Exhibit
2.1
AGREEMENT AND
PLAN OF MERGER
DATED AS OF OCTOBER 31,
2004
BY AND AMONG
VALERO L.P.
RIVERWALK
LOGISTICS, L.P.
VALERO GP, LLC
VLI SUB A LLC
AND
KANEB SERVICES
LLC
AGREEMENT AND PLAN OF MERGER, dated as of October 31, 2004 (this “Agreement”),
by and among Valero L.P., a Delaware limited partnership (“VLI”),
Riverwalk Logistics, L.P., a Delaware limited partnership and the general
partner of VLI (“VLI GP”), Valero GP, LLC, a Delaware limited liability
company and the general partner of VLI GP (“Parent GP”), VLI Sub A LLC,
a Delaware limited liability company and a wholly-owned subsidiary of VLI (“VLI
Sub A” and collectively with VLI, VLI GP and Parent GP, the “VLI
Entities” and each a “VLI Entity”), and Kaneb Services LLC, a Delaware
limited liability company (“KSL”).
W I T N E S S E T H:
WHEREAS, the VLI Entities and KSL desire that VLI and KSL combine their
businesses on the terms and conditions set forth in this Agreement;
WHEREAS, simultaneously with, and as a condition to, the execution
hereof, VLI, VLI GP, Parent GP and VLI Sub B LLC, a Delaware limited liability
company and wholly-owned subsidiary of VLI (“VLI Sub B”), Kaneb Pipe
Line Partners, L.P., a Delaware limited partnership (“KPP”), and Kaneb
Pipe Line Company LLC, a Delaware limited liability company that is a
wholly-owned subsidiary of KSL and the general partner of KPP (“KPP GP”
and collectively, with KSL and KPP, the “Kaneb Entities” and each a “Kaneb
Entity”) are entering into an Agreement and Plan of Merger (the “KPP
Merger Agreement”), pursuant to which VLI Sub B will merge with and into
KPP (the “KPP Merger”); and
WHEREAS, simultaneously with, and as a condition to, the execution
hereof, Messrs. Barnes and Doherty are
executing a support agreement substantially in the form of Exhibit A hereto
(the “Support Agreement”).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
“Acquisition Proposal” shall have the meaning set forth in Section 6.4(a)(i).
“Affiliate” shall have the meaning given such term in Rule 12b-2
under the Exchange Act.
“Agreement” shall have the meaning set forth in the preamble.
“Assets” means all of the assets (including the tangible and intangible
assets) used or necessary for the conduct of KSL’s or VLI’s, as the case may
be, and their respective Subsidiaries’ businesses as they are presently
conducted.
“beneficial ownership” or “beneficially own” shall have
the meaning ascribed to such terms under Section 13(d) of the Exchange Act
and the rules and regulations thereunder.
“Benefit Plan” means, with respect to any entity, any employee
compensation, benefit plan, program, policy, practice, agreement, contract or
other arrangement providing benefits to any current or former employee, officer
or director of such entity or any of its Subsidiaries or any beneficiary or
dependent thereof that is sponsored or maintained by such entity or any of its
Subsidiaries or to which such entity or any of its Subsidiaries contributes or
is obligated to contribute or with respect to which such entity or any of its
Subsidiaries may have any liability, contingent or otherwise, whether or not
written, including any employee welfare benefit plan within the meaning of Section 3(1)
of ERISA, any employee pension benefit plan within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program,
policy or agreement and any related trusts or other funding vehicles.
“Business Day” means any day on which banks are not required or
authorized to close in the City of New York.
“Certificate of Merger” shall have the meaning set forth in Section 2.2.
“Change in the Kaneb Recommendation” shall have the meaning set
forth in Section 6.1(b).
“Change in the VLI Recommendation” shall have the meaning set
forth in Section 6.1(c).
“Closing” shall have the meaning set forth in Section 2.4.
“Closing Date” shall have the meaning set forth in Section 2.4.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” shall have the meaning set forth in Section 6.2.
“Dissenting Shares” shall have the meaning set forth in Section 3.1(a)(ii).
“DOJ” means the Antitrust Division of the U.S. Department of
Justice.
“Effective Times” shall have the meaning set forth in Section 2.2.
“Encumbrances” shall have the meaning set forth in Section 4.1(b)(ii).
“Environmental Laws” shall have the meaning set forth in Section 4.1(l)(ii)(1).
“Environmental Permits” shall have the meaning set forth in Section 4.1(l)(i)(a).
“ERISA” means the Employee Retirement Income Security Act of
1974, as amended.
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“ERISA Affiliate” means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same “controlled group” as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
“Exchange Act” means the Securities Exchange Act of 1934, as
amended.
“Exchange Agent” shall have the meaning set forth in Section 3.3.
“Exchange Fund” shall have the meaning set forth in Section 3.3.
“Expenses” means all out-of-pocket expenses (including all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party and its Affiliates) incurred by a party or on its behalf
in connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, printing, filing and mailing of the Joint
Proxy Statement/Prospectus and the Form S-4 and the solicitation of member
and/or limited partner approvals and all other matters related to the
transactions contemplated hereby and thereby.
“Form S-4” means a registration statement, and any amendments
and supplements thereto, on Form S-4 with respect to the issuance of VLI Common
Units in the KPP Merger.
“FTC” means the U.S. Federal Trade Commission.
“GAAP” means U.S. generally accepted accounting principles.
“Governmental Entity” shall have the meaning set forth in Section 4.1(d).
“Hazardous Substances” shall have the meaning set forth in Section 4.1(l)(ii)(2).
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
“Indemnified Party” and “Indemnified Parties” shall have
the meaning set forth in Section 6.6(b).
“Intellectual Property” means all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, technology,
know-how, computer software programs or applications, and tangible or
intangible proprietary information or materials.
“Joint Proxy Statement/Prospectus” shall have the meaning set
forth in Section 4.1(d)(iii).
“Kaneb Benefit Plan” means the KSL Stock Plans and any other
Benefit Plan sponsored, maintained or contributed to by KSL or any of its
Subsidiaries, or to which KSL or any of its Subsidiaries is required to
contribute, or with respect to which KSL or any of its Subsidiaries may have
any liability, contingent or otherwise.
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“Kaneb Contract” shall have the meaning set forth in Section 4.1(j)(i).
“Kaneb Disclosure Schedule” shall have the meaning set forth in Section 4.1.
“Kaneb Employees” shall have the meaning set forth in Section 6.7(a).
“Kaneb Entities” or “Kaneb Entity” shall have the meaning
set forth in the recitals.
“Kaneb Partially Owned Entities” means Partially Owned Entities
of KSL.
“Kaneb Plan” means any Kaneb Benefit Plan other than a
Multiemployer Plan.
“Kaneb Qualified Plans” shall have the meaning set forth in Section 4.1(m)(iii).
“Kaneb Recommendation” shall have the meaning set forth in Section 6.1(b).
“Kaneb SEC Documents” means the KSL SEC Documents and the KPP
SEC Documents
“KSL Termination Fee” means $15,000,000.
“Knowledge” means, with respect to any entity, the knowledge of
such entity’s (or its general partner’s) executive officers after reasonable
inquiry.
“KPP” shall have the meaning set forth in the recitals.
“KPP Effective Time” shall have the meaning set forth in Section 2.2.
“KPP GP” shall have the meaning set forth in the recitals.
“KPP GP LLC Agreement” means the Amended and Restated Limited
Liability Company Agreement of KPP GP, dated July 2, 2001.
“KPP Merger” shall have the meaning set forth in the recitals.
“KPP Merger Agreement” shall have the meaning set forth in the recitals.
“KPP Partnership Agreement” means the Amended and Restated
Partnership Agreement of KPP, dated July 23, 1998, as amended October 27,
2003.
“KPP SEC Documents” shall have the meaning assigned thereto in
the KPP Merger Agreement.
“KPP Unit” shall have the meaning given the term “Common Unit”
in the KPP Partnership Agreement.
“KPP Unitholders” means the holders of the KPP Units.
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“KPP Unitholders Meeting” shall have the meaning set forth in
the KPP Merger Agreement.
“KSL” shall have the meaning set forth in the preamble.
“KSL Certificate” shall have the meaning set forth in Section 3.1(a)(i).
“KSL Common Shares” shall have the meaning given the term “Common
Share” in the KSL LLC Agreement.
“KSL Consideration” shall have the meaning set forth in Section 3.1(a)(i).
“KSL Deferred Share Unit” shall have the meaning set forth in Section 3.2(b).
“KSL Deferred Share Unit Arrangements” shall have the meaning
set forth in Section 3.2(b).
“KSL Effective Time” shall have the meaning set forth in Section 2.2.
“KSL Entities” means KSL and its Subsidiaries (which specifically
excludes KPP and its Subsidiaries).
“KSL LLC Agreement” means the Amended and Restated Limited
Liability Company Agreement of KSL, dated June 28, 2001.
“KSL Merger” shall have the meaning set forth in Section 2.1.
“KSL Owned Units” means KPP Units directly or indirectly owned
by KSL.
“KSL Rights” means any of the Rights, as such term is defined in
the KSL Rights Agreement.
“KSL Rights Agreement” means the Rights Agreement, dated as of June 27,
2001, between KSL and The Chase Manhattan Bank, National Association, as rights
agent.
“KSL SEC Documents” shall have the meaning set forth in Section 4.1(e)(i).
“KSL Shareholder” shall have the meaning given to the term “Shareholder”
in the KSL LLC Agreement.
“KSL Shareholders Approval” means the approval and adoption of
this Agreement and the transactions contemplated hereby by the KSL Shareholders
holding at least the majority of the voting power of KSL, including the
affirmative vote of the KSL Shareholders holding at least a majority of the
outstanding KSL Common Shares (other than those beneficially owned by VLI or
any Affiliates thereof or by any Kaneb Entity or any Affiliates thereof) that
are present, in person or by proxy, at the KSL Shareholders Meeting.
“KSL Shareholders Meeting” shall have the meaning set forth in Section 4.1(c)(i).
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“KSL Stock Option” shall have the meaning set forth in Section 3.2(a).
“KSL Stock Plans” shall have the meaning set forth in Section 4.1(b)(i).
“KSL 2003 10-K” means KSL’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, as filed with the SEC.
“Letter of Transmittal” shall have the meaning set forth in Section 3.4(a).
“LLC Act” shall have the meaning set forth in Section 2.2.
“Material Adverse Effect” means, with respect to any entity or
group of entities, a material adverse effect on (i) the business, operations,
results of operations or financial condition of such entity or entities and its
or their Subsidiaries taken as a whole or (ii) the ability of such entity or
entities to timely consummate the transactions contemplated by this Agreement,
except, in each case, to the extent such effect is reasonably attributable to
(A) general political and economic conditions (including prevailing interest
rate and stock market levels), (B) the general state of the industries in which
such entity operates, except to the extent such entity is substantially
disproportionately affected, (C) the negotiation, announcement, execution or
delivery of this Agreement or (D) any outbreak of hostilities, terrorism or
war, other than any terrorist or similar acts directed at or directly impacting
the business or assets of such entity or its Subsidiaries.
“Multiemployer Plan” means any “multiemployer plan” within the
meaning of Section 4001(a)(3) of ERISA.
“Necessary Consents” shall have the meaning set forth in Section 4.1(d)(vi).
“New Plans” shall have the meaning set forth in Section 6.7(b).
“NYSE” means the New York Stock Exchange, Inc.
“Old Plans” shall have the meaning set forth in Section 6.7(b).
“Other Approvals” shall have the meaning set forth in Section 4.1(d)(ii).
“Parent GP” shall have the meaning set forth in the preamble.
“Partially Owned Entity” means, with respect to a specified
Person, any other Person that is not a Subsidiary of such specified Person but
in which such specified Person, directly or indirectly, owns 30% or more of the
equity interests thereof (whether voting or non-voting and including beneficial
interests); provided, however, in no case shall KPP or its Subsidiaries or its
or their Partially Owned Entities be considered a “Partially Owned Entity” of
KSL.
“PBGC” shall have the meaning set forth in Section 4.1(m)(v).
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“Permitted Encumbrances” means (A) liens for current Taxes
not yet due and payable or for Taxes the validity of which is being contested
in good faith in appropriate proceedings, and (B) such other Encumbrances
that are de minimis or immaterial individually and in the aggregate.
“Person” means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
“Policies” shall have the meaning set forth in Section 4.1(k)(i).
“Regulatory Law” means the HSR Act, and all other federal, state
and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate (i) mergers, acquisitions or other
business combinations, (ii) foreign investment, or (iii) actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition.
“Release” shall have the meaning set forth in Section 4.1(l)(ii)(3).
“Required Approvals” shall have the meaning set forth in Section 6.3(a)(i).
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Subsidiary” shall have the meaning ascribed to such term in
Rule 1-02 of Regulation S-X of the SEC; provided, however, in no case shall any
of KPP or its Subsidiaries be considered a “Subsidiary” of KSL. For the avoidance of doubt, with respect to
KSL, a “Subsidiary” includes KPP GP.
“Superior Proposal” shall mean, for purposes of this Agreement,
a bona fide written Acquisition Proposal with respect to KSL that the Board of
Directors of KSL concludes in good faith, after consultation with its
respective financial advisors and legal advisors, taking into account all
legal, financial, regulatory and other aspects of the proposal and the Person
making the proposal (including any break-up fees, expense reimbursement
provisions and conditions to consummation), as well as after giving effect to
all of the adjustments that may be offered by VLI pursuant to clause (B) of the
final proviso in this definition below, (i) is more favorable to the KSL
Shareholders, from a financial point of view, than the transactions
contemplated by this Agreement, and (ii) is fully financed or reasonably
capable of being fully financed and otherwise reasonably capable of being
completed on the terms proposed; provided that, for purposes of this
definition of “Superior Proposal,” the term Acquisition Proposal shall have the
meaning assigned to such term in Section 6.4(a)(i), except that the
reference to “10% or more” in the definition of “Acquisition Proposal” shall be
deemed to be a reference to “a majority” and “Acquisition Proposal” shall only
be deemed to refer to a transaction involving a majority of the equity
securities of KSL or all or substantially all of the consolidated assets of the
KSL and its Subsidiaries; provided further that no Acquisition
Proposal shall constitute a Superior Proposal unless (A) KSL has notified VLI,
at least five Business Days in advance, of the intention to effect a Change in
the Kaneb Recommendation in accordance with Section 6.4 hereof on the
basis of such Acquisition
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Proposal, specifying the material terms and
conditions of any such Acquisition Proposal and furnishing to VLI a copy of the
relevant proposed transaction agreements, if such exist, with the party making
such Acquisition Proposal, and (B) during the period of not less than five Business
Days following KSL’s delivery of the notice referred to in clause (A) above and
prior to effecting such a Change in the Kaneb Recommendation, have negotiated,
and have used reasonable best efforts to cause their respective financial and
legal advisors to negotiate, with VLI in good faith (to the extent that VLI
desires to negotiate) to make such adjustments in the terms and conditions of
this Agreement so that such Acquisition Proposal ceases to constitute a
Superior Proposal.
“Support Agreement” shall
have the meaning set forth in the recitals.
“Surviving LLC” shall have the meaning ascribed to such term in Section 2.1.
“Tax Return” means any return, report or similar statement
(including any attached schedules) required to be filed with respect to any
Tax, including any information return, claim for refund, amended return or
declaration of estimated Tax.
“Taxes” means any and all taxes, assessments, fees and other
governmental charges imposed by any Governmental Entity, including without
limitation income, profits, gross receipts, net proceeds, alternative or add-on
minimum, ad valorem, value added, turnover, sales, use, property, personal
property (tangible and intangible), environmental (including taxes under section 59A
of the Code), stamp, leasing, lease, user, excise, duty, franchise, capital
stock, transfer, registration, license, withholding, social security (or
similar), unemployment, disability, payroll, employment, fuel, excess profits,
occupational, premium, windfall profit, severance, estimated, or other charge
of any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
“Termination Date” shall have the meaning set forth in Section 8.1(b).
“VLI” shall have the meaning set forth in the preamble.
“VLI Common Unit” shall have the meaning given the term “Common
Unit” in the VLI Partnership Agreement.
“VLI Disclosure Schedule” shall have the meaning set forth in Section 4.2.
“VLI Entities” and “VLI Entity” shall have the meaning
set forth in the preamble.
“VLI GP” shall have the meaning set forth in the preamble.
“VLI Incentive Distribution Rights” shall have the meaning given
the term “Incentive Distribution Rights” in the VLI Partnership Agreement.
“VLI Partnership Agreement” means the Third Amended and Restated
Agreement of Limited Partnership of VLI, dated as of March 18, 2003, as
amended March 11, 2004.
“VLI Recommendation” shall have the meaning set forth in Section 6.1(c).
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“VLI Sub A” shall have the meaning set forth in the preamble.
