SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 under Rule 14a-12
STATIA TERMINALS GROUP N.V.
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(Name Of Registrant As Specified In Its Charter)
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(Name Of Person(s) Filing Proxy Statement, If Other Than The 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:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(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):
The filing fee was determined based upon the aggregate cash to be received
by the Registrant from the proposed sale of assets, which, prior to any
adjustments, the Registrant believes will be $184,872,223. In accordance
with Rule 0-11 under the Securities Exchange Act of 1934, as amended, the
filing fee was determined by multiplying the amount calculated pursuant to
the preceding sentence by 1/50 of one percent.
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(4) Proposed maximum aggregate value of transaction: $184,872,223
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(5) Total fee paid: $36,975
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/ / Fee paid previously with preliminary materials:
/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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STATIA TERMINALS GROUP N.V.
L.B. Smithplein 3
Curacao, Netherlands Antilles
NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON [_______], 2002
To the Shareholders of Statia Terminals Group N.V.:
A special general meeting of the shareholders of Statia Terminals Group
N.V. will be held at the Curacao Marriott Beach Resort, Queen's Ballroom A, John
F. Kennedy Boulevard, Piscadera Bay, Curacao, Netherlands Antilles, on
[_________], 2002, at 10:00 a.m., local time, to consider and vote upon the
following matters:
1. To adopt amendments to our articles of incorporation (i) to add a
provision with respect to the distribution to our shareholders of the
proceeds from a sale of all or substantially all of our assets,
consisting of the capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc. and Statia
Marine, Inc. (collectively, the "Subsidiaries"), and (ii) to add new
provisions and adjust existing provisions with respect to the
distribution to our shareholders of our remaining assets upon our
liquidation after such a sale; and
2. To (i) approve a stock purchase agreement with Kaneb Pipe Line
Operating Partnership, L.P. ("Kaneb") pursuant to which we will sell
to Kaneb substantially all of our assets, consisting of all of the
outstanding capital stock of the Subsidiaries, followed by a
distribution to our shareholders of substantially all of the proceeds
of such sale in accordance with the terms of our articles of
incorporation, as amended, and (ii) adopt our liquidation and the
distribution of our remaining assets to our shareholders in accordance
with our articles of incorporation, as amended.
The close of business on [__________] has been fixed as the record date for
the special general meeting. All holders of record of our class A common shares
and class B subordinated shares at the close of business on the record date are
entitled to notice of and to vote at the special general meeting or any
adjournment thereof. All holders of our class C shares are entitled to attend
and address the special general meeting or any adjournment thereof in person or
by proxy, but not to vote thereat. Class A common shares and class B
subordinated shares can be voted at the special general meeting only if the
holder thereof is present at the special general meeting in person or by valid
proxy.
A copy of this notice, the agenda for the special general meeting and the
text of the proposed resolutions, together with a copy of the proxy statement
and its appendices, including the text of proposed amendments to our articles of
incorporation, may be inspected and copied without charge at our offices, c/o
Covenant Managers N.V., L.B. Smithplein 3, Curacao, Netherlands Antilles, and at
the offices of our proxy solicitation agent, Morrow & Co., Inc., located at 445
Park Avenue, New York, NY 10022; Telephone: (212) 754-8000; Call Toll-Free:
(800) 654-2468. In addition, the text of the proposed resolutions is available,
without charge, upon request to our proxy solicitation agent. Please read the
proxy statement and other materials concerning the proposed transactions, which
are mailed with this notice, for a more complete statement regarding the matters
to be acted upon at the special general meeting.
Our board of directors unanimously recommends that you vote "FOR" each of
the proposals.
Our board of directors cordially invites you to attend the special general
meeting. Even if you plan to attend the special general meeting in person,
please complete, sign, date, and promptly mail the enclosed voting instruction
card and proxy in the enclosed envelope so that your shares may be voted in
accordance with your wishes. If you attend the special general meeting, you may
vote your shares in person, even though you have previously signed and returned
your proxy, provided that you have revoked such proxy in writing. Your prompt
cooperation will be greatly appreciated.
By Order of the Board of Directors
/s/ Jack R. Pine
Jack R. Pine
Secretary
Dated [___________]
and mailed on or about [___________]
STATIA TERMINALS GROUP N.V.
L.B. Smithplein 3
Curacao, Netherlands Antilles
[-----------]
Dear Fellow Shareholder:
You are cordially invited to attend a special general meeting of the
shareholders of Statia Terminals Group N.V. ("Statia Group") to be held at the
Curacao Marriott Beach Resort, Queen's Ballroom A, John F. Kennedy Boulevard,
Piscadera Bay, Curacao, Netherlands Antilles, on [________], 2002, at 10:00
a.m., local time. A notice of the special general meeting, a proxy statement and
related information about Statia Group, and a proxy card are enclosed. All
holders of our class A common shares, par value $0.01 per share, and our class B
subordinated shares, par value $0.01 per share, in each case as of [__________],
will be entitled to notice of and to vote at the special general meeting. All
holders of our class C shares will be entitled to notice of, and to attend and
address, the special general meeting or any adjournment thereof in person or by
proxy, but not to vote thereat. You may vote shares at the special general
meeting only if you are present in person or represented by proxy.
At the special general meeting, you will be asked to consider and vote upon
the following proposals:
1. To adopt amendments to our articles of incorporation (i) to add a
provision with respect to the distribution to our shareholders of the
proceeds from a sale of all or substantially all of our assets,
consisting of the capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc and Statia
Marine, Inc. (collectively, the "Subsidiaries"), and (ii) to add new
provisions and adjust existing provisions with respect to the
distribution to our shareholders of our remaining assets upon our
liquidation after such a sale; and
2. To (i) approve a stock purchase agreement with Kaneb Pipe Line
Operating Partnership, L.P. ("Kaneb") pursuant to which we will sell
to Kaneb substantially all of our assets, consisting of all of the
outstanding capital stock of the Subsidiaries, followed by a
distribution to our shareholders of substantially all of the proceeds
of such sale in accordance with the terms of our articles of
incorporation, as amended, and (ii) adopt our liquidation and the
distribution of our remaining assets to our shareholders in accordance
with our articles of incorporation, as amended.
Appendix A to this proxy statement sets forth an English translation
containing substantially the form of the proposed Dutch language amendments to
our articles of incorporation. A copy of the stock purchase agreement between
Kaneb and us is attached as Appendix B to this proxy statement. We encourage you
to read each of these documents in its entirety. In addition, the text of the
proposed resolutions is available, without charge, upon request to our proxy
solicitation agent, Morrow & Co., Inc., located at 445 Park Avenue, New York, NY
10022; Telephone: (212) 754-8000; Call Toll-Free: (800) 654-2468.
Following the closing of the sale, our class A common shareholders will
have priority in the distribution of the sale proceeds and are entitled to
receive, in the aggregate, a distribution of $108.2 million, or $18.00 per
share. After payment in full of such amount to the class A common shareholders,
our class B subordinated shareholder will be entitled to receive, in the
aggregate, a distribution of up to $62.3 million, or $16.40 per share. Following
these distributions, after payment of $13.9 million to holders of options to
purchase our class A common shares, and the establishment of appropriate
reserves for the satisfaction of our other liabilities in connection with our
liquidation, our class C shareholder will be entitled to a distribution of any
remaining cash. Based on information available to us as of November 12, 2001,
assuming the closing of the sale on or about January 31, 2002, and assuming no
unanticipated claims are presented to us between the date hereof and the date of
the liquidation, we will make a distribution following the closing of the sale
of $18.00 per class A common share and $16.40 per class B subordinated share.
Based on information available to us as of November 12, 2001, we anticipate that
our class C shareholder is likely to receive a distribution, in the aggregate,
of approximately $9.1 million, consisting of approximately $6.1 million
following the closing of the sale and approximately $3.0 million following our
liquidation.
In connection with its evaluation of the proposed amendments to our
articles of incorporation, our board of directors engaged Houlihan Lokey Howard
& Zukin Financial Advisors, Inc. ("Houlihan Lokey") to act as its
independent financial advisor. Houlihan Lokey has rendered its opinion, dated
November 12, 2001, to the effect that, as of the date of the opinion and based
on and subject to the matters set forth in the opinion, the distribution of
$18.00 per share to be received by each of our class A common shareholders,
$16.40 per share to be received by our class B subordinated shareholder and the
distribution of the remaining cash to our class C shareholder in connection with
the sale of the Subsidiaries and our subsequent liquidation are fair to each
such class of shareholders from a financial point of view. The written opinion
of Houlihan Lokey is attached as Appendix C to this proxy statement, and you
should read it carefully.
Our board of directors has unanimously determined that the adoption of the
proposed amendments to our articles of incorporation and the sale of the
Subsidiaries followed by distribution of the sale proceeds and our liquidation
are advisable and in our best interests and the best interests of all our
shareholders and our employees. The board of directors has unanimously
determined that the distributions following the sale of the Subsidiaries of
$18.00 per class A common share and $16.40 per class B subordinated share, and
the anticipated aggregate distribution of approximately $9.1 million to our
class C shareholder following the sale of the Subsidiaries and our liquidation,
are fair to all our shareholders. Our board of directors has unanimously
approved, and recommends that you vote "FOR," the proposed resolutions.
Although our articles of incorporation do not require a separate vote of
the class A common shareholders, our board of directors has determined, in the
interest of fairness to the class A common shareholders, solely with respect to
the proposal to amend our articles of incorporation, to require the affirmative
vote of more than 66 2/3% of all votes cast by our class A common shareholders
at the special general meeting voting separately as a class, provided that at
least one-half of the outstanding class A common shares are present or
represented at such meeting. In the event that this majority vote of the class A
common shareholders is not obtained, Statia Terminals Holdings N.V. ("Statia
Terminals Holdings"), which is controlled by Castle Harlan Partners II, L.P. and
its affiliates, and which beneficially owns 100% of the outstanding class B
subordinated shares, comprising 38.7% of our outstanding voting securities, has
indicated that it will vote the class B subordinated shares against the proposal
to amend our articles of incorporation and against the proposal to sell the
Subsidiaries and liquidate.
Following the vote by the class A common shareholders on the proposal to
amend our articles of incorporation, each proposed resolution, including the
proposal to amend our articles of incorporation, requires the affirmative vote
of more than 66 2/3% of all votes cast at the special general meeting, provided
that at least one-half of our outstanding class A common shares and class B
subordinated shares, counted as a class, are present or represented at such
meeting. Subject to the receipt of the approval of the class A common
shareholders of the proposal to amend our articles of incorporation, Statia
Terminals Holdings has agreed to cause its shares to be voted in favor of the
proposed resolutions.
We urge you to read the accompanying proxy statement carefully as it sets
forth details of the proposed amendments to our articles of incorporation, the
proposed sale of the Subsidiaries, the proposed distribution of the sale
proceeds, the proposed liquidation and other important information.
Your vote is important. Whether or not you plan to attend the special
general meeting, please complete, sign and date the accompanying proxy card and
return it in the enclosed prepaid envelope. If you attend the special general
meeting, you may revoke your proxy and vote in person if you wish, even if you
have previously returned your proxy card, provided that you have revoked such
proxy in writing. Your prompt cooperation will be greatly appreciated.
Sincerely,
/s/ James G. Cameron
Director
This proxy statement is dated [__________] and is first being mailed to
shareholders on or about [__________].
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This transaction has not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
fairness or merits of this transaction or upon the accuracy or adequacy of the
information contained in this document. Any representation to the contrary is
unlawful.
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TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS.....................................1
SUMMARY TERM SHEET............................................................4
The Special General Meeting..........................................4
Reasons for the Amendments to our Articles of Incorporation,
and the Sale of the Subsidiaries and Liquidation..................6
The Parties to the Proposed Asset Sale...............................6
Effects of the Resolutions...........................................7
Recommendation of our Board of Directors.............................8
Opinion of Houlihan Lokey............................................9
Amendments to Articles of Incorporation..............................9
The Stock Purchase Agreement........................................10
Liquidation and Appointment of Liquidators..........................17
Material Netherlands Antilles Tax Consequences......................17
Material U.S. Federal Income Tax Consequences.......................18
Interests of our Directors and Executive Officers in the
Proposed Transaction.............................................18
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE..............................21
INTRODUCTION.................................................................22
Proposals to be Considered at the Special General Meeting...........22
Voting Rights.......................................................23
Quorum; Vote Required for Approval..................................23
Voting and Revocation of Proxies....................................24
Solicitation of Proxies.............................................24
SPECIAL FACTORS..............................................................25
Background of the Proposed Transaction..............................25
Opinion of Houlihan Lokey...........................................27
Reasons for the Recommendation of our Board of Directors............33
Purpose of the Proposed Amendments to our Articles of
Incorporation....................................................35
Requirement of Approval by Two-Thirds of our Class A Common
Shareholders for the Amendments to Our Articles of
Incorporation....................................................35
The Proposed Amendments.............................................36
Effect of the Proposed Resolutions..................................36
Interests of Directors and Executive Officers in the Transaction....37
Relationship Between Kaneb and Us...................................42
Material Netherlands Antilles Tax Consequences of the Proposed
Transaction to our Class A Common Shareholders..................42
Material U.S. Federal Income Tax Consequences of the Proposed
Transaction to our Class A Common Shareholders..................43
THE STOCK PURCHASE AGREEMENT AND LIQUIDATION.................................47
Absence of Appraisal Rights.........................................47
Regulatory Approvals and Other Consents.............................47
The Stock Purchase Agreement........................................47
The Voting and Option Agreement.....................................59
Dissolution and Liquidation.........................................62
OTHER INFORMATION............................................................65
Beneficial Ownership of Voting Securities by Directors, Executive
Officers and 5% Shareholders....................................65
EXPENSES OF SOLICITATION.....................................................66
EXPERTS......................................................................66
PROPOSALS BY HOLDERS OF CLASS A COMMON SHARES................................66
(i)
Page
TRANSACTION OF OTHER BUSINESS................................................66
DOCUMENTS INCORPORATED BY REFERENCE..........................................66
WHERE YOU CAN FIND MORE INFORMATION..........................................67
APPENDIX A - PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION
APPENDIX B - STOCK PURCHASE AGREEMENT
APPENDIX C - OPINION OF HOULIHAN LOKEY
(ii)
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
Q: What is the proposed transaction?
A: We are proposing to sell our three subsidiaries, Statia Terminals
International N.V., Statia Technology, Inc. and Statia Marine, Inc.
(collectively, the "Subsidiaries") to Kaneb Pipe Line Operating
Partnership, L.P. Subsequently, we will distribute the proceeds of the sale
to our shareholders and commence liquidation proceedings immediately
following that distribution.
Q: What will you be entitled to receive following the sale and upon our
liquidation?
A: Based on information available to us as of November 12, 2001, assuming the
close of the sale on or about January 31, 2002, and assuming no
unanticipated claims are presented to us between the date hereof and the
date of the liquidation, we will make a distribution shortly after the
closing of the sale of $18.00 per class A common share and $16.40 per class
B subordinated share. Based on information available to us as of November
12, 2001, we anticipate that our class C shareholder is likely to receive a
distribution, in the aggregate, of approximately $9.1 million, consisting
of approximately $6.1 million following the closing of the sale and
approximately $3.0 million following our liquidation. See "THE STOCK
PURCHASE AGREEMENT AND LIQUIDATION--Dissolution and Liquidation."
Q: What will happen to my class A common shares following the sale?
A: At the end of trading on the day on which the sale is closed, we intend to
terminate the listing of our class A common shares on the Nasdaq National
Market and to instruct our transfer agent to close its share transfer books
and discontinue recording transfers of class A common shares as of such
date. Our class A common shares will remain outstanding and you will remain
a shareholder of us until our liquidation is completed, which we anticipate
will occur by December 31, 2002.
Q: Why are we amending our articles of incorporation?
The proposed amendments to our articles of incorporation are a condition to
the sale of the Subsidiaries and our subsequent liquidation. The amendments
add a new provision and amend certain existing provisions to provide the
method of distribution among our three classes of shareholders of proceeds
received upon a sale of substantially all of our assets as a going concern.
See "SPECIAL FACTORS--Purpose of the Proposed Amendments to our Articles of
Incorporation."
Q: What will happen to your right to receive target quarterly distributions if
the resolutions are passed?
A: The payment of the target quarterly distribution for the quarter ending
December 31, 2001, will be subject to the decision of our board of
directors, which will be made pursuant to the tests contained in our
current articles of incorporation. We do not anticipate paying or
accumulating further arrearages of target quarterly distributions following
the $18.00 distribution to our class A common shareholders because we do
not expect to meet the tests for such payment contained in our articles of
incorporation. In addition, the $18.00 distribution to our class A
shareholders will eliminate all arrearages in target quarterly
distributions that have accumulated prior to the date of the distribution.
Q: Who can vote at the meeting?
A: Only holders of record of our class A common shares and class B
subordinated shares at the close of business on [__________] are entitled
to notice of and to vote at the special general meeting. Holders of our
class C shares are entitled to notice of, and to attend and address, the
special general meeting in person or by proxy, but not to vote at the
meeting. See "INTRODUCTION--Voting Rights."
Q: What vote is required to approve the transaction?
A: As an initial matter, solely with respect to the proposal to amend our
articles of incorporation, our board of directors is seeking the
affirmative vote of more than 66 2/3% of all votes cast by our class A
common shareholders at the special general meeting voting separately as a
class, provided that at least one-half of the outstanding class A common
shares are present or represented at such meeting. Following the vote by
our class A common shareholders, each proposed resolution, including the
proposal to amend our articles of incorporation, requires the affirmative
vote of more than 66 2/3% of all votes cast at the special general meeting,
provided that the holders of at least one-half of our outstanding class A
common shares and class B subordinated shares, counted as a single class,
are present or represented at such meeting. See "INTRODUCTION--Quorum;
Votes Required for Approval."
Q: What happens if we do not receive the approval of our class A common
shareholders to amend our articles of incorporation?
A: In the event that the separate approval of our class A common shareholders
is not received, the holder of all of our outstanding class B subordinated
shares, comprising 38.7% of our outstanding voting securities, has
indicated that it will vote the class B subordinated shares against the
proposal to amend our articles of incorporation and against the proposal to
sell the Subsidiaries and liquidate. In this event, the sale and our
subsequent liquidation will not take place because the approval by the
requisite majority of our shareholders will not have been received. See
"SPECIAL FACTORS--Requirement of Approval by Two-Thirds of our Class A
Common Shareholders for the Amendments to Our Articles of Incorporation."
Q: What does our board of directors recommend?
A: Our board of directors recommends that you vote "FOR" approval of the
proposed resolutions. Our board of directors has unanimously determined
that the distribution of the proceeds from the sale of the Subsidiaries and
the distribution in connection with our subsequent liquidation are fair to
all our shareholders and our employees. To review the background of and
reasons for the proposed transaction, see "SPECIAL FACTORS--Background of
the Transaction" and "SPECIAL FACTORS--Reasons for the Recommendations of
our Board of Directors."
Q: What should I do now? How do I vote?
A: After you read and consider carefully the information contained in this
proxy statement, please fill out, sign and date your proxy card and mail
your signed proxy card in the enclosed return envelope as soon as possible
so that your shares may be represented at the special general meeting. See
"INTRODUCTION--Voting and Revocation of Proxies."
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Yes, but only if you provide instructions to your broker on how to vote.
You should fill out, sign, date and return the proxy card and otherwise
follow the directions provided by your broker regarding how to instruct
your broker to vote your shares. See "INTRODUCTION--Voting and Revocation
of Proxies."
Q: What are the tax consequences of the proposed transaction to me?
A: If you are a U.S. shareholder holding our class A common shares as a
capital asset, your receipt of the distribution of proceeds from the sale
of the Subsidiaries will qualify as the receipt of liquidating
distributions for U.S. federal income tax purposes and generally will give
rise to capital gain or loss equal to the difference between the amount of
the liquidation proceeds received and the tax basis of your shares, subject
to the discussion regarding qualified electing fund elections under
"SPECIAL FACTORS--Material U.S. Federal Income Tax Consequences of the
Proposed Transaction to our Shareholders--Sale of Subsidiaries,
Liquidation, and Passive Foreign Investment Company Considerations--Passive
Foreign Investment Company Considerations."
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Q: Who can help answer my other questions?
A: If you have more questions about the proposed transaction, you should
contact our proxy solicitation agent:
Morrow & Co., Inc., 445 Park Avenue, New York, NY 10022; Telephone: (212)
754-8000; Call Toll-Free: (800) 654-2468.
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SUMMARY TERM SHEET
This summary term sheet highlights information from this proxy statement
and does not contain all of the information that is important to you. To
understand the proposed transaction fully, you should read carefully this entire
proxy statement (including the information incorporated by reference), the
appendices and the additional documents referred to in this proxy statement.
The Special General Meeting
Date, Time, Place and Matters to be Considered
o The special general meeting of shareholders will be held on
[________], 2002, at 10:00 a.m. local time, at the Curacao Marriott
Beach Resort, Queen's Ballroom A, John F. Kennedy Boulevard, Piscadera
Bay, Curacao, Netherlands Antilles. At the special general meeting,
shareholders will be asked to consider and to vote on the following
proposals:
1. To adopt amendments to our articles of incorporation (i) to add a
provision with respect to the distribution to our shareholders of
the proceeds from a sale of all or substantially all of our
assets, consisting of the capital stock of our three
subsidiaries, Statia Terminals International N.V., Statia
Technology, Inc. and Statia Marine, Inc. (collectively, the
"Subsidiaries"), and (ii) to add new provisions and adjust
existing provisions with respect to the distribution to our
shareholders of our remaining assets upon our liquidation after
such a sale; and
2. To (i) approve a stock purchase agreement with Kaneb Pipe Line
Operating Partnership, L.P. ("Kaneb") pursuant to which we will
sell to Kaneb substantially all of our assets, consisting of all
of the outstanding capital stock of the Subsidiaries, followed by
a distribution to our shareholders of substantially all of the
proceeds of such sale in accordance with the terms of our
articles of incorporation, as amended, and (ii) adopt our
liquidation and the distribution of our remaining assets to our
shareholders in accordance with our articles of incorporation, as
amended.
For additional information regarding the matters to be considered at
the special general meeting see "INTRODUCTION--Proposals to be
Considered at the Special General Meeting."
Record Date for Voting
o Only holders of record of our class A common shares and class B
subordinated shares at the close of business on [________] are
entitled to notice of and to vote at the special general meeting. On
that date, there were 6,013,253 class A common shares outstanding and
3,800,000 class B subordinated shares outstanding. Each of our class A
common shareholders and the class B subordinated shareholder is
entitled to one vote per share held on all matters presented at the
special general meeting. For additional information regarding the
record date for voting see "INTRODUCTION--Voting Rights."
Quorum and Votes Required for Approval
o The presence, in person or by proxy, of the holders of at least
one-half of our outstanding class A common shares and class B
subordinated shares, counted as a single class, as of the record date
is necessary to constitute a quorum at the special general meeting.
Abstentions are counted for the purpose of establishing a quorum.
Broker non-votes (where a named entity holding shares for a beneficial
owner has not received voting instructions from the beneficial owner
with respect to a particular matter and such named entity does not
possess or choose to exercise its discretionary authority with respect
thereto, but which are present in person or by proxy at the special
general meeting) are not counted for the purpose of establishing a
quorum.
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o Although our articles of incorporation do not require a separate vote
of the class A common shareholders, our board of directors has
determined, in the interest of fairness to the class A common
shareholders, solely with respect to the proposal to amend our
articles of incorporation, to require the affirmative vote of more
than 66 2/3% of all votes cast by our class A common shareholders at
the special general meeting voting separately as a class, provided
that at least one-half of the outstanding class A common shares are
present or represented at such meeting. In the event that this
majority vote of the class A common shareholders is not obtained,
Statia Terminals Holdings N.V. ("Statia Terminals Holdings"), which is
controlled by Castle Harlan Partners II, L.P. and its affiliates
("Castle Harlan Partners II") and which beneficially owns 100% of the
outstanding class B subordinated shares, comprising 38.7% of our
outstanding voting securities, has indicated that it will vote the
class B subordinated shares against the proposal to amend our articles
of incorporation and against the proposal to sell the Subsidiaries and
liquidate. In this event, the sale and our subsequent liquidation will
not take place because the approval by the requisite majority of our
shareholders will not have been received.
Following the vote by the class A common shareholders on the proposal
to amend our articles of incorporation, each proposed resolution,
including the proposal to amend our articles of incorporation,
requires the affirmative vote of more than 66 2/3% of all votes cast
at the special general meeting, provided that at least one-half of our
outstanding class A common shares and class B subordinated shares,
counted as a class, are present or represented at such meeting.
Subject to the receipt of the approval of the class A common
shareholders of the proposal to amend our articles of incorporation,
Statia Terminals Holdings has agreed to cause its shares to be voted
in favor of the proposed resolutions.
For additional information regarding the quorum and majorities
required at the special general meeting see "INTRODUCTION--Quorum;
Votes Required for Approval."
Procedures Relating to Your Vote at the Special General Meeting
o You should complete, date and sign your proxy card and mail it in the
enclosed return envelope as soon as possible so that your shares may
be represented at the special general meeting, even if you plan to
attend the meeting in person. Unless contrary instructions are
indicated on your proxy, all of your shares represented by valid
proxies will be voted "FOR" the approval of the proposed resolutions.
o If your shares are held in "street name" by your broker, your broker
will vote your shares, but only if you provide instructions on how to
vote. You should follow the procedures provided by your broker
regarding the voting of your shares.
o You can revoke your proxy and change your vote in any of the following
ways:
- Submit to the offices of Morrow & Co., Inc., 445 Park Avenue, New
York, NY 10022 (Telephone: (212) 754-8000; Toll-Free: (800) 654-2468),
on or before the business day prior to the special general meeting, a
later dated, signed proxy card or a written revocation of such proxy.
- Explicitly revoke your proxy in writing prior to or at the special
general meeting. Attendance at the special general meeting will not,
by itself, revoke your proxy.
o If you attend the special general meeting and wish to vote in person,
we will give you a ballot when you arrive. If your shares are held in
the name of your broker, bank, or other nominee, you must bring a
letter from the broker, bank, or other nominee to the special general
meeting showing that you were the direct or indirect (beneficial)
owner of the shares on [________]. For additional information
regarding the procedure for delivering your proxy see
"INTRODUCTION--Voting and Revocation of Proxies" and
"INTRODUCTION--Solicitation of Proxies."
-5-
Reasons for the Amendments to our Articles of Incorporation, and the Sale of the
Subsidiaries and Liquidation
o The principal reason for the sale of the Subsidiaries is to provide
our shareholders with the opportunity to receive a cash payment in
respect of their shares. In the case of the class A common shares,
this payment of $18.00 per share represents a premium of 39.5% over
the closing market price of $12.90 per share at which our class A
common shares traded on November 12, 2001, the last trading day
immediately prior to Kaneb's announcement of its agreement to acquire
the Subsidiaries.
o The principal purpose of the proposed amendments to our articles of
incorporation is to enable the sale of the Subsidiaries to Kaneb by
permitting the cash purchase price paid by Kaneb to us to be
distributed among our shareholders in a fair and timely manner that
reflects the sale of the Subsidiaries as a going concern.
Initially, our board of directors believed that the sale of all of the
outstanding shares of each class of our capital stock in the form of a
tender offer by the potential purchaser to our shareholders would be
the best strategic alternative for us and our shareholders, as it
would be the most rapid method of placing the proceeds from such sale
into the hands of our shareholders. However, during the course of our
negotiations with Kaneb, Kaneb and its representatives expressed
concerns regarding Kaneb's ability to purchase through a tender offer
at least 95% of our outstanding securities as would be required in the
Netherlands Antilles before Kaneb could cause us to implement a
mandatory buy-back of any securities not held by Kaneb. Therefore, our
board of directors agreed to pursue a transaction structure whereby
Kaneb would purchase the capital stock of the Subsidiaries followed by
a distribution of the sale proceeds to our shareholders and our
subsequent liquidation. In determining whether to agree to this
structure, our board of directors considered alternative methods by
which the proceeds from the sale of the Subsidiaries could be
distributed. One method that was considered involved the sale of the
Subsidiaries followed by our liquidation and a subsequent distribution
of the sale proceeds and any other remaining assets. However, the
amounts payable under our current articles of incorporation in respect
of our class B subordinated shares and class C shares upon a
liquidation and subsequent distribution of the proceeds from such a
sale differ substantially from the payments that would have been made
in a tender offer for our outstanding shares into which Statia
Terminals Holdings would have been willing to tender the class B
subordinated shares and class C shares. Castle Harlan Partners II, the
controlling shareholder of Statia Terminals Holdings, indicated that
it would not vote in favor of the sale of the Subsidiaries unless the
transaction was structured so that the distribution of sale proceeds
preceded our dissolution and liquidation, and the distributions
reflected the value of the Subsidiaries as a going concern. Our board
of directors determined that the provisions in our articles of
incorporation relating to the distribution of proceeds from a sale of
assets were not intended to apply to a sale of the Subsidiaries as a
going concern and do not adequately and clearly provide for a fair and
timely distribution of the proceeds from such a sale of the
Subsidiaries. Under the proposed amendments to our articles of
incorporation, the distribution of sale proceeds would result in our
shareholders receiving a cash amount equal to the amount such
shareholders would have received under an acceptable tender offer.
Because Castle Harlan Partners II beneficially owns 38.7% of our
outstanding voting securities, and approval of more than 66 2/3% of
our outstanding voting securities at a meeting at which at least
one-half of our voting securities are present or represented is
required to approve a sale of all or substantially all of our assets
or our liquidation, the affirmative vote of Castle Harlan Partners II
is required in order to consummate a sale of the Subsidiaries.
See "SPECIAL FACTORS--Background of the Proposed Transaction" and
"SPECIAL FACTORS--Purpose of the Proposed Amendments to Our Articles
of Incorporation."
The Parties to the Proposed Asset Sale
o Statia Group. We are a public company with limited liability organized
under the laws of the Netherlands Antilles and one of the largest
independent marine terminaling companies in the world as measured in
terms of storage capacity. We provide high quality services to the
petroleum industry
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including transshipment, storage, blending, bunkering, and other
related services. We own and operate facilities on the island of St.
Eustatius, Netherlands Antilles, and at Point Tupper, Nova Scotia,
Canada. For additional information and news concerning us, please log
onto our web site at www.statiaterm.com or call us at (954) 698-0705.
Our web site, and the information contained on the web site, is not a
part of this proxy statement. Our class A common shares are traded on
the Nasdaq National Market System under the symbol "STNV." Our
principal address is c/o Covenant Managers N.V., L.B. Smithplein 3,
Curacao, Netherlands Antilles, and the telephone number is (011)
599-9-462-3700.
o Kaneb. Kaneb Pipe Line Operating Partnership, L.P. is a limited
partnership organized under the laws of the State of Delaware.
The general partner of Kaneb Pipe Line Operating Partnership, L.P. is
Kaneb Pipe Line Company LLC, a Delaware limited liability company, and
its sole limited partner is Kaneb Pipe Line Partners, L.P., a Delaware
limited partnership that is managed by Kaneb Pipe Line Company LLC.
Kaneb Pipe Line Company LLC is a wholly-owned subsidiary of Kaneb
Services LLC, a Delaware limited liability company, the membership
interests of which are traded on the New York Stock Exchange under the
symbol "KSL." Kaneb Pipe Line Partners, L.P. is a major transporter of
refined petroleum products in the Midwest and is the third largest
independent liquids terminaling company in the United States. Its
limited partner units are traded on the New York Stock Exchange under
the symbol "KPP". Kaneb Pipe Line Operating Partnership, L.P. conducts
pipeline operations for Kaneb Pipe Line Partners, L.P., which consists
primarily of the transportation of refined petroleum products as a
common carrier in Kansas, Nebraska, Iowa, South Dakota, North Dakota,
Colorado and Wyoming. More information about Kaneb Pipe Line Operating
Partnership, L.P. and its related business units may be obtained by
visiting the website of Kaneb Pipe Line Company LLC at
www.kanebpipeline.com or by calling (972)699-4055.
Effects of the Resolutions
o Subject to receipt of approval of the amendments to our articles of
incorporation by the Ministry of Justice in the Netherlands Antilles,
which we expect to receive shortly after the special general meeting,
we anticipate that the sale of the Subsidiaries to Kaneb will be
closed within five business days following receipt of approval of all
of the proposed resolutions by our shareholders. At the end of trading
on the day on which the sale is closed, we intend to terminate the
listing of our class A common shares on the Nasdaq National Market and
to instruct our transfer agent, Computershare Investor Services LLC,
to close its share transfer books and discontinue recording transfers
of class A common shares as of such date. Following the closing of the
sale, our class A common shareholders will have priority in the
distribution of the sale proceeds and are entitled to receive, in the
aggregate, a distribution of $108.2 million, or $18.00 per share.
After payment in full of such amount to the class A common
shareholders, our class B subordinated shareholder will be entitled to
receive, in the aggregate, a distribution of up to $62.3 million, or
$16.40 per share. Following these distributions, after payment of
$13.9 million to holders of options to purchase our class A common
shares, and the establishment of appropriate reserves for the
satisfaction of our other liabilities in connection with our
liquidation, our class C shareholder will be entitled to a
distribution of any remaining cash. Based on information available to
us as of November 12, 2001, assuming the close of the sale on or about
January 31, 2002, and assuming no unanticipated claims are presented
to us between the date hereof and the date of the liquidation, we will
make a distribution following the closing of the sale of $18.00 per
class A common share and $16.40 per class B subordinated share. Based
on information available to us as of November 12, 2001, we anticipate
that our class C shareholder is likely to receive a distribution, in
the aggregate, of approximately $9.1 million, consisting of
approximately $6.1 million following the closing of the sale and
approximately $3.0 million following our liquidation. Following the
distributions described above to our class A common shareholders and
class B subordinated shareholder and the initial distribution to our
class C shareholder, we anticipate that by December 31, 2002, we will
be liquidated in accordance with our articles of incorporation and
Netherlands Antilles law. Our shares will remain outstanding and their
holders will continue to be shareholders of us until we are
liquidated.
-7-
o The proposed amendments to our articles of incorporation add new
provisions and amend existing provisions that address the distribution
of proceeds from a sale of the Subsidiaries as a going concern
followed by our liquidation. Currently, the provisions in our articles
of incorporation which would likely apply to such a transaction,
assuming that we were able to receive the requisite approval from our
shareholders, are provisions that address distributions from operating
surplus and interim capital transactions, as well as provisions
relating to our liquidation. Based on information available to us as
of November 12, 2001, assuming the close of the sale on or about
January 31, 2002, the following table sets forth the estimated
distribution per class A common share, class B subordinated share and
class C share that would be received under (1) the relevant provisions
of our current articles of incorporation covering our liquidation
followed by a liquidating distribution (assuming we could obtain the
requisite shareholder approval), (2) the relevant provisions of our
current articles of incorporation covering an interim capital
transaction followed by our liquidation (assuming we could obtain the
requisite shareholder approval), and (3) our articles of
incorporation, as amended:
Estimated Distribution per Share under
our Current Articles of Incorporation
-------------------------------------- Estimated Distribution
Liquidation Interim Capital per Share under our
Followed by a Transaction Articles of
Liquidating Followed by our Incorporation, as
Distribution Liquidation Amended
-------------- ---------------- ----------------------
Class A common share $21.60 $ 19.11 $ 18.00
Class B subordinated share 11.99 16.68 16.40
Class C share - - 238.35
o In the event that the requisite majority of our shareholders vote to
adopt the amendments to our articles of incorporation, but do not
approve the sale of the Subsidiaries followed by our liquidation, the
amendments will become part of our articles of incorporation, but will
not be relevant, since the sale of the Subsidiaries will not take
place and no proceeds from the sale will be distributed to our
shareholders.
o The payment of the target quarterly distribution for the quarter
ending December 31, 2001, will be subject to the decision of our board
of directors, which will be made pursuant to the tests contained in
our current articles of incorporation. We do not anticipate paying or
accumulating further arrearages of target quarterly distributions
following the $18.00 distribution to our class A common shareholders
because we do not expect to meet the tests for such payment contained
in our articles of incorporation.
o The $18.00 distribution per class A common share following the closing
of the sale will eliminate all arrearages in target quarterly
distributions that have accumulated prior to the date of the
distribution. As of the date of this proxy statement, the amount of
arrearages that have accumulated in favor of the class A common shares
is $1.60 per share. The $16.40 distribution per class B subordinated
share following the closing of the sale will eliminate all deferred
distributions that have accrued in favor of our class B subordinated
shares. As of the date of this proxy statement, the amount of deferred
distributions that has accrued in favor of the class B subordinated
shares is $0.77 per share.
See "SPECIAL FACTORS--Effects of the Proposed Resolutions."
Recommendation of our Board of Directors
o Our board of directors has unanimously determined that the adoption of
the proposed amendments to our articles of incorporation and the sale
of the Subsidiaries followed by a distribution of the sale proceeds
and our liquidation are advisable and in our best interests and the
best interests of all our shareholders and our employees. The board of
directors has unanimously determined that the distributions following
the sale of the Subsidiaries of $18.00 per class A common share and
$16.40 per class B subordinated share, and the anticipated aggregate
distribution of approximately $9.1 million to our class C shareholder
following the sale of the Subsidiaries and our liquidation, are fair
to our
-8-
shareholders. Accordingly, our board of directors has approved such
transaction and unanimously recommends that you vote "FOR" the
proposal to amend our articles of incorporation and the proposed sale
of the Subsidiaries followed by our liquidation. For a discussion of
the material factors considered by our board of directors in reaching
its conclusions and the reasons why it determined that the proposed
transaction is fair see "SPECIAL FACTORS--Reasons for the
Recommendations of our Board of Directors."
Opinion of Houlihan Lokey
o In connection with the sale of the Subsidiaries and subsequent
liquidation, our board of directors retained Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. ("Houlihan Lokey") to provide
independent financial advisory services and a financial fairness
opinion in connection with the amounts of the proposed distributions
to each of our class A common shareholders, class B subordinated
shareholder and class C shareholder following the sale and subsequent
liquidation. Houlihan Lokey delivered its opinion to the board of
directors on November 12, 2001, that, as of the date of the opinion
and based on and subject to the matters set forth in the opinion, the
consideration to be received by our class A common shareholders, class
B subordinated shareholder and class C shareholder in connection with
the sale of the Subsidiaries and our subsequent liquidation is fair to
each such class of shareholders from a financial point of view. The
Houlihan Lokey opinion was provided for the information of our board
of directors in their evaluation of the proposed transaction, and the
opinion is not intended to be, nor does it constitute, a
recommendation as to how any holder of shares should vote with respect
to the transaction.
o The full text of the written opinion of Houlihan Lokey is attached to
this proxy statement as Appendix C. We encourage you to read Houlihan
Lokey's opinion in its entirety for a description of the assumptions
made, matters considered and limitations on the review undertaken in
connection with that opinion.
Amendments to Articles of Incorporation
The material provisions of the proposed amendments to our articles of
incorporation are as follows:
o The amendments define the term "Sale Event" to mean a sale or other
voluntary disposition, in a single transaction, of all or
substantially all of our assets consisting of the capital stock of the
Subsidiaries. It is clarified that the provisions in our current
articles of incorporation concerning target quarterly distributions of
available cash and distributions following a liquidation do not apply
to distributions following a Sale Event.
o Any distribution of proceeds relating to a Sale Event shall be made in
the following manner:
o First, pro rata, to the holders of class A common shares, until
each outstanding class A common share has received a distribution
equal to $18.00;
o Second, pro rata, to the holders of class B subordinated shares,
until each outstanding class B subordinated share has received a
distribution equal to $16.40; and
o Third, pro rata, to the holders of class C shares, the balance
(A) minus (i) an amount equal to 20% of our authorized capital,
(ii) the amount necessary to satisfy our outstanding liabilities,
and (iii) any amounts payable by us pursuant to our 1999 Stock
Option Plan, and (B) plus or minus any amount required to adjust
the final purchase price paid in respect of the Sale Event. Our
authorized capital is currently $300,000.
o After complying with the requirements of Netherlands Antilles law and
assuming that our class A common shareholders and class B subordinated
shareholders have received distributions in the
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amounts set forth above, upon a liquidation following a Sale Event,
our remaining assets shall be distributed, pro rata, to the holders of
class C shares until no assets remain.
o It is clarified that any arrears in target quarterly distributions
that have accumulated in favor of the class A common shares and any
deferred distributions declared on the class B subordinated shares
will be eliminated by the distributions to such shareholders following
a Sale Event described above.
