<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X)
Filed by a party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential for Use of the
Commission Only (as permitted)
by Rule 14a-6(e) (2)
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CROWN CENTRAL PETROLEUM CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
( ) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
1) Title of each class of securities to which transaction applies:
Class A common stock, par value $5.00
Class B common stock, par value $5.00
2) Aggregate number of securities to which transaction applies: 7,113,101
shares (representing 2,450,868 and 4,662,233 shares of Class A and
Class B common stock, respectively, to be converted into the right to
receive cash consideration in the transaction)
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $9.50 per
share, payable in cash pursuant to an Agreement and Plan of Merger
dated April 7, 2000
4) Proposed maximum aggregate value of transaction: $67,574,459
5) Total fee paid: $ 13,514.89
(X) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO OF CROWN CENTRAL PETROLEUM CORPORATION]
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Crown Central Petroleum Corporation ("Crown") to be held at the Turf Valley
Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland on Thursday,
the 24th day of August, 2000 at 10:00 o'clock in the morning, Eastern Daylight
Time.
The purpose of the Special Meeting is to consider and vote upon a merger of
Crown and Rosemore Acquisition Corporation ("RAC"), an indirect wholly owned
subsidiary of Rosemore, Inc., a Maryland corporation ("Rosemore") and the
accompanying merger agreement. Rosemore, through a wholly owned subsidiary,
owns approximately 49% of the Crown Class A common stock and 11% of the Crown
Class B common stock. If the merger is consummated, Rosemore will acquire all
of the issued and outstanding Class A and Class B common stock held by
stockholders other than Rosemore at a price of $9.50 per share. The merger will
be effected by having RAC merge with and into Crown. Crown will be the
surviving corporation in the merger and will become an indirect wholly owned
subsidiary of Rosemore.
Consummation of the merger is subject to certain conditions, including
receipt of approval of two-thirds of all of the votes entitled to be cast on
the matter by holders of Crown Class A and Class B common stock outstanding on
July 10, 2000, voting as a single class, and the absence of defaults under the
indenture governing the Crown 10 7/8% senior notes. Rosemore has agreed to
cause its wholly owned subsidiary to vote shares representing approximately
45.4% of the votes entitled to be cast in favor of the merger and merger
agreement. In addition, officers and directors of Rosemore and Crown who hold
approximately 1.4% of the votes entitled to be cast have indicated that they
will vote in favor of the merger and merger agreement.
The merger was unanimously approved by a committee of Crown's independent
directors (the "Independent Committee") and, on the Independent Committee's
recommendation, by Crown's Board of Directors. Because of my affiliation with
Rosemore, I did not participate in the Crown Board's consideration of the
merger or its vote on the merger. However, I do support the merger. You should
carefully read the accompanying letter to stockholders from the chairman of the
Independent Committee.
The accompanying Proxy Statement provides a description of the proposed
merger and additional information (including Crown's most recent Quarterly
Report on Form 10-Q and Annual Report on Form 10-K) that you may wish to
consider in deciding how to vote. Please give this information your careful
attention.
Whether or not you plan to attend, it is important that your shares are
represented and voted at the Special Meeting. Accordingly, please promptly
complete, sign and date the enclosed proxy card and return it in the envelope
provided.
Very truly yours,
Henry A. Rosenberg, Jr., Chairman of the
Board,
President and Chief Executive Officer
July , 2000
<PAGE>
[LOGO OF CROWN CENTRAL PETROLEUM CORPORATION]
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201
To the Stockholders of Crown Central Petroleum Corporation:
You have received, together with this letter, notice of a Special Meeting of
stockholders of Crown Central Petroleum Corporation ("Crown") to be held on
Thursday, the 24th day of August, 2000 at 10:00 o'clock in the morning, Eastern
Daylight Time. The purpose of the Special Meeting is to consider and vote upon
a merger of Crown and Rosemore Acquisition Corporation ("RAC"), an indirect
wholly owned subsidiary of Rosemore, Inc., a Maryland corporation ("Rosemore")
and the accompanying merger agreement. Rosemore owns approximately 49% of the
Crown Class A common stock and 11% of the Crown Class B common stock. Pursuant
to the merger, Rosemore will acquire for a price of $9.50 per share all of the
issued and outstanding Class A and Class B common stock held by stockholders
other than Rosemore. The merger will be effected by having RAC merge with and
into Crown. Crown will be the surviving corporation in the merger and will
become an indirect wholly owned subsidiary of Rosemore.
After Crown's financial advisor, Credit Suisse First Boston Corporation
("CSFB"), recommended to Crown's Board of Directors in January 2000 that it
approach Rosemore to discuss whether Rosemore was interested in making an offer
to acquire Crown, Mr. Henry A. Rosenberg, Jr., the Chairman of the Board of
Directors of Crown and the chairman of the board of directors of Rosemore,
recused himself from any further proceedings of the Board of Directors relating
to Crown's consideration and evaluation of strategic alternatives. I chaired
all subsequent meetings of the Board of Directors relating to its consideration
and evaluation of strategic alternatives.
The Board of Directors then gave a committee of independent members (the
"Independent Committee"), of which I acted as chairman, the responsibility to
review, evaluate and, if appropriate, negotiate strategic alternatives for
Crown, including a possible transaction with Rosemore, and to make a
recommendation to the Board of Directors as to the course of action, if any,
Crown should pursue. CSFB assisted and advised the Independent Committee in
carrying out its responsibilities. CSFB has rendered its opinion to the Board
of Directors that, as of the date of the opinion, based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
aggregate consideration to be received by stockholders of Crown in the merger
is fair, from a financial point of view, to the stockholders of Crown other
than Rosemore and its affiliates. You should carefully read and consider the
written opinion of CSFB, dated April 7, 2000, that is attached as Exhibit B to
the enclosed Proxy Statement.
The Independent Committee and the Board of Directors believe that the terms
of the merger and merger agreement are fair to, and in the best interests of,
Crown's stockholders. The Independent Committee has unanimously recommended to
the Board of Directors that the terms of the merger and merger agreement be
approved, and the Board of Directors, without the participation of Mr.
Rosenberg, unanimously recommends that stockholders approve the merger and
merger agreement.
Very truly yours,
Michael F. Dacey, Chairman, Committee of
the Independent Directors of the Board of
Directors of Crown Central Petroleum
Corporation
July , 2000
<PAGE>
(CROWN LOGO)
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201
----------------
Notice of Special Meeting of Stockholders
August 24, 2000
----------------
To the Stockholders of CROWN CENTRAL PETROLEUM CORPORATION:
Notice is hereby given that a Special Meeting of stockholders of Crown
Central Petroleum Corporation ("Crown") will be held at the Turf Valley
Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland on Thursday,
the 24th day of August, 2000 at 10:00 o'clock in the morning, Eastern Daylight
Time to consider and vote on a proposal to approve a merger and the related
Agreement and Plan of Merger among Rosemore, Inc. ("Rosemore"), Rosemore
Acquisition Corporation ("RAC") and Crown, dated as of April 7, 2000. The
merger agreement provides for the merger of RAC, an indirect wholly owned
subsidiary of Rosemore, with and into Crown. After completion of the merger,
Crown will survive as an indirect wholly owned subsidiary of Rosemore.
Stockholders, other than Rosemore, will receive $9.50 in cash for each share of
Crown Class A and Class B common stock that they own.
Details respecting these matters are set forth in the proxy statement. Only
stockholders of record at the close of business on July 10, 2000 will be
entitled to notice of and to vote at the Special Meeting. Approval of the
merger and merger agreement requires the affirmative vote of at least two-
thirds of all of the votes entitled to be cast on the matter by holders of the
Crown Class A and Class B common stock outstanding on July 10, 2000, voting
together as a single class. Each share of Class A common stock entitles the
holder of record thereof to one vote, and each share of Class B common stock
entitles the holder of record thereof to a one-tenth (1/10) vote, on the merger
and merger agreement.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE PAID, ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY GIVING WRITTEN
NOTICE TO THE VICE PRESIDENT-SECRETARY OF CROWN AT THE ADDRESS ABOVE, BY
EXECUTING AND DELIVERING A LATER DATED PROXY OR BY ATTENDING AND VOTING AT THE
SPECIAL MEETING.
By order of the Board of Directors,
Dolores B. Rawlings
July , 2000 Vice President--Secretary
This transaction has not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the fairness or merits
of such transaction nor upon the accuracy or adequacy of the information
contained in this document. Any representation to the contrary is unlawful.
<PAGE>
SUMMARY TERM SHEET
The following is a summary of the essential features and significance of the
merger. You should read this entire document and the documents to which it
refers carefully for a complete description of the merger.
. Parties--The parties to the merger agreement are Crown, Rosemore and
Rosemore Acquisition Corporation. Crown and Rosemore Acquisition Corporation
will be the parties to the merger. (page )
. The merger--You are being asked to approve the merger and merger agreement
by which Rosemore will acquire Crown. After the merger, Crown will be an
indirect wholly owned subsidiary of Rosemore and you will no longer be a
stockholder of Crown or entitled to share in any future growth and earnings
of Crown or benefit from an increase in value of Crown common stock should
any increase occur. (page )
. Payment of $9.50 for each share of Crown--Each share of Class A and Class B
common stock that you own will convert into the right to receive $9.50 in
cash as a result of the merger. (page )
. Crown Board recommendation--The Crown Board, without the participation of
Mr. Henry A. Rosenberg, Jr., recommends that you vote in favor of the merger
and merger agreement. (page )
. Required vote--The approval of the merger and merger agreement requires the
affirmative vote of two-thirds of all of the votes entitled to be cast on
the matter by the holders of Class A common stock and the holders of Class B
common stock voting together as a single class. Approval of the merger and
merger agreement is not conditioned on a vote of the unaffiliated
stockholders. If your shares are not voted, it will have the same effect as
a vote against the merger and merger agreement. (page )
. The merger is taxable--In general, you will recognize taxable gain or loss
in the amount of the difference between $9.50 and your adjusted tax basis
for each share of Crown common stock that you own. You will not currently
recognize taxable gain or loss if you hold your Crown stock in a "tax
qualified plan" such as one of the Crown savings plans or an individual
retirement account. (page )
. Conditions to the merger--Significant conditions to the parties' obligations
to complete the merger include:
--approval of the merger and merger agreement by the requisite affirmative
vote of the stockholders of Crown;
--no legal restraint or prohibition will be in effect, and no law will have
been enacted or adopted that enjoins, prohibits or makes illegal the
completion of the merger; and
--no event of default under the indenture relating to the 10 7/8% senior
notes will have occurred and the completion of the merger will not result
in the occurrence of an event of default under the indenture. (page )
. Interests of Crown's Executive Officers--After the merger, Mr. Henry A.
Rosenberg, Jr., the chairman of Rosemore, will remain Chairman of the Board
of Crown while Mr. Frank B. Rosenberg will be elected President and Chief
Executive Officer of Crown. Mr. Henry A. Rosenberg, Jr. and Mr. Frank B.
Rosenberg have interests in Rosemore through family trusts that own stock in
Rosemore. Restrictions on performance vested restricted (PVR) stock will
lapse as a result of the merger and executive officers will be entitled to
receive the merger consideration for their PVR stock and also to receive
payment for the cancellation of their options. Crown's executive officers
executed limited waivers of certain benefits that they would otherwise be
entitled to receive because of the merger. (page )
. Other Interests of Crown's Directors and Officers--The directors and
officers will be entitled to receive the merger consideration for the Crown
stock they hold. Under the merger agreement, the surviving corporation will
continue the indemnification of directors and officers in its charter and
bylaws for six years and will use its best efforts to maintain the
directors' and officers' liability insurance at pre-merger coverage levels.
The independent directors waived the standard retainer for service on Crown
Board committees in connection with their service on the Independent
Committee but not the right to be reimbursed for expenses incurred. (page
)
<PAGE>
. Rosemore's current relationship with Crown--Rosemore, through a wholly owned
subsidiary, currently owns approximately 49% of the Crown Class A common
stock and approximately 11% of the Crown Class B common stock. Therefore,
Rosemore currently possesses approximately 45.4% of the total voting power
of the Crown common stock for purposes of the merger. Mr. Henry A.
Rosenberg, Jr., the Chairman of the Board of Directors of Crown, is an
affiliate and the chairman of the board of directors of Rosemore. (page )
. Ownership of Rosemore--All of the shares of Rosemore are held by trusts for
the benefit of descendants of Ruth B. Rosenberg. (page )
. Fairness of the transaction--Each of Crown, Rosemore, Rosemore Acquisition
Corporation and Mr. Henry A. Rosenberg, Jr. believes that the merger and
merger agreement are fair to the stockholders of Crown who are not
affiliated with Rosemore. Crown obtained an opinion from Credit Suisse First
Boston Corporation as to the fairness of the transaction to the stockholders
of Crown other than Rosemore and its affiliates. Crown did not obtain any
appraisals of the operating assets of Crown. (page )
. No appraisal rights--Under Maryland law, you will have no appraisal rights
or other similar statutory rights in connection with the merger. (page )
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q:Who is entitled to vote at the Special Meeting?
A: Holders of record of Crown Class A and Class B common stock as of the close
of business on July 10, 2000 are entitled to vote at the Special Meeting.
Each holder of Class A common stock has one vote per share, and each holder
of Class B common stock has a one-tenth (1/10) vote per share, on the merger
and merger agreement.
Q:How do I vote?
A: Please read this document and vote your shares as soon as possible, so that
your shares may be represented and voted at the Special Meeting. You may
vote your shares in any one of the following three ways: (1) complete, sign,
date and mail your proxy card in the enclosed return envelope as soon as
possible; (2) call toll free 1-877-776-8683 on a Touch Tone telephone and
follow the instructions on the enclosed proxy card; or (3) vote by Internet
at our Internet Address: http://www.eproxyvote.com/cnpab.
Q:What do I do if I want to change my vote?
A: Just submit a later dated proxy to Crown. You may also attend the Special
Meeting in person and vote, or revoke your proxy by sending a notice of
revocation to Crown's Vice President-Secretary, Ms. Dolores B. Rawlings, at
Crown's headquarters.
Q:If my broker holds my shares in "street name," will my broker vote my shares
for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker how to vote your shares by following
the directions your broker provides to you. If you do not provide
instructions to your broker, your shares will not be voted, which will have
the same effect as voting against the merger and merger agreement.
Q: If I hold shares in Crown's Employees Savings Plan and/or Employees
Supplemental Savings Plan, how do I vote these shares?
A: Your shares in Crown's Savings Plans will be voted by the trustee of the
Savings Plans, T. Rowe Price Associates, Inc. T. Rowe Price will contact you
for instructions as to how to vote your shares in the Savings Plans. If you
do not instruct T. Rowe Price as to how to vote your shares in the Savings
Plans, your shares will be voted as provided in the Savings Plans by the
trustee in the same proportion as the votes cast with respect to those
shares for which the trustee receives proper instructions.
Q:May I attend the Special Meeting in person?
A: You may attend the Special Meeting in person if you have shares registered
in your name or if you present a valid proxy in your favor from the
registered holder. If shares are registered in the name of a corporation or
other organization, bring a letter from an authorized agent of that
corporation or organization giving you authority to vote its shares.
Q: If I have shares registered in my name or if I have a proxy in my favor from
a registered holder, what do I need to do to attend the Special Meeting in
person?
A: Just bring proper photographic identification to the meeting, such as a
driver's license, passport or United States military identification.
Q:When should I send in my stock certificate(s)?
A: You will receive separate instructions for surrendering stock certificate(s)
following the Special Meeting. You should not send in your stock
certificate(s) until you receive these instructions.
Q:When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We hope to
complete the merger shortly after the Special Meeting, assuming the required
stockholder approval is obtained.
<PAGE>
Q: Whom can I contact if I have additional questions or would like additional
copies of the proxy statement or proxy card?
A: You should contact our proxy solicitor:
D.F. King & Co., Inc.
77 Water Street
New York, NY 10005
Banks and Brokers call: (212) 425-1685
All others call toll-free: (800) 848-3094
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
Summary
The Parties to the Merger............................................... 1
The Merger.............................................................. 2
What Stockholders Will Receive.......................................... 2
Federal Income Tax Consequences......................................... 2
Market Price of Class A and Class B Common Stock........................ 2
The Special Meeting..................................................... 2
Record Date; Stock Entitled to Vote..................................... 3
Required Vote........................................................... 3
No Appraisal Rights..................................................... 3
Treatment of Outstanding Options........................................ 3
Opinion of Crown's Financial Advisor.................................... 3
Purposes of the Merger.................................................. 4
Crown's Reasons for the Merger; Recommendation of Crown's Board......... 4
Rosemore's Reasons for the Merger....................................... 4
Conditions to the Merger................................................ 4
Interests of Certain Persons in the Merger.............................. 4
Terminating the Merger Agreement; Expenses.............................. 5
Accounting Treatment.................................................... 5
Regulatory Approvals.................................................... 5
Stockholder Litigation.................................................. 5
Forward-Looking Information............................................... 6
Market Price and Dividend Information..................................... 7
Common Stock Market Prices.............................................. 7
Dividend Policy......................................................... 7
Selected Consolidated Financial Information of Crown...................... 8
Recent Developments....................................................... 9
The Special Meeting....................................................... 10
Date, Time and Place.................................................... 10
Purpose of the Special Meeting.......................................... 10
Record Date............................................................. 10
Required Vote........................................................... 10
Proxies, Voting and Revocation.......................................... 11
Solicitation of Proxies................................................. 11
Special Factors........................................................... 12
Background of the Merger................................................ 12
Crown's Purposes of the Merger.......................................... 27
Recommendation of Crown's Board of Directors............................ 28
Crown's Reasons for the Merger and Statement as to the Fairness of the
Merger................................................................. 28
Opinion of Credit Suisse First Boston................................... 31
Rosemore's Purposes and Reasons for the Merger.......................... 35
Rosemore's Statement as to the Fairness of the Merger................... 37
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
Financial Report Prepared by Aegis Muse................................. 38
Henry A. Rosenberg, Jr.'s Reasons for the Merger and Statement as to the
Fairness of the Merger................................................. 39
Ownership of Rosemore................................................... 40
Effects of the Merger................................................... 40
Interests of and Effects of the Merger on Crown's Directors and
Officers............................................................... 41
Rosemore's Plans for Crown after the Merger............................. 42
Federal Income Tax Consequences......................................... 42
The Merger................................................................ 43
Merger Consideration.................................................... 43
Payment Procedure....................................................... 44
Treatment of Stock Options, Stock Grants and Stock Appreciation Units... 45
Merger Financing; Expenses of the Merger................................ 46
Interests of Certain Persons in the Merger.............................. 47
Stockholder Litigation.................................................. 49
Union Corporate Campaign................................................ 50
Accounting Treatment.................................................... 50
Regulatory Approvals.................................................... 50
No Appraisal Rights..................................................... 51
Delisting and Deregistration of Crown Common Stock after the Merger..... 51
The Merger Agreement...................................................... 52
Completion of the Merger................................................ 52
Representations and Warranties of Crown and Rosemore.................... 52
Certain Covenants....................................................... 53
Waiver Agreements....................................................... 54
No Solicitation of Acquisition Transactions............................. 54
Conduct of the Business of Crown before the Merger...................... 55
Employee Stock Plans.................................................... 56
Indemnification and Insurance........................................... 57
Conditions to the Merger................................................ 57
Organization of the Business of the Surviving Corporation after the
Merger................................................................. 58
Termination, Amendment or Waiver........................................ 58
Expenses and Termination Fee............................................ 59
Shareholder Rights Plan................................................... 60
Related Party Transactions................................................ 61
Security Ownership of Five Percent Beneficial Owners and Management....... 62
Owners of More than Five Percent........................................ 62
Directors and Officers.................................................. 63
Stockholder Proposals..................................................... 64
Where You Can Find More Information....................................... 64
</TABLE>
----------------
<TABLE>
<S> <C>
Agreement and Plan of Merger Among Rosemore, Inc., Rosemore
Acquisition Corporation and Crown Central Petroleum Corporation
Dated as of April 7, 2000.......................................... Exhibit A
Opinion of Credit Suisse First Boston Corporation................... Exhibit B
Quarterly report on Form 10-Q for the period ended March 31, 2000... Appendix A
Annual report on Form 10-K, as amended, for the year ended December
31, 1999............................................................ Appendix B
</TABLE>
(ii)
<PAGE>
SUMMARY
This summary highlights information from the proxy statement that Crown
believes is important information about the merger. You should read this entire
document carefully and the documents to which it refers for a complete
description of the merger. This summary includes page references in parentheses
to direct you to more complete descriptions of the topics presented in this
summary.
The Parties to the Merger
Crown Central Petroleum Corporation Rosemore, Inc.
Crown Central Petroleum Rosemore, Inc. is a Maryland
Corporation is a Maryland corporation headquartered in Baltimore,
corporation. Since 1930 when a Maryland. Through subsidiaries, it is
company controlled by Louis engaged in an oil and gas gathering and
Blaustein and his son, Jacob, distribution business and owns and
acquired a controlling interest in operates oil and gas wells in Texas and
Crown, its corporate headquarters surrounding states. Rosemore Holdings,
have been in Baltimore, Maryland. Inc., a Maryland corporation and a
Crown owns and operates two Texas wholly owned subsidiary of Rosemore,
refineries with a total refining holds all of Rosemore's stock in Crown,
capacity of 152,000 barrels per approximately 49% of the Crown Class A
day, 330 Crown gasoline stations common stock and approximately 11% of
and convenience stores in the Mid- the Crown Class B common stock,
Atlantic and Southeastern United together with certain other
States, and 13 petroleum product investments. Rosemore Acquisition
terminals along the Colonial, Corporation (RAC) is a wholly owned
Plantation and Texas Eastern Maryland subsidiary of Rosemore
Products pipelines. Mr. Henry A. Holdings, and RAC was formed for the
Rosenberg, Jr. is the Chairman of sole purpose of being merged with and
the Board, President and Chief into Crown.
Executive Officer of Crown.
In 1930, a predecessor to Rosemore
controlled by Mr. Henry A. Rosenberg,
Jr.'s grandfather, Louis Blaustein, and
Louis Blaustein's son, Jacob, acquired
a controlling interest in Crown. Mr.
Henry A. Rosenberg, Jr., the Chairman
of the Board of Directors of Crown, is
also the chairman of the board of
directors of Rosemore and Rosemore
Holdings. Mr. Edward L. Rosenberg, who
was the Executive Vice President--
Supply and Transportation of Crown
until December 1998, is the President
of Rosemore and Rosemore Holdings and
the son of Mr. Henry A. Rosenberg, Jr.
Crown's corporate address is:
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201
The phone number is: (410) 539-7400.
Rosemore's corporate address is:
Rosemore, Inc.
Suite 2300
One North Charles Street
Baltimore, Maryland 21201
The phone number is: (410) 347-7080.
1
<PAGE>
The Merger (page )
The merger will be effected by having RAC, an indirect wholly owned
subsidiary of Rosemore, merge with and into Crown. Crown will continue as the
surviving corporation and will become an indirect wholly owned subsidiary of
Rosemore.
After the merger, public trading of Crown Class A and Class B common stock
will cease and Crown common stock will be delisted from the American Stock
Exchange (AMEX). Stockholders other than Rosemore will no longer have any
ownership interest in Crown and will no longer participate in the future
earnings and growth of Crown or benefit from any increase in the value of Crown
common stock should any increase occur.
What Stockholders Will Receive (page )
Upon completion of the merger, you will be entitled to receive $9.50 in cash
for each share of Crown Class A and Class B common stock you own.
Federal Income Tax Consequences (page )
You will recognize taxable gain or loss, as of the date of the merger, equal
to the difference between the amount of cash you receive in the merger for your
shares to be surrendered and your adjusted tax basis in those shares. The gain
or loss will be a long-term capital gain or loss if, as of the date of the
merger, your holding period for your shares is more than one year. You will not
currently recognize taxable gain or loss if you hold your Crown stock in a "tax
qualified plan" such as one of the Crown savings plans or an individual
retirement account.
Unless you comply with the required reporting or certification procedures,
you may be subject to withholding tax of 31% with respect to any cash payments
you receive pursuant to the merger.
Market Price of Class A and Class B Common Stock (page )
Crown Class A and Class B common stock are listed on the AMEX under the
ticker symbols "CNPA" and "CNPB", respectively.
The average of the closing prices reported on the AMEX for the last quarter
of 1999 and in 2000 through January 27, 2000, for shares of Crown Class A
common stock was $6.81 and for shares of Crown Class B common stock was $6.38.
Therefore, the offer price represents a premium of approximately 38% over the
average per share closing price of the Class A common stock and approximately
47% over the average per share closing price of the Class B common stock from
October 1, 1999 to January 27, 2000, the day prior to the announcement that
Rosemore had been approached by Crown's financial advisor. On April 7, 2000,
the last full trading day prior to the public announcement of the signing of
the merger agreement, the closing sale price for each of the Crown Class A and
Class B common stock reported on the AMEX was $8.50 per share. On
, 2000, the most recent practicable date prior to the printing
of this proxy statement, the closing prices of Crown Class A and Class B common
stock reported on the AMEX were $ and $ per share,
respectively.
Historically, the market prices of shares of Crown Class A and Class B
common stock have fluctuated, and we expect such fluctuations to continue. In
addition, Crown Class A and Class B common stock have historically traded at
different prices. These fluctuations may affect your determination as to the
attractiveness of the merger. You are urged to obtain current market quotations
for Crown Class A and Class B common stock prior to making any decision with
respect to the merger.
The Special Meeting (page )
Crown will hold a Special Meeting of stockholders to vote on the merger and
merger agreement at the Turf Valley Conference Center, 2700 Turf Valley Road,
Ellicott City, Maryland on Thursday, the 24th day of August, 2000 at 10:00
o'clock in the morning, Eastern Daylight Time, subject to adjournments or
postponements. At the Special Meeting, Crown will ask you to approve the merger
and merger agreement.
2
<PAGE>
Record Date; Stock Entitled to Vote (page )
You are entitled to vote at the Special Meeting if you owned Crown Class A
or Class B common stock at the close of business on July 10, 2000.
On July 10, 2000, there were 4,817,394 shares of Crown Class A common stock
and 5,250,112 shares of Crown Class B common stock outstanding and held by 517
and 911 record holders, respectively. Of those shares, Rosemore, through its
wholly owned subsidiary, Rosemore Holdings, beneficially owned 2,366,526 shares
of Class A and 591,629 shares of Class B common stock or approximately 49% and
11%, respectively.
Required Vote (page )
The approval of the merger and merger agreement requires the affirmative
vote of two-thirds of all of the votes entitled to be cast on the matter by the
holders of Class A common stock and the holders of Class B common stock, voting
together as a single class. Each share of Class A common stock entitles the
holder of record thereof to one vote, and each share of Class B common stock
entitles the holder of record thereof to a one-tenth (1/10) vote on the merger
and merger agreement. Rosemore has agreed to cause Rosemore Holdings to vote
its shares of Crown common stock, representing approximately 45.4% of all of
the votes entitled to be cast at the Special Meeting, in favor of the merger
and merger agreement. Officers and directors of Rosemore and Crown who hold
approximately 1.4% of all of the votes entitled to be cast on the matter have
indicated that they will vote in favor of the merger and merger agreement.
No Appraisal Rights (page )
Under Maryland law, Crown's stockholders will not have any appraisal rights
or other similar statutory rights in connection with the merger.
Treatment of Outstanding Options (page )
Options and stock appreciation unit awards. Upon completion of the merger,
each outstanding option to purchase Crown Class B common stock and each stock
appreciation unit award will become fully vested and immediately exercisable
and will convert into an option or stock appreciation unit award for the
surviving corporation with the same relative rights and exercise prices as
applied to such option or stock appreciation unit award immediately before the
merger. Promptly following completion of the merger, the surviving corporation
will provide each option holder with the opportunity to receive payment for the
cancellation of his or her options for a cash price based upon a discounted
Black-Scholes valuation that reflects the strike price and term of the option
and also the relatively limited trading activity in the underlying stock.
Performance vested restricted stock awards. Upon completion of the merger,
holders of a performance vested restricted stock award will be treated in the
same manner as other holders of Crown common stock and will be entitled to
$9.50 for each share of performance vested restricted stock that they own, less
any required tax withholding.
Opinion of Crown's Financial Advisor (page )
Crown's financial advisor, Credit Suisse First Boston Corporation (CSFB),
has rendered its opinion to the Crown Board that, as of April 7, 2000, based
upon and subject to the assumptions, limitations and qualifications set forth
in such opinion, the aggregate consideration to be received by Crown
stockholders in the merger is fair, from a financial point of view, to the
Crown stockholders other than Rosemore and its affiliates. The full text of
CSFB's written opinion, dated April 7, 2000, is attached to this document as
Exhibit B. Crown encourages you to read this opinion carefully in its entirety
for a description of the procedures followed, assumptions made, matters
considered and limitations on the review undertaken. CSFB's opinion is
addressed to Crown's Board of Directors, does not address the allocation of the
aggregate consideration to be received by
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stockholders of Crown between holders of Class A common stock and Class B
common stock and does not constitute a recommendation to any stockholder as to
how that stockholder should vote on the merger and merger agreement.
Purposes of the Merger (page )
Crown's purposes of the merger are to provide the unaffiliated stockholders
with the opportunity to receive a fair price for their shares and to no longer
be subject to the market conditions and other uncertainties that have affected
the operations and financial performance of Crown in the past. Rosemore's
purpose of the merger is to acquire the remaining equity interest in Crown not
already owned by Rosemore, in order to effect its plans for Crown.
Crown's Reasons for the Merger; Recommendation of Crown's Board (page )
After considering the recommendation of the committee of the independent
directors of the Crown Board and the fairness opinion received from CSFB, the
Crown Board (other than Mr. Henry A. Rosenberg, Jr., who recused himself)
unanimously approved the merger and merger agreement and determined that the
terms of the merger with Rosemore were advisable and fair to, and in the best
interest of, Crown's stockholders. The Crown Board recommends that you vote in
favor of the merger and merger agreement.
Rosemore's Reasons for the Merger (page )
On April 7, 2000, Aegis Muse & Associates, LLC, Rosemore's financial
advisor, confirmed in writing its earlier oral opinion delivered to the
Rosemore board that the offer price of $9.50 per share proposed to be paid by
Rosemore for all of the shares of Crown common stock not owned by Rosemore was
fair to Rosemore (other than to Rosemore's shareholders or affiliates) from a
financial point of view.
The Rosemore board, after evaluating its substantial existing investment in
and financial support of Crown and considering the recommendation of the
Rosemore special committee and the report of Aegis Muse, determined that the
merger is consistent with and in furtherance of the long-term business strategy
of Rosemore and approved the merger and merger agreement.
Conditions to the Merger (page )
Conditions to the parties' obligations to complete the merger include:
. approval of the merger and merger agreement by the requisite affirmative
vote of the stockholders of Crown;
. no legal restraint or prohibition will be in effect, and no law will
have been enacted or adopted that enjoins, prohibits or makes illegal
the completion of the merger;
. each of Crown and Rosemore must certify to the other that its
representations and warranties contained in the merger agreement are
true and correct in all material respects and each must also certify to
the other that it has performed all of its material obligations under
the merger agreement; and
. no event of default under the indenture relating to the 10 7/8% senior
notes will have occurred and the completion of the merger will not
result in the occurrence of an event of default under the indenture.
There are additional conditions specific to the obligations of Crown,
Rosemore and RAC that must be satisfied or waived prior to completion of the
merger.
Interests of Certain Persons in the Merger (page )
The executive officers and directors of Crown have interests in connection
with the merger that are in addition to or different from your own interests as
a stockholder. The Crown Independent Committee and Board of Directors were
aware of these interests and considered them in addition to other matters in
recommending the merger.
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Terminating the Merger Agreement; Expenses (page )
Crown or Rosemore may be entitled to terminate the merger agreement at any
time before the merger is completed if one of the termination conditions in the
merger agreement occurs, either before or after stockholder approval. Other
than as described below, each party will pay its own costs and expenses
incurred in connection with the merger and merger agreement.
The merger agreement does not provide for a termination fee; however, based
upon the circumstances of the termination, Crown may be required to reimburse
Rosemore for all of its reasonable expenses if the merger agreement is
terminated and Crown consummates a competing transaction.
Accounting Treatment (page )
In accordance with accounting principles generally accepted in the United
States, the merger will be accounted for under the purchase method of
accounting.
Regulatory Approvals (page )
The merger agreement provides that Crown and Rosemore will use their
reasonable best efforts to cause the merger to be consummated, including by
obtaining all necessary waivers, permits, authorizations, orders and consents
of third parties, whether private or governmental, in connection with the
merger. In addition, although neither Crown nor Rosemore believes that the
merger will violate any antitrust laws, on or before May 15, 2000, Crown and
Rosemore submitted information regarding the merger for review by the Federal
Trade Commission and the Antitrust Division of the Department of Justice
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On May
26, 2000, the required waiting period under this Act relating to the merger was
terminated by the Federal Trade Commission.
Except for filing the articles of merger with the State Department of
Assessments and Taxation of Maryland after stockholder approval of the merger
and merger agreement and compliance with federal and state securities laws,
neither Crown nor Rosemore is aware of any material U.S. federal, state or
foreign governmental regulatory requirement that must be complied with, or
approval that must be obtained, in order to complete the merger.
Stockholder Litigation (page )
On December 15, 1998, five stockholders filed a derivative lawsuit in
District Court for Harris County, Texas against each of Crown's then-current
directors and three of its non-director officers, including Messrs. Henry A.
Rosenberg, Jr., Edward L. Rosenberg and Frank B. Rosenberg. One non-director
officer was subsequently dismissed from the lawsuit. Knox, et al. v. Rosenberg,
et al., C.A. No. 1998-58870. Three of the plaintiff stockholders are locked-out
union employees and the remaining two are retired union employees. The
defendants removed the case to the U.S. District Court for the Southern
District of Texas, H-99-0123. The suit alleges that the defendants breached
their fiduciary duties, committed "constructive fraud," "abuse of control," and
"gross mismanagement," and were unjustly enriched.
On March 9, 2000, a purported class action lawsuit was filed by Ms. Betty
Maiden against Crown, the members of the Crown Board, and Rosemore in the
Circuit Court for Baltimore City, Maryland on behalf of the public stockholders
of Crown. Maiden v. Crown Central Petroleum Corporation, et al. On May 11,
2000, that individual and another individual filed an amended complaint in the
lawsuit. The amended complaint sought to enjoin the merger and other relief and
alleged, among other things, that the defendants were breaching their fiduciary
duties to Crown's public stockholders. On May 26, the defendants filed a motion
to dismiss the amended complaint on the grounds that, among other things, the
complaint failed to allege facts that would constitute a breach of fiduciary
duty by the defendants. At the request of plaintiff's counsel, the parties
agreed to dismiss the case with prejudice, and a stipulation of dismissal
signed by counsel for all parties was filed on June 15, 2000, dismissing the
case.
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FORWARD-LOOKING INFORMATION
This proxy statement contains or incorporates by reference "forward-looking
statements". When used in this document, the words "anticipate," "believe,"
"estimate," "expect," "plan," and "intend" and similar expressions, as they
relate to Crown Central Petroleum Corporation (Crown) or its management, are
intended to identify forward-looking statements. These forward-looking
statements are based on current management assumptions and are subject to
uncertainties and inherent risks that could cause actual results to differ
materially from those contained in any forward-looking statement. Crown has
identified factors that could cause actual plans or results to differ
substantially from those included in any forward-looking statements. These risk
factors include, but are not limited to:
. changes in prices or demand for Crown's products including crude oil or
finished petroleum products, or in refining or retail margins, as a
result of competitive actions or economic factors;
. changes in refining technologies;
. increased regulatory burdens or inflation; and
. Crown's ability to continue to have access to capital markets and
commercial bank financing on favorable terms and its ability to buy on
open credit terms.
Although Crown believes that the expectations reflected by such forward-
looking statements are reasonable based on information currently available to
Crown, no assurances can be given that such expectations will prove to have
been correct. All forward-looking statements included in this proxy statement
and all subsequent oral forward-looking statements attributable to Crown or
persons acting on its behalf are expressly qualified in their entirety by these
cautionary statements. Crown undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place undue reliance
on any forward-looking statements, which speak only as to their particular
dates.
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MARKET PRICE AND DIVIDEND INFORMATION
Crown Class A and Class B common stock are listed on the American Stock
Exchange (AMEX) under the ticker symbols "CNPA" and "CNPB," respectively.
Common Stock Market Prices
<TABLE>
<CAPTION>
2000 1999 1998
Sales Sales Sales
Price Price Price
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
CLASS A
COMMON STOCK
First Quarter................... $8 9/16 $5 5/8 $ 9 $7 1/16 $22 $18
Second Quarter.................. 9 1/4 8 1/4 12 1/8 7 1/4 19 12 1/4
Third Quarter*.................. 9 3/16 9 1/8 12 6 13 1/16 9
Fourth Quarter.................. 8 5/8 4 3/4 10 1/4 7 1/16
Yearly.......................... 12 1/8 4 3/4 22 7 1/16
CLASS B
COMMON STOCK
First Quarter................... $8 3/4 $5 1/2 $ 9 $6 7/8 $20 3/4 $18
Second Quarter.................. 9 3/16 8 3/16 11 1/4 7 1/8 18 3/4 11 3/4
Third Quarter*.................. 9 1/4 9 1/8 11 6 13 1/16 9
Fourth Quarter.................. 7 1/4 4 9/16 10 7/16 6 3/4
Yearly.......................... 11 1/4 4 9/16 20 3/4 6 3/4
</TABLE>
--------
* through July 10, 2000
On January 27, 2000, the last full trading day prior to Crown's public
announcement that Crown's financial advisor had approached Rosemore, Inc.
regarding a potential strategic transaction between Crown and Rosemore, the
closing sale prices of the Crown Class A common stock and Class B common stock
reported on the AMEX were $6.8125 and $6.375 per share, respectively. On April
7, 2000, the last full trading day prior to the public announcement of the
merger agreement, the closing sale price of each of Crown Class A and Class B
common stock reported on the AMEX was $8.50 per share. On July , 2000, the
most recent practicable date prior to the printing of this proxy statement, the
closing sale prices of Crown Class A and Class B common stock reported on the
AMEX were $ and $ per share, respectively.
Historically, the market prices of Crown Class A and Class B common stock
have fluctuated, and we expect such fluctuations to continue. In addition,
Crown Class A and Class B common stock have historically traded at different
prices. These fluctuations may affect your determination as to the
attractiveness of the merger. You are urged to obtain current market quotations
for Crown Class A and Class B common stock prior to making any decision with
respect to the merger.
The number of stockholders of Crown common stock based on the number of
record holders on July 10, 2000 was:
Class A common stock.......... 517
Class B common stock.......... 911
Dividend Policy
The payment of cash dividends is dependent upon future earnings, capital
requirements, overall financial condition, substantial restrictions on the
payment of dividends included in an indenture under which Crown issued $125
million of 10 7/8% senior notes due 2005, and limitations on the payment of
cash dividends included in the secured credit facility with First Union
National Bank. There were no cash dividends declared on Crown Class A or Class
B common stock in 2000, 1999 or 1998.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION OF CROWN
The selected consolidated financial data for Crown set forth below for the
three months ended March 31, 2000 and 1999 and each of the five years in the
period ended December 31, 1999 should be read in conjunction with the
Consolidated Financial Statements included in Crown's Quarterly Report on Form
10-Q attached hereto as Appendix A and Annual Report on Form 10-K attached
hereto as Appendix B.
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
------------------ ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(thousands of dollars except per share and ratio amounts)
Sales and operating
revenues (a)........... $421,484 $225,165 $1,270,181 $1,264,317 $1,609,083 $1,641,875 $1,456,990
(Loss) income before
extraordinary item
(b).................... (3,563) (11,830) (30,026) (29,380) 19,235 (2,767) (67,367)
Extraordinary item (c).. (3,257)
Net (loss) income (b)... (3,563) (11,830) (30,026) (29,380) 19,235 (2,767) (70,624)
Total assets (d)........ 593,712 517,710 523,108 518,010 597,394 566,955 579,257
Long-term debt.......... 129,035 129,673 129,180 129,899 127,506 127,196 128,506
Per Share Data--basic:
(Loss) income before
extraordinary item..... (.36) (1.20) (3.04) (2.99) 1.97 (.28) (6.95)
Net (loss) income....... (.36) (1.20) (3.04) (2.99) 1.97 (.28) (7.28)
Per Share Data--assuming
dilution:
(Loss) income before
extraordinary item..... (.36) (1.20) (3.04) (2.99) 1.94 (.28) (6.95)
Net (loss) income....... (.36) (1.20) (3.04) (2.99) 1.94 (.28) (7.28)
Other Data:
Book value per common
share (e).............. 14.47 16.63 14.82 17.78 20.62 18.77 19.04
Ratio of earnings to
fixed charges (f)...... -- -- -- -- 2.4x -- --
</TABLE>
--------
(a) To conform to the 1999 and 1998 presentation, Sales and operating revenues
for the years ended December 31, 1997, 1996, and 1995, respectively, have
been restated. Service station rental income, which had previously been
reported as a reduction of Selling and administrative expenses, has been
reclassified and is now reported as a component of Sales and operating
revenues. These restatements had no effect on the Net (loss) income and the
Net (loss) income per share amounts previously reported.
