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:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material under Rule 14a-12
STATIA TERMINALS GROUP N.V.
- --------------------------------------------------------------------------------
(Name Of Registrant As Specified In Its Charter)
- --------------------------------------------------------------------------------
(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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/x/ 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. LOGO]
STATIA TERMINALS GROUP N.V.
WERFSTRAAT 6, WILLEMSTAD
CURACAO, NETHERLANDS ANTILLES
NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 22, 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 C,
John F. Kennedy Boulevard, Piscadera Bay, Curacao, Netherlands Antilles, on
February 22, 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 pursuant to which, in
the event that we sell all or substantially all of our assets, we will
distribute (i) in the following order of priority, $18.00 per share to our
class A common shareholders, $16.40 per share to our class B subordinated
shareholder and an initial distribution of the remaining cash to our class
C shareholder, and (ii) after payment of our liabilities and following our
liquidation, any remaining cash to our class C shareholder. If the amount
to be received by our class C shareholder pursuant to the sale, as
determined on the date of closing of the sale, would exceed 5% of the
total amount to be distributed to our shareholders following the closing
of the sale, the excess shall be distributed 66% to our class A common
shareholders and 34% to our class B subordinated shareholder.
2. To (i) approve the sale of substantially all of our assets, consisting
of all of the outstanding capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc. and Statia Marine,
Inc. to Kaneb Pipe Line Operating Partnership, L.P., followed by a
distribution to our shareholders of substantially all of the proceeds of
the sale in accordance with our articles of incorporation, as amended,
(ii) adopt our dissolution and liquidation to occur on the day following
the distribution referred to in (i) and distribute our remaining assets
to our shareholders in accordance with our articles of incorporation, as
amended, and (iii) appoint our board of directors as our liquidator and
custodian of our corporate documents following our liquidation.
The close of business on January 22, 2002, 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., Werfstraat 6, Willemstad, 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 exact 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 January 24, 2002.
STATIA TERMINALS GROUP N.V.
WERFSTRAAT 6, WILLEMSTAD
CURACAO, NETHERLANDS ANTILLES
January 24, 2002
Dear Fellow Shareholder:
You are cordially invited to attend a special general meeting of the
shareholders of Statia Terminals Group N.V. to be held at the Curacao Marriott
Beach Resort, Queen's Ballroom C, John F. Kennedy Boulevard, Piscadera Bay,
Curacao, Netherlands Antilles, on February 22, 2002, at 10:00 a.m., local time.
A notice of the special general meeting, a proxy statement and related
information about Statia Terminals Group, and a proxy card are enclosed. All
holders of our class A common shares and our class B subordinated shares, as of
January 22, 2002, will be entitled to notice of and to vote at the special
general meeting or any adjournment thereof. 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 pursuant to which, in
the event that we sell all or substantially all of our assets, we will
distribute (i) in the following order of priority, $18.00 per share to our
class A common shareholders, $16.40 per share to our class B subordinated
shareholder and an initial distribution of the remaining cash to our class
C shareholder, and (ii) after payment of our liabilities and following our
liquidation, any remaining cash to our class C shareholder. If the amount
to be received by our class C shareholder pursuant to the sale, as
determined on the date of closing of the sale, would exceed 5% of the
total amount to be distributed to our shareholders following the closing
of the sale, the excess shall be distributed 66% to our class A common
shareholders and 34% to our class B subordinated shareholder.
2. To (i) approve the sale of substantially all of our assets, consisting
of all of the outstanding capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc. and Statia Marine,
Inc. to Kaneb Pipe Line Operating Partnership, L.P., followed by a
distribution to our shareholders of substantially all of the proceeds of
the sale in accordance with our articles of incorporation, as amended,
(ii) adopt our dissolution and liquidation to occur on the day following
the distribution referred to in (i) and distribute our remaining assets
to our shareholders in accordance with our articles of incorporation, as
amended, and (iii) appoint our board of directors as our liquidator and
custodian of our corporate documents following our liquidation.
A copy of the stock purchase agreement between Kaneb and us is attached as
Appendix A to the enclosed proxy statement. Included as an annex to the stock
purchase agreement is an English translation containing substantially the form
of the proposed Dutch language amendments to our articles of incorporation. In
addition, the exact 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.
Our class A common shares are traded on the Nasdaq National Market under
the symbol "STNV." The closing price of our class A common shares on November
12, 2001, the last trading day immediately prior to the announcement of Kaneb's
agreement to acquire the Subsidiaries, was $12.90. On January 22, 2002, we
announced that the holders of record of our class A common shares on January
31, 2002, would be entitled to receive a target quarterly distribution of $0.45
per share for the quarter ended December 31, 2001. This target quarterly
distribution is expected to be paid on February 14, 2002. The closing price of
our class A common shares on January 23, 2002, the last trading day immediately
prior to the date of the enclosed proxy statement, was $18.27 per share, $0.27
more than the anticipated distribution of sale proceeds of $18.00 per class A
common share. We note that January 23, 2002 was after the announcement of the
amount of the target quarterly distribution for the quarter ended December 31,
2001, but before payment of that distribution.
Our board of directors has concluded that the sale of our business as a
going concern is the best strategic alternative for us and our shareholders.
Our class B subordinated shares, comprising 38.7% of our voting securities, and
our class C shares, which are non-voting, are held by Statia Terminals Holdings
N.V. which is controlled by Castle Harlan Partners II, L.P. and its affiliates.
An affirmative vote by our class B subordinated shareholder is required in
order to consummate the sale of the Subsidiaries and our subsequent
liquidation. By reason of his control position with Castle Harlan Partners II,
John K. Castle, one of our directors, may be deemed to be the beneficial owner
of all of our class B subordinated shares and our class C shares. Castle Harlan
Partners II has indicated that it will only cause the class B subordinated
shares to be voted in favor of the sale of the Subsidiaries and our liquidation
if our articles of incorporation are first amended so that the amounts
distributed to our shareholders are allocated among the classes of our shares
in a way that allocates the class B subordinated shares and the class C shares
amounts which, in the view of Castle Harlan Partners II, reflect the value of
our business as a going concern. As described below, such a proposed allocation
would result in the class A common shares receiving a smaller distribution than
they would have received if Castle Harlan Partners II were willing to vote in
favor of the sale of the Subsidiaries and our liquidation under the provisions
of our current articles of incorporation. However, in the opinion of our board
of directors, our current articles of incorporation do not contain specific
provisions for the distribution of proceeds upon a sale of all or substantially
all of our assets. Our current articles of incorporation do, however, contain
two alternative provisions which arguably could be used in such a situation:
o Provisions relating to an interim capital transaction (which includes
the sale of any of our assets). If the transaction were structured so
that these provisions applied, we estimate that we would distribute
$19.33 per class A common share, $16.36 per class B subordinated share
and zero per class C share.
o Provisions providing for our liquidation followed by a liquidating
distribution. If the transaction were structured so that these provisions
applied, we estimate that we would distribute $21.60 per class A common
share, $12.09 per class B subordinated share and zero per class C share.
In addition, because a liquidation in the Netherlands Antilles is a
time-consuming procedure, we estimate that a liquidating distribution
following a liquidation would not occur for approximately three months
after the sale of the Subsidiaries.
Our board of directors believes that the provisions in our articles of
incorporation relating to an interim capital transaction were intended to apply
only to periodic asset sales following which it would be appropriate to
distribute a portion of the proceeds of a sale to our shareholders after we had
retained sufficient working capital for our business. Our board of directors
does not believe that these provisions are applicable to the sale of all or
substantially all of our assets. In addition, our board of directors does not
believe that the provisions providing for our liquidation followed by a
liquidating distribution were intended to apply to a distribution of the
proceeds from the sale of our business as a going concern. We were informed by
Castle Harlan Partners II that it would oppose such a sale if the proceeds were
distributed according to either of these provisions.
Based on our projections of cash on hand as of January 23, 2002, assuming
the close of the sale on or about February 28, 2002, in consideration for the
transfer of all of the outstanding capital stock of the Subsidiaries, the
purchase price paid by Kaneb at closing will be approximately $306.7 million
minus approximately $106.7 million of indebtedness of the Subsidiaries.
Following the closing of the sale, our class A common shareholders will have
priority in the distribution of the sale proceeds and holders of record as of
the close of business on the date of closing will be entitled to receive, in the
aggregate, a distribution of $108.2 million, or $18.00 per share. After payment
in full of this 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,
provided that if the amount to be distributed to our class C shareholder
pursuant to the sale, as determined on the date of closing of the sale, would
exceed 5% of the total amount to be distributed to our shareholders following
the closing of the sale,
ii
the excess shall be distributed 66% to our class A common shareholders and 34%
to our class B subordinated shareholder. Based on information available to us
as of January 23, 2002, assuming the closing of the sale on or about February
28, 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
January 23, 2002, we anticipate that our class C shareholder is likely to
receive a distribution, in the aggregate, of approximately $9.4 million, which
is equivalent to 4.9% of the amount anticipated to be distributed to our
shareholders pursuant to the sale and our liquidation. This amount consists of
approximately $6.4 million to be distributed following the closing of the sale
and approximately $3.0 million to be distributed following our liquidation.
Although our articles of incorporation do not require a separate vote of
the class A common shareholders, in the interests of fairness to our class A
common shareholders, our board of directors has determined, 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 voting separately as a class at the special general meeting,
provided that at least one-half of our outstanding class A common shares are
present or represented at the meeting. 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 voting securities are present or represented at the meeting.
Subject to the receipt of the approval of our 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.
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. However, the amendments will not be relevant
at this time, since the proposed sale of the Subsidiaries will not take place
and no proceeds will be distributed to our shareholders.
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. 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 each of our class
A common shareholders, $16.40 per share to 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 B to this proxy
statement, and you should read it carefully.