The Stock Purchase Agreement
o The Sale of the Subsidiaries
The stock purchase agreement provides that, upon the terms and subject
to the conditions set forth therein, we will sell to Kaneb all of the
outstanding capital stock of the Subsidiaries, which constitutes
substantially all of our assets. For additional information on the
closing see "THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--General."
o Consideration to be Received by Us
On the day of the closing, we will deliver to Kaneb the capital stock
of the Subsidiaries in exchange for Kaneb's delivering to us (a) an
amount equal to the aggregate of (i) $184,872,223 plus (ii) the amount
referred to as the estimated net cash amount, which is equal to the
amount by which (A) the aggregate of (1) the combined cash of the
Subsidiaries and their subsidiaries as of the close of business on the
day before the day of the closing, (2) $1,516,403, representing the
amount of the accruals from November 15, 2001, through December 31,
2001, for interest payable by any Subsidiary or any of their
respective subsidiaries pursuant to the 11 3/4% first mortgage notes
of Statia International N.V. and Statia Terminals Canada,
Incorporated, (3) the amount of the accruals from November 13, 2001,
through December 31, 2001, for interest payable by any Subsidiary or
any of their respective subsidiaries pursuant to the loan agreement
between Statia Marine, Inc. and Transamerica Equipment Financial
Services Corporation, and (4) the amount of any payments of principal
under such loan from November 13, 2001, through the day of the closing
exceeds (B) the aggregate of (1) the amount of the unpaid accruals
through and including the day of the closing for interest payable by
any Subsidiary or any of their respective subsidiaries pursuant to any
outstanding indebtedness for borrowed money, (2) the amount reserved
by us to pay taxes on the Island Territory of Sint Eustatius and the
Land Territory of the Netherlands Antilles and (3) indebtedness of any
of our subsidiaries for borrowed money (other than indebtedness for
borrowed money described in clause (a)(ii)(A)(3) or (a)(ii)(A)(4)
above and indebtedness for borrowed money owing to any of our other
subsidiaries) and (b) the contingent tax payment note in the form
provided in the stock purchase agreement.
Promptly, and no later than 45 calendar days, following the closing,
Kaneb will prepare and deliver to us a statement, prepared on the same
basis as the line item cash and cash equivalents within financial
statements prepared in accordance with U.S. generally accepted
accounting principles, of the amount of the combined cash and cash
equivalents of the Subsidiaries and their respective subsidiaries as
of the day of the closing. The statement will specify the amount by
which (i) the amount of such combined cash and cash equivalents
exceeds the estimated net cash amount, or (ii) the amount by which
such estimated net cash amount exceeds the amount of combined cash and
cash equivalents. After delivery of such statement, Kaneb will provide
us and our representatives with reasonable access during business
hours to the books and records of the Subsidiaries to verify the
determination by Kaneb of the amount of the combined cash and cash
equivalents. If we do not object in writing to the determination by
Kaneb within 10 business days after receiving Kaneb's statement, the
amount of the combined cash and cash equivalents of the Subsidiaries
provided by Kaneb will be deemed final and binding. If we do object in
writing within such period, we and Kaneb will try to agree upon the
determination of the amount of combined cash and cash equivalents
within five business days after such objection. If we are unable to
agree on the amount, we will submit the dispute to arbitration. The
arbitrator will reach a decision within 30 calendar days after the
submission of the dispute, and the arbitrator's decision will be final
and binding on each party. If the estimated net cash amount exceeds
-10-
the combined cash and cash equivalents amount, then we will be
obligated to pay to Kaneb the amount of such difference within three
business days. If the combined cash and cash equivalents amount
exceeds the estimated net cash amount, then Kaneb will be obligated to
pay to us the amount of such difference within three business days.
For additional information on the consideration to be received by us
see "THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--The Stock Purchase
Agreement--Consideration to be Received by Us."
o No Solicitation of Other Offers
In the stock purchase agreement, we have agreed that, other than in
respect of a Superior Proposal (as defined in "THE STOCK PURCHASE
AGREEMENT AND LIQUIDATION--The Stock Purchase Agreement--No
Solicitation of Other Offers"), neither we nor our representatives
will:
o have any discussions or negotiations that may be ongoing with any
person other than Kaneb regarding any Acquisition Proposal (as
defined in "THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--The
Stock Purchase Agreement--No Solicitation of Other Offers");
o knowingly encourage, initiate, facilitate or solicit any
Acquisition Proposal;
o enter into any agreement, arrangement or understanding regarding
any Acquisition Proposal;
o participate in any discussions or negotiations with, or furnish
or disclose information to, any person in connection with any
Acquisition Proposal;
o facilitate any inquiries or the making of any proposal that
constitutes or would reasonably be expected to lead to any
Acquisition Proposal; or
o grant any waiver or release under any standstill, confidentiality
or similar agreement entered into by us or any of our affiliates
or representatives, other than waivers or releases in the
ordinary course of business.
Unless otherwise provided by the stock purchase agreement, neither our
board of directors nor any of its committees will:
o withdraw, modify, or amend, in a manner adverse to Kaneb, either
the approval, adoption or recommendation of the stock purchase
agreement and the transactions contemplated thereby or the
approval by our shareholders of the relevant proposals; or
o approve or recommend any Acquisition Proposal.
We have agreed to keep Kaneb informed of the status of any proposals
and negotiations relating to an Acquisition Proposal. If we receive an
unsolicited Acquisition Proposal that did not result from a breach of
any of the agreements described above, then:
o we may furnish information to the person who made the unsolicited
Acquisition Proposal, if (i) such disclosure is made subject to a
confidentiality agreement, (ii) our board of directors determines
that such Acquisition Proposal is or is reasonably likely to lead
to a Superior Proposal, and (iii) after receipt of advice from
legal counsel, our board of directors determines that it is
necessary to take such action in order to comply with its
fiduciary duties; or
o if the Acquisition Proposal is a Superior Proposal and, after
receipt of advice from legal counsel, our board of directors
determines that it is necessary to take such action in order to
comply with its fiduciary duties, we may recommend to our
shareholders the Acquisition Proposal and withdraw or modify our
approval of the stock purchase agreement.
-11-
For additional information regarding the agreement not to solicit
other offers, see "THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--The
Stock Purchase Agreement--No Solicitation of Other Offers."
o Conditions to Closing
The obligation of Kaneb to purchase the shares on the day of the
closing is subject to a number of conditions, including, among others:
o there being no (1) order issued or law enacted by any
governmental authority that (A) prohibits or restrains the
consummation of the transactions contemplated by the stock
purchase agreement, (B) prohibits or restricts the ownership or
operation by the Subsidiaries or their respective subsidiaries or
by Kaneb of any material portion of the business or assets of the
Subsidiaries and their respective subsidiaries, taken as a whole,
or compels Kaneb or any of its affiliates or subsidiaries to
dispose of or hold separate any material portion of the business
or assets of the Subsidiaries and their respective subsidiaries,
taken as a whole, or that would substantially deprive the
Subsidiaries or their respective subsidiaries or Kaneb of the
benefit of ownership of the business or assets of the
Subsidiaries and their respective subsidiaries, taken as a whole,
(C) imposes material limitations on the ability of Kaneb
effectively to acquire or to hold or to exercise full rights to
vote the shares of the Subsidiaries on all matters presented to
the shareholders of the Subsidiaries, or (D) imposes any material
limitations on the ability of the Subsidiaries or their
respective subsidiaries or on Kaneb to control effectively the
business and operations of the Subsidiaries and their respective
subsidiaries, taken as a whole, and (2) the absence of any
injunction or other order issued by or any action by any
governmental authority seeking to prohibit or restrain the
consummation of the transactions contemplated by the stock
purchase agreement;
o our representations and warranties being true and correct, except
for such breaches as would not, in the aggregate, have a Company
Material Adverse Effect (as defined in "THE STOCK PURCHASE
AGREEMENT AND LIQUIDATION--The Stock Purchase
Agreement--Representations and Warranties"), provided that,
unless we have delivered to Kaneb, not later than December 15,
2001, a copy of the share register of each of our subsidiaries
that is organized under the laws of the Netherlands Antilles, in
each case certified by the requisite number of members of the
board of directors of such subsidiary, the representations and
warranties with respect to our capitalization must be true and
correct in all respects;
o our having performed and complied in all material respects with
all our obligations under the stock purchase agreement;
o no event, fact or circumstance existing, that, individually or in
the aggregate, has or could reasonably be expected to have a
Company Material Adverse Effect;
o neither our board of directors nor any committee thereof having
(1) withdrawn, modified or amended, in a manner adverse to Kaneb,
its approval, adoption or recommendation of the stock purchase
agreement or the transactions contemplated thereby, or (2)
approved any Acquisition Proposal;
o at the special general meeting of our shareholders, (1)
shareholders representing more than 66 2/3% of our class A common
shares and our class B subordinated shares, voting together as a
single class, at a meeting at which holders of at least one-half
of the issued and outstanding class A common shares and class B
subordinated shares, counted as a single class, are present or
represented, having approved and adopted the proposals that (A)
our articles of incorporation be amended to provide for the
distribution of the proceeds from the sale of the shares of the
capital stock of the Subsidiaries, (B) we sell to Kaneb all of
the shares of the capital stock of the Subsidiaries and (C) we be
dissolved pursuant to our articles of incorporation, as amended,
and (2) shareholders representing more than 66 2/3% of our class
A common shares, voting as a separate
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class, at a meeting at which holders of at least one-half of the
issued and outstanding class A common shares are present or
represented, having approved and adopted the proposal to amend
our articles of incorporation; and
o all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act with respect to the transactions
contemplated by the stock purchase agreement having expired or
been terminated.
Our obligation to sell the shares on the day of the closing is subject
to a number of conditions, including the following:
o there being no injunction or other order issued or law enacted by
any governmental authority prohibiting or restraining the
consummation of the transactions contemplated by the stock
purchase agreement, or seeking to prohibit or restrain the making
or consummation of the transactions contemplated by the stock
purchase agreement;
o Kaneb's representations and warranties being true and correct,
except for such breaches as would not, in the aggregate, have a
Purchaser Material Adverse Effect (as defined in "THE STOCK
PURCHASE AGREEMENT AND LIQUIDATION--The Stock Purchase
Agreement--Representations and Warranties");
o Kaneb's having performed and complied in all material respects
with all of its obligations under the stock purchase agreement;
o no event, fact or circumstance existing, that, individually or in
the aggregate, has or could reasonably be expected to have a
Purchaser Material Adverse Effect;
o at the special general meeting of our shareholders, (1)
shareholders representing more than 66 2/3% of our class A common
shares and our class B subordinated shares, voting together as a
single class, at a meeting at which holders of at least one-half
of the issued and outstanding class A common shares and class B
subordinated shares, counted as a single class, are present or
represented, having approved and adopted the proposals that (A)
our articles of incorporation be amended to provide for the
distribution of the proceeds from the sale of the shares of the
Subsidiaries, (B) we sell to Kaneb all of the shares of the
capital stock of the Subsidiaries and (C) we be dissolved
pursuant to our articles of incorporation, as amended, and (2)
shareholders representing more than 66 2/3% of our class A common
shares, voting as a separate class, at a meeting at which holders
of at least one-half of the issued and outstanding class A common
shares are present or represented, having approved and adopted
the proposal to amend our articles of incorporation; and
o all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act with respect to the transactions
contemplated by the stock purchase agreement having expired or
been terminated.
For additional information regarding the conditions of each
party's obligation to close the sale see "THE STOCK PURCHASE
AGREEMENT AND LIQUIDATION--The Stock Purchase
Agreement--Conditions to Closing."
o Termination
The stock purchase agreement may be terminated at any time prior to
the closing by the consent of both us and Kaneb.
Either we or Kaneb may terminate the stock purchase agreement if:
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o a governmental entity issues a nonappealable final order
permanently restraining, restricting or prohibiting the sale of
the shares of the Subsidiaries pursuant to the stock purchase
agreement;
o at the special general meeting of our shareholders, the
shareholders do not approve the proposals that (1) our articles
of incorporation be amended to provide for the distribution of
the proceeds from the sale of the shares of the Subsidiaries, (2)
we sell to Kaneb all of the shares of the capital stock of the
Subsidiaries, and (3) we be dissolved pursuant to our articles of
incorporation, as amended; or
o at any time after April 30, 2002, if the closing shall not have
occurred by such date other than as a result of (x) a breach of
the stock purchase agreement by Kaneb, if Kaneb is the party
attempting to terminate it, or (y) a breach of the stock purchase
agreement by us, or a breach by Statia Terminals Holdings of its
obligations under the voting and option agreement, if we are the
party attempting to terminate the stock purchase agreement.
We may terminate the stock purchase agreement if a Superior Proposal
is received and our board of directors reasonably determines in good
faith, after receiving advice from our Netherlands Antilles counsel,
that it is necessary to terminate the stock purchase agreement and
enter into an agreement to effect the Superior Proposal in order to
satisfy the fiduciary duties of the board of directors, and (1) prior
to such termination Kaneb has received from us $8,000,000 by wire
transfer of immediately available funds, and (2) simultaneously or
substantially simultaneously with such termination we enter into a
definitive acquisition, merger, stock purchase, asset purchase or
similar agreement to effect the Superior Proposal.
Kaneb may terminate the stock purchase agreement if:
o we withdraw, modify or amend, in a manner adverse to Kaneb, the
approval, adoption or recommendation, as the case may be, of the
proposals that we (A) amend our articles of incorporation to
provide for the distribution of the proceeds from the sale of the
shares of the Subsidiaries, (B) sell to Kaneb all of the shares
of the capital stock of the Subsidiaries, and (C) be dissolved
pursuant to our articles of incorporation, as amended;
o our board approves or recommends any Acquisition Proposal, or
solicits other offers; or
o Statia Terminals Holdings breaches its obligations under the
voting and option agreement.
Upon termination, the stock purchase agreement will become void and
there will be no liability on the part of either party except that the
provisions of the stock purchase agreement dealing with
confidentiality, fees and expenses, the effect of termination and
amendment to the stock purchase agreement shall survive any
termination. However, neither party will be relieved from any
liability for any breach of the stock purchase agreement.
For additional information regarding the ability of the parties to
terminate the stock purchase agreement see "THE STOCK PURCHASE
AGREEMENT AND LIQUIDATION--The Stock Purchase Agreement--Termination."
o Fees and Expenses on Termination
If the stock purchase agreement is terminated:
o by us if we received a Superior Proposal, we must pay to Kaneb a
fee of $8,000,000 in immediately available funds immediately
prior to our entering into an agreement with respect to the
Superior Proposal;
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o by Kaneb if we (1) approved or recommended an Acquisition
Proposal, or (2) withdrew the recommendation of the proposals
that (A) our articles of incorporation be amended to provide for
the distribution of the proceeds from the sale of the shares of
the Subsidiaries, (B) we sell to Kaneb all of the shares of the
capital stock of the Subsidiaries and (C) we be dissolved
pursuant to our articles of incorporation, as amended, we must
pay to Kaneb a fee of $8,000,000; or
o by Kaneb or by us if at the special general meeting of
shareholders, the shareholders do not approve the proposals that
(1) our articles of incorporation be amended to provide for the
distribution of the proceeds from the sale of the shares of the
Subsidiaries, (2) we sell to Kaneb all of the shares of the
capital stock of the Subsidiaries and (3) we be dissolved
pursuant to our articles of incorporation, as amended, we must
pay to Kaneb in immediately available funds on the day next
succeeding the date of such termination, an amount equal to the
out-of-pocket expenses incurred by Kaneb in connection with the
preparation of its bid for, and due diligence of, the
Subsidiaries and their respective subsidiaries, negotiation and
execution of its obligations under the stock purchase agreement,
and preparation for consummation of the transactions contemplated
by the stock purchase agreement, such amount not to exceed
$500,000.
For additional information regarding the fees and expenses that must
be paid by us under certain circumstances see "THE STOCK PURCHASE
AGREEMENT AND LIQUIDATION--The Stock Purchase Agreement--Fees and
Expenses on Termination."
o Amendment to the Stock Purchase Agreement
The stock purchase agreement may be amended by the parties thereto
only in writing, by action taken by, on behalf of, or at the direction
of their board of directors or general partner, as applicable, subject
to applicable law.
For additional information regarding the ability of the parties to
amend the stock purchase agreement see "THE STOCK PURCHASE AGREEMENT
AND LIQUIDATION--The Stock Purchase Agreement--Amendment to the Stock
Purchase Agreement."
The Voting and Option Agreement
Upon the terms and subject to the conditions of the voting and option
agreement, Statia Terminals Holdings, which is controlled by Castle Harlan
Partners II, has granted to Kaneb an option to purchase all of our shares
that it beneficially owns and agreed to vote those shares in favor of
approval of the stock purchase agreement. For additional information on the
voting and option agreement see "THE STOCK PURCHASE AGREEMENT AND
LIQUIDATION--The Voting and Option Agreement."
o Voting
Statia Terminals Holdings has agreed that during the period starting
on the date of the voting and option agreement and ending on the date
of the termination of such agreement, at any meeting of the holders of
any class of our capital stock, it shall vote the 3,800,000 class B
subordinated shares it owns, the 38,000 class C shares it owns and any
other shares of our capital stock that it may acquire prior to the
termination of the voting and option agreement (1) subject to the vote
in favor of the amendments to our articles of incorporation by more
than 66 2/3% of the holders of our class A common shares, voting as a
separate class, at a meeting at which at least one-half of the issued
and outstanding class A common shares are present or represented, in
favor of approval and adoption of (A) the stock purchase agreement,
(B) the sale of the Subsidiaries and each of the other transactions
contemplated by the stock purchase agreement and (C) the amendments to
our articles of incorporation contemplated thereby, (2) against any
action or agreement that would result in a breach (A) by us of any
covenant, representation or warranty in the stock purchase agreement,
or (B) by Statia Terminals Holdings of any covenant, representation or
warranty in the voting and option agreement, and (3) except as
otherwise agreed to in writing in advance by Kaneb, against the
following actions: (A) any extraordinary
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corporate transaction, such as a merger, involving us or any of our
subsidiaries resulting from any Acquisition Proposal, (B) a sale,
lease or transfer of a significant part of our assets or of the assets
of any of our subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation involving us or any of our subsidiaries,
and (C) any change in our present capitalization, any amendment to our
articles of incorporation, any other material change in our corporate
structure or business or any other action involving us or any of our
subsidiaries that could impede or adversely affect the transactions
contemplated by either the voting and option agreement or the stock
purchase agreement.
For additional information regarding the voting obligation of Statia
Terminals Holdings, see "THE STOCK PURCHASE AGREEMENT AND
LIQUIDATION--The Voting and Option Agreement--Voting."
o Purchase Option
The voting and option agreement provides that Statia Terminals
Holdings will grant to Kaneb an irrevocable option (the "Option") to
purchase (i) the 3,800,000 class B subordinated shares owned by Statia
Terminals Holdings, at a purchase price equal to $16.40 per share,
(ii) the 38,000 class C shares owned by Statia Terminals Holdings, at
a purchase price equal to $232.89 per share and (iii) any other shares
of our capital stock that Statia Terminals Holdings may acquire prior
to the termination of the voting and option agreement, but only if a
triggering event occurs. A triggering event will be deemed to occur if
(1) the stock purchase agreement becomes terminable under
circumstances that would entitle Kaneb to termination fees pursuant to
the stock purchase agreement, (2) an Acquisition Proposal is made by
any person (other than Kaneb), or (3) any person other than Kaneb
acquires or proposes to acquire more than 15% of any class or series
of our capital stock, or is granted an option to acquire beneficial
ownership of more than 15% of any class or series of our capital
stock. Statia Terminals Holdings will promptly notify Kaneb in writing
of the occurrence of any triggering event. The Option is not
exercisable until (i) all waiting periods under any antitrust laws
have expired or been waived and (ii) there is not then in effect an
order issued by any governmental entity prohibiting the exercise of
the Option. If a triggering event occurs when the Option is not
exercisable, the Option shall be exercisable until the expiration of
the 20 business day period commencing on the first date that such
circumstances do not exist.
The voting and option agreement provides that if there is a change in
the outstanding number of class B subordinated shares or class C
shares due to a stock split, merger or similar transaction, the type
and number of shares purchasable upon the exercise of the Option and
the purchase price for such shares will be adjusted appropriately.
The Option will terminate upon the earlier of: (a) termination of the
stock purchase agreement, other than any termination upon or during a
continuation of a triggering event, and (b) 60 days following any
termination of the stock purchase agreement upon or during the
continuation of a triggering event, unless the Option cannot be
exercised because of a judgment, decree, order, law or regulation that
applies to it, in which case the Option shall terminate 20 business
days after such impediment to exercise has been removed.
For additional information regarding the purchase option, see "THE
STOCK PURCHASE AGREEMENT AND LIQUIDATION--The Voting and Option
Agreement--Purchase Option."
o Subsequent Sale of Shares
Pursuant to the voting and option agreement, if Kaneb has exercised
the Option and, at any time prior to the earlier of (1) the second
anniversary of the exercise of the Option and (2) the date on which
Kaneb acquires the shares of the Subsidiaries, (i) we consummate or
agree to consummate a business combination, (ii) Kaneb or any of its
affiliates disposes or agrees to dispose of any or all of (A) our
class B subordinated shares, (B) our class C shares or (C) other
shares of our capital stock that Statia Terminals Holdings acquires
prior to the termination of the voting and option agreement, to any
person
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other than Kaneb or any of its affiliates, or (iii) Kaneb or any of
its affiliates realizes proceeds following (A) any extraordinary
corporate transaction, such as a merger, involving us or any of our
subsidiaries resulting from any Acquisition Proposal or (B) a sale,
lease or transfer of a significant part of our assets or of the assets
of any of our subsidiaries, then Kaneb or the relevant affiliate
shall, upon consummation, promptly pay to Statia Terminals Holdings an
amount equal to the product of (x) the amount by which the new price
exceeds the relevant exercise price, multiplied by (y) the number of
class B subordinated shares or, as the case may be, class C shares,
that were disposed of pursuant to a business combination or a sale to
any person other than Kaneb or its affiliates.
For additional information regarding the subsequent sale of shares,
see "THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--The Voting and
Option Agreement--Subsequent Sale of Shares."
o Amendments
The voting and option agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by all of
the parties thereto.
For additional information regarding amendments to the voting and
option agreement, see "THE STOCK PURCHASE AGREEMENT AND
LIQUIDATION--The Voting and Option Agreement--Amendments."
o Termination
The voting and option agreement shall terminate, and neither we, nor
Kaneb, nor Statia Terminals Holdings shall have any rights or
obligations under it and it shall become null and void and have no
effect upon the earliest to occur of (a) the date on which the stock
purchase agreement is terminated by Kaneb in accordance with its
terms, (b) the date on which the shares of the Subsidiaries are
purchased by Kaneb pursuant to the stock purchase agreement, (c) the
date on which the class B subordinated shares and the class C shares
are purchased pursuant to the Option and (d) the consent of Kaneb and
Statia Terminals Holdings.
For additional information regarding the termination of the voting and
option agreement, see "THE STOCK PURCHASE AGREEMENT AND
LIQUIDATION--The Voting and Option Agreement--Termination."
Liquidation and Appointment of Liquidators
o Our board of directors unanimously approved our proposed liquidation
at a meeting held on November 12, 2001, subject to shareholder
adoption at the special general meeting of a resolution that we
dissolve and liquidate. Under our articles of incorporation, adoption
of such a resolution requires the affirmative vote of at least 66 2/3%
of all votes cast at the special general meeting, provided that at
least one-half of our outstanding class A common shares and class B
subordinated shares, counted as a single class, are present or
represented at such meeting. Pursuant to this resolution, our
shareholders appoint our board of directors to act as our liquidator.
We anticipate that by December 31, 2002, we will be liquidated in
accordance with our articles of incorporation and Netherlands Antilles
law. For additional information regarding our liquidation and the
appointment of liquidators see "THE STOCK PURCHASE AGREEMENT AND
LIQUIDATION--Dissolution and Liquidation."
Material Netherlands Antilles Tax Consequences
o Under the laws of the Netherlands Antilles as currently in effect, a
holder of our class A common shares who is not a resident or deemed to
be a resident of, and during the taxable year has not engaged in trade
or business through a permanent establishment, permanent
representative or agent in, the
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Netherlands Antilles will not be subject to Netherlands Antilles
income tax on the receipt of the distribution of proceeds from the
sale of the Subsidiaries; nor will the Netherlands Antilles impose a
withholding tax on such distributions. For additional information
regarding material Netherlands Antilles tax consequences of the sale
and liquidation to our shareholders see "SPECIAL FACTORS--Material
Netherlands Antilles Tax Consequences of the Proposed Transaction to
our Shareholders."
Material U.S. Federal Income Tax Consequences
o If you are a U.S. shareholder holding our class A common shares as a
capital asset, your receipt of the distribution of proceeds from the
sale of the Subsidiaries will qualify as the receipt of liquidating
distributions for U.S. federal income tax purposes and generally will
give rise to capital gain or loss equal to the difference between the
amount of the liquidation proceeds received and the tax basis of your
shares, subject to the discussion regarding qualified electing fund
elections under "SPECIAL FACTORS--Material U.S. Federal Income Tax
Consequences of the Proposed Transaction to our Shareholders--Sale of
Subsidiaries, Liquidation, and Passive Foreign Investment Company
Considerations--Passive Foreign Investment Company Considerations."
For additional information regarding material U.S. federal income tax
consequences of the sale and liquidation to our shareholders see
"SPECIAL FACTORS--Material U.S. Federal Income Tax Consequences of the
Proposed Transaction to our Shareholders."
Interests of our Directors and Executive Officers in the Proposed Transaction
o In considering the recommendation of our board of directors with
respect to the amendments to our articles of incorporation, the sale
of the Subsidiaries and our subsequent liquidation, you should be
aware that our directors and executive officers have various interests
in the amendments, and in the sale and liquidation described in this
section that are in addition to, or different from, the interests of
our shareholders generally and potentially create conflicts of
interest. See "SPECIAL FACTORS--Interests of Directors and Officers in
the Transaction."
o Some of our directors and all of our executive officers own options to
purchase our class A common shares. These options will become fully
vested immediately prior to the sale of the Subsidiaries. Our
directors and executive officers will be entitled to receive cash
payments equal to the difference between $18.00 and the per share
exercise price of such options, referred to as the "spread", reduced
by applicable withholding tax. Our directors and executive officers
hold options to purchase, in the aggregate, 979,000 class A common
shares and the aggregate spread for such shares is $12.2 million. See
"SPECIAL FACTORS--Interests of Directors and Officers in the
Transaction--Options."
o Each of our six executive officers is party to an employment agreement
among us, our subsidiary, Statia Terminals, Inc., and that executive
officer. Statia Terminals, Inc. is one of the Subsidiaries that will
be sold to Kaneb pursuant to the stock purchase agreement. Under the
terms of each employment agreement, upon the consummation of the sale
of the Subsidiaries, each of our executive officers will be entitled
to receive a one-time cash payment. The aggregate amount of the cash
payments expected to be paid to our executive officers upon the
consummation of the sale is $4.1 million. See "SPECIAL
FACTORS--Interests of Directors and Officers in the
Transaction--Employment Agreements."
o In the event that the employment of an executive officer is terminated
by Statia Terminals, Inc. without substantial cause or by the officer
for good reason following the sale of the Subsidiaries, the executive
officer is entitled to receive a lump sum cash payment on the date of
termination representing the base salary and annual bonus otherwise
payable to such executive officer for the remainder of his employment
term in effect on the date of termination, but in no event less than
one year's base salary and annual bonus. The annual base salaries of
our executive officers range from $165,000 to $310,000 and the target
annual bonuses range from $123,750 to $232,500 subject to our
attaining earnings targets. In addition, each executive officer is
entitled to outplacement services at the expense of Statia Terminals,
Inc. and the continuation of medical and dental benefits, and certain
other benefits and
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perquisites for the remainder of his employment term in effect on the
date of termination, but in no event for less than one year. Upon the
closing of the sale of the Subsidiaries, Statia Terminals, Inc. is
required to make an irrevocable contribution to a grantor trust in an
amount sufficient to pay all current and future premiums under certain
life insurance policies covering James G. Cameron, one of our
directors, and Chairman of the Board and President of Statia
Terminals, Inc. See "SPECIAL FACTORS--Interests of Directors and
Officers in the Transaction--Employment Agreements."
o Pursuant to a resolution of our board of directors, upon the closing
of the sale, we will forgive $1.0 million of outstanding indebtedness
owed to us by our executive officers in respect of loans that we made
to such executive officers in April 1999. The funds provided by these
loans, together with funds provided by our executive officers, were
used by the executive officers to acquire our class B subordinated
shares.
o After giving effect to the proposed resolution to amend our articles
of incorporation, based on information available to us as of November
12, 2001, assuming the closing of the sale on or around January 31,
2002, it is anticipated that the aggregate distribution upon the sale
of the Subsidiaries and our liquidation will be $16.40 per class B
subordinated share and $238.35 per class C share. The aggregate amount
of the distributions that our directors and officers will receive in
respect of the class B subordinated shares and class C shares that
they own, directly or indirectly, is expected to be $71.4 million
under our articles of incorporation, after giving effect to the
proposed resolution to amend our articles of incorporation, compared
to (1) $45.5 million under the relevant provisions of our current
articles of incorporation covering our liquidation followed by a
liquidating distribution, and (2) $63.4 million under the relevant
provisions of our current articles of incorporation covering an
interim capital transaction followed by our liquidation, in each case,
assuming that the sale were to be approved under the relevant
provisions of our current articles of incorporation. By virtue of his
control position with Castle Harlan Partners II, our director, John K.
Castle, may be deemed to be the beneficial owner of all of our class B
subordinated shares and our class C shares. The foregoing amounts
include distributions payable to Castle Harlan Partners II which Mr.
Castle disclaims except to the extent of his pro rata partnership
interest in Castle Harlan Partners II. See "SPECIAL FACTORS--Interests
of Directors and Officers in the Transaction--Ownership of Our
Shares."
o Each of our directors and executive officers owns, directly or
indirectly, class A common shares, class B subordinated shares or
class C shares. In connection with the sale of the Subsidiaries and
subsequent liquidation, based on information available to us as of
November 12, 2001, excluding any payments in respect of options they
own, it is anticipated that our directors and executive officers will
receive aggregate distributions of $71.9 million with respect to the
class A common shares, class B subordinated shares and class C shares
that they own, after giving effect to the resolution to amend our
articles of incorporation. The foregoing amounts include distributions
payable to Castle Harlan Partners II which Mr. Castle disclaims except
to the extent of his pro rata partnership interest in Castle Harlan
Partners II. See "SPECIAL FACTORS--Interests of Directors and Officers
in the Transaction--Ownership of Our Shares."
o The stock purchase agreement requires that indemnification
arrangements and directors' and officer's liability insurance for any
former or current officer or director of any of our subsidiaries will
be continued by Kaneb following the date of the consummation of the
sale for a period of six years. In addition, the stock purchase
agreement provides that Kaneb will indemnify and hold harmless any
former or current officer or director of any of our subsidiaries
against any losses in connection with any threatened or actual action,
suit or proceeding, based in whole or in part on, or arising in whole
or in part out of, the fact that the person is or was an officer or
director of any of our subsidiaries. See "SPECIAL FACTORS--Interests
of Directors and Officers in the Transaction--Indemnification."
o Castle Harlan Partners II controls Statia Terminals Holdings which
beneficially owns 100% of the outstanding class B subordinated shares,
comprising 38.7% of our outstanding voting securities, and 100% of our
outstanding class C shares. Certain of our directors control or are
affiliated with Castle
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Harlan Partners II. See "SPECIAL FACTORS--Interests of Directors and
Officers in the Transaction--Affiliations of Certain Directors with
Castle Harlan."
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FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
This proxy statement contains statements related to future events, which
are forward-looking statements. Forward-looking statements involve risks and
uncertainties, including the impact of competitive products and services and
pricing of such products or services, changing market conditions; and risks
which are detailed from time to time in our publicly filed documents, including
our Annual Report on Form 10-K for the period ended December 31, 2000, and
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001, June, 30,
2001, and September 30, 2001. Actual results may differ materially from those
projected. These forward-looking statements represent the judgment of our board
of directors as of the date of this proxy statement. Any references to Private
Securities Litigation Reform Act in our publicly filed documents which are
incorporated by reference into this proxy statement are specifically not
incorporated by reference into this proxy statement.
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INTRODUCTION
We are furnishing this proxy statement to you in connection with the
solicitation of proxies by our board of directors for a special general meeting
of shareholders to be held on [__________], 2002, at 10:00 a.m. local time, at
the Curacao Marriott Beach Resort, Queen's Ballroom A, John F. Kennedy
Boulevard, Piscadera Bay, Curacao, Netherlands Antilles, or at any adjournment
of the special general meeting. Our class A common shares, par value $0.01 per
share, and class B subordinated shares, par value $0.01 per share, present or
represented by properly executed proxies received by us will be voted at the
special general meeting or any adjournment of the special general meeting in
accordance with the terms of such proxies, unless revoked.
Proposals to be Considered at the Special General Meeting
At the special general meeting, you will be asked to consider and to vote
on the following proposals:
1. To adopt amendments to our articles of incorporation (i) to add a
provision with respect to the distribution to our shareholders of the
proceeds from a sale of all or substantially all of our assets,
consisting of the capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc. and Statia
Marine, Inc. (collectively, the "Subsidiaries"), and (ii) to add new
provisions and adjust existing provisions with respect to the
distribution to our shareholders of our remaining assets upon our
liquidation after such a sale; and
2. To (i) approve a stock purchase agreement with Kaneb Pipe Line
Operating Partnership, L.P. ("Kaneb") pursuant to which we will sell
to Kaneb substantially all of our assets, consisting of all of the
outstanding capital stock of the Subsidiaries, followed by a
distribution to our shareholders of substantially all of the proceeds
of such sale in accordance with the terms of our articles of
incorporation, as amended, and (ii) adopt our liquidation and the
distribution of our remaining assets to our shareholders in accordance
with our articles of incorporation, as amended.
Appendix A to this proxy statement sets forth an English translation
containing substantially the form of the proposed Dutch language amendments to
our articles of incorporation. A copy of the stock purchase agreement between
Kaneb and us is attached as Appendix B to this proxy statement. We encourage you
to read each of these documents in its entirety. In addition, the text of the
proposed resolutions is available, without charge, upon request to our proxy
solicitation agent, Morrow & Co., Inc., located at 445 Park Avenue, New York, NY
10022; Telephone: (212) 754-8000; Call Toll-Free: (800) 654-2468.
If the resolutions are adopted and approved, we will sell the Subsidiaries
and liquidate as follows:
o In consideration for the aggregate payment at the closing by Kaneb of
approximately $308.0 million (based on our projections as of November
12, 2001), including cash on hand and assumption at the closing of
approximately $106.9 million of indebtedness (based on our projections
as of November 12, 2001), we will sell to Kaneb all of the outstanding
capital stock of the Subsidiaries. Subject to receipt of approval of
the amendments to our articles of incorporation by the Ministry of
Justice in the Netherlands Antilles, which we expect to receive
shortly after the special general meeting, we anticipate that the sale
will be closed within five business days following receipt of
shareholder approval of all of the proposed resolutions.
o At the end of trading on the day on which the sale is closed, we
intend to terminate the listing of our class A common shares on the
Nasdaq National Market and to instruct our transfer agent,
Computershare Investor Services LLC, to close its share transfer books
and discontinue recording transfers of class A common shares as of
such date.
o We anticipate that shortly after the closing of the sale, a
distribution of $18.00 will be made in respect of each class A common
share and $16.40 in respect of each class B subordinated share, and,
based on information available to us as of November 12, 2001, an
initial aggregate distribution of $6.1 million will be made to our
class C shareholder. In addition, we will pay an aggregate of $13.9
million to
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holders of options to purchase our class A common shares in
consideration for the surrender of those options.
o The consideration paid to us by Kaneb is subject to adjustment based
on the value of the combined cash of the Subsidiaries and their
subsidiaries as of the effective date of the sale. Under the stock
purchase agreement, payment of any adjustment to the consideration by
us or Kaneb is to occur between approximately 30 and 85 days following
the sale of the Subsidiaries, depending on whether either party
contests the amount of the adjustment. Under Netherlands Antilles law,
we are required to satisfy our liabilities prior to, or arising in
connection with, our liquidation. We plan to establish reserves equal
to $3.0 million for payment of any adjustment to the consideration
paid by Kaneb and for the satisfaction of any other liabilities.
o We anticipate that by December 31, 2002, we will be liquidated in
accordance with our articles of incorporation and Netherlands Antilles
law at which time we will distribute our remaining cash to our class C
shareholder.
Voting Rights
Holders of record of our class A common shares and class B subordinated
shares outstanding at the close of business on [__________] referred to as the
"record date", are entitled to notice of and to vote at the special general
meeting. On that date, there were 6,013,253 class A common shares outstanding
and 3,800,000 class B subordinated shares outstanding. All of the class B
subordinated shares are beneficially owned by Castle Harlan Partners II. Each of
the class A common shareholders and class B subordinated shareholder is entitled
to one vote per share held on all matters presented at the special general
meeting. Holders of record of our class C shares are entitled to notice of, and
to attend and address, the special general meeting, but not to vote at the
meeting. Any shareholder entitled to vote may vote either in person or by proxy.
Holders of one-half of the aggregate outstanding voting securities must be
present in person or by proxy to constitute a quorum for the special general
meeting to be held.
Quorum; Vote Required for Approval
The presence, in person or by proxy, of the holders of at least one-half of
the aggregate outstanding class A common shares and class B subordinated shares,
counted as a single class, as of the record date is necessary to constitute a
quorum at the special general meeting. Abstentions are counted for the purpose
of establishing a quorum present at this special general meeting. Broker
non-votes (i.e., shares held by brokers in "street name", voting on certain
matters due to discretionary authority or instructions from the beneficial
owner, but not voting on other matters due to lack of authority to vote on such
matters without instructions from the beneficial owner) will not be counted for
the purpose of establishing a quorum at the special general meeting. Votes will
be tabulated by our transfer agent, Harris Trust and Savings Bank.
Although our articles of incorporation do not require a separate vote of
the class A common shareholders, our board of directors has determined, in the
interest of fairness to the class A common shareholders, solely with respect to
the proposal to amend our articles of incorporation, to require the affirmative
vote of more than 66 2/3% of all votes cast by our class A common shareholders
at the special general meeting voting separately as a class, provided that at
least one-half of the outstanding class A common shares are present or
represented at such meeting. In the event that this majority vote of the class A
common shareholders is not obtained, Statia Terminals Holdings, which is
controlled by Castle Harlan Partners II and which beneficially owns 100% of the
outstanding class B subordinated shares, comprising 38.7% of our outstanding
voting securities, has indicated that it will vote the class B subordinated
shares against the proposal to amend our articles of incorporation and against
the proposal to sell the Subsidiaries and liquidate. In this event, the sale and
our subsequent liquidation will not take place because the approval by the
requisite majority of our shareholders will not have been received.