(b) The Net loss in 1998 included a $7.1 million pre-tax reserve to reflect the
decline in inventory values of crude oil and petroleum products when
valuing inventories at the lower of cost or market. Due to the increase in
refined products prices, the pre-tax reserve of $7.1 million recorded as of
December 31, 1998 to reflect valuing inventories at the lower of cost or
market was recovered during the first quarter of 1999. The Net loss in 1995
was increased by a pre-tax write-down of certain refinery assets of $80.5
million in the fourth quarter relating to the adoption of Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
(c) The extraordinary loss recorded in the first quarter of 1995 resulted from
the early retirement of the remaining principal balance of Crown's then
outstanding 10.42% senior notes with the proceeds from the sale of $125
million of 10 7/8% senior notes due in 2005.
(d) To conform to the 1999 presentation, Total assets at December 31, 1998,
1997, 1996, and 1995, respectively, have been restated.
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(e) Book value per common share is calculated based on all outstanding shares
at the applicable balance sheet date including performance vested
restricted stock issued but not vested.
(f) The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings
to fixed charges, earnings consist of earnings (loss) before income taxes
and fixed charges (excluding capitalized interest). Fixed charges consist
of interest expense, capitalized interest and that portion of rental
expense representative of the interest factor. For the three- month periods
ended March 31, 2000 and 1999 and the years ended December 31, 1999, 1998,
1996 and 1995, there were deficiencies in the coverage of fixed charges to
earnings before fixed charges of $3.3 million, $19.0 million, $46.1
million, $47.3 million, $5.3 million and $98.8 million respectively.
There were no cash dividends declared in 2000, 1999, 1998, 1997, 1996 or
1995. See also "MARKET PRICE AND DIVIDEND INFORMATION--Dividend Policy" on page
.
For additional financial information regarding Crown, see Crown's Quarterly
Report on Form 10-Q for the period ended March 31, 2000 attached hereto as
Appendix A and Crown's Annual Report on Form 10-K for the year ended December
31, 1999 attached hereto as Appendix B.
RECENT DEVELOPMENTS
Since Crown's two refineries are situated in the Gulf Coast region, the
industry benchmark "crack spread" for the Gulf Coast is often used as an
indication of refining margins. The "Gulf Coast 20 day delayed 3/2/1 crack
spread" is the refining margin that most directly affects Crown's refining
results. This is a margin that measures the difference between the Gulf Coast
price of a barrel of West Texas Intermediate crude oil against the aggregate
Gulf Coast price of two-thirds of a barrel of regular gasoline and one-third of
a barrel of distillate, pricing the gasoline and distillate for delivery 20
days after the delivery date of the crude oil. Crown believes that this pricing
comparison provides a market measurement that most closely reflects the average
cycle time of pricing its crude oil purchases and the finished products being
available for sale. Crown has no control, however, over the prices of crude
oil, gasoline or distillate in the Gulf Coast markets.
Beginning in late January 2000, Gulf Coast refining margins have experienced
marked improvement as compared to the same 1999 period. For the first five
months of 2000, the Gulf Coast 20 day delayed 3/2/1 crack spread was $4.79 per
barrel compared to $2.25 per barrel for the same 1999 period. In particular,
the months of February and May 2000 realized significantly improved margins as
compared to the same 1999 months. As a result, Crown's estimated net income
improved from a loss of $16.1 million for the first five months of 1999 to a
net income of $4.4 million for the first five months of 2000. If the average
Gulf Coast 20 day delayed 3/2/1 crack spread of $2.54 per barrel that prevailed
over the three year period from 1997 through 1999 were to have prevailed during
the first five months of 2000, Crown's management estimates that Crown would
have incurred a net loss of approximately $24.7 million.
The Gulf Coast 20 day delayed 3/2/1 crack spread averaged $2.90 per barrel
in 1997, $2.00 per barrel in 1998, $2.62 per barrel in 1999, $2.54 per barrel
over the three year period of 1997 thorough 1999, and $2.66 per barrel over the
five year period of 1995 through 1999, compared to an average of $5.16 per
barrel for the first six months of 2000. The Gulf Coast 20 day delayed 3/2/1
crack spread fell from $7.75 per barrel on June 30, 2000 to [$2.33] per barrel
on [July 10, 2000], the most recent practicable date before the date of this
proxy solicitation. This readily reflects the continuing volatility in the
price of crude oil and the margin available for finished petroleum products.
The daily closing spot price of West Texas Intermediate crude oil has ranged
from $33.93 per barrel on March 7, 2000, to $23.85 per barrel on April 10,
2000, to $34.75 on June 23, 2000, falling back to [$29.79] on [July 10, 2000],
the most recent practicable date before the date of this proxy solicitation.
The futures markets trade futures margins, and many industry participants
use the futures markets to hedge anticipated futures margins. Crown and its
management are unable to predict or anticipate futures margins, but believe
that the futures markets provide the best available indicator of the margins
that will prevail in the
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future. The futures markets currently indicate a market expectation that the
average Gulf Coast 20 day delayed 3/2/1 crack spread over the last six months
of 2000 will be approximately $2.96 per barrel, and over the full year 2001
will be approximately $3.32 per barrel. There can be no assurances, however,
that the actual margins over these periods will not be higher or lower than
those anticipated by the futures markets.
Crown processes a monthly average of 35,000 barrels per day of crude oil at
its Pasadena refinery under a processing agreement with Statoil Marketing and
Trading (US) Inc. Statoil owns and supplies to Crown the crude oil that Crown
processes for Statoil, and Crown returns to Statoil a specified mix of finished
petroleum products and receives a specified fee per barrel processed. The
processing agreement is scheduled to expire in October 2000. Crown does not
currently expect that the processing agreement will be renewed with Statoil.
When and if it expires, Crown will have to purchase additional crude oil to
process in place of Statoil's crude oil. At the [July 10, 2000] price of West
Texas Intermediate crude oil for October 2000 delivery of $[27.52] per barrel,
Crown will be required to expend up to approximately [$25 million] in working
capital to pay for the crude oil to process to replace the crude oil and
finished petroleum products currently owned by Statoil. In addition, Crown will
then be processing this throughput for its own account, rather than for the
account of Statoil. As a result, Crown expects that its profits would be
greater or its losses reduced if margins remain at the average levels that
prevailed during the first five months of 2000, however, Crown's profits would
be reduced or its losses increased if the margins return to the levels that
prevailed over the three year period from 1997 through 1999.
THE SPECIAL MEETING
Date, Time and Place
The Special Meeting will be held at the Turf Valley Conference Center, 2700
Turf Valley Road, Ellicott City, Maryland on Thursday, the 24th day of August,
2000 at 10:00 o'clock in the morning, Eastern Daylight Time.
Purpose of the Special Meeting
At the Special Meeting, holders of Crown common stock will be asked to vote
on a proposal to approve the merger of Rosemore Acquisition Corporation (RAC)
with and into Crown pursuant to the merger agreement dated as of April 7, 2000
among Crown, Rosemore and RAC. Maryland law and Crown's bylaws do not permit
any matters to be presented at the Special Meeting other than those described
in this proxy statement and procedural matters relating to the meeting.
Record Date
Crown's Board of Directors has fixed the close of business on July 10, 2000
as the record date for the determination of the stockholders entitled to notice
of, and to vote at, the Special Meeting. Accordingly, only holders of record of
Class A common stock, par value $5.00 per share, and holders of record of Class
B common stock, par value $5.00 per share, at the close of business on the
record date are entitled to notice of the Special Meeting and to attend and
vote at the Special Meeting. On the record date, there were 4,817,394 shares of
Crown Class A and 5,250,112 shares of Crown Class B common stock outstanding.
No other voting securities of Crown are outstanding.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting.
Required Vote
Crown's stockholders must approve the merger and merger agreement by the
affirmative vote of two-thirds of all of the votes entitled to be cast on the
matter. Except with respect to the election of directors, in all proceedings in
which action of the Crown stockholders is to be taken:
. each share of Class A common stock entitles the holder of record thereof
to one vote, and each share of Class B common stock entitles the holder
of record thereof to a one-tenth (1/10) vote; and
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. holders of Class A common stock vote together with holders of Class B
common stock as a single class.
Therefore, Crown's stockholders must approve the merger and merger agreement
by the affirmative vote of two-thirds of all of the votes entitled to be cast
on the matter by the holders of Class A and Class B common stock voting
together as a single class.
Pursuant to the merger agreement, Rosemore has agreed to cause its wholly
owned subsidiary, Rosemore Holdings, Inc. (Rosemore Holdings), to vote shares
representing approximately 45.4% of all of the votes entitled to be cast on the
matter, in favor of the merger and merger agreement. In addition, officers and
directors of Rosemore and Crown who hold approximately 1.4% of the votes
entitled to be cast on the matter have indicated that they will vote in favor
of the merger and merger agreement. See "SECURITY OWNERSHIP OF FIVE PERCENT
BENEFICIAL OWNERS AND MANAGEMENT" on page .
Proxies, Voting and Revocation
Shares of Class A and Class B common stock represented by properly executed
proxies will, unless the proxies have been properly revoked, be voted in
accordance with the instructions indicated on the proxies, or, if no
instructions are indicated, will be voted for approval of the merger and merger
agreement, and in the best judgment of the individuals named in the
accompanying proxy on any other matter that may properly come before the
Special Meeting. Brokers who hold Crown common stock in "street name" will not
be permitted to vote that stock in the absence of instructions from the
beneficial owner of such common stock. Broker non-votes will have the same
effect as a vote against approval of the merger and merger agreement.
Execution and return of a proxy will not in any way affect a stockholder's
right to attend and to vote in person at the Special Meeting. Any proxy may be
revoked by the stockholder giving it, at any time prior to its being voted, by
filing a notice of revocation with the Vice President-Secretary of Crown,
Dolores B. Rawlings, at One North Charles Street, Baltimore, Maryland 21201 or
a duly executed proxy bearing a later date. A notice of revocation need not be
on any specific form. Any proxy may also be revoked by the stockholder's
attendance at the Special Meeting and voting in person. Attendance at the
Special Meeting will not by itself constitute revocation of a proxy.
Abstentions may be specified with respect to the approval of the merger and
merger agreement by properly marking the "abstain" box on the proxy, and will
be counted as present for the purpose of determining the existence of a quorum.
The presence, in person or by proxy, of shares representing a majority of the
votes entitled to be cast at the Special Meeting will constitute a quorum for
the transaction of business at the Special Meeting. Abstentions will have the
same effect as a vote against the approval of the merger and merger agreement.
T. Rowe Price Associates, Inc. serves as the trustee for Crown's Employees
Savings Plan and the Employees Supplemental Savings Plan (collectively, the
"Savings Plans"). Each plan participant with an investment in Crown Class A or
Class B common stock will be given a form of voting instruction by the trustee
to be used to instruct the trustee how to vote the Crown common stock held in
the Savings Plans for the benefit of the participant. Shares for which no
instructions are timely given will be voted as provided in the Savings Plans by
the trustee in the same proportion as the votes cast with respect to those
shares for which the trustee receives proper instructions. There is no
provision in the Savings Plans to permit the trustee to grant a proxy to a plan
participant, and, as a result, all shares of Crown Class A and Class B common
stock held in the Savings Plans will be voted by the trustee in accordance with
the procedures described in this paragraph.
Solicitation of Proxies
Proxies are being solicited by and on behalf of Crown's Board. This proxy
statement and a form of proxy will first be mailed to stockholders on or about
July , 2000. Crown will pay the expenses related to printing this proxy
statement as well as all mailing and Securities and Exchange Commission filing
fees
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incurred in connection with this proxy statement. Crown has engaged the
services of D. F. King & Co., Inc. to solicit proxies and to assist in the
distribution of proxy materials. See "THE MERGER -- Merger Financing; Expenses
of the Merger" on page . In addition to soliciting proxies by mail,
officers, directors and employees of Crown, without receiving additional
compensation, may solicit proxies by telephone, telegraph, in person or by
other means. Arrangements also will be made with brokerage firms and other
custodians, nominees and fiduciaries to forward proxy solicitation material to
the beneficial owners of Crown Class A and Class B common stock, and Crown will
reimburse brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection with forwarding proxy
solicitation materials.
SPECIAL FACTORS
Background of the Merger
During the last five fiscal years, Crown has experienced cumulative
operating losses of $60 million in addition to the 1995 write-down of certain
refinery assets. The cumulative operating losses were primarily due to downward
pressure on refining margins, volatile crude oil and petroleum product prices
and increased retail competition. In addition, Crown has used significant cash
resources to finance required environmental related expenditures. As a result
of these factors, as well as a declining stock price and financing constraints
under its borrowing arrangements, Crown management began to explore operating
alternatives in 1998, and, in late 1998, Crown management reviewed with the
Crown Board the need to explore strategic and financial alternatives.
Crown has been engaged in a labor dispute during most of this five year
period. Following a number of incidents apparently intended to disrupt normal
operations at the refinery and also as a result of the unsatisfactory status of
the negotiations on the collective bargaining agreement, on February 5, 1996,
Crown implemented a lock-out of employees in the collective bargaining unit at
Crown's Pasadena refinery. Since the lock-out, the Paper, Allied-Industrial,
Chemical & Energy Workers Union (PACE), the union to which the collective
bargaining unit belongs, has waged an orchestrated corporate campaign that
includes a boycott of Crown's retail facilities and support of various lawsuits
against Crown. See "THE MERGER--Union Corporate Campaign" on page .
In mid-1998, in connection with its exploration of operating alternatives,
Crown approached the operator of another Texas refinery (the "Texas Refinery
Operator") to explore joint operating alternatives. In discussions during late
1998, representatives of Crown's Pasadena refinery met with the Texas Refinery
Operator to consider various operating alternatives, including exchanging
feedstocks and intermediate products, creating a joint venture to combine the
respective refineries into a single operating unit, and the possible sale of
the Pasadena refinery to the Texas Refinery Operator. These discussions were
terminated in December 1998 by the Texas Refinery Operator because of its
financial and strategic priorities.
In late 1998, Crown learned through a newspaper article that Valero Energy,
Inc. was possibly interested in exploring a purchase of Crown. Some months
later Mr. William E. Greehey, the chairman of Valero Energy, advised Mr. Henry
A. Rosenberg, Jr., that Valero Energy had not publicly announced an intent to
acquire Crown. There were no further contacts with Valero Energy until it was
contacted by Crown's financial advisor, Credit Suisse First Boston Corporation
(CSFB), in late 1999 as part of the process described below. Valero Energy
ultimately advised CSFB that it was not interested in pursuing a transaction
with Crown.
Also in late 1998, in connection with its exploration of strategic
alternatives, the Crown Board authorized management to interview financial
advisors to assist in this process. Management interviewed several financial
advisors and recommended to the Crown Board that CSFB be hired based upon its
qualifications in the petroleum refining and marketing industry. CSFB made a
presentation to the Crown Board which highlighted CSFB's applicable
qualifications regarding this potential engagement. In February 1999, CSFB was
retained as financial advisor to Crown, and Crown publicly announced that it
was reviewing its strategic alternatives.
In February 1999, Mr. Henry A. Rosenberg, Jr., as chairman of the Rosemore
board, informed the Rosemore board that Crown might engage an investment bank
with respect to Crown's exploration of strategic alternatives. During the
course of 1999, at regularly scheduled meetings, the Rosemore board generally
discussed Rosemore's investment in Crown.
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At its February and March 1999 meetings, at the request of Crown, the
Rosemore board agreed to provide financial support to Crown by guaranteeing up
to $50 million of a letter of credit facility in excess of that which was then
available to Crown under its secured credit facility. Crude oil prices were
then starting to rise, and Crown wished to have a larger letter of credit
facility for its crude oil and feed stock purchases if there were to be a
general tightening of the market.
In February 1999, the directors of Crown, other than Mr. Henry A. Rosenberg,
Jr. (the "Independent Directors"), retained Skadden, Arps, Slate, Meagher &
Flom LLP (Skadden Arps) to represent the Independent Directors with respect to
the Knox, et al. v. Rosenberg, et al., C.A. No. 1998-58870 litigation. See "THE
MERGER--Stockholder Litigation" on page . As the review process by CSFB
progressed, the Independent Directors also sought the advice of Skadden Arps on
their fiduciary duties as directors, including their responsibilities as
directors in the strategic review process. On June 23, 1999 and September 29,
1999, Skadden Arps met with the Independent Directors and discussed the current
status of the CSFB process and the responsibilities of the Independent
Directors. The Independent Directors did not formally constitute themselves as
an independent committee until January 2000 when Rosemore indicated it might
become a participant in the strategic review process.
From late February to April of 1999, CSFB conducted site visits and meetings
with Crown's management and undertook a due diligence review of Crown,
including an analysis of Crown's business, results of operations, financial
position, structure and prospects. CSFB reviewed strategic alternatives and
prepared materials for consideration by senior management of Crown. Based upon
its review, CSFB proposed at the April 22, 1999 meeting of the Crown Board that
Crown pursue the sale or merger of Crown as a whole or the sale of its refining
and/or wholesale terminal assets. CSFB advised that Crown needed to sell
itself, grow significantly by way of a merger, or sell its lower performing
assets to improve returns. CSFB also advised Crown that it needed to cut
overhead significantly because its overhead as a percentage of overall costs
and revenues was higher than that of its peer competitors. After considering
the CSFB presentation, the Crown Board authorized CSFB to prepare an
information memorandum on Crown's business and assets and to retain consultants
to assist in presenting the business and assets to interested parties.
From the end of April to early August 1999, CSFB, in consultation with
senior management, prepared a list of potential purchasers and merger
candidates. The list focused on petroleum refiners and marketers and leveraged
buyout funds and similar entities whom CSFB believed likely to be interested in
evaluating a strategic transaction with Crown. Rosemore was not included in
this list. Crown and CSFB assembled publicly available information concerning
Crown and distributed this information to the parties on this list who
expressed interest in receiving this information.
Crown and CSFB also assembled a data package containing general information
about Crown, including Crown's business, management, strategy and growth
initiatives and historical and projected financial information. This data
package was to be distributed to potential interested parties after execution
of a confidentiality agreement. CSFB qualified potential interested parties on
the strength of financial information requested by CSFB and provided to CSFB by
such parties. CSFB reviewed its progress with the Crown Board at a July 29,
1999 meeting. On August 11, CSFB received Crown Board approval to distribute
the data package it had prepared to qualified parties to determine the extent
of their interest in merging with or acquiring all or a portion of Crown or
purchasing Crown's refining and/or wholesale terminal assets, including the
price any such parties would be willing to pay.
Confidentiality agreements were distributed to potential interested parties
beginning in early August and the data package was distributed to potential
interested parties beginning on August 19, 1999. Of the 72 parties contacted by
CSFB or that had discussions with CSFB, 30 parties expressed an interest in a
possible transaction with Crown, executed a confidentiality agreement and
received a data package. The standard form of confidentiality agreement
included "standstill" provisions prohibiting a prospective buyer from taking
certain actions for a period of two years, including purchasing shares of Crown
common stock. The Crown Board believed that the standstill provisions would
help to ensure an orderly evaluation process. In particular, the Crown Board
believed that standstill provisions were customary protections and would
encourage interested
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parties to participate in the Board's process and allow the Board to maximize
stockholder value, as well as prevent parties from buying and selling
securities in a manner that might disrupt the strategic process and not benefit
all Crown stockholders equally. Several of the potential interested parties
negotiated the terms of the standard form of confidentiality agreement.
At Crown Board meetings held on September 30, October 28, November 22, and
December 16, 1999, CSFB briefed the Crown Board on the status of discussions
with the various parties that had been contacted. In addition, at the October
28 and December 16 meetings, CSFB reviewed with the Crown Board the possibility
of refinancing Crown's existing indebtedness. The Crown Board directed CSFB to
continue working with interested parties and to explore a possible refinancing
of Crown's debt.
In early October, 1999, a representative of Apex Oil Company, one of the
original 72 parties referred to above, provided CSFB with unaudited interim
financial information in order to qualify itself as a participant in the
evaluation process and to receive a draft of the confidentiality agreement.
Crown had previously received a letter from Apex dated May 28, 1999, inquiring
about Crown's performance and future and requesting a meeting. This inquiry was
referred to CSFB. Based on SEC filings, Crown believes Apex is a privately
owned company headquartered in St. Louis, Missouri and is controlled by Mr.
Paul Anthony Novelly and affiliated parties who beneficially own 14.7% of the
Crown Class A common stock and 3.48% of the Crown Class B common stock.
On October 18, 1999, representatives of Crown met with representatives of a
large independent marketer of petroleum products (the "Independent Marketer"),
one of the 30 parties referred to above, to preliminarily discuss whether and
on what terms a transaction could be agreed on between Crown and the
Independent Marketer. The Independent Marketer presented a preliminary proposal
to acquire or to be acquired by Crown in a stock-for-stock merger. The
Independent Marketer, however, ultimately elected in 2000 not to make a final
offer given Crown's financial performance and the fact that, if the Independent
Marketer purchased Crown, it would constitute a change of control under Crown's
indenture relating to the 10 7/8% senior notes. A change in control would
permit the senior note holders to demand repayment of the 10 7/8% senior notes.
Nonetheless, CSFB continued to engage in discussions with the Independent
Marketer and its advisors to determine if there was a way to resolve these
issues.
On October 28, 1999, Crown sent to Apex, through Apex's financial advisor,
the standard form of confidentiality agreement that Crown had submitted to all
interested parties.
On November 8, 1999, Apex publicly announced a proposal to merge selected
assets of Apex into a newly created subsidiary of Crown in a stock-for-stock
transaction. Apex indicated that the stock-for-stock merger would value Crown
common stock at a minimum of $10.00 per share. The proposal contemplated that
Apex would distribute to its stockholders or otherwise dispose of all of its
wholesale terminal assets and operations and other unspecified personal
properties, so that Apex would have what it termed "sufficient net worth and
working capital commensurate with the merger consideration." In addition, the
proposal contemplated that Mr. Novelly would be chairman, chief executive
officer and president of Crown following the merger. The conditions to the
proposal included:
. satisfactory resolution of the ongoing labor union boycott of Crown;
. satisfactory completion by Apex of a due diligence review of Crown;
. receipt of a $125 million financing commitment on behalf of Crown on
terms satisfactory to Apex; and
. receipt of a line of credit on behalf of Crown sufficient to replace
Crown's existing line of credit on terms satisfactory to Apex.
On November 15, 1999, Crown representatives visited the offices of the
Independent Marketer to receive a presentation from the Independent Marketer
and to commence a due diligence examination of the business and assets of the
Independent Marketer. During the remainder of that week, Crown representatives
continued their due diligence examination of the Independent Marketer by
visiting various facilities of the Independent Marketer.
By letter dated November 15, 1999, Apex advised Crown that it stood ready to
meet with Crown to discuss Apex's proposal.
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On November 17, 1999, Mr. Henry A. Rosenberg Jr., the Chairman of the Crown
Board, advised Mr. Novelly, the chairman of the board of directors of Apex,
that Crown would not meet with any interested party that refused to sign a
confidentiality agreement with Crown, that the procedure that CSFB was using in
approaching potentially interested parties was designed to ensure a thorough,
fair and orderly process for Crown to evaluate its strategic alternatives, and
that it was a customary procedure that has been used in numerous transactions.
Mr. Rosenberg also advised Mr. Novelly that, if there were particular
circumstances unique to Apex that required modifications to the confidentiality
agreement, Crown would be prepared to consider them and tailor the
confidentiality agreement to Apex's circumstances.
In early November, 1999, Crown received expressions of interest from
interested parties. These preliminary offers or expressions of interest were
required to gain access to the data room that Crown had prepared for interested
parties, which opened on November 18, 1999. Seven of the 30 parties that had
received the data package (including the Independent Marketer) visited the data
room or otherwise reviewed data room materials, and one of the 30 parties
conducted on-site due diligence but did not request access to the data room
materials.
By letter dated November 24, 1999, Mr. Novelly, the chairman of Apex,
submitted a stockholder proposal to Crown for inclusion in Crown's proxy
statement for its 2000 annual meeting of stockholders. The proposal by its
terms would have required the Crown Board to cause the sale, merger or other
disposition of Crown or its assets as a whole. After correspondence among
Crown's legal counsel, Mr. Novelly's legal counsel and the staff of the SEC,
the staff of the SEC concurred with the request of Mr. Novelly that the
proposal be included in the proxy statement but required that changes be made
to the proposal.
On November 29 and 30, 1999, representatives of the Independent Marketer
visited Crown's data room. During the remainder of that week, representatives
of the Independent Marketer, including its financial advisor, continued their
due diligence examination of Crown by visiting Crown's refineries, the offices
of Crown's supply and transportation operations, and certain of Crown's
wholesale terminals and retail locations.
On December 2, 1999, Apex submitted to CSFB a form of confidentiality
agreement that it indicated it was willing to execute. The form of
confidentiality agreement did not contain standstill provisions which would
prevent Apex from acquiring any additional shares of Crown common stock. All
other confidentiality agreements with interested parties contained standstill
provisions.
During the period from December 6 through December 9, 1999, there were
communications between Apex's legal counsel, CSFB and Crown's legal counsel as
to with whom Apex should communicate with respect to the confidentiality
agreement sent to Apex by Crown on October 28, 2000. By letter dated December
9, 1999, Crown's legal counsel sent Apex's legal counsel an amended
confidentiality agreement containing provisions with respect to Apex's Schedule
13D filing group.
In early December, Mr. Henry A. Rosenberg, Jr. inquired of Mr. Edward L.
Rosenberg whether Rosemore would be in a position to review any proposal that
the Crown Board might recommend. To assist Rosemore with its ongoing review of
its investment in Crown and in order to enable it to respond in a timely manner
to any proposal the Crown Board might recommend, at a meeting of the Rosemore
board held on December 17, 1999, the Rosemore directors set up the Rosemore
special committee consisting of Messrs. Edward L. Rosenberg, Jeffrey A.
Hoffberger, William E. Mayer and Donald R. Mering. Mr. Edward L. Rosenberg is
the president and chief executive officer of Rosemore and the son of Mr. Henry
A. Rosenberg, Jr. and was previously Executive Vice President-Supply and
Transportation of Crown.
At the end of the December 17 Rosemore board meeting, Mr. Clive R. G.
O'Grady, a director and the corporate secretary of Rosemore and a partner in
the law firm of McGuire, Woods, Battle & Boothe LLP, advised Rosemore that he
would not participate in any capacity in any deliberations or activities of
Rosemore related to its consideration of its investment in Crown, and that the
law firm of McGuire Woods would not provide any legal advice or services to
Rosemore in connection with its consideration of its investment in Crown. He
recommended that Rosemore retain separate legal counsel and financial advisors.
McGuire Woods has provided legal advice to both Mr. Henry A. Rosenberg Jr.,
personally, and to Rosemore as its legal counsel.
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McGuire Woods is also legal counsel to Crown. On January 26, 2000, McGuire
Woods executed letter agreements with each of Rosemore and Mr. Henry A.
Rosenberg, Jr., personally, by which both Mr. Henry A. Rosenberg, Jr.,
personally, and Rosemore waived any conflict of interest arising from and
consented to McGuire Woods' continued representation of Crown in connection
with Crown's evaluation of strategic alternatives, and confirmed the
termination by McGuire Woods of any representation of either Rosemore or Mr.
Henry A. Rosenberg, Jr., personally, in any matters related to Crown's
strategic evaluation process. In addition, on January 26, 2000, McGuire Woods
executed a letter agreement with Crown by which Crown waived any conflict of
interest arising from McGuire Woods' representation of Rosemore and Mr. Henry
A. Rosenberg, Jr., personally, in any matters unrelated to Crown's strategic
evaluation process and its representation of Crown in such strategic
evaluation process.
Based upon preliminary offers or expressions of interest, eight qualified
companies undertook due diligence at Crown's data room and facilities,
otherwise reviewed data room materials or conducted other on-site diligence
during the fourth quarter of 1999. Two of these companies subsequently advised
CSFB that they would not submit bids.
On December 17, 1999, CSFB requested that final offers be submitted by
January 14, 2000 by the remaining six qualified companies which continued to
express interest in a transaction with Crown. Thereafter, CSFB followed up
with these six companies to encourage them to submit bids as requested.
On December 22, 1999, Crown representatives met with representatives of the
Independent Marketer to further discuss the Independent Marketer's business
and operations and review potential cost savings and other business issues
associated with a possible merger of the Independent Marketer and Crown.
Also, at a meeting of the Rosemore special committee held on December 22,
1999, the Rosemore special committee retained Shearman & Sterling as its
special legal advisor and discussed with Aegis Muse Associates, LLC its
experience and qualifications to act as financial advisor. The Rosemore
special committee subsequently engaged Aegis Muse as its financial advisor.
On December 29, 1999, Apex sent to Crown an amended confidentiality
agreement rejecting a number of provisions in Crown's December 9, 1999
confidentiality agreement, including standstill provisions.
On January 3, 2000, Crown advised Apex that Crown was not agreeable to the
deletion of the standstill provisions from the confidentiality agreement. On
January 5 and 6, 2000, legal counsel for Crown and Apex discussed the
confidentiality agreement and related matters. By letter dated January 7,
2000, Apex's legal counsel advised Crown's legal counsel that Mr. Novelly
would like to address the Crown Board.
On January 11 and 12, 2000, Crown representatives visited the Independent
Marketer's petroleum terminals.
Through CSFB, Crown had previously requested of interested parties that
they submit their best and final offers in the evaluation process by January
14, 2000. CSFB reported at a meeting on January 18, 2000 at which only the
Independent Directors were in attendance, that, although Crown had received
several preliminary proposals, only two parties presented final offers. One
offer was for the purchase of Crown's wholesale terminal assets and associated
inventory. The other offer was for the purchase of Crown's two refineries and
all Crown petroleum inventory. The Independent Directors, after considering
the recommendation of CSFB, determined that the prices and the terms of these
offers would not create sufficient stockholder value. In addition, the
Independent Directors noted the conditional nature of the Apex offer and the
fact that Apex was unwilling to sign a confidentiality agreement containing
standstill provisions as all other parties had done, and was therefore not in
a position to resolve the contingencies to which its proposal was subject. The
Independent Directors also noted that the Independent Marketer had declined to
make a bid for Crown, but had indicated an interest in having Crown acquire
the Independent Marketer. As the strategic review process did not yield any
other offers for Crown as a whole or any offers for other transactions with
Crown that would generate sufficient stockholder value, CSFB recommended that
the Independent Directors authorize it to approach Rosemore. CSFB also
proposed, and the Independent Directors agreed, that it continue discussions
with Apex and with the Independent Marketer regarding their respective
interests in a business combination with Crown.
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On January 18, 2000, representatives of CSFB invited Rosemore to make a
proposal concerning Crown and offered to make available to Rosemore information
concerning Crown that had also been made available to other interested parties
who executed confidentiality agreements. On the same date, CSFB provided
Rosemore representatives with a draft of a confidentiality agreement containing
standstill provisions. The confidentiality agreement was negotiated during the
course of the next several days.
By letter dated January 18, 2000, Crown's legal counsel advised Apex's legal
counsel that the Crown Board had declined Apex's request to allow Mr. Novelly
to address the Crown Board, and that the Crown Board recommended that Apex
follow the same procedures being followed by all other interested parties.
By letter dated January 25, 2000, Golnoy Barge Company, a member of Mr.
Novelly's Schedule 13D filing group and a company of which Mr. Novelly, the
chairman of Apex, is the president, advised Crown that it intended to nominate
Mr. Novelly for election as a director of Crown at Crown's annual meeting of
stockholders in 2000.
Also on January 26, 2000, CSFB met with Mr. Novelly and Apex's financial and
legal advisors to discuss Apex's proposal and to learn more about Apex. CSFB
again requested that Apex execute the confidentiality agreement and enter the
strategic review process, but Apex again declined to execute any
confidentiality agreement with standstill provisions which would prohibit,
among other things, additional accumulation of Crown stock. CSFB reiterated to
Apex that a confidentiality agreement with standstill provisions was required
of other interested parties, including Rosemore.
On January 26, 2000, Rosemore and certain of its affiliates executed a
confidentiality agreement with standstill provisions and, shortly thereafter,
began due diligence on Crown. Throughout February and March, Rosemore continued
its due diligence review and, in this regard, representatives of Crown and
Rosemore had several conversations relating to, among other things, legal and
financial due diligence matters.
At a January 27, 2000 meeting, the Crown Board took steps to institute
procedural safeguards in light of the fact that Rosemore would be conducting
due diligence on Crown. At the request of counsel for the Independent
Directors, Mr. Henry A. Rosenberg, Jr. submitted a letter to the Crown Board
recusing himself from the deliberations of the Board and Crown's management
with respect to any proposal made by any person (including Rosemore) concerning
any material transaction with or with respect to Crown, limiting his
involvement with Rosemore in any proposal made by Rosemore, and undertaking not
to discuss with any representative of Rosemore any information or knowledge
concerning any strategic proposals or transaction of Crown. Mr. Frank B.
Rosenberg also submitted a letter to the Crown Board at its January 27 meeting
in which he undertook not to share any information about proposals made to
Crown with Rosemore or to participate in any evaluation of proposals made to
Crown. Mr. Frank B. Rosenberg is the son of Mr. Henry A. Rosenberg, Jr. and an
officer of Crown. The Independent Committee directed the senior management of
Crown, in its activities on the strategic alternatives, to report directly to
the Independent Committee and appointed the Executive Vice President and Chief
Financial Officer and the Senior Vice President--Legal to coordinate
management's activities for the Independent Committee. The Independent
Directors requested these procedural safeguards to help insure that Rosemore,
now that it might become a participant in the strategic review process, would
not receive information that could give Rosemore an improper advantage.
The Crown Board appointed Mr. Michael F. Dacey to chair the meetings of the
Board in Mr. Rosenberg's absence. In addition, the Crown Board established an
Independent Committee of the Board of Directors, consisting of Mr. Jack Africk,
Mr. George L. Bunting, Mr. Dacey, Mr. Thomas M. Gibbons, Ms. Patricia A.
Goldman, Mr. William L. Jews, and the Reverend Harold Ridley, S.J. Mr. Dacey
was designated to act as the chairman of the Independent Committee. The
Independent Committee thus consisted of all of Crown's directors other than Mr.
Henry A. Rosenberg, Jr. The Independent Committee was authorized to review and
evaluate strategic alternatives for Crown, including a possible transaction
with Rosemore, to enter into negotiations with respect to the terms of a
strategic transaction, including negotiating on behalf of Crown a definitive
transaction agreement, and to make a recommendation to the Crown Board as to
the course of action, if any, Crown should pursue. The Crown Board also
authorized the Independent Committee to utilize the services of CSFB, as a
financial advisor, and Skadden Arps as special counsel to the Independent
Committee, and to retain such other
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advisors as the Independent Committee deemed necessary. The Independent
Committee believed that, in light of CSFB's reputation, experience and
familiarity with Crown's business, CSFB was well qualified to provide the
Independent Committee with independent, quality financial assistance and
advice, including the delivery of a fairness opinion.
Immediately following the Crown Board meeting, the Independent Committee met
and was briefed by CSFB on the progress of its discussions with the third
parties, as well as its analyses thus far with respect to the possibility of
refinancing Crown's debt. Skadden Arps reviewed with the directors their
fiduciary duties and the rights and powers of the Independent Committee under
applicable law and under Crown's charter and bylaws. The Independent Committee
directed CSFB to continue to pursue available options.
On February 1, 2000, the Crown Board met and approved the adoption of a one-
year shareholder rights plan pursuant to which rights to purchase Crown
preferred stock were distributed to holders of its common stock on February 15,
2000. The rights plan was designed to help to ensure that any strategic
transaction undertaken by Crown would be one in which all stockholders could
receive fair and equal treatment, and to guard against partial tender offers,
open market accumulations and other abusive tactics that might result in
unequal treatment of stockholders. See "SHAREHOLDER RIGHTS PLAN" on page .
On February 1, 2000, Apex's legal counsel asked Crown's legal counsel how
the confidentiality agreement executed by Rosemore differed from the
confidentiality agreement that Crown was asking Apex to sign, and asserted
that, because of the adoption by Crown of a shareholder rights plan, standstill
provisions would no longer be necessary to protect Crown or its stockholders.
On February 3, 2000, legal counsel to Apex sent a letter to McGuire Woods,
renewing its request to receive Crown confidential information but also
reiterating Apex's refusal to sign a confidentiality agreement with standstill
provisions. On February 7, 2000, Crown's legal counsel advised Apex's legal
counsel that, because Crown's shareholder rights plan would not prevent Apex
from purchasing up to 15% of Crown's Class B common stock, Crown continued to
require Apex to agree to the standstill provision before providing it with non-
public information, and noted that Crown had been consistent in requiring
standstill provisions in its negotiation of confidentiality agreements with
interested parties. On February 8, 2000, Apex's legal counsel advised Crown's
legal counsel that Apex stood ready to execute a confidentiality agreement
without standstill provisions. On February 9, Mr. Novelly wrote to the Crown
Board stating that Apex was willing to sign a confidentiality agreement without
standstill provisions. On February 15, 2000, Mr. Dacey, on behalf of the
Independent Committee, responded to the Apex letter and advised Apex that the
Independent Committee, after consulting with Skadden Arps, believed that a
confidentiality agreement with standstill provisions, as had been executed by
all other interested parties, was necessary to ensure a fair and orderly
process to benefit all stockholders and invited Apex to sign such a
confidentiality agreement.
On February 11, 2000, CSFB and two members of the Independent Committee met
to perform due diligence, and discuss with the Independent Marketer's
management its preliminary proposal to combine the companies and achieve
synergies.
During the period between February 18 and February 22, 2000, representatives
of Rosemore and of the Independent Committee also discussed the status of
Rosemore's due diligence investigation in relation to the pre-existing
evaluation process.
The Independent Committee met with its financial and legal advisors on
February 18 and February 23. CSFB delivered an update on the status of its
efforts to evaluate strategic alternatives for Crown, including the status of
discussions with Apex, the Independent Marketer and Rosemore.
Following a Crown Board meeting on February 24, the Independent Committee
again met with its financial and legal advisors. CSFB advised the Independent
Committee that, based on discussions with Rosemore's advisors, CSFB believed
that Rosemore was still considering whether to make a cash bid for Crown but
had not come to a definitive position and was having difficulty justifying a
valuation in excess of the existing market price. The Independent Committee
instructed CSFB to continue to pursue discussions with Rosemore's financial
advisor. Specifically, CSFB was asked to advise Rosemore that any offer at the
then existing market prices of Crown common stock would be unacceptable to the
Independent Committee and that the Independent Committee intended to pursue
other alternatives.
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On February 27, representatives of CSFB met with representatives of
Rosemore's financial advisor to discuss the valuation of Crown. CSFB informed
Aegis Muse that, in the absence of an acceptable offer from Rosemore or any
other party, the Independent Committee might make a preliminary proposal to the
Independent Marketer that Crown acquire the Independent Marketer, and asked
Aegis Muse whether, as the largest stockholder, Rosemore would be supportive of
such an acquisition.
Immediately following the meeting with CSFB, Aegis Muse informed Rosemore of
Crown's position regarding the Independent Marketer. Rosemore instructed Aegis
Muse to obtain more information on the Independent Marketer to facilitate
Rosemore's evaluation, as Crown's largest stockholder, of the preliminary
proposal to acquire the Independent Marketer. On February 29, at the request of
Aegis Muse and with the concurrence of the Independent Committee, CSFB provided
Aegis Muse with limited information about the Independent Marketer.
On February 28, 2000, Mr. Novelly, the chairman of Apex, advised Mr. Dacey
that Apex and the members of the Novelly Group would, as part of Apex's
confidentiality agreement, agree not to acquire shares of Crown Class B common
stock for six months. On March 7, 2000, Mr. Dacey advised Mr. Novelly that a
standstill provision for a minimum of six months covering both classes of stock
was necessary and that, if this was acceptable to Mr. Novelly, Mr. Dacey would
arrange for an execution copy of the confidentiality agreement to be sent to
Apex's legal counsel.
