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 SEPTEMBER 30, 1999
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 NUMBER 0-25821
--------------------
STATIA TERMINALS GROUP N.V.
(Exact name of registrant as specified in its charter)
NETHERLANDS ANTILLES 52-2003016
(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)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of November 15,
1999, 7,600,000 common shares of the issuer were outstanding.
<PAGE>
STATIA TERMINALS GROUP N.V.
QUARTERLY REPORT ON FORM 10-Q
SEPTEMBER 30, 1999
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Income (Loss) 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 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
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 "MAY", "WILL", "BELIEVE,"
"ANTICIPATE," "EXPECT", "ESTIMATE" 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 PETROLEUM TERMINALING INDUSTRY, ADDED COSTS DUE TO
CHANGES IN GOVERNMENT REGULATIONS AFFECTING THE PETROLEUM INDUSTRY, THE LOSS OF
A MAJOR CUSTOMER, THE FINANCIAL CONDITION OF THE COMPANY'S CUSTOMERS,
INTERRUPTION OF OUR OPERATIONS CAUSED BY ADVERSE WEATHER CONDITIONS, THE
CONDITION OF THE UNITED STATES ECONOMY, RISKS ASSOCIATED WITH OUR EFFORTS TO
COMPLY WITH THE Y2K REQUIREMENT, AND OTHER FACTORS INCLUDED IN THIS REPORT AND
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-72317). 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
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,061 $ 13,400
Accounts receivable-
Trade, net 7,562 13,317
Other 2,328 4,231
Inventory, net 4,528 1,964
Prepaid expenses 1,417 1,272
---------------- ----------------
Total current assets 29,896 34,184
PROPERTY AND EQUIPMENT, net 209,970 208,086
OTHER NONCURRENT ASSETS, net 5,744 3,120
---------------- ----------------
Total assets $ 245,610 $ 245,390
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,306 $ 13,881
Accrued interest payable 2,027 4,475
Preferred stock dividends payable 7,440 -
Other accrued expenses 8,506 7,775
---------------- ----------------
Total current liabilities 27,279 26,131
SUBORDINATED DISTRIBUTIONS PAYABLE - 1,203
LONG-TERM DEBT- 11-3/4% FIRST MORTGAGE NOTES 135,000 101,000
---------------- ----------------
Total liabilities 162,279 128,334
REDEEMABLE PREFERRED STOCK - SERIES A, B and C 40,000 -
STOCKHOLDERS' EQUITY:
Preferred stock - Series D and E 54,824 -
Common stock 4 -
Class A common shares - 76
Class B subordinated shares - 38
Class C incentive rights - -
Additional paid-in-capital 363 138,572
Notes receivable from stockholders (1,474) (1,474)
Accumulated deficit (10,386) (20,156)
---------------- ----------------
Total stockholders' equity 43,331 117,056
---------------- ----------------
Total liabilities and stockholders' equity $ 245,610 $ 245,390
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 1
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- -----------------------------------
1998 1999 1998 1999
---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 32,699 $ 43,310 $ 99,535 $ 122,992
COSTS OF SERVICES AND PRODUCTS SOLD 24,720 36,928 78,652 99,327
---------------- -------------- --------------- ----------------
Gross profit 7,979 6,382 20,883 23,665
ADMINISTRATIVE EXPENSES 2,344 2,269 7,018 6,751
SPECIAL COMPENSATION EXPENSE - - - 4,099
---------------- -------------- --------------- ----------------
Operating income 5,635 4,113 13,865 12,815
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT - - 4,000 -
INTEREST EXPENSE 4,206 3,176 12,651 11,113
INTEREST INCOME 202 117 464 684
---------------- -------------- --------------- ----------------
Income (loss) before provision for income
taxes, preferred stock dividends and
extraordinary charge 1,631 1,054 (2,322) 2,386
PROVISION FOR INCOME TAXES 49 55 268 548
---------------- -------------- --------------- ----------------
Income (loss) before preferred stock
dividends and extraordinary charge 1,582 999 (2,590) 1,838
PREFERRED STOCK DIVIDENDS 897 - 2,733 2,257
---------------- -------------- --------------- ----------------
Income (loss) before extraordinary charge 685 999 (5,323) (419)
EXTRAORDINARY CHARGE RELATED TO
EARLY EXTINGUISHMENT OF DEBT - - - 4,743
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 685 $ 999 $ (5,323) $ (5,162)
================ ============== =============== ================
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary charge $ - $ 0.13 $ - $ 0.79
Extraordinary charge - - - (1.10)
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ - $ 0.13 $ - $ (0.31)
================ ============== =============== ================
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary charge $ - $ 0.09 $ - $ 0.52
Extraordinary charge - - - (0.73)
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ - $ 0.09 $ - $ (0.21)
================ ============== =============== ================
BASIC EARNINGS PER SUBORDINATED SHARE:
Income (loss) before extraordinary charge $ 0.21 $ - $ (1.61) $ (1.06)
Extraordinary charge - - - -
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 0.21 $ - $ (1.61) $ (1.06)
================ ============== =============== ================
DILUTED EARNINGS PER SUBORDINATED
SHARE:
Income (loss) before extraordinary charge $ 0.19 $ - $ (1.61) $ (1.06)
Extraordinary charge - - - -
---------------- -------------- --------------- ----------------
Net income (loss) available to common
stockholders $ 0.19 $ - $ (1.61) $ (1.06)
================ ============== =============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 2
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
1998 1999
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss available to common stockholders $ (5,323) $ (5,162)
Adjustments to reconcile net loss available to common stockholders
to net cash provided by operating activities:
Extraordinary charge related to early extinguishment of debt - 4,743
Non-cash special compensation expense - 2,152
Depreciation, amortization and non-cash charges 9,186 8,968
Loss on disposition of property and equipment 4,000 -
Preferred stock dividends accrued 2,733 2,257
(Increase) decrease in accounts receivable-trade 4,428 (5,774)
(Increase) decrease in other receivables 1,149 (1,903)
Decrease in inventory 226 2,564
(Increase) decrease in prepaid expenses 190 (633)
(Increase) decrease in other non-current assets 11 (34)
Increase (decrease) in accounts payable (2,272) 4,575
Increase in accrued expenses 4,093 1,718
-------------- ---------------
Net cash provided by operating activities 18,421 13,471
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,489) (6,331)
Proceeds from sale of Statia Terminals Southwest, Inc. 6,500 -
Proceeds from sale of property and equipment - 15
-------------- ---------------
Net cash used in investing activities (989) (6,316)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from initial public offering of common shares - 136,757
Redemption of preferred stock (6,150) (94,824)
Repurchase of First Mortgage Notes - (37,681)
Payment of preferred stock dividends - (9,697)
Payment of Class A common share distributions - (2,405)
Issuance of additional subordinated shares and incentive rights - 34
-------------- ---------------
Net cash used in financing activities (6,150) (7,816)
-------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,282 (661)
CASH AND CASH EQUIVALENTS, beginning of period 6,113 14,061
-------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 17,395 $ 13,400
============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 285 $ 521
============== ===============
Cash paid for interest $ 8,002 $ 8,665
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Page 3
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed financial statements of Statia
Terminals Group N.V. ("Group") and its subsidiaries (together with Group, 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
for the year ended December 31, 1998 included in the Company's Registration
Statement on Form S-1 (File No. 333-72317) related to its initial public
offering of equity (the "Registration Statement"). In the opinion of the
Company's management, the accompanying consolidated condensed financial
statements contain all adjustments and accruals necessary to present fairly the
financial position of the Company at September 30, 1999 and the results of
operations and cash flows for the nine months ended September 30, 1998 and 1999.
Operating results for the nine months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. Additionally, the Company's initial public offering of
equity, which closed on April 28, 1999, impacted the Company's results of
operations and financial condition, and affects comparability across periods.
These financial statements should be read in conjunction with the Registration
Statement.
For all periods presented herein, there were no differences between net
income and comprehensive income.
2. SEGMENT INFORMATION
The Company is organized around several different factors, the two most
significant of which are services and products and geographic location. The
Company's primary services and products are terminaling services (resulting in
revenue from storage, throughput, dock usage, emergency response and other
terminal services) and bunker and bulk product sales.
The primary measures of profit and loss utilized by the Company's
management to make decisions about resources to be allocated to each segment are
earnings before interest expense, interest income, income taxes, depreciation,
amortization, and certain unallocated income and expenses ("Internal EBITDA")
and earnings before interest expense, interest income, income taxes, and certain
unallocated income and expenses ("Internal EBIT").
Page 4
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2. SEGMENT INFORMATION- (CONTINUED)
The following information is provided for the Company's terminaling
services and bunker and bulk products sales segments:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------
1998 1999 1998 1999
--------------- ---------------- --------------- ----------------
REVENUES:
<S> <C> <C> <C> <C>
Terminaling services $ 17,005 $ 14,292 $ 48,161 $ 48,328
Bunker and bulk product sales 15,694 29,018 51,374 74,664
--------------- ---------------- --------------- ----------------
Total $ 32,699 $ 43,310 $ 99,535 $ 122,992
=============== ================ =============== ================
INTERNAL EBITDA:
Terminaling services $ 8,945 $ 5,705 $ 21,834 $ 21,631
Bunker and bulk product sales 252 1,017 1,918 3,549
--------------- ---------------- --------------- ----------------
Total $ 9,197 $ 6,722 $ 23,752 $ 25,180
=============== ================ =============== ================
DEPRECIATION AND AMORTIZATION
EXPENSE:
Terminaling services $ 2,641 $ 2,624 $ 8,238 $ 8,198
Bunker and bulk product sales 124 134 376 423
--------------- ---------------- --------------- ----------------
Total $ 2,765 $ 2,758 $ 8,614 $ 8,621
=============== ================ =============== ================
INTERNAL EBIT:
Terminaling services $ 6,304 $ 3,081 $ 13,596 $ 13,433
Bunker and bulk product sales 128 883 1,542 3,126
--------------- ---------------- --------------- ----------------
Total $ 6,432 $ 3,964 $ 15,138 $ 16,559
=============== ================ =============== ================
</TABLE>
A reconciliation of Internal EBIT to the Company's income (loss) before
provision for income taxes, preferred stock dividends and extraordinary charge
is as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ ------------------------------------
1998 1999 1998 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Internal EBIT $ 6,432 $ 3,964 $ 15,138 $ 16,559
Unallocated operating and administrative
expenses (1,024) (21) (1,956) (241)
Special compensation expense - - - (4,099)
Interest expense excluding debt
amortization expense (3,979) (3,006) (11,968) (10,517)
Interest income 202 117 464 684
Loss on sale of Statia Terminals
Southwest, Inc. - - (4,000) -
--------------- ---------------- ---------------- ---------------
Income (loss) before provision for income
taxes, preferred stock dividends and
extraordinary charge $ 1,631 $ 1,054 $ (2,322) $ 2,386
=============== ================ ================ ===============
</TABLE>
Page 5
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
3. EARNINGS PER SHARE
In connection with its initial public offering of equity discussed
below, the Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS No. 128"). Earnings per share are computed based
upon the "Participating Securities and Two-Class Common Stock" methodology as
required by SFAS No. 128. Earnings and losses have been allocated to each class
of common equity based upon changes in the historical basis liquidation values
of the classes of common equity during the periods presented as determined in
accordance with the Company's Articles of Incorporation. Under this methodology,
all of the earnings and losses prior to the closing of the Company's initial
public offering of equity on April 28, 1999 have been allocated to the Class B
subordinated shareholders. All of the earnings and losses subsequent to April
28, 1999 have been allocated to the Class A common shareholders.
Basic earnings (loss) per share is computed by dividing the earnings
and losses allocated to each class of common equity by the weighted average
number of shares outstanding for each class during the period. Diluted earnings
(loss) per share is computed the same as basic earnings (loss) per share except
the denominator is adjusted for the effect of Class A common share and Class B
subordinated share equivalents outstanding. For periods prior to April 28, 1999,
subordinated share equivalents include, where appropriate, the assumed exercise
of previously outstanding stock options and the conversion of the Company's
previously outstanding Series B preferred stock.
All earnings per share amounts presented have been adjusted to give
retroactive effect, as of the beginning of each period presented, to the
reclassification and issuance of additional Class B subordinated shares and
Class C incentive rights that occurred in connection with the initial public
offering of equity. The Company's previously outstanding preferred stock with
conversion features was antidilutive for all periods presented.
The following additional information is presented with respect to the
Company's earnings per share amounts:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1999 1998 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE
Earnings and losses allocated to Class A
common shares:
Income before extraordinary charge $ - $ 999 $ - $ 3,384
Extraordinary charge - - - (4,743)
-------------- -------------- -------------- --------------
Net income (loss) available to common
stockholders $ - $ 999 $ - $ (1,359)
============== ============== ============== ==============
Weighted average Class A common shares
outstanding - 7,600 - 4,315
Dilutive effect of weighted average Class B
subordinated shares outstanding - 3,800 - 2,158
-------------- -------------- -------------- --------------
Diluted common shares outstanding - 11,400 - 6,473
============== ============== ============== ==============
EARNINGS PER SUBORDINATED SHARE
Earnings and losses allocated to Class B
subordinated shares:
Income (loss) before extraordinary charge $ 685 $ - $ (5,323) $ (3,803)
Extraordinary charge - - - -
-------------- -------------- -------------- --------------
Net income (loss) available to common
stockholders $ 685 $ - $ (5,323) $ (3,803)
============== ============== ============== ==============
Weighted average Class B subordinated shares
outstanding 3,304 3,800 3,305 3,588
Dilutive effect of stock options and preferred
stock with conversion features 230 - - -
-------------- -------------- -------------- --------------
Diluted subordinated shares outstanding 3,534 3,800 3,305 3,588
============== ============== ============== ==============
</TABLE>
Page 6
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY
On April 28, 1999, Group completed its initial public equity offering
of 7.6 million Class A common shares. The offering price was $20 per share
raising gross proceeds of $152,000. The gross proceeds of the offering were used
primarily to redeem all of Group's outstanding Series A-E preferred stock and
pay accrued dividends, pay underwriters' discounts and fees, and pay certain
other costs directly associated with the offering. The remaining proceeds were
invested and used during May, 1999, along with existing cash, to repurchase in
the open market a principal amount of $34,000 of the Company's 11 3/4% First
Mortgage Notes (the "Notes") for $39,522, including acquisition costs and
accrued interest of $3,681 and $1,841, respectively. During the second quarter
of 1999, the acquisition costs and the unamortized deferred financing costs
related to the repurchased Notes ($1,062) were recorded as an extraordinary
charge. There was no income tax effect associated with this extraordinary
charge.
