SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X)
Filed by a party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential for Use of the
Commission Only (as permitted)
by Rule 14a-6(e) (2)
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CROWN CENTRAL PETROLEUM CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
( ) No fee required.
(X) Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
1) Title of each class of securities to which transaction applies:
Class A common stock, par value $5.00
Class B common stock, par value $5.00
2) Aggregate number of securities to which transaction applies: 7,108,151
shares (representing 2,450,868 and 4,657,283 shares of Class A and
Class B common stock, respectively, to be converted into the right to
receive cash consideration in the transaction)
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $10.50 per
share, payable in cash pursuant to an Agreement and Plan of Merger
dated December 17, 2000
4) Proposed maximum aggregate value of transaction: $74,635,585.5
5) Total fee paid: $ 14,927.12
( ) Fee paid previously with preliminary materials.
(X) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $13,514.89
2) Form, Schedule or Registration Statement No.: PREM 14A
3) Filing Party: Crown Central Petroleum Corporation
4) Date Filed: May 15, 2000
[Crown Central Petroleum Corporation Logo]
Crown Central Petroleum Corporation One North Charles Street Baltimore,
Maryland 21201
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Crown Central Petroleum Corporation (Crown) to be held at the Turf Valley
Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland on
, the day of , 2001 at o'clock in the
, Eastern Standard Time.
The purpose of the Special Meeting is to consider and vote upon the merger
and related merger agreement of December 17, 2000 among Crown, Rosemore, Inc.
(Rosemore) and Rosemore Acquisition Corporation (RAC), an indirect wholly owned
subsidiary of Rosemore, pursuant to which RAC will be merged with and into
Crown. Rosemore, through a wholly owned subsidiary, owns approximately 49% of
the Crown Class A common stock and 11% of the Crown Class B common stock. If
the merger is consummated, Rosemore will acquire all of the issued and
outstanding Class A and Class B common stock held by stockholders other than
Rosemore at a price of $10.50 per share in cash. Crown will be the surviving
corporation in the merger and will become an indirect wholly owned subsidiary
of Rosemore. The merger agreement is attached as Exhibit A to the enclosed
proxy statement.
Consummation of the merger is subject to certain conditions, including the
approval of two-thirds of all of the votes entitled to be cast on the matter by
holders of Crown Class A and Class B common stock outstanding on [Record Date],
voting as a single class. Rosemore has agreed to cause its wholly owned
subsidiary to vote shares representing approximately 45.4% of the votes
entitled to be cast in favor of the merger and merger agreement. In addition,
officers and directors of Rosemore and Crown who hold approximately 1.4% of the
votes entitled to be cast have indicated that they will vote in favor of the
merger and merger agreement. Mr. Paul A. Novelly, the chairman of Apex Oil
Company, Inc., and certain parties related to Mr. Novelly (the Novelly Group)
have agreed with Rosemore to vote the shares of Crown common stock that they
control, representing approximately 13.6% of the votes entitled to be cast, in
favor of the merger and merger agreement.
Consummation of the merger will also require the approval of the merger and
merger agreement by a majority of the votes cast on the matter other than by
stock owned by Rosemore and its affiliates. The shares in Crown controlled by
the Novelly Group will be counted toward this vote.
The Crown Board's committee of independent directors (the Independent
Committee) believes that the terms of the merger and merger agreement are fair
to, and in the best interests of, the stockholders of Crown other than
Rosemore, the Novelly Group, and their respective affiliates. The Independent
Committee has unanimously recommended to the Board of Directors that the terms
of the merger and merger agreement be approved. You should carefully read the
accompanying letter to stockholders from the chairman of the Independent
Committee. The Board of Directors believes that the terms of the merger and
merger agreement are fair to, and in the best interests of, the stockholders of
Crown, and unanimously recommends that stockholders approve the merger and
merger agreement.
The accompanying proxy statement provides a description of the proposed
merger and additional information (including Crown's most recent Quarterly
Report on Form 10-Q and Annual Report on Form 10-K, as amended) that you may
wish to consider in deciding how to vote. Please give this information your
careful attention.
Whether or not you plan to attend, it is important that your shares are
represented and voted at the Special Meeting. Accordingly, please promptly
complete, sign and date the enclosed proxy card and return it in the envelope
provided.
Very truly yours,
[Henry A. Rosenberg, Jr., signature]
Henry A. Rosenberg, Jr., Chairman of the
Board,
President and Chief Executive Officer
January , 2001
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction, passed upon the
fairness or merits of this transaction, or passed upon the accuracy or adequacy
of the disclosure in this document. Any representation to the contrary is a
criminal offense.
[Crown Central Petroleum Corporation Logo]
Crown Central Petroleum Corporation One North Charles Street Baltimore,
Maryland 21201
To the Stockholders of Crown Central Petroleum Corporation:
You have received, together with this letter, notice of a Special Meeting of
Stockholders of Crown Central Petroleum Corporation (Crown) to be held on
, the day of , 2001 at o'clock in the
, Eastern Standard Time. The purpose of the Special Meeting is to
consider and vote upon the merger and related merger agreement of December 17,
2000 among Crown, Rosemore, Inc. (Rosemore) and Rosemore Acquisition
Corporation (RAC), an indirect wholly owned subsidiary of Rosemore, pursuant to
which RAC will be merged with and into Crown. Rosemore owns approximately 49%
of the Crown Class A common stock and 11% of the Crown Class B common stock. If
the merger is consummated, Rosemore will acquire all of the issued and
outstanding Class A and Class B common stock held by stockholders other than
Rosemore, for a price of $10.50 per share in cash. Crown will be the surviving
corporation in the merger and will become an indirect wholly owned subsidiary
of Rosemore. The merger agreement is attached as Exhibit A to the enclosed
proxy statement.
After Crown's financial advisor, Credit Suisse First Boston Corporation
(CSFB), recommended to Crown's Board of Directors in January 2000 that it
approach Rosemore to discuss whether Rosemore was interested in making an offer
to acquire Crown, Mr. Henry A. Rosenberg, Jr., the Chairman of the Board of
Directors of Crown and the chairman of the board of directors of Rosemore,
recused himself from further proceedings of the Board of Directors relating to
Crown's consideration and evaluation of strategic alternatives. At the Board's
request, in Mr. Rosenberg's absence, I chaired all meetings of the Board of
Directors relating to its consideration and evaluation of strategic
alternatives. Mr. Rosenberg did, however, participate in the Board's final
consideration and approval of the merger and merger agreement.
The Board of Directors then gave a committee of independent members
(Independent Committee), of which I acted as chairman, the responsibility to
review, evaluate and, if appropriate, negotiate strategic alternatives for
Crown, including a possible transaction with Rosemore, and to make a
recommendation to the Board of Directors as to the course of action, if any,
Crown should pursue. CSFB assisted and advised the Independent Committee in
carrying out its responsibilities.
In April 2000, Rosemore and Crown executed a merger agreement under which
Rosemore would acquire all of the Crown stock not held by it for $9.50 per
share in cash. This proposal was submitted to Crown's stockholders in a proxy
solicitation dated July 20, 2000. During the summer and fall of this year, Mr.
Paul A. Novelly, the chairman of Apex Oil Company, Inc., and certain affiliated
entities (the Novelly Group) proposed a potential acquisition of Crown at
$10.50 per share, and initiated a proxy solicitation in opposition to
Rosemore's proposed acquisition at $9.50 per share. At a special meeting of
Crown's stockholders held on August 24, 2000, Rosemore's proposed acquisition
of Crown at $9.50 per share failed to receive the requisite affirmative vote of
Crown's stockholders, and both Crown and Rosemore terminated that merger
agreement.
Mr. Novelly has now agreed to support Rosemore's acquisition of Crown at a
price of $10.50 per share, and the shares owned by the Novelly Group, amounting
to 13.6% of the votes entitled to be cast, will be voted in favor of Rosemore's
acquisition of Crown. Rosemore has agreed that, absent certain material adverse
changes, it will buy the Crown shares owned by the Novelly Group at $10.50 per
share if the merger agreement is terminated. In addition, Rosemore has
reimbursed the Novelly Group for expenses of $1,750,000 that it incurred in
pursuing a transaction with Crown.
Under Maryland law and Crown's charter, approval of the merger and merger
agreement requires the affirmative vote of two-thirds of all of the votes
entitled to be cast on the matter. The merger agreement also requires that the
merger and merger agreement be approved by a majority of the votes cast other
than by stock owned by Rosemore and its affiliates. The shares of Crown common
stock owned by the Novelly Group represent approximately 25.3% of the votes
eligible to be cast other than by stock owned by Rosemore and its affiliates.
CSFB has rendered its opinion to the Board of Directors that, as of the date
of its opinion, based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the aggregate consideration to be
received by stockholders of Crown in the merger is fair, from a financial point
of view, to the stockholders of Crown other than Rosemore, the Novelly Group,
and their respective affiliates. You should carefully read and consider the
written opinion of CSFB, dated December 17, 2000, that is attached as Exhibit B
to the enclosed proxy statement.
The Independent Committee believes that the terms of the merger and merger
agreement are fair to, and in the best interests of, the stockholders of Crown
other than Rosemore, the Novelly Group and their respective affiliates. The
Independent Committee has unanimously recommended to the Board of Directors
that the terms of the merger and merger agreement be approved. The Board of
Directors believes that the terms of the merger and merger agreement are fair
to, and in the best interests of, the stockholders of Crown, and unanimously
recommends that stockholders approve the merger and merger agreement.
Very truly yours,
[Michael F. Dacey Signature]
Michael F. Dacey, Chairman, Committee of
the Independent Directors of the Board of
Directors of Crown Central Petroleum
Corporation
January , 2001
[Crown Central Petroleum Corporation Logo]
Crown Central Petroleum Corporation One North Charles Street Baltimore,
Maryland 21201
----------------
Notice of Special Meeting of Stockholders
[SPECIAL MEETING DATE]
----------------
To the Stockholders of CROWN CENTRAL PETROLEUM CORPORATION:
Notice is hereby given that a Special Meeting of Stockholders of Crown
Central Petroleum Corporation (Crown) will be held at the Turf Valley
Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland on
, the day of , 2001 at o'clock in the
, Eastern Standard Time to consider and vote on a proposal to approve
a merger and the related Agreement and Plan of Merger among Rosemore, Inc.
(Rosemore), Rosemore Acquisition Corporation (RAC) and Crown, dated as of
December 17, 2000. The merger agreement provides for the merger of RAC, an
indirect wholly owned subsidiary of Rosemore, with and into Crown. After
completion of the merger, Crown will survive as an indirect wholly owned
subsidiary of Rosemore. Stockholders, other than Rosemore, will receive $10.50
in cash for each share of Crown Class A and Class B common stock that they own.
Details respecting these matters are set forth in the proxy statement. Only
stockholders of record at the close of business on [Record Date] will be
entitled to notice of and to vote at the Special Meeting. Under Maryland law
and Crown's charter, approval of the merger and merger agreement requires the
affirmative vote of two-thirds of all the votes entitled to be cast on the
matter. The merger agreement also requires that the merger and merger agreement
be approved by a majority of the votes cast other than by stock owned by
Rosemore and its affiliates. The holders on [Record Date] of Crown Class A and
Class B common stock will vote together as a single class, with each share of
Class A common stock entitling the holder of record thereof to one vote, and
each share of Class B common stock entitling the holder of record thereof to a
one-tenth (1/10) vote.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE PAID, ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY GIVING WRITTEN
NOTICE TO THE VICE PRESIDENT-SECRETARY OF CROWN AT THE ADDRESS ABOVE, BY
EXECUTING AND DELIVERING A LATER DATED PROXY OR BY ATTENDING AND VOTING AT THE
SPECIAL MEETING.
By order of the Board of Directors,
[Dolores B. Rawlings Signature]
Dolores B. Rawlings
Vice President--Secretary
January , 2001
SUMMARY TERM SHEET
The following is a summary of the essential features and significance of the
merger. You should read this entire document and the documents to which it
refers carefully for a complete description of the merger.
. Parties--The parties to the merger agreement are Crown, Rosemore and
Rosemore Acquisition Corporation. Crown and Rosemore Acquisition Corporation
will be the parties to the merger.(page 1)
. The merger--You are being asked to approve the merger and merger agreement
by which Rosemore will acquire Crown. After the merger, Crown will be an
indirect wholly owned subsidiary of Rosemore and you will no longer be a
stockholder of Crown or entitled to share in any future growth and earnings
of Crown or benefit from an increase in value of Crown common stock should
any increase occur. (page 53)
. Payment of $10.50 for each share of Crown--Each share of Class A and Class B
common stock that you own will convert into the right to receive $10.50 in
cash as a result of the merger. (page 2)
. Crown Board recommendation--The Crown Board unanimously recommends that you
vote in favor of the merger and merger agreement. (page 37)
. Required vote--Under Maryland law and Crown's charter, approval of the
merger and merger agreement requires the affirmative vote of two-thirds of
all of the votes entitled to be cast on the matter by the holders of Class A
common stock and Class B common stock voting together as a single class.
Under the merger agreement, approval of the merger and merger agreement also
requires the approval of a majority of all of the votes present and cast on
the matter by holders of Crown Class A common stock and Class B common stock
voting together as a single class, other than the votes of the Crown stock
owned by Rosemore and its affiliates. If your shares are not voted, it will
have the same effect as a vote against the merger and merger agreement with
respect to the required affirmative vote of two-thirds of all votes entitled
to be cast, but it will have no effect on the required approval by a
majority of the votes cast on the matter by stockholders other than Rosemore
and its affiliates. (page 12)
. The merger is taxable--In general, you will recognize taxable gain or loss
in the amount of the difference between $10.50 and your adjusted tax basis
for each share of Crown common stock that you own. You will not currently
recognize taxable gain or loss if you hold your Crown stock in one of the
Crown savings plans or in an individual retirement account. (page 52)
. Conditions to the merger--Significant conditions to the parties' obligations
to complete the merger include:
--approval of the merger and merger agreement by the requisite affirmative
vote of the stockholders of Crown;
--no legal restraint or prohibition will be in effect, and no law will have
been enacted or adopted that enjoins, prohibits or makes illegal the
completion of the merger; and
--no event of default under the indenture relating to the 10 7/8% senior
notes will have occurred and the completion of the merger will not result
in the occurrence of an event of default under the indenture. (page 67)
. Interests of Crown's Executive Officers--After the merger, Mr. Henry A.
Rosenberg, Jr., the chairman of Rosemore, will remain Chairman of the Board
of Crown while Mr. Frank B. Rosenberg, a director and Senior Vice
President--Marketing of Crown, will be elected President and Chief Executive
Officer of Crown. Mr. Henry A. Rosenberg, Jr. and Mr. Frank B. Rosenberg
have interests in Rosemore through family trusts that own stock in Rosemore.
Mr. Henry A. Rosenberg, Jr. is a beneficiary of trusts holding 31% of the
stock of Rosemore, and Mr. Frank B. Rosenberg is the beneficiary of one
trust holding less
than 1% of the stock of Rosemore. Restrictions on performance vested
restricted (PVR) stock will lapse as a result of the merger and executive
officers will be entitled to receive the merger consideration for their PVR
stock and also to receive payment for the cancellation of their options.
Crown's executive officers executed limited waivers of certain benefits
that they would otherwise be entitled to receive because of the merger.
(page 50)
. Other Interests of Crown's Directors and Officers--Crown's directors and
officers will be entitled to receive the merger consideration for the Crown
stock they hold. In connection with the merger and merger agreement, 12
Crown executives signed waiver agreements with Crown as described under
"SPECIAL FACTORS--Interests of and Effects of the Merger on Crown's
Directors and Officers" on page . Under the merger agreement, the
surviving corporation will continue the indemnification of directors and
officers in its charter and bylaws for six years and will use its best
efforts to maintain directors' and officers' liability insurance at pre-
merger coverage levels. The independent directors waived the standard
retainer for service on Crown Board committees in connection with their
service on the Independent Committee but not the right to be reimbursed for
expenses incurred. (page 50)
. Rosemore's current relationship with Crown--Rosemore, through a wholly
owned subsidiary, currently owns approximately 49% of the Crown Class A
common stock and approximately 11% of the Crown Class B common stock.
Therefore, for purposes of the required approval by two-thirds of all votes
entitled to be cast on the merger, Rosemore currently possesses
approximately 45.4% of the total voting power of the Crown common stock.
Mr. Henry A. Rosenberg, Jr., the Chairman of the Board of Directors,
President and Chief Executive Officer of Crown, is an affiliate and the
chairman of the board of directors of Rosemore. (page 49)
. Ownership of Rosemore--All of the shares of Rosemore are held by trusts for
the benefit of descendants of Ruth B. Rosenberg. Mr. Henry A. Rosenberg,
Jr., the Chairman of the Board of Directors, President and Chief Executive
Officer of Crown, and the chairman of the board of directors of Rosemore,
is a trustee of all of these trusts and is a beneficiary of trusts holding
31% of the stock of Rosemore. (page 49)
. Rosemore's prior proposal--In April 2000, Rosemore and Crown executed a
merger agreement under which Rosemore would acquire all of the Crown stock
not held by it for $9.50 per share in cash. This proposal was submitted to
Crown's stockholders in a proxy solicitation dated July 20, 2000. During
the summer and fall of this year, Mr. Paul A. Novelly, the chairman of Apex
Oil Company, Inc., proposed a potential acquisition of Crown at $10.50 per
share, and initiated a proxy solicitation in opposition to Rosemore's
proposed acquisition at $9.50 per share. At a special meeting of Crown's
stockholders held on August 24, 2000, Rosemore's proposed acquisition of
Crown at $9.50 per share failed to receive the requisite affirmative vote
of Crown's stockholders, and both Crown and Rosemore terminated that merger
agreement.
. Arrangements with the Novelly Group--Rosemore has entered into a stock
purchase agreement with Mr. Paul A. Novelly, the chairman of Apex Oil
Company, Inc., and certain affiliated entities (the Novelly Group),
pursuant to which the Novelly Group has agreed to vote its shares of Crown
common stock in favor of the merger and merger agreement. Each member of
the Novelly Group has agreed, on behalf of itself and its affiliates, not
to propose or support any transactions that are inconsistent with the
merger and merger agreement. Rosemore has agreed that, absent certain
material adverse changes, it will buy the Crown shares owned by the Novelly
Group at $10.50 per share if the merger agreement is terminated. The shares
of Crown common stock owned by the Novelly Group will be held in escrow
along with the purchase price of $10.50 per share to be paid by Rosemore,
pending the merger or, if the merger is terminated, the stock purchase. In
addition, Rosemore has reimbursed the Novelly Group for documented expenses
of $1,750,000 incurred in pursuing a transaction with Crown.
. Fairness of the transaction--Each of Crown, Rosemore, Rosemore Acquisition
Corporation and Mr. Henry A. Rosenberg, Jr. believes that the merger and
merger agreement are fair to the stockholders of Crown who are not
affiliated with Rosemore. Crown obtained an opinion from Credit Suisse First
Boston Corporation as to the fairness, from a financial point of view, of
the aggregate consideration to be received in the transaction by Crown
stockholders, other than Rosemore, the Novelly Group and their respective
affiliates. Crown did not obtain any appraisals of the operating assets of
Crown. (pages 37,45 and 48)
. No appraisal rights--Under Maryland law, you will have no appraisal rights
or other similar statutory rights in connection with the merger. (page 61)
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Who is entitled to vote at the Special Meeting?
A: Holders of record of Crown Class A and Class B common stock as of the close
of business on [Record Date] are entitled to vote at the Special Meeting.
Each holder of Class A common stock has one vote per share, and each holder
of Class B common stock has a one-tenth (1/10) vote per share, on the merger
and merger agreement.
Q: How do I vote?
A: Please read this document and vote your shares as soon as possible, so that
your shares may be represented and voted at the Special Meeting. You may
vote your shares in any one of the following three ways: (1) complete, sign,
date and mail your proxy card in the enclosed return envelope as soon as
possible; (2) call toll free 1-877-779-8683 on a Touch Tone telephone and
follow the instructions on the enclosed proxy card; or (3) vote by Internet
at our Internet Address: http://www.eproxyvote.com/cnpab.
Q: What do I do if I want to change my vote?
A: Just submit a later dated proxy to Crown. You may also attend the Special
Meeting in person and vote, or revoke your proxy by sending a notice of
revocation to Crown's Vice President-Secretary, Ms. Dolores B. Rawlings, at
Crown's headquarters.
Q: If my broker holds my shares in "street name," will my broker vote my shares
for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker how to vote your shares by following
the directions your broker provides to you. If you do not provide
instructions to your broker, your shares will not be voted, which will have
the same effect as voting against the merger and merger agreement with
respect to the required affirmative vote of two-thirds of all votes entitled
to be cast, but it will have no effect on the required approval by a
majority of the votes cast on the matter other than by stock owned by
Rosemore and its affiliates.
Q: If I hold shares in Crown's Employees Savings Plan and/or Employees
Supplemental Savings Plan, how do I vote these shares?
A: Your shares in Crown's Savings Plans will be voted by the trustee of the
Savings Plans, T. Rowe Price Associates, Inc. T. Rowe Price will contact you
for instructions as to how to vote your shares in the Savings Plans. If you
do not instruct T. Rowe Price as to how to vote your shares in the Savings
Plans, your shares will be voted as provided in the Savings Plans by the
trustee in the same proportion as the votes cast with respect to those
shares for which the trustee receives proper instructions.
Q: May I attend the Special Meeting in person?
A: You may attend the Special Meeting in person if you have shares registered
in your name or if you present a valid proxy in your favor from the
registered holder. If shares are registered in the name of a corporation or
other organization, you must bring a letter from an authorized agent of that
corporation or organization giving you authority to vote its shares.
Q: If I have shares registered in my name or if I have a proxy in my favor from
a registered holder, what do I need to do to attend the Special Meeting in
person?
A: Just bring proper photographic identification to the meeting, such as a
driver's license, passport or United States military identification.
Q: When should I send in my stock certificate(s)?
A: You will receive separate instructions for surrendering stock certificate(s)
following the Special Meeting. You should not send in your stock
certificate(s) until you receive these instructions.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We hope to
complete the merger shortly after the Special Meeting, assuming the required
stockholder approval is obtained.
Q: Whom can I contact if I have additional questions or would like additional
copies of the proxy statement or proxy card?
A: You should contact our proxy solicitor:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Banks and Brokers call: (212) 425-1685
All others call toll-free: (800) 848-3094
TABLE OF CONTENTS
Section Page
- ------- ----
Summary
The Parties to the Merger................................................ 1
The Merger............................................................... 2
What Stockholders Will Receive........................................... 2
Federal Income Tax Consequences.......................................... 2
Market Price of Class A and Class B Common Stock......................... 2
The Special Meeting...................................................... 2
Record Date; Stock Entitled to Vote...................................... 3
Required Vote............................................................ 3
No Appraisal Rights...................................................... 3
Treatment of Outstanding Options, Stock Appreciation Rights and
Restricted Stock Awards................................................. 3
Opinion of Crown's Financial Advisor..................................... 4
Purposes of the Merger................................................... 4
Crown's Reasons for the Merger; Recommendation of Crown's Board.......... 4
Rosemore's Reasons for the Merger........................................ 4
Conditions to the Merger................................................. 4
Ownership of Rosemore.................................................... 5
Interests of Certain Persons in the Merger............................... 5
Rosemore's Prior Proposal................................................ 5
Arrangements with the Novelly Group...................................... 6
Terminating the Merger Agreement; Expenses............................... 6
Accounting Treatment..................................................... 6
Regulatory Approvals..................................................... 6
Stockholder Litigation................................................... 7
Forward-Looking Information............................................... 8
Market Price and Dividend Information..................................... 8
Common Stock Market Prices............................................... 8
Dividend Policy.......................................................... 9
Selected Consolidated Financial Information of Crown...................... 9
Recent Developments....................................................... 10
The Special Meeting....................................................... 11
Date, Time and Place..................................................... 11
Purpose of the Special Meeting........................................... 11
Record Date.............................................................. 12
Required Vote............................................................ 12
Proxies, Voting and Revocation........................................... 13
Solicitation of Proxies.................................................. 13
Special Factors........................................................... 14
Background of the Merger................................................. 14
Crown's Purposes of the Merger........................................... 36
Recommendation of Crown's Board of Directors............................. 37
Crown's Reasons for the Merger and Statement as to the Fairness of the
Merger.................................................................. 37
Opinion of Credit Suisse First Boston.................................... 40
Rosemore's Purposes and Reasons for the Merger........................... 44
Rosemore's Statement as to the Fairness of the Merger.................... 45
Previous Financial Report Prepared by Aegis Muse......................... 47
Section Page
- ------- ----
Henry A. Rosenberg, Jr.'s Reasons for the Merger and Statement as to the
Fairness of the Merger.................................................. 48
Ownership of Rosemore.................................................... 49
Effects of the Merger.................................................... 49
Interests of and Effects of the Merger on Crown's Directors and
Officers................................................................ 50
Rosemore's Plans for Crown after the Merger.............................. 51
Federal Income Tax Consequences.......................................... 52
The Merger................................................................ 53
Merger Consideration..................................................... 53
Payment Procedure........................................................ 53
Treatment of Stock Options, Stock Grants and Stock Appreciation Units.... 54
Merger Financing; Expenses of the Merger................................. 55
Interests of Certain Persons in the Merger............................... 56
Stockholder Litigation................................................... 59
Union Corporate Campaign................................................. 60
Accounting Treatment..................................................... 60
Regulatory Approvals..................................................... 61
No Appraisal Rights...................................................... 61
Delisting and Deregistration of Crown Common Stock after the Merger...... 61
The Merger Agreement...................................................... 62
Completion of the Merger................................................. 62
Representations and Warranties of Crown and Rosemore..................... 62
Certain Covenants........................................................ 64
Waiver Agreements........................................................ 64
No Solicitation of Acquisition Transactions.............................. 64
Conduct of the Business of Crown before the Merger....................... 65
Employee Stock Plans..................................................... 67
Indemnification and Insurance............................................ 67
Conditions to the Merger................................................. 67
Organization of the Business of the Surviving Corporation after the
Merger.................................................................. 68
Termination, Amendment or Waiver......................................... 69
Expenses and Termination Fee............................................. 70
Shareholder Rights Plan................................................... 70
Related Party Transactions................................................ 72
Security Ownership of Five Percent Beneficial Owners and Management....... 73
Owners of More than Five Percent......................................... 73
Directors and Officers................................................... 74
Stockholder Proposals..................................................... 75
Where You Can Find More Information....................................... 75
---------------------
Agreement and Plan of Merger Among Rosemore, Inc., Rosemore
Acquisition Corporation and Crown Central Petroleum Corporation
dated as of December 17, 2000...................................... Exhibit A
Opinion of Credit Suisse First Boston Corporation dated December 17,
2000............................................................... Exhibit B
Quarterly report on Form 10-Q for the period ended September 30,
2000............................................................... Appendix A
Annual report on Form 10-K, as amended, for the year ended December
31, 1999........................................................... Appendix B
SUMMARY
This summary highlights information from the proxy statement that Crown
believes is important information about the merger and merger agreement. You
should read this entire document carefully and the documents to which it refers
for a complete description of the merger and merger agreement. This summary
includes page references in parentheses to direct you to more complete
descriptions of the topics presented in this summary.
The Parties to the Merger
Crown Central Petroleum Corporation
Rosemore, Inc.
Crown Central Petroleum Corporation Rosemore, Inc. is a Maryland
is a Maryland corporation. Since corporation headquartered in
1930 when a company controlled by Baltimore, Maryland. Through
Louis Blaustein and his son, Jacob, subsidiaries, it is engaged in an
acquired a controlling interest in oil and gas gathering and
Crown, its corporate headquarters distribution business and owns and
have been in Baltimore, Maryland. operates oil and gas wells in Texas
Crown owns and operates two Texas and surrounding states. Rosemore
refineries with a total refining Holdings, Inc., a Maryland
capacity of 152,000 barrels per corporation and a wholly owned
day, 329 Crown gasoline stations subsidiary of Rosemore, holds all
and convenience stores in the Mid- of Rosemore's stock in Crown,
Atlantic and Southeastern United amounting to approximately 49% of
States, and 13 petroleum product the Crown Class A common stock and
terminals along the Colonial, approximately 11% of the Crown
Plantation and Texas Eastern Class B common stock, together with
Products pipelines. Mr. Henry A. certain other investments. Rosemore
Rosenberg, Jr. is the Chairman of Acquisition Corporation (RAC) is a
the Board, President and Chief wholly owned Maryland subsidiary of
Executive Officer of Crown. Rosemore Holdings, and RAC was
formed for the sole purpose of
being merged with and into Crown.
In 1930, a predecessor to Rosemore
controlled by Mr. Henry A.
Rosenberg, Jr.'s grandfather, Louis
Blaustein, and Louis Blaustein's
son, Jacob, acquired a controlling
interest in Crown. Mr. Henry A.
Rosenberg, Jr., the Chairman of the
Board of Directors of Crown, is
also the chairman of the board of
directors of Rosemore and Rosemore
Holdings. Mr. Edward L. Rosenberg,
who was the Executive Vice
President--Supply and
Transportation of Crown until
December 1998, is the President of
Rosemore and Rosemore Holdings and
the son of Mr. Henry A. Rosenberg,
Jr.
Crown's corporate address is: Rosemore's corporate address is:
Crown Central Petroleum Corporation Rosemore, Inc.
One North Charles Street Suite 2300
Baltimore, Maryland 21201 One North Charles Street
Baltimore, Maryland 21201
The phone number is: (410) 539-
7400. The phone number is: (410) 347-
7080.
1
The Merger (page 53)
The merger will be effected by having RAC, an indirect wholly owned
subsidiary of Rosemore, merge with and into Crown. Crown will continue as the
surviving corporation and will become an indirect wholly owned subsidiary of
Rosemore.
After the merger, public trading of Crown Class A and Class B common stock
will cease and Crown common stock will be delisted from the American Stock
Exchange (AMEX). Stockholders other than Rosemore will no longer have any
ownership interest in Crown and will no longer participate in the future
earnings and growth of Crown or benefit from any increase in the value of Crown
common stock should any increase occur.
What Stockholders Will Receive (page 54)
Upon completion of the merger, you will be entitled to receive $10.50 in
cash for each share of Crown Class A and Class B common stock you own.
Federal Income Tax Consequences (page 52)
You will recognize taxable gain or loss, as of the date of the merger, equal
to the difference between the amount of cash you receive in the merger for your
shares to be surrendered and your adjusted tax basis in those shares. The gain
or loss will be a long-term capital gain or loss if, as of the date of the
merger, your holding period for your shares is more than one year. You will not
currently recognize taxable gain or loss if you hold your Crown stock in one of
the Crown savings plans or in an individual retirement account.
Unless you comply with the required reporting or certification procedures,
you may be subject to withholding tax of 31% with respect to any cash payments
you receive pursuant to the merger.
Market Price of Class A and Class B Common Stock (page 8)
Crown Class A and Class B common stock are listed on the AMEX under the
ticker symbols "CNPA" and "CNPB," respectively.
The acquisition price of $10.50 per share represents a premium of 31.25% and
50% to the market price of $8.00 per share and $7.00 per share of Crown's Class
A and Class B common stock, respectively, at the close of trading on December
14, 2000, the day prior to the date on which Rosemore announced its intention
to seek to acquire Crown. On December 15, 2000, the last full trading day prior
to the public announcement of the signing of the merger agreement, the closing
sale prices for each of the Crown Class A and Class B common stock reported on
the AMEX were $ 7.875 and $ 6.875 per share, respectively. On December 29,
2000, the most recent practicable date prior to the date of this proxy
statement, the closing sale prices for each of the Crown Class A and Class B
common stock reported on the AMEX were $10.00 and $9.81 per share,
respectively.
Historically, the market prices of shares of Crown Class A and Class B
common stock have fluctuated, and we expect such fluctuations to continue. In
addition, Crown Class A and Class B common stock have historically traded at
different prices. These fluctuations may affect your determination as to the
attractiveness of the merger. You are urged to obtain current market quotations
for Crown Class A and Class B common stock prior to making any decision with
respect to the merger and merger agreement.
The Special Meeting (page 11)
Crown will hold a Special Meeting of stockholders to vote on the merger and
merger agreement at the Turf Valley Conference Center, 2700 Turf Valley Road,
Ellicott City, Maryland on , the day of , 2001 at
o'clock in the , Eastern Standard Time, subject to adjournments
or postponements. At the Special Meeting, Crown will ask you to approve the
merger and merger agreement.
2
Record Date; Stock Entitled to Vote (page 12)
You are entitled to vote at the Special Meeting if you owned Crown Class A
or Class B common stock at the close of business on [Record Date].
On [Record Date], there were 4,817,394 shares of Crown Class A common stock
and [5,250,112] shares of Crown Class B common stock outstanding and held by
[517] and [911] record holders, respectively. Of those shares, Rosemore,
through its wholly owned subsidiary, Rosemore Holdings, beneficially owned
2,366,526 shares of Class A and 591,629 shares of Class B common stock or
approximately 49% and 11%, respectively.
Required Vote (page 12)
Each share of Class A common stock entitles the holder of record thereof to
one vote, and each share of Class B common stock entitles the holder of record
thereof to a one-tenth (1/10) vote, on the merger and merger agreement. Under
Maryland law and Crown's charter, the approval of the merger and merger
agreement requires the affirmative vote of two-thirds of all of the votes
entitled to be cast on the matter by the holders of Class A common stock and
the holders of Class B common stock, voting together as a single class.
Rosemore has agreed to cause Rosemore Holdings to vote its shares of Crown
common stock, representing approximately 45.4% of all of the votes entitled to
be cast at the Special Meeting, in favor of the merger and merger agreement.
Officers and directors of Rosemore and Crown, who hold approximately 1.4% of
all of the votes entitled to be cast on the matter, have indicated that they
will vote in favor of the merger and merger agreement. Additionally, Mr. Paul
A. Novelly, the chairman of Apex Oil Company, Inc., and certain affiliated
entities (the Novelly Group) have agreed, pursuant to a stock purchase
agreement dated as of December 17, 2000, to vote shares representing
approximately 13.6% of the votes entitled to be cast at the Special Meeting, in
favor of the merger and merger agreement, and have granted proxies to the
designees of Rosemore, permitting Rosemore to vote the Novelly Group's shares
of Crown common stock in favor of the merger and merger agreement at the
Special Meeting.
The merger agreement also requires that the merger and merger agreement be
approved by the affirmative vote of a majority of all the votes present and
cast on the matter by holders of Crown Class A common stock and the holders of
Class B common stock, voting together as a single class, other than the votes
of Crown stock owned by Rosemore and its affiliates. The shares of Crown common
stock owned by the Novelly Group will be counted as non-Rosemore shares of
Crown common stock for this purpose, and will constitute 25.3% of the votes
eligible to be cast by stockholders other than Rosemore and its affiliates.
No Appraisal Rights (page 61)
Under Maryland law, Crown's stockholders will not have any appraisal rights
or other similar statutory rights in connection with the merger.
Treatment of Outstanding Options, Stock Appreciation Rights and Restricted
Stock Awards (page 54)
Options and stock appreciation unit awards. Upon completion of the merger,
each outstanding option to purchase Crown Class B common stock and each stock
appreciation unit award will become fully vested and immediately exercisable
and will convert into an option or stock appreciation unit award for the
surviving corporation with the same relative rights and exercise prices as
applied to such option or stock appreciation unit award immediately before the
merger. Promptly following completion of the merger, the surviving corporation
will provide each option holder with the opportunity to receive payment for the
cancellation of his or her options for a cash price based upon a discounted
Black-Scholes valuation that reflects the strike price and term of the option.
As the established floor price for the stock appreciation units is higher than
the value of the Crown Class B common stock on the date of the merger, no
amounts will be paid out with respect to the stock appreciation units, and
these units will cease to continue as an obligation under such plan.
3
Performance vested restricted stock awards. Upon completion of the merger,
each performance vested restricted stock award will become fully vested and the
restrictions will lapse. Holders of a performance vested restricted stock award
will be treated in the same manner as other holders of Crown common stock and
will be entitled to $10.50 for each share of performance vested restricted
stock that they own, less any required tax withholding.
Opinion of Crown's Financial Advisor (page 40)
Crown's financial advisor, Credit Suisse First Boston Corporation (CSFB),
has rendered its opinion to the Crown Board that, as of December 17, 2000,
based upon and subject to the assumptions, limitations and qualifications set
forth in such opinion, the aggregate consideration to be received by Crown
stockholders in the merger is fair, from a financial point of view, to the
Crown stockholders other than Rosemore, the Novelly Group and their respective
affiliates. The full text of CSFB's written opinion, dated December 17, 2000,
is attached to this document as Exhibit B. Crown encourages you to read this
opinion carefully in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the review undertaken.
CSFB's opinion is addressed to Crown's Board of Directors, does not address the
allocation of the aggregate consideration to be received by stockholders of
Crown between holders of Class A common stock and Class B common stock and does
not constitute a recommendation to any stockholder as to how that stockholder
should vote on the merger and merger agreement.
Purposes of the Merger (pages 36 and 44)
Crown's purposes of the merger are to provide the unaffiliated stockholders
with the opportunity to receive a fair price for their shares and to no longer
be subject to the market conditions and other uncertainties that have affected
the operations and financial performance of Crown in the past. Rosemore's
purpose of the merger is to acquire the remaining equity interest in Crown not
already owned by Rosemore, in order to effect its plans for Crown.
Crown's Reasons for the Merger; Recommendation of Crown's Board (pages 36 and
37)
After considering the recommendation of the committee of the independent
directors of the Crown Board and the fairness opinion received from CSFB, the
Crown Board unanimously approved the merger and merger agreement and determined
that the terms of the merger with Rosemore were advisable and fair to, and in
the best interest of, Crown's stockholders other than Rosemore, the Novelly
Group and their respective affiliates. The Crown Board recommends that you vote
in favor of the merger and merger agreement.
Rosemore's Reasons for the Merger (page 44)
On December 15, 2000, the Rosemore board, after evaluating its substantial
existing investment in and financial support of Crown, determined that the
merger is consistent with and in furtherance of the long-term business strategy
of Rosemore and approved the merger and merger agreement.
Conditions to the Merger (page 67)
Conditions to the parties' obligations to complete the merger include:
. approval of the merger and merger agreement by the requisite affirmative
vote of the stockholders of Crown;
. no legal restraint or prohibition will be in effect, and no law will
have been enacted or adopted that enjoins, prohibits or makes illegal
the completion of the merger;
4
. each of Crown and Rosemore must certify to the other that its
representations and warranties contained in the merger agreement are
true and correct in all material respects and each must also certify to
the other that it has performed all of its material obligations under
the merger agreement; and
. no event of default under the indenture relating to the 10 7/8% senior
notes will have occurred and the completion of the merger will not
result in the occurrence of an event of default under the indenture.
There are additional conditions specific to the obligations of Crown,
Rosemore and RAC that must be satisfied or waived prior to completion of the
merger.
Ownership of Rosemore (page 49)
All of the shares of Rosemore are held by trusts for the benefit of
descendants of Ruth B. Rosenberg (daughter of Louis Blaustein and mother of Mr.
Henry A. Rosenberg, Jr. and his sisters). Mr. Henry A. Rosenberg, Jr. is a
trustee of all of these trusts and is a beneficiary of trusts holding 31% of
the stock of Rosemore. Mr. Rosenberg's sisters, Mrs. Ruth R. Marder and Mrs.
Judith R. Hoffberger, are trustees of trusts holding over 98% of the stock of
Rosemore and each is also a beneficiary of trusts holding 31% of the stock of
Rosemore.
Interests of Certain Persons in the Merger (pages 50 and 56)
The executive officers and directors of Crown have interests in connection
with the merger that are in addition to or different from your own interests as
a stockholder.
Rosemore has entered into an agreement with the Novelly Group in which the
Novelly Group has agreed to vote its shares in favor of the merger and merger
agreement. Rosemore has reimbursed the Novelly Group for documented expenses of
$1,750,000 in connection with the Novelly Group's previous efforts to acquire
control of Crown. If the merger agreement is terminated, Rosemore has agreed
that, absent certain material adverse changes, it will purchase the Novelly
Group's shares of Crown common stock at a price of $10.50 per share.
The Crown Independent Committee and Board of Directors were aware of these
interests and considered them in addition to other matters in recommending the
merger and merger agreement.
Rosemore's Prior Proposal
On April 7, 2000, Rosemore and Crown executed a merger agreement under which
Rosemore would acquire all of the Crown stock not held by it for $9.50 per
share in cash. This proposal was submitted to Crown's stockholders in a proxy
solicitation dated July 20, 2000.
During the summer and fall of this year, Mr. Paul A. Novelly, the chairman
of Apex Oil Company, Inc., and certain affiliated entities proposed a potential
acquisition of Crown at $10.50 per share, and initiated a proxy solicitation in
opposition to Rosemore's proposed acquisition at $9.50 per share.
At a special meeting of Crown's stockholders held on August 24, 2000,
Rosemore's proposed acquisition of Crown at $9.50 per share in cash failed to
receive the requisite affirmative vote of Crown's stockholders, and both Crown
and Rosemore terminated that merger agreement.
5
Arrangements with the Novelly Group (page 59)
Rosemore has entered into a stock purchase agreement with the Novelly Group,
pursuant to which the Novelly Group has agreed to vote its shares of Crown
common stock and grant proxies to designees of Rosemore in favor of the merger
and merger agreement. The Novelly Group has also agreed, on behalf of itself
and its affiliates, not to propose or support any transactions that are
inconsistent with the merger and merger agreement or that could negatively
impact the consummation of the merger.
Rosemore has reimbursed the Novelly Group for documented expenses of
$1,750,000 incurred in connection with the Novelly Group's previous efforts to
acquire control of Crown. In addition, if the merger agreement is terminated,
Rosemore has agreed to purchase the Novelly Group's shares of Crown common
stock at a price of $10.50 per share in cash. However, subject to certain
exceptions, the stock purchase agreement may be terminated by Rosemore upon the
occurrence of an event or change in circumstances that results in a material
adverse effect on the business, financial condition, or results of operations
of Crown and its subsidiaries taken as a whole, and provided that the event or
change also results in Rosemore terminating the merger agreement. In this
event, Rosemore would have no obligation to purchase any of the Novelly Group's
shares. The shares of Crown common stock owned by the Novelly Group are being
held in escrow along with the purchase price of $10.50 per share to be paid by
Rosemore, pending the outcome of the proposed merger, or if the merger
agreement is terminated, the stock purchase. The Novelly Group has also agreed,
on behalf of itself and its affiliates, that, if the merger does not close,
then for a period of five years from the date it sells its Crown shares to
Rosemore, it will not, acting alone or with others, acquire or agree to acquire
any of Crown's voting securities or assets or make any proxy solicitation or
otherwise seek to influence or control the management or policies of Crown.
Rosemore has agreed not to amend the merger agreement in any manner that
would decrease the amount or change the character of the merger consideration
or otherwise materially adversely affect the Novelly Group, without the Novelly
Group's prior written consent.
Terminating the Merger Agreement; Expenses (pages 69 and 70)
Crown or Rosemore may be entitled to terminate the merger agreement at any
time before the merger is completed if one of the termination conditions in the
merger agreement occurs, either before or after stockholder approval. Other
than as described below, each party will pay its own costs and expenses
incurred in connection with the merger and merger agreement.
The merger agreement does not provide for a termination fee; however, based
upon the circumstances of the termination, Crown may be required to reimburse
Rosemore for all of its reasonable expenses if the merger agreement is
terminated and Crown consummates a competing transaction.
Accounting Treatment (page 60)
In accordance with accounting principles generally accepted in the United
States, the merger will be accounted for under the purchase method of
accounting.
Regulatory Approvals (page 61)
The merger agreement provides that Crown and Rosemore will use their
reasonable best efforts to cause the merger to be consummated, including by
obtaining all necessary waivers, permits, authorizations, orders and consents
of third parties, whether private or governmental, in connection with the
merger. In connection with the merger agreement executed in April 2000, Crown
and Rosemore submitted information regarding the merger for review by the
Federal Trade Commission and the Antitrust Division of the Department of
Justice
6
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On May
26, 2000, the required waiting period under this Act relating to the merger was
terminated by the Federal Trade Commission. If the merger is completed by May
26, 2001, no additional notice or informational filings are required under the
Act.
Except for filing the articles of merger with the State Department of
Assessments and Taxation of Maryland after obtaining stockholder approval of
the merger and merger agreement and compliance with federal and state
securities laws, neither Crown nor Rosemore is aware of any material U.S.
federal, state or foreign governmental regulatory requirement that must be
complied with, or approval that must be obtained, in order to complete the
merger.
Stockholder Litigation (page 59)
On December 15, 1998, five stockholders filed a derivative lawsuit in
District Court for Harris County, Texas against each of Crown's then-current
directors and three of its non-director officers, including Messrs. Henry A.
Rosenberg, Jr., Edward L. Rosenberg and Frank B. Rosenberg. One non-director
officer was subsequently dismissed from the lawsuit. Knox, et al. v. Rosenberg,
et al., C.A. No. 1998-58870. Three of the plaintiff stockholders are locked-out
union employees and the remaining two are retired union employees. The
defendants removed the case to the U.S. District Court for the Southern
District of Texas, H-99-0123. The suit alleges that the defendants breached
their fiduciary duties, committed "constructive fraud," "abuse of control," and
"gross mismanagement," and were unjustly enriched.
7
FORWARD-LOOKING INFORMATION
This proxy statement contains or incorporates by reference "forward-looking
statements." When used in this document, the words "anticipate," "believe,"
"estimate," "expect," "plan," and "intend" and similar expressions, as they
relate to Crown Central Petroleum Corporation (Crown) or its management, are
intended to identify forward-looking statements. These forward-looking
statements are based on current management assumptions and are subject to
uncertainties and inherent risks that could cause actual results to differ
materially from those contained in any forward-looking statement. Crown has
identified factors that could cause actual plans or results to differ
substantially from those included in any forward-looking statements. These risk
factors include, but are not limited to:
. changes in prices or demand for Crown's products including crude oil or
finished petroleum products, or in refining or retail margins, as a
result of competitive actions or economic factors;
. changes in refining technologies;
. increased regulatory burdens or inflation; and
. Crown's ability to continue to have access to capital markets and
commercial bank financing on favorable terms and its ability to buy on
open credit terms.
Although Crown believes that the expectations reflected by such forward-
looking statements are reasonable based on information currently available to
Crown, no assurances can be given that such expectations will prove to have
been correct. All forward-looking statements included in this proxy statement
and all subsequent oral forward-looking statements attributable to Crown or
persons acting on its behalf are expressly qualified in their entirety by these
cautionary statements. Crown undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place undue reliance
on any forward-looking statements, which speak only as to their particular
dates.