During this period, Rosemore and its advisors continued to conduct due
diligence on Crown and met with members of Crown's senior management with
respect to Crown's rationalization plan and Crown's valuation.
On March 6, 2000, the Rosemore board met and, by a 6-2 vote of the members
of the Rosemore board (with Mr. O'Grady recusing himself), authorized certain
officers to submit, and, on March 6, Rosemore submitted, a letter to Crown
proposing that Rosemore acquire all of the outstanding shares of Crown common
stock not owned by Rosemore at a price of $8.35 per share in cash. As of the
close of the market on March 6, 2000, the market prices were $7.125 for the
Class A common stock and $7.375 for Class B common stock. The offer, which
would expire on March 10, was conditioned on:
. negotiation of a mutually acceptable merger agreement and its approval
by Rosemore's board;
. unanimous approval of the merger and merger agreement by the Independent
Committee;
. approval of the merger by the requisite vote of Crown's stockholders;
and
. receipt of all necessary governmental approvals.
The letter also indicated that, as a stockholder of Crown, Rosemore would give
favorable consideration to any alternative proposal made by a third party that
Rosemore's board believed would meet Rosemore's strategic and tax objectives
and that Rosemore considered fair to and in the best interests of Rosemore and
its stockholders.
At the March 6, 2000 Rosemore board meeting, Aegis Muse also advised
Rosemore that, based upon the information provided by CSFB, the transaction
with the Independent Marketer that CSFB had indicated the Independent Committee
might pursue was unlikely to result in the value to Crown's stockholders
(including Rosemore) that CSFB had anticipated. Therefore, Aegis Muse advised
Rosemore that the Independent Marketer merger proposal did not constitute a
superior alternative to a cash offer at or above the then current share price.
In discussions with CSFB, Aegis Muse orally indicated its belief that, after
reviewing the information provided to it on the Independent Marketer, Rosemore
was not likely to support the Independent Marketer's preliminary proposal to
merge with Crown.
In connection with the March 6 Rosemore board meeting, Aegis Muse delivered
to the Rosemore board its written report on the merger. See "- Financial Report
Prepared by Aegis Muse" on page .
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The Independent Committee held a meeting with its legal and financial
advisors on March 7, 2000. After discussing the terms of the Rosemore offer,
the members of the Independent Committee unanimously determined that the
Rosemore proposal was unsatisfactory. The Independent Committee authorized its
advisors to inform Rosemore of its desire to continue to work with Rosemore to
determine whether mutual agreement could be reached and to request an extension
of the proposal from Rosemore. In deciding that the proposal was
unsatisfactory, the Independent Committee particularly focused on the price.
The Independent Committee also believed that a procedural safeguard, such as a
requirement that a majority of non-Rosemore stockholders support the offer,
would enhance the bid. The Independent Committee also concluded that a tender
offer structure that delivered value to stockholders as quickly as possible
would be desirable. The Independent Committee also determined not to pursue
discussions with the Independent Marketer as it believed it was unlikely that
Rosemore would support an acquisition of the Independent Marketer, and that
Rosemore's support as a stockholder would be necessary to consummate such an
acquisition.
On March 8, 2000, Crown received a conditional proposal from an entity
identified as Olympic Resources Limited. As this potential bidder was unwilling
to provide information about itself, its principals and its potential sources
of financing to CSFB, as was requested of all the interested parties, the
Olympic proposal was not further considered.
On March 9, 2000, a purported class action lawsuit on behalf of the public
stockholders of Crown was filed by Ms. Betty Maiden against Crown, the members
of the Crown Board and Rosemore. The lawsuit sought to enjoin Crown and the
Board from accepting Rosemore's bid and alleged, among other things, that the
Independent Committee members breached their fiduciary duties by facilitating
Rosemore's proposed acquisition of Crown for unfair and inadequate
consideration, self-dealing, failing to consider other potential bidders and
colluding with Rosemore in improper and coercive tactics. Ms. Maiden is a Crown
stockholder and a member of the union that was locked out of Crown's Pasadena,
Texas refinery in February 1996. The plaintiff also sought to receive
compensatory and "rescissory" damages. The complaint was subsequently amended
and later dismissed. See "THE MERGER--Stockholder Litigation" on page .
Also on March 9, 2000, Crown received a proposal from Apex to acquire all of
the outstanding Crown common stock held by stockholders other than Apex for
$9.20 per share in cash. Apex indicated that it remained willing to explore an
all stock merger transaction, previously described to Crown in the November 8,
1999 Apex proposal, which Apex claimed would value Crown common stock at a
minimum of $10.00 per share. By its terms, the offer was open until March 17,
2000.
On March 10, 2000, Crown and its advisors received proposed forms of merger
agreements from both Apex and Rosemore. The Apex agreement contained the same
conditions as Apex's November 8, 1999 proposal, including due diligence and
financing conditions. It additionally provided that Apex could terminate the
agreement:
. with no liability to Crown, if it were dissatisfied for any reason with
any matter that arose in its 30-day due diligence investigation of Crown
which was to be commenced following execution of the agreement; or
. with a maximum liability to Crown of $500,000, if, at any time, the Apex
board of directors determined that there was a more desirable use of the
funds that would be required to acquire Crown.
The Rosemore merger agreement contemplated that:
. the transaction be structured as a merger, rather than as a tender
offer;
. a vote of two-thirds of the votes entitled to be cast by the Crown
stockholders be required to approve the transaction;
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. approval be required by the Crown Board, including the unanimous
approval of the Independent Committee; and
. a "topping fee" (a fee that would be payable by Crown to Rosemore if
Crown terminated the merger agreement and subsequently consummated a
transaction with another party at a higher price) and Rosemore's
transaction expenses be paid by Crown under certain circumstances were
the merger not to occur.
In a letter dated March 10, 2000 to Crown, Rosemore extended its offer to
March 17, 2000 to facilitate the ongoing negotiations.
During the period between March 10 and March 14, 2000, Apex's legal counsel
and Crown's legal counsel communicated further concerning the execution of a
confidentiality agreement and as to whether Apex's legal counsel should be
communicating with Skadden Arps, legal counsel to the Independent Committee,
rather than with McGuire Woods, legal counsel to Crown. On March 14, 2000,
Skadden Arps advised Apex's legal counsel that McGuire Woods was authorized to
communicate on behalf of the Independent Committee, and that Apex's legal
counsel could address correspondence to either McGuire Woods or Skadden Arps.
In a letter to Apex's counsel, dated March 13, 2000, McGuire Woods, at the
direction of the Independent Committee, advised Apex that its proposal was
under review by Crown and that improvements could be made to the proposal to
further its consideration. These improvements included entering into a
confidentiality agreement, immediately commencing due diligence and eliminating
the due diligence and financing conditions and Apex's corresponding termination
right. Apex was also requested to structure its proposal as a tender offer and
to eliminate the two termination conditions discussed above.
In telephone conversations with Shearman & Sterling, Skadden Arps relayed
the ways in which the Independent Committee believed Rosemore could improve the
legal terms of its offer. Specifically, it was proposed that the transaction be
structured as a tender offer, that consummation of the transaction be
conditioned on the approval of a majority of non-Rosemore stockholders, and
that there be no Crown obligation to pay Rosemore any fees or expenses in the
event of termination of the agreement.
At a meeting of the Independent Committee on March 14, 2000, Skadden Arps
reviewed with the Independent Committee the terms of the merger agreements
proposed by Rosemore and Apex, and the status of the negotiations of the
agreements, as well as the indication of interest Crown had received from
Olympic Resources Limited. CSFB summarized for the Independent Committee its
work to date. CSFB discussed its various approaches to valuation including,
among others, discounted cash flow analysis and analyses of comparable
transactions and comparable companies. See "- Opinion of Credit Suisse First
Boston" on page .
In a letter to the Crown Board, dated March 15, the U.S. subsidiary of a
non-U.S. oil company (the "Non-U.S. Oil Company") expressed its interest in
acquiring all of the outstanding shares of Crown common stock for cash at an
undisclosed price it stated would be above the offers announced by Rosemore and
Apex. The proposal was conditioned on satisfactory completion of a 45 to 60-day
period of due diligence and negotiation and execution of a mutually
satisfactory definitive agreement. The Non-U.S. Oil Company had previously
entered into a confidentiality agreement including standstill provisions with
Crown on February 14. CSFB informed the Non-U.S. Oil Company that, given the
already extensive length of the process and the fact that the Non-U.S. Oil
Company had signed the confidentiality agreement entitling it to commence due
diligence a month ago, a 45-day due diligence period was too long.
By March 15, 2000, Skadden Arps had delivered to counsel for Rosemore and
Apex mark-ups of their respective draft merger agreements reflecting, among
other things, the changes previously proposed to each of the parties. In
addition, both Rosemore and Apex were asked to extend the expiration dates of
their offers.
On March 16, 2000, Apex advised Crown that it was extending the expiration
date of its proposal to April 17. Also on March 16, representatives of Crown,
Skadden Arps, CSFB, McGuire Woods and Shearman & Sterling participated in a
conference call to discuss the draft of the merger agreement between Rosemore
and
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Crown. In a letter dated March 17 to Crown, Rosemore extended its deadline to
April 17 to give the Crown Board the opportunity to explore with Apex whether
the conditions included in the Apex proposal could be removed without the time
pressure created by Rosemore's earlier deadline.
On March 17, 2000, counsel for Apex contacted Skadden Arps and requested a
meeting between Mr. Novelly, the chairman of Apex, and the Independent
Committee to discuss ways in which a transaction between Apex and Crown might
be structured so that Crown remained a publicly traded company. On March 21,
after consultation with Mr. Dacey, Skadden Arps advised counsel for Apex that
the Independent Committee was not inclined to meet with a bidder who had not
signed Crown's confidentiality agreement but would facilitate a meeting between
the parties' respective financial advisors. Counsel for Apex was also advised
that the Independent Committee would agree to a confidentiality agreement with
standstill provisions that expired at the same time as the standstill binding
Rosemore. Apex was again asked to sign the confidentiality agreement but was
unwilling to do so.
On March 22 and March 23, 2000, representatives of Skadden Arps, McGuire
Woods, and Crown participated in telephone conversations with representatives
of Shearman & Sterling to discuss the draft merger agreement between Rosemore
and Crown.
On March 23, 2000, the Independent Committee held a telephonic meeting in
which its financial and legal advisors participated. The Independent Committee
determined that bringing the process to a timely conclusion was in the best
interests of Crown and its stockholders, and, to that end, it directed CSFB to
request that interested parties submit their "best and final offers" to Crown
by March 29, 2000. In this regard, the Independent Committee noted that the
Non- U.S. Oil Company, which had signed a confidentiality agreement almost six
weeks before, had failed to commence due diligence. The Independent Committee
believed that this delay raised questions regarding whether the Non-U.S. Oil
Company would ever become a serious bidder, and determined not to jeopardize
the progress made to date with an extended delay. On March 24, in accordance
with the Independent Committee's request, CSFB contacted Apex, the Non-U.S. Oil
Company and Rosemore.
On March 24, 2000, at the request of Crown, Rosemore agreed to provide up to
$66 million in performance guarantees relating to Crown's purchase of crude
oil, feedstock and other petroleum products. See "RELATED PARTY TRANSACTIONS"
on page .
On March 27, 2000, Shearman & Sterling distributed to Crown and its advisors
a revised draft of the merger agreement between Rosemore and Crown.
Also on March 27, 2000, the Non-U.S. Oil Company contacted CSFB to convey
that its board of directors had a meeting scheduled for later in the week to
consider the necessary funding for a possible due diligence investigation of
Crown. The Non-U.S. Oil Company indicated that it believed the transaction was
economically viable at a price per share in the range of $10 but that it would
need five weeks to conclude due diligence. The Non-U.S. Oil Company was again
advised that the strategic process had been ongoing for several months and that
it needed to begin due diligence as soon as possible for its offer to be
considered. The Non-U.S. Oil Company neither commenced due diligence nor
submitted a final offer.
From March 27 through March 29, 2000, Crown and Rosemore and their
respective legal and financial advisors negotiated the terms of the merger
agreement and the related documents and schedules.
On March 28, 2000, the Rosemore board authorized Mr. Edward L. Rosenberg to
submit a revised proposal to Crown increasing the consideration for the Crown
common stock to $9.35 per share in cash, with authority to increase the
consideration up to $9.50 per share, if necessary. At this time, Aegis Muse
confirmed to the Rosemore board that a purchase price of $9.50 per share was
fair to Rosemore (other than to Rosemore's shareholders or affiliates) from a
financial point of view. See "- Financial Report Prepared by Aegis Muse" on
page .
On March 29, 2000, Rosemore advised Crown that it was increasing its offer
to acquire all of the outstanding shares of Crown common stock to $9.35 per
share in cash, and that such offer would expire on
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March 31. It also indicated that it had satisfactorily completed its due
diligence investigation of Crown. Rosemore submitted a revised draft of its
proposed form of merger agreement to Crown and its advisors which contemplated
that:
. the transaction would be structured as a merger, rather than as a tender
offer;
. Rosemore would not be required to close the merger if an event of
default existed under Crown's indenture covering the 10 7/8% senior
notes or would occur as a result of the merger (see "THE MERGER
AGREEMENT -- Conditions to the Merger" on page );
. a stockholder vote of two-thirds of the votes entitled to be cast would
be required to approve the merger;
. Rosemore would not be entitled to a topping fee, but would be entitled
to reimbursement of expenses if the Crown stockholders did not approve
the merger; and
. Crown's stock plans would be amended to clarify that the merger would
not trigger certain benefits under the plans.
Also on March 29, 2000, Apex confirmed its cash offer of $9.20 and submitted
a revised draft of the proposed merger agreement. In accordance with the
Independent Committee's request, the agreement provided for a revised
transaction structure of a tender offer for all outstanding shares followed by
a second-step merger. The tender offer would also be conditioned on
satisfactory completion of due diligence, obtaining replacement financing for
Crown's 10 7/8% senior notes and the tender of 66 2/3% of the shares not owned
by Apex. Apex indicated that it was actively pursuing replacement financing for
the 10 7/8% senior notes. The agreement also provided that, in the event the
agreement was terminated under certain circumstances and, within 18 months of
such termination, Crown entered into an agreement with respect to another
acquisition proposal, Crown would be obligated to pay Apex the higher of $1
million or 10% of the excess amount of the consideration received in the third-
party transaction over the consideration proposed by Apex.
In its March 29 letter, Apex also reiterated its proposal to engage in a
stock-for-stock merger with Crown that it claimed would value Crown's stock at
a minimum of $10 per share. This offer was similarly conditioned on completion
of due diligence and obtaining replacement financing for the 10 7/8% senior
notes. The Apex proposal also provided for a "shortfall distribution" to all
stockholders on December 31, 2001 if the average closing price of the shares
for the combined company did not reach $12.00 for a period of at least five
consecutive trading days prior to that date. The distribution would be equal to
the difference between $12.00 and the highest five-day closing price during the
period. Apex also advanced a third alternative proposal to purchase 3.5 million
to 4.5 million newly issued Crown Class A common shares in a private placement
at a price of $9.50 per share. Such proposal also included a shortfall
distribution and was not conditioned on completion of due diligence, but was
conditioned upon suspension of Crown's shareholder rights plan and the
availability of replacement financing for the 10 7/8% senior notes. Apex
further indicated that it had instructed its financial advisors to schedule a
meeting with CSFB to discuss its various proposals. Apex also submitted a
revised form of a proposed acquisition agreement.
The Independent Committee met on March 29 and was updated by its advisors on
both the Apex and Rosemore proposals. The Independent Committee noted that the
Apex proposal remained subject to significant conditions and that the Rosemore
proposal declined to structure the offer as a tender offer or to include a
provision that the offer be found acceptable to a majority of the public
stockholders other than Rosemore. Rosemore agreed to eliminate the topping fee
provision. The Independent Committee believed that the price offered was still
not sufficient and that the requirement that Rosemore's expenses be paid by
Crown if its proposal was not approved by Crown's stockholders was not
acceptable. To permit continued negotiations with Rosemore on these and other
outstanding issues, the Independent Committee directed CSFB to request an
extension of Rosemore's offer beyond its Friday, March 31 deadline.
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The Independent Committee reconvened on March 30, 2000, with its legal and
financial advisors present. The Independent Committee discussed in detail the
three variations of the Apex offer, and compared the terms of those proposals
to the terms of the Rosemore proposal. The Committee focused on the cash
proposals of both bidders because this form of consideration provided a more
certain value for stockholders and because the Apex stock alternatives would
require Rosemore to remain invested in Crown in a minority position, which was
not an alternative the Independent Committee members believed Rosemore would
accept. All of the Apex proposals would fail without the support of Rosemore,
Crown's largest stockholder. Although the Independent Committee noted that the
cash consideration offered by Rosemore was greater than that offered by Apex,
the most significant factor distinguishing the proposals was the conditional
nature of the Apex bid. Specifically, the Apex cash offer still remained
subject to a due diligence condition, but Apex continued to refuse to enter
into a confidentiality agreement including standstill provisions which was a
prerequisite to beginning due diligence. The Independent Committee particularly
noted that Apex's cash offer was conditioned on obtaining a lender commitment
to refinance Crown's 10 7/8% senior notes. The Independent Committee noted that
these conditions were not contained in Rosemore's proposal, and, as a result,
Rosemore's proposal was more certain to be consummated than the Apex cash
offer. Accordingly, the Independent Committee deemed Rosemore's proposal to be
superior because the absence of such due diligence and financing conditions
suggested that there was a greater likelihood that a merger with Rosemore would
be completed. Following this discussion, the Independent Committee directed
CSFB to request a meeting with Apex's financial advisors to determine whether
Apex's proposal could be improved through the elimination of conditions or
improved consideration. The Independent Committee also determined that Mr.
Dacey should contact Rosemore to discuss price, expense reimbursement and any
other outstanding issues, and to request an extension of Rosemore's offer.
On March 30, 2000, CSFB contacted Apex and its legal advisors to review
Apex's offer and to request a higher cash bid with no conditions. CSFB also
requested that Apex enter into a confidentiality agreement including standstill
provisions with Crown, which request was refused. CSFB was informed that no
commitment had been obtained with respect to the refinancing of the 10 7/8%
senior notes, which was a condition to two of Apex's three proposals. CSFB was
also advised that the proposed "shortfall distribution" would be an obligation
of the surviving corporation, not Apex.
On March 31, 2000, in an Independent Committee meeting with its advisors
participating, Mr. Dacey reported on his conversations with Mr. Edward L.
Rosenberg, the president of Rosemore. Rosemore agreed to an extension of its
offer to April 3, so that the two parties and their advisors could continue to
negotiate price, the issue of Rosemore's expense reimbursement and other
outstanding issues with respect to the merger agreement. CSFB advised the
Independent Committee of the status of its discussions with Apex's advisors.
On March 31, 2000, at the request of Crown, Rosemore agreed to provide Crown
with cash borrowing availability (currently up to $13.45 million) as permitted
under Crown's indenture relating to the 10 7/8% senior notes. See "RELATED
PARTY TRANSACTIONS" on page .
On April 2, 2000, an Independent Committee meeting was held with all
advisors participating. Mr. Dacey reported that, after discussions with Mr.
Edward L. Rosenberg, the expense reimbursement issue had been resolved such
that reimbursement would be made only if Crown consummated a competing
transaction. He also reported that most of the outstanding issues in the
agreement had been resolved except for the form of severance-related waivers
from Crown executives and certain other benefits-related issues which were to
be negotiated over the course of the coming week directly between Rosemore's
representatives and the affected employees. Rosemore declined to further
discuss price until these outstanding issues were resolved, and Rosemore agreed
to extend its offer indefinitely to permit such resolution, although it
reserved the right to withdraw such extension at any time.
From March 30 to April 6, 2000, Crown's advisors and senior management, the
Independent Committee's advisors, and Rosemore and its advisors negotiated the
terms of and worked to finalize open issues in the merger agreement, related
documents and disclosure schedules, including the price per share of Crown
common stock, certain arrangements relating to employee benefits issues and the
terms of certain waivers to be executed by key employees of Crown in connection
with the merger.
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On Friday, April 7, 2000, the Independent Committee again met with its
advisors. The members were informed that all of the previously open issues in
the merger agreement had been satisfactorily resolved and that the waivers
requested by Rosemore had been executed. Skadden Arps informed the Independent
Committee that advisors to Apex had indicated on April 6, 2000 that Apex was
now willing to execute a confidentiality agreement with standstill provisions
but that it would require 30 days to complete due diligence and requested that
the Independent Committee hold any further action in abeyance while it
completed its investigation. The members of the Independent Committee noted
that Apex had repeatedly been urged to sign the confidentiality agreement over
the past several weeks but had declined to do so. The Independent Committee
therefore unanimously rejected the request to delay further the process that
had been ongoing for more than a year and thereby jeopardize a fully negotiated
contract with Rosemore. The Independent Committee also believed that it would
be difficult to obtain stockholder approval for an Apex transaction, and that a
transaction with Rosemore had a substantially higher likelihood of
consummation.
Members of the Independent Committee also considered management's concern
that, as a result of the losses sustained by Crown over the last five years,
the capital intensive nature of its business, the use of significant cash
resources to finance required environmental related expenditures, the
substantial consolidation underway in the refining and marketing industries,
the uncertainty created by volatility in crude oil prices and refining and
retail margins, and the working capital needs associated with the run-up in
crude oil prices, Crown would be constrained in its ability to maintain the
pace of improvements necessary to remain competitive without external financial
support. The Independent Committee noted that Rosemore has provided financial
support through its willingness to loan money to Crown and guarantee certain of
its trade obligations on an unsecured basis, and to participate in Crown's $125
million secured credit facility. The Independent Committee further noted that
management believes that there are no other providers of this type of support
on comparable terms and conditions. The Independent Committee considered that
Rosemore was under no obligation to continue its financial support of Crown in
the future, and believed that a termination or reduction of the support could
require Crown to seek additional financing that either may not be available or,
if available, would be more costly to Crown. Given these factors, the
Independent Committee viewed the sale of Crown, now at a price it believed to
be fair, as more beneficial to unaffiliated stockholders than risking a further
deterioration of Crown's business and prospects and decreased values for
stockholders in the future. The Independent Committee's view took into account
recent margin improvements (see "RECENT DEVELOPMENTS" on page ) that the
Independent Committee believed might be short-term in nature and not a change
in Crown's long-term business environment.
Mr. Dacey left the meeting and called Mr. Edward L. Rosenberg. On the call,
Mr. Dacey conveyed to Mr. Rosenberg that the Independent Committee would be
willing to recommend the merger agreement to the Crown Board if the offer price
were increased to at least $9.50 per share from $9.35 per share. After
discussion, Mr. Rosenberg, on behalf of Rosemore, agreed to raise the price to
$9.50 per share. Mr. Dacey returned to the meeting and reported the increased
offer to the Independent Committee.
CSFB then gave its oral opinion that the aggregate merger consideration was
fair, from a financial point of view, to the stockholders of Crown, other than
Rosemore and its affiliates, which opinion was subsequently confirmed in
writing. See "- Opinion of Credit Suisse First Boston" on page . Skadden Arps
reviewed with the members of the Independent Committee their fiduciary duties
and the terms of the merger agreement. The Independent Committee then
unanimously moved to recommend to the Crown Board that it accept the Rosemore
proposal and further recommend stockholder approval of the merger and merger
agreement.
Immediately following the meeting of the Independent Committee, the Crown
Board convened a meeting, with all directors present except for Mr. Henry A.
Rosenberg, Jr. who had recused himself. Based on the recommendation of the
Independent Committee and the fairness opinion of CSFB, among other things, the
Crown Board unanimously voted to approve a merger with Rosemore on the terms
set forth in the merger agreement presented to it and to recommend that the
stockholders approve the merger and merger agreement. See "- Recommendation of
Crown's Board of Directors" on page .
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In connection with its approval of the merger and merger agreement, the
Crown Board modified the shareholder rights plan, dated February 1, 2000, by
amending the definition of "Final Expiration Date" to provide that the earlier
of the close of business on February 14, 2001 or that time which is immediately
prior to acceptance by the State Department of Assessments and Taxation of
Maryland of articles of merger consummating the merger between Crown and RAC
will constitute the final expiration date under the rights plan. The Crown
Board also declared the merger and merger agreement to be an approved
transaction under the rights plan, so that the execution of the merger
agreement would not result in a distribution date under the rights plan, or the
separation of the rights from the Crown common stock to which they are
attached. In addition, the Crown Board nominated individuals identified by
Rosemore for election as directors of Crown following the consummation of the
merger. See "- Rosemore's Plans for Crown after the Merger" on page .
On Friday evening, April 7, 2000, Crown, Rosemore and RAC executed the
merger agreement.
On May 1, 2000, Crown received an amended transaction proposal from Apex. In
its amended cash merger proposal, Apex offered to purchase all of the
outstanding shares of Crown common stock not owned by it for $10.00 per share.
Although the proposal remained conditioned on the receipt of financing
sufficient to repay Crown's 10 7/8% senior notes, the prior due diligence
condition was eliminated. With respect to the alternative proposals previously
advanced by Apex, Apex increased the price at which it offered to purchase
between 3.5 million and 4.5 million shares of Crown Class A common stock in a
private placement from $9.50 per share to $10.00 per share, and affirmed its
offer relating to a stock-for-stock merger, which Apex asserts would value the
Crown common stock at $10.00 per share. In addition, Apex stated that it would
post a letter of credit in the amount of $30 million to secure the "shortfall
distribution" proposed in connection with the latter two alternative proposals.
On May 10, 2000, the Independent Committee met with its advisors and
discussed the amended Apex proposal. The Independent Committee was briefed by
CSFB on the current market for debt securities and the feasibility of issuing
debt securities in this market. At the meeting, the Independent Committee
determined to continue to review the Apex proposal.
On May 11, 2000, Ms. Maiden, together with Mr. Christopher Burkhardt, filed
an amended complaint in the purported class action lawsuit originally filed on
March 9, 2000 described above. The amended complaint sought to enjoin the
merger and alleged that the defendants were breaching their fiduciary duties to
the public stockholders of Crown and were engaging in self dealing and
improper, unfair and unlawful conduct. In the alternative, the complaint sought
compensatory and "recissory" damages if the merger was consummated. On May 26,
the defendants filed a motion to dismiss the amended complaint on the grounds
that, among other things, the complaint failed to allege facts that would
constitute a breach of fiduciary duty by the defendants. At the request of
plaintiff's counsel, the parties agreed to dismiss the case with prejudice, and
a stipulation of dismissal signed by counsel for all parties was filed on June
15, 2000, dismissing the case. See "THE MERGER--Stockholder Litigation" on page
.
On May 17, representatives of McGuire Woods inquired of Mr. Novelly's legal
advisors whether Mr. Novelly would agree to the omission of his shareholder
proposal calling for the sale of Crown from this proxy statement and to the
inclusion of such proposal in the proxy statement for any subsequent Crown
stockholder meeting to be held in the event the merger and merger agreement are
not approved by the Crown stockholders. Mr. Novelly assented to such request by
letter dated May 22, 2000, from Mr. Novelly's legal advisors to Skadden Arps.
Also in the May 22, 2000 letter, the Independent Committee was requested to
indicate whether it had rejected the Apex proposal and, additionally, to
release a proposed financing source from restrictions that Apex stated
prevented it from entering into discussions with the financing source. By
letter dated May 24, 2000, McGuire Woods advised Apex that Crown's
confidentiality agreement with the financing source does not preclude the
financing source from dealing with Apex so long as information furnished to it
by Crown is not disclosed to Apex.
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On May 23, 2000, Mr. Dacey contacted Rosemore to request a limited waiver
from Rosemore of Crown's obligation under the merger agreement not to encourage
any inquiries concerning a transaction competitive with the merger so that the
Independent Committee could communicate with Apex with respect to the Apex
proposal.
Pursuant to a limited waiver granted to Crown by Rosemore, by letter dated
May 23, 2000, Mr. Dacey, on behalf of the Independent Committee, informed Apex
that it continued to evaluate the Apex proposal and, to that end, sought
confirmation that the Apex proposal was still in effect.
In a letter dated May 25, 2000, Apex confirmed that its proposals remained
open and restated its willingness to sign a confidentiality agreement with a
standstill provision if Crown would cease activities with respect to the
Rosemore merger proposal while Apex conducted a 30-day due diligence review.
Pursuant to a second limited waiver by Rosemore dated May 26, 2000, the
Independent Committee, by letter also dated May 26, indicated to Apex its
willingness to arrange a meeting between Crown's and Apex's financial advisors
and two principals from each of Crown and Apex to discuss Apex's plans and
sources of financing in connection with its proposed refinancing of Crown's 10-
7/8% senior notes. By letter to Crown dated May 31, 2000, Apex requested that
the scope of the matters to be discussed at the proposed meeting be expanded.
In a letter to Apex dated June 1, Mr. Dacey, on behalf of the Independent
Committee, reiterated that the purpose of the meeting would remain limited to
an assessment of the financing contingency in Apex's proposal.
At a meeting of the Independent Committee and its advisors on June 1, 2000,
Mr. Dacey briefed the Independent Committee on the status of communications
with Apex, and the Independent Committee determined to continue efforts to
schedule a meeting with Apex and its financial advisor. The Independent
Committee was further briefed on the status of the proceedings with respect to
the proposed merger with Rosemore.
On June 5, 2000, pursuant to the merger agreement, Rosemore requested Crown
to amend the size of the Crown Board to be effective from the next succeeding
meeting of the Crown stockholders at which directors are to be elected
following the effective time of the merger and to amend some of its employee
benefit plans. These actions were taken at the regular Crown Board meeting on
June 29, 2000.
On June 8, 2000, a representative of Apex contacted CSFB and requested that
a meeting between Mr. Novelly, Apex's financial advisor, a member of the
Independent Committee and CSFB be scheduled for June 16, 2000 and a meeting was
scheduled for that date. On June 12, 2000, a representative of Apex advised
CSFB that Apex's financial advisor would not be able to meet at the earliest
until the week of June 26. In subsequent conversations between a representative
of Apex and CSFB, a meeting date of July 14, 2000 was scheduled.
Crown's Purposes of the Merger
The merger is the result of a deliberative process by Crown, in which the
strategic alternatives for Crown were considered in depth over an extended
period of time. During this process, Crown considered the merger or sale of
Crown as a whole, the sale of portions of the business of Crown and the
continuation of Crown with its current ownership structure. Crown's purposes
for the merger are to provide the unaffiliated stockholders with the
opportunity to receive a fair price for their shares and to no longer be
subject to the market conditions and other uncertainties that have affected the
operations and financial performance of Crown in the past. For the reasons
discussed under "-Background of the Merger" on page and "-Crown's Reasons
for the Merger and Statement as to the Fairness of the Merger," on page ,
including Crown's desire to place the company in a better position to address
the uncertain market conditions that are inherent in the industry in which
Crown operates, Crown has determined to pursue the merger at this time. The
transaction has been structured as a cash merger in order to provide the public
stockholders of Crown with cash for all of their shares, to provide a prompt
and orderly transfer of complete ownership of Crown with a minimized risk that
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the contemplated transaction will not be finalized and to reduce transaction
costs. Crown believes that the benefits of the merger to Crown are as follows:
. The merger will resolve the uncertainty as to the future direction of
Crown that has been present since Crown announced in early 1999 that it
had retained CSFB to assist it in considering its strategic
alternatives.
. Crown will no longer be subject to the costs associated with
communicating with a large number of public shareholders.
. The merger will result in an alliance that provides the potential for
long-term credit support at a level that has been needed by Crown in the
past and that Crown believes will be needed in the future to enable
Crown to address the types of financial and market pressures that have
impacted it in the past and might be expected to occur again in the
future.
The main detriment of the merger to Crown is the costs associated with the
transaction.
Recommendation of Crown's Board of Directors
On April 7, 2000, the Crown Board met and, after considering the
recommendation of the Independent Committee and the fairness opinion received
from CSFB, unanimously (with the exception of Mr. Henry A. Rosenberg, Jr., who
had recused himself) approved the merger and determined that the terms of the
merger with Rosemore were advisable and fair to, and in the best interests of,
Crown's stockholders. THE CROWN BOARD RECOMMENDS THAT CROWN'S STOCKHOLDERS VOTE
TO APPROVE THE MERGER AND MERGER AGREEMENT. Certain members of the management
and the Crown Board have interests which present them with potential or actual
conflicts of interest in connection with this recommendation and the merger.
These matters are discussed in "-Interests of and Effects of the Merger on
Crown's Directors and Officers" on page and "THE MERGER--Interests of
Certain Persons in the Merger" on page .
Crown's Reasons for the Merger and Statement as to the Fairness of the Merger
In recommending to the Crown Board that it approve the merger and merger
agreement, the Independent Committee consulted with members of Crown's
management, other than Messrs. Henry A. Rosenberg, Jr. and Frank B. Rosenberg,
as well as the Independent Committee's legal and financial advisors, and
considered the following material factors:
1. The fact that Crown and CSFB had conducted a thorough evaluation process
that had failed to produce alternatives to the merger or a sale of Crown as
a whole, on prices and on terms that the Independent Committee believed
would materially enhance Crown's financial position and generate increased
value for stockholders without carrying a material risk of non-completion.
The alternatives that were evaluated included the merger or sale of Crown as
a whole, the sale of portions of the business of Crown and the continuation
of Crown with its current ownership structure.
2. The facts that the evaluation process had continued for more than a year,
that during the last five fiscal years Crown had experienced cumulative
operating losses of $60 million in addition to the 1995 write down of
certain refinery assets, and that the merger was the only strategic proposal
which the process had produced which the Independent Committee believed was
reasonably likely to be completed. The Independent Committee also considered
the possible impact of the failure to conclude a transaction on Crown and
its future ability to address the types of financial and market pressures
that had impacted it in the past and might be expected to occur again in the
future and that the failure to conclude a transaction would subject the
stockholders of Crown to the continued risk of refining margins, the
volatility of crude oil and petroleum product prices, and the effects of
industry consolidation on the competitive environment in which Crown
operates.
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3. The relationship of the offer price to the then current market price, the
downward trend in the historical market price for Crown common stock and the
fact that the offer price represents a premium of approximately 39% over the
per share closing price of the Class A common stock and approximately 49%
over the per share closing price of the Class B common stock on January 27,
2000, the day prior to the announcement that Rosemore had been approached by
Crown's financial advisor. The Independent Committee considered this an
appropriate measurement of the premium represented by the offer price
because it is a customary measurement of the premium in transactions of this
type, and believed that this customary measurement was appropriate in this
transaction because Crown's per share price at that time was not materially
different from Crown's average per share price for the period from October
1, 1999 through January 27, 2000, and exceeded Crown's per share price in
early November 1999, before Apex approached Crown about a possible
transaction and disclosed its approach in a filing on Schedule 13D. In
addition, Crown's per share price at that time and its average per share
price for the period from October 1, 1999 through January 27, 2000 reflect
the financial market's valuation of Crown after Crown had absorbed the
impact of dramatic fluctuations in the price of crude oil over the preceding
two years, and the Independent Committee believed that because of this
impact it was not meaningful to compare the offer price to Crown's stock
price prior to that time.
4. The arm's-length negotiations between the Independent Committee and its
representatives and Rosemore and its representatives, including the fact
that the negotiations resulted in a substantial increase in the price at
which Rosemore was prepared to acquire the shares, from $8.35 per share to
$9.50 per share, and the Independent Committee's belief that $9.50 per share
was the highest price that Rosemore would be willing to offer. The
Independent Committee noted that $9.50 per share was at the high end or
above the valuation range produced by each of the analyses performed by CSFB
in connection with its rendering of the fairness opinion.
5. The Independent Committee's belief that the merger had a high probability of
consummation because of the following:
. the per share price to be received in the merger is payable in cash,
thereby eliminating any uncertainties in valuing the consideration to be
received by the stockholders;
. Rosemore has represented and warranted that it will have sufficient
funds to consummate the merger;
. the limited nature of the conditions to the merger and, particularly,
that there is no due diligence or financing condition; and
. the significant percentage of shares already owned by Rosemore that
would be voted in favor of the merger and merger agreement.
6. The analyses and presentations prepared by CSFB, and the opinion of that
firm, dated April 7, 2000, that as of the date of the opinion, based upon
and subject to the assumptions, limitations and qualifications set forth in
such opinion, the aggregate consideration to be received in the merger is
fair, from a financial point of view, to the Crown stockholders other than
Rosemore and its affiliates. The conclusions and opinions of CSFB were
adopted by the Independent Committee. THE FULL TEXT OF THE CSFB OPINION IS
ATTACHED AS EXHIBIT B TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY
REFERENCE. YOU ARE URGED TO READ THE CSFB OPINION IN ITS ENTIRETY, AND TO
READ THE DESCRIPTION OF SUCH OPINION UNDER THE CAPTION "- OPINION OF CREDIT
SUISSE FIRST BOSTON" ON PAGE .
7. The terms of the merger and merger agreement, including the following
provisions:
. the merger agreement may not be amended without the approval of the
Independent Committee;
. until the merger is complete, the Independent Committee is permitted to
consider unsolicited offers and change its recommendation concerning the
merger but not to terminate the merger agreement; and
. Crown is not required to pay any termination fees and there are limited
circumstances in which Rosemore's expenses must be reimbursed by Crown
in the event of the termination of the merger.
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8. The possible decline in the market price of the shares of Crown common stock
if the merger with Rosemore is not approved and no other transaction is
agreed to and consummated.
In view of the variety of factors which it considered in reaching a
determination, the Independent Committee did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its conclusions and recommendations. In
addition, individual members of the Independent Committee may have given
different weights to different factors.
The Independent Committee considered all of these factors in reaching the
conclusions and recommendations previously described. These factors figured
positively as advantages of the merger. In addition, the Independent Committee
considered the following:
. The consummation of the merger will preclude the unaffiliated
stockholders from participating in any future growth of Crown, including
the impact, if any, on Crown's performance that might result from
settlement of the labor dispute, the corporate campaign and related
boycott. See "THE MERGER--Union Corporate Campaign" on page . The
Independent Committee believed that this factor was outweighed by the
fairness of the offer price and the uncertainty as to whether Crown's
financial prospects could be improved, particularly without Rosemore's
continued financial support, which may or may not be given; and
. The fact that Apex had proposed certain transactions that Apex valued in
excess of the Rosemore offer price. The Independent Committee believed
that this fact was outweighed by the fact that Apex had requested an
additional month to undertake due diligence and the risk that the Apex
transactions would not deliver value to stockholders of Crown because:
- Apex may find the results of its due diligence unsatisfactory;
- Apex may not be able to arrange acceptable refinancing of Crown's
debt, financing for the transaction, or both;
- the Apex proposals could not be consummated without the support of
Rosemore; and
- a delay in accepting the Rosemore proposal could result in the
withdrawal of that proposal by Rosemore, or an adverse change in its
price or other terms, or the withdrawal of continued financial
support.
Because Rosemore had indicated that it would proceed promptly with a merger
transaction, and because either a tender offer or merger structure would
involve preparation of background and fairness disclosure required for
transactions of this type, the Independent Committee concluded that a tender
offer structure ultimately would have minimal, if any, timing advantages over a
merger structure. The Independent Committee therefore viewed Rosemore's choice
of a merger, rather than a tender offer, structure as a neutral factor in its
analysis. Rosemore was not willing to proceed with a tender offer because, as a
private company, it was not accustomed to providing the type of public company
disclosure required by the SEC tender offer requirements. Rosemore was also
concerned that a tender offer would require it to pay for the Crown common
stock even if it would not be able to consummate a second step merger because
it was possible that Crown's financial condition might in the future not permit
the merger to occur without a default under the indenture governing the 10 7/8%
senior notes.
The evaluation process did not produce any alternatives involving the sale
of portions of the operating assets of Crown at prices and on terms that the
Independent Committee believed would generate increased value for stockholders.
For this reason and for the reasons discussed in the immediately following
paragraph, Crown did not seek appraisals or request CSFB to seek appraisals of
its operating assets.
Neither the Independent Committee nor the Crown Board considered liquidation
of Crown's assets to be a viable course of action given the risks and
uncertainties of any liquidation procedure and the failure to obtain favorable
bids on Crown's refinery assets in the strategic review process. Therefore, no
appraisal of liquidation values was sought for purposes of evaluating the
merger.
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In reaching its determinations referred to above, the Crown Board considered
the following factors, each of which, in the view of the Board, supported such
determinations:
. The conclusions and recommendations of the Independent Committee;
. The factors referred to above as having been taken into account by the
Independent Committee; and
. The fact that the offer price and the terms and conditions of the merger
agreement were the result of arm's-length negotiations among the
Independent Committee, Crown and Rosemore and their respective advisors.