During the three months ended March 31, 1999, the Company recorded as
special compensation expense a bonus in the amount of $1,947 for particular
members of the Company's management. The purpose of this special management
bonus was to partially reimburse these individuals with respect to adverse tax
consequences that resulted from the offering and other past compensation
arrangements.
As more fully discussed in the Registration Statement, in connection
with the offering, certain previously granted stock options became fully vested,
were exercised and became subordinated shares. In accordance with APB 25, the
Company was amortizing as compensation expense the difference between the
estimated fair value of the options at the date of grant and the exercise price
over the vesting period of five years. During the period from January 1, 1999 to
April 28, 1999, $154 was amortized as compensation expense and credited to
additional paid in capital. On April 28, 1999, the remaining unamortized
compensation expense associated with these options of $2,152 was recorded as a
non-cash special compensation expense and credited to additional paid-in
capital.
The following additional information for the nine months ended
September 30, 1999 is presented with respect to the Company's equity accounts.
<TABLE>
<CAPTION>
PREFERRED STOCK - NOTES
SERIES D AND E RECEIVABLE COMMON STOCK ADDITIONAL
----------------- FROM -------------- PAID-IN ACCUMULATED
SHARES AMOUNT STOCKHOLDERS SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ ------------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 55 $54,824 $ (1,474) 41 $ 4 $ 363 $ (10,386) $ 43,331
Net proceeds from initial public
offering of common shares - - - 7,600 76 136,681 - 136,757
Exercise of stock options,
reclassification of
subordinated shares and
issuance of additional
subordinated shares and
incentive rights - - - 3,797 34 - - 34
Vesting of stock options - - - - - 2,152 - 2,152
Amortization expense related
to issuance of options - - - - - 154 - 154
Write-off of prepaid Castle
Harlan management fee - - - - - (778) - (778)
Redemption of preferred stock (55) (54,824) - - - - - (54,824)
Dividend of Petroterminal de
Panama shares - - - - - - (1,000) (1,000)
Class A common shares and Class B
subordinated shares
distributions declared - - - - - - (3,608) (3,608)
Net loss available to
common stockholders - - - - - - (5,162) (5,162)
------ ------ -------- ------- ------ ------- --------- --------
BALANCE, September 30, 1999 - $ - $ (1,474) 11,438 $ 114 $138,572 $ (20,156) $117,056
====== ====== ======== ======= ====== ======== ========= ========
</TABLE>
Page 7
<PAGE>
STATIA TERMINALS GROUP N.V. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
4. INITIAL PUBLIC OFFERING OF EQUITY- (CONTINUED)
In conjunction with the transactions surrounding the initial public
offering of equity, the Company authorized 30.0 million shares of Class A common
shares of which 7.6 million shares are currently issued and outstanding;
authorized 7.8 million shares of Class B subordinated shares of which 3.8
million shares are currently issued and outstanding; and authorized 2.2 million
shares of Class C incentive rights of which 0.38 million shares are currently
issued and outstanding.
The following unaudited pro forma consolidated results of operations
for the three-month and nine-month periods ended September 30, 1998 and 1999
were prepared to illustrate the estimated effects of:
o the disposition of Statia Terminals Southwest, Inc.,
o the elimination of the Castle Harlan management fee, and
o the use of the net proceeds from the initial public offering
of equity and the restructuring as described in the
Registration Statement,
(collectively, the "pro forma transactions") as if the pro forma transactions
had occurred at the beginning of each of these respective periods. The unaudited
pro forma consolidated condensed results of operations should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's financial statements and the notes
thereto, and the other financial information included in the Registration
Statement. This pro forma financial 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 pro forma transactions been completed on
the dates indicated or results of operations for any future date or period.
<TABLE>
<CAPTION>
UNAUDITED SELECTED PRO FORMA CONSOLIDATED RESULTS
-----------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES $32,699 $43,310 $97,922 $122,992
============= ============= ============= =============
OPERATING INCOME $ 5,973 $ 4,113 $14,939 $ 17,357
============= ============= ============= =============
NET INCOME AVAILABLE
TO COMMON STOCKHOLDERS $ 2,976 $ 999 $ 5,658 $ 7,847
============= ============= ============= =============
DEPRECIATION $ 2,537 $ 2,587 $ 7,634 $ 8,024
============= ============= ============= =============
EBITDA $ 8,712 $ 6,817 $23,037 $ 25,970
============= ============= ============= =============
BASIC EARNINGS PER COMMON SHARE $ 0.39 $ 0.13 $ 0.74 $ 1.03
============= ============= ============= =============
DILUTED EARNINGS PER COMMON SHARE $ 0.26 $ 0.09 $ 0.50 $ 0.69
============= ============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,600 7,600 7,600 7,600
============= ============= ============= =============
DILUTED COMMON SHARES OUTSTANDING 11,400 11,400 11,400 11,400
============= ============= ============= =============
</TABLE>
Page 8
<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 Group N.V. and Subsidiaries as of September 30, 1999 and the
three and nine month periods ended September 30, 1998 and 1999 included herein.
Reference should also be made to the Company's Registration Statement that
includes the Company's Consolidated Financial Statements as of and for the year
ended December 31, 1998. You should note that we sold our Brownsville, Texas,
facility on July 29, 1998, and the figures below and our consolidated condensed
financial statements for the nine months ended September 30, 1998 include the
operations of the Brownsville facility prior to its sale.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, the
percentage of revenues represented by certain items in our consolidated
condensed income statements.
RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1998 1999
------------------------------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $ 17,005 52.0% $ 14,292 33.0%
Bunker and bulk product sales 15,694 48.0% 29,018 67.0%
--------- -------- --------- --------
Total revenues 32,699 100.0% 43,310 100.0%
Cost of services and products sold 24,720 75.6% 36,928 85.3%
--------- -------- --------- --------
Gross profit 7,979 24.4% 6,382 14.7%
Administrative expenses 2,344 7.2% 2,269 5.2%
--------- -------- --------- --------
Operating income 5,635 17.2% 4,113 9.5%
Interest expense 4,206 12.9% 3,176 7.3%
Interest income 202 0.6% 117 0.2%
-------- ------ --------- --------
Income before income taxes, preferred stock dividends and
extraordinary charge 1,631 4.9% 1,054 2.4%
Provision for income taxes 49 0.1% 55 0.1%
Preferred stock dividends 897 2.7% - -
-------- ------ -------- -------
Net income available to common stockholders $ 685 2.1% $ 999 2.3%
======== ====== ======== =======
</TABLE>
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
1998 1999
-------------------- -------------------
% OF % OF
DOLLARS REVENUES DOLLARS REVENUES
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Terminaling services $ 48,161 48.4% $ 48,328 39.3%
Bunker and bulk product sales 51,374 51.6% 74,664 60.7%
--------- ------ --------- --------
Total revenues 99,535 100.0% 122,992 100.0%
Cost of services and products sold 78,652 79.0% 99,327 80.8%
--------- ------ --------- --------
Gross profit 20,883 21.0% 23,665 19.2%
Administrative expenses 7,018 7.1% 6,751 5.5%
Special compensation expense - - 4,099 3.3%
-------- -------- --------- --------
Operating income 13,865 13.9% 12,815 10.4%
Loss on disposition of property and equipment 4,000 4.0% - -
Interest expense 12,651 12.7% 11,113 9.0%
Interest income 464 0.5% 684 0.6%
-------- ------ --------- --------
Income (loss) before income taxes, preferred stock dividends
and extraordinary charge (2,322) (2.3)% 2,386 2.0%
Provision for income taxes 268 0.3% 548 0.5%
Preferred stock dividends 2,733 2.7% 2,257 1.8%
Extraordinary charge related to early extinguishment of debt - - 4,743 3.9%
-------- -------- -------- -------
Net loss available to common stockholders $ (5,323) (5.3)% $ (5,162) (4.2)%
========== ======= ========== ========
</TABLE>
The following tables set forth, for the periods indicated (a) the total
revenues and total operating income (loss), after allocation of administrative
expenses, at each of our operating locations and (b) the percentage of revenue
and operating income (loss) relative to our total revenue and operating income.
REVENUES BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 27,059 82.8% $ 39,647 91.5%
Canada 5,640 17.2% 3,663 8.5%
-------- ------- --------- -------
Total $ 32,699 100.0% $ 43,310 100.0%
======== ======= ========= =======
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 82,880 83.3% $ 108,129 87.9%
Canada 15,042 15.1% 14,863 12.1%
Brownsville, Texas facility 1,613 1.6% - -
-------- ------- --------- -------
Total $ 99,535 100.0% $ 122,992 100.0%
======== ======= ========= =======
</TABLE>
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
OPERATING INCOME (LOSS) BY LOCATION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 3,967 70.4% $ 3,892 94.6%
Canada 1,668 29.6% 221 5.4%
--------- ------- -------- -------
Total $ 5,635 100.0% $ 4,113 100.0%
========= ======= ======== =======
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Netherlands Antilles and the Caribbean $ 10,341 74.6% $ 10,467 81.7%
Canada 4,006 28.9% 2,348 18.3%
Brownsville, Texas facility (482) (3.5)% - -
-------- -------- -------- -------
Total $ 13,865 100.0% $ 12,815 100.0%
======== ======= ======== =======
</TABLE>
The following table sets forth for the periods indicated total
capacity, capacity leased, throughput, and vessel calls for each of our
operating locations. "Total capacity" represents the average storage capacity
available for lease for a period. "Capacity leased" represents the storage
capacity leased to third parties weighted for the number of days leased in the
month divided by the capacity available for lease. "Throughput" volume is the
total number of inbound barrels discharged into our facilities from a vessel,
tank, rail car or tanker truck, not including across-the-dock or tank-to-tank
transfers. A "vessel call" occurs when a vessel docks or anchors at one of our
terminal locations in order to load and/or discharge cargo and/or to take bunker
fuel. Such dockage or anchorage is counted as one vessel call regardless of the
number of activities carried on by the vessel. A vessel call also occurs when we
sell and deliver bunker fuel to a vessel not calling at our terminals for the
above purposes. Each of these statistics is a measure of the utilization of our
facilities and equipment.
Page 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPACITY, CAPACITY LEASED, THROUGHPUT AND VESSEL CALLS BY LOCATION
(CAPACITY AND THROUGHPUT IN THOUSANDS OF BARRELS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ---------------------------------
1998 1999 1998 1999
-------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Netherlands Antilles and
the Caribbean
Total capacity 11,334 11,334 11,334 11,334
Capacity leased 95% 89% 91% 91%
Throughput 21,516 15,011 53,042 48,687
Vessel calls 209 219 629 739
Canada
Total capacity 7,404 7,404 7,404 7,404
Capacity leased 98% 65% 91% 85%
Throughput 8,456 8,880 35,654 31,214
Vessel calls 22 19 85 78
All locations (1)
Total capacity 18,738 18,738 18,738 18,738
Capacity leased 96% 79% 91% 89%
Throughput 29,972 23,891 88,696 79,901
Vessel calls 231 238 714 817
<FN>
(1) The Brownsville, Texas, facility was sold on July 29, 1998. The
statistics above for the nine months ended September 30, 1998 exclude
the operations of the Brownsville facility.
</FN>
</TABLE>
COMPARABILITY
On July 29, 1998, we sold Statia Terminals Southwest to an unrelated
third-party. Our consolidated condensed financial statements for the nine months
ended September 30, 1998 include the operations of Statia Terminals Southwest
prior to its sale. The operating results of Statia Terminals Southwest for the
nine months ended September 30, 1998 were not significant. Additionally, our
initial public offering of equity, which closed on April 28, 1999, impacted our
results of operations and financial condition.
REVENUES
Total revenues for the three and nine months ended September 30, 1999
were $43.3 million and $123.0 million, compared to $32.7 million and $99.5
million for the same periods of 1998, representing increases of $10.6 million,
or 32.5% and $23.5 million, or 23.6%, respectively.
Revenues from terminaling services (resulting in revenue from storage,
throughout, dock usage, emergency response and other terminal services), for the
three and nine months ended September 30, 1999 were $14.3 million and $48.3
million, compared to $17.0 million and $48.2 million for the same periods of
1998, representing a decrease of $2.7 million, or 15.9% and an increase of $0.2
million, or 0.3%, respectively. The decrease in terminaling services revenue for
the three months ended September 30, 1999 compared to the same period in 1998
was principally due to the effects of the OPEC/OPEC Plus Accord which was
reached in March 1999. The Accord was established between many of the oil
producing nations, some of whom we do business with, to raise crude oil prices
by reducing supply. Members of the Accord have reduced their production of crude
oil which, in turn, has reduced the worldwide quantity of crude oil and
petroleum products in storage.
Page 12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
For the nine months ended September 30, 1999, approximately 57.2% of
our tank capacity and approximately 61.8% of our storage and throughput
revenues, excluding related ancillary services, were derived from long term
contracts.
Revenues from terminaling services at St. Eustatius decreased
approximately $1.4 million, or 12.0%, during the three months ended September
30, 1999 as compared to the third quarter of 1998, due to decreased throughput
and a lower percentage capacity leased. Revenues from terminaling services at
this facility increased $1.1 million, or 3.4%, during the nine months ended
September 30, 1999 as compared to the same period of 1998, due primarily to
increased vessel calls. Total throughput decreased from 21.5 million and 53.0
million barrels during the three and nine months ended September 30, 1998 to
15.0 million and 48.7 million barrels during the same periods of 1999 due
primarily to decreased throughput of crude and fuel oil which was partially
offset by increased throughput of petroleum products.
For the nine months ended September 30, 1998 and 1999, the overall
percentage of capacity leased at St. Eustatius was 91% each period. This
facility experienced increases in the percentage of capacity leased for
petroleum product tankage offset by decreases in the percentage of capacity
leased for fuel oil tankage. For the three months ended September 30, 1999, the
overall percentage of capacity leased at this facility was 89% compared to 95%
for the same period of 1998, primarily reflecting a decrease in the percentage
of capacity leased for fuel oil tankage. The percentage of capacity leased for
fuel oil tankage decreased during the three and nine months ended September 30,
1999 as compared to the same periods of 1998 primarily as a result of the
OPEC/OPEC Plus Accord and backwardation. Ten fewer cargo vessels called at the
St. Eustatius facility during the three months ended September 30, 1999 than
during the same period of 1998, resulting in lower revenues from port charges,
which consist of dock charges, emergency response fees and other terminal
charges. Thirty more cargo vessels called at this facility during the nine
months ended September 30, 1999 than during the same period of 1998, resulting
in higher revenues from port charges.
