SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to ______________________
COMMISSION FILE NUMBERS 333-18455 AND 333-18455-01
--------------------
STATIA TERMINALS INTERNATIONAL N.V.
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-2003102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TUMBLEDOWN DICK BAY
ST. EUSTATIUS, NETHERLANDS ANTILLES
(011) 5993-82300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STATIA TERMINALS CANADA, INCORPORATED
(Exact name of registrant as specified in its charter)
NOVA SCOTIA, CANADA 98-0164788
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3817 PORT MALCOLM ROAD
PORT HAWKESBURY, NOVA SCOTIA B0E 2V0
(902) 625-1711
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
Indicate by check mark whether each of the registrants: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No _____
The equity securities of the registrants have not been, and are not
required to be, registered under either the Securities Act of 1933 or the
Securities Exchange Act of 1934.
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V.
AND
STATIA TERMINALS CANADA, INCORPORATED
QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1998
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss)
and Accumulated Deficit 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
THIS QUARTERLY REPORT ON FORM 10-Q (THIS "REPORT") CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF 27A OF THE SECURITIES ACT OF
1933. DISCUSSIONS CONTAINING SUCH FORWARD-LOOKING STATEMENTS MAY BE FOUND IN
ITEMS 1, 2 AND 3 OF PART I HEREOF, AS WELL AS WITHIN THIS REPORT GENERALLY. IN
ADDITION, WHEN USED IN THIS REPORT, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES.
ACTUAL RESULTS IN THE FUTURE COULD DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF FLUCTUATIONS IN THE SUPPLY OF AND
DEMAND FOR CRUDE OIL AND OTHER PETROLEUM PRODUCTS, CHANGES IN THE LIQUID
TERMINALING INDUSTRY, CHANGES IN GOVERNMENT REGULATIONS AFFECTING THE PETROLEUM
INDUSTRY, THE FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS, ADVERSE WEATHER
CONDITIONS, THE CONDITION OF THE UNITED STATES ECONOMY AND OTHER MATTERS SET
FORTH IN THIS REPORT. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY
RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT
MAY BE MADE TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1998
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,083 $ 8,589
Accounts receivable-
Trade, net 10,092 7,797
Other 2,347 2,098
Inventory, net 1,247 1,163
Prepaid expenses 269 2,136
Assets held for sale, net 20,000 16,000
---------------- ----------------
Total current assets 40,038 37,783
PROPERTY AND EQUIPMENT, net 198,529 197,554
OTHER NONCURRENT ASSETS, net 5,661 5,199
---------------- ----------------
Total assets $ 244,228 $ 240,536
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,788 $ 7,155
Accrued interest payable 2,027 2,027
Other accrued expenses 7,587 7,883
---------------- ----------------
Total current liabilities 17,402 17,065
LONG-TERM DEBT 135,000 135,000
---------------- ----------------
Total liabilities 152,402 152,065
---------------- ----------------
STOCKHOLDER'S EQUITY SUBJECT TO REDUCTION 20,000 16,000
STOCKHOLDER'S EQUITY:
Common stock 6 6
Additional paid-in capital 78,494 82,494
Accumulated deficit (6,674) (10,029)
---------------- ----------------
Total stockholder's equity 71,826 72,471
---------------- ----------------
Total liabilities and stockholder's equity $ 244,228 $ 240,536
================ ================
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
Page 1
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS) AND ACCUMULATED DEFICIT
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- -----------------------------------
1997 1998 1997 1998
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 33,148 $ 36,472 $ 65,857 $ 66,836
COSTS OF SERVICES AND PRODUCTS SOLD 28,595 28,812 57,091 53,932
---------------- --------------- --------------- ---------------
Gross profit 4,553 7,660 8,766 12,904
VALUATION ADJUSTMENT
ON ASSET HELD FOR SALE - 4,000 - 4,000
ADMINISTRATIVE EXPENSES 1,703 1,993 3,182 3,809
---------------- --------------- --------------- ---------------
Income from operations 2,850 1,667 5,584 5,095
INTEREST EXPENSE 4,225 4,218 8,430 8,445
INTEREST INCOME 102 104 226 214
---------------- --------------- --------------- ---------------
Loss before provision for income taxes (1,273) (2,447) (2,620) (3,136)
PROVISION FOR INCOME TAXES 30 14 233 219
---------------- --------------- --------------- ---------------
Net loss (1,303) (2,461) (2,853) (3,355)
ACCUMULATED DEFICIT, beginning of period (2,995) (7,568) (95) (6,674)
COMMON STOCK DIVIDENDS - - (1,350) -
---------------- --------------- --------------- ---------------
ACCUMULATED DEFICIT, end of period $ (4,298) $ (10,029) $ (4,298) $ (10,029)
================ =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
Page 2
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED
JUNE 30,
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1998
-------------- ---------------
<S> <C> <C>
Net loss $ (2,853) $ (3,355)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 5,384 5,850
Valuation adjustment on asset held for sale - 4,000
Provision for spare parts inventory - 346
(Gain) loss on disposition of property (3) 6
Decrease in accounts receivable-trade, net 4,929 2,295
Decrease in other receivables 1,810 249
Decrease in inventory 2,172 84
(Increase) decrease in prepaid expenses 81 (1,867)
Increase in other non-current assets (121) (96)
Decrease in accounts payable (1,829) (633)
Increase (decrease) in accrued expenses (6,437) 796
-------------- ---------------
Net cash provided by operating activities 3,133 7,675
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,303) (5,169)
Proceeds from sale of property and equipment 6 -
-------------- ---------------
Net cash used in investing activities (2,297) (5,169)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,350) -
-------------- ---------------
Net cash used in financing activities (1,350) -
-------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (514) 2,506
CASH AND CASH EQUIVALENTS, beginning of period 9,264 6,083
-------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 8,750 $ 8,589
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 199 $ 224
Cash paid for interest $ 7,403 $ 7,989
</TABLE>
The accompanying notes are an integral part of these condensed
financial statements.
Page 3
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals International N.V. ("Statia") and its subsidiaries (together with
Statia, the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. Significant accounting
policies followed by the Company were disclosed in the Notes to the Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. In the opinion of the Company's management,
the accompanying consolidated condensed financial statements contain
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position of the Company at June 30, 1998 and the results of
operations and cash flows for the three and six months ended June 30, 1998 and
1997. Operating results for the three and six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130 -- "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. For the three and six months ended June 30, 1997 and 1998, there
were no differences between net income and comprehensive income.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 -- "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes certain standards of accounting for derivative instruments
including specific hedge accounting criteria. SFAS No. 133 is effective for
fiscal years beginning after June 15, 1999 although earlier adoption is allowed.
Management has not yet quantified the impacts of adopting SFAS No. 133 and has
not determined when the Company will adopt SFAS No. 133. However, management
expects that the impact of SFAS No. 133 will be immaterial.
2. RECLASSIFICATIONS
Certain amounts in the prior year consolidated condensed financial
statements have been reclassified to conform to the current year presentation.
Interest expense for the three and six months ended June 30, 1998
includes $228 and $456, respectively, of amortization expense related to
deferred financing costs. The same amounts were reclassified for the three
months and six months ended June 30, 1997 for comparative purposes.
Page 4
<PAGE>
STATIA TERMINALS INTERNATIONAL N.V. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(DOLLARS IN THOUSANDS)
3. ASSET HELD FOR SALE
On July 29, 1998, the Company sold a subsidiary, Statia Terminals
Southwest, Inc. ("Southwest"), which owns storage and transshipment facilities
located in Brownsville, Texas, for $6,500 in cash resulting in net proceeds of
approximately $6,000. The Company retained certain of the pre-closing assets and
liabilities of Southwest consisting primarily of accounts receivable and accrued
expenses and agreed to indemnify the purchaser for certain contingent legal and
environmental matters up to a maximum of $500. No provision has been made in the
Company's financial statements for these contingent matters as management
believes it is not probable the Company will ever be required to provide such
indemnification.
During the quarter ended June 30, 1998, the Company recognized a
valuation adjustment of $4,000 representing the difference between the
anticipated net proceeds from the sale of Southwest and the carrying amount of
the related assets. The valuation adjustment is an estimate and may be adjusted.
However, management anticipates that any such adjustment in future periods would
not be material. The Company has recorded a valuation allowance against the tax
asset resulting from the valuation adjustment, as management believes it is not
likely the net deferred tax asset will be utilized in the future. Therefore, the
valuation adjustment had no net effect on the provision for income taxes.
The following unaudited pro forma consolidated results of operations
for the six-month periods ended June 30, 1997 and 1998 were prepared to
illustrate the estimated effects of the sale of Southwest as if it had occurred
at the beginning of each of these respective six-month periods. The figures
below exclude operating results of Southwest and the valuation adjustment on
asset held for sale for the periods indicated.
FOR THE SIX MONTHS ENDED
JUNE 30,
---------------------------------
1997 1998
-------------- --------------
Revenues $ 64,952 $ 65,223
Income from operations $ 6,135 $ 9,156
Net income (loss) $ (2,290) $ 713
This pro forma information is provided for informational purposes only
and does not purport to be indicative of the results of operations which would
have been obtained had the sale of Southwest been completed on the dates
indicated or the results of operations for any future date or period (see
Exhibit 99.1 to this Form 10-Q for additional information related to the sale of
Southwest).
4. FINANCIAL STATEMENTS BY JURISDICTION
In connection with certain transactions, the Company issued 11-3/4%
First Mortgage Notes (the "Notes") in 1996. The Notes are guaranteed on a full,
unconditional, joint and several basis by each of the indirect and direct active
subsidiaries of Statia, other than Statia Terminals Canada, Incorporated
("Statia Canada") which is a co-obligor on the Notes. Each of the subsidiary
guarantors is, directly or indirectly, wholly-owned by Statia. The Company has
certain inactive, non-guaranteeing subsidiaries which are inconsequential,
individually and in the aggregate, and which have no assets, liabilities or
operations, and are in process of being dissolved by the Company. The following
combining condensed financial data illustrates the composition of the Company's
subsidiary guarantors combined by jurisdiction. The enforceability of the
guarantees may be affected differently under the laws of the applicable
jurisdictions. Separate financial statements of the subsidiaries are not
presented because management of the Company has determined that they are not
material to investors.
Page 5
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED BALANCE SHEET
DECEMBER 31, 1997
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
ASSETS (UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------ ------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1 $ 1,241 $ 4,593 $ 21 $ 227 $ - $ 6,083
Accounts receivable, net - 1,961 10,148 1 329 - 12,439
Inventory - 533 714 - - - 1,247
Prepaid expenses - 57 78 1 133 - 269
Assets held for sale - - 10,000 - 10,000 - 20,000
------- -------- --------- --------- -------- --------- ---------
Total current assets 1 3,792 25,533 23 10,689 - 40,038
PROPERTY AND EQUIPMENT, net - 28,651 168,788 1,215 (125) - 198,529
INVESTMENT IN SUBSIDIARIES 77,310 - - 181,609 205 (259,124) -
OTHER NONCURRENT ASSETS - 1,174 4,321 1 165 - 5,661
------- -------- --------- --------- -------- --------- ---------
Total assets $77,311 $ 33,617 $ 198,642 $ 182,848 $ 10,934 $(259,124) $ 244,228
======= ======== ========= ========= ======== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities $ 172 $ 3,121 $ 11,731 $ 70 $ 2,250 $ - $ 17,344
Payable to (receivable
from) affiliates (14,687) 288 7,119 (664) (1,998) 10,000 58
------- -------- --------- --------- -------- --------- ---------
Total current
liabilities (14,515) 3,409 18,850 (594) 252 10,000 17,402
LONG-TERM DEBT - 28,060 106,940 - - - 135,000
------- -------- --------- --------- -------- --------- ---------
Total liabilities (14,515) 31,469 125,790 (594) 252 10,000 152,402
------- -------- --------- --------- -------- --------- ---------
EQUITY SUBJECT TO
REDUCTION 20,000 - 10,000 - 10,000 (20,000) 20,000
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12 1 (19,408) 6
Additional paid-in
capital 78,494 2,266 45,241 184,880 3,000 (235,387) 78,494
Retained earnings
(deficit) (6,674) (118) (1,784) (1,450) (2,319) 5,671 (6,674)
------- -------- --------- --------- -------- --------- ---------
Total stockholders'
equity 71,826 2,148 62,852 183,442 682 (249,124) 71,826
------- -------- --------- --------- -------- --------- ---------
Total liabilities
and stockholders'
equity $77,311 $ 33,617 $ 198,642 $ 182,848 $ 10,934 $(259,124) $ 244,228
======= ======== ========= ========= ======== ========= =========
</TABLE>
Page 6
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1997
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 527 $ 4,642 $ 29,332 $ 644 $ 2,150 $ (4,147) $ 33,148
COST OF SERVICES AND
PRODUCTS SOLD - 3,559 25,685 114 740 (1,503) 28,595
--------- --------- --------- ------- -------- -------- ----------
Gross profit 527 1,083 3,647 530 1,410 (2,644) 4,553
ADMINISTRATIVE EXPENSES 121 557 837 - 1,775 (1,587) 1,703
--------- --------- --------- ------- -------- -------- ----------
Income (loss) from
operations 406 526 2,810 530 (365) (1,057) 2,850
INTEREST EXPENSE - 864 3,361 - - - 4,225
INTEREST INCOME 4 6 86 - 6 - 102
--------- --------- --------- ------- -------- -------- ----------
Income (loss) before
provision for
income taxes 410 (332) (465) 530 (359) (1,057) (1,273)
PROVISION FOR INCOME TAXES - 15 71 - (56) - 30
--------- --------- --------- ------- -------- -------- ----------
Net income (loss) 410 (347) (536) 530 (303) (1,057) (1,303)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (1,713) - - (883) (1) 2,597 -
--------- --------- --------- ------- -------- -------- ----------
Net income (loss)
available to
common
stockholders $ (1,303) $ (347) $ (536) $ (353) $ (304) $ 1,540 $ (1,303)
========= ========= ========= ======= ======== ======== ==========
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 484 $ 1,946 $ 12 $ 252 $ - $ 2,694
========= ========= ========= ======= ======== ======== ==========
</TABLE>
Page 7
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 528 $ 7,363 $ 58,633 $ 745 $ 4,256 $ (5,668) $ 65,857
COST OF SERVICES AND
PRODUCTS SOLD - 6,026 50,823 215 1,402 (1,375) 57,091
--------- --------- --------- ------- -------- -------- ----------
Gross profit 528 1,337 7,810 530 2,854 (4,293) 8,766
ADMINISTRATIVE EXPENSES 138 1,019 1,652 - 3,611 (3,238) 3,182
--------- --------- --------- ------- -------- -------- ----------
Income (loss) from
operations 390 318 6,158 530 (757) (1,055) 5,584
INTEREST EXPENSE - 1,753 6,672 - 5 - 8,430
INTEREST INCOME 59 14 143 - 10 - 226
--------- --------- --------- ------- -------- -------- ----------
Income (loss) before
provision for
income taxes 449 (1,421) (371) 530 (752) (1,055) (2,620)
PROVISION FOR INCOME TAXES - 39 140 8 46 - 233
--------- --------- --------- ------- -------- -------- ----------
Net income (loss) 449 (1,460) (511) 522 (798) (1,055) (2,853)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (3,302) - - (1,971) (11) 5,284 -
--------- --------- --------- ------- -------- -------- ----------
Net income (loss)
available to
common
stockholders $ (2,853) $ (1,460) $ (511) $(1,449) $ (809) $ 4,229 $ (2,853)
========= ========= ========= ======= ======== ======== ==========
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 970 $ 3,892 $ 19 $ 503 $ - $ 5,384
========= ========= ========= ======= ======== ======== ==========
</TABLE>
Page 8
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net cash provided by
(used in) operating
activities $ (5,714) $ (101) $ 8,540 $ 519 $ 946 $ (1,057) $ 3,133
--------- ------- -------- -------- ------ -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property
and equipment - (379) (1,759) (1) (167) 3 (2,303)
Proceeds from sale
property and
equipment - - - - 6 - 6
--------- ------- -------- -------- ------ -------- --------
Net cash used in
investing
activities - (379) (1,759) (1) (161) 3 (2,297)
--------- ------- -------- -------- ------ -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends paid (1,350) - (527) (527) - 1,054 (1,350)
--------- ------- -------- -------- ------ -------- --------
Net cash used in
financing
activities (1,350) - (527) (527) - 1,054 (1,350)
--------- ------- -------- -------- ------ -------- --------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS (7,064) (480) 6,254 (9) 785 - (514)
CASH AND CASH EQUIVALENTS,
beginning of period 7,065 854 1,304 41 - - 9,264
--------- ------- -------- -------- ------ -------- --------
CASH AND CASH EQUIVALENTS,
end of period $ 1 $ 374 $ 7,558 $ 32 $ 785 $ - $ 8,750
========= ======= ======== ======== ====== ======== ========
</TABLE>
Page 9
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL, N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED BALANCE SHEET
JUNE 30, 1998
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
ASSETS (UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------ ------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8 $ 1,127 $ 7,247 $ 12 $ 195 $ - $ 8,589
Accounts receivable, net - 2,062 7,428 1 404 - 9,895
Inventory - 427 736 - - - 1,163
Prepaid expenses - 106 33 - 1,997 - 2,136
Assets held for sale, net - - 10,000 - 6,000 - 16,000
------- -------- --------- --------- -------- --------- ---------
Total current assets 8 3,722 25,444 13 8,596 - 37,783
PROPERTY AND EQUIPMENT, net - 27,971 167,857 1,147 579 - 197,554
INVESTMENT IN SUBSIDIARIES 80,515 - - 180,267 196 (260,978) -
OTHER NONCURRENT ASSETS - 1,077 3,960 1 161 - 5,199
------- -------- --------- --------- -------- --------- ---------
Total assets $80,523 $ 32,770 $ 197,261 $ 181,428 $ 9,532 $(260,978) $ 240,536
======= ======== ========= ========= ======== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities $ 280 $ 3,128 $ 11,603 $ 34 $ 2,076 $ (1) $ 17,120
Payable to (receivable
from) affiliates (8,228) (1,574) (813) (673) 5,233 6,000 (55)
------- -------- --------- --------- -------- --------- ---------
Total current
liabilities (7,948) 1,554 10,790 (639) 7,309 5,999 17,065
LONG-TERM DEBT - 28,060 106,940 - - - 135,000
------- -------- --------- --------- -------- --------- ---------
Total liabilities (7,948) 29,614 117,730 (639) 7,309 5,999 152,065
------- -------- --------- --------- -------- --------- ---------
EQUITY SUBJECT TO REDUCTION 16,000 - 10,000 - 6,000 (16,000) 16,000
STOCKHOLDERS' EQUITY:
Common stock 6 - 19,395 12 - (19,407) 6
Additional paid-in capital 82,494 2,266 51,591 182,201 3,000 (239,058) 82,494
Retained earnings (deficit) (10,029) 890 (1,455) (146) (6,777) 7,488 (10,029)
------- -------- --------- --------- -------- --------- ---------
Total stockholders'
equity 72,471 3,156 69,531 182,067 (3,777) (250,977) 72,471
------- -------- --------- --------- -------- --------- ---------
Total liabilities and
stockholders' equity $80,523 $ 32,770 $ 197,261 $ 181,428 $ 9,532 $(260,978) $ 240,536
======= ======== ========= ========= ======== ========= =========
</TABLE>
Page 10
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1998