The Crown Board, including the members of the Independent Committee,
believes that sufficient procedural safeguards were and are present to ensure
the fairness of the merger and to permit the Independent Committee to represent
effectively the interests of the unaffiliated stockholders. The Crown Board
reached its conclusion as to the procedural fairness because:
. The Independent Committee consisted of non-employee independent
directors who acted to represent solely the interests of the public
stockholders;
. The Independent Committee retained and received advice from its
independent legal counsel, Skadden Arps;
. The Crown Board was advised by and received the opinion of CSFB as
financial advisor, described under "- Opinion of Credit Suisse First
Boston" on page ;
. The strategic review process remained open for a significant time period
and the Independent Committee was actively involved in deliberations;
. The offer price and the other terms and conditions of the merger
agreement resulted from extensive arm's-length negotiations between
representatives of the Independent Committee, on the one hand, and
representatives of Rosemore, on the other hand; and
. The merger cannot be approved by Rosemore alone, and the unaffiliated
stockholders have the power to prevent the merger.
The Crown Board and the Independent Committee recognized that the merger was
not structured to require the approval of a majority of the stockholders of
Crown other than Rosemore, and that Rosemore owns a sizeable voting block of
shares (approximately 45.4%). However, the Crown Board and the Independent
Committee also recognized that, under Maryland law and Crown's charter, the
merger requires approval by two-thirds of all of the votes entitled to be cast
on the merger and merger agreement. Thus, the unaffiliated stockholders retain
the ability to prevent the merger if sufficient stockholder votes are cast
against approval of the merger and merger agreement.
Opinion of Credit Suisse First Boston
CSFB has acted as Crown's exclusive financial advisor in connection with the
merger. Crown selected CSFB based on CSFB's experience, reputation, and
familiarity with Crown's business. CSFB is an internationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, leveraged buyouts,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. In light of the foregoing, the Independent Committee
believes that CSFB is well qualified to provide the committee with independent,
quality financial assistance and advice, including the delivery of the fairness
opinion.
In connection with CSFB's engagement, Crown requested that CSFB evaluate the
fairness, from a financial point of view, to the stockholders of Crown, other
than Rosemore and its affiliates, of the aggregate consideration to be received
by stockholders of Crown in the merger. On April 7, 2000, at a meeting of the
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Crown Board held to consider the merger, CSFB rendered to the Crown Board an
oral opinion, which opinion was subsequently confirmed by delivery of a written
opinion dated April 7, 2000, to the effect that, as of that date and based on
and subject to the matters described in its opinion, the aggregate
consideration to be received by Crown stockholders in the merger was fair, from
a financial point of view, to the stockholders of Crown, other than Rosemore
and its affiliates.
The full text of CSFB's written opinion, dated April 7, 2000, to the Crown
Board, which sets forth the procedures followed, assumptions made, matters
considered and limitations on the review undertaken, is attached as Exhibit B
and is incorporated by reference in its entirety into this proxy statement.
Holders of Crown common stock are urged to read this opinion carefully in its
entirety. CSFB's opinion is addressed to the Crown Board and states that, as of
the date of the opinion, based upon and subject to the assumptions, limitations
and qualifications set forth in such opinion, the aggregate consideration to be
received by Crown stockholders in the merger is fair, from a financial point of
view, to the Crown stockholders other than Rosemore and its affiliates. It does
not address the allocation between holders of Class A common stock and holders
of Class B common stock of the aggregate consideration to be received by
stockholders of Crown or any other aspect of the merger or any related
transaction and does not constitute a recommendation to any stockholder as to
how that stockholder should vote on any matter relating to the merger. The
following is a summary of the material financial analyses performed by CSFB in
connection with rendering its opinion and does not purport to be a complete
description of such analyses.
In arriving at its opinion, CSFB:
. reviewed the merger agreement;
. reviewed certain business and financial information relating to Crown;
. reviewed certain other information, including financial forecasts, that
Crown provided to CSFB;
. met with the management of Crown to discuss the business and prospects
of Crown;
. considered certain financial and stock market data of Crown, and
compared that data with similar data for other publicly held companies
in businesses similar to Crown;
. considered the results of the strategic evaluation process and other
proposals;
. considered the financial terms of other business combinations and other
transactions that have recently been effected; and
. considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria that CSFB
deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information that was provided to or
otherwise reviewed by it and relied on that information being complete and
accurate in all material respects. With respect to financial forecasts, CSFB
was advised, and assumed, that the forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Crown as to the future financial performance of Crown.
CSFB was not requested to, and did not, make an independent evaluation or
appraisal of the assets or liabilities, contingent or otherwise, of Crown, and
was not furnished with any evaluations or appraisals. CSFB's opinion was
necessarily based on information available to CSFB, and financial, economic,
market and other conditions as they existed and could be evaluated by CSFB, on
the date of its opinion. Although CSFB evaluated the fairness from a financial
point of view to the stockholders of Crown, other than Rosemore and its
affiliates, of the aggregate consideration to be received by the stockholders
of Crown in the merger, CSFB was not requested to, and did not, recommend the
specific consideration payable in the merger, which consideration was
determined in negotiations between Crown and Rosemore.
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In preparing its opinion to the Crown Board, CSFB performed various
financial and comparative analyses, including those described below. The
summary of CSFB's analyses described below is not a complete description of the
analyses performed in connection with rendering its opinion. The preparation of
a fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to summary
description. In arriving at its opinion, CSFB made qualitative judgments as to
the significance and relevance of each analysis and factor that it considered.
Accordingly, CSFB believes that its analyses must be considered as a whole and
that selecting portions of its analyses and factors or focusing on information
presented in tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a misleading or
incomplete view of the processes underlying its analyses and opinion.
In its analyses, CSFB considered industry performance, regulatory, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Crown. No company, transaction or business used
in CSFB's analyses as a comparison is identical to Crown or the merger, and an
evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed.
The estimates contained in CSFB's analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not necessarily
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, CSFB's analyses and estimates are
inherently subject to substantial uncertainty.
CSFB's opinion and financial analyses were among many factors considered by
Crown's Board in its evaluation of the merger and should not be viewed as
determinative of the views of the Crown Board or management with respect to the
merger or the aggregate consideration to be received.
The following is a summary of the material financial analyses underlying
CSFB's opinion dated April 7, 2000 delivered to the Crown Board in connection
with the merger. The financial analyses summarized below include information
presented in tabular format. In order to fully understand CSFB's financial
analyses, the table must be read together with the text. The table alone does
not constitute a complete description of the financial analyses. You are urged
to read the full narrative description of the financial analyses, including the
methodologies and assumptions underlying the analyses, or otherwise you may
have a misleading or incomplete view of CSFB's financial analyses.
Share Price Reference Range Analyses. CSFB derived implied share price
reference ranges based on a discounted cash flow analysis, selected companies
analysis and selected mergers and acquisitions analysis for Crown as more fully
described below. CSFB then compared the consideration to be received in the
merger of $9.50 per share of Crown common stock with the share price reference
ranges implied by these analyses.
Discounted Cash Flow Analysis. CSFB performed a discounted cash flow analysis
on Crown's business in order to estimate the present value of Crown's estimated
future stand-alone, unlevered, after-tax free cash flows. CSFB performed its
analysis based on three scenarios, a downside case, a base case and an upside
case. The base case for Crown was based on estimates of Crown's future
financial performance provided by and discussed with the management of Crown
and assumed improved Gulf Coast refining margins. The upside and downside cases
were based on adjustments to the base case, discussed with Crown management to
reflect, among other things, the potential for improved or reduced refining and
retail marketing margins. Each case described is only a portion of the overall
analysis performed by CSFB, and CSFB expresses no judgment on the
appropriateness or accuracy of the assumptions underlying each case.
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In addition to estimating the present value of Crown's estimated stand-
alone, unlevered, after-tax free cash flow from calendar years 2000 through
2004 based on the three cases described above, CSFB calculated ranges of
estimated values of such cash flow after 2004 by using terminal value multiples
of 2004 earnings before interest, taxes, depreciation and amortization,
commonly referred to as EBITDA, for each case ranging from 5.0x to 6.0x for
Crown's refining business and 6.0x to 7.0x for Crown's retail business. The
present value of Crown's estimated stand-alone, unlevered, after-tax free cash
flows were then calculated using discount rates of 11.0% to 12.0% for Crown's
refining business and 10.0% to 11.0% for Crown's retail business. The following
chart shows the reference range per share of Crown common stock indicated by
these analyses:
<TABLE>
<CAPTION>
Implied Price
Case Per Share
---- --------------
<S> <C> <C>
Downside case............................... $ 0 - $ 3.20
Base case................................... 5.30 - 9.00
Upside case................................. 7.10 - 10.70
</TABLE>
Selected Companies Analysis. CSFB compared selected financial, operating and
stock market data of Crown to corresponding data of the following publicly
traded companies in the petroleum refining and/or marketing businesses:
. Giant Industries, Inc.
. Holly Corporation
. Sunoco, Inc.
. Tosco Corporation
. Ultramar Diamond Shamrock Corporation
. Valero Energy Corporation
. Casey's General Stores, Inc.
. 7-Eleven, Inc.
. The Pantry, Inc.
CSFB reviewed enterprise values, calculated as fully diluted equity market
value, plus total debt, preferred stock and minority interests, less cash and
cash equivalents of the selected companies, as multiples of their calendar year
1999 EBITDA and estimates of their calendar year 2000 EBITDA. CSFB then applied
a range of selected multiples derived from that analysis to Crown's calendar
year 1999 EBITDA, calendar years 1997 to 1999 average EBITDA and estimated
calendar year 2000 EBITDA. Equity market values were calculated based on
closing stock prices on April 6, 2000. Estimated financial data for the
selected companies were based on publicly available research analysts'
estimates and estimated financial data for Crown was based on the base case for
Crown. This analysis indicated a reference range per share of Crown common
stock of $4.00 to $7.20.
Selected Mergers and Acquisitions Analysis. CSFB compared purchase prices paid
or proposed to be paid in selected transactions as multiples of the latest 12
months EBITDA, refining capacity and, for retail marketing transactions, store
count.
CSFB then applied a range of selected multiples derived from that analysis
to Crown's calendar year 1999 EBITDA, calendar years 1997 to 1999 average
EBITDA, refining capacity and store count. All multiples were based on publicly
available financial information. This analysis indicated a reference range per
share of Crown common stock of $3.30 to $6.20.
Miscellaneous. Crown has agreed to pay CSFB for its services an aggregate
transaction fee of 1.375% of the total fair market value, at the time of
closing, of all consideration, including cash, securities, property, all debt
remaining on Crown's financial statements at closing and other indebtedness and
obligations assumed by Rosemore, and any other consideration received by Crown
or the stockholders of Crown in the merger, subject to a minimum transaction
fee of $1.5 million. Based upon financial information included as a part of
this proxy statement and giving effect to the merger as presently contemplated,
CSFB will be entitled to a fee of approximately $3.3 million. See "THE MERGER--
Merger Financing; Expenses of the Merger" on page .
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A substantial portion of the transaction fee is contingent upon consummation of
the merger. Crown also has agreed to reimburse CSFB for its reasonable out-of-
pocket expenses, including fees and expenses of legal counsel and any other
advisor retained by CSFB, and to indemnify CSFB and certain related parties
against liabilities, including liabilities under the federal securities laws,
arising out of its engagement.
Since 1998, CSFB and its affiliates have provided services to Crown
unrelated to the merger, including (1) acting as Crown's financial advisor for
the solicitation of consents from the holders of Crown's 10 7/8% senior notes,
(2) providing opinions to the trustee under the indenture governing these notes
with respect to prior affiliated transactions, which are required under the
indenture to be provided with respect to any transaction between Crown and
Rosemore in which there is consideration in excess of $5 million and (3)
providing advice to Crown with respect to Crown's adoption of a shareholder
rights plan. CSFB and its affiliates have earned an aggregate of $825,000 in
fees for these services. Following approval of the merger, CSFB will provide
the opinion to the trustee required under the indenture with respect to the
merger.
In the ordinary course of business, CSFB and its affiliates may actively
trade the debt and equity securities of Crown for their own accounts and for
the accounts of customers and, accordingly, may at any time hold long or short
positions in those securities.
Rosemore's Purposes and Reasons for the Merger
Rosemore and its predecessors have held a significant interest in Crown
since 1930. On various occasions, Rosemore has been asked to provide and has
provided financial support to Crown. In addition, various members of the
Rosenberg family are currently serving and have served in the past as directors
and officers of Crown. See "-Interests of and Effects of the Merger on Crown's
Directors and Officers" on page , "THE MERGER--Interests of Certain Persons
in the Merger" on page and "RELATED PARTY TRANSACTIONS" on page .
Rosemore, from time to time, reviews its investment portfolio and evaluates
its investments, including its holdings in Crown, in order to maximize their
value. In December 1999, in light of developments at Crown, the Rosemore board
formed the Rosemore special committee and charged it with the responsibility of
retaining legal and financial advisors to assist the special committee in its
review of Rosemore's investment in Crown. Mr. Henry A. Rosenberg, Jr., chairman
of the board of Rosemore, was not a member of this committee. The Rosemore
special committee has examined several alternatives, ranging from the sale of
its investment in Crown to the acquisition of the shares of Crown common stock
not owned by Rosemore. The Rosemore special committee also sought to anticipate
the likely results of the Crown Board's exploration of strategic alternatives
so that in its capacity as a significant Crown stockholder it could be a
constructive participant in that process.
On January 18, 2000, Crown invited Rosemore to make a proposal to acquire
Crown. In response to this invitation, the Rosemore special committee with the
assistance of its financial and legal advisors conducted extensive due
diligence on Crown in order to value Crown and to determine whether Rosemore
might be interested in making a proposal. In late February, the Rosemore
special committee focused its attention on the terms and conditions on which it
might be willing to proceed with a merger transaction and the price at which it
would be willing to acquire 100% ownership of Crown. In early March, the
Rosemore special committee determined that, if the Crown Board were willing to
recommend to Crown stockholders that they approve the merger at that price,
Rosemore would prefer the merger to selling its shares of Crown common stock or
retaining its current equity interest in Crown as a public company. Rosemore
has concluded that increasing its equity interest in Crown to 100% would best
enable it to satisfy its investment goals and to support Crown's financial
recovery.
By a 6-2 vote, the Rosemore board (with Mr. Clive R.G. O'Grady recusing
himself from the vote) approved the merger and merger agreement after it
considered the recommendation of the Rosemore special committee and determined
that the merger is consistent with and in furtherance of Rosemore's long-term
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business strategy of investing in the oil and gas industry, and participating
in enterprises that operate in lines of business in which Rosemore has
knowledge and which Rosemore believes will yield a suitable return on
investment. Rosemore's purpose of the merger is for Rosemore to acquire the
remaining equity interest in Crown not already owned by Rosemore in order to
effect its plans for Crown as described under "-Rosemore's Plans for Crown
after the Merger" on page . Upon consummation of the merger, Crown will
become an indirect wholly owned subsidiary of Rosemore. The Rosemore directors
who voted against the merger did so because they believe:
. given the size of Rosemore's total potential investment in Crown, the
merger is not consistent with Rosemore's investment objectives from a
diversification standpoint;
. the merger consideration to be paid by Rosemore is too high; and
. subsequent to the merger, Rosemore might be required to provide
additional financial support to Crown.
Mr. O'Grady recused himself from the deliberations and voting of the
Rosemore board due to conflicts of interest. See "- Background of the Merger"
on page .
In reaching its conclusions, the Rosemore board consulted with its financial
and legal advisors and considered the matters described above and the following
additional factors:
. the current economic, financial and business environment generally, and
the present and anticipated environment in the petroleum refining and
marketing industry in particular;
. the judgment, advice and analysis of Rosemore's management with respect
to the financial benefits of the merger. This was based in part on the
due diligence investigation performed with respect to Crown, and on the
Rosemore board's independent knowledge of Rosemore, Crown and the
petroleum industry;
. the financial condition, results of operations, businesses and prospects
of Crown and Rosemore;
. the recent and historic stock prices of Crown;
. the pendency of a derivative lawsuit against Crown and its present and
former officers and directors, including Messrs. Henry A. Rosenberg,
Jr., Edward L. Rosenberg and Frank B. Rosenberg, and the impact that the
merger might have on the standing of the plaintiffs to continue the
lawsuit (see "THE MERGER--Stockholder Litigation" on page );
. the findings of the due diligence investigation with respect to Crown,
especially regarding environmental and compensation and benefits issues;
. an alternative proposal involving the possible merger of Crown and the
Independent Marketer as described by CSFB to Aegis Muse;
. the alternative proposals submitted to the Crown Board by Apex, as
described in the Schedule 13D filing made by Apex with the SEC, to
acquire all of the shares of Crown common stock not owned by Apex and
their likely impact on Rosemore's investment in Crown;
. the presentation to the Rosemore board made by Aegis Muse, financial
advisor to Rosemore (see "-Financial Report Prepared by Aegis Muse" on
page );
. the fact that Crown would continue to be operated on a stand-alone basis
and that the likelihood of retaining certain members of the Crown senior
management was enhanced as a result of their execution of certain waiver
agreements in connection with the merger (see "THE MERGER AGREEMENT--
Waiver Agreements" on page ); and
. the fact that Crown stockholders would receive a premium over the then
current market price of Crown common stock.
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Rosemore's Statement as to the Fairness of the Merger
In addition to the factors identified above under "-Rosemore's Purposes and
Reasons for the Merger," each of Rosemore, Rosemore Holdings and RAC believes
that the merger and the terms of the merger agreement, including the merger
consideration of $9.50 per share, are fair to Crown and its unaffiliated
stockholders based on the following factors:
. the appointment of the Crown Independent Committee, which consisted
solely of independent members of the Crown Board;
. the unanimous approval and recommendation of the merger and merger
agreement by the Crown Independent Committee;
. the fact that the price per share to be paid in the merger represents a
premium of 39% to the closing price of Crown Class A common stock and a
49% premium to the closing price of Crown Class B common stock on
January 27, 2000, the day prior to the announcement by Rosemore that
Rosemore had been contacted by CSFB, Crown's financial advisor;
. the fact that the price and the terms and conditions of the merger
agreement were the result of arm's-length negotiations over an extended
period between the Crown Independent Committee and Rosemore;
. notwithstanding that the opinion of CSFB was addressed to the Crown
Board and that Rosemore is not entitled to rely on it, the fact that the
Crown Board received an opinion from CSFB that, as of April 7, 2000,
based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the aggregate consideration to
be received by Crown stockholders in the merger is fair, from a
financial point of view, to the Crown stockholders other than Rosemore
and its affiliates;
. although Rosemore did not request Aegis Muse to and Aegis Muse did not
advise that the price offered was fair to Crown's unaffiliated
stockholders, the presentation of Aegis Muse to Rosemore described under
"- Financial Report Prepared by Aegis Muse" on page ;
. the fact that Crown had publicly announced that it was exploring
strategic alternatives in February 1999 and that there had been ample
opportunity since that time for interested parties to submit competing
proposals, as well as the fact that Rosemore had indicated to Crown that
it would consider any alternative proposal made by a third party that
the Rosemore board believed met its strategic and tax objectives and
considered fair to and in the best interest of Rosemore and its
stockholders; and
. although approval by a majority of the unaffiliated stockholders is not
a condition to the consummation of the merger, the fact that a majority
of the shares held by the unaffiliated stockholders, other than Apex,
will be required to approve the merger if Apex does not vote in favor of
the merger.
In connection with its determination of the fairness of the consideration to
be received by the unaffiliated stockholders of Crown under the merger
agreement, the Rosemore board has adopted the conclusions as to fairness set
forth under "-Crown's Reasons for the Merger and Statement as to the Fairness
of the Merger" on page , and the analyses underlying such conclusions of the
Crown Board, based upon the views of the members of Rosemore's board as to the
reasonableness of such analyses. Rosemore did not find it practicable to and
did not assign relative weights to the individual factors considered in
reaching its conclusion as to fairness. However, the Rosemore board believes
that each of the factors is material to its determination that the merger is
fair, and has characterized as positive each of the factors characterized as
positive by the Crown Board.
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Financial Report Prepared by Aegis Muse
In connection with Aegis Muse's services as financial advisor to Rosemore
regarding the transaction, the Rosemore board asked Aegis Muse to value Crown.
The Aegis Muse valuation report was delivered to Rosemore's board on March 6,
2000. In its valuation report Aegis Muse reviewed the recent stock price
performance of Crown and the environment in which Crown's stock was trading,
discussed the methodology and assumptions used to value Crown, described the
three refining margin scenarios and two refining operating scenarios employed
in its valuation, and presented a summary of its valuation.
The Aegis Muse valuation relied principally on discounted cash flows (DCF)
after taxes and after capital expenditures. Aegis Muse considered a DCF
analysis to be a better measure of value than other methods, namely net book
value and liquidation value, although it did observe prices paid in comparable
transactions to confirm the values generated using the DCF method. In defining
its valuation range Aegis Muse focused on its "expected case" for refining
margins under two refining operating scenarios: "continue refining" and "exit
refining." The "continue refining" scenario assumed that Crown makes all the
anticipated capital expenditures necessary for its refinery operations to meet
future expected fuel specifications and continues to operate its refineries
indefinitely. The "exit refining" scenario assumed Crown foregoes the capital
expenditures necessary to meet future expected fuel specifications and
discontinues refining operations by the year 2008 when Crown's refineries are
assumed to no longer produce fuels that comply with then prevailing
specifications that have been adopted or are projected to be adopted. Under all
refining margin and operating cases, Crown was assumed to continue its retail
gasoline and terminalling operations.
The cash flow projections used in the Aegis Muse valuation were based upon
various assumptions regarding the future operations of Crown. In general, Aegis
Muse relied upon its own experience and judgment in projecting revenues and
gross margins. Operating expenses were typically based on Crown's historical
performance, and estimates of future capital expenditures were based both on
Aegis Muse's own estimates of amounts needed to be spent to comply with
existing and anticipated environmental regulations as well as Crown's own
projections for sustaining capital. Estimates of future general and
administrative expenses were provided by Crown and included management's
projected reductions in overhead which were expected to result principally from
the implementation of a reduction in personnel and the replacement of Crown's
existing benefits programs with less expensive programs.
The after-tax and after-capital expenditures cash flows resulting from the
various margin cases and refining scenarios were discounted at 13%, the
weighted average after-tax cost of capital determined using the Capital Asset
Pricing Model as generally applied to publicly traded independent refining and
marketing companies. Cash flows were projected for ten years with the final
year's cash flow treated as a perpetuity valued using the 13% discount rate.
The expected-margin-continue-refining combination produced a DCF value of
approximately $5.50 per share. The expected-margin-exit-refining combination
produced a DCF value of approximately $11.50 per share. Aegis Muse then
estimated a value range for Crown of $6.00 to $9.00 per share based upon the
following:
. Were Crown to elect to continue refining operations indefinitely, the
expected-margin-continue-refining case represented the low end of the
value range.
. The expected-margin-exit-refining case produced an $11.50 per share
value; however, that value was predicated upon the continuation of
refining operations until 2008. Because margin estimates are
decreasingly reliable the further into the future they are projected,
and because Rosemore was understood to be more likely to favor
discontinuation by Crown of a portion of its refining operations prior
to 2008, a $9.00 per share upper end of the range was chosen.
In addition to estimating a value range for Crown, Aegis Muse developed an
investment return analysis for Rosemore's proposed purchase of Crown at various
per share acquisition prices and under the same margin and operating scenarios
as were used in estimating an equity value range for Crown. The investment
return
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calculations assumed the senior long-term debt of Crown remained outstanding
and was refinanced at its scheduled maturity in 2005 on substantially the same
terms. Under the expected-margin-continue-refining case, a proposed purchase
price of $9.00 per share was calculated to produce an investment return to
Rosemore of 18%. Under the expected-margin-exit-refining case, a proposed
purchase price of $9.00 per share was calculated to produce an investment
return to Rosemore of 32%. The 32% return reflects Crown's continued operation
of its refineries until 2008. Were Crown to discontinue refining operations
sooner than 2008, which has been and may continue to be considered by Rosemore,
then the investment return on the expected-margin-exit-refining case would
likely be significantly lower than 32%. In addition, all the hypothetical
investment return calculations assumed that the 10 7/8% senior notes remain
outstanding and are refinanced on substantially the same terms at scheduled
maturity in 2005. There is no guarantee that Crown will be able to refinance
the 10 7/8% senior notes on terms as favorable as the current terms of the
senior notes, if at all, in which case the returns on Rosemore's investment in
Crown could be materially lower than calculated in the hypothetical investment
return analysis.
On March 28, 2000, when the Rosemore board authorized Mr. Edward L.
Rosenberg to submit a revised proposal to Crown increasing the consideration
for the Crown common stock up to $9.35 per share in cash, with further
authorization to increase the consideration up to $9.50 per share, Rosemore
asked if Aegis Muse could opine that a purchase price of $9.50 per share was
fair to Rosemore from a financial point of view. Aegis orally confirmed, which
confirmation was subsequently delivered in writing, that while nothing had come
to light to suggest that the earlier valuation range should be altered, in the
judgment of Aegis Muse, the offer price of $9.50 per share was fair to Rosemore
(other than to Rosemore's shareholders or affiliates) from a financial point of
view.
Aegis Muse is a Texas limited liability company that was formed in 1999 to
provide strategic advice to companies engaged in oil and gas refining and
marketing activities. It is a joint venture between Aegis Energy Advisors
Corp., a boutique energy investment bank based in New York, and Muse Stancil &
Co., a refining and marketing consulting firm based in Dallas, Texas. On four
separate occasions since 1996, Muse Stancil has provided consulting services to
Crown for a variety of assignments involving both technical and economic
analysis of certain aspects of Crown's business activities. Prior to Aegis Muse
being retained by Rosemore, both Rosemore and Crown were fully apprised on Muse
Stancil's participation in Aegis Muse and the nature of Muse Stancil's previous
relationship with Crown, and Aegis Muse was instructed not to use any materials
previously prepared by Muse Stancil in connection with its prior work for
Crown.
Aegis Muse and its principals have advised clients on more than 100 refining
and marketing transactions over the past two decades. Aegis Muse was paid a
retainer of $100,000 at the time it was engaged and it was paid an additional
$150,000 at the time it delivered its report to the Rosemore board. In
addition, in connection with Rosemore making a proposal to acquire the Crown
common stock, Aegis Muse is entitled to an additional $250,000. In the event
the transaction is ultimately consummated, its total compensation will be
$1,500,000.
Henry A. Rosenberg, Jr.'s Reasons for the Merger and Statement as to the
Fairness of the Merger
Mr. Henry A. Rosenberg, Jr., the Chairman of the Board of Directors,
President and Chief Executive Officer of Crown, is an affiliate and the
chairman of the board of directors of Rosemore.
After Crown's financial advisor, CSFB, recommended to Crown's Board of
Directors in January, 2000, that it approach Rosemore to discuss whether
Rosemore was interested in making an offer to acquire Crown, Mr. Henry A.
Rosenberg, Jr. recused himself from any further proceedings of the Board of
Directors of Crown relating to Crown's consideration and evaluation of
strategic alternatives. He also agreed to limit his involvement with Rosemore
in any proposal made by Rosemore and further agreed not to discuss with any
representative of Rosemore any information or knowledge he had previously
acquired with respect to strategic proposals and transactions of Crown. See
"THE MERGER -- Interests of Certain Persons in the Merger" on page .
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The rules of the SEC require Mr. Rosenberg to express his belief as to the
fairness of the merger to Crown's unaffiliated stockholders. As described in
more detail under "-Background of the Merger," on page , the terms of the
Merger Agreement were negotiated at arms' length between the Independent
Committee and the Rosemore special committee and their respective financial and
legal advisors. Mr. Rosenberg did not independently consider the fairness of
the merger consideration to Crown's stockholders (other than Rosemore). Mr.
Rosenberg adopts the statements under "-Rosemore's Purposes and Reasons for the
Merger" and "-Rosemore's Statement as to the Fairness of the Merger." In
addition, Mr. Rosenberg supports the merger because it assures all stockholders
other than Rosemore will receive $9.50 for each share of Crown stock that they
own, and it allows the Rosenberg family to continue its historic management
relationship with Crown.
For reasons set forth above and in the statements Mr. Rosenberg has adopted,
Mr. Rosenberg believes that the terms of the merger and merger agreement are
fair to Crown's unaffiliated stockholders.
Mr. Rosenberg owns directly or in the Crown Savings Plans 22,525 shares of
Class A common stock and 81,925 shares of Class B common stock including PVR
stock. See "SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND
MANAGEMENT--Owners of More than Five Percent" on page . In addition, Mr.
Rosenberg holds vested options for the acquisition of 223,426 additional shares
of Class B common stock and options that will vest on May 1, 2001 to acquire
14,634 shares of Class B common stock. None of Mr. Rosenberg's options are in
the money. Mr. Rosenberg also holds 148,000 stock appreciation units for which
he is entitled to payment of the difference between the market price of the
Crown Class B common stock and the floor price of the units which is $14.91.
Mr. Rosenberg will receive $9.50 per share as a result of the merger for each
of the 104,450 Crown shares he owns for an aggregate consideration of $992,275
and will receive $397,669 for his options (as to which he will recognize
ordinary income) based upon a discounted Black-Scholes valuation of his
options. Mr. Rosenberg will recognize long term capital gain or loss on the
Crown shares he holds directly, depending on his tax basis for each such share.
He will not currently recognize taxable gain or loss on the Crown shares he
holds in the Crown Savings Plans.
Ownership of Rosemore
On December 31, 1998, as part of a reorganization of American Trading and
Production Corporation, American Trading transferred certain of its assets,
including all of its stock in Crown at a final valuation of $8.25 and $8.34375
per share of Crown Class A and Class B common stock, respectively, to Rosemore
and spun Rosemore off to the current stockholders of Rosemore, who received
stock in Rosemore in exchange for their stock in American Trading. All of the
shares of Rosemore are held by trusts for the benefit of descendants of Ruth B.
Rosenberg (daughter of Louis Blaustein and mother of Mr. Henry A. Rosenberg,
Jr. and his sisters). Mr. Henry A. Rosenberg, Jr. is a trustee of all of these
trusts and is a beneficiary of trusts holding 31% of the stock of Rosemore. Mr.
Rosenberg's sisters, Mrs. Ruth R. Marder and Mrs. Judith R. Hoffberger, are
trustees of trusts holding over 98% of the stock of Rosemore and each is also a
beneficiary of trusts holding 31% of the stock of Rosemore.
Effects of the Merger
As a result of the merger, Crown will become an indirect wholly owned
subsidiary of Rosemore. All shares of Crown stock not owned by Rosemore will be
converted into the right to receive $9.50 per share in cash. Accordingly,
Rosemore's interest in Crown common stock will increase in the merger from
29.4% to 100%, and as a consequence its interest in the net book value of Crown
will increase in the merger from a 29.4% equivalent interest of approximately
$42.8 million to an interest of approximately $145.7 million as of March 31,
2000, and its interest in the net earnings (loss) of Crown will increase in the
merger from a 29.4% equivalent interest of approximately $(8.8 million) and
$(1.0 million) for the twelve month period ended December 31, 1999 and the
three month period ended March 31, 2000, respectively, to an interest of
approximately $(30 million) and $(3.6 million) for these periods. See "RECENT
DEVELOPMENTS" on page .
Given Mr. Henry A. Rosenberg, Jr.'s ultimate beneficial interest in 31% of
the stock of Rosemore, he could be construed to have an implicit interest of
9.1% in Crown through Rosemore, in addition to the interests
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that he presently owns directly in Crown consisting of 1.0% of Crown's common
stock and vested options for up to 2.2% of Crown's common stock, giving him a
combined equivalent implicit interest of 12.3% in Crown's common stock before
the merger. This equivalent implicit interest of 12.3% in Crown's common stock
equates to an equivalent implicit interest in the net book value of Crown
before the merger of approximately $17.9 million as of March 31, 2000, and an
equivalent implicit interest in the net earnings (loss) of Crown before the
merger of approximately $(3.7 million) and $(0.4 million) for the twelve month
period ended December 31, 1999 and the three month period ended March 31, 2000,
respectively. Mr. Rosenberg will receive the merger consideration for his Crown
common stock and payment for the cancellation of his Crown options. His only
interest in Crown's common stock after the merger will be the interest he is
construed to have through his ultimate beneficial interest in 31% of the stock
of Rosemore, which will therefore give him an implicit interest in 31% of the
common stock of Crown after the merger. This implicit interest of 31% in
Crown's common stock equates to an implicit interest in the net book value of
Crown after the merger of approximately $45.2 million as of March 31, 2000, and
an implicit interest in the net earnings (loss) of Crown after the merger of
approximately $(9.3 million) and $(1.1 million) for the twelve month period
ended December 31, 1999 and the three month period ended March 31, 2000,
respectively.
As a result of the merger, the Crown common stock will no longer be listed
on any stock exchange and will not be publicly traded. The Crown common stock
will cease to be registered under the Exchange Act. Accordingly, holders of
Crown common stock, other than Rosemore, will cease to hold Crown common stock
as a result of the merger and will be precluded from participating in any
future growth of Crown, and Crown will no longer prepare or file reports with
the SEC with respect to the Crown common stock, although the indenture relating
to the 10 7/8% senior notes requires Crown to continue to file periodic
reports, if permitted, or to otherwise provide comparable financial data.
The merger is a tax-free transaction for Rosemore, RAC and Rosemore
Holdings. The merger will be a tax-free transaction for Crown unless Rosemore
elects to treat the transaction as an asset sale by Crown. Rosemore does not
currently intend to elect to treat the transaction as an asset sale by Crown
but may determine to do so at a later time.
Interests of and Effects of the Merger on Crown's Directors and Officers
All of Crown's executive officers, including Messrs. Henry A. Rosenberg, Jr.
(to the extent of the benefits to which he is entitled) and Frank B. Rosenberg,
executed limited waivers with respect to: the immediate funding of benefits
under the Executive Severance Plan; the revision of the definition of change of
control under various benefit plans including the Executive Severance Plan; and
the reduction of the period during which executive officers have job protection
under the Executive Severance Plan as a result of the merger from 24 months to
the period beginning at the effective time of the merger and ending on November
30, 2001. See "THE MERGER AGREEMENT --Waiver Agreements" on page .
Restrictions on performance vested restricted (PVR) stock will lapse as a
result of the merger and executive officers will, therefore, be entitled to
receive the merger consideration for their PVR stock and also to receive
payment for the cancellation of their options. Mr. Henry A. Rosenberg, Jr. will
resign as President and Chief Executive Officer after the merger, but will
remain Chairman of the Board of Crown. Mr. Frank B. Rosenberg will be elected
President and Chief Executive Officer of Crown.
Pursuant to the merger agreement, the charter and bylaws of the surviving
corporation shall contain the provisions for the indemnification of directors
and officers that were applicable at the date of the merger agreement and those
provisions may not be amended or repealed for a period of six years. The
surviving corporation is also required to use its best efforts to maintain
directors' and officers' liability insurance with coverage at least as
favorable as that contained in Crown's existing policies.
Directors and officers will be entitled to receive the merger consideration
for the Crown stock they hold. The Independent Directors waived the standard
retainer for service on Crown Board committees, but not the right to be
reimbursed for expenses incurred, when the Crown Board established the
Independent Committee and appointed the Independent Directors to that
committee. Other than the interests of Mr. Henry A.
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Rosenberg, Jr., as the chairman of Rosemore, and a trustee and trust
beneficiary of family trusts that own stock in Rosemore and of Mr. Frank B.
Rosenberg as a trust beneficiary of a family trust that owns stock in Rosemore,
the directors and officers of Crown will receive no other benefits as a result
of the merger.
Rosemore's Plans for Crown after the Merger
After completion of the merger, Rosemore plans to utilize the business
opportunities that are available to Crown in order to maximize revenues and
profits. This could include, but not necessarily be limited to, reduction of
overhead, the divestiture of assets and the restructuring of Crown's borrowing
arrangements.
Rosemore and Crown are currently discussing with First Union current and
post-merger financing. Although Crown has the right to redeem its 10 7/8%
senior notes under the indenture at a redemption price of 105.438% commencing
on February 1, 2000, Rosemore and Crown have no immediate plans to redeem the
10 7/8% senior notes.
In 1999, Crown initiated and is undergoing a rationalization program
designed to improve its operating margins that includes an overhead reduction
program and a limited reduction in the workforce. Rosemore understands that
Crown has made significant progress with the implementation of these cost-
saving initiatives and Rosemore expects that Crown will continue this program.
Crown will be the surviving corporation of the merger, and the directors and
the officers of Crown immediately prior to the effective time of the merger
will continue to be the directors and the officers of Crown after the
completion of the merger, until their respective successors are elected or
appointed and qualified, in accordance with the charter and bylaws of Crown. At
the request of Rosemore, the Crown Board nominated Mr. Donald R. Mering, Mrs.
Judith R. Hoffberger, Mr. Russell J. Hoffberger, Ms. Lisa J. Bertelsen and Mr.
Frank B. Rosenberg for election to the Crown Board after the merger. After the
merger, Rosemore will elect the nominated individuals to the Crown Board to
replace the current directors other than Mr. Henry A. Rosenberg, Jr. It is
expected that, after the completion of the merger, Mr. Henry A. Rosenberg, Jr.,
while keeping his position as the Chairman of the Crown Board, will resign as
President and Chief Executive Officer of Crown and that Mr. Frank B. Rosenberg
will be appointed President and Chief Executive Officer. After the merger,
Rosemore also expects to expand the size of the Crown Board to include outside
directors, who might include one or more current members of the Crown Board.
Other than by virtue of the merger and except as otherwise described above
or elsewhere in this proxy statement, Rosemore has no current plans or
proposals which relate to or would result in:
. any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Crown or any of its
subsidiaries;
. any purchase, sale or transfer of a material amount of assets of Crown
or any of its subsidiaries;
. any material change in Crown's capitalization, dividend rate or policy,
or indebtedness;
. any change in the management of Crown, the composition of the Crown
Board or any change in any material term of the employment arrangements
of any executive officer; or
. any other material change in Crown's corporate structure or business.
Federal Income Tax Consequences
The following discussion is a summary of material U.S. federal income tax
consequences of the merger to holders of Class A and Class B common stock who
are U.S. persons and hold their shares as capital assets. This summary is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury
regulations, administrative pronouncements of the U.S. Internal Revenue Service
(the "IRS") and judicial
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decisions in effect on the date hereof, all of which are subject to change,
retroactively and prospectively, and to possibly differing interpretations. For
purposes hereof, a U.S. person is (i) a U.S. citizen or resident alien
individual, (ii) a corporation created or organized in or under the laws of the
United States or any state, (iii) an estate the income of which is subject to
U.S. federal income tax without regard to the source and (iv) a trust if a
court within the United States is able to exercise primary supervision over its
administration and one or more U.S. persons have authority to control all
substantial decisions relating to the trust. The discussion set forth below is
for general information only and, thus, does not address all of the U.S.
federal income tax consequences of the merger that may be relevant to the
holders of Crown common stock based upon their particular circumstances.
Moreover, this summary does not apply to certain categories of holders of
common stock that may be subject to special tax rules, including, but not
limited to, banks, tax-exempt organizations, insurance companies, regulated
investment companies, non-U.S. persons and holders who acquired such shares
pursuant to the exercise of employee stock options or otherwise as
compensation. In addition, the discussion does not address the state, local or
foreign tax consequences of the merger.
EACH HOLDER OF COMMON STOCK IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT
TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER.
General Federal Income Tax Consequences of the Merger. The receipt of cash in
exchange for Class A and Class B common stock pursuant to the merger would be a
taxable sale for U.S. federal income tax purposes. Accordingly, a Crown
stockholder who receives cash pursuant to the merger will recognize taxable
gain or loss equal to the difference between the amount of cash received and
the stockholder's adjusted tax basis in the shares surrendered therefor. The
gain or loss will be a long-term capital gain or loss if, as of the date of the
sale, such stockholder's holding period for such shares is more than one year.
Under current law, an individual is subject to a maximum federal income tax
rate of 20% on any net long-term capital gains, and a corporation is subject to
a maximum U.S. federal income tax rate of 35% on any net capital gain. If the
receipt of cash in exchange for shares results in recognition of a capital
loss, deductibility of such loss may be subject to limitation. For additional
information on the tax consequences affecting options to purchase shares of
Crown common stock, and performance vested restricted stock, see "THE MERGER--
Treatment of Stock Options, Stock Grants, and Stock Appreciation Units" on page
.
Backup Withholding. Unless a Crown stockholder complies with certain reporting
or certification procedures or is an "exempt recipient" (in general,
corporations and certain other entities) under applicable provisions of the
Code and Treasury regulations, such stockholder may be subject to a withholding
tax of 31% with respect to any cash payments received pursuant to the merger.
