587,000
TOTAL ASSETS $103,666,000 $90,996,000
CURRENT LIABILITIES:
Accounts Payable $16,425,000 $8,528,000
Current Portion of Long-Term Debt 2,005,000 1,548,000
Accrued Interest 507,000 608,000
Other Accrued Liabilities 1,257,000 975,000
Total Current Liabilities 20,194,000 11,659,000
Long-Term Debt 36,418,000 34,905,000
Deferred Income Taxes and
Other Long-Term Obligations 3,565,000 2,783,000
CAPITAL:
Preferred Stock (1,000,000 shares
authorized, none issued) - -
Common Stock (75,000,000 shares
authorized, 15,004,771 outstanding) 150,000 150,000
Additional Paid-In Capital 34,818,000 34,698,000
Retained Earnings 8,521,000 6,801,000
Total Capital 43,489,000 41,649,000
TOTAL LIABILITIES AND CAPITAL $103,666,000 $90,996,000
HUNTWAY REFINING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
SALES $46,240,000 $22,655,000 $70,093,000 $35,254,000
COSTS AND EXPENSES:
Material and
Processing Costs 39,902,000 18,736,000 61,575,000 28,605,000
Selling and
Administration Expenses 1,446,000 1,256,000 2,677,000 2,528,000
Interest Expense 867,000 841,000 1,691,000 1,697,000
Depreciation and
Amortization 678,000 692,000 1,234,000 1,259,000
Total Costs and Expenses 42,893,000 21,525,000 67,177,000 34,089,000
INCOME BEFORE INCOME TAXES 3,347,000 1,130,000 2,916,000 1,165,000
Provision for Income Taxes 1,373,000 464,000 1,196,000 478,000
NET INCOME $1,974,000 $666,000 $1,720,000 $687,000
Net Income per Basic Share $0.13 $0.04 $0.11 $0.05
Net Income per Diluted Share $0.07 $0.03 $0.07 $0.04
Weighted Average Basic
Common Shares Outstanding 15,004,771 14,983,000 15,004,771 14,942,000
Weighted Average Diluted
Common Shares Outstanding 30,937,000 31,377,000 31,074,000 16,938,000
HUNTWAY REFINING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,720,000 $687,000
Adjustments to Reconcile
Net Income to Net Cash
Used by Operating Activities
Interest Expense Paid by the
Issuance of Notes 286,000 278,000
Depreciation and Amortization 1,234,000 1,259,000
Deferred Income Taxes 781,000 478,000
Changes in Operating Assets
and Liabilities:
Increase in Accounts Receivable (7,304,000) (4,754,000)
Increase in Inventories (11,488,000) (2,135,000)
Decrease (Increase) in
Prepaid Expenses 376,000 (1,445,000)
Increase in Accounts Payable 7,897,000 5,318,000
Increase (Decrease) in
Accrued Liabilities 281,000 (1,070,000)
NET CASH USED BY OPERATING ACTIVITIES (6,217,000) (1,384,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property (2,998,000) (5,242,000)
Other Assets (202,000) (605,000)
NET CASH USED BY INVESTING ACTIVITIES (3,200,000) (5,847,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock - 109,000
Proceeds of Notes Payable 2,500,000 13,390,000
Repayment of Long-term Obligations (916,000) (13,379,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,584,000 120,000
NET DECREASE IN CASH (7,833,000) (7,111,000)
CASH BALANCE - BEGINNING OF PERIOD 10,445,000 10,910,000
CASH BALANCE - END OF PERIOD $2,612,000 $3,799,000
Supplemental Disclosures:
Interest Paid in Cash
During the Period $1,506,000 $1,555,000
Income Taxes Paid in Cash
During the Period $ - $ -
HUNTWAY REFINING COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
Common Additional Treasury
Shares Common Paid In Retained Stock Total
Outstanding Stock Capital Earnings (at cost) Capital
Balance at
January 1, 2000 15,004,771$158,000$34,699,000$6,801,000$(9,000)$41,649,000
Earned Portion of
Option Awards 120,000 120,000
Net Income for the
Six Months
Ended June 30, 2000 1,720,000 1,720,000
Balance at
June 30, 2000 15,004,771$158,000$34,819,000$8,521,000$(9,000)$43,489,000
HUNTWAY REFINING COMPANY AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of
Huntway Refining Company and subsidiary as of June 30, 2000 and December
31, 1999 and for the three and six month periods ended June 30, 2000 and
1999 are unaudited, but in the opinion of management, reflect all
adjustments (consisting only of normal recurring adjustments) necessary for
fair presentation of such financial statements in accordance with generally
accepted accounting principles. The results of operations for an interim
period are not necessarily indicative of results for a full year. The
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in
the Companys annual report for the year ended December 31, 1999.
Crude oil and finished product inventories are stated at cost
determined by the last-in, first-out method, which is not in excess of
market. For the first half of 2000 and 1999, the effect of LIFO was to
decrease net income by approximately $1,139,000 and approximately $876,000,
respectively. For the quarter ended June 30, 2000 and 1999 the effect of
LIFO was to decrease net income by $379,000 and $720,000, respectively.
Inventories at June 30, 2000 and December 31, 1999 were as follows:
2000 1999
Finished Products $12,919,000 $2,264,000
Crude Oil and Supplies 5,512,000 2,583,000
18,431,000 4,847,000
Less LIFO Reserve (3,991,000) (2,093,000)
Total $14,440,000 $2,754,000
2. CONTINGENCIES
The Company's business is the refining of crude oil into liquid
asphalt and other light-end products, which is subject to various
environmental laws and regulations. Adherence to these environmental laws
and regulations creates the opportunity for unknown costs and loss
contingencies to arise in the future. Unknown costs and loss contingencies
could also occur due to the nature of the Companys business. The Company
is not aware of any costs or loss contingencies relating to environmental
laws and regulations that have not been recorded in its financial
statements. However, future environmental costs cannot be reasonably
estimated due to unknown factors. Although environmental costs may have a
significant impact on results of operations for any single period, the
Company believes that such costs will not have a material adverse effect on
the consolidated financial position, results of operations or cash flows of
the Company.
The Company is party to a number of lawsuits and other proceedings
arising in the ordinary course of its business. While the results of such
lawsuits and proceedings cannot be predicted with certainty, management
does not expect that the ultimate liability, if any, will have a material
adverse effect on the consolidated financial position, results of
operations or cash flows of the Company.
3. FINANCING ARRANGEMENTS
On April 12, 2000 the Company entered into a new $2,500,000 senior
secured note with Boeing Capital Corporation. The note bears interest at
10.705% and is due over the next three years. $1,250,000 will be repaid
ratably over the period with the remaining $1,250,000 paid at maturity.
Along with the existing senior secured note, also with Boeing Capital
Corporation, the new note is primarily collateralized by the Companys non-
current assets.
4. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedge Activities. SFAS No. 133 establishes the
accounting and reporting standard for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 is effective for financial
statements for periods beginning after June 15, 2000. We are currently
evaluating the potential impact of SFAS No. 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB 101), which provides additional guidance in applying generally
accepted accounting principles to revenue recognition in the financial
statements. We have evaluated our revenue recognition policies pursuant to
the adoption of SAB 101, and we believe that such adoption will not have
any impact.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the
financial statements included elsewhere in this report and the financial
statements and Management's Discussion and Analysis of Results of
Operations and Financial Condition included in Huntway's annual report for
1999 on Form 10-K. All per share amounts are diluted.