OUR BOARD OF DIRECTORS CONSISTS OF EIGHT DIRECTORS. THREE OF THESE
DIRECTORS, JOHN K. CASTLE, DAVID B. PITTAWAY AND JUSTIN B. WENDER, ARE
AFFILIATED WITH CASTLE HARLAN PARTNERS II. THESE DIRECTORS DID NOT PARTICIPATE
IN THE VOTE OF THE BOARD OF DIRECTORS ON THE PROPOSED TRANSACTION. THE FIVE
REMAINING DIRECTORS WHO ARE NOT AFFILIATED WITH CASTLE HARLAN PARTNERS II HAVE
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. THESE DIRECTORS HAVE 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 $9.4 MILLION TO OUR CLASS C SHAREHOLDER FOLLOWING
THE SALE OF THE SUBSIDIARIES AND OUR LIQUIDATION, ARE FAIR TO ALL OUR
SHAREHOLDERS. ACCORDINGLY, THE FIVE MEMBERS OF OUR BOARD OF DIRECTORS WHO ARE
NOT AFFILIATED WITH CASTLE HARLAN PARTNERS II HAVE UNANIMOUSLY APPROVED, AND
RECOMMEND THAT YOU VOTE "FOR," 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.
iii
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
----------------------------
James G. Cameron
Director
This proxy statement is dated January 24, 2002, and is first being mailed
to shareholders on or about January 24, 2002.
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.
iv
TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS ................................................ 1
SUMMARY TERM SHEET ....................................................................... 4
The Special General Meeting ........................................................... 4
The Parties to the Proposed Asset Sale ................................................ 5
Reasons for the Amendments to our Articles of Incorporation, and the Sale of the
Subsidiaries and Liquidation ......................................................... 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
The Voting and Option Agreement ....................................................... 13
Liquidation and Appointment of Liquidators ............................................ 14
Material Netherlands Antilles Tax Consequences ........................................ 14
Material U.S. Federal Income Tax Consequences ......................................... 14
Interests of our Directors and Executive Officers in the Proposed Transaction ......... 15
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE .......................................... 17
INTRODUCTION ............................................................................. 18
Proposals to be Considered at the Special General Meeting ............................. 18
Voting Rights ......................................................................... 19
Quorum; Vote Required for Approval .................................................... 19
Voting and Revocation of Proxies ...................................................... 20
Solicitation of Proxies ............................................................... 20
SPECIAL FACTORS .......................................................................... 22
Background of the Proposed Transaction ................................................ 22
Opinion of Houlihan Lokey ............................................................. 25
Reasons for the Recommendation of our Board of Directors .............................. 31
Purpose of the Proposed Amendments to our Articles of Incorporation ................... 33
Requirement of Approval by Two-Thirds of our Class A Common Shareholders for the
Amendments to our Articles of Incorporation .......................................... 34
The Proposed Amendments to our Articles of Incorporation .............................. 35
Effect of the Proposed Resolutions .................................................... 35
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 ................................................................ 42
THE STOCK PURCHASE AGREEMENT AND LIQUIDATION ............................................. 46
Absence of Appraisal Rights ........................................................... 46
Regulatory Approvals and Other Consents ............................................... 46
The Stock Purchase Agreement .......................................................... 46
The Voting and Option Agreement ....................................................... 57
Dissolution and Liquidation ........................................................... 60
i
PAGE
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OTHER INFORMATION ....................................................................... 63
Beneficial Ownership of Voting Securities by Directors, Executive Officers and 5%
Shareholders ........................................................................ 63
EXPENSES OF SOLICITATION ................................................................ 64
EXPERTS ................................................................................. 64
PROPOSALS BY HOLDERS OF CLASS A COMMON SHARES ........................................... 64
TRANSACTION OF OTHER BUSINESS ........................................................... 64
DOCUMENTS INCORPORATED BY REFERENCE ..................................................... 65
WHERE YOU CAN FIND MORE INFORMATION ..................................................... 65
APPENDIX A--STOCK PURCHASE AGREEMENT .................................................... A-1
Annex A--Promissory Note ............................................................. A-33
Annex B--Form of Shareholder Resolutions (including proposed amendments to articles of
incorporation) ...................................................................... A-35
APPENDIX B--OPINION OF HOULIHAN LOKEY ................................................... B-1
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. (which
we refer to collectively as 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 January 23, 2002, assuming the
close of the sale on or about February 28, 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 to holders of record of such shares as of the close of
business on the closing date. Based on information available to us as of
January 23, 2002, we anticipate that our class C shareholder is likely to
receive a distribution, in the aggregate, of approximately $9.4 million,
consisting of approximately $6.4 million to be distributed following the
closing of the sale and approximately $3.0 million to be distributed
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, our class A
common shares will be delisted from the Nasdaq National Market and our
transfer agent will cease recording transfers of our shares. 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. See "SPECIAL FACTORS--Effect of the Proposed
Resolutions."
Q: WHY ARE WE AMENDING OUR ARTICLES OF INCORPORATION?
A: Our class B subordinated shares, comprising 38.7% of our voting
securities, are held by Statia Terminals Holdings N.V. which is controlled
by Castle Harlan Partners II, L.P. and its affiliates. Therefore, an
affirmative vote by our class B subordinated shareholder is required in
order to consummate the proposed transaction. Statia Terminals Holdings
has indicated that it will only vote in favor of the proposed transaction
if our articles of incorporation are first amended pursuant to the
proposed resolution. See "SPECIAL FACTORS--Purpose of the Proposed
Amendments to our Articles of Incorporation."
Q: WHAT IS THE EFFECT OF THE PROPOSED AMENDMENTS ON OUR ARTICLES OF
INCORPORATION?
A: Pursuant to the amendments, in the event that we sell all or substantially
all of our assets and liquidate, we will distribute (i) in the following
order of priority, $18.00 per share to our class A common shareholders,
$16.40 per share to our class B subordinated shareholder, and an initial
distribution of the remaining cash to our class C shareholder, and (ii)
after payment of our liabilities and following our liquidation, any
remaining cash to our class C shareholder. If the amount to be received by
our class C shareholder pursuant to the sale, as determined on the date of
closing of the sale, would exceed 5% of the total amount to be distributed
to our shareholders following the closing of the sale, the excess shall be
distributed 66% to our class A common shareholders and 34% to our class B
subordinated shareholder. Our current articles of incorporation do not
contain specific provisions for the distribution of proceeds upon a sale of
all or substantially all of our assets. Our current articles of
incorporation do, however, contain two alternative provisions which
arguably could be used in such a situation: (i) provisions relating to an
interim capital transaction (which includes the sale of any of our assets),
and (ii) provisions providing for our liquidation followed by a liquidating
distribution. Assuming that Castle Harlan Partners II, the beneficial owner
of our class B subordinated shares, was willing to vote in favor of the
sale of the Subsidiaries under either of these provisions of our current
articles of incorporation, we estimate that pursuant to these provisions we
would distribute either $19.33 or $21.60, respectively, per class A common
1
share. Our directors affiliated with Castle Harlan Partners II and all of
our executive officers, directly or indirectly, own class B subordinated
shares and class C shares. Therefore, under the amended articles of
incorporation, they will receive larger distributions in respect of the
class B subordinated shares and class C shares that they own, directly or
indirectly, than they would have received if the transaction could be
consummated under our current articles of incorporation. In addition, our
directors who are not affiliated with Castle Harlan Partners II and our
executive officers own class A common shares or have options to purchase
class A common shares. Each director or executive officer who owns class A
common shares has indicated that he intends to vote these shares in favor
of the proposed resolutions. See "SPECIAL FACTORS--Effect of the Proposed
Resolutions."
Q: WHAT WILL HAPPEN TO YOUR RIGHT TO RECEIVE TARGET QUARTERLY DISTRIBUTIONS
IF THE RESOLUTIONS ARE PASSED?
A: On January 22, 2002, we announced that holders of record of our class A
common shares on January 31, 2002, would be entitled to receive a target
quarterly distribution of $0.45 per share for the quarter ended December
31, 2001. This target quarterly distribution is expected to be paid on
February 14, 2002. Assuming that the sale of the Subsidiaries and our
subsequent liquidation are approved by our shareholders, we anticipate that
the sale will be closed within five business days following the receipt of
that approval and that the distribution of $18.00 per class A common share
will be made shortly following the closing of the sale. Pursuant to the
proposed amendments to our articles of incorporation, 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 and we will not be obligated to pay or accrue any further
arrearages in target quarterly distributions following the $18.00
distribution. See "SPECIAL FACTORS--Effect of the Proposed Resolutions."
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 January 22, 2002, 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 voting separately as a class at the special general
meeting, provided that at least one-half of the outstanding class A common
shares are present or represented at the 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 the meeting. See "INTRODUCTION--Quorum;
Votes Required for Approval."
Q: WHAT DOES OUR BOARD OF DIRECTORS RECOMMEND?
A: The five members of our board of directors who are not affiliated with
Castle Harlan Partners II have unanimously determined that the
distribution of the proceeds from the sale of the Subsidiaries and our
subsequent liquidation are fair to all our shareholders and our employees.
These directors have unanimously approved, and recommend that you vote
"FOR," the proposed resolutions. 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."
2
Q: WHAT IF I OPPOSE THE PROPOSED SALE OF THE SUBSIDIARIES AND SUBSEQUENT
LIQUIDATION? DO I HAVE APPRAISAL RIGHTS?
A: Under Netherlands Antilles law, if our shareholders approve the sale of
the Subsidiaries and subsequent liquidation, these transactions will not
give rise to any rights of appraisal or similar dissenter's rights. See
"THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--Absence of Appraisal \
Rights."
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."
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.
3
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 February 22,
2002, at 10:00 a.m. local time, at the Curacao Marriott Beach Resort,
Queen's Ballroom C, 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 pursuant to
which, in the event that we sell all or substantially all of our
assets, we will distribute (i) in the following order of priority,
$18.00 per share to our class A common shareholders, $16.40 per share
to our class B subordinated shareholder and an initial distribution of
the remaining cash to our class C shareholder, and (ii) after payment
of our liabilities and following our liquidation, any remaining cash
to our class C shareholder. If the amount to be received by our class
C shareholder pursuant to the sale, as determined on the date of
closing of the sale, would exceed 5% of the total amount to be
distributed to our shareholders following the closing of the sale, the
excess shall be distributed 66% to our class A common shareholders and
34% to our class B subordinated shareholder.