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ - $ 5,149 $ 30,318 $ 128 $ 2,901 $ (2,024) $ 36,472
COST OF SERVICES AND
PRODUCTS SOLD - 2,706 25,102 151 1,190 (337) 28,812
--------- --------- --------- ------- -------- -------- ----------
Gross profit - 2,443 5,216 (23) 1,711 (1,687) 7,660
VALUATION ADJUSTMENT ON
ASSET HELD FOR SALE - - - - 4,000 - 4,000
ADMINISTRATIVE EXPENSES 145 607 1,078 - 1,850 (1,687) 1,993
--------- --------- --------- ------- -------- -------- ----------
Income (loss) from
operations (145) 1,836 4,138 (23) (4,139) - 1,667
INTEREST EXPENSE - 876 3,340 - 8 (6) 4,218
INTEREST INCOME - 10 99 - 1 (6) 104
--------- --------- --------- ------- -------- -------- ----------
Income (loss) before
provision for
income taxes (145) 970 897 (23) (4,146) - (2,447)
PROVISION FOR INCOME
TAXES 7 14 (4) (6) 3 - 14
--------- --------- --------- ------- -------- -------- ----------
Net income (loss) (152) 956 901 (17) (4,149) - (2,461)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (2,309) - - 1,857 (10) 462 -
--------- --------- --------- ------- -------- -------- ----------
Net income (loss)
available to
common stockholders $ (2,461) $ 956 $ 901 $ 1,840 $ (4,159) $ 462 $ (2,461)
========= ========= ========= ======= ======== ======== ==========
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 482 $ 2,047 $ 34 $ 380 $ - $ 2,943
========= ========= ========= ======= ======== ======== ==========
</TABLE>
Page 11
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1998
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN RECLASSIFICATIONS
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED AND CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES ELIMINATIONS TOTAL
------------------ ---------------- ------------ -------------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ - $ 9,628 $ 55,422 $ 257 $ 5,494 $ (3,965) $ 66,836
COST OF SERVICES AND
PRODUCTS SOLD - 5,697 46,314 286 2,383 (748) 53,932
--------- --------- --------- ------- -------- -------- ----------
Gross profit - 3,931 9,108 (29) 3,111 (3,217) 12,904
VALUATION ADJUSTMENT ON
ASSET HELD FOR SALE - - - - 4,000 - 4,000
ADMINISTRATIVE EXPENSES 195 1,158 2,124 - 3,549 (3,217) 3,809
--------- --------- --------- ------- -------- -------- ----------
Income (loss) from
operations (195) 2,773 6,984 (29) (4,438) - 5,095
INTEREST EXPENSE - 1,756 6,686 - 9 (6) 8,445
INTEREST INCOME - 23 195 - 2 (6) 214
--------- --------- --------- ------- -------- -------- ----------
Income (loss) before
provision for
income taxes (195) 1,040 493 (29) (4,445) - (3,136)
PROVISION FOR INCOME
TAXES 14 32 164 4 5 - 219
--------- --------- --------- ------- -------- -------- ----------
Net income (loss) (209) 1,008 329 (33) (4,450) - (3,355)
EARNINGS (LOSS) FROM
EQUITY INVESTMENTS (3,146) - - 1,337 (8) 1,817 -
--------- --------- --------- ------- -------- -------- ----------
Net income (loss)
available to
common stockholders $ (3,355) $ 1,008 $ 329 $ 1,304 $ (4,458) $ 1,817 $ (3,355)
========= ========= ========= ======= ======== ======== ==========
DEPRECIATION AND
AMORTIZATION EXPENSE $ - $ 962 $ 4,095 $ 68 $ 725 $ - $ 5,850
========= ========= ========= ======= ======== ======== ==========
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
COMBINING CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
GUARANTEEING SUBSIDIARIES
-----------------------------------------------------
STATIA TERMINALS NETHERLANDS
CANADA, INC. STATIA ANTILLES
STATIA TERMINALS (INCLUDES ALL TERMINALS OTHER THAN
INTERNATIONAL N.V. CANADIAN N.V. STATIA UNITED CONSOLIDATED
(UNCONSOLIDATED) ENTITIES) CONSOLIDATED TERMINALS N.V. STATES TOTAL
------------------ ---------------- ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
operating activities $ 7 $ 72 $ 5,803 $ (9) $1,802 $ 7,675
--------- ------- -------- -------- ------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - (186) (3,149) - (1,834) (5,169)
--------- ------- -------- -------- ------ --------
Net cash used in investing
activities - (186) (3,149) - (1,834) (5,169)
--------- ------- -------- -------- ------ --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 7 (114) 2,654 (9) (32) 2,506
CASH AND CASH EQUIVALENTS,
beginning of period 1 1,241 4,593 21 227 6,083
--------- ------- -------- -------- ------ --------
CASH AND CASH EQUIVALENTS,
end of period $ 8 $ 1,127 $ 7,247 $ 12 $ 195 $ 8,589
========= ======= ======== ======== ====== ========
</TABLE>
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For purposes of the discussion below, reference is made to the
unaudited Consolidated Condensed Financial Statements and Notes thereto of
Statia Terminals International N.V. and its Subsidiaries as of June 30, 1998 and
the three month and six month periods ended June 30, 1998 and 1997 included
herein. Reference should also be made to the Company's Annual Report on Form
10-K as of and for the year ended December 31, 1997 including the Consolidated
Financial Statements of the Company, Statia Canada and Statia Terminals N.V.
("STNV").
RESULTS OF OPERATIONS
Total revenues for the three months ended June 30, 1998 were $36.5
million compared to $33.1 million for the same period in 1997, an increase of
$3.3 million, or 10.0%. Total revenues for the six months ended June 30, 1998
were $66.8 million compared to $65.9 million for the same period in 1997, an
increase of $1.0 million, or 1.5%. The revenue increases resulted primarily from
increased terminaling services revenue (consisting of storage, throughput,
docking charges, emergency response fees and other terminal charges) at the
Company's St. Eustatius, Netherlands Antilles; Point Tupper, Canada; and
Brownsville, Texas facilities partially offset by reduced bunker and bulk
product sales revenues at St. Eustatius and Point Tupper. The improvement in
terminaling service revenue for the first half of 1998 compared to 1997 is
partially due to (i) the Company's ability to attract additional customers who
use the Company's facilities as part of their strategic distribution networks,
and (ii) the recent contango conditions in the petroleum market.
<TABLE>
<CAPTION>
REVENUES AND OPERATING INCOME (LOSS) BY LOCATION
(Dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- ----------------------------------
1997 1998 1997 1998
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES
Netherlands Antilles and the Caribbean
Terminaling services $ 8,529 $ 10,986 $ 18,276 $ 19,995
Bunker and bulk product sales 20,893 19,254 40,492 35,436
---------------- --------------- --------------- ---------------
29,422 30,240 58,768 55,431
---------------- --------------- --------------- ---------------
Canada
Terminaling services 3,577 4,951 5,791 9,430
Bunker and bulk product sales 1,065 198 1,572 198
---------------- --------------- --------------- ---------------
4,642 5,149 7,363 9,628
---------------- --------------- --------------- ---------------
United States
Terminaling services* 755 1,214 1,585 2,277
Corporate Services 1,395 1,687 2,671 3,217
---------------- --------------- --------------- ---------------
2,150 2,901 4,256 5,494
---------------- --------------- --------------- ---------------
Eliminations (3,066) (1,818) (4,530) (3,717)
---------------- --------------- --------------- ---------------
Total revenues $ 33,148 $ 36,472 $ 65,857 $ 66,836
================ =============== =============== ===============
OPERATING INCOME (LOSS)
Netherlands Antilles and the Caribbean $ 2,689 $ 3,970 $ 6,023 $ 6,760
Canada 526 1,836 318 2,773
United States* (365) (4,139) (757) (4,438)
---------------- --------------- --------------- ---------------
Total operating income $ 2,850 $ 1,667 $ 5,584 $ 5,095
================ =============== =============== ===============
<FN>
* As more fully discussed in Note 3 of Notes to Consolidated Condensed Financial
Statements and elsewhere in this Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company sold its Brownsville,
Texas facility on July 29, 1998.
</FN>
</TABLE>
Page 14
<PAGE>
Revenues from terminaling services at St. Eustatius increased
approximately $3.8 million and $3.1 million in the second quarter and first six
months of 1998, respectively, as compared to the same periods of 1997. Total
throughput increased from 15.1 million barrels during the second quarter of 1997
to 16.2 million barrels during the second quarter of 1998 due primarily to
higher throughput of clean products partially offset by reduced throughput of
crude oil and fuel oil. Total throughput decreased from 33.2 million barrels
during the first six months of 1997 to 31.5 million barrels during the same
period of 1998 due primarily to reduced throughput of crude oil and fuel oil
partially offset by higher throughput of clean products. Fifteen and seven more
vessels called at the St. Eustatius facility during the second quarter and first
six months of 1998, respectively, than during the same periods of 1997 resulting
in higher revenues from docking charges. For the second quarter and first six
months of 1998, the overall percentage of capacity leased at this facility was
93% and 89%, respectively, compared to 75% and 78% for the same periods of 1997,
respectively, reflecting increases in the percentage of capacity leased for
clean products and fuel oil tankage.
Caribbean bunker and bulk product sales decreased $1.6 million, or
7.8%, and $5.1 million, or 12.5%, in the second quarter and first six months of
1998, respectively, as compared to the same periods of 1997 primarily as a
result of lower comparative selling prices on bunker sales reflecting current
market conditions. Average selling prices decreased 28.3% and 27.9%,
respectively, when comparing the second quarter and first six months of 1998
with the same periods of 1997. However, metric tons of bunkers and bulk product
sold increased 28.5% and 21.3% during the second quarter and first six months of
1998, respectively, as compared to the same periods of 1997 resulting in higher
gross profit from these sales.
The percentage of tank capacity leased at Point Tupper increased from
65% and 60% for the second quarter and first six months of 1997, respectively,
to 89% and 88% for the same periods of 1998, respectively. These increases were
primarily the result of additional crude oil and clean products tankage leased
during the second quarter and first six months of 1998 as compared to the same
periods of 1997 and a nearly fifty percent increase in throughput barrels during
the first six months of 1998 as compared to the same period of 1997. Additional
throughput led to higher port charge revenues from vessels calling at this
facility during the first six months of 1998 as compared to the same period of
1997.
Gross profit for the second quarter and first six months of 1998 was
$7.7 million and $12.9 million, respectively, compared to $4.6 million and $8.8
million for the same periods of 1997, respectively, representing increases of
$3.1 million, or 68.2%, and $4.1 million, or 47.2%. The increase in gross profit
is primarily the result of the increased terminaling services revenue which
typically produces higher gross margins than bunker and bulk product sales.
Additionally, the Company realized higher gross margins on bunker sales during
the second quarter and first six months of 1998 as compared to the same periods
of 1997 due to higher volumes of bunker fuels delivered during the three and six
months ended June 30, 1998. Gross margin percentages on bunker sales at St.
Eustatius may vary widely depending upon relative market selling prices and due
to the fixed nature of delivery costs. As a result of lower average selling
prices, the Company realized higher gross margins on lower bunker sales revenue
during the second quarter and first six months of 1998 as compared to the same
periods of 1997.
As more fully discussed in Note 3 of Notes to Consolidated Condensed
Financial Statements, the Company recognized a valuation adjustment of $4.0
million related to its Brownsville, Texas facility during the second quarter of
1998. The Company has recorded a valuation allowance against the tax asset
resulting from the valuation adjustment as management believes it is not likely
the net deferred tax asset will be utilized in the future. Therefore, the
valuation adjustment had no net effect on the provision for income taxes.
Administrative expenses were $2.0 million and $3.8 million for the
three and six months ended June 30, 1998, respectively, as compared to $1.7
million and $3.2 million for the same periods of 1997, respectively,
representing increases of $0.3 million, or 17.0%, and $0.6 million, or 19.7%.
The increases during the second quarter and first six months of 1998 as compared
to the same periods of 1997 are primarily the result of higher personnel costs.
During the first six months of 1997 and 1998, the Company incurred $8.4
million of interest expense from interest accrued on the 11-3/4% First Mortgage
Notes due 2003 and amortization expense related to deferred financing costs.
Page 15
<PAGE>
The following table sets forth for the periods indicated certain key
statistics for each of the Company's operating locations.
<TABLE>
<CAPTION>
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(Capacity and throughput in thousands of barrels)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------- ---------------------------------
1997 1998 1997 1998
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Netherlands Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334 11,334
Capacity leased 75% 93% 78% 89%
Throughput 15,103 16,231 33,236 31,527
Vessel calls 210 225 413 420
Canada
Total capacity 7,404 7,404 7,404 7,404
Capacity leased 65% 89% 60% 88%
Throughput 11,959 11,613 18,666 27,198
Vessel calls 29 32 45 63
Texas*
Total capacity 1,649 1,649 1,649 1,649
Capacity leased 20% 58% 34% 50%
Throughput 250 1,013 583 1,876
Vessel calls 15 32 41 59
All locations
Total capacity 20,387 20,387 20,387 20,387
Capacity leased 67% 89% 68% 85%
Throughput 27,312 28,857 52,485 60,601
Vessel calls 254 289 499 542
<FN>
* As more fully discussed in Note 3 of Notes to Consolidated Condensed Financial
Statements and elsewhere in this Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, the Company sold its Brownsville,
Texas facility on July 29, 1998.
</FN>
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the Company's primary source of
liquidity during the period ended June 30, 1998. Cash provided by operations has
been used to purchase property and equipment. Despite net losses of $3.4 million
and $2.9 million for the six months ended June 30, 1998 and 1997, respectively,
the Company had positive cash flow from operations of $7.7 million and $3.1
million for the respective periods. Differences between net losses and positive
operating cash flow have resulted primarily from depreciation and amortization
burdens and changes in various asset and liability accounts. Additionally,
during the three months ended June 30, 1998, the Company recognized a $4.0
million non-cash valuation adjustment on certain assets held for sale (see Note
3 of Notes to Consolidated Condensed Financial Statements for more information).
At December 31, 1997, the Company had cash and cash equivalents on hand of $6.1
million compared to $8.6 million at June 30, 1998 (which included $6.9 million
invested in time deposits maturing in July and November of 1998).
Page 16
<PAGE>
In January 1997, Statia declared a common stock dividend in the amount
of $1.35 million to enable its Parent to pay a management fee to Castle Harlan,
Inc. for the period from November 1996 to November 1997. A similar dividend was
declared in November 1997 for management fees related to the year ended November
1998.
During the first six months of 1998, no significant changes have
occurred in the Company's debt and equity financing arrangements. As of June 30,
1998, the Company had not borrowed under its $17.5 million revolving credit
facility. This facility permits the Company to borrow in accordance with its
available borrowing base which was estimated at $6.2 million ($5.6 million for
STNV and $0.6 million for Statia Canada) as of June 30, 1998 and bears interest
at the prime rate plus 50 basis points (9.0% at June 30, 1998). This facility is
available for working capital needs and letter of credit financing.
The Company's capital expenditure budget for 1998 has been revised to
$9.5 million and includes funds for expanding and sustaining its existing
operations. During the first six months of 1998, a majority of capital
expenditures were related to sustaining the Company's existing operations
including its terminal and marine equipment maintenance programs. Additional
spending is contingent upon the disposition of those assets which the Company
continues to hold for sale and the addition of incremental terminaling business.
Because certain of the Company's computer systems may not adequately
handle changes brought about by the new millennium, the Company has developed a
plan for dealing with potential Year 2000 issues, including upgrading existing
software applications during 1998 and 1999. The 1998 capital expenditure budget
includes $0.7 million for such upgrades. In addition, certain non-recurring
expenses will be incurred during 1998 for consultants. In 1999, the Company
anticipates spending an additional $0.7 million to complete the development or
purchase and subsequent installation of computer software that will provide the
Company with a common database for the use of enterprise-wide applications. The
cost of addressing the Year 2000 issue is not expected to significantly impact
the Company's interaction with customers and suppliers, future financial
condition, or results of operations.
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES BY LOCATION
(Dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------- ----------------------------------
1997 1998 1997 1998
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 1,030 $ 1,777 $ 1,757 $ 3,149
Canada 265 70 379 186
United States 71 873 167 1,834
---------------- --------------- --------------- ---------------
$ 1,366 $ 2,720 $ 2,303 $ 5,169
================ =============== =============== ===============
</TABLE>
ASSETS HELD FOR SALE
As of December 31, 1997 and June 30, 1998 the Company's Brownsville,
Texas facility, owned by Statia Terminals Southwest, Inc., and the Company's
emergency response vessel, M/V STATIA RESPONDER (formerly known as M/V MEGAN D.
GAMBARELLA), were being held for sale. As more fully discussed in Note 3 of
Notes to Consolidated Condensed Financial Statements and Item 5 of this Form
10-Q, on July 29, 1998 the Company sold Southwest for $6.5 million in cash
resulting in net proceeds of approximately $6.0 million. Certain pro forma
financial information related to the sale of Southwest is provided in Note 3 of
Notes to Consolidated Condensed Financial Statements and Exhibit 99.1 of this
Form 10-Q.
The Company continues to actively seek potential buyers for its
emergency response vessel, the M/V STATIA RESPONDER. In addition, the Company is
presently considering other alternatives, which include retaining the vessel for
emergency response service in the Caribbean. Should the Company decide to retain
the vessel, the vessel's value would be reclassified on the Company's balance
sheet from an asset held for sale to property and equipment. At the present
time, the Company does not anticipate recognizing any adjustment to the vessel's
carrying value.
Page 17
Similar levels of revenues are anticipated to be earned and similar expenses
incurred following any disposition of the M/V STATIA RESPONDER.
Certain of the Company's parent's (the "Parent") preferred stock
agreements contain features which may require the Parent to cause the Company to
issue a dividend or otherwise remit the net proceeds from the sale of Southwest
and the M/V STATIA RESPONDER. Accordingly, $16 million of the Company's common
stockholder's equity has been classified outside the equity section as
stockholder's equity subject to reduction.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company periodically purchases refined petroleum products from its
customers and others for resale as bunker fuel, for small volume sales to
commercial interests and to maintain an inventory of blend stocks for its
customers. Petroleum inventories are held for short time periods, generally not
exceeding ninety days. The Company does not presently have any derivative
positions to hedge its inventory of petroleum products. The following table
indicates the Company's aggregate carrying value of its petroleum products on
hand at June 30, 1998 at average cost, net of any lower of cost or market
valuation provisions, and the estimated fair value of such products.