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and we
intend that such forward-looking statements be subject to the safe harbors
created thereby. Such forward-looking statements involve risks and
uncertainties and include, but are not limited to, such statements
regarding future events and our plans, goals and objectives. Such
statements are generally accompanied by words such as intend,
anticipate, believe, estimate, expect, looks, probably,
should or similar statements. Our actual results or events may differ
materially from such statements.
Important factors that could cause actual results to differ materially
from those indicated by such forward-looking statements are set forth in
Managements Discussion and Analysis of Results of Operations and Financial
Condition (including, but not limited to, Outlook and Factors that Affect
Future Results) in Huntways annual report on Form 10K for the year ended
December 31, 1999. Such factors include without limitation the price and
availability of crude oil, the demand for and price of liquid asphalt, the
availability of adequate outlets for light-end products and government and
private funding for road construction and repair as well as disruptions in
operations as a result of extended periods of inclement weather or natural
disaster and increased competition from other refiners.
Although we believe that the assumptions underlying our forward-looking
statements are reasonable, any of the assumptions could prove inaccurate
and, therefore, there can be no assurance that the results contemplated in
such forward-looking statements will be realized. The inclusion of such
forward-looking information should not be regarded as a representation by
us or any other person that the future events, plans or expectations
contemplated by us will be achieved.
Results of Operations
Huntway is principally engaged in the processing and sale of liquid
asphalt products, as well as the production of other refined petroleum
products such as gas oil, naphtha, kerosene distillate, diesel fuel, jet
fuel and bunker fuel.
Huntway's ability to generate income depends principally upon the
margins between the prices for its refined petroleum products and the cost
of crude oil, as well as upon demand for liquid asphalt, which affects both
price and sales volume.
Historically, refined petroleum product prices (including prices for
liquid asphalt, although to a lesser degree than Huntway's other refined
petroleum products) generally fluctuate with crude oil price levels. There
has not been a relationship between total revenues and income due to the
volatile commodity character of crude oil prices. As a result, management
believes that increases or decreases in revenues are not a meaningful basis
for comparing historical results of operations.
Because of the foregoing, as well as other factors affecting the
Companys operating results, past financial performance should not be
considered to be a reliable indicator of future performance and investors
should not use historical trends to anticipate results or trends in future
periods.
Three Months Ended June 30, 2000 Compared with the Three Months Ended
June 30, 1999
Second quarter 2000 net income was $1,974,000, or $.07 per share,
versus 1999 second quarter net income of $666,000, or $.03 per share.
The following table sets forth the effects of changes in price and
volume on sales and material and processing costs on the quarter ended June
30, 2000 as compared to the quarter ended June 30, 1999:
Material & Net Refining Barrels
Sales Processing Margin Sold
Three Months Ended
June 30, 1999 $22,655,000 $18,736,000 $3,919,000 1,082,000
Effect of changes
in price 14,435,000 13,599,000 836,000
Effect of changes
in volume 9,150,000 7,567,000 1,583,000 437,000
Three Months Ended
June 30, 2000 $46,240,000 $39,902,000 $6,338,000 1,519,000
Net refining margins improved by $2,419,000 or 62% in the second quarter
of 2000 versus the second quarter of 1999. This was primarily the result
of increased unit volume although an overall increase in selling prices in
excess of rising crude and material costs (net of hedge benefits) also
contributed. The increase in unit volume between periods was primarily due
to increased production levels achieved as a result of the expansion and
modernization of the Benicia refinery in the second quarter of 1999 as well
as the completion of a new 155,000 barrel asphalt storage tank at Benicia
in April of 2000. However, sales volumes in the second quarter of 1999
were adversely impacted by the construction related shutdown of the Benicia
refinery and fell 57,000 barrels short of the level achieved in the second
quarter of 1998. Management believes that the new tank along with
improvements made to the refinery in 1999 should enable the Company to
increase sales volume in all of 2000 by up to 10% over the level achieved
in 1999.
Overall product prices increased by 44% due to increased crude oil
costs. Asphalt prices rose between quarters by 38% due to the phase in of
price increases announced in the face of rising crude oil prices.
Intermediate refinery feedstock prices rose 60% also in response to
increasing crude oil prices as well as supply uncertainties caused by a
perception of gasoline and diesel fuel shortages due to reported declines
in inventories in the western United States (PADD 5), and a series of
refinery production shortfalls due to equipment problems in Huntways
market area.
Material and processing costs increased by $8.95 per barrel or 52% as
the cost of Huntways crude oil purchases increased from $12.92 a barrel in
the second quarter of 1999 to $23.42 a barrel in the second quarter of
2000, net of hedge benefits of $1.11 per barrel in the second quarter of
2000 versus no hedge benefit or decrement in the comparable quarter of
1999. This increase in crude oil costs was the result of a slow down in
production by certain producing nations and an increase in world wide
demand and uncertainty about world production levels.
Selling, general and administrative costs increased by $190,000 as
compared to the second quarter of 1999, primarily as a result of
performance related incentive plan accruals of $159,000. No such accruals
were made in the second quarter of 1999.
Net interest expense increased in the quarter by a nominal $26,000
due to the addition of $2,500,000 of new term debt in April, 2000.
Proceeds from the borrowing were used to fund a new 155,000 barrel asphalt
tank and related equipment at the Benicia refinery.
Depreciation and amortization declined in the quarter by $14,000
despite the increase in depreciable property between quarters (primarily
the Benicia modernization) due to increased production levels.
Six Months Ended June 30, 2000 Compared with the Six Months Ended June
30, 1999
First half 2000 net income was $1,720,000, or $.07 per share, versus
1999 first half net income of $687,000, or $.04 per share.
The following table sets forth the effects of changes in price and
volume on sales and material and processing costs on the six months ended
June 30, 2000 as compared to the six months ended June 30, 1999:
Material & Net Refining Barrels
Sales Processing Margin Sold
Six Months Ended
June 30, 1999 $35,254,000 $28,605,000 $6,649,000 1,895,000
Effect of changes
in price 26,709,000 26,373,000 336,000
Effect of changes
in volume 8,130,000 6,597,000 1,533,000 437,000
Six Months Ended
June 30, 2000 $70,093,000 $61,575,000 $8,518,000 2,332,000
The improvement in net refining margin of $1,869,000 or 28% in the
first half of 2000 versus the first half of 1999 was largely the result of
increased unit volume which grew by 437,000 barrels or 23% between periods.
Increased material and processing costs, net of hedge benefits, were
somewhat more than offset by increases in overall selling prices which also
contributed to the increase.
Overall, product prices increased by 62% to $30.07 per barrel for the
second half of 2000 versus $18.60 for the comparable period of 1999.
Asphalt prices rose between periods by 38% as price increases necessitated
by the impact of higher crude oil prices continued to phase in.
Intermediate refinery feedstock prices rose 96% also in response to
increasing crude oil prices.
In addition, a perception of gasoline and diesel fuel shortages due to
reported declines in inventories in the western United States (PADD 5),
shortages of heating oil in New England and a series of refinery production
shortfalls due to equipment problems both in Huntways market area and in
the rest of the country were also significant factors in the increase
in intermediate refinery feed stock prices.