MARKET PRICE AND DIVIDEND INFORMATION
Crown Class A and Class B common stock are listed on the American Stock
Exchange (AMEX) under the ticker symbols "CNPA" and "CNPB," respectively. Sales
price information for each of the periods is the closing sales price on the
AMEX.
Common Stock Market Prices
2000 1999 1998
Sales Sales Sales
Price Price Price
High Low High Low High Low
---- --- ---- --- ---- ---
CLASS A
COMMON STOCK
First Quarter.................. $ 8 9/16 $5 5/8 $ 9 $7 1/16 $22 $18
Second Quarter................. 9 1/4 8 1/4 12 1/8 7 1/4 19 12 1/4
Third Quarter.................. 9 3/4 8 7/8 12 6 13 1/16 9
Fourth Quarter*................ 10 3/16 7 5/8 8 5/8 4 3/4 10 1/4 7 1/16
Yearly......................... 10 3/16 5 5/8 12 1/8 4 3/4 22 7 1/16
CLASS B
COMMON STOCK
First Quarter.................. $8 3/4 $5 1/2 $ 9 $6 7/8 $20 3/4 $18
Second Quarter................. 9 3/16 8 3/16 11 1/4 7 1/8 18 3/4 11 3/4
Third Quarter.................. 9 9/16 8 9/16 11 6 13 1/16 9
Fourth Quarter*................ 9 7/8 6 7/8 7 1/4 4 9/16 10 7/16 6 3/4
Yearly......................... 9 7/8 5 1/2 11 1/4 4 9/16 20 3/4 6 3/4
- --------
* through December 29, 2000
8
On December 14, 2000, the day prior to the date on which Rosemore announced
its intention to seek to acquire Crown, the closing sale prices of Crown Class
A common stock and Class B common stock reported on the AMEX were $8.00 and
$7.00 per share, respectively. On December 15, 2000, the last full trading day
prior to the public announcement of the signing of the merger agreement, the
closing sale price of Crown Class A and Class B common stock reported on the
AMEX was $7.875 and $ 6.875 per share, respectively. On December 29, 2000, the
most recent practicable date prior to the date of this proxy statement, the
closing sale prices of Crown Class A and Class B common stock reported on the
AMEX were $10.00 and $9.81 per share, respectively.
Historically, the market prices of shares of Crown Class A and Class B
common stock have fluctuated, and we expect such fluctuations to continue. In
addition, shares of Crown Class A and Class B common stock have historically
traded at different prices. These fluctuations may affect your determination as
to the attractiveness of the merger. You are urged to obtain current market
quotations for Crown Class A and Class B common stock prior to making any
decision with respect to the merger.
The number of stockholders of Crown common stock based on the number of
record holders on [Record Date] was:
Class A common stock: [496]
Class B common stock: [873]
Dividend Policy
The payment of cash dividends is dependent upon future earnings, capital
requirements, overall financial condition, substantial restrictions on the
payment of dividends included in an indenture under which Crown issued $125
million of 10 7/8% senior notes due 2005, and limitations on the payment of
cash dividends included in the secured credit facility with First Union
National Bank. There were no cash dividends declared on Crown Class A or Class
B common stock in 2000, 1999 or 1998.
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF CROWN
The selected consolidated financial data for Crown set forth below for the
nine-month periods ended September 30, 2000 and 1999 and each of the five years
in the period ended December 31, 1999 should be read in conjunction with the
Consolidated Financial Statements included in Crown's Quarterly Report on Form
10-Q attached hereto as Appendix A and Annual Report on Form 10-K, as amended,
attached hereto as Appendix B.
Nine Months Ended
September 30, Year Ended December 31,
------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- -------- ---------- ---------- ---------- ---------- ----------
(thousands of dollars except per share and ratio amounts)
Sales and operating
revenues (a)........... $1,381,480 $866,478 $1,270,181 $1,264,317 $1,609,083 $1,641,875 $1,456,990
(Loss) income before
extraordinary
item (b)............... 178 (28,877) (30,026) (29,380) 19,235 (2,767) (67,367)
Extraordinary item (c).. (3,257)
Net (loss) income (b)... 178 (28,877) (30,026) (29,380) 19,235 (2,767) (70,624)
Total assets (d)........ 591,321 536,835 523,108 518,010 597,394 566,955 579,257
Long-term debt.......... 128,722 129,324 129,180 129,899 127,506 127,196 128,506
Per Share Data--basic:
(Loss) income before
extraordinary item..... 0.02 (2.93) (3.04) (2.99) 1.97 (.28) (6.95)
Net (loss) income....... 0.02 (2.93) (3.04) (2.99) 1.97 (.28) (7.28)
Per Share Data--assuming
dilution:
(Loss) income before
extraordinary item..... 0.02 (2.93) (3.04) (2.99) 1.94 (.28) (6.95)
Net (loss) income....... 0.02 (2.93) (3.04) (2.99) 1.94 (.28) (7.28)
Other Data:
Book value per common
share (e).............. 14.85 14.91 14.82 17.78 20.62 18.77 19.04
Ratio of earnings to
fixed charges (f)...... 1.1x -- -- -- 2.4x -- --
9
- --------
(a) To conform to the 1999 and 1998 presentation, Sales and operating revenues
for the years ended December 31, 1997, 1996 and 1995, respectively, has
been restated. Service station rental income, which had previously been
reported as a reduction of Selling and administrative expenses, has been
reclassified and is now reported as a component of Sales and operating
revenues. These restatements had no effect on the Net (loss) income and the
Net (loss) income per share amounts previously reported.
(b) The Net loss in 1998 included a $7.1 million pre-tax reserve to reflect the
decline in inventory values of crude oil and petroleum products when
valuing inventories at the lower of cost or market. Due to the increase in
refined products prices, the pre-tax reserve of $7.1 million recorded as of
December 31, 1998 to reflect valuing inventories at the lower of cost or
market was recovered during the first quarter of 1999. The Net loss in 1995
was increased by a pre-tax write-down of certain refinery assets of $80.5
million in the fourth quarter relating to the adoption of Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
(c) The extraordinary loss recorded in the first quarter of 1995 resulted from
the early retirement of the remaining principal balance of Crown's then
outstanding 10.42% senior notes with the proceeds from the sale of $125
million of 10 7/8% senior notes due in 2005.
(d) To conform to the 2000 presentation, Total assets at December 31, 1998,
1997, 1996 and 1995, respectively, has been restated.
(e) Book value per common share is calculated based on all outstanding shares
at the applicable balance sheet date including performance vested
restricted stock issued but not vested.
(f) The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings
to fixed charges, earnings consist of earnings (loss) before income taxes
and fixed charges (excluding capitalized interest). Fixed charges consist
of interest expense, capitalized interest and that portion of rental
expense representative of the interest factor. For the nine-month periods
ended September 30, 1999 and the years ended December 31, 1999, 1998, 1996
and 1995, there were deficiencies in the coverage of fixed charges to
earnings before fixed charges of $46.4 million, $46.1 million, $47.3
million, $5.3 million and $98.8 million respectively.
There were no cash dividends declared in 2000, 1999, 1998, 1997, 1996 or
1995. See also "MARKET PRICE AND DIVIDEND INFORMATION--Dividend Policy" on page
8.
For additional financial information regarding Crown, see Crown's Quarterly
Report on Form 10-Q for the period ended September 30, 2000 attached hereto as
Appendix A and Crown's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1999 attached hereto as Appendix B.
RECENT DEVELOPMENTS
Since Crown's two refineries are situated in the Gulf Coast region, the
industry benchmark "crack spread" for the Gulf Coast is often used as an
indication of refining margins. The "Gulf Coast 20 day delayed 3/2/1 crack
spread" is the refining margin that most directly affects Crown's refining
results. This is a margin that measures the difference between the Gulf Coast
price of a barrel of West Texas Intermediate crude oil against the aggregate
Gulf Coast price of two-thirds of a barrel of regular gasoline and one-third of
a barrel of distillate, pricing the gasoline and distillate for delivery 20
days after the delivery date of the crude oil. Crown believes that this pricing
comparison provides a market measurement that most closely reflects the average
cycle time of pricing its crude oil purchases and the finished products being
available for sale. Crown has no control, however, over the prices of crude
oil, gasoline or distillate in the Gulf Coast markets.
Beginning in late January 2000, Gulf Coast refining margins experienced
marked improvement as compared to the same 1999 period. For the first eleven
months of 2000, the Gulf Coast 20 day delayed 3/2/1 crack spread was $4.89 per
barrel compared to $2.76 per barrel for the same 1999 period. As a result,
Crown's estimated net income improved from a net loss of $29.3 million for the
first eleven months of 1999 to a net loss of $2.5 million for the first 11
months of 2000. If the average Gulf Coast 20 day delayed 3/2/1 crack spread of
$2.54 per barrel that prevailed for the 3-year period from 1997 through 1999
were to have prevailed during the first eleven months of 2000, Crown's
management estimates that Crown would have incurred a net loss of approximately
$44.8 million.
Conversely, in December 2000, Gulf Coast refining margins experienced marked
deterioration compared to the same 1999 period. For the month of December 2000,
the Gulf Coast 20 day delayed 3/2/1 crack spread was
10
negative $1.79 (a loss of $1.79 per barrel), compared to a positive $1.03 per
barrel for the month of December 1999. A negative margin means that the value
of the refined product is less than the cost of the crude oil used to produce
the products. With a negative "crack spread," the expected refining loss would
equal the cost of processing the crude oil at the refinery plus the negative
"crack spread." With a Gulf Coast 20 day delayed 3/2/1 crack spread of negative
$1.79 per barrel for the first 28 days of December 2000, Crown's management
anticipates that Crown will incur a substantial loss from refining operations
in December 2000.
The Gulf Coast 20 day delayed 3/2/1 crack spread averaged $2.90 per barrel
in 1997, $2.00 per barrel in 1998, $2.62 per barrel in 1999, $2.54 per barrel
over the three-year period of 1997 thorough 1999, and $2.66 per barrel over the
five-year period of 1995 through 1999, compared to an average of $4.89 per
barrel for the first eleven months of 2000 and negative $1.79 for the month of
December 2000. The Gulf Coast 20 day delayed 3/2/1 crack spread fell from $9.94
per barrel on September 11, 2000 to a loss of $4.30 per barrel on December 17,
2000. This readily reflects the continuing volatility in the price of crude oil
and the margin available for finished petroleum products. The daily closing
spot price of West Texas Intermediate crude oil has ranged from $33.93 per
barrel on March 7, 2000, to $23.85 per barrel on April 10, 2000, to $36.91 on
September 20, 2000, falling back to $26.74 on December 29, 2000, the most
recent practicable posting prior to the date of this proxy statement.
The futures markets trade futures margins, and many industry participants
use the futures markets to hedge anticipated futures margins. Crown and its
management are unable to predict or anticipate futures margins, but believe
that the futures markets provide the best available indicator of the margins
that will prevail in the future. The futures markets currently indicate a
market expectation that the average Gulf Coast 20 day delayed 3/2/1 crack
spread for the first six months of 2001 will be approximately $3.00 per barrel.
There can be no assurances, however, that the actual margins over this period
will not be higher or lower than those anticipated by the futures markets.
Through the middle of the fourth quarter 2000, Crown processed a monthly
average of 35,000 barrels per day of crude oil at its Pasadena refinery under a
processing agreement with Statoil Marketing and Trading (US) Inc. Statoil owned
and supplied to Crown the crude oil that Crown processed for Statoil, and Crown
returned to Statoil a specified mix of finished petroleum products and received
a specified fee per barrel processed. The processing agreement expired in
October 2000, and final settlement occurred in November 2000.
The conclusion of the Statoil processing agreement significantly increased
Crown's credit and working capital requirements to operate the Pasadena
refinery at maximum capacity. As Crown has previously reported, assuming crude
oil prices of $32.00 per barrel, Crown requires a working capital investment of
approximately $27 million to replace the barrels processed under the Statoil
processing agreement. To operate within the terms of its various credit
facilities, the production level at Pasadena in the fourth quarter averaged
less than 98,000 barrels per day, the average for the first nine months of
2000.
Crown has planned major turnarounds at both refineries in 2001 with
preliminary estimated expenditures of approximately $24 million. Early first
quarter 2001 cash requirements include $10 million for semi-annual bond
interest and annual property tax payments.
THE SPECIAL MEETING
Date, Time and Place
The Special Meeting will be held at the Turf Valley Conference Center, 2700
Turf Valley Road, Ellicott City, Maryland on , the day of
, 2001 at o'clock in the , Eastern Standard Time.
Purpose of the Special Meeting
At the Special Meeting, holders of Crown common stock will be asked to vote
to approve the merger and related merger agreement dated as of December 17,
2000 among Rosemore, Rosemore Acquisition Corporation (RAC) and Crown pursuant
to which RAC will be merged with and into Crown, a copy of which is attached as
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Exhibit A to this proxy statement. Maryland law and Crown's bylaws do not
permit any matters to be presented at the Special Meeting other than those
described in this proxy statement and procedural matters relating to the
meeting.
Record Date
Crown's Board of Directors has fixed the close of business on [Record Date]
as the record date for the determination of the stockholders entitled to notice
of, and to vote at, the Special Meeting. Accordingly, only holders of record of
Class A common stock, par value $5.00 per share, and holders of record of Class
B common stock, par value $5.00 per share, at the close of business on the
record date are entitled to notice of the Special Meeting and to attend and
vote at the Special Meeting. On the record date, there were 4,817,394 shares of
Crown Class A and [5,250,112] shares of Crown Class B common stock outstanding.
No other voting securities of Crown are outstanding.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting.
Required Vote
Under Maryland law and Crown's charter, Crown's stockholders must approve
the merger and merger agreement by the affirmative vote of two-thirds of all of
the votes entitled to be cast on the matter. Except with respect to the
election of directors, in all proceedings in which action of the Crown
stockholders is to be taken:
. each share of Class A common stock entitles the holder of record thereof
to one vote, and each share of Class B common stock entitles the holder
of record thereof to a one-tenth (1/10) vote; and
. holders of Class A common stock vote together with holders of Class B
common stock as a single class.
Pursuant to the merger agreement, Rosemore has agreed to cause its wholly
owned subsidiary, Rosemore Holdings, Inc. (Rosemore Holdings), to vote shares
representing approximately 45.4% of all of the votes entitled to be cast on the
matter in favor of the merger and merger agreement. In addition, officers and
directors of Rosemore and Crown who hold approximately 1.4% of the votes
entitled to be cast on the matter have indicated that they will vote in favor
of the merger and merger agreement. See "SECURITY OWNERSHIP OF FIVE PERCENT
BENEFICIAL OWNERS AND MANAGEMENT" on page 73.
Pursuant to a stock purchase agreement between Rosemore and certain entities
affiliated with Mr. Paul A. Novelly (the Novelly Group), including the trustees
of The Novelly Exempt Trust, The Capital Trust, the Paul A. Novelly Living
Trust, and Golnoy Barge Company, Inc., the Novelly Group agreed to vote its
shares of Crown common stock, representing approximately 13.6% of the votes
entitled to be cast, in favor of the merger and merger agreement, and to vote
against any action or other proposal that is inconsistent with the merger, or
would result in a breach of the merger agreement. These entities have each
granted proxies to Rosemore's designees permitting Rosemore's designees to vote
their shares of Crown common stock accordingly at the Special Meeting or any
other meeting of stockholders. The Novelly Group has reserved its right to vote
its shares on other matters that are not inconsistent with such stock purchase
agreement, but has limited its ability to grant subsequent proxies, powers of
attorney, consents or revocations, or enter into any agreement or understanding
with any person to vote such shares with respect to any matter included in the
stock purchase agreement, or make any transfers of shares in any manner
inconsistent with the voting agreement provided in the stock purchase
agreement. These entities have also agreed, on their and their affiliates'
behalf, not to propose or support any transactions that are inconsistent with
the merger and merger agreement. The stock purchase agreement, and the proxies
and voting agreement provided therein, may be terminated by Rosemore only upon
the occurrence of an event or change in circumstance that results in a material
adverse effect on the business, financial condition, or the results of the
operations of Crown and its subsidiaries taken as a whole (subject to certain
exceptions) and also results in Rosemore terminating the merger agreement.
The merger agreement also requires that the merger and merger agreement be
approved by a majority of the votes cast on the matter other than by stock
owned by Rosemore and its affiliates. This approval will be determined from the
vote to obtain the requisite two-thirds approval of all votes entitled to be
cast, and not by a separate vote.
12
The Crown stock owned by the Novelly Group will be counted toward this vote and
will constitute 25.3% of the votes eligible to be cast other than by stock
owned by Rosemore and its affiliates.
Proxies, Voting and Revocation
Shares of Class A and Class B common stock represented by properly executed
proxies will, unless the proxies have been properly revoked, be voted in
accordance with the instructions indicated on the proxies, or, if no
instructions are indicated, will be voted for approval of the merger and merger
agreement, and in the best judgment of the individuals named in the
accompanying proxy on any other matter that may properly come before the
Special Meeting. Brokers who hold Crown common stock in "street name" will not
be permitted to vote that stock in the absence of instructions from the
beneficial owner of such common stock. Broker non-votes will have the same
effect as a vote against approval of the merger and merger agreement with
respect to the required affirmative vote of two-thirds of all votes entitled to
be cast, but it will have no effect on the required approval by a majority of
the votes cast on the matter other than by stock owned by Rosemore and its
affiliates.
Execution and return of a proxy will not in any way affect a stockholder's
right to attend and to vote in person at the Special Meeting. Any proxy may be
revoked by the stockholder giving it, at any time prior to its being voted, by
filing a notice of revocation with the Vice President-Secretary of Crown,
Dolores B. Rawlings, at Crown Central Petroleum Corporation, One North Charles
Street, Baltimore, Maryland 21201 or a duly executed proxy bearing a later
date. A notice of revocation need not be on any specific form. Any proxy may
also be revoked by the stockholder's attendance at the Special Meeting and
voting in person. Attendance at the Special Meeting will not by itself
constitute revocation of a proxy.
Abstentions may be specified with respect to the approval of the merger and
merger agreement by properly marking the "abstain" box on the proxy, and will
be counted as present for the purpose of determining the existence of a quorum.
The presence, in person or by proxy, of shares representing a majority of the
votes entitled to be cast at the Special Meeting will constitute a quorum for
the transaction of business at the Special Meeting. Abstentions will have the
same effect as a vote against the approval of the merger and merger agreement
with respect to the required affirmative vote of two-thirds of all votes
entitled to be cast, but it will have no effect on the required approval by a
majority of the votes cast on the matter other than by stock owned by Rosemore
and its affiliates.
T. Rowe Price Associates, Inc. serves as the trustee for Crown's Employees
Savings Plan and the Employees Supplemental Savings Plan (collectively, the
Savings Plans). Each plan participant with an investment in Crown Class A or
Class B common stock will be given a form of voting instruction by the trustee
to be used to instruct the trustee how to vote the Crown common stock held in
the Savings Plans for the benefit of the participant. Shares for which no
instructions are timely given will be voted as provided in the Savings Plans by
the trustee in the same proportion as the votes cast with respect to those
shares for which the trustee receives proper instructions. There is no
provision in the Savings Plans to permit the trustee to grant a proxy to a plan
participant, and, as a result, all shares of Crown Class A and Class B common
stock held in the Savings Plans will be voted by the trustee in accordance with
the procedures described in this paragraph.
Solicitation of Proxies
Proxies are being solicited by and on behalf of Crown's Board. This proxy
statement and a form of proxy will first be mailed to stockholders on or about
January , 2001. Crown will pay the expenses related to printing this proxy
statement as well as all mailing and Securities and Exchange Commission filing
fees incurred in connection with this proxy statement. Crown has engaged the
services of D. F. King & Co., Inc. to solicit proxies and to assist in the
distribution of proxy materials. See "THE MERGER--Merger Financing; Expenses of
the Merger" on page 55. In addition to soliciting proxies by mail, officers,
directors and employees of Crown, without receiving additional compensation,
may solicit proxies by telephone, telegraph, in person or by other means.
Arrangements also will be made with brokerage firms and other custodians,
nominees and
13
fiduciaries to forward proxy solicitation material to the beneficial owners of
Crown Class A and Class B common stock, and Crown will reimburse brokerage
firms, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection with forwarding proxy solicitation
materials.
SPECIAL FACTORS
Background of the Merger
During the last five fiscal years, Crown has experienced cumulative
operating losses of $60 million in addition to the 1995 write-down of certain
refinery assets. The cumulative operating losses were primarily due to downward
pressure on refining margins, volatile crude oil and petroleum product prices
and increased retail competition. In addition, Crown has used significant cash
resources to finance required environmental related expenditures. As a result
of these factors, as well as a declining stock price and financing constraints
under its borrowing arrangements, Crown management began to explore operating
alternatives in 1998, and, in late 1998, Crown management reviewed with the
Crown Board the need to explore strategic and financial alternatives.
Crown has been engaged in a labor dispute during most of this five-year
period. Following a number of incidents apparently intended to disrupt normal
operations at the refinery and also as a result of the unsatisfactory status of
the negotiations on the collective bargaining agreement, on February 5, 1996,
Crown implemented a lock-out of employees in the collective bargaining unit at
Crown's Pasadena refinery. Since the lock-out, the Paper, Allied-Industrial,
Chemical & Energy Workers Union (PACE), the union to which the collective
bargaining unit belongs, has waged an orchestrated corporate campaign that
includes a boycott of Crown's retail facilities and support of various lawsuits
against Crown. See "THE MERGER--Union Corporate Campaign" on page 60.
In mid-1998, in connection with its exploration of operating alternatives,
Crown approached the operator of another Texas refinery (Texas Refinery
Operator) to explore joint operating alternatives. In discussions during late
1998, representatives of Crown's Pasadena refinery met with the Texas Refinery
Operator to consider various operating alternatives, including exchanging
feedstocks and intermediate products, creating a joint venture to combine the
respective refineries into a single operating unit, and the possible sale of
the Pasadena refinery to the Texas Refinery Operator. These discussions were
terminated in December 1998 by the Texas Refinery Operator because of its
financial and strategic priorities.
In late 1998, Crown learned through a newspaper article that Valero Energy,
Inc. was possibly interested in exploring a purchase of Crown. Some months
later Mr. William E. Greehey, the chairman of Valero Energy, advised Mr. Henry
A. Rosenberg, Jr., that Valero Energy had not publicly announced an intent to
acquire Crown. There were no further contacts with Valero Energy until it was
contacted by Crown's financial advisor, Credit Suisse First Boston Corporation
(CSFB), in late 1999 as part of the process described below. Valero Energy
ultimately advised CSFB that it was not interested in pursuing a transaction
with Crown.
Also in late 1998, in connection with its exploration of strategic
alternatives, the Crown Board authorized management to interview financial
advisors to assist in this process. Management interviewed several financial
advisors and recommended to the Crown Board that CSFB be hired based upon its
qualifications in the petroleum refining and marketing industry. CSFB made a
presentation to the Crown Board, which highlighted CSFB's applicable
qualifications regarding this potential engagement. In February 1999, CSFB was
retained as financial advisor to Crown, and Crown publicly announced that it
was reviewing its strategic alternatives.
In February 1999, Mr. Henry A. Rosenberg, Jr., as chairman of the Rosemore
board, informed the Rosemore board that Crown might engage an investment bank
with respect to Crown's exploration of strategic alternatives. During the
course of 1999, at regularly scheduled meetings, the Rosemore board generally
discussed Rosemore's investment in Crown.
At its February and March 1999 meetings, at the request of Crown, the
Rosemore board agreed to provide financial support to Crown by guaranteeing up
to $50 million of a letter of credit facility in excess of that
14
which was then available to Crown under its secured credit facility. Crude oil
prices were then starting to rise, and Crown wished to have a larger letter of
credit facility for its crude oil and feed stock purchases if there were to be
a general tightening of the market.
In February 1999, the directors of Crown, other than Mr. Henry A. Rosenberg,
Jr. (Independent Directors), retained Skadden, Arps, Slate, Meagher & Flom LLP
(Skadden Arps) to represent the Independent Directors with respect to the Knox,
et al. v. Rosenberg, et al., C.A. No. 1998-58870 litigation. See "THE MERGER--
Stockholder Litigation" on page 59. As the review process by CSFB progressed,
the Independent Directors also sought the advice of Skadden Arps on their
fiduciary duties as directors, including their responsibilities as directors in
the strategic review process. On June 23, 1999 and September 29, 1999, Skadden
Arps met with the Independent Directors and discussed the current status of the
CSFB process and the responsibilities of the Independent Directors. The
Independent Directors did not formally constitute themselves as an independent
committee until January 2000 when Rosemore indicated it might become a
participant in the strategic review process.
From late February to April of 1999, CSFB conducted site visits and meetings
with Crown's management and undertook a due diligence review of Crown,
including an analysis of Crown's business, results of operations, financial
position, structure and prospects. CSFB reviewed strategic alternatives and
prepared materials for consideration by senior management of Crown. Based upon
its review, CSFB proposed at the April 22, 1999 meeting of the Crown Board that
Crown pursue the sale or merger of Crown as a whole or the sale of its refining
and/or wholesale terminal assets. CSFB advised that Crown needed to sell
itself, grow significantly by way of a merger, or sell its lower performing
assets to improve returns. CSFB also advised Crown that it needed to cut
overhead significantly because its overhead as a percentage of overall costs
and revenues was higher than that of its peer competitors. After considering
the CSFB presentation, the Crown Board authorized CSFB to prepare an
information memorandum on Crown's business and assets and to retain consultants
to assist in presenting the business and assets to interested parties.
From the end of April to early August 1999, CSFB, in consultation with
senior management, prepared a list of potential purchasers and merger
candidates. The list focused on petroleum refiners and marketers and leveraged
buyout funds and similar entities that CSFB believed likely to be interested in
evaluating a strategic transaction with Crown. Rosemore was not included in
this list. Crown and CSFB assembled publicly available information concerning
Crown and distributed this information to the parties on this list that
expressed interest in receiving this information.
Crown and CSFB also assembled a data package containing general information
about Crown, including Crown's business, management, strategy and growth
initiatives and historical and projected financial information. This data
package was to be distributed to potential interested parties after execution
of a confidentiality agreement. CSFB qualified potential interested parties on
the strength of financial information requested by CSFB and provided to CSFB by
such parties. CSFB reviewed its progress with the Crown Board at a July 29,
1999 meeting. On August 11, CSFB received Crown Board approval to distribute
the data package it had prepared to qualified parties to determine the extent
of their interest in merging with or acquiring all or a portion of Crown or
purchasing Crown's refining and/or wholesale terminal assets, including the
price any such parties would be willing to pay.
Confidentiality agreements were distributed to potential interested parties
beginning in early August and the data package was distributed to potential
interested parties beginning on August 19, 1999. Of the 72 parties contacted by
CSFB or that had discussions with CSFB, 30 parties expressed an interest in a
possible transaction with Crown, executed a confidentiality agreement and
received a data package. The standard form of confidentiality agreement
included "standstill" provisions prohibiting a prospective buyer from taking
certain actions for a period of two years, including purchasing shares of Crown
common stock. The Crown Board believed that the standstill provisions would
help to ensure an orderly evaluation process. In particular, the Crown Board
believed that standstill provisions were customary protections and would
encourage interested parties to participate in the Board's process and allow
the Board to maximize stockholder value, as well as prevent parties from buying
and selling securities in a manner that might disrupt the strategic process and
not benefit all Crown stockholders equally. Several of the potential interested
parties negotiated the terms of the standard form of confidentiality agreement.
15
At Crown Board meetings held on September 30, October 28, November 22, and
December 16, 1999, CSFB briefed the Crown Board on the status of discussions
with the various parties that had been contacted. In addition, at the October
28 and December 16 meetings, CSFB reviewed with the Crown Board the possibility
of refinancing Crown's existing indebtedness. The Crown Board directed CSFB to
continue working with interested parties and to explore a possible refinancing
of Crown's debt.
In early October 1999, a representative of Apex Oil Company (Apex), one of
the original 72 parties referred to above, provided CSFB with unaudited interim
financial information in order to qualify itself as a participant in the
evaluation process and to receive a draft of the confidentiality agreement.
Apex is a privately owned company headquartered in St. Louis, Missouri, whose
chairman is Mr. Paul A. Novelly, and is a member of the Novelly Group. The
Novelly Group beneficially owns 14.7% of the Crown Class A common stock and
3.48% of the Crown Class B common stock. Crown had previously received a letter
from Apex dated May 28, 1999, inquiring about Crown's performance and future
and requesting a meeting. This inquiry was referred to CSFB.
On October 18, 1999, representatives of Crown met with representatives of a
large independent marketer of petroleum products (Independent Marketer), one of
the 30 parties referred to above, to preliminarily discuss whether and on what
terms a transaction could be agreed on between Crown and the Independent
Marketer. The Independent Marketer presented a preliminary proposal to acquire
or to be acquired by Crown in a stock-for-stock merger. The Independent
Marketer, however, ultimately elected in 2000 not to make a final offer given
Crown's financial performance and the fact that, if the Independent Marketer
purchased Crown, it would constitute a change of control under Crown's
indenture relating to the 10 7/8% senior notes. A change in control would
permit the senior note holders to demand repayment of the 10 7/8% senior notes.
Nonetheless, at the Independent Committee's direction, CSFB continued to engage
in discussions with the Independent Marketer and its advisors to determine if
there was a way to resolve these issues.
On October 28, 1999, Crown sent to Apex, through Apex's financial advisor,
the standard form of confidentiality agreement that Crown had submitted to all
interested parties.
On November 8, 1999, Apex publicly announced a proposal to merge selected
assets of Apex into a newly created subsidiary of Crown in a stock-for-stock
transaction. Apex indicated that the stock-for-stock merger would value Crown
common stock at a minimum of $10.00 per share. The proposal contemplated that
Apex would distribute to its stockholders or otherwise dispose of all of its
wholesale terminal assets and operations and other unspecified personal
properties, so that Apex would have what it termed "sufficient net worth and
working capital commensurate with the merger consideration." In addition, the
proposal contemplated that Mr. Novelly would be chairman, chief executive
officer and president of Crown following the merger. The conditions to the
proposal included:
. satisfactory resolution of the ongoing labor union boycott of Crown;
. satisfactory completion by Apex of a due diligence review of Crown;
. receipt of a $125 million financing commitment on behalf of Crown on
terms satisfactory to Apex; and
. receipt of a line of credit on behalf of Crown sufficient to replace
Crown's existing line of credit on terms satisfactory to Apex.
On November 15, 1999, Crown representatives visited the offices of the
Independent Marketer to receive a presentation from the Independent Marketer
and to commence a due diligence examination of the business and assets of the
Independent Marketer. During the remainder of that week, Crown representatives
continued their due diligence examination of the Independent Marketer by
visiting various facilities of the Independent Marketer.
By letter dated November 15, 1999, Apex advised Crown that it stood ready to
meet with Crown to discuss Apex's proposal.
16
On November 17, 1999, Mr. Henry A. Rosenberg Jr., the Chairman of the Crown
Board, advised Mr. Novelly, the chairman of the board of directors of Apex,
that Crown believed the execution of a confidentiality and standstill agreement
by each interested party was necessary to ensure a thorough, fair and orderly
process for Crown to evaluate its strategic alternatives and that, if there
were particular circumstances unique to Apex that required modifications to the
confidentiality agreement, Crown would be prepared to consider them and tailor
the confidentiality agreement to Apex's circumstances.
In early November, 1999, Crown received expressions of interest from
interested parties. These preliminary offers or expressions of interest were
required to gain access to the data room that Crown had prepared for interested
parties, which opened on November 18, 1999. Seven of the 30 parties that had
received the data package (including the Independent Marketer) visited the data
room or otherwise reviewed data room materials, and one of the 30 parties
conducted on-site due diligence but did not request access to the data room
materials.
By letter dated November 24, 1999, Mr. Novelly, the chairman of Apex,
submitted a stockholder proposal to Crown for inclusion in Crown's proxy
statement for its 2000 annual meeting of stockholders. The proposal by its
terms would have required the Crown Board to cause the sale, merger or other
disposition of Crown or its assets as a whole. After correspondence among
Crown's legal counsel, Mr. Novelly's legal counsel and the staff of the SEC,
the staff of the SEC concurred with the request of Mr. Novelly that the
proposal be included in the proxy statement but required that changes be made
to the proposal.
On November 29 and 30, 1999, representatives of the Independent Marketer
visited Crown's data room. During the remainder of that week, representatives
of the Independent Marketer, including its financial advisor, continued their
due diligence examination of Crown by visiting Crown's refineries, the offices
of Crown's supply and transportation operations, and certain of Crown's
wholesale terminals and retail locations.
On December 2, 1999, Apex submitted to CSFB a form of confidentiality
agreement that it indicated it was willing to execute. The form of
confidentiality agreement did not contain standstill provisions that would
prevent Apex from acquiring any additional shares of Crown common stock. All
other confidentiality agreements with interested parties contained standstill
provisions.
By letter dated December 9, 1999, Crown's legal counsel sent Apex's legal
counsel an amended confidentiality agreement containing provisions with respect
to Apex's Schedule 13D filing group.
In early December, Mr. Henry A. Rosenberg, Jr. inquired of Mr. Edward L.
Rosenberg whether Rosemore would be in a position to review any proposal that
the Crown Board might recommend. To assist Rosemore with its ongoing review of
its investment in Crown and in order to enable it to respond in a timely manner
to any proposal the Crown Board might recommend, at a meeting of the Rosemore
board held on December 17, 1999, the Rosemore directors organized the Rosemore
special committee, consisting of Messrs. Edward L. Rosenberg, Jeffrey A.
Hoffberger, William E. Mayer and Donald R. Mering. Mr. Edward L. Rosenberg is
the president and chief executive officer of Rosemore and the son of Mr. Henry
A. Rosenberg, Jr. and was previously Executive Vice President-Supply and
Transportation of Crown.
At the end of the December 17 Rosemore board meeting, Mr. Clive R. G.
O'Grady, a director and the corporate secretary of Rosemore and a partner in
the law firm of McGuireWoods, LLP (McGuireWoods), advised Rosemore that he
would not participate in any capacity in any deliberations or activities of
Rosemore related to its consideration of its investment in Crown, and that the
law firm of McGuireWoods would not provide any legal advice or services to
Rosemore in connection with its consideration of its investment in Crown. He
recommended that Rosemore retain separate legal counsel and financial advisors.
McGuireWoods has provided legal advice to both Mr. Henry A. Rosenberg Jr.,
personally, and to Rosemore as its legal counsel. McGuireWoods is also legal
counsel to Crown. On January 26, 2000, McGuireWoods executed letter agreements
with each of Rosemore and Mr. Henry A. Rosenberg, Jr., personally, by which
both Mr. Henry A. Rosenberg, Jr., personally, and Rosemore waived any conflict
of interest arising from and consented to McGuireWoods' continued
representation of Crown in connection with Crown's evaluation of strategic
alternatives, and confirmed the termination by McGuireWoods of any
representation of either Rosemore or Mr. Henry A. Rosenberg, Jr.,
17
personally, in any matters related to Crown's strategic evaluation process. In
addition, on January 26, 2000, McGuireWoods executed a letter agreement with
Crown by which Crown waived any conflict of interest arising from
McGuireWoods' representation of Rosemore and Mr. Henry A. Rosenberg, Jr.,
personally, in any matters unrelated to Crown's strategic evaluation process
and its representation of Crown in such strategic evaluation process.
Based upon preliminary offers or expressions of interest, eight qualified
companies undertook due diligence at Crown's data room and facilities,
otherwise reviewed data room materials or conducted other on-site diligence
during the fourth quarter of 1999. Two of these companies subsequently advised
CSFB that they would not submit bids.
On December 17, 1999, CSFB requested that final offers be submitted by
January 14, 2000 by the remaining six qualified companies which continued to
express interest in a transaction with Crown. Thereafter, CSFB followed up
with these six companies to encourage them to submit bids as requested.
On December 22, 1999, Crown representatives met with representatives of the
Independent Marketer to further discuss the Independent Marketer's business
and operations and review potential cost savings and other business issues
associated with a possible merger of the Independent Marketer and Crown.
Also, at a meeting of the Rosemore special committee held on December 22,
1999, the Rosemore special committee retained Shearman & Sterling as its
special legal advisor and discussed with Aegis Muse Associates, LLC (Aegis
Muse) its experience and qualifications to act as financial advisor. The
Rosemore special committee subsequently engaged Aegis Muse as its financial
advisor.
On December 29, 1999, Apex sent to Crown an amended confidentiality
agreement rejecting a number of provisions in Crown's December 9, 1999
confidentiality agreement, including standstill provisions.
On January 3, 2000, Crown advised Apex that Crown was not agreeable to the
deletion of the standstill provisions from the confidentiality agreement. On
January 5 and 6, 2000, legal counsel for Crown and Apex discussed the
confidentiality agreement and related matters. By letter dated January 7,
2000, Apex's legal counsel advised Crown's legal counsel that Mr. Novelly
would like to address the Crown Board.
On January 11 and 12, 2000, Crown representatives visited the Independent
Marketer's petroleum terminals.
Through CSFB, Crown had previously requested of interested qualified
parties that they submit their best and final offers in the evaluation process
by January 14, 2000. CSFB reported at a meeting on January 18, 2000, at which
only the Independent Directors were in attendance, that, although Crown had
received several preliminary proposals, only two parties presented final
offers. One offer was for the purchase of Crown's wholesale terminal assets
and associated inventory. The other offer was for the purchase of Crown's two
refineries and all Crown petroleum inventory. The Independent Directors, after
considering the recommendation of CSFB, determined that the prices and the
terms of these offers would not create sufficient stockholder value. In
addition, the Independent Directors noted the conditional nature of the Apex
offer and the fact that Apex was unwilling to sign a confidentiality agreement
containing standstill provisions as all other parties had done, and was
therefore not in a position to resolve the contingencies to which its proposal
was subject. The Independent Directors also noted that the Independent
Marketer had declined to make a bid for Crown, but had indicated an interest
in having Crown acquire the Independent Marketer. As the strategic review
process did not yield any other offers for Crown as a whole or any offers for
other transactions with Crown that would generate sufficient stockholder
value, CSFB recommended that the Independent Directors authorize it to
approach Rosemore. CSFB also proposed, and the Independent Directors agreed,
that it continue discussions with Apex and with the Independent Marketer
regarding their respective interests in a business combination with Crown.
18
On January 18, 2000, representatives of CSFB invited Rosemore to make a
proposal concerning Crown and offered to make available to Rosemore information
concerning Crown that had also been made available to other interested parties
who executed confidentiality agreements. On the same date, CSFB provided
Rosemore representatives with a draft of a confidentiality agreement containing
standstill provisions. The confidentiality agreement was negotiated during the
course of the next several days.
By letter dated January 18, 2000, Crown's legal counsel advised Apex's legal
counsel that the Crown Board had declined Apex's request to allow Mr. Novelly
to address the Crown Board, and that the Crown Board recommended that Apex
follow the same procedures being followed by all other interested parties.
By letter dated January 25, 2000, Golnoy Barge Company, a member of Mr.
Novelly's Schedule 13D filing group and a company of which Mr. Novelly, the
chairman of Apex, is the president, advised Crown that it intended to nominate
Mr. Novelly for election as a director of Crown at Crown's annual meeting of
stockholders in 2000.
Also on January 26, 2000, CSFB met with Mr. Novelly and Apex's financial and
legal advisors to discuss Apex's proposal and to learn more about Apex. CSFB
reiterated to Apex that a confidentiality agreement with standstill provisions
was required of other interested parties, including Rosemore.
On January 26, 2000, Rosemore and certain of its affiliates executed a
confidentiality agreement with standstill provisions and, shortly thereafter,
began due diligence on Crown. Throughout February and March, Rosemore continued
its due diligence review and, in this regard, representatives of Crown and
Rosemore had several conversations relating to, among other things, legal and
financial due diligence matters.
At a January 27, 2000 meeting, the Crown Board took steps to institute
procedural safeguards in light of the fact that Rosemore would be conducting
due diligence on Crown. At the request of counsel for the Independent
Directors, Mr. Henry A. Rosenberg, Jr. submitted a letter to the Crown Board
recusing himself from the deliberations of the Board and Crown's management
with respect to any proposal made by any person (including Rosemore) concerning
any material transaction with or with respect to Crown, limiting his
involvement with Rosemore in any proposal made by Rosemore, and undertaking not
to discuss with any representative of Rosemore any information or knowledge
concerning any strategic proposals or transaction of Crown. Mr. Frank B.
Rosenberg also submitted a letter to the Crown Board at its January 27 meeting
in which he undertook not to share any information about proposals made to
Crown with Rosemore or to participate in any evaluation of proposals made to
Crown. Mr. Frank B. Rosenberg is the son of Mr. Henry A. Rosenberg, Jr. and an
officer of Crown, who has since been elected to the Crown Board. The
Independent Committee directed the senior management of Crown, in its
activities on the strategic alternatives, to report directly to the Independent
Committee and appointed the Executive Vice President and Chief Financial
Officer and the Senior Vice President--Legal to coordinate management's
activities for the Independent Committee. The Independent Directors requested
these procedural safeguards to help insure that Rosemore, now that it might
become a participant in the strategic review process, would not receive
information that could give Rosemore an improper advantage.
The Crown Board appointed Mr. Michael F. Dacey to chair the meetings of the
Board in Mr. Rosenberg's absence. In addition, the Crown Board established an
Independent Committee of the Board of Directors, consisting of Mr. Jack Africk,
Mr. George L. Bunting, Mr. Dacey, Mr. Thomas M. Gibbons, Ms. Patricia A.
Goldman, Mr. William L. Jews, and the Reverend Harold Ridley, S.J. Mr. Dacey
was designated to act as the chairman of the Independent Committee. The
Independent Committee thus consisted of all of Crown's directors other than Mr.
Henry A. Rosenberg, Jr. The Independent Committee was authorized to review and
evaluate strategic alternatives for Crown, including a possible transaction
with Rosemore, to enter into negotiations with
19
respect to the terms of a strategic transaction, including negotiating on
behalf of Crown a definitive transaction agreement, and to make a
recommendation to the Crown Board as to the course of action, if any, Crown
should pursue. The Crown Board also authorized the Independent Committee to
utilize the services of CSFB, as a financial advisor, and Skadden Arps as
special counsel to the Independent Committee, and to retain such other advisors
as the Independent Committee deemed necessary. The Independent Committee
believed that, in light of CSFB's reputation, experience and familiarity with
Crown's business, CSFB was well qualified to provide the Independent Committee
with independent, quality financial assistance and advice, including the
delivery of a fairness opinion.
Immediately following the January 27, 2000 Crown Board meeting, the
Independent Committee met and was briefed by CSFB on the progress of its
discussions with the third parties, as well as its analyses thus far with
respect to the possibility of refinancing Crown's debt. Skadden Arps reviewed
with the directors their fiduciary duties and the rights and powers of the
Independent Committee under applicable law and under Crown's charter and
bylaws. The Independent Committee directed CSFB to continue to pursue available
options.
On February 1, 2000, the Crown Board met and approved the adoption of a one-
year shareholder rights plan pursuant to which rights to purchase Crown
preferred stock were distributed to holders of its common stock on February 15,
2000. The rights plan was designed to help to ensure that any strategic
transaction undertaken by Crown would be one in which all stockholders could
receive fair and equal treatment, and to guard against partial tender offers,
open market accumulations and other abusive tactics that might result in
unequal treatment of stockholders. See "SHAREHOLDER RIGHTS PLAN" on page 70.
On February 9, 2000, Mr. Novelly wrote to the Crown Board stating that Apex
was willing to sign a confidentiality agreement without standstill provisions.
On February 15, 2000, Mr. Dacey, on behalf of the Independent Committee,
responded to the Apex letter and advised Apex that the Independent Committee,
after consulting with Skadden Arps, believed that a confidentiality agreement
with standstill provisions, as had been executed by all other interested
parties, was necessary to ensure a fair and orderly process to benefit all
stockholders and invited Apex to sign such a confidentiality agreement.
On February 11, 2000, CSFB and two members of the Independent Committee met
to perform due diligence, and discuss with the Independent Marketer's
management its preliminary proposal to combine the companies and achieve
synergies.
During the period between February 18 and February 22, 2000, representatives
of Rosemore and of the Independent Committee also discussed the status of
Rosemore's due diligence investigation in relation to the pre-existing
evaluation process.
The Independent Committee met with its financial and legal advisors on
February 18 and February 23. CSFB delivered an update on the status of its
efforts to evaluate strategic alternatives for Crown, including the status of
discussions with Apex, the Independent Marketer and Rosemore.
Following a Crown Board meeting on February 24, the Independent Committee
again met with its financial and legal advisors. CSFB advised the Independent
Committee that, based on discussions with Rosemore's advisors, CSFB believed
that Rosemore was still considering whether to make a cash bid for Crown but
had not come to a definitive position and was having difficulty justifying a
valuation in excess of the existing market price. The Independent Committee
instructed CSFB to continue to pursue discussions with Rosemore's financial
advisor. Specifically, CSFB was asked to advise Rosemore that any offer at the
then existing market prices of Crown common stock would be unacceptable to the
Independent Committee and that the Independent Committee intended to pursue
other alternatives.
On February 27, representatives of CSFB met with representatives of
Rosemore's financial advisor to discuss the valuation of Crown. CSFB informed
Aegis Muse that, in the absence of an acceptable offer from
20
Rosemore or any other party, the Independent Committee might make a preliminary
proposal to the Independent Marketer that Crown acquire the Independent
Marketer, and asked Aegis Muse whether, as the largest stockholder, Rosemore
would be supportive of such an acquisition.
Immediately following the meeting with CSFB, Aegis Muse informed Rosemore of
Crown's position regarding the Independent Marketer. Rosemore instructed Aegis
Muse to obtain more information on the Independent Marketer to facilitate
Rosemore's evaluation, as Crown's largest stockholder, of the preliminary
proposal to acquire the Independent Marketer. On February 29, at the request of
Aegis Muse and with the concurrence of the Independent Committee, CSFB provided
Aegis Muse with limited information about the Independent Marketer.
On February 28, 2000, Mr. Novelly, the chairman of Apex, advised Mr. Dacey
that Apex and the members of the Novelly Group would, as part of Apex's
confidentiality agreement, agree not to acquire shares of Crown Class B common
stock for six months. On March 7, 2000, Mr. Dacey advised Mr. Novelly that a
standstill provision for a minimum of six months covering both classes of stock
was necessary and that, if this was acceptable to Mr. Novelly, Mr. Dacey would
arrange for an execution copy of the confidentiality agreement to be sent to
Apex's legal counsel.