ON BALANCE SHEET COMMODITY POSITION
(Dollars in thousands)
CARRYING FAIR
AMOUNT VALUE
--------------- --------------
Petroleum Inventory
STNV $ 736 $ 713
Statia Canada 427 480
--------------- --------------
$ 1,163 $ 1,193
=============== ==============
As substantially all of the Company's transactions are in U.S. dollars,
and as all of the Company's present debt obligations carry a fixed rate of
interest (except for the undrawn revolving credit facilities which vary with
changes in the lender's prime lending rate), management believes the Company's
exposure to foreign currency exchange rate fluctuation and interest rate
fluctuation are minimal.
Page 18
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to Item 3. Legal Proceedings in the Company's 1997
Annual Report on Form 10-K (the "10-K") for complete discussion. There have been
no material developments in the Company's legal proceedings since December 31,
1997, except with regard to the action by the U.S. Department of Justice against
Statia Terminals, Inc. ("STI") and STNV. As reported in the 10-K, in May 1994
the U.S. Department of Justice brought an action in the U.S. District Court for
the District of The Virgin Islands against STI and STNV for $3.6 million of
pollution clean-up costs in connection with the discharge of oil into the
territorial waters of the U.S. Virgin Islands and Puerto Rico by a barge (which
was not owned or leased by the Company or any of its affiliates) that had been
loaded by STNV at St. Eustatius. The Company has been disputing the U.S.
District Court's jurisdiction over STNV. On April 16, 1998 the U.S. District
Court entered an order granting STNV's motion to dismiss for lack of
jurisdiction over STNV (the "Order"). The U.S. Department of Justice has not
filed an interlocutory appeal from the Order, and the time for doing so has
expired. The case is still pending against STI, and the Order could be
challenged on appeal after final disposition by the U.S. District Court of the
balance of the case if the U.S. Department of Justice continues the case against
STI alone. In connection with the CHPII Acquisition, Praxair agreed to indemnify
the Company against damages relating to this matter.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
On July 29, 1998, the Company sold a subsidiary, Statia Terminals
Southwest, Inc., which owns storage and transshipment facilities located in
Brownsville, Texas to TransMontaigne Terminaling Inc., a subsidiary of
TransMontaigne Oil Company, for $6.5 million in cash resulting in net proceeds
of approximately $6.0 million. The sale price was determined through arms-length
negotiation. The Company retained certain of the pre-closing assets and
liabilities of Southwest consisting primarily of accounts receivable and accrued
expenses and agreed to indemnify the purchaser for certain contingent legal and
environmental matters up to a maximum of $0.5 million. No provision has been
made in the Company's financial statements for these contingent matters as
management believes it is not probable the Company will ever be required to
provide such indemnification.
During the quarter ended June 30, 1998, the Company recognized a
valuation adjustment of $4,000 representing the difference between the
anticipated net proceeds from the sale of Southwest and the carrying amount of
the related assets. The valuation adjustment is an estimate and may be adjusted
upon the final disposition of Southwest. However, management anticipates that
any such adjustment in future periods would be immaterial. The Company has
recorded a valuation allowance against the tax asset resulting from the
valuation adjustment, as management believes it is not likely the net deferred
tax asset will be utilized in the future. Therefore, the valuation adjustment
had no net effect on the provision for income taxes.
The Pro Forma Financial Information and sale agreement related to this
transaction are presented as exhibits to this Form 10-Q.
Page 19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
2 Stock Purchase Agreement Dated as of July 22, 1998 between
Statia Delaware HOLDCO II, Inc. and TransMontaigne Terminaling
Inc.
27.1 Financial Data Schedule for Statia Terminals International
N.V. (for electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada,
Incorporated. (for electronic filing only)
99.1 Pro Forma Financial Information
(b) Reports on Form 8-K.
None.
Page 20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this Report to be signed on their behalf by the
undersigned thereunto duly authorized.
STATIA TERMINALS INTERNATIONAL N.V.
(Registrant)
Date: August 13, 1998
By: /s/ JAMES F. BRENNER
-----------------------------------
James F. Brenner
Vice President - Finance
(As Authorized Officer)
STATIA TERMINALS CANADA, INCORPORATED
(Registrant)
Date: August 13, 1998
By: /s/ JAMES F. BRENNER
-----------------------------------
James F. Brenner
Vice President and Treasurer
(As Authorized Officer)
Page S-1
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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2 Stock Purchase Agreement Dated as of July 22, 1998 between
Statia Delaware HOLDCO II, Inc. and TransMontaigne Terminaling
Inc.
27.1 Financial Data Schedule for Statia Terminals International N.V.
(for electronic filing only)
27.2 Financial Data Schedule for Statia Terminals Canada, Incorporated.
(for electronic filing only)
99.1 Pro Forma Financial Information
EXHIBIT 2
STOCK PURCHASE AGREEMENT
DATED AS OF JULY 22, 1998
between
STATIA DELAWARE HOLDCO II, INC.
and
TRANSMONTAIGNE TERMINALING INC.
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.........................................................1
1.1 Defined Terms.......................................................1
1.2 Other Definitional Provisions.......................................4
ARTICLE 2 DELIVERY AND PAYMENT FOR SHARES.....................................4
2.1 Purchase and Sale of Shares.........................................4
2.2 Purchase Price......................................................5
2.3 Delivery of Shares..................................................5
2.4 Retained Assets and Liabilities.....................................5
2.5 Closing.............................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER........................6
3.1 Organization........................................................6
3.2 Authority; Enforceability...........................................6
3.3 No Violation........................................................6
3.4 Approvals...........................................................7
3.5 Capital Stock.......................................................7
3.6 Organization and Qualification of the Company.......................7
3.7 Financial Statements................................................7
3.8 Absence of Material Adverse Changes or Events.......................8
3.9 Legal Proceedings...................................................8
3.10 List of Properties, Contracts and Other Data........................8
3.11 Contracts...........................................................9
3.12 Leases..............................................................9
3.13 Certain Tax Matters.................................................9
3.14 Compliance with Laws...............................................10
3.15 Environmental Laws.................................................10
3.16 Affiliate Transactions.............................................11
3.17 Labor Matters......................................................11
3.18 Insurance..........................................................12
3.19 Public Utility Holding Company Act; Other Regulations..............12
3.20 Minute Books; Stock Register.......................................12
3.21 Benefit Plans......................................................12
3.22 Intercompany Transactions..........................................13
3.23 Information Supplied...............................................14
3.24 Brokerage Agreements...............................................14
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................14
4.1 Organization.......................................................14
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4.2 Authority; Enforceability..........................................14
4.3 No Violation.......................................................14
4.4 Approvals..........................................................15
4.5 Financing..........................................................15
4.6 Investment Purpose.................................................15
4.7 Investigation and Evaluation; No Implied Representation............15
4.8 Litigation.........................................................16
4.9 Brokerage Agreements...............................................16
ARTICLE 5 COVENANTS..........................................................17
5.1 Conduct of Business................................................17
5.2 Investigation......................................................18
5.3 Efforts; Taking of Necessary Action................................19
5.4 Expenses...........................................................19
5.5 Employees; Benefit Plans...........................................19
5.6 Termination of Seller Services.....................................22
5.7 Taxes; Operations Before or After Closing Date.....................23
5.8 Section 338(h)(10) Election........................................25
5.9 Additional Agreements..............................................25
5.10 Post-Closing Cooperation...........................................26
5.11 Preservation of Records and Access.................................26
5.12 Other Liabilities..................................................27
5.13 Release of Liens...................................................27
5.14 The Company's Name.................................................27
5.15 Post-Closing Reconciliation........................................27
5.16 Third-Party Construction Projects..................................28
5.17 Environmental Assessment...........................................28
5.18 Product and BS&W Inventory - Responsibility and Measurements.......28
ARTICLE 6 CONDITIONS TO THE CLOSING..........................................29
6.1 Conditions of Obligation of Each Party.............................29
6.2 Additional Conditions to the Obligations of the Purchaser..........29
6.3 Additional Conditions to the Obligations of the Seller.............31
ARTICLE 7 INDEMNIFICATION....................................................32
7.1 Survival of Representations, Warranties, Covenants and Agreements..32
7.2 Indemnification Provisions for the Benefit of the Purchaser........32
7.3 Indemnification Provisions for Benefit of the Seller
and its Affiliates...............................................33
7.4 Matters Involving Third Parties....................................33
7.5 Determination of Losses............................................35
7.6 Exclusive Remedy...................................................35
7.7 Liability of STI...................................................36
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ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER..................................36
8.1 Termination........................................................36
8.2 Effect of Termination..............................................36
ARTICLE 9 MISCELLANEOUS......................................................37
9.1 Schedules..........................................................37
9.2 Notices............................................................37
9.3 Heading; Cross References..........................................39
9.4 Amendment..........................................................39
9.5 Extension; Waiver..................................................39
9.6 Entire Agreement...................................................39
9.7 Assignment.........................................................39
9.8 Governing Law......................................................39
9.9 Attorneys Fees.....................................................39
9.10 Submission to Jurisdiction.........................................39
9.11 Counterparts.......................................................40
9.12 Press Releases and Public Announcements............................40
9.13 No Third-Party Beneficiaries.......................................41
9.14 Time of Essence....................................................41
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SCHEDULES
Schedule 2.4(b) -- Retained Assets and Liabilities
Schedule 2.4(f) -- Receivables
Schedule 3.3 -- No Violation
Schedule 3.4 -- Approvals
Schedule 3.5 -- Capital Stock
Schedule 3.7 -- Financial Statements
Schedule 3.9 -- Legal Proceedings
Schedule 3.10 -- Properties
Schedule 3.11 -- Contracts
Schedule 3.13(b) -- Tax Matters
Schedule 3.13(f) -- Partnerships for Federal Income Tax Purposes
Schedule 3.16 -- Affiliate Transactions
Schedule 3.17(c) -- Labor Matters
Schedule 3.18 -- Insurance
Schedule 3.21(a) -- Benefit Plans
Schedule 3.21(e) -- Employment
Schedule 4.3 -- No Violation
Schedule 4.4 -- Approvals
Schedule 5.1(i) -- Dividends; Other Dispositions of Assets
Schedule 5.5(a) -- Existing Employees
Schedule 5.16 -- Third-Party Construction Projects
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of July 22, 1998 between Statia
Delaware HoldCo II, Inc., a Delaware corporation (the "SELLER"), TransMontaigne
Terminaling Inc., an Arkansas corporation (the "PURCHASER"), and Statia
Terminals International N.V., a Netherlands Antilles corporation ("STI").
R E C I T A L S:
WHEREAS, the Seller is the legal owner of 1,000,000 shares of common
stock, par value $0.01 per share (the "SHARES"), of Statia Terminals Southwest,
Inc., a Texas corporation (the "COMPANY"), constituting all of the issued and
outstanding shares of capital stock of all classes of the Company; and
WHEREAS, Seller's parent company, STI, will dissolve or merge Seller
into STI or another affiliated entity, after which Seller's corporate existence
shall cease; and
WHEREAS, STI has agreed to assume and guaranty the payment or
performance of certain obligations of Seller referenced herein and is executing
this Agreement solely for such limited purpose; and
WHEREAS, the Seller desires to sell, and the Purchaser desires to
purchase, the Shares on the terms and subject to the conditions set forth in
this Agreement; and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements and subject to the terms and conditions hereinafter set
forth, the parties hereto agree as follows:
AGREEMENT
ARTICLE 1.
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"AFFILIATE": with respect to any person, means any other person which
controls, is controlled by or is under common control with the former. The term
"control" and correlative terms shall have the meanings ascribed to them in Rule
405 under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"AGREEMENT": this Stock Purchase Agreement, including the exhibits and
schedules attached thereto, as amended, modified or supplemented from time to
time.
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"APPLICABLE RATE": the corporate base rate of interest publicly
announced from time to time by BankBoston, N.A.
"BENEFIT PLANS": any employee pension benefit plan (whether or not
insured), as defined in Section 3(2) of ERISA, any employee welfare benefit plan
(whether or not insured) as defined in Section 3(1) of ERISA, and each other
plan, program, agreement, arrangement, policy, practice or understanding,
whether or not subject to ERISA, that provides benefits for Continuing Employees
and Former Employees and that is sponsored or maintained by the Company or its
Affiliate.
"CLOSING": as defined in Section 2.5.
"CLOSING DATE": as defined in Section 2.5.
"CODE": the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT": the Confidentiality Agreement dated
December 8, 1997 between the Purchaser and the Seller.
"CONTINUING EMPLOYEE": any person who is presently employed by the
Company and whose employment is continued by the Purchaser immediately following
the Closing Date, and shall include, where a Benefit Plan provides benefits for
beneficiaries or dependents, the beneficiaries and dependents of a Continuing
Employee.
"EFFECTIVE DATE": 12:01 a.m. Eastern Daylight Time on July 1, 1998.
"ENVIRONMENTAL LAWS": all Laws, as existing as of the Effective Date,
relating to (a) the control of any pollutant or potential pollutant or
protection of the air, water, land or the environment, (b) solid, gaseous or
liquid waste generation, handling, treatment, storage, disposal or
transportation, or (c) exposure to hazardous, toxic, explosive, corrosive or
other substances alleged to be harmful. "Environmental Laws" shall include, but
not be limited to, the Clean Air Act, 42.U.S.C./section/ 7401 ET SEQ., the
Resource Conservation Recovery Act, 42 U.S.C. /section/ 6901 ET SEQ., the
Federal Water Pollution Control Act, 33 U.S.C./section/ 1251 ET SEQ., the Safe
Drinking Water Act, 42 U.S.C. /section/ 300f ET SEQ., the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. /section/ 9601 ET SEQ.;
the Toxic Substances Control Act, as amended; the Hazardous and Solid Waste
Amendments Act of 1984, as amended; the Hazardous Materials Transportation Act,
as amended; the Oil Pollution Act of 1990; any state laws implementing the
foregoing federal laws; and any state laws pertaining to the handling of oil and
gas exploration and production wastes or the use, maintenance and closure of
pits and impoundments.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended, and the
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rules and regulations promulgated thereunder.
"EXISTING EMPLOYEES": as defined in Section 5.5(a).
"FORMER EMPLOYEE": any person formerly employed by the Company prior to
the Effective Date other than a Continuing Employee, and shall include, where a
Benefit Plan provides benefits for beneficiaries or dependents, the
beneficiaries and dependents of a Former Employee.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": (i) the United States of America, (ii) any
state, county, municipality or other governmental subdivision within the United
States of America, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality or other governmental
subdivision within the United States of America.
"GROUP HEALTH PLAN": a group health plan within the meaning of
/section/ 5000(b)(1) of the Code.
"LAW": any applicable statute, law, ordinance, regulation, rule,
ruling, order, restriction, requirement, writ, injunction, decree or other
official act of or by any Governmental Authority.
"LEASES": those certain real property leases and First Refusal by and
between the Company and the Brownsville Navigation District of Cameron County,
Texas dated May 17, 1993 (Contract No. 2790), as amended by Lease Amendment
dated March 30, 1998 (Contract No. 2790 "A"); dated January 14, 1994 (Contract
No. 2826); dated February 3, 1997 (Contract No. 3013), as amended and extended
by letter agreement dated November 5, 1997; and dated March 24, 1998 (Contract
No. 3067).
"LIEN": any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any lease in the nature
thereof or the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction.
"LOSSES": all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in
settlement, liabilities, obligations, Taxes, Liens, losses, expenses and fees,
including court costs and reasonable attorneys' fees and expenses.
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"MATERIAL ADVERSE EFFECT": any change or effect that, individually or
when taken together with all other related changes or effects, would have an
adverse effect of more than $100,000 on the financial condition, results of
operations, business or prospects of the Company; provided, however, that
Material Adverse Effect shall not include changes in general economic, industry
or market conditions.
"ORDER": any judgment, order or consent order or decree of any
Governmental Authority.
"PERMIT": any and all permits, licenses, authorizations, orders,
certificates, registrations or other approvals granted by any federal, state,
local or foreign Governmental Authority.
"PERMITTED ENCUMBRANCES": the lien retained by the Brownsville
Navigation District with respect to the Leases to secure the rent and
obligations of the Company thereunder, covering the assets, including
structures, fixtures, equipment and personal property of the Company located on
the real property covered by the Leases.
"REGULATION": any rule or regulation of any Governmental Authority.
"TAX OR TAXES": any and all taxes, charges, fees, levies, assessments,
duties or other amounts imposed by any Governmental Authority or any foreign or
territorial governmental agency, including (x) income, franchise, profits, gross
receipts, minimum alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock, license,
franchise, payroll, withholding, disability, employment, social security,
workers compensation, unemployment compensation, utility, severance, excise,
stamp, windfall profits, environmental, transfer and gains taxes, (y) customs,
duties, imposts, charges, levies or other similar assessments of any kind, and
(z) interest, fines, penalties, assessments and additions to tax imposed with
respect thereto or incurred in connection with any dispute thereof.
"TAX RETURN": all reports, estimates, declarations of estimated tax,
information statements and returns relating to or required to be filed with
respect to any Taxes, including information returns or reports with respect to
backup withholding and other payments to third parties.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the
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singular and plural forms of such terms.
ARTICLE 2.
DELIVERY AND PAYMENT FOR SHARES
2.1 PURCHASE AND SALE OF SHARES. Upon the terms and subject to the
conditions of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements contained herein, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller, the
Shares at the Closing referred to in Section 2.5 below. The Purchase Price for
the Shares shall be paid as provided in Section 2.2.
2.2 PURCHASE PRICE. The aggregate purchase price for all of the Shares
shall be $6,500,000 (the "PURCHASE PRICE"), subject to adjustment as herein
provided. At the Closing, and against delivery of certificates representing the
Shares as provided in Section 2.3, the Purchaser shall pay to the Seller, by
wire transfer of immediately available funds to such accounts as the Seller
shall have designated in writing to the Purchaser prior to the Closing Date, an
aggregate amount equal to the Purchase Price.
2.3 DELIVERY OF SHARES. At the Closing, the Seller shall deliver or
cause to be delivered to the Purchaser a certificate for the Shares, registered
in the name of the Purchaser or such other name as the Purchaser may specify by
notice to the Seller at least two (2) business days prior to the Closing,
together with evidence of the cancellation of the certificate for the Shares
previously registered in the name of the Seller.