Material and processing costs increased by $11.31 per barrel or 75%
as the cost of Huntways crude oil purchases increased from $11.01 a barrel
in the first half of 1999 to $23.13 a barrel in the first half of 2000, net
of hedge benefits of $1.24 per barrel in the first half of 2000 versus a
hedge decrement of $.16 per barrel in the comparable period of 1999. This
increase in crude oil costs was the result of a slow down in production by
certain producing nations and an increase in world wide demand and
uncertainty about world production levels.
Selling, general and administrative costs increased between periods
by $149,000 as a result of incentive plan accruals of $159,000. No such
accruals were recorded in the first half of 1999.
Net interest expense was flat between periods declining by a nominal
$6,000 due to lower average debt levels.
Depreciation and amortization declined between periods by $25,000
despite the increase in depreciable property between periods (primarily the
Benicia modernization) due to increased production levels.
Capital Resources And Liquidity
The Companys cash requirements and liquidity position are affected
by various factors, including the selling prices for its refined products
(liquid asphalt and light-end products) and the price of crude oil. The
selling prices for asphalt products are influenced by the price of crude
oil and by local market supply and demand factors for asphalt, including
public and private demand for road construction and improvements. The
selling prices for Huntways light end products (naphtha, kerosene
distillate and gas oil) are also strongly impacted by the price of crude
oil and by supply and demand factors for finished gasoline and diesel
products in California. Fluctuations in the cost of crude oil are impacted
by a myriad of market factors, both foreign and domestic.
The other primary factors that affect the Companys investment
requirements and liquidity position generally include the timing and
funding of capital expenditures either to improve operations and business
growth or to comply with environmental regulations, to provide for the
funding of inventories and accounts receivables during periods of
increasing crude costs and to provide for the funding of increasing
inventory and accounts receivable during the months prior to (generally
December through March) and during the initial start (generally April
through June) of the annual paving season.
In the first half of 2000, operating activities used $6,217,000 in
cash. The periods net income of $1,720,000 along with depreciation and
amortization of $1,234,000, deferred income taxes of $781,000 and by the
payment of interest by the issuance of notes of $286,000 provided
$4,021,000 in cash. Additionally, increases in accounts payable due to
higher crude costs contributed $7,897,000 and changes in prepaid expenses
and accrued liabilities contributed another $657,000 in cash. However, the
necessity to fund increases in accounts receivable and inventories of
$7,304,000 and $11,488,000 respectively required cash of $18,792,000. This
large increase in inventories and accounts receivable was necessitated by
increases in crude oil prices as well as increased production and storage
capacity in Benicia.
In comparison, in the first half of 1999, operating activities used
$1,384,000 in cash. The periods net income of $687,000 along with
depreciation and amortization of $1,259,000, the payment of interest by the
issuance of notes of $278,000 and a provision for deferred income taxes of
$478,000 provided $2,702,000 in cash. Additionally, an increase in
accounts payable provided $5,318,000. Offsetting these sources of cash
were seasonal increases in accounts receivable and inventories of
$4,754,000 and $2,135,000, respectively. Additionally, other accrued
liabilities decreased, requiring cash of $1,070,000, primarily for payment
of incentive plan awards and prepaid expenses consumed $1,445,000,
primarily for turnaround costs associated with the Benicia and Wilmington
refineries as well as the renewal of insurance coverage.
During the first half of 2000, investing activities consumed
$3,200,000 in cash. Additions to property, primarily for a new 155,000
barrel asphalt tank and waste water system at the Benicia refinery,
required cash of $2,998,000, while additions to other assets, primarily
loan costs, used $202,000 in cash. During the first half of 1999, investing
activities consumed $5,847,000 in cash. Additions to property, primarily
construction in progress for modernization of the Benicia refinery,
required $5,242,000 in cash while additions to other assets, primarily loan
costs used cash of $605,000.
Financing activities provided $1,584,000 in cash in the first half of
2000 resulting from the funding of a new $2,500,000 term loan used for the
construction of the new 155,000 barrel asphalt tank and related equipment
at Benicia offset by monthly principal payments on long-term debt. In
contrast, financing activities provided $120,000 in cash during the first
half of 1999 as new borrowings and repayments offset each other.
The Company believes that its credit facilities are sufficient to
guarantee requirements for crude oil purchases, collateralization of other
obligations and for hedging activities at current crude price levels.
However, due to the volatility in the price of crude oil there can be no
assurance that this facility will be adequate in the future. If crude oil
prices increased beyond the level of the Company's ability to extend
letters of credit, it may be required to prepay for crude oil or reduce its
crude oil purchases, either of which would adversely impact profitability.
In the opinion of management, cash on hand, together with anticipated
future cash flows and availability under its credit facility, will be
sufficient to meet Huntway's liquidity obligations for the next 12 months.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As previously noted, the Companys profitability depends largely on
the spread between market prices for its refined products and its crude oil
costs. A substantial and prolonged decrease in this overall spread would
have a significant negative effect on the Companys earnings, financial
position and cash flows. Approximately half of Huntways production
consists of light products and half of asphalt. The prices of Huntways
light products have historically followed changes in crude oil prices over
12- to 18-month time periods despite high short-term volatility.
Management believes that approximately 15% of Huntways asphalt unit sales
volume will be covered by contractual escalation and de-escalation clauses
with various state highway agencies, which are based upon various crude oil
cost indexes. In an effort to mitigate the remaining risk, the Company
enters into contracts intended to partially hedge its exposure to crude oil
price fluctuations. Historically, such contracts are zero cost collars
under which the Company receives or makes a monthly payment if crude oil
prices for the month rise above, or fall below, the contracts ceiling or
floor levels, respectively. The Company does not enter into such
arrangements for trading or other speculative purposes.
To a lesser extent, the Company is also exposed to risks associated
with interest rate fluctuations. However, because the Company invests only
in short-term investment grade securities and has only fixed rate debt,
such risks to its cash flows are not material.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to a number of lawsuits and other proceedings
arising in the ordinary course of its business. While the results of such
lawsuits and proceedings cannot be predicted with certainty, management
does not expect that the ultimate liability, if any, will have a material
adverse effect on the consolidated financial position, results of
operations or the cash flows of the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders on May 10, 2000, the following
proposal was voted upon:
Election of Directors for a three year term expiring in 2003
Votes Votes
Nominees for Director Cast For Withheld
Brian Hogan 13,907,324 92,923
J.C. McFarland 12,487,624 1,512,623
The directors whose terms expire in 2002 are:
Harris Kaplan
Dick Spencer
The director whose term expires in 2001 are:
Juan Forster
Warren Nelson
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment agreement made as of March 1, 2000 by and
between Huntway Refining Company, a Delaware corporation
and Warren J. Nelson.
10.2 Change in control agreement made as of July 6, 2000 by and
between Huntway Refining Company, a Delaware corporation and the
officers of the company.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on August 14, 2000.
HUNTWAY REFINING COMPANY
(Registrant)
By:
Earl G. Fleisher
Chief Financial Officer
(Principal Accounting Officer)
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of March 1,
2000 by and between Huntway Refining Company, a Delaware corporation (the
"Company"), and Warren J. Nelson ("Executive").
In consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Employment. The
Company shall continue to employ Executive, and Executive accepts continued
employment with the Company, upon the terms and conditions set forth in
this Agreement for the period beginning on the date hereof and ending as
provided in Section 4 hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period,
Executive shall serve as the principal executive officer of the Company,
and shall have the normal duties, responsibilities and authority of an
executive serving in such position, subject to the power of the Board of
Directors of the Company (the "Board") to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
Executive shall have the title President and Chief Executive Officer of the
Company. During the Employment Period, Executive shall also serve as a
director of the Company for so long as the Board causes him to be nominated
to such position and he is elected thereto and as a director and/or
principal executive officer of any affiliate of the Company designated by
the Board for so long as the Board causes him to be elected to such
position.