Following the vote by the class A common shareholders on the proposal to
amend our articles of incorporation, each proposed resolution, including the
proposal to amend our articles of incorporation, requires the affirmative vote
of more than 66 2/3% of all votes cast at the special general meeting, provided
that at least one-half
-23-
of our outstanding class A common shares and class B subordinated shares,
counted as a class, are present or represented at such meeting. Subject to the
receipt of the approval of the class A common shareholders of the proposal to
amend our articles of incorporation, Statia Terminals Holdings has agreed to
cause its shares to be voted in favor of the proposed resolutions.
We are incorporated in the Netherlands Antilles and, as required by the
laws thereof and our articles of incorporation, meetings of shareholders must be
held on an island of the Netherlands Antilles.
Each of our directors and executive officers has indicated that he intends
to vote his shares in favor of approval of the proposed resolutions. "See
SPECIAL FACTORS--Reasons for the Recommendations of the Board of Directors" and
"SPECIAL FACTORS--Interest of Executive Officers and Directors in the Proposed
Transaction."
Voting and Revocation of Proxies
The enclosed proxy is a means by which a shareholder may authorize the
voting of shares at the special general meeting. All shares represented by
proxies duly executed and received by us by the close of business on
[__________], 2002, will be voted at the special general meeting in accordance
with the terms of the proxies. If no instructions are indicated, such proxies
will be voted "FOR" the proposed resolutions and to adjourn the special general
meeting, if necessary.
The shareholder giving the proxy may revoke it by:
o submitting to the offices of Morrow & Co., Inc., 445 Park Avenue, New
York, NY 10022 (Telephone: (212) 754-8000; Toll-Free: (800) 654-2468),
on or before the business day prior to the special general meeting, a
later dated, signed proxy card or a written revocation of such proxy;
or
o explicitly revoking your proxy in writing prior to or at the special
general meeting (attendance at the special general meeting will not,
by itself, revoke your proxy).
If you attend the special general meeting and wish to vote in person, after
you have revoked any proxy previously given, we will give you a ballot when you
arrive. If your shares are held in the name of your broker, bank, or other
nominee, you must bring a letter from the broker, bank, or other nominee to the
special general meeting showing that you were the direct or indirect
(beneficial) owner of the shares on [__________].
Solicitation of Proxies
We will bear the expenses in connection with the solicitation of proxies.
Upon request, we will reimburse brokers, dealers and banks, or their nominees,
for reasonable expenses incurred in forwarding copies of the proxy material to
the beneficial owners of shares which such persons hold of record. Solicitation
of proxies will be made principally by mail. Proxies may also be solicited in
person, or by telephone or telegraph, by our officers and regular employees.
Such persons will receive no additional compensation for these services, but
will be reimbursed for any transaction expenses incurred by them in connection
with these services.
We have also retained Morrow & Co., Inc. for a fee of $12,500 plus
transaction expenses, to assist in the solicitation of proxies from
shareholders, including brokerage houses and other custodians, nominees and
fiduciaries.
We are mailing this proxy material to shareholders on or about
[___________], 2001.
-24-
SPECIAL FACTORS
Background of the Proposed Transaction
On May 10, 2001, John K. Castle, one of our directors and the controlling
stockholder of the general partner of Castle Harlan Partners II, approached
James G. Cameron, one of our directors, and Chairman of the Board and President
of Statia Terminals, Inc., regarding the desire of Castle Harlan Partners II to
sell its interest in us. Castle Harlan Partners II owns 62.9% of the outstanding
capital stock of Statia Terminals Holdings, which in turn owns all of our
outstanding class B subordinated shares and class C shares. The class B
subordinated shares comprise 38.7% of our outstanding voting securities.
On May 15, 2001, members of our senior management met with representatives
of our special counsel, White & Case LLP ("White & Case"), to discuss strategic
alternatives which would allow Castle Harlan Partners II to dispose of its
investment in us, including the sale of all of the outstanding shares of each
class of our capital stock.
During the period from May 15, 2001, through June 22, 2001, members of our
senior management and representatives of Castle Harlan Partners II continued to
discuss strategic alternatives with representatives of White & Case, as well as
representatives of our Netherlands Antilles counsel, Holland Van Gijzen, a
member firm of the Ernst & Young legal network. In addition, we interviewed
several investment banks to serve as our financial advisor to assist us in
evaluating and implementing the alternatives being discussed.
On June 22, 2001, we engaged Merrill Lynch & Co. ("Merrill Lynch") as our
financial advisor for such purpose, as it was agreed that Merrill Lynch had
given the most in-depth presentation. We decided, after discussions with our
legal advisors and Merrill Lynch, that the sale of all of the outstanding shares
of each class of our capital stock, in the form of a tender offer to our
shareholders, would be the best strategic alternative for us and our
shareholders as it would be the most fair and timely method of placing the
proceeds from such sale into the hands of our shareholders.
Subsequent to its engagement, Merrill Lynch contacted all those companies
which, in our view and Merrill Lynch's view, would likely have an interest in
acquiring us, would perceive the opportunity to acquire us as important to their
strategic objectives and thus would be willing to purchase us at the most
attractive price. In all, eight companies were formally contacted by Merrill
Lynch, including Kaneb.
During the period from July 27, 2001, through August 30, 2001, seven
companies, including Kaneb, entered into confidentiality agreements with us and
received a confidential offering memorandum prepared by us and Merrill Lynch.
During the period from August 16, 2001, through September 10, 2001, we
received initial indications of interest from each of the seven companies that
had received the confidential offering memorandum. One company submitted an
indication of interest containing terms, including a proposed purchase price,
which we did not believe warranted the further participation of that company in
the process.
During the period from August 30, 2001, through September 28, 2001, members
of our senior management met with representatives and members of management of
each of the remaining six participants in the process, including Kaneb. During
this same period, the six remaining participants, along with their respective
financial, accounting and legal advisors, conducted a due diligence review of
us.
On October 1, 2001, Merrill Lynch distributed final bid packages to each of
the six remaining participants. Each package included an acquisition agreement
to be entered into between us and the potential purchaser, as well as a tender
and option agreement to be entered into between Statia Terminals Holdings and
the potential purchaser. Pursuant to the acquisition agreement, the potential
purchaser would make a tender offer for all of the outstanding shares of each
class of our capital stock. Pursuant to the tender and option agreement, Statia
Terminals Holdings would agree to tender all of its class B subordinated shares
and class C shares into the offer of the potential purchaser. The potential
purchaser also would be entitled to exercise an option to purchase any of our
shares owned by Statia Terminals Holdings in the event a competing proposal was
made for us. The six remaining participants
-25-
were instructed to submit their final best offers by October 12, 2001. The
participants were also asked to submit proposed amendments to the acquisition
agreement and the tender and option agreement to reflect any changes that would
be required by them prior to execution of such agreements.
On October 12, 2001, Merrill Lynch received final bids from Kaneb and two
other potential purchasers. One of these other bids, delivered orally, was
deemed to be too low to warrant further discussions with the submitting party.
The second bid was at a lower purchase price than Kaneb's and involved
substantial additional conditions, although accepting the original tender offer
structure that we had proposed. The three participants not submitting final bids
provided various reasons for their respective decisions not to proceed.
On October 14, 2001, our board of directors held a telephonic meeting with
respect to the two remaining final bids. The initial bid from Kaneb proposed a
purchase price of $300 million (assuming that we were debt-free). Kaneb's bid,
however, rejected the tender offer structure originally proposed by us in favor
of purchasing the Subsidiaries. Kaneb expressed substantial concerns about its
ability to acquire 100% of our outstanding capital stock through the proposed
tender offer structure under Netherlands Antilles law. Our board of directors
instructed Merrill Lynch to contact Kaneb in order to, first, clarify the
economic terms of Kaneb's proposal, including whether Kaneb's proposal
contemplated adjusting the purchase price by the amount of any cash held by us
at the closing of a sale transaction; second, reaffirm the board of directors'
desire to proceed with the original tender offer structure; third, attempt to
eliminate features of Kaneb's proposed agreement that created uncertainty of
closing after the definitive agreement was signed; and fourth, make inquiries
regarding Kaneb's financing sources.
We instructed Merrill Lynch to contact the other bidder and its advisors
and inform it that its bid was too low and that its other conditions were
unacceptable. Merrill Lynch made contact with the other bidder's advisors on
October 15, 2001. The other bidder, through its advisors, indicated that it was
not willing to make any significant changes to its proposal. In light of this
fact, we decided not to pursue further discussions with this potential
purchaser.
Commencing on October 15, 2001, representatives of Merrill Lynch discussed
Kaneb's proposal with Edward D. Doherty, chief executive officer of Kaneb. Mr.
Doherty confirmed that the purchase price would be adjusted by the amount of
cash held by us at the closing of a transaction, net of certain interest accrued
on our indebtedness. Mr. Doherty, however, insisted that the cash adjustment be
reduced by approximately $8.1 million to reflect obligations of Statia
Terminals, Inc. with respect to certain employment arrangements with our senior
management. In addition, Kaneb required that our senior management agree to
certain amendments to their employment agreements prior to signing the stock
purchase agreement. Kaneb also provided evidence of its financing sources and
agreed to modify its proposed agreement in several areas which were deemed by us
to improve Kaneb's commitment to close the transaction. Kaneb, however, did not
agree to proceed with the tender offer structure proposed by us.
During the period from October 15, 2001, through October 31, 2001, Mr.
Doherty and representatives of Fulbright & Jaworski L.L.P. ("Fulbright &
Jaworski"), U.S. legal counsel to Kaneb, and Smeets Thesseling Van Bokhorst
N.V., Netherlands Antilles counsel to Kaneb, participated in various conference
calls with members of our senior management, White & Case and Holland Van Gijzen
with respect to the proposed transaction structure. Kaneb and its
representatives expressed concerns regarding Kaneb's ability to purchase at
least 95% of our outstanding securities through a tender offer, as would be
required in the Netherlands Antilles before Kaneb could cause us to implement a
mandatory buy-back of any securities not held by Kaneb.
On October 31, 2001, we agreed with Kaneb to pursue a transaction structure
whereby Kaneb would purchase the capital stock of the Subsidiaries. Under our
articles of incorporation, if Kaneb's proposed transaction were structured as a
sale of the capital stock of the Subsidiaries followed by our liquidation and a
subsequent distribution of the sale proceeds to our shareholders, the amounts
payable in respect of our class B subordinated shares and class C shares
differed substantially from the amounts that would have been paid in a tender
offer for our outstanding shares into which Statia Terminals Holdings would have
been willing to tender the class B subordinated shares and class C shares.
Castle Harlan Partners II, the controlling shareholder of Statia Terminals
Holdings, indicated that it would not vote in favor of a sale of the
Subsidiaries unless the transaction was structured so that the distribution of
sale proceeds preceded our dissolution and liquidation, and the distributions
reflected the value of the Subsidiaries as a going concern. Our board of
directors independently determined that the provisions in our articles
-26-
of incorporation relating to the distribution of proceeds from a sale of assets
were not intended to apply to a sale of the Subsidiaries as a going concern and
do not adequately provide for a fair distribution of the proceeds from such a
sale of the Subsidiaries. Under the proposed amendments to our articles of
incorporation, the distribution of sale proceeds would result in our
shareholders receiving cash in an amount equal to the amount such shareholders
would have received under an acceptable tender offer structure. As part of our
agreement with Kaneb on the new transaction structure, we insisted that it be an
additional condition of the sale that the proposed amendments to our articles of
incorporation be adopted by the holders of more than 66 2/3% of our class A
common shares at a special general meeting voting separately as a class,
provided that at least one-half of the outstanding class A common shares were
present or represented at such meeting.
From November 4, 2001, through November 11, 2001, members of our senior
management, representatives of Merrill Lynch, Kaneb and the respective legal
advisors of the parties continued to discuss the remaining outstanding issues
with respect to the acquisition of the Subsidiaries by Kaneb.
On November 6, 2001, we retained Houlihan Lokey Howard & Zukin Financial
Advisors, Inc. ("Houlihan Lokey") as independent financial advisors to opine as
to the fairness of the consideration to be received by each class of our
shareholders, including the class A common shareholders, in connection with the
distribution of the sale proceeds to be received by us following the sale of the
Subsidiaries.
On November 12, 2001, our board of directors met to discuss the proposed
sale of the Subsidiaries to Kaneb and heard presentations from its legal
advisors, Houlihan Lokey, and Merrill Lynch. Immediately prior to the board's
vote on the proposed transaction, at the request of the Chairman of our board of
directors, directors affiliated with Castle Harlan Partners II left the meeting
and did not vote on the proposals. Thereafter, the remaining members of our
board of directors, constituting the necessary quorum, unanimously approved the
stock purchase agreement and the transactions contemplated thereby, including
the amendment of our articles of incorporation and the distribution of the sale
proceeds to our shareholders followed by our liquidation. Members of our senior
management were authorized by our board of directors to negotiate any remaining
issues and execute the stock purchase agreement. Later that evening, the stock
purchase agreement was executed by us and Kaneb.
Opinion of Houlihan Lokey
Under the terms of an engagement letter, dated November 6, 2001, our board
of directors retained Houlihan Lokey as its independent financial advisor to
render a fairness opinion in connection with the amounts of the proposed
distributions to our class A common shareholders, class B subordinated
shareholder and class C shareholder pursuant to the sale of the Subsidiaries to
Kaneb and our subsequent liquidation. Houlihan Lokey delivered its opinion to
the board of directors on November 12, 2001, that, as of the date of the opinion
and based on and subject to the matters set forth in the opinion, the
consideration to be received by each of our class A common shareholders, class B
subordinated shareholder and class C shareholder in connection with the sale of
the Subsidiaries and our subsequent liquidation are fair to each such class of
shareholders from a financial point of view.
The full text of the written opinion of Houlihan Lokey, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken in connection with that opinion, is attached to this proxy statement
as Appendix C and is incorporated herein by reference. Our shareholders are
urged to, and should, read the opinion of Houlihan Lokey in its entirety. The
Houlihan Lokey opinion was provided for the information of our board of
directors in their evaluation of the transaction, and the opinion is not
intended to be, nor does it constitute, a recommendation as to how any holder of
our shares should vote with respect to the transaction.
In arriving at its opinion, Houlihan Lokey, among other things:
o interviewed key members of senior management concerning our business,
historical and future financial performance, and the transaction;
o interviewed representatives of our investment bankers, Merrill Lynch,
regarding the sale process;
o reviewed the stock purchase agreement between us and Kaneb;
-27-
o reviewed the rights and privileges of our class A common shareholders,
class B subordinated shareholder and class C shareholder;
o reviewed our filings with the Securities and Exchange Commission
including our Form 10-K for the fiscal years ended 1998, 1999 and
2000, and quarterly reports and Forms 10-Q for the years 2000 and
2001;
o reviewed the sale memorandum prepared by Merrill Lynch, dated July
2001;
o reviewed our financial model and forecasts for the period 2001 through
2006;
o reviewed our management presentation dated August 2001; and
o analyzed the industry, as well as the economic and competitive
environment in which we operate.
In rendering its opinion, Houlihan Lokey relied upon and assumed, without
independent verification, that the financial forecasts and projections provided
to it were reasonably prepared and reflect the best currently available
estimates of our future financial results and condition, and that there had been
no material change in our assets, financial condition, business or prospects
since the date of the most recent financial statements made available to it.
Houlihan Lokey did not independently verify the accuracy and completeness of the
information supplied to it with respect to us and does not assume any
responsibility with respect to such information. Houlihan Lokey did not make any
physical inspection or independent appraisal of any of our properties or assets.
Its opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by it at the date of the 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, is not susceptible to partial analysis or summary
descriptions. In arriving at its opinion, Houlihan Lokey made qualitative
judgments as to the significance and relevance of each analysis and factor
considered by it, and based on the results of all the analyses undertaken by it
and assessed as a whole. Houlihan Lokey did not draw conclusions, in isolation,
from or with regard to any one factor or method of analysis. Accordingly,
Houlihan Lokey believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
processes underlying the analyses set forth in its opinion.
In performing its analyses, Houlihan Lokey made numerous assumptions with
respect to industry performance, general business, financial, market and
economic conditions, and other matters, many of which are beyond our control. No
company, transaction or business used in those analyses as a comparison is
identical to us or our businesses or the sale, nor is an evaluation of the
results entirely mathematical. Rather, the analyses involve complex
considerations and judgments concerning financial and operating characteristics
and other factors that could affect the operating results, public trading or
other values of the companies or transactions being analyzed.
The estimates contained in the analyses performed by Houlihan Lokey 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 suggested by these analyses. In
addition, analyses relating to the value of securities do not purport to be
appraisals or to reflect the prices at which a business might actually be sold
or the prices at which any securities may trade at the present time or at any
time in the future.
The following is a summary of the material financial analyses used by
Houlihan Lokey in connection with the rendering of its opinion. The financial
analyses summarized below include information presented in tabular format. In
order to understand the financial analyses fully, the tables must be read
together with the text of each summary. Considering the data set forth below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the financial analyses.
-28-
Selected Comparable Public Company Analysis
Houlihan Lokey compared selected financial information, ratios and public
market multiples for us to the corresponding data for the following five
publicly traded companies:
o Kaneb Pipe Line Partners, L.P.
o Maritrans Inc.
o Royal Vopak N.V.
o TransMontaigne Inc.
o Williams Energy Partners, L.P.
Houlihan Lokey chose the selected companies because they were publicly
traded companies that, for the purposes of the analysis, Houlihan Lokey
considered to have operational, market and economic similarity with our
principal business operations. The selected public companies may significantly
differ from us based on, among other things, the size of the companies, the
geographic coverage of the companies' operations and the particular business
segments on which the companies focus.
Houlihan Lokey reviewed, among other information, the comparable companies'
multiples of total enterprise value, referred to as "TEV," to adjusted earnings
before interest, taxes, depreciation and amortization, referred to as "EBITDA,"
for the latest twelve months, referred to as "LTM." TEV consists of the market
value of a company's equity as of the valuation date, plus the value of the
particular company's debt and preferred stock, minus cash, cash equivalents and
marketable securities as of the most recent date available. Houlihan Lokey used
this analysis because it believed that dividing TEV by EBITDA provided the best
indication of value based on the relative performance level of the comparable
companies. Houlihan Lokey then applied a representative multiple range of 5.0x
to 6.0x to our EBITDA to determine our TEV (excluding cash). Because publicly
traded securities reflect minority interests in the equity of the comparable
companies, the value indicated by using these multiples is a minority,
marketable value. For this reason, Houlihan Lokey applied a control premium to
the indicated value of our equity, calculated as TEV less debt. The sum of the
value of our equity, control premium, debt, and cash equals our TEV. Based on
this analysis, the TEV range is $250 million to $300 million, as follows:
Selected Multiple Range Range (if applicable)
----------------------- ---------------------
LTM
EBITDA Low High Low High
----------- ------- ------- ----------- ----------
(thousands) (thousands)
TEV (excluding cash) $40,492 5.0x 6.0x $ 202,460 $242,952
Less: Debt (106,900) (106,900)
Equals: Equity Value (excluding cash) 95,560 136,052
Add: Control Premium of 25.0% 23,890 34,012
Add: Debt 106,900 106,900
Add: Cash 22,000 22,000
--------- --------
Total Enterprise Value Range (rounded) $ 250,000 $300,000
========= ========
-29-
Selected Comparable Transactions Analysis
Houlihan Lokey reviewed publicly available financial information relating
to the following selected transactions in the marine terminaling business since
March 1997:
Target Acquirer
----------------------------------- -----------------------------
GATX Terminals Corporation Kinder Morgan Energy Partners
Shore Terminals LLC Kaneb Pipe Line Partners, L.P.
Crown Central Petroleum Corporation Rosemore, Inc.
Louis Dreyfus Energy Corporation TransMontaigne, Inc.
ITAPCO Terminals Corporation TransMontaigne, Inc.
Houlihan Lokey chose the selected transactions because they reflect
business combinations that, for the purposes of the analysis, Houlihan Lokey
considered to be reasonably similar to our transaction because they involved
transactions in companies which could be considered alternative investments to
an investment in us. The selected transactions may differ significantly from our
transaction based on, among other things, the size of the transactions, the
structure of the transactions and the dates that the transactions were announced
and consummated. Because the transactions reviewed were also on a control basis,
no adjustments were necessary to our equity in estimating our TEV using this
method.
Houlihan Lokey reviewed, among other information, the target companies' TEV
as implied in the relevant transactions as a multiple of LTM EBITDA as of June
30, 2001. Based on this analysis, Houlihan Lokey applied a range of 6.0x to 7.0x
for TEV to EBITDA multiples which implied the following TEV range for us:
Selected Multiple Range Range (if applicable)
----------------------- ---------------------
LTM
EBITDA Low High Low High
----------- ------ ------ -------- --------
(thousands) (thousands)
TEV (excluding cash) $40,492 6.0x 7.0x $242,952 $283,444
Add: Cash 22,000 22,000
-------- --------
Total Enterprise Value Range (rounded) $265,000 $305,000
======== ========
Discounted Cash Flow Analysis
Houlihan Lokey performed a discounted cash flow analysis to determine a
range of values for our TEV. This range was determined by adding (1) the present
value of the estimated future unlevered free cash flows that we could generate
over the 5.2 year period from October 31, 2001, to December 31, 2006, and (2)
the present value of our "terminal value" at the end of fiscal year 2006, and
then adjusting these values by adding cash and subtracting net debt. The
unlevered free cash flows were determined based on financial projections
prepared by our management and represent EBITDA less projected taxes, capital
expenditures and working capital requirements. Our "terminal value" at the end
of the period was determined by applying a range of 4.5x to 5.5x to our EBITDA
in the final year of the period based on comparable control market multiples
from the selected comparable transactions analysis. The present value of interim
cash flows and the terminal value were determined using a risk-adjusted rate of
return or "discount rate" of 12% to 14%. The discount rate was developed through
an analysis of rates of return on alternative investment opportunities in
companies with similar risk and growth characteristics to us. Based on the above
analysis, the TEV range for us was $270 million to $310 million.
Strategic Alternatives
Houlihan Lokey examined the following strategic alternatives to the
proposed transaction, the valuation implications to our shareholders, the
probability of successfully completing the alternative transaction and the cost
and time to implement the alternative:
-30-
o Continue Sale Process. Houlihan Lokey noted that the consideration to
be paid by Kaneb represents a 35.4% premium over our current traded
market capitalization, as of the November 9, 2001, closing price for
our class A common shares. While our class A common shares are not
actively traded and could therefore be undervaluing our potential, the
premium offered is significant and is supported by several valuation
methods. Houlihan Lokey noted that we had hired Merrill Lynch to run a
controlled auction and that we had selected the highest bid based on
that controlled auction. Because the highest bid was chosen, Houlihan
Lokey noted that it is questionable whether a higher bidder could be
solicited based on the auction process already held.
o Postpone Sale Until a Later Date. Houlihan Lokey noted that our
performance between 2000 and 2001 has been very good with EBITDA
increasing approximately $8.0 million or 26.0%. They further noted
that, although our terminals are near capacity, there remains an
upside opportunity in the storage and throughput rates charged because
the entire region in which we operate is reaching capacity and there
are limited opportunities to offload inbound oil tankers to the United
States and Canada. For example, California is currently experiencing
similar capacity issues, with shipping terminals and rates that are
approximately 40.0% higher than our market. This indicates some future
EBITDA growth, but not as significant as what has been experienced in
the last year. Therefore, from a performance perspective aside from
possible rate increases, Houlihan Lokey noted that we are at the peak
of EBITDA growth expected over the next several years unless we incur
significant capital expenditures to increase capacity.
Allocation
Houlihan Lokey performed a discounted cash flow analysis of the
distributions to be received by our shareholders, assuming that we would operate
into perpetuity, to determine a range of valuations for the class A common
shares, class B subordinated shares and class C shares. This range was
determined by adding (1) the present value of the estimated distributions over
the 5.2 year period from October 31, 2001, to December 31, 2006 for each of our
class A common shares, class B subordinated shares and class C shares based on
discount rates that reflect the return on equity for each share class, and (2)
the present value of the "terminal value" for each class of share at the end of
fiscal year 2006. These distributions were determined based on the rights to
distributions contained in our current articles of incorporation and in light of
financial projections prepared by our management for the 5.2 year period from
October 31, 2001, to December 31, 2006. The "terminal value" of each class at
the end of the period was determined by evaluating distributions into perpetuity
and exit multiples. Based on a purchase price of $307.1 million and estimated
outstanding indebtedness at closing of $106.9 million, an equity consideration
of $192.6 million implies a return on equity of 14% to 22%.
Based on information available to us as of November 12, 2001, including
projected cash balances through closing, Houlihan Lokey determined the equity
consideration of $192.6 million using the following analysis:
(millions)
----------
Enterprise value bid price $300.0
Cash as of closing 22.0
Assumption of certain compensation adjustments (8.1)
Interest accrual through closing (1.0)
Tax accrual through closing (2.2)
Estimated distribution through closing(1) (3.6)
--------
Subtotal 307.1
Estimated transaction fees and expenses (7.6)
Outstanding debt at closing (106.9)
--------
Cash consideration to equity holders $192.6
========
___________________
(1) Includes an estimated amount of $932,000 in respect of target quarterly
distributions on our class A common shares for the first month of the
fiscal quarter ending March 31, 2002. Based on our current articles of
incorporation and our articles of incorporation as proposed to be amended,
no interim target
-31-
quarterly distribution is payable in respect of such period. Houlihan Lokey
has informed us that the exclusion of such amount does not affect its
opinion.
The discount rate for each class of shares was developed through an
analysis of the priorities in distribution of each class of shares and the
voting rights of the shares. The above analysis implied the following allocation
range for our outstanding shares:
Allocation Assumptions
----------------------------------------
Range of Relative Actual
Terminal Multiple Discount Rate Value of Each Class Allocation in
----------------- ---------------- ------------------- Proposed
Class of Share Low High Low High Low High Transaction
----- ----- ---- ---- ----- ----- --------------
Class A common shares 8.0x 8.0x 14% 14% 61.0% 66.0% 63.4%(1)
Class B subordinated shares 6.0x 7.5x 15% 18% 30.0% 34.0% 32.4%(1)
Class C shares 4.0x 5.5x 18% 22% 4.0% 5.0% 4.2%(1)
--------
Total 100%
========
___________________
(1) After giving effect to the exclusion described above of an estimated amount
of $932,000 in respect of target quarterly distributions on our class A
common shares for the first month of the fiscal quarter ending March 31,
2002, based on information available to us as of November 12, 2001, the
anticipated allocation of the sale proceeds is 63.1% to our class A common
shares, 32.2% to our class B subordinated shares and 4.7% to our class C
shares. These percentages are within the range of relative values for each
class of our capital stock established by Houlihan Lokey as set forth
above.
These allocation ranges imply a range of values for our equity of $190
million to $204 million.
Fee Arrangement
Pursuant to the engagement letter, dated November 6, 2001, between Houlihan
Lokey and us, we agreed to pay Houlihan Lokey a fee of $175,000 in connection
with rendering its financial fairness opinion. We also agreed to reimburse
Houlihan Lokey for its reasonable out-of-pocket expenses incurred in performing
its services up to a maximum of $17,500. Houlihan Lokey will not be entitled to
any additional fees or compensation with respect to the proposed transaction. In
addition, we have agreed to indemnify Houlihan Lokey and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Houlihan Lokey or any of its affiliates against liabilities and
expenses related to or arising out of Houlihan Lokey's engagement and any
related transactions, excluding in cases of gross negligence, bad faith, willful
misfeasance, or reckless disregard of its obligations or duties.
Our board of directors selected Houlihan Lokey based on its experience,
expertise and reputation. Houlihan Lokey is an internationally recognized
investment banking firm that regularly engages in the valuation of securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Other than
the provision of a solvency opinion to us in 1996, prior to this engagement
Houlihan Lokey had not provided investment banking or other financial services
to us. Houlihan Lokey does not have an ownership interest in us.
In July 2000, Houlihan Lokey was retained by Castle Harlan, Inc., the
investment manager of Castle Harlan Partners II, in connection with the merger
of a portfolio company of Castle Harlan Partners II and a portfolio company of
Castle Harlan Partners III, L.P., for which Castle Harlan, Inc. also acts as
investment manager. In connection with the merger, Houlihan Lokey provided an
opinion as to the relative values of the two portfolio companies in order to
determine how much of the merged company would be owned by Castle Harlan
Partners II and how much by Castle Harlan Partners III, L.P. The opinion
rendered by Houlihan Lokey was accepted by both parties. Houlihan Lokey was paid
$170,000 in consideration for rendering the opinion.
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A copy of the written materials provided by Houlihan Lokey and distributed
to the board of directors at the November 12, 2001, meeting is available for
inspection and copying at our principal executive offices during our regular
business hours by any shareholder upon execution of a consent letter addressed
to Houlihan Lokey. A copy of such materials will be provided to any shareholder
upon written request at the expense of the requesting shareholder.
Reasons for the Recommendation of our Board of Directors
In reaching its recommendation regarding the proposed amendments to our
articles of incorporation and the sale of the Subsidiaries and our subsequent
liquidation, our board of directors considered a number of factors both for and
against the proposed transaction. In view of the wide variety of factors
considered in connection with the proposed transaction, our board of directors
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors they considered in reaching
their determination:
o The presentation made by Houlihan Lokey to our board of directors on
November 12, 2001, and their opinion as of the same date that, based
on and subject to the assumptions, limitations and qualifications
described in the opinion, the distribution of $18.00 per share to be
received by our class A common shareholders, $16.40 per share to be
received by our class B subordinated shareholder and the remaining
cash to our class C shareholder is fair to each such class of
shareholders from a financial point of view. Our board of directors
considered Houlihan Lokey's presentation and opinion to be factors
that weighed in favor of the proposed transaction.
o The distribution per class A common share is $18.00, representing a
premium of 39.5% over the closing price per class A common share on
November 12, 2001, the last trading day before Kaneb first publicly
announced its agreement to acquire the Subsidiaries, and a premium of
25.1% over the 52-week high closing price per class A common share
(which occurred on July 26, 2001). Our board of directors considered
these premiums to be factors that weighed in favor of the proposed
transaction.
o The board of directors noted that there is no financing condition to
the closing of the sale and that the consideration for the
Subsidiaries is to be paid in full and in cash upon the closing of the
sale. Because of this, it was not necessary to conduct additional due
diligence on Kaneb in order to confirm the value of the consideration
to be received. Our board of directors considered the cash aspect of
the consideration to be a factor that weighed in favor of the proposed
transaction.
o The remoteness of the possibility that a third party would be willing
to offer a higher price than Kaneb in light of:
(1) the fact that our board of directors solicited and received
indications of interest from seven prospective purchasers and
final bids from three prospective purchasers by means of a
controlled auction conducted by Merrill Lynch to sell the
Subsidiaries; and none of the other bids submitted was as high as
that submitted by Kaneb; and
(2) the fact that, in our board of directors' judgment, the number of
potential acquirers of the Subsidiaries constitute a relatively
small group, including companies with interests in terminaling
operations, which do not compete directly with our clients, and
which have the financial capacity to successfully conclude a
transaction similar to the proposed transaction.
Our board of directors considered these to be factors that weighed in
favor of the proposed transaction:
o The fact that, in the longer term, we are likely to require
significant additional capital in order to capitalize on growth
opportunities. There is no guarantee that such financing will be
available. Any failure to capitalize on growth opportunities may
compromise our value to our shareholders. Our board of directors
considered this to be a factor that weighed in favor of the proposed
transaction.
-33-
o The belief of our board of directors that, after extensive
negotiations with Kaneb and its representatives, we have obtained the
highest price that Kaneb is willing to pay. Our board of directors
considered this to be a factor that weighed in favor of the proposed
transaction.
o The fact that, under the stock purchase agreement, as a condition to
the closing of the sale, the amendment to our articles of
incorporation, and the sale of the Subsidiaries and our subsequent
liquidation must be approved by the holders of more than 66 2/3% of
all votes cast at the special general meeting at which at least
one-half of our outstanding class A common shares and class B
subordinated shares, counted as a class, are present or represented.
Our board of directors considered the required approval by our
shareholders to be a factor that weighed in favor of the fairness of
the proposed transaction.
o The fact that as a further condition to the adoption of the amendment
of our articles of incorporation, our board of directors is seeking
the affirmative vote of more than 66 2/3% of all votes cast by our
class A common shareholders voting separately as a class at a meeting
at which one-half of the outstanding class A common shares are present
or represented. Our board of directors considered the required
approval by our class A common shareholders to be a factor that
weighed in favor of the fairness of the proposed transaction.
o The board of directors considered the terms and conditions of the
stock purchase agreement, including the amount and form of the
consideration, the parties' mutual representations, warranties and
covenants, and the conditions to their respective obligations. The
board of directors found that the terms of the stock purchase
agreement were, on balance, favorable to the shareholders and
considered this to be a factor in favor of the proposed transaction.
o The fact that, based on advice received from our Netherlands Antilles
counsel, in the Netherlands Antilles, a shareholder must own at least
95% of the outstanding securities of a company before being able to
force the minority shareholders to sell their shares and thereby
acquire the remaining 5%. Following discussions with Kaneb, our board
of directors agreed that this requirement would make it exceedingly
difficult for a third party, such as Kaneb, to acquire 100% of our
shares. Previously, our board of directors had believed it preferable
to structure the transaction as a tender offer followed by a buy-out
procedure because this would permit individual shareholders to decide
whether the price offered for their shares was acceptable and avoid
the need to amend our articles of incorporation in order to close the
transaction. However, the board of directors considered that the
difficulties discussed above under Netherlands Antilles law were a
factor that discouraged potential purchasers such as Kaneb and weighed
in favor of structuring the transactions as a sale of the capital
stock of the Subsidiaries followed by a liquidation.
o The fact that three members of our board of directors are directors or
officers of Castle Harlan, Inc. or its affiliates. While our board of
directors did not consider this to be a factor in favor of or against
the adoption of the amendments to our articles of incorporation, the
sale of the Subsidiaries and our subsequent liquidation, it was a
significant factor in the manner in which the board of directors
conducted itself. As a result, the three directors who are also
directors or officers of Castle Harlan, Inc. or its affiliates did not
participate in the vote of the board of directors on the proposed
transaction.
o Our board of directors did not consider the liquidation value of our
assets to be a material factor in its consideration of the sale of the
Subsidiaries because it believed that the value that could be obtained
through a liquidation of our assets would be significantly less than
the value that could be obtained through the sale of our assets as a
going concern.
o The fact that two of our subsidiaries have outstanding $101.0 million
of indebtedness that matures on November 27, 2003. While our board of
directors believes that we would be able to refinance this
indebtedness prior to its maturity, our ability to do so is dependent
on our operating performance which is, in turn, dependent on other
factors, many of which are beyond our control. Our board directors
noted that there can be no assurances that we will be able to repay at
maturity or refinance
-34-
this indebtedness in whole or in part, or at all, on terms acceptable
to us. Our board of directors considered that the sale of the
Subsidiaries would remove this risk to our existing shareholders and
this was therefore a factor that weighed in favor of the proposed
transaction.
Purpose of the Proposed Amendments to our Articles of Incorporation
Initially, our board of directors believed that the sale of all of the
outstanding shares of each class of our capital stock in the form of a tender
offer by the potential purchaser to our shareholders would be the best strategic
alternative for us and our shareholders, as it would be the most rapid method of
placing the proceeds from such sale into the hands of our shareholders. However,
during the course of our negotiations with Kaneb, Kaneb and its representatives
expressed concerns regarding Kaneb's ability to purchase through a tender offer
at least 95% of our outstanding securities as would be required in the
Netherlands Antilles before Kaneb could cause us to implement a mandatory
buy-back of any securities not held by Kaneb. Therefore, our board of directors
agreed to pursue a transaction structure whereby Kaneb would purchase the
capital stock of the Subsidiaries followed by a distribution of the sale
proceeds to our shareholders and our subsequent liquidation. In determining
whether to agree to this structure, our board of directors considered
alternative methods by which the proceeds from the sale of the Subsidiaries
could be distributed. One method that was considered involved the sale of the
Subsidiaries followed by our liquidation and a subsequent distribution of the
sale proceeds and any other remaining assets. However, the amounts payable under
our current articles of incorporation in respect of our class B subordinated
shares and class C shares upon a liquidation and subsequent distribution of the
proceeds from such a sale differ substantially from the payments that would have
been made in a tender offer for our outstanding shares into which Statia
Terminals Holdings would have been willing to tender the class B subordinated
shares and class C shares. Castle Harlan Partners II, the controlling
shareholder of Statia Terminals Holdings, indicated that it would not vote in
favor of the sale of the Subsidiaries unless the transaction was structured so
that the distribution of sale proceeds preceded our dissolution and liquidation,
and the distributions reflected the value of the Subsidiaries as a going
concern. Our board of directors determined that the provisions in our articles
of incorporation relating to the distribution of proceeds from a sale of assets
were not intended to apply to a sale of the Subsidiaries as a going concern and
do not adequately and clearly provide for a fair and timely distribution of the
proceeds from such a sale of the Subsidiaries. Under the proposed amendments to
our articles of incorporation, the distribution of sale proceeds would result in
our shareholders receiving a cash amount equal to the amount such shareholders
would have received under an acceptable tender offer. Because Castle Harlan
Partners II beneficially owns 38.7% of our outstanding voting securities, and
approval of more than 66 2/3% of our outstanding voting securities at a meeting
at which at least one-half of our voting securities are present or represented
is required to approve a sale of all or substantially all of our assets or our
liquidation, the affirmative vote of Castle Harlan Partners II is required in
order to consummate a sale of the Subsidiaries.
Requirement of Approval by Two-Thirds of our Class A Common Shareholders for the
Amendments to our Articles of Incorporation
Because the proposed amendments to our articles of incorporation have the
effect of changing the distributions which our class A common shareholders would
receive under the provisions of our current articles of incorporation (assuming
we could receive the requisite shareholder approval), our board of directors has
determined that, solely with respect to the adoption of the amendments, it would
be more equitable from the perspective of our class A common shareholders to
seek the affirmative vote of more than 66 2/3% of all votes cast by our class A
common shareholders at the special general meeting voting separately as a class,
provided that at least one-half of the outstanding class A common shares are
present or represented at such meeting
In the event that this majority vote of the class A common shareholders is
not obtained, Statia Terminals Holdings, which is controlled by Castle Harlan
Partners II and which beneficially owns 100% of the outstanding class B
subordinated shares, comprising 38.7% of our outstanding voting securities, has
indicated that it will vote the class B subordinated shares against the proposal
to amend our articles of incorporation and against the proposal to sell the
Subsidiaries and liquidate. In this event, the sale and our subsequent
liquidation will not take place because the approval by the requisite majority
of our shareholders will not have been received.
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The Proposed Amendments
The material provisions of the proposed amendments to our articles of
incorporation are as follows:
o The amendments define the term "Sale Event" to mean a sale or other
voluntary disposition, in a single transaction, of all or
substantially all of our assets consisting of the capital stock of the
Subsidiaries. It is clarified that the provisions in our current
articles of incorporation concerning target quarterly distributions of
available cash and distributions following a liquidation do not apply
to distributions following a Sale Event.
o Any distribution of proceeds relating to a Sale Event shall be made in
the following manner:
o First, pro rata, to the holders of class A common shares, until
each outstanding class A common share has received a distribution
equal to $18.00;
o Second, pro rata, to the holders of class B subordinated shares,
until each outstanding class B subordinated share has received a
distribution equal to $16.40; and
o Third, pro rata, to the holders of class C shares, the balance
(A) minus (i) an amount equal to 20% of our authorized capital,
(ii) the amount necessary to satisfy our outstanding liabilities,
and (iii) any amounts payable by us pursuant to our 1999 Stock
Option Plan, and (B) plus or minus any amount required to adjust
the final purchase price paid in respect of the Sale Event. Our
authorized capital is currently $300,000.
o After complying with the requirements of Netherlands Antilles law and
assuming that our class A common shareholders and class B subordinated
shareholders have received distributions in the amounts set forth
above, upon a liquidation following a Sale Event, our remaining assets
shall be distributed, pro rata, to the holders of class C shares until
no assets remain.
o It is clarified that any arrears in target quarterly distributions
that have accumulated in favor of the class A common shares and any
deferred distributions declared on the class B subordinated shares
will be included in the distributions to such shareholders following a
Sale Event described above.