2.4 RETAINED ASSETS AND LIABILITIES. The Company shall dividend, assign
and/or transfer to the Seller or its Affiliates, on or before the Closing Date,
the following items:
(a) all cash or cash equivalents in the Company's bank
accounts along with the bank accounts themselves;
(b) the Company's computer system, including all peripheral
and related equipment as more particularly described in Schedule 2.4(b)
and (i) all telephone pagers and cellular telephones and (ii) all
personal computers (exclusive of those included with the software and
equipment listed in Schedule 2.4(b) which are to remain with the
Company);
(c) all insurance policies and rights thereunder including
rights to any cancellation value before the Effective Date;
(d) all rights in and to the trade name "Statia";
(e) all intercompany accounts in existence before the
Effective Date; and
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(f) all receivables, prepaid items, deposits and trade
payables in existence before the Effective Date except for those items
listed in Schedule 2.4(f) to be retained by the Company and/or to be
transferred or assigned to the Purchaser for which the Seller shall be
reimbursed.
It is the intent of the parties, pursuant to the foregoing, that at Closing the
Company's assets shall consist primarily of plant, property and equipment. To
the extent the Purchaser shall receive any assets related to trade receivables
not transferred pursuant to Section 2.4(f), prepaid items or deposits or
liabilities related to trade payables not transferred pursuant to Section 2.4(f)
or accrued liabilities, including accrued but unused vacation entitlements
attributed to the Continuing Employees, the same shall be quantified to the
Effective Date, and the Purchase Price adjusted up or down, as the case may be,
by a like amount and settled in accordance with the provisions of Section 5.15.
2.5 CLOSING. Subject to the conditions of Article 6 hereof, unless this
Agreement shall have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to the provisions of Section 8.1, the closing
(the "CLOSING") of the purchase and sale of the Shares shall take place at the
offices of Brown, Parker & Leahy, L.L.P., 1200 Smith Street, Suite 3600,
Houston, Texas 77002, at 9:00 a.m. on July 29, 1998, or at such other place,
time and date as the parties may mutually agree. The date on which the Closing
occurs is herein referred to as the "CLOSING DATE".
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser that the following
statements contained in this Article 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 3), except as set forth in the disclosure
schedules delivered by the Seller to the Purchaser:
3.1 ORGANIZATION. The Seller is a corporation (a) duly organized,
validly existing and in good standing under the laws of the State of Delaware
and (b) has full power and authority to own, lease and operate all of its
properties and assets and to carry on its business as it is now being conducted.
3.2 AUTHORITY; ENFORCEABILITY. The Seller has the power and authority
to execute and deliver this Agreement and each instrument required hereby to be
executed and delivered by it at Closing, to perform its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby on the
part of the Seller. The execution and delivery by the Seller of this Agreement
and each instrument required hereby to be executed and delivered by it at the
Closing
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and the performance of its obligations hereunder and thereunder have been duly
and validly authorized by all requisite corporate action on the part of the
Seller. No other proceedings on the part of the Seller are necessary to
authorize the execution and delivery of this Agreement and the consummation by
the Seller of the transactions contemplated hereby or the performance of its
obligations hereunder. This Agreement has been duly executed and delivered by
the Seller and (assuming due authorization, execution and delivery hereof by the
other party hereto) constitutes (and as of the Closing Date, each document and
instrument to be executed and delivered by the Seller hereunder, will
constitute) a legal valid and binding obligation of the Seller enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws relating to or affecting creditors'
rights generally and by general equity principles.
3.3 NO VIOLATION. Except as set forth in SCHEDULE 3.3, the execution
and delivery by the Seller of this Agreement or any instrument required hereby
to be executed and delivered by Seller at Closing, do not, and the consummation
by it of the transactions contemplated hereby and the performance by the Seller
of the obligations which it is obligated to perform hereunder and thereunder, do
not and at Closing will not (a) violate any provision of the corporate charter
or bylaws or the articles or bylaws of the Company or of Seller, (b) violate, or
result in the violation of, any provision of, or result in the termination of or
the acceleration of, or entitle any party to accelerate any obligation or
indebtedness under, or result in the imposition of any Lien upon any of the
Shares, pursuant to, any mortgage, lien, lease, franchise, license, permit,
agreement or other instrument to which the Seller or the Company is a party, or
by which the Seller or the Company is bound, and that could, in any such event,
have a Material Adverse Effect, or (c) subject to the approvals required as set
forth in Section 3.4, violate or conflict with any other restriction of any kind
or character to which the Seller or the Company is subject which would prevent
the consummation of the transactions contemplated hereby.
3.4 APPROVALS. Except as set forth in Schedule 3.4, no filing,
notification or registration with, no waiting period imposed by and no Order or
Permit or approval of, or waiver or other action by, any Governmental Authority
which has not been obtained or made is required under any Law, Regulation or
Order applicable to Seller or the Company, (a) for or in connection with the
execution and delivery of this Agreement and each instrument required hereby to
be executed and delivered by it at Closing by the Seller and the consummation by
the Seller of the transactions contemplated hereby and the performance by the
Seller of its obligations hereunder and thereunder, or (b) for the ongoing
operations of the Company.
3.5 CAPITAL STOCK. The entire authorized capital stock of the Company
consists of 1,000,000 shares of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, of which authorized capital stock there are
1,000,000 shares of common stock issued and outstanding as of the date hereof;
and all such Shares are validly issued, fully paid and nonassessable. Except as
set forth on SCHEDULE 3.5, the Seller owns all such issued and outstanding
Shares free and clear of any Liens, and the Seller has, or at Closing will have,
full
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right, power and authority to sell, transfer, convey and deliver the Shares
to the Purchaser, in accordance with the terms of this Agreement free and clear
of any and all Liens and the Shares will be delivered to the Purchaser at
Closing free and clear of any and all Liens except for any created by the
Purchaser. There are no, and as of Closing, there shall be no outstanding
obligations, warrants, options or other rights to subscribe for or purchase, or
other plans, contracts or commitments providing for the issuance of, or the
granting of rights to acquire, shares of stock of any class of the Company or
any securities or other instruments convertible into or exchangeable for shares
of stock of any class of the Company.
3.6 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Texas and has full corporate power and authority to own,
lease and operate all of its properties and assets and to carry on its business
as it is now being conducted.
3.7 FINANCIAL STATEMENTS. SCHEDULE 3.7 contains copies of the audited
balance sheets of the Company as of December 31, 1995, December 31, 1996 and
December 31, 1997 and the related statements of income and cash flows for each
of the financial periods then ended (collectively, the "FINANCIAL STATEMENTS").
The Financial Statements (including the notes thereto) present fairly the
financial position and results of operations of the Company as of the dates and
for the periods specified therein, and have been prepared in accordance with
GAAP consistently applied.
3.8 ABSENCE OF MATERIAL ADVERSE CHANGES OR EVENTS. Except as
contemplated by this Agreement, since December 31, 1997, the Company has
conducted its business in the ordinary course. Since the date of this Agreement
and as of Closing, there shall have been no change, occurrence or circumstance
in the current or future business, financial condition or results of operations
of the Company having or likely to have, individually or in the aggregate, a
Material Adverse Effect on the financial condition, results of operations or
current or future business of the Company.
3.9 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.9, there are
no actions, suits, investigations or proceedings (including any proceedings in
arbitration) pending or threatened against the Seller or the Company or any of
their respective assets, at law or in equity, in, before or by any person or
Governmental Authority that could affect the validity or enforceability of this
Agreement, or the ability of the Seller to perform its obligations under this
Agreement, or which, if determined adversely to the Company, would have a
Material Adverse Effect, nor are there any Orders against or enjoining the
Company in respect of, or the effect of which is to prohibit, restrict, or
affect, any business practice or the acquisition of any property or the conduct
of business in any area which will have a Material Adverse Effect.
3.10 LIST OF PROPERTIES, CONTRACTS AND OTHER DATA. SCHEDULE 3.10
contains a list, complete and accurate in all material respects, setting forth
as of a recent date identified in
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SCHEDULE 3.10, the following:
(a) all the real property owned of record or beneficially by
the Company, all real property leased by the Company as lessee or
lessor and all personal property; and
(b) (i) all mortgages, indentures, loan agreements and other
borrowing agreements to which the Company is a party as obligor, or to
which it or any of their respective owned assets or properties is
subject, which relate to indebtedness of the Company for borrowed money
or to mortgaging, pledging or otherwise placing a lien on any of their
respective assets; (ii) all guarantees and indemnification agreements
given or entered into by the Company with respect to indebtedness for
borrowed money or in support of obligations the principal obligor in
respect of which is not the Company (other than letters of credit and
other instruments entered into in the ordinary course of business); and
(iii) except as set forth on any other schedule attached to this
agreement, all other written contracts, leases, understandings or
commitments involving the payment by or to the Company of more than
$25,000 per annum with respect to any one contract or commitment or
$50,000 per annum with respect to any related group of contracts or
commitments.
3.11 CONTRACTS. SCHEDULE 3.11 lists all current storage contracts and
all other contracts and agreements related to the business of the Company
(excluding the Leases) to which the Company is a party and all such contracts
and agreements are in full force and effect, the Company has performed its
obligations thereunder and each other party thereto has performed its
obligations thereunder, other than any failure of a contract or agreement to be
in full force and effect or any nonperformance thereof that, individually or in
the aggregate, would not have a Material Adverse Effect.
3.12 LEASES. The Company is not in violation of the terms of
any Lease except any such violations that, individually or in the aggregate,
would not have a Material Adverse Effect, all Leases are valid and enforceable
and grant the rights purported to be granted thereby and all rights necessary
thereunder for the current operation of the business of the Company.
3.13 CERTAIN TAX MATTERS.
(a) The Seller is not a "foreign person" within the meaning of
Section 1445 of the Code.
(b) Except as set forth in SCHEDULE 3.13(b), (i) all Tax
Returns required to be filed by or with respect to the Company on or
before the Closing Date (including any extensions of time for filing
thereof) have been or will be timely filed; (ii) all Taxes which have
become or will become due with respect to the periods covered by each
such Tax Return have been or will be timely paid in full; all Tax Items
(as defined in Section
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5.7(a)) required to be included in each such Tax Return have been or
will be so included and all information provided in each such Tax
Return is, to the Seller's knowledge, true, correct and complete; (iii)
there is no action, suit, proceeding, investigation, audit or claim now
pending with respect to any Taxes of the Company; (iv) all withholding
Tax requirements imposed on or with respect to the Company have been or
will be satisfied in full in all respects on a timely basis; (v) no
penalty, interest or other charge is or will become due with respect to
the late filing of any such Tax Return or late payment of any such Tax;
(vi) all Tax Returns with respect to federal income taxes of the
Company for taxable years ending on or prior to the year specified in
Schedule 3.13(b) have been examined and closed, or are Tax Returns with
respect to which the applicable period for assessment, after giving
effect to any and all extensions and waivers, has expired; (vii) there
is no agreement or consent made under Section 341(f) of the Code
affecting the Company; and (viii) there are no Liens for any Taxes on
the assets of the Company, except for Taxes not yet due and payable.
(c) There is no claim against the Company for any Taxes, and
no assessment, deficiency or adjustment, individually or in the
aggregate, has been asserted or proposed with respect to any Tax Return
that would have a Material Adverse Effect.
(d) The amount of the unpaid Taxes of the Company before the
Effective Date will not exceed the amount, if any, of the accrued
liability for such Taxes (excluding any deferred Taxes established to
reflect timing differences between book and tax income) as stated on
the balance sheet of the Company as of June 30, 1998.
(e) All amounts that the Company is obligated for under any
tax sharing agreement or tax allocation agreement will have been paid
as of the Closing.
(f) Except as disclosed on SCHEDULE 3.13(f), the Company is
not subject to any joint venture, partnership or other arrangement or
contract that is treated as a partnership for federal income tax
purposes.
(g) The Seller and the Company are part of a selling
consolidated group within the meaning of Treasury Regulation /section/
1.338(h)(10)-1, the Seller owns all the stock of the Company, and there
is nothing that would prevent the Seller or the Company from making a
Section 338(h)(10) Election with respect to the Purchaser's acquisition
of the stock of the Company as provided for in this Agreement.
3.14 COMPLIANCE WITH LAWS. The Company:
(a) is in compliance with all Laws, Regulations, reporting and
licensing requirements, and Orders applicable to its business or
employees conducting its business, the breach or violation of which,
individually or in the aggregate, would have a Material
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Adverse Effect;
(b) has received no notification or communication from any
Governmental Authority or the staff thereof (i) asserting that the
Company is not in compliance with any of the Laws, Regulations or
ordinances which such Governmental Authority enforces, which
noncompliance, individually or in the aggregate, would have a Material
Adverse Effect, or (ii) threatening to revoke any license, franchise,
permit or governmental authorization, which revocation, individually or
in the aggregate, would have a Material Adverse Effect; and
(c) is not a party to any written Order, agreement or
memorandum of understanding with, or a commitment letter or similar
submission to, or a recipient of any extraordinary supervisory letter
from, any Governmental Authority which restricts in any material
respect the conduct of business of the Company; nor has the Company
been advised by any such Governmental Authority that such Governmental
Authority is contemplating issuing or requesting any such Order,
agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter or similar submission.
3.15 ENVIRONMENTAL LAWS. Except for matters that, individually or in
the aggregate, would not have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
the Company (the "PROPERTIES") and all operations and activities of the
Company at the Properties are in compliance with all applicable
Environmental Laws and there are no circumstances which would prevent
continued compliance with all applicable Environmental Laws;
(b) the Company has not received any notice of violation,
alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the business operated by the
Company (the "BUSINESS"), nor does the Seller have knowledge that any
such notice is being threatened;
(c) no judicial proceeding or governmental or administrative
action exists or is pending or threatened, under any Environmental Law
to which the Company is or will be named as a party with respect to the
Properties or the Business, nor is there any Order under any
Environmental Law with respect to the Properties or the Business;
(d) all Permits, if any, required to be obtained or filed by
the Company under any Environmental Law in connection with the Business
of the Company have been obtained or filed and are valid and currently
in full force and effect;
(e) there has been no release or disposal of any hazardous
substance, pollutant
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or contaminant into the environment by the Company in connection with
its current or prior properties or operations which would have a
Material Adverse Effect on the financial condition of the Company;
(f) the Seller and the Company have made available to the
Purchaser all internal and external environmental audits, studies,
correspondence and documents on environmental matters relating to the
Company in the possession of the Company; and
(g) this Section 3.15 contains the sole and exclusive
representations and warranties of the Seller with respect to any
environmental, health or safety matters, including without limitation
any arising under any Environmental Law.
3.16 AFFILIATE TRANSACTIONS. Except as set forth in Schedule 3.16,
there is no material transaction, and no material transaction is now proposed,
to which the Company is or is to be a party in which any current director or
officer or other Affiliate of the Company has a direct or indirect material
interest.
3.17 LABOR MATTERS.
(a) The Company has never been a party to a collective
bargaining agreement or other labor union contracts and there is no
collective bargaining agreement or other labor agreement to which the
Company is a party or by which it is bound and no collective bargaining
agreement is being negotiated by the Company.
(b) No labor union or organization has been certified or
recognized as a representative of any employees of the Company. To the
knowledge of the Company, there are no current or threatened labor
disputes, organizational activities or demands for recognition by a
labor organization seeking to represent employees of the Company, labor
strike, material arbitration or material labor grievance or difficulty,
and no such activities have occurred during the past 24 months. To the
knowledge of the Seller, neither the Company nor any of its
representatives or employees has committed any unfair labor practices
in connection with the operation of the Business of the Company, and
there is no pending or threatened charge or complaint against the
Company by the National Labor Relations Board or any comparable state
agency.
(c) Except as set forth in SCHEDULE 3.17(c), the Company is
not a party to any oral or written agreement, plan or arrangement with
any officer, director or employee of the Company (i) the benefits of
which are contingent, or the terms of which are altered, upon the
occurrence of a transaction involving the Company of the nature of any
of the transactions contemplated by this Agreement, (ii) requiring
severance benefits or other benefits after the termination of
employment regardless of the reason for such termination of employment,
or (iii) any of the benefits of which will be increased, or the vesting
of
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benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of the transaction
contemplated by this Agreement.
3.18 INSURANCE. SCHEDULE 3.18 sets forth all insurance policies held by
or on behalf of the Company. All Properties and operations of the Company are
insured for its respective benefit, in such amounts and against such risks
customarily insured against by persons operating similar properties or
conducting similar operations under policies issued by insurers of recognized
responsibility. All such policies are in full force and effect and all premiums
due thereon have been paid. The Seller is not aware of any pending or threatened
termination or cancellation or coverage limitation or reduction with respect to
any policy.
3.19 PUBLIC UTILITY HOLDING COMPANY ACT; OTHER REGULATIONS. The Company
is not a "holding company" or a "public utility company" as such terms are
defined in the Public Utility Holding Company Act of 1935 and the rules and
regulations thereunder and therefore is not subject to regulation under the
Holding Company Act, the Federal Power Act or any foreign, federal or local Law
or Regulation limiting its ability to incur indebtedness for money borrowed or
guarantee such indebtedness.
3.20 MINUTE BOOKS; STOCK REGISTER. The copies of minute books and stock
registers of the Company which have been made available to the Purchaser for
review constitute all of the Company's minute books and stock registers and
contain a complete and accurate record of all resolutions and formal actions of
the Company's stockholders and directors (and any committees thereof), in each
case, in their respective capacities as such, and accurately reflect all
transfers and cancellations of stock certificates representing the Shares.
3.21 BENEFIT PLANS.
(a) Each Benefit Plan is listed in SCHEDULE 3.21(a). At or
prior to the Closing, true and correct copies of each of the following
have been or will be made available to the Purchaser: (i) the most
recent annual report (Form 5500), if filed, relating to each Benefit
Plan filed with the Internal Revenue Service, (ii) each such Benefit
Plan and all amendments thereto, (iii) the trust agreement, if any,
relating to each such Benefit Plan, (iv) the most recent summary plan
description for each such Benefit Plan for which a summary plan
description is required by ERISA, (v) the most recent actuarial report
or valuation relating to each such Benefit Plan subject to Title IV of
ERISA and (vi) the most recent determination letter, if any, issued by
the IRS with respect to any such Benefit Plan qualified under Section
401 of the Code.
(b) With respect to the Benefit Plans, no event has occurred
and there exists no condition or set of circumstances in connection
with which the Company could be subject to any liability under the
terms of such Benefit Plans, ERISA, the Code or any
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other applicable Law, other than any condition or set of circumstances
that, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) There are no actions, suits or claims pending (other than
routine claims for benefits) or threatened against, or with respect to,
any of the Benefit Plans or their assets or any Benefit Plan sponsor or
any member of any Benefit Plan sponsor's ERISA Group. ERISA Group means
a controlled or affiliated group within the meaning of Section 414 of
the Code of which the Benefit Plan sponsor is a member.
(d) All contributions required to be made to the Benefit Plans
pursuant to their terms and provisions have been made timely.