2. To (i) approve the sale of substantially all of our assets, consisting
of all of the outstanding capital stock of our three subsidiaries,
Statia Terminals International N.V., Statia Technology, Inc. and
Statia Marine, Inc. to Kaneb Pipe Line Operating Partnership, L.P.,
followed by a distribution to our shareholders of substantially all of
the proceeds of the sale in accordance with our articles of
incorporation, as amended, (ii) adopt our dissolution and liquidation
to occur on the day following the distribution referred to in (i) and
distribute our remaining assets to our shareholders in accordance with
our articles of incorporation, as amended, and (iii) appoint our board
of directors as our liquidator and custodian of our corporate
documents following our liquidation.
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 January 22, 2002, 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 are
not counted for the purpose of establishing a quorum.
4
o 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 the meeting. In the event that this majority vote of the
class A common shareholders is not obtained, Statia Terminals Holdings
N.V., 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. In this
event, the sale and our subsequent liquidation will not take place.
o 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 the 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:
o Submit to the offices of Morrow & Co., Inc., 445 Park Avenue, New
York, NY 10022 (Telephone: (212) 754-8000; Call 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.
o 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
January 22, 2002. For additional information regarding the procedure for
delivering your proxy see "INTRODUCTION--Voting and Revocation of
Proxies" and "INTRODUCTION--Solicitation of Proxies."
THE PARTIES TO THE PROPOSED ASSET SALE
o Statia Terminals 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
5
services to the petroleum industry 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 under the symbol "STNV."
Our principal address is c/o Covenant Managers N.V., Werfstraat 6,
Willemstad, 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 is Kaneb Pipe
Line Company LLC, a Delaware limited liability company, and its sole
limited partner is Kaneb Pipe Line Partners, a Delaware limited
partnership that is managed by Kaneb Pipe Line Company. Kaneb Pipe Line
Company 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 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 conducts pipeline operations for Kaneb Pipe Line Partners,
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 and its related business units may be obtained
by visiting the website of Kaneb Pipe Line Company at
www.kanebpipeline.com or by calling (972) 699-4055.
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 the
announcement of Kaneb's agreement to acquire the Subsidiaries.
o The principal reason for the proposed amendments to our articles of
incorporation is to obtain the consent of Castle Harlan Partners II to
the proposed sale of the Subsidiaries which our board of directors
believes is in the best interests of all of our shareholders. Because
Castle Harlan Partners II beneficially owns 38.7% of our outstanding
voting securities, its approval is required for a sale of all or
substantially all of our assets and for our liquidation. This is because
these transactions both require the affirmative vote of more than 66 2/3%
of the holders of our outstanding voting securities at a special general
meeting, provided that at least one-half of our outstanding voting
securities are present or represented at the meeting.
o Our board of directors has concluded that the sale of our business as a
going concern is the best strategic alternative for us and our
shareholders. Initially, our board of directors believed that this would
be achieved best by a tender offer by a potential purchaser for all of our
shares, as this would be the fairest and most rapid method of placing the
proceeds of the sale into the hands of our shareholders. However, 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. Therefore, our board of directors agreed
to adopt 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. Our current articles
of incorporation contain two alternative provisions which
6
arguably could be used to distribute the sale proceeds. However, under
both of these provisions, the amounts payable in respect of our class B
subordinated shares and class C shares differed substantially from the
amounts that would have been offered in a tender offer for our
outstanding shares into which Castle Harlan Partners II would have been
willing to tender the class B subordinated shares and class C shares.
Under these circumstances, Castle Harlan Partners II, the controlling
shareholder of Statia Terminals Holdings, indicated that it would only
vote in favor of the sale of the Subsidiaries and our liquidation if the
transaction were structured so that (1) the distribution of sale proceeds
preceded our liquidation, and (2) the amounts distributed to our
shareholders were allocated among the classes of our shares in a way that
allocated the class B subordinated shares and the class C shares amounts
which, in the view of Castle Harlan Partners II, reflected the value of
our business as a going concern.
o Our board of directors believes that the proposed amendments are fair to
our shareholders because they (1) result in an allocation of proceeds to
the various classes of shareholders that the board of directors has
determined is appropriate in the case of a sale of our business as a
going concern, and (2) provide for a much more rapid distribution of
proceeds to our shareholders than would have been the case if we were
liquidated first and then made a liquidating distribution of the
proceeds. We estimate that a liquidating distribution following our
liquidation would not occur for approximately three months after the 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."
EFFECTS OF THE RESOLUTIONS
o We will distribute to holders of record as of the close of business on the
closing date (i) in the following order of priority, $18.00 per share to
our class A common shareholders, $16.40 per share to our class B
subordinated shareholder and an initial distribution of the remaining cash
to our class C shareholder, and (ii) after payment of our liabilities and
following our liquidation, any remaining cash to our class C shareholder.
If the amount to be received by our class C shareholder pursuant to the
sale, as determined on the date of closing of the sale, would exceed 5% of
the total amount to be distributed to our shareholders following the
closing of the sale, the excess shall be distributed 66% to our class A
common shareholders and 34% to our class B subordinated shareholder. Our
current articles of incorporation contain two provisions which arguably
could be used to distribute the proceeds from a sale of the capital stock
of the Subsidiaries: (i) provisions relating to an interim capital
transaction (which includes the sale of any of our assets), and (ii)
provisions providing for our liquidation followed by a liquidating
distribution. Based on information available to us as of January 23, 2002,
assuming the close of the sale on or about February 28, 2002, the
following table sets forth the distributions for each class of share under
our articles of incorporation, as amended, and in the two possible
scenarios under our current articles of incorporation (assuming that
Castle Harlan Partners II was willing to vote in favor of the transaction
under either of these provisions). The following estimated distributions
per share under our current articles of incorporation and under our
articles of incorporation, as amended, are based on financial projections,
and Arthur Andersen LLP, our independent certified public accountants, has
not audited, examined or compiled or applied agreed-upon procedures to
these financial projections and assumes no responsibility for them:
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
-------------- ----------------- -----------------------
(unaudited) (unaudited) (unaudited)
Class A common share $21.60 $19.33 $ 18.00
Class B subordinated share 12.09 16.36 16.40
Class C share -- -- 248.22
7
o 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. Based on information available
to us as of January 23, 2002, assuming the close of the sale on or about
February 28, 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, and we anticipate
that our class C shareholder is likely to receive a distribution, in the
aggregate, of approximately $9.4 million payable in two installments. At
the end of trading on the day on which the sale is closed, our class A
common shares will be delisted from the Nasdaq National Market and our
transfer agent will cease recording transfers of our shares. Following the
above distributions to our class A common shareholders and class B
subordinated shareholder and the initial distribution to our class C
shareholder, we will commence liquidation proceedings 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 which we anticipate will occur
by December 31, 2002.
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. However, the
amendments will not be relevant at this time, since the proposed sale of
the Subsidiaries will not take place and no proceeds from the sale will
be distributed to our shareholders.
o On January 22, 2002, we announced that holders of record of our class A
common shares on January 31, 2002, would be entitled to receive a target
quarterly distribution of $0.45 per share for the quarter ended December
31, 2001. This target quarterly distribution is expected to be paid on
February 14, 2002. Assuming that the sale of the Subsidiaries and our
subsequent liquidation are approved by our shareholders, we anticipate
that the sale will be closed within five business days following the
receipt of that approval and that the distribution of $18.00 per class A
common share will be made shortly following the closing of the sale.
o Pursuant to the proposed amendments to 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 and we will not be
obligated to pay or accrue any further arrearages in target quarterly
distributions following the $18.00 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 The five members of our board of directors who are not affiliated with
Castle Harlan Partners II have 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. These directors have
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 $9.4 million to our class C shareholder following the sale
of the Subsidiaries and our liquidation, are fair to our shareholders.
Accordingly, the five members of our board of directors who are not
affiliated with Castle Harlan Partners II have unanimously recommended
that you vote "FOR" the proposal to amend our articles of incorporation
and
8
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. 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 its 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 B. 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.
See "SPECIAL FACTORS--Opinion of Houlihan Lokey."
AMENDMENTS TO ARTICLES OF INCORPORATION
The material provisions of the proposed amendments to our articles of
incorporation are as follows:
o In the event that we sell all or substantially all of our assets, the
proceeds from the sale will be distributed 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 minus
(i) $60,000 , (ii) the amount necessary to satisfy our outstanding
liabilities, and (iii) any amounts payable by us pursuant to our 1999
Share Option Plan; provided, however, that if the amount distributed to
the holders of class C shares exceeds 5% of the proceeds of the Sale
Event, then the excess shall be distributed 66% to the class A common
shareholders and 34% to the class B subordinated shareholders, and
provided further that any increase or decrease in the amount of
proceeds of the sale required to adjust the final purchase price paid
in respect of the sale shall be solely for the account of the class C
shareholders.
o Assuming that our class A common shareholders have received a distribution
of at least $18.00 per share and our class B subordinated shareholders
have received a distribution of at least $16.40 per share, upon a
liquidation following a sale, 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
9
subordinated shares will be eliminated by the distributions to our
shareholders described above and that no further target quarterly
distributions or deferred distributions will accrue or be paid.
See "SPECIAL FACTORS--The Proposed Amendments to Our Articles of
Incorporation."
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. In consideration for the sale of the
capital stock of the Subsidiaries, on the day of the closing, Kaneb will
deliver to us the consideration set forth in the stock purchase
agreement. Based on our projections of cash on hand as of January 23,
2002, we estimate that the consideration to be paid by Kaneb at the
closing will be approximately $306.7 million minus approximately $106.7
million of indebtedness of the Subsidiaries. The consideration paid by
Kaneb will be subject to adjustment following the closing based on the
amount of cash and cash equivalents of the Subsidiaries and their
respective subsidiaries on the day of the closing. 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
The stock purchase agreement provides that neither we nor our
representatives will:
o continue any discussions or negotiations that may be ongoing with any
other person regarding acquisition proposals by third parties;
o encourage knowingly, solicit, initiate or facilitate, directly or
indirectly, the making of any proposal with respect to an acquisition
proposal;
o enter into any agreement, arrangement or understanding regarding an
acquisition proposal;
o participate in any discussions or negotiations with, or furnish or
disclose information to, any person in connection with an acquisition
proposal;
o facilitate any inquiries or the making of any proposal that
constitutes or would reasonably be expected to lead to an 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.