Appendix A to this proxy statement sets forth an English translation
containing substantially the form of the proposed Dutch language amendments to
our articles of incorporation.
Effect of the Proposed Resolutions
Subject to receipt of approval of the amendments to our articles of
incorporation by the Ministry of Justice in the Netherlands Antilles, which we
expect to receive shortly after the special general meeting, we anticipate that
the sale of the Subsidiaries to Kaneb will be closed within five business days
following receipt of approval of all of the proposed resolutions by our
shareholders. At the end of trading on the day on which the sale is closed, we
intend to terminate the listing of our class A common shares on the Nasdaq
National Market and to instruct our transfer agent, Computershare Investor
Services LLC, to close its share transfer books and discontinue recording
transfers of class A common shares as of such date.
Following the closing of the sale, our class A common shareholders will
have priority in the distribution of the sale proceeds and are entitled to
receive, in the aggregate, a distribution of $108.2 million, or $18.00 per
share. After payment in full of such amount to the class A common shareholders,
our class B subordinated shareholder will be entitled to receive, in the
aggregate, a distribution of up to $62.3 million, or $16.40 per share. Following
these distributions, after payment of $13.9 million to holders of options to
purchase our class A common shares, and the establishment of appropriate
reserves for the satisfaction of our other liabilities in connection with our
liquidation, our class C shareholder will be entitled to a distribution of any
remaining cash. Based on information available to us as of November 12, 2001,
assuming the closing of the sale on or about January 31, 2002, and assuming no
unanticipated claims are presented to us between the date hereof and the date of
the liquidation, we will make a
-36-
distribution following the closing of the sale of $18.00 per class A common
share and $16.40 per class B subordinated share. Based on information available
to us as of November 12, 2001, we anticipate that our class C shareholder is
likely to receive a distribution, in the aggregate, of approximately $9.1
million, consisting of approximately $6.1 million following the closing of the
sale and approximately $3.0 million following our liquidation. Following the
distributions described above to our class A common shareholders and class B
subordinated shareholder and the initial distribution to our class C
shareholder, we anticipate that by December 31, 2002, we will be liquidated in
accordance with our articles of incorporation and Netherlands Antilles law. Our
shares will remain outstanding and their holders will continue to be
shareholders of us until we are liquidated.
The proposed amendments to our articles of incorporation add new provisions
and amend existing provisions that address the distribution of proceeds from a
sale of the Subsidiaries as a going concern followed by our liquidation.
Currently, the provisions in our articles of incorporation which would likely
apply to such a transaction, assuming that we were able to receive the requisite
approval from our shareholders, are provisions that address distributions from
operating surplus and interim capital transactions, as well as provisions
relating to our liquidation. Based on the information available to us as of
November 12, 2001, assuming the closing of the sale on or about January 31,
2001, the following table sets forth the estimated distribution per class A
common share, class B subordinated share and class C share that would be
received under (1) the relevant provisions of our current articles of
incorporation covering our liquidation followed by a liquidating distribution
(assuming we could obtain the requisite shareholder approval), (2) the relevant
provisions of our current articles of incorporation covering an interim capital
transaction followed by our liquidation (assuming we could obtain the requisite
shareholder approval), and (3) our articles of incorporation, as amended:
Estimated Distribution per Share under our
Current Articles of Incorporation Estimated Distribution
----------------------------------------------- per Share under our
Liquidation Followed Interim Capital Articles of
by a Liquidating Transaction Followed by Incorporation, as
Distribution our Liquidation Amended
-------------------- ------------------------ ----------------------
Class A common share $ 21.60 $ 19.11 $ 18.00
Class B subordinated share 11.99 16.68 16.40
Class C share - - 238.35
In the event that the requisite majority of our shareholders vote to adopt
the amendments to our articles of incorporation, but do not approve the sale of
the Subsidiaries followed by our liquidation, the amendments will become part of
our articles of incorporation, but will not be relevant since the sale of the
Subsidiaries will not take place and no proceeds from the sale will be
distributed to our shareholders.
The payment of the target quarterly distribution for the quarter ending
December 31, 2001, will be subject to the decision of our board of directors,
which will be made pursuant to the tests contained in our current articles of
incorporation. We do not anticipate paying or accumulating further arrearages of
target quarterly distributions following the $18.00 distribution to our class A
common shareholders because we do not expect to meet the tests for such payment
contained in our articles of incorporation.
The $18.00 distribution per class A common share following the closing of
the sale will eliminate all arrearages in target quarterly distributions that
have accumulated prior to the date of the distribution. As of the date of this
proxy statement, the amount of arrearages that have accumulated in favor of the
class A common shares is $1.60 per share. The $16.40 distribution per class B
subordinated share following the closing of the sale will eliminate all deferred
distributions that have accrued in favor of our class B subordinated shares. As
of the date of this proxy statement, the amount of deferred distributions that
has accrued in favor of the class B subordinated shares is $0.77 per share.
Interests of Directors and Executive Officers in the Transaction
In considering the recommendation of our board of directors with respect to
the adoption of the amendments to our articles of incorporation, the sale of the
Subsidiaries and our subsequent liquidation, you should be aware that, in
addition to the matters discussed above, our directors and executive officers
have various interests
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in the amendments, and in the sale and liquidation described in this section
that are in addition to, or different from, the interests of our shareholders
generally and potentially create conflicts of interest.
Options
We have granted options to some of our directors and all of our executive
officers for the purchase of our class A common shares. Currently, none of these
options are vested. Under the terms of the option grants, immediately prior to
the closing of the sale of the Subsidiaries, all outstanding options will become
fully vested and exercisable. We have agreed that, for each share covered by an
outstanding stock option at the time of the sale, the directors and executive
officers will be entitled to receive a cash payment equal to the difference
between $18.00 and the per share exercise price of such options, referred to as
the "spread", reduced by applicable withholding taxes.
The following table summarizes (1) the number of options that are currently
held by each director or executive officer and all directors and executive
officers as a group, and (2) the aggregate amount to which each director or
executive officer and all directors and executive officers as a group are
entitled immediately prior to the closing of the sale of the Subsidiaries:
Class A Common
Shares Subject to Aggregate
Position Options Spread
------------------------------------------ ----------------- ----------
James G. Cameron Chairman of the Board and President(1)(2) 277,000 $ 3,460,418
Thomas M. Thompson, Jr. Executive Vice President(1) 185,000 2,286,522
Robert R. Russo Senior Vice President(1) 183,000 2,264,206
Jack R. Pine Senior Vice President, General Counsel and 106,000 1,330,108
Secretary(1)
John D. Franklin Vice President - Marine Fuel Marketing(1) 106,000 1,330,108
James F. Brenner Vice President - Finance, Treasurer and 106,000 1,330,108
Assistant Secretary(1)
John K. Castle Director(2) - -
David B. Pittaway Director(2) - -
Justin B. Wender Director(2) - -
James L. Holloway III Director(2) 4,000 44,632
Francis Jungers Director(2) 4,000 44,632
Jonathan R. Spicehandler Director(2) 4,000 44,632
Ernest Voges Director(2) 4,000 44,632
-------- ------------
Directors and Executive
Officers as a group 979,000 $ 12,179,998
======== ============
_______________
(1) This individual is an executive officer of Statia Terminals, Inc.
(2) This individual is a director of Statia Terminals Group N.V.
Employment Agreements
Each of our six executive officers is party to an employment agreement
among us, our subsidiary, Statia Terminals, Inc., and that executive officer.
Pursuant to each such agreement, each individual is employed by Statia
Terminals, Inc. in the capacity specified in his employment agreement. Statia
Terminals, Inc. is a subsidiary of one of the Subsidiaries that will be sold to
Kaneb pursuant to the stock purchase agreement. If Statia Terminals, Inc. gives
notice at least 90 days prior to January 1, 2003, of its desire to terminate an
executive officer's employment agreement, the employment of that officer will
terminate on December 31, 2004. Thereafter, Statia Terminals, Inc. may terminate
the employment agreement of each executive officer by giving notice at least 90
days prior to January 1 of each year, in which case the employment of the
executive officer will terminate on December 31 of the second calendar year
immediately following the calendar year in which such notice is given. Each
executive officer is entitled to receive a base salary which will be increased
annually beginning January 2002 at the rate of increase in
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the consumer price index or by a greater amount determined in the discretion of
the board of directors of Statia Terminals, Inc. In addition, for each calendar
year of his employment, each executive officer is eligible to receive a target
cash bonus of not less than 75% of his base salary subject to our meeting annual
earnings targets.
Under the terms of each employment agreement, upon the closing of the sale
of the Subsidiaries, each of our executive officers will be entitled to receive
a one-time cash payment in the amount set forth in the table below.
In the event that the employment of an executive officer is terminated by
Statia Terminals, Inc. without substantial cause or by the officer for good
reason (as such terms are defined in the officer's employment agreement)
following the sale of the Subsidiaries, the executive officer is entitled to
receive a lump sum cash payment on the date of termination representing the base
salary and annual bonus otherwise payable to such executive officer for the
remainder of his employment term in effect on the date of termination, but in no
event less than one year's base salary and annual bonus. In addition, each
executive officer is entitled to outplacement services at the expense of Statia
Terminals, Inc. and the continuation of medical and dental benefits, and certain
other benefits and perquisites for the remainder of his employment term in
effect on the date of termination, but in no event for less than one year.
Following the expiration of the continued medical and dental benefits described
above, an executive officer may elect to further continue these benefits by
paying the applicable premium otherwise payable by other former employees for
continuation coverage under the applicable plans. Upon the closing of the sale
of the Subsidiaries, Statia Terminals, Inc., is required to make an irrevocable
contribution to a grantor trust in an amount sufficient to pay all current and
future premiums under certain life insurance policies covering James G. Cameron,
our director, and Chairman of the Board and President of Statia Terminals, Inc.
The following table sets forth the annual base salary and target annual
bonus of each of our executive officers and the one time cash payment each
executive officer will receive following the closing of the sale of the
Subsidiaries:
One-Time Cash
Payment Upon
the Closing Target
of the Sale Annual Salary Annual Bonus
-------------- ------------- ------------
James G. Cameron $ 1,400,000 $ 310,000 $ 232,500
Thomas M. Thompson, Jr. 750,000 265,000 198,750
Robert R. Russo 650,000 250,000 187,500
Jack R. Pine 500,000 195,000 146,250
John D. Franklin 400,000 165,000 123,750
James F. Brenner 400,000 165,000 123,750
-----------
Total $ 4,100,000
===========
Forgiveness of Indebtedness
Pursuant to a resolution of our board of directors, upon the closing of the
sale, we will forgive $1.0 million of outstanding indebtedness owed to us by our
executive officers in respect of loans that we made to such executive officers
in April 1999. The funds provided by these loans, together with funds provided
by our executive officers, were used by the executive officers to acquire our
class B subordinated shares. The following table sets forth the amount of
indebtedness that will be forgiven by us with respect to each executive officer:
Amount of Indebtedness
to be Forgiven
----------------------
James G. Cameron $ 260,026
Thomas M. Thompson, Jr. 205,020
Robert R. Russo 182,018
Jack R. Pine 140,014
John D. Franklin 115,012
James F. Brenner 98,010
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----------------------
Total $ 1,000,100
----------------------
Ownership of our Shares
Based on information available to us as of November 12, 2001, assuming the
closing of the sale on or around January 31, 2002, the following tables set
forth the number of class B subordinated shares and class C shares beneficially
owned by each of our directors and executive officers, and the anticipated
aggregate distributions payable in respect of such shares following the sale of
the Subsidiaries and our liquidation under (1) the relevant provisions of our
current articles of incorporation covering our liquidation followed by a
liquidating distribution, (2) the relevant provisions of our current articles of
incorporation covering an interim capital transaction followed by our
liquidation, and (3) our articles of incorporation as amended pursuant to the
proposed resolution:
Aggregate Distribution in Respect of
Class B Subordinated Shares
----------------------------------------------------
No. of Under our Current Articles of
Class B Incorporation
Subordinated Liquidation Interim Capital Under our
Shares Followed by a Transaction Articles of
Beneficially Liquidating Followed by our Incorporation,
Owned Distribution Liquidation as Amended
------------- -------------- ---------------- --------------
James G. Cameron 195,908 $ 2,196,760 $ 3,116,272 $ 3,062,886
Thomas M. Thompson, Jr. 152,751 1,712,831 2,429,782 2,388,156
Robert R. Russo 134,323 1,506,194 2,136,651 2,100,047
Jack R. Pine 66,758 748,572 1,061,907 1,043,715
John D. Franklin 58,837 659,752 935,909 919,876
James F. Brenner 52,533 589,064 835,633 821,317
John K. Castle(1) 3,800,000 45,548,979 63,384,627 62,320,000
David B. Pittaway 16,164 181,251 257,118 252,713
Justin B. Wender 808 9,060 12,853 12,633
James L. Holloway III 12,123 135,938 192,838 189,535
Francis Jungers 16,164 181,251 257,118 252,713
Jonathan R. Spicehandler 16,164 181,251 257,118 252,713
Ernest Voges 8,082 90,625 128,559 126,356
--------- ------------ ------------ ------------
Directors and Executive Officers
as a group 3,800,000 $ 45,548,979 $ 63,384,627 $ 62,320,000
========= ============ ============ ============
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Aggregate Distribution in Respect of
Class C Shares
--------------------------------------------------------
Under our Current Articles of
Incorporation
-----------------------------
No. of Liquidation Interim Capital Under our
Class C Shares Followed by a Transaction Articles of
Beneficially Liquidating Followed by our Incorporation,
Owned Distribution Liquidation as Amended
-------------- -------------- ---------------- --------------
James G. Cameron 1,959.08 - - $ 465,447
Thomas M. Thompson, Jr. 1,527.51 - - 362,912
Robert R. Russo 1,343.23 - - 319,130
Jack R. Pine 667.58 - - 158,607
John D. Franklin 588.37 - - 139,767
James F. Brenner 525.33 - - 124,810
John K. Castle(1) 38,000.00 - - 9,057,300
David B. Pittaway 161.64 - - 38,403
Justin B. Wender 80.82 - - 1,920
James L. Holloway III 121.23 - - 28,802
Francis Jungers 161.64 - - 38,403
Jonathan R. Spicehandler 161.64 - - 38,403
Ernest Voges 80.82 - - 19,202
--------- ------------- ------------- -----------
Directors and Executive Officers
as a group 38,000.00 - - $ 9,057,300
========= ============= ============= ===========
_______________
(1) By virtue of his control position with Castle Harlan Partners II, our
director, John K. Castle, may be deemed to be the beneficial owner of all
of our class B subordinated shares and our class C shares. The foregoing
amounts include distributions payable to Castle Harlan Partners II which
Mr. Castle disclaims except to the extent of Mr. Castle's pro rata
partnership interest in Castle Harlan Partners II.
Based on information available to us as of November 12, 2001, assuming the
closing of the sale on or around January 31, 2002, the following table sets
forth the number of class A common shares, class B subordinated shares and class
C shares beneficially owned by each of our directors and executive officers (not
including any options to acquire such shares), together with the aggregate
distributions that are anticipated to be paid in connection with such share
ownership upon the sale of the Subsidiaries and subsequent liquidation, after
giving effect to the resolution to amend our articles of incorporation:
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Class A Class B
Common Shares Subordinated Class C Shares Anticipated
Beneficially Shares Beneficially Beneficially Aggregate
Owned Owned Owned Consideration
-------------- ------------------- --------------- -------------
James G. Cameron - 195,908 1,959.08 $ 3,528,333
Thomas M. Thompson, Jr. 110 152,751 1,527.51 2,753,049
Robert R. Russo - 134,323 1,343.23 2,419,177
Jack R. Pine - 66,758 667.58 1,202,322
John D. Franklin - 58,837 588.37 1,059,663
James F. Brenner - 52,533 525.33 946,127
John K. Castle(1) - 3,800,000 38,000.00 71,377,300
David B. Pittaway - 16,164 161.64 291,116
Justin B. Wender - 808 80.82 14,552
James L. Holloway III - 12,123 121.23 218,337
Francis Jungers 31,050 16,164 161.64 850,016
Jonathan R. Spicehandler - 16,164 161.64 291,116
Ernest Voges - 8,082 80.82 145,558
------ --------- --------- -----------
Directors and Executive
Officers as a group 31,160 3,800,000 38,000 $71,938,180
====== ========= ========= ===========
__________________
(1) By virtue of his control position with Castle Harlan Partners II, our
director, John K. Castle, may be deemed to be the beneficial owner of all
of our class B subordinated shares and our class C shares. The foregoing
amounts include distributions payable to Castle Harlan Partners II which
Mr. Castle disclaims except to the extent of Mr. Castle's pro rata
partnership interest in Castle Harlan Partners II.
Affiliations of Certain Directors with Castle Harlan
Castle Harlan Partners II controls Statia Terminals Holdings which
beneficially owns 100% of the outstanding class B subordinated shares,
comprising 38.7% of our outstanding voting securities, and 100% of our
outstanding class C shares. John K. Castle, one of our directors, is the
controlling shareholder, a director and the chairman of Castle Harlan, Inc., the
investment manager of Castle Harlan Partners II, and of the ultimate parent of
the general partner of Castle Harlan Partners II. In addition, Mr. Castle is the
largest limited partner in the general partnership that acts as general partner
of Castle Harlan Partners II. David B. Pittaway, one of our directors, is a
limited partner in the general partnership that acts as the general partner of
Castle Harlan Partners II and a senior managing director of Castle Harlan, Inc.
Justin B. Wender, one of our directors, is a limited partner in the general
partnership that acts as the general partner of Castle Harlan Partners II and a
managing director of Castle Harlan, Inc.
Indemnification and Insurance
The stock purchase agreement requires that for a period of six years
following the closing of the sale: (1) the indemnification provisions set forth
in the organizational documents of our subsidiaries that were in effect on the
date of the stock purchase agreement will not be amended or modified, unless
such modification is required by law, and (2) Kaneb will maintain in effect the
current directors' and officers' liability insurance or substantially similar
insurance covering those persons who are currently covered on the date of the
stock purchase agreement by our subsidiaries' and their respective subsidiaries'
directors' and officers' insurance (provided that Kaneb is not required to pay
an annual premium for any such policy in excess of 200% of the last annual
premium paid by us prior to the date of the stock purchase agreement). The stock
purchase agreement also provides that Kaneb will indemnify and hold harmless any
former or current officer or director of any of our subsidiaries against any
losses in connection with any threatened or actual action, suit or proceeding,
based in whole or in part on, or arising in whole or in part out of, the fact
that the person is or was an officer or director of any of our subsidiaries.
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Relationship Between Kaneb and Us
Other than the stock purchase agreement for the sale of the Subsidiaries to
Kaneb and agreements ancillary to that transaction, including the voting and
option agreement, we have not entered into any commercial agreements with Kaneb.
Material Netherlands Antilles Tax Consequences of the Proposed Transaction to
our Class A Common Shareholders
The following is a description of the material Netherlands Antilles tax
consequences to you of the sale of the Subsidiaries and of your disposition of
our class A common shares pursuant to our liquidation. Under the laws of the
Netherlands Antilles as currently in effect, a holder of our class A common
shares will not be subject to Netherlands Antilles tax on the sale of the
Subsidiaries. Under the laws of the Netherlands Antilles as currently in effect,
a holder of our class A common shares who is not a resident or deemed to be a
resident of, and during the taxable year has not engaged in trade or business
through a permanent establishment, permanent representative or agent in, the
Netherlands Antilles will not be subject to Netherlands Antilles income tax on
the receipt of the distribution of proceeds from the sale of the Subsidiaries;
nor will the Netherlands Antilles impose a withholding tax on such
distributions. No stamp, transfer, documentary or similar taxes will be imposed
by the Netherlands Antilles on the receipt by you of such distributions pursuant
to our liquidation. There will be no gift or inheritance taxes levied by the
Netherlands Antilles on the receipt by you of the distribution of proceeds from
the sale of the Subsidiaries pursuant to our liquidation if you were not
domiciled or deemed domiciled in the Netherlands Antilles at the time of such
distributions. A person is not deemed a resident or deemed domiciled in the
Netherlands Antilles merely on the basis of being a holder of our class A common
shares.
Material U.S. Federal Income Tax Consequences of the Proposed Transaction to our
Class A Common Shareholders
The following is a description of the material U.S. federal income tax
considerations generally applicable to holders of our class A common shares who
hold such shares as capital assets and who dispose of such shares pursuant to
our liquidation. This description does not purport to be a complete analysis of
all potential tax considerations that may be relevant to such holders. This
description does not address the tax considerations applicable to holders that
may be subject to special tax rules, such as:
o insurance companies;
o tax-exempt organizations;
o financial institutions;
o brokers and dealers or traders in securities or currencies;
o former U.S. citizens and long-term residents;
o banks;
o real estate investment trusts;
o regulated investment companies;
o grantor trusts;
o persons subject to the alternative minimum tax;
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o persons that own, or are deemed to own, 10% or more (by voting power
or value) of our outstanding shares;
o persons holding our class A common shares as part of a "straddle,"
"hedge" or "conversion transaction" for U.S. federal income tax
purposes;
o our or our subsidiaries' directors, officers and employees; and
o persons that have a functional currency for U.S. federal income tax
purposes other than the U.S. dollar.
This description also does not address U.S. federal estate and gift tax
consequences or the tax consequences under the laws of any state, locality or
non-U.S. jurisdiction. Holders should consult their tax advisors with regard to
the application of the U.S. federal income tax laws to their particular
situation. In addition, this description assumes, although it has not been
independently verified, that we are not currently, and have not been in the
past, a passive foreign investment company for U.S. federal income tax purposes.
U.S. Holders (as defined below) are urged to consult their tax advisors
regarding their specific tax consequences if we are or were a passive foreign
investment company. This description is based on the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed U.S. Treasury
Regulations promulgated thereunder, current administrative rulings and court
decisions, in each case, in effect and available as of the date of this proxy
statement. All of the foregoing are subject to change, and any such change could
be retroactive and could affect the continuing validity of this description.
These income tax laws and regulations are also subject to various
interpretations, and the U.S. Internal Revenue Service or the United States
courts could later disagree with the explanations or conclusions set out below.
As used in this description, "U.S. Holder" means a beneficial owner of our
class A common shares who, for U.S. federal income tax purposes, is:
o a citizen or resident of the United States;
o a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof (including
the District of Columbia);
o an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
o a trust if: (1) such trust validly has elected to be treated as a
United States person for U.S. federal income tax purposes or (2) (A) a
United States court is able to exercise primary supervision over the
administration of the trust and (B) one or more United States persons
have the authority to control all substantial decisions of the trust.
A "Non-U.S. Holder" is a beneficial owner of our class A common shares who
is not a U.S. Holder.
If a partnership (or any other entity treated as a partnership for U.S.
federal income tax purposes) holds our class A common shares, the tax treatment
of a partner in such partnership will generally depend on the status of the
partner and the activities of the partnership. Such partner should consult its
tax advisor as to its tax consequences.
Sale of Subsidiaries, Liquidation, and Passive Foreign Investment Company
Considerations
Sale of Subsidiaries
In the event that our shareholders approve both the sale of the
Subsidiaries and our liquidation, we would sell to Kaneb all the capital stock
of the Subsidiaries and thereafter make liquidating distributions to our
shareholders. Subject to the discussion below under the caption "Passive Foreign
Investment Company Considerations," the sale of the Subsidiaries would not give
rise to gain or loss to you.
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Liquidation
If you are a U.S. Holder, the distribution to you of proceeds from the sale
of the Subsidiaries will, for U.S. federal income tax purposes, qualify as
liquidating distributions and be treated as proceeds from a sale or exchange of
your shares. Subject to the discussion below under the caption "Passive Foreign
Investment Company Considerations," if you are a U.S. Holder, your receipt of
such liquidating distributions would give rise to capital gain or loss equal to
the difference between the amount of the liquidation proceeds received and the
tax basis of your shares. If you are a noncorporate U.S. Holder, generally the
maximum U.S. federal income tax rate applicable to you with respect to capital
gain will be lower than the maximum U.S. federal income tax rate applicable to
ordinary income if your holding period for the shares exceeds one year. If you
are a U.S. Holder, any gain or loss recognized by you generally will be treated
as U.S. source income or loss for U.S. foreign tax credit purposes. The
deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Considerations
A non-United States corporation will be classified as a passive foreign
investment company for U.S. federal income tax purposes in any taxable year in
which, after applying certain look-through rules, either:
o at least 75% of its gross income is passive income or
o at least 50% of the average value of its gross assets is attributable
to assets that produce passive income or is held for the production of
passive income.
Passive income for this purpose generally includes dividends, interest,
royalties, rents and gains from commodities and securities transactions.
As a result of uncertainty in the application to us of certain U.S. federal
income tax rules relating to passive foreign investment companies, the U.S.
Internal Revenue Service may argue that the sale of the Subsidiaries and the
proceeds from such sales, which would be held by us until liquidating
distributions are completed, are treated as giving rise to passive income and
passive assets, respectively, and may thereby cause us to be classified as a
passive foreign investment company. In that case, if you are a U.S. Holder,
unless you make the qualified electing fund election described below, a special
tax regime under the passive foreign investment company rules would apply to
both (1) any excess distribution by us (generally, your ratable portion of
distributions in any year which are greater than 125% of the average annual
distribution received by you in the shorter of the three preceding years or your
holding period) and (2) any gain realized on the sale or other disposition of
your shares. Under this regime, any excess distribution and realized gain will
be treated as ordinary income and will be subject to tax as if (A) the excess
distribution or gain had been realized ratably over your holding period, (B) the
amount deemed realized had been subject to tax in each year of that holding
period at the highest applicable rate of tax in effect for each such year, and
(C) the interest charge generally applicable to underpayments of tax had been
imposed on the taxes deemed to have been payable in those years. In particular,
if we were treated as a passive foreign investment company as a result of the
sale of the Subsidiaries and/or the retention of the proceeds from the sale
until completion of liquidating distributions and you are a U.S. Holder
recognizing gain on the receipt of liquidating distributions from us, that gain
would be ordinary income to you, and you may face other disadvantageous tax
treatment.
However, if you are a U.S. Holder, you may protect yourself against the
uncertainty described in the preceding paragraph by electing with respect to
your shareholding, provided we comply with certain reporting requirements, to
treat us as a qualified electing fund, in which case, you must include annually
in your gross income your pro rata share of our annual ordinary earnings and
annual net realized capital gains, whether or not such amounts are actually
distributed to you. These amounts would be included by you for your taxable year
in or with which our taxable year ends. A qualified electing fund election
generally may be made by filing U.S. Internal Revenue Service Form 8621 with
your U.S. federal income tax return for the taxable year in or with which our
taxable year that includes the sale of the Subsidiaries ends. If the election is
made, amounts previously included as income generally could be distributed
tax-free, and to the extent not distributed, would increase the tax basis of
your shares. We intend to comply, either directly or through our authorized
representative, with the reporting requirements that will allow you to make a
qualified electing fund election with respect to your shareholding.
-45-
Each U.S. Holder should consult its own tax advisor regarding the tax
consequences that would arise if we were treated as a passive foreign investment
company and the propriety of making a qualified electing fund election to
alleviate the potential adverse tax consequences in that event.
Subject to the discussion below under "Backup Withholding Tax and
Information Reporting Requirements," if you are a Non-U.S. Holder, generally you
will not be subject to U.S. federal income or withholding tax on any gain
realized on receipt of liquidating distributions from us unless:
o the gain is effectively connected with the conduct by you of a trade
or business in the United States or
o if you are an individual Non-U.S. Holder, you are present in the
United States for 183 days or more in the taxable year of the
liquidating distributions and certain other conditions are met.
Backup Withholding Tax and Information Reporting Requirements
Backup withholding tax and information reporting requirements may apply to
you with respect to cash paid within the United States and received in
consideration for our class A common shares in connection with our liquidation.
We or our U.S. paying agent may be required to withhold tax from any such
payment at a rate of 30.5% if you are a United States person and you fail to
furnish your correct taxpayer identification number, to certify that you are not
subject to backup withholding or to comply otherwise with the applicable
requirements of the backup withholding rules. Certain U.S. Holders (including,
among others, corporations) are not subject to the backup withholding rules.
If you are not a United States person, you will not be subject to backup
withholding tax and information reporting if you provide an appropriate
certification to us or our U.S. paying agent, and we and our agent do not have
actual knowledge that such certification is incorrect.
The above description is not intended to constitute a complete analysis of
all tax consequences relating to the disposition of our class A common shares.
You should consult your tax advisor concerning the tax consequences of your
particular situation, as well as any tax consequences that may arise under the
laws of any non-U.S., state, local, or other taxing jurisdiction.
-46-
THE STOCK PURCHASE AGREEMENT AND LIQUIDATION
The following information describes the material aspects of the stock
purchase agreement and the liquidation. This description does not purport to be
complete and is qualified in its entirety by reference to the appendices hereto,
including the stock purchase agreement which is attached to this proxy statement
as Appendix B and is incorporated herein by reference. You are urged to read
Appendix B in its entirety.
Our board of directors has unanimously approved the sale of the
Subsidiaries followed by our liquidation. The board of directors has unanimously
determined that the distributions following the sale of the Subsidiaries of
$18.00 per class A common share and $16.40 per class B subordinated share, and
the anticipated aggregate distribution of approximately $9.1 million to our
class C shareholder following the sale of the Subsidiaries and our liquidation,
are fair to all our shareholders. See "SPECIAL FACTORS--Reasons for the
Recommendations of our Board of Directors."
Absence of Appraisal Rights
Irrespective of whether a shareholder votes for or against the adoption of
the proposed resolutions for the sale of the Subsidiaries and our subsequent
liquidation, such shareholder will not be entitled to seek a court appraisal of
the value of its shares or similar dissenter's rights, since such rights do not
exist under Netherlands Antilles law. Nevertheless, shareholders holding at
least 20% of our issued share capital may petition the courts in the Netherlands
Antilles to appoint one or more persons, neither of whom are our directors, to
investigate all or part of the conduct of our affairs and the management of our
corporate policy with respect to a certain period of time. Such a petition to
the court may only be made if the applicant shareholder or shareholders have
unsuccessfully sought the appointment of such person by the directors of the
company and by a general meeting of the shareholders. Under Netherlands Antilles
law, the court will reject the petition if (1) it is shown that no well-founded
reason exists to doubt the correct conduct of the affairs and the management of
corporate policy, and (2) the petitioners have not provided a security bond, in
an amount determined by the court, for the payment of expenses incidental to the
investigation.
Regulatory Approvals and Other Consents
The sale of the Subsidiaries is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act. Under that act certain
acquisitions may not be consummated unless notice has been given and certain
information has been furnished to the Antitrust Division of the United States
Department of Justice and the Federal Trade Commission. The transaction is
deemed approved if no objection has been raised within the applicable waiting
period, which is 30 days unless early termination is requested. Both we and
Kaneb have filed an application and notice pursuant to the act on November 15,
2001, with the Department of Justice and the Federal Trade Commission pursuant
to which we have sought early termination of the waiting period.
The approval of the Ministry of Justice in the Netherlands Antilles is
required prior to the effectiveness of the proposed amendments to our articles
of incorporation. We anticipate receiving this approval shortly after the
special general meeting of our shareholders.
The Stock Purchase Agreement
The following discussion of the material terms of the stock purchase
agreement is qualified in its entirety by reference to the complete text of the
stock purchase agreement, a copy of which is included in this proxy statement as
Appendix B and is incorporated herein by reference.
General
The stock purchase agreement provides that, upon the terms and subject to
the conditions set forth therein, we will sell to Kaneb all of the outstanding
capital stock of the Subsidiaries, which constitute substantially all of our
assets.
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Consideration to be Received by Us
On the day of the closing, we will deliver to Kaneb the capital stock of
the Subsidiaries in exchange for Kaneb's delivering to us (a) an amount equal to
the aggregate of (i) $184,872,223 plus (ii) the amount referred to as the
estimated net cash amount, which is equal to the amount by which (A) the
aggregate of (1) the combined cash of the Subsidiaries and their subsidiaries as
of the close of business on the day before the day of the closing, (2)
$1,516,403, representing the amount of the accruals from November 15, 2001,
through December 31, 2001, for interest payable by any Subsidiary or any of
their respective subsidiaries pursuant to the 11 3/4% first mortgage notes of
Statia International N.V. and Statia Terminals Canada, Incorporated, (3) the
amount of the accruals from November 13, 2001, through December 31, 2001, for
interest payable by any Subsidiary or any of their respective subsidiaries
pursuant to the loan agreement between Statia Marine, Inc. and Transamerica
Equipment Financial Services Corporation, and (4) the amount of any payments of
principal under such loan from November 13, 2001, through the day of the closing
exceeds (B) the aggregate of (1) the amount of the unpaid accruals through and
including the day of the closing for interest payable by any Subsidiary or any
of their respective subsidiaries pursuant to any outstanding indebtedness for
borrowed money, (2) the amount reserved by us to pay taxes on the Island
Territory of Sint Eustatius and the Land Territory of the Netherlands Antilles
and (3) indebtedness of any of our subsidiaries for borrowed money (other than
indebtedness for borrowed money described in clause (a)(ii)(A)(3) or
(a)(ii)(A)(4) above and indebtedness for borrowed money owing to any of our
other subsidiaries) and (b) the contingent tax payment note in the form provided
in the stock purchase agreement.
Promptly, and no later than 45 calendar days, following the closing, Kaneb
will prepare and deliver to us a statement, prepared on the same basis as the
line item cash and cash equivalents within financial statements prepared in
accordance with U.S. generally accepted accounting principles, of the amount of
the combined cash and cash equivalents of the Subsidiaries as of the day of the
closing. The statement will specify the amount by which (i) the amount of such
combined cash and cash equivalents exceeds the estimated net cash amount, or
(ii) the amount by which such estimated net cash amount exceeds the amount of
such combined cash and cash equivalents. After delivery of such statement, Kaneb
will provide us and our representatives with reasonable access during business
hours to the books and records of the Subsidiaries to verify the determination
by Kaneb of the amount of the combined cash and cash equivalents. If we do not
object in writing to the determination by Kaneb within 10 business days after
receiving Kaneb's statement, the amount of the combined cash and cash
equivalents of the Subsidiaries will be deemed final and binding. If we do
object in writing within such period, we and Kaneb will try to agree upon the
determination of the amount of the combined cash and cash equivalents within
five business days after such objection. If we and Kaneb are unable to agree on
the amount, we will submit the dispute to arbitration. The arbitrator will reach
a decision within 30 calendar days after the submission of the dispute and the
arbitrator's decision will be final and binding on both parties. If the
estimated net cash amount exceeds the amount of the combined cash and cash
equivalents, then we will be obligated to pay to Kaneb the amount of such
difference within three business days. If the amount of the combined cash and
cash equivalents exceeds the estimated net cash amount, then Kaneb will be
obligated to pay to us the amount of such difference within three business days.
Representations and Warranties
We have made various representations and warranties in the stock purchase
agreement to Kaneb relating to:
o our corporate organization and existence;
o our power and authority to enter into and perform our obligations
under the stock purchase agreement and the enforceability of the stock
purchase agreement against us;
o our capital structure;
o the required consents and approvals of governmental entities and
absence of conflict with our governing documents and certain
agreements and permits;
o the making and accuracy of filings with the Securities and Exchange
Commission (including our financial statements);
-48-
o the absence of certain material changes since December 31, 2000, that
could reasonably be expected to have a material adverse effect on us;
o our title to properties and encumbrances on assets;
o our compliance with applicable laws;
o the absence of material litigation;
o our employee benefit plans;
o our employment relations and agreements;
o our tax matters;
o the absence of undisclosed material liabilities;
o our intellectual property rights;
o the accuracy of this proxy statement and related materials;
o our utilization of, and payment of fees to, brokers and finders;
o the identification and enforceability of our material contracts;
o environmental matters;
o the vote required by our shareholders to adopt the stock purchase
agreement;
o insurance matters;
o our inventory; and
o the nature and quality of information furnished by us to Kaneb or its
representatives.
We have made various representations and warranties in the stock purchase
agreement to Kaneb relating to the Subsidiaries and:
o their corporate organization and existence;
o their capital structure;
o their title to properties and encumbrances on assets;
o their compliance with applicable laws;
o the absence of material litigation;
o their employee benefit plans;
o their employment relations and agreements;
o their tax matters;
-49-
o the absence of undisclosed material liabilities;
o their intellectual property rights;
o the identification and enforceability of their material contracts;
o environmental matters;
o insurance matters; and
o their inventory.
Kaneb has made customary representations and warranties to us in the stock
purchase agreement, including representations relating to:
o its corporate organization;
o its corporate authority;
o the absence of conflicts;
o required filings and consents;
o the accuracy of the information it provides for inclusion in the proxy
materials and any materials included therewith;
o its utilization of, and payment of fees to, brokers and finders;
o financing;
o litigation; and
o no knowledge of any adverse change to us.
Certain of our and Kaneb's representations and warranties are qualified as
to "Company Material Adverse Effect" or "Purchaser Material Adverse Effect,"
respectively.
"Company Material Adverse Effect" means any event, change, occurrence,
effect, fact or circumstance having a material adverse effect on (1) our ability
to perform our obligations under the stock purchase agreement or to consummate
the transactions contemplated thereby on a timely basis, or (2) the business,
properties, assets, liabilities, value, results of operations or financial
condition of the Subsidiaries and their respective subsidiaries taken as a
whole, but it does not include any effect arising out of (A) the performance by
us of any of our obligations pursuant to the stock purchase agreement, (B) any
general change in global economic conditions or the economic conditions of the
United States of America, Canada or the Netherlands Antilles, (C) any changes in
the condition of any industry in which any Subsidiary or any of their respective
subsidiaries operates that does not affect such subsidiary disproportionately,
(D) any change, in and of itself, in the market price or trading volume of our
class A common shares, (E) any failure, in and of itself, by us or any
Subsidiary or any of their respective subsidiaries to meet the revenue or
earnings predictions of equity analysts for any period ending on or after the
date of the stock purchase agreement and prior to the closing, or (F) the
announcement by Kaneb of any plan or intention to make any change in the conduct
of the business of any Subsidiary or any of their respective subsidiaries.
"Purchaser Material Adverse Effect" means any event, change, occurrence,
effect, fact or circumstance having a material adverse effect on the ability of
Kaneb to perform its obligations under the stock purchase agreement or to
consummate the transactions contemplated by the stock purchase agreement on a
timely basis.
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Covenants
We have agreed that we will, and will cause each of our subsidiaries to,
except as expressly contemplated by the stock purchase agreement or consented to
in writing by Kaneb, until the earlier of the termination of the stock purchase
agreement or the day of the closing, conduct our respective businesses and
operations only according to our ordinary course of business, and will use
commercially reasonable efforts to preserve intact our respective business
organization, keep available the services of our present officers and employees
and maintain satisfactory relationships with licensors, suppliers, distributors,
clients, customers and others having significant business dealings with us.