(b) Executive shall report directly to the Board.
(c) During the Employment
Period, Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods, reasonable periods of
illness or other incapacity, reasonable participation in charitable and
civic endeavors and reasonable attention to management of his personal
investments and business interests) to the business and affairs of the
Company, its subsidiaries and affiliates. Executive shall perform his
duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
3. Salary and Benefits.
(a) The Company agrees to pay
Executive a salary during the Employment Period in bi-weekly installments.
(b) Executive's initial salary shall
be $250,000 per annum (as such amount may from time to time be increased
pursuant to clause (c) below, "Executive's Reference Salary").
(c) Executive's salary may be increased by the Board from time to time.
(d) The Board may, in its sole discretion, award (i) a bonus to Executive
for any fiscal year occurring in
whole or in part during the Employment Period and/or (ii) stock options or
other stock incentives to Executive.
(e) The Company shall reimburse
Executive for all reasonable expenses incurred by him in the course of
performing his duties under this Agreement which are consistent with its
policies in effect from time to time with respect to travel, entertainment
and other business expenses, subject to the Company's requirements with
respect to reporting and documentation of such expenses.
(f) In addition to the salary and any
bonus(es) and/or stock incentives payable to Executive pursuant to this
Section 3, Executive shall be entitled during the Employment Period to
health, welfare and other benefits under Company benefit plans, policies
and arrangements (including without limitation medical, dental, vision,
life insurance, disability, 401(k)/profit sharing, pension plan and car
allowance, but excluding change of control plans, policies and
arrangements) at least substantially equivalent in the aggregate to those
enjoyed by Executive as of the date hereof, except for and excluding any
reduction in such benefits which is generally applied to the other senior
executives of the Company (the "Standard Executive Benefits Package").
4. Employment Period.
(a) Except as hereinafter provided,
the Employment Period shall continue until, and shall end upon, the third
anniversary of the date hereof.
(b) On each anniversary of the date
hereof which precedes Executive's sixty-fifth birthday by more than two
years, unless the Employment Period shall have ended early pursuant to (c)
below or either party shall have given the other party written notice prior
to such anniversary that the extension provision in this sentence shall no
longer apply, the Employment Period shall be extended for an additional
year (unless Executive's sixty-fifth birthday occurs during such additional
year, in which event the Employment Period shall be extended only until
such birthday). In no event shall the Employment Period be extended beyond
Executive's sixty-fifth birthday except by mutual written agreement of the
Company and Executive.
(c) Notwithstanding (a) and (b)
above, the Employment Period shall end early upon the first to occur of any
of the following events: (i) Executive's death; (ii) Executive's retirement
upon or after reaching age 65 ("Retirement"); (iii) the Company's
termination of Executive's employment on account of Executive's having
become unable (as determined by the Board in good faith) to regularly
perform his duties hereunder by reason of illness or incapacity for a
period of more than 6 consecutive months ("Termination for Disability");
(iv) the Company's termination of Executive's employment for Cause
("Termination for Cause"); (v) the Company's termination of Executive's
employment other than a Termination for Disability or a Termination for
Cause ("Termination without Cause"); (vi) Executive's termination of
Executive's employment for Good Reason, by means of advance written notice
to the Company at least 15 days prior to the effective date of such
termination identifying such termination as a Termination by Executive for
Good Reason ("Termination by Executive for Good Reason") (it being
expressly understood that Executive's giving notice that the extension
provision in the first sentence of Section 4(b) hereof shall no longer
apply shall not constitute a "Termination by Executive for Good Reason");
or (vii) Executive's termination of Executive's employment for any reason
other than Good Reason, by means of advance written notice to the Company
at least 120 days prior to the effective date of such termination
identifying such termination as a Termination by Executive with Advance
Notice ("Termination by Executive with Advance Notice") (it being expressly
understood that Executive's giving notice that the extension provision in
the first sentence of Section 4(b) hereof shall no longer apply shall not
constitute a "Termination by Executive with Advance Notice").
(d) For purposes of this Agreement,
"Cause" shall mean: (i) the commission by Executive of a felony or a crime
involving moral turpitude; (ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving dishonesty or
disloyalty with respect to the Company or any of its subsidiaries or
affiliates; (iv) conduct by Executive tending to bring the Company or any
of its subsid-iaries or affiliates into substantial public disgrace or
disrepute; (v) gross negligence or willful misconduct by Executive with
respect to the Company or any of its subsidiaries or affiliates; (vi)
repudiation of this Agreement by Executive or Executive's abandonment of
his employment with the Company (it being expressly understood that neither
Executives giving notice that the extension provision in the first
sentence of Section 4(b) hereof shall no longer apply nor a Termination by
Executive for Good Reason nor a Termination by Executive with Advance
Notice shall constitute such a repudiation or abandonment); or (vii) any
other breach by Executive of this Agreement which is material and which is
not cured within 30 days after written notice thereof to Executive from the
Company.
(e) Good Reason means: (i) a
reduction by the Company in Executive's salary to an amount less than
Executive's Reference Salary or a reduction by the Company in Executive's
target bonus for any period to an amount less than the Target Bonus for
such period; (ii) assignment of Executive to duties materially inconsistent
with Executive's authorities, duties, responsibilities and status as the
principal executive officer of the Company; (iii) a material reduction or
material adverse alteration in the nature or status of Executive's
authorities, duties or responsibilities (excluding, however, in each case
an isolated and inadvertent action not taken in bad faith which is remedied
by the Company promptly upon receipt of notice thereof from Executive) from
the greater of (x) those in effect on the date hereof and (y) those in
effect at any time after the date hereof and prior to the end of the
Employment Period, other than any such authorities, duties or
responsibilities assigned at any time after the date hereof which are by
their nature, or which are identified at the time of assignment, as being
temporary or short-term; (iv) a change in the reporting requirements of
Executive to other than the Board or if Executive is not elected or
appointed as the, or is removed from the position of, President and Chief
Executive Officer of the Company, excluding, however, an inadvertent
failure to elect or appoint Executive as President and Chief Executive
Officer which is remedied by the Company promptly upon discovery or receipt
of notice thereof from Executive; (v) a material reduction in the aggregate
Standard Executive Benefits Package from such in effect at the date hereof,
other than any reduction in such benefits permitted under Section 3(f)
hereof; (vi) upon or following a Change in Control (as defined in Section
6(d) hereof), but only in such event and thereafter, a material reduction
in the aggregate Standard Executive Benefits Package from such in effect
immediately prior to such Change in Control; (vii) the Company's requiring
Executive to be based at a location which is 75 or more miles from the
primary residence of Executive on the date hereof, unless Executive
otherwise consents in writing (the Company and Executive hereby agree that
the distance from the residence of Executive on the date hereof to the
Wilmington, California facility of the Company is less than 75 miles); or
(viii) any breach by the Company of this Agreement, not covered by any of
the foregoing provisions of this subsection (e), which is material and
which is not cured within 30 days after written notice thereof to the
Company from Executive.