“VLI Sub B” shall have the meaning set forth in the recitals.
“VLI Subordinated Units” shall have the meaning given the term “Subordinated
Unit” in the VLI Partnership Agreement.
“VLI Termination Fee” means $25,000,000.
“VLI Unitholders” shall have the meaning set forth in the KPP
Merger Agreement.
“VLI Unitholders Approval” shall have the meaning set forth in Section 4.2(b)(i).
“VLI Unitholders Meeting” shall have the meaning set forth in Section 4.2(b)(i).
“Voting Debt” means any bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which holders of
capital stock or members or partners of the same issuer may vote.
“Withdrawal Liability” means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan,
as those terms are defined in Part I of Subtitle E of Title IV of ERISA.
ARTICLE II
2.1 The Merger.
Upon the terms and subject to the conditions hereof, at the KSL Effective
Time, VLI Sub A shall be merged with and into KSL (the “KSL Merger”),
with KSL as the surviving entity in the KSL Merger (the “Surviving LLC”),
and the separate existence of VLI Sub A shall thereupon cease.
2.2 Effective Time of the Merger. The KSL Merger shall become effective as set
forth in (or, if not set forth, at the time of filing) a properly executed
certificate of merger, in accordance with the Delaware Limited Liability
Company Act (the “LLC Act”) duly filed with the Secretary of State of
the State of Delaware (the “Certificate of Merger”), which filing shall
be made on the Closing Date. As used in this Agreement, the term “KSL Effective
Time” shall mean the date and time when the KSL Merger becomes effective,
which date and time shall immediately precede the time that the KPP Merger
becomes effective (the “KPP Effective Time” and, together with the KSL
Effective Time, the “Effective Times”).
2.3 Effects of the Merger. The KSL Merger shall have the effects set forth
in the applicable provisions of the LLC Act.
2.4 Closing. Upon
the terms and subject to the conditions set forth in Article VII and the
termination rights set forth in Article VIII, the closing of the
transactions contemplated by this Agreement (the “Closing”) will take
place at the offices of Wachtell, Lipton,
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Rosen &
Katz, 51 West 52nd Street, New York, New York 10019 at 10:00 A.M. on the date
that is the second full NYSE trading day to occur after the date following the
satisfaction or waiver (subject to applicable law) of the conditions (excluding
conditions that, by their nature, cannot be satisfied until the Closing Date)
set forth in Article VII, unless this Agreement has been theretofore terminated
pursuant to its terms or unless another place, time or date is agreed to in
writing by the parties hereto (the date of the Closing being referred to herein
as the “Closing Date”).
2.5 LLC Agreement.
At the KSL Effective Time, the limited liability company agreement of
the Surviving LLC shall be the KSL LLC Agreement, as in effect immediately
prior to the KSL Effective Time, until thereafter changed or amended as
provided therein or by applicable law.
2.6 Directors and Officers. The directors and officers of VLI Sub A immediately
prior to the KSL Effective Time shall be the directors and officers of the
Surviving LLC.
2.7 Alternative Transaction Structures. The parties agree that VLI, with the consent
of KSL, which shall not be unreasonably withheld or delayed, may change the
method and structure of effecting the KSL Merger, and KSL shall cooperate in
such efforts, including by entering into appropriate amendments to this
Agreement; provided, however, that any actions taken pursuant to
this Section 2.7 shall not (i) alter or change the kind or amount of
consideration to be issued to KSL Shareholders as provided for in this
Agreement, (ii) adversely affect the tax consequences of the receipt of such
consideration by the holders of KSL Common Shares, (iii) materially delay
receipt of any Required Approvals, or (iv) otherwise cause any condition to
Closing set forth in Article VII to be materially delayed or to be
materially more difficult to fulfill (unless duly waived by the party entitled
to the benefits thereof).
ARTICLE III
(a) At
the KSL Effective Time, by virtue of the KSL Merger and without any action on
the part of any holder of any KSL Common Shares:
(i) Subject
to Section 3.1(a)(ii), each outstanding KSL Common Share (together with
any associated KSL Rights) issued and outstanding immediately prior to the KSL
Effective Time shall be converted into the right to receive an amount in cash
equal to $43.31 (the “KSL Consideration”). All KSL Common Shares converted into the
right to receive the KSL Consideration pursuant to this Section 3.1(a)
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate that immediately prior to the KSL
Effective Time represented any such KSL Common Shares (a “KSL Certificate”)
shall thereafter cease to be a member of KSL or have any rights with respect to
such KSL Common Shares, except the right to receive the KSL Consideration to be
issued in consideration therefor and any distributions to which holders
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of KSL Common Shares become
entitled all in accordance with this Article III upon the surrender of
such KSL Certificate.
(ii) Notwithstanding
any other provision contained in this Agreement, no KSL Common Shares that are
issued and outstanding as of the KSL Effective Time and that are held by a KSL
Shareholder who has properly exercised such KSL Shareholder’s appraisal rights (any
such KSL Common Shares being referred to herein as “Dissenting Shares”)
under Section 11.5 of the KSL LLC Agreement shall be converted into the
right to receive the KSL Consideration as provided in Section 3.1(a)
unless and until such KSL Shareholder shall have failed to perfect, or shall
have effectively withdrawn or lost, such Shareholder’s right to dissent from
the KSL Merger under the KSL LLC Agreement and to receive such consideration as
may be determined to be due with respect to such Dissenting Shares pursuant to
and subject to the KSL LLC Agreement. If
any holder of Dissenting Shares shall have so failed to perfect or has
effectively withdrawn or lost such KSL Shareholder’s right to dissent from the
KSL Merger after the KSL Effective Time, each of such holder’s KSL Common
Shares shall thereupon be deemed to have been converted into and to have
become, as of the KSL Effective Time, the right to receive the KSL
Consideration.
(b) At
the KSL Effective Time, by virtue of the KSL Merger and without any action on
the part of VLI, each outstanding limited liability company interest in VLI Sub
A issued and outstanding immediately
prior to the KSL Effective Time shall be converted into 1,000 KSL Common Shares
and KSL shall issue to VLI a certificate evidencing such KSL Common
Shares. VLI agrees that at the KSL
Effective Time, VLI shall be automatically bound by the KSL LLC Agreement and
VLI shall be admitted to KSL as a member of KSL immediately upon the KSL
Effective Time. At the KSL Effective
Time, the books and records of KSL shall be revised to reflect the admission of
VLI as a member of KSL and the simultaneous resignation of all other members of
KSL, and VLI shall continue KSL without dissolution.
3.2 KSL Stock Options; Other KSL
Equity Awards. (a) Immediately prior to the KSL Effective Time,
each KSL stock option to acquire KSL Common Shares then outstanding (the “KSL
Stock Options”) shall become fully vested and shall be converted into the
right to receive, upon the exercise thereof, an amount in cash (without
interest) equal to the KSL Consideration multiplied by the number of KSL Common
Shares subject to the KSL Stock Option so exercised. As of the KSL Effective
Time, each outstanding KSL Stock Option so converted shall be cancelled, and
the holder thereof shall be entitled to receive, as soon as practicable thereafter,
an amount of cash (without interest) equal to the product of (x) the total
number of KSL Common Shares subject to such KSL Stock Option multiplied by (y)
the excess, if any, of the amount of the KSL Consideration over the exercise
price per share of KSL Common Shares under such KSL Stock Option (with the
aggregate amount of such payment rounded to the nearest cent) less applicable
Taxes, if any, required to be withheld with respect to such payment. Payment of
any amounts in respect of the KSL Stock Options pursuant to Section 3.2(a)
hereof shall be in full satisfaction of the obligations in respect thereof.
(b) Effective
as of the KSL Effective Time, all then outstanding and unsettled stock units in
respect of KSL Common Shares (each, a “KSL Deferred Share Unit”)
credited
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pursuant to a
compensation agreement or plan or any similar plan, agreement or arrangement
with respect to KSL Common Shares including, but not limited to, the Xanser
Corporation Deferred Stock Unit Plan and the Xanser Corporation 1996
Supplemental Deferred Compensation Plan (the “KSL Deferred Share Unit
Arrangements”) shall be converted into an obligation to pay cash in respect
thereof with a value equal to the product of (i) the KSL Consideration and (ii)
the number of KSL Common Shares subject to such KSL Deferred Share Unit (with
the aggregate amount of such payment rounded to the nearest cent). Such obligation shall be payable or distributable
in accordance with the terms of the applicable KSL Deferred Share Unit
Arrangement.
(c) Prior
to the KSL Effective Time, the compensation committee of the Board of Directors
of KSL shall take all actions as are necessary, including making such
adjustments and amendments to, or determinations with respect to, the KSL Stock
Options and KSL Deferred Share Units, including the plans and agreements
related thereto, to implement the provisions of this Section 3.2, so as to
ensure that following the KSL Effective Time, no holder of a KSL Stock Option
or KSL Deferred Share Unit or participant in a Kaneb Plan or other employee
benefit arrangement of Kaneb or its Subsidiaries shall have any right
thereunder to acquire or receive any KSL Common Shares.
(d) Schedule 3.2(d)
contains a list of all KSL Stock Options and KSL Deferred Share Units
outstanding as of the date hereof and lists for each such KSL Stock Option or
KSL Deferred Share Unit (i) the holder thereof; (ii) the number of KSL shares
subject to such award; (iii) the dates of grant and expiration; and (iv) the
exercise price (if any).
3.3 Exchange Fund.
Prior to the KSL Effective Time, VLI shall appoint Computershare
Limited, or a commercial bank or trust company, or a subsidiary thereof,
reasonably acceptable to KSL, to act as exchange agent hereunder for the
purpose of exchanging KSL Certificates for the KSL Consideration (the “Exchange
Agent”). At or prior to the KSL Effective
Time, VLI shall deposit with the Exchange Agent in trust for the benefit of
holders of KSL Common Shares, cash to be issued and paid pursuant to Section 3.1(a)
in exchange for outstanding KSL Common Shares upon due surrender of KSL
Certificates pursuant to this Article III.
Any cash deposited with the Exchange Agent (including the amount of any
distributions (or other distributions payable with respect thereto) shall hereinafter
be referred to as the “Exchange Fund.”
3.4 Exchange Procedures. Promptly after the KSL Effective Time, VLI
shall cause the Exchange Agent to mail to each holder of a KSL Certificate
(other than any KSL Certificate representing any Dissenting Shares) (a) a
letter of transmittal (the “Letter of Transmittal”) that shall specify
that delivery shall be effected, and risk of loss and title to the KSL Certificates
shall pass, only upon proper delivery of the KSL Certificates to the Exchange
Agent, and which Letter of Transmittal shall be in customary form and have such
other provisions as VLI and KSL may reasonably specify (such letter to be
reasonably acceptable to VLI and KSL prior to the KSL Effective Time) and (b)
instructions for effecting the surrender of such KSL Certificates in exchange
for the KSL Consideration, together with any distributions with respect thereto
and any cash in lieu of fractional shares.
Upon surrender of a KSL Certificate to the Exchange Agent together with
the relevant Letter of Transmittal, duly executed and completed in accordance
with the instructions thereto, and such other documents as may reasonably be
required by
12
the Exchange
Agent, the holder of such KSL Certificate shall be entitled to receive in
exchange therefor a check in the amount equal to the cash such holder has the
right to receive pursuant to Section 3.1(a).
3.5 No Further Ownership Rights in
KSL Common Shares. All
cash paid upon conversion of KSL Common Shares in accordance with the terms of
this Article III shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to the KSL Common Shares.
3.6 Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of KSL Certificates one year after the KSL
Effective Time shall, at VLI’s request, be delivered to VLI or otherwise on the
instruction of VLI, and any holders of KSL Certificates who have not
theretofore complied with this Article III shall after such delivery look
only to VLI for any amounts payable to such holders pursuant to this Article III. Any such portion of the Exchange Fund
remaining unclaimed by holders of KSL Common Shares immediately prior to such
time as such amounts would otherwise escheat to or become property of any
Governmental Entity shall, to the extent permitted by law, become the property
of VLI free and clear of any claims or interest of any Person previously
entitled thereto.
3.7 No Liability.
To the fullest extent permitted by law, none of the VLI Entities, KSL or
the Exchange Agent shall be liable to any Person in respect of any portion of
the Exchange Fund required to be delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3.8 Investment of the Exchange Fund. The Exchange Agent shall invest any cash included
in the Exchange Fund as directed by VLI on a daily basis; provided that
no such investment or loss thereon shall affect the amounts payable or the
timing of the amounts payable to KSL Shareholders pursuant to the other
provisions of this Article III. Any
interest and other income resulting from such investments shall promptly be
paid to VLI.
3.9 Lost Certificates. If any KSL Certificate (other than any KSL
Certificate representing any Dissenting Shares) shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed and, if required by VLI, the
posting by such Person of a bond in such reasonable amount as VLI may direct as
indemnity against any claim that may be made against it with respect to such
certificate, following the KSL Effective Time the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed certificate the consideration
and amounts payable with respect to the KSL Common Shares formerly represented
thereby pursuant to this Article III.
3.10 Withholding Rights. VLI shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld or
paid over to or deposited with the relevant Governmental Entity by VLI, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding was made by
VLI.
13
3.11 Further Assurances. At and after the KSL Effective Time, the
officers and directors of the Surviving LLC shall be authorized to execute and
deliver, in the name and on behalf of the Surviving LLC or KSL, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Surviving LLC or KSL, any other actions and things necessary to
vest, perfect or confirm of record or otherwise in the Surviving LLC any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving LLC as a result of, or in
connection with, the KSL Merger.
3.12 Stock Transfer Books. Subject to Section 3.1(b), the limited
liability company interest transfer books of KSL shall be closed immediately
upon the KSL Effective Time, and there shall be no further registration of
transfers of KSL Common Shares or other
limited liability company interests of KSL thereafter on the records of
KSL. On or after the KSL Effective Time,
subject to Section 3.1(a)(ii) any KSL Certificates presented to the
Exchange Agent, VLI or the Surviving LLC for any reason shall be converted into
the right to receive the KSL Consideration with respect to the KSL Common
Shares formerly represented thereby.
ARTICLE IV
4.1 Representations and Warranties of
KSL. Except as disclosed in a section of
the KSL disclosure schedule delivered to VLI concurrently herewith (the “Kaneb
Disclosure Schedule”) corresponding to the subsection of this Section 4.1
to which such disclosure applies, or as specifically identified in the Kaneb
SEC Documents filed prior to the date hereof, KSL represents and warrants to
VLI as follows:
(a) Organization.
(i) Each
of KPP GP and KSL is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of KPP GP and KSL has the requisite
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to have such power or authority or be so licensed or
qualified would not, either individually or in the aggregate, have a Material
Adverse Effect on the KSL Entities. A
true and complete copy of the KSL LLC Agreement and the KPP GP LLC Agreement,
each as in effect as of the date of this Agreement, has previously been made
available by KSL to VLI.
(ii) Each
Subsidiary of KSL (other than KPP GP) (A) is duly organized and validly
existing under the laws of its jurisdiction of organization, (B) is duly
qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and (C) has all
requisite power and authority to own or lease its properties and assets and to
carry on its business as now conducted, except in each case where the failure
to have such
14
power or
authority or to be so organized, in existence, or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect on the KSL
Entities.
(iii) Section 4.1(a)(iii)
of the Kaneb Disclosure Schedule sets forth, as of the date of this
Agreement, a true and complete list of each of the KSL Entities and Kaneb
Partially Owned Entities and each of their respective Subsidiaries, together
with (A) the nature of the legal organization of such Person, (B) the
jurisdiction of organization or formation of such Person, (C) the name of each
KSL Entity or Kaneb Partially Owned Entity that owns beneficially or of record
any equity or similar interest in such Person, and (D) the percentage interest
owned by such KSL Entity or Kaneb Partially Owned Entity in such Person. None of the KSL Entities is subject to any
obligation in excess of $1,000,000 to provide funds to or make any investment
in (in the form of a loan, capital contribution or otherwise) any of its
Subsidiaries, Partially Owned Entities or other persons.
(b) Capitalization. (i) Except as set forth in Section 4.1(b)
of the Kaneb Disclosure Schedule, KSL has no limited liability company or other
equity interests issued or outstanding other than, as of the date of this
Agreement, 11,692,328 KSL Common Shares (each of which includes one KSL
Right). Each of such KSL Common Shares
has been duly authorized and validly issued in accordance with applicable laws
and the KSL LLC Agreement, and are fully paid and non-assessable. From and after October 31, 2004, no KSL
Common Shares have been issued except pursuant to employee and director stock
plans of KSL in effect as of the date of this Agreement and listed on Section 4.1(b)
of the Kaneb Disclosure Schedule (the “KSL Stock Plans”) or the KSL
Deferred Share Unit Arrangements. Except
pursuant to the terms of options or deferred or restricted stock units issued
pursuant to the KSL Stock Plans or the KSL Deferred Share Unit Arrangements and
outstanding as of the date of this Agreement or issued thereafter as expressly
permitted hereby, and pursuant to the KSL Rights, KSL does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any KSL
Common Shares or any other equity securities of KSL or any securities of KSL
representing the right to purchase or otherwise receive any KSL Common Shares
or any other equity securities of KSL.