Backup withholding is not an additional tax. Any amount withheld under these
rules will be credited against a stockholder's U.S. federal income tax
liability provided such stockholder furnishes the required information to the
IRS. If a stockholder does not comply with the backup withholding rules, such
holder may be subject to penalties imposed by the IRS. A non-U.S. Crown
stockholder should consult its tax advisor with respect to the application of
withholding rules to it with respect to any cash payments received pursuant to
the merger.
Tax Qualified Plans. You will not currently recognize taxable gain or loss if
you hold your Crown stock in a "tax qualified plan" such as one of the Crown
Savings Plans or an individual retirement account.
THE MERGER
Merger Consideration
The merger will become effective when the articles of merger are filed with,
and are accepted for record by, the State Department of Assessments and
Taxation of Maryland. At the time of the merger, RAC will be merged with and
into Crown. The separate corporate existence of RAC will cease, and Crown will
continue as the surviving corporation and become an indirect wholly owned
subsidiary of Rosemore.
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The merger will have the following effects:
. Each outstanding share of Crown common stock will be converted into the
right to receive $9.50 in cash as merger consideration. The merger
consideration will be payable without any interest once the Crown stock
certificate that formerly evidenced such share of Crown common stock has
been duly returned. Crown common stock includes the associated right to
purchase Crown's Series A or Series B Junior Participating Preferred
Stock that was granted pursuant to Crown's shareholder rights plan. See
"SHAREHOLDER RIGHTS PLAN" on page . The rights will expire immediately
before the articles of merger are filed with the State Department of
Assessments and Taxation of Maryland, and the holders of these rights
will receive no compensation for these rights in connection with the
merger. The conversion described in this paragraph will not apply to the
shares owned by Rosemore Holdings.
. Each outstanding share of common stock of RAC will be converted into one
share of common stock of Crown as the surviving corporation.
. Each share of Crown common stock owned by Rosemore Holdings will
automatically be cancelled, and no payment will be made with respect
thereto.
Dissenting stockholders do not have any statutory right to seek a
determination of the fair value of their shares of Crown common stock under
Maryland corporate law. See "- No Appraisal Rights" on page .
Payment Procedure
On or before the closing date of the merger, Rosemore will enter into an
agreement with a bank or trust company to serve as a paying agent selected by
Rosemore and reasonably acceptable to Crown. Before the merger becomes
effective, Rosemore will deposit for the account of the paying agent, in trust
for the benefit of the holders of Crown common stock who are to receive merger
consideration, an amount in cash equal to the aggregate merger consideration.
This amount will be used as the exchange fund for the merger.
The paying agent will mail to you a letter of transmittal after the merger
becomes effective. The letter of transmittal will contain instructions that
explain how you should return Crown stock certificate(s) in order to receive
the merger consideration. You should not return your Crown stock certificate(s)
until you receive the letter of transmittal.
Upon returning your Crown stock certificate(s), together with your letter of
transmittal, duly completed and validly executed in accordance with the paying
agent's instructions, the paying agent will pay you an amount in cash equal to
the product of the merger consideration multiplied by the number of shares of
Crown common stock formerly represented by such Crown stock certificate(s).
Upon payment, all returned Crown stock certificate(s) will be cancelled.
Until you return your Crown stock certificate(s), they will only represent
the right to receive the merger consideration. No interest will be paid or
accrued on the merger consideration. If the merger consideration (or any
portion thereof) is to be paid to any person other than you, then the stock
certificate(s) must be properly endorsed or otherwise be in proper form for
transfer. The person surrendering such Crown stock certificate(s) will pay to
the paying agent any transfer or other similar taxes required. Alternatively,
you may establish to the satisfaction of the surviving corporation that such
tax has been paid or is not applicable.
After the six-month anniversary of the merger, the surviving corporation
will be entitled to require the paying agent to return to the surviving
corporation any portion of the exchange fund (including, without limitation,
all interest and other income received by the paying agent in respect of all
funds made available to it) which remains undistributed to the holders of Crown
stock certificates and any other documents in its possession relating to the
merger, and the paying agent's duties will terminate. If you have not received
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payment of the merger consideration by this time, then you may look only to the
surviving corporation for payment. You may obtain payment from the surviving
corporation by surrendering your Crown stock certificate(s) to the surviving
corporation and complying with other instructions received from the surviving
corporation.
After the merger, the stock transfer books of Crown will be closed. There
will be no further registration of transfers on the stock transfer books of the
surviving corporation of any shares of Crown common stock that were outstanding
immediately before the merger. Crown stock certificates presented to the
surviving corporation or the paying agent after the merger will be surrendered
and cancelled in return for the payment of the merger consideration represented
thereby, as provided above and pursuant to the terms of the merger agreement.
You will cease to have any rights with respect to shares of Crown common
stock after the merger, except the right to receive the merger consideration.
The paying agent and the surviving corporation will be entitled to deduct
and withhold from the merger consideration otherwise payable to you as required
under the Code, or any applicable provision of state, local or foreign tax law.
Any withheld tax amounts will be treated as having been paid to you.
You will need to provide an affidavit if you have lost your Crown stock
certificate(s) or if your certificate(s) have been stolen or destroyed. The
paying agent or surviving corporation may require you to post a bond of a
reasonable amount as indemnity against any claim that may be made with respect
to any missing Crown stock certificate. The paying agent will issue in exchange
for such lost, stolen or destroyed Crown stock certificate(s) the merger
consideration to which you are entitled pursuant to the merger agreement.
Treatment of Stock Options, Stock Grants and Stock Appreciation Units
Various rights were granted pursuant to Crown's 1994 Long-Term Incentive
Plan, Crown's 1995 Management Stock Option Plan, and Crown's 1999 Long-Term
Incentive Plan.
Options. At the time of the merger and pursuant to Crown's stock plans, each
option to purchase shares of Crown common stock will (i) become fully vested
and immediately exercisable and (ii) remain outstanding and, thereafter, be an
option in the surviving corporation with the same relative rights and exercise
prices as applied to such option immediately before the merger. Each option
will be subject to the terms (as in effect as of the date of the merger) of the
Crown stock plan with regard to which such option was issued. After the merger,
when you refer to Crown's stock plans, all references to Crown will be deemed
to be references to the surviving corporation and all references to Crown
common stock will be deemed to be references to the common stock of the
surviving corporation. Crown will take all necessary action to approve the
disposition of the options in connection with the transactions contemplated by
the merger agreement to the extent necessary to exempt such dispositions and
acquisitions under Rule 16b-3 of the Exchange Act.
Promptly after the merger, Rosemore will or will cause the surviving
corporation to provide each holder of any options with the opportunity to
receive payment for the cancellation of his or her options at prices ranging
from $0.85 to $3.21 per option (depending upon the exercise price and the
remaining term of the option). If all of Crown's 1,027,572 outstanding options
are cancelled, it would result in an aggregate payment of $1,769,434. Any
payments related to the cancellation of options will result in the recognition
of ordinary income and will be subject to all applicable federal, state and
local tax withholding requirements.
Performance Vested Restricted Stock. At the time of the merger, restrictions on
Crown stock awards in the form of performance vested restricted stock granted
pursuant to Crown's 1994 Long-Term Incentive Plan will lapse (and this will
result in the recognition of ordinary income equal to the value of the stock at
the time the restrictions lapse), any restrictive legend contained on any Crown
stock certificate(s) related thereto will be removed and any Crown stock
certificate(s) related thereto held in escrow by Crown pursuant to the terms of
such plan will be released to the grantee of such Crown stock award. At the
time of the merger, the
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performance vested common stock, which is Class B common stock, will therefore
be converted into the right to receive $9.50 in cash as merger consideration.
The payment procedures previously described in "- Payment Procedure" on page
will apply to this stock.
Stock Appreciation Units. At the time of the merger and pursuant to Crown's
1999 Long-Term Incentive Plan, each stock appreciation unit will become fully
vested and immediately exercisable. Holders of stock appreciation units are
entitled to payment of the difference between the market price of the Crown
Class B common stock and the floor price of $14.91. As the established floor
price for the stock appreciation units is higher than the value of the Crown
Class B common stock on the date of the merger, no amounts will be paid out
with respect to the stock appreciation units, and these units will cease to
continue as an obligation under such plan.
Merger Financing; Expenses of the Merger
The total amount of funds required by Rosemore to acquire all of the
outstanding shares of Crown common stock not owned by Rosemore and to pay
related fees and expenses is estimated to be approximately $70 million.
Rosemore Holdings has amended its existing revolving credit agreement with
First Union National Bank to borrow up to an additional $75 million to finance
the acquisition of the Crown common stock, to pay for the cancellation of the
options and for other related transaction costs. The revolving credit facility
will terminate on May 30, 2001, and will be secured by certain publicly traded
securities owned by Rosemore Holdings and pledged to First Union. Rosemore
Holdings will pay interest on the outstanding borrowings under the $75 million
portion of the credit facility at a floating rate indexed to LIBOR.
The merger agreement provides that, with certain limited exceptions, all
costs and expenses incurred in connection with the merger will be paid by the
party incurring such expenses, whether or not the merger is consummated. Crown
is required under the merger agreement to reimburse Rosemore's reasonable and
documented expenses incurred in connection with the merger agreement if:
. Crown or Rosemore terminates the merger agreement due to the failure of
Crown's stockholders to approve the merger and merger agreement;
. at the time of such failure to approve the merger and merger agreement,
there exists a publicly announced competing transaction to that of
Rosemore;
. within 12 months of the termination of the merger agreement with
Rosemore, Crown enters into an agreement with a third party with respect
to a competing transaction; and
. the competing transaction is subsequently consummated.
The following is an estimate of expenses to be incurred in connection with
the merger.
<TABLE>
<CAPTION>
EXPENSES TO BE PAID BY CROWN:
<S> <C>
Financial advisory fees and expenses............................... $3,300,000
Legal fees and expenses............................................ 1,700,000
Printing and mailing fees.......................................... 165,000
Accounting fees and expenses....................................... 50,000
Solicitation expenses.............................................. 45,000
SEC filing fees.................................................... 13,515
Miscellaneous...................................................... 20,000
----------
Total............................................................. $5,293,515
==========
<CAPTION>
EXPENSES TO BE PAID BY ROSEMORE:
<S> <C>
Financial advisory fees and expenses............................... $1,650,000
Legal fees and expenses............................................ 825,000
Miscellaneous...................................................... 160,000
HSR filing fees.................................................... 45,000
----------
Total............................................................. $2,680,000
==========
</TABLE>
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Interests of Certain Persons in the Merger
In considering the merger, you should be aware that certain members of
Crown's management and Board may have interests in the merger that are
different from, or in addition to, their interests solely as stockholders of
Crown. These interests are described below.
The Independent Committee and the Crown Board were aware of these potential
or actual conflicts of interest and considered them along with the other
matters described under "SPECIAL FACTORS--Recommendation of Crown's Board of
Directors" on page and "SPECIAL FACTORS --Interests of and Effects of the
Merger on Crown's Director and Officers" on page .
Messrs. Henry A. Rosenberg, Jr. and Frank B. Rosenberg. Mr. Henry A. Rosenberg,
Jr. is Chairman of the boards of both Rosemore and of Crown. Mr. Frank B.
Rosenberg, the son of Henry A. Rosenberg, Jr., is Senior Vice President--
Marketing of Crown.
Mr. Henry A. Rosenberg, Jr., as a result of his position with Crown, owes
fiduciary duties to the stockholders of Crown, in addition to the fiduciary
duties he owes to the stockholders of Rosemore. At times, he may be confronted
by issues, including the merger, that present him with potentially conflicting
interests and obligations.
On January 18, 2000, CSFB recommended to the Crown Board that it be
authorized to approach Rosemore to solicit its interest in making an offer to
acquire Crown. The Crown Board authorized CSFB to approach Rosemore, which it
did on January 18, 2000. Because of Mr. Henry A. Rosenberg, Jr.'s conflicting
fiduciary duties, Crown's Board empowered the Independent Committee to
represent the interests of Crown's stockholders in the review, evaluation and
negotiation of the merger. Mr. Henry A. Rosenberg, Jr. was not a member of the
Independent Committee.
Also, from January 18, 2000, when CSFB approached Rosemore to solicit its
interest in making an offer to acquire Crown, Mr. Henry A. Rosenberg, Jr.
recused himself from all consideration by the management and Board of Crown of
any proposal made to Crown by any persons (including, without limitation,
Rosemore) concerning any material transaction with or with respect to Crown,
except and only to the extent requested of him by the Independent Committee.
In a letter submitted to the Crown Board at its meeting on January 27, 2000,
Mr. Henry A. Rosenberg, Jr. committed to the Crown Board not to discuss with
any representative of Rosemore any information or knowledge he had or would
have concerning any strategic proposals made to Crown by any third party
concerning any material strategic transaction with or with respect to Crown. He
also committed to the Crown Board that he would not participate in the
formulation by Rosemore of any proposal with respect to Crown and would limit
his participation to meetings in which the Rosemore board considered and
approved or disapproved any such proposal.
Rosemore has a Schedule 13D on file with the SEC with respect to its
stockholdings in Crown. Mr. Frank B. Rosenberg, an officer of Crown, was
included in Rosemore's 13D filing but has disclaimed membership in any filing
group. See "SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND
MANAGEMENT--Owners of More than Five Percent" on page . In consideration of
potential conflicts, at a meeting of the Crown Board on January 27, 2000, Mr.
Frank B. Rosenberg committed, through a letter submitted to the Crown Board,
not to discuss with any representative of Rosemore any information or knowledge
he had or would have concerning any strategic proposals made to Crown by any
third party concerning any material transaction with or with respect to Crown.
Mr. Frank B. Rosenberg further agreed not to participate in the evaluation of
any such proposals made by third parties, except to the extent necessary to
fulfill his responsibilities for Crown's retail marketing and wholesale
operations as Senior Vice President--Marketing, and then only after discussion
of his participation with the Independent Committee or their representatives.
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Rosemore has informed Crown that, after the merger has become effective,
Rosemore intends to elect Mr. Frank B. Rosenberg to the Crown Board and appoint
him as President and Chief Executive Officer.
Messrs. Frank B. Rosenberg and Henry A. Rosenberg, Jr. each have pre-
existing elections in the Savings Plans, pursuant to which the plan trustee
purchases stock for each of them as a part of its purchases for all other
participants in the plans. Both Messrs. Frank B. Rosenberg and Henry A.
Rosenberg, Jr. have undertaken, for a period of twelve months from January
2000, or such shorter period to which the Crown Board may consent, that neither
of them would change or amend those pre-existing elections. See "SECURITY
OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT--Directors and
Officers" on page .
Stockholder Litigation. Messrs. Henry A. Rosenberg, Jr., Edward L. Rosenberg
and Frank B. Rosenberg are named defendants in a derivative lawsuit brought in
December 1998 by five Crown stockholders on behalf of Crown against Crown's
then-current directors and three of its non-director officers. Upon completion
of the merger, stockholders of Crown prior to the merger will have no rights in
the Crown common stock other than the right to receive $9.50 per share. As a
result, former stockholders may lose standing to continue the derivative
lawsuit. See "-Stockholder Litigation" on page .
Effects of the Merger on Interested Persons' Stock Plans. Crown's executive
officers hold options to purchase shares of Crown Class B common stock pursuant
to Crown's 1994 Long-Term Incentive Plan and 1995 Management Stock Option Plan,
and also hold performance units pursuant to Crown's 1999 Long-Term Incentive
Plan.
. Options. As of March 31, 2000, the outstanding Crown options had
exercise prices between $7.75 and $17.69. In connection with the merger,
the options will become fully vested and immediately exercisable
(including options that, in the ordinary course, would not have been
exercisable and vested at the time the merger becomes effective). Upon
completion of the merger, each outstanding option to purchase Crown
Class B common stock will convert into an option for the surviving
corporation with the same relative rights and exercise prices as applied
to such option immediately before the merger. Promptly after the merger,
Rosemore will or will cause the surviving corporation to provide each
holder of options with the opportunity to receive payment for the
cancellation of his/her options at prices ranging from $0.85 to $3.21
per option based upon a discounted Black-Scholes valuation that reflects
the strike price and term of the option and also the relatively limited
trading activity in the underlying stock.
. Performance Vested Restricted Stock. In connection with the merger,
restrictions on outstanding stock awards for 199,825 shares of Crown
Class B common stock will lapse, any restrictive legend contained on any
Crown stock certificate(s) related thereto will be removed and any Crown
stock certificate(s) related thereto held in escrow by Crown pursuant to
the terms of any stock plan or otherwise will be released to the grantee
of such Crown stock award (including stock awards that, in the ordinary
course, would not have had their restrictions lapse and would not have
been released to the grantee for a period of time ranging from six to
thirty months, depending upon the grant date). At the time the merger
becomes effective, each executive will be paid $9.50 for each share of
formerly restricted Crown common stock held by him/her, less any
applicable taxes.
. Stock Appreciation Units. In connection with the merger, the stock
appreciation units will become payable (including stock appreciation
units that, in the ordinary course, would not have become payable at the
time the merger becomes effective) and must be promptly exercised. A
floor price of $14.91 was established for the outstanding stock
appreciation units (based on the fair market value of Crown Class B
common stock during the previous three calendar years). Holders of stock
appreciation units are entitled to payment of the difference between the
market price of the Crown Class B common stock and the floor price. As
the established floor price of the stock appreciation units is higher
than the value of the Class B common stock on the date of the merger, no
amounts will be paid out with respect to the stock appreciation units,
and these units will cease to continue as an obligation under the stock
plans.
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The following table sets forth the value of the options outstanding under
Crown's stock plans (based on the prices to be paid for the cancellation of
each option) and the value of the number of shares of Crown common stock
represented by performance vested restricted stock awards held by Crown's chief
executive officer and four other most highly compensated executive officers and
all of the executive officers as a group:
<TABLE>
<CAPTION>
Crown Executive Officers Option Value PVR Stock
------------------------ ------------ ----------
<S> <C> <C>
Henry A. Rosenberg, Jr................................ $ 397,669 $ 689,700
Randall M. Trembly.................................... $ 126,497 $ 222,205
John E. Wheeler, Jr................................... $ 97,069 $ 154,375
Thomas L. Owsley...................................... $ 70,788 $ 96,710
Frank B. Rosenberg.................................... $ 67,500 $ 91,865
All executive officers as a group including those
listed above (12 officers)........................... $1,015,894 $1,592,675
</TABLE>
Waivers. As a condition to the willingness of Rosemore and RAC to enter into
the merger agreement, Rosemore required that twelve Crown executives enter into
a waiver agreement relating to certain of their rights to severance benefits.
See "THE MERGER AGREEMENT--Waiver Agreements" on page .
Stockholder Litigation
Stockholder Derivative Lawsuit. On December 15, 1998, five stockholders filed a
derivative lawsuit in District Court for Harris County, Texas against each of
Crown's then-current directors and three of its non-director officers,
including Messrs. Henry A. Rosenberg, Jr., Edward L. Rosenberg and Frank B.
Rosenberg. One non-director officer was subsequently dismissed from the
lawsuit. Knox, et al. v. Rosenberg, et al., C.A. No. 1998 58870. Three of the
plaintiff stockholders are locked-out union employees and the remaining two are
retired union employees. The defendants removed the case to the U.S. District
Court for the Southern District of Texas, H-99-0123. The suit alleges that
Crown's executive management is liable for breach of its fiduciary duties to
Crown and for gross mismanagement and abuse of control for the way in which it
has conducted Crown's affairs. The suit further alleges that the defendant
board members breached their fiduciary duties, abused their control and grossly
mismanaged Crown by failing to properly oversee Crown and its executives'
management of Crown while allowing those executives to self-deal and unjustly
enrich themselves with excessive salaries, benefits and perquisites. In
addition, the suit alleges that Crown's executive management and board members
made misrepresentations to, and concealed material facts from Crown and its
stockholders, by suggesting that Crown was well-managed and that workers were
responsible for any financial troubles that Crown was experiencing. On
September 27, 1999, the Court dismissed the action for the plaintiffs' failure
to make pre-suit demand on Crown's Board or to allege with particularity facts
sufficient to demonstrate why demand would have been futile. The plaintiffs
were granted leave to amend and on November 29, 1999 they filed a Second
Amended Complaint. The defendants filed a Motion to Dismiss the Second Amended
Complaint based on the plaintiffs' continuing failure to allege with
particularity facts sufficient to excuse pre-suit demand. The Second Amended
Complaint subsequently was withdrawn and re-filed as a purported "Restated"
Second Amended Complaint. The defendants have filed a Motion to Dismiss the
Second Amended Complaint and the "Restated" Second Amended Complaint for the
plaintiffs' continuing failure to comply with the Federal Rules of Civil
Procedure. Pursuant to undertakings received from the individual defendants,
Crown is advancing the defense costs and expects to indemnify the defendants to
the extent permitted by law and Crown's charter and bylaws.
Upon completion of the merger, stockholders of Crown prior to the merger
will have no rights in the Crown common stock other than the right to receive
$9.50 per share. As a result, former stockholders may lose standing to continue
the derivative lawsuit.
Stockholder Class Action Lawsuit. On March 9, 2000, a purported class action
lawsuit was filed in the Circuit Court for Baltimore City, Maryland on behalf
of the public stockholders of Crown by Ms. Betty Maiden against Crown, the
members of the Crown Board, and Rosemore. On May 11, 2000, Ms. Maiden, together
with
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Mr. Christopher Burkhardt, filed an amended complaint in the lawsuit. Maiden v.
Crown Central Petroleum Corporation, et al. #24-C-00-001238 (Circuit Court for
Baltimore City, Maryland). The amended complaint sought to enjoin the merger
and alleged that the defendants were breaching their fiduciary duties to the
public stockholders and were engaging in self dealing and in improper, unfair
and unlawful conduct. In the alternative, the plaintiffs sought compensatory
and/or "rescissory" damages if the merger was consummated. On May 26, 2000, the
defendants filed a motion to dismiss the amended complaint on the grounds that,
among other things, the complaint failed to allege facts that would constitute
a breach of fiduciary duty by the defendants. At the request of plaintiff's
counsel, the parties agreed to dismiss the case with prejudice, and a
stipulation of dismissal signed by counsel for all parties was filed on June
15, 2000, dismissing the case.
Union Corporate Campaign
Crown's collective bargaining agreement with the Paper, Allied-Industrial,
Chemical and Energy Workers Union ("PACE"), formerly the Oil, Chemical & Atomic
Workers Union, covering employees at the Pasadena refinery expired on February
1, 1996. Following a number of incidents apparently intended to disrupt normal
operations at the refinery and also as a result of the unsatisfactory status of
the negotiations, on February 5, 1996 Crown implemented a lock-out of employees
in the collective bargaining unit at the Pasadena facility. PACE subsequently
filed a number of unfair labor practice charges with the National Labor
Relations Board ("NLRB"), and it continues to file lock-out related charges.
All of the charges that have been considered to date have been dismissed by the
NLRB. Since the lock-out, PACE has waged an orchestrated corporate campaign
including sponsoring a boycott of Crown's retail facilities and supporting
various lawsuits against Crown. The lawsuits include: Texans United for a Safe
Economy Education Fund, et al. vs. Crown Cental Petroleum Corporation, a
citizens' suit under the Clean Air Act; Allman, et al. vs. Crown Central
Petroleum Corporation, et al., a suit for damages related to emissions from the
Pasadena refinery; Loretta Burrell, et al. vs. Crown Central Petroleum
Corporation, a purported class action suit alleging race and sex
discrimination; Knox, et al. vs. Rosenberg, et al., a shareholder derivative
lawsuit; and Maiden vs. Crown Central Petroleum Corporation, et al., a
purported shareholder class action lawsuit which has been dismissed. Regulatory
complaints have been filed with the Texas Natural Resource Conservation
Commission, the U.S. Environmental Protection Agency and other agencies. In
addition, letters of complaint have been filed with some regulatory agencies,
including the SEC. Crown has been operating the Pasadena refinery since the
lock-out and intends to continue to do so during the negotiation period with
the collective bargaining unit. The impact of the corporate campaign on Crown
is difficult to measure. There can be no assurance as to when or how the lock-
out, corporate campaign and associated boycott will be resolved or what the
effect of a resolution might be. The lock-out and negotiations on a new
contract continue.
Accounting Treatment
The merger will be accounted for by Rosemore under the purchase method of
accounting in accordance with accounting principles generally accepted in the
United States. Under this accounting method, Crown's historical results for the
periods before the merger will remain unchanged. In addition, the aggregate
consideration paid by Rosemore in connection with the merger, together with the
direct costs of acquisition, will be allocated to Crown's assets and
liabilities and measured at their fair values. The excess of the investment
cost over the net assets' fair value will be recognized as an intangible asset
(goodwill). Crown's pre-merger earnings will be excluded from the net income of
the combined enterprise. Crown's retained earnings will not carry over to the
combined enterprise. Costs incurred to effect the merger will be capitalized by
adding to the investment cost.
Regulatory Approvals
The merger agreement provides that Rosemore and Crown will use their
reasonable best efforts to cause the merger to be consummated, including the
obtaining of all necessary consents, waivers, permits, authorizations, orders
and consents of third parties, whether private or governmental, in connection
with the merger.
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Except for the filing of articles of merger with the State Department of
Assessments and Taxation of Maryland, after Crown's stockholder approval of the
merger and merger agreement and compliance with federal and state securities
laws, neither Rosemore nor Crown is aware of any material U.S. federal or state
or foreign governmental regulatory requirement that must be complied with, or
approval that must be obtained, in connection with the merger.
Each of Crown and Rosemore have provided notice of and information regarding
the merger to the Federal Trade Commission and the Antitrust Division of the
Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 for their review. On May 26, 2000, the required waiting period
under the Act relating to the merger was terminated by the Federal Trade
Commission. At any time before or after the completion of the merger, either
the Federal Trade Commission or the Antitrust Division could take any action
under the antitrust laws as it deems necessary or desirable in the public
interest. Other persons could also take action under the antitrust laws,
including an attempt to enjoin the merger. Accordingly, it is possible that a
challenge to the merger on antitrust grounds will be made, and, if made, it is
uncertain what the result will be. Crown believes, however, that the
anticipated closing of the merger will not violate any antitrust laws.
No Appraisal Rights
If you decide to vote against the merger and merger agreement, i.e., dissent
or withhold your vote, you will not be entitled to seek statutory appraisal
rights or other similar rights under Maryland law. If the merger is approved by
the required vote, stockholders who vote against the merger, like stockholders
who vote to approve the merger, will be bound by the terms of the merger.
The Maryland General Corporation Law does not provide statutory appraisal
rights or any other similar remedy to stockholders of a corporation in
connection with a merger if the corporation's shares are listed on a national
securities exchange on the record date for determining stockholders entitled to
vote on the merger and merger agreement. All shares of Crown common stock
outstanding on the record date for determining stockholders entitled to vote on
the merger and merger agreement at the Special Meeting were listed on the AMEX.
Delisting and Deregistration of Crown Common Stock after the Merger
Crown common stock is currently listed on the AMEX. Because all of the Crown
common stock outstanding immediately prior to the completion of the merger will
be cancelled in exchange for the right to receive the merger consideration as a
result of the merger, the Crown Class A and Class B common stock will be
delisted from the AMEX.
Crown common stock is currently registered under the Exchange Act. Crown has
stated its intention to terminate registration of Crown common stock under the
Exchange Act following the merger. The termination of registration of the
common stock under the Exchange Act will reduce the information required to be
furnished to the SEC and will make certain of the provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and
the requirement of furnishing a proxy or information statement in connection
with stockholders meetings, no longer applicable. Crown will, however, remain
required under the indenture relating to the 10 7/8% senior notes, whether or
not it is subject to Section 13(a) or 15(d) of the Exchange Act and to the
extent permitted under the Act, to file with the SEC and the indenture trustee,
and transmit to the noteholders, the annual reports, quarterly reports and
other documents which Crown would have been required to file with the SEC
pursuant to Section 13(a) or 15(d) were it still subject to those sections. If
the filing of the documents with the SEC is not permitted under the Exchange
Act, Crown will, upon the written request and payment of the reasonable cost of
duplication and delivery by the noteholders, prepare and supply at Crown's cost
copies of such documents to the noteholders.
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THE MERGER AGREEMENT
The merger agreement provides for the merger of RAC with and into Crown,
with Crown continuing as the surviving corporation after the merger. This
section of the proxy statement describes material provisions of the merger
agreement. Because the description of the merger agreement contained in this
proxy statement is a summary, it does not contain all of the information that
may be important to you. You should carefully read the entire copy of the
merger agreement attached as Exhibit A to this proxy statement before you
decide how to vote. The merger agreement attached as Exhibit A to this proxy
statement qualifies the description of the merger agreement contained in this
document in its entirety and is incorporated by reference into this proxy
statement.
Completion of the Merger
Closing. Unless the parties agree otherwise, the closing of the merger will
take place as promptly as practicable and no later than the second business day
after the date on which certain closing conditions have been satisfied or
waived or any other time as agreed to in writing by Rosemore and Crown.
Effective Time of the Merger. The merger will be effective upon the filing of
the articles of merger with the State Department of Assessments and Taxation of
Maryland, or at such time not to exceed 30 days after acceptance for record as
agreed to by Rosemore and Crown. See "- Conditions to the Merger" on page .
Effect of Merger. At the effective time, all outstanding shares, other than
shares held by Rosemore Holdings, of Class A common stock and Class B common
stock will be converted into the right to receive $9.50 per share in cash.
Following the merger, Crown will become an indirect wholly owned subsidiary of
Rosemore.
Representations and Warranties of Crown and Rosemore
The merger agreement contains various representations and warranties of
Crown relating to:
. proper organization and good standing of Crown and its subsidiaries;
. the charter and bylaws of Crown;
. the capitalization of Crown;
. the corporate authorization and enforceability of the merger agreement;
. compliance with laws;
. the filing of SEC reports and the preparation of financial statements;
. the absence of certain material adverse changes or events;
. employee benefit plans and labor matters;
. material contracts and debt instruments;
. litigation;
. environmental matters;
. trademarks, patents and copyrights;
. taxes;
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. title to personal property, real property and leases;
. Crown's shareholder rights plan;
. insurance;
. Crown Board recommendation;
. opinion of financial advisor;
. brokers;
. required stockholder vote to approve the merger and merger agreement and
state takeover statutes;
. directors of the surviving corporation; and
. waiver of certain obligations.
The merger agreement contains various representations and warranties of
Rosemore and RAC relating to:
. proper organization and good standing of Rosemore and RAC;
. compliance with laws;
. absence of litigation;
. brokers;
. purpose of RAC;
. financing of the merger; and
. ownership of Crown common stock.
Certain Covenants
The merger agreement contains certain covenants relating to:
. filing of this proxy statement and a transaction statement on Schedule
13E-3;
. Crown's obligation to call a stockholders' meeting to vote on the
approval of the merger and merger agreement;
. access to information and confidentiality of information;
. election of directors of the surviving corporation after the merger;
. directors' and officers' indemnification and insurance;
. Hart-Scott-Rodino Act filing and obtaining necessary regulatory and
other authorizations;
. amendment of Crown's shareholder rights plan;
. the waiver by certain Crown officers of severance benefits under the
executive severance plan (See "- Waiver Agreements" on page );
. public announcements; and
. amendment of certain employee benefit plans.
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<PAGE>
Waiver Agreements
As a condition of the willingness of Rosemore and RAC to enter into the
merger agreement, Rosemore required that twelve executives of Crown execute
waiver agreements with Crown. Generally, under the waiver agreements, the
executives agreed, among other things:
. to the shortening of the period of time following the merger during
which the executive would otherwise be entitled to certain significant
cash severance payments in the event his or her employment is terminated
under certain circumstances, from two years following the merger to
November 30, 2001;
. to surrender all options Crown granted under the Crown stock plans to
Crown in exchange for payment of between $.85 and $3.21 per option
(depending on the exercise price and the expiration date of the option);
. that a change in his or her duties or responsibilities following the
merger relating to Crown becoming a private company or a change in the
person to whom the executive reports will not constitute a "good reason"
for such executive to resign and be entitled to significant cash
severance benefits; and
. that any reduction in Crown's refining capacity or in the number of
retail units Crown operates will not trigger a "change of control" that
would act to extend the November 30, 2001 period referred to above.
No Solicitation of Acquisition Transactions
Competing Transaction. The merger agreement provides that Crown and its
subsidiaries, officers, directors, employees, agents or other representatives
will not initiate, solicit or encourage any inquiries or the making of any
proposal or offer with respect to:
. a merger, reorganization, business combination, liquidation, dissolution
or other similar transaction involving Crown;
. the purchase or sale of all or any significant portion of the assets of
Crown and its subsidiaries, taken as a whole; or
. the purchase or sale of 15% or more of the equity securities of Crown.
Crown, its subsidiaries and their officers, directors, employees, agents or
other representatives will not have any discussion with or provide any
confidential information relating to Crown or its subsidiaries to any person
relating to a competing transaction or engage in or facilitate any negotiations
concerning a competing transaction unless:
. Crown concludes in good faith, after consultation with independent
financial advisors, that such competing transaction would, if
consummated, be more favorable to Crown's stockholders than the merger
(a "Superior Proposal");
. either the Crown Board or the Independent Committee determines in good
faith, after consultation with independent legal counsel, that such
action is necessary for the Crown Board to act consistently with its
fiduciary duty;
. prior to providing any Crown confidential information in response to
such Superior Proposal, Crown receives a confidentiality agreement with
respect to such person at least as restrictive with such person as the
confidentiality agreement entered into with Rosemore; and
. prior to providing any Crown confidential information or entering into
any discussions with such person making a Superior Proposal, Crown gives
notice to Rosemore of the identity of the person making, and the terms
of, the Superior Proposal.
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<PAGE>
Conduct of the Business of Crown before the Merger
Pursuant to the merger agreement, Crown has agreed that, among other things,
prior to the merger, unless Rosemore will otherwise consent in writing, which
consent will not be unreasonably withheld or delayed, it will, and, where
applicable, will cause each of its subsidiaries to:
. conduct its business in the ordinary course of business and consistent
with past practice;
. use its reasonable best efforts to keep available the services of the
present officers, significant employees and consultants of Crown and its
subsidiaries and to preserve the current relationship with customers,
suppliers and others having significant business relations with them, in
order to preserve substantially intact its business organization;
. not amend organizational documents;
. not issue, sell, dispose of, or otherwise encumber any shares of capital
stock, any options, warrants, convertible securities or other rights of
any kind to acquire any shares of capital stock, or any other ownership
interest, of Crown or any of its subsidiaries, except for the issuance
of any shares of capital stock issuable pursuant to the exercise of any
Crown stock options outstanding as of April 7, 2000;
. not issue, sell, dispose of, or otherwise encumber any property or
assets of Crown or its subsidiaries, except in the ordinary course of
business and in a manner consistent with past practice, provided that
the aggregate amount of any such sale or disposition or pledge, grant,
transfer, lease, license, guarantee or encumbrance of the property or
assets will not exceed $500,000 or, in the case of any sale or
disposition of retail gasoline sites, $1,000,000;
. not declare, set aside, make or pay any dividend or distribution payable
in cash, stock, property or otherwise;
. not reclassify, combine, split, subdivide, redeem, purchase or otherwise
acquire its outstanding capital stock;
. not acquire any interest in any business organization other than
acquisitions of assets in the ordinary course of business consistent
with past practice which are not, in the aggregate, in excess of
$300,000 or purchases of crude oil or intermediate products for refining
or refined petroleum products or other inventory for resale in the
ordinary course of business and consistent with past practice;
. not incur any indebtedness or issue any debt securities or assume,
guarantee or endorse or otherwise become responsible for the obligations
of any person except for indebtedness incurred in the ordinary course of
business and consistent with past practice under Crown's secured credit
facility, or incurred to refinance outstanding indebtedness of Crown or
other indebtedness of Crown with a maturity of not more than one year or
a principal amount not, in the aggregate, in excess of $1,000,000;
. not terminate, cancel or request or agree to any material change in any
material contract of Crown, or enter into any contract or agreement
material to the business, results of operations or financial condition
of Crown and its subsidiaries, other than in the ordinary course of
business and consistent with past practice;
. not make or authorize certain capital expenditures;
. not enter into or amend any contract or arrangement that, if fully
performed, would not be permitted under the previous four provisions;
. not increase the compensation of officers or employees, except for
increases in accordance with past practices in salaries of employees who
are not officers of Crown;
55
<PAGE>
. not grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of Crown or its subsidiaries;
. not establish, adopt, enter into or amend any employee benefit
agreement, except as required by the merger agreement or the terms of a
collective bargaining agreement or a contractual obligation existing on
April 7, 2000;
. not take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of accounting
principles generally accepted in the United States and as advised by
Crown's regular certified independent public accountants;
. not waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $250,000; and
. not make any material tax election or settle any material tax liability.
Pursuant to the merger agreement, each of Crown and Rosemore will give
prompt notice to the other of:
. any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
merger;
. any notice or other communication from any governmental entity in
connection with the merger;
. any actions or proceedings commenced or, to the best of the party's
knowledge, threatened in writing against or relating to Rosemore, Crown
or their subsidiaries that relate to the completion of the merger;
. the occurrence of a default or event that will become a default under
any of Crown's material contracts; and
. any change that is reasonably likely to result in a material adverse
effect under the merger agreement or is likely to delay or impede the
ability of either Rosemore or Crown to complete the transactions
contemplated in the merger agreement or to fulfill its obligations under
the merger agreement.
Employee Stock Plans
Effective as of the completion of the merger, each outstanding Crown stock
option or stock appreciation unit will:
. become fully vested and immediately exercisable;
. for options--remain outstanding and become the surviving corporation's
stock option with the same rights and relative exercise prices as
applied to the Crown stock options immediately prior to the completion
of the merger and otherwise subject to the terms of the Crown stock
plans pursuant to which the Crown stock option was issued; and
. for stock appreciation units--be cancelled as the established floor
price for the stock appreciation units is higher than the value of the
Crown Class B common stock on the date of the merger.
Promptly after the completion of the merger, Rosemore will or will cause
Crown to provide each holder of Crown stock options with the opportunity to
receive payment for the cancellation of his or her stock options. Any payments
related to the cancellation of his or her stock options will be subject to all
applicable federal, state and local tax withholding requirements.
56
<PAGE>
At the completion of the merger, restrictions on the performance vested
restricted stock will lapse and each holder of performance vested restricted
stock will be paid in full satisfaction of such performance vested restricted
stock.
Indemnification and Insurance
Following the merger, the charter and bylaws of the surviving corporation
will contain the provisions regarding liability of directors and
indemnification of directors and officers that are set forth, as of April 7,
2000, in the charter and bylaws of Crown. For a period of six years from the
completion of the merger those provisions will not be amended, replaced or
otherwise modified in a manner that would affect adversely the rights of
individuals who at or prior to the completion of the merger were directors,
officers, employees, fiduciaries or agents of Crown. In addition, for a period
of six years from the completion of the merger, the surviving corporation will
maintain insurance policies for directors and officers with coverage relating
to claims arising from facts or events that occurred prior to the completion of
the merger as extensive as Crown's existing policies.
The merger agreement provides that, following the merger, the surviving
corporation will indemnify each present and former director and officer of
Crown for all costs incurred in connection with any claim, action, suit,
proceeding or investigation, arising out of matters existing or occurring at or
prior to the completion of the merger.
Conditions to the Merger
Conditions to Each Party's Obligation to Complete the Merger. The respective
obligation of Crown, Rosemore and RAC to effect the merger is subject to the
satisfaction of the following conditions, unless waived by the parties:
. Stockholder Approval. The merger and merger agreement will have been
approved by the requisite affirmative vote of the stockholders of Crown
under applicable law.
. No Proceedings. No preliminary or permanent injunction, decree or other
order issued by any governmental entity or other legal restraint or
prohibition preventing the completion of the merger will be in effect,
and no law will have been enacted or adopted that enjoins, prohibits or
makes illegal the completion of the merger.
. Hart-Scott-Rodino Act. The waiting period applicable to the completion
of the merger under the Hart-Scott-Rodino Act will have expired or been
terminated.
Additional Conditions to the Obligation of Rosemore and Rosemore Acquisition
Corporation. The obligation of Rosemore and RAC to effect the merger is further
subject to the satisfaction of the following additional conditions, unless
waived by Rosemore and RAC:
. Representations and Warranties. The representations and warranties of
Crown contained in the merger agreement will be true and correct in all
material respects as of the time of the merger as if made at and as of
such time, except that the representations and warranties that address
matters only as of a particular date will remain true and correct in all
material respects as of such date and Rosemore will have received a
certificate of the chief financial officer of Crown to that effect. Any
representation or warranty of Crown which would otherwise not be true
and correct in all material respects, that was made by Crown (1) with
the approval of Mr. Henry A. Rosenberg, Jr. despite his actual knowledge
that such representation and warranty was false; and (2) without
knowledge on April 7, 2000, by any of the other officers or directors of
Crown that such representation or warranty was false, will be deemed to
be true and correct in all material respects.