The stock purchase agreement provides, however, that if we receive an
unsolicited acquisition proposal from a third party 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 our board of directors determines that the
acquisition proposal is or is reasonably likely to lead to a proposal
to acquire us on terms superior to those of the stock purchase
agreement, 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; 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 superior
proposal and withdraw or modify our approval of the stock purchase
agreement.
10
We have agreed to keep Kaneb informed of the status of any proposals and
negotiations.
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 and us to sell the shares of the
Subsidiaries are subject to a number of conditions, including, among
others:
o our and Kaneb's respective representations and warranties being
accurate, except for such breaches as would not, in the aggregate,
have a material adverse effect on Kaneb or us, as applicable;
o the performance, in all material respects, by both Kaneb and us of our
respective obligations under the stock purchase agreement;
o the absence of any injunction or other order issued or pending, or any
law enacted by any governmental authority that prohibits or restrains
the sale of the Subsidiaries;
o the absence of any order issued or pending, or any law enacted by any
governmental authority that (1) 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, (2) 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 (3) 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;
o the absence of any event, fact or circumstance that, individually or
in the aggregate, has or could reasonably be expected to have a
material adverse effect on either Kaneb or, as the case may be, us;
and
o the adoption of the amendments to our articles of incorporation and
the approval of the sale of the Subsidiaries followed by our
liquidation by the requisite vote of our shareholders.
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:
o by the mutual consent of Kaneb and us;
o by either Kaneb or us if a governmental entity issues a nonappealable
final order permanently restraining, restricting or prohibiting the
sale of the Subsidiaries;
o by either Kaneb or us if the requisite vote of our shareholders
approving the proposed transaction is not obtained at the special
general meeting of our shareholders or any adjournment thereof;
11
o by either Kaneb or us if the closing is not completed on or prior to
April 30, 2002, and (1) Kaneb is not in breach of the stock purchase
agreement if Kaneb is the terminating party, or (2) we are not in
breach of the stock purchase agreement and Statia Terminals Holdings
is not in breach of the voting and option agreement, if we are the
terminating party;
o by us if (1) we receive a proposal to acquire us on terms superior to
those of the stock purchase agreement, (2) 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 our
board of directors, (3) prior to termination we have paid Kaneb $8.0
million, and (4) we enter into a definitive acquisition, merger, stock
purchase, asset purchase or similar agreement to effect the superior
proposal; and
o by Kaneb if (1) our board of directors withdraws or amends, in a
manner adverse to Kaneb, the approval, adoption or, as the case may
be, recommendation, of the proposals that we (a) amend our articles of
incorporation, (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, (2) our board approves or
recommends an acquisition proposal from a third party, or solicits
other offers, or (3) Statia Terminals Holdings breaches its
obligations under the voting and option 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
The stock purchase agreement obligates us to pay Kaneb a fee of $8.0
million in the following circumstances:
o we receive a proposal to acquire us on terms superior to those of the
stock purchase agreement and enter into an agreement with respect to
that superior proposal and we then terminate the stock purchase
agreement; and
o our board of directors (1) approves or recommends an acquisition
proposal by a third party, or (2) withdraws its recommendation of the
stock purchase agreement and Kaneb then terminates the stock purchase
agreement.
In addition, the stock purchase agreement obligates us to pay Kaneb a fee
of up to $500,000 if the stock purchase agreement is terminated by either
Kaneb or us because the requisite vote of our shareholders approving the
proposed transaction is not obtained at the special general meeting of
shareholders or any adjournment thereof.
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."
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o Regulatory Approvals
Kaneb and we are required to make filings with certain United States and
foreign regulatory authorities in connection with the sale of the
Subsidiaries, including a filing under the Hart-Scott-Rodino Antitrust
Improvements Act. An application and notice was filed with the Federal
Trade Commission and the Antitrust Division of the U.S. Department of
Justice on November 15, 2001, and the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act terminated on December 10,
2001. For additional information regarding regulatory approvals see "THE
STOCK PURCHASE AGREEMENT AND LIQUIDATION--Regulatory Approvals and Other
Consents."
THE VOTING AND OPTION AGREEMENT
Pursuant to the voting and option agreement:
o Statia Terminals Holdings, which is controlled by Castle Harlan Partners
II, has agreed to vote, at any meeting of the holders of any class of our
capital stock, the 3,800,000 class B subordinated shares it owns, the
38,000 class C shares it owns (if our class C shares have voting rights
at that time) and any other shares of our capital stock that it may
acquire prior to the termination of the voting and option agreement:
o subject to the approval of the amendments to our articles of
incorporation by the requisite vote of our class A common
shareholders, in favor of the amendments to our articles of
incorporation, and the stock purchase agreement and the transactions
contemplated thereby;
o against any action or agreement that would result in a breach (1) by
us of any covenant, representation or warranty in the stock purchase
agreement, or (2) by Statia Terminals Holdings of any covenant,
representation or warranty in the voting and option agreement; and
o against the following actions: (1) any extraordinary corporate
transaction, such as a merger, involving us or any of our subsidiaries
resulting from any acquisition proposal by a third party, (2) 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 (3) 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;
o Statia Terminals Holdings has granted Kaneb an irrevocable option to
purchase (1) the 3,800,000 class B subordinated shares owned by Statia
Terminals Holdings, at a purchase price of $16.40 per share, (2) the
38,000 class C shares owned by Statia Terminals Holdings, at a purchase
price of $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, if any of the following occurs:
o the stock purchase agreement becomes terminable under circumstances
that would entitle Kaneb to a termination fee pursuant to the stock
purchase agreement;
o a third party makes an acquisition proposal that meets certain
requirements; or
o 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.
o If Kaneb exercises its option to purchase shares from Statia Terminals
Holdings and, any time prior to the earlier of the second anniversary of
the exercise of the option and the date on which Kaneb acquires the
shares of the Subsidiaries, Kaneb disposes of some or all of the
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shares that it acquired pursuant to the option or if we enter into
certain transactions, such as a merger or sale, of assets that result in
the payment of proceeds to Kaneb in excess of the aggregate exercise
price for such shares, Kaneb is required to pay the excess to Statia
Terminals Holdings.
For additional information regarding the voting and option agreement, see
"THE STOCK PURCHASE AGREEMENT AND LIQUIDATION--The Voting and Option
Agreement."
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 sell the outstanding
capital stock of the Subsidiaries and 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 the meeting.
Pursuant to this resolution, our shareholders appoint our board of
directors to act as our liquidator and custodian of our corporate
documents following our liquidation. 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 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
14
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 the amount paid to our class A common shareholders in
connection with the sale of the Subsidiaries 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. Of these options,
680,000 were granted by our board of directors on August 27, 2001, at an
exercise price of $5.00 per share. 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 a subsidiary of 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. This
payment was agreed to by our board of directors as an incentive to our
executive officers to continue to run our business during the sale
process, as well as to assist in the completion of the sale of our
business and our subsequent liquidation. 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 that
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 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 our
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 beneficially our class B subordinated
shares by purchasing interests in Statia Terminals Holdings. See "SPECIAL
FACTORS--Interests of Directors and Officers in the
Transaction--Forgiveness of Indebtedness."
o After giving effect to the proposed resolution to amend our articles of
incorporation, based on information available to us as of January 23,
2002, assuming the closing of the sale on or around February 28, 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 $248.22 per
15
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 $72.3 million under our articles of
incorporation, after giving effect to the proposed resolution to amend
our articles of incorporation, compared to (1) $45.9 million under the
relevant provisions of our current articles of incorporation covering our
liquidation followed by a liquidating distribution, and (2) $62.2 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 January 23, 2002,
excluding any payments in respect of options they own, it is anticipated
that our directors and executive officers will receive aggregate
distributions of $72.3 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 of $43.2 million 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 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.
Certain financial projections prepared by our management are presented
throughout this proxy statement, including the following (1) estimated
distributions per class A common share, class B subordinated shares and class C
shares under our current articles of incorporation, including the provisions
for a liquidation followed by a liquidating distribution and the provision for
an interim capital transaction followed by our liquidation, (2) the estimated
distribution per class C share under our articles of incorporation, as amended,
and (3) the estimated consideration to be paid by Kaneb at the closing. These
financial projections were not prepared in accordance with published guidelines
of the U.S. Securities and Exchange Commission or the American Institute of
Certified Public Accounts for the preparation and presentation of financial
projections. These projections are, or involve, forward-looking statements.
Arthur Andersen LLP, our independent certified public accountants, has not
audited, examined, compiled or applied agreed upon procedures to these
financial projections and assumes no responsibility for them.
17
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 February 22, 2002, at 10:00 a.m. local time, at
the Curacao Marriott Beach Resort, Queen's Ballroom C, 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 pursuant to which,
in the event that we sell all or substantially all of our assets, we will
distribute (i) in the following order of priority, $18.00 per share to
our class A common shareholders, $16.40 per share to our class B
subordinated shareholder and an initial distribution of the remaining
cash to our class C shareholder, and (ii) after payment of our
liabilities and following our liquidation, any remaining cash to our
class C shareholder. If the amount to be received by our class C
shareholder pursuant to the sale, as determined on the date of closing of
the sale, would exceed 5% of the total amount to be distributed to our
shareholders following the closing of the sale, the excess shall be
distributed 66% to our class A common shareholders and 34% to our class B
subordinated shareholder.