KSL has no Voting Debt issued or outstanding. Section 3.2(d) of the
Kaneb Disclosure Schedule lists all KSL Stock Options and KSL Deferred
Share Units outstanding as of the date hereof.
(ii) KPP
GP is the sole general partner of KPP.
KPP GP is the sole record and beneficial owner of the general partner
interest and incentive distribution rights in KPP, and such general partner
interest and incentive distribution rights have been duly authorized and
validly issued in accordance with applicable laws and the KPP Partnership
Agreement. KPP GP owns such general
partner interest and incentive distribution rights free and clear of any liens,
pledges, charges, encumbrances, restrictions and security interests whatsoever
(“Encumbrances”). KSL is the sole
record and beneficial owner of all of the outstanding limited liability company
or other equity interests in KPP GP free and clear of any Encumbrances. KSL owns, directly or indirectly, all of the
issued and outstanding equity securities or other equity ownership and limited
liability company interests (including but not limited to general partnership
interests) of each Subsidiary of KSL, free and clear of any Encumbrances, and
all of such limited liability company interests or equity ownership interests
are duly authorized and validly issued in accordance with applicable laws and
the applicable partnership agreement, limited liability company agreement or
other similar organizational document and are fully paid, non-assessable and
free
15
of pre-emptive
rights. No Subsidiary of any of the KSL Entities has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any equity securities or any
other equity ownership interests of such Subsidiary or any securities
representing the right to purchase or otherwise receive any equity security of
such Subsidiary. No Subsidiary of any of
the KSL Entities has any Voting Debt.
(c) Authority;
No Violation. Except as set forth in
Section 4.1(c) of the Kaneb Disclosure Schedule:
(i) KSL
has the requisite power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby, subject to the KSL Shareholders
Approval. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by unanimous vote of the Board of Directors
of KSL, at a duly convened meeting thereof. The Board of Directors of KSL has
directed that this Agreement be submitted to KSL Shareholders for approval at a
meeting of KSL Shareholders for the purpose of approving the KSL Merger and
this Agreement (including any adjournment thereof, the “KSL Shareholders
Meeting”), and, except for the KSL Shareholders Approval, no other limited
liability company or other actions on the part of KSL are necessary to approve
this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by KSL and (assuming due authorization, execution and
delivery by the VLI Entities) constitutes a valid and binding obligation of
KSL, enforceable against KSL in accordance with its terms.
(ii) Neither
the execution and delivery of this Agreement by KSL, nor the consummation by
KSL of the transactions contemplated hereby, nor compliance by KSL with any of
the terms or provisions hereof, will (A) violate any provision of the KSL LLC
Agreement or the organizational documents of its Subsidiaries, or (B) assuming
that the consents and approvals referred to in Section 4.1(d) are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to KSL, any of its Subsidiaries or
Partially Owned Entities or any of its respective properties or assets or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, accelerate any right or benefit provided by, or result
in the creation of any Encumbrance upon any of the respective properties or
assets of KSL, any of its Subsidiaries or, to the KSL Entities’ Knowledge,
their Partially Owned Entities under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which KSL, any of its
Subsidiaries or Partially Owned Entities is a party, or by which they or any of
their respective properties or assets may be bound or affected, except (in the
case of clause (B) above) for such violations, conflicts, breaches or defaults
which either individually or in the aggregate will not have a Material Adverse
Effect on the KSL Entities or the Surviving LLC.
(d) Consents
and Approvals. Except for
(i) the filing of a notification and report form under the HSR Act
and the termination or expiration of the waiting period under the HSR Act,
(ii) the filing of any other required applications or notices with any
state or foreign
16
agencies of
competent jurisdiction and approval of such applications and notices (the “Other
Approvals”), (iii) the filing with the SEC of a proxy statement
relating to the matters to be submitted to KSL Shareholders at the KSL Shareholders
Meeting and the matters to be submitted to the VLI Unitholders at the VLI
Unitholders Meeting (such joint proxy statement/prospectus, and any amendments
or supplements thereto, the “Joint Proxy Statement/Prospectus”), (iv)
the filing of the Certificate of Merger, (v) any consents, authorizations, approvals,
filings or exemptions in connection with compliance with the rules of the NYSE,
(vi) such filings and approvals as are required to be made or obtained under
the securities or “Blue Sky” laws of various states in connection with the
issuance of VLI Common Units pursuant to this Agreement (the consents, approvals,
filings and registration required under or in relation to the foregoing clauses
(ii) through (vi) being referred to as “Necessary Consents”) and (vii)
such other consents, approvals, filings and registrations the failure of which
to obtain or make would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the KSL Entities or the Surviving
LLC, no consents or approvals of or filings or registrations with any
supranational, national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or commission or
other authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, importing or other governmental or quasi-governmental authority
(each, a “Governmental Entity”) are necessary in connection with (A) the
execution and delivery by KSL of this Agreement and (B) the consummation by KSL
of the transactions contemplated by this Agreement.
(e) Financial
Reports and SEC Documents; Disclosure and Internal Controls.
(i) The
KSL 2003 10-K and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by KSL or any of its
Subsidiaries subsequent to December 31, 2000 (including but not limited
to, items incorporated by reference into such reports, registration statements,
definitive proxy statements or information statements) under the Securities Act
or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act in the form filed,
or to be filed (collectively, the “KSL SEC Documents”), with the SEC,
(1) complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act, as the
case may be, and (2) as of its filing date, did not or will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading; and
each of the balance sheets contained in or incorporated by reference into any
such KSL SEC Document (including the related notes and schedules thereto)
fairly presents or will fairly present the financial position of the entity or
entities to which it relates as of its date, and each of the statements of
operations and changes in shareholders’ equity and cash flows or equivalent
statements in such KSL SEC Documents (including any related notes and schedules
thereto) fairly presents or will fairly present the results of operations,
changes in shareholders’ equity and changes in cash flows, as the case may be,
of the entity or entities to which it relates for the periods to which it
relates, in each case in accordance with GAAP consistently applied during the
periods involved, except, in each case, as may be noted therein, subject to
normal year-end audit adjustments in the case of unaudited statements. There are no outstanding comments from, or
unresolved issues raised by, the SEC with respect to any of the KSL SEC
Documents. No executive officer of any
of the KSL Entities has failed in any respect to make the certification
required of him or her under Sections
17
302 or 906 of
the Sarbanes-Oxley Act of 2002 and no enforcement action has been initiated
against KSL relating to disclosures contained in any KSL SEC Document.
(ii) Prior
to the date of this Agreement and in the ordinary course of business, KSL has
established approval procedures (which, as in effect as of the date of this
Agreement, have previously been disclosed to VLI) with respect to the open
position resulting from KSL and its Subsidiaries’ physical commodity
transactions, exchange-traded futures and options and over-the-counter derivative
instruments.
(iii) Except
as set forth in Section 4.1(e)(iii) of the Kaneb Disclosure Schedule, the
records, systems, controls, data and information of KSL and its respective
Subsidiaries are recorded, stored, maintained and operated under means that are
under the exclusive ownership and direct control of KSL or its Subsidiaries or
accountants, except for any non-exclusive ownership and non-direct control that
would not reasonably be expected to have a materially adverse effect on the
system of internal accounting controls described in the following
sentence. KSL and its Subsidiaries have
devised and maintain a system of internal accounting controls sufficient to
provide reasonable assurances regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. GAAP, including that (1) transactions are executed only in accordance
with management’s authorization; (2) transactions are recorded as necessary to
permit preparation of the financial statements of KSL and its Subsidiaries and
to maintain accountability for the assets of KSL and its Subsidiaries; (3)
access to such assets is permitted only in accordance with management’s authorization;
(4) the reporting of such assets is compared with existing assets at regular
intervals; and (5) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis. Each of the KSL Entities (1) has designed
disclosure controls and procedures (within the meaning of Rules 13a-15(e) and
15d-15(e) of the Exchange Act) to ensure that material information relating to
such entity and its Subsidiaries is made known to the management of such entity
(or its general partner) by others within those entities as appropriate to
allow timely decisions regarding required disclosure and to make the
certifications required by the Exchange Act with respect to the KSL SEC
Documents, and (2) has disclosed, based on its most recent evaluation prior to
the date of this Agreement, to its auditors and the audit committee of its
Board of Directors (A) any significant deficiencies in the design or operation
of internal controls which could adversely affect in any material respect its
ability to record, process, summarize and report financial data and have disclosed
to its auditors any material weaknesses in internal controls and (B) any fraud,
whether or not material, that involves management or other employees who have a
significant role in its internal controls.
The KSL Entities have made available to VLI a summary of any such
disclosure made by management to KSL’s auditors and audit committee since January 1,
2002. KSL has initiated its process of
compliance with Section 404 of the Sarbanes-Oxley Act and expects to be in
full compliance therewith by the SEC mandated compliance date.
(iv) Except
as set forth in Section 4.1(e)(iv) of the Kaneb Disclosure Schedule, since
July 30, 2002, (x) none of KSL or any of its Subsidiaries nor, to the
Knowledge of KSL, any director, officer, employee, auditor, accountant or
representative of either of KSL or any of its Subsidiaries has received or
otherwise had or obtained Knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of KSL or any of its
Subsidiaries or
18
their
respective internal accounting controls, including any material complaint,
allegation, assertion or claim that either of KSL or any of its Subsidiaries
has engaged in questionable accounting or auditing practices, and (y) no
attorney representing either KSL or any of its Subsidiaries, whether or not
employed thereby, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by KSL or any of its
officers, directors, employees or agents, or those of its Subsidiaries, to the Board
of Directors of KSL or any committee thereof or to any director or officer of
KSL.
(f) Absence
of Undisclosed Liabilities. Except
as set forth in Section 4.1(f) of the Kaneb Disclosure Schedule or
disclosed in the audited financial statements (or notes thereto) included in
the KSL 2003 10-K, neither KSL nor any of its Subsidiaries had at December 31,
2003, or has incurred since that date, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except (a) liabilities,
obligations or contingencies which (i) are accrued or reserved against in the
financial statements in the KSL 2003 10-K with respect to KSL or its
Subsidiaries, or in the notes thereto or (ii) were incurred thereafter in the
ordinary course of business and consistent with past practices, and (b)
liabilities, obligations or contingencies which (i) would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
on the KSL Entities or (ii) have been discharged or paid in full prior to the
date hereof.
(g) Absence
of Certain Changes or Events.
(i) Since
December 31, 2003, except as set forth in the Kaneb SEC Documents filed
prior to the date hereof, no event or events have occurred that has had or
would reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect on the KSL Entities.
(ii) Except
as set forth in Section 4.1(g)(ii) of the Kaneb Disclosure Schedule, since
December 31, 2003, KSL and its Subsidiaries have carried on their
respective businesses in all material respects in the ordinary course.
(iii) Except
as set forth in Section 4.1(g)(iii) of the Kaneb Disclosure Schedule,
since December 31, 2003, or as permitted under Section 5.1(h),
neither KSL nor any of its Subsidiaries has (A) except for such actions prior
to the date hereof as were in the ordinary course of business consistent with
past practice or except as required by applicable law, (I) increased the wages,
salaries, compensation, pension, or other fringe benefits or perquisites payable
to any executive officer or director from the amount thereof in effect as of December 31,
2003, or (II) granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any
bonuses, to any executive officer or director or (B) suffered any strike, work
stoppage, slowdown, or other labor disturbance which would be reasonably be
expected to have (in the case of this clause (B) only), either individually or
in the aggregate, a Material Adverse Effect on the KSL Entities.
(iv) Since
December 31, 2003 and prior to the date hereof, KSL has not declared or
made any distributions with respect to KSL Common Shares other than its regular
quarterly distributions as follows:
19
|
Quarter
|
|
Amount Per KSL Common Share
|
|
|
Fourth
(2003)
|
|
$
|
0.475
|
|
|
|
First (2004)
|
|
$
|
0.475
|
|
|
|
Second
(2004)
|
|
$
|
0.495
|
|
|
|
Third (2004)
|
|
$
|
0.495
|
|
|
(h) Legal
Proceedings. Except as disclosed in
the Kaneb SEC Documents filed prior to the date hereof or in Section 4.1(h)
of the Kaneb Disclosure Schedule, there is no suit, action or proceeding or
investigation pending or, to the Knowledge of KSL, threatened, against or
affecting KSL or any of its Subsidiaries that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the KSL
Entities, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against any of the KSL Entities
or any of its Subsidiaries having, or which would reasonably be expected to
have, individually or in the aggregate, any such effect.
(i) Compliance
with Applicable Law. KSL and each of
its Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are not in default
under any, applicable law, statute, order, rule or regulation of any
Governmental Entity relating to KSL or any of its Subsidiaries, except where
the failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the KSL Entities.
(j) Contracts. Except as set forth in Section 4.1(j) of
the Kaneb Disclosure Schedule or filed as exhibits to the Kaneb SEC
Documents filed prior to the date hereof:
(i) Neither
KSL nor any of its Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or oral) (1), which,
upon the consummation or KSL Shareholders Approval of the transactions
contemplated by this Agreement, will (either alone or upon the occurrence of
any additional acts or events) result in any payment (whether of severance pay
or otherwise) becoming due from KSL, VLI, the Surviving LLC, or any of their
respective Subsidiaries to any director, officer or employee thereof, (2) which
is a “material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K), or which, if entered into, amended, terminated or otherwise
created or modified on or after the date of this Agreement, would be required
to be disclosed on a Current Report on Form 8-K filed with the SEC, to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the Kaneb SEC Documents filed prior to the date of
this Agreement, (3) which materially restricts the conduct of any line of
business by KSL or upon consummation of the KSL Merger will materially restrict
the ability of KSL, VLI or the Surviving LLC to engage in any line of business,
(4) relating to any outstanding commitment for any capital expenditure in
excess of $10,000,000, (5) with any labor union or organization, (6) except (a)
as reflected in the financial statements included in the Kaneb SEC Documents
filed prior to the date hereof, (b) as reflected in the September 30, 2004
financial statements of KSL delivered prior to the date hereof to VLI or (c)
from the date hereof to the extent permitted under Section 5.1(g),
indentures, mortgages, liens, promissory notes, loan agreements, guarantees or
other arrangements relating to the borrowing of money by KSL or any of its Subsidiaries,
(7) containing provisions triggered
20
by change of
control of KSL or any of its Subsidiaries or (8) in favor of directors or
officers relating to employment or compensation or providing rights to
indemnification, or (9) between any of the KSL Entities and any of their
respective Affiliates on the one hand and Xanser Corporation or any of its
Affiliates on the other. Each contract,
arrangement, commitment or understanding of the type described in this Section 4.1(j),
whether or not set forth in the Kaneb Disclosure Schedule or in such Kaneb
SEC Documents, is referred to herein as a “Kaneb Contract”. True and complete copies of all such Kaneb
Contracts have been made available by the Kaneb Entities to VLI.
(ii) (A) Each Kaneb Contract is valid and binding on
KSL and any of its Subsidiaries that is a party thereto, as applicable, and in
full force and effect, (B) KSL and each of its Subsidiaries has performed all
obligations required to be performed by it to date under each Kaneb Contract,
except where such noncompliance, either individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on the KSL
Entities, and (C) neither KSL nor any of its Subsidiaries knows of, or has
received notice of, the existence of any event or condition which constitutes,
or, after notice or lapse of time or both, will constitute, a default on the
part of KSL or any of its Subsidiaries under any such Kaneb Contract, except
where such default, either individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the KSL Entities.
(k) Insurance.
(i) Section 4.1(k)
of the Kaneb Disclosure Schedule sets forth a true and complete list of
all policies of property, casualty and liability insurance, including crime insurance,
liability and casualty insurance, property insurance, business interruption
insurance, workers’ compensation, excess or umbrella liability insurance and
any other type of property and casualty insurance insuring the properties,
assets, employees and/or operations of KSL or its Subsidiaries (collectively,
the “Policies”). Upon request,
KSL will make available to VLI certificates of insurance and insurance
summaries from the insurance broker evidencing the existence of the
Policies. Except as set forth on Section 4.1(k)
of the Kaneb Disclosure Schedule, all such policies are in full force and
effect. All premiums payable under such
Policies have been paid in a timely manner and KSL, and its Subsidiaries have
complied in all material respects with the terms and conditions of all such
Policies.