57
<PAGE>
. Performance of Obligations. Crown will have performed or complied in all
material respects with all agreements and covenants required by the
merger agreement and Rosemore will have received a certificate of the
chief financial officer of Crown to that effect.
. Governmental Approvals. All consents, approvals, waivers and
authorizations required to be obtained to complete the merger will have
been obtained from all governmental entities, except if the failure to
obtain any such consents would not result in a material adverse effect
under the merger agreement.
. Third Party Consents. All consents, approvals, waivers and
authorizations of third parties the failure of which to obtain would
result in a material adverse effect under the merger agreement will have
been obtained.
. No Event of Default. No event of default under the indenture relating to
the 10 7/8% senior notes will have occurred and the completion of the
merger will not result in the occurrence of an event of default under
the indenture. Under the indenture, Crown is required to comply with
certain financial performance criteria in order to be able to consummate
the merger.
Additional Conditions to the Obligations of Crown. The obligation of Crown to
effect the merger is further subject to the satisfaction of the following
additional conditions, unless waived by Crown:
. Performance of Obligations/Representations and Warranties. Rosemore and
RAC will have performed or complied in all material respects with all of
their agreements and covenants in the merger agreement, and the
representations and warranties of Rosemore and RAC will be true and
correct in all material respects as of the time of the merger as if made
at and as of such time, except that those representations and warranties
that address matters only as of a particular date will remain true and
correct in all material respects as of such date and Crown will have
received a certificate of the chief financial officer of Rosemore to
that effect.
Organization of the Business of the Surviving Corporation after the Merger
Following the merger between RAC and Crown, Crown will be an indirect wholly
owned subsidiary of Rosemore. Pursuant to the merger agreement, the charter of
RAC, as in effect immediately prior to the time of the merger, will be the
charter of Crown following the merger, except that it will be amended to
provide that the name of the surviving corporation will be "Crown Central
Petroleum Corporation." Pursuant to the merger agreement, the bylaws of RAC, as
in effect immediately prior to the time of the merger will be the bylaws of
Crown following the merger. After the merger, the organizational documents may
be amended as provided by applicable law and by the organizational documents of
Crown.
Termination, Amendment or Waiver
Termination. The merger agreement may be terminated at any time prior to the
merger, whether before or after the approval by the stockholders of Crown:
. by the mutual written consent of the boards of directors of Crown and
Rosemore and the Independent Committee;
. by either Rosemore or Crown if:
- the merger is not completed by August 31, 2000, so long as the delay
or default was not on the part of the terminating party;
- the merger is restrained, enjoined or otherwise prohibited by a
court order or any law is enacted that enjoins, prohibits or makes
illegal completion of the merger; or
- any required approval of the merger or merger agreement by the
stockholders of Crown is not obtained due to the failure to obtain
the required vote at Crown's stockholders meeting; or
58
<PAGE>
. by Rosemore upon a breach of, or failure to perform in any material
respect, any representation, warranty, covenant or agreement on the part
of Crown contained in the merger agreement, which had caused certain
conditions to the obligation of Crown to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
. by Crown upon a breach of, or failure to perform in any material
respect, any representation, warranty, covenant or agreement on the part
of Rosemore contained in the merger agreement, which had caused certain
conditions to the obligation of Rosemore to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
. by Rosemore if:
- the Crown Board withdraws, modifies or changes its recommendation of
the merger agreement in a manner adverse to Rosemore or resolves to
do so;
- after receiving a proposal relating to a competing transaction the
Crown Board refuses to affirm its recommendation of the merger
agreement with Rosemore upon request by Rosemore;
- the Crown Board recommends to its stockholders a competing
transaction or resolves to do so; or
. a tender offer or exchange offer for 15% or more of the outstanding
shares of Crown common stock is commenced and the Crown Board fails to
recommend against acceptance of the tender offer or exchange offer by
its stockholders.
Amendment. The merger agreement may be amended by action taken by the parties'
respective boards of directors, including the approval of the Independent
Committee with respect to Crown, at any time prior to the time of the merger.
Following the approval of the merger agreement by Crown stockholders, no
amendment will be made which would reduce the amount of or change the type of
consideration into which each share of Crown common stock will be converted
upon the completion of the merger.
Waiver. At any time prior to the time of the merger, either party to the merger
agreement may, in writing:
. extend the time for the performance of any obligation or other act of
the other party to the merger agreement;
. waive any inaccuracy in the representations and warranties contained in
the merger agreement or in any document delivered pursuant to the merger
agreement; and
. waive compliance with any agreement or condition contained in the merger
agreement.
Expenses and Termination Fee
Expenses. The merger agreement provides that all costs and expenses incurred in
connection with the merger and merger agreement will be paid by the party
incurring those expenses, whether or not the merger is completed, except:
. if Crown or Rosemore terminates the merger agreement due to the failure
of Crown's stockholders to approve the merger and merger agreement and
at the time of such failure there exists a publicly announced competing
transaction with respect to Crown and within 12 months of the
termination of the merger agreement, Crown enters into an agreement with
any third party with respect to a competing transaction, which
transaction is subsequently completed, then Crown will reimburse all
reasonable documented expenses of Rosemore and RAC.
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<PAGE>
No Termination Fee. The merger agreement provides that the above reimbursement
will be the sole and exclusive remedy of the parties upon a termination of the
merger agreement based upon the termination of the merger agreement due to the
failure of Crown's stockholders to approve the merger and merger agreement;
provided, however, that nothing in the merger agreement relieves any party from
liability for the willful breach of any of its representations or warranties,
and the breach of any of its covenants or agreements set forth in the merger
agreement.
SHAREHOLDER RIGHTS PLAN
On February 1, 2000, Crown adopted a one-year shareholder rights plan in
which rights to purchase its preferred stock were distributed to holders of its
common stock on February 15, 2000 to ensure that any strategic transaction
undertaken by Crown will be one in which all stockholders can receive fair and
equal treatment, and to guard against partial tender offers, open market
accumulations and other abusive tactics that might result in unequal treatment
of stockholders.
Under the rights plan, the Crown Board created two new classes of preferred
stock, known as Series A and Series B Junior Participating Preferred Stock.
Crown declared a dividend distribution of one preferred stock purchase right on
each outstanding share of its common stock. Each right entitles stockholders to
buy one one-thousandth of a share of preferred stock at an exercise price of
$16.00, with Crown Class A common stock receiving purchase rights for the
Series A preferred stock and the Crown Class B common stock receiving purchase
rights for the Series B preferred stock.
Generally, the rights become exercisable only if a person or group acquires
a substantial block (i.e., 15% or more) of either class of common stock or
announces a tender offer which may result in any person becoming the owner of a
substantial block of either class. For persons owning in excess of 14% of any
class as of the date of the adoption of the rights plan, however, the rights
plan "grandfathers" their current level of ownership (as indicated on such
person's federal securities law filings) plus an additional 1% of that class.
Under the rights plan, the Crown Board can pre-approve a tender offer or
other transaction which would otherwise trigger the rights plan. If a person
acquires a substantial block of either class of Crown common stock other than
pursuant to an offer or transaction which has been pre-approved by the Crown
Board, each right then will entitle its holder to purchase a number of shares
of Crown common stock having a market value at that time of twice the right's
exercise price, except for the rights held by the person who acquired the
substantial block of stock and those rights will become void and will not be
exercisable to purchase shares at the discounted purchase price.
If, after a person has acquired a substantial block of Crown common stock
other than pursuant to a Crown Board approved offer or transaction, Crown is
acquired in a merger or other business combination transaction, each right
(other than the rights held by the owner of the substantial block) will entitle
its holder to purchase a number of the acquiring person's common shares having
a market value at the time of twice the right's exercise price.
The rights plan permits Crown to redeem each purchase right at the option of
the Crown Board for $.001 per right or for one one-thousandth of a share of
common stock, at any time before a person acquires a substantial block of
either class of common stock. Until the rights become exercisable, no separate
rights certificate will be issued to stockholders. Instead, the rights will be
evidenced by the certificates for the Crown common stock. At the time the
rights become exercisable, rights certificates will be distributed to holders
of the Crown common stock. The rights plan will expire at the close of business
on February 14, 2001.
In connection with its approval of the merger and merger agreement, the
Crown Board modified the rights plan, by amending the definition of "Final
Expiration Date" to provide that the earlier of the close of business on
February 14, 2001 or that time which is immediately prior to acceptance by the
State Department of
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<PAGE>
Assessments and Taxation of Maryland of articles of merger consummating the
merger between Crown and RAC will constitute the final expiration date under
the rights plan. The Crown Board also declared the merger and merger agreement
to be an approved transaction under the rights plan, so that the execution of
the merger agreement would not result in a distribution date under the rights
plan, or the separation of the rights from the common stock to which they are
attached.
RELATED PARTY TRANSACTIONS
Prior to entering into the merger agreement, Crown and Rosemore engaged in a
number of transactions with one another. The management of Crown believes that
all such transactions between Crown and Rosemore are the result of arm's-length
negotiations between the parties and are fair to Crown.
Rosemore Holdings, a wholly owned subsidiary of Rosemore, owns directly over
49% of the Crown Class A common stock and over 11% of the Crown Class B common
stock. Trusts for the benefit of Mr. Henry A. Rosenberg, Jr. and for members of
his immediate family and for the benefit of his sisters, Mrs. Ruth R. Marder
and Mrs. Judith R. Hoffberger, and for members of their immediate families,
hold all of the Rosemore stock. Rosemore, Rosemore Holdings and various
individuals who are beneficial owners of Rosemore stock are a "group" as that
term is used in Section 13(d)(3) of the Exchange Act; accordingly, the Rosemore
group has filed Statements of Beneficial Ownership on Schedule 13Ds to report
its holdings of Class A and Class B common stock.
In early 1999, Rosemore agreed to participate in Crown's working capital and
letter of credit facility established pursuant to its secured credit facility
(the "working capital facility"). Rosemore's participation resulted in an
increase of $50,000,000 in the credit limit under this facility. Rosemore is
compensated at competitive rates for its participation in the facility as it
relates to the availability of certain letters of credit issued for the account
of Crown. Payments for 1999 comprised of commitment and utilization fees
totaled approximately $147,000. Of this amount, in accordance with the terms of
the working capital facility, Rosemore paid approximately $49,000 to First
Union.
Crown terminated its aircraft lease with General Electric Credit Corporation
in early 1999. Rosemore subsequently entered into an aircraft lease with
General Electric Credit Corporation. Crown then assigned its lease with the
Maryland Aviation Administration of hangar space at Martin State Airport to
Rosemore, and Rosemore has purchased from Crown for $345,000 the leasehold
improvements, furniture and various supplies and spare parts formerly used by
Crown in connection with its operation of the aircraft and the related charter
activities.
During 1999, Rosemore and its subsidiaries purchased certain entertainment
and oil product related assets of Crown for approximately $208,000.
During the first quarter of 2000, Crown negotiated agreements with Rosemore
whereby Rosemore will provide up to $66 million in performance guarantees
relating to Crown's purchase of crude oil, feedstocks and other petroleum
products pursuant to an arrangement currently scheduled to expire on August 30,
2000, and up to approximately $13.45 million in cash borrowing availability
pursuant to an arrangement currently scheduled to expire on July 31, 2000.
Rosemore will be compensated at competitive rates for its performance
guarantees and cash borrowing availability. Under these arrangements, Crown
currently has guarantees of $39.4 million from Rosemore and no outstanding
borrowings. Payments and obligations incurred in 2000 through July 10, 2000 in
guarantee fees and interest on prior borrowings under these arrangements and
commitment and utilization fees under the working capital facility have totaled
approximately $230,000. Of this amount, in accordance with the terms of the
working capital facility, Rosemore paid approximately $91,000 to First Union.
In connection with entering into these arrangements, as well as the working
capital facility referred to above, Crown provided the opinions of CSFB to the
trustee in accordance with the requirements of the indenture governing the 10
7/8% senior notes.
Mr. Edward L. Rosenberg, president and chief executive officer of Rosemore,
was formerly employed by Crown. In December 1998, Mr. Rosenberg resigned from
the position of Executive Vice President-Supply and Transportation and no
longer works for Crown.
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<PAGE>
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT
Owners of More than Five Percent
The following table sets forth the class of shares of Crown common stock,
and the amount and percentage of that class, owned by all persons known by
Crown to be the beneficial owners of more than 5% of the shares of any class
of Crown common stock on July 10, 2000:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF TITLE PERCENT
BENEFICIAL OWNER OF CLASS AMOUNT OF CLASS
------------------- -------- --------- --------
<S> <C> <C> <C>
Rosemore "Group" (a) Class A 2,401,232 49.85
One North Charles Street Class B 954,024 17.30
Suite 2300
Baltimore, MD 21201
Novelly "Group" (b) Class A 708,375 14.70
8182 Maryland Avenue Class B 182,800 3.48
St. Louis, MO 63105
Dimensional Fund Advisors Inc. (c) Class A 288,850 6.00
1299 Ocean Avenue, 11th Floor Class B 291,100 5.54
Santa Monica, California 90401
Heartland Advisors, Inc. (c) Class B 900,000 17.14
789 North Water Street
Milwaukee, WI 53202
Franklin Resources, Inc. (c) Class B 309,600 5.90
Mariners Island Boulevard
P.O. Box 7777
San Mateo, CA 94403
</TABLE>
(a) Rosemore Holdings, a wholly owned subsidiary of Rosemore, owns directly
over 49% of Crown Class A common stock and over 11% of Crown Class B common
stock. Trusts for the benefit of Mr. Henry A. Rosenberg, Jr. and for members
of his immediate family and for the benefit of his sisters, Mrs. Ruth R.
Marder and Mrs. Judith R. Hoffberger, and for members of their immediate
families hold all of the Rosemore stock. Rosemore, Rosemore Holdings and
various individuals who are beneficial owners of Rosemore stock are a "group"
as that term is used in Section 13(d)(3) of the Exchange Act; accordingly, the
Rosemore group has filed reports on Schedule 13D with the SEC to report its
holdings of Class A and Class B common stock. Rosemore Holdings is the holder
of 2,366,526 shares of Class A common stock and 591,629 shares of Class B
common stock, and other members of the Rosemore group are the holders of
34,706 shares of Class A common stock and 362,395 shares of Class B common
stock. The Class B common stock shown in the table includes 82,270 shares of
stock granted to members of the Rosemore group as performance vested
restricted stock under Crown's 1994 Long-Term Incentive Plan and 263,039
shares that members of the Rosemore group have a right to acquire pursuant to
options granted under the 1994 Long-Term Incentive Plan that vested on or
before July 10, 2000. No additional options will vest for members of the
Rosemore group within 60 days of July 10, 2000. The percentage calculation is
based on the shares outstanding plus the shares that may be acquired pursuant
to vested options granted to members of the Rosemore group.
(b) This information was obtained from a report on Schedule 13D dated
January 14, 1983 and Amendment No. 11 dated November 8, 1999, which were filed
with the SEC. The Novelly Exempt Trust and others acknowledge that they are a
"group" as that term is used in Section 13(d)(3) of the Exchange Act.
(c) Information concerning the stock holdings of Dimensional Fund Advisors
Inc., Franklin Resources, Inc. and Heartland Advisors, Inc. was obtained from
reports on Schedule 13G and amendments to those schedules that have been filed
with the SEC. Each of these three entities reports that it is registered as an
investment adviser.
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<PAGE>
Directors and Officers
The following table sets forth the number of shares of each class of Crown
stock and the percentage of each class owned by each of the directors, by
certain executive officers and by all directors and officers as a group on July
10, 2000:
<TABLE>
<CAPTION>
SHARES OF SECURITIES BENEFICIALLY OWNED
ON JULY 10, 2000 (a)
CLASS A STOCK CLASS B STOCK
------------------- ----------------------
NAME AMOUNT % AMOUNT %
<S> <C> <C> <C> <C>
Jack Africk -- -- 500 (b)
George L. Bunting, Jr. -- -- 1,000 (b)
Michael F. Dacey 1,000 (b) -- --
Thomas M. Gibbons 200 (b) -- --
Patricia A. Goldman 100 (b) -- --
William L. Jews -- -- 200 (b)
Thomas L. Owsley 100 (b) 52,471(c) (b)
Rev. Harold Ridley, S.J. -- -- 100 (b)
Frank B. Rosenberg (d) 1,863 (b) 52,482(c) (b)
Henry A. Rosenberg, Jr. (e) 2,399,369 49.81 901,542 16.47
Randall M. Trembly (f) 11,774 (b) 103,502(c) 1.95
John E. Wheeler, Jr. (f) 3,264 (b) 72,658(c) 1.37
All directors and officers as a
group including those
listed above (19 individuals) 2,423,896 50.32 1,369,712(g) 23.53
</TABLE>
(a) Each director holds sole voting and investment power over the shares
listed except for Mr. Dacey who holds his stock jointly with his wife; however,
in one or more cases the stock may be registered in the name of a trust or
retirement fund for the benefit of the director. In the case of officers of
Crown, the table includes interest in shares held by the trustee under the
Savings Plans, the Class B common stock granted as performance vested
restricted stock under the 1994 Long-Term Incentive Plan (but not shares of
performance vested restricted stock granted but subsequently forfeited) and
shares subject to options. See footnote (c).
(b) Represents less than one percent of the shares outstanding.
(c) Includes vested options as follows: Mr. Owsley, 41,686 shares; Mr. Frank
B. Rosenberg, 39,613 shares; Mr. Trembly, 67,003 shares and Mr. Wheeler, 52,813
shares. The percentage calculations are based on the shares outstanding plus
the shares that may be acquired pursuant to the vested options granted to the
executive.
(d) Mr. Frank B. Rosenberg disclaims membership in any filing "group" as
that term is used in Section 13(d)(3) of the Exchange Act. Mr. Frank B.
Rosenberg purchased 52.74 shares on June 7, 2000 and 52.59 shares on July 10,
2000 of Class B common stock in the Savings Plans at prices of $9.24 and $9.25
per share, respectively.
(e) Mr. Henry A. Rosenberg, Jr. is chairman of the board of Rosemore. The
shares listed are the shares owned by the Rosemore group other than shares
reported separately in the table as owned by Mr. Frank B. Rosenberg. Of the
shares listed above, Mr. Henry A. Rosenberg, Jr. holds 32,525 shares of Class A
common stock and 305,351 shares (including PVR Stock) of Class B common stock
individually and in Crown's Savings Plans. Mr. Henry A. Rosenberg, Jr. has
purchased 3,183.46 shares of Class B common stock in the Savings Plans within
the past two years at prices from $12.91 to $5.72 per share. The average
purchase prices for each quarter were as follows: 3rd Quarter 1998--$11.49; 4th
Quarter 1998--$9.81; 1st Quarter 1999--$7.68; 2nd Quarter 1999--$8.53; 3rd
Quarter 1999--$8.56; 4th Quarter 1999--$5.83; 1st Quarter 2000--$6.93; 2nd
Quarter 2000--$9.09. In addition, 121.36 shares were purchased on July 10, 2000
at $9.25 per share. The Class B common stock shown on the table also includes
223,426 shares that may be acquired by Mr. Henry A. Rosenberg, Jr. upon the
exercise of vested options granted under the 1994 Long- Term Incentive Plan.
The percentage calculation is based on the shares outstanding plus the shares
that may be acquired pursuant to vested options granted to Mr. Rosenberg.
63
<PAGE>
(f) Mr. Trembly purchased 246.13 shares on June 7, 2000 and 245.42 shares on
July 10, 2000 and Mr. Wheeler purchased 52.74 shares on June 7, 2000 and 52.59
shares on July 10, 2000 of Crown Class B common stock in the Savings Plans at
prices of $ 9.24 and $ 9.25 per share, respectively.
(g) Includes 570,865 shares that may be acquired pursuant to vested options
granted under the 1994 Long-Term Incentive Plan or under the 1995 Management
Stock Option Plan. The percentage calculation is based on the shares
outstanding plus the shares that may be acquired pursuant to vested options. No
additional options held by the executive officers will vest within 60 days of
July 10, 2000.
STOCKHOLDER PROPOSALS
The matters to be considered at the Special Meeting are limited to those set
forth in the Notice of Special Meeting accompanying the proxy statement and
procedural matters relating to the meeting.
According to the Crown bylaws, as amended, the Annual Meeting of
Stockholders of Crown for the year 2000 is to be held during a 30-day period
commencing on the last Thursday of September. Stockholder proposals intended to
be presented at the Annual Meeting of public stockholders of Crown in 2000, if
the merger is not approved and such a meeting is held, should be received by
Ms. Dolores B. Rawlings, Vice President-Secretary of Crown, P.O. Box 1168,
Baltimore, Maryland 21203 on or before July 31, 2000. Stockholder proposals
must comply with the bylaws of Crown and with the rules of the SEC to be
eligible for inclusion in the proxy statement for the Annual Meeting in 2000.
WHERE YOU CAN FIND MORE INFORMATION
Crown files annual, quarterly and special reports, proxy statements and
other information with the SEC. In addition, because the merger is a "going
private" transaction, Crown, Rosemore, Rosemore Holdings and RAC have filed a
Rule 13e-3 Transaction Statement on Schedule 13E-3 with respect to the merger.
The Schedule 13E-3 and such reports, proxy statements and other information
contain additional information about Crown. You may read and copy any reports,
statements or other information filed by Crown at the SEC's public reference
room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following
Regional Offices of the SEC: 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. SEC filings of Crown are also available to the
public from commercial document retrieval services and at the website
maintained by the SEC--"http://www.sec.gov".
The SEC allows Crown to "incorporate by reference" information into this
proxy statement. This means that Crown can disclose important information by
referring to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy statement, and
later information filed with the SEC will update and supercede the information
in this proxy statement.
Crown incorporates by reference into this proxy statement the following
documents filed by it with the SEC (File No. 1-1059) pursuant to the Exchange
Act:
. Crown's Annual Report on Form 10-K for the year ended December 31, 1999,
as amended (attached hereto as Appendix B);
. Crown's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (attached hereto as Appendix A); and
. Crown's Current Reports on Form 8-K, filed on June 22, 2000, May 2,
2000, April 10, 2000, April 3, 2000, March 31, 2000, March 17, 2000,
March 13, 2000, March 10, 2000, March 7, 2000 and February 3, 2000.
64
<PAGE>
All subsequent documents filed by Crown with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the date of the Special Meeting will be deemed to be
incorporated by reference into this proxy statement and to be a part of it from
the date of filing of those documents.
Crown undertakes to provide without charge to each person to whom a copy of
this proxy statement has been delivered, upon request, a copy of any or all of
the documents incorporated by reference herein, other than the exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this proxy statement incorporates. Requests for copies
should be directed to Crown Central Petroleum Corporation, P.O. Box 1168,
Baltimore, Maryland 21203, Attention: Vice President--Secretary (Telephone
number: (410) 539-7400).
If you would like to request documents from Crown, please do so by
, 2000 to receive them before the Special Meeting.
Crown's Board does not intend to bring any other matters to the stockholders
for consideration at the Special Meeting.
The proxy statement does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom it is not lawful to make any offer
or solicitation in such jurisdiction. The delivery of this proxy statement will
not create an implication that there has been no change in the affairs of Crown
since the date of this proxy statement or that the information herein is
correct as of any later date.
You should rely on the information contained or incorporated by reference in
this proxy statement. Crown has not authorized anyone to provide you with
information that is different from what is contained in this proxy statement.
This proxy statement is dated July , 2000. You should not assume that the
information contained in this proxy statement is accurate as of any date other
than such date, and the mailing of this proxy statement will not create any
implication to the contrary.
By Order of the Board of Directors
Dolores B. Rawlings
Vice President--Secretary
July , 2000
65
<PAGE>
EXHIBIT A
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
ROSEMORE, INC.,
ROSEMORE ACQUISITION CORPORATION
and
CROWN CENTRAL PETROLEUM
CORPORATION
Dated as of April 7, 2000
--------------------------------------------------------------------------------
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
THE MERGER
<S> <C>
SECTION 1.01. The Merger................................................... 1
SECTION 1.02. Effective Time; Closing...................................... 1
SECTION 1.03. Effect of the Merger......................................... 2
SECTION 1.04. Charter; Bylaws.............................................. 2
SECTION 1.05. Directors and Officers of the Surviving Corporation.......... 2
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
SECTION 2.01. Conversion of Capital Stock.................................. 2
SECTION 2.02. Payment for Shares........................................... 2
SECTION 2.03. Employee Stock Options....................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification; Subsidiaries................. 4
SECTION 3.02. Charter and Bylaws........................................... 5
SECTION 3.03. Capitalization............................................... 5
SECTION 3.04. Authority Relative to This Agreement......................... 6
SECTION 3.05. No Conflict; Required Filings and Consents................... 6
SECTION 3.06. Permits; Compliance.......................................... 7
SECTION 3.07. SEC Filings; Financial Statements............................ 7
SECTION 3.08. Absence of Certain Changes or Events......................... 8
SECTION 3.09. Employee Benefit Plans; Labor Matters........................ 8
SECTION 3.10. Contracts; Debt Instruments.................................. 10
SECTION 3.11. Absence of Litigation........................................ 12
SECTION 3.12. Environmental Matters........................................ 12
SECTION 3.13. Trademarks, Patents and Copyrights........................... 14
SECTION 3.14. Taxes........................................................ 14
SECTION 3.15. Property and Leases.......................................... 14
SECTION 3.16. Rights Agreement............................................. 15
SECTION 3.17. Insurance.................................................... 15
SECTION 3.18. Board Recommendation......................................... 15
SECTION 3.19. Opinion of Financial Advisor................................. 15
SECTION 3.20. Brokers...................................................... 16
SECTION 3.21. Vote Required; State Takeover Statutes....................... 16
SECTION 3.22. Directors of the Surviving Corporation....................... 16
SECTION 3.23. Waiver of Certain Obligations................................ 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01. Organization and Qualification............................... 17
SECTION 4.02. No Conflict; Required Filings and Consents................... 17
SECTION 4.03. Absence of Litigation........................................ 17
SECTION 4.04. Brokers...................................................... 17
SECTION 4.05. No Activities................................................ 18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.06. Financing.................................................. 18
SECTION 4.07. Ownership of Company Common Stock.......................... 18
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing..... 18
SECTION 5.02. Notices of Certain Events.................................. 20
SECTION 5.03. Contractual Consents....................................... 20
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement; Schedule 13E-3............................ 20
SECTION 6.02. Company Stockholders' Meeting.............................. 21
SECTION 6.03. Access to Information; Confidentiality..................... 21
SECTION 6.04. No Solicitation of Transactions............................ 22
SECTION 6.05. Election of Directors...................................... 23
SECTION 6.06. Directors' and Officers' Indemnification and Insurance..... 23
SECTION 6.07. Further Action; Consents; Filings.......................... 24
SECTION 6.08. The Company Rights Plan.................................... 25
SECTION 6.09. Public Announcements....................................... 25
SECTION 6.10. Amendment of Plans......................................... 25
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate
the Merger.............................................................. 25
SECTION 7.02. Conditions to the Obligations of the Company............... 25
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub..... 26
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination................................................ 26
SECTION 8.02. Notice of Termination; Effect of Termination............... 27
SECTION 8.03. Amendment.................................................. 27
SECTION 8.04. Waiver..................................................... 27
SECTION 8.05. Expenses................................................... 28
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements.............................................................. 28
SECTION 9.02. Notices.................................................... 29
SECTION 9.03. Certain Definitions........................................ 30
SECTION 9.04. Severability............................................... 30
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit............ 31
SECTION 9.06. Incorporation of Exhibits.................................. 31
SECTION 9.07. Specific Performance....................................... 31
SECTION 9.08. Governing Law.............................................. 31
SECTION 9.09. Submission to Jurisdiction; Venue.......................... 31
SECTION 9.10. Headings................................................... 31
SECTION 9.11. Counterparts............................................... 31
SECTION 9.12. Entire Agreement........................................... 31
SECTION 9.13. Waiver of Jury Trial....................................... 32
</TABLE>
ii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<S> <C>
Aegis Muse..................................................... (S) 4.04
affiliate...................................................... (S) 9.03(a)
Agreement...................................................... Preamble
AMEX........................................................... (S) 3.03
Articles of Merger............................................. (S) 1.02
beneficial owner............................................... (S) 9.03(b)
business day................................................... (S) 9.03(c)
Class A Common Stock........................................... Recitals
Class B Common Stock........................................... Recitals
Closing........................................................ (S) 1.02
Closing Date................................................... (S) 1.02
Code........................................................... (S) 2.02(e)
Company........................................................ Preamble
Company Board.................................................. Recitals
Company Certificates........................................... (S) 2.02(a)
Company Common Stock........................................... Recitals
Company Option................................................. (S) 2.03(a)
Company SEC Reports............................................ (S) 3.07(a)
Company Independent Committee.................................. Recitals
Company Stock Award............................................ (S) 2.03(b)
Company Stock Plans............................................ (S) 2.03(a)
Company Stockholders' Meeting.................................. (S) 6.01(a)
Company Subsidiaries........................................... (S) 3.01(a)
Competing Transaction.......................................... (S) 6.04
Confidentiality Agreement...................................... (S) 6.03(b)
control........................................................ (S) 9.03(d)
controlled by.................................................. (S) 9.03(d)
Costs.......................................................... (S) 6.06(d)
CSFB........................................................... (S) 3.19
Disclosure Schedule............................................ (S) 3.01(a)
Effective Time................................................. (S) 1.02
Environmental Claims........................................... (S) 3.12(b)
Environmental Laws............................................. (S) 3.12(b)
Environmental Permit........................................... (S) 3.12(b)
ERISA.......................................................... (S) 3.09(a)
Exchange Act................................................... (S) 3.05(b)(i)
Expenses....................................................... (S) 8.05(a)
Governmental Entity............................................ (S) 3.05(b)
Hazardous Material............................................. (S) 3.12(b)
Holdings....................................................... Recitals
HSR Act........................................................ (S) 3.05(b)(i)
Indemnified Parties............................................ (S) 6.06(d)
Indenture...................................................... (S) 3.22(b)
IRS............................................................ (S) 3.09(a)(iii)
knowledge...................................................... (S) 9.03(e)
Law............................................................ (S) 3.05(a)(ii)
Letter of Transmittal.......................................... (S) 2.02(b)
Material Adverse Effect........................................ (S) 3.01(a)
Material Contract.............................................. (S) 3.10(a)
Merger......................................................... Recitals
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Merger Consideration............................................ (S) 2.01(a)
Merger Sub...................................................... Preamble
MGCL............................................................ Recitals
Multiemployer Plan.............................................. (S) 3.09(b)
Multiple Employer Plan.......................................... (S) 3.09(b)
Order........................................................... (S) 7.01(b)
Parent.......................................................... Preamble
Paying Agent.................................................... (S) 2.02(a)
Permits......................................................... (S) 3.06
person.......................................................... (S) 9.03(f)
Plans........................................................... (S) 3.09(a)
Preferred Stock................................................. (S) 3.03(c)
Proxy Statement................................................. (S) 6.01(a)
Real Property................................................... (S) 3.12(a)(ii)
Release......................................................... (S) 3.12(b)
Remedial Action................................................. (S) 3.12(b)
Reorganization Agreement........................................ (S) 3.09(b)
Representatives................................................. (S) 6.02(a)
Rights Agreement................................................ (S) 3.16
SAR Unit........................................................ (S) 2.03(a)
Schedule 13E-3.................................................. (S) 6.01(a)
SDAT............................................................ (S) 1.02
SEC............................................................. (S) 3.07(a)
subsidiary(ies)................................................. (S) 9.03(g)
Superior Proposal............................................... (S) 6.04
Surviving Corporation........................................... (S) 1.01
Tax Returns..................................................... (S) 3.14
Taxes........................................................... (S) 3.14
Third Party Provision........................................... (S) 9.05
under common control with....................................... (S) 9.03(d)
U.S. GAAP....................................................... (S) 3.07(b)
Waivers......................................................... (S) 3.23
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 7, 2000 (this
"Agreement"), by and among ROSEMORE, INC., a Maryland corporation ("Parent"),
CROWN CENTRAL PETROLEUM CORPORATION, a Maryland corporation (the "Company"),
and ROSEMORE ACQUISITION CORPORATION, a Maryland corporation and an indirect
wholly owned subsidiary of Parent ("Merger Sub").
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the Maryland General Corporation Law (the "MGCL"),
Parent will acquire, pursuant to the merger (the "Merger") of Merger Sub with
and into the Company, all of the issued and outstanding shares of the Company's
Class A common stock, par value $5.00 per share (the "Class A Common Stock"),
and Class B common stock, par value $5.00 per share (the "Class B Common
Stock"; and together with the Class A Common Stock, the "Company Common
Stock"), at a price of $9.50 per share;
WHEREAS, a special committee of independent members (the "Company
Independent Committee") of the Board of Directors of the Company (the "Company
Board") has unanimously recommended to the Company Board that it, and the
Company Board unanimously has (i) approved and deemed the Merger advisable upon
the terms and subject to the conditions set forth in this Agreement and (ii)
recommended the approval of the Merger and this Agreement by the stockholders
of the Company;
WHEREAS, the Board of Directors of Parent has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of
Parent and has approved and adopted this Agreement, the Merger and the other
transactions contemplated by this Agreement; and
WHEREAS, this Agreement has been approved and adopted by the Board of
Directors of Merger Sub and by Rosemore Holdings, Inc., a Maryland corporation
and a wholly owned subsidiary of Parent ("Holdings"), as sole stockholder of
Merger Sub.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Provided that this Agreement shall not have been
terminated in accordance with Section 8.01, upon the terms and subject to the
conditions set forth in Article VII, and in accordance with the MGCL, at the
Effective Time (as defined below), Merger Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. Provided that this Agreement shall
not have been terminated in accordance with Section 8.01, as promptly as
practicable and in no event later than the second business day following the
satisfaction or, if permissible, waiver of the conditions set forth in clauses
(a) through (c) of Section 7.01 (or such other date as may be agreed to in
writing by each of the parties hereto), the parties hereto shall cause the
Merger to be consummated by filing the articles of merger (the "Articles of
Merger") with the State Department of Assessments and Taxation of Maryland
("SDAT") in such form as is required by, and executed in accordance with, the
relevant provisions of the MGCL. The term "Effective Time" means the date and
time of the filing with, and the acceptance for record by, the SDAT of the
Articles of Merger (or such later time, not to exceed 30 days after such
acceptance for record, as may be agreed in writing by each of the parties
hereto and specified in the Articles of Merger). Immediately prior to the
filing of the Articles of Merger, a closing (the "Closing") will be held at the
offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York (or
such other place as the parties hereto may agree).
<PAGE>
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the MGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all of the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Merger Sub shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 1.04. Charter; Bylaws. At the Effective Time, (a) subject to the
provisions of Section 6.05(a), the charter of Merger Sub as in effect
immediately prior to the Effective Time shall be the charter of the Surviving
Corporation until thereafter amended as provided by law, the bylaws and such
charter of the Surviving Corporation, except that Article I shall be amended
to provide that the name of the Surviving Corporation shall be "Crown Central
Petroleum Corporation" and (b) the bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation until thereafter amended as provided by law, the charter of the
Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers of the Surviving Corporation. The
directors of the Company immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the charter and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) each share of Company Common Stock (together with the associated
right to purchase Company Series A or Series B Junior Participating
Preferred Stock, no par value, as the case may be, pursuant to the Rights
Agreement (as defined in Section 3.16 hereof)) issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Common Stock to be canceled pursuant to Section 2.01(b) hereof) shall be
converted into the right to receive $9.50 in cash (the "Merger
Consideration"), payable without interest to the holder of such share of
Company Common Stock, upon surrender of the Company Certificate that
formerly evidenced such share of Company Common Stock;
(b) each share of Company Common Stock owned by Parent or owned by any
direct or indirect wholly owned subsidiary of the Company or Parent shall
be canceled and extinguished without any conversion thereof and no payment
shall be made with respect thereto; and
(c) each issued and outstanding share of common stock, par value $5.00
per share, of Merger Sub will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
SECTION 2.02. Payment for Shares. (a) From and after the Effective Time,
a bank or trust company designated by Parent and reasonably acceptable to the
Company shall act as paying agent (the "Paying Agent") in effecting the
payment of the Merger Consideration in respect of certificates that, prior to
the Effective Time, represented shares of Company Common Stock entitled to
payment of the Merger Consideration pursuant to Section 2.01(a) (the "Company
Certificates"). From and after the Effective Time, Parent shall cause to be
provided to the Paying Agent cash in amounts necessary to pay for all of the
shares of Company Common Stock pursuant to Section 2.01. Such funds (and the
interest thereon) shall be invested by the Paying Agent in an interest-bearing
investment consisting of short-term U.S. Government obligations or federally
insured, interest-bearing demand deposit accounts.
2
<PAGE>
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of a Company Certificate (i) a letter of transmittal in customary
form (which shall specify that delivery shall be effected, and risk of loss and
title to the Company Certificate shall pass, only upon delivery of the Company
Certificate to the Paying Agent) (the "Letter of Transmittal") and (ii)
instructions for use in surrendering such Company Certificate in exchange for
payment therefor. Upon the surrender of each such Company Certificate, together
with such Letter of Transmittal, duly completed and validly executed in
accordance with the instructions therein, and such other documents as may be
required pursuant to such instructions, the Paying Agent shall pay the holder
of such Company Certificate an amount in cash equal to the product of the
Merger Consideration multiplied by the number of shares of Company Common Stock
formerly represented by such Company Certificate, in consideration therefor,
and such Company Certificate shall forthwith be cancelled. Until so
surrendered, each such Company Certificate (other than Company Certificates
representing shares of Company Common Stock to be canceled pursuant to Section
2.01(b)) shall represent solely the right to receive the aggregate Merger
Consideration represented thereby. No interest shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion thereof) is
to be paid to any person other than the person in whose name the Company
Certificate surrendered is registered, it shall be a condition to such right to
receive such payment that the Company Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Company Certificate shall pay to the Paying Agent any
transfer or other similar Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Company
Certificate surrendered, or shall establish to the satisfaction of the
Surviving Corporation that such Tax has been paid or is not applicable.
(c) At any time following the six-month anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
direct the delivery of any funds which previously had been made available to
the Paying Agent and were not disbursed to holders of shares of Company Common
Stock (including, without limitation, all interest and other income received by
the Paying Agent in respect of all funds made available to it), Company
Certificates and other documents in its possession relating to the Merger, and
the Paying Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving Corporation
and receive in consideration therefor the aggregate Merger Consideration
relating thereto, without any interest. Notwithstanding the foregoing, neither
the Surviving Corporation nor the Paying Agent shall be liable to any holder of
a share of Company Common Stock for any Merger Consideration delivered in
respect of such share to a public official pursuant to any abandoned property,
escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of any shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation or the Paying Agent,
they shall be surrendered and cancelled in return for the payment of the
aggregate Merger Consideration represented thereby, as provided in this Article
II. From and after the Effective Time, the holders of shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such shares of Company Common Stock, except as
otherwise provided herein or by applicable law.
(e) The Surviving Corporation shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any applicable
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by the Surviving Corporation, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation.
(f) If any Company Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Company Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving
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Corporation may direct as indemnity against any claim that may be made against
it with respect to such Company Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Company Certificate the Merger
Consideration to which the holder thereof is entitled pursuant to Section
2.01(a).
SECTION 2.03. Employee Stock Options. (a) At the Effective Time, each
option to purchase shares of Company Common Stock (a "Company Option") or
stock appreciation unit award ("SAR Unit") with respect to Company Common
Stock outstanding and unexercised as of the Effective Time granted pursuant to
the Company's 1994 Long-Term Incentive Plan, the Company's 1995 Management
Stock Option Plan and the Company's 1999 Long-Term Incentive Plan, each as
amended through the date of this Agreement, and the option grant agreements
and award agreements entered into in connection therewith, (collectively, the
"Company Stock Plans"), or granted by the Company other than pursuant to the
Company Stock Plans shall (i) become fully vested and immediately exercisable
and (ii) remain outstanding and, thereafter, be a Company Option or SAR Unit
with the same rights and exercise prices as applied to such Company Option or
SAR Unit immediately prior to the Effective Time, and otherwise subject to the
terms (as in effect as of the date hereof) of the Company Stock Plans pursuant
to which such Company Option or SAR Unit was issued, except that all
references to the Company shall be deemed to be references to the Surviving
Corporation and all references to Company Common Stock shall be deemed to be
references to the common stock of the Surviving Corporation. The Company shall
take all necessary action to approve the disposition of the Company Options in
connection with the transactions contemplated by this Agreement to the extent
necessary to exempt such dispositions and acquisitions under Rule 16b-3 of the
Exchange Act (as defined in Section 3.05(b)(i)).