(e) Except as set forth in SCHEDULE 3.21(e), the Company is
not a party to or bound by any employment agreements, severance
agreements, programs or policies. True and correct copies of (i) all
vacation, overtime and other compensation policies of the Company
relating to the Existing Employees, (ii) all plans, policies or
arrangements providing for severance or other termination pay for any
Existing Employee of the Company, and (iii) true and correct copies of
all employee handbooks, policies or guidelines, as amended, have been
made available to the Purchaser. Except as listed in SCHEDULE 3.21(e),
there are no agreements with consultants of the Company obligating the
Company to make any cash payments.
3.22 INTERCOMPANY TRANSACTIONS. Since December 31, 1997, all
intercompany transactions between the Company, on the one hand, and the Seller
and its Affiliates (other than the Company), on the other, including interest,
administrative and overhead services, have been made on terms substantially
consistent with, and accounted for by the Company consistent with, transactions
of a similar nature occurring during the periods reflected in the Financial
Statements; and all such transactions for the periods covered by the Financial
Statements are accurately and completely reflected therein.
3.23 INFORMATION SUPPLIED. Without limiting any of the representations
and warranties contained herein, no representation or warranty of the Seller and
no statement by the Seller or the Company or other information delivered by the
Seller or the Company to the Purchaser (including any document incorporated
therein by reference) since the date of the Confidentiality Agreement, as of the
date of such representation, warranty, statement or document, contains or
contained any untrue statement of material fact, or, at the date thereof, omits
or omitted to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements are
or were made, not misleading.
3.24 BROKERAGE AGREEMENTS. The Seller represents and warrants that,
except for Aegis Energy Advisors Corp. and its sub-agent, Ernst Young Wright
Killen (for whose fees and expenses the Seller is solely responsible and against
whose fees and expenses the Seller hereby
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indemnifies the Purchaser), no person is entitled to any brokerage or finder's
fee, financial advisory fee or other payment from the Seller or any of its
Affiliates based on agreements, arrangements or undertakings made by the Seller
in connection with the transactions contemplated hereby.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller that the following
statements contained in this Article 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Article 4):
4.1 ORGANIZATION. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Arkansas.
4.2 AUTHORITY; ENFORCEABILITY. The Purchaser has all requisite power
and authority to enter into this Agreement and each instrument required hereby
to be executed and delivered by it at Closing, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated on its
part hereby. The execution and delivery by the Purchaser of this Agreement and
each instrument required hereby to be executed and delivered by it at Closing,
to perform its obligations hereunder and thereunder and the consummation by it
of the transactions contemplated hereby have been duly and validly authorized by
all requisite corporate action on the part of the Purchaser. This Agreement has
been duly executed and delivered by the Purchaser and (assuming due
authorization, execution and delivery hereof by the other party hereto)
constitutes (and as of the Closing Date each document and instrument to be
executed and delivered by the Purchaser hereunder will constitute) a legal,
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency or other similar laws relating to or affecting creditors rights
generally and by general equity principles.
4.3 NO VIOLATION. Except as set forth in SCHEDULE 4.3, the execution
and delivery by the Purchaser of this Agreement or any instrument required
hereby to be executed and delivered by Purchaser at Closing, do not, and the
consummation by it of the transactions contemplated hereby and the performance
by the Purchaser of the obligations which it is obligated to perform hereunder
and thereunder do not and at Closing will not (a) violate any provision of the
corporate charter or bylaws or the articles or bylaws of the Purchaser, (b)
violate, or result in the violation of, any provision of, or result in the
termination of or the acceleration of, or entitle any party to accelerate any
obligation or indebtedness under any mortgage, lien, lease, franchise, license,
permit, agreement or other instrument to which the Purchaser is a party, or by
which the Purchaser is bound, and that could, in any such event, have a Material
Adverse Effect, or (c) subject to the approvals required as set forth in Section
4.4, violate or conflict with any other
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restriction of any kind or character to which the Purchaser is subject which
would prevent the consummation of the transactions contemplated hereby.
4.4 APPROVALS. Except as set forth in SCHEDULE 4.4, no consent,
authorization, order or approval of, or filing or registration with, any
Governmental Authority which has not been obtained or made is required for or in
connection with the execution and delivery of this Agreement or any instrument
required hereby to be executed and delivered by it at Closing by the Purchaser,
and the consummation by it of the transactions contemplated hereby and the
performance by it of its obligations hereunder.
4.5 FINANCING. The Purchaser has available internal funds that are
otherwise uncommitted and funds that can be acquired through borrowings from
nationally recognized financial institutions, and such funds are, in the
aggregate, sufficient to enable the Purchaser to pay the Purchase Price of the
Shares in full, together with all costs and expenses related thereto, and
otherwise to perform its obligations under this Agreement.
4.6 INVESTMENT PURPOSE. The Purchaser is acquiring the Shares for its
own account, for investment, and not with a view to, or for offer or resale in
connection with, a distribution of any of the Shares or any beneficial interest
in the Shares within the meaning of the Securities Act of 1933, as amended, and
the rules and regulations thereunder or distribution thereof in violation of any
applicable securities laws. None of the Shares may be offered for sale, sold or
otherwise transferred unless they are registered or otherwise qualified under
federal and any applicable state securities laws or unless an exemption from
such registration or qualification is available.
4.7 INVESTIGATION AND EVALUATION; NO IMPLIED REPRESENTATION.
(a) The Purchaser acknowledges that the Purchaser is
experienced in the operation of the type of Business conducted by the
Company, the Purchaser and its directors, officers, attorneys,
accountants and advisors until Closing, will be given and will have had
the opportunity to conduct a due diligence investigation of the
Company, its Properties and Business, including without limitation (i)
an examination of to the full extent deemed necessary and desirable by
the Purchaser all relevant and on-going non-financial books, records
and other information with respect to the Company and its Properties
and Business, (ii) an environmental assessment of the Company's
Properties, including review of prior environmental assessments and
related materials made available to the Purchaser by the Seller, and
(iii) an on-site operational assessment of the Company's tanks,
equipment, structures and related personal property. The Purchaser has
taken full responsibility for determining the scope of its
investigations of the Company and its Properties and Business, and for
the manner in which such investigations have been conducted, and prior
to Closing shall have examined the Company, its assets, its method of
doing business and its accounting procedure to the Purchaser's full
satisfaction and completed its due diligence investigation with results
satisfactory to Purchaser. The
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Purchaser is fully capable of evaluating the adequacy and accuracy of
the information and material obtained by the Purchaser in the course of
such investigation. The Seller is not making any representations or
warranties other than those expressly set forth in Article 3 in respect
of the Company or any of its assets, liabilities or operations,
including, without limitation, with respect to merchantability or
fitness for any particular purpose, and any such other representations
or warranties are hereby expressly disclaimed.
(b) It is understood that any estimates, projections or other
predictions contained or referred to in any Exhibit or Schedule hereto
or which otherwise have been provided to the Purchaser are not and
shall not be deemed to be representations or warranties of the Seller.
The Purchaser acknowledges that there are uncertainties inherent in
attempting to make such estimates, projections and other predictions,
that the Purchaser is familiar with such uncertainties, that the
Purchaser is taking full responsibility for making its own evaluation
of the adequacy and accuracy of all estimates, projections and other
predictions so furnished to it, and that the Purchaser shall have no
claim against anyone with respect thereto. The Purchaser hereby
acknowledges and agrees that, except to the extent specifically set
forth in this Agreement, the Purchaser is purchasing the Shares on an
"as-is, where-is" basis.
4.8 LITIGATION. There are no actions, suits, investigations or
proceedings (including any proceedings in arbitration) pending, or threatened,
against the Purchaser or any of its assets, at law or in equity, in, before or
by any Governmental Authority that would affect the validity or enforceability
of this Agreement or the ability of the Purchaser to perform its obligations
under this Agreement.
4.9 BROKERAGE AGREEMENTS. The Purchaser represents and warrants that,
except for Herman Luffman, the Purchaser's outside independent consultant (for
whose fees and expenses the Purchaser is solely responsible and against whose
fees and expenses the Purchaser hereby indemnifies the Seller), no person is
entitled to any brokerage or finder's fee, financial advisory fee or other
payment from the Purchaser or any of its Affiliates based on agreements,
arrangements or undertakings made by the Purchaser in connection with the
transactions contemplated hereby.
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ARTICLE 5.
COVENANTS
5.1 CONDUCT OF BUSINESS. During the period from the date hereof to the
Closing Date, without the prior written consent of the Purchaser or except as
contemplated by this Agreement, the Seller agrees:
(a) to cause the Business of the Company to be operated in the
ordinary course of business consistent with past practice;
(b) to cause the Company to maintain and keep the Properties
and structures and equipment located thereon the loss of which,
individually or in the aggregate, would have a Material Adverse Effect,
in as good repair and condition as on the date of this Agreement,
ordinary wear and tear excepted, and to maintain supplies and
inventories in quantities consistent with the Company's past business
practices;
(c) to cause the Company to use all commercially reasonable
efforts to keep in full force and effect insurance comparable in amount
and scope of coverage to that set forth in SCHEDULE 3.18;
(d) to cause the Company not to permit changes to be made in
the corporate charter or bylaws or other constituent documents of the
Company;
(e) except as previously disclosed to the Purchaser, to cause
the Company to not (i) increase the compensation payable or to become
payable by the Company to any officer, employee or agent shall be made,
and (ii) make or agree to make any bonus or retirement or similar
benefit or arrangement;
(f) to cause the Company not to permit any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
to be made, except for any such asset acquired in connection with
normal replacement and maintenance programs properly charged to current
operations or otherwise listed on SCHEDULE 5.16;
(g) to cause the Company, to the extent reasonably
practicable, (i) to cause the business organization, rights and
franchises of the Company to remain intact and to keep available to the
Purchaser the opportunity to retain the services of the present
employees of the Company and (ii) to cause the goodwill of the
customers and suppliers of the Company and others having business
relations with the Company to be preserved;
(h) to cause the Company to comply in all material respects
with all applicable Laws, Regulations and Orders;
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(i) except as contemplated in Section 2.4 and as otherwise set
forth in SCHEDULE 5.1(i), to cause the Company not to (i) declare or
pay any dividend on or make any other distribution in respect of the
Shares, (ii) sell, lease, encumber, transfer or dispose of any of its
Properties or assets, otherwise than in the ordinary course of business
consistent with past practice, or (iii) issue any shares of capital
stock or any rights to purchase or receive any shares of capital stock;
(j) in the event the Company seeks to enter into any new
contracts with its customers subsequent to the date of this Agreement,
to notify the Purchaser in writing of any such proposed new contract,
and to cause the Company not to enter into any such new contract
without the written consent of the Purchaser; provided, however, that
if the Purchaser has not provided the Seller with such written consent
or written objection to such consent within two (2) business days
following notice thereof, the Purchaser shall be deemed to have
consented to any such new contract;
(k) to cause the Company not to, from the date hereof to the
Closing Date (i) enter into, modify or extend any existing employment
or severance agreements in respect of the Existing Employees, (ii)
modify the annual compensation or hourly rates of the Existing
Employees as listed in Schedule 5.5(a); or (iii) change or modify, or
permit to be changed or modified, any Benefit Plan provisions or
coverages relating to the Existing Employees;
(l) to cause the Company not to agree in writing or otherwise
to do any of the foregoing; and
(m) except as set forth in SCHEDULE 3.16, to cause the Company
not to enter into any transaction with the Seller or any Affiliate of
the Seller, other than in the ordinary course of business.
5.2 INVESTIGATION. Prior to the Closing Date, the Purchaser may make or
cause to be made, such additional due diligence investigation of the Business
and Properties of the Company and its financial, environmental, operational and
legal condition as the Purchaser deems necessary or advisable to further
familiarize itself therewith, provided that such investigation shall not
interfere with normal operations of the Company. The Seller agrees to permit the
Purchaser and its accountants, counsel and other representatives to have, during
the period from the date of this Agreement to the Closing Date, access to the
premises, books and records of the Company that relate to its business during
its normal business hours and upon reasonable notice. The Seller shall furnish
the Purchaser with such financial, environmental and operating data and other
information with respect to the Business and Properties of the Company as the
Purchaser shall from time to time reasonably request. Any information regarding
the Company heretofore obtained from the Seller or the Company by the Purchaser
or its representatives or hereafter obtained from the Seller or the Company by
the Purchaser or its representatives shall be subject
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to the terms of the Confidentiality Agreement and such information shall be held
by the Purchaser and its representatives in accordance with the terms of such
Confidentiality Agreement.
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5.3 EFFORTS; TAKING OF NECESSARY ACTION. Each of the parties hereto
agrees to use all commercially reasonable efforts promptly to take or cause to
be taken all action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable Laws and Regulations to consummate and make
effective the transactions contemplated by this Agreement. Without limiting the
foregoing, the Purchaser agrees to promptly prepare and file all applications
and other notices required in connection with, and to use all commercially
reasonable efforts to obtain promptly, the regulatory approvals described in
SCHEDULE 4.4 and any other consent, approval or other action by, or notice to or
registration or filing with, any Governmental Authority required or necessary to
be made, obtained or complied with, as the case may be, by the Purchaser in
connection with the performance of this Agreement by the Purchaser or the
consummation of the transactions contemplated hereby. Notwithstanding the
foregoing, such regulatory approvals, consents or other approvals shall be in
form reasonably satisfactory to Purchaser. To the extent that any application
filed in connection with obtaining any such approval contains any significant
information relating to the Seller or the Company, prior to submitting such
application to any Governmental Authority, the Purchaser will permit the Seller
to review such information and will consider in good faith the suggestions of
the Seller with respect thereto. The Seller shall have the right to approve any
such information that relates to the Seller or the Company provided that such
approval shall not be unreasonably withheld.
5.4 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall, except as otherwise provided
herein, be paid by the party incurring such expenses.
5.5 EMPLOYEES; BENEFIT PLANS.
(a) Contained in SCHEDULE 5.5(a) attached hereto is a
confidential schedule setting forth the name, date of hire, annual
compensation or hourly rates (including any currently taxable profit
sharing, bonus or other form of compensation) as of the Effective Date
of all current employees of the Company (the "EXISTING EMPLOYEES").
Subsequent to the execution of this Agreement and in order to enable
the Purchaser to assess the qualifications of each of the Existing
Employees, the Seller shall provide the Purchaser with an opportunity
to confer with the Company's terminal manager as well as to meet each
of the Existing Employees. As soon as is reasonably practicable, and in
any event on or before the Closing Date, the Purchaser shall advise the
Seller of the name or positions of any Existing Employees (other than
Messrs. Challenger and Narro) up to a maximum of eight (8) whose
employment with the Company the Purchaser intends, within 45 days after
the Closing Date, to discontinue. For the purposes of this Agreement,
any such Existing Employee or Employees whose employment with the
Company the Purchaser intends to discontinue and has so advised the
Seller as provided above shall be considered to be a "DISCONTINUED
EMPLOYEE". All Continuing Employees
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shall be employed on an "at will" basis and their compensation
arrangement shall not be less than each such Continuing Employee's
compensation as of June 30, 1998 and their compensation shall not be
decreased prior to the first anniversary of the Closing Date; provided,
however, that the rate of compensation of any such Continuing Employee
may be decreased if such decrease is imposed for disciplinary purposes
in accordance with the Purchaser's established practice in a manner
which is not arbitrary, capricious or discriminatory. The Purchaser
agrees to grant all Continuing Employees credit for purposes of
eligibility and vesting under the Purchaser's Benefit Plans for their
years of service with the Company or any of its Affiliates prior to the
Closing Date.
(b) On or before the Closing Date, but with effect as of June
30, 1998, the Seller shall take such action as is necessary to
terminate or to cause the Company to terminate its participation in all
Benefit Plans, practices and arrangements sponsored by the Seller or
any of its Affiliates and in which the Existing Employees of the
Company participate. Except as expressly retained by the Seller in this
Section 5.5, from and after the Effective Date the Purchaser will
assume and be solely responsible for all obligations and liabilities
relating to (i) the employment or termination of employment of any
Continuing Employee, including without limitation liability for
severance benefits for Continuing Employees other than for severance
benefits retained by the Seller in Section 5.5(c), (ii) the termination
of employment of Discontinued Employees including without limitation
any liability of the Seller or its Affiliates for any claims,
judgments, costs, expenses or attorney's fees arising out of such
termination other than for any severance benefits retained by the
Seller in Section 5.5(c) and (iii) the termination of employment of any
Existing Employee who, although he or she was not designated as a
Discontinued Employee and was intended to be a Continuing Employee,
either fails a drug screening test administered during the course of
implementation of the Purchaser's drug policy, or otherwise violates
the conditions of the Purchaser's drug policy.
(c) In respect of Former Employees and Discontinued Employees
and except as provided in Section 5.5(b)(ii), the Seller will retain
all liabilities and obligations relating to such Employees and will
promptly reimburse the Purchaser for or receive from the Purchaser, as
the case may be, all obligations and liabilities, if any, for (i) any
earned and unpaid vacation time to the Effective Date for Continuing
Employees and Discontinued Employees, (ii) severance benefits
delineated in SCHEDULE 3.21(e) which are payable through the Company
under a plan or policy of the Seller or any of the Seller's Affiliates
adopted for the benefit of Discontinued Employees, (iii) any
obligations arising under any employment or other similar agreements
with respect to any Former Employees and Messrs. Challenger and Narro,
(iv) benefits accrued or expense or liability incurred to the Effective
Date under any Benefit Plan, (v) continuation coverage required by Code
/section/ 4980B(f) under the Company's Group Health Plans with respect
to any Former Employee, (vi) retiree medical benefits under any Benefit
Plan, determined without regard to any modifications to such benefits
by the Purchaser on or after the
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Closing Date and (vii) any and all obligations or benefits arising from
any Benefit Plan, any plan or policy of the Company to any Former
Employees and any obligations of the Company arising under any
agreement with respect to all Former Employees. If a Former Employee or
Discontinued Employee, as the case may be, is rehired by the Purchaser
or any Affiliate of the Purchaser within eighteen (18) months following
the date of such termination (and is not again terminated within the
12-month period beginning on the Effective Date), the Purchaser will
reimburse the Seller for any obligations or liabilities incurred by the
Seller with respect to such Former Employee or Discontinued Employee
under clause (ii) or (iii) of this Section 5.5(c). The Purchaser will
promptly notify the Seller if a Former Employee or Discontinued
Employee is rehired as described in the preceding sentence, and will
pay any required reimbursement within thirty (30) days after the amount
of the obligation or liability is determined. The obligations under
clauses (i), (ii) and (iii) of this Section 5.5(c) will be paid through
the Purchaser's or the Company's payroll, as the case may be. The
Seller will reimburse the Purchaser within ten (10) days after
notification of such payment of the obligations referred to in clauses
(i) and (ii) of this Section 5.5(c), and the Seller will provide, upon
notice from the Purchaser, the funds necessary to pay the obligations
referred to in clause (iii) of this Section 5.5(c).