(ii) Except
as set forth in Section 4.1(k)(ii) of the Kaneb Disclosure Schedule,
neither KSL nor any of its Subsidiaries is in default under any provisions of
the Policies, and there is no claim by KSL or any Subsidiary of KSL or any
other Person pending under any of the Policies as to which coverage has been
questioned, denied or disputed by the underwriters or issuers of such
Policies. Neither KSL nor any of its
Subsidiaries has received written notice from an insurance carrier issuing any
Policies that alteration of any equipment or any improvements located on real
property, purchase of additional equipment, or modification of any of the
methods of doing business of KSL or its Subsidiaries, will be required or
suggested after the date of this Agreement, except for any such alterations or
modifications as, either individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the KSL Entities.
21
(l) Environmental
Liability.
(i) Except
as set forth in Section 4.1(l) of the Kaneb Disclosure Schedule, and
except as would not have a Material Adverse Effect on the KSL Entities: (a) KSL and its Subsidiaries, and to the
Knowledge of KSL, the Kaneb Partially Owned Entities, and their respective
businesses, operations, properties and Assets are in compliance with all Environmental
Laws and all permits, registrations, licenses, approvals, exemptions,
variances, and other authorizations required under Environmental Laws (“Environmental
Permits”); (b) KSL, its Subsidiaries, and to the Knowledge of KSL, the
Kaneb Partially Owned Entities, have obtained or filed for all Environmental
Permits for its respective businesses, operations, properties and Assets as
they currently exist and all such Environmental Permits are currently in full
force and effect; (c) KSL, its Subsidiaries, and to the Knowledge of KSL, the
Kaneb Partially Owned Entities, and their respective businesses, operations,
properties and Assets are not subject to any pending or, to the Knowledge of
the KSL, threatened claims, actions, suits, writs, injunctions, decrees,
orders, judgments, investigations, inquiries or proceedings relating to their
compliance with Environmental Laws; (d) (i) there has been no Release of
Hazardous Substances on, under or from the current or former property owned,
leased or operated by KSL, its Subsidiaries or to the Knowledge of KSL the
Kaneb Partially Owned Entities, that was required to be reported under
applicable Environmental Laws but was not so reported, and (ii) KSL has
provided the VLI Entities with copies of all reports and related documentation
regarding any Release of Hazardous Substances on, under or from the current or
former property owned, leased or operated by KSL, its respective Subsidiaries
or the Kaneb Partially Owned Entities; (e) none of KSL, its Subsidiaries, and
to the Knowledge of KSL, the Kaneb Partially Owned Entities have received any
written notice asserting an alleged liability or obligation under any
Environmental Laws involving KSL, its Subsidiaries or the Kaneb Partially Owned
Entities with respect to the actual or alleged Hazardous Substance contamination
of any property offsite of the properties of KSL; (f) to the Knowledge of KSL
or its Subsidiaries, there are not any existing, pending or threatened actions,
suits, claims, investigations, inquiries or proceedings by or before any court
or any other Governmental Entity directed against KSL, its Subsidiaries or the
Kaneb Partially Owned Entities that pertain or relate to personal injury or
property damage claims relating to a Release of Hazardous Substances; (g) there
have been no ruptures in the Pipeline Systems resulting in personal injury, loss of life, or material property
damage; (h) to the Knowledge of KSL, there are no defects, corrosion or other
damage to any of the Pipeline Systems that could reasonably be expected to
create a risk of pipeline integrity failure; and (i) KSL has made available to
VLI complete and correct information regarding compliance matters relating to
Environmental Laws in the possession of KSL or its Subsidiaries and relating to
their respective businesses, operations, properties or Assets.
(ii) The
following terms shall have the following meanings:
(1) “Environmental
Laws” means any and all applicable laws, statutes, regulations, rules,
orders, ordinances, and legally enforceable directives of and agreements between
a person that is subject to the applicable representation and any Governmental
Entity and rules of common law pertaining to protection of human health (to the
extent arising from exposure to Hazardous Substances) or the environment
(including any generation, use, storage, treatment, or Release of Hazardous
Substances into the environment) including the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et
22
seq., the Clean Air Act, 42 U.S.C. Section 7401
et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et
seq., the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq.,
the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et
seq., the Atomic Energy Act, 42 U.S.C. Section 2014 et seq.,
the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136
et seq., and the Federal
Hazardous Materials Transportation Law, 49 U.S.C. Section 5101 et seq., as each has been amended from
time to time, and all other environmental conservation and protection laws.
(2) “Hazardous
Substances” means any (a) chemical, product, substance, waste, material,
pollutant, or contaminant that is defined or listed as hazardous or toxic or
that is otherwise regulated under any Environmental Law; (b) asbestos
containing materials, whether in a friable or non-friable condition, polychlorinated
biphenyls, naturally occurring radioactive materials or radon; and (c) any oil
or gas exploration or production waste or any petroleum, petroleum hydrocarbons,
petroleum products, crude oil and any components, fractions, or derivatives
thereof.
(3) “Release”
means any depositing, spilling, leaking, pumping, pouring, emitting,
discarding, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment.
(m) Employee
Benefit Plans; Labor Matters.
(i) Section 4.1(m)(i)
of the Kaneb Disclosure Schedule includes a complete list of all Kaneb
Benefit Plans.
(ii) With
respect to each Kaneb Plan, KSL has delivered or made available to VLI, as
applicable, a true, correct and complete copy of: (A) each Kaneb Plan document or a
summary of any unwritten Kaneb Plan, trust agreement and insurance contract or
other funding vehicle; (B) the most recent Annual Report (Form 5500
Series) and accompanying schedule; (C) the current summary plan
description and any material modifications thereto (in each case, whether or
not required to be furnished under ERISA); (D) the most recent annual financial
report; (E) the most recent actuarial report; and (F) the most recent
determination letter from the Internal Revenue Service. Except as specifically provided in the
foregoing documents delivered or made available to VLI, or except as provided
in Section 4.1(m)(ii) of the Kaneb Disclosure Schedule, there are no
amendments to any Kaneb Plan that have been adopted or approved nor has KSL or
any of its Subsidiaries undertaken to make any such amendments or to adopt or
approve any new Kaneb Plan.
(iii) Section 4.1(m)(iii)
of the Kaneb Disclosure Schedule identifies each Kaneb Plan that is
intended to be a “qualified plan” within the meaning of Section 401(a) of
the Code (“Kaneb Qualified Plans”).
The Internal Revenue Service has issued a favorable determination letter
with respect to each Kaneb Qualified Plan and the related trust, and such determination
letter has not been revoked. No
circumstances exist and no events have occurred
23
that could
adversely affect the qualified status of any Kaneb Qualified Plan or the
related trust, which could not be corrected under the Internal Revenue Service’s
Employee Plans Compliance Resolution System (Revenue Procedure 2003-44) without
material liability. No Kaneb Plan is
intended to meet the requirements of Code Section 501(c)(9).
(iv) All
contributions required to be made to any Kaneb Plan by applicable law or
regulation or by any plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Kaneb
Plan, for any period through the date of this Agreement have been timely made
or, to the extent not required to be made or paid on or before the date of this
Agreement, have been fully reflected on the financial statements. Each Kaneb
Benefit Plan that is an employee welfare benefit plan under Section 3(1)
of ERISA is either (A) funded through an insurance company contract and is not
a “welfare benefit fund” with the meaning of Section 419 of the Code or
(B) unfunded.
(v) With
respect to each Kaneb Plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code: (A) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the
Code or Section 302 of ERISA, whether or not waived; (B) the fair market
value of the assets of such Kaneb Plan equals or exceeds the actuarial present
value of all accrued benefits under such Kaneb Plan (whether or not vested) on
an accumulated benefits obligation basis based on the most recent actuarial
report for each such plan; (C) no reportable event within the meaning of Section 4043(c)
of ERISA for which the 30-day notice requirement has not been waived has
occurred, and the consummation of the transactions contemplated by this
Agreement will not result in the occurrence of any such reportable event; (D)
all premiums to the Pension Benefit Guaranty Corporation (the “PBGC”)
have been timely paid in full; (E) no liability (other than for premiums to the
PBGC) under Title IV of ERISA has been or is expected to be incurred by KSL or
any of its Subsidiaries; and (F) the PBGC has not instituted proceedings to
terminate any such Kaneb Plan and, to the Knowledge of KSL, no condition exists
that presents a risk that such proceedings will be instituted or which would
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any such Kaneb Plan.
(vi) (A)
No Kaneb Benefit Plan is a Multiemployer Plan or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA; and (B) neither KSL, any of its
Subsidiaries nor any ERISA Affiliates has incurred any Withdrawal Liability
that has not been satisfied in full or reasonably expects to incur any such
liability. With respect to each Kaneb Benefit Plan that is a Multiemployer
Plan, neither KSL, any of its Subsidiaries, nor any of its ERISA Affiliates has
received any notification, nor has any reason to believe, that any such
Multiemployer Plan is in reorganization, has been terminated, is insolvent, or
may reasonably be expected to be in reorganization, to be insolvent, or to be
terminated.
(vii) (A) Each
of the Kaneb Plans has been operated and administered in all material respects
in accordance with applicable law and administrative rules and regulations of
any Governmental Entity, including, but not limited to, ERISA and the Code, and
(B) there are no pending or, to the Knowledge of KSL, threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Kaneb Plans,
any fiduciaries thereof with respect to their duties to the Kaneb Plans or
24
the assets of
any of the trusts under any of the Kaneb Plans which could reasonably be
expected to result in any material liability of KSL or any of its Subsidiaries
to the PBGC, the U.S. Department of the Treasury, the U.S. Department of Labor,
any Kaneb Plan, any participant in a Kaneb Plan, or any other party.
(viii) Except
as set forth in Section 4.1(m)(viii) of the Kaneb Disclosure Schedule, KSL
and its Subsidiaries have no liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof,
except for health continuation coverage that is required by Section 4980B
of the Code or Part 6 of Title I of ERISA or that is provided at no expense to
KSL and its Subsidiaries. KSL and its
Subsidiaries have reserved the right to amend, terminate or modify at any time
all plans or arrangements providing for retiree health or life insurance
coverage.
(ix) Section 4.1(m)(ix)
of the Kaneb Disclosure Schedule sets forth (A) an accurate and complete
list of each Kaneb Plan under which the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby could
(either alone or in conjunction with any other event), result in, cause the
accelerated vesting, funding or delivery of, or increase the amount or value
of, any payment or benefit (including the forgiveness of indebtedness) to any
employee, officer or director of KSL or any of its Subsidiaries, or could limit
the right of KSL or any of its Subsidiaries to amend, merge, terminate or
receive a reversion of assets from any Kaneb Plan or related trust or any
material employment agreement or related trust, and (B) a reasonable good faith
estimate of the maximum amount of the payments or value of benefits that could
become payable to officers and senior management of KSL or any of its
Subsidiaries if their employment were terminated at the KSL Effective
Time. No amounts or benefits payable by
KSL or any of its Subsidiaries will be “parachute payments” within the meaning
of Section 280G of the Code.
(x) Except
as would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect on the KSL Entities, all Kaneb Benefit Plans subject
to the laws of any jurisdiction outside of the United States (A) have been
maintained in accordance with all applicable requirements; (B) if they are
intended to qualify for special tax treatment meet all requirements for such
treatment; and (C) if they are intended to be funded and/or book-reserved are
fully funded and/or book reserved, as appropriate, based upon reasonable
actuarial assumptions.
(xi) There
does not now exist, nor do any circumstances exist that could result in, any
liability (A) under Title IV of ERISA, (B) under section 302 of ERISA, (C)
under sections 412 and 4971 of the Code, (D) as a result of a failure to comply
with the continuation coverage requirements of section 601 et seq. of
ERISA and section 4980B of the Code, and (E) under corresponding or
similar provisions of foreign laws or regulations, other than such liabilities
that arise solely out of, or relate solely to, the Kaneb Benefit Plans, that
would be a liability of KSL or any of its Subsidiaries following the KSL
Effective Time. Without limiting the
generality of the foregoing, neither KSL nor any of its Subsidiaries, nor any of
its ERISA Affiliates, has engaged in any transaction described in Section 4069,
4204 or 4212 of ERISA. With respect to
each Kaneb Plan, there is not now, nor do any circumstances exist that could
give rise to, any requirement for the posting of security with respect to a
Kaneb Plan or the imposition of any lien on the assets of KSL or any of its
Subsidiaries under ERISA or the Code.
25
(xii) Neither
KSL nor any of its Subsidiaries has any potential liability, contingent or
otherwise, under the Coal Industry Retiree Health Benefits Act of 1992. None of KSL, any of its Subsidiaries or any
entity that was ever an ERISA Affiliate of KSL or a Subsidiary of KSL was, on
July 20, 1992, required to be treated as a single employer under Section 414 of
the Code together with an entity that was ever a party to any collective
bargaining agreement or any other agreement with the United Mine Workers of
America.
(n) Property
of the KSL Entities. Except for
Permitted Encumbrances, failures that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the KSL Entities
or as set forth in Section 4.1(n) of the Kaneb Disclosure Schedule, KSL or its
Subsidiaries have defensible fee or leasehold title to use their other Assets,
free and clear of all Encumbrances. The
KSL Entities do not own any real property.
(o) Intellectual
Property. Except as would not reasonably
be expected to have a Material Adverse Effect on the KSL Entities, (i) the
KSL Entities and their Subsidiaries own, or are licensed to use, all Intellectual
Property used in and necessary for the conduct of their business as it is
currently conducted, (ii) to the Knowledge of KSL, the use of Intellectual
Property by KSL and its Subsidiaries does not infringe on or otherwise violate
the rights of any third party, and, to the extent such Intellectual Property is
licensed, its use is in accordance in all material respects with the applicable
license pursuant to which KSL acquired the right to use such Intellectual
Property, (iii) to the Knowledge of KSL, no third party is challenging,
infringing on or otherwise violating any right of any of KSL in the Intellectual
Property, (iv) neither KSL nor any of its Subsidiaries has received any
written notice of any pending claim, order or proceeding with respect to any
Intellectual Property used in and necessary for the conduct of KSL’s and its
Subsidiaries’ businesses, as they are presently conducted, and (v) to the
Knowledge of KSL, no Intellectual Property is being used or enforced by KSL or
any of its Subsidiaries in a manner that would reasonably be expected to result
in the abandonment, cancellation or unenforceability of any Intellectual
Property used in and necessary for the conduct of KSL’s and its Subsidiaries’
businesses, as they are presently conducted.
(p) State
Takeover Laws; Rights Plan.
(i) The
Board of Directors of KSL has approved this Agreement and the transactions
contemplated by this Agreement as required under Section 18-209 of the LLC Act
and any other applicable state takeover laws and any applicable provision of
the KSL LLC Agreement so that any such state takeover laws and such provisions
will not apply to this Agreement or any of the transactions contemplated
hereby.
(ii) KSL
has taken all action, if any, necessary or appropriate so that the execution of
this Agreement does not result in the ability of any person to exercise any KSL
Rights under the KSL Rights Agreement or enable or require the KSL Rights to
separate from the KSL Common Shares to which they are attached or to be
triggered or become exercisable. No “Distribution
Date” or “Share Acquisition Date” (as such terms are defined in the KSL Rights
Agreement) has occurred.
(q) Opinion
of Financial Advisor. KSL has
received the opinion of Raymond James & Associates Inc., dated the date of
this Agreement, to the effect that the KSL Consideration
26
to be received by
KSL Shareholders in the KSL Merger is fair to such KSL Shareholders (excluding
VLI or any Affiliate or associate thereof, any Kaneb Entity or any Affiliate or
associate thereof, or any director or executive officer of any Kaneb Entity) from
a financial point of view.
(r) Board
Approval and General Partner Approval.
The Board of Directors of KSL, at a meeting duly called and held, has by
unanimous vote of those directors present, (i) determined that this Agreement
and the transactions contemplated hereby are advisable, fair to and in the best
interests of the KSL Shareholders, (ii) approved and adopted this Agreement and
(iii) recommended that the KSL Merger and this Agreement be approved and adopted
by the KSL Shareholders.
(s) Broker’s
Fees. Neither KSL nor any of its
Subsidiaries nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker’s fees, commissions
or finder’s fees in connection with the transactions contemplated by this
Agreement.