Revenues from terminaling services at Point Tupper decreased
approximately $1.4 million, or 27.6%, and $0.3 million, or 2.4%, during the
three and nine months ended September 30, 1999, as compared to the same periods
of 1998. The decrease is due to a lower percentage capacity leased and fewer
vessel calls during the three and nine months ended September 30, 1999, and due
to lower throughput during the nine months ended September 30, 1999. The
percentage of tank capacity leased at Point Tupper decreased from 98% and 91%
for the three and nine months ended September 30, 1998 to 65% and 85% for the
same periods of 1999. These decreases are primarily the result of the decision
by a customer of this facility, which is a participant in the Accord, not to
renew its crude oil storage contract at the end of the second quarter of 1999.
Fewer vessels called during the three and nine months ended September 30, 1999
as compared to the same periods of 1998 which led to lower revenues from port
charges at this facility.
Revenues from bunker and bulk product sales were $29.0 million and
$74.7 million for the three and nine months ended September 30, 1999 compared to
$15.7 million and $51.4 million for the same periods of 1998, an increase of
$13.3 million, or 84.9% and $23.3 million, or 45.3%. These increases were due to
increases in the volume of bunkers and bulk product delivered and increases in
average selling prices. Metric tons of bunkers and bulk product delivered
increased 23.9% and 29.7% during the three and nine months ended September 30,
1999 as compared to the same periods of 1998. Average selling prices increased
49.5% and 12.1% when comparing the three and nine months ended September 30,
1999 with the same periods of 1998. These changes in average selling prices were
primarily the result of changes in the world oil markets which have been
significantly influenced by the Accord.
Page 13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
GROSS PROFIT
Gross profit for the three months ended September 30, 1998 and 1999 was
$8.0 million and $6.4 million, representing a decrease of $1.6 million, or
20.0%. Gross profit for the nine months ended September 30, 1998 and 1999 was
$20.9 million and $23.7 million, representing an increase of $2.8 million, or
13.3%. The decrease and the increase in gross profit for these periods are
primarily the result of the changes in our terminaling services revenue
discussed above. Additionally, we realized higher dollar gross margins on bunker
sales during the three and nine months ended September 30, 1999 as compared to
the same periods of 1998 due to higher volumes of bunker fuels delivered.
Gross profits from terminaling services are generally higher than gross
profits from bunker and bulk product sales. Our operating costs for terminaling
services are relatively fixed and generally do not change significantly with
changes in capacity leased. Additions or reductions in storage, throughput and
ancillary revenues directly impact our gross profit. Costs for the procurement
of bunker fuels and bulk petroleum products are variable and linked to global
oil prices. Our bunker and bulk product costs are also impacted by market supply
conditions, types of products sold and volumes delivered.
ADMINISTRATIVE EXPENSES
Administrative expenses were $2.3 million and $6.8 million for the
three and nine months ended September 30, 1999 as compared to $2.3 million and
$7.0 million for the same periods of 1998, representing no change for the three
months ended September 30, 1999 and a decrease of $0.3 million, or 3.8% for the
nine months ended September 30, 1999. The decrease during the nine months ended
September 30, 1999, as compared to the same period of 1998, is primarily the
result of the termination of the Castle Harlan management fee subsequent to our
initial public offering of equity which was partly offset by higher personnel
and related costs.
SPECIAL COMPENSATION EXPENSE
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recorded special compensation expense during the nine months ended September 30,
1999 of $4.1 million of which $2.2 million was a non-cash charge.
INTEREST EXPENSE
During the three and nine months ended September 30, 1999, we incurred
$3.2 million and $11.1 million of interest expense compared to $4.2 million and
$12.7 million for the same periods of 1998. Interest expense includes interest
accrued on our mortgage notes due in 2003, amortization expense related to
deferred financing costs, other interest expenses and bank charges. In May,
1999, we repurchased $34.0 million of the mortgage notes which resulted in lower
interest expense on this debt.
PROVISION FOR INCOME TAXES
Provision for income taxes was $0.06 million and $0.5 million for the
three and nine months ended September 30, 1999 as compared to $0.05 million and
$0.3 million for the same periods of 1998. The provision for income taxes has
been increased in 1999 in contemplation of a new tax agreement with the
governments of the Netherlands Antilles and island of St. Eustatius (see further
discussions regarding the tax agreement and taxation matters in the Registration
Statement).
Page 14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
PREFERRED STOCK DIVIDENDS
Preferred stock dividends were $2.3 million for the nine months ended
September 30, 1999. Preferred stock dividends were $0.9 million and $2.7 million
for the three and nine months ended September 30, 1998. The decrease during 1999
is the result of the redemption of all outstanding preferred stock in connection
with our initial public offering of equity.
EXTRAORDINARY CHARGE RELATED TO EARLY EXTINGUISHMENT OF DEBT
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, we
recognized an extraordinary charge of $4.7 million during the nine months ended
September 30, 1999 in connection with the repurchase of $34.0 million of our 11
3/4% mortgage notes. There was no income tax effect associated with this
extraordinary charge.
NET INCOME (LOSS)
Net income available to common stockholders was $1.0 million for the
three months ended September 30, 1999 and we have incurred a net loss of $5.2
million for the nine months ended September 30, 1999, as compared to net income
of $0.7 million and a net loss of $5.3 million for the same periods of 1998,
representing improvements of $0.3 million and $0.2 million, respectively. These
improvements are attributable to the net effect of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As more fully discussed in note 4 of notes to the consolidated
condensed financial statements included in Part I, Item 1 of this Report, our
initial public offering of equity closed on April 28, 1999. The net proceeds of
the offering were used primarily to redeem all of our outstanding preferred
stock and pay accrued dividends, and repurchase in the open market a principal
amount of $34.0 million of our mortgage notes, leaving $101.0 million of
mortgage notes outstanding. It is anticipated that the repurchase of the
mortgage notes will result in annual reductions in interest payments of $4.0
million.
We have extended, in accordance with the provisions of the original
agreement with the lender, our $17.5 million revolving credit facility secured
by our accounts receivable and oil inventory. No draws have been made on this
facility. The revolving credit facility is available for working capital needs
and letter of credit financing, and it permits us to borrow in accordance with
our available borrowing base, which was estimated at $11.8 million at September
30, 1999. The revolving credit facility bears interest at the prime rate plus
0.50% per annum (8.75% at November 15, 1999) and will expire on November 27,
2000.
At September 30, 1999, we had cash and cash equivalents on hand of
$13.4 million compared to $14.1 million at December 31, 1998. We currently
believe that cash on hand, cash flow generated by operations, and amounts
available under the revolving credit facility will be sufficient to fund working
capital needs, to service debt, to make capital expenditures and to meet other
operating requirements, including any expenditures required by applicable
environmental laws and regulations. Our operating performance and ability to
service or refinance the mortgage notes will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond our control. We can give no assurances that our future operating
performance will be sufficient to service our indebtedness or that we will be
able to repay at maturity or refinance our indebtedness in whole or in part.
Page 15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
As more fully discussed in the Registration Statement, under our
Articles of Incorporation we are required to distribute all of our "available
cash" (as defined therein) generated from operations to our shareholders.
"Available cash" as defined generally includes cash from various sources after
deducting such reserves as our Board of Directors may deem necessary or
appropriate to provide for the proper conduct of our business, including future
capital expenditures, anticipated operational needs, and to comply with debt
obligations.
During October 1999, our Board of Directors declared a distribution of
$0.45 per share on the Class A common shares and Class B subordinated
shareholders meeting our target quarterly distribution. The distribution was
payable to shareholders of record as of the close of business on October 29,
1999 and was paid on November 12, 1999 only to Class A common shareholders. We
retained, and will continue to retain, distributions on Class B subordinated
shares of up to $6.8 million, until the end of the deferral period which lasts
until at least June 30, 2001.
CASH FLOW FROM OPERATING ACTIVITIES
Net cash provided by operating activities was $18.4 million and $13.5
million for the nine months ended September 30, 1998 and 1999, respectively.
Cash flow from operations has been our primary source of liquidity during these
periods. Differences between net losses and positive operating cash flow have
resulted primarily from depreciation and amortization burdens, non-cash charges
and changes in various asset and liability accounts.
Accounts receivable and accounts payable were $17.5 million and $13.9
million, respectively, at September 30, 1999 as compared to $9.9 million and
$9.3 million, respectively, at December 31, 1998. The increase in accounts
receivable and accounts payable is primarily due to changes in the world oil
markets which have increased both our selling prices and related costs of bunker
and bulk product sales.
CASH FLOW FROM INVESTING ACTIVITIES
Net cash used in investing activities was $1.0 million and $6.3 million
for the nine months ended September 30, 1998 and 1999, respectively. Investing
activities during the nine months ended September 30, 1998 and 1999 included
purchases of property and equipment of $7.5 million and $6.3 million,
respectively. During the nine months ended September 30, 1998, we received gross
proceeds of $6.5 million from the sale of Statia Terminals Southwest.
CASH FLOW FROM FINANCING ACTIVITIES
Our cash flows from financing activities for the nine months ended
September 30, 1999 were impacted by our initial public offering of equity which
is more fully discussed in note 4 of notes to the consolidated condensed
financial statements included in Part I, Item 1 of this Report. Additionally, on
August 13, 1999 we paid $2.4 million to holders of our Class A common shares
representing our target quarterly distribution of $0.45 per share prorated for
the period from the date of closing of our initial public offering of equity on
April 28, 1999 through June 30, 1999.
During the nine months ended September 30, 1998 we utilized the net
proceeds from the sale of the Brownsville, Texas, facility to retire $6.15
million of our Series D Preferred Stock.
Page 16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
CAPITAL EXPENDITURES
Our projected capital spending for 1999 is $7.8 million for maintenance
capital expenditures and $1.1 million for producing incremental revenues.
Additional spending is contingent upon the addition of incremental terminaling
business.
The following table sets forth capital expenditures and separates such
expenditures into those which produce, or have the potential to produce,
incremental revenue, and those which represent maintenance capital expenditures.
SUMMARY OF CAPITAL EXPENDITURES BY TYPE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 491 21.2% $ 355 15.6%
Maintenance capital expenditures 1,829 78.8% 1,919 84.4%
--------- ------- ------- -------
Total $ 2,320 100.0% $ 2,274 100.0%
========= ======= ======= =======
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------
1998 1999
-------------------- --------------------
% OF % OF
DOLLARS TOTAL DOLLARS TOTAL
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Produce incremental revenues $ 711 9.5% $ 651 10.3%
Maintenance capital expenditures 6,778 90.5% 5,680 89.7%
------- ------- ------- -------
Total $ 7,489 100.0% $ 6,331 100.0%
======= ======= ======= =======
</TABLE>
INFORMATION TECHNOLOGY AND THE YEAR 2000
Some computer software and hardware applications and embedded
microprocessor, microcontroller or other processing technology applications and
systems use only two digits to refer to a year rather than four digits. As a
result, these applications could fail or create erroneous results in dealing
with certain dates and especially if the applications recognize "00" as the year
1900 rather than the year 2000. During 1997, we developed a Year 2000 plan to
upgrade our key information systems and simultaneously address the potential
disruption to both operating and accounting systems that might be caused by the
Year 2000 problem. The Year 2000 plan also provides for evaluations of the
systems of customers, vendors, and other third-party service providers and
evaluations of our non-information technology systems.
Page 17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
We have substantially completed the assessment phase of the Year 2000
plan. We have tested new Year 2000 compliant terminal operations software at our
facilities and are implementing corrective actions for deficiencies. We
anticipate that the Year 2000 compliant terminal operations systems will be
fully implemented during the fourth quarter of 1999. We have implemented a fully
integrated Year 2000 compliant finance, accounting, and human resources system.
In addition to being Year 2000 compliant, it is anticipated that this system and
the terminal operations software will significantly enhance systems
functionality.
We previously identified some components of our control systems at our
two terminals as not being Year 2000 compliant. We have installed, tested, and
continue to test, replacements of non-compliant components. These systems
measure, regulate, control, and maintain crude oil and petroleum product flow
and fire protection equipment at the terminals. We have evaluated the best means
to mitigate the possible adverse effects resulting from the potential failure of
these systems. We believe that in a worst case scenario, existing manual
overrides would prevent the failure of these systems from having a material
adverse effect on our operations.
In accordance with our Year 2000 plan, we have initiated a formal
communications process with other companies with which our systems interface or
rely on to determine the extent to which those companies are addressing their
Year 2000 compliance. In connection with this process, we have sent numerous
letters and questionnaires to third parties and are evaluating those responses
as they are received. Based upon information we have received and our review of
existing relationships with third parties, we do not currently anticipate that
any third-party non-compliance would have a material adverse effect on our
business, results of operations, or financial condition.
We have developed, tested, and continue to test, our company-wide
contingency plans for use in the event any of our systems or those of third
parties should fail.
Through September 30, 1999, we have spent $2.0 million in connection
with our Year 2000 remediation efforts and related enhancements of systems
functionality. Of this total, we have capitalized $1.8 million and expensed $0.2
million. During the remainder of 1999, we anticipate spending an additional $0.2
million to complete these efforts of which we anticipate capitalizing
substantially all $0.2 million. However, we cannot guarantee that these
estimates will be met and actual expenditures could differ materially from these
estimates.
Based upon information currently available to us, we believe our
efforts will succeed in preventing the Year 2000 issue from having a material
adverse effect on us. However, the pervasive nature of the Year 2000 issue may
prevent us from fully assessing and rectifying all systems that could have an
effect on our business, results of operations, or financial condition.
Page 18
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We periodically purchase refined petroleum products from our customers
and others for resale as bunker fuel, for small volume sales to commercial
interests and to maintain an inventory of blend stocks for our customers.
Petroleum product inventories are held for short periods, generally not
exceeding ninety days. We do not presently have any derivative positions to
hedge our inventory of petroleum products. The following table indicates the
aggregate carrying value of our petroleum products, which are sensitive to
changes in commodity prices, on hand at September 30, 1999 computed at average
costs, 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)
AS OF SEPTEMBER 30, 1999
---------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ----------
Petroleum Inventory:
Statia Terminals N.V. $ 1,705 $ 1,984
Statia Terminals Canada, Inc. 259 331
--------- --------
Total $ 1,964 $ 2,315
========= ========
Except for certain local operating expenses in Canadian dollars and
Netherlands Antilles guilders, all of our transactions are in U.S. dollars.
Therefore, we believe we are not significantly exposed to exchange rate
fluctuations. As all of our present debt obligations carry a fixed rate of
interest, except for the undrawn revolving credit facility which varies with
changes in the lender's prime lending rate, we believe our exposure to interest
rate fluctuations is minimal.