During this period, Rosemore and its advisors continued to conduct due
diligence on Crown and met with members of Crown's senior management with
respect to Crown's rationalization plan and Crown's valuation.
On March 6, 2000, the Rosemore board met and, by a 6-2 vote of the members
of the Rosemore board (with Mr. O'Grady recusing himself from the board's
deliberations and vote), authorized certain officers to submit, and, on March
6, Rosemore submitted, a letter to Crown proposing that Rosemore acquire all of
the outstanding shares of Crown common stock not owned by Rosemore at a price
of $8.35 per share in cash. As of the close of the market on March 6, 2000, the
market prices were $7.125 for the Class A common stock and $7.375 for Class B
common stock. The offer, which would expire on March 10, was conditioned on:
. negotiation of a mutually acceptable merger agreement and its approval
by Rosemore's board;
. unanimous approval of the merger and merger agreement by the Independent
Committee;
. approval of the merger by the requisite vote of Crown's stockholders;
and
. receipt of all necessary governmental approvals.
The letter also indicated that, as a stockholder of Crown, Rosemore would give
favorable consideration to any alternative proposal made by a third party that
Rosemore's board believed would meet Rosemore's strategic and tax objectives
and that Rosemore considered fair to and in the best interests of Rosemore and
its stockholders.
At the March 6, 2000 Rosemore board meeting, Aegis Muse also advised
Rosemore that, based upon the information provided by CSFB, the transaction
with the Independent Marketer that CSFB had indicated the Independent Committee
might pursue was unlikely to result in the value to Crown's stockholders
(including Rosemore) that CSFB had anticipated. Therefore, Aegis Muse advised
Rosemore that the Independent Marketer merger proposal did not constitute a
superior alternative to a cash offer at or above the then current share price.
In discussions with CSFB, Aegis Muse orally indicated its belief that, after
reviewing the information provided to it on the Independent Marketer, Rosemore
was not likely to support the Independent Marketer's preliminary proposal to
merge with Crown.
In connection with the March 6 Rosemore board meeting, Aegis Muse delivered
to the Rosemore board a written report on the merger then being contemplated by
the Rosemore board. See "--Previous Financial Report Prepared by Aegis Muse" on
page 47. Rosemore did not request, and Aegis Muse did not render, a report in
connection with the transaction contemplated by the December 17, 2000 merger
agreement, nor has Aegis Muse updated the report that it delivered in
connection with the March 6 Rosemore board meeting.
21
The Independent Committee held a meeting with its legal and financial
advisors on March 7, 2000. After discussing the terms of the Rosemore offer,
the members of the Independent Committee unanimously determined that the
Rosemore proposal was unsatisfactory. The Independent Committee authorized its
advisors to inform Rosemore of its desire to continue to work with Rosemore to
determine whether mutual agreement could be reached and to request an extension
of the proposal from Rosemore. In deciding that the proposal was
unsatisfactory, the Independent Committee particularly focused on the price.
The Independent Committee also believed that a procedural safeguard, such as a
requirement that a majority of non-Rosemore stockholders support the offer,
would enhance the bid. Further, the Independent Committee concluded that a
tender offer structure that delivered value to stockholders as quickly as
possible would be desirable. The Independent Committee also determined not to
pursue discussions with the Independent Marketer as it believed it was unlikely
that Rosemore would support an acquisition of the Independent Marketer, and
that Rosemore's support as a stockholder would be necessary to consummate such
an acquisition.
On March 8, 2000, Crown received a conditional proposal from an entity
identified as Olympic Resources Limited. As this potential bidder was unwilling
to provide information about itself, its principals and its potential sources
of financing to CSFB, as was requested of all the interested parties, the
Olympic proposal was not further considered.
On March 9, 2000, a purported class action lawsuit on behalf of the public
stockholders of Crown was filed by Ms. Betty Maiden against Crown, the members
of the Crown Board and Rosemore. The lawsuit sought to enjoin Crown and the
Board from accepting Rosemore's bid and alleged, among other things, that the
Independent Committee members breached their fiduciary duties by facilitating
Rosemore's proposed acquisition of Crown for unfair and inadequate
consideration, self-dealing, failing to consider other potential bidders and
colluding with Rosemore in improper and coercive tactics. Ms. Maiden is a Crown
stockholder and a member of the union that was locked out of Crown's Pasadena,
Texas refinery in February 1996. The plaintiff also sought to receive
compensatory and "rescissory" damages. The complaint was subsequently amended
and later dismissed.
Also on March 9, 2000, Crown received a proposal from Apex to acquire all of
the outstanding Crown common stock held by stockholders other than the Novelly
Group, for $9.20 per share in cash. Apex indicated that it remained willing to
explore an all stock merger transaction, previously described to Crown in the
November 8, 1999 Apex proposal, which Apex claimed would value Crown common
stock at a minimum of $10.00 per share. By its terms, the offer was open until
March 17, 2000.
On March 10, 2000, Crown and its advisors received proposed forms of merger
agreements from both Apex and Rosemore. The Apex agreement contained the same
conditions as Apex's November 8, 1999 proposal, including due diligence and
financing conditions. It additionally provided that Apex could terminate the
agreement:
. with no liability to Crown, if it were dissatisfied for any reason with
any matter that arose in its 30-day due diligence investigation of Crown
which was to be commenced following execution of the agreement; or
. with a maximum liability to Crown of $500,000, if, at any time, the Apex
board of directors determined that there was a more desirable use of the
funds that would be required to acquire Crown.
The Rosemore merger agreement contemplated that:
. the transaction be structured as a merger, rather than as a tender
offer;
. a vote of two-thirds of the votes entitled to be cast by the Crown
stockholders be required to approve the transaction;
. approval be required by the Crown Board, including the unanimous
approval of the Independent Committee; and
22
. a "topping fee" (a fee that would be payable by Crown to Rosemore if
Crown terminated the merger agreement and subsequently consummated a
transaction with another party at a higher price) and Rosemore's
transaction expenses be paid by Crown under certain circumstances were
the merger not to occur.
In a letter dated March 10, 2000 to Crown, Rosemore extended its offer to
March 17, 2000 to facilitate the ongoing negotiations.
In a letter to Apex's counsel, dated March 13, 2000, McGuireWoods, at the
direction of the Independent Committee, advised Apex that its proposal was
under review by Crown and that improvements could be made to the proposal to
further its consideration. These improvements included entering into a
confidentiality agreement, immediately commencing due diligence and eliminating
the due diligence and financing conditions and Apex's corresponding termination
right. Apex was also requested to structure its proposal as a tender offer and
to eliminate the two termination conditions discussed above.
In telephone conversations with Shearman & Sterling, Skadden Arps relayed
the ways in which the Independent Committee believed Rosemore could improve the
legal terms of its offer. Specifically, it was proposed that the transaction be
structured as a tender offer, that consummation of the transaction be
conditioned on the approval of a majority of non-Rosemore stockholders, and
that there be no Crown obligation to pay Rosemore any fees or expenses in the
event of termination of the agreement.
At a meeting of the Independent Committee on March 14, 2000, Skadden Arps
reviewed with the Independent Committee the terms of the merger agreements
proposed by Rosemore and Apex, and the status of the negotiations of the
agreements, as well as the indication of interest Crown had received from
Olympic Resources Limited. CSFB summarized for the Independent Committee its
work to date. CSFB discussed its various approaches to valuation including,
among others, discounted cash flow analysis and analyses of comparable
transactions and comparable companies.
In a letter to the Crown Board, dated March 15, 2000, the U.S. subsidiary of
a non-U.S. oil company (the Non-U.S. Oil Company) expressed its interest in
acquiring all of the outstanding shares of Crown common stock for cash at an
undisclosed price it stated would be above the offers announced by Rosemore and
Apex. The proposal was conditioned on satisfactory completion of a 45 to 60-day
period of due diligence and negotiation and execution of a mutually
satisfactory definitive agreement. The Non-U.S. Oil Company had previously
entered into a confidentiality agreement including standstill provisions with
Crown on February 14. CSFB informed the Non-U.S. Oil Company that, given the
already extensive length of the process and the fact that the Non-U.S. Oil
Company had signed the confidentiality agreement entitling it to commence due
diligence a month ago, a 45-day due diligence period was too long.
By March 15, 2000, Skadden Arps had delivered to counsel for Rosemore and
Apex mark-ups of their respective draft merger agreements reflecting, among
other things, the changes previously proposed to each of the parties. In
addition, both Rosemore and Apex were asked to extend the expiration dates of
their offers.
On March 16, 2000, Apex advised Crown that it was extending the expiration
date of its proposal to April 17. Also on March 16, representatives of Crown,
Skadden Arps, CSFB, McGuireWoods, and Shearman & Sterling participated in a
conference call to discuss the draft of the merger agreement between Rosemore
and Crown. In a letter dated March 17 to Crown, Rosemore extended its deadline
to April 17 to give the Crown Board the opportunity to explore with Apex
whether the conditions included in the Apex proposal could be removed without
the time pressure created by Rosemore's earlier deadline.
On March 17, 2000, counsel for Apex contacted Skadden Arps and requested a
meeting between Mr. Novelly, the chairman of Apex, and the Independent
Committee to discuss ways in which a transaction between Apex and Crown might
be structured so that Crown remained a publicly traded company. On March 21,
after consultation with Mr. Dacey, Skadden Arps advised counsel for Apex that
the Independent Committee would not meet with Apex until it had executed a
confidentiality agreement with standstill provisions.
23
On March 22 and March 23, 2000, representatives of Skadden Arps,
McGuireWoods, and Crown participated in telephone conversations with
representatives of Shearman & Sterling to discuss the draft merger agreement
between Rosemore and Crown.
On March 23, 2000, the Independent Committee held a telephonic meeting in
which its financial and legal advisors participated. The Independent Committee
determined that bringing the process to a timely conclusion was in the best
interests of Crown and its stockholders, and, to that end, it directed CSFB to
request that interested parties submit their "best and final offers" to Crown
by March 29, 2000. In this regard, the Independent Committee noted that the
Non-U.S. Oil Company, which had signed a confidentiality agreement almost six
weeks before, had failed to commence due diligence. The Independent Committee
believed that this delay raised questions regarding whether the Non-U.S. Oil
Company would ever become a serious bidder, and determined not to jeopardize
the progress made to date with an extended delay. On March 24, in accordance
with the Independent Committee's request, CSFB contacted Apex, the Non-U.S. Oil
Company and Rosemore.
On March 24, 2000, at the request of Crown, Rosemore agreed to provide up to
$66 million in performance guarantees relating to Crown's purchase of crude
oil, feedstock and other petroleum products. Rosemore has since reduced its
commitment to provide guarantees to a level not to exceed $40 million, and the
guarantee arrangement is currently scheduled to expire on January 31, 2001. See
"RELATED PARTY TRANSACTIONS" on page 72.
On March 27, 2000, Shearman & Sterling distributed to Crown and its advisors
a revised draft of the merger agreement between Rosemore and Crown.
Also on March 27, 2000, the Non-U.S. Oil Company contacted CSFB to convey
that its board of directors had a meeting scheduled for later in the week to
consider the necessary funding for a possible due diligence investigation of
Crown. The Non-U.S. Oil Company indicated that it believed the transaction was
economically viable at a price per share in the range of $10.00 but that it
would need five weeks to conclude due diligence. The Non-U.S. Oil Company was
again advised that the strategic process had been ongoing for several months
and that it needed to begin due diligence as soon as possible for its offer to
be considered. The Non-U.S. Oil Company neither commenced due diligence nor
submitted a final offer.
From March 27 through March 29, 2000, Crown and Rosemore and their
respective legal and financial advisors negotiated the terms of the merger
agreement and the related documents and schedules.
On March 28, 2000, the Rosemore board authorized Mr. Edward L. Rosenberg to
submit a revised proposal to Crown increasing the consideration for the Crown
common stock to $9.35 per share in cash, with authority to increase the
consideration up to $9.50 per share, if necessary. At this time, Aegis Muse
confirmed to the Rosemore board that a purchase price of $9.50 per share was
fair to Rosemore (other than to Rosemore's shareholders or affiliates) from a
financial point of view.
On March 29, 2000, Rosemore advised Crown that it was increasing its offer
to acquire all of the outstanding shares of Crown common stock to $9.35 per
share in cash, and that such offer would expire on March 31. It also indicated
that it had satisfactorily completed its due diligence investigation of Crown.
Rosemore submitted a revised draft of its proposed form of merger agreement to
Crown and its advisors which contemplated that:
. the transaction would be structured as a merger, rather than as a tender
offer;
. Rosemore would not be required to close the merger if an event of
default existed under Crown's indenture covering the 10 7/8% senior
notes or would occur as a result of the merger;
. a stockholder vote of two-thirds of the votes entitled to be cast would
be required to approve the merger;
. Rosemore would not be entitled to a topping fee, but would be entitled
to reimbursement of expenses if the Crown stockholders did not approve
the merger; and
24
. Crown's stock plans would be amended to clarify that the merger would
not trigger certain benefits under the plans.
Also on March 29, 2000, Apex confirmed its cash offer of $9.20 and submitted
a revised draft of the proposed merger agreement. In accordance with the
Independent Committee's request, the agreement provided for a revised
transaction structure of a tender offer for all outstanding shares followed by
a second-step merger. The tender offer would also be conditioned on
satisfactory completion of due diligence, obtaining replacement financing for
Crown's 10 7/8% senior notes and the tender of 66 2/3% of the shares not owned
by Apex. Apex indicated that it was actively pursuing replacement financing for
the 10 7/8% senior notes. The agreement also provided that, in the event the
agreement was terminated under certain circumstances and, within 18 months of
such termination, Crown entered into an agreement with respect to another
acquisition proposal, Crown would be obligated to pay Apex the higher of $1
million or 10% of the excess amount of the consideration received in the third-
party transaction over the consideration proposed by Apex.
In its March 29 letter, Apex also reiterated its proposal to engage in a
stock-for-stock merger with Crown that it claimed would value Crown's stock at
a minimum of $10 per share. This offer was similarly conditioned on completion
of due diligence and obtaining replacement financing for the 10 7/8% senior
notes. The Apex proposal also provided for a "shortfall distribution" to all
stockholders on December 31, 2001 if the average closing price of the shares
for the combined company did not reach $12.00 for a period of at least five
consecutive trading days prior to that date. The distribution would be equal to
the difference between $12.00 and the highest five-day closing price during the
period. Apex also advanced a third alternative proposal to purchase 3.5 million
to 4.5 million newly issued Crown Class A common shares in a private placement
at a price of $9.50 per share. Such proposal also included a shortfall
distribution and was not conditioned on completion of due diligence, but was
conditioned upon suspension of Crown's shareholder rights plan and the
availability of replacement financing for the 10 7/8% senior notes. Apex
further indicated that it had instructed its financial advisors to schedule a
meeting with CSFB to discuss its various proposals. Apex also submitted a
revised form of a proposed acquisition agreement.
The Independent Committee met on March 29 and was updated by its advisors on
both the Apex and Rosemore proposals. The Independent Committee noted that the
Apex proposal remained subject to significant conditions and that the Rosemore
proposal declined to structure the offer as a tender offer or to include a
provision that the offer be found acceptable to a majority of the public
stockholders other than Rosemore. The Independent Committee observed that
Rosemore agreed to eliminate the topping fee provision. The Independent
Committee believed that the price offered was still not sufficient and that the
requirement that Rosemore's expenses be paid by Crown if its proposal was not
approved by Crown's stockholders was not acceptable. To permit continued
negotiations with Rosemore on these and other outstanding issues, the
Independent Committee directed CSFB to request an extension of Rosemore's offer
beyond its Friday, March 31 deadline.
The Independent Committee reconvened on March 30, 2000, with its legal and
financial advisors present. The Independent Committee discussed in detail the
three variations of the Apex offer, and compared the terms of those proposals
to the terms of the Rosemore proposal. The Committee focused on the cash
proposals of both bidders because this form of consideration provided a more
certain value for stockholders and because the Apex stock alternatives would
require Rosemore to remain invested in Crown in a minority position, which was
not an alternative the Independent Committee members believed Rosemore would
accept. All of the Apex proposals would fail without the support of Rosemore,
Crown's largest stockholder. Although the Independent Committee noted that the
cash consideration offered by Rosemore was greater than that offered by Apex,
the most significant factor distinguishing the proposals was the conditional
nature of the Apex bid. Specifically, the Apex cash offer still remained
subject to a due diligence condition, but Apex continued to refuse to enter
into a confidentiality agreement including standstill provisions which was a
prerequisite to beginning due diligence. The Independent Committee particularly
noted that Apex's cash offer was conditioned on obtaining a lender commitment
to refinance Crown's 10 7/8% senior notes. The Independent Committee noted that
these conditions
25
were not contained in Rosemore's proposal, and, as a result, Rosemore's
proposal was more certain to be consummated than the Apex cash offer.
Accordingly, the Independent Committee deemed Rosemore's proposal to be
superior because the absence of such due diligence and financing conditions
suggested that there was a greater likelihood that a merger with Rosemore would
be completed. Following this discussion, the Independent Committee directed
CSFB to request a meeting with Apex's financial advisors to determine whether
Apex's proposal could be improved through the elimination of conditions or
improved consideration. The Independent Committee also determined that Mr.
Dacey should contact Rosemore to discuss price, expense reimbursement and any
other outstanding issues, and to request an extension of Rosemore's offer.
On March 30, 2000, CSFB contacted Apex and its legal advisors to review
Apex's offer and to request a higher cash bid with no conditions. CSFB also
requested that Apex enter into a confidentiality agreement including standstill
provisions with Crown, which request was refused. CSFB was informed that no
commitment had been obtained with respect to the refinancing of the 10 7/8%
senior notes, which was a condition to two of Apex's three proposals. CSFB was
also advised that the proposed "shortfall distribution" would be an obligation
of the surviving corporation, not Apex.
On March 31, 2000, in an Independent Committee meeting with its advisors
participating, Mr. Dacey reported on his conversations with Mr. Edward L.
Rosenberg, the president of Rosemore. Rosemore agreed to an extension of its
offer to April 3, so that the two parties and their advisors could continue to
negotiate price, the issue of Rosemore's expense reimbursement and other
outstanding issues with respect to the merger agreement. CSFB advised the
Independent Committee of the status of its discussions with Apex's advisors.
On March 31, 2000, at the request of Crown, Rosemore agreed to provide Crown
with cash borrowing availability as permitted under Crown's indenture relating
to the 10 7/8% senior notes. The agreement pursuant to which such cash
borrowing capacity was available has since been cancelled. See "RELATED PARTY
TRANSACTIONS" on page 72.
On April 2, 2000, an Independent Committee meeting was held with all
advisors participating. Mr. Dacey reported that, after discussions with Mr.
Edward L. Rosenberg, the expense reimbursement issue had been resolved such
that reimbursement would be made only if Crown consummated a competing
transaction. He also reported that most of the outstanding issues in the
agreement had been resolved except for the form of severance-related waivers
from Crown executives and certain other benefits-related issues which were to
be negotiated over the course of the coming week directly between Rosemore's
representatives and the affected employees. Rosemore declined to further
discuss price until these outstanding issues were resolved, and Rosemore agreed
to extend its offer indefinitely to permit such resolution, although it
reserved the right to withdraw such extension at any time.
From March 30 to April 6, 2000, Crown's advisors and senior management, the
Independent Committee's advisors, and Rosemore and its advisors negotiated the
terms of and worked to finalize open issues in the merger agreement, related
documents and disclosure schedules, including the price per share of Crown
common stock, certain employee benefits issues and the terms of certain waivers
to be executed by key employees of Crown in connection with the merger.
On Friday, April 7, 2000, the Independent Committee again met with its
advisors. The members were informed that all of the previously open issues in
the merger agreement had been satisfactorily resolved and that the waivers
requested by Rosemore had been executed. Skadden Arps informed the Independent
Committee that advisors to Apex had indicated on April 6, 2000 that Apex was
now willing to execute a confidentiality agreement with standstill provisions
but that it would require 30 days to complete due diligence and requested that
the Independent Committee hold any further action in abeyance while it
completed its investigation. The members of the Independent Committee noted
that Apex had repeatedly been urged to sign the confidentiality agreement over
the past several weeks but had declined to do so. The Independent Committee
therefore unanimously rejected the request to delay further the process that
had been ongoing for more than a year and thereby jeopardize a fully negotiated
contract with Rosemore. The Independent
26
Committee also believed that it would be difficult to obtain stockholder
approval for an Apex transaction, and that a transaction with Rosemore had a
substantially higher likelihood of consummation.
Members of the Independent Committee also considered management's concern
that, as a result of the losses sustained by Crown over the last five years,
the capital intensive nature of its business, the use of significant cash
resources to finance required environmental related expenditures, the
substantial consolidation underway in the refining and marketing industries,
the uncertainty created by volatility in crude oil prices and refining and
retail margins, and the working capital needs associated with the run-up in
crude oil prices, Crown would be constrained in its ability to maintain the
pace of improvements necessary to remain competitive without external financial
support. The Independent Committee noted that Rosemore has provided financial
support through its willingness to loan money to Crown and guarantee certain of
its trade obligations on an unsecured basis, and to participate in Crown's $125
million secured credit facility. The Independent Committee further noted that
management believes that there are no other providers of this type of support
on comparable terms and conditions. The Independent Committee considered that
Rosemore was under no obligation to continue its financial support of Crown in
the future, and believed that a termination or reduction of the support could
require Crown to seek additional financing that either may not be available or,
if available, would be more costly to Crown. Given these factors, the
Independent Committee viewed the sale of Crown, now at a price it believed to
be fair, as more beneficial to unaffiliated stockholders than risking a further
deterioration of Crown's business and prospects and decreased values for
stockholders in the future. The Independent Committee's view took into account
margin improvements at that time that the Independent Committee believed might
be short-term in nature and not a change in Crown's long-term business
environment.
Mr. Dacey left the meeting and called Mr. Edward L. Rosenberg. On the call,
Mr. Dacey conveyed to Mr. Rosenberg that the Independent Committee would be
willing to recommend the merger agreement to the Crown Board if the offer price
were increased to at least $9.50 per share from $9.35 per share. After
discussion, Mr. Rosenberg, on behalf of Rosemore, agreed to raise the price to
$9.50 per share. Mr. Dacey returned to the meeting and reported the increased
offer to the Independent Committee.
CSFB then gave its oral opinion that the aggregate merger consideration was
fair, from a financial point of view, to the stockholders of Crown, other than
Rosemore and its affiliates, which opinion was subsequently confirmed in
writing. Skadden Arps reviewed with the members of the Independent Committee
their fiduciary duties and the terms of the merger agreement. The Independent
Committee then unanimously moved to recommend to the Crown Board that it accept
the Rosemore proposal and further recommend stockholder approval of the merger
and merger agreement.
Immediately following the meeting of the Independent Committee, the Crown
Board convened a meeting, with all directors present except for Mr. Henry A.
Rosenberg, Jr. who had recused himself. Based on the recommendation of the
Independent Committee and the fairness opinion of CSFB, among other things, the
Crown Board unanimously voted to approve a merger with Rosemore on the terms
set forth in the merger agreement presented to it and to recommend that the
stockholders approve the merger and merger agreement.
In connection with its approval of the merger and merger agreement, the
Crown Board modified the shareholder rights plan, dated February 1, 2000, by
amending the definition of "Final Expiration Date" to provide that the earlier
of the close of business on February 14, 2001 or that time which is immediately
prior to acceptance by the State Department of Assessments and Taxation of
Maryland of articles of merger consummating the merger between Crown and RAC
will constitute the final expiration date under the rights plan. The Crown
Board also declared the merger and merger agreement to be an approved
transaction under the rights plan, so that the execution of the merger
agreement that was under discussion would not result in a distribution date
under the rights plan or the separation of the rights from the Crown common
stock to which they are attached. In addition, the Crown Board nominated
individuals identified by Rosemore for election as directors of Crown following
the consummation of the merger.
On Friday evening, April 7, 2000, Crown, Rosemore and RAC executed the
merger agreement.
27
On May 1, 2000, Crown received an amended transaction proposal from Apex. In
its amended cash merger proposal, Apex offered to purchase all of the
outstanding shares of Crown common stock not owned by it for $10.00 per share.
Although the proposal remained conditioned on the receipt of financing
sufficient to repay Crown's 10 7/8% senior notes, the prior due diligence
condition was eliminated. With respect to the alternative proposals previously
advanced by Apex, Apex increased the price at which it offered to purchase
between 3.5 million and 4.5 million shares of Crown Class A common stock in a
private placement from $9.50 per share to $10.00 per share, and affirmed its
offer relating to a stock-for-stock merger, which Apex asserts would value the
Crown common stock at $10.00 per share. In addition, Apex stated that it would
post a letter of credit in the amount of $30 million to secure the "shortfall
distribution" proposed in connection with the latter two alternative proposals.
On May 10, 2000, the Independent Committee met with its advisors and
discussed the amended Apex proposal. The Independent Committee was briefed by
CSFB on the current market for debt securities and the feasibility of issuing
debt securities in this market. At the meeting, the Independent Committee
determined to continue to review the Apex proposal.
On May 15, 2000, Crown filed its preliminary proxy statement for its special
meeting to be held on August 24, 2000, which was amended on June 22 and July
12, filed definitively on July 24, 2000 and further amended on July 25, 2000.
On May 17, representatives of McGuireWoods inquired of Mr. Novelly's legal
advisors whether Mr. Novelly would agree to the omission of his shareholder
proposal calling for the sale of Crown from the proxy statement relating to the
April 17, 2000 merger agreement and to the inclusion of such proposal in the
proxy statement for any subsequent Crown stockholder meeting to be held in the
event the merger and merger agreement were not approved by the Crown
stockholders. Mr. Novelly assented to such request by letter, dated May 22,
2000, from Mr. Novelly's legal advisors to Skadden Arps.
Also in the May 22, 2000 letter, the Independent Committee was requested to
indicate whether it had rejected the Apex proposal and, additionally, to
release a proposed financing source from restrictions that Apex stated
prevented it from entering into discussions with the financing source. By
letter dated May 24, 2000, McGuireWoods advised Apex that Crown's
confidentiality agreement with the financing source does not preclude the
financing source from dealing with Apex so long as information furnished to it
by Crown is not disclosed to Apex.
On May 23, 2000, Mr. Dacey contacted Rosemore to request a limited waiver
from Rosemore of Crown's obligation under the merger agreement not to encourage
any inquiries concerning a transaction competitive with the merger so that the
Independent Committee could communicate with Apex with respect to the Apex
proposal.
Pursuant to a limited waiver granted to Crown by Rosemore, by letter dated
May 23, 2000, Mr. Dacey, on behalf of the Independent Committee, informed Apex
that it continued to evaluate the Apex proposal and, to that end, sought
confirmation that the Apex proposal was still in effect.
In a letter dated May 25, 2000, Apex confirmed that its proposals remained
open and restated its willingness to sign a confidentiality agreement with a
standstill provision if Crown would cease activities with respect to the
Rosemore merger proposal while Apex conducted a 30-day due diligence review.
Pursuant to a second limited waiver by Rosemore dated May 26, 2000, the
Independent Committee, by letter also dated May 26, indicated to Apex its
willingness to arrange a meeting between Crown's and Apex's financial advisors
and two principals from each of Crown and Apex to discuss Apex's plans and
sources of financing in connection with its proposed refinancing of Crown's 10
7/8% senior notes. By letter to Crown dated May 31, 2000, Apex requested that
the scope of the matters to be discussed at the proposed meeting be expanded.
In a letter to Apex dated June 1, Mr. Dacey, on behalf of the Independent
Committee, reiterated that the purpose of the meeting would remain limited to
an assessment of the financing contingency in Apex's proposal.
28
At a meeting of the Independent Committee and its advisors on June 1, 2000,
Mr. Dacey briefed the Independent Committee on the status of communications
with Apex, and the Independent Committee determined to continue efforts to
schedule a meeting with Apex and its financial advisor. The Independent
Committee was further briefed on the status of the proceedings with respect to
the proposed merger with Rosemore.
On June 5, 2000, pursuant to the April 7, 2000 merger agreement, Rosemore
requested Crown to amend the size of the Crown Board to be effective from the
next succeeding meeting of the Crown stockholders at which directors are to be
elected following the effective time of the merger and to amend some of its
employee benefit plans. These actions were taken at the regular Crown Board
meeting on June 29, 2000.
On July 14, 2000, Mr. Novelly and Mr. Wahl, together with Apex's financial
advisors, met with Mr. Dacey and Crown's financial advisors to discuss the
financing contingency in Apex's proposal. Mr. Novelly provided a letter
(Arrangement Letter) from a lender setting forth a proposal to arrange and
agent a credit facility to refinance Crown's 10 7/8% senior notes and secured
indebtedness. This proposed facility was subject to numerous conditions,
including completion of a field survey acceptable to the lender, receipt of
appraisals acceptable to the lender, successful syndication of the facility,
approval of the lender's credit committee and an unspecified guarantee and an
equity infusion from Apex in an unspecified amount.
At this meeting Mr. Novelly stated the unsolicited intention of Apex to
raise its cash bid from $10.00 to $10.50 per share. Mr. Novelly also expressed
Apex's willingness to pursue a stock-for-stock transaction valued at $10.50 per
share with contingent value rights entitling holders thereof to cash payments
equal to the difference between $12.50 and the highest average closing price of
the stock over certain periods. Mr. Novelly also provided a letter from a
second lender that would, subject to its credit committee approval, issue a
letter of credit to support the contingent value right obligation. In addition,
during the meeting, Apex's financial advisor provided Crown's financial advisor
with additional information concerning the revised Apex proposal.
On July 17, 2000, CSFB and the Independent Committee's legal advisors
discussed the substance of the July 14 meeting and the Arrangement Letter with
Mr. Dacey. Also on July 17, Apex filed an amendment to its Schedule 13D stating
that it had increased its bid for Crown in the manner previously indicated by
Mr. Novelly.
On July 18, the Independent Committee met with its financial and legal
advisors to discuss the Arrangement Letter and the modified Apex proposal. The
Independent Committee discussed the various conditions in the Arrangement
Letter and expressed its view that it was more in the nature of an indication
of interest in facilitating a transaction rather than a firm commitment to lend
the amounts necessary to refinance Crown's debt. CSFB concurred with the
Independent Committee's view. The Independent Committee concluded that the
letter did not alleviate the Independent Committee's previous concerns
regarding the conditional nature of the Apex proposal.
The Independent Committee also noted that consummation of either the cash or
the stock-for-stock Apex alternative proposal would require approval of Crown's
stockholders, and that without the support of Rosemore this stockholder
approval could not be obtained. Accordingly, unless the Independent Committee
believed that Rosemore would vote for the modified Apex proposal, the higher
per share price contained in the modified Apex proposal, even assuming
financing could be obtained, would prove illusory and fail to deliver value to
stockholders. The Independent Committee members did not believe Rosemore would
support the modified Apex proposal because of the conditional nature of the
proposal and because it would require Rosemore to relinquish its position as
Crown's largest stockholder. The Independent Committee determined to confirm
its belief by asking Rosemore if it would support either form of the modified
Apex proposal. Such inquiry was made on July 18, 2000. On July 19, 2000,
Rosemore stated in a letter addressed to the Independent Committee that while
Rosemore would seriously evaluate any credible proposal, it did not support the
revised Apex proposal. In addition, Rosemore stated that if the Crown
stockholders do not approve the merger, Rosemore would have to reconsider its
willingness to continue to provide financial support to Crown.
On July 25, 2000, Crown first began mailing to its stockholders its
definitive proxy statement relating to the April 7, 2000 merger agreement.
29
By letter dated July 25, 2000, Apex disputed the Independent Committee's
stated reasons for not pursuing Apex's acquisition proposals and reiterated
that Apex had authorized Crown to contact its lenders to confirm that the Apex
financing proposals were not conditional. Apex also requested that Crown amend
its rights plan or redeem its rights to permit Apex to make a tender offer free
from the rights plan.
On July 27, 2000, the Independent Committee met with its legal and financial
advisors and considered Apex's July 25 letter. After discussion, the
Independent Committee authorized Mr. Dacey to reply, which he did by letter
dated July 27, 2000. In the letter, Mr. Dacey indicated that the Independent
Committee continued to believe that Apex's evidence of financing was
conditional and observed that Crown's rights plan permits fair tender offers
for all of the Crown stock coupled with a back-end merger. The letter further
noted that, were a tender offer made for 100% of the Crown stock, the
Independent Committee would consider the terms and conditions of such an offer
and take appropriate action regarding the rights plan for the benefit of all
Crown stockholders.
On July 31, 2000, Golnoy Barge Company, Inc. and Apex, two entities
beneficially owned by Mr. Novelly, filed a preliminary proxy statement, which
was amended on August 11 and filed definitively on August 14, 2000, and sent
letters to stockholders on August 9 and August 17, 2000, asserting, among other
things, that the Rosemore merger offered inadequate value.
The Independent Committee met with its advisors on August 3, 2000 and again
on August 9 and discussed the status of Crown's proxy solicitation process in
connection with the April 7, 2000 merger agreement, as well as the
correspondence between Mr. Novelly, Crown and Crown's stockholders.
At an August 23, 2000 meeting of the Crown Board, the Board was informed
that the April 7, 2000 merger agreement would probably not receive the
requisite stockholder approval. The Crown Board authorized a Crown officer to
execute and deliver a notice of termination of the merger agreement if
stockholder approval was not obtained. At a meeting of the Independent
Committee on the same day, it was determined that, if stockholder approval were
not obtained, Mr. Dacey should meet with Mr. Novelly following the special
meeting to request Apex to present Crown with a definitive proposal to acquire
all of Crown's stock at $10.50 per share in a fully-financed, all-cash
unconditional tender offer to be commenced by September 29, 2000 and followed
by a back-end merger. The Independent Committee also determined that, if such
an offer were not received, Crown would focus on other strategic alternatives,
which might include a strategic redirection or sale of assets and the
continuation of overhead and cost structure reduction initiatives.
Rosemore was told of Crown's intent to terminate the merger agreement and to
encourage Apex to present a definitive acquisition proposal in the event that
the Rosemore merger did not receive the requisite stockholder approval.
Rosemore indicated that it would consider selling its Crown shares in any
credible fully financed offer for cash.
The Rosemore merger was submitted to Crown's stockholders for approval at a
special meeting of stockholders on August 24, 2000. The merger agreement did
not receive the requisite affirmative vote of two-thirds of the votes entitled
to be cast and, following the meeting, the merger agreement was terminated by
both Crown and Rosemore.
On the same day, Mr. Dacey met with Mr. Novelly and his advisors and
requested that Apex make a definitive tender offer proposal by September 29,
2000 on the terms and conditions outlined by the Independent Committee,
including the requirement that Apex have in place firm financing commitments
to, among other things, refinance Crown's 10 7/8% senior notes and secured
indebtedness. Mr. Novelly agreed to work toward the Independent Committee's
September 29, 2000 deadline, and Mr. Dacey recommended that Apex's financial
advisors contact Rosemore's advisors to determine Rosemore's interest in the
proposed tender offer. Further, in connection with the proposed transaction,
Mr. Dacey again asked Mr. Novelly to enter into a confidentiality and
standstill agreement with Crown that would prohibit Apex and its affiliates
from acquiring Crown stock, other than pursuant to the offer, through September
29, 2000. Following the meeting, Mr. Dacey briefed the Independent Committee on
his conversation with Mr. Novelly, and, on August 24, Mr. Novelly delivered to
Crown an executed confidentiality and standstill agreement on behalf of Apex
and the Novelly Group.
30
On August 25, Rosemore filed an amendment to its Schedule 13D, stating,
among other things, that Rosemore would continue to evaluate its investment in
Crown to determine whether it was appropriate to remain an investor or to
pursue another opportunity to acquire 100% of Crown, and that it would also
seriously consider any credible third-party offer to acquire 100% of Crown's
capital stock for cash or highly liquid securities that the Independent
Committee supported.
On August 29, 2000, there was an initial meeting of Crown and Apex
executives in Baltimore, followed by another meeting attended by
representatives of Apex, Rosemore, CSFB, Bear Stearns (financial advisor to
Apex) and Aegis Muse. Beginning on August 29 and through the month of October,
Apex and its advisors conducted a due diligence investigation of Crown,
including meeting with Crown management, inspecting Crown facilities and
reviewing financial, tax, legal and environmental matters.
The Crown Board met on September 20, 2000 with Skadden Arps and
McGuireWoods. At the meeting, the Board was briefed on the status of Apex's due
diligence investigation and the Board discussed the interplay between the
proposed Apex offer and the timing of Crown's annual stockholders meeting. The
Board decided to call for the annual meeting to be held on October 26, 2000,
with the understanding that such meeting could be postponed if necessary to
allow more time to explore an Apex offer.
The Crown Board met again on September 26, 2000, with Skadden Arps and
McGuireWoods participating. The Board reviewed its earlier decision to approve
a sale and leaseback transaction covering certain Crown retail marketing
properties, in light of a financing alternative orally proposed by Mr. Novelly
to Mr. Dacey. Mr. Dacey explained Mr. Novelly's proposal to pre-fund $15
million of purchases of finished petroleum products for delivery in mid-
October, and Mr. Novelly's opposition to the sale and leaseback transaction as
an impediment to his tender offer proposal. After deliberation, the Crown Board
concluded that Crown's financial needs dictated that Crown proceed with the
sale and leaseback transaction and that Mr. Novelly's financing proposal was
not an adequate substitute. Mr. Dacey was directed to explain the reasoning
behind the Crown Board's conclusion to Mr. Novelly.
In a letter dated September 26, 2000 to Mr. Dacey, Apex requested that the
September 29, 2000 deadline be extended to permit Apex to complete its due
diligence. The Independent Committee met on September 27, 2000 and decided to
grant Apex's request. By letter dated September 27, 2000, Skadden Arps
indicated to Apex that the Independent Committee had extended the deadline for
Apex to complete its due diligence and commence its tender offer until 5 p.m.
on October 31, 2000. The Independent Committee also determined that, given this
extension, the proposed October 26, 2000 annual stockholders meeting should be
further postponed.
Following a number of discussions between their respective advisors, on
October 3, 2000, Crown and Apex finalized an agreement requiring Crown to keep
certain Apex information confidential, including the terms of its proposed
financing for a transaction.
On October 5, 2000, Apex's advisors delivered to the Independent Committee's
advisors a draft commitment letter dated October 2, 2000 from a lender to Apex
pursuant to which the lender would agree to provide Apex and its acquisition
vehicle funds sufficient to consummate the tender offer, refinance Crown's 10
7/8% senior notes and secured indebtedness, reimburse Rosemore for its credit
support and provide working capital.
On October 10, 2000, Mr. Novelly, as chairman of Apex, and his financial and
legal advisors, met with the Independent Committee. At the meeting, Mr. Novelly
proposed that a limited liability company composed of trusts and entities
related to Mr. Novelly effect a cash tender offer for all Crown capital stock
for $10.50 per share. Stockholders not accepting the $10.50 per share tender
offer would retain their Crown stock and receive a $12.50 contingent value
right. Further, following the tender offer, Crown would acquire Apex by way of
a share exchange, the terms of which were not specified. In addition, Mr.
Novelly advised the Independent Committee that Apex's willingness to proceed
with this transaction was conditioned upon the active support and cooperation
of Crown and Rosemore prior to consummation of the tender offer. In particular,
Mr. Novelly
31
stated that it would be necessary for Crown and Apex promptly to enter into a
supply and processing agreement whereby Apex would supply Crown's crude oil
requirements prior to the closing of the proposed transaction. At that time,
Apex provided the Independent Committee with a draft tender offer agreement
reflecting the terms of its tender offer proposal. On October 11, 2000, Apex
delivered the draft tender offer agreement to Rosemore and its advisors.
On October 11, Mr. Dacey and Mr. Edward L. Rosenberg, the president and
chief executive officer of Rosemore, had a conversation in which Mr. Dacey
outlined the terms of the transaction proposed by the Novelly Group. Mr. Dacey
suggested that Rosemore review the bank commitment letter relating to the
Novelly Group's proposed transaction, even if such a review would require
Rosemore to execute a confidentiality agreement, as had been suggested by Apex.
Rosemore, through its counsel, subsequently declined to execute such a
confidentiality agreement because the bank commitment letter would in any event
become a publicly filed document, and it preferred to be allowed to publicly
comment on that document, if necessary.
Over the next two weeks, the Independent Committee and its financial and
legal advisors provided comments on the draft commitment letter and discussed
the terms of the proposal with Apex's advisors. The Independent Committee met
on October 17, 2000 to discuss the Apex proposal. Although the Independent
Committee was willing to attempt to accommodate Apex's desire to keep Crown as
a public company, the Independent Committee determined that it would prefer
that the proposal be recast as originally requested--a tender offer coupled
with a back-end merger--as such a structure would avoid concerns of the
Independent Committee raised by the Apex proposal. These concerns related to
the potential illiquid nature of the remaining Crown shares after an Apex
tender offer and the impact that would have on the value of a contingent value
right, as well as uncertainty regarding the nature and value of Apex assets
that were to be combined with Crown in the proposed share exchange. The
Independent Committee directed its advisors to contact Apex's advisors
regarding its concerns.
Apex's advisors informed the Independent Committee's advisors that Apex was
most interested in a transaction if Crown could remain a public company
following the tender offer. On October 25, 2000, Skadden Arps provided Apex's
legal advisors with a mark-up of the draft tender offer agreement, which
proposed that, among other things, Apex be required to guarantee the
obligations of the newly-formed acquisition vehicle, the offer schedule be
expedited and Apex's offer conditions and termination rights be narrowed.
Further, following a meeting of the Independent Committee on October 26, 2000
and at its direction, it was also proposed to Apex that a back-end merger could
be foregone only if Crown's AMEX listing were retained for one year, two
independent directors were appointed to the post-closing Crown Board and, for
one year, no transaction would be proposed between Crown and an affiliate of
Mr. Novelly which would result in Crown stockholders receiving less than $10.50
per share.
On October 26, 2000, the Crown Board set December 14, 2000 as the date of
Crown's 2000 annual meeting of stockholders, and asked the nominating committee
of Crown's Board to propose nominees for election.
On October 28, 2000, Apex's legal counsel delivered to Skadden Arps a term
sheet for its proposed supply and processing agreement, additional evidence of
financing and comments on Crown's mark-up of the tender offer agreement. Apex's
counsel also indicated that it believed the Independent Committee should now
advise Rosemore that, subject to completion of definitive documentation, the
Independent Committee recommended the Apex deal, and that Apex would not
proceed with final negotiations unless Rosemore indicated its support for the
proposed Apex offer. Mr. Novelly subsequently confirmed this point to Mr.
Dacey.
The Independent Committee met again on October 30, 2000 with its advisors to
discuss the status of the Apex proposal. The Independent Committee was briefed
on the current status of the contractual documents for the Apex proposal and
informed that Apex had indicated it was not interested in continuing to pursue
the tender offer unless it had assurances that Rosemore would support it.
Although the Independent Committee believed that it would be preferable to have
a fully negotiated deal with Apex prior to seeking Rosemore's support, given
Apex's position and the Independent Committee's desire to proceed promptly with
a transaction that would give all Crown stockholders the opportunity to receive
$10.50 per share, the Independent Committee
32
determined to provide Rosemore with the current documentation for the Apex
tender offer and advise Rosemore that the Independent Committee was willing to
proceed with the Apex tender offer subject to Rosemore's support. The
Independent Committee also directed Mr. Dacey to contact Mr. Novelly and
encourage him to continue working toward finalizing the proposed transaction,
and asked CSFB and Skadden Arps to convey a similar message to Apex's advisors.
The Independent Committee also extended the deadline for commencement of an
Apex tender offer until November 30, 2000.
At the October 30, 2000 meeting of the Independent Committee, Messrs.
Bunting, Gibbons and Jews and Ms. Goldman confirmed that they did not intend to
seek reelection as directors of Crown at the next annual meeting of
stockholders scheduled for December 14, 2000.
On October 30, 2000, the Crown Board, on the recommendation of its
nominating committee, nominated the following eight directors for election at
Crown's annual meeting of stockholders to be held on December 14, 2000. Michael
F. Dacey, Stanley A. Hoffberger, Barry L. Miller, Frank B. Rosenberg, Henry A.
Rosenberg, Jr., and John E. Wheeler, Jr. were nominated for election by the
holders of Crown's Class A common stock, and Jack Africk and the Reverend
Harold Ridley, S.J. were nominated for election by the holders of Crown's Class
B common stock.
On October 31, 2000, Mr. Dacey telephoned Kenneth Trout, Rosemore's
Executive Vice President and Chief Operating Officer, and outlined the terms of
the proposed Apex transaction. Mr. Dacey also noted that the Independent
Committee had extended the deadline for commencement of an Apex tender offer to
November 30, 2000. Mr. Trout indicated that Rosemore continued to evaluate
whether to continue to hold its investment in Crown, to sell into a third-party
offer, or to pursue another opportunity to acquire 100% of Crown. Mr. Dacey
stated that he would arrange for Rosemore to receive the proposed Apex
transaction documents, except for the bank commitment letter, which could not
be provided by the Independent Committee due to the confidentiality agreement
with Apex. Mr. Dacey suggested that Mr. Trout discuss with Mr. Novelly the
proposed Apex transaction and arrange to receive the bank commitment letter
directly from Apex. On the following day, Mr. Novelly called Mr. Trout to
invite him to Apex's offices in St. Louis on November 2, in order to review the
bank commitment letter.
On November 1, 2000, Skadden Arps provided to counsel to Rosemore, for its
review, the Apex draft tender offer agreement and term sheet for the processing
and supply agreement with Apex. Rosemore's counsel was advised that the
Independent Committee believed that Apex could finance its proposed tender
offer and that the Independent Committee desired to proceed with this
transaction, and, therefore, asked Rosemore to indicate to the Independent
Committee whether it would support the tender offer.
On November 3, 2000, Crown filed its preliminary proxy statement for its
annual meeting of stockholders to be held on December 14, 2000, which was filed
definitively on November 17, 2000 and first mailed to Crown's stockholders on
or about November 20, 2000.
Mr. Trout was unable to travel to St. Louis on November 2, 2000. Instead, on
November 14, the financial and legal advisors to Apex and Rosemore met in New
York to allow Rosemore's advisors to review Apex's financing commitment and to
discuss Apex's proposal in further detail. Because Rosemore did not have any
information about the exchange of shares of Apex and Crown contemplated by the
Apex proposal, Rosemore deferred consideration of the Apex proposal at that
time. Following that meeting, the financial advisors to Apex and Rosemore
discussed the possibility of the Novelly Group selling its investment in Crown
to Rosemore.