(d) The first pay period on or after the Closing Date, the
Purchaser shall take all action necessary and appropriate to extend
eligibility for coverage under the TransMontaigne Oil Company Savings
and Profit Sharing Plan (the "PURCHASER SAVINGS PLAN") to the
Continuing Employees. The Continuing Employees shall be credited with
service under the Purchaser Savings Plan for purposes of eligibility
and vesting with the service credited to them under the terms of the
Statia Thrift Plan or which they would have been credited had they
participated therein. In all other respects, the Continuing Employees
shall participate in the Purchaser Savings Plan according to the terms
and conditions of the Purchaser Savings Plan as in effect from time to
time.
(e) For calendar year 1998, all vacation entitlement for
Continuing Employees shall be determined in accordance with the
Seller's or its Affiliates vacation policy as extended to the Company,
and any Continuing Employee with accrued but unused vacation
entitlement as of the Closing Date must schedule and take such vacation
in accordance with the Purchaser's vacation policy. Liability for the
cost of any unused vacation entitlement of a Continuing Employee (to
the extent such entitlement differs from the Purchaser's existing
vacation policy) shall be calculated to the Effective Date and
accounted for and reconciled under the provisions of Section 5.15.
Commencing January 1, 1999, the Continuing Employees shall accrue and
be entitled to vacation pursuant to the Purchaser's vacation policy, as
in effect from time to time, giving credit for their years of service
with the Company or any of its Affiliates.
(f) The Seller shall be solely responsible for compliance with
the health care
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continuation requirements of Code /section/ 4980B and Part 6 of Title I
of ERISA (referred to as "COBRA") with respect to all Former Employees
of the Company who incurred a qualifying event (within the meaning of
Code /section/ 4980B(f)(3) and ERISA /section/ 603) prior to the
Effective Date. The Seller shall be solely responsible for compliance
with COBRA with respect to all Former Employees who had elected COBRA
continuation coverage prior to the Closing. The Purchaser shall be
solely responsible for compliance with COBRA with respect to all
Continuing Employees who participate in the Purchaser's Group Health
Plan after the Closing, and who, or whose beneficiaries, experience a
qualifying event from and after the Closing Date.
(g) The Purchaser will waive, or will cause the Company to
waive, any preexisting condition limitations applicable to Continuing
Employees under any Group Health Plan of the Seller or its Affiliates
as extended to the Company; provided, however, that if a Continuing
Employee's condition is a condition which is currently not covered
under the Purchaser's Group Health Plan, such condition shall not be so
waived and the Purchaser shall have no obligation or liability
therefor. In addition, the Purchaser will take all action necessary to
ensure that Continuing Employees are given full credit for all
co-payments and deductibles incurred by such Continuing Employees under
the Seller's Group Health Plan for the 1998 plan year.
(h) The Seller shall discharge all liabilities for claims for
workers compensation benefits for Continuing Employees arising out of
occurrences prior to the Effective Date. The Purchaser shall discharge
all liabilities for claims for workers compensation benefits for
Continuing Employees arising out of occurrences on or after the
Effective Date.
(i) The actions taken by Seller in subsection (a) above with
respect to the Existing Employees shall be deemed a "qualifying event"
with respect to all Existing Employees participating in the Statia
Terminals 401(k) Plan (the "STATIA THRIFT PLAN") and Seller shall
provide each such participant with a letter advising that a qualifying
event has occurred and advising such participant of their distribution
election to (a) take a cash distribution, (b) rollover their vested
account balance into an individual retirement account, (c) rollover
their vested account balance to the Purchaser's Savings Plan, or (d) if
applicable, leave their vested account balance in the Statia Thrift
Plan. Further, Seller shall effect a partial plan termination of the
Statia Thrift Plan, if applicable under the circumstances, and take
such actions as may be necessary or required as a result thereof with
respect to each participant's account balance and the vesting thereof.
(j) Except as expressly provided herein, the Company shall
provide to Continuing Employees after the Closing only those benefits
that are expressly provided to be furnished by the Purchaser after the
Closing in this Section 5.5 and no provision of this Agreement shall
restrict the Purchaser from amending any of its Benefit Plans after the
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Closing Date.
5.6 TERMINATION OF SELLER SERVICES. All contracts, agreements,
commitments or other arrangements, whether written or oral, and whether express
or implied, including without limitation that certain Intercompany Services
Agreement dated effective January 1, 1998, pursuant to which the Seller or any
of its Affiliates provides legal, financial, accounting, insurance,
communications, computer or other corporate support services to the Company
shall be terminated prior to the Effective Date. The Purchaser shall execute and
deliver to the Seller, at the Seller's request, documents (in form reasonably
acceptable to the Purchaser) necessary or desirable to release the Seller and
any such Affiliate from any obligations with respect to such terminated
contracts, agreements, commitments and arrangements and to otherwise confirm
such termination.
5.7 TAXES; OPERATIONS BEFORE OR AFTER CLOSING DATE. The Seller shall be
liable for any and all Taxes applicable to the Company's operations with respect
to all periods occurring before the Effective Date as follows:
(a) With respect to each Tax Return covering any taxable
period of the Company which ends before the Effective Date, that is
required to be filed from and after the Effective Date, the Seller
shall timely prepare, or shall cause such Tax Return to be timely
prepared and shall cause to be included in such Tax Return all items of
income, gain, loss, deductions, credits, estimates, withholding amounts
information or other items (collectively, the "TAX ITEMS") required to
be included therein (which shall include any Tax Items resulting from
the Section 338(h)(10) Election, any deferred intercompany gain and any
excess loss account) and shall file or cause to be filed, any and all
Tax Returns that are required and due to be filed with respect to such
taxable period, and to timely pay, or cause to be timely paid, any and
all Taxes (including any interest and penalties thereon) due with
respect to such Tax Returns. The Purchaser shall (i) provide, or cause
to be provided to the Seller, any data, reports, copies of prior Tax
Returns or other information, (ii) make available to the Seller such
personnel of the Purchaser or the Company, and (iii) cooperate and
cause the Company to cooperate with the Seller in order to enable the
Seller to fulfill its obligations under the preceding sentence. Any
Taxes (including any interest and penalties thereon) reflected in such
Tax Returns which were not actually paid by the Company or the Seller
prior to the Effective Date and related to any time period prior to the
Effective Date shall be timely paid by the Seller directly to the
appropriate Governmental Authority. The Seller shall deliver a copy of
such Tax Return to the Purchaser when filed. The Seller shall timely
file such Tax Return with the appropriate Governmental Authority and
pay the amount of Taxes shown to be due on such Tax Return.
(b) With respect to the taxable period of the Company
commencing on January 1, 1998 and ending on June 30, 1998, the Seller
shall timely prepare and file, or
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shall cause to be timely prepared and filed, with the appropriate
Governmental Authority, any and all Tax Returns that are required and
due to be filed with respect to such taxable period. The Seller shall
pay, or cause to be paid (i) all Taxes (including any interest and
penalties thereon) due with respect to such Tax Returns attributable to
such taxable period and (ii) all Taxes due with respect to Tax Returns
filed by the Purchaser after June 30, 1998 which are attributable to
such taxable period. The Purchaser shall timely prepare and file, or
shall cause to be timely prepared and filed, with the appropriate
Governmental Authority, any and all Tax Returns that are required and
due to be filed after June 30, 1998 with respect to the taxable period
commencing on January 1, 1998 and ending on December 31, 1998 or
commencing on July 1, 1998 (the commencement date of the Purchaser's
fiscal year), and to pay, or cause to be paid, the Purchaser's
applicable portion of such Taxes (including any interest and penalties
thereon) due with respect to such Tax Returns. The Seller shall (i)
provide, or cause to be provided to the Purchaser, any data, reports,
copies of prior Tax Returns or other information, (ii) make available
to the Purchaser such personnel of the Seller, and (iii) cooperate and
cause the Seller to cooperate with the Purchaser in order to enable the
Purchaser to fulfill its obligations under the preceding sentence. As
to the Purchaser's preparation and filing of any such Tax Returns
applicable to the taxable period covering the Seller's ownership of the
Company, at least twenty (20) days prior to the due date thereof, the
Purchaser will deliver to the Seller the completed Tax Return and any
required schedules thereto. Provided that the information on the Tax
Return is, in the reasonable determination of the Seller, correct and
complete in all material respects, the Seller will so advise the
Purchaser, failing which the Seller shall be deemed to have approved
such Tax Return as so submitted. If any changes or supplements are
required to any Tax Return, the Seller and the Purchaser will promptly
agree upon and make such changes.
(c) The Seller shall cause to be included in the consolidated
federal income Tax Returns (and the state income Tax Returns of any
state in which the Seller files consolidated, combined or unitary
income Tax Returns) of the Seller and its consolidated Affiliates for
all periods ending on or before or which include the period ending June
30, 1998, all Tax Items of the Company which are required to be
included therein (which shall include any Tax Items resulting from the
Section 338(h)(10) Election, any deferred intercompany gain and any
excess loss account), shall file timely all such Tax Returns with the
appropriate Governmental Authorities and shall pay timely all Taxes due
with respect to the periods covered by such Tax Returns.
(d) Prior to the Effective Date, the Seller paid estimated
Taxes covering periods before the Effective Date. The Purchaser will
pay, or will cause to be paid, to the Seller any and all overpayments
of estimated Taxes or refunds of Taxes (including any interest and
penalties thereon) received by the Purchaser, or any Affiliate of
Purchaser, after the Closing Date and attributable to Taxes (including
any interest and penalties thereon) previously paid to any appropriate
Governmental Authority by either the Seller
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or the Company (or any predecessor or Affiliate of the Seller or the
Company) with respect to all taxable periods ending before the
Effective Date. Such payment will be made by check to the Seller within
three (3) business days after the Purchaser's receipt of any such Tax
overpayment or refund (including any interest and penalties thereon)
from the appropriate Governmental Authority.
(e) In the event of a proposed adjustment by any appropriate
Governmental Authority to increase any Taxes incurred (including any
interest and penalties thereon) by the Company for any taxable period
ending before the Effective Date and for which the Seller or the
Company previously filed the related Tax Return, the Purchaser will
promptly notify the Seller of such proposed adjustment, and the Seller,
if it so elects, and at its own expense, may contest such adjustment
with the appropriate Governmental Authority on behalf of the Company;
provided, a delay or failure to so notify the Seller shall not relieve
the Seller of any liability pursuant to this Section 5.8(d) unless such
delay or failure causes the Seller to lose the right to assert a
reasonable defense to such claim or adjustment.
5.8 SECTION 338(h)(10) ELECTION.
(a) Both the Purchaser and the Seller are eligible to and
shall make a timely and effective election under Section 338(g) of the
Code with respect to the purchase and sale of the Shares. Further, both
the Seller and the Purchaser are eligible to and shall make or shall
cause to be made a timely and effective election under Section
338(h)(10) of the Code (the "SECTION 338(h)(10) ELECTION"). The
Purchaser and the Seller agree that neither of them will take, or
permit any of their Affiliates to take, any action to modify or revoke
such elections without the express consent of the other.
(b) Not later than November 1, 1998, the Seller will deliver
to the Purchaser a completed Internal Revenue Service Form 8023, and
the required schedules thereto ("FORM 8023"), providing for the Section
338(h)(10) Election. Provided that the information on Form 8023 is, in
the reasonable determination of the Purchaser, correct and complete in
all material respects, the Purchaser will, within fifteen (15) days
thereafter, execute and redeliver such Form 8023 to the Seller. If any
changes or supplements are required to Form 8023, the Seller and the
Purchaser will promptly agree upon and make such changes. The Seller
and the Purchaser will each timely file Form 8023, and any required
supplements thereto, and will provide assurance to each other that they
have done so.
(c) The Seller shall pay any Tax (including any liability of
the Company) for any Tax resulting from the application to the Seller
of Treasury Regulation /section/ 1.338(h)(10)) attributable to the
making of the Section 338(h)(10) Election and, in accordance with the
provisions of Section 7.2(b), will indemnify the Purchaser and the
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Company against any loss or damage arising out of any failure to pay
such Taxes. Seller shall also pay any state, local or foreign Taxes
(and indemnify the Purchaser and the Company against any loss or damage
arising out of any failure to pay such Taxes) attributable to an
election under state, local or foreign law similar to the election
available under Section 338(g) of the Code (or which results from the
making of an election under Section 338(g) of the Code) with respect to
the purchase and sale of the Shares and any such election shall be
included within the term "Section 338(h)(10) Election" for purposes of
this Agreement.
5.9 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws and
Regulations to consummate and make effective, as soon as reasonably practicable,
the transactions contemplated by this Agreement. In case at any time after the
Closing Date any further action is necessary, proper or advisable to carry out
the purposes of this Agreement, as soon as reasonably practicable, each party to
this Agreement shall cause its proper officers and/or directors to take all such
necessary action.
5.10 POST-CLOSING COOPERATION. After the Closing, the Seller and the
Purchaser shall cooperate (and cause their respective Affiliates to cooperate)
with each other and with each other's agents, including accounting firms and
legal counsel, in connection with the preparation or audit of any Tax Return or
report, refund claims and Tax claims or litigation in respect of the Company or
its activities and the parties agree that all reasonable requests for
cooperation shall be honored. Additionally, the parties acknowledge that,
pursuant to the terms of a customer's storage and throughput agreement for the
handling and storing of Product Inventory (as defined in Section 5.18(a)), the
Company holds a Lien in a customer's Product Inventory in order to secure
payment of such customer's accounts or other financial obligations owing to the
Company. Should any account retained by the Seller under the provisions of
Section 2.4 hereof not be paid when due and the Seller so notifies the
Purchaser, then the Purchaser or the Company, as the case may be, shall
cooperate with the Seller so as to enable the Seller to realize or otherwise
take full legal advantage of such Lien held by the Company against such
delinquent customer's Product Inventory at any time stored with Company.
5.11 PRESERVATION OF RECORDS AND ACCESS.
(a) The Seller shall deliver to the Purchaser all material
information, books and records relating to the Company within the
possession of the Seller's Affiliates (including work papers and
correspondence with Tax authorities) provided, however, that as to
books and records, the Seller need only deliver such books and records
relating to all years open under any applicable statute of limitation.
(b) From and after the Closing, the Purchaser shall grant to
the Seller or any
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of its Affiliates (or its designees) access at all reasonable times to
all of the information, books and records relating to the Company
within the possession of the Purchaser (including work papers and
correspondence with taxing authorities), and shall afford to the Seller
(or its designees) the right (at the Seller's expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably
necessary to permit the Seller (or its designees) to prepare Tax
Returns, to conduct negotiations with Tax authorities, to fulfill an
obligation to any Governmental Authority imposed by Law, Regulation or
Order and to implement the provisions of, or to investigate or defend
any claims between the parties arising under, this Agreement or
otherwise.
(c) From and after the Closing, each of the parties hereto
shall preserve and retain all schedules, work papers and other
documents relating to any Tax Returns of or with respect to the Company
or to any claims, audits or other proceedings affecting the Company
until the expiration of the statute of limitations (including
extensions) applicable to the taxable period to which such documents
relate or until the final determination of any controversy with respect
to such taxable period, and until the final determination of any
payments that may be required with respect to such taxable period under
this Agreement.
(d) Notwithstanding the foregoing provisions of this Section,
neither party hereto shall be required to grant or cause to be granted
to the other access to information, books and records or to furnish
extracts or copies thereof if such information, books and records also
include information regarding such party or any of its Affiliates. In
such circumstances, such party shall either (i) provide accurate
detailed summaries of the information contained therein or (ii), in
providing extracts or copies thereof, redact the information relating
to such party or its Affiliates.
(e) The information received by a party pursuant to this
Section shall be treated as if it were "Information" (as defined in the
Confidentiality Agreement), and the receiving party hereunder were the
receiving party under the Confidentiality Agreement.
5.12 OTHER LIABILITIES. Except for those liabilities assumed by the
Purchaser in Section 5.5(b) and those liabilities listed in SCHEDULE 2.4(f)
which the Purchaser will assume or otherwise cause the Company, the Seller or
its Affiliates, as the case may be, to be discharged from such liabilities, the
Seller shall discharge any and all obligations and liabilities of the Company
arising out of the Company's ownership of any interest in or operation of any
properties, assets or businesses which were sold, transferred, conveyed or
otherwise divested by the Company prior to the Closing and shall discharge any
and all other obligations and liabilities of the Company arising prior to the
Closing, including without limitation liabilities related to any and all loans
and lines of credit, whether intercompany or third-party.
5.13 RELEASE OF LIENS. The Seller shall release, or cause to be
released, all Liens
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(except Permitted Encumbrances) currently existing which pertain to the Company,
its Properties or the Shares, including without limitation those Liens arising
out of or related to that certain Indenture and Securities Pledge Agreement
dated November 27, 1996 to which the Seller and its Affiliates are parties and
Marine Midland Bank is agent and trustee and that certain $17.5 Million Senior
Secured Revolving Credit Facility.
5.14 THE COMPANY'S NAME. Any trademark and license agreement between
the Company and the Seller or any of its Affiliates under which the Company has
the right to use trademarks, trade names and logos including the word "Statia"
shall be terminated on the Closing Date. As soon as is reasonably practicable
and in any event no later than six (6) months after the Closing Date, the
Purchaser shall cause the Company to eliminate the word "Statia" or any word or
expression similar thereto from any name under which it does business, and the
foregoing name shall be removed from the Company's property, stationery and
literature, and thereafter neither the Purchaser, the Company nor any Affiliate
thereof shall use any logos, trademarks or tradenames belonging to the Seller or
any of its Affiliates.
5.15 POST-CLOSING RECONCILIATION. Within 120 days after Closing, the
Seller and the Purchaser shall perform an accounting with respect to (a) all
expenses incurred and paid by the Seller for the period from the Effective Date
to and including the end of the month in which Closing occurred (i) to maintain
Benefit Plan coverage with respect to the Continuing Employees, (ii) for
insurance coverage on the Properties, (iii) for salaries paid and contributions
made to Benefit Plans to the Continuing Employees, (iv) for pro rated rentals
paid pursuant to the Leases; (b) all accounts receivable payments received by
the Seller relating to Business activity after the Effective Date; (c) all
accounts receivable payments received by the Purchaser relating to Business
activity prior to the Effective Date; (d) the items listed on SCHEDULE 2.4(f);
and (e) any other payments made or received by the Seller or the Purchaser, but
to which pursuant to the terms and provisions of this Agreement, the other party
is entitled. Based upon the results of such accounting, the Seller and the
Purchaser shall net out all such amounts (other than in respect of ad valorem
taxes) and an invoice prepared and delivered to the party owing a balance
thereunder. The party to whom a balance is owed shall be paid by the other party
within ten (10) days of receipt of invoice.