Page 19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to the Legal Proceedings section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's amended Registration Statement on Form S-1 (File No.
333-72317). There have been no material developments in the Company's legal
proceedings since the amended Registration Statement was filed.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
The Company's web site is located at http://www.statiaterm.com.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Articles of Incorporation of Statia Terminals Group N.V. (for
electronic filing only)
27.1 Financial Data Schedule for Statia Terminals Group N.V. (for
electronic filing only)
(b) Reports on Form 8-K.
None.
Page 20
<PAGE>
Page S-1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
STATIA TERMINALS GROUP N.V.
(Registrant)
Date: November 15, 1999
By: /s/ JAMES G. CAMERON
----------------------------
James G. Cameron
Director
(As Authorized Officer)
By: /s/ JAMES F. BRENNER
----------------------------
James F. Brenner
Vice President and Treasurer
(As Authorized Officer and Principal
Finance and Accounting Officer)
Page S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Articles of Incorporation of Statia Terminals Group N.V. (for
electronic filing only)
27.1 Financial Data Schedule for Statia Terminals Group N.V. (for
electronic filing only)
1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
STATIA TERMINALS GROUP N.V.
NAME, SEAT AND DURATION
ARTICLE 1
1. NAME. The name of the company is: Statia Terminals Group N.V.
2. STATUTORY SEAT, BRANCHES AND BRANCH OFFICES. The company has its
statutory seat at Curacao, Netherlands Antilles. The company may have
one or more branches and/or branch offices outside of Curacao,
Netherlands Antilles.
3. TRANSFER OF STATUTORY SEAT. The company may transfer its statutory seat
to another country and assume the status of a legal entity formed under
the laws of that country in accordance with the Netherlands Antilles
Ordinance on transfer of seat to third countries, pursuant to a
resolution to that effect adopted by the Board of Directors (as defined
in paragraph 1 of article 10 hereof), but only if it deems such
transfer of seat in the best interests of the company.
4. DURATION. The company has been constituted for an indefinite period of
time.
OBJECTS
ARTICLE 2
1. OBJECTS. The objects of the company are to incorporate, participate in,
hold, manage, operate and finance entities, legal or otherwise,
directly or indirectly, belonging to the Statia group of companies
engaged in the business of marine terminaling in St. Eustatius, and
Point Tupper, Nova Scotia, Canada, as well as (a) to participate in any
other venture or company, (b) to invest its assets in securities,
including shares and other certificates of participation and bonds, as
well as other claims for interest bearing debts however denominated,
and (c) to guarantee or otherwise secure, and to transfer in ownership,
to mortgage, pledge or otherwise to encumber assets as security for the
obligations of the company and for the obligations of third parties,
with or without consideration.
2. RELATED ACTIVITIES. The company is entitled to do all that may be
useful or
<PAGE>
2
necessary for the attainment of its objects or that is connected
therewith in the widest sense.
CAPITAL AND SHARES
ARTICLE 3
1. AUTHORIZED CAPITAL (AMOUNT). The authorized capital of the company
amounts to Three Hundred Thousand United States Dollars (US
$300,000.00).
2. AUTHORIZED CAPITAL (SHARES). The authorized capital consists of thirty
million (30,000,000) shares, each with a par value of One United States
Cent (US $0.01), and is divided into twenty million (20,000,000) class
A common shares (the "class A shares" or the "common shares"), seven
million eight hundred thousand (7,800,000) class B subordinated shares
(the "class B shares" or the "subordinated shares"), and two million
two hundred thousand (2,200,000) class C shares (the "class C shares"
or the "incentive shares"). The class A shares shall be numbered A1
through A20.000.000, the class B shares shall be numbered B1 through
B7.800.000, and the class C shares shall be numbered C1 through
C2.200.000. The class A shares and the class B shares have full voting
rights, whilst the class C shares shall be non-voting. At the date of
this amendment (the "Initial Issue Date"), at least twenty percent of
the authorized capital is issued and outstanding in the form of voting
shares with third parties, consisting of at least 7,600,000 common
shares issued in connection with the initial public offering of such
shares at the Initial Issue Date and 3,800,000 subordinated shares.
3. DEFINITIONS OF "SHARES", "SHAREHOLDERS". In these articles of
incorporation, unless specifically stated otherwise herein, the term
"shares" means class A shares, class B shares and class C shares, and
the term "shareholders" means holders of shares of class A shares,
class B shares and class C shares.
4. REPURCHASE OF SHARES. The company is entitled to repurchase fully paid
up shares in its own capital for valuable consideration, provided that
at all times at least twenty percent of the authorized capital of the
company in the form of voting shares remains outstanding with third
parties.
5. TREATMENT OF TREASURY SHARES. The company may not derive any rights
from its treasury shares. For the purpose of determining its issued and
outstanding
<PAGE>
3
capital, such shares shall not be included as part of such capital.
6. CANCELLATION OF SHARES. The Board of Directors may, without instruction
or authorization of the General Meeting (as defined in paragraph 1 of
article 13 hereof), cancel shares which are in the possession of the
company.
FORM OF SHARES; ISSUANCE OF SHARES
ARTICLE 4
1. REGISTERED FORM. The shares shall be issued in registered form only.
2. CONSIDERATION; FRACTIONAL SHARES. Shares shall be issued at or above
par. Fractional shares may be issued. Payments on shares may be made in
cash and/or in kind, and in such currency as the Board of Directors
deems fit.
3. TERMS AND CONDITIONS OF ISSUANCE. Subject to the terms of these
articles of incorporation, shares may be issued at such times, for such
considerations and on such terms as may be established from time to
time by the Board of Directors in its sole discretion without the
approval of the shareholders, except as set forth in the next sentence.
During the Subordination Period (as defined in article 5) with respect
to the subordinated shares, the Board of Directors may not issue (i)
more than 4,000,000 common shares, in addition to the common shares
issued on the Initial Issue Date, excluding any common shares issued
upon any exercise of the overallotment option by one or more
underwriters of the common shares, or (ii) any equity securities
ranking senior to the common shares on distribution of dividends (as
set out in article 17) or on any distribution upon dissolution and
liquidation of the company (as set forth in article 18), without the
approval of the holders of a majority of the outstanding common shares,
not including those common shares held by the holder(s) of incentive
shares and their affiliates, if any. For purposes of the foregoing, an
"affiliate" shall mean a holder of shares of the company that is (i)
directly, or indirectly, through one or more intermediaries controlled
by or under control or "common control" (as such terms are further
described in the United States Securities Exchange Act of 1934) with,
the company including but not limited to, any holder of the
subordinated shares and/or incentive shares at the Initial Issue Date,
or (ii) an officer or director of the company or of an affiliate of the
company.
<PAGE>
4
4. EXCEPTION TO RESTRICTION ON ISSUANCE. The restriction set forth in
paragraph 3 of article 4 on issuance of additional common shares shall,
however, not apply to the following issuances: (a) upon exercise of the
over-allotment option by any underwriter of common shares, (b) upon
conversion of any subordinated shares, (c) pursuant to one or more
employee benefit plans of the company, (d) in the event of a
combination or subdivision of any common shares, or (e) in connection
with an acquisition or capital improvement by or of the company that
would have resulted in an increase in Adjusted Operating Surplus (as
defined in article 17) on a per common share and subordinated share,
pro forma basis for the preceding four-quarter period (or within 365
days of the closing of such an acquisition or the completion of such a
capital improvement and the net proceeds from such issuance are used to
repay debt, if any, incurred in connection therewith).
5. COMPANY MAY NOT SUBSCRIBE FOR SHARES. When issuing shares, the company
shall not be entitled to subscribe for its own shares.
6. PRE-EMPTION. No shareholder shall have any right of pre-emption in
connection with any issuance of shares in the capital of the company or
other equity securities that may be issued by the company.
CLASS B CONVERSION
ARTICLE 5
1. CLASS B SHARES CONVERSION - GENERAL. If, at any time during or after
the Subordination Period (as defined below), any subordinated shares
are outstanding, all of such subordinated shares will convert into
common shares in the manner set forth in this article: (i) if the tests
for ending subordination (as set out below) have been met for any
quarter ending on or after June 30, 2002, one quarter of the aggregate
number of subordinated shares outstanding on the Initial Issue Date
(being 950,000 subordinated shares) will convert into common shares and
(ii) if the tests for ending subordination have been met for any
quarter ending on or after June 30, 2003, an additional quarter of the
aggregate number of subordinated shares outstanding on the Initial
Issue Date (being 950,000 subordinated shares) will convert into common
shares, provided that such conversion of the second one-quarter of the
subordinated shares may not occur until at least one calendar year
following the conversion of the first one-quarter of the subordinated
shares as described above. The Board of Directors shall for the purpose
of such conversion be authorized in its sole discretion to
<PAGE>
5
take any and all necessary steps in connection therewith, including,
without limitation, the determination of the applicable shares,
numbered from B1 onwards representing a quarter of all outstanding
subordinated shares, at each time of a conversion. For the purpose
hereof, the "Subordination Period" shall mean the period from the
Initial Issue Date until the tests set forth below in (a) through (c),
inclusive, have been met for any quarter ending on or after June 30,
2004 for which:
(a) distributions (in the form of dividends or otherwise) of
Available Cash from Operating Surplus (as such terms are
defined in article 17) on the common and subordinated shares
with respect to each of the three consecutive non-overlapping
four-quarter periods immediately preceding the date of
determination that equaled or exceeded the sum of the Target
Quarterly Distribution (as defined in article 17) on all of
the outstanding common and subordinated shares during such
periods;
(b) the Adjusted Operating Surplus generated by the company during
each of the three consecutive non-overlapping four-quarter
periods immediately preceding the date of determination
equaled or exceeded the sum of the Target Quarterly
Distribution on all of the common and subordinated shares that
were outstanding on a fully diluted basis (i.e. after assuming
the exercise of all warrants, vested stock options and
conversion of subordinated shares) during those periods; and
(c) there are no outstanding Common Share Arrearages (as defined
in article 17).
For purpose of the determination of any conversion as set out above for
any quarter (as further described above), the tests for ending
subordination shall be met for any quarter for which:
(d) distributions (in the form of dividends or otherwise) of
Available Cash from Operating Surplus on the common and
subordinated shares with respect to each of the three
consecutive non-overlapping four-quarter periods immediately
preceding the date of determination equaled or exceeded the
sum of the Target Quarterly Distribution on all the
outstanding common and subordinated shares during such
periods;
<PAGE>
6
(e) the Adjusted Operating Surplus generated by the company during
each of the three consecutive non-overlapping four-quarter
periods immediately preceding the date of determination
equaled or exceeded the sum of the Target Quarterly
Distribution on all of the common and subordinated shares that
were outstanding on a fully diluted basis during those
periods; and
(f) there are no outstanding Common Share Arrearages.
2. CONVERSION OF SUBORDINATED SHARES ON EXPIRATION OF THE SUBORDINATION
PERIOD. Upon the expiration of the Subordination Period all outstanding
subordinated shares will convert into common shares. Subject to
paragraph 1 of this article, in each conversion, the relevant
subordinated shares outstanding will convert on a one-for-one basis,
into common shares, and will thereafter participate, among other
things, pro rata with the other common shares then outstanding in
distributions (in the form of dividends or otherwise) of Available Cash
with due observance of the dividend and other distribution rights of
the holders of incentive shares (as described in article 17) in
Available Cash.
3. EFFECT OF SURRENDER AND CONVERSION. Upon conversion of the appropriate
number of subordinated shares in accordance with the foregoing
provisions, the Board of Directors may upon request, issue one or more
share certificates representing the common shares upon conversion of
the subordinated shares, all in accordance with the provisions of
article 6 of these articles of incorporation. All rights relating to
the subordinated shares converted into common shares shall cease and
such subordinated shares shall no longer be outstanding.
SHARE CERTIFICATES FOR SHARES
ARTICLE 6
1. SHARE CERTIFICATES. Share certificates may be issued for shares.
2. NUMBER OF SHARES REPRESENTED BY CERTIFICATES. Share certificates may be
issued to represent more than one share, or, in the event of the
issuance of a (temporary) global share certificate representing all
common shares issued and outstanding at the Initial Issue Date. If
shares held by a shareholder are represented by one share certificate,
and if such shareholder disposes of part of his or her shares, such
shareholder shall be entitled to request the issuance of a share
certificate
<PAGE>
7
representing such shareholder's remaining shares.
3. FORM AND MANNER OF ISSUANCE. Share certificates, if any, which shall
include duplicates of share certificates as referred to in article 7
hereof, shall be issued and signed on behalf of the company by or on
behalf of the Board of Directors or by one or more persons or entities
appointed as transfer agent and/or registrar. All costs and expenses of
the company associated with the issuance of share certificates
(including any duplicates) at the request of a shareholder, may be
charged to such requesting shareholder, unless provided otherwise in
these articles of incorporation. Share certificates shall bear such
legend or legends as the Board of Directors deems fit and appropriate
in connection with the issuance of shares or restrictions on transfer
of shares. The reverse side of any certificates issued shall contain a
printed form of an instrument of transfer that can be used by the
holders of the shares represented by such certificates to transfer such
shares, or a portion thereof, to a transferee, which may include the
company in accordance with the provisions of these articles of
incorporation.
LOST AND MUTILATED CERTIFICATES
ARTICLE 7
LOST AND MUTILATED SHARE CERTIFICATES. If any shareholder can prove to
the satisfaction of the Board of Directors or any transfer agent or
registrar of the company, that any share certificate has been
mutilated, mislaid or destroyed, then, at such shareholder's written
request, a duplicate may be issued by the Board of Directors or any
transfer agent or registrar of the company on such terms and conditions
as the Board of Directors may deem fit. Upon the issuance of the
duplicate share certificate (on which it shall be noted that such
certificate is a duplicate), the original share certificate shall be
null and void vis-a-vis the company. A mutilated share certificate may
be exchanged for a duplicate certificate upon delivery of the mutilated
certificate to the Board of Directors or any transfer agent or
registrar of the company.
SHAREHOLDERS REGISTER; TRANSFER OF SHARES; NOTICES
ARTICLE 8
1. SHAREHOLDERS REGISTER. The Board of Directors, or registrar or transfer
agent designated pursuant to paragraph 5 of article 8, shall keep a
shareholders register
<PAGE>
8
(the "Register") in which the names and addresses of all shareholders
shall be registered, along with the shares issued to, and the payment
thereon by, the shareholders. The Board of Directors shall regularly
maintain the Register, including the registration in the Register of
any issue, transfer and cancellation of shares.