(f)Target Bonus for any
period means at any time an amount equal to the greater of (i) one-half of
the Executive's Reference Salary payable during such period and (ii) the
target bonus for Executive for such period then most recently established
by the Board or the compensation committee thereof.
5. Post-Employment Period Payments.
(a) If the Employment Period ends on
the date on which (without any extension thereof) it is then scheduled to
end pursuant to Section 4 hereof, or if the Employment Period ends early
pursuant to Section 4 hereof for any reason, Executive shall cease to have
any rights to salary, bonus (if any), stock incentives (if any) or benefits
other than: (i) any salary which has accrued but is unpaid as of the end of
the Employment Period; (ii) any plan benefits which by their terms extend
beyond termination of Executive's employment, but only to the extent
provided in any benefit plan in which Executive has participated as an
employee of the Company; and (iii) any other amounts and/or benefits to
which Executive is entitled pursuant to the succeeding provisions of this
Section 5.
(b) If the Employment Period ends
pursuant to Section 4 hereof on Executive's sixty-fifth birthday, or on
account of Executive's Retirement, the Company shall make no further
payments to Executive except as contemplated in Section 5(a) (i) and (ii)
above.
(c) If the Employment Period ends
early pursuant to Section 4 hereof on account of Termination for Cause, the
Company shall pay Executive an amount equal to that which Executive would
have received as salary (based on Executive's salary then in effect) had
the Employment Period remained in effect until the later of the effective
date of the Company's termination of Executive's employment or the date 30
days after the Company's notice to Executive of such termination.
(d) If the Employment Period ends
early pursuant to Section 4 hereof on account of a Termination without
Cause or a Termination by Executive for Good Reason (in each case other
than following a Change in Control, in which event Section 6 shall apply),
(i) the Company shall pay to Executive an amount equal to the sum of
Executives Reference Salary plus the then Target Bonus for the fiscal year
or other period in which the Employment Period ends, (ii) Executive shall
be entitled to Continuation Benefits until the first anniversary of the end
of the Employment Period and (iii) each option to purchase stock of the
Company held by Executive which remains outstanding shall immediately vest
in full and become exercisable and shall remain exercisable (with respect
to the 2000 Option Agreement, subject to the second sentence of Section
2(c) of the 2000 Option Agreement and to Article 8 of the 1998 Plan, and
with respect to any other present or future option to purchase stock of the
Company held by Executive, subject to similar provisions contained in the
respective option agreement and stock plan of the Company) until 60 days
after the date on which (without any extension thereof) the Employment
Period is then scheduled to end pursuant to Section 4 hereof, but in no
event after the natural expiration date of such option. The amount
described in clause (i) of the preceding sentence shall be paid in a lump
sum within 15 business days after the end of the Employment Period, at the
option of Executive either by wire transfer of immediately available funds
(but only upon the written direction of Executive to the Company together
with proper wire transfer information) or by check. 2000 Option
Agreement means the Stock Option Agreement dated as of January 7, 2000 by
and between Executive and the Company, as amended from time to time, which
evidences the grant to Executive of an option to acquire 200,000 shares of
the common stock of the Company. 1998 Plan means the 1998 Stock
Incentive Plan of the Company, as amended from time to time. Continuation
Benefits means the following: (i) the Company shall pay on behalf of
Executive the premium cost of any COBRA coverage that is required to be
offered to Executive and is elected by Executive; (ii) Executive shall be
entitled to continued participation at the expense of the Company in each
benefit plan, policy and arrangement under the Standard Executive Benefits
Package in effect from time to time (other than any plan, policy or
arrangement providing benefits of a type included in any COBRA coverage
required to be offered to Executive and other than any short-term
disability plan) if such benefit may be provided to Executive after the end
of the Employment Period under the terms of such plan, policy or
arrangement and under applicable law; (iii) in respect of each benefit
plan, policy and arrangement under the Standard Executive Benefits Package
in effect from time to time (other than any plan, policy or arrangement
providing benefits of a type included in any COBRA coverage required to be
offered to Executive, any short-term disability plan, any 401(k) plan
and/or any Section 125 plan), if such benefit cannot be provided to
Executive after the end of the Employment Period under the terms of such
plan, policy or arrangement or under applicable law, Executive shall be
entitled to cash payments from the Company in lieu of such continued
participation in amounts equal to the amount that would have been
contributed or paid by the Company with respect to such participation
immediately prior to the end of the Employment Period, with such payments
being payable by the Company at the same times as contributions or premium
payments would have been made by the Company had Executive continued to be
employed by the Company; and (iv) with respect to any cash payment pursuant
to clause (i), (ii) or (iii) above in lieu of any contribution made or
premium paid for by the Company on behalf of Executive of a kind that was
not taxable to Executive prior to the end of the Employment Period,
Executive shall also be entitled to a tax gross up payment (in cash on or
prior to the April 1 following the year in which such cash payment in lieu
of contribution or premium was made to Executive or benefit provided to
Executive) in an amount which fully compensates Executive for any and all
Federal, state and local income taxes attributable to (x) such cash payment
in lieu of contribution or premium and (y) any taxes which arise from the
tax gross-up payment contemplated by clause (x) and any additional payment
pursuant to this clause (y) (this tax gross-up right of Executive shall
only be applicable to the cash payment representing any contribution made
or premium paid and not to any actual benefits received by Executive under
any plan, policy or arrangement); provided that with respect to any
particular benefit under clause (i), (ii) or (iii), in the event that
Executive becomes entitled to receive the same type of benefit with another
employer, the Company shall thereupon cease to have any obligation to
provide such type of benefit or to make any payment related to such type of
benefit hereunder. "COBRA" means the requirements of Part 6 of Subtitle B
of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and Section 4980B of the Internal Revenue Code of 1986, as amended
(the Code).
(e) If the Employment Period
ends early pursuant to Section 4 hereof on account of a Termination for
Disability or death, the Company shall pay to Executive (i) amounts equal
to the amounts Executive would have received as salary based on Executive's
Reference Salary had the Employment Period remained in effect until the
first anniversary of the end of the Employment Period and (ii) amounts
equal to the then Target Bonus for each fiscal year or portion thereof
ending prior to the first anniversary of the end of the Employment Period,
in the case of any such portion of a fiscal year, pro rated based on the
number of days in such portion compared to the number of days in such
fiscal year prior to the first anniversary of the end of the Employment
Period, in the case of each of (i) and (ii) above at the times such amounts
would have been paid; provided that in the event Executive is entitled
during the payment period contemplated by clause (i) of the immediately
preceding sentence to any payments under any disability benefit plan or the
like in which Executive has participated as an employee of the Company and
for which the Company has paid the premiums or is responsible for paying
the benefits, less such payments (that is, the salary payable pursuant to
clause (i) above shall be reduced by any payments actually paid to
Executive under any such plan). Notwithstanding the foregoing, in the
event Executive's death causes the end of the Employment Period or in the
event of Executives death during the payment period described above
following a Termination for Disability, the Company shall not be obligated
to pay any subsequent such amounts to Executive, but the Company shall
instead pay such subsequent amounts to Executive's estate or such person or
persons as Executive may designate in a written instrument signed by him
and delivered to the Company prior to his death.
(f) If the Employment Period
ends early pursuant to Section 4 hereof on account of a Termination by
Executive with Advance Notice, the Company shall make no further payments
to Executive except as contemplated in Section 5(a)(i) and (ii) above.