Promptly after the Effective Time, Parent shall or shall cause Surviving
Corporation to provide each holder of Company Options with the opportunity to
sell its Company Options at the prices set forth in Annex A of the Waivers
(defined herein). Any payments related to such sale of Company Options shall
be subject to all applicable federal, state and local tax withholding
requirements.
(b) At the Effective Time, each performance-restricted stock award (a
"Company Stock Award") granted pursuant to the Company Stock Plans or granted
by the Company (other than pursuant to the Company Stock Plans) shall become
fully vested, the restrictions thereon shall lapse, any restrictive legend
contained on any Company Certificate related thereto shall be removed and any
Company Certificate related thereto held in escrow by the Company pursuant to
the terms of any Company Stock Plan or otherwise shall be released to the
grantee of such Company Stock Award. At the Effective Time, each holder of a
Company Stock Award shall be paid in full satisfaction of such Company Stock
Award a cash payment in an amount in respect thereof equal to the product of
(i) the Merger Consideration and (ii) the number of shares of Company Common
Stock subject to such Company Stock Award, less any income or employment tax
withholding required under the Code or any provision of state or local law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. (a) Except as
set forth in Section 3.01(a) of the Disclosure Schedule attached hereto, dated
as of the date hereof and forming a part of this Agreement (the "Disclosure
Schedule"), the Company and each subsidiary of the Company (the "Company
Subsidiaries") has been duly organized, and is validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority to
own, lease and operate its properties and to carry on its business as it is
now being conducted. Each of the Company and each of the Company Subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not materially delay
consummation of the Merger and would not have
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a Material Adverse Effect. For purposes of this Agreement, "Material Adverse
Effect" means any event, circumstances, change in or effect on the business of
the Company and the Company Subsidiaries, taken as a whole, that, when taken
together with all other events, circumstances, changes and effects occurring
after the date hereof that do not individually have a Material Adverse Effect
and all other circumstances that would, but for the fact that they do not
individually have a Material Adverse Effect, constitute a breach of any
representation or warranty made by the Company in this Agreement, is, or is
reasonably likely to be, materially adverse to the business, financial
condition, results of operations or prospects of the Company and the Company
Subsidiaries taken as a whole.
(b) A true and complete list of all the Company Subsidiaries, together
with the jurisdiction of incorporation or organization of each Company
Subsidiary and the percentage of the outstanding capital stock of each Company
Subsidiary owned by the Company and each other Company Subsidiary, is set
forth in Section 3.01(b) of the Disclosure Schedule. Except as disclosed in
Section 3.01(b) of the Disclosure Schedule, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity.
SECTION 3.02. Charter and Bylaws. The copies of the Company's charter and
bylaws, each as amended and restated, that are set forth as exhibits to the
Company's proxy statement dated March 15, 1996 and Form 10-Q for the quarter
ended June 30, 1998 and the Form 10-K for the year ended December 31, 1999,
respectively, are complete and correct copies thereof. Such charter and bylaws
are in full force and effect. The Company is not in violation of any of the
provisions of its charter or bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of (a) 15,000,000 shares of Class A Common Stock, (b) 15,000,000
shares of Class B Common Stock and (c) 5,000,000 shares of preferred stock, no
par value (the "Preferred Stock"), 4,818 shares of which are designated Series
A Junior Participating Preferred Stock, no par value, and 5,254 of which are
designated Series B Junior Participating Preferred Stock, no par value. At the
close of business on February 29, 2000, (i) 4,817,394 shares of Class A Common
Stock and 5,253,862 shares of Class B Common Stock, all of which were validly
issued, fully paid and nonassessable and no shares of Preferred Stock were
issued and outstanding, (ii) no shares of Class A Common Stock and Class B
Common Stock were held in the treasury of the Company or by the Company
Subsidiaries, (iii) 1,227,150 shares of Class B Common Stock were reserved for
issuance in connection with the exercise of outstanding Company Options in the
amounts and at the exercise prices set forth in Section 3.03 of the Disclosure
Schedule, (iv) 4,818 shares of Series A Junior Participating Preferred Stock
were reserved for issuance pursuant to the Rights Agreement and (v) 5,254
shares of Series B Junior Participating Preferred Stock were reserved for
issuance pursuant to the Rights Agreement (defined below). Except as set forth
in Section 3.03 of the Disclosure Schedule, all publicly traded shares of
Common Stock are authorized for listing on the American Stock Exchange (the
"AMEX"). From February 29, 2000 through the date hereof, the Company has not
issued any additional shares of capital stock, except pursuant to the exercise
of Company Options outstanding on February 29, 2000, nor has the Company
granted any additional options, warrants or other rights or entered into any
agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, the Company or any Company
Subsidiary. Except as issued pursuant to the Company Stock Plans, the Rights
Agreement, pursuant to agreements or arrangements described in Section 3.03 of
the Disclosure Schedule or as set forth in the Company SEC Reports (as defined
herein), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company is a party
or by which the Company is bound relating to the issued or unissued capital
stock of the Company or any Company Subsidiary or obligating the Company or
any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. All shares
of Company Common Stock subject to issuance as aforesaid, upon issuance prior
to the Effective Time on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in Section 3.03 of the
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any Company
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Subsidiary to repurchase, redeem or otherwise acquire any shares of Common
Stock or any capital stock of any Company Subsidiary. Each outstanding share
of capital stock of each Company Subsidiary is duly authorized, validly
issued, fully paid and nonassessable and, except as set forth in Section 3.03
of the Disclosure Schedule, each such share owned by the Company or another
Company Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Company's or such other Company Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever, except where failure to own such shares
free and clear would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth in Section 3.03 of the Disclosure
Schedule, there are no material outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other person, other than obligations arising in the ordinary
course of business, obligations disclosed in the Company SEC Reports and
guarantees by the Company of any indebtedness of any Company Subsidiary.
SECTION 3.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
(including, without limitation, the Merger) contemplated herein to be
consummated by the Company. The execution and delivery of this Agreement by
the Company and the consummation by the Company of such transactions have been
duly and validly authorized by all necessary corporate action, including the
unanimous approval of the Company Board (with one director having recused
himself), and the unanimous approval of the Company Independent Committee, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate such transactions (other than the
adoption of this Agreement by the requisite affirmative vote of the
stockholders of the Company as required by the MGCL). This Agreement has been
duly and validly executed and delivered by the Company and (assuming due
authorization, execution and delivery by Parent and Merger Sub) constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate any provision of the charter or bylaws of the Company or any
equivalent organizational documents of the Company or any Company Subsidiary,
(ii) assuming that all consents, approvals, authorizations and other actions
described in Section 3.05(b) have been obtained and all filings and
obligations described in Section 3.05(b) have been made, conflict with or
violate any United States or non-United States or supranational law, statute,
ordinance, rule, regulation, code, executive order, injunction, judgment,
decree or other order ("Law") applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any Company
Subsidiary is bound or affected, or (iii) except as set forth in Section
3.05(a)(iii) of the Disclosure Schedule, result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any Company Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clause (iii), for any such conflicts, violations, breaches,
defaults, or other occurrences which would not reasonably be expected to (A)
have a Material Adverse Effect or (B) prevent or materially delay the
performance of this Agreement by the Company.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States federal, state, county or local or non-United States or
supranational government, governmental, regulatory or administrative
authority, agency, instrumentality or commission or any court, tribunal or
judicial or arbitral body ("Governmental Entity"), except (i) for applicable
requirements of the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), the
AMEX, the pre-merger notification requirements (A) of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") or (B) as may be applicable pursuant to
the antitrust laws of any state, (ii) for applicable
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requirements relating to the filing and recordation of appropriate merger
documents pursuant to the MGCL and as set forth in Section 3.05(b) of the
Disclosure Schedule and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to (A) prevent or materially
delay consummation of the Merger or (B) have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance. Except as set forth in Section 3.06 of
the Disclosure Schedule, each of the Company and the Company Subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for the Company or any Company Subsidiary
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Permits"), except where the failure to have, or the
suspension or cancellation of, any of the Permits would not reasonably be
expected to (a) have a Material Adverse Effect or (b) prevent or materially
delay the performance of this Agreement by the Company, and no suspension or
cancellation of any of the Permits is pending or, to the knowledge of the
Company, threatened. Neither the Company nor any Company Subsidiary is in
conflict with, or in default or violation of, (i) any Law applicable to the
Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, Permit, franchise or
other instrument or obligation to which the Company or any Company Subsidiary
is a party to or by which the Company or any Company Subsidiary is bound by,
except for any such conflicts, defaults or violations that would not
reasonably be expected to (A) have a Material Adverse Effect or (B) prevent or
materially delay the performance of this Agreement by the Company.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has
timely filed all forms, reports and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since December 31, 1998 through
the date of this Agreement (collectively, the "Company SEC Reports"). The
Company SEC Reports and all forms, reports and documents to be filed by the
Company after the date hereof and prior to the Closing (i) were or will be
prepared in all material respects in accordance with the requirements of the
Exchange Act and the rules and regulations promulgated thereunder, (ii) did or
will not, as of their respective dates, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, and (iii) did not
and will not omit any document required to be filed as an exhibit thereto. No
Company Subsidiary is required to file any form, report or other document with
the SEC.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports and each of the financial
statements to be included in forms, reports and documents to be filed with the
SEC after the date hereof and prior to the Closing, was or will be prepared in
accordance with United States generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants and as
interpreted from time to time by the staff of the SEC ("U.S. GAAP"), applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly or will present
fairly, the consolidated financial position, results of operations and cash
flow of the Company, and the consolidated Company Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein in
all material respects, except as otherwise noted therein in accordance with
U.S. GAAP (subject, in the case of unaudited statements, to normal year-end
adjustments which were not and are not expected to have a Material Adverse
Effect).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the Company Subsidiaries as of December 31, 1999,
including the notes thereto, or in any of the Company SEC Reports filed
subsequent to December 31, 1999 or in Section 3.07(c) of the Disclosure
Schedule, neither the Company nor any Company Subsidiary has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with U.S. GAAP, except for liabilities or
obligations incurred in the ordinary course of business since December 31,
1999 that would not reasonably be expected to, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) prevent or materially
delay the performance of this Agreement by the Company.
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(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendment or modification, that has not yet been filed with the
SEC, to agreements, documents or other instruments that previously have been
filed by the Company with the SEC pursuant to the Exchange Act.
SECTION 3.08. Absence of Certain Changes or Events. Since December 31,
1999, except as contemplated by or as set forth in Section 3.08 of the
Disclosure Schedule or as expressly contemplated by this Agreement or as
specifically disclosed in the Company SEC Reports filed subsequent to December
31, 1999, the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, (a) there has not been any change, condition,
event or development that has had a Material Adverse Effect, (b) there has not
been any event that could reasonably be expected to prevent or materially delay
the performance of this Agreement by the Company and (c) none of the Company or
any Company Subsidiary has taken any action that, if taken after the date of
this Agreement, would constitute a breach of any of the covenants set forth in
Section 5.01.
SECTION 3.09. Employee Benefit Plans; Labor Matters. (a) Section 3.09(a)
of the Disclosure Schedule lists (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which the Company or any
Company Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has any obligation or which are maintained, contributed to or
sponsored by the Company or any Company Subsidiary for the benefit of any
current or former employee, officer or director of the Company or any Company
Subsidiary, (ii) each employee benefit plan for which the Company or any
Company Subsidiary could incur liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated, (iii) any plan in respect of
which the Company or any Company Subsidiary could incur liability under Section
4212(c) of ERISA, and (iv) any contracts, arrangements or understandings
between the Company or any Company Subsidiary and any employee of the Company
or any Company Subsidiary including, without limitation, any contracts,
arrangements or understandings relating in any way to a sale of the Company or
any Company Subsidiary (collectively, the "Plans"). Each Plan is in writing and
the Company has furnished or made available to Parent a true and complete copy
of each material Plan and has delivered or made available to Parent a true and
complete copy of each material document, if applicable, prepared in connection
with each such Plan, including, without limitation, (A) a copy of each trust or
other funding arrangement, (B) each summary plan description and summary of
material modifications, (C) the most recently filed Internal Revenue Service
("IRS") Form 5500, (D) the most recently received IRS determination letter for
each such Plan, and (E) the most recently prepared actuarial report and
financial statement in connection with each such Plan. Neither the Company nor
any Company Subsidiary has any express or implied commitment, whether legally
enforceable or not, (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual, or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by ERISA or the Code.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Company Subsidiary could incur liability under Section
4063 or 4064 of ERISA (a "Multiple Employer Plan"). Except as set forth in
Section 3.09(b) of the Disclosure Schedule, none of the Plans (i) provides for
the payment of separation, severance, termination or similar-type benefits to
any person, (ii) obligates or obligated the Company or any Company Subsidiary
to pay, or segregate any funds to pay (into a trust or otherwise), separation,
severance, termination or similar-type benefits solely or partially as a result
of any transaction contemplated by this Agreement or pursuant to the
consummation of the transactions contemplated by the Agreement and Plan of
Reorganization, dated December 8, 1998, as amended, among American Trading and
Production Corporation, ATAPCO, Inc., American Trading Real Estate Company,
Inc. and Gateway Gathering and Marketing Company (the "Reorganization
Agreement"), or (iii) obligates or obligated the Company or any Company
Subsidiary to make any payment, or segregate any funds to pay (into a trust or
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otherwise), or provide any benefit as a result of a "change in control",
within the meaning of such term under Section 280G of the Code solely or
partially as a result of any transaction contemplated by this Agreement or the
Reorganization Agreement. Except as set forth in Section 3.09(b) of the
Disclosure Schedule, none of the Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary. Each
of the Plans is subject only to the Laws of the United States or a political
subdivision thereof.
(c) Each Plan is now and always has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Law including, without limitation, ERISA and the Code. The Company and the
Company Subsidiaries have performed all obligations required to be performed
by them under, are not in material default under or in violation of, and have
no knowledge of any default or violations by any party to, any Plan. No action
is pending or, to the knowledge of the Company, threatened with respect to any
Plan (other than claims for benefits in the ordinary course), and, to the
Company's knowledge, no fact or event exists that could reasonably be expected
to give rise to any such action.
(d) Each Plan that is intended to be qualified under Section 401(a) or
Section 401(k) of the Code has heretofore been determined by the IRS so to
qualify, and if submitted and assuming all amendments required by the IRS were
made, the Company believes that such Plans would receive a favorable
determination letter from the IRS with respect to the changes required by the
Small Business Job Protection Act of 1996, the General Agreement on Tariffs
and Trade, the Tax Reform Act of 1997, and the Uniformed Services Employment
and Reemployment Rights Act of 1994, and each trust established in connection
with any Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code has received a determination letter from the
IRS that it is so exempt, and no fact or event has occurred since the date of
such determination letter or letters from the IRS to adversely affect the
qualified status of any such Plan or the exempt status of any such trust.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) for which an exemption is
not available with respect to any Plan. Neither the Company nor any Company
Subsidiary has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could reasonably be expected to give rise to any
such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes to the extent
permitted by applicable Law and no such deduction has been challenged or
disallowed by any Governmental Entity and, to the Company's knowledge, no fact
or event exists which could reasonably be expected to give rise to any such
challenge or disallowance.
(g) Except as set forth in Section 3.09(g) of the Disclosure Schedule,
all directors and officers of the Company and the Company Subsidiaries (other
than those directors of the Company Subsidiaries organized in England, Vermont
and the Netherland Antilles who are not employees of the Company or any
Company Subsidiary) are under written obligation to the Company and the
Company Subsidiaries to maintain in confidence all confidential or proprietary
information acquired by them in the course of their employment and to assign
to the Company and the Company Subsidiaries all inventions made by them within
the scope of their employment during such employment and for a reasonable
period thereafter.
(h) The Company currently operates and for the last five years has
operated each of the Company's Employee Savings Plan and Employee Supplemental
Savings Plan in accordance with its terms, including, without limitation, the
provision (A) permitting the participant to direct the trustee under such plan
to vote the participant's Company Common Stock held in the participant's
account in accordance with his or her instructions and (B) providing that any
shares of the Company Common Stock in the accounts of a participant for which
clear and timely instructions of the participant are not received shall be
voted in the same proportion as such shares for which instructions are
received.
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(i) Section 3.09(i) of the Disclosure Schedule sets forth a true and
accurate list of all issued and outstanding SAR Units, including the amounts
and exercise prices related thereto.
(j) Except as set forth in Section 3.09(j) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, (i) there are no controversies pending
or, to the knowledge of the Company, threatened between the Company or any
Company Subsidiary and any of their respective employees; (ii) neither the
Company nor any Company Subsidiary is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any Company Subsidiary, nor, to the knowledge of the Company, are
there any activities or proceedings of any labor union to organize any such
employees; (iii) neither the Company nor any Company Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or
contract, and there are no grievances outstanding against the Company or any
Company Subsidiary under any such agreement or contract; (iv) there are no
unfair labor practice complaints pending against the Company or any Company
Subsidiary before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any Company
Subsidiary; and (v) there is no strike, slowdown, work stoppage or lockout, or,
to the knowledge of the Company, threat thereof, by or with respect to any
employees of the Company or any Company Subsidiary. The consent of the labor
unions which are a party to the collective bargaining agreements listed in
Section 3.09(j) of the Disclosure Schedule is not required to consummate the
Merger.
(k) Except as set forth in Section 3.09(k) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, the Company and the Company
Subsidiaries are in material compliance with all applicable laws relating to
the employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Entity and has withheld and paid to the
appropriate Governmental Entity or are holding for payment not yet due to such
Governmental Entity all amounts required to be withheld from employees of the
Company or any Company Subsidiary and are not liable for any significant
arrears of wages, taxes, penalties or other sums for failure to comply with any
of the foregoing. The Company and the Company Subsidiaries have paid in full to
all employees or adequately accrued for in accordance with U.S. GAAP
consistently applied all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees, and there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or, to the Company's knowledge, threatened before any
Governmental Entity with respect to any persons currently or formerly employed
by the Company or any Company Subsidiary. Except as set forth in Section
3.09(k) of the Disclosure Schedule, neither the Company nor any Company
Subsidiary is a party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Entity relating to employees or employment
practices. Except as set forth in Section 3.09(k) of the Disclosure Schedule,
there is no charge or proceeding with respect to a violation of any
occupational safety or health standards that has been asserted or is now
pending or, to the Company's knowledge, threatened with respect to the Company.
Except as set forth in Section 3.09(k) of the Disclosure Schedule or as
disclosed in the Company SEC Reports, there is no charge of discrimination in
employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category,
which has been asserted or is now pending or, to the knowledge of the Company,
threatened before the United States Equal Employment Opportunity Commission, or
any other Governmental Entity in any jurisdiction in which the Company or any
Company Subsidiary have employed or employ any person.
SECTION 3.10. Contracts; Debt Instruments. (a) Set forth in subsections
(i) through (viii) of Section 3.10(a) of the Disclosure Schedule is a true and
accurate list of all contracts and agreements of the types described in such
subsections to which the Company or any Company Subsidiary is a party as of the
date hereof (such contracts, agreements and arrangements as required to be set
forth in Section 3.10(a) of the Disclosure Schedule, together with those listed
in Section 3.09(a) of the Disclosure Schedule, and subject to the proviso at
the end of paragraph (a) of this Section 3.10 being the "Material Contracts"):
(i) as of the date of this Agreement, each contract and agreement which
(A) is likely to involve consideration of more than $500,000, in the
aggregate, during the calendar year ending December 31, 2000 or (B) is
likely to involve consideration of more than $1,000,000, in the aggregate,
over the remaining term
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of such contract, except for purchase orders for crude oil or intermediate
feedstock arising in the usual and ordinary course of business and
consistent with past practices (provided that in any case and without
regard to the proviso at the end of paragraph (a) of this Section 3.10, the
top 15 purchase orders are set forth in Section 3.10(a)(i) of the
Disclosure Schedule) and which, in either case, cannot be canceled by the
Company or any Company Subsidiary without penalty or further payment and
without more than 90 days' notice;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which the
Company or any Company Subsidiary is a party, in each case, not cancelable
without penalty on not more than 90 days' notice;
(iii) all material management contracts (excluding contracts for
employment) and contracts with other consultants, including any contracts
involving the payment of royalties or other amounts calculated based upon
the revenues or income of the Company or any Company Subsidiary or income
or revenues related to any product of the Company or any Company Subsidiary
to which the Company or any Company Subsidiary is a party;
(iv) all material contracts and agreements evidencing indebtedness of the
Company or any Company Subsidiary;
(v) as of the date hereof, all material contracts and agreements with any
Governmental Entity to which the Company or any Company Subsidiary is a
party;
(vi) all contracts and agreements that materially limit, or purport to
materially limit, the ability of the Company or any Company Subsidiary to
compete in any line of business or with any person or entity or in any
geographic area or during any period of time;
(vii) all material contracts or arrangements that result in any person or
entity holding a power of attorney from the Company or any Company
Subsidiary that relates to the Company, any Company Subsidiary or their
respective businesses; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company and any
Company Subsidiary or the conduct of its businesses, or the absence of
which would prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or would have a Material Adverse Effect.
The foregoing provisions of this Section 3.10(a) are subject to the
following proviso. With respect to Section 3.10(a)(i): (1) contracts for the
purchase of crude oil and other feedstocks which in the aggregate do not
exceed the requirements for the combined operation of the Company's two
refineries at 105% of rated capacity for a period of sixty (60) days and do
not have a term in excess of seventy-five (75) days shall be deemed to be in
the usual and ordinary course of business and, as such, shall not be Material
Contracts and shall not be included in the Disclosure Schedule; (2) contracts
for the sale of finished petroleum products which in the aggregate combined
with the Company's retail requirements do not exceed the combined rated
capacities of the Company's two refineries when measured over a sixty (60) day
period shall be deemed to be in the usual and ordinary course of business and,
as such, shall not be Material Contracts and shall not be included in the
Disclosure Schedule; and (3) contracts for the sale of intermediate
feedstocks, sulfur, petroleum coke and other by products of the petroleum
refining process shall, if produced by the Company and sold from inventory or
from the anticipated production of the refineries within the next two months,
shall be deemed to be in the usual and ordinary course of business and, as
such, shall not be Material Contracts and shall not be included in the
Disclosure Schedule. With respect to Sections 3.10(a)(i) through (v) and
Section 3.10(a)(viii) (and without derogating from the immateriality of
contracts in excess of the following threshold which are not otherwise
material), all contracts involving consideration or the payment of less than
$250,000 shall be deemed to be not material. Notwithstanding the foregoing,
the types of contracts described in clauses (1), (2) and (3) of the first
sentence of the foregoing proviso shall be deemed to be Material Contracts
with respect to clauses (b) and (c) of this Section 3.10.
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(b) Except as would not prevent or materially delay consummation of the
Merger or otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not have a Material Adverse Effect,
(i) each Material Contract is a legal, valid and binding agreement, and, to the
Company's knowledge, none of the Material Contracts is in default by its terms
or has been canceled by the other party; (ii) to the Company's knowledge, no
other party is in breach or violation of, or default under, any Material
Contract; (iii) the Company and the Company Subsidiaries are not in receipt of
any claim of default under any Material Contract; and (iv) except as set forth
in Section 3.10(b)(iv) of the Disclosure Schedule, neither the execution of
this Agreement nor the consummation of any transaction contemplated hereby
shall constitute a default, give rise to cancellation rights, or otherwise
materially and adversely affect any of the Company's rights under any Material
Contract. The Company has furnished or made available to Parent true and
complete copies of all Material Contracts, including any amendments thereto.
(c) Set forth in Section 3.10(c) of the Disclosure Schedule is a
description of any material changes to the amount and material terms of the
indebtedness of the Company and the Company Subsidiaries as described in the
notes to the financial statements incorporated in, or otherwise disclosed in,
the Company's Form 10-K for the year ended December 31, 1999.
SECTION 3.11. Absence of Litigation. Except as set forth in Section 3.11
of the Disclosure Schedule or as specifically disclosed in the Company SEC
Reports, there is no litigation, suit, claim, action, proceeding, arbitration,
review or investigation pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or any property or asset of the
Company or any Company Subsidiary before any Governmental Entity that is
reasonably likely to have a Material Adverse Effect or seeks to materially
delay or prevent the consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement. Except as set forth in Section 3.11 of the Disclosure Schedule or as
disclosed in the Company SEC Reports, there has been no change since December
31, 1999 in the status of any litigation, suit, claim, action, proceeding or
investigation relating to the Company or any Company Subsidiary that would be
reasonably likely to have a Material Adverse Effect. Except as disclosed in the
Company SEC Reports or as set forth in Section 3.11 of the Disclosure Schedule,
neither the Company nor any Company Subsidiary is subject to any outstanding
Order (as defined below), writ, injunction or decree which, insofar as can be
reasonably foreseen, would have a Material Adverse Effect.
SECTION 3.12. Environmental Matters. (a) Except as disclosed in Section
3.12 of the Disclosure Schedule or as disclosed in the Company SEC Reports or
as would not reasonably be expected to have a Material Adverse Effect:
(i) The Company is in compliance with all applicable Environmental Laws
and all Environmental Permits. All past noncompliance with Environmental
Laws or Environmental Permits identified by the Company has been resolved
without any pending, ongoing or future obligation, cost or liability, and,
to the Company's actual knowledge, there is no requirement proposed as of
the date hereof that is reasonably expected to be adopted or implemented
and give rise to liability under any Environmental Law or Environmental
Permit;
(ii) Except as expressly authorized under any Environmental Law or
Environmental Permit, there has been no Release of Hazardous Materials on
any of the real property owned or leased by the Company or any Company
Subsidiary (the "Real Property") or, during the Company's ownership or
occupancy of such property, on any property formerly owned, leased, used or
occupied by the Company;
(iii) The Company is not conducting, and has not undertaken or completed,
any Remedial Action relating to any Release or threatened Release on the
Real Property or at any other site, location or operation, either
voluntarily or pursuant to the order of any Governmental Entity or the
requirements of any Environmental Law or Environmental Permit;
(iv) To the Company's knowledge, there is no asbestos or asbestos-
containing material on any of the Real Property;
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(v) None of the Real Property is listed or proposed for listing, or, to
the Company's knowledge, adjoins any other property that is listed or
proposed for listing, on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System under
the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or any analogous federal, state or local list;
(vi) There are no Environmental Claims pending or, to the Company's
knowledge, threatened against the Company or the Real Property, and, to the
Company's knowledge, there are no circumstances that can reasonably be
expected to form the basis of any such Environmental Claim, including,
without limitation, with respect to any off-site disposal location
presently or formerly used by the Company or any of its predecessors or
with respect to any previously owned or operated facilities;
(vii) Under current Law, the Company can maintain present production
levels, or any planned expansion of production levels upon which financial
projections provided to Parent have been based, in compliance with
applicable Environmental Laws without a material increase in capital or
operating expenditures and without modifying any Environmental Permits or
obtaining any additional Environmental Permits;
(viii) The Company has provided Parent or made available copies of (i)
any environmental assessment or audit reports or other similar studies or
analyses relating to the Real Property or the Company, and (ii) all
insurance policies issued at in the past five years that may provide
coverage to the Company for environmental matters; and
(ix) Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will require any Remedial Action or notice
to or consent of Governmental Entities or third parties pursuant to any
applicable Environmental Law or Environmental Permit.
(b) For purposes of this Agreement:
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent
orders or consent agreements relating in any way to any Environmental Law,
any Environmental Permit or any Hazardous Materials.
"Environmental Law" means any Law in effect and as amended as of the
Effective Time, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental
Law.
"Hazardous Material" means (i) petroleum and petroleum products, by-
products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (ii) any other chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the
like into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the environment; (ii)
restore or reclaim the environment or natural resources; (iii) prevent the
Release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or the environment; or (iv) perform
remedial investigations, feasibility studies, corrective actions, closures
and postremedial or postclosure studies, investigations, operations,
maintenance and monitoring on, about or in any Real Property.
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SECTION 3.13. Trademarks, Patents and Copyrights. Except to the extent the
inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy) would not reasonably be expected to have a Material Adverse Effect,
the Company and each of the Company Subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service
marks, mask works, know-how and other proprietary rights and information used
or held for use in connection with the businesses of the Company and the
Company Subsidiaries as currently conducted or as contemplated to be conducted,
and, to the Company's knowledge, there is no assertion or claim challenging the
validity of any of the foregoing. Neither the Company nor any of the Company
Subsidiaries has infringed or is infringing in any way any patent, patent
right, license, trademark, trademark right, trade dress, trade name, trade name
right, service mark, mask work or copyright of any third party that would
reasonably be expected to have a Material Adverse Effect. To the Company's
knowledge, there are no infringements of any proprietary rights owned by or
licensed by or to the Company or any Company Subsidiary that could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule, (a) the Company and the Company Subsidiaries have timely filed or
will timely file all material federal, state, local and foreign Tax Returns
required to be filed by them with any taxing authority with respect to Taxes
for any period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company and
the Company Subsidiaries, and all such Tax Returns are complete and correct in
all material respects; (b) all Taxes that are shown as due on such Tax Returns
have been or will be timely paid; (c) no deficiency for any material amount of
Tax has been asserted or assessed in writing by a taxing authority against the
Company or any of the Company Subsidiaries for which there are not adequate
reserves; (d) the Company and the Company Subsidiaries have provided adequate
reserves in accordance with U.S. GAAP in their financial statements for any
Taxes that have not been paid, whether or not shown as being due on any
returns; (e) as of the date hereof, the Company and the Company Subsidiaries
have neither extended nor waived any applicable statute of limitations with
respect to Taxes and have not otherwise agreed to any extension of time with
respect to Tax assessment or deficiency; (f) none of the Company and the
Company Subsidiaries is a party to any Tax sharing agreement or arrangement
other than with each other; (g) as of the date hereof, there are no pending or
threatened in writing material audits, examinations, investigations,
litigation, or other proceedings in respect of Taxes of the Company or any
Company Subsidiary; (h) no liens for Taxes exist with respect to any of the
assets or properties of the Company or the Company Subsidiaries, except for
statutory liens for Taxes not yet due or payable or that are being contested in
good faith for which there are adequate reserves; (i) all Taxes which the
Company or any Company Subsidiary are required to withhold or to collect for
payment have been duly withheld and collected, and have been paid or accrued,
reserved against and entered on the books of the Company; and (j) none of the
Company or any Company Subsidiary has been a member of any group or corporation
filing Tax Returns on a consolidated, combined, unitary or similar basis other
than each such group of which it is currently a member. As used in this
Agreement, "Taxes" shall mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any Governmental Entity, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration
and documentation fees and customs duties, tariffs, and similar charges.
"Tax Returns" shall mean any return, declaration, report, claim for refund
or information return or statement relating to Taxes filed with a taxing
authority, including any schedule or attachment thereto, and including any
amendment thereof.
SECTION 3.15. Property and Leases. (a) The Company and the Company
Subsidiaries have sufficient title to all their properties and assets to
conduct their respective businesses as currently conducted or as contemplated
to be conducted, with only such exceptions as would not have a Material Adverse
Effect.
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(b) No parcel of real property owned or leased by the Company or any
Company Subsidiary is subject to any governmental decree or order to be sold or
is being condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefor, nor, to the knowledge of the
Company, has any such condemnation, expropriation or taking been proposed other
than as could not reasonably be expected to have a Material Adverse Affect.
(c) Except as set forth in Section 3.15(c) of the Disclosure Schedule,
there are no contractual or legal restrictions that preclude or restrict the
ability to use any real property owned or leased by the Company or any Company
Subsidiary for the purposes for which it is currently being used other than
preclusions or restrictions which do not preclude or restrict or otherwise
adversely affect the actual use which the Company or Company Subsidiary is
making of the real property on the date of this Agreement but which may or
would preclude or restrict any expansion or enhancement or change in such use.
There are no material latent defects or material adverse physical conditions
affecting the real property, and improvements thereon, owned or leased by the
Company or any Company Subsidiary other than those that would not prevent or
materially delay consummation of the Merger or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and
would not have a Material Adverse Effect.
SECTION 3.16. Rights Agreement. The copy of the Rights Agreement, dated as
of February 1, 2000, between the Company and First Union National Bank, a
national banking association, as rights agent (the "Rights Agreement"),
including all amendments and exhibits thereto, that is set forth as an exhibit
to the Company's Form 8-A filed with the SEC on February 3, 2000, is a complete
and correct copy thereof. The Company Board has taken all necessary action to
amend the Rights Agreement, a copy of which amendment has been provided to
Parent and its Representatives (as defined herein), so that (a) neither the
execution of this Agreement nor the consummation of the Merger will (i) cause
the Rights (as such term is defined in the Rights Agreement) issued pursuant to
the Rights Agreement to become exercisable, (ii) cause Parent or Merger Sub to
become an Acquiring Person (as such term is defined in the Rights Agreement) or
(iii) give rise to a Distribution Date (as such term is defined in the Rights
Agreement) and (b) the Rights will expire pursuant to the terms of the Rights
Agreement immediately prior to the Effective Time.
SECTION 3.17. Insurance. The Company and the Company Subsidiaries have in
effect insurance coverage with reputable insurers or are self-insured, which,
in respect of amounts, premiums, types and risks insured, constitutes
reasonable coverage for the risks customarily insured against by companies
engaged in the industries in which the Company and the Company Subsidiaries are
engaged and comparable in size and operations to the Company and the Company
Subsidiaries. The Company's current annual premiums for directors' and
officers' liability insurance is approximately $400,000 per year, and, as of
the date of this Agreement, the Company has no reason to believe that such
insurance will not be renewable by it or the Surviving Corporation upon
expiration in June 2001 on similar or more favorable terms.
SECTION 3.18. Board Recommendation. On the unanimous recommendation of the
Company Independent Committee, the Company Board (with one director having
recused himself), including all of the members of the Company Independent
Committee, at a meeting duly called and held, has by unanimous vote of the
Company Board (with one director having recused himself) (i) approved and
deemed it advisable that the Company and its stockholders consummate the
Merger, upon the terms and subject to the conditions set forth in this
Agreement, and (ii) resolved to recommend that the stockholders of the Company
approve and adopt this Agreement and the transactions contemplated herein,
including the Merger.
SECTION 3.19. Opinion of Financial Advisor. Credit Suisse First Boston
Corporation ("CSFB") has delivered to the Company its written opinion, dated
the date hereof, accompanied by an authorization to include such opinion in the
Proxy Statement and the Schedule 13E-3 (each as defined below) to the effect
that, as of the date of this Agreement, the aggregate Merger Consideration to
be received by the stockholders of the Company is fair, from a financial point
of view, to the Company's stockholders (other than Parent and its affiliates).
The Company has delivered a signed copy of such written opinion to Parent.
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SECTION 3.20. Brokers. No broker, finder or investment banker (other than
CSFB) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Company. The Company has heretofore made available
to Parent a complete and correct copy of all agreements between the Company and
CSFB pursuant to which such firm would be entitled to any payment relating to
the transactions contemplated hereby.
SECTION 3.21. Vote Required; State Takeover Statutes. (a) The only vote of
the holders of any class or series of capital stock of the Company necessary to
approve the Merger, this Agreement or the transactions contemplated by this
Agreement is the affirmative vote by the Company's stockholders representing
two-thirds of the outstanding shares of the Company's Class A Common Stock and
Class B Common Stock voting together, with each outstanding share of Class A
Common Stock representing one vote and each outstanding share of Class B Common
Stock representing one-tenth of a vote.
(b) Section 3-602 of the MGCL does not apply to Parent, Merger Sub or any
of their affiliates in connection with the Merger or the transactions
contemplated by this Agreement. The Company Board has validly amended the
bylaws of the Company to exempt any acquisition of Company Common Stock by
Parent or Merger Sub from Section 3-702 of the MGCL and has taken all other
action necessary to ensure that the provisions of Title 3, Subtitles 6 and 7 of
the MGCL or any other applicable state takeover statutes are not and will not
be applicable to this Agreement, the Merger and the other transactions
contemplated by this Agreement. No other state takeover statute is applicable
to this Agreement, the Merger or the other transactions contemplated by this
Agreement. No stockholder of the Company shall have any statutory appraisal
rights under applicable Law as a result of the Merger, this Agreement or any of
the transactions contemplated hereby or thereby.
SECTION 3.22. Directors of the Surviving Corporation. (a) The Company
Board has by the two-thirds vote required by the definition of "Change of
Control" in Section 101 of the Indenture, nominated the persons identified in
Section 3.22(a) of the Disclosure Schedule for election by the sole stockholder
of the Surviving Corporation to the board of directors of the Surviving
Corporation after the Effective Time.
(b) Provided that (i) the Surviving Corporation and Holdings, as the sole
stockholder of the Surviving Corporation after the Effective Time, take all
necessary action pursuant to the MGCL after the Effective Time to elect as the
board of directors of the Surviving Corporation the persons identified in
Section 3.22(a) of the Disclosure Schedule, and (ii) the charter and bylaws of
the Merger Sub (which shall, pursuant to Section 1.04 of this Agreement, be the
charter and bylaws of the Surviving Corporation) and all actions of the board
of directors and stockholders of Merger Sub prior to the Merger are properly
conformed to allow the implementation of the actions contemplated under the
preceding portion of this sentence and the provisions of Section 6.05
(including without limitation the reduction in the size of the board of
directors of the Surviving Corporation as of and with effect from the next
succeeding election of directors of the Surviving Corporation occurring after
the Effective Time and the election of the persons identified in Section
3.22(a) of the Disclosure Schedule as a new board of directors of the Surviving
Corporation after the Merger), then the Merger, this Agreement and the
transactions contemplated by this Agreement, including, without limitation, the
election after the Effective Time by Holdings as the sole stockholder of the
Surviving Corporation of the individuals identified in Section 3.22(a) of the
Disclosure Schedule as the directors of the Surviving Corporation, will not
result in a "Change of Control" within the meaning of clause (ii) of the
definition of "Change of Control" contained in Section 101 of the Indenture,
dated as of January 24, 1995, as amended and as in effect as of the date of
this Agreement, between the Company and The First National Bank of Boston as
trustee (the "Indenture").
SECTION 3.23. Waiver of Certain Obligations. The Company and, to the
Company's knowledge, each of the individuals identified in Section 3.23 of the
Disclosure Schedule has duly executed and delivered the respective agreement
provided by Parent (collectively, the "Waivers"), true and complete copies of
which have been furnished to Parent, and such Waivers are in full force and
effect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant
to the Company, that:
SECTION 4.01. Organization and Qualification. Each of Parent and Merger
Sub has been duly organized and is validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby to be consummated by Parent and Merger Sub.
The execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of such transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent and Merger Sub are necessary to authorize
this Agreement or to consummate such transactions. This Agreement has been duly
authorized and validly executed and delivered by each of Parent and Merger Sub
and constitutes (assuming due authorization, execution and delivery by the
Company) a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to bankruptcy, insolvency, moratorium, reorganization or similar
laws affecting the rights of creditors generally and the availability of
equitable remedies.
SECTION 4.02. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, (i)
conflict with or violate any provision of the charter and bylaws of Parent or
Merger Sub, (ii) assuming that all consents, approvals, authorizations and
other actions described in Section 4.02(b) have been obtained and all filings
and obligations described in Section 4.02(b) have been made, conflict with or
violate any Law applicable to Parent or Merger Sub or by which any property or
asset of Parent or Merger Sub is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clause (iii), for any such
conflicts, violations, breaches, defaults, or other occurrences which would not
reasonably be expected to prevent or materially delay the performance of this
Agreement by either Parent or Merger Sub.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (i) for
applicable requirements of the Exchange Act, the pre-merger notification
requirements of the HSR Act and the filing and recordation of appropriate
merger documents as required by the MGCL and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not reasonably be expected to prevent or materially delay
consummation of the Merger.
SECTION 4.03. Absence of Litigation. Except as set forth in Section
3.07(c)(ii) of the Disclosure Schedule, there is no litigation, suit, claim,
action, proceeding or investigation pending or, to the best knowledge of
Parent, threatened against Parent or Merger Sub or any of their respective
properties or assets before any court, arbitrator or Governmental Entity which
sought to delay or prevent or would result in the material delay of or would
prevent the consummation of any of the transactions contemplated hereby.