We have also agreed that, except as expressly contemplated by the stock
purchase agreement or consented to in writing by Kaneb, until the earlier of the
termination of the stock purchase agreement or the day of the closing, we will
not permit any of our subsidiaries to:
Organizational Documents and Capitalization
o amend its respective articles of incorporation or comparable governing
documents;
o issue or sell any shares of capital stock or any other securities, or
any options, warrants or other rights to purchase or subscribe for, or
enter into any arrangement or contract with respect to the issuance or
sale of, any share capital or any other securities, or make any other
changes in its capital structure;
o sell, pledge or dispose of or agree to sell, pledge or dispose of any
shares or other equity interests it may own in any other person;
o issue any debt securities or become responsible for the obligations of
any person, other than any of our other subsidiaries;
Acquisitions, Divestitures and Expenditures
o enter into any contract or commitment with respect to capital
expenditures with a value in excess of $1,000,000, individually, or
enter into contracts or commitments with respect to capital
expenditures with a value in excess of $2,000,000, in the aggregate,
other than inventory purchased in the ordinary course of business;
o acquire, by amalgamating, merging or consolidating with or by
purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any person, other than the purchase
of assets in the ordinary course of business;
o declare, pay or set aside any dividend or other distribution or
payment with respect to, or split, combine, redeem or reclassify, or
purchase or otherwise acquire, any shares of its share capital or its
other securities, other than distributions to any other subsidiary of
ours;
o transfer, lease, license, guarantee, sell, mortgage, pledge, dispose
of or otherwise encumber any material assets or incur or modify any
indebtedness or other material liability;
Employee Benefits
o (1) increase the compensation or fringe benefits of any directors,
officers or employees, except as may be required by law or under
existing benefit plans; (2) enter into any employment, consulting or
severance agreement with any present or former directors, officers or
other employees, except as may be required by law or under existing
benefit plans; or (3) establish, adopt, enter into, amend or terminate
any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund or arrangement for the benefit of
directors, officers or employees of such
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subsidiary, except as may be required by law or under existing benefit
plans; provided, however that, the prior consent of Kaneb is not
necessary for (a) the Subsidiaries and their respective subsidiaries
to increase the aggregate annualized compensation paid to all of the
employees of the Subsidiaries and their respective subsidiaries (other
than employees who have an employment contract with any Subsidiary or
any of their respective subsidiaries or employees who are covered by
collective bargaining contracts) by an amount not to exceed 4% of the
aggregate annualized compensation payable to such employees as of the
date of the stock purchase agreement, or (b) such Subsidiaries, with
respect to any employee of any Subsidiary or any of their respective
subsidiaries having an employment contract, to set (A) the bonus
target for any such employee at an amount not in excess of 75% of such
employee's base pay, (B) the bonus target earnings before interest,
taxes, depreciation and amortization for the Subsidiaries and their
respective subsidiaries for fiscal year 2002 in order to determine the
incentive thresholds applicable to such contract at an amount not
lower than $42,700,000, and (C) the annual compensation increase for
any such employee at an amount not in excess of the minimum required
by such employee's employment contract;
Other Covenants
o make any loan or other extension of credit;
o make or rescind any material tax election;
o make any material change in our method of accounting, except as may be
required by law or generally accepted accounting principles;
o adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization;
o incur or guarantee any indebtedness for borrowed money, or make any
loans or advances to any other person, other than for any of our other
subsidiaries for borrowings under existing credit facilities in the
ordinary course of business for working capital purposes;
o accelerate the payment, right to payment or vesting of any bonus,
severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefit;
o pay, discharge or satisfy any claims, liabilities or obligations,
other than in the ordinary course of business or if contemplated by
the consolidated financial statements in the filings we have
previously made with the Securities and Exchange Commission;
o enter into, materially modify, amend or terminate any material
contract, other than any storage and throughput contract that both has
a duration of less than 90 days and involves even payment obligations
throughout the term of such contract;
o plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of any of our employees,
other than routine employee terminations for cause in the ordinary
course of business or as disclosed in the completed filings with the
Securities and Exchange Commission;
o enter into any tax agreement or similar agreement with the Island
Territory of Sint Eustatius or the Land Territory of the Netherlands
Antilles; or
o agree, in writing or otherwise, to take any of the actions described
above.
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Commercially Reasonable Efforts
The stock purchase agreement provides that we and Kaneb will, and we will
cause each of our subsidiaries to, cooperate and use commercially reasonable
efforts to make effective the transactions contemplated in the stock purchase
agreement, including the satisfaction of the conditions to closing, and to make
all filings necessary as may be required by law, including commercially
reasonable efforts to obtain prior to the day of the closing all permits,
consents and approvals that are necessary to consummate the transactions and
satisfy the conditions to closing.
No Solicitation of Other Offers
We have also agreed that, other than in respect of a Superior Proposal (as
defined below), neither we nor our representatives will:
o have any discussions or negotiations that may be ongoing with any
other person regarding any Acquisition Proposal (as defined below);
o knowingly encourage, facilitate, initiate or solicit any Acquisition
Proposal;
o enter into any agreement, arrangement, or understanding regarding any
Acquisition Proposal;
o participate in any discussions or negotiations with, or furnish or
disclose any information to, any person in connection with any
Acquisition Proposal;
o facilitate any inquiries or the making of any proposal that
constitutes or would reasonably be expected to lead to any Acquisition
Proposal; or
o grant any waiver or release under any standstill, confidentiality or
similar agreement entered into by us or any of our affiliates or
representatives, other than waivers or releases in the ordinary course
of business.
Unless otherwise provided by the stock purchase agreement, neither our
board of directors nor any of its committees will:
o withdraw, modify, or amend, in a manner adverse to Kaneb, either the
approval, adoption or recommendation by our board of directors of the
stock purchase agreement and the transactions contemplated thereby or
the approval by our shareholders of the relevant proposals; or
o approve or recommend any Acquisition Proposal.
We have agreed to keep Kaneb informed of the status of any proposals and
negotiations relating to an Acquisition Proposal. If we receive an unsolicited
Acquisition Proposal that did not result from a breach of any of the agreements
described above, then:
o we may furnish information to the person who made the unsolicited
Acquisition Proposal, if (i) such disclosure is made subject to a
confidentiality agreement, (ii) our board of directors determines that
such Acquisition Proposal is or is reasonably likely to lead to a
Superior Proposal, and (iii) after receipt of advice from legal
counsel, our board of directors determines that it is necessary to
take such action in order to comply with its fiduciary duties; or
o if the Acquisition Proposal is a Superior Proposal and, after receipt
of advice from legal counsel, our board of directors determines that
it is necessary to take such action in order to comply with its
fiduciary duties, we may recommend to our shareholders the Acquisition
Proposal and withdraw or modify our approval of the stock purchase
agreement.
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"Acquisition Proposal" means: (1) any inquiry, proposal or offer from any
person regarding any acquisition or purchase of any class of equity securities
of us or any of our subsidiaries or 5% or more of the consolidated assets of us
and our subsidiaries, (2) any tender offer or exchange offer that would result
in any person beneficially owning any class of equity securities of us or any of
our subsidiaries, (3) any amalgamation, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving us or any of our subsidiaries, or (4) any other transaction that could
reasonably be expected to impede, interfere with, prevent or materially delay
consummation of the transactions contemplated by the stock purchase agreement,
or that could dilute materially the benefits to us of the transactions
contemplated in the stock purchase agreement.
"Superior Proposal" means a bona fide written Acquisition Proposal made by
a third party to acquire all of our shares or all or substantially all of the
combined assets of the Subsidiaries and their respective subsidiaries, pursuant
to a tender offer, amalgamation, merger or a sale (1) on terms that our board of
directors, after consultation with an independent nationally recognized
investment bank, determines in good faith to be more favorable from a financial
point of view than the transactions contemplated by the stock purchase
agreement, and (2) that is reasonably capable of being consummated, taking into
account the identity of the person making such proposal and all legal, financial
and other aspects of such proposal.
Access to Information
Subject to the terms of a confidentiality agreement with Kaneb, we have
agreed that we and each of our subsidiaries will, upon reasonable notice, afford
to Kaneb and its representatives access to our and our subsidiaries' officers,
directors, employees, accountants, properties, books and records and furnish
Kaneb with all information concerning the business it reasonably requests. We
also have acknowledged that we have had and will have access to certain
confidential information concerning Kaneb and its business, and we have agreed
that during the term of the stock purchase agreement and for a period of three
years following the closing or any termination of the stock purchase agreement,
we will not disclose any such confidential information to any person except to
authorized representatives of Kaneb in connection with the fulfillment of our
obligations under the stock purchase agreement or as required by applicable law.
Notification of Certain Matters
The stock purchase agreement provides that we and Kaneb will promptly
notify each other of the occurrence or non-occurrence of any fact or event that
has caused or could reasonably be expected to cause (1) any representation or
warranty made by such party in the stock purchase agreement to be materially
false at any time from the date of the stock purchase agreement until the day of
the closing, or (2) any covenant, condition or agreement under the stock
purchase agreement not to be complied with or satisfied by such party in any
material respect, provided that such notification will not modify either the
representations or warranties, or the conditions to the obligations of any
party.
Antitrust
Pursuant to the stock purchase agreement, both we and Kaneb will promptly
take all actions necessary to make the filings required under antitrust laws.
That includes filing with the appropriate antitrust authorities, no later than
the fifth business day after the date of the stock purchase agreement, a
notification and report form regarding the transactions contemplated by the
stock purchase agreement, complying with any request for additional information
or documentary material received from any antitrust authority, and cooperating
with the other party in connection with any filing under antitrust laws and in
connection with resolving any investigation initiated by the antitrust
authorities.
We and Kaneb have also agreed to use our commercially reasonable efforts to
resolve any objections that may be raised against us under any antitrust law in
connection with the transactions contemplated by the stock purchase agreement.
Notwithstanding the foregoing, we and Kaneb agree that Kaneb shall not be
obligated by the stock purchase agreement to hold separate, divest, license or
cause a third party to purchase, assets and/or businesses of any Subsidiary or
any of their respective subsidiaries or of Kaneb or any of its affiliates.
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We and Kaneb will promptly inform the other of any material communication
made to, or received from, any antitrust authority or any other governmental
entity regarding the transactions contemplated by the stock purchase agreement.
Employees
The stock purchase agreement provides that, starting on the day of the
closing of the sale of the Subsidiaries and ending on the first anniversary
thereof, the employees of our Subsidiaries and their respective subsidiaries who
are entitled to receive compensation or any benefits on the day of the closing
will continue to receive, in the aggregate, such compensation or benefits from
Kaneb, other than stock option or other plans involving the potential issuance
of securities. For additional information regarding the interests of directors
and executive officers, see "SPECIAL FACTORS--Interests of Directors and
Executive Officers--Employment Agreements."
Upon the sale of the shares, a "change of control" will be deemed to have
occurred in respect of each of the employment agreements, change in control
agreements, severance agreements and other employee benefit plans. Starting on
the day of the closing, Kaneb will cause the Subsidiaries and their respective
subsidiaries to pay and perform their respective obligations thereunder.
Notwithstanding the above, except as set forth in the company disclosure
letter, no employee of any Subsidiary or any of their respective subsidiaries
will have any continued right to employment with any Subsidiary or any of their
respective subsidiaries following the closing, except as provided in writing by
Kaneb (provided that nothing in such provision affects the rights of any
employee pursuant to any employment contract).
Directors' and Officers' Indemnification
The stock purchase agreement provides that for a period of six years
following the closing, (1) the indemnification provisions set forth in the
organizational documents of our subsidiaries that were in effect on the date of
the stock purchase agreement will not be amended or modified, unless such
modification is required by law, and (2) Kaneb will maintain in effect the
current directors' and officers' liability insurance or substantially similar
insurance covering those persons who are currently covered as directors or
officers of us or any of our subsidiaries on the date of the stock purchase
agreement by our directors' and officers' insurance (provided that Kaneb is not
required to pay an annual premium for any such policy, on an annualized basis,
in excess of 200% of the last annualized premium paid by us prior to the date of
the stock purchase agreement, which we represented to be $205,000 for the
12-month period ending on March 31, 2002). The stock purchase agreement also
provides that Kaneb will indemnify and hold harmless any current officer or
director of any of our subsidiaries against any losses in connection with any
threatened or actual action, suit or proceeding, based in whole or in part on,
or arising in whole or in part out of, the fact that the person is an officer or
director of any of our subsidiaries.
In order to claim indemnification, any indemnified party will promptly
notify Kaneb upon learning of any claim or action. The indemnification
obligations of Kaneb will survive the closing and will be binding upon Kaneb's
successors and assigns.
Public Announcements
We and Kaneb will consult with each other before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated by the stock purchase agreement and, except as required by law,
will not issue any such press release prior to such consultation or without the
prior consent of the other party, which consent will not be unreasonably
withheld.
Shareholder Approval
As soon as reasonably practicable after the date of the stock purchase
agreement, we have agreed to (1) duly call and convene the shareholder special
general meeting, (2) make all filings with all governmental entities necessary,
including filing the proxy materials with the Securities and Exchange
Commission, (3) subject to the
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rights of our board of directors pursuant to this proxy statement, provide the
proxy materials to our shareholders and retain the services of a proxy
solicitation firm and/or an information agent if so requested by Kaneb and (4)
subject to the rights of our board of directors pursuant to this proxy
statement, use all commercially reasonable efforts to obtain approval of all the
proposals by the requisite vote of our shareholders.
Section 338 Election
Notwithstanding anything to the contrary contained in the stock purchase
agreement, if Kaneb or any of its affiliates acquires or becomes the owner for
U.S. federal income tax purposes of any of our shares (other than our shares
held by Statia Terminals Holdings) at any time that Statia Terminals Holdings is
the owner for U.S. federal income tax purposes of any of our shares, neither
Kaneb nor any of its affiliates will make or permit to be made an election under
Section 338 of the Code with respect to such shares or with respect to any of
the transactions contemplated by the stock purchase agreement, unless we provide
our prior express written consent to any such election.
Repayment of Indebtedness
On or prior to the day of the closing, Kaneb will, in a manner satisfactory
to us, either (1) satisfy in full the indebtedness under the loan agreement
between Statia Marine, Inc. and Transamerica Equipment Financial Services
Corporation, (2) obtain a release for us from our obligations as guarantor of
such indebtedness, or (3) agree to indemnify us for our obligations as guarantor
of such indebtedness.
Transfer Taxes
All stamp, documentary, transfer or similar taxes resulting directly from
the transactions contemplated by the stock purchase agreement will be borne 50%
by Kaneb and 50% by us. Any tax returns that must be filed in connection with
transfer taxes will be prepared and filed by the party customarily responsible
under applicable local law.
Termination of Existing Tax Sharing Agreements
All existing tax sharing agreements, written or oral, between us, any of
our subsidiaries or affiliates on the one hand, and any of our subsidiaries on
the other, must be terminated by us and such subsidiaries as of the day of the
closing.
Refunds of Taxes for Pre-Closing Periods
In the event that we receive, after the day of the closing, but prior to
our liquidation, a refund of taxes paid by any of our subsidiaries, we must
promptly remit such refund to Kaneb.
Resignation of Directors
Unless otherwise requested in writing by Kaneb on or prior to December 15,
2001, at or prior to the closing, we must either (i) cause each director of each
of our subsidiaries to deliver to Kaneb his or her resignation as a director of
such subsidiary or (ii) remove each director of each of our subsidiaries from
his or her position as a director thereof.
Conditions to Closing
The obligation of Kaneb to purchase the shares on the day of the closing is
subject to a number of conditions, including, among others:
o there being no (1) order issued or law enacted by any governmental
authority that (A) prohibits or restrains the consummation of the
transactions contemplated by the stock purchase agreement, (B)
prohibits or restricts the ownership or operation by the Subsidiaries
or their respective subsidiaries or
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by Kaneb of any material portion of the business or assets of the
Subsidiaries and their respective subsidiaries, taken as a whole, or
compels Kaneb or any of its affiliates or subsidiaries to dispose of
or hold separate any material portion of the business or assets of the
Subsidiaries and their respective subsidiaries, taken as a whole, or
substantially deprives the Subsidiaries or their respective
subsidiaries or Kaneb of the benefit of ownership of the business or
assets of the Subsidiaries and their respective subsidiaries, taken as
a whole, (C) imposes material limitations on the ability of Kaneb
effectively to acquire or to hold or to exercise full rights to vote
the shares of the Subsidiaries on all matters presented to the
shareholders of the Subsidiaries, or (D) imposes any material
limitations on the ability of the Subsidiaries or their respective
subsidiaries or on Kaneb to control effectively the business and
operations of the Subsidiaries and their respective subsidiaries,
taken as a whole, and (2) the absence of any injunction or other order
issued by or any action by any governmental authority seeking to
prohibit or restrain the consummation of the transactions contemplated
by the stock purchase agreement;
o our representations and warranties being true and correct, except for
such breaches as would not, in the aggregate, have a Company Material
Adverse Effect (as defined in "--The Stock Purchase Agreement--No
Solicitation of Other Offers"), provided that, unless we have
delivered to Kaneb, not later than December 15, 2001, a copy of the
share register of each of our subsidiaries that is organized under the
laws of the Netherlands Antilles, in each case certified by the
requisite number of members of the board of directors of such
subsidiary, the representations and warranties with respect to our
capitalization must be true and correct in all respects;
o our having performed and complied in all material respects with all
our obligations under the stock purchase agreement;
o no event, fact or circumstance existing, that, individually or in the
aggregate, has or could reasonably be expected to have a Company
Material Adverse Effect;
o neither our board of directors nor any committee thereof having (1)
withdrawn, modified or amended, in a manner adverse to Kaneb, its
approval, adoption or recommendation of the stock purchase agreement
or the transactions contemplated thereby, or (2) approved any
Acquisition Proposal;
o at the special general meeting of our shareholders, (1) shareholders
representing more than 66 2/3% of our class A common shares and our
class B subordinated shares, voting together as a single class, at a
meeting at which holders of at least one-half of the issued and
outstanding class A common shares and class B subordinated shares,
counted as a single class, are present or represented, having approved
and adopted the proposals that (A) our articles of incorporation be
amended to provide for the distribution of the proceeds from the sale
of the shares of the Subsidiaries, (B) we sell to Kaneb all of the
shares of the capital stock of the Subsidiaries and (C) we be
dissolved pursuant to our articles of incorporation, as amended, and
(2) shareholders representing more than 66 2/3% of our class A common
shares, voting as a separate class, at a meeting at which holders of
at least one-half of the issued and outstanding class A common shares
are present or represented, having approved and adopted the proposal
to amend our articles of incorporation; and
o all applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act with respect to the transactions contemplated by the
stock purchase agreement having expired or been terminated.
Our obligation to sell the shares on the day of the closing is subject to a
number of conditions, including the following:
o there being no injunction or other order issued or law enacted by any
governmental authority prohibiting or restraining the consummation of
the transactions contemplated by the stock purchase agreement, or
seeking to prohibit or restrain the making or consummation of the
transactions contemplated by the stock purchase agreement;
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o Kaneb's representations and warranties being true and correct, except
for such breaches as would not, in the aggregate, have a Purchaser
Material Adverse Effect (as defined above);
o Kaneb's having performed and complied in all material respects with
all of its obligations under the stock purchase agreement;
o no event, fact or circumstance existing, that, individually or in the
aggregate, has or could reasonably be expected to have a Purchaser
Material Adverse Effect;
o at the special general meeting of our shareholders, (1) shareholders
representing more than 66 2/3% of our class A common shares and our
class B subordinated shares, voting together as a single class, at a
meeting at which holders of at least one-half of the issued and
outstanding class A common shares and class B subordinated shares,
counted as a single class, are present or represented, having approved
and adopted the proposals that (A) our articles of incorporation be
amended to provide for the distribution of the proceeds from the sale
of the shares of the Subsidiaries, (B) we sell to Kaneb all of the
shares of the capital stock of the Subsidiaries, and (C) we be
dissolved pursuant to our articles of incorporation, as amended, and
(2) shareholders representing more than 66 2/3% of our class A common
shares, voting as a separate class, at a meeting at which holders of
at least one-half of the issued and outstanding class A common shares
are present or represented,, having approved and adopted the proposal
to amend our articles of incorporation; and
o all applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act with respect to the transactions contemplated by the
stock purchase agreement having expired or been terminated.
Termination
The stock purchase agreement may be terminated at any time prior to the
closing by the consent of both us and Kaneb.
Either we or Kaneb may terminate the stock purchase agreement if:
o a governmental entity issues a nonappealable final order permanently
restraining, restricting or prohibiting the sale of the shares of the
Subsidiaries pursuant to the stock purchase agreement;
o at the special general meeting of our shareholders, the shareholders
do not approve the proposals that (1) our articles of incorporation be
amended to provide for the distribution of the proceeds from the sale
of the shares of the Subsidiaries, (2) we sell to Kaneb all of the
shares of the capital stock of the Subsidiaries, and (3) we be
dissolved pursuant to our articles of incorporation, as amended; or
o at any time after April 30, 2002, if the closing shall not have
occurred by such date other than as a result of (x) a breach of the
stock purchase agreement by Kaneb, if Kaneb is the party attempting to
terminate it, or (y) a breach of the stock purchase agreement by us,
or a breach by Statia Terminals Holdings of its obligations under the
voting and option agreement, if we are the party attempting to
terminate the stock purchase agreement.
We may terminate the stock purchase agreement if a Superior Proposal is
received and our board of directors reasonably determines in good faith, after
receiving advice from our Netherlands Antilles counsel, that it is necessary to
terminate the stock purchase agreement and enter into an agreement to effect the
Superior Proposal in order to satisfy the fiduciary duties of the board of
directors, and (1) prior to such termination Kaneb has received from us
$8,000,000 by wire transfer of immediately available funds, and (2)
simultaneously or substantially simultaneously with such termination we enter
into a definitive acquisition, merger, stock purchase, asset purchase or similar
agreement to effect the Superior Proposal.
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Kaneb may terminate the stock purchase agreement if:
o we withdraw, modify or amend, in a manner adverse to Kaneb, the
approval, adoption or recommendation, as the case may be, of the
proposals that we (A) amend our articles of incorporation to provide
for the distribution of the proceeds from the sale of the shares of
the Subsidiaries, (B) sell to Kaneb all of the shares of the capital
stock of the Subsidiaries, and (C) be dissolved pursuant to our
articles of incorporation, as amended;
o our board approves or recommends any Acquisition Proposal, or solicits
other offers; or
o Statia Terminals Holdings breaches its obligations under the voting
and option agreement.
Upon termination, the stock purchase agreement will become void and there
will be no liability on the part of either party except that the provisions of
the stock purchase agreement dealing with confidentiality, fees and expenses,
the effect of termination and amendment to the stock purchase agreement shall
survive any termination. However, neither party will be relieved from any
liability for any breach of the stock purchase agreement.
Fees and Expenses on Termination
If the stock purchase agreement is terminated:
o by us if we received a Superior Proposal, we must pay to Kaneb a fee
of $8,000,000 in immediately available funds immediately prior to our
entering into an agreement with respect to the Superior Proposal;
o by Kaneb if we (1) approved or recommended an Acquisition Proposal, or
(2) withdrew the recommendation of the proposals that (A) our articles
of incorporation be amended to provide for the distribution of the
proceeds from the sale of the shares of the Subsidiaries, (B) we sell
to Kaneb all of our shares of the capital stock of the Subsidiaries,
and (C) we be dissolved pursuant to our articles of incorporation, as
amended, we must pay to Kaneb a fee of $8,000,000; or
o by Kaneb or by us if at the special general meeting of our
shareholders, the shareholders do not approve the proposals that (1)
our articles of incorporation be amended to provide for the
distribution of the proceeds from the sale of the shares of the
Subsidiaries, (2) we sell to Kaneb all of the shares of the capital
stock of the Subsidiaries, and (3) we be dissolved pursuant to our
articles of incorporation, as amended, we must pay to Kaneb in
immediately available funds on the day next succeeding the date of
such termination, an amount equal to the out-of-pocket expenses
incurred by Kaneb in connection with the preparation of its bid for,
and due diligence of, the Subsidiaries and their respective
subsidiaries, negotiation and execution of its obligations under the
stock purchase agreement, and preparation for consummation of the
transactions contemplated by the stock purchase agreement, such amount
not to exceed $500,000.
Amendment to the Stock Purchase Agreement
The stock purchase agreement may be amended by the parties thereto only in
writing, by action taken by, on behalf of, or at the direction of their board of
directors or general partner, as applicable, subject to applicable law.
The Voting and Option Agreement
General
Upon the terms and subject to the conditions of the voting and option
agreement, Statia Terminals Holdings, which is controlled by Castle Harlan
Partners II, has granted to Kaneb an option to purchase all of our shares that
it beneficially owns and agreed to vote those shares in favor of approval of the
stock purchase agreement.
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Voting
Statia Terminals Holdings has agreed that during the period starting on the
date of the voting and option agreement and ending on the date of the
termination of such agreement, at any meeting of the holders of any class of our
capital stock, it shall vote the 3,800,000 class B subordinated shares it owns,
the 38,000 class C shares it owns and any other shares of our capital stock that
it may acquire prior to the termination of the voting and option agreement (1)
subject to the vote in favor of the amendments to our articles of incorporation
by more than 66 2/3% of the holders of our class A common shares, voting as a
separate class, at a meeting at which at least one-half of the issued and
outstanding class A common shares are present or represented, in favor of
approval and adoption of (A) the stock purchase agreement, (B) the sale of the
Subsidiaries and each of the other transactions contemplated by the stock
purchase agreement, and (C) the amendments to our articles of incorporation
contemplated thereby, (2) against any action or agreement that would result in a
breach (A) by us of any covenant, representation or warranty in the stock
purchase agreement, or (B) by Statia Terminals Holdings of any covenant,
representation or warranty in the voting and option agreement, and (3) except as
otherwise agreed to in writing in advance by Kaneb, against the following
actions: (A) any extraordinary corporate transaction, such as a merger,
involving us or any of our subsidiaries resulting from any Acquisition Proposal,
(B) a sale, lease or transfer of a significant part of our assets or of the
assets of any of our subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation involving us or any of our subsidiaries, and (C) any
change in our present capitalization, any amendment to our articles of
incorporation, any other material change in our corporate structure or business
or any other action involving us or any of our subsidiaries that could impede or
adversely affect the transactions contemplated by either the voting and option
agreement or the stock purchase agreement.
Purchase Option
The voting and option agreement provides that Statia Terminals Holdings
will grant to Kaneb an irrevocable option (the "Option") to purchase (i) the
3,800,000 class B subordinated shares owned by Statia Terminals Holdings, at a
purchase price equal to $16.40 per share, (ii) the 38,000 class C shares owned
by Statia Terminals Holdings, at a purchase price equal to $232.89 per share,
and (iii) any other shares of our capital stock that Statia Terminals Holdings
may acquire prior to the termination of the voting and option agreement, but
only if a triggering event occurs. A triggering event will be deemed to occur if
(1) the stock purchase agreement becomes terminable under circumstances that
would entitle Kaneb to termination fees pursuant to the stock purchase
agreement, (2) an Acquisition Proposal is made by any person (other than Kaneb),
or (3) any person other than Kaneb acquires or proposes to acquire more than 15%
of any class or series of our capital stock, or is granted an option to acquire
beneficial ownership of more than 15% of any class or series of our capital
stock. Statia Terminals Holdings will promptly notify Kaneb in writing of the
occurrence of any triggering event. The Option is not exercisable until (i) all
waiting periods under any antitrust laws have expired or been waived, and (ii)
there is not then in effect an order issued by any governmental entity
prohibiting the exercise of the Option. If a triggering event occurs when the
Option is not exercisable, the Option shall be exercisable until the expiration
of the 20 business day period commencing on the first date that such
circumstances do not exist.
The voting and option agreement provides that if there is a change in the
outstanding number of class B subordinated shares or class C shares due to a
stock split, merger or similar transaction, the type and number of shares
purchasable upon the exercise of the Option and the purchase price for such
shares will be adjusted appropriately.
The Option will terminate upon the earlier of: (a) termination of the stock
purchase agreement, other than any termination upon or during a continuation of
a triggering event, and (b) 60 days following any termination of the stock
purchase agreement upon or during the continuation of a triggering event, unless
the Option cannot be exercised because of a judgment, decree, order, law or
regulation that applies to it, in which case the Option shall terminate 20
business days after such impediment to exercise has been removed.
Subsequent Sale of Shares
Pursuant to the voting and option agreement, if Kaneb has exercised the
Option and, at any time prior to the earlier of (1) the second anniversary of
the exercise of the Option, and (2) the date on which Kaneb acquires the shares
of our Subsidiaries, (i) we consummate or agree to consummate a business
combination, (ii) Kaneb or any of
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its affiliates disposes or agrees to dispose of any or all of (A) our class B
subordinated shares, (B) our class C shares or (C) other shares of our capital
stock that Statia Terminals Holdings acquires prior to the termination of the
voting and option agreement, to any person other than Kaneb or any of its
affiliates, or (iii) Kaneb or any of its affiliates realizes proceeds following
(A) any extraordinary corporate transaction, such as a merger, involving us or
any of our subsidiaries resulting from any Acquisition Proposal or (B) a sale,
lease or transfer of a significant part of our assets or of the assets of any of
our subsidiaries, then Kaneb or the relevant affiliate shall, upon consummation,
promptly pay to Statia Terminals Holdings an amount equal to the product of (x)
the amount by which the new price exceeds the relevant exercise price,
multiplied by (y) the number of class B subordinated shares or, as the case may
be, class C shares, that were disposed of pursuant to a business combination or
a sale to any person other than Kaneb or its affiliates.
Covenants
Statia Terminals Holdings has agreed that it will not and it will not
permit its affiliates to:
o sell, transfer, tender, pledge, encumber, assign, or otherwise dispose
of, or consent to any of the above actions, or enter into any
contract, option or other agreement with respect to any or all of the
class B subordinated shares and class C shares;
o grant any proxies or powers of attorney in respect of the class B
subordinated shares and class C shares, or deposit any such shares
into a voting trust or enter into a voting agreement with respect to
any of such shares; or
o take any action that would have the effect of preventing or disabling
Statia Terminals Holdings from performing its obligations under the
voting and option agreement.
In addition, Statia Terminals Holdings will and will cause its affiliates
to:
o cease any discussions or negotiations with any other person that may
be ongoing with respect to an Acquisition Proposal; and
o undertake no efforts to (i) encourage knowingly, solicit, initiate or
facilitate, directly or indirectly, the making or submission of any
Acquisition Proposal, (ii) enter into any agreement, arrangement or
understanding with respect to any Acquisition Proposal, (iii) initiate
or participate in any way in any discussions or negotiations with, or
furnish or disclose any information to, any person (other than Kaneb)
in connection with any Acquisition Proposal, or (iv) facilitate or
further in any other manner any inquiries or the making or submission
of any proposal that constitutes or would reasonably be expected to
lead to any Acquisition Proposal.
Notwithstanding anything to the contrary contained in the voting and option
agreement, if Kaneb or any of its affiliates acquires or becomes the owner of,
for U.S. federal income tax purposes, any shares of our class A common shares,
class B subordinated shares or class C shares (other than any such shares held
by Statia Terminals Holdings) at any time that Statia Terminals Holdings is the
owner, for U.S. federal income tax purposes, of any of our class A common
shares, class B subordinated shares or class C shares, neither Kaneb nor any of
its affiliates shall make or permit to be made an election under Section 338 of
the Code with respect to such class A common shares, class B subordinated shares
or class C shares or with respect to any of the transactions contemplated by the
stock purchase agreement between Kaneb and us, unless Statia Terminals Holdings
provides prior express written consent to any such election.
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Representations and Warranties
Statia Terminals Holdings and Kaneb have each made customary
representations and warranties in the voting and option agreement to the other,
including representations relating to:
o corporate organization;
o corporate authority;
o no conflict; and
o brokers or finders.
Statia Terminals Holdings has also made representations and warranties that
the class B subordinated shares and the class C shares are free of any
encumbrances and can be freely transferred to Kaneb.
Kaneb has also made representations and warranties with respect to its
investment intent.
Amendments
The voting and option agreement may not be amended, changed, supplemented,
waived or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by all of the parties thereto.
Termination
The voting and option agreement shall terminate, and neither we, nor Kaneb,
nor Statia Terminals Holdings shall have any rights or obligations under it and
it shall become null and void and have no effect upon the earliest to occur of
(a) the date on which the stock purchase agreement is terminated by Kaneb in
accordance with its terms, (b) the date on which the shares of the Subsidiaries
are purchased by Kaneb pursuant to the stock purchase agreement, (c) the date on
which the class B shares and the class C shares are purchased pursuant to the
Option, and (d) the consent of Kaneb and Statia Terminals Holdings.
Dissolution and Liquidation
Dissolution and Liquidation Procedure
Following adoption of the proposed resolution to dissolve and liquidate and
to appoint a liquidator and a custodian, and following the distribution of
proceeds received through the sale of the Subsidiaries, we will be dissolved and
the liquidator will commence our liquidation by publishing the resolution
adopted by our shareholders to dissolve us in the official Gazette of the
Netherlands Antilles and by registering our dissolution and the resolution to
dissolve us with the Trade Registry at Curacao, Netherlands Antilles. Our
dissolution will commence immediately following the distribution to our
shareholders of the proceeds of the sale of the Subsidiaries and establishment
of appropriate reserves, which we anticipate will amount to approximately $3.0
million, for the payment of our liabilities in connection with our liquidation.
From the date of our dissolution, we will no longer be authorized to undertake
actions other than those necessary to wind up our affairs. The steps taken to
wind up our affairs, as described below, will be completed when no more assets
are available for distribution, all required filings have been made and the
report of the liquidator has become binding and final.
Actions by the Liquidator
The liquidator appointed by the special general meeting will (a) settle and
wind-up our business and our remaining operations, (b) convert to cash as many
of our remaining non-cash assets as possible, (c) pay or make provision for the
satisfaction of all of our expenses and liabilities, (d) create reserves for
contingencies, (e) prosecute, defend and settle lawsuits, if any, (f) draw up a
plan of distribution (plan van uitkering) for the
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distribution of our assets to our shareholders, file the plan of distribution
with the Trade Registry at Curacao, Netherlands Antilles and register our
dissolution and the resolution to dissolve us with the Trade Registry at
Curacao, Netherlands Antilles, (g) distribute our remaining assets, if any, to
our class C shareholder, assuming the prior distribution of $18.00 per class A
common share and $16.40 per class B subordinated share, and (h) do any other act
necessary to wind up and liquidate our business and affairs, including filing
and publishing information regarding the liquidation as required under
Netherlands Antilles law. Under Netherlands Antilles law a liquidator has the
same powers, obligations and liabilities as a director.
From the date of dissolution the words: "pending liquidation" (in
liquidatie) will follow our name on all official documents.
Plan of Distribution
After adoption of the proposal to dissolve us, the liquidator will draw up
a plan of distribution which provides the basis for the liquidating
distributions. The plan of distribution will be made public by filing it with
the Netherlands Antilles Trade Registry, publishing the filing with the Trade
Registry official Gazette of the Netherlands Antilles and making it available in
the offices of our registered agent in Curacao, Netherlands Antilles. Our
creditors will have a two month period from the date of the publishing of the
filing to review the plan of distribution and object to its contents. If our
creditors do not object to the plan of distribution, our remaining assets, if
any, shall be distributed in accordance with the plan. The liquidator shall have
the authority to sell all of our assets and distribute the proceeds from such
sale according to the plan of distribution, without further shareholder action
or approval.
Distribution to Shareholders
Before making any liquidating distributions to shareholders, the liquidator
first must make adequate provision for the payment, satisfaction and discharge
of all known, unascertained or contingent debts and liabilities, including costs
and expenses incurred and anticipated to be incurred in connection with the sale
of any assets remaining after the sale of the Subsidiaries and claims from tax
authorities. In connection with this, we anticipate expenses for professional
fees and other expenses of liquidation. These expenses will reduce the amount of
assets available for ultimate distribution to shareholders.
Distributions, treated as liquidating distributions under Netherlands
Antilles law, will be made to shareholders, on the following basis: first, pro
rata, to the class A common shares until each common share has received an
amount equal to $18.00, second, pro rata, to the class B subordinated shares
until each subordinated share has received an amount equal to $16.40, and third,
pro rata, to the class C shares, all remaining proceeds, if any. However, the
amount of such liquidating distribution shall be reduced by the amount per share
that shall have previously been distributed to our shareholders following the
sale of the Subsidiaries. Because we anticipate making distributions of $18.00
per class A common share and $16.40 per class B subordinated share shortly after
the closing of the sale of the Subsidiaries, we anticipate that no further
distributions will be made in respect of these shares upon our liquidation.
Liquidation Accounts
Distributions to our shareholders which have not been claimed within six
months of the date on which they first became payable will be placed in a
depository account under the supervision of the Netherlands Antilles court.
Within seven months of the date on which the last distribution payment became
payable the liquidator will draw up final liquidation accounts (rekening en
verantwoording). Subsequently, the liquidator will announce in the official
Gazette of the Netherlands Antilles that the liquidation accounts have been
drawn up and such accounts will be filed with the Trade Registry at Curacao,
Netherlands Antilles, for inspection by interested parties. The liquidation
accounts will become final if no objections are filed within three months from
the public announcement that the liquidation accounts are available for
inspection.
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Contingent Liability of Shareholders after Dissolution
If, following liquidation, a creditor or other party entitled to the
surplus comes forward, or the existence of an asset is ascertained, the court in
the Netherlands Antilles can reopen the liquidation at the request of an
interested party. The court's ability to reopen the liquidation is not subject
to any time limit. In case of such reopening of the liquidation, the liquidator
is entitled to recover from shareholders who received a liquidating
distribution, on a pro rata basis, the amount necessary to satisfy the claim of
the creditor or other party, up to the amount of the liquidating distribution
received by each shareholder.
Custodian of Company's Records
After completion of our liquidation, the custodian appointed by the special
general meeting will retain all our accounting records and documents for a
period of ten years. The custodian is required to inform the Trade Registry in
Curacao, Netherlands Antilles, of his appointment. Our previous shareholders or
their successors may request the court to provide them with access to our
records if they can provide a valid reason for such request.
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OTHER INFORMATION
Beneficial Ownership of Voting Securities by Directors, Executive Officers and
5% Shareholders
The following table sets forth the number of voting securities beneficially
owned, as of [______], 2001, the record date for the special general meeting,
by: (a) each person or group who is known to us to be the beneficial owner of
more than 5% of any class of our voting securities, (b) each of our current
directors and executive officers, and (c) all of our directors and executive
officers as a group.
Class A Class B
Common Shares Subordinated Shares Total Voting Securities(1)
------------------------ --------------------------- ----------------------------
# of Percentage of Percentage of Percentage of
Shares Outstanding # of Shares Outstanding # of Shares Outstanding
------- ------------- ----------- ------------- ------------ -------------
Name and Address
Shareholder:
Castle Harlan Partners II, L.P., - - 3,800,000 100.0% 3,800,000 100.0%
affiliates and Castle Harlan, Inc.
employees(2)
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
Directors and Executive Officers:
James G. Cameron - - 195,908 5.2 195,908 2.0
Thomas M. Thompson, Jr. 110 * 152,751 4.0 152,861 1.6
Robert R. Russo - - 134,323 3.5 134,323 1.4
Jack R. Pine - - 66,758 1.8 66,758 0.7
John D. Franklin - - 58,837 1.5 58,837 0.6
James F. Brenner - - 52,533 1.4 52,533 0.5
John K. Castle(1) - - 3,800,000 100.0 3,800,000 38.7
c/o Castle Harlan, Inc.