(t) Taxes. Except in each case for any exceptions that
are immaterial individually and in the aggregate or as set forth in Section
4.1(t) of the Kaneb Disclosure Schedule:
(i) all Tax Returns that were required to be filed by or with
respect to KSL or any of its Subsidiaries have been duly and timely filed,
(ii) all items of income, gain, loss, deduction and credit or other items
required to be included in each such Tax Return, have been so included,
(iii) all Taxes owed by KSL or any of its Subsidiaries that are or have
become due have been timely paid in full or an adequate reserve for the payment
of such Taxes has been established, (iv) all Tax withholding and deposit requirements
imposed on or with respect to KSL or any of its Subsidiaries have been
satisfied in full in all respects, (v) there are no Encumbrances on any of
the assets of KSL or any of its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax, (vi) there is no written
claim against KSL or any of its Subsidiaries for any Taxes, and no assessment,
deficiency or adjustment has been asserted, proposed, or threatened in writing
with respect to any Tax Return of or with respect to KSL or any of its
Subsidiaries, (vii) there is not in force any extension of time with
respect to the due date for the filing of any Tax Return of or with respect to
KSL or any of its Subsidiaries or any waiver or agreement for any extension of
time for the assessment or payment of any Tax of or with respect to KSL or any
of its Subsidiaries, (viii) neither KSL nor any of its Subsidiaries will
be required to include any amount in income for any taxable period as a result
of a change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with respect
to any such taxable period, (ix) except as set forth in Section 4.1(t)(ix)
of the Kaneb Disclosure Schedule, neither KSL nor any of its Subsidiaries is a
party to a Tax allocation or sharing agreement, and no payments are due or will
become due by KSL or any of its Subsidiaries pursuant to any such agreement or
arrangement or any Tax indemnification agreement, (x) neither KSL nor any
of its Subsidiaries has been a member of an affiliated group filing a consolidated
federal income Tax Return or has any liability for the Taxes of any Person
(other than KSL or any of its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise, (xi) KSL is a “publicly
traded partnership” for United States federal income tax purposes, and
(xii) at least 90% of the gross income of KSL for each taxable year since
its formation has been from sources that will be treated as “qualifying income”
within the meaning of section 7704(d) of the Code.
27
(u) Labor
Relations; Collective Bargaining Agreements. Except as set forth on Section 4.1(u) of the
Kaneb Disclosure Schedule, neither KSL nor any of its Subsidiaries is a party
to any collective bargaining or other labor union contract applicable to persons
employed by KSL or its Subsidiaries, and no collective bargaining agreement or
other labor union contract is being negotiated by KSL or its Subsidiaries. No labor organization or group of employees
of KSL or its Subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or, to the
Knowledge of KSL, threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority. Except as would not reasonably be expected to
have a Material Adverse Effect on the KSL Entities, (i) there is no labor
dispute, strike, slowdown or work stoppage against KSL or any of its
Subsidiaries pending or, to the Knowledge of KSL, threatened against KSL or any
of its Subsidiaries and (ii) no unfair labor practice or labor charge or
complaint has occurred with respect to KSL or its Subsidiaries.
(v) Regulation
as a Utility; Investment Company.
None of the KSL Entities nor any of its Subsidiaries is (i) an “investment
company”, as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended, or (ii) (1) a “public-utility company” or a “holding
company” or (2) a “subsidiary company” or an “affiliate” of a “public-utility
company” or a “holding company,” as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended. Except as set forth in Section 4.1(v) of the
Kaneb Disclosure Schedule, none of the KSL Entities or their Affiliates, all or
part of whose rates or services are regulated by a Governmental Entity, is a
party to any proceeding before a Governmental Entity that could reasonably be
expected to result in orders having a Material Adverse Effect with respect to
the KSL Entities, nor to the Knowledge of the KSL Entities has notice of such a
proceeding been given or has any Governmental Entity indicated to any of the
KSL Entities its intention to hold such a proceeding.
4.2 Representations
and Warranties of VLI. Except as
disclosed in a section of the VLI disclosure schedule delivered to KSL
concurrently herewith (the “VLI Disclosure Schedule”) corresponding to
the subsection of this Section 4.2 to which such disclosure applies or as
specifically identified in the VLI SEC Documents filed prior to the date hereof,
VLI hereby represents and warrants to KSL as follows:
(a) Organization.
(i) Each
of VLI, VLI GP and Parent GP is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(ii) Each
Subsidiary of VLI is duly organized, validly existing under the laws of the
State of Delaware and in good standing under the laws of the State of Delaware.
(iii) VLI
GP is the sole general partner of VLI.
VLI GP is the sole record and beneficial owner of the general partner interest
in VLI, and such general partner interest has been
duly authorized and validly issued in accordance with applicable laws and the
VLI Partnership Agreement. VLI GP owns
such general partner interest free and clear of any Encumbrances. VLI GP is the sole record and beneficial
owner of all of the VLI Incentive Distribution Rights and owns such rights free
and clear of all Encumbrances.
28
(iv) Parent
GP is the sole general partner of VLI GP.
Parent GP is the sole record and beneficial owner of the general partner
interest in VLI GP, and such general partner interest
has been duly authorized and validly issued in accordance with applicable laws
and the VLI GP partnership agreement.
Parent GP owns such general partner interest free and clear of any
Encumbrances.
(b) Authority;
No Violation.
(i) Each
of the VLI Entities has full power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, subject to VLI
Unitholders Approval. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by VLI Sub A and VLI,
as its sole member, and by VLI GP.
Parent GP, on behalf of VLI GP, has directed that the KPP Merger
Agreement be submitted to VLI Unitholders for approval at a meeting of VLI Unitholders
for the purpose of approving the issuance of VLI Common Units in the KPP Merger
(the “VLI Unitholders Meeting”), and except for the approval of the
issuance of VLI Common Units in the KPP Merger by both the holders of a
majority of the outstanding VLI Common Units and the holders of a majority of
the outstanding VLI Subordinated Units, each voting as a separate class, at a
meeting of VLI’s unitholders at which a quorum is present (the “VLI Unitholders
Approval”), no other proceedings on the part of any VLI Entity are
necessary to approve this Agreement or the KPP Merger Agreement and to consummate
the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the VLI Entities
and (assuming due authorization, execution and delivery by KSL) constitutes a
valid and binding obligation of the VLI Entities, enforceable against the VLI
Entities in accordance with its terms.
(ii) Neither
the execution and delivery of this Agreement by VLI, nor the consummation by
VLI of the transactions contemplated hereby, nor compliance by VLI with any of
the terms or provisions hereof, will (A) violate any provision of the VLI
Partnership Agreement or the organizational documents or its Subsidiaries, (B)
assuming that the consents and approvals referred to in Section 4.2(c) are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to VLI, any of its Subsidiaries or
Partially Owned Entities or any of their respective properties or assets or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, accelerate any right or benefit provided by, or result
in the creation of any Encumbrance upon any of the properties or assets of VLI,
any of its Subsidiaries or, to the VLI Entities’ Knowledge, the Partially Owned
Entities under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which VLI, any of its Subsidiaries or Partially
Owned Entities is a party, or by which they or any of their properties or
assets may be bound or affected, except (in the case of clause (y) above) for
such violations, conflicts, breaches or defaults which, either individually or
in the aggregate, will not have a Material Adverse Effect on VLI.
(c) Consents
and Approvals. Except for
(i) the filing of a notification and report form under the HSR Act and the
termination or expiration of the waiting period under the HSR Act, (ii) the
Other Approvals, (iii) the filing of the Certificate of Merger, (iv) any consents,
29
authorizations, approvals, filings or
exemptions in connection with compliance with the rules of the NYSE, (v) such
other consents, approvals, filings and registrations the failure of which to
obtain or make would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on VLI, no consents or approvals of
or filings or registrations with any Governmental Entity are necessary in
connection with (A) the execution and delivery by the VLI Entities of this
Agreement and (B) the consummation by the VLI Entities of the transactions
contemplated by this Agreement.
(d) Opinion
of Financial Advisor. VLI has
received the opinion of Credit Suisse First Boston LLC, dated the date of this
Agreement, to the effect that, as of the date of this Agreement, the aggregate
consideration to be paid by VLI in the KPP Merger and the KSL Merger is fair to
VLI from a financial point of view.
(e) General
Partner Approval. VLI GP has
(i) determined that this Agreement and the transactions contemplated hereby are
advisable, fair to and in the best interests of the unitholders of VLI, (ii)
approved and adopted this Agreement, and (iii) recommended the approval of the
issuance of the VLI Common Units by the VLI Unitholders as contemplated by the
KPP Merger Agreement.
(f) Broker’s
Fees. Neither VLI nor any of its
Subsidiaries nor any of its respective officers or directors has employed any
broker or finder or incurred any liability for any broker’s fees, commissions
or finder’s fees in connection with the transactions contemplated by this
Agreement, excluding fees to be paid to Credit Suisse First Boston LLC and
Citigroup Global Markets Inc.
(g) Financing. VLI, taken together with its Subsidiaries,
will have available on the Closing Date sufficient funds to enable it to
consummate the transactions contemplated by this Agreement.
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants
of KSL. During the period from the
date of this Agreement and continuing until the KSL Effective Time, KSL agrees
as to itself and its Subsidiaries that without the written consent of VLI,
which consent shall not be unreasonably withheld or delayed (except as
expressly contemplated or permitted by this Agreement or a correspondingly
numbered subsection of the Kaneb Disclosure Schedule):
(a) Ordinary
Course.
(i) KSL
and its Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practices in all material respects, in
substantially the same manner as heretofore conducted, and shall use their reasonable
best efforts consistent with the other provisions of this Agreement to keep
available the services of their respective present officers and key employees,
preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with customers, suppliers and
others having business
30
dealings with
them to the end that their ongoing businesses shall not be impaired in any
material respect at the KSL Effective Time.
(ii) KSL
shall not, and shall not permit any of its Subsidiaries to, (A) enter into any
new material line of business or (B) incur or commit to any capital expenditures
or any obligations or liabilities in connection therewith, other than capital
expenditures and obligations or liabilities in connection therewith (I) not
exceeding $1 million individually, or $3 million in the aggregate, or (II)
contemplated by the 2004 or 2005 capital budget approved by the board of
directors of KSL and set forth on Section 5.1(a)(ii) of the Kaneb Disclosure
Schedule.
(b) Distributions;
Changes in Share Capital. Except as
required under the KSL LLC Agreement, KSL shall not, and shall not permit any
of its Subsidiaries to, and shall not propose to, (i) declare or pay any
distributions or in respect of any of its equity securities, except (x) the
declaration and payment of regular quarterly cash distributions not in excess
of $0.495 per KSL Common Share with usual record and payment dates for such
distributions in accordance with past distribution practice and (y) the declaration
and payment of regular distributions from a wholly owned Subsidiary of any of
the KSL Entities to its parent KSL Entity or to another wholly owned Subsidiary
of such parent KSL Entity in accordance with past distribution practice, (ii)
split, combine or reclassify any of its equity securities or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for, its equity securities, except for any such transaction by a
wholly owned Subsidiary of any KSL Entity which remains a wholly owned
Subsidiary of such KSL Entity after consummation of such transaction, or (iii)
repurchase, redeem or otherwise acquire any of its equity securities or any
securities convertible into or exercisable for any equity securities.
(c) Issuance
of Securities. The KSL Entities
shall not, and shall not permit any of their respective Subsidiaries to, issue,
deliver, sell, pledge or dispose of, or authorize or propose the issuance,
delivery, sale, pledge or disposition of, any of its equity securities, any
Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants, calls or options to acquire, any such shares or Voting Debt,
or enter into any commitment, arrangement, undertaking or agreement with
respect to any of the foregoing, other than (i) the issuance of KSL Common
Shares (and the associated KSL Rights) upon the exercise of KSL Stock Options outstanding
as of the date of this Agreement or in satisfaction of KSL Deferred Share Units
unsatisfied as of the date of this Agreement, in each case in accordance with
their present terms, (ii) issuances, sales or deliveries by a wholly owned
Subsidiary of any of the KSL Entities of equity securities or partnership units
to such Subsidiary’s parent or another wholly owned Subsidiary of any of the
KSL Entities or (iii) issuances in accordance with the KSL Rights Agreement.
(d) Governing
Documents. Except to the extent
required to comply with its obligations hereunder or with applicable law, KSL
shall not and shall cause each of its Subsidiaries not to amend or propose to
amend its partnership agreement or limited liability company agreement or
similar organizational documents.
(e) No
Acquisitions. Except for
acquisitions (i) set forth in Section 5.1(e) of the Kaneb Disclosure Schedule
or (ii) in the ordinary course of business consistent with past practice that
do not exceed $1 million individually or $3 million in the aggregate, KSL shall
not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merger or consolidation,
31
or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (excluding the acquisition of assets used in the operations of the
business of KSL and its Subsidiaries in the ordinary course, which assets do
not constitute a business unit, division or all or substantially all of the
assets of the transferor and which acquisitions are in the ordinary course of
business consistent with past practice).
(f) No
Dispositions. KSL shall not, and
shall not permit any of its Subsidiaries to, sell, lease or otherwise dispose
of, or agree to sell, lease or otherwise dispose of, in each case including but
not limited to by way of merger, any of its assets (including equity securities
or partnership units of Subsidiaries of KSL), except for, in the case of assets
that are not equity securities or partnership units, dispositions or
encumbrances of immaterial assets in the ordinary course of business consistent
with past practice.
(g) Investments;
Indebtedness. KSL shall not, and
shall not permit any of its Subsidiaries to, (i) make any loans, advances or
capital contributions to, or investments in, any other Person, other than (x)
loans or investments by KSL or any of its wholly owned Subsidiaries to any of their
wholly owned Subsidiaries or parent wholly owning such entity, (y) in the
ordinary course of business consistent with past practice which are not,
individually or in the aggregate, material to KSL and its Subsidiaries taken as
a whole (provided that none of such transactions referred to in this
clause (y) presents a material risk of making it more difficult to obtain any
approval or authorization required in connection with the KSL Merger under
Regulatory Law) or (ii) except for additional borrowings under existing loan
arrangements, incur any indebtedness for borrowed money or guarantee or assume
any such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of KSL or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any “keep
well” or other agreement to maintain any financial statement condition of another
Person (other than any wholly owned Subsidiary or KPP or any wholly owned
Subsidiary of KPP) or enter into any arrangement having the economic effect of
any of the foregoing. Notwithstanding
any other provision of this Agreement, KSL and its Subsidiaries shall be
entitled to transfer funds and make payments to KPP and its Subsidiaries (i) to
reimburse KPP and its Subsidiaries for obligations (which otherwise were
incurred in compliance with the KPP Merger Agreement) of KSL or its
Subsidiaries incurred by KPP or its Subsidiaries or (ii) in the ordinary course
of business consistent with past practice.
(h) Compensation.
Except (i) as disclosed on Section 5.1(h) of the Kaneb Disclosure Schedule or
except as required by law or by the terms of any collective bargaining
agreement or other agreement in effect as of the date hereof between KSL or its
Subsidiaries and any director, officer or employee thereof identified on
Section 5.1(h) of the Kaneb Disclosure Schedule, or (ii) as otherwise agreed by
KSL and VLI, KSL shall not and shall not permit any of its Subsidiaries to (A)
increase the amount of compensation of, or pay any severance to, any director,
officer or employee of KSL or its Subsidiaries (except for increases in base
salary or wages to employees who are not directors or officers of the foregoing
entities in the ordinary course of business consistent with past practice), (B)
make any increase in or commitment to increase any employee benefits, (C) grant
any additional KSL Stock Options or other equity-based awards or permit the
deferral or accrual of any amounts under the KSL Deferred Share Unit Arrangements
32
or any similar plan, (D) adopt, enter into or
amend, make any commitment to adopt, enter into or amend, or take any action to
clarify any provision of, any Kaneb Benefit Plan, (E) fund or make any
contribution to any Kaneb Benefit Plan or any related trust or other funding
vehicles, other than regularly scheduled contributions to trusts funding qualified
plans, or (F) adopt, enter into or amend any collective bargaining agreement or
other arrangement relating to union or organized employees.
(i) Accounting
Methods; Tax Elections. Except as
disclosed in Kaneb SEC Documents filed prior to the date of this Agreement, or
as required by a Governmental Entity, KSL shall not change in any material
respect its methods of accounting in effect at December 31, 2003, except as
required by changes in GAAP as concurred in by KSL’s independent public
accountants. KSL shall not (i) change
its fiscal year or any method of tax accounting, (ii) make any material Tax
election or (iii) settle or compromise any material liability for Taxes.
(j) Material
Contracts. Other than in the
ordinary course of business consistent with past practice or as disclosed on
Section 5.1(j) of the Kaneb Disclosure Schedule, KSL and its Subsidiaries shall
not enter into any contract or agreement that would be a Kaneb Contract if in
existence as of the date of this Agreement or terminate or amend in any
material respect any Kaneb Contract or waive any material rights under any
Kaneb Contract.
(k) Settlement
of Disputes. KSL and its
Subsidiaries shall not settle any claim, demand, lawsuit or state or federal
regulatory proceeding (i) for damages to the extent such settlement in the
aggregate assesses damages in excess of $500,000 or (ii) seeking an injunction
or any other equitable relief, except in case of clause (i) a settlement of any
such claim, demand, lawsuit or state or federal regulatory proceeding within
the specific amount reserved and identified on Section 5.1(k) of the Kaneb
Disclosure Schedule, provided that such settlement achieves a full, final and
non-appealable resolution of the matter reserved.