2. To (i) approve the sale of substantially all of our assets, consisting
of all of the outstanding capital stock of our three subsidiaries,
Statia Terminals International N.V., Statia Technology, Inc. and Statia
Marine, Inc. to Kaneb Pipe Line Operating Partnership, L.P., followed by
a distribution to our shareholders of substantially all of the proceeds
of the sale in accordance with our articles of incorporation, as
amended, (ii) adopt our dissolution and liquidation to occur on the day
following the distribution referred to in (i) and distribute our
remaining assets to our shareholders in accordance with our articles of
incorporation, as amended, and (iii) appoint our board of directors as
our liquidator and custodian of our corporate documents following our
liquidation.
A copy of the stock purchase agreement between Kaneb and us is attached as
Appendix A to this proxy statement. Included as an annex to the stock purchase
agreement is an English translation containing substantially the form of the
proposed Dutch language amendments to our articles of incorporation. We
encourage you to read these documents in their entirety. In addition, the exact
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 Based on our projections of cash on hand as of January 23, 2002, in
consideration for the transfer of all of the outstanding capital stock of
the Subsidiaries, the purchase price paid by Kaneb at closing will be
approximately $306.7 million minus approximately $106.7 million of
indebtedness 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.
18
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 that 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 January 23, 2002, an initial aggregate distribution
of $6.4 million will be made to our class C shareholder. The distributions
will be made to holders of record of such shares as of the close of
business on the closing date. In addition, we will pay an aggregate of
$13.9 million to 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 January 22, 2002, 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 the 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, Computershare Investor
Services LLC.
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
19
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
the 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 of our outstanding class A common shares and class B
subordinated shares, counted as a class, are present or represented at the
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 9:00 am on February 22, 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 January 22, 2002.
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
20
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 January 24,
2002.
21
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, to discuss strategic alternatives
which would allow Castle Harlan Partners II to dispose of its investment in us,
including the sale of our business as a going concern.
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. 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 our business as a going concern was the best
strategic alternative for us and our shareholders. Initially, the executive
committee of 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 for all of our shares by the potential purchaser would be the best way of
achieving this objective, as it would be the fairest and most rapid 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
22
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 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 the
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, the executive committee of our board of directors
discussed 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. The executive committee
of 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 LLP., 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 expressed concerns regarding its 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.
23
On October 31, 2001, we agreed with Kaneb to pursue a transaction
structure whereby Kaneb would purchase the capital stock of the Subsidiaries.
Our current articles of incorporation contain two provisions which arguably
could be used to distribute the proceeds from a sale of the capital stock of
the Subsidiaries:
o Provisions relating to an interim capital transaction (which includes
the sale of any of our assets). If the transaction were structured so
that these provisions applied, we estimate that we would distribute
$19.33 per class A common share, $16.36 per class B subordinated share
and zero per class C share.
o Provisions providing for our liquidation followed by a liquidating
distribution. If the transaction were structured so that these provisions
applied, we estimate that we would distribute $21.60 per class A common
share, $12.09 per class B subordinated share and zero per class C share.
The amounts payable under these methods differed substantially from the
amounts that would have been offered to our shareholders in a tender offer into
which Statia Terminals Holdings was willing to tender the class B subordinated
shares and class C shares. In addition, because a liquidation in the
Netherlands Antilles is a time-consuming procedure, our board of directors was
advised that a liquidating distribution following a liquidation would not occur
for approximately three months after the sale of the Subsidiaries. Under these
circumstances, Castle Harlan Partners II, the controlling shareholder of Statia
Terminals Holdings, had indicated that it would only vote in favor of the sale
of the Subsidiaries and our liquidation if the transaction were structured so
that (1) the distribution of sale proceeds preceded our liquidation, and (2)
the amounts distributed to our shareholders were allocated among the classes of
our shares in a way that allocated the class B subordinated shares and the
class C shares amounts which, in the view of Castle Harlan Partners II,
reflected the value of our business as a going concern. In considering the
position of Castle Harlan Partners II, our board of directors independently
determined that the provisions in our articles of incorporation relating to an
interim capital transaction were intended to apply only to periodic asset sales
following which it would be appropriate to distribute a portion of the proceeds
of a sale to our shareholders after we had retained sufficient working capital
for our business. Our board of directors did not believe that these provisions
are applicable to the sale of all or substantially all of our assets. In
addition, our board of directors did not believe that the provisions providing
for our liquidation followed by a liquidating distribution were intended to
apply to the distribution of the proceeds from the sale of our business as a
going concern. Under the proposed amendments to our articles of incorporation,
the distribution of sale proceeds would result in our shareholders receiving,
promptly following the sale, a cash amount equal to the amount such
shareholders would have been offered under a tender offer acceptable to Castle
Harlan Partners II. 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 the meeting.
Our board of directors did not contact the bidder with whom it had terminated
negotiations on October 15, 2001, in order to inform it of the change in
structure from a tender offer to an asset purchase, since the bid submitted by
the other bidder was lower than Kaneb's bid and the change in transaction
structure did not have any impact on the aggregate amount of Kaneb's bid.
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. 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. Our
board of directors considered engaging Merrill Lynch to provide such a opinion.
However, because the board
24
of directors had been advised by Netherlands Antilles counsel to obtain an
independent valuation of our class A common shares and the delivery of such an
opinion was not part of Merrill Lynch's original engagement, our board of
directors determined that it would be in the best interests of our shareholders
to engage a financial advisor who was independent of the bid process.
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, John K. Castle, David B. Pittaway and Justin B. Wender, who are
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 Kaneb and us.
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 B 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 its 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;
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
25
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. Houlihan
Lokey did not consider our net book value in its financial analysis because it
did not believe that our net book value provided a meaningful basis for
determining our current value.
26
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
========== ==========
27
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:
28
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, both determined as of
November 12, 2001, an equity consideration of $192.6 million implies a return on
equity of 14% to 22%.
29
Based on information available to us as of November 12, 2001, including
projected cash balances through closing which at that time was anticipated to
occur on January 31, 2002, 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(2) ................ $ 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 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.
(2) Based on information available to us as of January 23, 2002, and assuming
the closing of the sale on or about February 28, 2002, we estimate that
the actual cash consideration to equity holders will be approximately
$193.9 million as follows:
(millions)
-----------
Enterprise value bid price .............................. $ 300.0
Cash as of closing ...................................... 18.9
Assumption of certain compensation adjustments .......... (8.1)
Interest accrual through closing ........................ (1.9)
Tax accrual through closing ............................. (2.2)
Estimated distribution through closing .................. --
-------
SUBTOTAL ............................................... 306.7
Estimated unpaid transaction fees and expenses .......... (6.1)
Outstanding debt at closing ............................. (106.7)
-------
CASH CONSIDERATION TO EQUITY HOLDERS ................... $ 193.9
=======
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
30
quarter ending March 31, 2002, based on information available to us as of
January 23, 2002, the anticipated allocation of the sale proceeds is 63.0%
to our class A common shares, 32.1% to our class B subordinated shares and
4.9% 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.
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
31
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 the first public
announcement of Kaneb's 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 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.
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.
32
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 noted
that we would be required to pay a fee of $8.0 million to Kaneb in the
event that we wished to accept a superior offer from a third party after
entering into the stock purchase agreement with Kaneb. However, 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 that weighed 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
transaction 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 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.
o The fact that, as a condition to closing the sale of the Subsidiaries,
it would be necessary to amend our articles of incorporation. Our board
of directors considered that this requirement complicated the transaction
and may lead to confusion among our shareholders. Our board of directors
considered this to be a factor that weighed against the proposed
transaction.
PURPOSE OF THE PROPOSED AMENDMENTS TO OUR ARTICLES OF INCORPORATION
Our board of directors has concluded that the sale of our business as a
going concern is the best strategic alternative for us and our shareholders.
Initially, our board of directors believed that this would be best achieved by
a tender offer by a potential purchaser to our shareholders, as this would be
the most fair and rapid method of placing the proceeds of the sale into the
hands of our
33
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 consider 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.
Our current articles of incorporation contain two provisions which
arguably could be used to distribute the proceeds from a sale of the capital
stock of the Subsidiaries: (i) provisions relating to an interim capital
transaction (which includes the sale of any of our assets), and (ii) provisions
providing for our liquidation followed by a liquidating distribution. However,
the amounts payable under either of these provisions in respect of our class B
subordinated shares and class C shares differ substantially from the payments
that would have been made in a tender offer for our outstanding shares into
which Statia Terminals Holdings was willing to tender the class B subordinated
shares and class C shares. Under these circumstances, Castle Harlan Partners
II, the controlling shareholder of Statia Terminals Holdings, indicated that it
would only vote in favor of the sale of the Subsidiaries and our liquidation if
the transaction were structured so that (1) the distribution of sale proceeds
preceded our liquidation, and (2) the amounts distributed to our shareholders
were allocated among the classes of our shares in a way that allocated the
class B subordinated shares and the class C shares amounts which, in the view
of Castle Harlan Partners II, reflect the value of our business as a going
concern. 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.
In considering the position of Castle Harlan Partners II, our board of
directors determined that the provisions in our articles of incorporation
relating to an interim capital transaction were intended to apply only to
periodic asset sales following which it would be appropriate to distribute a
portion of the proceeds of a sale to our shareholders after we had retained
sufficient working capital for our business. Our board of directors does not
believe that these provisions are applicable to the sale of all or
substantially all of our assets. In addition, our board of directors does not
believe that the provisions providing for our liquidation followed by a
liquidating distribution were intended to apply to the distribution of the
proceeds from the sale of our business as a going concern. Our board of
directors believes that the proposed amendments are fair to our shareholders
because they: (1) result in an allocation of proceeds to the various classes of
shareholders that the board of directors has determined is appropriate in the
case of a sale of our business as a going concern, and (2) provide for a much
more rapid distribution of proceeds to our shareholders than would have been
the case if we were liquidated first and then made a liquidating distribution
of the proceeds.
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 if the distribution of the proceeds from the sale of the
Subsidiaries were made under the provisions of our current articles of
incorporation (assuming that Castle Harlan Partners II was willing to vote in
favor of a sale of the Subsidiaries under these provisions), 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 the 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
34
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.