150 East 58th Street
New York, NY 10155
David B. Pittaway - - 16,164 * 16,164 0.2
Justin B. Wender - - 808 * 808 0.0
James L. Holloway III - - 12,123 * 12,123 0.1
Francis Jungers 31,050 * 16,164 * 47,214 0.5
Jonathan R. Spicehandler - - 16,164 * 16,164 0.2
Ernest Voges - - 8,082 * 8,082 0.1
Directors and Executive Officers 31,160 * 3,800,000 100.0% 3,831,160 39.0%
as a group (13 in number)(3)
* Beneficially owns less than one percent of shares of the class.
_______________________
(1) Some of our directors and all of our executive officers hold options to
purchase our class A common shares. These options automatically vest and
become exercisable upon the closing of the sale of the Subsidiaries.
Therefore, the options will not be exercisable at the time at of the
special general meeting. For this reason, even though the options may
become exercisable within 60 days of the date of this proxy statement, they
are not included in the above table. For additional information regarding
the number of options held by our directors and executive officers, see
"SPECIAL FACTORS--Interests of Directors and Executive Officers in the
Transaction."
(2) Castle Harlan Partners II and certain of its affiliates own a majority of
the voting securities of Statia Terminals Holdings which holds 3,800,000
class B subordinated shares. Mr. Castle is the controlling stockholder of
the general partner of the general partner of Castle Harlan Partners II.
Mr. Castle may, therefore, be deemed to be the beneficial owner of shares
beneficially owned by Castle Harlan Partners II or its affiliates and
Castle Harlan, Inc. employees. Mr. Castle disclaims beneficial ownership of
the shares
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owned by Castle Harlan Partners II, its affiliates and Castle Harlan, Inc.
employees other than such shares that represent his pro rata partnership
interests in Castle Harlan Partners II and its affiliates.
(3) Share amounts for directors and named executive officers and all directors
and officers as a group are beneficially held by such persons through their
shareholdings in Statia Terminals Holdings which holds 3,800,000 class B
subordinated shares. The following is a list of our directors and executive
officers and the directors and executive officers of Statia Terminals, Inc.
Mr. Cameron is a director of us, and Chairman of the Board and President of
Statia Terminals, Inc. Mr. Thompson is Vice President of us and a director
and Executive Vice President of Statia Terminals, Inc. Mr. Russo is Vice
President of us and a director and Senior Vice President of Statia
Terminals, Inc. Mr. Pine is our Secretary and Senior Vice President,
General Counsel, and Secretary of Statia Terminals, Inc. Mr. Franklin is
Vice President--Marine Fuel Marketing of Statia Terminals, Inc. Mr. Brenner
is the Vice President and Treasurer of us and the Vice President--Finance,
Treasurer, and Assistant Secretary of Statia Terminals, Inc. Messrs.
Castle, Pittaway, Wender, Holloway, Jungers, Spicehandler, and Voges each
serve as our directors.
EXPENSES OF SOLICITATION
We will bear the cost of preparing, mailing, and soliciting the proxy
statement. In addition to our solicitations by mail, our directors, officers,
and regular employees may solicit proxies personally and by telephone,
facsimile, or other means, for which they will receive no compensation in
addition to their normal compensation. We have also retained Morrow & Co., Inc.,
located at 445 Park Avenue, New York, NY 10022, telephone number (212) 754-8000
or (800) 654-2468, to assist in the solicitation of proxies from shareholders,
including brokerage houses and other custodians, nominees, and fiduciaries and
will pay a fee of $12,500 plus that firm's transaction expenses. Arrangements
will also be made with brokerage houses and other custodians, nominees, and
fiduciaries for the forwarding of solicitation material to the beneficial owners
of class A common shares held of record by such persons, and we may reimburse
them for their reasonable transaction and clerical expenses.
EXPERTS
Our consolidated financial statements and schedules for the years ended
December 31, 2000 and 1999, incorporated herein by reference, have been audited
by Arthur Andersen LLP, independent certified public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of that firm as experts in giving such reports. It is not
anticipated that a representative of Arthur Andersen LLP will attend the special
general meeting.
PROPOSALS BY HOLDERS OF CLASS A COMMON SHARES
Due to the contemplated closing of the sale of the Subsidiaries and our
subsequent commencement of dissolution and liquidation proceedings, we
anticipate that our board of directors will not convene an annual meeting of
shareholders in 2002.
TRANSACTION OF OTHER BUSINESS
As of the date of this proxy statement, our board of directors is not aware
of any other matters to be presented for action at the special general meeting
other than those described herein and does not intend to bring any other matters
before the special general meeting.
DOCUMENTS INCORPORATED BY REFERENCE
This proxy statement incorporates information by reference from the
following documents filed with the Securities and Exchange Commission:
o Our Annual Report on Form 10-K and Form 10-K/A (Amendment No. 1) for
the fiscal year ended December 31, 1999;
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o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000;
o Our Quarterly Report on 10-Q for the fiscal quarter ended September
30, 2001; and
o Our Form 8-K filed on November 14, 2001, announcing the potential sale
of the Subsidiaries to Kaneb and our subsequent liquidation.
These documents are not presented in this proxy statement or delivered with
it, but are available (without exhibits, unless the exhibits are specifically
incorporated into this proxy statement by reference) to any person, including
any beneficial owner, to whom this proxy statement is delivered, without charge,
upon written request directed to our proxy solicitation agent, Morrow & Co.,
Inc., located at 445 Park Avenue, New York, NY 10022; Telephone: (212) 754-8000;
Call Toll Free: (800) 654-2468. Copies of these documents so requested will be
sent, within one business day of receipt of such request, by first class mail,
postage paid.
All documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the
date of this proxy statement and prior to the date of the special general
meeting shall be deemed to be incorporated by reference in this proxy statement
and to be a part of this proxy statement from the respective dates of filing of
such documents. Any statement contained in this proxy statement or in a document
incorporated or deemed to be incorporated by reference in this proxy statement
shall be deemed to be modified or superseded for purposes of this proxy
statement to the extent that a statement contained in any subsequently filed
document that also is or is deemed to be incorporated by reference in this proxy
statement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this proxy statement. Any references to the Private
Securities Litigation Reform Act in our publicly filed documents which are
incorporated by reference into this proxy statement are specifically not
incorporated by reference into this proxy statement.
WHERE YOU CAN FIND MORE INFORMATION
We are currently subject to the informational reporting requirements of the
Exchange Act and in accordance with the Exchange Act, we file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC"). Such reports, proxy statements and other information can be
inspected and copies made at the Public Reference Room of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. Information regarding the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Copies of such material may also be accessed through the SEC's web site at
www.sec.gov. Our class A common shares are traded on Nasdaq under the symbol
"STNV."
A copy of the notice and agenda for the special general meeting, together
with this proxy statement and its appendices, including the text of proposed
amendments to our articles of incorporation and the resolutions, may be
inspected and copied without charge at our offices, c/o Covenant Managers N.V.,
at L.B. Smithplein 3, Curacao, Netherlands Antilles, and at the offices of our
proxy solicitation agent, Morrow & Co., Inc., located at 445 Park Avenue, New
York, NY 10022.
If you would like to request documents from us, please do so at least five
business days before the date of the special general meeting in order to receive
timely delivery of such documents prior to the special general meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote your shares at the special general
meeting. We have not authorized anyone to provide you with information that is
different from what is contained in this proxy statement.
This proxy statement is dated [____________]. You should not assume that
the information contained in this proxy statement is accurate as of any date
other than that date, and the mailing of this proxy statement to shareholders
does not create any implication to the contrary. This proxy statement does not
constitute a solicitation of a proxy in any jurisdiction where, or to or from
any person to whom, it is unlawful to make such proxy solicitation in such
jurisdiction.
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No persons have been authorized to give any information or to make any
representations other than those contained, or incorporated by reference, in
this proxy statement, and if given or made, such information or representations
must not be relied upon as having been authorized by us or any other person. We
have supplied all information contained in this proxy statement relating to us,
and Kaneb has supplied all information contained in this proxy statement
relating to Kaneb and its affiliates.
By order of the Board of Directors
/s/ Jack R. Pine
Secretary
[_________________]
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints [___________] and [___________], or either
of them, proxies (each with full power of substitution) to vote, as indicated
below and in their discretion upon such other matters, not known or determined
at the time of solicitation of this proxy, as to which shareholders may be
entitled to vote at the special general meeting of the shareholders of Statia
Terminals Group N.V., to be held at the Curacao Marriott Beach Resort, Queen's
Ballroom A, John F. Kennedy Boulevard, Piscadera Bay, Curacao, Netherlands
Antilles, on [_________], 2002, at 10:00 a.m. local time, and at any adjournment
or postponement of the special general meeting, as indicated on the reverse
side.
This proxy is solicited on behalf of the board of directors. This proxy,
when properly executed, will be voted in a manner directed herein by the
undersigned shareholder. If no direction is made, provided that the proxy is
signed, the proxy will be voted "FOR" the proposals. The undersigned shareholder
understands that this proxy is being provided for use in connection with such
resolutions.
(Continued and to be signed on the reverse side)
1. To adopt amendments to our articles of incorporation (i) to add a
provision with respect to the distribution to our shareholders of the proceeds
from a sale of all or substantially all of our assets, consisting of the capital
stock of our three subsidiaries, Statia Terminals International N.V., Statia
Technology, Inc. and Statia Marine, Inc. (collectively, the "Subsidiaries"), and
(ii) to add new provisions and adjust existing provisions with respect to the
distribution to our shareholders of our remaining assets upon our liquidation
after such a sale.
/ / FOR / / AGAINST / / ABSTAIN
2. To (i) approve a stock purchase agreement with Kaneb Pipe Line Operating
Partnership, L.P. ("Kaneb") pursuant to which we will sell to Kaneb
substantially all of our assets, consisting of all of the outstanding capital
stock of the Subsidiaries, followed by a distribution to our shareholders of
substantially all of the proceeds of such sale in accordance with the terms of
our articles of incorporation, as amended, and (ii) adopt our liquidation and
the distribution of our remaining assets to our shareholders in accordance with
our articles of incorporation, as amended.
/ / FOR / / AGAINST / / ABSTAIN
The undersigned hereby acknowledges receipt of the notice of the special
general meeting and the proxy statement.
This proxy is governed by Netherlands Antilles law.
PLEASE SIGN THIS PROXY AND COMPLETE THE INFORMATION BELOW.
_________________________________
Please sign exactly as your name appears on
the left. When signing as attorney, executor,
administrator, guardian or corporate official,
please give full title.
Date:
_________________________________
Number of class A common shares held:
________________________________
(i)
Appendix A
PROPOSED TEXT OF THE AMENDMENT TO THE ARTICLES OF
INCORPORATION OF STATIA TERMINALS GROUP N.V.
I. ARTICLE 17, PARAGRAPH 1 SHALL BE AMENDED AS FOLLOWS: A new final sentence
shall be added to paragraph 1 ("Definitions") of this article, which shall read
as follows: "The provisions of this article 17 will, other than the provisions
set forth in paragraphs 2, 3, 4 and 5 of this article 17, not apply to a Sale
Event (as defined in article 17A) or any distribution made to the shareholders
of the company from the proceeds of a Sale Event."
II. A NEW ARTICLE 17A SHALL BE ADDED AFTER ARTICLE 17 WHICH SHALL HAVE THE
FOLLOWING HEADING: "DEFINITIONS/SPECIFIC PROVISION ON A SALE EVENT (AS DEFINED
BELOW) OF OR BY THE COMPANY AND ON DISTRIBUTIONS TO SHAREHOLDERS FROM THE
PROCEEDS OF A SALE EVENT", WHICH ARTICLE SHALL READ AS FOLLOWS:
"In the event (a) the Board of Directors has adopted a resolution to
approve and to recommend to the General Meeting the adoption and approval of a
Sale Event, (b) the General Meeting has adopted and approved such Sale Event,
and (c) a definitive agreement has been entered into by or on behalf of the
company with a third party purchaser in connection with such Sale Event, and the
transactions contemplated by such definitive agreement have been consummated,
then, with due observance of the provisions of paragraphs 2, 3, 4 and 5 of
article 17 of these articles of incorporation, a distribution to the
shareholders shall be made out of the proceeds received by the company from such
Sale Event in accordance with the following provisions:
1. Sale Event Distribution: A distribution of any proceeds received by the
company from a Sale Event shall be made and be paid from legally available funds
therefor, by or on behalf of the company in cash as a distribution from profit,
as a dividend or interim-dividend, as the case may be, and/or from freely
distributable reserves of the company including, but not limited to, capital
surplus reserves, to and for the benefit of its shareholders.
2. Sale Event: Sale Event shall mean a sale or other voluntary disposition, in a
single transaction, of all or substantially all of the assets of the company
comprising the capital stock of Statia Terminals International N.V., Statia
Technology, Inc. and Statia Marine, Inc.
3. Distribution from Sale Event: Any distribution from proceeds received by the
company from a Sale Event shall be made in the following manner:
(a) First, to the common shares, pro rata, until each issued and outstanding
common share has been paid an amount equal to $18.00 (such amount being the
value per common share attributed to each such common share by one or more
independent experts, as appointed by or on behalf of the company in conjunction
with the establishment of the going concern value of the company);
(b) Second, after satisfaction in full of the payment of the amounts under (a)
above, to the subordinated shares, pro rata, until each issued and outstanding
subordinated share has been paid an amount equal to $16.40 (such amount being
A-1
the value per subordinated share as attributed to each such subordinated share
by the company in conjunction with the establishment of the going concern value
of the company referred to in clause (a) above);
(c) Third, after satisfaction in full of the payment of the amounts under (a)
and (b) above, to the incentive shares, pro rata, the balance of the proceeds
received by the company from the Sale Event (such amount being the value per
incentive share as attributed to each such incentive share by the company in
conjunction with the establishment of the going concern value of the company
referred to in clause (a) above) minus (x) the amount due from the company
pursuant to the obligations of the company under the 1999 Stock Option Plan, (y)
the amount necessary to satisfy any outstanding liabilities of the company, as
determined by the Board of Directors and (z) $[insert dollar amount equal to 20%
of the authorized capital of the company], and subject to upward or downward
adjustment commensurate with the adjustment of the purchase price, if any,
pursuant to the definitive agreement entered into in connection with such Sale
Event.
Distributions under this paragraph 3 shall satisfy in full any obligations with
respect to, and shall be in lieu of payment of, any Common Share Arrearages and
any deferred distributions declared on the Subordinated Shares, in each case
accrued and unpaid for any period prior to the Sale Event giving rise to such
distributions.
III ARTICLE 18, PARAGRAPH 1 SHALL BE AMENDED AS FOLLOWS: After "to dissolve the
company or to sell all or substantially all of the assets of the company", the
following shall be added ", including but not limited to, a Sale Event".
IV ARTICLE 18, PARAGRAPH 6 SHALL BE AMENDED AS FOLLOWS: After "(a Liquidation
Event)" the following text shall be added: "not constituting a Sale Event (as
defined in these articles of incorporation) in which case paragraph 6A of this
article 18 shall apply".
V A NEW PARAGRAPH 6A SHALL BE ADDED TO ARTICLE 18 AFTER PARAGRAPH 6, WHICH SHALL
HAVE THE HEADING "SALE EVENT/DISTRIBUTION IN CONJUNCTION WITH A LIQUIDATION
EVENT" AND WHICH SHALL READ AS FOLLOWS: "In case of a Liquidation Event
following the distribution of the proceeds from a Sale Event, after satisfaction
of all the company's creditors in the order of priority as set out by or under
applicable law, any distribution of proceeds of such liquidation will be made to
the holders of common and subordinated shares and the holders of incentive
shares as follows:
(a) First, to the common shares, pro rata, until each common share
received an amount equal to $18.00;
(b) Second, to the subordinated shares, pro rata, until each subordinated
share receives an amount equal to $16.40; and
(c) Third, to the incentive shares, pro rata, all remaining proceeds, if
any.
provided however that (x) with any such distribution under (a), (b) and (c)
respectively, any amounts paid under paragraph 17A of these articles of
incorporation, with respect to the common shares, the subordinated shares
and the incentive shares, respectively, shall be deducted from the amounts
of liquidation proceeds prior to any allocation and payment of the
foregoing distribution of liquidation proceeds and (y) no holder shall be
entitled to any distribution under Article 17 hereof.
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VI ARTICLE 18, PARAGRAPH 7 SHALL BE AMENDED AS FOLLOWS: A new final sentence
shall be added which reads as follows: "This paragraph shall not apply in the
case of a distribution following a Sale Event in conjunction with a Liquidation
Event under paragraph 6A of article 18 of these articles of incorporation."
A-3
Appendix B
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KANEB PIPE LINE OPERATING PARTNERSHIP, L.P.
AND
STATIA TERMINALS GROUP N.V.
Dated as of November 12, 2001
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 12, 2001 (this
"Agreement"), by and between Kaneb Pipe Line Operating Partnership, L.P., a
limited partnership organized under the laws of the State of Delaware
("Purchaser"), and Statia Terminals Group N.V., a public company with limited
liability organized under the laws of the Netherlands Antilles ("Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company owns (i) 6,100 common shares (the "Statia
International Common Shares"), par value $1.00, of Statia Terminals
International N.V. ("Statia International"), a Netherlands Antilles limited
liability company, (ii) 1,220 shares of common stock (the "Statia Technology
Common Shares"), par value $0.01, of Statia Technology, Inc. ("Statia
Technology"), a Delaware corporation, and (iii) 471,720 common shares (the
"Statia Marine Common Shares" and, collectively with the Statia International
Common Shares and the Statia Technology Common Shares, the "Shares"), par value
$0.01, of Statia Marine, Inc. ("Statia Marine" and, collectively with Statia
International and Statia Technology, the "Operating Subsidiaries"), a Cayman
Islands company;
WHEREAS, the Company desires to sell, and Purchaser desires to
purchase, the Shares pursuant to this Agreement;
WHEREAS, it is the intention of the parties hereto that, upon
consummation of the purchase and sale of the Shares pursuant to the terms and
subject to the conditions set forth in this Agreement, Purchaser shall own all
of the outstanding shares of capital stock of each of the Operating
Subsidiaries;
WHEREAS, Purchaser is unwilling to enter into this Agreement unless
Statia Terminals Holdings N.V. ("Holdings"), concurrently with the execution and
delivery of this Agreement, enters into a voting and option agreement (the
"Voting Agreement"), dated the date hereof, by and between Purchaser and
Holdings providing for, among other things, the agreement of Holdings to vote
its Company Shares in favor of this Agreement and the transactions and other
matters contemplated by, and described more fully in, this Agreement and to
grant to Purchaser an option to purchase all such Company Shares.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
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ARTICLE I
DEFINITIONS; ETC.
Section 1.1 Definitions. When used in this Agreement, the following terms
shall have the respective meanings specified therefor below (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under common control with, such Person.
"Antitrust Authorities" shall mean the Federal Trade Commission, the
Antitrust Division of the United States Department of Justice, the attorneys
general of the several states of the United States and any other Governmental
Entity having jurisdiction with respect to the transactions contemplated hereby
pursuant to applicable Antitrust Laws.
"Antitrust Laws" shall mean the Sherman Antitrust Act of 1890, as
amended, the Clayton Act of 1914, as amended, the HSR Act, the Federal Trade
Commission Act of 1914, as amended and all other federal, state and foreign
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
"Business Day" shall mean any day except a Saturday, a Sunday or any
other day on which commercial banks are required or authorized to close in New
York, New York or Curacao, Netherlands Antilles.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Company Business Party" shall mean any supplier or customer of the
Company or any of its Subsidiaries that is disclosed as a supplier or customer
of the Company or any of its Subsidiaries on Schedule 4.8 of the Company
Disclosure Letter.
"Company Common Shares" shall mean the class A common shares, par
value $0.01, of the Company.
"Company Disclosure Letter" shall mean the disclosure letter delivered
to Purchaser upon or prior to entering into this Agreement.
"Company Incentive Rights" shall mean the class C shares, par value
$0.01, of the Company.
"Company Material Adverse Effect" shall mean any event, change,
occurrence, effect, fact or circumstance having a material adverse effect on (i)
the ability of the Company to perform its obligations under this Agreement or to
consummate the transactions contemplated
B-2
hereby on a timely basis or (ii) the business, properties, assets, liabilities,
value, results of operations or financial condition of the Operating
Subsidiaries and their respective Subsidiaries, taken as a whole; other than any
such effect resulting from or arising out of (u) the performance by the Company
of any of its obligations pursuant to this Agreement, (v) any general change in
global economic conditions or the economic conditions of the United States of
America, Canada or the Netherlands Antilles, (w) any changes in the condition of
any industry in which any Operating Subsidiary or any of their respective
Subsidiaries operates that does not affect such Subsidiary of the Company
disproportionately, (x) any change, in and of itself, in the market price or
trading volume of the Company Common Shares, (y) any failure, in and of itself,
by the Company or any Operating Subsidiary or any of their respective
Subsidiaries to meet the revenue or earnings predictions of equity analysts for
any period ending (or for which earnings are released) on or after the date of
this Agreement and prior to the Closing, or (z) the announcement by Purchaser of
any plan or intention to make any change in the conduct of any of the businesses
of any Operating Subsidiary or any of their respective Subsidiaries as such
businesses are being conducted on the date of this Agreement.
"Company Shares" shall mean collectively, the Company Common Shares,
the Company Subordinated Shares and the Company Incentive Rights.
"Company Subordinated Shares" shall mean the class B subordinated
shares, par value $0.01, of the Company.
"Completed Commission Filings" shall mean the Commission Filings filed
prior to the date hereof.
"Contingent Tax Payment Note" shall mean an instrument substantially
in the form attached hereto as Annex A.
"control" (including with correlative meanings, the terms "controlled
by" and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or partnership interests, by contract or
otherwise.
"Environmental Law" shall mean any Law, Order or other requirement of
law, including any principle of common law, relating to the protection of human
health or the environment, or the manufacture, use, transport, treatment,
storage, disposal, release or threatened release of petroleum products,
asbestos, urea formaldehyde insulation, polychlorinated biphenyls or any
substance listed, classified or regulated as hazardous or toxic, or any similar
term, under such Law, Order or other requirement of Law.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles of the
United States of America consistently applied, as in effect from time to time.
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"Governmental Entity" shall mean any domestic or foreign court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory agency, authority or body.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean all registered domestic and foreign
trademark, service mark and trade name registrations and applications therefor,
patents, patent applications, copyright registrations and applications, domain
names and trade secrets.
"Law" shall mean any statute, law, code, ordinance, rule or regulation
of any Governmental Entity.
"Lien" shall mean any lien, security interest, charge or encumbrance
of any kind or nature.
"Net Cash Amount" shall mean the difference of (a) the aggregate of
(i) the combined cash of the Operating Subsidiaries and their respective
Subsidiaries as of the close of business on the day before the Closing Date,
(ii) one million five hundred sixteen thousand four hundred three dollars
($1,516,403), representing the amount of the accruals from November 15, 2001
through December 31, 2001 for interest payable by any Operating Subsidiary or
any of their respective Subsidiaries pursuant to the 11-3/4% First Mortgage
Notes of Statia International and Statia Terminals Canada, Incorporated, (iii)
the amount of the accruals from the date hereof through December 31, 2001 for
interest payable by any Operating Subsidiary or any of their respective
Subsidiaries pursuant to the Transamerica Loan, and (iv) the amount of any
payments of principal under the Transamerica Loan from the date hereof through
the Closing Date, minus (b) the aggregate of (i) the amount of the unpaid
accruals through and including the Closing Date for interest payable by any
Operating Subsidiary or any of their respective Subsidiaries pursuant to any
indebtedness for borrowed money outstanding from time to time, (ii) the Tax
Reserve Amount and (iii) indebtedness of any Subsidiary of the Company for
borrowed money (other than indebtedness for borrowed money described in clause
(a)(ii) or (a)(iii) above and indebtedness for borrowed money owing to any other
Subsidiary of the Company).
"Order" shall mean any judgment, order, injunction, decree or writ of
any Governmental Entity.
"Person" shall mean and include an individual, a partnership, a
limited liability partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization, any other legal
entity, a group and a government or other department or agency thereof.
"Purchaser Material Adverse Effect" shall mean any event, change,
occurrence, effect, fact or circumstance having a material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement or to
consummate the transactions contemplated hereby on a timely basis.
B-4
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary", with respect to any Person, shall mean (i) any
partnership of which such Person or any of its Subsidiaries is a general
partner, (ii) any other Person in which such Person or any of its Subsidiaries
owns or has the power to vote more than fifty percent (50%) of the equity
interests in such other Person having general voting power to participate in the
election of the governing body of such other Person or (iii) any other Person
directly or indirectly (through another Person or otherwise) controlled by such
Person.
"Subsidiary Property" shall mean any real property and improvements
owned (directly, indirectly, or beneficially), leased, used, operated or
occupied by any Operating Subsidiary or any of their respective Subsidiaries.
"Tax Reserve Amount" shall mean the amount shown as a liability on the
Interim Balance Sheet, plus any amounts accrued by the Company pursuant to GAAP
for the period from the date of the Interim Balance Sheet through the Closing
Date for amounts that may be payable to the Island Territory of Sint Eustatius
and the Land Territory of the Netherlands Antilles pursuant to an agreement
regarding Taxes to be entered into by the Operating Subsidiaries and their
respective Subsidiaries and the Island Territory of Sint Eustatius and the Land
Territory of the Netherlands Antilles.
"Transamerica Loan" shall mean the Loan Agreement dated, as of
December 20, 2000, by and between Statia Marine and Transamerica Equipment
Financial Services Corporation
Section 1.2 Cross References. The following terms shall have the
meaning assigned to such term in the respective section.
Acquisition Proposal...........................5.5(b) Material Contracts.............................3.17
Agreement......................................Preamble Notice of Objection............................2.3(b)(i)
Arbitrator.....................................2.3(b)(ii) Operating Subsidiaries.........................Recitals
Cash Deficiency Amount.........................2.4(a) Permits........................................3.8(b)
Cash Excess Amount.............................2.4(a) Proposals......................................3.15
Closing Date Net Cash Amount...................2.2 Proxy Materials................................3.15
Closing Date...................................2.5 Purchaser......................................Preamble
Closing Payment................................2.3 Returns........................................3.12(a)
Closing........................................2.5 Severance Protection Plans.....................5.8(b)
"commercially reasonable efforts"..............5.7(b) Shareholder Meeting............................3.15
Commission Filings.............................3.5 Shares.........................................Recitals
Company Articles...............................3.1 Statia International Common Shares.............Recitals
Company........................................Preamble Statia International...........................Recitals
Company Indemnified Parties....................5.9(b) Statia Marine Common Shares....................Recitals
Confidentiality Agreement......................5.2(a) Statia Marine..................................Recitals
Contracts......................................3.17 Statia Technology Common Shares................Recitals
Employee Benefit Plans.........................3.10 Statia Technology..............................Recitals
ERISA..........................................3.10 Subsidiary Indemnified Parties.................5.9(b)
B-5
Estimated Net Cash Amount......................2.2 Superior Proposal..............................5.5(b)
Holdings.......................................Recitals Taxes..........................................3.12(a)
Interim Balance Sheet..........................3.7 Transfer Taxes.................................5.14
Voting Agreement...............................Recitals
Section 1.3 Knowledge. Where any representation or warranty or other
provision contained in this Agreement is expressly qualified by reference to the
knowledge of the Company, such knowledge means to the actual knowledge of the
following individuals, after reasonable investigation under the circumstances of
the transaction contemplated by this Agreement (including the decision to keep
the transactions contemplated hereby confidential until the announcement of the
execution of this Agreement) but without giving effect to constructive
knowledge: James G. Cameron, James F. Brenner, Jack R. Pine, Paul R. Crissman
(solely with respect to matters involving the Point Tupper facility), Clarence
W. Brown (solely with respect to matters involving the St. Eustatius facility)
or Robert C. Gaffney (solely with respect to Section 3.18).
ARTICLE II
SALE OF SHARES
Section 2.1 Sale of Shares. On the terms and subject to the conditions
set forth in this Agreement, the Company agrees to sell, assign, transfer and
deliver to Purchaser on the Closing Date, and Purchaser agrees to purchase from
the Company on the Closing Date, all right, title and interest in and to the
Shares. The Company agrees to deliver to Purchaser at the Closing all right,
title and interest in and to the Shares, free and clear of all Liens, with the
certificate or certificates, if any, evidencing the Shares being duly endorsed
or acknowledged for transfer by the Company (and otherwise acknowledged on
behalf of the respective Operating Subsidiary, if required by Law), and any
deeds of transfer relating to the Shares and, in each case, accompanied by all
powers of attorney and/or other instruments necessary to convey valid and
unencumbered title thereto to Purchaser.
Section 2.2 Delivery of Estimated Net Cash Amount. Not later than
three (3) Business Days prior to the Closing Date, the Company shall deliver to
Purchaser a good faith estimate (the "Estimated Net Cash Amount") of the Net
Cash Amount ("Closing Date Net Cash Amount"), prepared on the same basis as the
line item cash and cash equivalents within financial statements prepared in
accordance with GAAP, which shall describe in reasonable detail the calculation
thereof.
Section 2.3 Closing Payment. In consideration for the sale of the
Shares by the Company to Purchaser, Purchaser shall deliver to the Company at
the Closing (a) an amount (the "Closing Payment") equal to the aggregate of (i)
one hundred eighty-four million eight hundred seventy-two thousand two hundred
twenty-three dollars ($184,872,223) plus (ii) the Estimated Net Cash Amount, by
wire transfer of immediately available funds to the designated account or
accounts of the Company (which account or accounts shall be designated by the
Company in writing to
B-6
Purchaser at least two (2) Business Days prior to the Closing Date) and (b) the
Contingent Tax Payment Note, duly executed by Purchaser.
Section 2.4 Determination of Purchase Price. (a) Promptly after the
Closing Date, and in any event not later than forty-five (45) calendar days
following the Closing Date, Purchaser shall prepare and deliver to the Company a
statement, prepared on the same basis as the line item cash and cash equivalents
within financial statements prepared in accordance with GAAP, of the Closing
Date Net Cash Amount, which shall describe in reasonable detail the calculation
thereof and shall specify the amount by which (i) the Closing Date Net Cash
Amount exceeds the Estimated Net Cash Amount (the "Cash Excess Amount") or, as
the case may be, (ii) the Estimated Net Cash Amount exceeds the Closing Date Net
Cash Amount (the "Cash Deficiency Amount"). Upon delivery of such statement by
Purchaser to the Company, Purchaser shall provide the Company and its
representatives with reasonable access during business hours to the books and
records of the Operating Subsidiaries and their respective Subsidiaries in order
to allow the Company and its representatives to verify the accuracy of the
determination by Purchaser of the Closing Date Net Cash Amount.
(b) (i) In the event that the Company does not object to the
determination by Purchaser of the Closing Date Net Cash Amount by written
notice of objection (the "Notice of Objection") delivered to Purchaser
within ten (10) Business Days after the Company's receipt of the statement
referred to in Section 2.4(a), such Notice of Objection to describe in
reasonable detail the Company's objections to the Closing Date Net Cash
Amount, the Closing Date Net Cash Amount shall be deemed final and binding.
(ii) If the Company delivers a Notice of Objection to Purchaser, then
any dispute shall be resolved as follows:
(x) the Company and Purchaser shall promptly endeavor to agree
upon the determination of the Closing Date Net Cash Amount. In the
event that a written agreement determining the amount of the Closing
Date Net Cash Amount has not been reached within five (5) Business
Days after the date of receipt by Purchaser from the Company of the
Notice of Objection, Purchaser's determination of the Closing Date Net
Cash Amount, together with a description of any unresolved dispute,
shall be submitted to the Miami, Florida office of BDO Seidman, LLP
(the "Arbitrator");
(y) the Company and Purchaser shall use commercially reasonable
efforts to cause the Arbitrator to render a decision in accordance
with this Section 2.4(b), along with a statement of reasons therefor,
within thirty (30) calendar days after the submission of any dispute
concerning the determination of the Closing Date Net Cash Amount to
the Arbitrator. The decision of the Arbitrator shall be final and
binding upon each party hereto and deemed to be an arbitral award
which may be entered in any court having competent jurisdiction; and
B-7
(z) in the event the Company and Purchaser submit any unresolved
disputes to the Arbitrator for resolution pursuant to this Section
2.4(b)(ii), the Company and Purchaser shall each pay fifty percent
(50%) of the fees and expenses of the Arbitrator.
(c) If the Estimated Net Cash Amount exceeds the Closing Date Net Cash
Amount, then the Company shall be obligated to pay to Purchaser the Cash
Deficiency Amount within three (3) Business Days after the determination of the
Closing Date Net Cash Amount by wire transfer of immediately available funds to
an account designated in writing by Purchaser. If the Closing Date Net Cash
Amount exceeds the Estimated Net Cash Amount, then Purchaser shall be obligated
to pay to the Company the Cash Excess Amount within three (3) Business Days
after the determination of the Closing Date Net Cash Amount by wire transfer of
immediately available funds to an account designated in writing by the Company.
Section 2.5 Closing. The sale referred to in Section 2.1 (the
"Closing") shall take place at 10:00 A.M. New York time at the offices of White
& Case LLP, 1155 Avenue of the Americas, New York, New York as soon as
practicable after the last of the conditions set forth in Article VI is
satisfied or waived, but in no event later than the fifth (5th) Business Day
thereafter or at such other time and date as the parties hereto shall agree.
Such date is herein referred to as the "Closing Date".
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 3.1 Due Organization, Good Standing and Corporate Power. The
Company is a limited liability company in the form of a "naamloze venootschap"
duly organized, validly existing and in good standing under the laws of the
Netherlands Antilles. Each Subsidiary of the Company is duly organized, validly
existing and in good standing (where such concept is applicable) under the laws
of the jurisdiction of its incorporation or formation. Each of the Company and
each Subsidiary of the Company has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted. Each Subsidiary of the Company is duly qualified or licensed to
do business and is in good standing (where such concept is applicable) in each
jurisdiction in which the property owned, leased or operated by it, or the
nature of the business conducted by it makes such qualification necessary,
except in such jurisdictions where the failure to be so qualified or licensed
and in good standing does not have, and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. The
Company has, prior to the date of this Agreement, made available to Purchaser
complete and correct copies of the articles of incorporation of the Company (as
amended from time to time, the "Company Articles") and the formation,
organizational and other governing documents of each Subsidiary of the Company,
each as in effect as of the date of this Agreement.
B-8
Section 3.2 Authorization and Validity of this Agreement. The Company
has the requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company, and the consummation by it of the transactions
contemplated hereby and by the Voting Agreement, have been duly authorized and
approved by its Board of Directors and, except for the shareholder vote
contemplated by Section 5.11, no other corporate action on the part of the
Company is necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation of the transactions
contemplated hereby and by the Voting Agreement. This Agreement has been duly
executed and delivered by the Company and, assuming that this Agreement
constitutes a valid and binding obligation of Purchaser, constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws relating to or affecting the enforcement of creditors' rights generally and
by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
Section 3.3 Capitalization. The authorized capital stock of Statia
International consists of 30,000 Statia International Common Shares, of which
6,100 are issued and outstanding and none are held in the treasury of Statia
International. The authorized capital stock of Statia Technology consists of
3,000 Statia Technology Common Shares, of which 1,220 are issued and outstanding
and none are held in the treasury of Statia Technology. The authorized capital
stock of Statia Marine consists of 5,000,000 Statia Marine Common Shares, of
which 471,720 are issued and outstanding and none are held in the treasury of
Statia Marine. The Shares constitute all of the issued and outstanding equity
interests in the Operating Subsidiaries. All of the Shares are owned, of record
and beneficially, by the Company, free and clear of any Liens. All of the issued
and outstanding shares of the capital stock and other equity interests of each
of the Operating Subsidiaries and each of their respective Subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable,
and are not subject to, nor were they issued in violation of, any preemptive
rights. Except as set forth on Schedule 3.3(a) of the Company Disclosure Letter,
there are no outstanding or authorized options, warrants, rights, subscriptions,
agreements, obligations, convertible or exchangeable securities, or other
commitments or claims of any character, contingent or otherwise, relating to
shares of capital stock or other equity interests of any Operating Subsidiary or
any of their respective Subsidiaries or pursuant to which any Operating
Subsidiary or any of their respective Subsidiaries is or may become obligated to
issue shares of capital stock or other equity interests or any securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of capital stock or other equity interests of any Operating
Subsidiary or any of their respective Subsidiaries. Except as set forth on
Schedule 3.3(b) of the Company Disclosure Letter, none of the Operating
Subsidiaries or any of their respective Subsidiaries has authorized or
outstanding bonds, debentures, notes or other indebtedness that entitle the
holders to vote (or are convertible or exercisable for or exchangeable into
securities that entitle the holders to vote) with the shareholders of such
Person on any matter. Except as set forth on Schedule 3.3(c) of the Company
Disclosure Letter, all of the outstanding capital shares and other equity
interests of each of the respective Subsidiaries of each Operating Subsidiary
are owned, of record and beneficially, by such Operating Subsidiary or one or
B-9
more of its Subsidiaries, free and clear of any Liens. Except as set forth on
Schedule 3.3(d) of the Company Disclosure Letter or pursuant to applicable Law,
there are no restrictions of any kind that prevent or restrict the payment of
dividends by any Operating Subsidiary or any of their respective Subsidiaries.
Except as set forth on Schedule 3.3(e) of the Company Disclosure Letter, none of
the Operating Subsidiaries or any of their respective Subsidiaries owns,
directly or indirectly, any shares of the capital stock or other equity,
ownership or proprietary interest in any Person (other than any Subsidiary of
any Operating Subsidiary).
Section 3.4 Consents and Approvals; No Violations. Assuming (a) the
filings required under the HSR Act are made and the applicable waiting periods
thereunder have been terminated or have expired, and (b) the sale of the Shares
by the Company pursuant to this Agreement has been approved and/or adopted by
the shareholders of the Company, the execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby do not: (i) violate or conflict with any provision of the Company
Articles or the comparable governing documents of any of its Subsidiaries; (ii)
violate or conflict in any material respect with any statute, ordinance, rule,
regulation, order or decree of any Governmental Entity applicable to the Company
or any of its Subsidiaries or by which any of their respective properties or
assets may be bound; (iii) except as set forth on Schedule 3.4(a) of the Company
Disclosure Letter, require any material filing with, or material Permit,
material consent or approval of, or the giving of any material notice to, any
Governmental Entity or any other Person; or (iv) except as set forth on Schedule
3.4(b) of the Company Disclosure Letter, result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under (or give rise to any right of termination, cancellation, payment
or acceleration under), result in the creation of any material Lien upon any of
the properties or assets of any Operating Subsidiary or any of their respective
Subsidiaries under, or give rise to any obligation, right of termination,
cancellation, acceleration or increase of any obligation or a loss of a material
benefit or any right that becomes effective upon the occurrence of a merger,
amalgamation, scheme of arrangement, consolidation or change of control under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, franchise, Permit, Contract, arrangement, lease, franchise agreement
or other obligation to which the Company or any of its Subsidiaries is a party,
or by which any such Person or any of its properties or assets are bound.
Section 3.5 Company Reports and Financial Statements. Since December
31, 1999, the Company has filed all forms, reports, schedules, statements,
registration statements and other documents with the Commission relating to
periods commencing on or after such date required to be filed by it pursuant to
the federal securities Laws and the Commission rules and regulations thereunder
(such forms, reports, schedules, statements, registration statements and other
documents being hereinafter referred to as the "Commission Filings") and, as of
their respective dates, the Commission Filings complied in all material respects
with all applicable requirements of the federal securities Laws and the
Commission rules and regulations promulgated thereunder. The Company has, prior
to the date of this Agreement, made available to Purchaser true and complete
copies of all portions of any Commission Filings not publicly available. As of
their respective dates, the Commission Filings did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made. All financial statements
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contained in the Commission Filings have been prepared in accordance with GAAP
throughout the periods indicated and present fairly in all material respects the
financial position, results of operations and changes in financial position of
the Company as of the indicated dates and for the indicated periods (except, in
the case of interim financial statements, for the absence of notes thereto and
subject to normal year-end audit adjustments and accruals required to be made in
the ordinary course of business which are not materially adverse and are
consistent with past practices).