Following the November 14 meeting in New York, representatives of Rosemore
and its legal and financial advisors continued discussions with the legal and
financial advisors of the Novelly Group to better understand the terms of the
Novelly Group's proposed transaction. On November 22, 2000, during
conversations between the financial advisors to Apex and Rosemore, Bear
Stearns, financial advisor to Apex, suggested, in response to an inquiry by
Aegis Muse, that the Novelly Group would be willing to sell its interest in
Crown to Rosemore if Rosemore reimbursed its documented transaction expenses to
date, which the Novelly Group estimated to be between $2 million and $3
million. Aegis Muse, financial advisor to Rosemore, indicated that there had
been
33
no decision by Rosemore to propose a transaction for the acquisition of Crown,
and that Rosemore continued to evaluate whether to hold its investment in
Crown, to sell into a third-party offer, or to pursue another opportunity to
acquire 100% of Crown. Aegis Muse also expressed its belief that Rosemore would
not be willing to reimburse expenses in an amount in excess of $1.5 million.
The Novelly Group's advisor responded that the Novelly Group would consider
selling its Crown holdings to Rosemore at a price of $10.50 per share if
Rosemore paid $1,750,000 million of its transaction expenses incurred in
pursuing a transaction with Crown and completed the purchase quickly.
Rosemore's financial adviser agreed to communicate this proposed transaction
structure to Rosemore's management.
At a meeting of Rosemore's special committee on November 28, 2000, Aegis
Muse presented the primary terms on which advisors to the Novelly Group had
indicated that the Novelly Group would be willing to sell its shares in Crown
to Rosemore. After discussing the possibility of acquiring the Novelly Group's
shares in Crown on the terms suggested, the special committee instructed
Rosemore's advisors to continue discussions with the Novelly Group.
From time to time in November and December, Rosemore's legal counsel called
Skadden Arps to indicate that Rosemore was still considering a number of
options, including selling its shares in an Apex tender offer or, instead,
offering again to acquire Crown. Rosemore's counsel noted that, in any
transaction with Rosemore as the acquiror, Rosemore would be likely to seek a
proxy to vote the Novelly Group's shares in favor of such a transaction, and
might be willing to buy the Novelly Group's Crown stock for $10.50 per share
even if a transaction with Crown were not consummated. Skadden Arps indicated
to Rosemore's counsel that it believed the Independent Committee would consider
either a Rosemore or Apex acquisition proposal, so long as the proposal was
supported by both the Novelly Group and Rosemore and offered all stockholders
the right to receive at least $10.50 per share in cash.
On November 29, 2000, counsel to Rosemore distributed to Crown's advisors a
draft merger agreement, substantially similar in form to the April 7, 2000
merger agreement, and, on November 30, a stock purchase agreement to the
Novelly Group and its advisors. The stock purchase agreement contemplated that
the Novelly Group would grant Rosemore a proxy to vote in favor of the proposed
merger between Crown and Rosemore and also provided for the purchase of the
Novelly Group's Crown stock by Rosemore in the event the merger was not
completed, other than in certain limited circumstances. On November 30, 2000,
Crown publicly announced that it was discussing its strategic alternatives with
Rosemore and Apex.
The Independent Committee met on December 4, 2000 with its financial and
legal advisors. Prior to the meeting, the Independent Committee had received
from its advisors materials containing an updated Crown valuation analysis, as
well as drafts of the proposed Rosemore merger agreement, the stock purchase
agreement and an amendment to the rights plan that would facilitate such a
proposed transaction. CSFB discussed its updated valuation of Crown.
At that December 4 meeting, Skadden Arps updated the Independent Committee
on the status of discussions among the advisors to Crown, Rosemore and the
Novelly Group. Particularly, the Independent Committee was advised that the
draft Rosemore merger agreement was substantially similar to the original
agreement, and that the key open issues were certain employee benefits matters,
the inclusion of a provision that would require approval of the merger by a
majority of the Crown shares not held by Rosemore and Rosemore's desire to
condition any transaction upon receipt of a consent to the merger from the
lessor under Crown's sale and leaseback transaction covering certain Crown
retail marketing activities. Skadden Arps also briefed the Independent
Committee on its understanding of the status of discussions among the advisors
to Rosemore and the Novelly Group with respect to the stock purchase agreement.
The Independent Committee was notified of Mr. Novelly's request that the Crown
annual stockholders meeting be further postponed if a definitive transaction
could not be finalized in the immediate future. After discussion among the
members of the Independent Committee and their advisors, the Independent
Committee determined not to change the scheduled meeting date at that time.
The legal and financial advisors to the Novelly Group and Rosemore continued
to discuss the terms of the draft stock purchase agreement. Legal counsel for
each of the Novelly Group and Rosemore contacted Skadden
34
Arps to provide updates on the status of those discussions, each noting that
the circumstances upon which Rosemore would be obligated to purchase the
Novelly Group's Crown shares were still under discussion. Legal advisors to
Rosemore and to certain key employees of Crown also discussed the terms of
proposed waivers for execution by those employees in connection with any
transaction involving Rosemore. See "THE MERGER AGREEMENT--Waiver Agreements"
on page 64.
The Independent Committee met again with its advisors on December 10, 2000.
It was informed that negotiations between management and Rosemore's advisors
with respect to employee benefits matters had been finalized, and that Crown
had received an indication from the lessor to the sale and leaseback
transaction that it would consent to a merger of Crown and Rosemore. Skadden
Arps relayed to the Independent Committee its understanding that advisors to
the Novelly Group and Rosemore continued to discuss the timing and conditions
related to the possible purchase of the Novelly Group's Crown stock and the
reimbursement of its expenses in connection with its offer to acquire Crown, as
well as Mr. Novelly's continued interest in the further postponement of the
Crown annual meeting of stockholders. After review of the discussions among the
three parties, the Independent Committee directed Mr. Dacey to contact Rosemore
and Mr. Novelly to encourage the parties to resolve the outstanding issues and
to advise them that the annual meeting would be held as scheduled.
Over the course of the next week, representatives of the Novelly Group and
Rosemore and their advisors continued to discuss the terms of a stock purchase
agreement, and an escrow agreement to provide for escrow of the Novelly Group's
Crown capital stock and the cash that would be used to pay the purchase price
for these shares. In addition, the legal advisors to the Independent Committee
and Rosemore's legal and financial advisors resolved the remaining issues under
the merger agreement. This allowed the terms of the agreement to be considered
by the Independent Committee and by Rosemore's board.
On December 14, 2000, Crown held its annual meeting of stockholders for
2000. At the meeting, Crown's stockholders elected the directors nominated by
the Crown Board. No other matters were brought to a vote of stockholders at the
meeting. Following the annual meeting, Crown's Board met and reappointed Mr.
Dacey, Mr. Africk and the Reverend Ridley to the Independent Committee of
Crown's Board.
On the morning of December 15, 2000, the Rosemore special committee met,
with its financial and legal advisors present. The special committee reviewed
the discussions of its financial and legal advisors with Crown and Apex and
their respective advisors, and then discussed the relative merits of holding
its investment in Crown, selling into a third-party offer, or pursuing another
opportunity to acquire 100% of Crown. Immediately following the special
committee meeting, the full board of directors of Rosemore convened for a
discussion of the special committee's progress to date in evaluating strategic
alternatives regarding its Crown investment. The board agreed to reconvene
later in the day in order to allow board members additional time to consider
these strategic alternatives.
The Rosemore board convened again on the evening of December 15, 2000, with
all directors (other than Mr. Clive R.G. O'Grady) and its advisors present. The
board engaged in a further discussion of the strategic alternatives with
respect to its investment in Crown. The Rosemore board did not request, and
Aegis Muse did not render, a report in connection with the transactions
contemplated by the merger agreement, stock purchase agreement and escrow
agreement then under consideration. After it considered the view of the
Rosemore special committee and determined that the merger is consistent with
and in furtherance of Rosemore's long-term business strategy, the Rosemore
board (with Mr. O'Grady recusing himself from the board's deliberations and
vote) approved the merger, the merger agreement, the stock purchase agreement
and the escrow agreement by a 5-3 vote.
On December 16, 2000, the Independent Committee met with its financial and
legal advisors. CSFB reviewed updated valuation analyses it had provided to the
Independent Committee, including its discounted cash flow analysis and analyses
of comparable transactions and comparable companies. CSFB then gave its oral
opinion that the aggregate merger consideration was fair, from a financial
point of view, to the stockholders of Crown, other than Rosemore, the Sellers
(as such term is defined in the merger agreement) and their respective
affiliates, which opinion was subsequently confirmed in writing. See "--Opinion
of Credit Suisse First Boston" on page 40. In response to a question from the
Independent Committee, CSFB also advised the Independent
35
Committee that, while it had not been asked to perform, and had not performed,
a liquidation valuation of Crown, based on its knowledge of Crown's businesses
and current market conditions, as well as the indications of interest for
certain assets received over the course of the strategic review process, it did
not believe such an alternative would produce greater value for Crown
stockholders. Skadden Arps reviewed with the members of the Independent
Committee their fiduciary duties and the terms of the merger agreement, the
stock purchase agreement and the escrow agreement. The Independent Committee
discussed the terms of the transaction agreements, including the requirement
that the merger receive the approval of a majority of the votes cast on the
matter other than by stock owned by Rosemore and its affiliates and the fact
that, as a result of the proposed agreement of the Novelly Group to vote its
shares in favor of the merger and merger agreement, the transaction would have
the support of Crown's two largest stockholders. The Independent Committee then
unanimously moved to recommend to the Crown Board that it accept the Rosemore
proposal and amend the rights plan to permit the transaction to proceed without
triggering the rights.
Immediately following the meeting of the Independent Committee, the Crown
Board convened a meeting, with all directors present. At the meeting, Mr. Henry
A. Rosenberg, Jr., Mr. Frank B. Rosenberg, Mr. Barry L. Miller and Mr. Stanley
A. Hoffberger reminded the Crown Board of their current relationships with
Rosemore and the potential conflicts of interests that might be inferred from
these relationships; however, they indicated that they believed they could act
impartially and in the best interests of the Crown stockholders. After
discussion and upon the invitation of the other members of the Crown Board,
they participated in the consideration of the proposed merger with Rosemore.
Based on the recommendation of the Independent Committee and the fairness
opinion of CSFB, among other things, after discussion, the Crown Board
unanimously voted to approve a merger with Rosemore on the terms set forth in
the merger agreement and to recommend that the stockholders approve the merger
and merger agreement. See "--Recommendation of Crown's Board of Directors" on
page 37. The Crown Board further approved an amendment to the rights plan so
that the execution of the merger agreement, the stock purchase agreement and
the escrow agreement would not result in a distribution date under the rights
plan or otherwise trigger the rights plan.
On December 17, 2000, Crown and First Union National Bank (First Union)
amended Crown's shareholder rights plan, Crown, Rosemore and RAC executed the
merger agreement, and Rosemore and members of the Novelly Group entered into
the stock purchase agreement and the escrow agreement. A copy of the merger
agreement is attached as Exhibit A to this proxy statement.
Crown's Purposes of the Merger
The merger is the result of a deliberative process by Crown, in which the
strategic alternatives for Crown were considered in depth over an extended
period of time. During this process, Crown considered the merger or sale of
Crown as a whole, the sale of portions of the business of Crown and the
continuation of Crown with its current ownership structure. Crown's purposes
for the merger are to provide the unaffiliated stockholders with the
opportunity to receive a fair price for their shares and to no longer be
subject to the market conditions and other uncertainties that have affected the
operations and financial performance of Crown in the past. For the reasons
discussed under "--Background of the Merger" on page 14 and "--Crown's Reasons
for the Merger and Statement as to the Fairness of the Merger," on page 37,
including Crown's desire to place the company in a better position to address
the uncertain market conditions that are inherent in the industry in which
Crown operates, Crown has determined to pursue the merger at this time. The
transaction has been structured as a cash merger in order to provide the public
stockholders of Crown with cash for all of their shares, to provide a prompt
and orderly transfer of complete ownership of Crown with a minimized risk that
the contemplated transaction will not be finalized and to reduce transaction
costs. Crown believes that the benefits of the merger to Crown are as follows:
. The merger will resolve the uncertainty as to the future direction of
Crown that has been present since Crown announced in early 1999 that it
had retained CSFB to assist it in considering its strategic
alternatives.
. Crown will no longer be subject to the costs associated with
communicating with a large number of public shareholders.
36
. The merger will result in an alliance that provides the potential for
long-term credit support at a level that has been needed by Crown in the
past and that Crown believes will be needed in the future to enable
Crown to address the types of financial and market pressures that have
impacted it in the past and might be expected to occur again in the
future.
The main detriment of the merger to Crown is the costs associated with the
transaction.
Recommendation of Crown's Board of Directors
On December 16, 2000, the Crown Board met and, after considering the
recommendation of the Independent Committee and the fairness opinion received
from CSFB, unanimously approved the merger and determined that the terms of the
merger with Rosemore were advisable and fair to, and in the best interests of,
Crown's stockholders. THE CROWN BOARD RECOMMENDS THAT CROWN'S STOCKHOLDERS VOTE
TO APPROVE THE MERGER AND MERGER AGREEMENT. Certain members of the management
and the Crown Board have interests which present them with potential or actual
conflicts of interest in connection with this recommendation and the merger.
These matters are discussed in "--Interests of and Effects of the Merger on
Crown's Directors and Officers" on page 50 and "THE MERGER--Interests of
Certain Persons in the Merger" on page 56.
Crown's Reasons for the Merger and Statement as to the Fairness of the Merger
In recommending to the Crown Board that it approve the merger and merger
agreement, the Independent Committee consulted with members of Crown's
management, other than Messrs. Henry A. Rosenberg, Jr. and Frank B. Rosenberg,
as well as the Independent Committee's legal and financial advisors, and
considered the following material factors:
1. The fact that Crown and CSFB had conducted a thorough evaluation process
that had failed to produce alternatives to the merger or a sale of Crown as
a whole, on prices and on terms that the Independent Committee believed
would materially enhance Crown's financial position and generate increased
value for stockholders without carrying a material risk of non-completion.
The alternatives that were evaluated included the merger or sale of Crown as
a whole, the sale of portions of the business of Crown and the continuation
of Crown with its current ownership structure.
2. Apex Oil Company, Inc. (Apex) proposed to acquire Crown at $10.50 per share.
Pursuant to the stock purchase agreement, the Novelly Group, which includes
Apex, has agreed that at this price it will support Rosemore's acquisition
of Crown. The Crown shares held by the Novelly Group, amounting to 13.6% of
the votes entitled to be cast by Crown's common stock, will be voted in
favor of Rosemore's acquisition of Crown at $10.50 per share. The Novelly
Group has agreed, on behalf of itself and its affiliates, not to propose or
support any transactions that are inconsistent with the merger and merger
agreement.
3. The facts that the evaluation process had continued for more than eighteen
months, that during the last five fiscal years Crown had experienced
cumulative operating losses of $60 million in addition to the 1995 write
down of certain refinery assets, and that the merger was the only strategic
proposal which the process had produced which the Independent Committee
believed was reasonably likely to be completed. The Independent Committee
also considered the possible impact of the failure to conclude a transaction
on Crown and its future ability to address the types of financial and market
pressures that had impacted it in the past and might be expected to occur
again in the future and that the failure to conclude a transaction would
subject the stockholders of Crown to the continued risk of reduced refining
margins, the volatility of crude oil and petroleum product prices, and the
effects of industry consolidation on the competitive environment in which
Crown operates.
4. The relationship of the offer price to the then current market price, the
downward trend in the historical market price for Crown common stock and the
fact that the offer price represents a premium of
37
approximately 31.25% over the per share closing price of the Class A common
stock and approximately 50% over the per share closing price of the Class B
common stock on December 14, 2000, the day prior to the day Rosemore
announced its intention to seek to acquire Crown. The Independent Committee
considered this an appropriate measurement of the premium represented by the
offer price because it is a customary measurement of the premium in
transactions of this type. The Independent Committee also believed that this
customary measurement was appropriate in this transaction because, except
for the periods when Crown's stock price was affected by pending proposals
to acquire Crown, since October 1999 Crown's stock has traded in a range
close to the average per share price subsequent to the third quarter of 1999
when the financial market's valuation of Crown had absorbed the impact of
dramatic fluctuations in the price of crude oil over the preceding two
years. The Independent Committee believed that because of the significance
of the effect on Crown's stock price of these crude oil price fluctuations,
it was not meaningful to compare the offer price to Crown's stock price
prior to that time. In addition, the price exceeded Crown's per share price
in early November 1999, immediately before Apex approached Crown about a
possible transaction and disclosed its approach in a filing with the SEC on
Schedule 13D.
5. The arm's-length negotiations between the Independent Committee and its
representatives and Rosemore and its representatives, including the fact
that the negotiations resulted in a substantial increase in the price at
which Rosemore was prepared to acquire the shares, from $8.35 per share to
$10.50 per share, and the Independent Committee's belief that $10.50 per
share was the highest price that Rosemore would be willing to offer for any
and all shares of Crown. The Independent Committee noted that $10.50 per
share was at the high end or above the valuation range produced by each of
the analyses performed by CSFB in connection with its rendering of the
fairness opinion.
6. The Independent Committee's belief that the merger had a high probability of
consummation because of the following:
. the per share price to be received in the merger is payable in cash,
thereby eliminating any uncertainties in valuing the consideration to be
received by the stockholders;
. Rosemore has represented and warranted that it will have sufficient
funds to consummate the merger;
. the limited nature of the conditions to the merger and, particularly,
that there is no due diligence or financing condition; and
. the significant percentage of shares already owned by Rosemore and the
Novelly Group that would be voted in favor of the merger and merger
agreement pursuant to the covenants contained in the merger agreement
and the stock purchase agreement, respectively.
7. The analyses and presentations prepared by CSFB, and the opinion of that
firm, dated December 17, 2000, that as of the date of the opinion, based
upon and subject to the assumptions, limitations and qualifications set
forth in such opinion, the aggregate consideration to be received in the
merger is fair, from a financial point of view, to the Crown stockholders
other than Rosemore, the Novelly Group and their respective affiliates. The
conclusions and opinions of CSFB were adopted by the Independent Committee.
THE FULL TEXT OF THE CSFB OPINION IS ATTACHED AS EXHIBIT B TO THIS PROXY
STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. YOU ARE URGED TO READ THE
CSFB OPINION IN ITS ENTIRETY, AND TO READ THE DESCRIPTION OF SUCH OPINION
UNDER THE CAPTION "--OPINION OF CREDIT SUISSE FIRST BOSTON" ON PAGE 40.
8. The terms of the merger and merger agreement, including the following
provisions:
. the merger agreement may not be amended without the approval of the
Independent Committee, Rosemore, and, in certain circumstances pursuant
to the terms of the stock purchase agreement, the Novelly Group;
. until the merger is complete, the Independent Committee is permitted to
consider unsolicited offers and change its recommendation concerning the
merger but not to terminate the merger agreement;
38
. Crown is not required to pay any termination fees and there are limited
circumstances in which Rosemore's expenses must be reimbursed by Crown
in the event of the termination of the merger;
. consummation of the merger will require the approval of a majority of
all of the votes cast on the matter other than by stock owned by
Rosemore and its affiliates.
9. The possible decline in the market price of the shares of Crown common stock
if the merger with Rosemore is not approved and no other transaction is
agreed to and consummated.
In view of the variety of factors which it considered in reaching a
determination, the Independent Committee did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its conclusions and recommendations. In
addition, individual members of the Independent Committee may have given
different weights to different factors.
The Independent Committee considered all of these factors in reaching the
conclusions and recommendations previously described. These factors figured
positively as advantages of the merger. In addition, the Independent Committee
considered the following:
. The consummation of the merger will preclude the unaffiliated
stockholders from participating in any future growth of Crown, including
the impact, if any, on Crown's performance that might result from
settlement of the labor dispute, the corporate campaign and related
boycott. See "THE MERGER--Union Corporate Campaign" on page 60. The
Independent Committee believed that this factor was outweighed by the
fairness of the offer price and the uncertainty as to whether Crown's
financial prospects could be improved, particularly without Rosemore's
continued financial support, which may or may not be given; and
. Rosemore has entered into a stock purchase agreement with the Novelly
Group at the same price as the price at which Apex had proposed to
acquire Crown, which, absent a material adverse change in Crown and its
subsidiaries, will obligate Rosemore to purchase the Novelly Group
shares at $10.50 per share even if the merger is not consummated.
Pursuant to this stock purchase agreement, Rosemore has reimbursed the
Novelly Group for $1,750,000 of its expenses incurred in connection with
the Novelly Group's previous efforts to acquire control of Crown. The
Independent Committee believes these arrangements between Rosemore and
the Novelly Group were necessary to obtain a transaction for all
stockholders at $10.50 per share that would be supported by both
Rosemore and the Novelly Group, and therefore be capable of
consummation.
Because Rosemore had indicated that it would proceed promptly with a merger
transaction, and because either a tender offer or merger structure would
involve preparation of background and fairness disclosures required for
transactions of this type, the Independent Committee concluded that a tender
offer structure ultimately would have minimal, if any, timing advantages over a
merger structure. The Independent Committee therefore viewed Rosemore's choice
of a merger, rather than a tender offer, structure as a neutral factor in its
analysis.
The evaluation process did not produce any alternatives involving the sale
of portions of the operating assets of Crown at prices and on terms that the
Independent Committee believed would generate increased value for stockholders.
For this reason and for the reasons discussed in the immediately following
paragraph, Crown did not seek appraisals or request CSFB to seek appraisals of
its operating assets.
Neither the Independent Committee nor the Crown Board considered liquidation
of Crown's assets to be a viable course of action given the risks and
uncertainties of any liquidation procedure and the failure to obtain favorable
bids on Crown's refinery assets in the strategic review process. In response to
a question from the Independent Committee, CSFB also advised the Independent
Committee that, while it had not been asked to perform, and had not performed,
a liquidation valuation of Crown, based on its knowledge of Crown's
39
businesses and current market conditions, as well as the indications of
interest for certain assets received over the course of the strategic review
process, it did not believe such an alternative would produce greater value for
Crown stockholders. Therefore, no appraisal of liquidation values was sought
for purposes of evaluating the merger.
In reaching its determinations referred to above, the Crown Board considered
the following factors, each of which, in the view of the Board, supported such
determinations:
. The conclusions and recommendations of the Independent Committee;
. The factors referred to above as having been taken into account by the
Independent Committee; and
. The fact that the offer price and the terms and conditions of the merger
agreement were the result of arm's-length negotiations among the
Independent Committee, Crown and Rosemore and their respective advisors.
The Crown Board, including the members of the Independent Committee,
believes that sufficient procedural safeguards were and are present to ensure
the fairness of the merger and to permit the Independent Committee to represent
effectively the interests of the unaffiliated stockholders. The Crown Board
reached its conclusion as to the procedural fairness because:
. The Independent Committee consisted of non-employee independent
directors who acted to represent solely the interests of the public
stockholders;
. The Independent Committee retained and received advice from its
independent legal counsel, Skadden Arps;
. The Crown Board was advised by and received the opinion of CSFB as
financial advisor, described under "--Opinion of Credit Suisse First
Boston" below;
. The strategic review process remained open for a significant time period
and the Independent Committee was actively involved in deliberations;
. The offer price and the other terms and conditions of the merger
agreement resulted from extensive arm's-length negotiations between
representatives of the Independent Committee, on the one hand, and
representatives of Rosemore, on the other hand;
. The merger cannot be approved by Rosemore alone, and the unaffiliated
stockholders have the power to prevent the merger; and
. The merger requires the approval of a majority of all of the votes cast
on the matter other than by stock owned by Rosemore and its affiliates.
Opinion of Credit Suisse First Boston
CSFB has acted as Crown's exclusive financial advisor in connection with the
merger. Crown selected CSFB based on CSFB's experience, reputation, and
familiarity with Crown's business. CSFB is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. In light of the foregoing, the Independent Committee
believes that CSFB is well qualified to provide the committee with independent,
quality financial assistance and advice, including the delivery of the fairness
opinion.
40
In connection with CSFB's engagement, Crown requested that CSFB evaluate the
fairness, from a financial point of view, to the stockholders of Crown, other
than Rosemore, the Novelly Group and their respective affiliates, of the
aggregate consideration to be received by stockholders of Crown in the merger.
On December 16, 2000, at a meeting of the Crown Board held to consider the
merger, CSFB rendered to the Crown Board an oral opinion, which opinion was
subsequently confirmed by delivery of a written opinion dated December 17,
2000, to the effect that, as of that date and based on and subject to the
matters described in its opinion, the aggregate consideration to be received by
Crown stockholders in the merger was fair, from a financial point of view, to
the stockholders of Crown, other than Rosemore, the Novelly Group, and their
respective affiliates.
The full text of CSFB's written opinion, dated December 17, 2000, to the
Crown Board, which sets forth the procedures followed, assumptions made,
matters considered and limitations on the review undertaken, is attached as
Exhibit B and is incorporated by reference in its entirety into this proxy
statement. Holders of Crown common stock are urged to read this opinion
carefully in its entirety. CSFB's opinion is addressed to the Crown Board and
states that, as of the date of the opinion, based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
aggregate consideration to be received by Crown stockholders in the merger is
fair, from a financial point of view, to the Crown stockholders other than
Rosemore, the Novelly Group and their respective affiliates. It does not
address the allocation between holders of Class A common stock and holders of
Class B common stock of the aggregate consideration to be received by
stockholders of Crown or any other aspect of the merger or any related
transaction and does not constitute a recommendation to any stockholder as to
how that stockholder should vote on any matter relating to the merger. The
following is a summary of the material financial analyses performed by CSFB in
connection with rendering its opinion and does not purport to be a complete
description of such analyses.
In arriving at its opinion, CSFB:
. reviewed the merger agreement and certain related documents;
. reviewed certain business and financial information relating to Crown;
. reviewed certain other information, including financial forecasts, that
Crown provided to CSFB;
. met with the management of Crown to discuss the business and prospects
of Crown;
. considered certain financial and stock market data of Crown, and
compared that data with similar data for other publicly held companies
in businesses similar to Crown;
. considered the results of the strategic evaluation process and other
proposals;
. considered the financial terms of other business combinations and other
transactions that have recently been effected; and
. considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that CSFB
deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information that was provided to or
otherwise reviewed by it and relied on that information being complete and
accurate in all material respects. With respect to financial forecasts, CSFB
was advised, and assumed, that the forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Crown as to the future financial performance of Crown.
CSFB was not requested to, and did not, make an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of Crown, and
was not furnished with any evaluations or appraisals. CSFB's opinion was
necessarily based on information available to CSFB, and financial, economic,
market and other conditions as they existed and could be evaluated by CSFB, on
the date of its opinion. Although CSFB evaluated the fairness from a financial
point of view to the stockholders of Crown, other than Rosemore, the Novelly
Group and their respective affiliates, of the aggregate consideration to be
received by the stockholders of Crown in the merger, CSFB was not requested to,
and did not, recommend the specific consideration payable in the merger, which
consideration was determined in negotiations between Crown and Rosemore.
41
In preparing its opinion to the Crown Board, CSFB performed various
financial and comparative analyses, including those described below. The
summary of CSFB's analyses described below is not a complete description of the
analyses performed in connection with rendering its opinion. The preparation of
a fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to summary
description. In arriving at its opinion, CSFB made qualitative judgments as to
the significance and relevance of each analysis and factor that it considered.
Accordingly, CSFB believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a misleading or
incomplete view of the processes underlying its analyses and opinion.
In its analyses, CSFB considered industry performance, regulatory, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Crown. No company, transaction or business used
in CSFB's analyses as a comparison is identical to Crown or the merger, and an
evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed.
The estimates contained in CSFB's analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not necessarily
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, CSFB's analyses and estimates are
inherently subject to substantial uncertainty.
CSFB's opinion and financial analyses were among many factors considered by
Crown's Board in its evaluation of the merger and should not be viewed as
determinative of the views of the Crown Board or management with respect to the
merger or the aggregate consideration to be received.
The following is a summary of the material financial analyses underlying
CSFB's opinion dated December 17, 2000 delivered to the Crown Board in
connection with the merger. The financial analyses summarized below include
information presented in tabular format. In order to fully understand CSFB's
financial analyses, the table must be read together with the text. The table
alone does not constitute a complete description of the financial analyses. You
are urged to read the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, or
otherwise you may have a misleading or incomplete view of CSFB's financial
analyses.
Share Price Reference Range Analyses. CSFB derived implied share price
reference ranges based on a discounted cash flow analysis, selected companies
analysis and selected mergers and acquisitions analysis for Crown as more fully
described below. CSFB then compared the consideration to be received in the
merger of $10.50 per share of Crown common stock with the share price reference
ranges implied by these analyses.
Discounted Cash Flow Analysis. CSFB performed a discounted cash flow analysis
on Crown's business in order to estimate the present value of Crown's estimated
future stand-alone, unlevered, after-tax free cash flows. CSFB performed its
analysis based on three scenarios, a downside case, a base case and an upside
case. The base case for Crown was based on estimates of Crown's future
financial performance provided by and discussed with the management of Crown.
The upside and downside cases were based on adjustments to the base case,
discussed with Crown management to reflect, among other things, the potential
for improved or reduced refining and retail marketing margins. Each case
described is only a portion of the overall analysis performed by CSFB, and CSFB
expresses no judgment on the appropriateness or accuracy of the assumptions
underlying each case.
42
In addition to estimating the present value of Crown's estimated stand-
alone, unlevered, after-tax free cash flow from calendar years 2001 through
2005 based on the three cases described above, CSFB calculated ranges of
estimated values of such cash flow after 2005 by using terminal value multiples
of 2005 earnings before interest, taxes, depreciation and amortization,
commonly referred to as EBITDA, for each case ranging from 4.0x to 5.0x for
Crown's refining business and 5.5x to 6.5x for Crown's retail business. The
present value of Crown's estimated stand-alone, unlevered, after-tax free cash
flows were then calculated using discount rates of 11.0% to 12.0% for Crown's
refining business and 10.0% to 11.0% for Crown's retail business. The following
chart shows the reference range per share of Crown common stock indicated by
these analyses:
Implied
Price
Case Per Share
---- ------------
Downside case................................................. $1.83 $ 6.04
Base case..................................................... 3.95 8.60
Upside case................................................... 6.11 11.20
Selected Companies Analysis. CSFB compared selected financial, operating and
stock market data of Crown to corresponding data of the following publicly
traded companies in the petroleum refining and/or marketing businesses:
. Giant Industries, Inc.
. Holly Corporation
. Sunoco, Inc.
. Tosco Corporation
. Ultramar Diamond Shamrock Corporation
. Valero Energy Corporation
. Casey's General Stores, Inc.
. 7-Eleven, Inc.
. The Pantry, Inc.
CSFB reviewed enterprise values, calculated as fully diluted equity market
value, plus total debt, preferred stock and minority interests, less cash and
cash equivalents of the selected companies, as multiples of estimates of their
calendar years 2000 and 2001 EBITDA. CSFB then applied a range of selected
multiples derived from that analysis to Crown's estimated calendar years 2000
and 2001 EBITDA and calendar years 1997 to 1999 average EBITDA. Equity market
values were calculated based on closing stock prices on December 8, 2000.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates and estimated financial data for Crown
was based on the base case for Crown. This analysis indicated a reference range
per share of Crown common stock of $4.28 to $7.79.
Selected Mergers and Acquisitions Analysis. CSFB compared purchase prices paid
or proposed to be paid in selected transactions as multiples of the latest 12
months EBITDA, refining capacity and, for retail marketing transactions, store
count.
CSFB then applied a range of selected multiples derived from that analysis
to Crown's latest 12 months EBITDA, refining capacity and store count. All
multiples were based on publicly available financial information. This analysis
indicated a reference range per share of Crown common stock of $4.88 to $8.98.
Miscellaneous. Crown has agreed to pay CSFB for its services an aggregate
transaction fee of 1.375% of the total fair market value, at the time of
closing, of all consideration, including cash, securities, property, all debt
remaining on Crown's financial statements at closing and other indebtedness and
obligations assumed by Rosemore, and any other consideration received by Crown
or the stockholders of Crown in the merger, subject to a minimum transaction
fee of $1.5 million. Based upon financial information included as a part of
this proxy statement and giving effect to the merger as presently contemplated,
CSFB will be entitled to a fee of
43
approximately $3.6 million. See "THE MERGER--Merger Financing; Expenses of the
Merger" on page 55. A substantial portion of the transaction fee is contingent
upon consummation of the merger. Crown also has agreed to reimburse CSFB for
its reasonable out-of-pocket expenses, including fees and expenses of legal
counsel and any other advisor retained by CSFB, and to indemnify CSFB and
certain related parties against liabilities, including liabilities under the
federal securities laws, arising out of its engagement.
Since 1998, CSFB and its affiliates have provided services to Crown
unrelated to the merger, including (1) acting as Crown's financial advisor for
the solicitation of consents from the holders of Crown's 10 7/8% senior notes,
(2) providing opinions to the trustee under the indenture governing these notes
with respect to prior affiliated transactions, which are required under the
indenture to be provided with respect to any transaction between Crown and
Rosemore in which there is consideration in excess of $5 million, (3) providing
advice to Crown with respect to Crown's adoption of a shareholder rights plan
and (4) acting as Crown's financial advisor in connection with the merger
previously proposed between Crown and Rosemore. CSFB and its affiliates have
earned or been reimbursed an aggregate of approximately $1.09 million in fees
and expenses for these services. As of December 17, 2000, CSFB has agreed to
subsequently provide the opinion to the trustee required under the indenture
with respect to the merger.
In the ordinary course of business, CSFB and its affiliates may actively
trade the debt and equity securities of Crown for their own accounts and for
the accounts of customers and, accordingly, may at any time hold long or short
positions in those securities.
Rosemore's Purposes and Reasons for the Merger
Rosemore and its predecessors have held a significant interest in Crown
since 1930. On various occasions, Rosemore has been asked to provide and has
provided financial support to Crown. In addition, various members of the
Rosenberg family are currently serving and have served in the past as directors
and officers of Crown. See "--Interests of and Effects of the Merger on Crown's
Directors and Officers" on page 50, "THE MERGER--Interests of Certain Persons
in the Merger" on page 56 and "RELATED PARTY TRANSACTIONS" on page 72.
Rosemore, from time to time, reviews its investment portfolio and evaluates
its investments, including its holdings in Crown, in order to maximize their
value. In December 1999, in light of developments at Crown, the Rosemore board
formed the Rosemore special committee and charged it with the responsibility of
retaining legal and financial advisors to assist the special committee in its
review of Rosemore's investment in Crown. Mr. Henry A. Rosenberg, Jr., chairman
of the board of Rosemore, was not a member of this committee. On January 18,
2000, Crown invited Rosemore to make a proposal to acquire Crown. In response
to this invitation and since that time, the Rosemore special committee with the
assistance of its financial and legal advisors has conducted extensive due
diligence on Crown in order to value Crown and to determine whether Rosemore
might be interested in making a proposal. Throughout this period, the Rosemore
special committee has examined several alternatives, ranging from the sale of
its investment in Crown to the acquisition of the shares of Crown common stock
not owned by Rosemore. The Rosemore special committee also sought to anticipate
the likely results of the Crown Board's exploration of strategic alternatives
so that in its capacity as a significant Crown stockholder it could be a
constructive participant in that process. Rosemore has concluded that
increasing its equity interest in Crown to 100% would best enable it to satisfy
its investment goals and to support Crown's financial recovery.
On December 15, 2000, by a 5-3 vote, the Rosemore board (with Mr. Clive R.G.
O'Grady recusing himself from the board deliberations and vote) approved the
merger and merger agreement and determined that the merger is consistent with
and in furtherance of Rosemore's long-term business strategy of investing in
the oil and gas industry, and participating in enterprises that operate in
lines of business in which Rosemore has knowledge and which Rosemore believes
will yield a suitable return on investment. Rosemore's purpose of the merger is
for Rosemore to acquire the remaining equity interest in Crown not already
owned by Rosemore in order to effect its plans for Crown as described under "--
Rosemore's Plans for Crown after the Merger" on page 51. Upon consummation of
the merger, Crown will become an indirect wholly owned subsidiary of Rosemore.
The Rosemore directors who voted against the merger did so because they
believe:
44
. the merger consideration to be paid by Rosemore is too high;
. given the size of Rosemore's total potential investment in Crown, the
merger is not consistent with Rosemore's investment objectives from a
diversification standpoint;
. Crown operates in a volatile and high risk business environment and
Rosemore's capital might be better employed in other investments with
higher returns relative to the associated risk; and
. subsequent to the merger, Rosemore might be required to provide
additional financial support to Crown.
Mr. O'Grady recused himself from the deliberations and voting of the
Rosemore board due to conflicts of interest. See "--Background of the Merger"
on page 14.
In reaching its conclusions, the Rosemore board consulted with its advisors
and considered the matters described above and the following additional
factors:
. the current economic, financial and business environment generally, and
the present and anticipated environment in the petroleum refining and
marketing industry in particular;
. the judgment, advice and analysis of Rosemore's management with respect
to the financial benefits of the merger. This was based in part on the
due diligence investigation performed with respect to Crown, and on the
Rosemore board's independent knowledge of Rosemore, Crown and the
petroleum industry;
. the financial condition, results of operations, businesses and prospects
of Crown and Rosemore;
. the recent and historic stock prices of Crown;
. the pendency of a derivative lawsuit against Crown and its present and
former officers and directors, including Messrs. Henry A. Rosenberg,
Jr., Edward L. Rosenberg and Frank B. Rosenberg, and the impact that the
merger might have on the standing of the plaintiffs to continue the
lawsuit (see "THE MERGER--Stockholder Litigation" on page 59);
. the findings of the due diligence investigation with respect to Crown,
especially regarding environmental and compensation and benefits issues;
. the alternative proposals submitted to the Crown Board by Apex on
October 10, 2000 might not be timely consummated and the effects on
Crown of such a delay or failure;
. the fact that Crown would continue to be operated on a stand-alone basis
and that the likelihood of retaining certain members of the Crown senior
management was enhanced as a result of their execution of certain waiver
agreements in connection with the merger (see "THE MERGER AGREEMENT--
Waiver Agreements" on page 64); and
. the fact that Crown stockholders would receive a premium over the then
current market price of Crown common stock.
Rosemore's Statement as to the Fairness of the Merger
In addition to the factors identified above under "--Rosemore's Purposes and
Reasons for the Merger," each of Rosemore, Rosemore Holdings and RAC believes
that the merger and the terms of the merger agreement, including the merger
consideration of $10.50 per share, are fair to Crown and its unaffiliated
stockholders based on the following factors:
. the appointment and involvement of the Crown Independent Committee,
which consisted solely of independent members of the Crown Board;
45
. the unanimous approval and recommendation of the merger and merger
agreement by the Crown Independent Committee;
. the fact that the price per share to be paid in the merger represents a
premium of 31.25% to the closing price of Crown Class A common stock and
a 50% premium to the closing price of Crown Class B common stock on
December 14, 2000, the day prior to the date Rosemore announced its
intention to seek to acquire Crown;
. the fact that the price and the terms and conditions of the merger
agreement were the result of arm's-length negotiations between the Crown
Independent Committee and Rosemore;
. notwithstanding that the opinion of CSFB was addressed to the Crown
Board and that Rosemore is not entitled to rely on it, the fact that the
Crown Board received an opinion from CSFB that, as of December 17, 2000,
based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the aggregate consideration to
be received by Crown stockholders in the merger is fair, from a
financial point of view, to the Crown stockholders other than Rosemore,
the Novelly Group and their respective affiliates;
. although Rosemore did not request Aegis Muse to and Aegis Muse did not
advise that the price offered was fair to Crown's unaffiliated
stockholders, Rosemore considered that Aegis Muse had made a
presentation to Rosemore in connection with the April 7, 2000 merger
proposal, as described under "--Previous Financial Report Prepared by
Aegis Muse" on page 47;
. the fact that Crown had publicly announced that it was exploring
strategic alternatives in February 1999 and that there had been ample
opportunity since that time for interested parties to submit competing
proposals, as well as the fact that Rosemore had indicated to Crown that
it would consider any alternative proposal made by a third party that
the Rosemore board believed met its strategic and tax objectives and
considered fair to and in the best interest of Rosemore and its
stockholders;
. Rosemore considered that Apex, controlled by the Novelly Group, had
proposed to acquire Crown at $10.50 per share. Rosemore also considered
that, pursuant to the stock purchase agreement, the Novelly Group would
agree that at this price it would support Rosemore's acquisition of
Crown, and the shares held by the Novelly Group, amounting to 13.6% of
the votes entitled to be cast, would be voted in favor of Rosemore's
acquisition of Crown at $10.50 per share. The Novelly Group would also
agree not to propose any competing transactions that would have a
negative impact on the consummation of the merger; and
. the merger requires the approval of a majority of all of the votes
present and cast on the matter by holders of Crown Class A and Class B
common stock voting together as a single class, other than by stock
owned by Rosemore and its affiliates.
In connection with its determination of the fairness of the consideration to
be received by the unaffiliated stockholders of Crown under the merger
agreement, the Rosemore board has adopted the conclusions as to fairness set
forth under "--Crown's Reasons for the Merger and Statement as to the Fairness
of the Merger" on page 37, and the analyses underlying such conclusions of the
Crown Board, based upon the views of the members of Rosemore's board as to the
reasonableness of such analyses. Rosemore did not find it practicable to and
did not assign relative weights to the individual factors considered in
reaching its conclusion as to fairness. However, the Rosemore board believes
that each of the factors is material to its determination that the merger is
fair, and has characterized as positive each of the factors characterized as
positive by the Crown Board.
46
Previous Financial Report Prepared by Aegis Muse
In connection with Aegis Muse's prior services as financial advisor to
Rosemore regarding the transaction contemplated by the April 7, 2000 merger
agreement, the Rosemore board asked Aegis Muse to value Crown. That Aegis Muse
valuation report was delivered to Rosemore's board on March 6, 2000. In
connection with the transactions contemplated by the December 17, 2000 merger
agreement, the stock purchase agreement and the escrow agreement, Rosemore did
not request and Aegis Muse did not provide any valuation of Crown, nor did
Aegis Muse update any of the analysis that is described below. Moreover, the
analysis below assumed gross refining margins equal to approximately $3.90 per
barrel for the ten-year period beginning with the year 2000, which is
considerably higher than the gross margin levels actually realized over the
past ten years. What follows is included here only for informational purposes
and to comply with applicable SEC disclosure requirements. In its valuation
report Aegis Muse reviewed the stock price performance of Crown and the
environment in which Crown's stock was then trading, discussed the methodology
and assumptions used to value Crown, described the three refining margin
scenarios and two refining operating scenarios employed in its valuation, and
presented a summary of its valuation.
The Aegis Muse March 6, 2000 report relied principally on discounted cash
flows (DCF) after taxes and after capital expenditures. Aegis Muse considered a
DCF analysis to be a better measure of value than other methods, namely net
book value and liquidation value, although it did observe prices paid in
comparable transactions to confirm the values generated using the DCF method.
In defining its valuation range Aegis Muse focused on its "expected case" for
refining margins under two refining operating scenarios: "continue refining"
and "exit refining." The "continue refining" scenario assumed that Crown would
make all of the then- anticipated capital expenditures necessary for its
refinery operations to meet future expected fuel specifications and continues
to operate its refineries indefinitely. The "exit refining" scenario assumed
Crown foregoes the capital expenditures necessary to meet future expected fuel
specifications and discontinues refining operations by the year 2008 when
Crown's refineries are assumed to no longer produce fuels that comply with then
prevailing specifications that have been adopted or are projected to be
adopted. Under all refining margin and operating cases, Crown was assumed to
continue its retail gasoline and terminalling operations.
The cash flow projections used in the March 6, 2000 Aegis Muse report were
based upon various assumptions regarding the future operations of Crown. In
general, Aegis Muse relied upon its own experience and judgment in projecting
revenues and gross margins. Operating expenses were typically based on Crown's
historical performance at the time of this report, and estimates of future
capital expenditures were based both on Aegis Muse's own estimates of amounts
needed to be spent to comply with existing and anticipated environmental
regulations as well as Crown's projections at the time for sustaining capital.
Estimates of future general and administrative expenses were provided by Crown
and included management's projected reductions in overhead which were expected
to result principally from the implementation of a reduction in personnel and
the replacement of Crown's existing benefits programs with less expensive
programs.
The after-tax and after-capital expenditures cash flows resulting from the
various margin cases and refining scenarios were discounted at 13%, the
weighted average after-tax cost of capital determined using the Capital Asset
Pricing Model as generally applied to publicly traded independent refining and
marketing companies. Cash flows were projected for ten years from the date of
this report with the final year's cash flow treated as a perpetuity valued
using the 13% discount rate.
The expected-margin-continue-refining combination produced a DCF value of
approximately $5.50 per share. The expected-margin-exit-refining combination
produced a DCF value of approximately $11.50 per share. Aegis Muse then
estimated a value range for Crown of $6.00 to $9.00 per share based upon the
following:
. Were Crown to elect to continue refining operations indefinitely, the
expected-margin-continue-refining case represented the low end of the
value range.
. The then expected-margin-exit-refining case produced an $11.50 per share
value; however, that value was predicated upon the continuation of
refining operations until 2008. Because margin estimates are
decreasingly reliable the further into the future they are projected,
and because Rosemore at the time of the March 6 report was understood to
be more likely to favor discontinuation by Crown of a portion of its
refining operations prior to 2008, a $9.00 per share upper end of the
range was chosen.
47
In addition to estimating a value range for Crown, Aegis Muse developed an
investment return analysis for Rosemore's proposed purchase of Crown at various
per share acquisition prices and under the same margin and operating scenarios
as were then used in estimating an equity value range for Crown. The investment
return calculations assumed the senior long-term debt of Crown remained
outstanding and was refinanced at its scheduled maturity in 2005 on
substantially the same terms. Under the expected-margin-continue-refining case,
a proposed purchase price of $9.00 per share was calculated to produce an
investment return to Rosemore of 18%. Under the expected-margin-exit-refining
case, a proposed purchase price of $9.00 per share was calculated to produce an
investment return to Rosemore of 32%. The 32% return reflects Crown's continued
operation of its refineries until 2008. Were Crown to discontinue refining
operations sooner than 2008, which has been and may continue to be considered
by Rosemore, then the investment return on the expected-margin-exit-refining
case would likely be significantly lower than 32%. In addition, all of the
hypothetical investment return calculations assumed that the 10 7/8% senior
notes remain outstanding and are refinanced on substantially the same terms at
scheduled maturity in 2005. There is no guarantee that Crown will seek to or
will be able to refinance the 10 7/8% senior notes on terms as favorable as the
current terms of the senior notes, if at all, in which case the returns on
Rosemore's investment in Crown could be materially lower than calculated in the
hypothetical investment return analysis.