Neither Parent nor Merger Sub or any property or asset of Parent or Merger Sub
is subject to any continuing order of, consent decree, settlement agreement or
similar written agreement with, or, to the knowledge of Parent, continuing
investigation by, any Governmental Entity or any order, writ, judgment,
injunction, decree, determination or award of any governmental or regulatory
authority or any arbitrator which would prevent Parent or Merger Sub from
performing their respective material obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated hereby.
SECTION 4.04. Brokers. No broker, finder or investment banker other than
Aegis Muse Associates LLC and its associates (collectively, "Aegis Muse") is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent.
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SECTION 4.05. No Activities. Merger Sub was formed solely for the purpose
of engaging in the Merger. Except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement, Merger Sub does not have any obligations or
liabilities of any nature (whether accrued, absolute, contingent or otherwise)
and has not engaged in any business activities of any type or kind whatsoever
or entered into any agreements or arrangements with any person.
SECTION 4.06. Financing. At or prior to the Closing Date, Parent will
cause Merger Sub to have, and Merger Sub will have, all of the financing
required to consummate the transactions contemplated by this Agreement.
SECTION 4.07. Ownership of Company Common Stock. As of the date hereof,
the information relating to Holdings' ownership of Company Common Stock
contained in the Statement of Beneficial Ownership on Schedule 13-D filed
jointly by Parent and others with the SEC on January 12, 1999, as amended, is
true and correct in all material respects.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
consent in writing, which consent shall not be unreasonably withheld or
delayed, (1) the businesses of the Company and the Company Subsidiaries shall
be conducted only in, and the Company and the Company Subsidiaries shall not
take any action except in, the ordinary course of business consistent with past
practice and (2) the Company shall use its reasonable best efforts to keep
available the services of such of the current officers, significant employees
and consultants of the Company and the Company Subsidiaries and to preserve the
current relationships of the Company and the Company Subsidiaries with such of
the customers, suppliers and other persons with which the Company or any
Company Subsidiary has significant business relations in order to preserve
substantially intact its business organization. By way of amplification and not
limitation, except as set forth in Section 5.01 of the Disclosure Schedule or
as contemplated by any other provision of this Agreement, the Company shall
not, and shall neither cause nor permit any Company Subsidiaries or any of the
Company's affiliates (over which it exercises control), or any of its or their
officers, directors, employees and agents (in each case, in their capacities as
such) to, between the date of this Agreement and the Effective Time, directly
or indirectly, do, or agree to do, any of the following, without the prior
written consent of Parent, which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change its charter or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any
shares of capital stock of the Company or any Company Subsidiary of any
class, or securities convertible or exchangeable or exercisable for any
shares of such capital stock, or any options, warrants or other rights of
any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest),
of the Company or any Company Subsidiary (except for the issuance of any
shares of capital stock issuable pursuant to the exercise of any Company
Options outstanding on the date of this Agreement); or (ii) any property or
assets of the Company or any Company Subsidiary, except in all cases in the
ordinary course of business and in a manner consistent with past practice;
provided that the aggregate amount of any such sale or disposition (other
than a sale or disposition of petroleum products or other inventory in the
ordinary course of business consistent with past practice, as to which
there shall be no restriction on the aggregate amount), or pledge, grant,
transfer, lease, license, guarantee or encumbrance of such property or
assets of the Company or any Company Subsidiary shall not exceed (x)
$500,000 or (y) in the case of any sale or disposition of retail gasoline
sites, $1,000,000, provided that not more than four
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retail gasoline sites may be disposed of under this subsection (y) between
the date of this Agreement and the Effective Time;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, other than dividends paid by any of the wholly owned Company
Subsidiaries to the Company in the ordinary course of business consistent
with past practice;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization, person or any division thereof or
any assets, other than (x) acquisitions of any assets in the ordinary
course of business consistent with past practice that are not, in the
aggregate, in excess of $300,000 or (y) purchases (whether for cash or
pursuant to an exchange) of crude oil or intermediate products for refining
or refined petroleum products or other inventory for resale in the ordinary
course of business and consistent with past practice; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person for borrowed money, except for
indebtedness for borrowed money incurred in the ordinary course of business
and consistent with past practice under the Loan and Security Agreement,
effective as of December 10, 1998 and last amended effective as of March
16, 2000, between Congress Financial Corporation and First Union National
Bank, as lenders, Congress Financial Corporation, as administrative agent,
the Company and certain of the Company Subsidiaries, as borrowers, or
incurred to refinance outstanding indebtedness for borrowed money existing
on the date of this Agreement (which refinancing shall not increase the
aggregate amount of indebtedness permitted to be outstanding thereunder and
shall not include any covenants that shall be materially more burdensome to
the Company in any material respect or increase costs to the Surviving
Corporation after the Effective Time in any material respect), or other
indebtedness for borrowed money with a maturity of not more than one year
in a principal amount not, in the aggregate, in excess of $1,000,000; (iii)
terminate, cancel or request any material change in, or agree to any
material change in any Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a whole, in
either case other than in the ordinary course of business, consistent with
past practice; (iv) make or authorize any capital expenditure, other than
as set forth in Section 5.01(e)(iv) of the Disclosure Schedule; or (v)
enter into or amend any contract, agreement, commitment or arrangement
that, if fully performed, would not be permitted under this Section
5.01(e);
(f) increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company or any Company
Subsidiary who are not officers of the Company, or grant any rights to
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer or other employee of the Company or
any Company Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, stock option appreciation unit awards, performance
awards or performance restricted stock awards), stock purchase, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any director, officer or employee, except as contemplated by this
Agreement or to the extent required by applicable Law or the terms of a
collective bargaining agreement or a contractual obligation existing on the
date hereof;
(g) take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of U.S. GAAP and as
advised by the Company's regular certified independent public accountants;
(h) waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $250,000, except for claims
asserted by the Company or the applicable Company Subsidiary;
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(i) make any material Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(j) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing;
(k) amend or modify, or propose to amend or modify, the Rights Agreement,
as amended as of the date hereof, except as contemplated in this Agreement;
(l) take any action that will be likely to result in the representations
and warranties set forth in Article III becoming false or inaccurate in any
material respect (or, with respect to any representation and warranty
already qualified by materiality, false or inaccurate in any respect);
(m) enter into or carry out any other transaction other than in the
ordinary and usual course of business or other than as permitted pursuant
to the other clauses in this Section 5.01;
(n) take any action or fail to take any action that could reasonably be
expected to have or result in a Material Adverse Effect; or
(o) permit or cause any Company Subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing.
SECTION 5.02. Notices of Certain Events. Each of Parent and the Company
shall give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be required
in connection with the Merger, (ii) any notice or other communication from any
Governmental Entity in connection with the Merger, (iii) any actions, suits,
claims, investigations or proceedings commenced or, to the best of its
knowledge threatened in writing against, relating to or involving or otherwise
affecting Parent, the Company or their subsidiaries that relate to the
consummation of the Merger or the transactions contemplated by this Agreement;
(iv) the occurrence of a default or event that, with notice or lapse of time or
both, will become a default under any Material Contract; and (v) any change
that is reasonably likely to result in a Material Adverse Effect or is likely
to delay or impede the ability of either Parent or the Company to consummate
the transactions contemplated by this Agreement or to fulfill its obligations
set forth herein.
SECTION 5.03. Contractual Consents. Except as set forth in Section 5.03 of
the Disclosure Schedule, prior to or at the Effective Time each of the parties
hereto shall use its reasonable best efforts to prevent the occurrence, as a
result of the Merger, of the triggering of a change of control or similar
clause or any event which constitutes a default (or an event which with notice
or lapse of time or both would become a default) under any material contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which it or any of its subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement; Schedule 13E-3. (a) As promptly as
practicable after the execution of this Agreement, (i) the Company shall
prepare (in consultation with Parent) and file with the SEC a proxy statement
(together with any amendments thereof or supplements thereto, the "Proxy
Statement") relating to the meeting of the Company's stockholders (the "Company
Stockholders' Meeting") to be held to consider approval of this Agreement and
the Merger, and (ii) Parent, Merger Sub and the Company shall, if required by
the Exchange Act, prepare and file with the SEC a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3") relating to the Merger and the other
transactions contemplated by this Agreement. The Company shall furnish all
information concerning the Company that Parent may reasonably request in
connection with such actions and the preparation of the Proxy Statement and
Schedule 13E-3, if any.
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(b) Subject to the fiduciary duties of the Company Board, as described in
the following proviso, the Proxy Statement shall include the unanimous
recommendation of the Company Board to the stockholders of the Company to vote
in favor of approving the Merger and this Agreement; provided, however, that
the Company Board may, at any time prior to the date of the Company
Stockholders' Meeting, withdraw, modify or change any such recommendation to
the extent that the Company Board or the Company Independent Committee
determines in good faith after consultation with independent legal counsel that
the failure to so withdraw, modify or change their recommendation could cause
the Company Board to breach its fiduciary duties to the Company's stockholders
under applicable law.
(c) No amendment or supplement to the Proxy Statement or the Schedule 13E-
3, if any, will be made or filed with the SEC by Company or Parent, as the case
may be, without the approval of the other party (which will not be unreasonably
withheld). The Company and Parent each will advise the other, promptly after
they receive notice thereof of any request by the SEC for amendment of the
Proxy Statement or the Schedule 13E-3 or comments thereon and responses thereto
or requests by the SEC for additional information.
(d) The information supplied by Parent for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy Statement
(or any amendment thereof or supplement thereto), is first mailed to the
stockholders of the Company and (ii) the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or fail to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the date of the Company Stockholders'
Meeting, any event or circumstance relating to Parent, or its officers or
directors, is discovered by Parent that should be set forth in an amendment or
a supplement to the Proxy Statement or the Schedule 13E-3, Parent shall
promptly inform the Company. The Schedule 13E-3 will comply as to form and
substance in all material aspects with the applicable requirements of the
Exchange Act.
(e) The information supplied by the Company for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy Statement
(or any amendment thereof or supplement thereto), is first mailed to the
stockholders of the Company and (ii) the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or fail to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the date of the Company Stockholders'
Meeting, any event or circumstance relating to the Company or any Company
Subsidiary, or their respective officers or directors, is discovered by the
Company that should be set forth in an amendment or a supplement to the Proxy
Statement or the Schedule 13E-3, the Company shall promptly inform Parent. The
Proxy Statement will comply as to form and substance in all material respects
with the applicable requirements of the Exchange Act.
SECTION 6.02. Company Stockholders' Meeting. (a) The Company shall call
and hold the Company Stockholders' Meeting as promptly as practicable for the
purpose of voting upon the approval of this Agreement and the Merger.
(b) The Company shall use all commercially reasonable efforts to solicit
from its stockholders proxies in favor of the approval of this Agreement and
the Merger, and shall take all other action necessary or advisable to secure
the vote or consent of its stockholders required by the MGCL and the rules of
the AMEX to obtain such approvals.
(c) Rosemore shall cause Holdings to vote all shares of the Company Common
Stock held by it in favor of the Merger and this Agreement.
SECTION 6.03. Access to Information; Confidentiality. (a) Except as
required pursuant to any confidentiality agreement or similar agreement or
arrangement to which the Company or any of the Company Subsidiaries is a party
or pursuant to applicable Law from the date of this Agreement to the Effective
Time, the Company shall (and shall cause the Company Subsidiaries to): (i)
provide to Parent (and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives, collectively,
"Representatives") reasonable access at reasonable times, upon prior notice to
the Company, to the officers,
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employees, agents, properties, offices and other facilities of the Company and
the Company Subsidiaries and to the books and records thereof (including,
without limitation, access to the Company's accountants, any correspondence
between the Company and such accountants and work papers prepared with respect
to the Company by such accountants), (ii) provide to Parent and its
Representatives access to the Real Property for Parent to conduct any
environmental site assessment that Parent deems appropriate, including,
without limitation, access to enter upon and investigate and collect air,
surface water, groundwater and soil samples, and (iii) furnish promptly such
information concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of the Company and the Company
Subsidiaries as Parent or their respective Representatives may reasonably
request. No investigation conducted pursuant to this Section 6.03 shall affect
or be deemed to modify any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement dated January 26, 2000 (the "Confidentiality
Agreement") among Parent and the Company with respect to the information
disclosed pursuant to this Section 6.03.
SECTION 6.04. No Solicitation of Transactions. The Company agrees that,
from and after the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with Article VIII, neither it nor
any Company Subsidiary shall, and that it shall cause its and each Company
Subsidiary's Representatives not to, except as contemplated by this Agreement,
directly or indirectly, initiate, solicit or encourage any inquiries or the
making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase or
sale of all or any significant portion of the assets of the Company (including
the sale of either of the Company's refineries or any of its terminals) and
the Company Subsidiaries, taken as a whole, or 15% or more of the equity
securities of the Company (any such proposal or offer being hereinafter
referred to as a "Competing Transaction"). The Company further agrees that
neither it nor any Company Subsidiary shall, and that it shall cause its and
each Company Subsidiary's Representatives not to, directly or indirectly, have
any discussion with or provide any confidential information or data relating
to the Company or any Company Subsidiary to any person relating to a Competing
Transaction or engage in any negotiations concerning a Competing Transaction,
or otherwise facilitate any effort or attempt to make or implement a Competing
Transaction or accept a Competing Transaction; provided, however, that nothing
contained in this Section 6.04 shall prevent the Company or the Company Board
from (i) engaging in any discussions or negotiations with, or providing any
information to, any person in response to an unsolicited written Competing
Transaction by any such person; or (ii) recommending such an unsolicited
written Competing Transaction to the holders of Company Common Stock if, in
any such case as is referred to in clause (i) or (ii), (A) the Company Board
concludes in good faith (after consultation with independent financial
advisors) that such Competing Transaction would, if consummated, result in a
transaction more favorable to holders of Company Common Stock than the
transaction contemplated by this Agreement (any such more favorable Competing
Transaction being referred to in this Agreement as a "Superior Proposal"), (B)
either the Company Board or the Company Independent Committee determines in
good faith after consultation with independent legal counsel that such action
is necessary for the Company Board to act in a manner consistent with its
fiduciary duties under applicable Law, (C) prior to providing any information
or data regarding the Company to any person or any of such person's
Representatives in connection with a Superior Proposal by such person, the
Company receives from such person an executed confidentiality agreement on
terms at least as restrictive on such person as those contained in the
Confidentiality Agreement and (D) prior to providing any information or data
to any person or any of such person's Representatives or entering into
discussions or negotiations with any person or any of such person's
Representatives in connection with a Superior Proposal by such person, the
Company notifies Parent promptly of the receipt of such Superior Proposal
indicating, in connection with such notice, the name of such person and
attaching a copy of the proposal or offer or providing a complete written
summary thereof. The Company agrees that it shall keep Parent informed, on a
current basis, of the status and terms of any discussions or negotiations
related to such Superior Proposal. The Company agrees that it will take the
necessary steps to promptly inform each Company Subsidiary and each
Representative of the Company or any Company Subsidiary of the
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obligations undertaken in this Section 6.04. Immediately following the
execution of this Agreement, the Company shall terminate and cause the Company
Subsidiaries to terminate any existing activities, discussions or negotiations
with any third parties that may be ongoing with respect to any Competing
Transaction and promptly after the public announcement of the execution of
this Agreement shall use all reasonable efforts to request that all
confidential information previously furnished to any such third parties be
returned promptly. Nothing contained in this Agreement shall prohibit the
Company or the Company Board from taking or disclosing to its stockholders a
position contemplated by Rules 14d-9 and 14e-(2)(a) promulgated under the
Exchange Act.
SECTION 6.05. Election of Directors. (a) Prior to the Effective Time, in
accordance with the MGCL, the Company Board shall take all further action
necessary to ensure that the directors identified in Section 3.22 of the
Disclosure Schedule shall become directors of the Surviving Corporation,
including, without limitation, the reduction in the size of the board of
directors to the number of persons identified in Section 3.22(a) of the
Disclosure Schedule as of and with effect from the next succeeding election of
directors of the Surviving Corporation occurring after the Merger and by
accommodating the election by the sole stockholder of the Surviving
Corporation of a new board of directors of the Surviving Corporation after the
Effective Time.
(b) If requested by Parent after the date of this Agreement and prior to
the mailing of the Proxy Statement, the Company Board shall take all further
action necessary in accordance with Parent's request to change the size of the
board of directors as with effect from the next succeeding election of
directors of the Surviving Corporation occurring after the Merger and to
modify its earlier nomination of individuals to be directors of the Surviving
Corporation referred to in Section 3.22 of this Agreement.
SECTION 6.06. Directors' and Officers' Indemnification and
Insurance. (a) The charter and bylaws of the Surviving Corporation shall
contain the provisions regarding liability of directors and indemnification of
directors and officers that are set forth, as of the date of this Agreement,
in the charter and the bylaws, respectively, of the Company, which provisions
shall not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the Effective Time
were directors, officers, employees, fiduciaries or agents of the Company.
(b) For a period of six years after the Effective Time, the Surviving
Corporation shall use best efforts to cause to be maintained in effect
policies of directors' and officers' liability insurance with coverage in
amount and scope at least as favorable as the Company's existing policies with
respect to claims arising from facts or events that occurred prior to the
Effective Time.
(c) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and its
respective successors and assigns.
(d) From and after the Effective Time, the Surviving Corporation agrees
that it shall indemnify and hold harmless each present and former director and
officer of the Company, determined as of the Effective Time (the "Indemnified
Parties"), from and against any costs, judgments, fines, losses, obligations,
claims, damages, liabilities, or expenses (including interest, penalties,
reasonable out-of-pocket expenses and reasonable attorneys' fees incurred in
the investigation or defense of any of the same or in asserting any of their
rights hereunder) (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, resulting from, or pertaining
to matters existing or occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that the Company would have been permitted or required under Maryland
laws and under the Company's charter documents (as in effect on the date
hereof) to indemnify such Indemnified Parties (and the Surviving Corporation
shall advance expenses as incurred to the fullest extent permitted under
applicable Law; provided that the Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification);
provided that any determination required to be made with respect to whether an
officer's or director's conduct complies with the
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standards set forth under Maryland law and the Company's charter documents
shall be made by independent counsel selected by the Surviving Corporation.
(e) Any Indemnified Party wishing to claim indemnification under paragraph
(d) of this Section 6.06, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve the Surviving Corporation of any
liability it may have to such Indemnified Party, except to the extent that such
failure materially prejudices the Surviving Corporation. In the event of any
such claim, action, suit, proceeding or investigation (whether arising before
or after the Effective Time), (i) the Surviving Corporation shall have the
right to assume the defense thereof, with counsel selected by Parent and
reasonably acceptable to the Indemnified Party, and the Surviving Corporation
shall not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
the Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
the Surviving Corporation shall be obligated pursuant to this paragraph (f) to
pay for only one firm of counsel for all Indemnified Parties in any
jurisdiction unless the use of one counsel for such Indemnified Parties would
present such counsel with a conflict of interest, (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) the Surviving
Corporation shall not be liable for any settlement effected without the prior
written consent of Parent; and provided further that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law. The Surviving Corporation shall not, in the defense of any claim or
litigation, except with the consent of the Indemnified Party (which consent
shall not be unreasonably withheld or delayed), consent to entry of judgment or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation.
(f) If the Surviving Corporation or any of its successors or assigns shall
(i) consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfer all or substantially all of its properties and
assets or outstanding voting securities to any individual, corporation or other
entity, then and in each such case, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation shall expressly assume all
of the obligations set forth in this Section 6.06.
SECTION 6.07. Further Action; Consents; Filings. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the Merger,
(ii) obtain from Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Parent or the Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger, (iii) make all necessary filings, and thereafter make any other
submissions either required or deemed appropriate by each of the parties, with
respect to this Agreement and the Merger required under (A) the Exchange Act,
(B) the HSR Act, (C) the rules of the AMEX, (D) any other applicable Law. The
parties hereto shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing, and none of
the parties will file any such document if any of the other parties shall have
reasonably objected to the filing of such document. No party to this Agreement
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the
behest of any Governmental Entity without the consent and agreement of the
other parties to this Agreement, which consent shall not be unreasonably
withheld or delayed. Without limiting the foregoing, each of the parties hereto
shall,
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and shall cause each of its subsidiaries to, use its reasonable best efforts
to obtain (and to cooperate and coordinate with the other parties to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity that is required to be obtained in connection with the
Merger and to take all actions reasonably necessary to satisfy any applicable
regulatory requirements relating thereto. Each of the parties shall promptly
take, in the event that any permanent or preliminary injunction or other order
is entered or becomes reasonably foreseeable to be entered in any proceeding
that would make consummation of the transaction contemplated hereby in
accordance with the terms of this Agreement unlawful or that would prevent or
delay consummation of the transaction contemplated hereby, any and all steps
necessary to vacate, modify or suspend such injunction or order so as to
permit such consummation prior to the deadline specified in Section 8.01(b).
Each of the parties agrees to consult in good faith and to use all
commercially reasonable efforts to avoid or cure the occurrence of an Event of
Default (as such term is defined in the Indenture).
SECTION 6.08. The Company Rights Plan. Prior to the Effective Time, the
Company shall take all further action necessary to (i) amend the Rights
Agreement so as to accelerate the Final Expiration Date (as such term is used
in the Rights Agreement) to a date that is immediately prior to the Effective
Time, and (ii) ensure that after such acceleration of the Final Expiration
Date (A) neither the Company, Parent nor Merger Sub shall have any obligations
under the Rights or Rights Agreement and (B) none of the holders of the Rights
shall have any rights under the Rights or Rights Agreement.
SECTION 6.09. Public Announcements. After the issuance of the initial
press release, Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to this Agreement or any transaction contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation, except to the extent required by applicable Law or the
requirements of the AMEX, in which case the issuing party shall use its
reasonable best efforts to consult with the other party before issuing any
such release or making any such public statement.
SECTION 6.10. Amendment of Plans. At the request of Parent, the Company
shall use its best efforts to amend its Plans containing a "change of control"
or similar provision, to the satisfaction of Parent, to clarify that any
reduction in the Company's refining capacity or number of retail units
operated by the Company shall not constitute a "change of control" or similar
event under such Plans.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate
the Merger. The obligations of Parent, the Company and Merger Sub to effect
the Merger shall be subject to the satisfaction or, if permitted by applicable
Law, waiver prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite affirmative vote of the
stockholders of the Company in accordance with the MGCL;
(b) no preliminary or permanent injunction, decree or other order (an
"Order"), issued by any Governmental Entity or other legal restraint or
prohibition preventing the consummation of the transactions contemplated by
this Agreement shall be in effect, and no Law shall have been enacted or
adopted that enjoins, prohibits or makes illegal consummation of any of the
transactions contemplated hereby; and
(c) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
SECTION 7.02. Conditions to the Obligations of the Company. The
obligations of the Company to effect the Merger shall be subject to the
satisfaction or, if permitted by applicable Law, waiver, prior to the Closing
Date, of the following further conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the
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Effective Time, except that those representations and warranties that
address matters only as of a particular date shall remain true and correct
in all material respects as of such date, and the Company shall have
received a certificate of the Chief Financial Officer of Parent to that
effect; and
(b) Parent and Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate of the
Chief Executive Officer or Chief Financial Officer of Parent to that
effect.
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the satisfaction or, if permitted by applicable Law, waiver prior to the
Closing Date of the following further conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of
the Effective Time, as though made at and as of the Effective Time, except
that those representations and warranties that address matters only as of a
particular date shall remain true and correct in all material respects as
of such date (provided that any representation or warranty that is
qualified by materiality (including, without limitation, qualification by
reference to a Material Adverse Effect) shall be true in all respects as of
the Effective Time or as of such particular date, as the case may be), and
Parent shall have received a certificate of the Chief Financial Officer of
the Company to that effect, it being understood that any representation and
warranty of the Company which would otherwise not be true and correct in
all material respects or in all respects, as the case may be, but was made
by the Company (i) with the approval of Mr. Henry A. Rosenberg, Jr. despite
his actual knowledge that such representation and warranty was false and
(ii) without knowledge at the date of this Agreement by any of the other
officers or directors of the Company that such representation and warranty
was false shall not be deemed to not be true and correct in all material
respects or to not be true and correct in all respects, as the case may be,
for purposes of this Section 7.03(a);
(b) the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time, and
Parent shall have received a certificate of the Chief Financial Officer of
the Company to that effect;
(c) all consents, approvals, waivers and authorizations required to be
obtained to effect the Merger shall have been obtained from all
Governmental Entities, except if the failure to obtain any such consents,
approvals and authorizations would not result in a Material Adverse Effect;
(d) all consents, approvals, waivers and authorizations (including,
without limitation, waivers of termination rights) of third parties (other
than Governmental Entities) the failure of which to obtain would result in
a Material Adverse Effect shall have been obtained; and
(e) no Event of Default (as such term is defined in the Indenture) shall
have occurred under the Indenture and the consummation of the Merger will
not result in the occurrence of an Event of Default under the Indenture.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by each of the Company
Board, the Company Independent Committee and the Board of Directors of
Parent;
26
<PAGE>
(b) by either Parent or the Company, if the Effective Time shall not have
occurred on or before August 31, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available
to the party whose failure to fulfill any obligation under this Agreement
shall have been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Parent or the Company, if any Order or other legal
restraint or prohibition preventing the consummation of the Merger shall
have been entered by any Governmental Entity or any Law shall have been
enacted or adopted that enjoins, prohibits or makes illegal consummation of
the Merger;
(d) by Parent, if (i) the Company Board withdraws, modifies or changes
its recommendation of this Agreement in a manner adverse to Parent, or
shall have resolved to do so, (ii) after receiving a bona fide proposal or
offer relating to a Competing Transaction, the Company Board shall have
refused to affirm its recommendation of this Agreement as promptly as
practicable (but in any case within ten business days) after receipt of any
written request from Parent, (iii) the Company Board shall have recommended
to the stockholders of the Company a Competing Transaction, or shall have
resolved to do so, or (iv) a tender offer or exchange offer for 15% or more
of the outstanding shares of capital stock of the Company is commenced, and
the Company Board fails to recommend against acceptance of such tender
offer or exchange offer by its stockholders (including not taking a
position with respect to the acceptance of such tender offer or exchange
offer by its stockholders);
(e) by Parent or the Company, if this Agreement shall fail to receive the
requisite vote for adoption at the Company Stockholders' Meeting or any
adjournment or postponement thereof;
(f) by Parent, upon a breach of, or failure to perform in any material
respect (which breach or failure cannot be or has not been cured within 30
days after the giving of notice of such breach or failure), any
representation, warranty, covenant or agreement on the part of the Company
set forth in this Agreement, such that the conditions set forth in clause
(a) or (b) of Section 7.03 would not be satisfied; or
(g) by the Company, upon a breach of, or failure to perform in any
material respect (which breach or failure cannot be or has not been cured
within 30 days after the giving of notice of such breach or failure), any
representation, warranty, covenant or agreement on the part of Parent set
forth in this Agreement, such that the conditions set forth in Section 7.02
would not be satisfied.
SECTION 8.02. Notice of Termination; Effect of Termination. In the event
of termination of this Agreement by either Parent or the Company pursuant to
Section 8.01 hereof, the terminating party shall give prompt written notice
thereof to the nonterminating party. Except as provided in Section 9.01, in the
event of termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void, there shall be no liability under this Agreement
on the part of Parent, the Company or Merger Sub or any of their respective
officers or directors, and all rights and obligations of each party hereto
shall cease, subject to the remedies of the parties set forth in Section
8.05(b), (c) and (d); provided, however, that nothing herein shall relieve any
party from liability for the breach of any of its representations and
warranties or the breach of any of its covenants or agreements set forth in
this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by mutual agreement
of the parties hereto by action taken by or on behalf of their respective
Boards of Directors (with respect to the Company, including approval of the
Company Independent Committee) at any time prior to the Effective Time;
provided, however, that after the approval of this Agreement by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each share of Company
Common Stock shall be converted upon consummation of the Merger.
SECTION 8.04. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
waiver of a condition set forth in Section 7.01 will be effective only if made
in writing by each of the Company and Parent and, unless otherwise specified in
27
<PAGE>
such writing, shall thereafter operate as a waiver of such condition for any
and all purposes of this Agreement. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party or parties
to be bound thereby.
SECTION 8.05. Expenses. (a) Except as otherwise set forth in this Section
8.05, all Expenses (as defined below) incurred in connection with this
Agreement and the Merger shall be paid by the party incurring such expenses,
whether or not the Merger is consummated. "Expenses," as used in this
Agreement, shall consist of all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
(including, without limitation, any fees or expenses payable to Aegis Muse
pursuant to the terms of the engagement letter from Aegis Muse to Parent dated
January 26, 2000) experts and consultants to a party hereto and its
affiliates) reasonably incurred by a party or on its behalf in connection
with, or related to the authorization, preparation, negotiation, execution and
performance of, this Agreement, the preparation, printing, filing and mailing
of the Proxy Statement, the solicitation of stockholder approvals and all
other matters related to the consummation of the Merger.
(b) The parties agree that if the Company or Parent shall terminate this
Agreement pursuant to Section 8.01(e) due to the failure of the Company's
stockholders to approve and adopt this Agreement and (i) at the time of such
failure to so approve and adopt this Agreement there shall exist a Competing
Transaction (which Competing Transaction shall have become the subject of a
public announcement or any person shall have publicly announced an intention
to make a proposal or offer relating thereto) with respect to the Company and
(ii) within 12 months of the termination of this Agreement, the Company enters
into an agreement with any third party with respect to a Competing
Transaction, which transaction is subsequently consummated, then the Company
shall reimburse all reasonable and documented Expenses of Parent and Merger
Sub simultaneously with the consummation of such transaction.
(c) The parties agree that the payment of Expenses provided for in
Section 8.05(b) shall be the sole and exclusive remedy of the parties upon a
termination of this Agreement pursuant to Section 8.01(e), and such remedy
shall be limited to the payments stipulated in Section 8.05(b); provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations and warranties or the breach of
any of its covenants or agreements set forth in this Agreement.
(d) Any payment of Expenses required to be made pursuant to Section
8.05(b) shall be made by wire transfer of immediately available funds to an
account designated in writing by the party entitled to receive payment.
(e) In the event that the Company shall fail to pay any Expenses of
Parent in accordance with Section 8.05(b) when due, the amount of any such
Expenses shall be increased to include the costs and expenses actually
incurred or accrued by Parent, acting together (including, without limitation,
fees and expenses of counsel) in connection with the collection under and
enforcement of this Section 8.05.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
and in any certificate delivered pursuant hereto shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be, except that the agreements set forth in Articles I
and II, Section 6.06 and this Article IX shall survive the Effective Time and
those set forth in Sections 6.03(b) and 8.05 and this Article IX shall survive
termination. Each party agrees that, except for the representations and
warranties contained in this Agreement and the Disclosure Schedule, no party
hereto has made any other representations and warranties, and each party
hereby disclaims any other representations and warranties made by itself or
any of its officers, directors, employees, agents, financial and legal
advisors or other representatives with respect to the execution and delivery
of this Agreement or the transactions contemplated herein, notwithstanding the
delivery or disclosure to any other party
28
<PAGE>
or any party's representatives of any documentation or other information with
respect to any one or more of the foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
and facsimile or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 9.02):
if to Parent:
Rosemore, Inc.
One North Charles Street, Suite 2300
Baltimore, Maryland 21201
Attention: Edward L. Rosenberg
President and Chief Executive Officer
Telephone: (410) 347-7090
Facsimile: (410) 347-7081
with a copy (which shall not constitute notice to Parent) to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Attention: John A. Marzulli, Jr., Esquire
Telephone: (212) 848-8590
Facsimile: (212) 848-7179
if to the Company:
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, Maryland 21201-3740
Attention: Thomas L. Owsley, Esquire
Telephone: (410) 659-4833
Facsimile: (410) 659-4763
If mailed to the Company:
P.O. Box 1168
Baltimore, Maryland 20208
with copies (which shall not constitute notice to the Company) to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, NW
Washington, D.C. 20005-2111
Attention: Stephen W. Hamilton, Esquire
Telephone: (202) 371-7000
Facsimile: (202) 393-5670
29
<PAGE>
and
McGuire, Woods, Battle & Boothe LLP
1750 Tysons Boulevard, Suite 1800
Tysons Corner, Virginia 22102-3915
Attention: Clive R. G. O'Grady, Esquire
Telephone: (703) 712-5017
Facsimile: (703) 712-5248
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such specified person;
(b) "beneficial owner" with respect to any shares of capital stock means
a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such terms are
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly, (ii) which such person or any of its
affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom
such person or any of its affiliates or associates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of capital stock;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the State of Maryland;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "knowledge" means, with respect to any matter in question, that the
executive officers of Parent or the Company, as the case may be, (i) have
knowledge of such matter, or (ii) after reasonable due investigation,
should have known of such matter;
(f) "person" means an individual, corporation, company, limited liability
company, partnership, limited partnership, syndicate, person (including,
without limitation, a "person" as defined in section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(g) "subsidiary" or "subsidiaries" of any person means any corporation,
limited liability company, partnership, joint venture or other legal entity
of which such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or
other equity interests, the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect, as long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely
30
<PAGE>
as possible, in a mutually acceptable manner, in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other parties.
Notwithstanding anything to the contrary contained in this Agreement, Parent
may transfer the shares of Merger Sub to one of its subsidiaries prior to the
consummation of the Merger. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of Section 6.06 (the
"Third Party Provision"), nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The Third Party Provision
may be enforced by the beneficiaries thereof.
SECTION 9.06. Incorporation of Exhibits. The Disclosure Schedule and any
exhibits attached hereto and referred to herein are hereby incorporated herein
and made a part of this Agreement for all purposes as if fully set forth
herein.
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that the Merger is
mandatorily governed by, or pursuant to the terms of this Agreement is subject
to, the MGCL, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in
and to be performed in that State, without regard to any conflicts of laws
principles otherwise applicable. No provision of this Agreement shall be
construed to require any of the parties hereto or any of their respective
subsidiaries, affiliates, directors, officers, employees or agents to take any
action that would violate any applicable Law.
SECTION 9.09. Submission to Jurisdiction; Venue. The parties hereto
unconditionally and irrevocably agree and consent to the exclusive
jurisdiction of, and service of process and venue in, the United States
District Court for the District of Maryland and the courts of the State of
Maryland and waive any objection with respect thereto, for the purpose of any
action, suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby; the parties further agree not to commence
any such action, suit or proceeding except in any such court. Each party
irrevocably waives any objections or immunities to jurisdiction to which it
might otherwise be entitled or become entitled in any legal suit, action or
proceeding against it arising out of or relating to this Agreement or the
transactions contemplated hereby which is instituted in any such court.
SECTION 9.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all of which,
taken together, shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the exhibits
attached hereto and the Disclosure Schedule) and the Confidentiality Agreement
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless it is made in
writing and signed by all parties hereto.
31
<PAGE>
SECTION 9.13. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ROSEMORE, INC.
By : /s/ Edward L. Rosenberg
-------------------------------------
Name: Edward L. Rosenberg
Title: President and Chief Executive
Officer
CROWN CENTRAL PETROLEUM
CORPORATION
By : /s/ John E. Wheeler, Jr.
-------------------------------------
Name: John E. Wheeler, Jr.
Title: Executive Vice President and
Chief Financial Officer
ROSEMORE ACQUISITION
CORPORATION
By : /s/ Edward L. Rosenberg
-------------------------------------
Name: Edward L. Rosenberg
Title: President
<PAGE>
EXHIBIT B
April 7, 2000
Board of Directors
Crown Central Petroleum Corporation
One North Charles Street
Baltimore, MD 21203
Members of the Board:
You have asked us to advise you with respect to the fairness from a
financial point of view to the stockholders of Crown Central Petroleum
Corporation (the "Company" or "you"), other than Rosemore, Inc. ("Rosemore")
and its affiliates, of the aggregate consideration to be received by such
stockholders pursuant to the terms of the Agreement and Plan of Merger dated as
of April 7, 2000 (the "Merger Agreement") among the Company, Rosemore and
Rosemore Acquisition Corporation ("Merger Sub"). The Merger Agreement provides
for the merger (the "Merger") of Merger Sub with and into the Company pursuant
to which the Company will become an indirect wholly owned subsidiary of
Rosemore and each outstanding share of Class A Common Stock and Class B Common
Stock of the Company, par value $5.00 per share, other than shares owned by the
Company, Rosemore or any of their direct or wholly owned subsidiaries, will be
converted into the right to receive $9.50 per share in cash.
In arriving at our opinion, we have reviewed certain business and financial
information relating to the Company, as well as the Merger Agreement. We have
also reviewed certain other information, including financial forecasts,
provided to us by the Company and have met with the Company's management to
discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company, and we have compared that data with similar data for publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached third parties to solicit
indications of interest in acquiring all or significant assets of the Company
and held preliminary discussions with certain of these parties prior to the
date hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the past, we have performed certain investment banking services unrelated
to the Merger for the Company, and have received customary fees for such
services.
In the ordinary course of our business, we and our affiliates may actively
trade the equity and debt securities of the Company for our and such
affiliates' own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
<PAGE>
It is understood that this letter is for the information of the Board of
Directors of the Company (including members of the Independent Committee
thereof) in connection with its consideration of the Merger, does not address
the allocation of the aggregate consideration to be received by the
stockholders of the Company between the Class A Common Stock and Class B Common
Stock and does not constitute a recommendation as to how any stockholder should
vote with respect to any matter relating to the Merger.
It is understood that any written advice or opinion of CSFB may be
disclosed, to the extent required by applicable law, in any communication to
your stockholders or in any filing with the Securities and Exchange Commission,
or to the extent required to be disclosed pursuant to judicial or regulatory
order, provided that, in each such instance, CSFB has been promptly advised by
the Company as to such requirement and has been given reasonable opportunity to
review the proposed disclosure and to comment upon any CSFB-related reference
in any such communication, filing or disclosure.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the aggregate consideration to be received by the stockholders of
the Company in the Merger is fair to such stockholders, other than Rosemore and
its affiliates, from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By:/s/ William C. Sharpstone
-------------------------
William C. Sharpstone
Managing Director
<PAGE>
[Crown Logo]
YOUR VOTE IS VERY IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
(1) Mark, sign and date your proxy card and return it promptly in the
accompanying envelope.
(2) Call toll-free 1-877-779-8683 on a Touch Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
(3) Vote by Internet at our Internet Address: http://www.eproxyvote.com/cnpab
by following the instructions on the reverse side.
CCP52B DETACH HERE
PROXY
CROWN CENTRAL PETROLEUM CORPORATION
P.O. BOX 1168
BALTIMORE, MARYLAND 21203
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF STOCKHOLDERS
August 24, 2000
Reserving the right of revocation, the undersigned hereby appoints Thomas
L. Owsley, Dolores B. Rawlings and John E. Wheeler, Jr., or any one or more of
them, as proxies, each with full power of substitution, to represent and to vote
all shares of Class A Common Stock and Class B Common Stock of Crown Central
Petroleum Corporation ("Crown") which the undersigned would be entitled to vote
at the Special Meeting of stockholders to be held on Thursday, the 24th day of
August, 2000, at 10:00 o' clock in the morning, Eastern Daylight Time, at
Turf Valley Conference Center, 2700 Turf Valley Road, Ellicott City, Maryland
and any adjournment or postponement thereof, as hereinafter specified by the
undersigned on the proposal listed on the reverse side hereof and in their
discretion on such other matters as may properly come before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
APPROVAL OF THE MERGER AND THE AGREEMENT AND PLAN OF MERGER REFERRED TO BELOW.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
[SEE REVERSE] CONTINUED AND TO BE SIGNED ON [SEE REVERSE]
SIDE REVERSE SIDE SIDE
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Vote by Telephone Vote by Internet
It's fast, convenient and immediate! It's fast, convenient and your vote is
Call Toll Free on a Touch Tone Phone immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683)
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy Statement 1. Read the accompanying Proxy Statement
and Proxy Card. and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/cnpab
3. Enter your 14-digit Voter Control 3. Enter your 14-digit Voter Control
Number located on your Proxy Card above Number located on your Proxy Card above
your name. your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/cnpab anytime!
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DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
DETACH HERE
This proxy card is provided for completion both by holders of Class A common
stock and by holders of Class B common stock.
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the merger and merger agreement.
Approval of the merger of Rosemore Acquisition Corporation, an indirect wholly
owned subsidiary of Rosemore, Inc., with and into Crown with Crown continuing as
the surviving corporation, pursuant to the Agreement and Plan of Merger, dated
as of April 7, 2000, by and among Rosemore, Inc., Rosemore Acquisition
Corporation and Crown.
[_] FOR [_] AGAINST [_]ABSTAIN
[_] Mark here for address change
and note at left
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
This proxy should be signed by the stockholder in person. If a joint account,
all joint owners should sign.
Signature: ________________________________ Date: _____________
Signature: ________________________________ Date: _____________