2. REGISTRATION OF OTHER PERSONS. The Board of Directors shall also
register in the Register the names and addresses of those persons who
have a right of usufruct (VRUCHTGEBRUIK) or pledge (PAND) on the
shares.
3. ADDRESSES TO BE FURNISHED, ETC. Each shareholder, and holder of a right
of usufruct or pledge on shares is required to provide his or her
address to the company. The company shall be entitled for all purposes
to rely on the name and address of the aforementioned persons as
entered in the Register. Such person may at any time change his or her
address as entered in the Register by means of a written notification
to the company at its principal office, or any transfer agent or
registrar of the company.
4. ACCESS TO REGISTER. At the request of a shareholder, or a holder of a
right of usufruct or pledge on shares, the Board of Directors shall
furnish an extract of the Register, free of charge, insofar as it
relates to such person's interest in a share.
5. LOCATION OF REGISTER. The Register shall be kept by the Board of
Directors at the company's principal office, or by a registrar or
transfer agent designated thereto by the Board of Directors at such
other location as it may deem fit. In case the Register is kept at any
location other than the company's principal office, then the registrar
or transfer agent shall be obligated to send to the principal office of
the company a copy thereof from time to time. In case a registrar or
transfer agent is appointed by the Board of Directors, then such
registrar or transfer agent shall be authorized and, as the case may
be, obligated to exercise the rights and fulfill the obligations set
out in this article with respect to the Register.
6. TRANSFER OF SHARES--GENERAL. With due observance of the provisions of
article 9 hereof, the transfer of shares, including any limited rights
thereon, shall be effected (i) by serving upon the company in the
manner prescribed by law, an instrument of transfer, or (ii) by written
acknowledgment by the company of the transfer, which acknowledgment
shall be signed on behalf of the company
<PAGE>
9
by or on behalf of the Board of Directors or by the registrar or
transfer agent of the company. In case a share certificate is
outstanding, the written acknowledgment by the company of the transfer
of a share, including any limited rights thereon, can only be made by
an endorsement of the transfer on such share certificate. In that case,
the transferor or transferee of a share shall present such share
certificate to the company, or its registrar or transfer agent, for
acknowledgment of the transfer on behalf of the company to be made
thereon. In case no share certificate has been issued, the registration
of the transfer of a share in the Register shall have the effect of a
written acknowledgment by the company of such transfer of a share. This
paragraph shall also apply in the case of an allocation of shares
resulting from a division and partition of any community property.
7. CERTAIN REPURCHASE PROCEDURES. With due observance of paragraph 4 of
article 3 hereof, in case of any repurchase of shares by the company,
the holder shall surrender each certificate or certificates
representing such shares, if any, to the company in the manner and at a
place designated therefor by the company, with the reverse side of the
certificate or certificates duly executed for the purpose of the
transfer of such shares to the company. Such manner shall include
personal delivery, registered mail or overnight delivery service of
recognized standing.
8. EFFECT OF SURRENDER AND REPURCHASE. Upon surrender of the shares for
repurchase by the company, each surrendered certificate shall be
canceled, all rights of the holders of such shares as such shall cease
with respect to such shares, and such shares shall no longer be deemed
to be outstanding for any purpose whatsoever.
9. TRANSFER OF SHARES--ASSIGNMENT OF VOTING RIGHTS OF COMMON SHARES. If a
common share is encumbered with a right of usufruct or pledge, then the
voting right of such common share, can not be assigned to the holder of
the right of usufruct or pledge.
PROHIBITED OWNERSHIP/RESTRICTION ON TRANSFER
ARTICLE 9
1. PROHIBITION ON PERCENTAGE OF OWNERSHIP - GENERAL. Primarily to prevent
the company from becoming, or minimize the duration of its
classification as, a
<PAGE>
10
"controlled foreign corporation" or "CFC" (as defined below) and also
to prevent any ownership or transfer of the common shares which may
result in such a classification, the ownership by a holder of common
shares, directly, indirectly, actually or constructively (within the
meaning of section 958 of the United States Internal Revenue Code of
1986, as amended (the "Code")), of more than 9.9% of all of the common
and subordinated shares issued and outstanding (the "Ownership Limit")
is prohibited, except as otherwise provided in this article 9 below.
For the purpose of the foregoing Ownership Limit, ownership of common
shares and/or subordinated shares shall be understood to include the
holding of voting rights or voting power relating to such shares by
law, agreement or otherwise, in whatever form.
2. RESTRICTION ON TRANSFER. In order to further the purposes set forth in
paragraph 1 of article 9, any sale, transfer, or other disposition of
any common shares by a holder of common shares (a "Sale") or any other
event relating to any common shares held by such a holder that would
result in a Violation of the Ownership Limit (as defined below) is null
and void to the extent it causes a Violation of the Ownership Limit.
The restriction in the preceding sentence shall not apply to and the
definition of the term "Sale" does not include (i) the conversion of
subordinated shares into common shares, (ii) any subsequent transfer of
the common shares resulting from such conversion, (iii) any pledge,
encumbrance, transfer by operation of law, gift, inheritance or marital
law of any interest in or right to any common shares, as well as any
sale, transfer, or other disposition (other than a Sale) of any
beneficial, as opposed to legal (registered) interest in or right to
any common shares, or (iv) acquisition of any common shares pursuant to
the exercise of compensatory stock options or to an employee benefit
plan of the company or its subsidiaries or affiliates or any subsequent
transfer of any such common shares.
3. DEFINITION CFC - OWNERSHIP LIMIT. For purposes of this article, a
non-United States corporation will be classified as a "controlled
foreign corporation" or "CFC" for United States federal income tax
purposes in any taxable year of such corporation in which more than 50%
of either (i) the total combined voting power of all of its classes of
stock entitled to vote or (ii) the total value of its stock is owned or
considered owned (after applying certain attribution rules), on any day
during a taxable year, by United States persons (as such term is
defined in Section 7701 (a) (30) of the Code) who own or are considered
to own 10% or more of the total combined voting power of all of its
classes of stock
<PAGE>
11
entitled to vote. For purposes of this article, a "Violation of the
Ownership Limit" occurs when (1) any person would own or would be
considered to own by virtue of the attribution provisions of section
958 of the Code and the United States Treasury Regulations issued
thereunder, or (2) any person together with its "affiliates" and
"associates" (as defined in Rule 12b-2 under the United States
Securities Exchange Act of 1934) and any group (within the meaning of
Section 13(d)(3) of such Securities Exchange Act) of which such person
is a part would own or would be considered to own by virtue of the
beneficial ownership provisions of Rule 13d-3 under such Securities
Exchange Act, in either case more than the Ownership Limit.
4. PROHIBITION ON OWNERSHIP AND/OR TRANSFERS OTHER THAN BY SALE. With due
observance of the provisions of foregoing paragraphs of this article,
including the restrictions contained therein, any pledge, encumbrance,
transfer by operation of law, gift, inheritance or marital law of any
legal (registered) or beneficial interest in or right to any common
shares, as well as any sale, transfer, or other disposition (other than
a Sale) of any beneficial, as opposed to any interest in or right to
any common shares (other than the conversion of subordinated shares
into common shares, any subsequent transfer of the common shares
resulting from such conversion or the acquisition of any common shares
pursuant to the exercise of compensatory stock options or to an
employee benefit plan of the company or its subsidiaries or affiliates
or any subsequent transfer of any such common shares) (a "Gift") that
would result in a Violation of the Ownership Limit is prohibited to the
extent that such Gift causes a Violation of the Ownership Limit.
5. WAIVER/DECLARATION OF NON-APPLICABILITY. The restrictions on transfer
and ownership described in this article may be waived, or declared not
applicable, and an exemption may be granted from time to time by the
Board of Directors, in its sole discretion, provided the same is
irrevocable with respect to a Transfer (as defined in paragraph 6
article 9 below) or any other event described in this article relating
to ownership by a holder of common shares above the Ownership Limit.
The Board of Directors may, in its sole discretion set the terms and
conditions for the issuance of such waiver, declaration of
non-applicability and/or exemption.
6. RESTRICTIVE MEASURES FOR BENEFIT OF THE COMPANY. In order for the
company to determine, or verify compliance with the restrictions set
out above in this
<PAGE>
12
article, the following shall apply: (a) any person who acquires or
attempts or intends to acquire ownership (direct, indirect, actual or
constructive ownership within the meaning of section 958 of the Code)
of common shares that will or may violate the foregoing restrictions on
transferability and ownership is required to give notice immediately to
the company thereof and to provide the company and the Board of
Directors with such other reasonable information as it may request in
order to determine the effect of a Sale, Gift (a Sale and/or a Gift to
be referred to as a "Transfer") or event on the classification of the
company as a CFC or for any other related purpose, (b) the company
shall not recognize a person in the capacity as shareholder of common
shares until its common shares have been issued in the name of such
person (or in the case of a Transfer, until the common shares so
transferred have been registered by or on behalf of the Board of
Directors in the name of such transferee in the register); until such
recognition by or on behalf of the company in the manner as
aforementioned, the voting rights, dividend rights and/or other
distribution rights relating to such shares shall be suspended and may
not be exercised by the purported holder thereof, (c) upon the
occurrence of a Gift resulting in a Violation of the Ownership Limit,
the acquiror or transferee shall be required to dispose of the number
of common shares that exceeds the Ownership Limit (the "Excess Common
Shares") to a person whose ownership of any such shares would not
violate the Ownership Limit (a "Qualified Person") within 15 days of
the date of the prohibited Gift. The acquiror or transferee of Excess
Common Shares pursuant to a prohibited Gift (the "Prohibited
Transferee") shall be required to notify the company in writing of its
compliance with the requirement in the preceding sentence within 5 days
of any such compliance (a "Compliance Notice"). If the Prohibited
Transferee fails to provide such a Compliance Notice to the company
within 20 days of the date of the prohibited Gift, the company shall be
irrevocably and exclusively authorized to sell and transfer on behalf
of the Prohibited Transferee the Excess Common Shares to a Qualified
Person, at a price for such shares of no less than the fair market
value and to take all necessary steps in connection therewith. In the
event of a Gift, the acquiror or transferee shall by acceptance or
receipt of the relevant share certificate(s), if any, representing any
Excess Common Shares be deemed to have agreed to the foregoing
provisions set out in (c) above.
7. NOTICES, ETC. Notices and other communications provided for herein
shall be in writing, shall be delivered by hand or overnight courier
services of recognized standing or sent by telecopy, shall be deemed
given when actually received and
<PAGE>
13
shall be addressed as follows: if to a shareholder's address, as shown
in the Register of the company; and if to the company, to the company's
principal office or its registered agent, attention: Secretary.
8. APPLICABILITY ON ISSUE OF COMMON SHARES OR SUBORDINATED SHARES. For the
purpose of this article, acquisition by holders of common shares of
common shares or subordinated shares by virtue of an issue or
distribution of such shares to a holder of common shares shall be
equated to a transfer; for the purposes of determining the amount of
the issued capital, the shares to be issued or distributed shall be
included therein.
MANAGEMENT
ARTICLE 10
1. BOARD OF DIRECTORS--GENERAL. The management of all the affairs,
property and business of the company shall be vested in a Board of
Directors (the "Board of Directors"), who shall have and may exercise
all powers except such as are exclusively conferred upon the
shareholders by law or by these articles of incorporation, as from time
to time amended.
2. BOARD OF DIRECTORS--NUMBER OF MEMBERS/CLASS OF MEMBERS. The number of
persons constituting the Board of Directors shall be not less than
three or more than fifteen, as fixed from time to time by the General
Meeting. The number of persons constituting the Board of Directors
shall, until changed at any succeeding General Meeting, be the number
so fixed. The Board of Directors shall be divided into three classes,
being class A directors (the "A director(s)"), class B directors (the
"B director(s)") and class C directors (the "C director (s)"), the
designation of which shall be determined by the General Meeting. Each
director shall be so designated by the General Meeting upon appointment
or reappointment, as the case may be, in case of a vacancy (as defined
in paragraph 4 of this article 10).
3. BOARD OF DIRECTORS--TERM. Each director shall serve, subject to the
provisions of paragraph 6 of this article 10, as director, with due
observance of the following terms: the A directors shall initially
serve - as of the Initial Issue Date - for a period of two years, and
thereafter for six-year periods; the B directors shall initially serve
- as of the Initial Issue Date - for a period of four years, and
thereafter for six-year periods; and the C directors shall serve - as
of the Initial
<PAGE>
14
Issue Date - for six-year periods.
4. BOARD OF DIRECTORS--APPOINTMENT. Each director shall be appointed by
the General Meeting, with due observance of the following provisions.
In case of a vacancy, upon the expiration of a director's term or
otherwise (each, a "vacancy"), the Board of Directors shall be
authorized pursuant to a duly adopted resolution to nominate for such
vacancy a director for appointment by the General Meeting. Such Board
of Directors' resolution shall list at least two names for each such
vacancy, which may include a former director whose term has lapsed. The
resolutions to nominate directors shall be non-binding on the General
Meeting; the General Meeting is free to appoint, by a duly adopted
shareholders resolution in accordance with the provisions of paragraph
8 of article 14, the directors so nominated, or reject nomination. In
case the nominated director(s) are not appointed by the General
Meeting, the Board of Directors must convene within seven days of the
date of the General Meeting, a new meeting, with due observance of the
provision of article 14 below, at which the vacancy or vacancies shall
be filled. At such subsequent General Meeting, the Board of Directors
may, again, nominate - by non-binding resolution - two directors for
each such vacancy for appointment by the General Meeting.
Notwithstanding the foregoing sentence, at such subsequent General
Meeting, the shareholders shall be free to appoint any person or entity
for each vacancy as they deem fit upon rejection of the persons
nominated by the Board of Directors. In the event the Board of
Directors wishes to exercise its right to nominate directors, it shall
in the convening of a General Meeting to appoint directors state the
persons so nominated for each such vacancy by the Board of Directors.
5. BOARD OF DIRECTORS--VACANCIES IN GENERAL. If one or more directors are
prevented from or are incapable of acting as a director, the remaining
directors may appoint one or more persons to fill such vacancy or
vacancies with the same qualifications, if any, as determined by the
General Meeting to serve until the immediately following General
Meeting.
6. BOARD OF DIRECTORS--REMOVAL. Directors may be removed or suspended at
any time by the General Meeting. At any General Meeting at which action
is taken to remove a director, or at any subsequent General Meeting,
any vacancy or vacancies created by such action may be filled with due
observance of paragraph 2 of article 10.