Aegis Muse is a Texas limited liability company that was formed in 1999 to
provide strategic advice to companies engaged in oil and gas refining and
marketing activities. It is a joint venture between Aegis Energy Advisors
Corp., a boutique energy investment bank based in New York, and Muse Stancil &
Co. (Muse Stancil), a refining and marketing consulting firm based in Dallas,
Texas. On four separate occasions since 1996, Muse Stancil has provided
consulting services to Crown for a variety of assignments involving both
technical and economic analysis of certain aspects of Crown's business
activities. Prior to Aegis Muse being retained by Rosemore, both Rosemore and
Crown were fully apprised on Muse Stancil's participation in Aegis Muse and the
nature of Muse Stancil's previous relationship with Crown, and Aegis Muse was
instructed not to use any materials previously prepared by Muse Stancil in
connection with its prior work for Crown.
Aegis Muse and its principals have advised clients on more than 100 refining
and marketing transactions over the past two decades. Aegis Muse was paid a
retainer of $100,000 at the time it was first engaged and it was paid an
additional $150,000 at the time it delivered its March 6, 2000 report to the
Rosemore board. In addition, in connection with Rosemore making a proposal to
acquire the Crown common stock in the spring of the year 2000, Aegis Muse was
paid an additional $250,000 and was also reimbursed for expenses in the amount
of approximately $15,000. In the event the transaction contemplated by the
December 7, 2000 merger agreement is ultimately consummated, its total
compensation will be $1,500,000, and Aegis Muse will also be reimbursed for its
expenses.
Henry A. Rosenberg, Jr.'s Reasons for the Merger and Statement as to the
Fairness of the Merger
Mr. Henry A. Rosenberg, Jr., the Chairman of the Board of Directors,
President and Chief Executive Officer of Crown, is an affiliate and the
chairman of the board of directors of Rosemore.
After Crown's financial advisor, CSFB, recommended to Crown's Board of
Directors in January, 2000, that it approach Rosemore to discuss whether
Rosemore was interested in making an offer to acquire Crown, Mr. Henry A.
Rosenberg, Jr. recused himself from any further proceedings of the Board of
Directors of Crown relating to Crown's consideration and evaluation of
strategic alternatives other than the final vote of the Crown Board to approve
the merger and merger agreement after they had been recommended by the
Independent Committee. He also agreed to limit his involvement with Rosemore in
any proposal made by Rosemore and further agreed not to discuss with any
representative of Rosemore any information or knowledge he had previously
acquired with respect to strategic proposals and transactions of Crown. See
"THE MERGER--Interests of Certain Persons in the Merger" on page 56.
48
The rules of the SEC require Mr. Rosenberg to express his belief as to the
fairness of the merger to Crown's unaffiliated stockholders. As described in
more detail under "--Background of the Merger," on page 14, the terms of the
merger agreement were negotiated at arm's-length between the Independent
Committee and the Rosemore special committee and their respective financial and
legal advisors. Mr. Rosenberg considered the conclusions and recommendations of
Crown's Independent Committee and the factors referred to under "--Crown's
Reasons for the Merger and Statements as to the Fairness of the Merger" as
having been taken into account by the Independent Committee, including the
analyses and presentations prepared by CSFB, and the opinion of that firm dated
December 17, 2000. He also believes, for the reasons set out in "--Crown's
Reasons for the Merger and Statements as to the Fairness of the Merger," that
sufficient procedural safeguards were and are present to ensure the fairness of
the merger and to permit the Independent Committee to represent effectively the
interests of the unaffiliated stockholders. In addition, Mr. Rosenberg supports
the merger because it assures all stockholders other than Rosemore will receive
$10.50 for each share of Crown stock that they own, and it allows the Rosenberg
family to continue its historic management relationship with Crown.
For reasons set forth above and in the statements Mr. Rosenberg has adopted,
Mr. Rosenberg believes that the terms of the merger and merger agreement are
fair to Crown's unaffiliated stockholders.
Mr. Rosenberg owns directly or in the Crown Savings Plans 32,525 shares of
Class A common stock and 82,428 shares of Class B common stock including PVR
stock. See "SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND
MANAGEMENT--Owners of More than Five Percent" on page 73. In addition, Mr.
Rosenberg holds vested options for the acquisition of 223,426 additional shares
of Class B common stock and options that will vest on May 1, 2001 to acquire
14,634 shares of Class B common stock. None of Mr. Rosenberg's options are in
the money. Mr. Rosenberg also holds 148,000 stock appreciation units for which
he will receive no payment as the established floor price of the units of
$14.91 is higher than the merger consideration. Mr. Rosenberg will receive
$10.50 per share as a result of the merger for each of the 114,953 Crown shares
he owns for an aggregate consideration of $1,207,007 and will receive $513,763
for his options (as to which he will recognize ordinary income) based upon a
discounted Black-Scholes valuation of his options. Mr. Rosenberg will recognize
long term capital gain or loss on the Crown shares he holds directly (other
than for shares as to which he will recognize ordinary income), depending on
his tax basis for each such share. He will not currently recognize taxable gain
or loss on the Crown shares he holds in the Crown savings plans.
Ownership of Rosemore
On December 31, 1998, as part of a reorganization of American Trading and
Production Corporation, American Trading transferred certain of its assets,
including all of its stock in Crown at a final valuation of $8.25 and $8.34375
per share of Crown Class A and Class B common stock, respectively, to Rosemore
and spun Rosemore off to the current stockholders of Rosemore, who received
stock in Rosemore in exchange for their stock in American Trading. All of the
shares of Rosemore are held by trusts for the benefit of descendants of Ruth B.
Rosenberg (daughter of Louis Blaustein and mother of Mr. Henry A. Rosenberg,
Jr. and his sisters). Mr. Henry A. Rosenberg, Jr. is a trustee of all of these
trusts and is a beneficiary of trusts holding 31% of the stock of Rosemore. Mr.
Rosenberg's sisters, Mrs. Ruth R. Marder and Mrs. Judith R. Hoffberger, are
trustees of trusts holding over 98% of the stock of Rosemore and each is also a
beneficiary of trusts holding 31% of the stock of Rosemore.
Effects of the Merger
As a result of the merger, Crown will become an indirect wholly owned
subsidiary of Rosemore. All shares of Crown stock not owned by Rosemore will be
converted into the right to receive $10.50 per share in cash. Accordingly,
Rosemore's interest in Crown common stock will increase in the merger from
29.4% to 100%, and as a consequence its interest in the net book value of Crown
will increase in the merger from a 29.4% equivalent interest of approximately
$44.0 million to an interest of approximately $149.5 million as of September
30, 2000, and its interest in the net earnings (loss) of Crown will increase in
the merger from a 29.4% equivalent interest of approximately $(8.8 million) and
$(0.1 million) for the twelve-month period ended December 31, 1999 and the
nine-month period ended September 30, 2000, respectively, to an interest of
approximately $(30 million) and $(0.2 million) for these periods. See "RECENT
DEVELOPMENTS" on page 10.
Given Mr. Henry A. Rosenberg, Jr.'s ultimate beneficial interest in 31% of
the stock of Rosemore, he could be construed to have an implicit interest of
9.1% in Crown through Rosemore, in addition to the interests
49
that he presently owns directly in Crown consisting of 1.0% of Crown's common
stock and vested options for up to 2.2% of Crown's common stock, giving him a
combined equivalent implicit interest of 12.3% in Crown's common stock before
the merger. This equivalent implicit interest of 12.3% in Crown's common stock
equates to an equivalent implicit interest in the net book value of Crown
before the merger of approximately $18.4 million as of September 30, 2000, and
an equivalent implicit interest in the net earnings (loss) of Crown before the
merger of approximately $(3.7 million) and $(0.2 million) for the twelve-month
period ended December 31, 1999 and the nine-month period ended September 30,
2000, respectively. Mr. Rosenberg will receive the merger consideration for his
Crown common stock and payment for the cancellation of his Crown options. His
only interest in Crown's common stock after the merger will be the interest he
is construed to have through his ultimate beneficial interest in 31% of the
stock of Rosemore, which will therefore give him an implicit interest in 31% of
the common stock of Crown after the merger. This implicit interest of 31% in
Crown's common stock equates to an implicit interest in the net book value of
Crown after the merger of approximately $46.3 million as of September 30, 2000,
and an implicit interest in the net earnings (loss) of Crown after the merger
of approximately $(9.3 million) and $(0.1 million) for the twelve-month period
ended December 31, 1999 and the nine-month period ended September 30, 2000,
respectively.
As a result of the merger, the Crown common stock will no longer be listed
on any stock exchange and will not be publicly traded. The Crown common stock
will cease to be registered under the Exchange Act. Accordingly, holders of
Crown common stock, other than Rosemore, will cease to hold Crown common stock
as a result of the merger and will be precluded from participating in any
future growth of Crown, and Crown will no longer prepare or file reports with
the SEC with respect to the Crown common stock, although the indenture relating
to the 10 7/8% senior notes requires Crown to continue to file periodic
reports, if permitted, or to otherwise provide comparable financial data.
The merger is a tax-free transaction for Rosemore, RAC and Rosemore
Holdings. The merger will be a tax-free transaction for Crown unless Rosemore
elects to treat the transaction as an asset sale by Crown. Rosemore does not
currently intend to elect to treat the transaction as an asset sale by Crown
but may determine to do so at a later time.
Interests of and Effects of the Merger on Crown's Directors and Officers
All of Crown's executive officers except for Henry A. Rosenberg, Jr. are
participants in the Executive Severance Plan which provides for certain
payments of benefits in connection with the merger and in the event of the
termination of the employment of a participant without "good cause" or if such
executive resigns for "good reason" within the two-year period following the
completion of the merger. The executives, other than Mr. Henry A. Rosenberg,
Jr., all executed limited waivers of payments and benefits due under the
Executive Severance Plan as a result of the merger, and Mr. Henry A. Rosenberg,
Jr. executed a limited waiver with respect to Crown stock options that he
holds. The limited waivers applicable to the Executive Severance Plan waive the
requirement for the immediate funding of benefits under the Supplemental
Retirement Income Plan and consent to a possible reduction in certain medical
benefits, adopt an interpretation of the term "good reason" as it applies to
the executive's duties and responsibilities following the merger and agree to a
revision of the definition of "change of control" with respect to certain
reductions in Crown's economic interests in refining capacity. Pursuant to the
limited waivers the executives agree to accept payment at a discounted Black-
Scholes valuation for the cancellation of their options, and Crown agrees to
adopt annual incentive plans for performance years 2001 and 2002 applicable to
the executives that provide target incentive award opportunity percentages
substantially comparable to target incentive award opportunity percentages
provided in the 2000 Executive Performance Incentive Plan. In 2001, upon the
consummation of the merger, executives will be deemed to have satisfied 100% of
the performance goals under the year 2001 Executive Performance Incentive Plan.
See "THE MERGER AGREEMENT--Waiver Agreements" on page 64. Restrictions on
performance vested restricted (PVR) stock will lapse as a result of the merger
and executive officers will, therefore, be entitled to receive the merger
consideration for their PVR stock and also to receive payment for the
cancellation of their options. Mr. Henry A. Rosenberg, Jr. will resign as
President and Chief Executive Officer after the merger, but will remain
Chairman of the Board of Crown. Mr. Frank B. Rosenberg will be elected
President and Chief Executive Officer of Crown.
50
Pursuant to the merger agreement, the charter and bylaws of the surviving
corporation shall contain the provisions for the indemnification of directors
and officers that were applicable at the date of the merger agreement and those
provisions may not be amended or repealed for a period of six years. The
surviving corporation is also required to use its best efforts to maintain
directors' and officers' liability insurance with coverage at least as
favorable as that contained in Crown's existing policies.
Directors and officers will be entitled to receive the merger consideration
for the Crown stock they hold. The Independent Directors waived the standard
retainer for service on Crown Board committees, but not the right to be
reimbursed for expenses incurred, when the Crown Board established the
Independent Committee and appointed the Independent Directors to that
committee. Other than the interests of Mr. Henry A. Rosenberg, Jr., as the
chairman of Rosemore, and a trustee and trust beneficiary of family trusts that
own stock in Rosemore and of Mr. Frank B. Rosenberg as a trust beneficiary of a
family trust that owns stock in Rosemore, the directors and officers of Crown
will receive no other benefits as a result of the merger.
Mr. Stanley A. Hoffberger, elected a director of Crown on December 14, 2000,
is the husband of Judith R. Hoffberger. Mrs. Hoffberger, a sister of Henry A.
Rosenberg, Jr., is a director of Rosemore, and a trustee of trusts holding over
93% of the stock of Rosemore and a beneficiary of trusts holding 31% of the
stock of Rosemore. Their son, Jeffrey A. Hoffberger, is a director and vice
president of Rosemore, and a member of the special committee of the Rosemore
board which reviewed Rosemore's investment in Crown.
Mr. Barry L. Miller, elected a director of Crown on December 14, 2000, is a
Senior Vice President and the Treasurer and Chief Financial Officer of
Rosemore. In that capacity, prior to his election to Crown's Board, he assisted
the special committee of the Rosemore board and the Rosemore board in their
deliberations with respect to Rosemore's investment in Crown. After his
election to Crown's Board, Mr. Miller did not participate in or assist the
Rosemore special committee or board in their deliberations.
Rosemore's Plans for Crown after the Merger
After completion of the merger, Rosemore plans to utilize the business
opportunities that are available to Crown in order to maximize revenues and
profits. This could include, but not necessarily be limited to, reduction of
overhead and the restructuring of Crown's borrowing arrangements. Following the
merger, Rosemore intends to request that Crown evaluate on a regular basis the
future capital requirements and operating performance for each of its
operations and assets, and, in light of these criteria, to make an asset-by-
asset determination as to which assets to retain.
Rosemore and Crown expect to discuss with First Union National Bank (First
Union) current and post-merger financing. Although Crown has the right to
redeem its 10 7/8% senior notes under the indenture at a redemption price of
103.625% commencing on February 1, 2001, Rosemore and Crown have no immediate
plans to redeem the 10 7/8% senior notes.
In 1999, Crown initiated and is undergoing a rationalization program
designed to improve its operating margins that includes an overhead reduction
program and a limited reduction in the workforce. Rosemore understands that
Crown has made significant progress with the implementation of these cost-
saving initiatives and Rosemore expects that Crown will continue this program.
Crown will be the surviving corporation of the merger, and the directors and
the officers of Crown immediately prior to the effective time of the merger
will continue to be the directors and the officers of Crown after the
completion of the merger, until their respective successors are elected or
appointed and qualified, in
accordance with the charter and bylaws of Crown. It is expected that, after the
completion of the merger, Mr. Henry A. Rosenberg, Jr., while keeping his
position as the Chairman of the Crown Board, will resign as President and Chief
Executive Officer of Crown and that Mr. Frank B. Rosenberg will be appointed
President and Chief Executive Officer. Rosemore has no current intention to
change the size or membership of the Crown Board immediately following the
merger.
Other than by virtue of the merger and except as otherwise described above
or elsewhere in this proxy statement, Rosemore has no current plans or
proposals which relate to or would result in:
. any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Crown or any of its
subsidiaries;
51
. any purchase, sale or transfer of a material amount of assets of Crown
or any of its subsidiaries;
. any material change in Crown's capitalization, dividend rate or policy,
or indebtedness;
. any change in the management of Crown, the composition of the Crown
Board or any change in any material term of the employment arrangements
of any executive officer; or
. any other material change in Crown's corporate structure or business.
Federal Income Tax Consequences
The following discussion is a summary of material U.S. federal income tax
consequences of the merger to holders of Class A and Class B common stock who
are U.S. persons and hold their shares as capital assets. This summary is based
upon the Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury
regulations, administrative pronouncements of the U.S. Internal Revenue Service
(the IRS) and judicial decisions in effect on the date hereof, all of which are
subject to change, retroactively and prospectively, and to possibly differing
interpretations. For purposes hereof, a U.S. person is (i) a U.S. citizen or
resident alien individual, (ii) a corporation created or organized in or under
the laws of the United States or any state, (iii) an estate the income of which
is subject to U.S. federal income tax without regard to the source, and (iv) a
trust if a court within the U.S. is able to exercise primary supervision over
its administration and one or more U.S. persons have authority to control all
substantial decisions relating to the trust. The discussion set forth below is
for general information only and, thus, does not address all of the U.S.
federal income tax consequences of the merger that may be relevant to the
holders of Crown common stock based upon their particular circumstances.
Moreover, this summary does not apply to certain categories of holders of
common stock that may be subject to special tax rules, including, but not
limited to, banks, tax-exempt organizations, insurance companies, regulated
investment companies, non-U.S. persons and holders who acquired such shares
pursuant to the exercise of employee stock options or otherwise as
compensation. In addition, the discussion does not address the state, local or
foreign tax consequences of the merger.
EACH HOLDER OF COMMON STOCK IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT
TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER.
General Federal Income Tax Consequences of the Merger. The receipt of cash in
exchange for Class A and Class B common stock pursuant to the merger would be a
taxable sale for U.S. federal income tax purposes. Accordingly, a Crown
stockholder who receives cash pursuant to the merger will recognize taxable
gain or loss equal to the difference between the amount of cash received and
the stockholder's adjusted tax basis in the shares surrendered therefor. The
gain or loss will be a long-term capital gain or loss if, as of the date of the
sale, such stockholder's holding period for such shares is more than one year.
Under current law, an individual is subject to a maximum federal income tax
rate of 20% on any net long-term capital gains, and a corporation is subject to
a maximum U.S. federal income tax rate of 35% on any net capital gain. If the
receipt of cash in exchange for shares results in recognition of a capital
loss, deductibility of such loss may be subject to limitation. You will not
currently recognize taxable gain or loss if you hold your Crown stock in one of
the Crown savings plans or in an individual retirement account. For additional
information on the tax consequences affecting options to purchase shares of
Crown common stock, and performance vested restricted stock, see "THE MERGER--
Treatment of Stock Options, Stock Grants, and Stock Appreciation Units" on page
54.
Backup Withholding. Unless a Crown stockholder complies with certain reporting
or certification procedures or is an "exempt recipient" (in general,
corporations and certain other entities) under applicable provisions of the
Code and Treasury regulations, such stockholder may be subject to a withholding
tax of 31% with respect to any cash payments received pursuant to the merger.
Backup withholding is not an additional tax. Any amount withheld under these
rules will be credited against a stockholder's U.S. federal income tax
liability provided such stockholder furnishes the required information to the
IRS. If a stockholder does not comply with the backup withholding rules, such
holder may be subject to penalties imposed by the IRS. A non-U.S. Crown
stockholder should consult its tax advisor with respect to the application of
withholding rules to it with respect to any cash payments received pursuant to
the merger.
52
THE MERGER
Merger Consideration
The merger will become effective when the articles of merger are filed with,
and are accepted for record by, the State Department of Assessments and
Taxation of Maryland. At the time of the merger, RAC will be merged with and
into Crown. The separate corporate existence of RAC will cease, and Crown will
continue as the surviving corporation and become an indirect wholly owned
subsidiary of Rosemore.
The merger will have the following effects:
. Each outstanding share of Crown common stock will be converted into the
right to receive $10.50 in cash as merger consideration. The merger
consideration will be payable without any interest once the Crown stock
certificate that formerly evidenced such share of Crown common stock has
been duly returned. Crown common stock includes the associated right to
purchase Crown's Series A or Series B Junior Participating Preferred
Stock that was granted pursuant to Crown's shareholder rights plan. See
"SHAREHOLDER RIGHTS PLAN" on page 70. The rights will expire at the
earlier of the close of business on February 14, 2001 or the time that
is immediately before the articles of merger are filed with the State
Department of Assessments and Taxation of Maryland, and the holders of
these rights will receive no compensation for these rights in connection
with the merger. The conversion described in this paragraph will not
apply to the shares owned by Rosemore Holdings.
. Each outstanding share of common stock of RAC will be converted into one
share of common stock of Crown as the surviving corporation.
. Each share of Crown common stock owned by Rosemore Holdings will
automatically be cancelled, and no payment will be made with respect
thereto.
Dissenting stockholders do not have any statutory right to seek a
determination of the fair value of their shares of Crown common stock under
Maryland corporate law. See "--No Appraisal Rights" on page 61.
Payment Procedure
On or before the closing date of the merger, Rosemore will enter into an
agreement with a bank or trust company to serve as a paying agent selected by
Rosemore and reasonably acceptable to Crown. At the time the merger becomes
effective, Rosemore will deposit for the account of the paying agent, in trust
for the benefit of the holders of Crown common stock who are to receive merger
consideration, an amount in cash equal to the aggregate merger consideration.
This amount will be used as the exchange fund for the merger.
The paying agent will mail to you a letter of transmittal after the merger
becomes effective. The letter of transmittal will contain instructions that
explain how you should return Crown stock certificate(s) in order to receive
the merger consideration. You should not return your Crown stock certificate(s)
until you receive the letter of transmittal.
Upon returning your Crown stock certificate(s), together with your letter of
transmittal, duly completed and validly executed in accordance with the paying
agent's instructions, the paying agent will pay you an amount in cash equal to
the product of the merger consideration multiplied by the number of shares of
Crown common stock formerly represented by such Crown stock certificate(s).
Upon payment, all returned Crown stock certificate(s) will be cancelled.
Until you return your Crown stock certificate(s), they will only represent
the right to receive the merger consideration. No interest will be paid or
accrued on the merger consideration. If the merger consideration (or any
portion thereof) is to be paid to any person other than you, then the stock
certificate(s) must be properly endorsed or otherwise be in proper form for
transfer. The person surrendering such Crown stock certificate(s) will pay to
the paying agent any transfer or other similar taxes required. Alternatively,
you may establish to the satisfaction of the surviving corporation that such
tax has been paid or is not applicable.
53
After the six-month anniversary of the merger, the surviving corporation
will be entitled to require the paying agent to return to the surviving
corporation any portion of the exchange fund (including, without limitation,
all interest and other income received by the paying agent in respect of all
funds made available to it) which remains undistributed to the holders of Crown
stock certificates and any other documents in its possession relating to the
merger, and the paying agent's duties will terminate. If you have not received
payment of the merger consideration by this time, then you may look only to the
surviving corporation for payment. You may obtain payment from the surviving
corporation by surrendering your Crown stock certificate(s) to the surviving
corporation and complying with instructions received from the surviving
corporation.
After the merger, the stock transfer books of Crown will be closed. There
will be no further registration of transfers on the stock transfer books of the
surviving corporation of any shares of Crown common stock that were outstanding
immediately before the merger. Crown stock certificates presented to the
surviving corporation or the paying agent after the merger will be surrendered
and cancelled in return for the payment of the merger consideration represented
thereby, as provided above and pursuant to the terms of the merger agreement.
You will cease to have any rights with respect to shares of Crown common
stock after the merger, except the right to receive the merger consideration.
The paying agent and the surviving corporation will be entitled to deduct
and withhold from the merger consideration otherwise payable to you as required
under the Code, or any applicable provision of state, local or foreign tax law.
Any withheld tax amounts will be treated as having been paid to you.
You will need to provide an affidavit if you have lost your Crown stock
certificate(s) or if your certificate(s) have been stolen or destroyed. The
paying agent or surviving corporation may require you to post a bond of a
reasonable amount as indemnity against any claim that may be made with respect
to any missing Crown stock certificate. The paying agent will issue in exchange
for such lost, stolen or destroyed Crown stock certificate(s) the merger
consideration to which you are entitled pursuant to the merger agreement.
Treatment of Stock Options, Stock Grants and Stock Appreciation Units
Various rights were granted pursuant to Crown's 1994 Long-Term Incentive
Plan, Crown's 1995 Management Stock Option Plan, and Crown's 1999 Long-Term
Incentive Plan.
Options. At the time of the merger and pursuant to Crown's stock plans, each
option to purchase shares of Crown Class B common stock will (i) become fully
vested and immediately exercisable and (ii) remain outstanding and, thereafter,
be an option to purchase common stock in the surviving corporation with the
same relative rights and exercise prices as applied to such option immediately
before the merger. Each option will be subject to the terms (as in effect as of
the date of the merger) of the Crown stock plan with regard to which such
option was issued. After the merger, when you refer to Crown's stock plans, all
references to Crown will be deemed to be references to the surviving
corporation and all references to Crown common stock will be deemed to be
references to the common stock of the surviving corporation. Crown will take
all necessary action to approve the disposition of the options in connection
with the transactions contemplated by the merger agreement to the extent
necessary to exempt such dispositions and acquisitions under Rule 16b-3 of the
Exchange Act.
Promptly after the merger, Rosemore will or will cause the surviving
corporation to provide each holder of any options with the opportunity to
receive payment for the cancellation of his or her options at prices ranging
from $1.27 to $3.62 per option (depending upon the exercise price and the
remaining term of the option). If all of Crown's 980,507 outstanding options
are cancelled, it would result in an aggregate payment of $2,189,171. Any
payments related to the cancellation of options will result in the recognition
of ordinary income and will be subject to all applicable federal, state and
local tax withholding requirements.
54
Performance Vested Restricted Stock. At the time of the merger, restrictions on
Crown stock awards in the form of performance vested restricted stock granted
pursuant to Crown's 1994 Long-Term Incentive Plan will lapse (and this will
result in the recognition of ordinary income equal to the value of the stock at
the time the restrictions lapse), any restrictive legend contained on any Crown
stock certificate(s) related thereto will be removed and any Crown stock
certificate(s) related thereto held in escrow by Crown pursuant to the terms of
such plan will be released to the grantee of such Crown stock award. At the
time of the merger, the performance vested common stock, which is Class B
common stock, will therefore be converted into the right to receive $10.50 in
cash as merger consideration. The payment procedures previously described in
"--Payment Procedure" on page 53 will apply to this stock.
Stock Appreciation Units. At the time of the merger and pursuant to Crown's
1999 Long-Term Incentive Plan, each stock appreciation unit will become fully
vested and immediately exercisable. Holders of stock appreciation units are
entitled to payment of the difference between the market price of the Crown
Class B common stock on the date of the merger and the floor price of $14.91.
As the established floor price for the stock appreciation units is higher than
the merger consideration, no amounts will be paid out with respect to the stock
appreciation units, and these units will cease to continue as an obligation
under such plan.
Merger Financing; Expenses of the Merger
The total amount of funds required by Rosemore to acquire all of the
outstanding shares of Crown common stock not owned by Rosemore and to pay
related fees and expenses of the transaction is estimated to be approximately
$82 million in addition to the $1,750,000 in documented expenses which have
been reimbursed to the Novelly Group. Rosemore Holdings has amended its
existing revolving credit agreement with First Union to borrow up to an
additional $75 million to finance the acquisition of the Crown common stock, to
pay for the cancellation of options and for Rosemore's general corporate
purposes. The revolving credit facility, unless renewed, will terminate on May
30, 2001, and will be secured by certain publicly traded securities owned by
Rosemore Holdings and pledged to First Union. Rosemore Holdings will pay
interest on the outstanding borrowings under the $75 million portion of the
credit facility at a floating rate indexed to LIBOR.
The merger agreement provides that, with certain limited exceptions, all
costs and expenses incurred in connection with the merger will be paid by the
party incurring such expenses, whether or not the merger is consummated. Crown
is required under the merger agreement to reimburse Rosemore's reasonable and
documented expenses incurred in connection with the merger agreement if:
. Crown or Rosemore terminates the merger agreement due to the failure of
Crown's stockholders to approve the merger and merger agreement;
. at the time of such failure to approve the merger and merger agreement,
there exists a publicly announced competing transaction to that of
Rosemore;
. within 12 months of the termination of the merger agreement with
Rosemore, Crown enters into an agreement with a third party with respect
to a competing transaction; and
. the competing transaction is subsequently consummated.
55
The following is an estimate of expenses to be incurred in connection with
the merger.
EXPENSES TO BE PAID BY CROWN:
Financial advisory fees and expenses................................
Legal fees and expenses.............................................
Printing and mailing fees...........................................
Accounting fees and expenses........................................
Solicitation expenses...............................................
Miscellaneous.......................................................
SEC filing fees..................................................... 1,412
---------
Total..............................................................
=========
EXPENSES TO BE PAID BY ROSEMORE:
Financial advisory fees and expenses................................
Legal fees and expenses.............................................
Reimbursement of expenses incurred by the Novelly Group............. 1,750,000
Miscellaneous.......................................................
HSR filing fees.....................................................
---------
Total..............................................................
=========
Interests of Certain Persons in the Merger
In considering the merger, you should be aware that certain members of
Crown's management and Board may have interests in the merger that are
different from, or in addition to, their interests solely as stockholders of
Crown. These interests are described below.
The Independent Committee and the Crown Board were aware of these potential
or actual conflicts of interest and considered them along with the other
matters described under "SPECIAL FACTORS--Recommendation of Crown's Board of
Directors" on page 37 and "SPECIAL FACTORS--Interests of and Effects of the
Merger on Crown's Director and Officers" on page 50.
Messrs. Henry A. Rosenberg, Jr. and Frank B. Rosenberg. Mr. Henry A. Rosenberg,
Jr. is Chairman of the boards of both Rosemore and Crown. Mr. Frank B.
Rosenberg, the son of Henry A. Rosenberg, Jr., is a director and Senior Vice
President--Marketing of Crown.
Mr. Henry A. Rosenberg, Jr., as a result of his position with Crown, owes
fiduciary duties to the stockholders of Crown, in addition to the fiduciary
duties he owes to the stockholders of Rosemore. At times, he may be confronted
by issues, including the merger, that present him with potentially conflicting
interests and obligations.
On January 18, 2000, CSFB recommended to the Crown Board that it be
authorized to approach Rosemore to solicit its interest in making an offer to
acquire Crown. The Crown Board authorized CSFB to approach Rosemore, which it
did on January 18, 2000. Because of Mr. Henry A. Rosenberg, Jr.'s conflicting
fiduciary duties, Crown's Board empowered the Independent Committee to
represent the interests of Crown's stockholders in the review, evaluation and
negotiation of the merger. Mr. Henry A. Rosenberg, Jr. was not a member of the
Independent Committee.
Also, from January 18, 2000, when CSFB approached Rosemore to solicit its
interest in making an offer to acquire Crown, Mr. Henry A. Rosenberg, Jr.
recused himself from all consideration by the management and Board of Crown of
any proposal made to Crown by any persons (including, without limitation,
Rosemore) concerning any material transaction with or with respect to Crown,
except to the extent requested of him by the Independent Committee, and the
final vote of the Crown Board to approve the merger and merger agreement that
had been recommended by the Independent Committee.
56
In a letter submitted to the Crown Board at its meeting on January 27, 2000,
Mr. Henry A. Rosenberg, Jr. committed to the Crown Board not to discuss with
any representative of Rosemore any information or knowledge he had or would
have concerning any strategic proposals made to Crown by any third party
concerning any material strategic transaction with or with respect to Crown. He
also committed to the Crown Board that he would not participate in the
formulation by Rosemore of any proposal with respect to Crown and would limit
his participation to meetings in which the Rosemore board considered and
approved or disapproved any such proposal.
Rosemore has a Schedule 13D on file with the SEC with respect to its
stockholdings in Crown. Mr. Frank B. Rosenberg, a director and officer of
Crown, was included in Rosemore's 13D filing but has disclaimed membership in
any filing group. See "SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND
MANAGEMENT--Owners of More than Five Percent" on page 73. In consideration of
potential conflicts, at a meeting of the Crown Board on January 27, 2000, Mr.
Frank B. Rosenberg committed, through a letter submitted to the Crown Board,
not to discuss with any representative of Rosemore any information or knowledge
he had or would have concerning any strategic proposals made to Crown by any
third party concerning any material transaction with or with respect to Crown.
Mr. Frank B. Rosenberg further agreed not to participate in the evaluation of
any such proposals made by third parties, except to the extent necessary to
fulfill his responsibilities for Crown's retail marketing and wholesale
operations as Senior Vice President--Marketing, and then only after discussion
of his participation with the Independent Committee or their representatives.
Rosemore has informed Crown that, after the merger has become effective,
Rosemore intends to appoint Mr. Frank B. Rosenberg as President and Chief
Executive Officer of Crown.
Messrs. Frank B. Rosenberg and Henry A. Rosenberg, Jr. each have pre-
existing elections in the Savings Plans, pursuant to which the plan trustee
purchases stock for each of them as a part of its purchases for all other
participants in the plans. Both Messrs. Frank B. Rosenberg and Henry A.
Rosenberg, Jr. undertook, for a period of twelve months from January 2000, or
such shorter period to which the Crown Board may consent, that neither of them
would change or amend those pre-existing elections. See "SECURITY OWNERSHIP OF
FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT--Directors and Officers" on page
74.
Messrs. Stanley A. Hoffberger and Mr. Barry L. Miller. Mr. Stanley A.
Hoffberger, elected a director of Crown on December 14, 2000, is the husband of
Judith R. Hoffberger. Mrs. Hoffberger, a sister of Henry A. Rosenberg, Jr., is
a director of Rosemore, and a trustee of trusts holding over 93% of the stock
of Rosemore and a beneficiary of trusts holding 31% of the stock of Rosemore.
Their son, Jeffrey A. Hoffberger, is a director and vice president of Rosemore
and a member of the special committee of the Rosemore board which reviewed
Rosemore's investment in Crown.
Mr. Barry L. Miller, elected a director of Crown on December 14, 2000, is a
Senior Vice President and the Treasurer and Chief Financial Officer of
Rosemore. In that capacity, prior to his election to Crown's Board, he assisted
the special committee of the Rosemore board and the Rosemore board in their
deliberations with respect to their investment in Crown. After his election to
Crown's Board, Mr. Miller did not participate in or assist the Rosemore special
committee or board in their deliberations.
Stockholder Litigation. Messrs. Henry A. Rosenberg, Jr., Edward L. Rosenberg
and Frank B. Rosenberg are named defendants in a derivative lawsuit brought in
December 1998 by five Crown stockholders on behalf of Crown against Crown's
then-current directors and three of its non-director officers. Upon completion
of the merger, stockholders of Crown prior to the merger will have no rights in
the Crown common stock other than the right to receive $10.50 per share. As a
result, former stockholders may lose standing to continue the derivative
lawsuit. See "--Stockholder Litigation" on page 59.
Effects of the Merger on Interested Persons' Stock Plans. Crown's executive
officers hold options to purchase shares of Crown Class B common stock pursuant
to Crown's 1994 Long-Term Incentive Plan and 1995 Management Stock Option Plan,
and also hold stock appreciation units pursuant to Crown's 1999 Long-Term
Incentive Plan.
57
. Options. As of September 30, 2000, the outstanding Crown options had
exercise prices between $7.75 and $19.50. In connection with the merger,
the options will become fully vested and immediately exercisable
(including options that, in the ordinary course, would not have been
exercisable and vested at the time the merger becomes effective). Upon
completion of the merger, each outstanding option to purchase Crown
Class B common stock will convert into an option to purchase common
stock of the surviving corporation with the same relative rights and
exercise prices as applied to such option immediately before the merger.
Promptly after the merger, Rosemore will or will cause the surviving
corporation to provide each holder of options with the opportunity to
receive payment for the cancellation of his/her options at prices
ranging from $1.27 to $3.62 per option based upon a discounted Black-
Scholes valuation that reflects the strike price and term of the option.
. Performance Vested Restricted Stock. In connection with the merger,
restrictions on outstanding stock awards for 193,975 shares of Crown
Class B common stock will lapse, any restrictive legend contained on any
Crown stock certificate(s) related thereto will be removed and any Crown
stock certificate(s) related thereto held in escrow by Crown pursuant to
the terms of any stock plan or otherwise will be released to the grantee
of such Crown stock award (including stock awards that, in the ordinary
course, would not have had their restrictions lapse and would not have
been released to the grantee for a period of time ranging from twelve to
twenty-four months, depending upon the grant date). At the time the
merger becomes effective, each executive will be paid $10.50 for each
share of formerly restricted Crown common stock held by him/her, less
any applicable taxes.
. Stock Appreciation Units. In connection with the merger, the stock
appreciation units will become payable (including stock appreciation
units that, in the ordinary course, would not have become payable at the
time the merger becomes effective) and must be promptly exercised. A
floor price of $14.91 was established for the outstanding stock
appreciation units (based on the fair market value of Crown Class B
common stock during the previous three calendar years). Holders of stock
appreciation units are entitled to payment of the difference between the
market price of the Crown Class B common stock and the floor price. As
the established floor price of the stock appreciation units is higher
than the value of the Class B common stock on the date of the merger, no
amounts will be paid out with respect to the stock appreciation units,
and these units will cease to continue as an obligation under the stock
plans.
The following table sets forth the value of the options outstanding under
Crown's stock plans (based on the prices to be paid for the cancellation of
each option) and the value of the number of shares of Crown common stock
represented by performance vested restricted stock awards held by Crown's chief
executive officer and four other most highly compensated executive officers and
all of the executive officers as a group:
Option
Crown Executive Officers Value PVR Stock
- ------------------------ ---------- ----------
Henry A. Rosenberg, Jr. ................................ $ 513,763 $ 762,300
Randall M. Trembly...................................... $ 162,429 $ 245,595
John E. Wheeler, Jr. ................................... $ 125,647 $ 170,625
Thomas L. Owsley........................................ $ 91,877 $ 106,890
Frank B. Rosenberg...................................... $ 87,338 $ 101,535
All executive officers as a group including those listed
above (12 officers).................................... $1,313,427 $1,760,325
Waivers. As a condition to the willingness of Rosemore and RAC to enter into
the merger agreement, Rosemore required that twelve Crown executives each enter
into a waiver agreement relating to certain of their rights to severance
benefits. See "THE MERGER AGREEMENT--Waiver Agreements" on page 64.
58
Arrangements with the Novelly Group. Rosemore has entered into a stock purchase
agreement dated December 17, 2000 with the trustees of The Novelly Exempt
Trust, The Capital Trust and the Paul A. Novelly Living Trust, and Golnoy Barge
Company, Inc., members of the Novelly Group related to Mr. Paul A. Novelly, the
chairman of Apex. Pursuant to the stock purchase agreement, the Novelly Group
has agreed to vote its Crown shares, representing in total approximately 13.6%
of the votes entitled to be cast at the Special Meeting, in favor of the merger
and merger agreement, and to vote against any action or other proposal that is
inconsistent with the merger, or would result in a breach of, the merger
agreement. They have each granted proxies to the designees of Rosemore,
permitting Rosemore's designees to vote their shares of Crown common stock
accordingly at the Special Meeting. Each member has reserved the right to vote
its shares of Crown common stock on other matters that are not inconsistent
with such voting agreement, but have limited its ability to grant subsequent
proxies, powers of attorney, consents or revocations, or enter into any
agreement or understanding with any person to vote its shares with respect to
any matter included in the voting agreement or make any transfers of shares in
any manner inconsistent with such voting agreement. The Novelly Group has
agreed not to propose any competing transactions, and not to make or support
any such proposals or competing transactions at the Special Meeting or any
other meeting of Crown stockholders.
If the merger is consummated, shares of Crown held by the Novelly Group
would be converted into the right to receive $10.50 in cash in the same manner
as shares held by other Crown stockholders. The stock purchase agreement also
requires the Novelly Group members to sell its shares of Crown common stock to
Rosemore for $10.50 per share in cash in the event the merger agreement is
terminated. If the merger agreement is terminated, the purchase and sale of the
Crown shares under the stock purchase agreement will be consummated on the
earlier of March 31, 2001 or the fifth Business Day following the date that the
merger agreement is terminated. The shares of Crown common stock owned by the
Novelly Group are being held in escrow along with the purchase price of $10.50
per share to be paid by Rosemore, pending the outcome of the proposed merger
or, if the merger agreement is terminated, the stock purchase. However, the
stock purchase agreement may be terminated by Rosemore upon the occurrence of
an event or change in circumstances that results in a material adverse effect
on the business, financial condition, or results of operations of Crown and its
subsidiares, taken as a whole, subject to certain exceptions, that also results
in Rosemore terminating the merger agreement, in which event Rosemore would
have no obligation to purchase any of the Novelly Group's shares.
Rosemore has also reimbursed the Novelly Group for expenses, in the amount
of $1,750,000, incurred by the Novelly Group in connection with the Novelly
Group's efforts to acquire control of Crown. Rosemore received invoices and
receipts from the Novelly Group for expenses incurred and paid by the Novelly
Group, in excess of $1,750,000 for services rendered to it in connection with
the Novelly Group's previous efforts to acquire control of Crown.
Rosemore has agreed not to amend the merger agreement in any manner that
would decrease the amount or change the character of the merger consideration
or otherwise materially adversely affect the Novelly Group, without the Novelly
Group's prior written consent. The Novelly Group has also agreed on behalf of
itself and its affiliates that, if the merger is not completed, then, for a
period of five years from the date that it sells its Crown shares to Rosemore,
it will not, acting alone or with others, acquire or agree to acquire any
voting securities or assets of Crown or to participate in any solicitation of
any proxies relating to Crown common stock or to otherwise seek to influence
the management or policies of Crown.
The stock purchase agreement also includes representations, warranties and
other terms and conditions customary in transactions of the type contemplated
by the stock purchase agreement.
Stockholder Litigation
Stockholder Derivative Lawsuit. On December 15, 1998, five stockholders filed a
derivative lawsuit in District Court for Harris County, Texas against each of
Crown's then-current directors and three of its non-director officers,
including Messrs. Henry A. Rosenberg, Jr., Edward L. Rosenberg and Frank B.
Rosenberg. One non-director officer was subsequently dismissed from the
lawsuit. Knox, et al. v. Rosenberg, et al., C.A. No. 1998 58870. Three of the
plaintiff stockholders are locked-out union employees and the remaining two are
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retired union employees. The defendants removed the case to the U.S. District
Court for the Southern District of Texas, H-99-0123. The suit alleges that
Crown's executive management is liable for breach of its fiduciary duties to
Crown and for gross mismanagement and abuse of control for the way in which it
has conducted Crown's affairs. The suit further alleges that the defendant
board members breached their fiduciary duties, abused their control and grossly
mismanaged Crown by failing to properly oversee Crown and its executives'
management of Crown while allowing those executives to self-deal and unjustly
enrich themselves with excessive salaries, benefits and perquisites. In
addition, the suit alleges that Crown's executive management and board members
made misrepresentations to, and concealed material facts from Crown and its
stockholders, by suggesting that Crown was well-managed and that workers were
responsible for any financial troubles that Crown was experiencing. On
September 27, 1999, the Court dismissed the action for the plaintiffs' failure
to make pre-suit demand on Crown's Board or to allege with particularity facts
sufficient to demonstrate why demand would have been futile. The plaintiffs
were granted leave to amend and on November 29, 1999 they filed a Second
Amended Complaint. The defendants filed a Motion to Dismiss the Second Amended
Complaint based on the plaintiffs' continuing failure to allege with
particularity facts sufficient to excuse pre-suit demand. The Second Amended
Complaint subsequently was withdrawn and re-filed as a purported "Restated"
Second Amended Complaint. The defendants filed a Motion to Dismiss the Second
Amended Complaint and the "Restated" Second Amended Complaint for the
plaintiffs' continuing failure to comply with the Federal Rules of Civil
Procedure, which was denied on September 27, 2000. The defendants have filed
another Motion to Dismiss the "Restated" Second Amended Complaint for the
plaintiff's failure to make pre-suit demand on Crown's Board. Pursuant to
undertakings received from the individual defendants, Crown is advancing the
defense costs and expects to indemnify the defendants to the extent permitted
by law and Crown's charter and bylaws.
Upon completion of the merger, stockholders of Crown prior to the merger
will have no rights in the Crown common stock other than the right to receive
$10.50 per share. As a result, former stockholders may lose standing to
continue the derivative lawsuit.
Union Corporate Campaign
Crown's collective bargaining agreement with the Paper, Allied-Industrial,
Chemical and Energy Workers Union (PACE), formerly the Oil, Chemical & Atomic
Workers Union, covering employees at the Pasadena refinery expired on February
1, 1996. Following a number of incidents apparently intended to disrupt normal
operations at the refinery and also as a result of the unsatisfactory status of
the negotiations, on February 5, 1996 Crown implemented a lock-out of employees
in the collective bargaining unit at the Pasadena facility. PACE subsequently
filed a number of unfair labor practice charges with the National Labor
Relations Board (NLRB), and it continues to file lock-out related charges. The
NLRB has dismissed all of the charges that have been considered to date. Since
the lock-out, PACE has waged an orchestrated corporate campaign including
sponsoring a boycott of Crown's retail facilities and supporting various
lawsuits against Crown. The lawsuits include: Texans United for a Safe Economy
Education Fund, et al. vs. Crown Cental Petroleum Corporation, a citizens' suit
under the Clean Air Act; Allman, et al. vs. Crown Central Petroleum
Corporation, et al. and Barrett, et al. vs. Crown Central Petroleum
Corporation, et al., suits for damages related to emissions from the Pasadena
refinery; Loretta Burrell, et al. vs. Crown Central Petroleum Corporation, a
purported class action suit alleging race and sex discrimination; Knox, et al.
vs. Rosenberg, et al., a shareholder derivative lawsuit; and Maiden vs. Crown
Central Petroleum Corporation, et al., a purported shareholder class action
lawsuit which has been dismissed. Regulatory complaints have been filed with
the Texas Natural Resource Conservation Commission, the U.S. Environmental
Protection Agency and other agencies. In addition, letters of complaint have
been filed with some regulatory agencies, including the SEC. Crown has been
operating the Pasadena refinery since the lock-out and intends to continue to
do so during the negotiation period with the collective bargaining unit. The
impact of the corporate campaign on Crown is difficult to measure. There can be
no assurance as to when or how the lock-out, corporate campaign and associated
boycott will be resolved or what the effect of a resolution might be. The lock-
out and negotiations on a new contract continue.
Accounting Treatment
Rosemore will account for the merger under the purchase method of accounting
in accordance with accounting principles generally accepted in the United
States. Under this accounting method, Crown's historical
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results for the periods before the merger will remain unchanged. In addition,
the aggregate consideration paid by Rosemore in connection with the merger,
together with the direct costs of acquisition, will be allocated to Crown's
assets and liabilities and measured at their fair values. The excess, if any,
of the investment cost over the net assets' fair value will be recognized as an
intangible asset (goodwill). Crown's pre-merger earnings, to the extent not
historically included by Rosemore under the equity method of accounting, will
be excluded from the net income of the combined enterprise. Costs incurred to
effect the merger will be capitalized by adding to the investment cost.
Regulatory Approvals
The merger agreement provides that Rosemore and Crown will use their
reasonable best efforts to cause the merger to be consummated, including the
obtaining of all necessary consents, waivers, permits, authorizations, orders
and consents of third parties, whether private or governmental, in connection
with the merger.