(l) Insurance. KSL shall use commercially reasonable efforts
to maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are now carried by KSL and its
Subsidiaries.
(m) Governmental
Filings. KSL shall file on a timely
basis all material notices, reports, returns and other filings required to be
filed with or reported to any Governmental Entity, as well as all applications
and other documents necessary to maintain, renew or extend any material permit,
license, variance or any other approval required by any Governmental Entity for
the continuing operation of its business.
(n) Certain
Actions. KSL and its Subsidiaries
shall not take any action or omit to take any action which action or omission would
reasonably be expected to prevent or materially delay or impede the
consummation of the KSL Merger or the other transactions contemplated by this
Agreement.
(o) No
Related Actions. KSL shall not, and
shall not permit any of its Subsidiaries to, agree or commit to do any of the
foregoing.
5.2 Covenants
of VLI. During the period from the
date of this Agreement and continuing until the KSL Effective Time, each of the
VLI Entities agrees as to itself and its Subsidiaries
33
that without the written consent of KSL,
which consent shall not be unreasonably withheld or delayed (except as
expressly contemplated or permitted by this Agreement or a correspondingly
numbered subsection of the VLI Disclosure Schedule):
(a) Certain
Actions. The VLI Entities and their
Subsidiaries shall not take any action or omit to take any action which action
or omission would reasonably be expected to prevent or materially delay or
impede the consummation of the Merger, the other transactions contemplated by
this Agreement or the payment of the KSL Consideration.
(b) No
Related Actions. Each of the VLI
Entities shall not, and shall not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing.
5.3 Governmental
Filings. To the extent permitted by
law or regulation or any applicable confidentiality agreement, KSL and VLI
shall confer on a reasonable basis with each other on operational matters. KSL and VLI shall file all reports required
to be filed by each of them with the SEC (and all other Governmental Entities)
between the date of this Agreement and the KSL Effective Time and shall, if
requested by the other and (to the extent permitted by law or regulation or any
applicable confidentiality agreement) deliver to the other party copies of all
such reports, announcements and publications promptly upon request.
5.4 Control
of Other Party’s Business. Nothing
contained in this Agreement shall give KSL, directly or indirectly, the right
to control or direct VLI’s operations or give VLI, directly or indirectly, the
right to control or direct KSL’s operations prior to the KSL Effective
Time. Prior to the KSL Effective Time,
KSL and VLI shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its respective operations.
ADDITIONAL AGREEMENTS
6.1 Preparation
of Proxy Statement; Shareholders Meetings.
(a) As
promptly as reasonably practicable following the date of this Agreement, VLI
and KSL shall cooperate in preparing and each shall cause to be filed with the
SEC mutually acceptable proxy materials which shall constitute the Joint Proxy
Statement/Prospectus and VLI shall prepare and file with the SEC the Form
S-4. The Joint Proxy
Statement/Prospectus will be included as a prospectus in and will constitute a
part of the Form S-4 as VLI’s prospectus.
Each of VLI and KSL shall use reasonable best efforts to have the Joint
Proxy Statement/Prospectus cleared by the SEC and the Form S-4 declared
effective by the SEC. VLI and KSL shall,
as promptly as practicable after receipt thereof, provide each other with
copies of any written comments, and advise each other of any oral comments,
with respect to the Joint Proxy Statement/Prospectus or Form S-4 received from
the SEC. The parties shall cooperate and
provide the other party with a reasonable opportunity to review and comment on
any amendment or supplement to the Joint Proxy Statement/Prospectus and Form
S-4 prior to filing such with the SEC and will provide each other with a copy
of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment
or supplement (including by
34
incorporation by reference) to the Joint
Proxy Statement/Prospectus or the Form S-4 shall be made without the approval
of both VLI and KSL, which approval shall not be unreasonably withheld or
delayed; provided that, with respect to documents filed by a party which
are incorporated by reference in the Form S-4 or the Joint Proxy Statement/Prospectus,
this right of approval shall apply only with respect to information relating to
the other party or its business, financial condition or results of
operations. VLI will use reasonable best
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to the VLI Unitholders,
and KSL will use reasonable best efforts to cause the Joint Proxy Statement/Prospectus
to be mailed to KSL Shareholders, in each case as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Each party will advise the other party,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective, the issuance of any stop order, the suspension of the qualification
of the VLI Common Units issuable in connection with the KPP Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy Statement/Prospectus or the Form S-4. If, at any time prior to the KSL Effective
Time, any information relating to VLI or KSL, or any of their respective Affiliates,
officers or directors, is discovered by VLI or KSL and such information should
be set forth in an amendment or supplement to either of the Form S-4 or the
Joint Proxy Statement/Prospectus so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party discovering such information
shall promptly notify the other party hereto and, to the extent required by
law, rules or regulations, an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and disseminated to the
KSL Shareholders and the VLI Unitholders.
KSL shall use
its reasonable best efforts to ensure that none of the information to be
supplied by KSL or its Subsidiaries in the Joint Proxy Statement/Prospectus shall,
at the time of the mailing of the Joint Proxy Statement/Prospectus and any
amendments or supplements thereto, and at the time of each of the KSL
Shareholders Meeting, and the VLI Unitholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. KSL shall use its reasonable best efforts to
ensure that the Joint Proxy Statement/Prospectus will comply, as of its mailing
date, as to form in all material respects with all applicable laws, including
the provisions of the Exchange Act and the rules and regulations promulgated
thereunder, except that no covenant is made by KSL with respect to information
supplied by VLI for inclusion in any filing by KSL with the SEC.
VLI shall use
its reasonable best efforts to ensure that none of the information to be
supplied by the VLI Entities or their Subsidiaries in the Joint Proxy Statement/Prospectus
will, at the time of the mailing of the Joint Proxy Statement/Prospectus and
any amendments or supplements thereto, and at the time of each of the KSL
Shareholders Meeting and the VLI Unitholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. VLI shall use its reasonable best efforts to
ensure that the Joint Proxy Statement/Prospectus will comply, as of its mailing
date, as to form in all material respects with all applicable laws, including
the provisions of the
35
Exchange Act
and the rules and regulations promulgated thereunder, except that no covenant
is made by the VLI Entities with respect to information supplied by KSL for
inclusion therein.
(b) KSL
shall duly take all lawful action to call, give notice of, convene and hold the
KSL Shareholders Meeting as soon as practicable on a date determined in
accordance with the mutual agreement of VLI and KSL for the purpose of
obtaining the KSL Shareholder Approval and, subject to Section 6.4, shall take
all lawful action to solicit the KSL Shareholder Approval. The Board of Directors of KSL (i) shall
recommend the approval and adoption of the plan of merger contained in this
Agreement by the KSL Shareholders to the effect as set forth in Section 4.1(r)
(the “Kaneb Recommendation”), and (ii) shall not, unless VLI first makes
a Change in the VLI Recommendation, (x) withdraw, modify or qualify (or
propose to withdraw, modify or qualify) in any manner adverse to VLI the Kaneb
Recommendation or (y) take any action or make any statement in connection
with the KSL Shareholder Meeting inconsistent with such recommendation (collectively,
a “Change in the Kaneb Recommendation”); provided, however,
that the Board of Directors of KSL may make a Change in the Kaneb Recommendation
pursuant to Section 6.4 hereof. KSL agrees, in its capacity as a KPP Unitholder,
that it shall cause all KPP Units beneficially owned by it or any of its Subsidiaries
(whether beneficially owned as of the date hereof or acquired thereafter and
prior to the record date for the KPP Unitholders Meeting) to be present for quorum
purposes at the KPP Unitholders Meeting and shall vote or cause to be voted
such KPP Units in favor of the approval and adoption of the KPP Merger
Agreement and the transactions contemplated thereby, and against any
Acquisition Proposal at any meeting of KPP Unitholders at which such proposal
may be considered.
(c) VLI
shall duly take all lawful action to call, give notice of, convene and hold the
VLI Unitholders Meeting as soon as practicable on a date determined in accordance
with the mutual agreement of VLI and KSL for the purpose of obtaining the VLI
Unitholders Approval and shall take all lawful action to solicit the VLI
Unitholders Approval. The Board of
Directors of VLI GP shall recommend the approval of the issuance of VLI Common
Units in the KPP Merger by the VLI Unitholders to the effect set forth in
Section 4.2(e) (the “VLI Recommendation”), and shall not, unless the
board of directors of KSL (pursuant to this Agreement) or the board of
directors of KPP GP (pursuant to the KPP Merger Agreement) first makes a Change
in the Kaneb Recommendation (as defined in this Agreement and in the KPP Merger
Agreement), (x) withdraw, modify or qualify (or propose to withdraw, modify or
qualify) in any manner adverse to the Kaneb Entities the VLI Recommendation or
(y) take any action or make any statement in connection with the VLI
Unitholders Meeting inconsistent with such recommendation (collectively, a “Change
in the VLI Recommendation”).
6.2 Access
to Information. Upon reasonable
notice, each party shall (and shall cause its Subsidiaries to), except as
prohibited by law, afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of the other party reasonable
access during normal business hours, during the period prior to the Effective
Times, to all its properties, books, contracts, commitments, records, officers
and employees, and, during such period, such party shall (and shall cause its
Subsidiaries to) furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed, published, announced
or received by it in connection with the transactions contemplated by this
Agreement during such period pursuant to the requirements of Federal, state or
foreign laws (including, without limitation, pursuant to the HSR Act, the Securities
Act, the Exchange Act and the rules
36
of any Governmental Entity thereunder), as
applicable (other than documents which such party is not permitted to disclose
under applicable law), and (b) all other information concerning it and its
business, properties and personnel as such other party may reasonably request; provided,
however, that either party may restrict the foregoing access to the
extent that (i) any law, treaty, rule or regulation of any Governmental Entity
applicable to such party or any contract requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information or (ii) such disclosure of the information would breach
confidentiality obligations owed to a third party (provided, further, that if
the circumstances of the preceding proviso occur, the parties will use
reasonable best efforts to agree upon alternate disclosure methods to convey,
to the maximum extent possible, the substance of such information to the
requesting party). The parties will hold
any information obtained pursuant to this Section 6.2 in confidence in
accordance with, and shall otherwise be subject to, the provisions of the amended
and restated confidentiality agreement dated August 8, 2004, between KPP, KSL
and VLI (the “Confidentiality Agreement”), which Confidentiality
Agreement shall continue in full force and effect. Any investigation by either VLI or KSL shall
not affect the representations and warranties of the other.
6.3 Reasonable
Best Efforts.
(a) Subject
to the terms and conditions of this Agreement, each party hereto will use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under this
Agreement and applicable laws and regulations to consummate the KSL Merger and
the other transactions contemplated by this Agreement as soon as reasonably
practicable after the date of this Agreement, including (i) preparing and
filing as promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings, and other documents and to obtain as
promptly as reasonably practicable all Necessary Consents and all other
consents, waivers, licenses, orders, registrations, approvals, permits,
rulings, authorizations and clearances necessary or advisable to be obtained
from any third party and/or any Governmental Entity in order to consummate the
KSL Merger or any of the other transactions contemplated by this Agreement
(collectively, the “Required Approvals”) and (ii) using its reasonable
best efforts to obtain all such Necessary Consents and the Required
Approvals. In furtherance of and not in
limitation of the foregoing, each of VLI and KSL agrees (i) to make (A) as
promptly as reasonably practicable, an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions contemplated
hereby, (B) as promptly as reasonably practicable, appropriate filings with the
Canadian Competition Commission, if required, in accordance with applicable
competition, merger control, antitrust, investment or similar laws, and (C) as
promptly as reasonably practicable, all other necessary filings with other
Governmental Entities relating to the KSL Merger, and, to supply as promptly as
reasonably practicable any additional information or documentation that may be
requested pursuant to such laws or by such authorities and to use reasonable best
efforts to cause the expiration or termination of the applicable waiting
periods under the HSR Act and the receipt of Required Approvals under such
other laws or from such authorities as soon as reasonably practicable and (ii)
not to extend any waiting period under the HSR Act or enter into any agreement
with the FTC or the DOJ not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other parties hereto
(which shall not be unreasonably withheld or delayed).
37
(b) Each
of KSL and the VLI Entities shall, in connection with the efforts referenced in
Section 6.3(a) to obtain all Required Approvals, use its reasonable best efforts
to (i) cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (ii) subject to
applicable law, permit the other party to review in advance any proposed
written communication between it and any Governmental Entity, (iii) promptly inform
each other of (and, at the other party’s reasonable request, supply to such
other party) any communication (or other correspondence or memoranda) received
by such party from, or given by such party to, the DOJ, the FTC or any other
Governmental Entity and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any
of the transactions contemplated hereby, (iv) consult with each other in
advance to the extent practicable of any meeting or conference with the DOJ,
the FTC or any other Governmental Entity or, in connection with any proceeding
by a private party, with any other Person, and to the extent permitted by the
DOJ, the FTC or such other applicable Governmental Entity or other Person, give
the other party the opportunity to attend and participate in such meetings and
conferences, and (v) subject to any action taken by the parties pursuant to
Section 6.3(c), respond promptly and fully to any “second request” or other
request for information in connection with filings required by the HSR Act or
any similar or corresponding foreign or state statute, law, rule or regulation.
(c) In
furtherance and not in limitation (except as otherwise expressly set forth) of
the covenants of the parties contained in Section 6.3(a) and 6.3(b), if any administrative
or judicial action or proceeding, including any proceeding by a private party,
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any regulatory law, or if any
statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a
Governmental Entity which would make the KSL Merger or the other transactions
contemplated hereby illegal or would otherwise prohibit or materially impair or
delay the consummation of the KSL Merger or the other transactions contemplated
hereby, KSL and the VLI Entities shall cooperate with each other in all
respects in responding thereto, and each party shall use its respective
reasonable best efforts in responding thereto, including (i) contesting and
resisting any such action or proceeding, and to have vacated, lifted, reversed
or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the KSL Merger or the other transactions
contemplated by this Agreement and to have such statute, rule, regulation,
executive order, decree, injunction or administrative order repealed, rescinded
or made inapplicable so as to permit consummation of the transactions
contemplated by this Agreement and (ii) holding separate or otherwise disposing
of or conducting their business in a specified manner, or agreeing to sell,
hold separate or otherwise dispose of or conduct their business in a specified
manner or permitting the sale, holding separate or other disposition of, assets
of VLI, KSL or its Subsidiaries or the conducting of their business in a
specified manner, provided that the actions described in this clause (ii) would
not reasonably be expected to have a Material Adverse Effect on the VLI
Entities taken as a whole, the Kaneb Entities taken as a whole, or the combined
VLI Entities and Kaneb Entities after consummation of the KSL Merger. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 6.3 shall limit a party’s
right to terminate this Agreement pursuant to Section 8.1(b) or 8.1(c) so long
as such party has up to then complied with its obligations under this Section
6.3.
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(d) Each
of the VLI Entities and KSL and their respective Boards of Directors and
general partners shall, if any state takeover statute or similar statute
becomes applicable to this Agreement, the KSL Merger or any other transactions
contemplated hereby, take all action reasonably necessary to ensure that the
KSL Merger and the other transactions contemplated by this Agreement may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation on this Agreement, the KSL
Merger and the other transactions contemplated hereby.
6.4 Acquisition
Proposals.
(a) KSL
agrees that neither it nor any of its Subsidiaries nor any of its officers and
directors nor those of its Subsidiaries shall, and that it shall cause its and
its Subsidiaries’ employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, (i) initiate, solicit, encourage
or knowingly take any action that facilitates any inquiries, or the making of
any proposal or offer, with respect to, or a transaction to effect, a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving KSL
or any of its Subsidiaries, or any purchase, sale or other transfer of 10% or
more of the consolidated assets of KSL (including stock of its Subsidiaries) of
it or its Subsidiaries, or any purchase or sale of, or tender or exchange offer
for, or other transfer of, its equity securities that, if consummated, would
result in any Person (or the shareholders of such Person) beneficially owning
securities representing 10% or more of the total voting power of KSL or the
voting power of any of its Subsidiaries (any such proposal, offer or
transaction, other than (a) a proposal or offer made by VLI or an Affiliate
thereof, or (b) a proposal, offer or transaction solely involving the equity
securities of KPP to the extent KPP and KPP GP comply with their obligation relating
thereto under the KPP Merger Agreement, being hereinafter referred to as an “Acquisition
Proposal”), (ii) except as the board of directors of KSL determines in good
faith, after consultation with outside counsel and taking into account any
change in the terms of the KSL Merger or other proposal made reasonably
promptly by VLI after being notified pursuant to Section 6.4(b), that doing so
is necessary for such directors to comply with their fiduciary duties under
applicable law (and in such case only after entering into a confidentiality
agreement with such Person on terms no less favorable to KSL than the
Confidentiality Agreement and conditioned upon contemporaneously providing to
VLI a copy of any such information or data that it is providing to any such
Person pursuant to this Section 6.4 to the extent not previously provided or
made available to VLI), have any discussion with or provide any confidential
information or data to any Person relating to an Acquisition Proposal, or
engage in any negotiations concerning an Acquisition Proposal, (iii) approve or
recommend, or propose publicly to approve or recommend, any Acquisition
Proposal or (iv) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar agreement
or propose publicly or agree to do any of the foregoing related to any
Acquisition Proposal.