THE PROPOSED AMENDMENTS TO OUR 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
minus (i) $60,000, (ii) the amount necessary to satisfy our
outstanding liabilities, and (iii) any amounts payable by us pursuant
to our 1999 Share Option Plan; provided, however, that if the amount
distributed to the holders of class C shares exceeds 5% of the proceeds
of the Sale Event, then the excess shall be distributed 66% to the
class A common shareholders and 34% to the class B subordinated
shareholders, and provided further that any increase or decrease in the
amount of proceeds of the Sale Event required to adjust the final
purchase price paid in respect of the Sale Event shall be solely for
the account of the class C shareholders.
o After complying with the requirements of Netherlands Antilles law and
assuming that our class A common shareholders have received a
distribution of at least $18.00 per share and our class B subordinated
shareholders have received a distribution of at least $16.40 per share,
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 the shareholders following a Sale Event
described above and that no further target quarterly distributions or
deferred distributions will accrue or be paid.
A copy of the stock purchase agreement between Kaneb and us is attached as
Appendix A to this proxy statement. Included as an annex to the stock
purchase agreement is an English translation containing substantially the form
of the proposed Dutch language amendments to our articles of incorporation.
EFFECT OF THE PROPOSED RESOLUTIONS
Under the proposed amendments to our articles of incorporation, in the
event that we sell all or substantially all of our assets and liquidate, we will
distribute (i) in the following order of priority,
35
$18.00 per share to our class A common shareholders, $16.40 per share to our
class B subordinated shareholder and an initial distribution of the remaining
cash to our class C shareholder, and (ii) after payment of our liabilities and
following our liquidation, any remaining cash to our class C shareholder. If the
amount to be received by our class C shareholder pursuant to the sale, as
determined on the date of closing of the sale, would exceed 5% of the total
amount to be distributed to our shareholders following the closing of the sale,
the excess shall be distributed 66% to our class A common shareholders and 34%
to our class B subordinated shareholder. Based on information available to us as
of January 23, 2002, assuming the close of the sale on or about February 28,
2002, the following table sets forth the distributions for each class of share
under our articles of incorporation, as amended, and in the two possible
scenarios under our current articles of incorporation (assuming that Castle
Harlan Partners II was willing to vote in favor of the transaction under either
of these provisions). The following estimated distributions per share under our
current articles of incorporation and under our articles of incorporation, as
amended, were prepared by our management based on financial projections, and
Arthur Andersen LLP, our independent certified public accountants, has not
audited, examined, compiled or applied agreed-upon procedures to these financial
projections and assumes no responsibility for them:
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
--------------------- ------------------------- -----------------------
(unaudited) (unaudited) (unaudited)
Class A common share ............... $21.60 $19.33 $ 18.00
Class B subordinated share ......... 12.09 16.36 16.40
Class C share ...................... -- -- 248.22
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 that 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 this 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. These
distributions will be made to holders of record as of the close of business on
the closing date. 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, provided that if the amount to
be distributed to our class C shareholder pursuant to the sale, as determined on
the date of closing of the sale, would exceed 5% of the total amount to be
distributed to our shareholders following the closing of the sale, the excess
shall be distributed 66% to our class A common shareholders and 34% to our class
B subordinated shareholder. Based on information available to us as of January
23, 2002, assuming the closing of the sale on or about February 28, 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 January 23, 2002,
we anticipate that our class C shareholder is likely to receive a distribution,
in the aggregate, of approximately $9.4 million, consisting of approximately
$6.4 million following the closing of the sale and approximately $3.0 million
following our liquidation. Following the distributions described above
36
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.
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. However, the amendments 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.
On January 22, 2002, we announced that holders of record of our class A
common shares on January 31, 2002, would be entitled to receive a target
quarterly distribution of $0.45 per share for the quarter ended December 31,
2001. This target quarterly distribution is expected to be paid on February 14,
2002. Assuming that the sale of the Subsidiaries and our subsequent liquidation
are approved by our shareholders, we anticipate that the sale will be closed
within five business days following the receipt of that approval and that the
distribution of $18.00 per class A common share will be made shortly following
the closing of the sale to holders of record as of the close of business on the
date of closing.
Pursuant to the proposed amendments to 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 and we will not be obligated
to pay or accrue any further arrearages in target quarterly distributions
following the $18.00 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 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 the amount paid to our class A common shareholders in connection with
the sale of the Subsidiaries 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. Of the options listed below, 680,000 were granted by our board of
directors on August 27, 2001, at an exercise price of $5.00 per share:
37
CLASS A COMMON
SHARES SUBJECT TO AGGREGATE
POSITION OPTIONS SPREAD
-------------------------------- ------------------- -------------
James G. Cameron ............ Chairman of the Board and 277,000 $ 3,460,418
President(1)(2)
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 106,000 1,330,108
Counsel and Secretary(1)
John D. Franklin ............ Vice President -- Marine Fuel 106,000 1,330,108
Marketing(1)
James F. Brenner ............ Vice President -- Finance, 106,000 1,330,108
Treasurer and 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 the 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 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. This
payment was agreed to by our board of directors as an incentive to our
executive officers to continue to run our business during the sale process, as
well as to assist in the completion of the sale of our business and our
subsequent liquidation.
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
38
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 beneficially our class B subordinated shares by purchasing interests in
Statia Terminals Holdings. 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
----------
Total ........................... $1,000,100
==========
Ownership of our Shares
Based on information available to us as of January 23, 2002, assuming the
closing of the sale on or around February 28, 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
39
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
--------------------------------------------------------
UNDER OUR CURRENT ARTICLES OF
INCORPORATION
NO. OF -----------------------------------
CLASS B
SUBORDINATED LIQUIDATION INTERIM CAPITAL UNDER OUR
SHARES FOLLOWED BY A TRANSACTION ARTICLES OF
BENEFICIALLY LIQUIDATING FOLLOWED BY OUR INCORPORATION, AS
OWNED DISTRIBUTION LIQUIDATION AMENDED
------------- --------------- ----------------- ------------------
James G. Cameron ............ 195,908 $ 2,210,292 $ 3,047,061 $ 3,057,143
Thomas M. Thompson, Jr....... 152,751 1,723,382 2,375,816 2,383,679
Robert R. Russo ............. 134,323 1,515,472 2,089,197 2,096,110
Jack R. Pine ................ 66,758 753,183 1,038,323 1,041,758
John D. Franklin ............ 58,837 663,616 915,123 918,151
James F. Brenner ............ 52,533 592,693 817,074 819,777
John K. Castle(1) ........... 3,800,000 45,923,947 62,154,651 62,320,000
David B. Pittaway ........... 16,164 182,367 251,407 252,239
Justin B. Wender ............ 808 9,116 12,567 12,609
James L. Holloway III ....... 12,123 136,775 188,555 189,179
Francis Jungers ............. 16,164 182,367 251,407 252,239
Jonathan R. Spicehandler..... 16,164 182,367 251,407 252,239
Ernest Voges ................ 8,082 91,184 125,704 126,120
Directors and Executive
Officers as a group ........ 3,800,000 $45,923,947 $62,154,651 $62,320,000
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, AS
OWNED DISTRIBUTION LIQUIDATION AMENDED
--------------- --------------- ----------------- ------------------
James G. Cameron ............ 1,959.08 -- -- $ 484,725
Thomas M. Thompson, Jr....... 1,527.51 -- -- 377,944
Robert R. Russo ............. 1,343.23 -- -- 332,349
Jack R. Pine ................ 667.58 -- -- 165,176
John D. Franklin ............ 588.37 -- -- 145,577
James F. Brenner ............ 525.33 -- -- 129,980
John K. Castle(1) ........... 38,000.00 -- -- 9,432,360
David B. Pittaway ........... 161.64 -- -- 39,994
Justin B. Wender ............ 80.82 -- -- 1,999
James L. Holloway III ....... 121.23 -- -- 29,995
Francis Jungers ............. 161.64 -- -- 39,994
Jonathan R. Spicehandler..... 161.64 -- -- 39,994
Ernest Voges ................ 80.82 -- -- 19,997
Directors and Executive
Officers as a group ........ 38,000.00 -- -- $9,432,360
- ----------
(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
40
shares. The amount referenced includes 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 January 23, 2002, assuming the
closing of the sale on or around February 28, 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:
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 $ 3,541,869
Thomas M. Thompson, Jr....... 110 152,751 1,527.51 2,763,603
Robert R. Russo ............. -- 134,323 1,343.23 2,428,458
Jack R. Pine ................ -- 66,758 667.58 1,206,934
John D. Franklin ............ -- 58,837 588.37 1,063,729
James F. Brenner ............ -- 52,533 525.33 949,757
John K. Castle(1) ........... -- 3,800,000 38,000.00 71,752,360
David B. Pittaway ........... -- 16,164 161.64 292,233
Justin B. Wender ............ -- 808 80.82 14,608
James L. Holloway III ....... -- 12,123 121.23 219,175
Francis Jungers ............. 31,050 16,164 161.64 851,133
Jonathan R. Spicehandler..... -- 16,164 161.64 292,233
Ernest Voges ................ -- 8,082 80.82 146,116
Directors and Executive
Officers as a group ........ 31,160 3,800,000 38,000.00 $72,313,240
- ----------
(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 amount
referenced includes 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
41
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.
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
In the opinion of PricewaterhouseCoopers, our special Netherlands Antilles
tax advisor, 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
In the opinion of White & Case LLP, our special U.S. tax counsel, 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;
42
o banks;
o real estate investment trusts;
o regulated investment companies;
o grantor trusts;
o persons subject to the alternative minimum tax;
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.
43
Sale of the 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.
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:
o the excess distribution or gain had been realized ratably over your
holding period;
o 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
o 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
44
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. 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% 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.
45
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 A and is incorporated herein by reference. You are urged
to read Appendix A in its entirety.