Except for the filing of articles of merger with the State Department of
Assessments and Taxation of Maryland, after Crown's stockholder approval of the
merger and merger agreement and compliance with federal and state securities
laws, neither Rosemore nor Crown is aware of any material U.S. federal or state
or foreign governmental regulatory requirement that must be complied with, or
approval that must be obtained, in connection with the merger.
In connection with the April 7, 2000 merger agreement, each of Crown and
Rosemore provided notice of and information regarding the merger to the Federal
Trade Commission and the Antitrust Division of the Department of Justice
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 for their
review. On May 26, 2000, the Federal Trade Commission terminated the required
waiting period under the Act relating to the merger. If the merger is completed
by May 26, 2001, no additional notice or informational filings are required
under the Act. However, at any time before or after the completion of the
merger, either the Federal Trade Commission or the Antitrust Division could
take any action under the antitrust laws as it deems necessary or desirable in
the public interest. Other persons could also take action under the antitrust
laws, including an attempt to enjoin the merger. Accordingly, it is possible
that a challenge to the merger on antitrust grounds will be made, and, if made,
it is uncertain what the result will be. Crown believes, however, that the
anticipated closing of the merger will not violate any antitrust laws.
No Appraisal Rights
The Maryland General Corporation Law does not provide statutory appraisal
rights or any other similar remedy to stockholders of a corporation in
connection with a merger if the corporation's shares are listed on a national
securities exchange on the record date for determining stockholders entitled to
vote on the merger and merger agreement. All shares of Crown common stock
outstanding on the record date for determining stockholders entitled to vote on
the merger and merger agreement at the Special Meeting were listed on the AMEX.
Thus, if you decide to vote against the merger and merger agreement, i.e.,
dissent or withhold your vote, you will not be entitled to seek statutory
appraisal rights or other similar rights under Maryland law. If the merger is
approved by the required vote, stockholders who vote against the merger, like
stockholders who vote to approve the merger, will be bound by the terms of the
merger.
Delisting and Deregistration of Crown Common Stock after the Merger
Crown common stock is currently listed on the AMEX. Because all of the Crown
common stock outstanding immediately prior to the completion of the merger will
be converted into the right to receive the merger consideration as a result of
the merger, the Crown Class A and Class B common stock will be delisted from
the AMEX.
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Crown common stock is currently registered under the Exchange Act. Crown has
stated its intention to terminate registration of Crown common stock under the
Exchange Act following the merger. The termination of registration of the
common stock under the Exchange Act will reduce the information required to be
furnished to the SEC and will make certain of the provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and
the requirement of furnishing a proxy or information statement in connection
with stockholders meetings, no longer applicable. Crown will, however, remain
required under the indenture relating to the 10 7/8% senior notes, whether or
not it is subject to Section 13(a) or 15(d) of the Exchange Act and to the
extent permitted under the Act, to file with the SEC and the indenture trustee,
and transmit to the noteholders, the annual reports, quarterly reports and
other documents which Crown would have been required to file with the SEC
pursuant to Section 13(a) or 15(d) were it still subject to those sections. If
the filing of the documents with the SEC is not permitted under the Exchange
Act, Crown will, upon the written request and payment of the reasonable cost of
duplication and delivery by the noteholders, prepare and supply at Crown's cost
copies of such documents to the noteholders.
THE MERGER AGREEMENT
The merger agreement provides for the merger of RAC with and into Crown,
with Crown continuing as the surviving corporation after the merger. This
section of the proxy statement describes material provisions of the merger
agreement. Because the description of the merger agreement contained in this
proxy statement is a summary, it does not contain all of the information that
may be important to you. You should carefully read the entire copy of the
merger agreement attached as Exhibit A to this proxy statement before you
decide how to vote. The merger agreement attached as Exhibit A to this proxy
statement qualifies the description of the merger agreement contained in this
document in its entirety and is incorporated by reference into this proxy
statement.
Completion of the Merger
Closing. Unless the parties agree otherwise, the closing of the merger will
take place as promptly as practicable and no later than the second business day
after the date on which certain closing conditions have been satisfied or
waived or any other time as agreed to in writing by Rosemore and Crown.
Effective Time of the Merger. The merger will be effective upon the filing of
the articles of merger with the State Department of Assessments and Taxation of
Maryland, or at such time not to exceed 30 days after acceptance for record as
agreed to by Rosemore and Crown. See "--Conditions to the Merger" on page 67.
Effect of Merger. At the effective time, all outstanding shares, other than
shares held by Rosemore Holdings, of Class A common stock and Class B common
stock will be converted into the right to receive $10.50 per share in cash.
Following the merger, Crown will become an indirect wholly owned subsidiary of
Rosemore.
Required Vote. Under Maryland law and Crown's charter, the approval of the
merger and merger agreement requires the affirmative vote of two-thirds of all
of the votes entitled to be cast on the matter by the holders of Class A common
stock and the holders of Class B common stock voting together as a single
class, with each share of Class A common stock entitling the holder to one vote
and each share of Class B common stock entitling the holder to one-tenth (
1/10) vote. The merger agreement also requires that the merger and merger
agreement be approved by a majority of the votes cast other than by stock owned
by Rosemore and its affiliates. The Crown stock owned by the Novelly Group will
count towards this vote.
Representations and Warranties of Crown and Rosemore
The merger agreement contains various representations and warranties of
Crown relating to:
. proper organization and good standing of Crown and its subsidiaries;
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. the charter and bylaws of Crown;
. the capitalization of Crown;
. the corporate authorization and enforceability of the merger agreement;
. compliance with laws;
. the filing of SEC reports and the preparation of financial statements;
. the absence of certain material adverse changes or events;
. employee benefit plans and labor matters;
. material contracts and debt instruments;
. litigation;
. environmental matters;
. trademarks, patents and copyrights;
. taxes;
. title to personal property, real property and leases;
. Crown's shareholder rights plan;
. insurance;
. Crown Board recommendation;
. opinion of financial advisor;
. brokers;
. required stockholder vote to approve the merger and merger agreement and
state takeover statutes; and
. waiver of certain obligations.
The merger agreement contains various representations and warranties of
Rosemore and RAC relating to:
. proper organization and good standing of Rosemore and RAC;
. compliance with laws;
. absence of litigation;
. brokers;
. purpose of RAC;
. financing of the merger; and
. ownership of Crown common stock.
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Certain Covenants
The merger agreement contains certain covenants relating to:
. filing of this proxy statement and a transaction statement on Schedule
13E-3;
. Crown's obligation to call a stockholders' meeting to vote on the
approval of the merger and merger agreement;
. access to information and confidentiality of information;
. restrictions on Crown's ability to solicit competing transactions;
. directors' and officers' indemnification and insurance;
. Hart-Scott-Rodino Act filing and obtaining necessary regulatory and
other authorizations;
. amendment of Crown's shareholder rights plan;
. further requirements to complete the transactions;
. public announcements; and
. amendment of certain employee benefit plans.
Waiver Agreements
As a condition of the willingness of Rosemore and RAC to enter into the
merger agreement, Rosemore required that 12 executives of Crown execute limited
waiver agreements with Crown. Generally, under the waiver agreements, the
executives agreed, among other things:
. to waive the funding of benefits under the Supplemental Retirement
Income Plan as required by the terms of the Executive Severance Plan;
. to surrender all options Crown granted under the Crown stock plans to
Crown in exchange for payment of between $1.27 and $2.78 per option
(depending on the exercise price and the expiration date of the option);
. that a change in his or her duties or responsibilities following the
merger relating to Crown becoming a private company or a change in the
person to whom the executive reports will not constitute "good reason"
for such executive to resign and be entitled to significant cash
severance benefits;
. to a possible reduction in certain medical benefits applicable generally
to all employees of Crown; and
. that certain reductions in Crown's economic interests in refining
capacity will not trigger a "change of control."
No Solicitation of Acquisition Transactions
Competing Transaction. The merger agreement provides that Crown and its
subsidiaries, officers, directors, employees, agents or other representatives
will not initiate, solicit or encourage any inquiries or the making of any
proposal or offer with respect to:
. a merger, reorganization, business combination, liquidation, dissolution
or other similar transaction involving Crown;
. the purchase or sale of all or any significant portion of the assets of
Crown and its subsidiaries, taken as a whole; or
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. the purchase or sale of 15% or more of the equity securities of Crown.
Crown, its subsidiaries and their officers, directors, employees, agents or
other representatives will not have any discussion with or provide any
confidential information relating to Crown or its subsidiaries to any person
relating to a competing transaction or engage in or facilitate any negotiations
concerning a competing transaction unless:
. Crown concludes in good faith, after consultation with independent
financial advisors, that such competing transaction would, if
consummated, be more favorable to Crown's stockholders than the merger
(a Superior Proposal);
. either the Crown Board or the Independent Committee determines in good
faith, after consultation with independent legal counsel, that such
action is necessary for the Crown Board to act consistently with its
fiduciary duty;
. prior to providing any Crown confidential information in response to
such Superior Proposal, Crown receives a confidentiality agreement with
respect to such person at least as restrictive with such person as the
confidentiality agreement entered into with Rosemore; and
. prior to providing any Crown confidential information or entering into
any discussions with such person making a Superior Proposal, Crown gives
notice to Rosemore of the identity of the person making, and the terms
of, the Superior Proposal.
Conduct of the Business of Crown before the Merger
Pursuant to the merger agreement, Crown has agreed that, among other things,
prior to the merger, unless Rosemore will otherwise consent in writing, which
consent will not be unreasonably withheld or delayed, it will, and, where
applicable, will cause each of its subsidiaries to:
. conduct its business in the ordinary course of business and consistent
with past practice;
. use its reasonable best efforts to keep available the services of the
present officers, significant employees and consultants of Crown and its
subsidiaries and to preserve the current relationship with customers,
suppliers and others having significant business relations with them, in
order to preserve substantially intact its business organization;
. not amend organizational documents;
. not issue, sell, dispose of, or otherwise encumber any shares of capital
stock, any options, warrants, convertible securities or other rights of
any kind to acquire any shares of capital stock, or any other ownership
interest, of Crown or any of its subsidiaries, except for the issuance
of any shares of capital stock issuable pursuant to the exercise of any
Crown stock options outstanding as of December 17, 2000;
. not issue, sell, dispose of, or otherwise encumber any property or
assets of Crown or its subsidiaries, except in the ordinary course of
business and in a manner consistent with past practice, provided that
the aggregate amount of any such sale or disposition or pledge, grant,
transfer, lease, license, guarantee or encumbrance of the property or
assets will not exceed $500,000 or, in the case of any sale or
disposition of retail gasoline sites, $1,000,000;
. not declare, set aside, make or pay any dividend or distribution payable
in cash, stock, property or otherwise;
. not reclassify, combine, split, subdivide, redeem, purchase or otherwise
acquire its outstanding capital stock;
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. not acquire any interest in any business organization other than
acquisitions of assets in the ordinary course of business consistent
with past practice which are not, in the aggregate, in excess of
$300,000 or purchases of crude oil or intermediate products for refining
or refined petroleum products or other inventory for resale in the
ordinary course of business and consistent with past practice;
. not incur any indebtedness or issue any debt securities or assume,
guarantee or endorse or otherwise become responsible for the obligations
of any person except for indebtedness incurred in the ordinary course of
business and consistent with past practice under Crown's secured credit
facility, or incurred to refinance outstanding indebtedness of Crown or
other indebtedness of Crown with a maturity of not more than one year or
a principal amount not, in the aggregate, in excess of $1,000,000;
. not terminate, cancel or request or agree to any material change in any
material contract of Crown, or enter into any contract or agreement
material to the business, results of operations or financial condition
of Crown and its subsidiaries, other than in the ordinary course of
business and consistent with past practice;
. not make or authorize certain capital expenditures;
. not enter into or amend any contract or arrangement that, if fully
performed, would not be permitted under the previous four provisions;
. not increase the compensation of officers or employees, except for
increases in accordance with past practices in salaries of employees who
are not officers of Crown;
. not grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of Crown or its subsidiaries;
. not establish, adopt, enter into or amend any employee benefit
agreement, except as required by the merger agreement or the terms of a
collective bargaining agreement or a contractual obligation existing on
December 17, 2000;
. not take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of accounting
principles generally accepted in the United States and as advised by
Crown's regular certified independent public accountants;
. not waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $250,000; and
. not make any material tax election or settle any material tax liability.
Pursuant to the merger agreement, each of Crown and Rosemore will give
prompt notice to the other of:
. any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
merger;
. any notice or other communication from any governmental entity in
connection with the merger;
. any actions or proceedings commenced or, to the best of the party's
knowledge, threatened in writing against or relating to Rosemore, Crown
or their subsidiaries that relate to the completion of the merger;
. the occurrence of a default or event that will become a default under
any of Crown's material contracts; and
. any change that is reasonably likely to result in a material adverse
effect under the merger agreement or is likely to delay or impede the
ability of either Rosemore or Crown to complete the transactions
contemplated in the merger agreement or to fulfill its obligations under
the merger agreement.
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Employee Stock Plans
Effective as of the completion of the merger, each outstanding Crown stock
option or stock appreciation unit will:
. become fully vested and immediately exercisable;
. for options--remain outstanding and become the surviving corporation's
stock option with the same rights and relative exercise prices as
applied to the Crown stock options immediately prior to the completion
of the merger and otherwise subject to the terms of the Crown stock
plans pursuant to which the Crown stock option was issued; and
. for stock appreciation units--cease to continue as a plan obligation,
and no amount will be paid out with respect to the stock appreciation
units, as the established floor price for the stock appreciation units
is higher than the merger consideration.
Promptly after the completion of the merger, Rosemore will or will cause
Crown to provide each holder of Crown stock options with the opportunity to
receive payment in exchange for the cancellation of his or her stock options.
Any payments related to the cancellation of his or her stock options will be
subject to all applicable federal, state and local tax withholding
requirements.
At the completion of the merger, restrictions on the performance vested
restricted stock will lapse and each holder of performance vested restricted
stock will be paid the merger consideration paid to holders of Class B common
stock in full satisfaction of such performance vested restricted stock.
Indemnification and Insurance
Following the merger, the charter and bylaws of the surviving corporation
will contain the provisions regarding liability of directors and
indemnification of directors and officers that are set forth, as of December
17, 2000, in the charter and bylaws of Crown. For a period of six years from
the completion of the merger those provisions will not be amended, replaced or
otherwise modified in a manner that would affect adversely the rights of
individuals who at or prior to the completion of the merger were directors,
officers, employees, fiduciaries or agents of Crown. In addition, for a period
of six years from the completion of the merger, the surviving corporation will
maintain insurance policies for directors and officers with coverage relating
to claims arising from facts or events that occurred prior to the completion of
the merger as extensive as Crown's existing policies.
The merger agreement provides that, following the merger, the surviving
corporation will indemnify each present and former director and officer of
Crown for all costs incurred in connection with any claim, action, suit,
proceeding or investigation, arising out of matters existing or occurring at or
prior to the completion of the merger.
Conditions to the Merger
Conditions to Each Party's Obligation to Complete the Merger. The respective
obligation of Crown, Rosemore and RAC to effect the merger is subject to the
satisfaction of the following conditions, unless waived by the parties:
. Stockholder Approval. The merger and merger agreement will have been
approved by the requisite affirmative vote of the stockholders of Crown
under applicable law and as prescribed in the merger agreement.
. No Proceedings. No preliminary or permanent injunction, decree or other
order issued by any governmental entity or other legal restraint or
prohibition preventing the completion of the merger will be in effect,
and no law will have been enacted or adopted that enjoins, prohibits or
makes illegal the completion of the merger.
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. Hart-Scott-Rodino Act. The waiting period applicable to the completion
of the merger under the Hart-Scott-Rodino Act will have expired or been
terminated.
Additional Conditions to the Obligation of Rosemore and Rosemore Acquisition
Corporation. The obligation of Rosemore and RAC to effect the merger is further
subject to the satisfaction of the following additional conditions, unless
waived by Rosemore and RAC:
. Representations and Warranties. The representations and warranties of
Crown contained in the merger agreement will be true and correct in all
material respects as of the time of the merger as if made at and as of
such time, except that the representations and warranties that address
matters only as of a particular date will remain true and correct in all
material respects as of such date and Rosemore will have received a
certificate of the chief financial officer of Crown to that effect. Any
representation or warranty of Crown which would otherwise not be true
and correct in all material respects, that was made by Crown (1) with
the approval of Mr. Henry A. Rosenberg, Jr. despite his actual knowledge
that such representation and warranty was false; and (2) without
knowledge on December 17, 2000, by any of the other officers or
directors of Crown that such representation or warranty was false, will
be deemed to be true and correct in all material respects.
. Performance of Obligations. Crown will have performed or complied in all
material respects with all agreements and covenants required by the
merger agreement and Rosemore will have received a certificate of the
chief financial officer of Crown to that effect.
. Governmental Approvals. All consents, approvals, waivers and
authorizations required to be obtained to complete the merger will have
been obtained from all governmental entities, except if the failure to
obtain any such consents would not result in a material adverse effect
under the merger agreement.
. Third Party Consents. All consents, approvals, waivers and
authorizations of third parties the failure of which to obtain would
result in a material adverse effect under the merger agreement will have
been obtained.
. No Event of Default. No event of default under the indenture relating to
the 10 7/8% senior notes will have occurred and the completion of the
merger will not result in the occurrence of an event of default under
the indenture. Under the indenture, Crown is required to comply with
certain financial performance criteria in order to be able to consummate
the merger.
Additional Conditions to the Obligations of Crown. The obligation of Crown to
effect the merger is further subject to the satisfaction of the following
additional conditions, unless waived by Crown:
. Performance of Obligations/Representations and Warranties. Rosemore and
RAC will have performed or complied in all material respects with all of
their agreements and covenants in the merger agreement, and the
representations and warranties of Rosemore and RAC will be true and
correct in all material respects as of the time of the merger as if made
at and as of such time, except that those representations and warranties
that address matters only as of a particular date will remain true and
correct in all material respects as of such date and Crown will have
received a certificate of the chief financial officer of Rosemore to
that effect.
Organization of the Business of the Surviving Corporation after the Merger
Following the merger between RAC and Crown, Crown will be an indirect wholly
owned subsidiary of Rosemore. Pursuant to the merger agreement, the charter of
RAC, as in effect immediately prior to the time of the merger, will be the
charter of Crown following the merger, except that it will be amended to
provide that the name of the surviving corporation will be "Crown Central
Petroleum Corporation." Pursuant to the merger
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agreement, the bylaws of RAC, as in effect immediately prior to the time of the
merger will be the bylaws of Crown following the merger. After the merger, the
organizational documents may be amended as provided by applicable law and by
the organizational documents of Crown.
Termination, Amendment or Waiver
Termination. The merger agreement may be terminated at any time prior to the
merger, whether before or after the approval by the stockholders of Crown:
. by the mutual written consent of the boards of directors of Crown and
Rosemore and the Independent Committee;
. by either Rosemore or Crown if:
- the merger is not completed by March 30, 2001, so long as the delay
or default was not on the part of the terminating party;
- the merger is restrained, enjoined or otherwise prohibited by a
court order or any law is enacted that enjoins, prohibits or makes
illegal completion of the merger; or
- any required approval of the merger or merger agreement by the
stockholders of Crown is not obtained due to the failure to obtain
the required vote at Crown's stockholders meeting; or
. by Rosemore upon a breach of, or failure to perform in any material
respect, any representation, warranty, covenant or agreement on the part
of Crown contained in the merger agreement, which had caused certain
conditions to the obligation of Crown to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
. by Crown upon a breach of, or failure to perform in any material
respect, any representation, warranty, covenant or agreement on the part
of Rosemore contained in the merger agreement, which had caused certain
conditions to the obligation of Rosemore to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
. by Rosemore if:
- the Crown Board withdraws, modifies or changes its recommendation of
the merger agreement in a manner adverse to Rosemore or resolves to
do so;
- after receiving a proposal relating to a competing transaction the
Crown Board refuses to affirm its recommendation of the merger
agreement with Rosemore upon request by Rosemore;
- the Crown Board recommends to its stockholders a competing
transaction or resolves to do so; or
. a tender offer or exchange offer for 15% or more of the outstanding
shares of Crown common stock is commenced and the Crown Board fails to
recommend against acceptance of the tender offer or exchange offer by
its stockholders.
Amendment. The merger agreement may be amended by action taken by the parties'
respective boards of directors, including the approval of the Independent
Committee with respect to Crown, at any time prior to the time of the merger.
Pursuant to the stock purchase agreement, Rosemore has agreed not to amend the
merger agreement in any manner that would decrease the amount or change the
character of the merger consideration or otherwise materially adversely affect
the Novelly Group, without the Novelly Group's prior written consent. Following
the approval of the merger agreement by Crown stockholders, no amendment will
be made which
69
would reduce the amount of or change the type of consideration into which each
share of Crown common stock will be converted upon the completion of the
merger.
Waiver. At any time prior to the time of the merger, either party to the merger
agreement may, in writing:
. extend the time for the performance of any obligation or other act of
the other party to the merger agreement;
. waive any inaccuracy in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement; and
. waive compliance with any agreement or condition contained in the merger
agreement.
Expenses and Termination Fee
Expenses. The merger agreement provides that all costs and expenses incurred in
connection with the merger and merger agreement will be paid by the party
incurring those expenses, whether or not the merger is completed, except:
. if Crown or Rosemore terminates the merger agreement due to the failure
of Crown's stockholders to approve the merger and merger agreement and
at the time of such failure there exists a publicly announced competing
transaction with respect to Crown and within 12 months of the
termination of the merger agreement, Crown enters into an agreement with
any third party with respect to a competing transaction, which
transaction is subsequently completed, then Crown will reimburse all
reasonable documented expenses of Rosemore and RAC.
No Termination Fee. The merger agreement provides that the above reimbursement
will be the sole and exclusive remedy of the parties upon a termination of the
merger agreement based upon the termination of the merger agreement due to the
failure of Crown's stockholders to approve the merger and merger agreement;
provided, however, that nothing in the merger agreement relieves any party from
liability for the willful breach of any of its representations or warranties,
and the breach of any of its covenants or agreements set forth in the merger
agreement.
SHAREHOLDER RIGHTS PLAN
On February 1, 2000, Crown adopted a one-year shareholder rights plan in
which rights to purchase its preferred stock were distributed to holders of its
common stock on February 15, 2000 to ensure that any strategic transaction
undertaken by Crown will be one in which all stockholders can receive fair and
equal treatment, and to guard against partial tender offers, open market
accumulations and other abusive tactics that might result in unequal treatment
of stockholders.
Under the rights plan, the Crown Board created two new classes of preferred
stock, known as Series A and Series B Junior Participating Preferred Stock.
Crown declared a dividend distribution of one preferred stock purchase right on
each outstanding share of its common stock. Each right entitles stockholders to
buy one one-thousandth of a share of preferred stock at an exercise price of
$16.00, with Crown Class A common stock receiving purchase rights for the
Series A preferred stock and the Crown Class B common stock receiving purchase
rights for the Series B preferred stock.
Generally, the rights become exercisable only if a person or group acquires
a substantial block (i.e., 15% or more) of either class of common stock or
announces a tender offer which may result in any person becoming the owner of a
substantial block of either class. For persons owning in excess of 14% of any
class as of the date of the adoption of the rights plan, however, the rights
plan "grandfathers" their current level of ownership (as indicated on such
person's federal securities law filings) plus an additional 1% of that class.
70
Under the rights plan, the Crown Board can pre-approve a tender offer or
other transaction that would otherwise trigger the rights plan. If a person
acquires a substantial block of either class of Crown common stock other than
pursuant to an offer or transaction which has been pre-approved by the Crown
Board, each right then will entitle its holder to purchase a number of shares
of Crown common stock having a market value at that time of twice the right's
exercise price, except for the rights held by the person who acquired the
substantial block of stock and those rights will become void and will not be
exercisable to purchase shares at the discounted purchase price.
If, after a person has acquired a substantial block of Crown common stock
other than pursuant to a Crown Board approved offer or transaction, Crown is
acquired in a merger or other business combination transaction, each right
(other than the rights held by the owner of the substantial block) will entitle
its holder to purchase a number of the acquiring person's common shares having
a market value at the time of twice the right's exercise price.
The rights plan permits Crown to redeem each purchase right at the option of
the Crown Board for $.001 per right or for one one-thousandth of a share of
common stock, at any time before a person acquires a substantial block of
either class of common stock. Until the rights become exercisable, no separate
rights certificate will be issued to stockholders. Instead, the rights will be
evidenced by the certificates for the Crown common stock. At the time the
rights become exercisable, rights certificates will be distributed to holders
of the Crown common stock. The rights plan will expire at the close of business
on February 14, 2001.
In connection with the merger, merger agreement, stock purchase agreement
and related escrow agreement, the Crown Board and the rights agent adopted a
second amendment to the rights plan as of December 17, 2000 to provide that the
merger and the transactions contemplated by the stock purchase agreement will
not cause a distribution date to occur or otherwise trigger the operative
provisions of the rights plan.
The definition of "Acquiring Person" was amended to provide that no person
will become an "Acquiring Person" solely as a result of shares of Crown common
stock acquired under an arrangement entered into in connection with the
consummation of an "Approved Transaction," where the "Approved Transaction" is
not consummated and such shares of Crown common stock are acquired after the
latest date on which the "Final Expiration Date" can occur under the rights
plan. The definition was also amended to provide that no person will become an
"Acquiring Person" solely as a result of shares of Crown common stock acquired
in connection with the stock purchase agreement and related escrow agreement.
The second amendment also expanded the definition of "Approved Transaction"
to include the transactions contemplated by the merger agreement, the stock
purchase agreement and the escrow agreement, and amended the definition of
"Beneficial Owner" and "beneficially own" to provide that a person will be
deemed to not be a "Beneficial Owner" and to not "beneficially own" any shares
of Crown common stock that such person:
. has the right to vote under any arrangement, if the right to vote such
shares is granted in connection with the consummation of, or the
solicitation of stockholder approval for, an "Approved Transaction," or
otherwise in connection with any arrangement for the acquisition of
Crown common stock described immediately below;
. has the right to acquire under an arrangement entered into in connection
with the consummation of an "Approved Transaction," including any Crown
common stock which that person has the right to acquire under the
arrangement if the "Approved Transaction" is not consummated, but only
if such acquisition is not consummated before the latest date on which
the "Final Expiration Date" can occur under the rights plan; or
71
. has the right to vote in connection with the stock purchase agreement or
to acquire in connection with that agreement in the event that the
merger is not consummated, but only if such acquisition is not
consummated prior to the latest date on which the Final Expiration Date
can occur under the rights plan.
The second amendment to the rights plan also modified the definition of
"Final Expiration Date" to reflect that the "Final Expiration Date" is the
earlier of the close of business on February 14, 2001 or the time which is
immediately prior to acceptance by the State Department of Assessments and
Taxation of Maryland of articles of merger consummating the merger.
The Crown Board also declared the merger and the transactions contemplated
by the stock purchase agreement and escrow agreement to be an "Approved
Transaction" under the rights plan, so that the execution of the merger
agreement, stock purchase agreement and escrow agreement would not result in a
distribution date under the rights plan, or the separation of the rights from
the common stock to which they are attached.
RELATED PARTY TRANSACTIONS
Prior to entering into the merger agreement, Crown and Rosemore engaged in a
number of transactions with one another. The management of Crown believes that
all such transactions between Crown and Rosemore are the result of arm's-length
negotiations between the parties and are fair to Crown.
Rosemore Holdings, a wholly owned subsidiary of Rosemore, owns directly over
49% of the Crown Class A common stock and over 11% of the Crown Class B common
stock. Trusts for the benefit of Mr. Henry A. Rosenberg, Jr. and for members of
his immediate family and for the benefit of his sisters, Mrs. Ruth R. Marder
and Mrs. Judith R. Hoffberger, and for members of their immediate families,
hold all of the Rosemore stock. Rosemore, Rosemore Holdings and various
individuals who are beneficial owners of Rosemore stock are a "group" as that
term is used in Section 13(d)(3) of the Exchange Act; accordingly, the Rosemore
group has filed Statements of Beneficial Ownership on Schedule 13Ds to report
its holdings of Class A and Class B common stock.
In early 1999, Rosemore agreed to participate in Crown's working capital and
letter of credit facility established pursuant to its secured credit facility
(the "working capital facility"). Rosemore's participation resulted in an
increase of $50,000,000 in the credit limit under this facility. Rosemore is
compensated at competitive rates for its participation in the facility as it
relates to the availability of certain letters of credit issued for the account
of Crown. Payments for 1999 comprised of commitment and utilization fees
totaled approximately $147,000. Of this amount, in accordance with the terms of
the working capital facility, Rosemore paid approximately $49,000 to First
Union.
Crown terminated its aircraft lease with General Electric Credit Corporation
in early 1999. Rosemore subsequently entered into an aircraft lease with
General Electric Credit Corporation. Crown then assigned its lease with the
Maryland Aviation Administration of hangar space at Martin State Airport to
Rosemore, and Rosemore has purchased from Crown for $345,000 the leasehold
improvements, furniture and various supplies and spare parts formerly used by
Crown in connection with its operation of the aircraft and the related charter
activities.
During 1999, Rosemore and its subsidiaries purchased certain entertainment
and oil product related assets of Crown for approximately $208,000.
During the first quarter of 2000, Crown negotiated an agreement with
Rosemore by which Rosemore would provide up to $66 million in performance
guarantees relating to Crown's purchase of crude oil, feedstocks and other
petroleum products. The maximum amount actually guaranteed under the agreement
was $58,824,000. The agreement was subsequently amended to reduce the maximum
amount that Rosemore would guarantee to $40 million, and the agreement is
currently scheduled to expire on January 31, 2001. On December 29, 2000,
Rosemore had no guarantees outstanding under this agreement. During the
72
first quarter of 2000, Crown also negotiated an agreement with Rosemore under
which Rosemore agreed to provide up to approximately $16.2 million in cash
borrowing availability pursuant to an arrangement that expired on September 30,
2000. Rosemore has been and will continue to be compensated at competitive
rates for its performance guarantees and cash borrowing availability. Payments
and obligations incurred in 2000 in guarantee fees and interest on prior
borrowings under these arrangements and commitment and utilization fees under
the working capital facility have totaled approximately $572,000. Of this
amount, in accordance with the terms of the working capital facility, Rosemore
paid approximately $91,000 to First Union. In connection with entering into
these arrangements, as well as the working capital facility referred to above,
Crown provided the opinions of CSFB to the trustee in accordance with the
requirements of the indenture governing the 10 7/8% senior notes.
Mr. Edward L. Rosenberg, president and chief executive officer of Rosemore,
was formerly employed by Crown. In December 1998, Mr. Rosenberg resigned from
the position of Executive Vice President-Supply and Transportation and no
longer works for Crown.
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT
Owners of More than Five Percent
The following table sets forth the class of shares of Crown common stock,
and the amount and percentage of that class, owned by all persons known by
Crown to be the beneficial owners of more than 5% of the shares of any class of
Crown common stock on November 15, 2000.
NAME AND ADDRESS OF TITLE PERCENT
BENEFICIAL OWNER OF CLASS AMOUNT OF CLASS
------------------- -------- --------- --------
Rosemore "Group" (a) Class A 2,401,232 49.85
One North Charles Street Class B 954,745 17.32
Suite 2300
Baltimore, MD 21201
Novelly "Group" (b) Class A 708,375 14.70
8182 Maryland Avenue Class B 182,800 3.48
St. Louis, MO 63105
Dimensional Fund Advisors Inc. (c) Class A 288,850 6.00
1299 Ocean Avenue, 11th Floor Class B 291,100 5.55
Santa Monica, California 90401
Heartland Advisors, Inc. (c) Class B 900,000 17.15
789 North Water Street
Milwaukee, WI 53202
Franklin Resources, Inc. (c) Class B 309,600 5.90
Mariners Island Boulevard
P.O. Box 7777
San Mateo, CA 94403
(a) Rosemore Holdings, a wholly owned subsidiary of Rosemore, owns directly
over 49% of Crown Class A common stock and over 11% of Crown Class B common
stock. Trusts for the benefit of Mr. Henry A. Rosenberg, Jr. and for members of
his immediate family and for the benefit of his sisters, Mrs. Ruth R. Marder
and Mrs. Judith R. Hoffberger, and for members of their immediate families hold
all of the Rosemore stock. Rosemore, Rosemore Holdings and various individuals
who are beneficial owners of Rosemore stock are a "group" as that term is used
in Section 13(d)(3) of the Exchange Act; accordingly, the Rosemore group has
filed reports on Schedule 13D with the SEC to report its holdings of Class A
and Class B common stock. Rosemore Holdings is the holder of 2,366,526 shares
of Class A common stock and 591,629 shares of Class B common stock, and other
members of the Rosemore group are the holders of 34,706 shares of Class A
common
73
stock and 363,116 shares of Class B common stock. The Class B common stock
shown in the table includes 82,270 shares of stock granted to members of the
Rosemore group as performance vested restricted stock under Crown's 1994 Long-
Term Incentive Plan and 263,039 shares that members of the Rosemore group have
a right to acquire pursuant to options granted under the 1994 Long-Term
Incentive Plan that vested on or before November 15, 2000. No additional
options will vest for members of the Rosemore group within 60 days of November
15, 2000. The percentage calculation is based on the shares outstanding plus
the shares that may be acquired pursuant to vested options granted to members
of the Rosemore group.
(b) This information was obtained from a report on Schedule 13D dated
January 14, 1983, Amendment No. 11 thereto dated November 8, 1999, and later
amendments, which were filed with the SEC. The Novelly Exempt Trust and others
acknowledge that they are a "group" as that term is used in Section 13(d)(3) of
the Exchange Act.
(c) Information concerning the stock holdings of Dimensional Fund Advisors
Inc., Franklin Resources, Inc. and Heartland Advisors, Inc. was obtained from
reports on Schedule 13G and amendments to those schedules that have been filed
with the SEC. Each of these three entities reports that it is registered as an
investment adviser.
Directors and Officers
The following table sets forth the number of shares of each class of Crown
stock and the percentage of each class owned by each of the directors, by
certain executive officers and by all directors and officers as a group on
November 15, 2000:
SHARES OF SECURITIES BENEFICIALLY OWNED
ON NOVEMBER 15, 2000 (a)
CLASS A STOCK CLASS B STOCK
------------------- ----------------------
NAME AMOUNT % AMOUNT %
Jack Africk -- -- 500 (b)
Michael F. Dacey 1,000 (b) -- --
Stanley A. Hoffberger -- -- -- --
Barry L. Miller -- -- -- --
Thomas L. Owsley 100 (b) 52,471(c) (b)
Rev. Harold Ridley, S.J. -- -- 100 (b)
Frank B. Rosenberg (d) 1,863 (b) 52,700(c) 1.00
Henry A. Rosenberg, Jr. (e) 2,399,369 49.81 902,049 16.48
Randall M. Trembly (f) 11,774 (b) 104,518(c) 1.97
John E. Wheeler, Jr. (f) 3,264 (b) 72,876(c) 1.37
All directors and officers as a
group including those
listed above (17 individuals) 2,423,596 50.31 1,370,467(g) 22.55
(a) Each director holds sole voting and investment power over the shares
listed except for Mr. Dacey who holds his stock jointly with his wife; however,
in one or more cases the stock may be registered in the name of a trust or
retirement fund for the benefit of the director. In the case of officers of
Crown, the table includes interest in shares held by the trustee under the
Savings Plans, the Class B common stock granted as performance vested
restricted stock under the 1994 Long-Term Incentive Plan (but not shares of
performance vested restricted stock granted but subsequently forfeited) and
shares subject to options. See footnote (c).
(b) Represents less than one percent of the shares outstanding.
(c) Includes vested options as follows: Mr. Owsley, 41,686 shares; Mr. Frank
B. Rosenberg, 39,613 shares; Mr. Trembly, 67,003 shares and Mr. Wheeler, 52,813
shares. The percentage calculations are based on the shares outstanding plus
the shares that may be acquired pursuant to the vested options granted to the
executive.
(d) Mr. Frank B. Rosenberg disclaims membership in any filing "group" as
that term is used in Section 13(d)(3) of the Exchange Act. Mr. Frank B.
Rosenberg purchased 59.25 shares on November 3, 2000 and 58.64 shares on
December 5, 2000 of Class B common stock in the Savings Plans at prices of
$8.23 and $8.31 per share, respectively.
74
(e) Mr. Henry A. Rosenberg, Jr. is chairman of the board of Rosemore. The
shares listed are the shares owned by the Rosemore group other than shares
reported separately in the table as owned by Mr. Frank B. Rosenberg. Of the
shares listed above, Mr. Henry A. Rosenberg, Jr. holds 32,525 shares of Class A
common stock and 305,854 shares (including PVR Stock) of Class B common stock
individually and in Crown's Savings Plans. Mr. Henry A. Rosenberg, Jr. has
purchased 3,427.89 shares of Class B common stock in the Savings Plans within
the past two years at prices from $12.91 to $5.72 per share. The average
purchase prices for each quarter were as follows: 1st Quarter 1999--$7.68; 2nd
Quarter 1999--$8.53; 3rd Quarter 1999--$8.56; 4th Quarter 1999--$5.83; 1st
Quarter 2000--$6.93; 2nd Quarter 2000--$9.09; 3rd Quarter 2000--$9.29; and 4th
Quarter 2000--$8.54. In addition, 136.73 shares were purchased on November 3,
2000 and 135.32 shares on December 5 at prices of $8.23 and $8.31 per share,
respectively. The Class B common stock shown on the table also includes 223,426
shares that may be acquired by Mr. Henry A. Rosenberg, Jr. upon the exercise of
vested options granted under the 1994 Long-Term Incentive Plan. The percentage
calculation is based on the shares outstanding plus the shares that may be
acquired pursuant to vested options granted to Mr. Rosenberg.
(f) Mr. Trembly purchased 276.50 shares on November 3, 2000 and 273.64
shares on December 5, 2000 and Mr. Wheeler purchased 59.25 shares on November
3, 2000 and 58.64 shares on December 5, 2000 of Crown Class B common stock in
the Savings Plans at prices of $8.23 and $8.31 per share, respectively.
(g) Includes 570,865 shares that may be acquired pursuant to vested options
granted under the 1994 Long-Term Incentive Plan or under the 1995 Management
Stock Option Plan. The percentage calculation is based on the shares
outstanding plus the shares that may be acquired pursuant to vested options. No
additional options held by the executive officers will vest within 60 days of
November 15, 2000.
STOCKHOLDER PROPOSALS
The matters to be considered at the Special Meeting are limited to those set
forth in the Notice of Special Meeting accompanying this proxy statement and
procedural matters relating to the meeting.
According to the Crown bylaws, as amended, the Annual Meeting of
Stockholders of Crown for the year 2001 is to be held during a 30-day period
commencing on the last Thursday of April. In accordance with Crown's proxy
statement dated November 20, 2000 for its annual meeting of stockholders held
December 14, 2000, stockholder proposals intended to be presented at the Annual
Meeting of Stockholders of Crown in 2001, if the merger is not approved and
such a meeting is held, should have been received by Ms. Dolores B. Rawlings,
Vice President--Secretary of Crown, P.O. Box 1168, Baltimore, Maryland 21203 on
or before December 28, 2000. Stockholder proposals that were received before
this date must also comply with the bylaws of Crown and with the rules of the
SEC to be eligible for inclusion in the proxy statement for the annual meeting
in 2001.
WHERE YOU CAN FIND MORE INFORMATION
Crown files annual, quarterly and special reports, proxy statements and
other information with the SEC. In addition, because the merger is a "going
private" transaction, Crown, Rosemore, Rosemore Holdings, RAC and Mr. Henry A.
Rosenberg, Jr. have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3
with respect to the merger. The Schedule 13E-3 and such reports, proxy
statements and other information contain additional information about Crown.
You may read and copy any reports, statements or other information filed by
Crown at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the SEC: 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. SEC filings
of Crown are also available to the public from commercial document retrieval
services and at the website maintained by the SEC--"http://www.sec.gov."
The SEC allows Crown to "incorporate by reference" information into this
proxy statement. This means that Crown can disclose important information by
referring to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy statement, and
later information filed with the SEC will update and supercede the information
in this proxy statement.
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Crown incorporates by reference into this proxy statement the following
documents filed by it with the SEC (File No. 1-1059) pursuant to the Exchange
Act:
. Crown's Annual Report on Form 10-K for the year ended December 31, 1999,
as amended (attached hereto as Appendix B);
. Crown's Quarterly Report on Form 10-Q for the quarter ended September
30, 2000 (attached hereto as Appendix A); and
. Crown's Current Reports on Form 8-K, filed on December 18, 2000;
November 30, 2000; November 1, 2000; October 11, 2000; and September 28,
2000.
. Crown's Definitive Proxy Statement dated November 20, 2000 for Crown's
Annual Meeting of Stockholders held on December 14, 2000.
All subsequent documents filed by Crown with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the date of the Special Meeting will be deemed to be
incorporated by reference into this proxy statement and to be a part of it from
the date of filing of those documents.
Crown undertakes to provide without charge to each person to whom a copy of
this proxy statement has been delivered, upon request, a copy of any or all of
the documents incorporated by reference herein, other than the exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this proxy statement incorporates. Requests for copies
should be directed to Crown Central Petroleum Corporation, P.O. Box 1168,
Baltimore, Maryland 21203, Attention: Vice President--Secretary (Telephone
number: (410) 539-7400).
If you would like to request documents from Crown, please do so by
, 2001 to receive them before the Special Meeting.
Crown's Board does not intend to bring any other matters to the stockholders
for consideration at the Special Meeting.
The proxy statement does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom it is not lawful to make any offer
or solicitation in such jurisdiction. The delivery of this proxy statement will
not create an implication that there has been no change in the affairs of Crown
since the date of this proxy statement or that the information herein is
correct as of any later date.
You should rely on the information contained or incorporated by reference in
this proxy statement. Crown has not authorized anyone to provide you with
information that is different from what is contained in this proxy statement.
This proxy statement is dated January , 2001. You should not assume that the
information contained in this proxy statement is accurate as of any date other
than such date, and the mailing of this proxy statement will not create any
implication to the contrary.