<PAGE>
15
7. BOARD OF DIRECTORS--VACANCIES IN CONNECTION WITH CERTAIN REDUCTIONS. If
at any time the number of directors in office shall be reduced to less
than three, the remaining director(s) shall forthwith call and convene
a General Meeting for the purpose of filling the vacancies in the Board
of Directors, and in the event that all of the directors are prevented
from or are incapable of acting as directors, the company shall be
temporarily managed by any person or persons previously appointed by
the General Meeting to so act, who in turn shall forthwith call and
convene a General Meeting for the purpose of appointing three or more
directors. If no such General Meeting shall be called, or if no such
person shall have been appointed, any person or persons holding in the
aggregate at least ten percent of the issued and outstanding voting
shares may call and convene a General Meeting for the purpose of
appointing the directors.
8. BOARD OF DIRECTORS--MEETINGS/NOTICE. Meetings of the Board of Directors
shall be held regularly at such place and at such time as the Board of
Directors may from time to time determine. Special meetings of the
Board of Directors shall be held as often as any two directors or the
Chairman deems necessary, who shall be authorized to call the same.
Notice of the time and place of a meeting of the Board of Directors
shall be given:
(a) not less than ninety-six hours before such meeting, by written
notice mailed to each director, or
(b) not later than the day immediately preceding the date of such
meeting, by personal delivery, or by telephone call or by
sending a telegram or telefax or other means of written
notification to each director, receipt of which has been
confirmed.
A waiver of notice of any meeting of the Board of Directors signed by
all of the non attending directors, whether before, at, or after the
time of such meeting, shall be deemed equivalent to notice of the
meeting. If all the directors are present at the meeting, notice shall
be deemed to have been duly given.
9. BOARD OF DIRECTORS--QUORUM. A majority of the members of the Board of
Directors shall constitute a quorum. The resolution of the majority of
the directors present, in person or by proxy as hereinafter provided,
at a meeting at which a quorum is so present, shall constitute the
decision of the Board of
<PAGE>
16
Directors. In the absence of a quorum, any director may adjourn any
meeting from time to time until a quorum shall be present.
10. BOARD OF DIRECTORS--ADOPTION OF RESOLUTIONS. All resolutions to be
adopted at a meeting of the Board of Directors shall be adopted by
majority of the votes cast, provided that in the event of an equality
of votes, the vote(s) cast by the Chairman shall be decisive.
11. BOARD OF DIRECTORS--MEETINGS BY TELEPHONE, ETC. Meetings of the Board
of Directors may be held through conference telephone calls or other
communication equipment allowing all persons participating in the
meeting to hear each other or through any other device permitted by
law, and participation in a meeting through any such lawful device or
arrangement shall constitute presence at such meeting.
12. BOARD OF DIRECTORS--ACTION BY WRITTEN CONSENT. When action by the Board
of Directors is required or permitted to be taken, action at a meeting
may be dispensed with if all the directors shall consent in writing to
such action taken or being taken.
13. BOARD OF DIRECTORS--PROXIES. Directors may by telegram, telefax or
other written instrument appoint a proxy to act on their behalf at any
designated meeting or meetings of the Board of Directors. Such proxy
can only be another director of the company.
14. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors shall have
the power and authority to create and disband committees of the Board
of Directors, and each such committee shall have the authority and
power as may from time to time be delegated to it by the Board of
Directors and shall operate under the ultimate responsibility of the
Board of Directors.
OFFICERS AND REPRESENTATIVES
ARTICLE 11
1. CHAIRMAN AND OTHER OFFICERS AND AGENTS. The Board of Directors may
designate a Chairman (the "Chairman") from among the directors. The
Board of Directors may further from time to time elect a president, one
or more vice-presidents (including executive or senior
vice-presidents), a controller, one or
<PAGE>
17
more assistant controllers, a treasurer, one or more assistant
treasurers, a secretary, one or more assistant secretaries and any such
other officers and agents as it determines proper, all of whom shall
hold office at the pleasure of the Board of Directors. The same person
may hold any two or more of the aforesaid offices but no officer shall
execute, acknowledge or verify an instrument in more than one capacity
if such instrument is required by law or by these articles of
incorporation to be executed, acknowledged or verified by two or more
officers. The Chairman must be a director, but the other officers of
the company need not be members of the Board of Directors.
2. REPRESENTATION OF THE COMPANY. The company shall be represented at law
and otherwise, and shall be bound with respect to third parties, by (i)
any two directors acting jointly, (ii) any director together with any
of the following persons listed in (i) through (vi) below, acting
jointly, or (iii) any two of the following persons acting jointly,
provided such persons are authorized by the Board of Directors to
represent the company with the following titles:
(i) Chairman;
(ii) president;
(iii) vice-presidents (including any executive vice-presidents or
senior vice-presidents);
(iv) treasurer or assistant treasurer;
(v) officer;
(vi) secretary or assistant secretary;
(vi) controller or assistant controller.
The Board of Directors may also from time to time authorize other
persons, who may or may not be directors, to represent the company, who
shall have such other titles as the Board of Directors may determine,
provided that at all times any two of such persons can only represent
the company acting jointly.
3. ADDITIONAL POWER AND AUTHORITY OF REPRESENTATIVES. The persons holding
the
<PAGE>
18
above mentioned titles which the Board of Directors may from time to
time authorize as herein provided, shall have such power and authority
as the Board of Directors may from time to time grant each of them
respectively.
4. ADDITIONAL RULES AND REGULATIONS. The Board of Directors may adopt and
may amend and repeal such rules, regulations and resolutions as it may
deem appropriate for the conduct of the affairs and the management of
the company, including rules, regulations and resolutions setting forth
the specific powers and duties of the holders of the above-mentioned
titles (not being directors of the company), other persons and
committees of the Board of Directors authorized by the Board of
Directors to represent the company. Such rules, regulations and
resolutions must be consistent with these articles of incorporation.
Any restrictions of the powers of representation of the holders of the
above-mentioned titles (other than any director) will take effect on
the day after the resolutions, rules or regulations containing such
restrictions have been filed at the Commercial Register of the Chamber
of Commerce and Industry in Curacao, and such other places in the
Netherlands Antilles where the company conducts its business.
5. COMPENSATION OF REPRESENTATIVES. The directors, the holders of the
above-mentioned titles and any other persons authorized by the Board of
Directors to represent the company shall receive such compensation as
the General Meeting (in the case of the directors) may from time to
time determine or approve and the Board of Directors (in the case of
all other persons not being directors) may from time to time determine.
INDEMNIFICATION, ADVANCEMENT OF EXPENSES AND INSURANCE
ARTICLE 12
1. INDEMNIFICATION NOT IN CONNECTION WITH ACTIONS BY OR IN RIGHT OF THE
COMPANY. The company shall have the power to indemnify, and shall
indemnify to the fullest extent permitted by applicable law, any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the company) by reason of the fact that such
person is or was a director, officer, employee or agent of the company,
or is or was serving at the request of the company as a director,
officer, employee or agent of another company, partnership, joint
venture, trust
<PAGE>
19
or other enterprise or entity, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit
or proceeding if he acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of
the company and with respect to any criminal action or proceeding, had
no reasonable cause to believe that its conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which was reasonably believed
to be in or not opposed to the best interests of the company.
2. INDEMNIFICATION IN CONNECTION WITH ACTIONS BY OR IN RIGHT OF THE
COMPANY. The company shall have the power to indemnify, and shall
indemnify to the fullest extent permitted by applicable law, any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the company to procure a judgment in its favor by reason of the fact
that such person is or was a director, officer, employee or agent of
the company or is or was serving at the request of the company as a
director, officer, employee or agent of another company, partnership,
joint venture, trust or other enterprise or entity, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the company and except
that no indemnification shall be made in respect of any claim, issue or
matters as to which such person shall have been finally adjudged to be
liable to the company for improper conduct unless and only to the
extent that the court in which such action or suit was brought or any
other court having appropriate jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses, judgments, fines and amounts
paid in settlement which the court in which the action or suit was
brought or such other court having appropriate jurisdiction shall deem
proper.
3. RELATED EXPENSES. To the extent that a director, officer, employee or
agent of the company has been successful on the merits or otherwise in
defense of any
<PAGE>
20
action, suit or proceeding referred to paragraph 1 and paragraph 2 of
this article, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
therewith.
4. CERTAIN LIMITATIONS ON INDEMNIFICATION. Any indemnification under
paragraph 1 and paragraph 2 of this article (unless ordered by a court)
shall be made by the company only as authorized by contract approved,
or resolution or other action adopted or taken, by the Board of
Directors or by the shareholders.
5. ADVANCEMENT OF EXPENSES. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the company in
advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the applicable
director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be
indemnified by the company as authorized by this article 12.
6. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES NOT EXCLUSIVE. The
indemnification and advancement of expenses provided by or granted
pursuant to the other paragraphs of this article 12 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, agreement, vote
of shareholders or disinterested directors, or otherwise, both as to
action in its official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
7. INSURANCE. The company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the company or is or was serving at the request of
the company as a director, officer, employee or agent of another
company, partnership, joint venture, trust or other enterprise against
any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether
or not the company would have the power to indemnify him or her against
such liability under the provisions of this article 12.
GENERAL MEETINGS OF SHAREHOLDERS
ARTICLE 13
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21
1. GENERAL. All general meetings of shareholders (each, a "General
Meeting") shall be held on any one of the Islands of the Netherlands
Antilles.
2. TIMING. The annual General Meeting shall be held as early as reasonably
practicable, and in any event not later than the first day of June,
after the close of the company's preceding financial year.
3. ACTIONS TO BE TAKEN. At the annual General Meeting:
a. the Board of Directors shall render a report on the business
of the company and the conduct of its affairs during the
preceding financial year;
b. the balance sheet and the profit and loss account shall be
determined, set and adopted after having been submitted
together with an explanatory statement (together, the "annual
accounts"), stating by which standards the movable and
immovable property of the company have been appraised;
c. the person or persons referred to in paragraph 5 of article 10
hereof shall be appointed;
d. the appropriation of profits shall be made; and
e. such other proposals included in the agenda specified in the
notice of the meeting shall be dealt with.
GENERAL MEETINGS--PLACE, CONVOCATION AND VOTING
ARTICLE 14
1. TIMING OF OTHER GENERAL MEETINGS. Other than the annual General
Meeting, all General Meetings shall be held as often as the Board of
Directors shall deem necessary.
2. CONVENING BY BOARD OF DIRECTORS. With due observance of paragraph 3 of
article 14, all General Meetings shall be exclusively convened by the
Board of Directors.
<PAGE>
22
3. REQUEST BY SHAREHOLDERS TO CONVENE. Shareholders representing in the
aggregate at least one tenth of the outstanding capital of the company
may request the Board of Directors to convene a General Meeting,
stating the subjects to be discussed. If the Board of Directors has not
convened a meeting within four weeks after the request, the person(s)
who requested the convening of the meeting shall be authorized to
petition the competent courts of the Netherlands Antilles for
authorization to convene such meeting, but only in accordance with, and
subject to, the provisions of Article 82 of the Commercial Code of the
Netherlands Antilles. A copy of the notice to convene such meeting
shall be sent to the company at its principal office, and shall be
given to the Board of Directors.
4. METHOD OF CONVOCATION AND NOTIFICATION. All convocations of General
Meetings and all notifications to shareholders shall be made by letter
mailed to the addresses of shareholders appearing in the Register.
5. TIMING OF CONVOCATION -RECORD DATE. The convocation shall take place no
later than ten days prior to the date of the meeting, excluding the
date of the sending of the notice and the date of the meeting. The
Board of Directors may set a record date for any General Meeting which
shall be no less than seven days and no more than sixty days prior to
the date of the meeting, to verify the eligibility of shareholders to
vote, as well as to verify the ownership level of any shareholders
under the provisions of article 9 of these articles of incorporation.
6. AGENDA. The agenda for the meeting shall be specified in the
convocation of the meeting or it shall be stated that the shareholders
may take cognizance thereof at the principal office of the company.
7. PERSON PRESIDING. General meetings shall be presided over by the
Chairman or any other director, or, in their absence at such meeting,
by a person designated thereto by the meeting.
8. MAJORITY VOTES - QUORUM. All resolutions of General Meetings shall be
taken by an absolute majority of votes, for which meeting a quorum
exists of at least one-third of the aggregate outstanding voting shares
in the capital of the company present or represented thereat, except
where otherwise provided in these articles of incorporation.
<PAGE>
23
9. PROXIES. Shareholders may be represented at the meeting by a proxy
authorized in writing, which shall include any message transmitted by
telegram or telefax or other means of written communication.
10. VOTE PER SHARE. At a General Meeting, one vote may be cast for each
class A share and one vote may be cast for each class B share. Holders
of class C shares shall not be entitled to vote, other than in the case
of, and subject to the provisions of, Article 93a of the Commercial
Code of the Netherlands Antilles, in which case one vote may be cast
for each class C share.
11. INTERESTED VOTES; ABSTENTIONS AND INVALIDLY CAST VOTES. Valid votes may
also be cast for the shares of those who, other than as shareholders of
the company, would acquire any right or be discharged from any
obligation towards the company by the resolution to be adopted.
Abstentions and invalidly cast votes shall not be counted as votes at a
General Meeting.
12. VALIDITY OF CERTAIN RESOLUTIONS AS A RESULT OF UNANIMOUS ACTIONS.
Provided and as long as the entire issued share capital is represented
at any General Meeting, valid resolutions may be adopted, even when the
provisions of these articles of incorporation with respect to
convocation and specification of the agenda have not or have only
partially been observed, provided that such resolutions are unanimously
adopted.
13. PARTICIPATIONS OF DIRECTORS. Each director shall in his or her capacity
be entitled to attend, address and advise the General Meeting.
FINANCIAL YEAR
ARTICLE 15
TERM OF FINANCIAL YEAR. The financial year of the company shall run
from the first day of January of each year up to and including the last
day of December of such year.
ANNUAL ACCOUNTS; BOOKS AND RECORDS
ARTICLE 16
1. ANNUAL ACCOUNTS--TIMING AND MANNER OF SUBMISSION. Within five (5)
months
<PAGE>
24
after the close of the company's financial year, the annual accounts
shall be submitted to the shareholders by the Board of Directors. Each
director shall sign the annual accounts; if the signature of any
director is lacking, then this shall be stated therein together with
the reason thereof.
2. MAINTENANCE OF BOOKS AND RECORDS AND ANNUAL ACCOUNTS. The company shall
maintain its books and records, as well as the annual accounts by which
the profit is determined, on the basis of generally accepted accounting
principles in effect in the United States of America ("US GAAP").