The five members of our board of directors who are not affiliated with
Castle Harlan Partners II have unanimously approved the sale of the
Subsidiaries followed by our liquidation. These directors have 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 $9.4 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
We have been advised by our Netherlands Antilles counsel, Holland Van
Gijzen, a member firm of the Ernst & Young legal network, that 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,
that 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
We and Kaneb are required to make filings with certain United States and
foreign regulatory authorities in connection with the sale of the Subsidiaries,
including a filing under the Hart-Scott-Rodino Antitrust Improvements Act. An
application and notice was filed with the Federal Trade Commission and the
Antitrust Division of the U.S. Department of Justice on November 15, 2001, and
the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act terminated on December 10, 2001.
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 A 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 constitutes substantially all of our
assets.
46
CONSIDERATION TO BE RECEIVED BY US
At the closing, we will deliver to Kaneb certificates representing all of
the shares of the capital stock of the Subsidiaries in exchange for:
(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
o 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 The CIT Group/Equipment Financing, Inc., and
(4) the amount of any payments of principal under such loan from
November 13, 2001, through the day of the closing exceeds
o 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
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;
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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);
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;
o the absence of undisclosed material liabilities;
o their intellectual property rights;
o the identification and enforceability of their material contracts;
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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.
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
o amend its respective articles of incorporation or comparable governing
documents;
Capitalization
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;
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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 increase the compensation or fringe benefits of any directors, officers
or employees, except as may be required by law or under existing benefit
plans;
o 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;
o 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
subsidiary, except as may be required by law or under existing benefit
plans.
Notwithstanding the foregoing, 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 (i) the bonus
target for any such employee at an amount not in excess of 75% of such
employee's base pay, (ii) 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 (iii) 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;
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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.
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 continue any discussions or negotiations that may be ongoing with any
other person regarding any Acquisition Proposal (as defined below);
o encourage knowingly, solicit, initiate or facilitate, directly or
indirectly, the making of 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.
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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.
"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.
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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.
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.
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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 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 The CIT Group/Equipment Financing,
Inc., (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
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 of the Subsidiaries 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
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(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 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");
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 of the Subsidiaries 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 above);
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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 $8.0
million 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
$8.0 million 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 $8.0 million; 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.
57
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 the agreement, at any meeting of the holders of any class of our
capital stock, it will vote the 3,800,000 class B subordinated shares it owns,
the 38,000 class C shares it owns (if our class C shares have voting rights at
that time) and any other shares of our capital stock that it may acquire prior
to the termination of the voting and option agreement:
o 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;
o 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
o 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
58
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 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
59
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.
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. However, the Option and the provisions of the voting and options
agreement regarding subsequent sales of our shares by Kaneb following exercise
of the Option remain in force until their termination in accordance with their
terms as described above.
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.
60
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 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 or such higher amount as provided for
under our articles of incorporation, as amended, 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, filings 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
61
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.
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.
62
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 January 22, 2002, 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
NAME AND ADDRESS SHARES OUTSTANDING # OF SHARES OUTSTANDING # OF SHARES OUTSTANDING
- ------------------------------------------ -------- --------------- ------------- --------------- ------------- --------------
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(2) ........................ -- -- 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 as a
group (13 in number)(3) ................. 31,160 * 3,800,000 100.0% 3,831,160 39.0%
- ----------
* 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 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."
63
(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 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 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 this 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 toll-free (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.
64
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;
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2000; and
o Our Quarterly Report on Form 10-Q and Form 10-Q/A (Amendment No. 1) for
the fiscal quarter ended September 30, 2001.
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.,
Werfstraat 6, Willemstad, 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.
65
This proxy statement is dated January 24, 2002. 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.
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
-------------------------
Jack R. Pine
Secretary
January 24, 2002
66
APPENDIX A
================================================================================
EXECUTION COPY
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
================================================================================
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS; ETC. ............................................ A-1
Section 1.1 Definitions .................................................. A-1
Section 1.2 Cross References ............................................. A-4
Section 1.3 Knowledge .................................................... A-4
ARTICLE II SALES OF SHARES .............................................. A-4
Section 2.1 Sale of Shares ............................................... A-4
Section 2.2 Delivery of Estimated Net Cash Amount ........................ A-5
Section 2.3 Closing Payment .............................................. A-5
Section 2.4 Determination of Purchase Price .............................. A-5
Section 2.5 Closing ...................................................... A-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............... A-6
Section 3.1 Due Organization, Good Standing and Corporate Power .......... A-6
Section 3.2 Authorization and Validity of this Agreement ................ A-6
Section 3.3 Capitalization .............................................. A-7
Section 3.4 Consents and Approvals; No Violations ....................... A-7
Section 3.5 Company Reports and Financial Statements ..................... A-8
Section 3.6 Absence of Certain Changes .................................. A-8
Section 3.7 Title to Properties; Encumbrances ........................... A-8
Section 3.8 Compliance with Laws ......................................... A-9
Section 3.9 Litigation ................................................... A-9
Section 3.10 Employee Benefit Plans ....................................... A-9
Section 3.11 Employment Relations and Agreements .......................... A-10
Section 3.12 Taxes ........................................................ A-11
(a) Tax Returns .................................................. A-11
(b) Payment of Taxes ............................................. A-11
(c) Tax Liens .................................................... A-11
(d) Tax Audits ................................................... A-11
(e) Statute of Limitations ....................................... A-11
(f) Tax Agreements ............................................... A-11
(g) Powers of Attorney ........................................... A-11
(h) Tax Deficiencies ............................................. A-11
(i) Consolidated, Combined or Unitary Tax Returns ................ A-11
(j) No Joint or Several Liability ................................ A-12
Section 3.13 Liabilities .................................................. A-12
Section 3.14 Intellectual Property ........................................ A-12
Section 3.15 Proxy Materials .............................................. A-12
Section 3.16 Broker's or Finder's Fee ..................................... A-12
Section 3.17 Certain Contracts and Arrangements ........................... A-12
Section 3.18 Environmental Laws and Regulations ........................... A-13
Section 3.19 Voting Requirements .......................................... A-14
Section 3.20 Insurance .................................................... A-14
Section 3.21 Inventory .................................................... A-14
Section 3.22 Information Furnished ........................................ A-14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER .............. A-14
Section 4.1 Due Organization, Good Standing and Corporate Power .......... A-14
Section 4.2 Authorization and Validity of Agreement ...................... A-14
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Section 4.3 Consents and Approvals; No Violations ................................ A-15
Section 4.4 Proxy Materials ...................................................... A-15
Section 4.5 Broker's or Finder's Fee ............................................. A-15
Section 4.6 Funds ................................................................ A-15
Section 4.7 Litigation ........................................................... A-15
Section 4.8 No Knowledge of Adverse Change ....................................... A-16
ARTICLE V TRANSACTIONS PRIOR TO CLOSING DATE ................................... A-16
Section 5.1 Access to Information Concerning Properties and Records .............. A-16
Section 5.2 Confidentiality ...................................................... A-16
Section 5.3 Conduct of Business Pending the Closing Date ......................... A-17
Section 5.4 Commercially Reasonable Efforts ...................................... A-19
Section 5.5 No Solicitation of Other Offers ...................................... A-19
Section 5.6 Notification of Certain Matters ...................................... A-20
Section 5.7 Antitrust ............................................................ A-21
Section 5.8 Employee Benefits .................................................... A-21
Section 5.9 Directors' and Officers' Insurance and Indemnification ............... A-22
Section 5.10 Public Announcements ................................................. A-24
Section 5.11 Shareholder Approval ................................................. A-24
Section 5.12 Section 338 Election ................................................. A-24
Section 5.13 Repayment of Indebtedness ............................................ A-24
Section 5.14 Transfer Taxes ....................................................... A-24
Section 5.15 Termination of Existing Tax Sharing Agreements ....................... A-24
Section 5.16 Refunds of Taxes for Pre-Closing Periods ............................. A-25
Section 5.17 Resignation of Directors. ............................................ A-25
ARTICLE VI CONDITIONS TO CLOSING; TERMINATION AND ABANDONMENT ................... A-25
Section 6.1 Conditions to Purchaser's Obligations ................................ A-25
(a) Statutes, Orders; No Injunction ...................................... A-25
(b) Truth of Representations and Warranties .............................. A-25
(c) Performance of Covenants ............................................. A-26
(d) No Company Material Adverse Effect ................................... A-26
(e) Board Recommendation ................................................. A-26
(f) Shareholder Approval ................................................. A-26
(g) HSR Act Waiting Periods .............................................. A-26
Section 6.2 Conditions to the Company's Obligations .............................. A-26
(a) Statutes, Orders; No Injunction ...................................... A-26
(b) Truth of Representations and Warranties .............................. A-26
(c) Performance of Covenants ............................................. A-27
(d) Shareholder Approval ................................................. A-27
(e) HSR Act Waiting Periods .............................................. A-27
Section 6.3 Termination .......................................................... A-27
Section 6.4 Effect of Termination ................................................ A-28
ARTICLE VII NON-SURVIVAL ......................................................... A-28
Section 7.1 Non-Survival of Representations, Warranties, Agreements and Covenants A-28
ARTICLE VIII MISCELLANEOUS ........................................................ A-28
Section 8.1 Fees and Expenses .................................................... A-28
ii
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Section 8.2 Investigation and Agreement; Projections; No Other Representations and
Warranties ........................................................... A-28
Section 8.3 Extension; Waiver .................................................... A-29
Section 8.4 Notices .............................................................. A-29
Section 8.5 Entire Agreement ..................................................... A-30
Section 8.6 Binding Effect; Benefit; Assignment .................................. A-30
Section 8.7 Amendment and Modification ........................................... A-31
Section 8.8 Further Actions ...................................................... A-31
Section 8.9 Headings ............................................................. A-31
Section 8.10 Counterparts ......................................................... A-31
Section 8.11 APPLICABLE LAW ....................................................... A-31
Section 8.12 Severability ......................................................... A-31
Section 8.13 Interpretation ....................................................... A-31
Section 8.14 Specific Enforcement ................................................. A-32
Section 8.15 Waiver of Jury Trial ................................................. A-32
ANNEX A--Form of Contingent Tax Payment Note ......................................... A-33
ANNEX B--Form of Shareholder Proposals ............................................... A-35
SCHEDULE I ........................................................................... A-36
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of November 12, 2001, as amended on
January 23, 2002 (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:
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.