By Order of the Board of Directors
Dolores B. Rawlings
Vice President--Secretary
January , 2001
76
EXHIBIT A
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
ROSEMORE, INC.,
ROSEMORE ACQUISITION CORPORATION
and
CROWN CENTRAL PETROLEUM
CORPORATION
Dated as of December 17, 2000
- --------------------------------------------------------------------------------
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
TABLE OF CONTENTS
Page
----
ARTICLE I
SECTION 1.01. The Merger................................................... 1
SECTION 1.02. Effective Time; Closing...................................... 2
SECTION 1.03. Effect of the Merger......................................... 2
SECTION 1.04. Charter; Bylaws.............................................. 2
SECTION 1.05. Directors and Officers of the Surviving Corporation.......... 2
ARTICLE II
SECTION 2.01. Conversion of Capital Stock.................................. 2
SECTION 2.02. Payment for Shares........................................... 3
SECTION 2.03. Employee Stock Options....................................... 4
ARTICLE III
SECTION 3.01. Organization and Qualification; Subsidiaries................. 5
SECTION 3.02. Charter and Bylaws........................................... 5
SECTION 3.03. Capitalization............................................... 5
SECTION 3.04. Authority Relative to This Agreement......................... 6
SECTION 3.05. No Conflict; Required Filings and Consents................... 6
SECTION 3.06. Permits; Compliance.......................................... 7
SECTION 3.07. SEC Filings; Financial Statements............................ 7
SECTION 3.08. Absence of Certain Changes or Events......................... 8
SECTION 3.09. Employee Benefit Plans; Labor Matters........................ 8
SECTION 3.10. Contracts; Debt Instruments.................................. 11
SECTION 3.11. Absence of Litigation........................................ 12
SECTION 3.12. Environmental Matters........................................ 13
SECTION 3.13. Trademarks, Patents and Copyrights........................... 14
SECTION 3.14. Taxes........................................................ 14
SECTION 3.15. Property and Leases.......................................... 15
SECTION 3.16. Rights Agreement............................................. 15
SECTION 3.17. Insurance.................................................... 16
SECTION 3.18. Board Recommendation......................................... 16
SECTION 3.19. Opinion of Financial Advisor................................. 16
SECTION 3.20. Brokers...................................................... 16
SECTION 3.21. Vote Required; State Takeover Statutes....................... 16
SECTION 3.22. Waiver of Certain Obligations................................ 17
ARTICLE IV
SECTION 4.01. Organization and Qualification............................... 17
SECTION 4.02. No Conflict; Required Filings and Consents................... 17
SECTION 4.03. Absence of Litigation........................................ 18
SECTION 4.04. Brokers...................................................... 18
SECTION 4.05. No Activities................................................ 18
SECTION 4.06. Financing.................................................... 18
SECTION 4.07. Ownership of Company Common Stock............................ 18
i
Page
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ARTICLE V
SECTION 5.01. Conduct of Business by the Company Pending the Closing..... 18
SECTION 5.02. Notices of Certain Events.................................. 20
SECTION 5.03. Contractual Consents....................................... 21
ARTICLE VI
SECTION 6.01. Proxy Statement; Schedule 13E-3............................ 21
SECTION 6.02. Company Stockholders' Meeting.............................. 22
SECTION 6.03. Access to Information; Confidentiality..................... 22
SECTION 6.04. No Solicitation of Transactions............................ 22
SECTION 6.05. Amendment of Plans......................................... 23
SECTION 6.06. Directors' and Officers' Indemnification and Insurance..... 23
SECTION 6.07. Further Action; Consents; Filings.......................... 24
SECTION 6.08. The Company Rights Plan.................................... 25
SECTION 6.09. Public Announcements....................................... 25
ARTICLE VII
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate
the Merger.............................................................. 25
SECTION 7.02. Conditions to the Obligations of the Company............... 26
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub..... 26
ARTICLE VIII
SECTION 8.01. Termination................................................ 27
SECTION 8.02. Notice of Termination; Effect of Termination............... 28
SECTION 8.03. Amendment.................................................. 28
SECTION 8.04. Waiver..................................................... 28
SECTION 8.05. Expenses................................................... 28
ARTICLE IX
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements.............................................................. 29
SECTION 9.02. Notices.................................................... 29
SECTION 9.03. Certain Definitions........................................ 30
SECTION 9.04. Severability............................................... 31
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit............ 31
SECTION 9.06. Incorporation of Exhibits.................................. 31
SECTION 9.07. Specific Performance....................................... 31
SECTION 9.08. Governing Law.............................................. 31
SECTION 9.09. Submission to Jurisdiction; Venue.......................... 31
SECTION 9.10. Headings................................................... 32
SECTION 9.11. Counterparts............................................... 32
SECTION 9.12. Entire Agreement........................................... 32
SECTION 9.13. Waiver of Jury Trial....................................... 32
ii
GLOSSARY OF DEFINED TERMS
Aegis Muse..................................................... (S) 4.04
affiliate...................................................... (S) 9.03(a)
Agreement...................................................... Preamble
AMEX........................................................... (S) 3.03
Articles of Merger............................................. (S) 1.02
business day................................................... (S) 9.03(c)
Class A Common Stock........................................... Recitals
Class B Common Stock........................................... Recitals
Closing........................................................ (S) 1.02
Closing Date................................................... (S) 1.02
Code........................................................... (S) 2.02(e)
Company........................................................ Preamble
Company Board.................................................. Recitals
Company Certificates........................................... (S) 2.02(a)
Company Common Stock........................................... Recitals
Company Option................................................. (S) 2.03(a)
Company SEC Reports............................................ (S) 3.07(a)
Company Independent Committee.................................. Recitals
Company Stock Award............................................ (S) 2.03(b)
Company Stock Plans............................................ (S) 2.03(a)
Company Stockholders' Meeting.................................. (S) 6.01(a)
Company Subsidiaries........................................... (S) 3.01(a)
Competing Transaction.......................................... (S) 6.04
Confidentiality Agreement...................................... (S) 6.03(b)
control........................................................ (S) 9.03(c)
controlled by.................................................. (S) 9.03(c)
Costs.......................................................... (S) 6.06(d)
CPP............................................................ (S) 7.03(d)
CSFB........................................................... (S) 3.19
Disclosure Schedule............................................ (S) 3.01(a)
Effective Time................................................. (S) 1.02
Environmental Claims........................................... (S) 3.12(b)
Environmental Laws............................................. (S) 3.12(b)
Environmental Permit........................................... (S) 3.12(b)
ERISA.......................................................... (S) 3.09(a)
Escrow Agent................................................... Recitals
Escrow Agreement............................................... Recitals
Exchange Act................................................... (S) 3.05(b)(i)
Expenses....................................................... (S) 8.05(a)
Governmental Entity............................................ (S) 3.05(b)
Hazardous Material............................................. (S) 3.12(b)
Holdings....................................................... Recitals
HSR Act........................................................ (S) 3.05(b)(i)
Indemnified Parties............................................ (S) 6.06(d)
Indenture...................................................... (S) 6.07
IRS............................................................ (S) 3.09(a)(iii)
knowledge...................................................... (S) 9.03(d)
Law............................................................ (S) 3.05(a)(ii)
Letter of Transmittal.......................................... (S) 2.02(b)
Material Adverse Effect........................................ (S) 3.01(a)
iii
Material Contract............................................... (S) 3.10(a)
Merger.......................................................... Recitals
Merger Consideration............................................ (S) 2.01(a)
Merger Sub...................................................... Preamble
MGCL............................................................ Recitals
Multiemployer Plan.............................................. (S) 3.09(b)
Multiple Employer Plan.......................................... (S) 3.09(b)
Order........................................................... (S) 7.01(b)
Parent.......................................................... Preamble
Paying Agent.................................................... (S) 2.02(a)
Permits......................................................... (S) 3.06
person.......................................................... (S) 9.03(e)
Plans........................................................... (S) 3.09(a)
Preferred Stock................................................. (S) 3.03(c)
Proxy Statement................................................. (S) 6.01(a)
Real Property................................................... (S) 3.12(a)(ii)
Release......................................................... (S) 3.12(b)
Remedial Action................................................. (S) 3.12(b)
Reorganization Agreement........................................ (S) 3.09(b)
Representatives................................................. (S) 6.02(a)
Rights Agreement................................................ (S) 3.16
SAR Unit........................................................ (S) 2.03(a)
Schedule 13E-3.................................................. (S) 6.01(a)
SDAT............................................................ (S) 1.02
SEC............................................................. (S) 3.07(a)
Seller or Sellers............................................... Recitals
Stock Purchase Agreement........................................ Recitals
subsidiary(ies)................................................. (S) 9.03(f)
Superior Proposal............................................... (S) 6.04
Surviving Corporation........................................... (S) 1.01
Tax Returns..................................................... (S) 3.14
Taxes........................................................... (S) 3.14
Third Party Provision........................................... (S) 9.05
under common control with....................................... (S) 9.03(c)
U.S. GAAP....................................................... (S) 3.07(b)
Waivers......................................................... (S) 3.22
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 17, 2000 (this
"Agreement"), by and among ROSEMORE, INC., a Maryland corporation ("Parent"),
CROWN CENTRAL PETROLEUM CORPORATION, a Maryland corporation (the "Company"),
and ROSEMORE ACQUISITION CORPORATION, a Maryland corporation and an indirect
wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the Maryland General Corporation Law (the "MGCL"), Parent
will acquire, pursuant to the merger (the "Merger") of Merger Sub with and into
the Company, all of the issued and outstanding shares of the Company's Class A
common stock, par value $5.00 per share (the "Class A Common Stock"), and Class
B common stock, par value $5.00 per share (the "Class B Common Stock"; and
together with the Class A Common Stock, the "Company Common Stock"), at a price
of $10.50 per share;
WHEREAS, a special committee of independent members (the "Company
Independent Committee") of the Board of Directors of the Company (the "Company
Board") has unanimously recommended to the Company Board that it (a) approve
and deem the Merger advisable upon the terms and subject to the conditions set
forth in this Agreement and (b) recommend the approval of the Merger and this
Agreement by the stockholders of the Company, and the Company Board has
unanimously (i) approved and deemed the Merger advisable upon the terms and
subject to the conditions set forth in this Agreement and (ii) recommended the
approval of the Merger and this Agreement by the stockholders of the Company;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and has approved and adopted this Agreement, the Merger and the other
transactions contemplated by this Agreement;
WHEREAS, this Agreement has been approved and adopted by the Board of
Directors of Merger Sub and by Rosemore Holdings, Inc., a Maryland corporation
and a wholly owned subsidiary of Parent ("Holdings"), as sole stockholder of
Merger Sub; and
WHEREAS, P.A. Novelly, II and John K. Pruellage, as trustees for The Novelly
Exempt Trust U/I dated August 12, 1992, Douglas D. Hommert and William Lauber,
as trustees for The Capital Trust U/I dated February 4, 1994, Paul A. Novelly,
as trustee of the Paul A. Novelly Living Trust U/I dated July 28, 1982, as
amended and Golnoy Barge Company, Inc. (each of the foregoing, a "Seller", and
collectively, the "Sellers") and Parent have entered into a Stock Purchase
Agreement, dated as of the date hereof (the "Stock Purchase Agreement"),
whereby, subject to the terms and conditions contained therein, the Sellers (i)
irrevocably appoint the designees of Parent as their proxies to vote in favor
of the Merger, this Agreement and the transactions contemplated hereby with
respect to the Company Common Stock held by such Sellers, and (ii) shall sell
their Company Common Stock to Parent if this Agreement is terminated; and the
Sellers, Parent and an escrow agent (the "Escrow Agent") shall enter into an
Escrow Agreement (the "Escrow Agreement") promptly after the date hereof, to
effect the transactions contemplated by the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Provided that this Agreement shall not have been
terminated in accordance with Section 8.01, upon the terms and subject to the
conditions set forth in Article VII, and in accordance with the MGCL, at the
Effective Time (as defined below), Merger Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence
of Merger Sub shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. Provided that this Agreement shall
not have been terminated in accordance with Section 8.01, as promptly as
practicable and in no event later than the second business day following the
satisfaction or, if permissible, waiver of the conditions set forth in clauses
(a) through (c) of Section 7.01 (or such other date as may be agreed to in
writing by each of the parties hereto), the parties hereto shall cause the
Merger to be consummated by filing the articles of merger (the "Articles of
Merger") with the State Department of Assessments and Taxation of Maryland
("SDAT") in such form as is required by, and executed in accordance with, the
relevant provisions of the MGCL. The term "Effective Time" means the date and
time of the filing with, and the acceptance for record by, the SDAT of the
Articles of Merger (or such later time, not to exceed 30 days after such
acceptance for record, as may be agreed in writing by each of the parties
hereto and specified in the Articles of Merger). Immediately prior to the
filing of the Articles of Merger, a closing (the "Closing") will be held at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York (or
such other place as the parties hereto may agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the MGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all of the property, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of each of the
Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04. Charter; Bylaws. At the Effective Time, (a) the charter of
Merger Sub as in effect immediately prior to the Effective Time shall be the
charter of the Surviving Corporation until thereafter amended as provided by
law, the bylaws and such charter of the Surviving Corporation, except that
Article I shall be amended to provide that the name of the Surviving
Corporation shall be "Crown Central Petroleum Corporation" and (b) the bylaws
of Merger Sub as in effect immediately prior to the Effective Time shall be the
bylaws of the Surviving Corporation until thereafter amended as provided by
law, the charter of the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers of the Surviving Corporation. The
directors of the Company immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the charter and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) each share of Company Common Stock (together with the associated
right to purchase Company Series A or Series B Junior Participating
Preferred Stock, no par value, as the case may be, pursuant to the Rights
Agreement (as defined in Section 3.16 hereof)) issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be canceled pursuant to Section 2.01(b) hereof) shall be
converted into the right to receive $10.50 in cash (the "Merger
Consideration"), payable without interest to the holder of such share of
Company Common Stock, upon surrender of the Company Certificate that
formerly evidenced such share of Company Common Stock;
(b) each share of Company Common Stock owned by Parent or owned by any
direct or indirect wholly owned subsidiary of the Company or Parent shall
be canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto; and
2
(c) each issued and outstanding share of common stock, par value $5.00
per share, of Merger Sub will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
SECTION 2.02. Payment for Shares. (a) From and after the Effective Time, a
bank or trust company designated by Parent and reasonably acceptable to the
Company shall act as paying agent (the "Paying Agent") in effecting the payment
of the Merger Consideration in respect of certificates that, prior to the
Effective Time, represented shares of Company Common Stock entitled to payment
of the Merger Consideration pursuant to Section 2.01(a) (the "Company
Certificates"). From and after the Effective Time, Parent shall cause to be
provided to the Paying Agent cash in amounts necessary to pay for all of the
shares of Company Common Stock pursuant to Section 2.01(a). Such funds (and the
interest thereon) shall be invested by the Paying Agent in an interest-bearing
investment consisting of short-term U.S. Government obligations or federally
insured, interest-bearing demand deposit accounts.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of a Company Certificate (i) a letter of transmittal in customary
form (which shall specify that delivery shall be effected, and risk of loss and
title to the Company Certificate shall pass, only upon delivery of the Company
Certificate to the Paying Agent) (the "Letter of Transmittal") and (ii)
instructions for use in surrendering such Company Certificate in exchange for
payment therefor. Upon the surrender of each such Company Certificate, together
with such Letter of Transmittal, duly completed and validly executed in
accordance with the instructions therein, and such other documents as may be
required pursuant to such instructions, the Paying Agent shall pay the holder
of such Company Certificate an amount in cash equal to the product of the
Merger Consideration multiplied by the number of shares of Company Common Stock
formerly represented by such Company Certificate, in consideration therefor,
and such Company Certificate shall forthwith be cancelled. Until so
surrendered, each such Company Certificate (other than Company Certificates
representing shares of Company Common Stock to be canceled pursuant to Section
2.01(b)) shall represent solely the right to receive the aggregate Merger
Consideration represented thereby. No interest shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is
to be paid to any person other than the person in whose name the Company
Certificate surrendered is registered, it shall be a condition to such right to
receive such payment that the Company Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Company Certificate shall pay to the Paying Agent any
transfer or other similar Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Company
Certificate surrendered, or shall establish to the satisfaction of the
Surviving Corporation that such Tax has been paid or is not applicable.
(c) At any time following the six-month anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
direct the delivery of any funds which previously had been made available to
the Paying Agent and were not disbursed to holders of shares of Company Common
Stock (including, without limitation, all interest and other income received by
the Paying Agent in respect of all funds made available to it), Company
Certificates and other documents in its possession relating to the Merger, and
the Paying Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving Corporation
and receive in consideration therefor the aggregate Merger Consideration
relating thereto, without any interest. Notwithstanding the foregoing, neither
the Surviving Corporation nor the Paying Agent shall be liable to any holder of
a share of Company Common Stock for any Merger Consideration delivered in
respect of such share to a public official pursuant to any abandoned property,
escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of any shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and cancelled in return for the payment of the
3
aggregate Merger Consideration represented thereby, as provided in this Article
II. From and after the Effective Time, the holders of shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of Company Common Stock, except as
otherwise provided herein or by applicable law.
(e) The Surviving Corporation shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any applicable provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by the
Surviving Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding were made by
the Surviving Corporation.
(f) If any Company Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Company Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Company Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed Company
Certificate the Merger Consideration to which the holder thereof is entitled
pursuant to Section 2.01(a).
SECTION 2.03. Employee Stock Options. (a) At the Effective Time, each option
to purchase shares of Company Common Stock (a "Company Option") or stock
appreciation unit award ("SAR Unit") with respect to Company Common Stock
outstanding and unexercised as of the Effective Time granted pursuant to the
Company's 1994 Long-Term Incentive Plan, the Company's 1995 Management Stock
Option Plan and the Company's 1999 Long-Term Incentive Plan, each as amended
through the date of this Agreement, and the option grant agreements and award
agreements entered into in connection therewith, (collectively, the "Company
Stock Plans"), or granted by the Company other than pursuant to the Company
Stock Plans shall (i) become fully vested and immediately exercisable and (ii)
remain outstanding and, thereafter, be a Company Option or SAR Unit with the
same rights and exercise prices as applied to such Company Option or SAR Unit
immediately prior to the Effective Time, and otherwise subject to the terms (as
in effect as of the date hereof) of the Company Stock Plans pursuant to which
such Company Option or SAR Unit was issued, except that all references to the
Company shall be deemed to be references to the Surviving Corporation and all
references to Company Common Stock shall be deemed to be references to the
common stock of the Surviving Corporation. The Company shall take all necessary
action to approve the disposition of the Company Options in connection with the
transactions contemplated by this Agreement to the extent necessary to exempt
such dispositions and acquisitions under Rule 16b-3 of the Exchange Act (as
defined in Section 3.05(b)(i)).
Promptly after the Effective Time, Parent shall or shall cause Surviving
Corporation to provide each holder of Company Options with the opportunity to
sell its Company Options at the prices set forth in Annex A of the Waivers
(defined herein). Any payments related to such sale of Company Options shall be
subject to all applicable federal, state and local tax withholding
requirements.
(b) At the Effective Time, each performance-restricted stock award (a
"Company Stock Award") granted pursuant to the Company Stock Plans or granted
by the Company (other than pursuant to the Company Stock Plans) shall become
fully vested, the restrictions thereon shall lapse, any restrictive legend
contained on any Company Certificate related thereto shall be removed and any
Company Certificate related thereto held in escrow by the Company pursuant to
the terms of any Company Stock Plan or otherwise shall be released to the
grantee of such Company Stock Award. At the Effective Time, each holder of a
Company Stock Award shall be paid in full satisfaction of such Company Stock
Award a cash payment in an amount in respect thereof equal to the product of
(i) the Merger Consideration and (ii) the number of shares of Company Common
Stock subject to such Company Stock Award, less any income or employment tax
withholding required under the Code or any provision of state or local law.
4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. (a) Except as
set forth in Section 3.01(a) of the Disclosure Schedule attached hereto and
forming a part of this Agreement (the "Disclosure Schedule"), the Company and
each subsidiary of the Company (the "Company Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted. Each of the Company and
each of the Company Subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature
of its business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that would
not materially delay consummation of the Merger and would not have a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
any event, circumstances, change in or effect on the business of the Company
and the Company Subsidiaries, taken as a whole, that, when taken together with
all other events, circumstances, changes and effects occurring after the date
hereof that do not individually have a Material Adverse Effect and all other
circumstances that would, but for the fact that they do not individually have a
Material Adverse Effect, constitute a breach of any representation or warranty
made by the Company in this Agreement, is, or is reasonably likely to be,
materially adverse to the business, financial condition, results of operations
or prospects of the Company and the Company Subsidiaries taken as a whole.
(b) A true and complete list of all the Company Subsidiaries, together with
the jurisdiction of incorporation or organization of each Company Subsidiary
and the percentage of the outstanding capital stock of each Company Subsidiary
owned by the Company and each other Company Subsidiary, is set forth in Section
3.01(b) of the Disclosure Schedule. Except as disclosed in Section 3.01(b) of
the Disclosure Schedule, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
SECTION 3.02. Charter and Bylaws. The copies of the Company's charter and
bylaws, each as amended and restated, that are set forth as exhibits to the
Company's proxy statement dated March 15, 1996 and Form 10-K for the year ended
December 31, 1999, as amended, and Form 10-Q for the quarter ended September
30, 2000, respectively, are complete and correct copies thereof. Such charter
and bylaws are in full force and effect. The Company is not in violation of any
of the provisions of its charter or bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of (a) 15,000,000 shares of Class A Common Stock, (b) 15,000,000
shares of Class B Common Stock and (c) 5,000,000 shares of preferred stock, no
par value (the "Preferred Stock"), 4,818 shares of which are designated Series
A Junior Participating Preferred Stock, no par value, and 5,254 of which are
designated Series B Junior Participating Preferred Stock, no par value. At the
close of business on (A) November 15, 2000, (i) 4,817,394 shares of Class A
Common Stock and 5,248,912 shares of Class B Common Stock, all of which were
validly issued, fully paid and nonassessable and no shares of Preferred Stock
were issued and outstanding, (ii) no shares of Class A Common Stock and Class B
Common Stock were held in the treasury of the Company or by the Company
Subsidiaries, (iii) 4,818 shares of Series A Junior Participating Preferred
Stock were reserved for issuance pursuant to the Rights Agreement and (iv)
5,254 shares of Series B Junior Participating Preferred Stock were reserved for
issuance pursuant to the Rights Agreement, and (B) November 30, 2000, 980,507
shares of Class B Common Stock were reserved for issuance in connection with
the exercise of outstanding Company Options in the amounts and at the exercise
prices set forth in Section 3.03 of the Disclosure Schedule. Except as set
forth in Section 3.03 of the Disclosure Schedule, all
5
publicly traded shares of Company Common Stock are authorized for listing on
the American Stock Exchange (the "AMEX"). From November 15, 2000 through the
date hereof, the Company has not issued any additional shares of capital stock,
except pursuant to the exercise of Company Options outstanding on November 15,
2000, nor has the Company granted any additional options, warrants or other
rights or entered into any agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
any Company Subsidiary or obligating the Company or any Company Subsidiary to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. Except as issued pursuant to the Company
Stock Plans, the Rights Agreement, pursuant to agreements or arrangements
described in Section 3.03 of the Disclosure Schedule or as set forth in the
Company SEC Reports (as defined herein), there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
the Company is a party or by which the Company is bound relating to the issued
or unissued capital stock of the Company or any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, the Company or any Company
Subsidiary. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except
as set forth in Section 3.03 of the Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Common Stock or any
capital stock of any Company Subsidiary. Each outstanding share of capital
stock of each Company Subsidiary is duly authorized, validly issued, fully paid
and nonassessable and, except as set forth in Section 3.03 of the Disclosure
Schedule, each such share owned by the Company or another Company Subsidiary is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the Company's or such other
Company Subsidiary's voting rights, charges and other encumbrances of any
nature whatsoever, except where failure to own such shares free and clear would
not, individually or in the aggregate, have a Material Adverse Effect. Except
as set forth in Section 3.03 of the Disclosure Schedule, there are no material
outstanding contractual obligations of the Company or any Company Subsidiary to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Company Subsidiary or any other person,
other than obligations arising in the ordinary course of business, obligations
disclosed in the Company SEC Reports and guarantees by the Company of any
indebtedness of any Company Subsidiary.
SECTION 3.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
(including, without limitation, the Merger) contemplated herein to be
consummated by the Company. The execution and delivery of this Agreement by the
Company and the consummation by the Company of such transactions have been duly
and validly authorized by all necessary corporate action, including the
unanimous approval of the Company Board and the unanimous approval of the
Company Independent Committee, and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate such
transactions (other than the adoption of this Agreement by the requisite
affirmative vote of the stockholders of the Company as required by the MGCL).
This Agreement has been duly and validly executed and delivered by the Company
and (assuming due authorization, execution and delivery by Parent and Merger
Sub) constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate any
provision of the charter or bylaws of the Company or any equivalent
organizational documents of the Company or any Company Subsidiary, (ii)
assuming that all consents, approvals, authorizations and other actions
described in Section 3.05(b) have been obtained and all filings and obligations
described in Section 3.05(b) have been made, conflict with or violate any
United States or non-United States or supranational law, statute, ordinance,
rule, regulation, code, executive order, injunction, judgment, decree or other
order ("Law") applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is bound or
affected, or (iii) except as set
6
forth in Section 3.05(a) of the Disclosure Schedule, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clause (iii), for any such conflicts, violations,
breaches, defaults, or other occurrences which would not reasonably be expected
to (A) have a Material Adverse Effect or (B) prevent or materially delay the
performance of this Agreement by the Company.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States federal, state, county or local or non-United States or
supranational government, governmental, regulatory or administrative authority,
agency, instrumentality or commission or any court, tribunal or judicial or
arbitral body ("Governmental Entity"), except (i) for applicable requirements
of the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), the AMEX, the pre-
merger notification requirements (A) of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR Act") which requirements have been satisfied assuming the
Closing occurs before May 26, 2001, or (B) as may be applicable pursuant to the
antitrust laws of any state, (ii) for applicable requirements relating to the
filing and recordation of appropriate merger documents pursuant to the MGCL and
(iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not reasonably be
expected to (A) prevent or materially delay consummation of the Merger or (B)
have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance. Except as set forth in Section 3.06 of
the Disclosure Schedule, each of the Company and the Company Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any Company Subsidiary
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Permits"), except where the failure to have, or the
suspension or cancellation of, any of the Permits would not reasonably be
expected to (a) have a Material Adverse Effect or (b) prevent or materially
delay the performance of this Agreement by the Company, and no suspension or
cancellation of any of the Permits is pending or, to the knowledge of the
Company, threatened. Neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, Permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary
is a party to or by which the Company or any Company Subsidiary is bound by,
except for any such conflicts, defaults or violations that would not reasonably
be expected to (A) have a Material Adverse Effect or (B) prevent or materially
delay the performance of this Agreement by the Company.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has timely
filed all forms, reports and documents required to be filed by it with the
Securities and Exchange Commission ("SEC") from December 31, 1998 through the
date of this Agreement (collectively, the "Company SEC Reports"). The Company
SEC Reports and all forms, reports and documents to be filed by the Company
after the date hereof and prior to the Closing (i) were or will be prepared in
all material respects in accordance with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder, (ii) did or will not, as
of their respective dates, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading, and (iii) did not and will not omit any
document required to be filed as an exhibit thereto. No Company Subsidiary is
required to file any form, report or other document with the SEC.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports and each of the financial
statements to be included in forms, reports and documents to be filed
7
with the SEC after the date hereof and prior to the Closing, was or will be
prepared in accordance with United States generally accepted accounting
principles as promulgated by the American Institute of Certified Public
Accountants and as interpreted from time to time by the staff of the SEC ("U.S.
GAAP"), applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto) and each presented fairly or will
present fairly, the consolidated financial position, results of operations and
cash flow of the Company, and the consolidated Company Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein in
all material respects, except as otherwise noted therein in accordance with
U.S. GAAP (subject, in the case of unaudited statements, to normal year- end
adjustments which were not and are not expected to have a Material Adverse
Effect).
(c) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the Company Subsidiaries as of September 30, 2000, including
the notes thereto, or in any of the Company SEC Reports filed subsequent to
September 30, 2000, neither the Company nor any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with U.S. GAAP, except for liabilities or
obligations incurred in the ordinary course of business since September 30,
2000 that would not reasonably be expected to, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) prevent or materially
delay the performance of this Agreement by the Company.
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendment or modification, that has not yet been filed with the
SEC, to agreements, documents or other instruments that previously have been
filed by the Company with the SEC pursuant to the Exchange Act.
SECTION 3.08. Absence of Certain Changes or Events. Since September 30,
2000, except as expressly contemplated by this Agreement or as specifically
disclosed in the Company SEC Reports filed subsequent to September 30, 2000,
the Company and the Company Subsidiaries have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and, since
such date, (a) there has not been any change, condition, event or development
that has had a Material Adverse Effect, (b) there has not been any event that
could reasonably be expected to prevent or materially delay the performance of
this Agreement by the Company and (c) none of the Company or any Company
Subsidiary has taken any action that, if taken after the date of this
Agreement, would constitute a breach of any of the covenants set forth in
Section 5.01.
SECTION 3.09. Employee Benefit Plans; Labor Matters. (a) Section 3.09(a) of
the Disclosure Schedule lists (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which the Company or any
Company Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Company Subsidiary for the benefit of any
current or former employee, officer or director of the Company or any Company
Subsidiary, (ii) each employee benefit plan for which the Company or any
Company Subsidiary could incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, (iii) any plan in respect of
which the Company or any Company Subsidiary could incur liability under Section
4212(c) of ERISA, and (iv) any contracts, arrangements or understandings
between the Company or any Company Subsidiary and any employee of the Company
or any Company Subsidiary including, without limitation, any contracts,
arrangements or understandings relating in any way to a sale of the Company or
any Company Subsidiary (collectively, the "Plans"). Each Plan is in writing and
the Company has furnished or made available to Parent a true and complete copy
of each material Plan and has delivered or made available to Parent a true and
complete copy of each material document, if applicable, prepared in connection
with each such Plan, including, without limitation, (A) a copy of each trust or
other funding arrangement, (B) each summary plan description and summary of
material modifications, (C) the most recently filed Internal Revenue Service
("IRS") Form 5500, (D) the most recently received IRS determination letter for
each such Plan, and (E) the most recently prepared
8
actuarial report and financial statement in connection with each such Plan.
Neither the Company nor any Company Subsidiary has any express or implied
commitment, whether legally enforceable or not, (i) to create, incur liability
with respect to or cause to exist any other employee benefit plan, program or
arrangement, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
(b) None of the Plans is a multiemployer plan (within the meaning of Section
3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single employer
pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which the
Company or any Company Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). Except as set forth in Section
3.09(b) of the Disclosure Schedule, none of the Plans (i) provides for the
payment of separation, severance, termination or similar-type benefits to any
person, (ii) obligates or obligated the Company or any Company Subsidiary to
pay, or segregate any funds to pay (into a trust or otherwise), separation,
severance, termination or similar-type benefits solely or partially as a result
of any transaction contemplated by this Agreement or pursuant to the
consummation of the transactions contemplated by the Agreement and Plan of
Reorganization, dated December 8, 1998, as amended, among American Trading and
Production Corporation, ATAPCO, Inc., American Trading Real Estate Company,
Inc. and Gateway Gathering and Marketing Company (the "Reorganization
Agreement"), or (iii) obligates or obligated the Company or any Company
Subsidiary to make any payment, or segregate any funds to pay (into a trust or
otherwise), or provide any benefit as a result of a "change in control", within
the meaning of such term under Section 280G of the Code solely or partially as
a result of any transaction contemplated by this Agreement or the
Reorganization Agreement. Except as set forth in Section 3.09(b) of the
Disclosure Schedule, none of the Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary. Each of
the Plans is subject only to the Laws of the United States or a political
subdivision thereof.
(c) Each Plan is now and always has been operated in all material respects
in accordance with its terms and the requirements of all applicable Law
including, without limitation, ERISA and the Code. The Company and the Company
Subsidiaries have performed all obligations required to be performed by them
under, are not in material default under or in violation of, and have no
knowledge of any default or violations by any party to, any Plan. No action is
pending or, to the knowledge of the Company, threatened with respect to any
Plan (other than claims for benefits in the ordinary course), and, to the
Company's knowledge, no fact or event exists that could reasonably be expected
to give rise to any such action.
(d) Each Plan that is intended to be qualified under Section 401(a) or
Section 401(k) of the Code has heretofore been determined by the IRS so to
qualify, and if submitted and assuming all amendments required by the IRS were
made, the Company believes that such Plans would receive a favorable
determination letter from the IRS with respect to the changes required by the
Small Business Job Protection Act of 1996, the General Agreement on Tariffs and
Trade, the Tax Reform Act of 1997, and the Uniformed Services Employment and
Reemployment Rights Act of 1994, and each trust established in connection with
any Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS
that it is so exempt, and no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) for which an exemption is not
available with respect to any Plan. Neither the Company nor any Company
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could reasonably be expected to give rise to any
such liability.
9
(f) All contributions, premiums or payments required to be made with respect
to any Plan have been made on or before their due dates. All such contributions
have been fully deducted for income tax purposes to the extent permitted by
applicable Law and no such deduction has been challenged or disallowed by any
Governmental Entity and, to the Company's knowledge, no fact or event exists
which could reasonably be expected to give rise to any such challenge or
disallowance.
(g) Except as set forth in Section 3.09(g) of the Disclosure Schedule, all
directors and officers of the Company and the Company Subsidiaries (other than
those directors of the Company Subsidiaries organized in England, Vermont and
the Netherland Antilles who are not employees of the Company or any Company
Subsidiary) are under written obligation to the Company and the Company
Subsidiaries to maintain in confidence all confidential or proprietary
information acquired by them in the course of their employment and to assign to
the Company and the Company Subsidiaries all inventions made by them within the
scope of their employment during such employment and for a reasonable period
thereafter.
(h) The Company currently operates and for the last five years has operated
each of the Company's Employee Savings Plan and Employee Supplemental Savings
Plan in accordance with its terms, including, without limitation, the provision
(A) permitting the participant to direct the trustee under such plan to vote
the participant's Company Common Stock held in the participant's account in
accordance with his or her instructions and (B) providing that any shares of
the Company Common Stock in the accounts of a participant for which clear and
timely instructions of the participant are not received shall be voted in the
same proportion as such shares for which instructions are received.
(i) Section 3.09(i) of the Disclosure Schedule sets forth a true and
accurate list of all issued and outstanding SAR Units, including the amounts
and exercise prices related thereto.
(j) Except as set forth in Section 3.09(j) of the Disclosure Schedule or as
disclosed in the Company SEC Reports, (i) there are no controversies pending
or, to the knowledge of the Company, threatened between the Company or any
Company Subsidiary and any of their respective employees; (ii) neither the
Company nor any Company Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any Company Subsidiary, nor, to the knowledge of the Company, are
there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Company Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or
contract, and there are no grievances outstanding against the Company or any
Company Subsidiary under any such agreement or contract; (iv) there are no
unfair labor practice complaints pending against the Company or any Company
Subsidiary before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any Company
Subsidiary; and (v) there is no strike, slowdown, work stoppage or lockout, or,
to the knowledge of the Company, threat thereof, by or with respect to any
employees of the Company or any Company Subsidiary. The consent of the labor
unions which are a party to the collective bargaining agreements listed in
Section 3.09(j) of the Disclosure Schedule is not required to consummate the
Merger or the transactions contemplated by the Stock Purchase Agreement.
(k) Except as set forth in Section 3.09(k) of the Disclosure Schedule or as
disclosed in the Company SEC Reports, the Company and the Company Subsidiaries
are in material compliance with all applicable laws relating to the employment
of labor, including those relating to wages, hours, collective bargaining and
the payment and withholding of taxes and other sums as required by the
appropriate Governmental Entity and has withheld and paid to the appropriate
Governmental Entity or are holding for payment not yet due to such Governmental
Entity all amounts required to be withheld from employees of the Company or any
Company Subsidiary and are not liable for any significant arrears of wages,
taxes, penalties or other sums for failure to comply with any of the foregoing.
The Company and the Company Subsidiaries have paid in full to all employees or
adequately accrued for in accordance with U.S. GAAP consistently applied all
wages, salaries, commissions, bonuses, benefits and other compensation due to
or on behalf of such employees, and there is no claim with respect to payment
of wages, salary or overtime pay that has been asserted or is now pending or,
to the Company's knowledge, threatened before any Governmental Entity with
respect to any persons currently or formerly employed by the Company or any
Company Subsidiary. Except as set forth in Section 3.09(k) of the
10
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Entity relating to employees or employment practices. Except as
set forth in Section 3.09(k) of the Disclosure Schedule, there is no charge or
proceeding with respect to a violation of any occupational safety or health
standards that has been asserted or is now pending or, to the Company's
knowledge, threatened with respect to the Company. Except as set forth in
Section 3.09(k) of the Disclosure Schedule or as disclosed in the Company SEC
Reports, there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender, race,
religion or other legally protected category, which has been asserted or is now
pending or, to the knowledge of the Company, threatened before the United
States Equal Employment Opportunity Commission, or any other Governmental
Entity in any jurisdiction in which the Company or any Company Subsidiary have
employed or employ any person.
SECTION 3.10. Contracts; Debt Instruments. (a) Set forth in subsections (i)
through (viii) of Section 3.10(a) of the Disclosure Schedule is a true and
accurate list of all contracts and agreements of the types described in such
subsections to which the Company or any Company Subsidiary is a party as of the
date hereof (such contracts, agreements and arrangements as required to be set
forth in Section 3.10(a) of the Disclosure Schedule, together with those listed
in Section 3.09(a) of the Disclosure Schedule, and subject to the proviso at
the end of paragraph (a) of this Section 3.10 being the "Material Contracts"):
(i) as of the date of this Agreement, each contract and agreement which
(A) is likely to involve consideration of more than $500,000, in the
aggregate, during the calendar year ending December 31, 2000 or (B) is
likely to involve consideration of more than $1,000,000, in the aggregate,
over the remaining term of such contract, except for purchase orders for
crude oil or intermediate feedstock arising in the usual and ordinary
course of business and consistent with past practices (provided that in any
case and without regard to the proviso at the end of paragraph (a) of this
Section 3.10, the top 15 purchase orders as of November 30, 2000 are set
forth in Section 3.10(a)(i) of the Disclosure Schedule) and which, in
either case, cannot be canceled by the Company or any Company Subsidiary
without penalty or further payment and without more than 90 days' notice;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Company or any Company Subsidiary is a party, in each case, not cancellable
without penalty on not more than 90 days' notice;
(iii) all material management contracts (excluding contracts for
employment) and contracts with other consultants, including any contracts
involving the payment of royalties or other amounts calculated based upon
the revenues or income of the Company or any Company Subsidiary or income
or revenues related to any product of the Company or any Company Subsidiary
to which the Company or any Company Subsidiary is a party;
(iv) all material contracts and agreements evidencing indebtedness of the
Company or any Company Subsidiary;
(v) as of the date hereof, all material contracts and agreements with any
Governmental Entity to which the Company or any Company Subsidiary is a
party;
(vi) all contracts and agreements that materially limit, or purport to
materially limit, the ability of the Company or any Company Subsidiary to
compete in any line of business or with any person or entity or in any
geographic area or during any period of time;
(vii) all material contracts or arrangements that result in any person or
entity holding a power of attorney from the Company or any Company
Subsidiary that relates to the Company, any Company Subsidiary or their
respective businesses; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company and any
Company Subsidiary or the conduct of its businesses, or the
11
absence of which would prevent or materially delay consummation of the
Merger or otherwise prevent or materially delay the Company from performing
its obligations under this Agreement or would have a Material Adverse
Effect.
The foregoing provisions of this Section 3.10(a) are subject to the
following proviso. With respect to Section 3.10(a)(i): (1) contracts for the
purchase of crude oil and other feedstocks which in the aggregate do not exceed
the requirements for the combined operation of the Company's two refineries at
105% of rated capacity for a period of sixty (60) days and do not have a term
in excess of seventy-five (75) days shall be deemed to be in the usual and
ordinary course of business and, as such, shall not be Material Contracts and
shall not be included in the Disclosure Schedule; (2) contracts for the sale of
finished petroleum products which in the aggregate combined with the Company's
retail requirements do not exceed the combined rated capacities of the
Company's two refineries when measured over a sixty (60) day period shall be
deemed to be in the usual and ordinary course of business and, as such, shall
not be Material Contracts and shall not be included in the Disclosure Schedule;
and (3) contracts for the sale of intermediate feedstocks, sulfur, petroleum
coke and other by products of the petroleum refining process shall, if produced
by the Company and sold from inventory or from the anticipated production of
the refineries within the next two months, be deemed to be in the usual and
ordinary course of business and, as such, shall not be Material Contracts and
shall not be included in the Disclosure Schedule. With respect to Sections
3.10(a)(i) through (v) and Section 3.10(a)(viii) (and without derogating from
the immateriality of contracts in excess of the following threshold which are
not otherwise material), all contracts involving consideration or the payment
of less than $250,000 shall be deemed to be not material. Notwithstanding the
foregoing, the types of contracts described in clauses (1), (2) and (3) of the
first sentence of the foregoing proviso shall be deemed to be Material
Contracts with respect to clauses (b) and (c) of this Section 3.10.
(b) Except as set forth in Section 3.10(b) of the Disclosure Schedule or as
would not prevent or materially delay consummation of the Merger or otherwise
prevent or materially delay the Company from performing its obligations under
this Agreement and would not have a Material Adverse Effect, (i) each Material
Contract is a legal, valid and binding agreement, and, to the Company's
knowledge, none of the Material Contracts is in default by its terms or has
been canceled by the other party; (ii) to the Company's knowledge, no other
party is in breach or violation of, or default under, any Material Contract;
(iii) the Company and the Company Subsidiaries are not in receipt of any claim
of default under any Material Contract; and (iv) except as set forth in Section
3.10(b)(iv) of the Disclosure Schedule, neither the execution of this Agreement
nor the consummation of any transaction contemplated hereby or the transactions
contemplated under the Stock Purchase Agreement shall constitute a default,
give rise to cancellation rights, or otherwise materially and adversely affect
any of the Company's rights under any Material Contract. The Company has
furnished or made available to Parent true and complete copies of all Material
Contracts, including any amendments thereto.
(c) Set forth in Section 3.10(c) of the Disclosure Schedule is a description
of any material changes to the amount and material terms of the indebtedness of
the Company and the Company Subsidiaries as described in the notes to the
financial statements incorporated in, or otherwise disclosed in, the Company's
Form 10-K for the year ended December 31, 1999, as amended, and Form 10-Q for
the period ended September 30, 2000.
SECTION 3.11. Absence of Litigation. Except as set forth in Section 3.11 of
the Disclosure Schedule or as specifically disclosed in the Company SEC
Reports, there is no litigation, suit, claim, action, proceeding, arbitration,
review or investigation pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or any property or asset of the
Company or any Company Subsidiary before any Governmental Entity that is
reasonably likely to have a Material Adverse Effect or seeks to materially
delay or prevent the consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement. Except as set forth in Section 3.11 of the Disclosure Schedule or as
disclosed in the Company SEC Reports, there has been no change since
September 30, 2000 in the status of any litigation, suit, claim, action,
proceeding or investigation relating to the Company or any Company Subsidiary
that would be reasonably likely to have a Material Adverse Effect. Except as
disclosed in the Company SEC Reports or as set forth in Section 3.11 of the
Disclosure Schedule,
12
neither the Company nor any Company Subsidiary is subject to any outstanding
Order (as defined below), writ, injunction or decree which, insofar as can be
reasonably foreseen, would have a Material Adverse Effect.
SECTION 3.12. Environmental Matters. (a) Except as disclosed in Section
3.12(a) of the Disclosure Schedule or as disclosed in the Company SEC Reports
or as would not reasonably be expected to have a Material Adverse Effect:
(i) The Company is in compliance with all applicable Environmental Laws
and all Environmental Permits. All past noncompliance with Environmental
Laws or Environmental Permits identified by the Company has been resolved
without any pending, ongoing or future obligation, cost or liability, and,
to the Company's actual knowledge, there is no requirement proposed as of
the date hereof that is reasonably expected to be adopted or implemented
and give rise to liability under any Environmental Law or Environmental
Permit;
(ii) Except as expressly authorized under any Environmental Law or
Environmental Permit, there has been no Release of Hazardous Materials on
any of the real property owned or leased by the Company or any Company
Subsidiary (the "Real Property") or, during the Company's ownership or
occupancy of such property, on any property formerly owned, leased, used or
occupied by the Company;
(iii) The Company is not conducting, and has not undertaken or completed,
any Remedial Action relating to any Release or threatened Release on the
Real Property or at any other site, location or operation, either
voluntarily or pursuant to the order of any Governmental Entity or the
requirements of any Environmental Law or Environmental Permit;
(iv) To the Company's knowledge, there is no asbestos or asbestos-
containing material on any of the Real Property;
(v) None of the Real Property is listed or proposed for listing, or, to
the Company's knowledge, adjoins any other property that is listed or
proposed for listing, on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System under
the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or any analogous federal, state or local list;
(vi) There are no Environmental Claims pending or, to the Company's
knowledge, threatened against the Company or the Real Property, and, to the
Company's knowledge, there are no circumstances that can reasonably be
expected to form the basis of any such Environmental Claim, including,
without limitation, with respect to any off-site disposal location
presently or formerly used by the Company or any of its predecessors or
with respect to any previously owned or operated facilities;
(vii) Under current Law, the Company can maintain present production
levels, or any planned expansion of production levels upon which financial
projections provided to Parent have been based, in compliance with
applicable Environmental Laws without a material increase in capital or
operating expenditures and without modifying any Environmental Permits or
obtaining any additional Environmental Permits;
(viii) The Company has provided Parent or made available copies of (i)
any environmental assessment or audit reports or other similar studies or
analyses relating to the Real Property or the Company, and (ii) all
insurance policies issued at in the past five years that may provide
coverage to the Company for environmental matters; and
(ix) Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will require any Remedial Action or notice
to or consent of Governmental Entities or third parties pursuant to any
applicable Environmental Law or Environmental Permit.
(b) For purposes of this Agreement:
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent
orders or consent agreements relating in any way to any Environmental Law,
any Environmental Permit or any Hazardous Materials.
13
"Environmental Law" means any Law in effect and as amended as of the
Effective Time, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental
Law.
"Hazardous Material" means (i) petroleum and petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (ii) any other chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the
like into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the environment; (ii)
restore or reclaim the environment or natural resources; (iii) prevent the
Release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or the environment; or (iv) perform
remedial investigations, feasibility studies, corrective actions, closures
and postremedial or postclosure studies, investigations, operations,
maintenance and monitoring on, about or in any Real Property.
SECTION 3.13. Trademarks, Patents and Copyrights. Except to the extent the
inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy) would not reasonably be expected to have a Material Adverse Effect,
the Company and each of the Company Subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service
marks, mask works, know- how and other proprietary rights and information used
or held for use in connection with the businesses of the Company and the
Company Subsidiaries as currently conducted or as contemplated to be conducted,
and, to the Company's knowledge, there is no assertion or claim challenging the
validity of any of the foregoing. Neither the Company nor any of the Company
Subsidiaries has infringed or is infringing in any way any patent, patent
right, license, trademark, trademark right, trade dress, trade name, trade name
right, service mark, mask work or copyright of any third party that would
reasonably be expected to have a Material Adverse Effect. To the Company's
knowledge, there are no infringements of any proprietary rights owned by or
licensed by or to the Company or any Company Subsidiary that could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule, (a) the Company and the Company Subsidiaries have timely filed or
will timely file all material federal, state, local and foreign Tax Returns
required to be filed by them with any taxing authority with respect to Taxes
for any period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company and
the Company Subsidiaries, and all such Tax Returns are complete and correct in
all material respects; (b) all Taxes that are shown as due on such Tax Returns
have been or will be timely paid; (c) no deficiency for any material amount of
Tax has been asserted or assessed in writing by a taxing authority against the
Company or any of the Company Subsidiaries for which there are not adequate
reserves; (d) the Company and the Company Subsidiaries have provided adequate
reserves in accordance with U.S. GAAP in their financial statements for any
Taxes that have not been paid, whether or not shown as being due on any
returns; (e) as of the date hereof, the Company and the Company Subsidiaries
have neither extended nor waived any applicable statute of limitations with
respect to Taxes and have not otherwise agreed to any extension of time with
respect to Tax assessment or deficiency; (f) none of the Company and the
Company Subsidiaries is a party to any Tax sharing agreement or arrangement
other than with each other; (g) as of the
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date hereof, there are no pending or threatened in writing material audits,
examinations, investigations, litigation, or other proceedings in respect of
Taxes of the Company or any Company Subsidiary; (h) no liens for Taxes exist
with respect to any of the assets or properties of the Company or the Company
Subsidiaries, except for statutory liens for Taxes not yet due or payable or
that are being contested in good faith for which there are adequate reserves;
(i) all Taxes which the Company or any Company Subsidiary are required to
withhold or to collect for payment have been duly withheld and collected, and
have been paid or accrued, reserved against and entered on the books of the
Company; and (j) none of the Company or any Company Subsidiary has been a
member of any group or corporation filing Tax Returns on a consolidated,
combined, unitary or similar basis other than each such group of which it is
currently a member. As used in this Agreement, "Taxes" shall mean any and all
taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind
(together with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any Governmental Entity,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp, transfer, value added,
or gains taxes; license, registration and documentation fees and customs
duties, tariffs, and similar charges.
"Tax Returns" shall mean any return, declaration, report, claim for refund
or information return or statement relating to Taxes filed with a taxing
authority, including any schedule or attachment thereto, and including any
amendment thereof.
SECTION 3.15. Property and Leases. (a) The Company and the Company
Subsidiaries have sufficient title to all their properties and assets to
conduct their respective businesses as currently conducted or as contemplated
to be conducted, with only such exceptions as would not have a Material Adverse
Effect.
(b) No parcel of real property owned or leased by the Company or any Company
Subsidiary is subject to any governmental decree or order to be sold or is
being condemned, expropriated or otherwise taken by any public authority with
or without payment of compensation therefor, nor, to the knowledge of the
Company, has any such condemnation, expropriation or taking been proposed other
than as could not reasonably be expected to have a Material Adverse Affect.
(c) There are no contractual or legal restrictions that preclude or restrict
the ability to use any real property owned or leased by the Company or any
Company Subsidiary for the purposes for which it is currently being used other
than preclusions or restrictions which do not preclude or restrict or otherwise
adversely affect the actual use which the Company or Company Subsidiary is
making of the real property on the date of this Agreement but which may or
would preclude or restrict any expansion or enhancement or change in such use.
There are no material latent defects or material adverse physical conditions
affecting the real property, and improvements thereon, owned or leased by the
Company or any Company Subsidiary other than those that would not prevent or
materially delay consummation of the Merger or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and
would not have a Material Adverse Effect.