Section 3.6 Absence of Certain Changes. Except as set forth on
Schedule 3.6 of the Company Disclosure Letter or in the Completed Commission
Filings, or as contemplated by this Agreement, since December 31, 2000 and prior
to the date of this Agreement, (a) there has not occurred any event, change or
development that has or would reasonably be expected to have a Company Material
Adverse Effect, (b) the business of each Operating Subsidiary and each of their
respective Subsidiaries has been conducted only in the ordinary course of
business, (c) none of the Operating Subsidiaries or any of their respective
Subsidiaries has increased the compensation of any officer or granted any
general salary or benefits increase to their respective employees, other than in
the ordinary course of business, (d) there has been no declaration, setting
aside or payment of any dividend or other distribution with respect to any class
of shares or any repurchase, redemption or other acquisition by any Operating
Subsidiary of any shares or other securities of such Operating Subsidiary, and
(e) there has been no change by any Operating Subsidiary or any of their
respective Subsidiaries in their respective accounting principles, practices or
methods.
Section 3.7 Title to Properties; Encumbrances. Except as set forth on
Schedule 3.7 of the Company Disclosure Letter or in the Completed Commission
Filings, one of the Operating Subsidiaries or one of their respective
Subsidiaries has valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, (a) all of the material tangible and
intangible properties and assets (real and personal) used in connection with the
businesses of the Operating Subsidiaries and their respective Subsidiaries,
including, without limitation, all of the properties and assets reflected in the
consolidated balance sheet of the Company and its Subsidiaries as of September
30, 2001 and previously supplied by the Company to Purchaser (the "Interim
Balance Sheet"), except as indicated in the notes thereto and except for
properties and assets reflected in the Interim Balance Sheet that have been sold
or otherwise disposed of in the ordinary course of business after the date
thereof, and (b) all of the tangible and intangible properties and assets
purchased by the Operating Subsidiaries or any of their respective Subsidiaries
since September 30, 2001, except for such properties and assets that have been
sold or otherwise disposed of in the ordinary course of business; in each case
subject to no material Liens, except for Liens reflected or reserved against in
the Completed Commission Filings or the Interim Balance Sheet. The assets and
properties owned or held pursuant to valid leases by any Operating Subsidiary or
any of their respective Subsidiaries are all of the assets and properties needed
by the Operating Subsidiaries and their respective Subsidiaries to operate the
businesses of the Company and its Subsidiaries in all material respects as such
businesses have been operated by the Company and its Subsidiaries during the
twelve (12)-month period immediately preceding the date of this Agreement. The
Company owns no assets other than the Shares and conducts no business other than
the business incident to ownership of the Shares.
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Section 3.8 Compliance with Laws. (a) Except as set forth on Schedule
3.8 of the Company Disclosure Letter or in the Completed Commission Filings, the
Operating Subsidiaries and their respective Subsidiaries are in material
compliance with all material applicable federal, state, local and foreign Laws,
orders, judgments and decrees.
(b) Except as set forth on Schedule 3.8 of the Company Disclosure
Letter, the Operating Subsidiaries and their respective Subsidiaries hold all
material federal, state, local and foreign permits, approvals, licenses,
authorizations, certificates, rights, exemptions and orders from Governmental
Entities (the "Permits") that are necessary for the operation of the business of
the Operating Subsidiaries and/or their respective Subsidiaries as now
conducted, and there has not occurred any default under any such Permit.
(c) To the knowledge of the Company, none of the Operating
Subsidiaries or any of their respective Subsidiaries has made, or promised or
authorized the making of, any payment of any money or anything of value, or the
provision of any gift, to any foreign official, political party, candidate for
office or any other Person for any purpose prohibited by any applicable Law.
Section 3.9 Litigation. Except as set forth on Schedule 3.9 of the
Company Disclosure Letter or in the Completed Commission Filings, on the date of
this Agreement, there is no action, suit, proceeding at law or in equity, or any
arbitration or any administrative or other proceeding by or before any
Governmental Entity pending or, to the knowledge of the Company, threatened,
against or affecting any Operating Subsidiary or any of their respective
Subsidiaries, or any of their respective properties or rights. There are no
suits, actions, claims, proceedings or investigations pending or, to the
knowledge of the Company, threatened, seeking to prevent or challenging the
transactions contemplated by this Agreement. Except as set forth on Schedule 3.9
of the Company Disclosure Letter, none of the Operating Subsidiaries or any of
their respective Subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding.
Section 3.10 Employee Benefit Plans. Each material employee benefit
plan within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all other material employee
benefit agreements or arrangements that are not employee benefit plans within
the meaning of Section 3(3) of ERISA, including without limitation deferred
compensation plans, incentive plans, bonus plans or arrangements, stock option
plans, stock purchase plans, stock award plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans, employee assistance
programs, scholarship programs, employment contracts, retention incentive
agreements, noncompetition agreements, consulting agreements, confidentiality
agreements and vacation policies, maintained by any Operating Subsidiary or any
of their respective Subsidiaries, or to which any Operating Subsidiary or any of
their respective Subsidiaries contributes or with respect to which any Operating
Subsidiary or any of their respective Subsidiaries may have any material
liability (collectively, the "Employee Benefit Plans") is listed on Schedule
3.10 of the Company Disclosure Letter. Except as disclosed in the Completed
Commission Filings or as set forth on Schedule 3.10 of the Company Disclosure
Letter: (a) each Employee Benefit Plan is in material compliance with any
applicable Law and has been administered and operated in all material respects
in accordance with its terms; (b) each Employee Benefit Plan that is intended to
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be "qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter or opinion letter from the Internal Revenue
Service and, to the knowledge of the Company, no event has occurred and no
condition exists that would reasonably be expected to result in the revocation
of any such determination letter or opinion letter; (c) (i) none of the
Operating Subsidiaries or any of their respective Subsidiaries or any Person
that was at any time after December 1, 1996 treated as a single employer
together with any Operating Subsidiary or any of their respective Subsidiaries
under section 414 of the Code has ever maintained, had an obligation to
contribute to, or contributed to, or incurred any liability with respect to, a
pension plan that is or was subject to Title IV of ERISA or Section 412 of the
Code and (ii) none of the Operating Subsidiaries or any of their respective
Subsidiaries or any Person that was at any time during the six (6)-year period
immediately preceding the date of this Agreement treated as a single employer
together with any Operating Subsidiary or any of their respective Subsidiaries
under Section 414 of the Code has, within such six (6)-year period, had an
obligation to contribute to, or contributed to, or incurred any unsatisfied
liability with respect to, a multiemployer plan (within the meaning of Section
4001(a)(3) of ERISA that is or was subject to Title IV of ERISA; (d) none of the
Operating Subsidiaries or any of their respective Subsidiaries, or, to the
knowledge of the Company, any other "disqualified person" or "party in interest"
(as defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transactions in connection with any Employee
Benefit Plan that would reasonably be expected to result in the imposition of a
material penalty pursuant to Section 502(i) of ERISA or a material tax pursuant
to Section 4975 of the Code; (e) no claims have been made, commenced or, to the
knowledge of the Company, threatened with respect to any Employee Benefit Plan
(other than routine claims for benefits payable in the ordinary course, and
appeals of denied routine claims for benefits payable in the ordinary course)
that would reasonably be expected to result in a material liability of any
Operating Subsidiary or any of their respective Subsidiaries; (f) no Employee
Benefit Plan provides medical, surgical, hospitalization or life insurance
benefits (whether or not insured by a third party) for employees or former
employees of any Operating Subsidiary or any of their respective Subsidiaries
for periods extending beyond their terminations of employment, other than
coverage mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, or a similar state Law; and (g) the consummation of the transactions
contemplated by this Agreement, either alone or in conjunction with another
event (such as a termination of employment), will not (i) entitle any current or
former employee of any Operating Subsidiary or any of their respective
Subsidiaries to severance pay or any other payment under any Employee Benefit
Plan, (ii) accelerate the time of payment or vesting, or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any Employee Benefit Plan, or (iii) increase the amount of
compensation due any such employee, or result in any material breach or
violation of, or default under, any Employee Benefit Plan.
Section 3.11 Employment Relations and Agreements. (a) Except as set
forth on Schedule 3.11(a) of the Company Disclosure Letter or in the Completed
Commission Filings (i) each of the Operating Subsidiaries and each of their
respective Subsidiaries is in material compliance with all federal, foreign,
state or other applicable Laws respecting employment and employment practices,
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terms and conditions of employment and wages and hours, and has not and is not
engaged in any unfair labor practice; (ii) there is no labor strike, slowdown,
stoppage or material dispute pending or, to the knowledge of the Company,
threatened against or involving any Operating Subsidiary or any of their
respective Subsidiaries; (iii) no representation question exists respecting the
employees of any Operating Subsidiary or any of their respective Subsidiaries;
(iv) no collective bargaining agreement is currently being negotiated by any
Operating Subsidiary or any of their respective Subsidiaries and none of the
Operating Subsidiaries or any of their respective Subsidiaries is or has been a
party to a collective bargaining agreement; (v) none of the Operating
Subsidiaries or any of their respective Subsidiaries is experiencing or has
experienced any material labor difficulty during the last three (3) years; and
(vi) no grievance or arbitration proceeding arising out of or under a collective
bargaining agreement is pending and no claim thereunder exists or, to the
knowledge of the Company, is threatened with respect to the operations of the
Operating Subsidiaries or any of their respective Subsidiaries.
(b) Except as set forth on Schedule 3.11(b) of the Company Disclosure
Letter, there exist no employment, consulting, severance, indemnification or
deferred compensation agreements between any Operating Subsidiary or any of
their respective Subsidiaries and any director, officer or employee of any
Operating Subsidiary or any of their respective Subsidiaries or any agreement
that would give any director, officer or employee of any Operating Subsidiary or
any of their respective Subsidiaries the right to receive any payment from any
Operating Subsidiary or any of their respective Subsidiaries as a result of the
transactions contemplated by this Agreement.
Section 3.12 Taxes. Except as set forth on Schedule 3.12 of the
Company Disclosure Letter:
(a) Tax Returns. Each Operating Subsidiary and each of their
respective Subsidiaries have filed or caused to be filed, or shall file or cause
to be filed on or prior to the Closing Date, all material returns, statements,
forms and reports for Taxes (the "Returns") that are required to be filed by, or
with respect to, the Operating Subsidiaries and their respective Subsidiaries on
or prior to the Closing Date (taking into account any extension of time to file
granted to or on behalf of the Company or any of its Subsidiaries), and the
information set forth on the Returns is true and correct in all material
respects and contains all material information required to be reported thereon.
"Taxes" shall mean all taxes, assessments, charges, duties, fees, levies or
other governmental charges including, without limitation, all United States
federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest.
(b) Payment of Taxes. All material Taxes and material Tax liabilities
of the Operating Subsidiaries and their respective Subsidiaries for all taxable
years or periods that end on or prior to the Closing Date and, with respect to
any taxable year or period beginning prior to and ending after the Closing Date,
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the portion of such taxable year or period ending on and including the Closing
Date, have been paid or shall be paid in full on or prior to the Closing Date or
accrued and adequately disclosed and fully provided for on the books and records
of the Operating Subsidiaries and their respective Subsidiaries in accordance
with GAAP.
(c) Tax Liens. There are no Liens for Taxes upon any property or
assets of any of the Operating Subsidiaries --------- or any of their respective
Subsidiaries, except for Liens for Taxes not yet due or payable or Liens for
Taxes being contested in good faith.
(d) Tax Audits. No Federal, state, local or foreign audits,
examinations, investigations or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns filed
by or on behalf of any of the Operating Subsidiaries or any of their respective
Subsidiaries, and no written notification of such proceedings has been received
by the Company, any of the Operating Subsidiaries or any of their respective
Subsidiaries.
(e) Statute of Limitations. There are no outstanding requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies against any of the
Operating Subsidiaries or any of their respective Subsidiaries.
(f) Tax Agreements. None of the Operating Subsidiaries or any of their
respective Subsidiaries is a party to any material tax sharing, tax indemnity or
other similar agreement or arrangement with any Person.
(g) Powers of Attorney. No power of attorney has been granted with
respect to any matter relating to Taxes of any Operating Subsidiary or any of
their respective Subsidiaries that is currently in force.
(h) Tax Deficiencies. No material deficiency or claim has been
formally proposed, asserted or assessed by any Governmental Entity with regard
to any Taxes of any Operating Subsidiary or any of their respective Subsidiaries
or Tax Returns including or required to be filed by any Operating Subsidiary or
any of their respective Subsidiaries for which Purchaser would be liable as a
result of the transactions contemplated by this Agreement, which has not been
resolved and paid in full.
(i) Consolidated, Combined or Unitary Tax Returns. None of the
Operating Subsidiaries or any of their respective Subsidiaries has been included
in a consolidated, combined, unitary or similar Tax Return that included the
Company.
(j) No Joint or Several Liability. None of the Operating Subsidiaries
or any of their respective Subsidiaries has any liability, either joint or
several, for any Taxes owed by the Company.
Section 3.13 Liabilities. As of the date of this Agreement, none of
the Operating Subsidiaries or any of their respective Subsidiaries has
outstanding any claims, liabilities or indebtedness, contingent or otherwise, of
any kind whatsoever (whether accrued, absolute, contingent or otherwise, and
B-15
whether or not required to be reflected in the financial statements of the
Operating Subsidiaries and their respective Subsidiaries in accordance with
GAAP), except (a) as set forth on Schedule 3.13 of the Company Disclosure
Letter, (b) as set forth in the Completed Commission Filings or on the Interim
Balance Sheet, and (c) other claims, liabilities or indebtedness that are not,
individually or in the aggregate, material.
Section 3.14 Intellectual Property. (a) Except as set forth in the
Completed Commission Filings, one of the Operating Subsidiaries or one of their
respective Subsidiaries owns or has a valid and enforceable right to use, free
and clear of all material Liens, all material Intellectual Property necessary to
operate their respective businesses in all material respects as such businesses
have been operated during the twelve (12)-month period immediately preceding the
date of this Agreement.
(b) Except as set forth in the Completed Commission Filings, neither
the conduct of the businesses of the Operating Subsidiaries and their respective
Subsidiaries nor the use of the Intellectual Property materially infringes,
violates, misappropriates or misuses any Intellectual Property rights or any
other proprietary right of any Person.
Section 3.15 Proxy Materials. The proxy statement (the "Proxy
Materials") prepared by the Company soliciting the proxies of the shareholders
of the Company in favor of the proposals (the "Proposals") substantially in the
form set forth on Annex B to be voted on at an extraordinary meeting of the
shareholders of the Company (the "Shareholder Meeting"), together with all
materials included therewith and any amendments or supplements thereto will not,
at the time they are filed with the Commission or are first published, sent or,
as the case may be, given, to shareholders of the Company or at the time of the
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied or to be
supplied by Purchaser or any of its representatives in writing for inclusion in
the foregoing documents. The Proxy Materials will comply in all material
respects with the requirements of the Exchange Act.
Section 3.16 Broker's or Finder's Fee. Other than Merrill Lynch & Co.
and Houlihan Lokey Howard & Zukin Financial Advisors, Inc. (the fees and
expenses of each of whom shall be paid by the Company in accordance with the
agreements of the Company with such firms, true and correct copies of which have
been previously delivered to Purchaser by the Company), no agent, broker,
investment bank, Person or firm acting on behalf of the Company is, or shall be,
entitled to any commission or broker's or finder's fees in connection with this
Agreement or any of the transactions contemplated hereby from any of the parties
hereto, or from any Affiliate of the parties hereto.
Section 3.17 Certain Contracts and Arrangements. As of the date
hereof, except as set forth on Schedule 3.17 of the Company Disclosure Letter,
none of the Operating Subsidiaries or any of their respective Subsidiaries is a
party to or bound by any contracts, agreements, instruments, licenses,
commitments or understandings ("Contracts") of the following nature
(collectively, the "Material Contracts"):
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(a) storage and throughput Contracts;
(b) Contracts in respect of the sale or provision of products or
services by the Company or any of its Subsidiaries involving, in each case,
either (i) annualized consideration in excess of five hundred thousand
dollars ($500,000) that are not cancelable without penalty upon ninety (90)
days' notice or (ii) aggregate consideration in excess of two million
dollars ($2,000,000);
(c) collective bargaining agreements, union agreements, employment
agreements, "change of control agreements" with employees, severance
agreements or consulting agreements; (d) loan or credit agreements,
indentures, guarantees (other than endorsements made for collection),
mortgages, pledges, conditional sales or other title retention agreements,
or equipment financing obligations, lease or lease-purchase agreements
involving, in each case, borrowings, or capacity to borrow, in excess of
one hundred thousand dollars ($100,000);
(e) leases or similar instruments regarding real property (other than
storage and throughput Contracts);
(f) (i) Contracts relating to competitive activities that restrict any
Operating Subsidiary or any of their respective Subsidiaries from competing
in any line of business or with any Person in any geographical area, or
that restrict any other Person from competing with any Operating Subsidiary
or any of their respective Subsidiaries in any line of business or in any
geographical area and (ii) Contracts that are material to the Operating
Subsidiaries and their respective Subsidiaries, taken as a whole, and that
restrict any Operating Subsidiary or any of their respective Subsidiaries
from disclosing any information concerning or obtained from any other
Person, or that restrict any other Person from disclosing any information
concerning or obtained from any Operating Subsidiary or any of their
respective Subsidiaries (other than Contracts entered into in the ordinary
course of business);
(g) Contracts with any Affiliate that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act;
(h) except for Contracts for the purchase of inventory to be used for
product sales, other Contracts of a type not described in clauses (a)
through (g) above that involve, in each case, receipts or expenditures of
or by the Operating Subsidiaries and their respective Subsidiaries in
excess of five hundred thousand dollars ($500,000); or
(i) offers or tenders outstanding and capable of being converted into
an obligation of the Company described in clauses (a) through (h) above.
Except as set forth on Schedule 3.17 of the Company Disclosure Letter,
none of the Operating Subsidiaries or any of their respective Subsidiaries is in
material breach or default under any Material Contract nor, to the knowledge of
the Company, is any other party to any
B-17
Material Contract in material breach or default thereunder. There is no
condition that, with the passage of time or the giving of notice or both, would
constitute a material breach or default by any Operating Subsidiary or any of
their respective Subsidiaries under any Material Contract. Copies of all
Material Contracts (or in the case of oral Material Contracts, descriptions of
the terms thereof) have been delivered to Purchaser and such copies are true,
complete and accurate and such descriptions are true, complete and accurate in
all material respects and in each case include all amendments, supplements or
modifications thereto, as at the date hereof. None of the Operating Subsidiaries
or any of their respective Subsidiaries has received any written notice of
cancellation of any Material Contract, and to the knowledge of the Company, no
Person has threatened to cancel any Material Contract.
Section 3.18 Environmental Laws and Regulations. Except as set forth
on Schedule 3.18 of the Company Disclosure Letter or in the Completed Commission
Filings (a) each of the Operating Subsidiaries and each of their respective
Subsidiaries is in material compliance with all applicable Environmental Laws,
and have obtained, and are in material compliance with, all Permits required of
them under applicable Environmental Laws; (b) there are no proceedings,
investigations, actions or material claims by any Governmental Entity pending
or, to the knowledge of the Company, threatened, against any Operating
Subsidiary or any of their respective Subsidiaries under any Environmental Law;
(c) there is no material obligation, undertaking or liability arising out of or
relating to Environmental Laws that any Operating Subsidiary or any of their
respective Subsidiaries has agreed to or assumed, by Contract or otherwise, or
has expressly retained by Contract; (d) to the knowledge of the Company, there
are no existing or proposed requirements under Environmental Laws that would
require any Operating Subsidiary or any of their respective Subsidiaries to
incur any material expenses subsequent to the Closing to remain in compliance
with Environmental Laws or to otherwise make capital improvements; and (e) there
are no facts, circumstances or conditions relating to the past or present
business or operations of any Operating Subsidiary or any of their respective
Subsidiaries (including the disposal of any wastes, hazardous substances or
other materials), or to any past or present Subsidiary Property, that would
reasonably be expected to give rise to any proceeding or action or any material
claim or liability under any Environmental Law.
Section 3.19 Voting Requirements. At a meeting duly called and held at
which at least one-half of the aggregate of the Company Common Shares and
Company Subordinated Shares is present or represented by proxy and entitled to
vote, the affirmative vote of holders of more than sixty-six and two-thirds
percent (66-2/3%) of the Company Common Shares and Company Subordinated Shares,
voting together as a single class, is the only vote required to approve and/or
adopt the Proposals to approve this Agreement and dissolve the Company (each as
more fully set forth on Annex B).
Section 3.20 Insurance. Set forth on Schedule 3.20 of the Company
Disclosure Letter is a list of all policies of fire, liability and other forms
of insurance and all fidelity bonds held by or applicable to any Operating
Subsidiary or any of their respective Subsidiaries at any time during the last
three (3) years. Except as set forth on Schedule 3.20 of the Company Disclosure
Letter, the insurance currently held by or applicable to each Operating
Subsidiary and each of their respective Subsidiaries is in such amount and of
such type and scope as is customary in the industry in which it is engaged and
B-18
each of them has had in full force and effect at all appropriate times insurance
of appropriate type, amount and scope. Except as set forth on Schedule 3.20 of
the Company Disclosure Letter, there has been no change in the type of insurance
coverage held by or applicable to any Operating Subsidiary or any of their
respective Subsidiaries during the past three (3) years that has resulted in any
period during which any of them failed to have appropriate insurance coverage.
Excluding insurance policies that have expired and been replaced, no insurance
policy of any Operating Subsidiary or any of their respective Subsidiaries has
been canceled within the last three (3) years and no threat has been made to
cancel any such insurance policy within such period.
Section 3.21 Inventory. Except as set forth on Schedule 3.21 of the
Company Disclosure Letter, the inventories owned by the Operating Subsidiaries
or their respective Subsidiaries consist of a quality usable by the Operating
Subsidiaries or their respective Subsidiaries in the ordinary course of
business. There are no material shortages in the quantity of product of
customers being held by any Operating Subsidiary or any of their respective
Subsidiaries. There are no contaminations of product of customers being held by
any Operating Subsidiary or any of their respective Subsidiaries for which any
Operating Subsidiary or any of their respective Subsidiaries has any material
liability.
Section 3.22 Information Furnished. Except as set forth on Schedule
3.22 of the Company Disclosure Letter, the Company has made available to
Purchaser or its attorneys, accountants or other representatives true and
correct copies of all agreements and documents listed on the Company Disclosure
Letter and all minute books and stock records of each of the Operating
Subsidiaries and each of their respective Subsidiaries, and none of (a) this
Agreement, (b) the Company Disclosure Letter or (c) the minute books and stock
records of the Operating Subsidiaries and their respective Subsidiaries as of
the date hereof and as of the Closing Date, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
to make the statements herein or therein, as the case may be, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
Section 4.1 Due Organization, Good Standing and Corporate Power.
Purchaser is a limited partnership duly organized and validly existing under the
laws of the State of Delaware.
Section 4.2 Authorization and Validity of Agreement. Purchaser has the
requisite partnership power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Purchaser and the consummation by it of the transactions contemplated hereby
have been duly authorized by its general partner. No other partnership action on
the part of Purchaser is necessary to authorize the execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and, assuming that this Agreement constitutes a valid and
B-19
binding obligation of the Company, constitutes a valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, except
that such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting creditors' rights
generally, and general equitable principles.
Section 4.3 Consents and Approvals; No Violations. Assuming (a) the
filings required under the HSR Act are made and the applicable waiting periods
thereunder have been terminated or have expired, and (b) the purchase of the
Shares by Purchaser pursuant to this Agreement has been approved by the
shareholders of the Company, the execution and delivery of this Agreement by
Purchaser and the consummation by Purchaser of the transactions contemplated
hereby do not: (i) violate or conflict with any provision of the limited
partnership agreement of Purchaser; (ii) violate or conflict in any material
respect with any statute, ordinance, rule, regulation, order or decree of any
Governmental Entity applicable to Purchaser or by which any of its properties or
assets may be bound; (iii) require any filing with, or Permit, material consent
or approval of, or the giving of any material notice to, any Governmental
Entity; or (iv) result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default under (or give
rise to any right of termination, cancellation, payment or acceleration under),
or result in the creation of any Lien upon any of the properties or assets of
Purchaser under, or give rise to any obligation, right of termination,
cancellation, acceleration or increase of any obligation or a loss of a material
benefit or any right that becomes effective upon the occurrence of a merger,
amalgamation, scheme of arrangement, consolidation or change of control under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, franchise, Permit, Contract, arrangement, lease, franchise agreement
or other obligation to which Purchaser or any of its Subsidiaries is a party, or
by which any such Person or any of its properties or assets may be bound.
Section 4.4 Proxy Materials. None of the information provided by
Purchaser in writing for inclusion in the Proxy Materials, any materials
included therewith or any amendments or supplements thereto, will, at the time
such Proxy Materials, materials, amendments or supplements are filed with the
Commission or are first published, sent or, as the case may be, given to the
shareholders of the Company or at the time of the Shareholder Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Section 4.5 Broker's or Finder's Fee. No agent, broker, investment
bank, Person or firm acting on behalf of Purchaser is, or shall be, entitled to
any commission or broker's or finder's fees in connection with this Agreement or
any of the transactions contemplated hereby from any of the parties hereto, or
from any Affiliate of the parties hereto.
Section 4.6 Funds. Purchaser has sufficient funds available to pay (a)
the Closing Payment, (b) the Cash Excess Amount, if any, and (c) all obligations
set forth on Schedule 4.6 of the Company Disclosure Letter, which will, as a
result of the consummation of the transactions contemplated hereby, become due
in respect of any indebtedness of the Operating Subsidiaries or any of their
respective Subsidiaries for money borrowed.
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Section 4.7 Litigation. On the date of this Agreement, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before any Governmental Entity pending
or, to the knowledge of Purchaser, threatened, against or affecting Purchaser or
any of its respective Subsidiaries, or any of their respective properties or
rights that has, or would reasonably be expected to have, a Purchaser Material
Adverse Effect. There are no suits, actions, claims, proceedings or
investigations pending or, to the knowledge of Purchaser, threatened, seeking to
prevent or challenging the transactions contemplated by this Agreement. Neither
Purchaser nor any of its Affiliates is subject to any judgment, order or decree
entered in any lawsuit or proceeding that has or would reasonably be expected to
have, individually or in the aggregate, a Purchaser Material Adverse Effect.
Section 4.8 No Knowledge of Adverse Change. To the actual knowledge of
Edward D. Doherty, Fred Johnson, Ron Rushton, Alan Barclay or Jim Tidmore, after
reasonable investigation but without giving effect to constructive knowledge,
there exists no fact, event or condition that resulted from or was caused by any
dealing Purchaser or any of its Affiliates has had with any Company Business
Party that, as a result of the announcement of this Agreement or the
consummation of the transactions contemplated by this Agreement, will have, or
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
ARTICLE V
TRANSACTIONS PRIOR TO CLOSING DATE
Section 5.1 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending on the earlier of (a)
the Closing Date and (b) the date on which this Agreement is terminated pursuant
to Section 6.3, the Company shall cause each of its Subsidiaries to, upon
reasonable notice, afford Purchaser and its employees, counsel, accountants,
consultants and other authorized representatives, access during normal business
hours to the officers, directors, employees, accountants, properties, books and
records of such Subsidiaries. The Company shall furnish promptly to Purchaser
all information concerning its Subsidiaries' business, properties and personnel
as Purchaser may reasonably request.
Section 5.2 Confidentiality. (a) Information obtained by Purchaser and
its counsel, accountants, consultants and other authorized representatives
pursuant to Section 5.1 shall be subject to the provisions of the
Confidentiality Agreement by and between the Company and Kaneb Pipe Line Company
LLC, dated July 27, 2001 (the "Confidentiality Agreement"). The Confidentiality
Agreement shall terminate as of the Closing.
(b) The Company recognizes and acknowledges that it has had and will
have access to certain confidential information concerning Purchaser and its
business that is the valuable, special and unique property of Purchaser. The
Company agrees that, during the term of this Agreement and for a period of three
(3) years following the Closing Date or any termination of this Agreement, it
will not disclose, and it will use its commercially reasonable efforts to
prevent disclosure by any Affiliate or authorized representative of the Company
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of, any such confidential information to any Person, except to authorized
representatives of Purchaser in connection with the fulfillment of the Company's
obligations under this Agreement or as required by applicable Law or Order. The
Company agrees that money damages would not be a sufficient remedy for any
breach of its obligations under this Section 5.2(b) and that, in addition to all
other remedies, Purchaser or any of its Affiliates shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach and the Company agrees to waive, and to use its commercially reasonable
efforts to cause each of its Affiliates and representatives to waive, any
requirement for the securing or posting of any bond in connection with such
remedy.
(c) The Company recognizes and acknowledges that it has certain
confidential information concerning the Operating Subsidiaries and their
respective Subsidiaries and their respective businesses that is, after the
Closing, the valuable, special and unique property of Purchaser. The Company
agrees that, for a period of three (3) years following the Closing Date, it will
not disclose, and it will use its commercially reasonable efforts to prevent
disclosure by any Affiliate or authorized representative of the Company of, any
such confidential information to any Person, except to authorized
representatives of Purchaser in connection with the fulfillment of the Company's
obligations under this Agreement or as required by applicable Law or Order. The
Company agrees that money damages would not be a sufficient remedy for any
breach of its obligations under this Section 5.2(c) and that, in addition to all
other remedies, Purchaser or any of its Affiliates shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach and the Company agrees to waive, and to use its commercially reasonable
efforts to cause each of its Affiliates and representatives to waive, any
requirement for the securing or posting of any bond in connection with such
remedy.
Section 5.3 Conduct of Business Pending the Closing Date. The Company
agrees that, except as set forth on Schedule 5.3 of the Company Disclosure
Letter or unless expressly permitted or required by this Agreement or otherwise
consented to in writing by Purchaser (which consent (i) shall not be
unreasonably withheld, conditioned or delayed and (ii) in the case of Section
5.3(b)(xv), shall only be required of Mr. Edward D. Doherty which consent, in
the case of storage and throughput Contracts, shall be deemed given if not
received or affirmatively refused within twenty-four (24) hours after receipt by
Mr. Doherty of the request therefor), during the period commencing on the date
hereof and ending at the earlier of (x) the Closing and (y) any termination of
this Agreement pursuant to Section 6.3:
(a) it shall cause each of its Subsidiaries to conduct such
Subsidiary's operations only in accordance with the ordinary course of business
of such Subsidiary, use such Subsidiary's commercially reasonable efforts to
preserve intact, in all material respects, such Subsidiary's business
organization, keep available, in all material respects, the services of such
Subsidiary's officers and employees and maintain, in all material respects,
satisfactory relationships with licensors, suppliers, distributors, clients,
customers and others having significant business relationships with such
Subsidiary; and
(b) it shall cause each of its Subsidiaries not to:
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(i) take any action to make any change in or amendment to such
Subsidiary's articles of incorporation (or comparable governing documents);
(ii) issue or sell, or authorize to issue or sell, any of such
Subsidiary's share capital or any other securities, or issue or sell, or
authorize to issue or sell, any securities convertible into or exchangeable
for, or options, warrants or rights to purchase or subscribe for, or enter
into any arrangement or contract with respect to the issuance or sale of,
any of such Subsidiary's share capital or any other securities, or make any
other changes in such Subsidiary's capital structure;
(iii) sell, pledge or dispose of or agree to sell, pledge or dispose
of any shares or other equity interest owned by such Subsidiary's in any
other Person;
(iv) declare, pay or set aside any dividend or other distribution or
payment with respect to, or split, combine, redeem or reclassify, or
purchase or otherwise acquire, any shares of such Subsidiary's share
capital or such Subsidiary's other securities (other than (x) distributions
to any other Subsidiary of the Company or (y) distributions to the Company
to the extent necessary to make the distributions required by the Company
Articles);
(v) enter into any contract or commitment with respect to capital
expenditures with a value in excess of, or requiring expenditures in excess
of, one million dollars ($1,000,000), individually, or enter into contracts
or commitments with respect to capital expenditures with a value in excess
of, or requiring expenditures in excess of, two million dollars
($2,000,000), in the aggregate, other than inventory purchased in the
ordinary course of business;
(vi) acquire, by amalgamating, merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any Person or otherwise acquire any assets of
any Person (other than the purchase of assets in the ordinary course of
business);
(vii) except to the extent required by applicable Law or under
existing employee or director benefit plans, Contracts, arrangements or
collective bargaining Contracts in effect on the date of this Agreement,
increase the compensation or fringe benefits of any of such Subsidiary's
directors, officers or employees, or grant any bonus or severance or
termination pay not currently required to be paid under existing severance
plans, or enter into any employment, consulting or severance Contract or
arrangement with any of such Subsidiary's present or former directors,
officers or other employees, or establish, adopt, enter into, amend or
terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, Contract,
trust, fund, policy or arrangement for the benefit of such Subsidiary's
directors, officers or employees; provided, that, without the prior consent
of Purchaser, (A) the Operating Subsidiaries and their respective
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Subsidiaries may increase the aggregate annualized compensation paid to all
of the employees of the Operating Subsidiaries and their respective
Subsidiaries (other than employees who have an employment Contract with any
Operating Subsidiary or any of their respective Subsidiaries or employees
who are covered by any collective bargaining Contract) by an amount not to
exceed four percent (4%) of the aggregate annualized compensation as of the
date hereof payable to such employees, and (B) such Subsidiaries may, with
respect to any employee of any Operating Subsidiary or any of their
respective Subsidiaries having an employment Contract, (1) set the bonus
target for such employee at an amount not in excess of seventy-five percent
(75%) of such employee's base pay, (2) set the bonus target EBITDA for the
Operating Subsidiaries and their respective Subsidiaries for fiscal year
2002 for the purpose of determining the incentive thresholds applicable to
such Contract at an amount not lower than forty-two million seven hundred
thousand dollars ($42,700,000) and (3) set the annual compensation increase
for such employee at an amount not in excess of the minimum required by
such employee's employment Contract;
(viii) transfer, lease, license, guarantee, sell, mortgage, pledge,
dispose of, subject to any Lien, (other than Liens arising by operation of
Law in the ordinary course of business including, without limitation,
mechanics' or materialmens' Liens and maritime Liens, that are not,
individually or in the aggregate, material) or otherwise encumber any
material assets, or incur or modify any indebtedness or other material
liability, or issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for the obligations of any
Person (other than any other Subsidiary of the Company) or make any loan or
other extension of credit;
(ix) make or rescind any material Tax election;
(x) except as required by applicable Law or GAAP, make any material
change in its method of accounting;
(xi) adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization;
(xii) (x) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, other than indebtedness owing to or
guarantees of indebtedness owing to any other Subsidiary of the Company, or
(y) make any loans or advances to any other Person, other than to any other
Subsidiary of the Company, except, in the case of clause (x), for
borrowings under existing credit facilities described in the Completed
Commission Filings in the ordinary course of business for working capital
purposes;
(xiii) accelerate the payment, right to payment or vesting of any
bonus, severance, profit sharing, retirement, deferred compensation, stock
option, insurance or other compensation or benefits;
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(xiv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction (x) of any such claims,
liabilities or obligations in the ordinary course of business or (y) of
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) contained in the Completed Commission Filings;
(xv) enter into, materially modify, amend or terminate any Material
Contract (other than any storage and throughput Contract that both (x) has
a duration (immediately before terminating such Material Contract or
immediately after entering into, modifying or, as the case may be, amending
such Material Contract) of less than ninety (90) days and (y) involves even
payment obligations throughout the term of such Contract);
(xvi) other than routine employee terminations for cause or in the
ordinary course of business or as disclosed in the Completed Commission
Filings, plan, announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other program or
effort concerning the termination of employment of any of such Subsidiary's
employees; or
(xvii) enter into any Tax agreement or similar agreement with the
Island Territory of Sint Eustatius or the Land Territory of the Netherlands
Antilles; or
(xviii) agree, in writing or otherwise, to take any of the foregoing
actions.
Section 5.4 Commercially Reasonable Efforts. Subject to the terms and
conditions provided herein, the Company and Purchaser shall, and the Company
shall cause each of its Subsidiaries to, cooperate and use their respective
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and do, or cause to be done, and assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated hereby including, without limitation, the satisfaction of the
conditions set forth in Article VI and to make, or cause to be made, all filings
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated by this Agreement, including their
respective commercially reasonable efforts to obtain, prior to the Closing Date,
all Permits, consents and approvals of Governmental Entities and parties to
Contracts with any Operating Subsidiary or any of their respective Subsidiaries
as are required to fulfill the conditions set forth in Article VI.
Section 5.5 No Solicitation of Other Offers. (a) The Company shall,
and shall use its commercially reasonable efforts to cause its Affiliates and
each of its and their respective officers, directors, employees,
representatives, consultants, investment bankers, attorneys, accountants and
other agents immediately to, cease any discussions or negotiations with any
other Person or Persons that may be ongoing with respect to any Acquisition
Proposal. The Company shall not take, and shall use its commercially reasonable
efforts to cause its Affiliates and each of its and their respective officers,
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directors, employees, representatives, consultants, investment bankers,
attorneys, accountants or other agents not to take, any action (i) to encourage
knowingly, solicit, initiate or facilitate, directly or indirectly, the making
or submission of any Acquisition Proposal, (ii) to enter into any agreement,
arrangement or understanding with respect to any Acquisition Proposal, (iii) to
initiate or participate in any way in any discussions or negotiations with, or
furnish or disclose any information to, any Person (other than Purchaser) in
connection with any Acquisition Proposal, (iv) to facilitate or further in any
other manner any inquiries or the making or submission of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal,
or (v) to grant any waiver or release under any standstill, confidentiality or
similar agreement (other than waivers or releases in the ordinary course of
business) entered into by the Company or any of its Affiliates or
representatives; provided, that the Company, in response to an unsolicited
Acquisition Proposal that did not result from a breach of this Section 5.5(a)
and otherwise in compliance with its obligations under Section 5.5(c), may
participate in discussions with, request clarifications from, or furnish
information to, any Person (other than Purchaser) that makes an unsolicited
Acquisition Proposal if (x) such action is taken subject to a confidentiality
agreement with terms not more favorable to such Person than the terms of the
Confidentiality Agreement (as in effect on the date hereof), (y) the Board of
Directors of the Company reasonably determines in good faith that such
Acquisition Proposal is, or could reasonably likely lead to, a Superior Proposal
and (z) the Board of Directors of the Company reasonably determines in good
faith, after receiving advice from Netherlands Antilles counsel to the Company,
that it is necessary to take such actions in order to comply with the fiduciary
duties of the Board of Directors under applicable Law.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw, modify or amend, or propose to withdraw, modify or
amend, in a manner adverse to Purchaser, the approval, adoption or, as the case
may be, recommendation of (x) this Agreement and the transactions contemplated
hereby, or (y) the approval by the shareholders of the Company of the Proposals,
or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal; provided, that the Company may recommend to its
shareholders an Acquisition Proposal and, in connection therewith, withdraw or
modify its approval or recommendation of this Agreement and the transactions
contemplated by this Agreement if (x) the Company has complied with its
obligations under Sections 5.5(a) and (c), (y) the Acquisition Proposal is a
Superior Proposal and (z) the Board of Directors of the Company has determined,
in good faith, after receiving advice from Netherlands Antilles counsel to the
Company, that it is necessary to take such action in order to comply with the
fiduciary duties of the Board of Directors of the Company under applicable Law.