6. Change in Control.
(a) If the Employment Period ends
early pursuant to Section 4 hereof on account of the occurrence within 12
months after a Change in Control of a Termination without Cause or a
Termination by Executive for Good Reason, then notwithstanding anything to
the contrary in Section 5 and in lieu of any amounts and/or benefits to
which Executive would otherwise be entitled under clause (iii) of Section
5(a), (i) the Company shall pay to Executive an amount equal to three times
the sum of Executives Reference Salary and the then Target Bonus for the
fiscal year or other period in which the Employment Period ends and (ii)
Executive shall be entitled to Change in Control Continuation Benefits
until the third anniversary of the end of the Employment Period; provided
that the amount payable to Executive pursuant to clause (i) above shall not
exceed the maximum amount that may be paid to Executive without causing
such payment (taking into account all other payments and benefits to which
Executive is entitled pursuant to this Agreement or otherwise) to be a
parachute payment within the meaning of Section 280G(b)(2) of the Code.
The amount described in clause (i) above shall be paid in a lump sum within
15 business days after the Employment Period ends, at the option of
Executive either by wire transfer of immediately available funds (but only
upon the written direction of Executive to the Company together with proper
wire transfer information) or by check. Nothing in this Section 6(a) shall
affect the terms of any option to purchase stock of the Company held by
Executive. Change in Control Continuation Benefits means the following:
(i) the Company shall pay the premium cost of COBRA coverage for Executive
for all benefits subject to COBRA coverage that are in effect as of
immediately prior to the Change in Control; (ii) Executive shall be
entitled to continued participation at the expense of the Company in each
benefit plan, policy and arrangement under the Standard Executive Benefits
Package in effect immediately prior to the Change in Control (other than
any plan, policy or arrangement providing benefits of a type included in
any COBRA coverage required to be offered to Executive and other than any
short-term disability plan) if such benefit may be provided to Executive
after the end of the Employment Period under the terms of such plan, policy
or arrangement and under applicable law; (iii) in respect of each benefit
plan, policy and arrangement under the Standard Executive Benefits Package
in effect immediately prior to the Change in Control (other than any plan,
policy or arrangement providing benefits of a type included in any COBRA
coverage required to be offered to Executive, any short-term disability
plan, any 401(k) plan and/or any Section 125 plan), if such benefit cannot
be provided to Executive after the end of the Employment Period under the
terms of such plan, policy or arrangement or under applicable law,
Executive shall be entitled to cash payments from the Company in lieu of
such continuing participation in amounts equal to the amount that would
have been contributed or paid by the Company with respect to such
participation immediately prior to the Change in Control, with such
payments being payable by the Company at the same times as contributions or
premium payments would have been made by the Company had Executive
continued to be employed by the Company; and (iv) with respect to any cash
payment pursuant to clause (i), (ii) or (iii) above in lieu of any
contribution made or premium paid for by the Company on behalf of Executive
of a kind that was not taxable to Executive prior to the end of the
Employment Period, Executive shall also be entitled to a tax gross up
payment (in cash on or prior to the April 1 following the year in which
such cash payment in lieu of contribution or premium was made to Executive
or benefit provided to Executive) in an amount which fully compensates
Executive for any and all Federal, state or local income taxes attributable
to (x) such cash payment in lieu of contribution or premium and (y) any
taxes which arise from the tax gross-up payment contemplated by clause (x)
and any additional payment made pursuant to this clause (y) (this tax
gross-up right of Executive shall only be applicable to the cash payment
representing any contribution made or premium paid and not to any actual
benefits received by Executive under any plan, policy or arrangement);
provided that with respect to any particular benefit under clause (i), (ii)
or (iii), in the event that Executive becomes entitled to receive the same
type of benefit with another employer, the Company shall thereupon cease to
have any obligation to provide such type of benefit or to make any payment
related to such type of benefit hereunder.
(b) If the Employment Period ends
early pursuant to Section 4 hereof on account of a Termination without
Cause after the occurrence of a Potential Change in Control but prior to
the resulting Change in Control or on account of a Termination by Executive
for Good Reason where the event or events giving rise thereto occur during
such period (but in each case only if a Change in Control results from such
Potential Change in Control), clause (a) of this Section 6 shall apply as
if such Termination without Cause or Termination by Executive for Good
Reason were described therein.
(c) "Potential Change in Control" of
the Company means: (i) the Company enters into a binding agreement with any
person (as such term is defined in Section 13(d) or 14(d) of the 1934 Act)
to effect a transaction the consummation of which would result in the
occurrence of a Change in Control; (ii) any person (as such term is defined
in Section 13(d) or 14(d) of the 1934 Act) publicly announces an intention
to take or to consider taking actions which if consummated would constitute
a Change in Control; (iii) any person, other than (v) the Company, (w) a
trustee or other fiduciary holding voting securities under one or more
employee benefit plans of the Company, (x) an underwriter temporarily
holding voting securities pursuant to an offering of such securities, (y) a
corporation owned, directly or indirectly, by the security holders of the
Company in substantially the same proportions as their ownership of voting
securities of the Company or (z) one or more initial purchasers of the 9%
Senior Subordinated Secured Convertible Notes due 2007 of the Company or
Related Parties with respect thereto, or a group of which the same
constitute a majority in interest, is or becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the 1934 Act), directly
or indirectly, of voting securities of the Company representing 45 percent
or more of the combined voting power of the Company's then outstanding
voting securities; or (iv) the Compensation Committee of the Board in good
faith adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control of the Company has occurred.
1934 Act means the Securities Exchange Act of 1934, as amended. Related
Party with respect to any initial purchaser of the 9% Senior Subordinated
Secured Convertible Notes due 2007 of the Company means (x) any controlling
stockholder, partner or member (or spouse of such stockholder, partner or
member), 80% (or more) owned subsidiary, or spouse or immediate family
member (in the case of any individual), of such initial purchaser or (y)
any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding an 80% or
more controlling interest of which consist of such initial purchaser and/or
such other persons referred to in the immediately preceding clause (x).
(d) "Change in Control" means the
occurrence of any of the following events: (i) when any person, entity or
group (other than one or more initial purchasers of the 9% Senior
Subordinated Secured Convertible Notes due 2007 of the Company or Related
Parties with respect thereto, or a group of which the same constitute a
majority in interest) becomes the beneficial owner (as defined in Rule 13d-
3 under the 1934 Act) of more than 50 percent of the voting power of the
voting capital stock of the Company; (ii) the sale, lease or transfer of
all or substantially all of the assets of the Company to any person or
group other than in a transaction that does not have the result set forth
in clause (i); or (iii) when the individuals who constitute the Board on
the date first above written (the Incumbent Directors) cease for any
reason other than death to constitute at least a majority thereof;
provided, however, that a director who was not a director on such date
shall be deemed to have satisfied such requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors either actually (because they were
directors on such date) or by prior operation of this provision.
7. Inventions and Other Intellectual
Property. Executive agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, trademarks,
slogans, product or other designs, advertising or marketing programs, and
all similar or related information which relate to the Company's or any of
its subsid-iaries' or affiliates' actual or anticipated business, research
and development or existing or future products or services and which are
(or were prior to the date of this Agreement) conceived, developed or made
by Executive, whether alone or jointly with others, while employed by the
Company or any such subsidiary or affiliate or any predecessor thereof
("Work Product") belong to the Company or such subsidiary or affiliate.
Executive will promptly disclose such Work Product to the Board and perform
all actions reasonably requested by the Board (whether during or after the
Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).