5.16 THIRD-PARTY CONSTRUCTION PROJECTS. The Company has undertaken the
third-party repair or improvement projects listed on SCHEDULE 5.16. As to the
improvements to Tank Nos. 104 and 118 (as described in SCHEDULE 5.16), pursuant
to the Company's arrangements with its customer for each such tank, each such
customer has agreed to reimburse the Company for the costs of such improvements.
To the extent such improvements to Tank Nos. 104 and 118 are not completed on or
before the Closing Date, then the Purchaser shall undertake to supervise the
completion of such improvements and upon receipt of any payment therefor from
such customer, to pay over to the Seller any unreimbursed costs theretofore
expended by the Company. Any other costs associated with projects identified in
SCHEDULE 5.16 incurred from and after the Effective Date for which a customer
has not agreed to reimburse the Company shall be borne by the Seller and shall
be accounted for and reconciled under the provisions of Section 5.15.
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5.17 ENVIRONMENTAL ASSESSMENT. The Seller has and shall continue to
permit the Purchaser reasonable access to the Company's Properties prior to the
Closing for the purpose of allowing the Purchaser to conduct an environmental
assessment of the Properties at the Purchaser's sole cost, risk and expense in
order to more clearly define the environmental condition of the Properties and
the Company's compliance with Environmental Laws. At the conclusion of the
environmental assessment and prior to Closing, the Purchaser agrees to provide
the Seller with a summary of the Purchaser's findings.
5.18 PRODUCT AND BS&W INVENTORY - RESPONSIBILITY AND MEASUREMENTS.
(a) Beginning prior to the Closing in sufficient time to
complete on or before the Closing Date, the Seller and the Purchaser, or their
respective designees, shall, in accordance with standard industry practices,
take inventory (including quantity, quality specifications and type of product)
of all merchantable products located (i) in all of the Company's aboveground
storage tanks and (ii) in all of the Company's active pipelines (all of which
merchantable product shall be hereinafter called the "PRODUCT INVENTORY"). The
quantity and type of Product Inventory shall correspond to that reflected in the
Company's most recent inventory books and records and, as to quality
specifications of Product Inventory, the Purchaser, at its sole cost and
expense, may confirm the same based upon tests conducted by a qualified
independent testing laboratory selected by the Purchaser and reasonably
acceptable to the Seller. Should Product Inventory allowances for quantity
and/or quality be different from those required under the Company's storage and
throughput agreement with a customer, then the Seller and the Purchaser shall
ascertain and agree upon the economic impact, if any, of any such discrepancy
and, if appropriate, adjust the Purchase Price upward or downward, as the case
may be. Upon Closing, the Purchaser shall assume custody of and all
responsibility for the Product Inventory.
(b) In connection with the inventory conducted under Section
5.18(a) above, should any Product Inventory contain bottom sediments and water
("BS&W"), then the Seller and the Purchaser, or their respective designees,
shall concurrently measure BS&W in all of the Company's aboveground storage
tanks and active pipelines and any such BS&W shall be excluded from Product
Inventory (the "PRE-CLOSING BS&W"). The Seller and the Purchaser, or their
respective designees, shall have the right to observe the measuring of the
Pre-Closing BS&W and agree to the calculation of the same. Based upon the
measurement of Pre-Closing BS&W, the Seller and the Purchaser shall mutually
agree upon any costs to remove or dispose of the Pre-Closing BS&W and the same
shall be taken into account during the reconciliation conducted under Section
5.15 above.
ARTICLE 6.
CONDITIONS TO THE CLOSING
6.1 CONDITIONS OF OBLIGATION OF EACH PARTY. The respective obligations
of each party to effect
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the Closing are subject to the fulfillment at or prior to the Closing Date of
each of the following conditions precedent:
(a) REGULATORY APPROVALS. All filings required to be made with
and all Permits required to be obtained from any Governmental Authority under
any applicable Law, Regulation or Order, in each case, in order to permit the
consummation of the transactions contemplated hereby to occur at the Closing
shall have been made or obtained; all regulatory approvals necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect; and all required waiting periods shall
have expired or been terminated.
(b) NO INJUNCTIONS. No preliminary or permanent injunction or
other Order issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any Governmental
Authority shall be in effect enjoining or otherwise materially impairing the
consummation of the transactions contemplated by this Agreement.
6.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser are also subject to fulfillment (or waiver by the
Purchaser) at or prior to the Closing Date of each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained in Article 3 of this Agreement shall be true
and correct in all material respects as of the date of execution of this
Agreement and as of the Closing Date as though made at and as of the Closing
Date.
(b) PERFORMANCE OF COVENANTS. The Seller shall have duly
performed and complied in all material respects with each covenant, agreement
and condition required by this Agreement to be performed or complied with by the
Seller prior to or on the Closing Date.
(c) OFFICER'S CERTIFICATE. The Purchaser shall have received
from a duly authorized officer of the Seller a certificate as to the matters
described in Sections 6.2(a), 6.2(b) and 6.2(g) of this Article 6.
(d) OPINION OF COUNSEL. The Purchaser shall have received from
counsel to the Seller an opinion in form and substance reasonably acceptable to
the Purchaser addressed to the Purchaser and dated as of the Closing Date.
(e) RESIGNATIONS. The Purchaser shall have received the
resignations, effective as of the Closing, of each director and officer of the
Company.
(f) STOCK CERTIFICATES. The Seller shall have delivered to the
Purchaser at the Closing one
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or more stock certificates representing the Shares, duly endorsed by the Seller
in blank or with duly executed stock powers attached, and Purchaser shall have
received the originals of certificates representing shares of the issued and
outstanding capital stock of the Company, which certificates have been duly
canceled.
(g) NO MATERIAL CHANGE OR EVENT. Since the date of this
Agreement, there shall have been no change, occurrence or circumstance in the
current or future business, financial condition, results of operations or
prospects of the Company having or reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on the financial condition, results of
operations, current or future business, or prospects of the Company.
(h) SECTION 338(h)(10) ELECTION. The transactions hereunder
shall qualify for a Section 338(h)(10) Election under the applicable provisions
of the Code and the Treasury Regulations and under the state income tax laws of
the states in which any of the Seller, its Affiliates or the Company is required
to file a Tax Return.
(i) LIEN RELEASES. The Purchaser shall have received originals
or certified copies of documents evidencing the release of Liens (except
Permitted Encumbrances) relating to the Company, its Properties and the Shares.
(j) THIRD-PARTY CONSENTS. The Purchaser shall have received
all necessary third party consents, if any required, related to the Leases,
Permits and Business contracts.
(k) BOARD RESOLUTIONS. Seller shall have furnished the
Purchaser with certified copies of resolutions duly adopted by the Board of
Directors of the Seller authorizing the execution, delivery and performance of
this Agreement and each instrument required hereby to be executed and delivered
by the Seller at the Closing.
(l) DUE DILIGENCE/INVESTIGATION SATISFACTORY. The Purchaser
shall have completed its due diligence investigation of the Company (including
the environmental assessment), title to real property and real property
interests, litigation, taxes, accounting books and records, business contracts
and operational matters to its satisfaction; and any breaches, defaults or
curative matters determined to exist that individually or in the aggregate would
have a Material Adverse Effect shall have been cured by Seller, waived by
Purchaser, or an appropriate adjustment made to the Purchase Price.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE SELLER. The
obligations of the Seller is also subject to fulfillment (or waiver by the
Seller) at or prior to the Closing Date of each of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Purchaser contained in Article 4 of this Agreement shall
be true and correct in all material
33
<PAGE>
respects as of the date of execution of this Agreement and as of the Closing
Date as though made at and as of the Closing Date.
(b) PERFORMANCE OF COVENANTS. The Purchaser shall have duly
performed and complied in all material respects with each covenant, agreement
and condition required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
(c) OFFICER'S CERTIFICATE. The Seller shall have received from
a duly authorized senior officer of the Purchaser a certificate as to the
matters described in Sections 6.3(a) and 6.3(b) above.
(d) OPINION OF COUNSEL. The Seller shall have received from
counsel to the Purchaser an opinion in form and substance reasonably acceptable
to the Seller addressed to the Seller and dated as of the Closing Date.
(e) CHANGE OF NAME. The Purchaser shall have filed with the
Secretary of State of Texas an amendment to the articles of incorporation of the
Company changing the name of the Company so as to delete therefrom the word
"Statia".
(f) BOARD RESOLUTIONS. The Purchaser shall have furnished the
Seller at the Closing with certified copies of resolutions duly adopted by the
Board of Directors of the Purchaser authorizing the execution, delivery and
performance of this Agreement and each instrument required hereby to be executed
and delivered by the Purchaser at the Closing.
(g) PAYMENT OF PURCHASE PRICE. The Purchaser shall have
delivered to the Seller at the Closing immediately available funds in an amount
equal to the Purchase Price, as adjusted.
ARTICLE 7.
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
(a) Each of the representations and warranties contained in
Article 3 related to Taxes will survive the Closing and shall remain in full
force and effect for a period of thirty (30) months from and after the Effective
Date. Each of the representations and warranties contained in Article 3 (other
than related to Taxes), each of the representations and warranties contained in
Article 4 and each representation or warranty made in any certificate delivered
pursuant to Section 6.2(c) or Section 6.3(c), as the case may be, will survive
the Closing and remain in full force and effect for one year from and after the
Effective Date. Any claim for indemnification with respect to any of such
matters which is not asserted by notice given as herein provided which
specifically identifies a particular breach and the underlying facts and Loss
relating thereto within such specified period of survival may not be pursued and
is hereby irrevocably waived
34
<PAGE>
after such time.
(b) Unless a specified period is set forth in this Agreement
(in which event such specified period will control), the covenants contained in
Sections 5.5(b) and (c), Sections 5.7 through 5.12, inclusive, Sections 5.14
through 5.16, inclusive, Section 9.7, in this Article 7 and in and the related
general provisions of Article 9, will survive the Closing and remain in full
force and effect until the expiration of the applicable statute of limitations.
All other covenants contained in this Agreement will survive the Closing and
remain in full force and effect for one year after the Closing Date, with the
result that any claim for an alleged breach of any such covenant may not, after
such one year period, be pursued and is hereby irrevocably waived.
7.2 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF THE PURCHASER.
(a) In the event the Seller breaches any of its
representations, warranties or covenants contained herein, and if there is an
applicable survival period pursuant to Section 7.1(a) above, provided that the
Purchaser makes a written claim for indemnification against the Seller pursuant
to Section 7.4(b) below within such survival period, then the Seller agrees to
indemnify the Purchaser from and against the entirety of any Losses the
Purchaser may suffer through and after the date of the claim for indemnification
(including any Losses the Purchaser may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the nature of,
or caused by the breach; provided, however, that (a) the Seller shall not have
any obligation to indemnify the Purchaser from and against any Losses resulting
from, arising out of, relating to, in the nature of, or caused by the breach of
any representation, warranty or covenant of the Seller specified in Section 7.1
above until the Purchaser has suffered Losses by reason of all such breaches in
excess of a $50,000 aggregate deductible (after which point the Seller will be
obligated only to indemnify the Purchaser from and against further such Losses)
and (b) there will be a $500,000 aggregate ceiling on the obligation of the
Seller to indemnify the Purchaser from and against any and all Losses resulting
from, arising out of, relating to, in the nature of, or caused by breaches of
the representations and warranties of the Seller specified in Section 7.1 above.
(b) The Seller agrees to indemnify the Purchaser from and
against the entirety of any Losses the Purchaser may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any liability of the
Company (x) for any Taxes of the Company with respect to any Tax year or portion
thereof ending before the Effective Date (or for any Tax year beginning before
and ending after the Effective Date to the extent allocable [determined in a
manner consistent with Section 5.7] to the portion of such period beginning
before and ending on June 30, 1998), to the extent such Taxes are not reflected
in the reserve for income tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the most recent balance sheet (rather than in any notes
thereto), as such reserve is adjusted for the passage of time to the Effective
Date in accordance with the past custom and practice of the Seller and its
Affiliates in filing their consolidated Tax
35
<PAGE>
Returns.
7.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER AND ITS
AFFILIATES. In the event the Purchaser breaches any of its representations,
warranties or covenants contained herein, and, if there is an applicable
survival period pursuant to Section 7.1 above, provided that the Seller or its
Affiliate makes a written claim for indemnification against the Purchaser
pursuant to Section 7.4(b) below within such survival period, then the Purchaser
agrees to indemnify the Seller from and against the entirety of any Losses the
Seller or any of its Affiliates may suffer through and after the date of the
claim for indemnification (including any Losses the Seller or any of its
Affiliates may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by the breach.
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If the transactions contemplated hereby to occur at the
Closing are consummated and subject to the provisions of Section 7.1 specifying
survival periods, each party hereto (the "INDEMNIFYING PARTY") shall indemnify
and hold harmless the other party hereto and its Affiliates (collectively, the
"INDEMNIFIED PARTY") against any Losses (or actions, suits or proceedings in
respect thereof and any appeals therefrom [the "PROCEEDINGS"]) which the
Indemnified Party shall actually incur that:
(i) arise out of or are based upon any allegation
that any representation or warranty made herein by the Indemnifying
Party was untrue or was breached in any respect (without regard to any
exception in any representation or warranty for matters that would not
constitute a Material Adverse Effect) when made or as of the Closing
Date as though made at and as of the date of Closing; or
(ii) arise out of or are based upon any allegation
that any covenant or agreement made herein by the Indemnifying Party
has not been performed in accordance with its terms (without regard to
any exception in any covenant or agreement for matters that would not
constitute a Material Adverse Effect).
(b) Promptly after the Indemnified Party under subsection (a)
of this Section identifies a Loss or receives notice of the commencement of any
Proceeding against which it believes it is indemnified under this Section, the
Indemnified Party shall, if a claim in respect thereto is to be made against the
Indemnifying Party under this Section, notify the Indemnifying Party in writing
of the commencement thereof; provided, however, that the omission so to notify
the Indemnifying Party shall not relieve it from any liability which it may have
to the Indemnified Party to the extent that the Indemnifying Party is not
prejudiced by such omission.
(c) The Indemnifying Party shall, within thirty (30) days
after receipt of a notice of Loss or Proceeding given pursuant to subsection (b)
of this Section, either (i) acknowledge
36
<PAGE>
liability, as between the Indemnifying Party and the Indemnified Party, for such
Loss or the amount in controversy in such Proceeding and pay the Indemnified
Party the amount of such Loss or the amount in controversy in such Proceeding in
cash or other immediately available funds (or establish by agreement with the
Indemnified Party an alternative payment schedule), (ii) acknowledge liability,
as between the Indemnifying Party and the Indemnified Party, for such Loss or
the amount in controversy in such Proceeding, disavow the validity of the Loss
or Proceeding or the amount thereof and, to the extent that it shall so desire
in accordance with subsection (d) of this Section, assume the legal defense
thereof, or (iii) object (or reserve the right to object until additional
information is obtained) to the claim for indemnification or the amount thereof,
setting forth the grounds therefor in reasonable detail.
(d) If any such Proceeding shall be brought against an
Indemnified Party and it shall notify the Indemnifying Party thereof in
accordance with subsection (c) of this Section, the Indemnifying Party shall, if
it shall have responded to such notice in accordance with clause (ii) of
subsection (c) of this Section, be entitled to assume the legal defense thereof
with counsel reasonably satisfactory to the Indemnified Party. After notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or such action, the Indemnifying Party shall not be liable
to the Indemnified Party under this Section for any attorney's fees or other
expenses (except reasonable costs of investigation) subsequently incurred by the
Indemnified Party in connection with the defense thereof; however, if the
Indemnified Party decides to engage counsel at its own expense, the Indemnifying
Party shall cause its counsel to permit counsel to the Indemnified Party to
participate in the defense. If the Indemnifying Party does not assume the
defense of a Proceeding as to which it has acknowledged liability, as between
itself and the Indemnified Party, pursuant to clause (ii) of subsection (c) of
this Section, the Indemnified Party may require the Indemnifying Party to
reimburse it on a current basis for its reasonable expenses of investigation,
reasonable attorney's fees and expenses and reasonable out-of-pocket expenses
incurred in the defense thereof and, subject to the provisions of subsection (e)
of this Section, the Indemnifying Party shall be bound by the result obtained
with respect thereto by the Indemnified Party.
(e) An Indemnifying Party will not, without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld or delayed), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened Proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
the Indemnified Party is an actual or potential party to such Proceeding) unless
such settlement, compromise or consent includes an unconditional release of the
Indemnified Party from all liability arising out of such Proceeding. If the
Indemnifying Party has responded to the Indemnified Party pursuant to clause (i)
of subsection (c) of this Section, the Indemnified Party may settle or
compromise or consent to the entry of any judgment with respect to the
Proceeding that was the subject of notice to the Indemnifying Party pursuant to
subsection (c) of this Section without the consent of the Indemnifying Party. An
Indemnified Party will not otherwise, without the prior written consent of the
Indemnifying Party (which consent shall not
37
<PAGE>
be unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened Proceeding, but, if such
Proceeding is settled or compromised or if there is entered any judgment with
respect to any such Proceeding, in either case with the consent of the
Indemnifying Party, or if there be a final judgment of the plaintiff in any such
Proceeding, the Indemnifying Party agrees to indemnify and hold harmless any
Indemnified Party from and against any loss or liability by reason of such
settlement, compromise or judgment.
7.5 DETERMINATION OF LOSSES. The parties shall make appropriate
adjustments for tax consequences and insurance coverage and take into account
the time cost of money (using the Applicable Rate as the discount rate) in
determining Losses for purposes of this Article 7. All indemnification payments
under this Article 7 shall be deemed adjustments to the Purchase Price.
7.6 EXCLUSIVE REMEDY. From and after the Closing, except as provided in
this Section 7.6, the provisions of this Article 7 shall be the sole and
exclusive remedy of each party hereto for (i) any breach of the other party's
representations or warranties contained in this Agreement or (ii) any breach of
the other party's covenants or agreements contained in this Agreement. In
addition to any other remedy available to a party hereunder, each party shall be
entitled to specific performance of any covenant contained herein. Without
limiting the generality of the foregoing, the Purchaser and the Seller hereby
waive any statutory, equitable, or common law rights or remedies relating to any
environmental matters, including without limitation any such matters arising
under any Environmental Laws. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, IN NO EVENT SHALL ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES
INDEMNIFIED HEREUNDER INCLUDE ANY CONSEQUENTIAL OR PUNITIVE DAMAGES, EXCEPT
THOSE CLAIMED BY THIRD PARTIES.