A-1
"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 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.
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"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.
"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 governmentor 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.
"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
A-3
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)
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
A-4
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 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
A-5
(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.
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).
A-6
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 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,
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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 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
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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.
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 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
A-9
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,
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 knowledgeof 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.
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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, 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.
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(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 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"):
(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);
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(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
knowledgeof the Company, is any other party to any 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
A-13
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
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
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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 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.
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,
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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 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
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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:
(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
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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 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;
(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;
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(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, 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.
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(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,
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.
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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
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
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
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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 (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,
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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 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
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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.
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.
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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 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 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
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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
(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;
A-26
(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
(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 the Company of
any provision of Section 5.5(c) or a breach by Holdings of its
obligations under the Voting Agreement.
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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 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
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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 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
inthis 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-29
(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:
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.
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
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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 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
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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.
* * * * *
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
A-32
ANNEX A
PROMISSORY NOTE
, 200
On the Due Date, as defined below, the undersigned, Kaneb Pipe Line
Operating Partnership, L.P. (the "Maker"), a Delaware limited partnership,
hereby promises upon the terms and subject to the provisions of this promissory
note (this "Note") to pay to Statia Terminals Group N.V. (the "Holder"), a
public company with limited liability organized under the laws of the
Netherlands Antilles, or its registered assigns, the Principal Amount (as
defined below) in lawful money of the United States of America, which shall at
the time of payment be legal tender in payment of all debts and dues, public
and private.
1. Principal Amount and Due Date. The "Principal Amount" shall be an
amount equal to eighty percent (80%) of the amount by which (a) the Tax Reserve
Amount (as defined in the Stock Purchase Agreement, dated as of November 12,
2001, by and between the Holder and the Maker (the "Stock Purchase Agreement")
(as such amount is finally determined pursuant to Section 2.4 of the Stock
Purchase Agreement) exceeds (b) the aggregate actual amount paid or payable by
the Maker and its Affiliates in satisfaction of Taxes pursuant to the Tax
Agreement for periods prior to the date hereof.
The Principal Amount shall be due and payable in full on the date (the
"Due Date") that is five (5) Business Days after the date of execution of the
Tax Agreement.
2. No Presentment. The Maker, for itself and its successors and assigns,
waives presentment, demand, protest and notice thereof or of dishonor, and
waives any right to be released by reason of any extension of time or change in
the terms of payment.
3. Amendment. This Note may not be changed orally, but only by an
agreement in writing signed by the Holder and the Maker.
4. Cancellation. After the Principal Amount has been paid in full, this
Note shall be surrendered to the Maker for cancellation and shall not be
reissued.
5. Transfer Restrictions. This Note shall not be assignable by either the
Maker or the Holder without the prior written consent of the other party, which
consent shall not be unreasonably withheld, conditioned or delayed; provided,
that the Holder shall be entitled to assign this Note to Holdings or any one
shareholder of Holdings in connection with the liquidation of the Holder.
6. GOVERNING LAW. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT
OF LAW PROVISION THEREOF.
7. Descriptive Headings. The descriptive headings of this Note are
inserted for convenience only, and do not constitute a part of this Note.
8. Definitions. Capitalized terms used but not otherwise defined herein
shall have the meaning ascribed to such terms in the Stock Purchase Agreement.
A-33
IN WITNESS WHEREOF, the Maker has executed and delivered this Note on the
date first written above.
KANEB PIPE LINE OPERATING PARTNERSHIP,
L.P.
By KANEB PIPE LINE COMPANY LLC,
its general partner
By:
------------------------------------
Name:
Title:
A-34
ANNEX B
This Annex B to the Stock Purchase Agreement (the "Agreement") by and between
Kaneb Pipe Line Operating Partnership, L.P. ("Purchaser") and Statia Terminals
Group N.V. (the "Company"), dated as of November 12, 2001, as amended on
January 23, 2002, sets forth the proposals that will be presented at the
extraordinary meeting of the shareholders of the Company. Capitalized terms
used but not defined herein shall have the respective meaning ascribed thereto
in the Agreement.
AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE COMPANY
PROPOSED, TO ADOPT a resolution to amend the Company Articles in
accordance with Schedule I attached hereto, and to authorize, with full right
of substitution, each director and officer of the Company and any of the
lawyers of the civil law notary office of Smeets Thesseling van Bokhorst in
Curacao to (i) request the approval of the Ministry of Justice in the
Netherlands Antilles with respect to the Amendment, (ii) make such changes as
the Ministry of Justice requires to the Amendment, and (iii) execute the
notarial deed of amendment to the Company Articles incorporating the Amendment.
STOCK PURCHASE AGREEMENT
PROPOSED, TO ADOPT A RESOLUTION TO (i) approve the sale of substantially
all of the Company's assets consisting of all of the outstanding capital stock
of Statia Terminals International N.V., Statia Technology, Inc. and Statia
Marine, Inc. to Kaneb Pipe Line Operating Partnership, L.P., or any affiliate
thereof, pursuant to the Stock Purchase Agreement, dated November 12, 2001, as
amended on January 23, 2002 (the "Agreement"), as well as the transactions
contemplated thereby, approve the distribution of the proceeds received by the
Company pursuant to the Agreement in accordance with Article 17A of the Company
Articles (the "Distribution"), and approve any and all actions in connection
with the Distribution by or on behalf of the Company, (ii) dissolve the Company
as of the date following the Distribution in accordance with Article 18 of the
Company Articles and to approve the distribution of any liquidation proceeds of
the Company in accordance with the provisions of Article 18, paragraph 6A of the
Company Articles, and (iii) appoint the Board of Directors of the Company as the
Company's liquidator and custodian of the Company's corporate documents.
A-35
SCHEDULE I
PROPOSED TEXT OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION OF
STATIA TERMINALS GROUP N.V.
I. ARTICLE 17, PARAGRAPH 1 ("DEFINITIONS") SHALL BE AMENDED AS FOLLOWS:
New text shall be added to the definition of "Common Share Arrearages" after
the word "interest" which shall read as follows: "and provided further that no
Common Share Arrearages will accrue after the distribution of any proceeds from
a Sale Event (as defined in article 17A)."
II. ARTICLE 17, PARAGRAPH 1 SHALL BE AMENDED FURTHER 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."
III. 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 on a date certain (the "Closing Date"), 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 on the Closing Date of a Sale Event (the "Sale
Proceeds") shall be made by the Company 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 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 clause (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 the value per subordinated share attributed to
each 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
clauses (a) and (b) above, to the incentive shares, pro rata, the balance
of the Sale Proceeds minus (x) the amount
A-36
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)
$60,000, provided that if the amount determined pursuant to this clause (c)
is, in the aggregate, more than 5% of the Sale Proceeds then the amount
distributed to the incentive shares, in the aggregate, shall be reduced to an
amount equal to 5% of the Sale Proceeds (such amount being the value per
incentive share 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); and
(d) Fourth, if the amount that otherwise would have been distributed to
the incentive shares is reduced pursuant to the proviso in clause (c)
above, the balance of the Sale Proceeds shall be distributed, pro rata, to
each issued and outstanding common share and each issued and outstanding
subordinated share such that the issued and outstanding common shares in
the aggregate receive 66% of such balance and the issued and outstanding
subordinated shares in the aggregate receive 34% of such balance.
Any upward or downward adjustment after the Closing Date in the purchase
price determined in accordance with the definitive agreement entered into in
connection with the Sale Event shall result in a commensurate upward or downward
adjustment in the amount otherwise payable to the incentive shares and shall not
affect the distribution to the common shares or to the subordinated shares.
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.
IV. 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."
V. 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".
VI. 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 Sale Proceeds, 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 (the
"Liquidation Proceeds") 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 has
received an amount equal to $18.00;
(b) Second, to the subordinated shares, pro rata, until each subordinated
share has received an amount equal to $16.40;
(c) Third, to the incentive shares, pro rata, all remaining Liquidation
Proceeds, if any,
provided however that (x) with any such distribution under clauses (a) and
(b), respectively, any amounts paid under Article 17A of these articles of
incorporation, with respect to the common shares and the subordinated shares
respectively, shall be deducted from the amount 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.
VII. 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-37
APPENDIX B
[HOULIHAN LOKEY HOWARD & ZUKIN LOGO]
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")(1) 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 addition, we consent to the use of this Opinion in the
Company's proxy statement filed with the SEC.
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;
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;
- ----------
(1) 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.
B-1
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.
B-2
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James G. Cameron and John K. Castle, 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 C, John F. Kennedy Boulevard, Piscadera Bay, Curacao,
Netherlands Antilles, on February 22, 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 pursuant to which,
in the event that we sell all or substantially all of our assets, we will
distribute (i) in the following order of priority, $18.00 per share to our class
A common shareholders, $16.40 per share to our class B subordinated shareholder
and an initial distribution of the remaining cash to our class C shareholder,
and (ii) after payment of our liabilities and following our liquidation, any
remaining cash to our class C shareholder. If the amount to be received by our
class C shareholder pursuant to the sale, as determined on the date of closing
of the sale, would exceed 5% of the total amount to be distributed to our
shareholders following the closing of the sale, the excess shall be distributed
66% to our class A common shareholders and 34% to our class B subordinated
shareholder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To (i) approve the sale of substantially all of our assets, consisting
of all of the outstanding capital stock of our three subsidiaries, Statia
Terminals International N.V., Statia Technology, Inc. and Statia Marine, Inc.
to Kaneb Pipe Line Operating Partnership, L.P., followed by a distribution to
our shareholders of substantially all of the proceeds of the sale in accordance
with our articles of incorporation, as amended, (ii) adopt our dissolution and
liquidation to occur on the day following the distribution referred to in (i)
and distribute our remaining assets to our shareholders in accordance with our
articles of incorporation, as amended, and (iii) appoint our board of directors
as our liquidator and custodian of our corporate documents following our
liquidation.
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:
-----------------------------------------------