8. Limitation. Section 7 of this
Agreement regarding the ownership of inventions and other intellectual
property does not apply to the extent application thereof is prohibited by
any law the benefits of which cannot be waived by Executive. Executive
hereby waives the benefits of any such law to the maximum extent permitted
by law.
9. Confidential Information.
Executive acknowl-edges that the information, observations and data
obtained by him while employed by the Company pursuant to this Agreement as
well as those obtained by him while employed by the Company or any of its
subsidiaries or affiliates or any predecessor thereof prior to the date of
this Agreement, concerning the business or affairs of the Company or any of
its subsidiaries or affiliates or any predecessor thereof (unless and
except to the extent the foregoing become generally known to and available
for use by the public other than as a result of Executive's acts or
omissions to act, "Confidential Informa-tion") are the property of the
Company or such subsidiary or affiliate. Therefore, Executive agrees that
he shall not disclose any Confiden-tial Information without the prior
written consent of the Compensation Committee of the Board (or an officer
of the Company delegated such authority to so consent by the Compensation
Committee of the Board in writing) unless and except to the extent that
such disclosure is (i) made in the ordinary course of Executive's
performance of his duties under this Agreement or (ii) required by any
subpoena or other legal process (in which event Executive will give the
Company prompt notice of such subpoena or other legal process in order to
permit the Company to seek appropriate protective orders), and that he
shall not use any Confidential Information for his own account without the
prior written consent of the Compensation Committee of the Board (or an
officer of the Company delegated such authority to so consent by the
Compensation Committee of the Board in writing). Executive shall deliver
to the Company at the termination of the Employment Period, or at any other
time the Company may request, all memoran-da, notes, plans, records,
reports, computer tapes and software and other documents and data (and
copies thereof) relating to the Confiden-tial Information, the Work Product
or the business of the Company or any of its subsidiaries or affiliates
which he may then possess or have under his control.
10. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in
the course of his employment with the Company pursuant to this Agreement he
will become familiar, and during the course of his employment by the
Company or any of its subsidiaries or affiliates or any predecessor thereof
prior to the date of this Agreement he has become familiar, with trade
secrets and customer lists of and other confidential information concerning
the Company and its subsidiaries and affiliates and predecessors thereof
and that his services have been and will be of special, unique and
extraordinary value to the Company.
(b) Executive agrees that during the
Employment Period and for one year thereafter he shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or
as a member of a partnership or as an officer, director, stockholder,
investor or employee of or in any other corporation or enterprise or
otherwise, engage or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business
conducted by the Company or any of its subsidiaries or affiliates at any
time prior to the cessation of the Employment Period, in any geographic
area in which the Company or any of its subsidiaries or affiliates
conducted such business at any time prior to the cessation of the
Employment Period (whether through manufacturing or production, calling on
customers or prospective customers or otherwise).
(c) Executive further agrees that
during the Employment Period and for one year thereafter he shall not in
any manner, directly or indirectly, solicit any full time employee of the
Company or of any of its subsidiaries or affiliates to quit or abandon his
employ, or any customer of the Company or of any of its subsidiaries or
affiliates to quit or abandon its relationship, for any purpose whatsoever.
(d) Nothing in this Section 10 shall
prohibit Executive from being: (i) a stockholder in a mutual fund or a
diversified investment company or (ii) a passive owner of not more than 2
percent of the outstanding stock of any class of a corporation which is
publicly traded, so long as Executive has no active participation in the
business of such corporation.
(e) The restrictions on Executive
pursuant to this Section 10 shall be of no force or effect if the
Employment Period ends early pursuant to Section 4 on account of a
Termination without Cause or a Termination by Executive for Good Reason.
(f) If, at the time of enforcement of
this Section, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions contained herein
to cover the maximum period, scope and area permitted by law.
11. Enforcement. Because Executive's
services are unique and because Executive has access to Confidential
Information and Work Product, the parties hereto agree that the Company
would be damaged irreparably in the event any of the provisions of Section
7, 9 or 10 hereof were not performed in accordance with their specific
terms or were otherwise breached and that money damages would be an
inadequate remedy for any such non-performance or breach. Therefore, the
Company or its successors or assigns shall be entitled, in addition to
other rights and remedies existing in their favor, to an injunction or
injunctions to prevent any breach or threatened breach of any of such
provisions and to enforce such provisions specifically (without posting a
bond or other security).
12. Executive Representations.
Executive repre-sents and warrants to the Company that (i) the execution,
delivery and performance of this Agreement by Executive does not and will
not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which Executive is a
party or by which he is bound, (ii) Executive is not a party to or bound by
any employment agreement, noncompete agreement or confidentiality agreement
with any other person or entity other than the Company and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Executive, enforceable in
accordance with its terms.
13. Early Vesting of January 7, 2000
Options. The Compensation Committee of the Board shall consider in good
faith on or prior to December 31, 2000 accelerating the vesting of all then
unvested options under the 2000 Option Agreement to January 1, 2001 (from
January 1, 2002) based on the subjective view of such Committee of the
performance of Executive in the year 2000. Executive shall be given a
reasonable opportunity to present to such Committee either an oral or
written (in the discretion of Executive) summary of his year 2000
performance in connection with such determination. Such Committee shall
notify Executive of its determination pursuant to this Section on or prior
to December 31, 2000.
14. Survival. Sections 7, 9 and 10
hereof shall survive and continue in full force in accordance with their
terms notwithstand-ing any termination of the Employment Period.
15. Notices. All notices, requests,
demands, claims and other communications hereunder shall be in writing. Any
notice, request, demand, claim or other communication hereunder shall be
deemed duly given if (and then one business day after) it is sent by
overnight courier via a national courier service and addressed to the
intended recipient as set forth below:
16. Notices to Executive:
17. Warren J. Nelson
11371 Glenside Lane
Camarillo, CA 93012-8822
Notices to the Company:
Huntway Refining Company
25129 The Old Road
Suite 322
Newhall, California 91381
Attention: Secretary
with a copy to:
The Chairperson of the Compensation Committee of the Board at his or her
last known address for purposes of notices of Board meetings.
Any party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any party may change the address to
which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other party notice in the manner herein
set forth.
1. Severability. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to
be effec-tive and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other provision or any
other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
2. Complete Agreement. This
Agreement embodies the complete agreement and understanding between the
parties with respect to the subject matter hereof and effective as of its
date supersedes and preempts any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related to the subject matter hereof in any way; provided that, except as
expressly set forth in this Agreement, nothing in this Agreement affects
any option to purchase stock of the Company held by Executive that is
outstanding on the date hereof.
3. Counterparts. This Agreement may
be executed in separate counterparts, each of which shall be deemed to be
an original and both of which taken together shall constitute one and the
same agreement.
4. Successors and Assigns. This
Agreement shall bind and inure to the benefit of and be enforceable by
Execu-tive, the Company and their respective heirs, executors, personal
representatives, successors and assigns, except that neither party may
assign any of his or its rights or delegate any of his or its obligations
hereunder without the prior written consent of the other party. Executive
hereby consents to the assignment by the Company of all of its rights and
obligations hereunder to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Company's
assets; in each case provided such transferee or successor assumes the
liabilities of the Company hereunder.
5. Choice of Law. This Agreement
shall be governed by the internal law, and not the laws of conflicts, of
the State of California.