3. ANNUAL ACCOUNTS--ADOPTION BY ANNUAL GENERAL MEETING. The annual
accounts shall be adopted by the annual General Meeting.
DEFINITIONS/ GENERAL PROVISION ON PROFIT AND RESERVES;
PAYMENT OF MINIMUM QUARTERLY DISTRIBUTION
AND OTHER AMOUNTS TO SHAREHOLDERS
ARTICLE 17
1. DEFINITIONS. For the purpose of the payment by the company of
distributions on its shares by dividend or otherwise, the following
definitions are used. For purposes of this article 17, for accounting
purposes and otherwise, the term "company" shall be deemed to include
Statia Terminals Group N.V. and its subsidiaries on a consolidated
basis in accordance with U.S. GAAP.
(i) ACQUISITION: Acquisition manes any transaction in which the company
acquires (through an asset acquisition, merger, stock acquisition or
other form of investment) control over all or a portion of the assets,
properties or business of another person for the purpose of increasing
the operating capacity or revenues of the company over the operating
capacity or revenues of the company existing immediately prior to such
transaction.
(ii) ADJUSTED OPERATING SURPLUS: For any period, Adjusted Operating
Surplus means:
(1) the Operating Surplus generated during that period,
as adjusted to:
(a) decrease Operating Surplus by:
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25
(1) any net increase in Working Capital Borrowings during that
period, and
(2) any net reduction in cash reserves for Operating Expenditures
during that period not relating to an Operating Expenditure
made during that period; and
(b) increase Operating Surplus by:
(1) any net decrease in Working Capital Borrowings during that
period, and
(2) any net increase in cash reserves for Operating Expenditures
during that period required by any debt instrument for the
repayment of principal, interest or premium.
Adjusted Operating Surplus does not include that portion of Operating
Surplus included in clause (a) (1) of the definition of Operating
Surplus.
(iii) AVAILABLE CASH: For any calendar quarter prior to the dissolution
and liquidation of the company, Available Cash means:
(a) the sum of:
(1) all of the company's cash and cash equivalents on
hand at the end of that quarter, and
(2) all of the company's additional cash and cash
equivalents on hand on the date of determination of
Available Cash for that quarter resulting from
Working Capital Borrowings made after the end of that
quarter;
LESS
(b) the amount of any cash reserves necessary or appropriate in
the reasonable discretion of the Board of Directors to:
(1) provide for the proper conduct of the company's
business, including reserves for future capital
expenditures and for the company's anticipated future
credit needs, after that quarter,
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26
(2) provide funds for Target Quarterly Distributions
and cumulative Common Share Arrearages (as defined
below) for any one or more of the next four quarters,
or
(3) comply with applicable law or any loan agreement,
security agreement, mortgage, debt instrument or
other agreement or obligation to which the company is
a party or by which the company or any of its
subsidiaries is bound or to which any of their
respective assets are subject.
With respect to Available Cash, the Board of Directors may not
establish cash reserves pursuant to (b) (2) above if the effect of
those reserves would be that the company is unable to distribute the
Target Quarterly Distribution on all common shares, plus any cumulative
Common Share Arrearage for that quarter; and disbursements made by the
company or cash reserves established, increased or reduced after the
end of that quarter but on or before the date of determination of
Available Cash for that quarter shall be deemed to have been made,
established, increased or reduced for purposes of determining Available
Cash within that quarter if the Board of Directors so determines.
However, Available Cash for the quarter in which the dissolution and
liquidation of the company occurs and any quarter after that will equal
zero.
(iv) CAPITAL IMPROVEMENTS: Additions or improvements to the capital
assets owned by the company or the acquisition of existing, or the
construction of new, capital assets (including terminaling and storage
facilities and related assets), in each case made to increase the
operating capacity or revenue of the Company existing immediately prior
to such addition, improvement, acquisition or construction.
(v) COMMON SHARE ARREARAGES: Common Share Arrearages means the amount
by which the Target Quarterly Distribution in any quarter during the
Subordination Period exceeds the distribution of Available Cash from
Operating Surplus actually made for that quarter on all common shares
issued and outstanding on or after the Initial Issue Date, cumulative
for that quarter and all prior quarters during the Subordination
Period; provided that the Common Share Arrearages will not accrue
interest.
<PAGE>
27
(vi) INTERIM CAPITAL TRANSACTIONS: The following transactions, if they
occur prior to the dissolution and liquidation of the company, are
Interim Capital Transactions:
(i) any of the company's borrowings, refinancings of indebtedness
and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account
in the ordinary course of business);
(ii) sales by the company of equity interests (other than any
common shares issued and sold to any of the company's
underwriters of the initial public offering of the common
shares for the exercise of their over-allotment option at the
time of the company's initial public offering); and
(iii) sales or other voluntary or involuntary dispositions of the
company's assets, except for sales or other dispositions of:
(a) inventory in the ordinary course of business,
(b) accounts receivable and other assets in the ordinary
course of business, and
(c) assets as a part of normal retirements or
replacements.
(vii) OPERATING EXPENDITURES: All expenditures, including but not
limited to, taxes, debt service payments and capital expenditures, are
Operating Expenditures, except the following:
(a) payments or prepayments of principal and premium on
indebtedness:
(1) required in connection with the sale or other
disposition of assets; or
(2) made in connection with the refinancing or refunding
of indebtedness with the proceeds from new
indebtedness or from the sale of equity interests.
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28
For the purpose hereof, at the election and in the reasonable
discretion of the Board of Directors, any payment of principal or
premium will be deemed to be refunded or refinanced by any indebtedness
incurred or to be incurred by the company within 180 days before or
after that payment to the extent of the principal amount of that
indebtedness.
(b) (1) capital expenditures made for Acquisitions or for
Capital Improvements;
(2) payment of transaction expenses relating to Interim
Capital Transactions; or
(3) distribution(s) to shareholders, in the form of
dividend or otherwise.
For the purpose hereof, where capital expenditures are made partially
for Acquisitions or Capital Improvements and partially for other
purposes, the Board of Directors' allocation as made in good faith
between the amounts paid for each will be deemed conclusive.
(viii) OPERATING SURPLUS: For any period prior to the date of
dissolution and liquidation of the company on a cumulative basis,
Operating Surplus is:
(a) the sum of:
(1) US$7.5 million,
(2) any net positive working capital on hand as of the
close of business on the Initial Issue Date,
(3) all cash receipts for the period beginning on the
Initial Issue Date and ending on the last day of that
period, other than cash receipts from Interim Capital
Transactions, and
(4) all cash receipts after the end of that period but on
or before the date of determination of Operating
Surplus for that period resulting from Working
Capital Borrowings;
<PAGE>
29
LESS
(b) the sum of:
(1) Operating Expenditures for the period beginning on
the Initial Issue Date and ending with the last day
of that period, and
(2) the amount of cash reserves that is necessary or
advisable to be kept in the reasonable discretion of
the Board of Directors to provide funds for future
Operating Expenditures.
For the purposes hereof, disbursements made or cash reserves
established, increased or reduced after the end of this period but on
or before the date of determination of Available Cash for this period
will be deemed to have been made, established, increased or reduced for
purposes of determining Operating Surplus within this period if the
Board of Directors so determines. However, Operating Surplus for the
quarter in which the company's dissolution and liquidation occurs and
any subsequent quarter will be equal to zero.
(ix) UNRECOVERED INITIAL PRICE: At any time, the Unrecovered Initial
Price is the initial public offering price per common share issued on
the Initial Issue Date (the "Initial Price"), after:
(1) subtracting all distributions on or after the Initial Issue
Date to shareholders, in the form of dividend or otherwise,
from Interim Capital Transactions;
(2) subtracting any distributions of cash on or after the Initial
Issue Date in connection with the company's dissolution and
liquidation; and
(3) adjusting this price as the Board of Directors determined is
needed to reflect any distribution, subdivision or combination
of the common and/or subordinated shares on or after the
Initial Issue Date.
(x) WORKING CAPITAL BORROWINGS: Working Capital Borrowings are
borrowings made by the company exclusively for working capital purposes
and made pursuant to a credit facility or other arrangement that
requires all borrowings under that arrangement to be reduced to a
relatively small amount each year for
<PAGE>
30
an economically meaningful period of time, all in the reasonable
judgment of the Board of Directors.
2. DEFINITION AND DETERMINATION OF PROFIT. The profit of any financial
year, by which term is meant the net profit according to the adopted
annual accounts of the company for such year, shall be determined by
the annual General Meeting.
3. AUTHORITY - DISTRIBUTION DIVIDEND/RESERVES. The Board of Directors is
the corporate body authorized to distribute and/or reserve profit of
the company, as established, from time to time in the form of dividends
by the General Meeting. In addition, the Board of Directors may set up,
cancel, and distribute from time to time from one or more reserves to,
or for the benefit of, its shareholders. Distributions shall be paid in
cash unless the Board of Directors has authorized a distribution in
kind.
4. AUTHORITY - DISTRIBUTION INTERIM-DIVIDEND. If and to the extent that
the Board of Directors has the reasonable expectation that sufficient
profit shall be made for the relevant financial year, it may declare
and pay from time to time during a calendar quarter one or more interim
distributions on any class of shares in the form of interim-dividend.
At the time of a declaration and payment of interim dividends, the
Board of Directors may, by a duly adopted resolution thereto, qualify
any amounts payable or paid, which cannot ultimately be covered by the
profit for the relevant financial year, as payment out of freely
distributable reserves, including, but not limited to, capital surplus
reserves, insofar as available.
5. CERTAIN EFFECTS OF LOSSES. In the event that the profit and loss
account shows a loss for any given year, which loss cannot be covered
by the reserves or compensated in another manner, no profit can be
distributed in any subsequent year, until such loss has been recovered
or otherwise offset by reserves.
6. PAYMENT OF AVAILABLE CASH/TARGET QUARTERLY DISTRIBUTION.
6.1. GENERAL. The company shall pay, from legally available funds therefore,
on a quarterly basis, all of its Available Cash, in the manner as set
out in this paragraph 6. For the purpose of this paragraph 6 of this
article 17, whenever reference is made to a distribution of Available
Cash, out of Operating Surplus or Interim Capital Transactions, such
distributions shall be, with due
<PAGE>
31
observance of the provisions of paragraph 6.2 through paragraph 6.5
hereof, made by or on behalf of the company in cash as a distribution
from profit, as a dividend or interim-dividend, as the case may be, or
from freely distributable reserves, including capital surplus reserves,
to and for the benefit of its shareholders.
6.2. TARGET QUARTERLY DISTRIBUTION - COMMON SHARES. The company shall, out
of Available Cash, pay an amount equal to US$0.45 per common share per
calendar quarter (hereinafter referred to as the "Target Quarterly
Distribution") or US$1.80 per common share on an annual basis, plus any
Common Share Arrearages from any prior quarters, prior to any
distributions on the subordinated shares in the manner set forth below
in this article.
6.3. TARGET QUARTERLY DISTRIBUTION - SUBORDINATED SHARES. Only after the
common shares have received the Target Quarterly Distribution plus any
Common Share Arrearages thereon, the company shall, out of Available
Cash, pay on each subordinated share an amount equal to the Target
Quarterly Distribution per calendar quarter, provided however, that no
subordinated share shall be entitled to any arrearages.
6.4. SOURCES OF FUNDS. For the purpose of a distribution by the company to
pay the Target Quarterly Distribution and such other amounts as set out
in this article to its shareholders, the company shall use as source of
funds for payment of Available Cash funds from Operating Surplus and/or
from Interim Capital Transactions, with due observance of the
limitation set out in this article and paragraph 6.8 in particular. In
this respect, for accounting purposes or otherwise, all Available Cash
paid as a distribution to shareholders from any source will be treated
as a distribution from Operating Surplus until the sum of all Available
Cash paid as a distribution since the Initial Issue Date equals the
Operating Surplus as of the end of the quarter prior to that
distribution. Any Available Cash in excess of that amount (regardless
of its source) will be deemed to be from Interim Capital Transactions
and paid accordingly. If Available Cash from Interim Capital
Transactions is paid as a distribution for each common share in an
aggregate amount per common share equal to the Initial Price of that
common share, plus any Common Share Arrearages, the distinction between
Operating Surplus and Interim Capital Transactions will cease, and all
distributions of Available Cash will be treated as if they were made
from Operating Surplus.
<PAGE>
32
6.5. DIVIDEND AND OTHER DISTRIBUTIONS. With due observance of the foregoing
paragraph 6.1 through paragraph 6.4, the company shall pay on each
common share, each subordinated share and each incentive share the
following amounts out of Available Cash:
6.5.1. DISTRIBUTIONS FROM OPERATING SURPLUS DURING SUBORDINATION PERIOD.
Distributions of Available Cash from Operating Surplus, if any, for any
quarter during the Subordination Period will be made in the following
manner:
(a) FIRST, 100% to the common shares, pro rata, until each outstanding
common share has been paid an amount equal to the Target Quarterly
Distribution for that quarter;
(b) SECOND, 100% to the common shares, pro rata, until each outstanding
common share has been paid an amount equal to any Common Share
Arrearages accrued and unpaid for any prior quarters during the
Subordination Period;
(c) THIRD, 100% to the subordinated shares, pro rata, until each
outstanding subordinated share has been paid an amount equal to the
Target Quarterly Distribution for that quarter; and
(d) THEREAFTER, any Available Cash from Operating Surplus for that
quarter will be paid among the holders of common shares and
subordinated shares and the holders of incentive shares in the
following manner:
(1) FIRST, 85% to all common and subordinated shares, pro rata, and 15%
to the incentive shares, pro rata, until the common shares and
subordinated shares have received (including the Target Quarterly
Distribution) a total of $0.495 for that quarter to each outstanding
common share and subordinated share (the "first additional
distribution");
(2) SECOND, 75% to all common shares and subordinated shares, pro rata,
and 25% to the incentive shares, until the common and subordinated
shares have received (including the Target Quarterly Distribution) a
total of $0.675 for that quarter to each outstanding common share and
subordinated share (the "second additional distribution");
<PAGE>
33
(3) THEREAFTER, 50% to all common shares and subordinated shares, pro
rata, and 50% to the incentive shares, pro rata.
6.5.2. DISTRIBUTION FROM OPERATING SURPLUS AFTER SUBORDINATION PERIOD.
Distributions paid out Available Cash from Operating Surplus, if any,
for any quarter after the Subordination Period will be made in the
following manner:
(a) FIRST, 100% to all common shares, pro rata, until each share has
been paid an amount equal to the Target Quarterly Distribution for that
quarter; and
(b) THEREAFTER, in the manner set forth in paragraph 6.5.1., section
(d) (1) through (3) set forth above of this article, with due
observance of the fact that no subordinated shares shall be outstanding
after the Subordination Period.