(b) Notwithstanding
anything in this Agreement to the contrary, KSL (and the Board of Directors of
KSL shall be permitted to (A) take and publicly disclose a position to the
extent necessary to comply with Rule 14d-9 or Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal (to the extent applicable),
(B) effect a Change in the Kaneb Recommendation, or (C) engage in discussions
or negotiations with, or provide any information
39
(whether confidential, non-public or
otherwise) to, any Person in response to an unsolicited bona fide written
Acquisition Proposal by any such Person, if and only to the extent that, in any
such case referred to in clause (B) or (C), (I) the KSL Shareholder Meeting
shall not have occurred other than as a result of a breach by KSL of its
obligations pursuant to Section 6.1, (II) (y) in the case of clause (B) above,
it has received an unsolicited bona fide written Acquisition Proposal from a
third party not in violation of Section 6.4(a) and the Board of Directors of KSL
concludes in good faith that such Acquisition Proposal constitutes a Superior
Proposal, (III) in the case of clause (B) or (C) above, the Board of Directors
of KSL, after receipt of the advice of outside counsel, determines in good
faith that doing so is necessary for such directors to comply with their
fiduciary duties under applicable law, (IV) prior to providing any information
or data permitted to be provided pursuant to this sentence, KSL shall have
entered into a confidentiality agreement with such Person on terms no less favorable
to the KSL than the Confidentiality Agreement, and shall have provided to VLI a
copy of any such information or data that it is providing to any such Person
pursuant to this Section 6.4 to the extent not previously provided or made
available to VLI, and (V) prior to providing any information or data to any
Person or entering into discussions or negotiations with any Person, KSL shall
notify VLI promptly of such inquiries, proposals or offers received by, any
such information requested from, or any such discussions or negotiations sought
to be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any inquiries, proposals or offers, along with a copy of the
relevant proposed transaction agreements, if such exist, with the party making
such Acquisition Proposal. KSL agrees
that it will promptly keep VLI reasonably informed of the status and terms of
any inquiries, proposals or offers and the status and terms of any discussions
or negotiations, including the identity of the party making such inquiry,
proposal or offer. KSL agrees that it will, and will cause its officers,
directors and employees and use its reasonable best efforts to cause its
representatives to, immediately cease and cause to be terminated any
activities, discussions or negotiations existing as of the date of this
Agreement with any parties (other than the parties to this Agreement) conducted
heretofore with respect to any Acquisition Proposal. KSL agrees that it will use reasonable best
efforts to promptly inform its directors, officers, key employees, agents and
representatives of the obligations undertaken in this Section 6.4.
6.5 Fees
and Expenses. Subject to Section
8.2, whether or not the KSL Merger is consummated, all Expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such Expenses, except Expenses incurred in connection
with any filings under the HSR Act the filing, printing and mailing of the
Joint Proxy Statement/Prospectus, which shall be shared equally by VLI, on the
one hand, and the Kaneb Entities, on the other hand.
6.6 Directors’
and Officers’ Indemnification and Insurance.
(a) The
indemnification provisions of the KSL LLC Agreement as in effect as of the date
hereof shall not be amended, repealed or otherwise modified for a period of at
least six years from the KSL Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the KSL Effective Time would
be entitled to indemnification by KSL under the KSL LLC Agreement. At the KSL Effective Time, VLI shall cause
the Surviving LLC to honor in accordance with their respective terms each of
the covenants contained in this Section 6.6 applicable thereto.
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(b) Without
limiting Section 6.6(a), but without duplication of any right or benefit
thereunder, after the KSL Effective Time, each of VLI and the Surviving LLC
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer and employee of KSL or any
of its Subsidiaries (each, together with such person’s heirs, executors or administrators,
an “Indemnified Party” and collectively, the “Indemnified Parties”),
in their capacity as such, against any costs or expenses (including reasonable attorneys’
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with (x) any action
or omission occurring or alleged to occur prior to the KSL Effective Time
(including, without limitation, acts or omissions in connection with such
persons serving as an officer, director, manager, partner, employee or other
fiduciary in any entity if such service was at the request of KSL) and (y) the
KSL Merger and the other transactions contemplated by this Agreement or arising
out of or pertaining to the transactions contemplated by this Agreement. In the
event of any such actual or threatened claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) KSL or
VLI and the Surviving LLC, as the case may be, shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to VLI and the Surviving LLC, promptly after
statements therefor are received and shall pay all other reasonable expenses in
advance of the final disposition of such action, subject to the receipt of any
undertaking (which need not be secured) by or on behalf of the Indemnified
Party to repay such amount if it shall be determined that such Person is not
entitled to be indemnified pursuant to the KSL LLC Agreement, (ii) VLI and the
Surviving LLC will use all reasonable efforts to assist in and cooperate in the
defense of any such matter, and (iii) to the extent any determination is
required to be made with respect to whether an Indemnified Party’s conduct
complies with the standards set forth under Delaware law and VLI’s or the
Surviving LLC’s respective partnership agreement, such determination shall be
made by independent legal counsel acceptable to VLI or the Surviving LLC, as
the case may be, and the Indemnified Party; provided, however, that neither VLI
nor the Surviving LLC shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld) and,
provided further, that if VLI or the Surviving LLC advances or pays any amount
to any Person under this paragraph (b) and if it shall thereafter be finally determined
by a court of competent jurisdiction that such Person was not entitled to be
indemnified hereunder for all or any portion of such amount, to the extent
required by law, such person shall repay such amount or such portion thereof,
as the case may be, to VLI or the Surviving LLC, as the case may be. The
Indemnified Parties as a group may not retain more than one law firm to represent
them with respect to each matter unless there is, under applicable standards of
professional conduct, a conflict requiring separate representation on any
significant issue between the positions of any two or more Indemnified Parties.
(c) In
the event the Surviving LLC or VLI or any of their successors or assigns (i)
consolidates with or merges into any other Person and shall not be the continuing
or surviving corporation or entity of such consolidation or merger, or (ii)
transfers all or substantially all of its properties and assets to any Person,
then and in each such case, proper provisions shall be made so that the successors
and assigns of the Surviving LLC or VLI shall assume the obligations of the
Surviving LLC or VLI, as the case may be, set forth in this Section 6.6.
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(d) For
a period of six years after the KSL Effective Time, VLI shall cause to be
maintained in effect the current policies of directors’ and officers’ liability
insurance maintained by KSL and its Subsidiaries with respect to matters
arising on or before the KSL Effective Time (provided that VLI may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions that are no less advantageous to the Indemnified Parties, and
which coverages and amounts shall be no less than the coverages and amounts
provided at that time for VLI’s directors and officers) with respect to matters
arising on or before the KSL Effective Time; provided, however, provided, however, that in no event shall
VLI (or any such successor) be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by KSL and its
Subsidiaries for such insurance; and, provided further that if the
annual premiums of such insurance coverage exceed such amount, VLI (or any such
successor) shall obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
(e) The
rights of each Indemnified Party hereunder shall be in addition to, and not in
limitation of, any other rights such Indemnified Party may have under the KSL
LLC Agreement, any indemnification agreement, Delaware law or otherwise, but
shall in no event entitle any Indemnified Party to duplicative payments or
reimbursement. The provisions of this
Section 6.6 shall survive the consummation of the KSL Merger and expressly are
intended to benefit each of the Indemnified Parties.
(f) VLI
shall pay all reasonable expenses, including reasonable attorneys
fees that may be incurred by an Indemnified Party in enforcing the indemnity
and other obligations provided in this Section 6.6 to the extent such
Indemnified Party is finally determined to be successful on the merits.
(g) Nothing
contained in this Section 6.6 shall provide, or shall be interpreted as
providing, any individual with rights or benefits that are duplicative of those
that may be provided under any similar provisions of the KPP Merger Agreement.
6.7 Employee
Benefits.
(a) Following
the KSL Effective Time until the first anniversary of the KSL Effective Time, Parent
GP shall provide, or shall cause to be provided, to individuals who are
employees of KSL and its Subsidiaries immediately before the KSL Effective Time
and who continue to be employed by any of the VLI Entities after the KSL
Effective Time (the “Kaneb Employees”) employee benefits (other than any
equity-based benefits) that are, in the aggregate, not less favorable than
those generally provided to Kaneb Employees as of the date of this Agreement,
as disclosed by KSL to VLI immediately prior to the date of this
Agreement. Notwithstanding anything
contained herein to the contrary, Kaneb Employees who are covered under a
collective bargaining agreement shall be provided the benefits that are
required by such collective bargaining agreement from time to time.
(b) (i)
For purposes of eligibility and vesting under the employee benefit plans of the
VLI Entities and their respective Subsidiaries providing benefits to any Kaneb
Employee after the KSL Effective Time (the “New Plans”) and (ii) solely
for purposes of levels of vacation and severance benefits under the severance
and vacation benefit plans providing benefits to any
42
Kaneb Employee after the KSL Effective Time,
each Kaneb Employee shall be credited with his or her years of service with KSL
and its Subsidiaries and predecessor employers before the KSL Effective Time,
to the same extent as such Kaneb Employee was entitled, before the KSL Effective
Time, to credit for such service under any similar Kaneb Benefit Plans, except
to the extent such credit would result in a duplication of benefits. In addition, and without limiting the generality
of the foregoing: (i) each Kaneb Employee shall be immediately eligible to
participate, without any waiting time, in any and all New Plans to the extent
coverage under such New Plan replaces coverage under a Kaneb Benefit Plan in
which such Kaneb Employee participated immediately prior to the KSL Effective
Time (such plans, collectively, the “Old Plans”); and (ii) for purposes
of each New Plan providing medical, dental, pharmaceutical and/or vision
benefits to any Kaneb Employee, Parent GP or the other applicable VLI Entity
shall cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and his or her
covered dependents, and Parent GP or the other applicable VLI Entity shall
cause any eligible expenses incurred by such employee and his or her covered
dependents - during the portion of the plan year of the Old Plan ending on the
date such employee’s participation in the corresponding New Plan begins – to be
taken into account under such New Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to such
employee and his or her covered dependents for the applicable plan year as if
such amounts had been paid in accordance with such New Plan.
(c) Parent
GP or the other applicable VLI Entity will honor, in accordance with their
terms, all vested and accrued benefit obligations to, and contractual rights
of, current and former employees of KSL and its Subsidiaries which are
disclosed in Section 4.1(m)(i) of the Kaneb Disclosure Schedules. Nothing in
this Agreement shall be interpreted as preventing Parent GP or the other
applicable VLI Entity from amending, modifying or terminating any Kaneb Benefit
Plan or other contract, arrangement, commitment or understanding, in accordance
with their terms and applicable law. This Agreement is not intended, and it
shall not be construed, to create third party beneficiary rights for any
current or former employees of KSL or its Subsidiaries (including any
beneficiaries or dependents thereof) under or with respect to any plan, program,
or arrangement described or contemplated by this Agreement.
(d) VLI
and the Kaneb Entities will take all actions necessary to satisfy the
obligations set forth on Section 6.7(d) of the Kaneb Disclosure Schedule in
accordance with the procedure set forth therein. Nothing contained in this Section
6.7 shall provide, or shall be interpreted as providing, any individual with
rights or benefits that are duplicative of those that may be provided under any
similar provisions of the KPP Merger Agreement.
6.8 Public
Announcements. Neither the VLI Entities
nor KSL shall, and neither the VLI Entities nor KSL shall permit any of their
respective Subsidiaries to, issue or cause the publication of any press release
or other public announcement with respect to, or otherwise make any public
statement concerning, the transactions contemplated by this Agreement without
the prior consent (which consent shall not be unreasonably withheld) of VLI, in
the case of a proposed announcement or statement by KSL, or KSL in the case of
a proposed announcement or statement by any of the VLI Entities; provided,
however, that either party may, without the prior consent of the other party
(but after prior consultation with the other party to the extent practicable
under the circumstances) issue or cause the publication of any press release or
other public announcement to the extent required by law or by the rules and
regulations of the NYSE.
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6.9 KSL
Rights Agreement. The Board of
Directors of KSL shall take all action to the extent necessary (including
amending the KSL Rights Agreement) in order to render the KSL Rights
inapplicable to the KSL Merger and the KPP Merger and the other transactions
contemplated by this Agreement. Except
in connection with the foregoing sentence, the Board of Directors of KSL shall
not, without the prior written consent of VLI, (i) amend or waive any provision
of the KSL Rights Agreement or (ii) take any action with respect to, or make
any determination under, the KSL Rights Agreement, including a redemption or exchange
of the KSL Rights, in each case in order to, or that would reasonably be
expected to, facilitate any Acquisition Proposal with respect to KSL.
6.10 Section
16 Matters. Prior to the KSL
Effective Time, to the extent permitted by law KSL shall take all such steps as
may be required to cause any dispositions of KSL Common Shares (including
derivative securities with respect to Kaneb Entities equity securities or
partnership interests) or acquisitions of VLI Common Units (including derivative
securities with respect to VLI Entities equity securities) resulting from the
transactions contemplated by Article II or Article III of this Agreement by
each individual who is subject to the reporting requirements of Section 16(a)
of the Exchange Act with respect to KSL or will become subject to such
reporting requirements with respect to VLI, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.11 Accountants’
Letter. KSL shall use their
reasonable best efforts to cause to be delivered to VLI a letter from their independent
public accountants addressed to VLI, dated a date within two Business Days
before the date on which the Form S-4 shall become effective, in form and
substance reasonably satisfactory to VLI and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4. VLI shall use its reasonable best efforts to
cause to be delivered to the Kaneb Entities a letter from its independent
public accountants addressed to the Kaneb Entities, dated a date within two
Business Days before the date on which the Form S-4 shall become effective in
form and substance reasonably satisfactory to the Kaneb Entities and customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Form S-4.
6.12 Tax
Matters. KSL and the VLI Entities
agree and consent to treat the KSL Merger as a transaction governed by Rev.
Rul. 99-6, 1999-1 C.B. 432 (Situation 2) provided further, that, to the
extent applicable, each holder of a KSL Common Share shall be deemed to have
consented for federal income tax purposes (and to the extent applicable state
and local income tax purposes) to report the KSL Merger as a sale of the holder’s
KSL Common Shares to VLI consistent with Treasury Regulation Section
1.708-(c)(4). Further, if pursuant to a
determination (as that term is defined in section 1313 of the Code), the KSL
Merger is classified as an “asset-over” transaction under Treasury Regulation
Section 1.708-1(c)(i), KSL hereby consents to report
such transfer for federal income tax purposes of its general partner interests
in KPP to VLI and KSL Owned Units cancelled hereunder as a sale of such interests
to VLI consistent with Treasury Regulation Section 1.708-(c)(4).
6.13 Other
Agreements. KPP or KSL shall pay the
amount to the extent due and payable as set forth on and pursuant to Section
6.13 of the Kaneb Disclosure Schedule.
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CONDITIONS PRECEDENT
7.1 Conditions
to Each Party’s Obligation to Effect the KSL Merger. The respective obligations of KSL and VLI to effect the KSL Merger are subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Shareholder
and Unitholder Approval.
(i) KSL shall have obtained the KSL Shareholders Approval and
(ii) VLI shall have obtained the VLI Unitholders Approval.
(b) No
Injunctions or Restraints; Illegality.
No law shall have been adopted or promulgated, and no temporary restraining
order, preliminary or permanent injunction or other order issued by a court or
other Governmental Entity of competent jurisdiction shall be in effect, having
the effect of making the KSL Merger illegal or otherwise prohibiting
consummation of the KSL Merger.
(c) HSR
Act; Other Approvals. (i) The
waiting period (and any extension thereof) applicable to the KSL Merger under
the HSR Act shall have been terminated or shall have expired, without the
imposition of any condition or requirement that would be expected to have a
Material Adverse Effect on the VLI Entities taken as a whole, the Kaneb Entities
taken as a whole, or the combined VLI Entities and Kaneb Entities after consummation
of the KSL Merger, and (ii) all Other Approvals shall have been obtained,
except those Other Approvals the failure of which to obtain would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on VLI or the KSL Entities.
7.2 Additional
Conditions to Obligations of VLI.