Nothing in this Section 5.5 shall prohibit the Company or the Board of Directors
of the Company from taking and disclosing to the shareholders of the Company a
position with respect to an Acquisition Proposal by a third party to the extent
required under Rule 14e-2 of the Exchange Act.
"Acquisition Proposal" shall mean (i) any inquiry, proposal or offer
(including, without limitation, any proposal to shareholders of the Company)
from any Person or group relating to any direct or indirect acquisition or
purchase of (x) any class of equity securities of the Company or any of its
Subsidiaries or (y) five percent (5%) or more of the consolidated assets of the
Company and its Subsidiaries, (ii) any tender offer or exchange offer that, if
consummated, would result in any Person beneficially owning any class of equity
securities of the Company or any of its Subsidiaries, (iii) any amalgamation,
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merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries, or (iv) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the consummation of the transactions contemplated by this Agreement or that
could reasonably be expected to dilute materially the benefits to Purchaser of
the transactions contemplated hereby.
"Superior Proposal" shall mean a bona fide written Acquisition
Proposal made by a third party to acquire either all of the Company Shares or
the Shares or substantially all of the combined assets of the Operating
Subsidiaries and their respective Subsidiaries, in either case pursuant to a
tender offer, an amalgamation, a merger or a sale (i) on terms that the Board of
Directors of the Company (after consultation with an independent, nationally
recognized investment bank) reasonably determines in good faith to be more
favorable, from a financial point of view, to the Company and its shareholders
(in their capacity as such) than the transactions contemplated hereby, and (ii)
that is reasonably capable of being consummated (taking into account, among
other things, all legal, financial, regulatory and other aspects of such
proposal and the identity of the Person making such proposal).
(c) In addition to the obligations of the Company set forth in
paragraph (a) above, promptly after receipt or occurrence thereof, the Company
shall advise Purchaser of any request for information with respect to any
Acquisition Proposal or of any Acquisition Proposal, or any inquiry, proposal,
discussions or negotiation with respect to any Acquisition Proposal, the terms
and conditions of such request, Acquisition Proposal, inquiry, proposal,
discussion or negotiation and the Company shall, promptly after receipt thereof,
provide to Purchaser copies of any written materials received by the Company in
connection with any of the foregoing, and the identity of the Person making any
such Acquisition Proposal or such request, inquiry or proposal or with whom any
discussions or negotiations are taking place.
Section 5.6 Notification of Certain Matters. Purchaser and the Company
shall promptly notify each other of the occurrence or non-occurrence of any fact
or event that has caused or could reasonably be expected to cause (a) any
representation or warranty made by it in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Closing, or (b) any covenant, condition or agreement under this Agreement not to
be complied with or satisfied by it in any material respect; provided, however,
that no such notification shall modify the representations or warranties of any
party or the conditions to the obligations of any party hereunder.
Section 5.7 Antitrust. (a) Each party hereto shall promptly take all
actions necessary to make the filings required of it or any of its Affiliates
under any applicable Antitrust Laws in connection with this Agreement and the
transactions contemplated hereby, including but not limited to filing with the
appropriate Antitrust Authorities, no later than the fifth (5th) Business Day
following the date hereof, a Notification and Report Form with respect to the
transactions contemplated by this Agreement, complying at the earliest
practicable date with any formal or informal request for additional information
or documentary material received by it or any of its Affiliates from any
Antitrust Authority, and cooperating, as permitted by Law, with one another in
connection with any filing under applicable Antitrust Laws and in connection
B-27
with resolving any investigation or other inquiry concerning the transactions
contemplated by this Agreement initiated by any Antitrust Authority.
(b) Each party hereto shall use its commercially reasonable efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any Antitrust Law. Without
limiting the generality of the foregoing, "commercially reasonable efforts"
shall include:
(i) in the case of each of Purchaser and the Company, if
Purchaser or the Company receives a formal request for additional
information or documentary material from an Antitrust Authority,
substantially complying with such formal request within a reasonable
period of time following the date of its receipt thereof;
(ii) in the case of the Company only, subject to the compliance
by Purchaser with this Section 5.7, not frustrating or impeding
strategy or negotiating positions of Purchaser with any Antitrust
Authority; and
(iii) in the case of each of Purchaser and the Company, using all
commercially reasonable efforts to (x) defend against any lawsuits,
actions or proceedings, judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby;
(y) seek to prevent the entry or imposition of any preliminary
injunction, temporary restraining order, stay or other legal restraint
or prohibition by any Governmental Entity; and (z) appeal and seek to
have vacated or reversed as promptly as possible any such injunction,
order, stay or other restraint or prohibition that is not yet final
and nonappealable.
The parties agree that, notwithstanding the foregoing, Purchaser shall not be
obligated by this Agreement to hold separate, divest, license or cause a third
party to purchase assets and/or businesses of any Operating Subsidiary or any of
their respective Subsidiaries or of Purchaser or any of its Affiliates.
(c) Each party hereto shall promptly inform the other parties of any
material communication made to, or received by such party from, any Antitrust
Authority or any other Governmental Entity regarding any of the transactions
contemplated hereby.
Section 5.8 Employee Benefits. (a) During the period commencing at the
Closing and ending on the first anniversary thereof, Purchaser shall cause the
current and former employees of the Operating Subsidiaries and their respective
Subsidiaries who are, on the Closing Date, entitled to receive compensation or
any benefits from any Operating Subsidiary or any of their respective
Subsidiaries to be provided with compensation and employee benefit plans (other
than stock option or other plans involving the potential issuance of securities
of any Operating Subsidiary, Purchaser or any of their respective Subsidiaries)
that in the aggregate are not materially less favorable than those currently
provided to such employees by the Operating Subsidiaries and their respective
Subsidiaries. The provisions of this Section 5.8(a) shall not create in any
current or former employee of any Operating Subsidiary or any of their
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respective Subsidiaries any rights to employment or continued employment with
Purchaser or any Operating Subsidiary or any of their respective Subsidiaries or
Affiliates or any right to specific terms or conditions of employment.
(b) The parties hereto agree that, upon the Closing, a "change in
control", "change of control" or "consolidation" as applicable, shall be deemed
to have occurred in respect of each of the employment agreements, change in
control agreements and severance agreements and other employee benefit plans and
agreements set forth on Schedule 5.8(b) of the Company Disclosure Letter
(collectively, the "Severance Protection Plans"). This Section 5.8(b) shall not
affect any terms of, or otherwise imply that the Closing or any other
termination shall not constitute a "change in control" or "change of control"
under, any employment agreement, change in control agreement, severance
agreement or other employee benefit plan or agreement that is not listed on such
Schedule 5.8(b).
(c) From and after the Closing, Purchaser shall cause the Operating
Subsidiaries and their respective Subsidiaries to (i) pay and perform the
respective obligations of the Operating Subsidiaries and their respective
Subsidiaries under the Severance Protection Plans and (ii) take such action as
may be necessary to pay promptly any severance payments or other amounts from
time to time due thereunder.
(d) Notwithstanding the foregoing provisions of this Section 5.8, no
employee of any Operating Subsidiary or any of their Subsidiaries shall have any
continued right to employment with any Operating Subsidiary or any Subsidiary of
any Operating Subsidiary following the Closing, except as provided in writing by
Purchaser; provided, that nothing in this Section 5.8(d) shall affect the rights
of any employee pursuant to any employment Contract.
Section 5.9 Directors' and Officers' Insurance and Indemnification.
(a) The provisions with respect to indemnification and exculpation from
liability set forth in the respective organizational documents of the
Subsidiaries of the Company as in effect on the date of this Agreement shall not
be amended, repealed or otherwise modified for a period of six (6) years after
the Closing in any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Closing Date were directors or officers of
the Subsidiaries of the Company, unless such modification is required by Law.
(b) For a period of six (6) years following the Closing, Purchaser
shall cause the Operating Subsidiaries to either (i) maintain in effect the
current directors' and officers' liability insurance of the Company covering (x)
those Persons who are currently covered as directors or officers of any
Subsidiary of the Company on the date of this Agreement by the directors' and
officers' liability insurance policy of the Company (a copy of which has been
heretofore delivered to Purchaser) (the "Subsidiary Indemnified Parties") and
(y) those Persons who are currently covered as directors or officers of the
Company on the date of this Agreement by the directors' and officers' liability
insurance policy of the Company (the "Company Indemnified Parties"); provided,
however, that in no event shall Purchaser be required to expend, on an
annualized basis, an amount in excess of two hundred percent (200%) of the
annualized premiums currently paid by the Company for such insurance, which the
Company represents to be two hundred and five thousand ($205,000) for the twelve
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(12) month period ending on March 31, 2002; provided, further, that if the
annual premiums of such insurance coverage exceed such amount, Purchaser shall
cause the Operating Subsidiaries to obtain a policy or, as the case may be,
policies, with the greatest coverage available for a cost not exceeding such
amount; and provided, further, that Purchaser may substitute or, as the case may
be, cause to be substituted for such policies other policies with at least the
same coverage containing terms and conditions that are no less advantageous, and
provided that said substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Closing, or (ii) cause
directors' and officers' liability insurance of Purchaser then in effect to
cover the Company Indemnified Parties and the Subsidiary Indemnified Parties
with respect to those matters covered by the directors' and officers' liability
insurance policy of the Company so long as the terms thereof are no less
advantageous to the Company Indemnified Parties and the Subsidiary Indemnified
Parties than the current directors' and officers' liability insurance of the
Company covering the Company Indemnified Parties and the Subsidiary Indemnified
Parties.
(c) The Operating Subsidiaries shall and, if, at any time after the
Closing, any Operating Subsidiary or any of their respective Subsidiaries shall
be liquidated, dissolved or wound up, Purchaser, or a Person designated by
Purchaser that has a net worth at least equal to that of the liquidated,
dissolved or, as the case may be, wound up, Operating Subsidiary at the time of
such liquidation, dissolution or, as the case may be, winding up (the
"Substitute Party"), shall indemnify all Subsidiary Indemnified Parties to the
fullest extent permitted by applicable Law with respect to all acts and
omissions prior to the Closing arising out of such individuals' services as
officers, directors, employees or agents of any Subsidiary of the Company or as
trustees or fiduciaries of any plan for the benefit of employees of any
Subsidiary of the Company including, without limitation, the execution of, and
the transactions contemplated by, this Agreement. Without limitation of the
foregoing, in the event any such Subsidiary Indemnified Party is or becomes
involved, in any capacity, in any action, proceeding or investigation in
connection with any matter occurring prior to and including the time of the
Closing, including, without limitation, the transactions contemplated by this
Agreement, the Operating Subsidiaries, Purchaser or, as the case may be, the
Substitute Party, shall pay, as incurred, the reasonable legal and other
expenses of such Subsidiary Indemnified Party (including the cost of any
investigation and preparation) incurred in connection therewith. Subject to
Section 5.9(d) below, the Operating Subsidiaries, Purchaser or, as the case may
be, the Substitute Party, shall pay all reasonable expenses, including
attorneys' fees, that may be incurred by any Subsidiary Indemnified Party in
enforcing this Section 5.9 or any action involving a Subsidiary Indemnified
Party resulting from the transactions contemplated by this Agreement.
(d) Any Subsidiary Indemnified Party wishing to claim indemnification
under Section 5.9(a), upon learning of any such claim, action, suit, proceeding
or investigation, shall promptly notify the Operating Subsidiaries, Purchaser
or, as the case may be, the Substitute Party, thereof. In the event of any such
claim, action, suit, proceeding or investigation, (i) the Operating
Subsidiaries, Purchaser or, as the case may be, the Substitute Party, shall have
the right, from and after the Closing, to assume the defense thereof (with
counsel engaged by the Operating Subsidiaries, Purchaser or, as the case may be,
the Substitute Party, to be reasonably acceptable to the relevant Subsidiary
Indemnified Party), and none of the Operating Subsidiaries, Purchaser or, as the
case may be, the Substitute Party, shall be liable to such Subsidiary
Indemnified Party for any legal expenses of other counsel or any other expenses
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subsequently incurred by such Subsidiary Indemnified Party in connection with
the defense thereof, (ii) such Subsidiary Indemnified Party shall cooperate in
the defense of any such matter, and (iii) none of the Operating Subsidiaries,
Purchaser or, as the case may be, the Substitute Party, shall be liable for any
settlement effected without its prior written consent, which consent shall not
be unreasonably withheld, conditioned or delayed; provided, that none of the
Operating Subsidiaries, Purchaser or, as the case may be, the Substitute Party
shall have any obligation hereunder to any Subsidiary 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
Subsidiary Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law. None of the Operating Subsidiaries, Purchaser or, as the case
may be, the Substitute Party shall enter into any settlement that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to each Subsidiary Indemnified Party a release from all liability in
respect of such matter.
(e) Notwithstanding any other provisions hereof, the obligations of
Purchaser, the Operating Subsidiaries and the Substitute Party contained in this
Section 5.9 shall be binding upon their respective successors and assigns. In
the event Purchaser, any Operating Subsidiary, the Substitute Party or any of
their respective successors or assigns (i) consolidates or amalgamates with or
merges into any other Person or (ii) transfers all or substantially all of its
properties or assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Purchaser honor
the indemnification obligations set forth in this Section 5.9.
(f) The obligations of Purchaser, the Operating Subsidiaries and the
Substitute Party and their respective Subsidiaries under this Section 5.9 shall
survive the Closing and shall not be terminated or modified in such a manner as
to affect adversely any Company Indemnified Party or any Subsidiary Indemnified
Party to whom this Section 5.9 applies without the consent of such affected
Indemnified Party (it being expressly agreed that the Company Indemnified
Parties and Subsidiary Indemnified Parties to whom this Section 5.9 applies
shall be third-party beneficiaries of this Section 5.9, each of whom may enforce
the provisions of this Section).
Section 5.10 Public Announcements. Purchaser and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation and review by the other party of such
release or statement, or without the prior consent of the other party, which
consent shall not be unreasonably withheld, conditioned or delayed; provided,
however, that a party may, without the prior consent of the other party, issue
such press release or make such public statement as may be required by Law or by
any listing agreement with a national securities exchange or automated quotation
system to which Purchaser or any Affiliate of Purchaser or, as the case may be,
the Company is a party, if it has used all commercially reasonable efforts to
consult with the other party and to obtain the consent of such party, but has
been unable to do so in a timely manner.
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Section 5.11 Shareholder Approval. As soon as reasonably practicable
after the date of this Agreement, the Company shall (a) duly call, give notice
of, convene and hold the Shareholder Meeting, including adjourning or recalling
the same if necessary to obtain a quorum, (b) make all filings with all
Governmental Entities necessary in connection therewith (including filing the
Proxy Materials with the Commission), (c) subject to the rights of the Board of
Directors of the Company pursuant to Section 5.5(b), provide the Proxy Materials
to the shareholders of the Company and, if so requested by Purchaser, retain the
services of a proxy solicitation firm and/or an information agent (selected by
the Company) to assist in obtaining proxies for approval and adoption of the
Proposals at the Shareholder Meeting, and (d) subject to the rights of the Board
of Directors of the Company pursuant to Section 5.5(b), use all commercially
reasonable efforts to obtain approval of all of the Proposals by the requisite
vote of the shareholders of the Company.
Section 5.12 Section 338 Election. Notwithstanding anything to the
contrary contained in this Agreement, if Purchaser or any Affiliate of Purchaser
acquires or becomes the owner, for U.S. federal income tax purposes, of any
Company Shares (other than Company Shares held by Holdings) at any time that
Holdings is the owner, for U.S. federal income tax purposes, of any Company
Shares, neither Purchaser nor any Affiliate of Purchaser shall make, or permit
to be made, an election under Section 338 of the Code with respect to such
Company Shares or with respect to any of the transactions contemplated by this
Agreement, unless the Company provides prior express written consent to any such
election.
Section 5.13 Repayment of Indebtedness. At or prior to the Closing,
Purchaser shall, in a manner satisfactory to the Company (which consent shall
not be unreasonably withheld, conditioned or delayed), either (a) discharge in
full the indebtedness under the Transamerica Loan, (b) obtain a release for the
Company of its obligations as guarantor of the Transamerica Loan or (c) agree to
indemnify the Company for its obligations as guarantor of the Transamerica Loan.
Section 5.14 Transfer Taxes. All stamp, documentary, transfer or
similar Taxes ("Transfer Taxes") resulting directly from the transactions
contemplated by this Agreement shall be borne fifty percent (50%) by Purchaser
and fifty percent (50%) by the Company. Any Tax Returns that must be filed in
connection with Transfer Taxes shall be prepared and filed when due by the party
primarily or customarily responsible under the applicable local law for filing
such Tax Returns, provided that New York State stock transfer tax stamps shall
be affixed to the Shares transferred at the Closing. The Company and Purchaser
hereby agree to cooperate with each other prior to the Closing to allow the
relevant party to satisfy its obligations under the immediately preceding
sentence.
Section 5.15 Termination of Existing Tax Sharing Agreements. Any and
all existing Tax sharing agreements or arrangements, written or oral, between
the Company (or any Subsidiary or Affiliate of the Company), on the one hand,
and any Subsidiary of the Company, on the other, shall be terminated by the
Company and such Subsidiaries as of the Closing Date.
Section 5.16 Refunds of Taxes for Pre-Closing Periods. In the event
that the Company receives, after the Closing Date, but prior to any liquidation
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of the Company, a refund of Taxes paid by any Subsidiary of the Company, the
Company shall promptly remit such refund to Purchaser.
Section 5.17 Resignation of Directors. Unless otherwise requested in
writing by Purchaser on or prior to December 15, 2001, at or prior to the
Closing, the Company shall either (a) cause each director of each Subsidiary of
the Company to deliver to Purchaser his or her resignation as a director of such
Subsidiary or (ii) remove each director of each Subsidiary of the Company from
his or her position as a director of such Subsidiary.
ARTICLE VI
CONDITIONS TO CLOSING; TERMINATION AND ABANDONMENT
Section 6.1 Conditions to Purchaser's Obligations. The purchase of the
Shares by Purchaser on the Closing Date is conditioned upon the satisfaction or
waiver by Purchaser, at or prior to the Closing, of the following conditions:
(a) Statutes, Orders; No Injunction. (i) There shall not be in effect
any Order by any Governmental Entity of competent jurisdiction and no Law shall
have been promulgated or enacted by any Governmental Entity of competent
jurisdiction that (A) restrains or prohibits the consummation of the
transactions contemplated by this Agreement, (B) prohibits or restricts the
ownership or operation by the Operating Subsidiaries or their respective
Subsidiaries or by Purchaser of any material portion of the business or assets
of the Operating Subsidiaries and their respective Subsidiaries, taken as a
whole, or that would substantially deprive the Operating Subsidiaries or their
respective Subsidiaries or Purchaser of the benefit of ownership of the business
or assets of the Operating Subsidiaries and their respective Subsidiaries, taken
as a whole, or compels Purchaser (or any of its Affiliates or Subsidiaries) to
dispose of or hold separate any material portion of the business or assets of
the Operating Subsidiaries and their respective Subsidiaries, taken as a whole,
(C) imposes material limitations on the ability of Purchaser effectively to
acquire or to hold or to exercise full rights to vote the Shares on all matters
properly presented to the shareholders of the respective Operating Subsidiary,
or (D) imposes any material limitations on the ability of the Operating
Subsidiaries or their respective Subsidiaries or Purchaser to control
effectively in any material respect the business and operations of the Operating
Subsidiaries and their respective Subsidiaries, taken as a whole, and (ii) there
shall not be pending any action by any Governmental Entity seeking to restrain
or prohibit the making or consummation of the transactions contemplated by this
Agreement or to impose any other restriction, prohibition or limitation referred
to in the foregoing clause (i);
(b) Truth of Representations and Warranties. The representations and
warranties of the Company in this Agreement (without giving effect to any
materiality qualification set forth in such representation or warranty, other
than the materiality qualifications set forth in Sections 3.6(a), 3.15 and 3.22
and the first and third sentences of Section 3.5) shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made on or as
of such date (other than representations and warranties that, by their terms,
address matters only as of another specified date, which shall be true and
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correct only as of such other specified date), other than any such failures to
be true and correct that, in the aggregate, do not have, and would not
reasonably be expected to have, a Company Material Adverse Effect; provided,
that unless the Company has, not later than December 15, 2001, delivered to
Purchaser a copy of the shareregister of each Subsidiary of the Company that is
organized under the laws of the Netherlands Antilles, in each case certified by
the requisite number of the members of the board of directors of such Subsidiary
and showing the information thereon with respect to such Subsidiary to be as
represented in Section 3.3, the representations and warranties set forth in
Section 3.3 shall be true and correct in all respects. For the avoidance of
doubt, the parties acknowledge that it is their intention that, for purposes of
determining whether the condition set forth in the first sentence of this
Section 6.1(b) has been satisfied, all materiality qualifications set forth in
the representations and warranties of the Company in this Agreement (other than
those set forth in Sections 3.6(a), 3.15 and 3.22 and the first and third
sentences of Section 3.5) shall be deemed to be deleted from such
representations and warranties and the truth and correctness of such
representations and warranties shall be determined as if such materiality
qualifications did not exist;
(c) Performance of Covenants. The Company shall have performed in all
material respects its obligations and complied in all material respects with the
agreements and covenants of the Company to be performed or complied with by it
under this Agreement;
(d) No Company Material Adverse Effect. Since the date of this
Agreement, there shall have occurred no event, nor shall there exist any fact or
circumstance, that, individually or in the aggregate, has, or would reasonably
be expected to have, a Company Material Adverse Effect;
(e) Board Recommendation. Neither the Board of Directors of the
Company nor any committee thereof shall have withdrawn, modified or amended, in
a manner adverse to Purchaser, the approval, adoption or recommendation, as the
case may be, of this Agreement or the transactions contemplated hereby, or shall
have approved or recommended, any Acquisition Proposal;
(f) Shareholder Approval. (i) Each of the Proposals (each as more
fully set forth on Annex B) shall have been approved and adopted by the holders
of more than sixty-six and two-thirds percent (66-2/3%) of the Company Common
Shares and Company Subordinated Shares, voting together as a single class, that
are present or represented by proxy and voting at a meeting at which holders of
at least one-half of the issued and outstanding Company Common Shares and
Company Subordinated Shares, counted as a single class, are present or
represented by proxy, and (ii) the Proposal with respect to the amendment of the
Company Articles (as more fully set forth on Annex B) shall have been approved
and adopted by the holders of more than sixty-six and two-thirds percent
(66-2/3%) of the Company Common Shares, voting as a separate class, that are
present or represented by proxy and voting at a meeting at which holders of
least one-half of the issued and outstanding Company Common Shares are present
or represented by proxy; and
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(g) HSR Act Waiting Periods. All applicable waiting periods under the
HSR Act with respect to the transactions contemplated by this Agreement shall
have expired or been terminated.
Section 6.2 Conditions to the Company's Obligations. The sale of the
Shares by the Company on the Closing Date is conditioned upon the satisfaction
or waiver by the Company, at or prior to the Closing, of the following
conditions:
(a) Statutes, Orders; No Injunction. There shall not be in effect any
Order by any Governmental Entity of competent jurisdiction and no Law shall have
been promulgated or enacted by a Governmental Entity of competent jurisdiction
that restrains or prohibits the consummation of the transactions contemplated by
this Agreement and there shall not be pending any action by a Governmental
Entity seeking to restrain or prohibit the making or consummation of the
transactions contemplated by this Agreement;
(b) Truth of Representations and Warranties. The representations and
warranties of Purchaser in this Agreement (without giving effect to any
materiality qualification set forth in any such representation or warranty,
other than the materiality qualification set forth in Section 4.4) shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on or as of such date (other than representations and warranties
that, by their terms, address matters only as of another specified date, which
shall be true and correct only as of such other specified date), other than any
such failures to be true and correct that, in the aggregate, do not have, or
would not reasonably be expected to have, a Purchaser Material Adverse Effect.
For the avoidance of doubt, the parties acknowledge that it is their intention
that, for purposes of determining whether the condition set forth in the first
sentence of this Section 6.2(b) has been satisfied, all materiality
qualifications set forth in the representations and warranties of Purchaser in
this Agreement (other than those set forth in Section 4.4) shall be deemed to be
deleted from such representations and warranties and the truth and correctness
of such representations and warranties shall be determined as if such
materiality qualifications did not exist;
(c) Performance of Covenants. Purchaser shall have performed in all
material respects its obligations and complied in all material respects with the
agreements and covenants of Purchaser to be performed or complied with by it
under this Agreement;
(d) Shareholder Approval. (i) Each of the Proposals (each as more
fully set forth on Annex B) shall have been approved and adopted by the holders
of more than sixty-six and two-thirds percent (66-2/3%) of the Company Common
Shares and Company Subordinated Shares, voting together as a single class, that
are present or represented by proxy and voting at a meeting at which holders of
at least one-half of the issued and outstanding Company Common Shares and
Company Subordinated Shares, counted as a single class, are present or
represented by proxy, and (ii) the Proposal with respect to the amendment of the
Company Articles (as more fully set forth on Annex B) shall have been approved
and adopted by the holders of more than sixty-six and two-thirds percent
(66-2/3%) of the Company Common Shares, voting as a separate class, that are
present or represented by proxy and voting at a meeting at which holders of at
least one-half of the issued and outstanding Company Common Shares are present
or represented by proxy; and
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(e) HSR Act Waiting Periods. All applicable waiting periods under the
HSR Act with respect to the transactions contemplated by this Agreement shall
have expired or been terminated.
Section 6.3 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual consent of the Company and Purchaser;
(b) by either Purchaser, on the one hand, or the Company, on the other
hand:
(i) if any court of competent jurisdiction or any Governmental
Entity shall have issued an order, decree or ruling or taken any other
action permanently restricting, enjoining, restraining or otherwise
prohibiting the sale of the Shares pursuant to this Agreement, and
such order, decree or ruling or other action shall have become final
and nonappealable;
(ii) if at the Shareholder Meeting, or any adjournment or recall
thereof, the shareholders of the Company shall not have approved the
Proposals; or
(iii) at any time after April 30, 2002 if the Closing shall not
have occurred by such date other than as a result of (x) a breach of
this Agreement by Purchaser, if Purchaser is the party attempting to
terminate this Agreement or (y) a breach of this Agreement by the
Company or a breach by Holdings of its obligations under the Voting
Agreement, if the Company is the party attempting to terminate this
Agreement;
(c) by the Company, if a Superior Proposal is received and the Board
of Directors of the Company reasonably determines in good faith, after receiving
advice from Netherlands Antilles counsel to the Company, that it is necessary to
terminate this Agreement and enter into an agreement to effect the Superior
Proposal in order to comply with the fiduciary duties of the Board of Directors
under applicable Law; provided, however, that (x) prior to such termination,
Purchaser has received the payment required by Section 8.1(b) by wire transfer
of immediately available funds and (y) simultaneously or substantially
simultaneously with such termination the Company enters into a definitive
acquisition, merger, stock purchase, asset purchase or similar agreement to
effect the Superior Proposal; or
(d) by Purchaser at any time prior to the Closing, if:
(i) the Company shall have (x) withdrawn, modified or amended in
a manner adverse to Purchaser, the approval, adoption or
recommendation, as the case may be, of the relevant Proposals or (y)
approved or recommended any Acquisition Proposal; or
(ii) there shall have been a breach by the Company of any
provision of Section 5.5(a) or Section 5.5(b) or a material breach by
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the Company of any provision of Section 5.5(c) or a breach by Holdings
of its obligations under the Voting Agreement.
Section 6.4 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 6.3 by Purchaser or the Company, written
notice thereof shall forthwith be given to the other party specifying the
provision hereof pursuant to which such termination is made, and, except as
provided in this sentence and in the last sentence of this Section 6.4, this
Agreement shall become void and have no effect, and there shall be no liability
hereunder on the part of Purchaser or the Company, except that the provisions of
Section 5.2(b), Section 5.12, this Section 6.4 and Article VII shall survive any
termination of this Agreement. Termination of this Agreement shall not relieve
any party to this Agreement of liability for breach of this Agreement.
ARTICLE VII
NON-SURVIVAL
Section 7.1 Non-Survival of Representations, Warranties, Agreements
and Covenants. None of the representations, warranties, agreements or covenants
contained in this Agreement or in any Schedule, Annex, Exhibit or certificate
delivered pursuant to this Agreement, shall survive the Closing, other than the
agreements and covenants in Sections 2.4, 5.2(b), 5.2(c), 5.8, 5.9, 5.12, 5.13,
5.14, 5.16, this Article VII and Article VIII.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. (a) Except as provided in paragraph (b)
below, all costs and expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses; provided, that all out-of-pocket costs and
expenses related to the printing, filing and mailing of the Proxy Materials
shall be borne by the Company.
(b) If this Agreement is terminated (i) by Purchaser in accordance
with Section 6.3(d)(i); or (ii) by the Company in accordance with Section
6.3(c), then the Company shall (A) in the case of clause (i), on the day next
succeeding the date of such termination, or (B) in the case of clause (ii),
immediately prior to the Company entering into an agreement with respect to an
Acquisition Proposal, pay to Purchaser in immediately available funds (in
recognition of the fees and expenses incurred and efforts extended by Purchaser
in connection with the transactions contemplated by this Agreement) an amount
equal to eight million dollars ($8,000,000).
(c) If this Agreement is terminated by Purchaser or the Company in
accordance with Section 6.3(b)(ii), the Company shall pay to Purchaser in
immediately available funds an amount equal to the documented, out-of-pocket
expenses incurred by Purchaser in connection with the preparation of its bid
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for, and due diligence of, the Operating Subsidiaries and their respective
Subsidiaries, negotiation and execution of, and the performance of its
obligations under, this Agreement, and preparation for consummation of the
transactions contemplated by this Agreement, such amount not to exceed, in any
event, five hundred thousand dollars ($500,000).
Section 8.2 Investigation and Agreement; Projections; No Other
Representations and Warranties. (a) Each of Purchaser and the Company
acknowledges and agrees that it has made its own inquiry and investigation into,
and, based thereon, has formed an independent judgment concerning, the other
party and its Subsidiaries and their businesses and operations, and such party
has requested and received such documents and information from the other party
as such party considers material in determining whether to enter into this
Agreement and to consummate the transactions contemplated by this Agreement.
Each of Purchaser and the Company acknowledges and agrees that it has had an
opportunity to ask questions of and receive answers from the other party with
respect to matters such party considers material in determining whether to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement.
(b) The respective representations and warranties of the Company and
Purchaser contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party. Each and every such representation and
warranty shall expire with, and be terminated and extinguished by, the Closing,
and thereafter neither the Company nor Purchaser shall be under any liability
whatsoever with respect to any such representation or warranty. This Section
8.2(b) shall have no effect upon any other obligation of the parties hereto.
(c) In connection with the investigation by Purchaser of the Company
and its Subsidiaries and their businesses and operations, Purchaser and its
representatives have received from the Company or its representatives certain
projections and other forecasts for the Company and its Subsidiaries and certain
estimates, plans and budget information. Purchaser acknowledges and agrees that
there are uncertainties inherent in attempting to make such projections,
forecasts, estimates, plans and budgets; that it is familiar with such
uncertainties; that it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets so furnished to it or its representatives; and that
it will not (and will cause all of its Subsidiaries or other Affiliates or any
other person acting on its behalf to not) assert any claim or cause of action
against any of the direct or indirect partners, directors, officers, employees,
shareholders or Affiliates of the Company with respect thereto, or hold any such
person liable with respect thereto.
(d) Purchaser and the Company agree that, except for the
representations and warranties made by the other party that are expressly set
forth herein, neither the other party nor any of its representatives or
Affiliates has made and shall not be deemed to have made to such party or to any
of its representatives or Affiliates any representation or warranty of any kind.
Without limiting the generality of the foregoing, each party agrees that neither
the other party nor any of its Affiliates makes or has made any representation
or warranty to such party or to any of its representatives or Affiliates with
respect to:
(i) any projections, forecasts, estimates, plans or budgets of
future revenues, expenses or expenditures, future results of
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operations (or any component thereof), future cash flows (or any
component thereof) or future financial condition (or any component
thereof) of the other party or any of its Subsidiaries or the future
business, operations or affairs of the other party or any of its
Subsidiaries heretofore or hereafter delivered to or made available to
such party or its counsel, accountants, advisors, lenders,
representatives or Affiliates; and
(ii) any other information, statement or documents heretofore or
hereafter delivered to or made available to such party or its counsel,
accountants, advisors, lenders, representatives or Affiliates with
respect to the other party or any of its Subsidiaries or the business,
operations or affairs of the other party or any of its Subsidiaries,
except, with respect to clauses (i) and (ii), to the extent and as expressly
covered by a representation and warranty made by the other party and contained
in this Agreement.
Section 8.3 Extension; Waiver. At any time prior to the Closing, the
parties hereto, by action taken by, on behalf of, or at the direction of the
Board of Directors of the Company or the general partner of Purchaser, may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein by any other applicable party or in any document,
certificate or writing delivered pursuant hereto by any other applicable party,
or (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
Section 8.4 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
sent by facsimile (upon confirmation of receipt), as follows:
(a) if to the Company, to it:
c/o Statia Terminals, Inc.
800 Fairway Drive
Suite 295
Deerfield Beach, Florida 33441
Attention: James G. Cameron, President
Fax: (954) 570-3453
with copies (which shall not constitute notice) to:
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Statia Terminals, Inc.
801 Warrenville Road
Suite 200
Lisle, Illinois 60532-1396
Attention: Jack R. Pine, Secretary
Fax: (630) 435-9542
and
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Eugene W. Goodwillie, Jr., Esq.
Oliver C. Brahmst, Esq.
Fax: (212) 354-8113
(b) if to Purchaser, to it at:
Kaneb Pipe Line Operating Partnership, L.P.
2435 N. Central Expressway
Suite 700
Richardson, TX 75080
Attention: Mr. Edward D. Doherty
Fax: (972) 699-1894
with a copy (which shall not constitute notice) to:
Fulbright & Jaworski L.L.P
2200 Ross Avenue
Suite 2800
Dallas, TX 75201
Attention: Kenneth L. Stewart, Esq.
Fax: (214) 855-8200
or to such other Person or address as either party shall specify by notice in
writing to other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery,
except for a notice of a change of address, which shall be effective only upon
receipt thereof.
Section 8.5 Entire Agreement. This Agreement, together with the
Company Disclosure Letter, Annex A, Annex B and the Confidentiality Agreement,
contains the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersedes all prior agreements and
understandings, oral and written, with respect thereto, other than the
Confidentiality Agreement.
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Section 8.6 Binding Effect; Benefit; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and, with respect
to the provisions of Section 5.9, shall inure to the benefit of the Persons or
entities benefiting from the provisions thereof who are intended to be
third-party beneficiaries thereof. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of each of the other parties, except
that Purchaser may assign and transfer its right and obligations hereunder to
any of its Affiliates. Except as provided in the first sentence of this Section
8.6, nothing in this Agreement, expressed or implied, is intended to confer on
any Person (including, without limitation, any current or former employees of
the Company), other than the parties hereto, any rights or remedies.
Section 8.7 Amendment and Modification. Subject to applicable Law,
this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Closing, by action by, on
behalf of, or at the direction of the Board of Directors of the Company or the
general partner of Purchaser.
Section 8.8 Further Actions. Each of the parties hereto agrees that,
subject to its legal obligations, it shall use its commercially reasonable
efforts to fulfill all conditions precedent specified herein, to the extent that
such conditions are within its control, and to do all things reasonably
necessary to consummate the transactions contemplated hereby.
Section 8.9 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the meaning
or interpretation of this Agreement.
Section 8.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
Section 8.11 APPLICABLE LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS RULES
THEREOF. THE STATE OR FEDERAL COURTS LOCATED WITHIN THE STATE AND COUNTY OF NEW
YORK SHALL HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES
HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT
AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY AND THE
PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. EACH
OF THE PARTIES HEREBY WAIVES AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS
NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND
THE PROPERTY OF SUCH PARTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH
COURTS OR (III) ANY LITIGATION OR OTHER PROCEEDING COMMENCED IN SUCH COURTS IS
BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES HEREBY AGREE THAT MAILING OF
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PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE
MANNER PROVIDED IN SECTION 8.4, OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY
LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF AND HEREBY WAIVE ANY
OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER HEREIN PROVIDED.
Section 8.12 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable term, provision, covenant or restriction or
any portion thereof had never been contained herein.
Section 8.13 Interpretation. When a reference is made in this
Agreement to a Section or Article, such reference shall be to a Section or
Article of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for convenience of reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.14 Specific Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
Section 8.15 Waiver of Jury Trial. Each of the parties to this
Agreement hereby irrevocably waives all right to a trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement or the
transactions contemplated hereby.
* * * * *
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IN WITNESS WHEREOF, each of Purchaser and the Company has caused this
Agreement to be executed by its respective officers thereunto duly authorized,
all as of the date first above written.
KANEB PIPE LINE OPERATING
PARTNERSHIP, L.P.
By KANEB PIPE LINE COMPANY
LLC, its general partner
By /s/ Edward D. Doherty
--------------------------------------------
Name: Edward D. Doherty
Title: Chairman and Chief Executive Officer
STATIA TERMINALS GROUP N.V.
By /s/ David B. Pittaway
--------------------------------------------
Name: David B. Pittaway
Title: Director
By /s/ James G. Cameron
--------------------------------------------
Name: James G. Cameron
Title: Director
B-43
Appendix C
November 12, 2001
Statia Terminals Group N.V.
800 Fairway Drive, Suite 295
Deerfield Beach, FL 33441
Attention: James G. Cameron
Dear Mr. Cameron:
We understand that Statia Terminals Group N.V. (the "Company") is in discussions
with a potential purchaser with respect to an agreement whereby all of the
assets of the Company are to be acquired for approximately $307 million in cash.
As part of such transaction, class A common shareholders ("Public
Stockholders")[F1] of the Company will receive $18 per share, class B
subordinated shareholders of the Company will receive $16.40 per share, and
class C shareholders of the Company will receive the remainder, subject to a
purchase price adjustment. Such transaction and other related transactions
disclosed to Houlihan Lokey are referred to collectively herein as the
"Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
We understand, however, based on our discussions with representatives of Merrill
Lynch, that Merrill Lynch has solicited third party indications of interest in
acquiring all or any part of the Company. Furthermore, at your request, we have
not negotiated the Transaction or advised you with respect to alternatives to
it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries, as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. interviewed key members of senior management concerning the Company's
business, historical and future financial performance, and the Transaction;
2. interviewed representatives of the Company's investment bankers, Merrill
Lynch, regarding the sale process;
3. reviewed the Stock Purchase Agreement between Kaneb Pipe Line Operating
Partnership, L.P. and the Company;
4. reviewed the rights and privileges of the class A common, class B
subordinated, and class C shareholders;
- ---------------
F1 Includes options which are exercisable into 1,136,000 Class A shares upon a
change of control at strike prices ranging from $5-$8.094 per share.
C-1
Mr. James G. Cameron
800 Fairway Drive, Suite 295
Deerfield Beach, FL 33441
5. reviewed the Company's SEC filings including the Form 10K for the fiscal
years ended 2000, 1999 and 1998 and quarterly reports and Forms 10Q for the
years 2000 and 2001;
6. reviewed the sale memorandum prepared by Merrill Lynch, dated July 2001;
7. reviewed the Company's financial model and forecasts for the period 2001
through 2006;
8. reviewed the Company's management presentation dated August 2001; and
9. analyzed the industry, as well as the economic and competitive environment
in which the Company operates.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by each of the Public Stockholders, class B
subordinated shareholders and class C shareholders of the Company in connection
with the Transaction is fair to each such class of shareholders from a financial
point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
C-2