6.5.3. DISTRIBUTIONS FROM INTERIM CAPITAL TRANSACTIONS. Distributions of
Available Cash from Interim Capital Transactions for any quarter during
or after the Subordination Period will be made in the following manner:
(a) FIRST, 100% to the common shares and subordinated shares, if any,
pro rata until each outstanding common share has been paid Available
Cash from Interim Capital Transactions in an aggregate amount per
common share equal to the Initial Price;
(b) SECOND, 100% to the common shares until each outstanding common
share has been paid Available Cash from Interim Capital Transactions in
an aggregate amount equal to any unpaid Common Share Arrearages; and
(c) THEREAFTER, all distributions of Available Cash from Interim
Capital Transactions will be made as if they were from Operating
Surplus, in the manner of paragraph 6.5.1. and 6.5.2. of this article,
as applicable.
6.6.1. ADJUSTMENT OF TARGET QUARTERLY DISTRIBUTION - ADDITIONAL DISTRIBUTION
LEVELS. Upon a distribution of Available Cash from Interim Capital
Transactions, the Target Quarterly Distribution and the additional
distribution levels as referred to in paragraph 6.2. and 6.5.1. (d) (1)
through (3) of this article, respectively, will be adjusted by the
Board of Directors downward by multiplying each such amount by a
fraction equal to:
<PAGE>
34
(1) the Unrecovered Initial Price;
divided by
(2) the Initial Price, or the Unrecovered Initial Price, as the case
may be, of the common shares immediately prior to that distribution of
Available Cash from Interim Capital Transactions.
6.6.2. ADDITIONAL ADJUSTMENTS. In addition to the provisions of paragraph
6.6.1. above, in the event of any combination or subdivision of common
shares (whether effected by a distribution by way of dividend or
otherwise payable in common shares or otherwise) but not by reason of
the issuance of additional common shares for cash or property, the
following amounts will be proportionately adjusted upward or downward,
as appropriate, by the Board of Directors:
(a) the Target Quarterly Distribution;
(b) the additional distribution levels;
(c) the Unrecovered Initial Price;
(d) the number of additional common shares issuable during the
Subordination Period without a shareholder vote pursuant to the
provision of paragraph 3 of article 4 of these articles of
incorporation;
(e) the number of common shares outstanding upon conversion of
subordinated shares; and
(f) other amounts calculated on a per common share and/or subordinated
share basis.
6.7. PAYMENT OF AVAILABLE CASH; HOLDERS OF RECORD ENTITLED THERETO. Each
distribution from Available Cash shall be made by the company to the
holders of record as they appear in the Register on such record date,
approximately forty-five days after the end of each calendar quarter,
commencing with the calendar quarter ending June 30, 1999, as shall be
fixed by the Board of Directors from time to time. Any distribution of
the Target Quarterly
<PAGE>
35
Distribution or of amounts of the additional distribution levels as
referred to in paragraph 6.2. and paragraph 6.5.1. of this article,
respectively, for the period from the Initial Issue Date through June
30, 1999 will be adjusted downward by the Board of Directors based on
the actual length of such period.
6.8. AMOUNT OF DISTRIBUTABLE AVAILABLE CASH AS DIVIDENDS OR OTHERWISE -
INDENTURE LIMITATION - SENIOR NOTES INDENTURE. If on any distribution
date, being a date as set by the Board of Directors to pay the Target
Quarterly Distribution out of Available Cash and/or such or other
amounts on the shares as set out in this article, during or after the
Subordinated Period, an Indenture Limitation (as defined below) is in
effect, the Board of Directors shall determine the amount, if any, of
dividends or other distributions out of Available Cash on the shares
that the company shall be permitted to pay in cash to its shareholders
consistent with the Indenture Limitation. For the purpose hereof, an
"Indenture Limitation" shall be deemed to be in effect on any date to
the extent that on such date any section of the Indenture shall
prohibit or make impossible the payment of cash dividends by the
company's subsidiaries to the company on such date. The "Indenture"
means (i) that certain indenture dated as of November 27, 1996, as
amended, pursuant to which the 113/4Mortgage Notes Due 2003 have been
issued by Statia Terminals International N.V., a Netherlands Antilles
company, and Statia Terminals Canada, Incorporated, a Nova Scotia,
Canada company and as subsidiaries of the company, as in effect from
time to time and (ii) any successor indenture pursuant to which debt
obligations have been issued refinancing the debt obligation referred
to in clause (i) above.
6.9. DEFERRAL OF PAYMENT ON SUBORDINATED SHARES. The company shall with
respect to any payment of Available Cash on the subordinated shares,
defer the payment of the first US$ 6.8 million (being the amount equal
to the aggregate Target Quarterly Distribution on the subordinated
shares for one year) in the form of cash distributions, by dividend or
otherwise, until the end of the Deferral Period (as defined below), but
the same will be deemed paid for purposes of determining Available
Cash, Operating Surplus, Adjusted Operating Surplus, additional
distribution levels, early conversion rights and the expiration of the
Subordinated Period. For the purpose hereof, the Deferral Period shall
mean the period from the Initial Issue Date until the tests set forth
below have been met for any quarter ending on or after June 30, 2001
for which:
<PAGE>
36
1) distributions (by dividend or otherwise) of Available Cash
from Operating Surplus on the common shares and subordinated
shares (including deferred distributions) for each of the two
consecutive non-overlapping four-quarter periods immediately
preceding the date of determination that equaled or exceeded
the sum of the Target Quarterly Distribution on all of the
outstanding common shares and subordinated shares during such
periods;
2) the Adjusted Operating Surplus generated during each of the
two consecutive non-overlapping four-quarter periods
immediately preceding the date of determination that equaled
or exceeded the sum of the Target Quarterly Distribution on
all of the common and subordinated shares that were
outstanding on a fully diluted basis during those periods; and
3) there are no outstanding Common Share Arrearages.
6.10. PAYMENT AFTER DEFERRAL PERIOD. After the Deferral Period, the company
will pay on the subordinated shares until the deferred distributions
have been paid in full all Available Cash from Operating Surplus
remaining after all Common Share Arrearages and the Target Quarterly
Distributions have been paid on all common shares and subordinated
shares prior to any further distribution under the provisions of this
article.
AMENDMENT OF THE ARTICLES OF INCORPORATION; DISSOLUTION
AND LIQUIDATION OF THE COMPANY/DISTRIBUTION OF
LIQUIDATION PROCEEDS/PROHIBITION AGAINST CERTAIN ACTIONS
ADVERSE TO CERTAIN CLASSES OF SHARES
ARTICLE 18
1. RESOLUTIONS TO AMEND THE ARTICLES OF INCORPORATION, TO DISSOLVE THE
COMPANY OR TO SELL ITS ASSETS. Resolutions to amend the articles of
incorporation, to dissolve the company or to sell all or substantially
all of the assets of the company, may only be taken in a General
Meeting by at least a sixty-six and two thirds percent majority of
votes cast at which meeting at least one-half of the outstanding voting
capital is represented.
2. SECOND MEETING IN CERTAIN CIRCUMSTANCES. If the required capital is not
<PAGE>
37
represented at the meeting referred to paragraph 1 of this article, a
second meeting shall be convened, to be held within one month after the
first meeting, at which (second) meeting valid resolutions may then be
taken with an absolute majority of votes cast, irrespective of the
issued and outstanding voting capital represented.
3. PROHIBITION AGAINST CERTAIN ACTIONS ADVERSE TO INCENTIVE SHARES. In
accordance with the provisions of Article 93a of the Commercial Code of
the Netherlands Antilles, the General Meeting shall not, without the
vote of the absolute majority of holders of incentive shares then
outstanding, amend, alter or repeal any of the provisions of these
articles of incorporation so as to affect adversely the rights or
powers of such incentive shares.
4. PROCEDURES FOR LIQUIDATION. In the event of a dissolution of the
company, the liquidation shall take place under such provisions as the
General Meeting shall determine with due observance of (i) the
remaining paragraphs of this article 18, and (ii) the provisions of
applicable law on dissolution and liquidation of Netherlands Antilles
companies.
5. ALLOCATION OF PROFITS. If the profit and loss account covering the
financial year closing per the date of the dissolution of the company
shows a profit, this profit shall be allocated in conformity with the
provisions of article 17 hereof.
6. LIQUIDATION EVENT--DEFINITION AND ALLOCATION TO SHAREs. In case of any
dissolution, liquidation or winding up of the affairs of the company,
whether voluntary or otherwise (a "Liquidation Event"), after
satisfaction of all the company's creditors in the order of priority as
set out by or under applicable law, proceeds of such liquidation will
be distributed to the holders of common and subordinated shares and the
holders of incentive shares in accordance with their respective
priorities as described below, provided however, that the holders of
common shares shall be entitled to receive, out of the assets of the
company available for distribution to its shareholders, in cash, (i)
their Unrecovered Initial Price, (ii) the amount of the Target
Quarterly Distribution due on each such share, plus (iii) any
arrearages, before any distribution shall be made to the holders of any
other class of shares, as further described below. If the company is
dissolved and liquidated before the end of the Subordination Period,
any distribution will be made as follows:
<PAGE>
38
(a) FIRST, 100% to the common shares, pro rata, until each common share
receives an amount equal to the sum of:
(1) the Unrecovered Initial Price of such common share;
(2) the amount of the Target Quarterly Distribution for the
quarter(s) during which the company's liquidation occurs; and
(3) any Unpaid Common Share Arrearages on that common share;
(b) SECOND, 100% to the subordinated shares, pro rata, until each
subordinated share receives an amount equal to the sum of:
(1) the Unrecovered Initial Price of that subordinated share;
(2) the amount of the Target Quarterly Distribution for the
quarter(s) during which the company's liquidation occurs; and
(3) any unpaid deferred distributions on that subordinated share;
(c) THIRD, 85% to the common shares and subordinated shares, pro rata,
and 15% to the incentive shares, pro rata, until there has been
allocated under this paragraph (c) an amount per common share and
subordinated share equal to:
(1) the cumulative excess of the first additional distribution
over the Target Quarterly Distribution for all common shares
and subordinated shares for each quarter of the company's
existence as from the Initial Issue Date,
LESS
(2) the cumulative amount per share of any prior distributions (by
dividend or otherwise) of Available Cash from Operating
Surplus in excess of the Target Quarterly Distribution that
the company paid 85% to the common shares and subordinated
shares, pro rata, and 15% to the incentive shares, pro rata,
for each quarter of the company's existence as from the
Initial Issue Date;
<PAGE>
39
(d) FOURTH, 75% to the common shares and subordinated shares, pro rata,
and 25% to the incentive shares, pro rata, until there has been
allocated under this paragraph (d) an amount per common share and
subordinated share equal to:
(1) the cumulative excess of the second additional distribution
over the first additional distribution for each quarter of the
company's existence as from the Initial Issue Date,
LESS
(2) the cumulative amount per share of any distributions of
Available Cash from Operating Surplus in excess of the first
target distribution that the company paid 75% to the common
shares and subordinated shares, pro rata, and 15% to the
incentive shares, pro rata, for each quarter of the company's
existence as from the Initial Issue Date; and
(e) THEREAFTER, 50% to all common shares and subordinated shares, pro
rata, and 50% to the incentive shares, pro rata.
7. If the dissolution and liquidation of the company occurs after the
Subordination Period so as a result of which only common shares and
incentive shares, if any, are outstanding, all of paragraph (b) above
will no longer be applicable, and any reference to distribution on
subordinated shares need no longer be followed.
8. LIQUIDATION EVENT--MAINTENANCE OF BOOKS AND RECORDs. During a period of
ten years after the end of the liquidation relating to any Liquidation
Event, the books and records of the company shall remain in the custody
of the person designated for that purpose by the General Meeting.
SEPARATE MEETINGS OF CLASSES OF SHARES/
ACTION BY WRITTEN CONSENT
ARTICLE 19
1. GENERAL. Separate meetings of the holders of any class of shares shall
be held and may be convened by the Board of Directors at the request of
the holders of the respective classes of shares, being the holders of
common shares, subordinated shares or incentive shares, by the holders
of ten percent of any shares of such class issued and outstanding (each
a "class meeting").
<PAGE>
40
2. CONVOCATION. A convocation of such class meeting shall be given by
means of a written notice mailed not fewer than ten days and no more
than thirty days prior to the date of the meeting to the address of
each holder of a class of shares, appearing in the Register.
3. AGENDA. The notice shall contain the agenda of the meeting or shall
state that it may be examined by the holders of such class of shares
for inspection at the registered office of the company.
4. SEPARATE MEETING AS DETERMINED BY BOARD OF DIRECTORS. Separate meetings
may also be held as often as the Board of Directors deems necessary.
5. RESOLUTIONS OUTSIDE MEETINGS BY WRITTEN CONSENT FOR A CLASS OF SHARES
ONLY; RECORDS. Resolutions of holders of a class of shares may also be
adopted by written consent (without recourse to a separate meeting of
holders of a class as provided herein), provided (i) all holders of
shares of such class have had an opportunity to express themselves in
connection with such action by written consent and (ii) such expression
is made in writing. The Board of Directors shall keep a record of the
resolutions thus made by written consent.
6. APPLICATION OF PROVISIONS OF ARTICLES OF INCORPORATION AND LAWS. All
the provisions of these articles of incorporation and the laws of the
Netherlands Antilles as to General Meetings, in as far as possible,
apply to separate meetings, except as otherwise specifically provided
in this article 19.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATIA
TERMINALS GROUP N.V.'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,400
<SECURITIES> 0
<RECEIVABLES> 18,352
<ALLOWANCES> (804)
<INVENTORY> 1,964
<CURRENT-ASSETS> 34,184
<PP&E> 235,922
<DEPRECIATION> (27,836)
<TOTAL-ASSETS> 245,390
<CURRENT-LIABILITIES> 26,131
<BONDS> 101,000
0
0
<COMMON> 114
<OTHER-SE> 116,942
<TOTAL-LIABILITY-AND-EQUITY> 245,390
<SALES> 74,664
<TOTAL-REVENUES> 122,992
<CGS> 66,336
<TOTAL-COSTS> 99,327
<OTHER-EXPENSES> 10,850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,113
<INCOME-PRETAX> 2,386
<INCOME-TAX> 548
<INCOME-CONTINUING> (419)
<DISCONTINUED> 0
<EXTRAORDINARY> (4,743)
<CHANGES> 0
<NET-INCOME> (5,162)
<EPS-BASIC> (0.31)
<EPS-DILUTED> (0.21)
</TABLE>