6. Amendment and Waiver. The
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company (with the prior approval of the Compensation
Committee of the Board) and Executive, and no course of conduct or failure
or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
7. IN WITNESS WHEREOF, the parties
hereto have executed this Employment Agreement as of the date first written
above.
HUNTWAY REFINING COMPANY WARREN J. NELSON
Exhibit 10.2
Huntway Refining Company
Change of Control Policy
July 6, 2000
Participants
Each employee of Huntway Refining Company (the Company) designated a
participant hereunder by resolution of the board of directors of the
Company from time to time shall be a Participant under this Policy.
Benefits for Participants
If within 12 months following a Change in Control there occurs with
respect to any individual who was a Participant immediately prior to the
time of the Change in Control either a Termination without Cause or a
Termination for Good Reason, such individual shall be entitled to both of
the following:
A payment from the Company in an
amount equal to the sum of the Reference Salary and the Target Bonus of
such individual. This amount shall be paid in a lump sum within 15
business days after such Termination without Cause or Termination for Good
Reason, either by wire transfer of immediately available funds (but only
upon the written direction of such individual to the Company together with
proper wire transfer information) or by check, at the option of the
individual.
During the period of 12 months following such Termination without
Cause or Termination for Good Reason, the Company shall (i) pay on behalf
of such individual the premium cost of any COBRA coverage that is required
to be offered to such individual and is elected by such individual, (ii) if
permitted under the terms of the group term life insurance policy of the
Company in effect from time to time, if any, continue to pay on behalf of
such individual the premium cost of group term life insurance thereunder in
a face amount equal to the face amount of group term life insurance
provided to such individual at the expense of the Company, if any,
immediately prior to the Change in Control and (iii) continue to reimburse
such individual for the premium cost of individual term life insurance
acquired and held directly by such individual in a face amount equal to the
face amount of individual term life insurance for which the Company
reimbursed such individual, if any, immediately prior to the Change in
Control; provided that the Company shall have no obligation to make any
payment or reimbursement contemplated by clause (ii) or (iii) above to the
extent that such payment or reimbursement would exceed the corresponding
premium being paid or reimbursement being made by the Company immediately
prior to the Change in Control; and provided further that the obligation of
the Company to pay the premium cost of COBRA coverage, or to pay or
reimburse any term life insurance premium, shall cease immediately if and
when such individual becomes entitled to receive health care or medical
benefits, or life insurance benefits, respectively, as a result of the
employment of such individual at any time during such period.
Modifications and Amendments of Policy; Rights of Participants
The board of directors of the Company may at any time or from time to
time, and for any reason, modify or amend this Policy in any manner without
any notice; provided however, that no such modification or amendment shall
deprive an individual who is a Participant at the time thereof of any right
or interest of such Participant hereunder, except upon the prior written
consent of such Participant. This Policy shall be deemed to provide to
each Participant a contract right to the benefits hereunder, as though the
Company had entered into a change in control agreement with such
Participant on the terms and conditions contained herein. However, nothing
in this Policy shall interfere with or limit in any way the right of the
Company to terminate the employment of a Participant at any time, with or
without Cause, nor confer upon a Participant any right to continue in the
employ of the Company for any period of time or to continue his or her
present or any other rate of compensation.
Definitions
1934 Act means the Securities Exchange Act of 1934, as amended.
"Cause" means the following: (i) the Participants commission of a
felony or a crime involving moral turpitude; (ii) the Participants
commission of a fraud; (iii) the Participants commission of any act
involving dishonesty or disloyalty with respect to the Company or any of
its subsidiaries or affiliates; (iv) conduct by the Participant tending to
bring the Company or any of its subsid-iaries or affiliates into
substantial public disgrace or disrepute; (v) the Participants gross
negligence or willful misconduct with respect to the Company or any of its
subsidiaries or affiliates; (vi) the Participants abandonment of
employment with the Company; or (vii) any material failure by the
Participant to perform his or her employment duties and responsibilities to
the best of his or her ability and in a diligent, trustworthy, businesslike
and efficient manner.
"Change in Control" means the occurrence of any of the following events:
(i) when any person, entity or group (other than one or more initial
purchasers of the 9% Senior Subordinated Secured Convertible Notes due
2007 of the Company or Related Parties with respect thereto, or a group of
which the same constitute a majority in interest) becomes the beneficial
owner (as defined in Rule 13d-3 under the 1934 Act) of more than 50 percent
of the voting power of the voting capital stock of the Company; (ii) the
sale, lease or transfer of all or substantially all of the assets of the
Company to any person or group other than in a transaction that does not
have the result set forth in clause (i); or (iii) when the individuals who
constitute the Board on the date first above noted (the Incumbent
Directors) cease for any reason other than death to constitute at least a
majority thereof; provided, however, that a director who was not a director
on such date shall be deemed to have satisfied such requirement (and be an
Incumbent Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually
(because they were directors on such date) or by prior operation of this
provision.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974, as amended, and Section
4980B of the Internal Revenue Code of 1986, as amended.
Good Reason" means the following: (i) a reduction by the Company in the
salary of the Participant to an amount less than the Reference Salary of
the Participant or a reduction by the Company in the target bonus of the
Participant to an amount less than the Target Bonus of the Participant;
(ii) the assignment of the Participant to duties materially inconsistent
with the authorities, duties, responsibilities and status of the
Participant as of immediately prior to the time of the Change in Control,
or a material reduction or material adverse alteration in the nature or
status of the authorities, duties or responsibilities of the Participant
from those in effect as of immediately prior to the time of the Change in
Control; or (iii) the relocation by more than 75 miles of the facility of
the Company out of which the Participant is based, unless the Participant
otherwise consents thereto in writing.
Reference Salary means the Participants per annum salary as of
immediately prior to the time of the Change in Control.
Related Party with respect to any initial purchaser of the 9% Senior
Subordinated Secured Convertible Notes due 2007 of the Company means (x)
any controlling stockholder, partner or member (or spouse of such
stockholder, partner or member), 80% (or more) owned subsidiary, or spouse
or immediate family member (in the case of any individual), of such initial
purchaser or (y) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or persons beneficially
holding an 80% or more controlling interest of which consist of such
initial purchaser and/or such other persons referred to in the immediately
preceding clause (x).
Target Bonus means an amount equal to the greater of (i) one-third of
the Participants Reference Salary and (ii) the target bonus for the period
during which the Change in Control occurs most recently established by the
board of directors of the Company or the compensation committee thereof for
the Participant as of the time of the Change in Control.
Termination for Disability means the termination by the Company of the
Participants employment on account of the Participants having become
unable (as determined by the board of directors of the Company in good
faith) to regularly perform his or her normal employment duties to the
Company by reason of illness or incapacity for a period of more than 6
consecutive months.
Termination for Good Reason means the termination of employment by the
Participant for Good Reason, by means of advance written notice delivered
to the Company, which notice shall specify in reasonable detail the
circumstances giving rise to such Termination for Good Reason, at least 30
days prior to the effective date of such termination identifying such
termination as a Termination for Good Reason; provided that the Company
shall have the opportunity to remedy any circumstances giving rise to such
Termination for Good Reason in the 15 day period following the delivery to
the Company of such written notice, and no Termination for Good Reason or
Good Reason shall be deemed to have occurred if such circumstances are in
fact remedied by the Company within such 15 day period.
Termination without Cause means the termination by the Company of the
Participants employment other than a Termination for Disability or a
termination by the Company for Cause.
- -1-
- -10-
47