7.7 LIABILITY OF STI. The Seller has advised Purchaser that subsequent
to Closing, the Seller may be dissolved or otherwise merged into STI and shall
thereupon cease to have corporate existence. In such event and for the purposes
of this Article 7, references to the Seller herein shall be deemed to refer to
STI and the duties, obligations, performance and liabilities of the Seller as an
"Indemnifying Party" or an "Indemnified Party", as applicable, pursuant to the
terms and provisions of this Article 7, shall be fully assumed by STI and STI,
by execution of this Agreement for such purpose, agrees to be so bound.
ARTICLE 8.
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by mutual written agreement of the Seller and the
Purchaser;
(b) unless waived by the non-breaching party and subject to
the provisions of Section
38
<PAGE>
8.2 below, by the Purchaser or the Seller, as the case may be, upon a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, or if any representation or warranty of the
other party shall have become untrue, in either case such that the applicable
conditions to Closing would be incapable of being satisfied by Closing;
provided, however, that, in any case, a willful breach shall be deemed to cause
such conditions to be incapable of being satisfied for the purposes of this
subsection;
(c) by the Purchaser or the Seller upon notice given to the
other in the event that the other shall, contrary to the terms of this
Agreement, fail or refuse to consummate the transactions contemplated hereby or
to take any other action referred to herein necessary to consummate the
transactions contemplated hereby, after affording such defaulting party a
thirty-day period after notice in which to cure;
(d) by the Purchaser or the Seller upon notice given to the
other if the Closing shall not have taken place on or before July 31, 1998;
provided that the failure of the Closing to occur on or before such date is not
the result of the breach of the covenants, agreements, representations or
warranties hereunder of the party seeking such termination; or
(e) by the Seller or the Purchaser upon written notice to the
other party if any court or Governmental Authority of competent jurisdiction
shall have issued a final permanent Order, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement.
8.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 8.1, this Agreement shall
forthwith become wholly void and of no further force and effect and,
other than in the event of a termination pursuant to Section 8.1(b) or
(c), there shall be no liability on the part of the Purchaser or the
Seller or their respective officers or directors (except as set forth
in this Section and Sections 5.2 and 5.4). In the event of the
termination of this Agreement pursuant to Section 8.1(b) or (c), the
terminating party shall be indemnified by the other party for any or
all damages, costs and expenses sustained or incurred as a result of
such termination. The obligations of the parties to this Agreement
under Sections 5.2 and 5.4 shall survive any such termination.
Notwithstanding anything in this Agreement to the contrary, in no event
shall any losses, claims, damages or liabilities claimed with respect
to the exception to the immediately preceding sentence include any
consequential or punitive damages, except those claimed by third
parties.
ARTICLE 9.
MISCELLANEOUS
9.1 SCHEDULES. Disclosures included in any Schedule to this Agreement
shall be considered to be made for purposes of all Schedules. Inclusion of any
matter in any Schedule to this Agreement does not imply that such matter would,
under the provisions of this Agreement,
39
<PAGE>
have to be included in such Schedule. If at any time at or before Closing there
is any material change with respect to the matters contained in any original
Schedule attached to this Agreement or which the Seller delivers to the
Purchaser following the execution hereof, then the Seller shall give the
Purchaser prompt notice thereof in which case such Schedule, as amended by such
notice and with the consent of the Purchaser, shall be substituted for such
original Schedule.
9.2 NOTICES. All notices provided for or permitted to be given under
this Agreement must be in writing and must be given either by depositing that
writing in the United States mail, addressed to the recipient, postage paid, and
registered or certified with return receipt requested or by delivering that
writing to the recipient in person; by courier; or by facsimile transmission;
and a notice given under this Agreement is effective on receipt by the person to
which such notice was sent. All notices to be sent to person must be sent to or
made at the addresses given for that person or such other address as that person
may specify by notice to other parties as follows:
if to Purchaser, to:
TransMontaigne Terminaling Inc.
280 North College, Suite 500
Fayetteville, Arkansas 72701
Attn: W. A. Sikora, Executive Vice President
FAYETTEVILLE: DENVER:
Phone: (501) 521-5565 Phone: (303) 626-8217
Fax: (501) 442-4650 Fax: (303) 626-8228
with a copy to:
Erik B. Carlson, General Counsel
TransMontaigne Oil Company
370 Seventeenth Street, Suite 2750
Denver, Colorado 80202
Phone: (303) 626-8200
Fax: (303) 626-8238
if to the Seller, to:
Statia Delaware HoldCo II, Inc.
800 Fairway Drive, Suite 295
Deerfield Beach, Florida 33441
Attention: Mr. Thomas M. Thompson, Jr., Vice President
Phone: 954-698-0705
Fax: 954-698-0706
40
<PAGE>
with a copies to:
Mr. Jack R. Pine
Statia Terminals, Inc.
701 Warrenville Road, Suite 275
Lisle, Illinois 60532
Fax: 630-435-9542
and
Mr. Jerry L. Metcalf
Brown, Parker & Leahy, L.L.P.
1200 Smith Street, Suite 3600
Houston, Texas 77002
Fax: 713-654-1871
if to STI, to:
Statia Terminals International N.V.
Tumbledown Dick Bay
St. Eustatius, Netherlands Antilles
Fax: ###-##-####
with a copy to:
41
<PAGE>
Mr. Jack R. Pine
Statia Terminals, Inc.
701 Warrenville Road, Suite 275
Lisle, Illinois 60532
Fax: 630-435-9542
9.3 HEADING; CROSS REFERENCES. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and do
not constitute a part of the Agreement. Unless the context otherwise requires,
all references herein to Articles or Sections shall refer to Articles or
Sections of this Agreement.
9.4 AMENDMENT. This Agreement and the Schedules hereto may be amended
by the parties hereto, but may not be amended except by an instrument or
instruments in writing signed and delivered on behalf of each of the parties
hereto.
9.5 EXTENSION; WAIVER. At any time prior to the Closing Date, any party
hereto which is entitled to the benefits hereof may (a) extend the time for the
performance of any of the obligations or other acts of any of the other parties
hereto, (b) waive any inaccuracy in the representations and warranties of any of
the other parties hereto contained herein or in any Schedule hereto or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements of any of the other parties hereto or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed and delivered on
behalf of such party.
9.6 ENTIRE AGREEMENT. This Agreement (including the Schedules,
documents and instruments referred to herein) and the Confidentiality Agreement
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
9.7 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, and any attempted assignment shall be void.
9.8 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Texas.
9.9 ATTORNEYS FEES. In the event of any litigation to interpret or
enforce any provision of this Agreement, upon entry of a final, nonappealable
order, the prevailing party shall be entitled to recover its attorneys fees and
costs plus interest thereon from the date incurred until paid at the Applicable
Rate.
42
<PAGE>
9.10 SUBMISSION TO JURISDICTION. (a) Each of the Seller, the Company,
the Purchaser and STI hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of Texas in Harris
County, Texas and the courts of the United States for the Southern
District of Texas in the Houston Division;
(ii) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in Section 9.2 or at such other
address for a party as shall be specified by a notice pursuant thereto;
and
(iv) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(b) In the event the Purchaser institutes an action against
STI in the manner above set forth and obtains a default judgment
against STI in a court of competent jurisdiction in the United States
based upon STI's failure to appear or otherwise plead, STI hereby
agrees to waive any rights it may have to contest the enforceability of
such default judgment against STI and its assets in STI's home
jurisdiction in the Netherlands Antilles whether pursuant to procedural
protections provided under the laws or statutes of the Netherlands
Antilles or by reason of such matter being deemed contrary to natural
justice or public policy in the Netherlands Antilles.
(c) Each of the Seller, the Company, the Purchaser and STI
hereby irrevocably and unconditionally waive trial by jury in any legal
action or proceeding referred to in Section 9.10(a).
9.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute a single agreement.
9.12 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Prior to Closing, neither
the Seller nor the Purchaser or any agent or Affiliates thereof shall issue any
press release or make any public announcement with respect to this Agreement and
the transactions contemplated hereby
43
<PAGE>
without the prior written consent of the other party, except where the releasing
party is advised by legal counsel that such release or announcement is required
by applicable Laws or Regulations. If either party determines that a press
release or announcement is required or desired, they will so notify the other
party in writing, shall consult with each other with regard to the same, and the
party making a release or announcement will use all commercially reasonable
efforts to provide a copy to the other party prior to any release or
announcement. Purchaser and Seller further agree to consult with each other on
all press releases and announcements issued at Closing concerning the
transactions contemplated by this Agreement.
9.13 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights, remedies or obligations upon any person, firm or corporation other than
the parties hereto and their respective successors and permitted assigns.
9.14 TIME OF ESSENCE. Time is of the essence in this Agreement.
44
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed on their behalf by their respective officers hereunto
duly authorized all as of the date first written above. Statia Terminals
International N.V. signs this Agreement solely for the purposes specified in
Section 7.7 of this Agreement and makes no representations or warranties, makes
no agreements or covenants and assumes no undertakings or obligations other than
those specified in said Article.
STATIA DELAWARE HOLDCO II, INC.
By_________________________________
Its________________________________
"Seller"
TRANSMONTAIGNE TERMINALING INC.
By________________________________
Name: W. A. Sikora
Title: Executive Vice President
"Purchaser"
STATIA TERMINALS INTERNATIONAL N.V.
By________________________________
Managing Director
By________________________________
Managing Director
"STI"
45
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS INTERNATIONAL N.V.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001029101
<NAME> STATIA TERMINALS INTERNATIONAL N.V.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 8,589
<SECURITIES> 0
<RECEIVABLES> 10,755
<ALLOWANCES> 860
<INVENTORY> 1,163
<CURRENT-ASSETS> 37,783
<PP&E> 213,449
<DEPRECIATION> 15,895
<TOTAL-ASSETS> 240,536
<CURRENT-LIABILITIES> 17,065
<BONDS> 135,000
0
0
<COMMON> 6
<OTHER-SE> 98,494
<TOTAL-LIABILITY-AND-EQUITY> 240,536
<SALES> 35,634
<TOTAL-REVENUES> 66,836
<CGS> 31,229
<TOTAL-COSTS> 53,932
<OTHER-EXPENSES> 3,809
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,445
<INCOME-PRETAX> (3,136)
<INCOME-TAX> 219
<INCOME-CONTINUING> (3,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,355)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS CANADA INCORPORATED'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE
30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001029102
<NAME> STATIA TERMINALS CANADA INCORPORATED
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,127
<SECURITIES> 0
<RECEIVABLES> 2,125
<ALLOWANCES> 62
<INVENTORY> 427
<CURRENT-ASSETS> 3,722
<PP&E> 30,348
<DEPRECIATION> 2,377
<TOTAL-ASSETS> 32,770
<CURRENT-LIABILITIES> 1,554
<BONDS> 28,060
0
0
<COMMON> 0
<OTHER-SE> 2,266
<TOTAL-LIABILITY-AND-EQUITY> 32,770
<SALES> 0
<TOTAL-REVENUES> 6,628
<CGS> 0
<TOTAL-COSTS> 5,697
<OTHER-EXPENSES> 1,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,756
<INCOME-PRETAX> 1,040
<INCOME-TAX> 32
<INCOME-CONTINUING> 1,008
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
On July 29, 1998, Statia Terminals International N.V. and Subsidiaries
(the "Company") sold a subsidiary (Statia Terminals Southwest, Inc. or
"Southwest") which owns storage and transshipment facilities located in
Brownsville, Texas to TransMontaigne Terminaling Inc., a subsidiary of
TransMontaigne Oil Company (collectively "TransMontaigne"), for $6.5 million in
cash resulting in net proceeds of approximately $6.0 million. The Company
retained certain of the pre-closing assets and liabilities of Southwest
consisting primarily of accounts receivable and accrued expenses and agreed to
indemnify the purchaser for certain contingent legal and environmental matters
up to a maximum $0.5 million. No provision has been made in the Company's
financial statements for these contingent matters as management believes it is
not probable the Company will ever be required to provide such indemnification.
The following unaudited pro forma consolidated condensed balance sheet
as of June 30, 1998 was prepared to illustrate the estimated effects of the sale
of Southwest, as if the sale had occurred on June 30, 1998. The following
unaudited pro forma consolidated condensed statements of income (loss) for the
year ended December 31, 1997 and the six-month periods ended June 30, 1997 and
1998 were prepared to illustrate the estimated effects of sale of Southwest as
if it had occurred at the beginning of each of these respective periods. This
pro forma information is provided for informational purposes only and does not
purport to be indicative of the results of operations or financial position
which would have been obtained had the sale of Southwest been completed on the
dates indicated or the financial condition or results of operations for any
future date or period.
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1998
(DOLLARS IN THOUSANDS)
LESS ADD
HISTORICAL PRO FORMA ADJUSTED
HISTORICAL SOUTHWEST ADJUSTMENTS PRO FORMA
---------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 8,589 $ 46 $ 6,546 (a) $ 15,089
Accounts receivable-
Trade, net 7,797 300 300 (b) 7,797
Other 2,098 - - 2,098
Inventory, net 1,163 - - 1,163
Prepaid expenses 2,136 14 14 (b) 2,136
Assets held for sale, net 16,000 - (6,000) (c) 10,000
---------------- ----------------- ------------------- -----------------
Total current assets 37,783 360 860 38,283
PROPERTY AND EQUIPMENT, net 197,554 4,127 4,127 (d) 197,554
OTHER NONCURRENT ASSETS, net 5,199 - - 5,199
---------------- ----------------- ------------------- -----------------
Total assets $ 240,536 $ 4,487 $ 4,987 $ 241,036
================ ================= =================== =================
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 7,155 $ 136 $ 136 (b) $ 7,155
Accrued interest payable 2,027 - - 2,027
Other accrued expenses 7,883 199 699 (b) 8,383
---------------- ----------------- ------------------- -----------------
Total current liabilities 17,065 335 835 17,565
LONG-TERM DEBT 135,000 - - 135,000
---------------- ----------------- ------------------- -----------------
Total liabilities 152,065 335 835 152,565
---------------- ----------------- ------------------- -----------------
STOCKHOLDER'S EQUITY
SUBJECT TO REDUCTION 16,000 - - 16,000
STOCKHOLDER'S EQUITY 72,471 4,152 4,152 (e) 72,471
---------------- ----------------- ------------------- -----------------
Total liabilities and
Stockholder's equity $ 240,536 $ 4,487 $ 4,987 $ 241,036
================ ================= =================== =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
LESS ADD
HISTORICAL PRO FORMA ADJUSTED
HISTORICAL SOUTHWEST ADJUSTMENT PRO FORMA
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 66,836 $ 1,613 $ - $ 65,223
COSTS OF SERVICES AND PRODUCTS SOLD 53,932 1,674 - 52,258
--------------- ---------------- --------------- ---------------
Gross profit (loss) 12,904 (61) - 12,965
VALUATION ADJUSTMENT ON ASSETS HELD FOR SALE 4,000 - (4,000) (f) -
ADMINISTRATIVE EXPENSES 3,809 337 337 (g) 3,809
--------------- ---------------- --------------- ---------------
Income (loss) from operations 5,095 (398) 3,663 9,156
INTEREST EXPENSE 8,445 7 - 8,438
INTEREST INCOME 214 - - 214
--------------- ---------------- --------------- ---------------
Loss before provision for income taxes (3,136) (405) 3,663 932
PROVISION FOR INCOME TAXES 219 - - (h) 219
--------------- ---------------- --------------- ---------------
Net loss $ (3,355) $ (405) $ 3,663 $ 713
=============== ================ =============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
LESS ADD
HISTORICAL PRO FORMA ADJUSTED
HISTORICAL SOUTHWEST ADJUSTMENT PRO FORMA
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 65,857 $ 1,170 $ 265 (i) $ 64,952
COSTS OF SERVICES AND PRODUCTS SOLD 57,091 1,697 241 (i) 55,635
--------------- ---------------- --------------- ---------------
Gross profit (loss) 8,766 (527) 24 9,317
ADMINISTRATIVE EXPENSES 3,182 380 380 (g) 3,182
--------------- ---------------- --------------- ---------------
Income (loss) from operations 5,584 (907) (356) 6,135
INTEREST EXPENSE 8,430 2 - 8,428
INTEREST INCOME 226 - - 226
--------------- ---------------- --------------- ---------------
Loss before provision for income taxes (2,620) (909) (356) (2,067)
PROVISION FOR INCOME TAXES 233 10 - (h) 223
--------------- ---------------- --------------- ---------------
Net loss $ (2,853) $ (919) $ (356) $ (2,290)
=============== ================ =============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATIA TERMINALS INTERNATIONAL N.V. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
LESS ADD
HISTORICAL PRO FORMA ADJUSTED
HISTORICAL SOUTHWEST ADJUSTMENT PRO FORMA
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ 142,499 $ 2,356 $ 485 (i) $ 140,628
COSTS OF SERVICES AND PRODUCTS SOLD 122,835 3,517 341 (i) 119,659
--------------- ---------------- --------------- ---------------
Gross profit (loss) 19,664 (1,161) 144 20,969
ADMINISTRATIVE EXPENSES 6,348 706 706 (g) 6,348
--------------- ---------------- --------------- ---------------
Income (loss) from operations 13,316 (1,867) (562) 14,621
INTEREST EXPENSE 16,874 5 - 16,869
INTEREST INCOME 459 - - 459
--------------- ---------------- --------------- ---------------
Loss before provision for income taxes (3,099) (1,872) (562) (1,789)
PROVISION FOR INCOME TAXES 780 21 - (h) 759
--------------- ---------------- --------------- ---------------
Net loss $ (3,879) $ (1,892) $ (562) $ (2,548)
=============== ================ =============== ===============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(a) Represents the $6,500 gross proceeds received from TransMontaigne from
the sale of Southwest and the cash balance of Southwest to be retained
by the Company.
(b) Represents certain pre-closing assets and liabilities of Southwest
consisting primarily of accounts receivable and accrued expenses
retained by the Company.
(c) Represents the reduction of net Assets Held for Sale for the estimated
net proceeds from the sale of Southwest.
(d) Represents the historical net property and equipment balance of
Southwest. Such balance had been reclassified in consolidation and is
not in the historical consolidated net Property and Equipment balance
appearing in the Historical column.
(e) Represents the historical equity balance of Southwest. Such balance had
been eliminated in consolidation and is not in the historical
consolidated Stockholder's Equity balance appearing in the Historical
column.
(f) Represents the reversal of the valuation adjustment recorded by the
Company during the three months ended June 30, 1998.
(g) Represents the reallocation of Administrative Expenses previously
allocated to Southwest. These expenses will continue to be incurred
after the sale of Southwest and will be allocated to Statia Terminals
Canada, Inc.
(h) There is no tax effect for the sale of Southwest because the Company
will record a valuation allowance against the tax asset resulting from
the transaction as management believes it is not likely the deferred
tax asset will be utilized in the future.
(i) Represents intercompany revenues and expenses related to the rental
during 1997 of certain marine assets by Southwest to Statia Terminals
N.V.