SECTION 3.16. Rights Agreement. The copy of the Rights Agreement, dated as
of February 1, 2000, between the Company and First Union National Bank, a
national banking association, as rights agent, that is set forth as an exhibit
to the Company's Form 8-A filed with the SEC on February 3, 2000, as amended by
the First Amendment to Rights Agreement dated April 10, 2000 as set forth as an
exhibit to the Company's amended Form 8-A filed with the SEC on April 19, 2000
and the Second Amendment to Rights Agreement dated December 17, 2000 (as true
and correct copy of which has been furnished to the Parent), as set forth as an
exhibit to the Company's amended Form 8-A to be filed with the SEC on December
18, 2000 (collectively, the "Rights Agreement") is a complete and correct copy
thereof. The Company Board has taken all necessary action to amend the Rights
Agreement, a copy of which amendment has been provided to Parent and its
Representatives (as defined herein), so that (a) neither the execution of this
Agreement, the Stock Purchase Agreement or the Escrow Agreement nor the
consummation of the Merger or the transactions contemplated by the Stock
Purchase Agreement or the Escrow Agreement will (i) cause the Rights (as such
term is defined in
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the Rights Agreement) issued pursuant to the Rights Agreement to become
exercisable, (ii) cause Parent or Merger Sub to become an Acquiring Person (as
such term is defined in the Rights Agreement) or (iii) give rise to a
Distribution Date (as such term is defined in the Rights Agreement) and (b) the
Rights will expire pursuant to the terms of the Rights Agreement no later than
immediately prior to the Effective Time.
SECTION 3.17. Insurance. The Company and the Company Subsidiaries have in
effect insurance coverage with reputable insurers or are self-insured, which,
in respect of amounts, premiums, types and risks insured, constitutes
reasonable coverage for the risks customarily insured against by companies
engaged in the industries in which the Company and the Company Subsidiaries are
engaged and comparable in size and operations to the Company and the Company
Subsidiaries. The Company's current annual premium for directors' and officers'
liability insurance is approximately $400,000 per year, and, as of the date of
this Agreement, the Company has no reason to believe that such insurance will
not be renewable by it or the Surviving Corporation upon expiration in June
2001 on similar or more favorable terms.
SECTION 3.18. Board Recommendation. On the unanimous recommendation of the
Company Independent Committee, the Company Board, including all of the members
of the Company Independent Committee, at a meeting duly called and held, has by
unanimous vote of the Company Board (i) determined that the transactions
contemplated by this Agreement, the Stock Purchase Agreement and the Escrow
Agreement constitute an "Approved Transaction" within the meaning of the Rights
Agreement, (ii) approved and deemed it advisable that the Company and its
stockholders consummate the Merger, upon the terms and subject to the
conditions set forth in this Agreement, and (iii) resolved to recommend that
the stockholders of the Company approve and adopt this Agreement and the
transactions contemplated herein, including the Merger.
SECTION 3.19. Opinion of Financial Advisor. Credit Suisse First Boston
Corporation ("CSFB") has delivered to the Company its verbal opinion on
December 16, 2000, with the authorization to include such opinion in the Proxy
Statement and the Schedule 13E-3 (each as defined below), subject to CSFB being
provided with a reasonable opportunity prior to the filing thereof to review
the proposed disclosure and to comment upon any CSFB related reference
contained therein, to the effect that, as of the date of this Agreement, the
aggregate Merger Consideration to be received by the stockholders of the
Company is fair, from a financial point of view, to the Company's stockholders
(other than Parent, Sellers and their respective affiliates). The Company
expects that CSFB will deliver a written opinion to that effect to the Company,
and the Company will promptly thereafter deliver a signed copy of such written
opinion to Parent.
SECTION 3.20. Brokers. No broker, finder or investment banker (other than
CSFB) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Company. The Company has heretofore made available
to Parent a complete and correct copy of all agreements between the Company and
CSFB pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereby.
SECTION 3.21. Vote Required; State Takeover Statutes. (a) Subject to Section
7.01(a), the only vote of the holders of any class or series of capital stock
of the Company necessary to approve the Merger, this Agreement or the
transactions contemplated by this Agreement is the affirmative vote by the
Company's stockholders representing two-thirds of the outstanding shares of the
Company's Class A Common Stock and Class B Common Stock voting together, with
each outstanding share of Class A Common Stock representing one vote and each
outstanding share of Class B Common Stock representing one-tenth of a vote.
(b) Section 3-602 of the MGCL does not apply to Parent, Merger Sub or any of
their affiliates in connection with the Merger or the transactions contemplated
by this Agreement, the Stock Purchase Agreement or the Escrow Agreement. The
Company Board has validly amended the bylaws of the Company to exempt any
acquisition of Company Common Stock by Parent or Merger Sub from Section 3-702
of the MGCL and has taken all other action necessary to ensure that the
provisions of Title 3, Subtitles 6 and 7 of the MGCL or any other applicable
state takeover statutes are not and will not be applicable to this Agreement,
the Merger
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and the other transactions contemplated by this Agreement. No other state
takeover statute is applicable to this Agreement, the Merger or the other
transactions contemplated by this Agreement, the Stock Purchase Agreement or
the Escrow Agreement. No stockholder of the Company shall have any statutory
appraisal rights under applicable Law as a result of the Merger, this Agreement
or any of the transactions contemplated hereby or thereby.
SECTION 3.22. Waiver of Certain Obligations. The Company and, to the
Company's knowledge, each of the individuals identified in Section 3.22 of the
Disclosure Schedule has agreed to duly execute and deliver the respective
agreement provided by Parent (collectively, the "Waivers"), true and complete
copies of which have been furnished to Parent, and such Waivers will be, when
executed and delivered, in full force and effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company, that:
SECTION 4.01. Organization and Qualification. Each of Parent and Merger Sub
has been duly organized and is validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby to be consummated by Parent and Merger Sub.
The execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of such transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent and Merger Sub are necessary to authorize
this Agreement or to consummate such transactions. This Agreement has been duly
authorized and validly executed and delivered by each of Parent and Merger Sub
and constitutes (assuming due authorization, execution and delivery by the
Company) a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies.
SECTION 4.02. No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement and the transactions contemplated hereby by
Parent and Merger Sub will not, (i) conflict with or violate any provision of
the charter or bylaws of Parent or Merger Sub, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 4.02(b) have
been obtained and all filings and obligations described in Section 4.02(b) have
been made, conflict with or violate any Law applicable to Parent or Merger Sub
or by which any property or asset of Parent or Merger Sub is bound or affected,
or (iii) result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to clause
(iii), for any such conflicts, violations, breaches, defaults, or other
occurrences which would not reasonably be expected to prevent or materially
delay the performance of this Agreement by either Parent or Merger Sub.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (i) for
applicable requirements of the Exchange Act, the pre-merger notification
requirements of the HSR Act which requirements have been satisfied assuming the
Closing occurs before May 26, 2001, and the filing and recordation of
appropriate merger documents as required by the MGCL and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected to prevent or
materially delay consummation of the Merger.
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SECTION 4.03. Absence of Litigation. There is no litigation, suit, claim,
action, proceeding or investigation pending or, to the best knowledge of
Parent, threatened against Parent or Merger Sub or any of their respective
properties or assets before any court, arbitrator or Governmental Entity which
seeks to delay or prevent or would result in the material delay of or would
prevent the consummation of any of the transactions contemplated hereby.
Neither Parent nor Merger Sub or any property or asset of Parent or Merger Sub
is subject to any continuing order of, consent decree, settlement agreement or
similar written agreement with, or, to the knowledge of Parent, continuing
investigation by, any Governmental Entity or any order, writ, judgment,
injunction, decree, determination or award of any governmental or regulatory
authority or any arbitrator which would prevent Parent or Merger Sub from
performing their respective material obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated hereby.
SECTION 4.04. Brokers. No broker, finder or investment banker other than
Aegis Muse Associates LLC and its associates (collectively, "Aegis Muse") is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.
SECTION 4.05. No Activities. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by the Agreement and Plan of Merger,
dated as of April 7, 2000, among Parent, Merger Sub and the Company and in any
subsequent transaction to acquire the Company by Parent and Merger Sub,
including the Merger contemplated by this Agreement. Except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement and the Agreement and Plan of
Merger, dated as of April 7, 2000, among Parent, Merger Sub and the Company,
Merger Sub does not have any obligations or liabilities of any nature (whether
accrued, absolute, contingent or otherwise) and has not engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person.
SECTION 4.06. Financing. At or prior to the Closing Date, Parent will cause
Merger Sub to have, and Merger Sub will have, all of the financing required to
consummate the transactions contemplated by this Agreement.
SECTION 4.07. Ownership of Company Common Stock. As of the date hereof, the
information relating to Holdings' ownership of Company Common Stock contained
in the Statement of Beneficial Ownership on Schedule 13-D filed jointly by
Parent and others with the SEC on January 12, 1999, as amended, is true and
correct in all material respects.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
consent in writing, which consent shall not be unreasonably withheld or
delayed, (1) the businesses of the Company and the Company Subsidiaries shall
be conducted only in, and the Company and the Company Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice and (2) the Company shall use its reasonable best efforts to keep
available the services of such of the current officers, significant employees
and consultants of the Company and the Company Subsidiaries and to preserve the
current relationships of the Company and the Company Subsidiaries with such of
the customers, suppliers and other persons with which the Company or any
Company Subsidiary has significant business relations in order to preserve
substantially intact its business organization. By way of amplification and not
limitation, except as set forth in Section 5.01 of the Disclosure Schedule or
as contemplated by any other provision of this Agreement, the Company shall
not, and shall neither cause nor permit any Company Subsidiaries or any of the
Company's affiliates (over which it exercises control), or any of its or their
officers, directors, employees and agents (in each case, in their capacities as
such) to, between the date of this Agreement and the Effective Time,
18
directly or indirectly, do, or agree to do, any of the following, without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed:
(a) amend or otherwise change its charter or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any
shares of capital stock of the Company or any Company Subsidiary of any
class, or securities convertible or exchangeable or exercisable for any
shares of such capital stock, or any options, warrants or other rights of
any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest),
of the Company or any Company Subsidiary (except for the issuance of any
shares of capital stock issuable pursuant to the exercise of any Company
Options outstanding on the date of this Agreement); or (ii) any property or
assets of the Company or any Company Subsidiary, except in all cases in the
ordinary course of business and in a manner consistent with past practice;
provided that the aggregate amount of any such sale or disposition (other
than a sale or disposition of petroleum products or other inventory in the
ordinary course of business consistent with past practice, as to which
there shall be no restriction on the aggregate amount), or pledge, grant,
transfer, lease, license, guarantee or encumbrance of such property or
assets of the Company or any Company Subsidiary shall not exceed (x)
$500,000 or (y) in the case of any sale or disposition of retail gasoline
sites, $1,000,000, provided that not more than four retail gasoline sites
may be disposed of under this subsection (y) between the date of this
Agreement and the Effective Time;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, other than dividends paid by any of the wholly owned Company
Subsidiaries to the Company in the ordinary course of business consistent
with past practice;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization, person or any division thereof or
any assets, other than (x) acquisitions of any assets in the ordinary
course of business consistent with past practice that are not, in the
aggregate, in excess of $300,000 or (y) purchases (whether for cash or
pursuant to an exchange) of crude oil or intermediate products for refining
or refined petroleum products or other inventory for resale in the ordinary
course of business and consistent with past practice; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person for borrowed money, except for
indebtedness for borrowed money incurred in the ordinary course of business
and consistent with past practice under the Loan and Security Agreement,
effective as of December 10, 1998 and last amended effective as of March
16, 2000, between Congress Financial Corporation and First Union National
Bank, as lenders, Congress Financial Corporation, as administrative agent,
the Company and certain of the Company Subsidiaries, as borrowers, or
incurred to refinance outstanding indebtedness for borrowed money existing
on the date of this Agreement (which refinancing shall not increase the
aggregate amount of indebtedness permitted to be outstanding thereunder and
shall not include any covenants that shall be materially more burdensome to
the Company in any material respect or increase costs to the Surviving
Corporation after the Effective Time in any material respect), or other
indebtedness for borrowed money with a maturity of not more than one year
in a principal amount not, in the aggregate, in excess of $1,000,000; (iii)
terminate, cancel or request any material change in, or agree to any
material change in any Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a whole, in
either case other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
as set forth in Section 5.01(e)(iv) of the Disclosure Schedule; or (v)
enter into or amend any contract, agreement, commitment or arrangement
that, if fully performed, would not be permitted under this Section
5.01(e);
19
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any Company
Subsidiary who are not officers of the Company, or grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or
any Company Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, stock option appreciation unit awards, performance
awards or performance restricted stock awards), stock purchase, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any director, officer or employee, except as contemplated by this
Agreement or to the extent required by applicable Law or the terms of a
collective bargaining agreement or a contractual obligation existing on the
date hereof;
(g) take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of U.S. GAAP and as
advised by the Company's regular certified independent public accountants;
(h) waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $250,000, except for claims
asserted by the Company or the applicable Company Subsidiary;
(i) make any material Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(j) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing;
(k) amend or modify, or propose to amend or modify, the Rights Agreement,
as amended as of the date hereof, except as contemplated in this Agreement;
(l) take any action that will be likely to result in the representations
and warranties set forth in Article III becoming false or inaccurate in any
material respect (or, with respect to any representation and warranty
already qualified by materiality, false or inaccurate in any respect);
(m) enter into or carry out any other transaction other than in the
ordinary and usual course of business or other than as permitted pursuant
to the other clauses in this Section 5.01;
(n) take any action or fail to take any action that could reasonably be
expected to have or result in a Material Adverse Effect; or
(o) permit or cause any Company Subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing.
SECTION 5.02. Notices of Certain Events. Each of Parent and the Company
shall give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger, (ii) any notice or other communication from any
Governmental Entity in connection with the Merger, (iii) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its
knowledge threatened in writing against, relating to or involving or otherwise
affecting Parent, the Company or their subsidiaries that relate to the
consummation of the Merger or the transactions contemplated by this Agreement;
(iv) the occurrence of a default or event that, with notice or lapse of time or
both, will become a default under any Material Contract; and (v) any change
that is reasonably likely to result in a Material Adverse Effect or is likely
to delay or impede the ability of either Parent or the Company to consummate
the transactions contemplated by this Agreement or to fulfill its obligations
set forth herein.
20
SECTION 5.03. Contractual Consents. Prior to or at the Effective Time each
of the parties hereto shall use its reasonable best efforts to prevent the
occurrence, as a result of the Merger, of the triggering of a change of control
or similar clause or any event which constitutes a default (or an event which
with notice or lapse of time or both would become a default) under any material
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which it or any of its subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement; Schedule 13E-3. (a) As promptly as
practicable after the execution of this Agreement, (i) the Company shall
prepare (in consultation with Parent) and file with the SEC a proxy statement
(together with any amendments thereof or supplements thereto, the "Proxy
Statement") relating to the meeting of the Company's stockholders (the "Company
Stockholders' Meeting") to be held to consider approval of this Agreement and
the Merger, and (ii) Parent, Merger Sub and the Company shall, if required by
the Exchange Act, prepare and file with the SEC a Rule 13e-3 Transaction
Statement on Schedule 13E-3 or an amendment to such Schedule filed with the SEC
by the same parties on May 16, 2000, as appropriate (together with all
amendments and supplements thereto, the "Schedule 13E-3"), relating to the
Merger and the other transactions contemplated by this Agreement. The Company
shall furnish all information concerning the Company that Parent may reasonably
request in connection with such actions and the preparation of the Proxy
Statement and Schedule 13E-3, if any.
(b) Subject to the fiduciary duties of the Company Board, as described in
the following proviso, the Proxy Statement shall include the unanimous
recommendation of the Company Board to the stockholders of the Company to vote
in favor of approving the Merger and this Agreement; provided, however, that
the Company Board may, at any time prior to the date of the Company
Stockholders' Meeting, withdraw, modify or change any such recommendation to
the extent that the Company Board or the Company Independent Committee
determines in good faith after consultation with independent legal counsel that
the failure to so withdraw, modify or change their recommendation could cause
the Company Board to breach its fiduciary duties to the Company's stockholders
under applicable law.
(c) No amendment or supplement to the Proxy Statement or the Schedule 13E-3,
if any, will be made or filed with the SEC by Company or Parent, as the case
may be, without the approval of the other party (which will not be unreasonably
withheld). The Company and Parent each will advise the other, promptly after
they receive notice thereof of any request by the SEC for amendment of the
Proxy Statement or the Schedule 13E-3 or comments thereon and responses thereto
or requests by the SEC for additional information.
(d) The information supplied by Parent for inclusion in the Proxy Statement
and the Schedule 13E-3 shall not, at (i) the time the Proxy Statement (or any
amendment thereof or supplement thereto), is first mailed to the stockholders
of the Company and (ii) the time of the Company Stockholders' Meeting, contain
any untrue statement of a material fact or fail to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If, at any time prior to the date of the Company Stockholders'
Meeting, any event or circumstance relating to Parent, or its officers or
directors, is discovered by Parent that should be set forth in an amendment or
a supplement to the Proxy Statement or the Schedule 13E-3, Parent shall
promptly inform the Company. The Schedule 13E-3 will comply as to form and
substance in all material aspects with the applicable requirements of the
Exchange Act.
(e) The information supplied by the Company for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy Statement
(or any amendment thereof or supplement thereto), is first mailed to the
stockholders of the Company and (ii) the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or fail to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the date of the Company Stockholders'
Meeting, any event or circumstance relating to the Company or any Company
Subsidiary, or their respective officers or directors, is
21
discovered by the Company that should be set forth in an amendment or a
supplement to the Proxy Statement or the Schedule 13E-3, the Company shall
promptly inform Parent. The Proxy Statement will comply as to form and
substance in all material respects with the applicable requirements of the
Exchange Act.
SECTION 6.02. Company Stockholders' Meeting. (a) The Company shall call and
hold the Company Stockholders' Meeting as promptly as practicable for the
purpose of voting upon the approval of this Agreement and the Merger.
(b) The Company shall use all commercially reasonable efforts to solicit
from its stockholders proxies in favor of the approval of this Agreement and
the Merger, and shall use all commercially reasonable efforts to take all other
action necessary or advisable to secure the vote or consent of its stockholders
required by the MGCL and pursuant to the terms of Section 7.01(a) hereof and
the rules of the AMEX to obtain such approvals.
(c) Parent shall cause Holdings to vote all shares of the Company Common
Stock held by it, or for which it holds proxies, in favor of the Merger and
this Agreement.
SECTION 6.03. Access to Information; Confidentiality. (a) Except as required
pursuant to any confidentiality agreement or similar agreement or arrangement
to which the Company or any of the Company Subsidiaries is a party or pursuant
to applicable Law from the date of this Agreement to the Effective Time, the
Company shall (and shall cause the Company Subsidiaries to): (i) provide to
Parent (and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives, collectively, "Representatives")
reasonable access at reasonable times, upon prior notice to the Company, to the
officers, employees, agents, properties, offices and other facilities of the
Company and the Company Subsidiaries and to the books and records thereof
(including, without limitation, access to the Company's accountants, any
correspondence between the Company and such accountants and work papers
prepared with respect to the Company by such accountants), (ii) provide to
Parent and its Representatives access to the Real Property for Parent to
conduct any environmental site assessment that Parent deems appropriate,
including, without limitation, access to enter upon and investigate and collect
air, surface water, groundwater and soil samples, and (iii) furnish promptly
such information concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of the Company and the Company
Subsidiaries as Parent or its respective Representatives may reasonably
request. No investigation conducted pursuant to this Section 6.03 shall affect
or be deemed to modify any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated January 26, 2000 (the "Confidentiality
Agreement") between Parent and the Company with respect to the information
disclosed pursuant to this Section 6.03.
SECTION 6.04. No Solicitation of Transactions. The Company agrees that, from
and after the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with Article VIII, neither it nor
any Company Subsidiary shall, and that it shall cause its and each Company
Subsidiary's Representatives not to, except as contemplated by this Agreement,
directly or indirectly, initiate, solicit or encourage any inquiries or the
making of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase or sale of all or
any significant portion of the assets of the Company (including the sale of
either of the Company's refineries or any of its terminals) and the Company
Subsidiaries, taken as a whole, or 15% or more of the equity securities of the
Company (any such proposal or offer being hereinafter referred to as a
"Competing Transaction"). The Company further agrees that neither it nor any
Company Subsidiary shall, and that it shall cause its and each Company
Subsidiary's Representatives not to, directly or indirectly, have any
discussion with or provide any confidential information or data relating to the
Company or any Company Subsidiary to any person relating to a Competing
Transaction or engage in any negotiations concerning a Competing Transaction,
or otherwise facilitate any effort or attempt to make or implement a Competing
Transaction or accept a Competing Transaction; provided, however, that nothing
contained in this
22
Section 6.04 shall prevent the Company or the Company Board from (i) engaging
in any discussions or negotiations with, or providing any information to, any
person in response to an unsolicited written Competing Transaction by any such
person; or (ii) recommending such an unsolicited written Competing Transaction
to the holders of Company Common Stock if, in any such case as is referred to
in clause (i) or (ii), (A) the Company Board concludes in good faith (after
consultation with independent financial advisors) that such Competing
Transaction would, if consummated, result in a transaction more favorable to
holders of Company Common Stock than the transaction contemplated by this
Agreement (any such more favorable Competing Transaction being referred to in
this Agreement as a "Superior Proposal"), (B) either the Company Board or the
Company Independent Committee determines in good faith after consultation with
independent legal counsel that such action is necessary for the Company Board
to act in a manner consistent with its fiduciary duties under applicable Law,
(C) prior to providing any information or data regarding the Company to any
person or any of such person's Representatives in connection with a Superior
Proposal by such person, the Company receives from such person an executed
confidentiality agreement on terms at least as restrictive on such person as
those contained in the Confidentiality Agreement and (D) prior to providing any
information or data to any person or any of such person's Representatives or
entering into discussions or negotiations with any person or any of such
person's Representatives in connection with a Superior Proposal by such person,
the Company notifies Parent promptly of the receipt of such Superior Proposal
indicating, in connection with such notice, the name of such person and
attaching a copy of the proposal or offer or providing a complete written
summary thereof. The Company agrees that it shall keep Parent informed, on a
current basis, of the status and terms of any discussions or negotiations
related to such Superior Proposal. The Company agrees that it will take the
necessary steps to promptly inform each Company Subsidiary and each
Representative of the Company or any Company Subsidiary of the obligations
undertaken in this Section 6.04. Immediately following the execution of this
Agreement, the Company shall terminate and cause the Company Subsidiaries to
terminate any existing activities, discussions or negotiations with any third
parties that may be ongoing with respect to any Competing Transaction and
promptly after the public announcement of the execution of this Agreement shall
use all reasonable efforts to request that all confidential information
previously furnished to any such third parties be returned promptly. Nothing
contained in this Agreement shall prohibit the Company or the Company Board
from taking or disclosing to its stockholders a position contemplated by Rules
14d-9 and 14e-(2)(a) promulgated under the Exchange Act.
SECTION 6.05. Amendment of Plans. At the request of Parent, the Company
shall use its best efforts to amend its Plans containing a "change of control"
or similar provision, to the satisfaction of Parent, to clarify that a
reduction in the Company's economic interest in total refining output below
80,000 barrels per day as a result of processing agreements, joint ventures or
similar transactions, will not constitute a "change of control" under such
Plans provided that the Company retains responsibility for staffing and
operating the refineries.
SECTION 6.06. Directors' and Officers' Indemnification and
Insurance. (a) The charter and bylaws of the Surviving Corporation shall
contain the provisions regarding liability of directors and indemnification of
directors and officers that are set forth, as of the date of this Agreement, in
the charter and the bylaws, respectively, of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time
were directors, officers, employees, fiduciaries or agents of the Company.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall use best efforts to cause to be maintained in effect policies
of directors' and officers' liability insurance with coverage in amount and
scope at least as favorable as the Company's existing policies with respect to
claims arising from facts or events that occurred prior to the Effective Time.
(c) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
respective successors and assigns.
23
(d) From and after the Effective Time, the Surviving Corporation agrees that
it shall indemnify and hold harmless each present and former director and
officer of the Company, determined as of the Effective Time (the "Indemnified
Parties"), from and against any costs, judgments, fines, losses, obligations,
claims, damages, liabilities, or expenses (including interest, penalties,
reasonable out-of-pocket expenses and reasonable attorneys' fees incurred in
the investigation or defense of any of the same or in asserting any of their
rights hereunder) (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, resulting from, or pertaining
to matters existing or occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted or required under Maryland
laws and under the Company's charter documents (as in effect on the date
hereof) to indemnify such Indemnified Parties (and the Surviving Corporation
shall advance expenses as incurred to the fullest extent permitted under
applicable Law; provided that the Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification);
provided that any determination required to be made with respect to whether an
officer's or director's conduct complies with the standards set forth under
Maryland law and the Company's charter documents shall be made by independent
counsel selected by the Surviving Corporation.
(e) Any Indemnified Party wishing to claim indemnification under paragraph
(d) of this Section 6.06, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party, except to the extent that such
failure materially prejudices the Surviving Corporation. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before
or after the Effective Time), (i) the Surviving Corporation shall have the
right to assume the defense thereof, with counsel selected by Parent and
reasonably acceptable to the Indemnified Party, and the Surviving Corporation
shall not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
the Surviving Corporation shall be obligated pursuant to this paragraph (f) to
pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest, (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) the Surviving
Corporation shall not be liable for any settlement effected without the prior
written consent of Parent; and provided further that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law. The Surviving Corporation shall not, in the defense of any claim or
litigation, except with the consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed), consent to entry of judgment or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
(f) If the Surviving Corporation or any of its successors or assigns shall
(i) consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfer all or substantially all of its properties and
assets or outstanding voting securities to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation shall expressly assume all
of the obligations set forth in this Section 6.06.
SECTION 6.07. Further Action; Consents; Filings. Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use its reasonable
best efforts to (i) take, or cause to be taken, all
24
appropriate action, and do, or cause to be done, all things necessary, proper
or advisable under applicable Law or otherwise to consummate and make effective
the Merger, (ii) obtain from Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained
or made by Parent or the Company or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger, (iii) make all necessary filings, and thereafter
make any other submissions either required or deemed appropriate by each of the
parties, with respect to this Agreement and the Merger required under (A) the
Exchange Act, (B) the HSR Act, which requirements have been satisfied assuming
the Closing occurs before May 26, 2001, (C) the rules of the AMEX, or (D) any
other applicable Law. The parties hereto shall cooperate and consult with each
other in connection with the making of all such filings, including by providing
copies of all such documents to the nonfiling party and its advisors prior to
filing, and none of the parties will file any such document if any of the other
parties shall have reasonably objected to the filing of such document. No party
to this Agreement shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of the
Merger at the behest of any Governmental Entity without the consent and
agreement of the other parties to this Agreement, which consent shall not be
unreasonably withheld or delayed. Without limiting the foregoing, each of the
parties hereto shall, and shall cause each of its subsidiaries to, use its
reasonable best efforts to obtain (and to cooperate and coordinate with the
other parties to obtain) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity that is required to be obtained in
connection with the Merger and to take all actions reasonably necessary to
satisfy any applicable regulatory requirements relating thereto. Each of the
parties shall promptly take, in the event that any permanent or preliminary
injunction or other order is entered or becomes reasonably foreseeable to be
entered in any proceeding that would make consummation of the transaction
contemplated hereby in accordance with the terms of this Agreement unlawful or
that would prevent or delay consummation of the transaction contemplated
hereby, any and all steps necessary to vacate, modify or suspend such
injunction or order so as to permit such consummation prior to the deadline
specified in Section 8.01(b). Each of the parties agrees to consult in good
faith and to use all commercially reasonable efforts to avoid or cure the
occurrence of an Event of Default, as such term is defined in the Indenture
dated as of January 24, 1995, as amended and as in effect as of the date of
this Agreement, between the Company and The First National Bank of Boston as
trustee (the "Indenture").
SECTION 6.08. The Company Rights Plan. Prior to the Effective Time, the
Company shall take all further action necessary to (i) amend the Rights
Agreement so as to accelerate the Final Expiration Date (as such term is used
in the Rights Agreement) to a date that is immediately prior to the Effective
Time, and (ii) ensure that after such acceleration of the Final Expiration Date
(A) neither the Company, Parent nor Merger Sub shall have any obligations under
the Rights or Rights Agreement and (B) none of the holders of the Rights shall
have any rights under the Rights or Rights Agreement.
SECTION 6.09. Public Announcements. After the issuance of the initial press
release, Parent and the Company shall consult with each other before issuing
any press release or otherwise making any public statement with respect to this
Agreement or any transaction contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except to the extent required by applicable Law or the requirements of the
AMEX, in which case the issuing party shall use its reasonable best efforts to
consult with the other party before issuing any such release or making any such
public statement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of Parent, the Company and Merger Sub to effect the
Merger shall be subject to the satisfaction or, if permitted by applicable Law,
waiver prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by (i) the requisite affirmative vote of the
stockholders of the Company in accordance with the MGCL; and
25
(ii) a majority of the votes cast by or on behalf of the holders of all
Company Common Stock not beneficially owned by Parent or its affiliates
which is represented in person or by proxy at, and votes at, the Company
Stockholders' Meeting, for which purpose: (A) the Class A Common Stock and
the Class B Common Stock shall, as provided for in Section 5.3 of the
Company's charter, vote together as a single class with each share of Class
A Common Stock entitling the holder of record thereof to one (1) vote, and
each share of Class B Common Stock entitling the holder of record thereof
to one-tenth (1/10) vote, and (B) shares of Company Common Stock which
Parent or its affiliates have the right to acquire or have acquired prior
to the Company Stockholders' Meeting pursuant to the Stock Purchase
Agreement shall be deemed to not be beneficially owned by Parent or its
affiliates and shall, if present and voting at the Company Stockholders'
Meeting, be counted toward the votes cast by or on behalf of the holders of
Company Common Stock not beneficially owned by Parent or its affiliates,
notwithstanding the acquisition by Parent or its affiliates of, or the
right of Parent or its affiliates to acquire, such Company Common Stock;
(b) no preliminary or permanent injunction, decree or other order (an
"Order"), issued by any Governmental Entity or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by
this Agreement shall be in effect, and no Law shall have been enacted or
adopted that enjoins, prohibits or makes illegal consummation of any of the
transactions contemplated hereby; and
(c) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act (which shall not be applicable
assuming the Closing occurs before May 26, 2001) shall have expired or been
terminated.
SECTION 7.02. Conditions to the Obligations of the Company. The obligations
of the Company to effect the Merger shall be subject to the satisfaction or, if
permitted by applicable Law, waiver, prior to the Closing Date, of the
following further conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the
Effective Time, except that those representations and warranties that
address matters only as of a particular date shall remain true and correct
in all material respects as of such date, and the Company shall have
received a certificate of the Chief Financial Officer of Parent to that
effect; and
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate of the
Chief Executive Officer or Chief Financial Officer of Parent to that
effect.
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the satisfaction or, if permitted by applicable Law, waiver prior to the
Closing Date of the following further conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of
the Effective Time, as though made at and as of the Effective Time, except
that those representations and warranties that address matters only as of a
particular date shall remain true and correct in all material respects as
of such date (provided that any representation or warranty that is
qualified by materiality (including, without limitation, qualification by
reference to a Material Adverse Effect) shall be true in all respects as of
the Effective Time or as of such particular date, as the case may be), and
Parent shall have received a certificate of the Chief Financial Officer of
the Company to that effect, it being understood that any representation and
warranty of the Company which would otherwise not be true and correct in
all material respects or in all respects, as the case may be, but was made
by the Company (i) with the approval of Mr. Henry A. Rosenberg, Jr. despite
his actual knowledge that such representation and warranty was false and
(ii) without knowledge at the date of this
26
Agreement by any of the other officers or directors of the Company that
such representation and warranty was false shall not be deemed to not be
true and correct in all material respects or to not be true and correct in
all respects, as the case may be, for purposes of this Section 7.03(a);
(b) the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, and
Parent shall have received a certificate of the Chief Financial Officer of
the Company to that effect;
(c) all consents, approvals, waivers and authorizations required to be
obtained to effect the Merger shall have been obtained from all
Governmental Entities, except if the failure to obtain any such consents,
approvals and authorizations would not result in a Material Adverse Effect;
and
(d) no Event of Default (as such term is defined in the Indenture) shall
have occurred under the Indenture and the consummation of the Merger will
not result in the occurrence of an Event of Default under the Indenture.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by each of the Company
Board, the Company Independent Committee and the Board of Directors of
Parent;
(b) by either Parent or the Company, if the Effective Time shall not have
occurred on or before March 30, 2001; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available
to the party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Parent or the Company, if any Order or other legal
restraint or prohibition preventing the consummation of the Merger shall
have been entered by any Governmental Entity or any Law shall have been
enacted or adopted that enjoins, prohibits or makes illegal consummation of
the Merger;
(d) by Parent, if (i) the Company Board withdraws, modifies or changes
its recommendation of this Agreement in a manner adverse to Parent, or
shall have resolved to do so, (ii) after receiving a bona fide proposal or
offer relating to a Competing Transaction, the Company Board shall have
refused to affirm its recommendation of this Agreement as promptly as
practicable (but in any case within ten business days) after receipt of any
written request from Parent, (iii) the Company Board shall have recommended
to the stockholders of the Company a Competing Transaction, or shall have
resolved to do so, or (iv) a tender offer or exchange offer for 15% or more
of the outstanding shares of capital stock of the Company is commenced, and
the Company Board fails to recommend against acceptance of such tender
offer or exchange offer by its stockholders (including not taking a
position with respect to the acceptance of such tender offer or exchange
offer by its stockholders);
(e) by Parent or the Company, if this Agreement shall fail to receive the
requisite vote for adoption at the Company Stockholders' Meeting or any
adjournment or postponement thereof;
(f) by Parent, upon a breach of, or failure to perform in any material
respect (which breach or failure cannot be or has not been cured within 30
days after the giving of notice of such breach or failure), any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement, such that the conditions set forth in clause
(a) or (b) of Section 7.03 would not be satisfied; or
27
(g) by the Company, upon a breach of, or failure to perform in any
material respect (which breach or failure cannot be or has not been cured
within 30 days after the giving of notice of such breach or failure), any
representation, warranty, covenant or agreement on the part of Parent set
forth in this Agreement, such that the conditions set forth in Section 7.02
would not be satisfied.
SECTION 8.02. Notice of Termination; Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company pursuant to
Section 8.01 hereof, the terminating party shall give prompt written notice
thereof to the nonterminating party. Except as provided in Section 9.01, in the
event of termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void, there shall be no liability under this Agreement
on the part of Parent, the Company or Merger Sub or any of their respective
officers or directors, and all rights and obligations of each party hereto
shall cease, subject to the remedies of the parties set forth in Section
8.05(b), (c) and (d); provided, however, that nothing herein shall relieve any
party from liability for the breach of any of its representations and
warranties or the breach of any of its covenants or agreements set forth in
this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by mutual agreement
of the parties hereto by action taken by or on behalf of their respective
Boards of Directors (with respect to the Company, including approval of the
Company Independent Committee) at any time prior to the Effective Time;
provided, however, that after the approval of this Agreement by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each share of Company
Common Stock shall be converted upon consummation of the Merger.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
waiver of a condition set forth in Section 7.01 will be effective only if made
in writing by each of the Company and Parent and, unless otherwise specified in
such writing, shall thereafter operate as a waiver of such condition for any
and all purposes of this Agreement. Any such extension or waiver shall be valid
if set forth in an instrument in writing signed by the party or parties to be
bound thereby.
SECTION 8.05. Expenses. (a) Except as otherwise set forth in this Section
8.05, all Expenses (as defined below) incurred in connection with this
Agreement and the Merger shall be paid by the party incurring such expenses,
whether or not the Merger is consummated. "Expenses," as used in this
Agreement, shall consist of all out- of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
(including, without limitation, any fees or expenses payable to Aegis Muse
pursuant to the terms of the engagement letter from Aegis Muse to Parent dated
January 26, 2000) experts and consultants to a party hereto and its affiliates)
reasonably incurred by a party or on its behalf in connection with, or related
to the authorization, preparation, negotiation, execution and performance of,
this Agreement, the preparation, printing, filing and mailing of the Proxy
Statement, the solicitation of stockholder approvals and all other matters
related to the consummation of the Merger.
(b) The parties agree that if the Company or Parent shall terminate this
Agreement pursuant to Section 8.01(e) due to the failure of the Company's
stockholders to approve and adopt this Agreement and (i) at the time of such
failure to so approve and adopt this Agreement there shall exist a Competing
Transaction (which Competing Transaction shall have become the subject of a
public announcement or any person shall have publicly announced an intention to
make a proposal or offer relating thereto) with respect to the Company and (ii)
within 12 months of the termination of this Agreement, the Company enters into
an agreement with any third party with respect to a Competing Transaction,
which transaction is subsequently consummated, then the Company shall reimburse
all reasonable and documented Expenses of Parent and Merger Sub simultaneously
with the consummation of such transaction.
28
(c) The parties agree that the payment of Expenses provided for in Section
8.05(b) shall be the sole and exclusive remedy of the parties upon a
termination of this Agreement pursuant to Section 8.01(e), and such remedy
shall be limited to the payments stipulated in Section 8.05(b); provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations and warranties or the breach of
any of its covenants or agreements set forth in this Agreement.
(d) Any payment of Expenses required to be made pursuant to Section 8.05(b)
shall be made by wire transfer of immediately available funds to an account
designated in writing by the party entitled to receive payment.
(e) In the event that the Company shall fail to pay any Expenses of Parent
in accordance with Section 8.05(b) when due, the amount of any such Expenses
shall be increased to include the costs and expenses actually incurred or
accrued by Parent, acting together (including, without limitation, fees and
expenses of counsel) in connection with the collection under and enforcement of
this Section 8.05.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
and in any certificate delivered pursuant hereto shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be, except that the agreements set forth in Articles I
and II, Section 6.06 and this Article IX shall survive the Effective Time and
those set forth in Sections 6.03(b) and 8.05 and this Article IX shall survive
termination. Each party agrees that, except for the representations and
warranties contained in this Agreement and the Disclosure Schedule, no party
hereto has made any other representations and warranties, and each party hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated herein, notwithstanding the delivery or
disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
and facsimile or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent:
Rosemore, Inc.
One North Charles Street, Suite 2300
Baltimore, Maryland 21201
Attention: Edward L. Rosenberg
President and Chief Executive Officer
Telephone: (410) 347-7090
Facsimile: (410) 347-7081
with a copy (which shall not constitute notice to Parent) to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: John A. Marzulli, Jr., Esquire
Telephone: (212) 848-8590
Facsimile: (212) 848-7179
29
if to the Company:
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201-3740
Attention: Thomas L. Owsley, Esquire
Telephone: (410) 659-4833
Facsimile: (410) 659-4763
If mailed to the Company:
P.O. Box 1168
Baltimore, Maryland 20208
with copies (which shall not constitute notice to the Company) to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, NW
Washington, D.C. 20005-2111
Attention: Stephen W. Hamilton, Esquire
Telephone: (202) 371-7000
Facsimile: (202) 393-5670
and
McGuireWoods LLP
1750 Tysons Boulevard, Suite 1800
Tysons Corner, Virginia 22102-3915
Attention: Clive R. G. O'Grady, Esquire
Telephone: (703) 712-5017
Facsimile: (703) 712-5248
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such specified person;
(b) "beneficial owner" with respect to any shares of capital stock means
a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such terms are
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its
affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of capital stock;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the State of Maryland;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
30
(e) "knowledge" means, with respect to any matter in question, that the
executive officers of Parent or the Company, as the case may be, (i) have
knowledge of such matter, or (ii) after reasonable due investigation,
should have known of such matter;
(f) "person" means an individual, corporation, company, limited liability
company, partnership, limited partnership, syndicate, person (including,
without limitation, a "person" as defined in section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(g) "subsidiary" or "subsidiaries" of any person means any corporation,
limited liability company, partnership, joint venture or other legal entity
of which such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect, as long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible, in a mutually
acceptable manner, in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties.
Notwithstanding anything to the contrary contained in this Agreement, Parent
may transfer the shares of Merger Sub to one of its subsidiaries prior to the
consummation of the Merger. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of Section 6.06 (the
"Third Party Provision"), nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The Third Party Provision may
be enforced by the beneficiaries thereof.
SECTION 9.06. Incorporation of Exhibits. The Disclosure Schedule and any
exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part of this Agreement for all purposes as if fully set forth
herein.
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that the Merger is
mandatorily governed by, or pursuant to the terms of this Agreement is subject
to, the MGCL, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in and
to be performed in that State, without regard to any conflicts of laws
principles otherwise applicable. No provision of this Agreement shall be
construed to require any of the parties hereto or any of their respective
subsidiaries, affiliates, directors, officers, employees or agents to take any
action that would violate any applicable Law.
SECTION 9.09. Submission to Jurisdiction; Venue. The parties hereto
unconditionally and irrevocably agree and consent to the exclusive jurisdiction
of, and service of process and venue in, the United States
31
District Court for the District of Maryland and the courts of the State of
Maryland and waive any objection with respect thereto, for the purpose of any
action, suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby; the parties further agree not to commence any
such action, suit or proceeding except in any such court. Each party
irrevocably waives any objections or immunities to jurisdiction to which it
might otherwise be entitled or become entitled in any legal suit, action or
proceeding against it arising out of or relating to this Agreement or the
transactions contemplated hereby which is instituted in any such court.
SECTION 9.10. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original but all of which, taken
together, shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the exhibits
attached hereto and the Disclosure Schedule) and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless it is made in
writing and signed by all parties hereto.
SECTION 9.13. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
32
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ROSEMORE, INC.
By : /s/ Edward L. Rosenberg
-------------------------------------
Name: Edward L. Rosenberg
Title: President and Chief Executive
Officer
CROWN CENTRAL PETROLEUM
CORPORATION
By : /s/ John E. Wheeler, Jr.
-------------------------------------
Name: John E. Wheeler, Jr.
Title: Executive Vice President and
Chief Financial Officer
ROSEMORE ACQUISITION
CORPORATION
By : /s/ Edward L. Rosenberg
-------------------------------------
Name: Edward L. Rosenberg
Title: President
33
EXHIBIT B
[LOGO OF CREDIT SUISSE/FIRST BOSTON]
December 17, 2000
Board of Directors
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, MD 21203
Members of the Board:
You have asked us to advise you with respect to the fairness from a
financial point of view to the stockholders of Crown Central Petroleum
Corporation (the "Company" or "you"), other than Rosemore, Inc. ("Rosemore"),
the Sellers (as such term is defined in the Merger Agreement (as defined
below)) and their respective affiliates, of the aggregate consideration to be
received by such stockholders pursuant to the terms of the Agreement and Plan
of Merger dated as of December 17, 2000 (the "Merger Agreement") among the
Company, Rosemore and Rosemore Acquisition Corporation ("Merger Sub"). The
Merger Agreement provides for the merger (the "Merger") of Merger Sub with and
into the Company pursuant to which the Company will become an indirect wholly
owned subsidiary of Rosemore and each outstanding share of Class A Common Stock
and Class B Common Stock of the Company, par value $5.00 per share, other than
shares owned by the Company, Rosemore or any of their direct or wholly owned
subsidiaries, will be converted into the right to receive $10.50 per share in
cash.
In arriving at our opinion, we have reviewed certain business and financial
information relating to the Company, as well as the Merger Agreement and
certain related documents. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and have met with
the Company's management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company, and we have compared that data with similar data for publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached third parties to solicit
indications of interest in acquiring all or significant assets of the Company
and held preliminary discussions with certain of these parties prior to the
date hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the past, we have performed certain investment banking services unrelated
to the Merger for the Company, and have received customary fees for such
services.
In the ordinary course of our business, we and our affiliates may actively
trade the equity and debt securities of the Company for our and such
affiliates' own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company (including members of the Independent Committee
thereof) in connection with its consideration of the Merger, does not address
the allocation of the aggregate consideration to be received by the
stockholders of the Company between the Class A Common Stock and Class B Common
Stock and does not constitute a recommendation as to how any stockholder should
vote with respect to any matter relating to the Merger.
It is understood that any written advice or opinion of CSFB may be
disclosed, to the extent required by applicable law, in any communication to
your stockholders or in any filing with the Securities and Exchange Commission,
or to the extent required to be disclosed pursuant to judicial or regulatory
order, provided that, in each such instance, CSFB has been promptly advised by
the Company as to such requirement and has been given reasonable opportunity to
review the proposed disclosure and to comment upon any CSFB-related reference
in any such communication, filing or disclosure.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the aggregate consideration to be received by the stockholders of
the Company in the Merger is fair to such stockholders, other than Rosemore,
the Sellers and their respective affiliates, from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By:/s/ William C. Sharpstone
-------------------------
William C. Sharpstone
Managing Director
[Crown Logo]
APPENDIX
CCP52B DETACH HERE
PROXY
CROWN CENTRAL PETROLEUM CORPORATION
P.O. BOX 1168
BALTIMORE, MARYLAND 21203
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS -- ____________,
2001
Reserving the right of revocation, the undersigned hereby appoints Thomas
L. Owsley, Dolores B. Rawlings and John E. Wheeler, Jr., or any one or more of
them, as proxies, each with full power of substitution, to represent and to vote
all shares of Class A Common Stock and Class B Common Stock of Crown Central
Petroleum Corporation ("Crown") which the undersigned would be entitled to vote
at the Special Meeting of stockholders to be held on ____________, the __ day of
________, 2001, at _____ o' clock in the _________, Eastern Daylight Time, at
Turf Valley Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland
and any adjournment or postponement thereof.
When properly executed, this proxy will be voted in the manner directed by the
undersigned stockholder. If no direction is made, this proxy will be voted FOR
approval of the merger and the agreement and plan of merger referred to below
and in accordance with the judgement of the person(s) voting the proxy upon such
other matters properly coming before the meeting and any adjournment thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
[SEE REVERSE] CONTINUED AND TO BE SIGNED ON [SEE REVERSE]
SIDE REVERSE SIDE SIDE
[Crown Logo]
Crown Central Petroleum Corporation
Refiners/marketers of petroleum products & petrochemicals
One North Charles Street o P.O. Box 1168 o Baltimore, Maryland 21203
This proxy card is provided for completion both by holders of Class A common
stock and by holders of Class B common stock.
DETACH HERE
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the merger and merger agreement.
Approval of the merger of Rosemore Acquisition Corporation, an indirect wholly
owned subsidiary of Rosemore, Inc., with and into Crown with Crown continuing as
the surviving corporation, pursuant to the Agreement and Plan of Merger, dated
as of December 17, 2000, by and among Rosemore, Inc., Rosemore Acquisition
Corporation and Crown.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Mark here for address change
and note at left
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
This proxy should be signed by the stockholder in person. If a joint account,
all joint owners should sign.
Signature: Date:
____________________________ _________________
Signature: Date:
____________________________ _________________