The obligations of VLI to effect the KSL Merger
are subject to the satisfaction, or waiver by VLI, on or prior to the Closing
Date, of the following conditions:
(a) Representations
and Warranties. Each of the representations and warranties of KSL set forth
in this Agreement that is qualified as to materiality or Material Adverse
Effect shall be true and correct, and each of the representations and warranties
of KSL set forth in this Agreement that is not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (except
to the extent that such representations and warranties speak as of another
date, in which case such representations and warranties shall be so true and
correct as of such other date); provided, however, that no such
representations or warranties shall be deemed to have failed to be true and
correct for purposes of this Section 7.2(a) unless the failure of such
representations and warranties to be true and correct, disregarding for this
purpose all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect, would, individually or in the
aggregate, reasonably be expected to result in (A) an adverse effect on the KSL
Entities involving $20,000,000 or more (individually or in the aggregate) or
(B) a Material Adverse Effect on the KSL Entities. In addition to the requirements of the
preceding sentence, the representations and warranties set forth in Sections
4.1(a) and (b) that are not qualified therein as to Material Adverse Effect or
materiality shall be true and correct in all material respects and those that are
so qualified shall be true and correct.
VLI shall have received a certificate
45
of an executive
officer of KSL to the effect of the preceding provisions of this Section
7.2(a).
(b) Performance
of Obligations of KSL. KSL shall
have performed or complied in all material respects with all material agreements
and covenants required to be performed by it under this Agreement at or prior
to the Closing Date, except for non-willful failures to comply that would not,
individually or in the aggregate, have a Material Adverse Effect on the
combined VLI Entities and the KSL Entities after the consummation of the KSL
Merger and VLI shall have received a certificate of an executive officer of KSL
to such effect.
(c) Tax
Opinion. VLI shall have received an
opinion of each of Andrews Kurth LLP and Wachtell, Lipton, Rosen & Katz
dated as of the Closing Date to the effect that (i) no VLI Entity will
recognize any income or gain as a result of the KSL Merger or the KPP Merger
(other than any gain resulting from any decrease in partnership liabilities
pursuant to section 752 of the Code), (ii) no gain or loss will be recognized
by holders of VLI Common Units as a result of the KSL Merger or the KPP Merger
(other than any gain resulting from any decrease in partnership liabilities
pursuant to section 752 of the Code), and (iii) 90% of the combined gross
income of each of VLI, KSL and KPP for the most recent four complete calendar
quarters ending before the Closing Date for which the necessary financial
information is available are from sources treated as “qualifying income” within
the meaning of section 7704(d) of the Code.
In rendering such opinion, such counsel shall be entitled to receive and
rely upon representations of officers of the VLI Entities and the Kaneb
Entities and any of their respective Affiliates as to such matters as such
counsel may reasonably request.
(d) Consummation
of the KPP Merger. The KPP Merger
shall be capable of being consummated immediately succeeding the consummation
of the KSL Merger.
7.3 Additional
Conditions to Obligations of KSL.
The obligations of KSL to effect the KSL Merger
are subject to the satisfaction, or waiver by KSL, on or prior to the Closing
Date, of the following additional conditions:
(a) Representations
and Warranties. Each of the
representations and warranties of VLI set forth in this Agreement that is
qualified as to materiality or Material Adverse Effect shall be true and
correct, and each of the representations and warranties of VLI set forth in
this Agreement that is not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except to the extent
that such representations and warranties speak as of another date, in which
case such representations and warranties shall be so true and correct as of
such other date); provided, however, that no such representations
or warranties shall be deemed to have failed to be true and correct for
purposes of this Section 7.3(a) unless the failure of such representations and
warranties to be true and correct, disregarding for this purpose all qualifications
and exceptions contained therein relating to materiality or Material Adverse
Effect, would, individually or in the aggregate, have a Material Adverse Effect
on VLI. In addition to the requirements
of the preceding sentence, that the representations and warranties set forth in
Sections 4.2(a) and (b) that are not qualified therein as to Material Adverse
Effect or materiality shall be true and correct in all material respects and
those that are so qualified shall be true and correct.
46
KSL shall have received a certificate of an
executive officer of VLI to the effect of the preceding provisions of this Section
7.3(a).
(b) Performance
of Obligations of VLI. VLI shall
have performed or complied in all material respects with all material agreements
and covenants required to be performed by it under this Agreement at or prior
to the Closing Date, except for non-willful failures to comply that would not,
individually or in the aggregate, have a Material Adverse Effect on the
combined VLI Entities and the KSL Entities after the consummation of the KSL
Merger and KSL shall have received a certificate of an executive officer of VLI
to such effect.
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time
prior to the KSL Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as specifically
provided below, whether before or after the KSL Shareholders Meeting or the VLI
Unitholders Meeting:
(a) By
mutual written consent of VLI and KSL;
(b) By
either VLI or KSL, if the KSL Effective Time shall not have occurred on or
before the date that is ten (10) months
after the date hereof (the “Termination Date”); provided, however,
that the right to terminate this Agreement under this Section 8.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement (including such party’s obligations set forth in Section 6.3) has
been the primary cause of, or resulted in, the failure of the KSL Effective
Time to occur on or before the Termination Date;
(c) By
either VLI or KSL if any Governmental Entity (i) shall have issued an order,
decree or ruling or taken any other action (which the parties shall have used
their reasonable best efforts to resist, resolve or lift, as applicable, in
accordance with Section 6.3) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable or
(ii) shall have failed to issue an order, decree or ruling or to take any other
action which is necessary to fulfill the conditions set forth in Sections 7.1(c),
and such denial of a request to issue such order, decree, ruling or the failure
to take such other action shall have become final and nonappealable (which
order, decree, ruling or other action the parties shall have used their
reasonable best efforts to obtain, in accordance with Section 6.3); provided,
however, that the right to terminate this Agreement under this Section
8.1(c) shall not be available to any party whose failure to comply with Section
6.3 has been the primary cause of such action or inaction;
(d) By
either VLI or KSL, if either the VLI Unitholders Approval or the KSL
Shareholders Approval has not been obtained by reason of the failure to obtain
the required vote at the VLI Unitholders Meeting or the KSL Shareholders
Meeting, as applicable;
(e) By
VLI, if KSL shall have breached or failed to perform any of its representations,
warranties, covenants or other agreements contained in this Agreement, such
that the
47
conditions set
forth in Section 7.2(a) or (b) are not capable of being satisfied on or before
the Termination Date;
(f) By
KSL, if VLI shall have breached or failed to perform any of its representations,
warranties, covenants or other agreements contained in this Agreement, such
that the conditions set forth in Section 7.3(a) or (b) are not capable of being
satisfied on or before the Termination Date;
(g) By
KSL, if VLI shall have either (i) failed to make the VLI Recommendation or
effected a Change in the VLI Recommendation (or resolved to take any such action),
whether or not permitted by the terms hereof, or (ii) materially breached its
obligations under this Agreement by reason of a failure to call the VLI
Unitholders Meeting in accordance with Section 6.1(c) or a failure to prepare
and mail to its shareholders the Joint Proxy Statement/Prospectus in accordance
with Section 6.1(a);
(h) By
VLI, if KSL shall have either (i) failed to make the Kaneb Recommendation or
effected a Change in the Kaneb Recommendation (or resolved to take any such
action), whether or not permitted by the terms hereof, or (ii) materially
breached its obligations under this Agreement by reason of a failure to call
the KSL Shareholders Meeting in accordance with Section 6.1(b) or a failure to
prepare and mail to the KSL Shareholders the Joint Proxy Statement/Prospectus
in accordance with Section 6.1(a);
(i) By
KSL, if the Board of Directors of KSL has provided written notice to VLI that
KSL intends to enter into a binding written agreement for a Superior Proposal
(with such termination becoming effective, if VLI does not make the offer
contemplated by clause (iii) below, on the business day immediately following
the five business day period contemplated thereby, or otherwise, upon KSL
entering into such binding written agreement); provided, however, that (i) KSL
shall have complied with Section 6.4 hereof in all material respects; (ii) KSL
shall have (A) notified VLI in writing of its receipt of such Superior
Proposal, (B) further notified VLI in such writing that KSL intends to enter
into a binding agreement with respect to such Superior Proposal subject to
clause (iii) below and (C) attached the most current written version of such
Superior Proposal (or a summary containing all material terms and conditions of
such Superior Proposal) to such notice; and (iii) VLI does not make, within
five business days after receipt of KSL’s written notice pursuant to clause
(ii) above, an offer that the Board of Directors of KSL shall have reasonably
concluded in good faith (following consultation with its financial advisor and
outside counsel) is at least as favorable to the KSL Shareholders as such
Superior Proposal; or
(j) By
VLI, if the KPP Merger Agreement has been terminated without consummation of
the transactions contemplated thereby.
8.2 Effect
of Termination.
(a) In
the event of termination of this Agreement by KSL or VLI as provided in Section
8.1, this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of any party to this Agreement or their respective
officers or directors except as otherwise expressly set forth herein and except
with respect to Section 4.1(s), Section 4.2(f), the second sentence of Section
6.2, Section 6.5, this Section 8.2 and Article IX, which
48
provisions shall
survive such termination; provided that, notwithstanding anything to the
contrary contained in this Agreement, neither VLI nor KSL shall be relieved or
released from any liabilities or damages arising out of its intentional or
willful and material breach of this Agreement.
(b) If
(A) (I) KSL or VLI terminates this Agreement pursuant to Section 8.1(d) as a
result of the failure to obtain the required vote at the KSL Shareholder
Meeting, or pursuant to Section 8.1(b) without the KSL Shareholder Meetings
having occurred, (II) VLI terminates this Agreement pursuant to Section 8.1(h),
(III) VLI terminates this Agreement pursuant to Section 8.1(e), or (IV) KSL
terminates this Agreement pursuant to Section 8.1(i), (B) at any time after the
date of this Agreement and before such termination an Acquisition Proposal with
respect to KSL shall have been publicly announced or otherwise communicated to
the senior management, Board of Directors of KSL, or to KSL Shareholders and
(C) within 18 months of such termination KSL or any of its Subsidiaries enters
into any definitive agreement with respect to, or the Board of Directors of KSL
or any of its Subsidiaries recommends that KSL Shareholders approve, adopt or accept,
any Acquisition Proposal and such Acquisition Proposal is consummated at any
time, KSL shall promptly, but in no event later than one Business Day, after
consummation of such Acquisition Proposal, pay VLI, subject to the last
sentence of Section 8.2(d), an aggregate amount equal to the KSL Termination
Fee by wire transfer of immediately available funds.
(c) If
(A) (I) KSL or VLI terminates this Agreement pursuant to Section 8.1(d) as a
result of the failure to obtain the required vote at the VLI Unitholders
Meeting, or pursuant to Section 8.1(b) without the VLI Unitholders Meetings
having occurred, (II) KSL terminates this Agreement pursuant to Section 8.1(f),
or (III) KSL terminates this Agreement pursuant to Section 8.1(g), (B) at any
time after the date of this Agreement and before such termination there shall
have been publicly announced or otherwise communicated to Parent GP, VLI GP,
the senior management or unitholders of VLI a proposal for the acquisition by a
third party of 10% or more of the consolidated assets (including stock of its
Subsidiaries) of VLI and its Subsidiaries, taken as a whole, or of 10% or more
of its total voting power, whether by merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution,
tender offer or exchange offer or similar transaction or series of related
transactions and (C) within 18 months of the such termination VLI or any of its
Subsidiaries consummates or enters into any definitive agreement with respect
to, or VLI GP or any of its Subsidiaries recommends that its respective
unitholders or stockholders approve, adopt or accept, a transaction or series
of related transactions contemplated by clause (B), then in the case of a
termination, VLI shall promptly, but in no event later than one Business Day,
after consummation of the transactions contemplated by clause (B), pay KSL,
subject to the last sentence of Section 8.2(d), an aggregate amount equal to
the VLI Termination Fee by wire transfer of immediately available funds.
(d) The
parties hereto acknowledge that the agreements contained in this Section 8.2
are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, neither party would enter into this Agreement;
accordingly, if either party fails promptly to pay any amount due pursuant to
this Section 8.2, and, in order to obtain such payment, the other party commences
a suit which results in a judgment against such party for the fee set forth in
this Section 8.2, such party shall pay to the other party its costs and
expenses (including
49
attorneys’ fees and expenses) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank, N.A. in effect on the date such payment was required to be
made, notwithstanding the provisions of Section 6.5. The parties hereto agree that any remedy or
amount payable pursuant to this Section 8.2 shall not preclude any other remedy
or amount payable hereunder, and shall not be an exclusive remedy, for any
willful and material breach of any representation, warranty, covenant or
agreement contained in this Agreement. The
parties agree that any KSL Termination Fee payable hereunder, together with any
Kaneb Termination Fee previously paid under the KPP Merger Agreement, shall not
exceed $25 million, and that any VLI Termination Fee payable hereunder,
together with any VLI Termination Fee previously paid under the KPP Merger
Agreement, shall not exceed $25 million.
8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors
or General Partner, as applicable, at any time before or after the KSL
Shareholders Approval or the VLI Unitholders Approval, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
shareholders or unitholders without such further approval. This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension;
Waiver. At any time prior to the KSL
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors or General Partner, as applicable, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
GENERAL PROVISIONS
9.1 Non-Survival
of Representations, Warranties and Agreements. None of the representations, warranties, covenants
and other agreements in this Agreement or in any instrument delivered pursuant
to this Agreement, including any rights arising out of any breach of such
representations, warranties, covenants, agreements and other provisions, shall
survive the Effective Times, except for those covenants, agreements and other
provisions contained herein that by their terms apply or are to be performed in
whole or in part after the Effective Times and this Article IX.
9.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly given (a) on the date of
delivery if delivered personally, or by telecopy or facsimile, upon verbal
confirmation of receipt, (b) on the first Business Day following the date of
dispatch if delivered by a recognized next-day courier service, or (c) on the
fifth Business Day following the date of mailing if delivered by registered or
certified mail, return receipt
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requested,
postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to
such other instructions as may be designated in writing by the party to receive
such notice:
(i)
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if to any of the VLI Entities to:
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Valero L.P.
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One Valero Way
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San Antonio, Texas 78249
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Attention:
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Bradley Barron, Esq.
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with a copy
to:
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Andrews Kurth LLP
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600 Travis, Suite 4200
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Houston, Texas 77002
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Attention:
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Gislar Donnenberg, Esq.
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and:
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Wachtell, Lipton, Rosen &
Katz
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51 West 52nd Street
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New York, New York 10019
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Attention:
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Edward D. Herlihy, Esq.
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Lawrence S. Makow, Esq.
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(ii)
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if to KSL to:
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2435 North Central
Expressway, Suite 700
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Richardson, Texas 75080
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Attention: John Barnes
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with a copy
to:
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Fulbright & Jaworski
L.L.P.
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1301 McKinney, Suite 5100
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Houston, Texas 77010
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Attention:
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John Watson, Esq.
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9.3 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an
Article or Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the
51
meaning or
interpretation of this Agreement.
Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” No provision of this Agreement shall be construed to require VLI
or KSL or any of their respective Subsidiaries or Affiliates to take or omit to
take any action if doing so would violate any applicable obligation (arising in
law or equity), rule or regulation.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
9.5 Entire
Agreement; No Third Party Beneficiaries.
(a) This
Agreement, the Confidentiality Agreement, the Support Agreement and the
exhibits and schedules hereto and the other agreements and instruments of the
parties delivered in connection herewith constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(b) This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than Section 6.7 (which
is intended to be for the benefit of the Persons covered thereby).
9.6 Governing
Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware
(without giving effect to choice of law principles thereof).
9.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so 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 as
possible in an acceptable manner in order that the transactions contemplated hereby
are consummated as originally contemplated to the greatest extent possible.
9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
9.9 Submission
to Jurisdiction; Waivers. Each of
the VLI Entities and KSL irrevocably agrees that any legal action or proceeding
with respect to this Agreement or for recognition
52
and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Chancery or other Courts of the State of
Delaware, and each of the VLI Entities and KSL hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of
the aforesaid courts. Each of the VLI
Entities and KSL hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable law, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
9.10 Waiver
of Jury Trial. EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND
(D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.
9.11 Enforcement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms. It is accordingly agreed that the parties
hereto shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
[The remainder of this page is intentionally
left blank.]
53
IN WITNESS
WHEREOF, VALERO L.P., RIVERWALK LOGISTICS, L.P., VALERO GP, LLC, VLI SUB A LLC,
and KANEB SERVICES LLC, have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the date first written
above.
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VALERO L.P.
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By:
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Name:
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Title:
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RIVERWALK
LOGISTICS, L.P.
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By:
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Name:
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Title:
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VALERO GP,
LLC
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By:
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Name:
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Title:
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VLI SUB A
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By:
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Name:
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Title:
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KANEB
SERVICES LLC
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By:
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Name:
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Title:
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