As filed with the Securities and Exchange Commission on December 12, 2017
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Delek US Holdings, Inc.
(Exact name of Registrant as specified in its charter)
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As filed with the Securities and Exchange Commission on February 28, 2017 |
Registration No. 333- |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DELEK HOLDCO, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | 001-694426 | | 35-2581557 |
(State or other jurisdiction of incorporation or organization) | | 5500
(Commission
FilePrimary Standard Industrial Classification Code Number) | | 35-2581557
(I.R.S. Employer Identification Number) |
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Melissa M. Buhrig
Executive Vice President, General Counsel and Secretary
Delek US Holding, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
7102 Commerce Way
Brentwood, Tennessee 37207
(615) 771-6701
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
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Ezra Uzi Yemin, Chief Executive Officer
Delek Holdco, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)Andrew J. Ericksen
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Copies to: |
Gillian A. Hobson, Esq.
Vinson & Elkins LLP
1001 Fannin Street
Suite 2500
Houston, Texas 77002
(713) 758-3747 | | Amber Ervin, Esq.
General Counsel
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701 | | Daniel L. Mark, Esq.
Joshua Davidson
Baker Botts LLPL.L.P. 910 Louisiana Street Houston, Texas 77002 (713) 229-1723229-1234 | Evan D. Stone Alan Perkins Gardere Wynne Sewell LLP 2021 McKinney Avenue, Suite 1600 Dallas, Texas 75201 (214) 999-3000
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Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and all other conditions to the proposed merger contemplated by the Agreement and Plan of Merger, dated November 8, 2017, described in the enclosed consent statement/prospectus, have been satisfied or waived.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the Mergers described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a largeLarge accelerated filer an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):x
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Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| Non-accelerated filer | ☐( ☐(Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
If applicable, place an ☐in the box designate the appropriate rule provision relied upon in conducting this transaction: |
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)☐ |
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)Emerging growth company ☐ |
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
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| CALCULATION OF REGISTRATION FEE |
| Title of Each Class of Securities to be Registered | Amount to be Registered(1) | Proposed Maximum Offering Price per Share | Proposed Maximum Aggregate Offering Price(2) | Amount of Registration Fee(3) |
| Common Stock, par value $0.01 per share | 86,210,601 shares | N/A | $1,993,189,101 | $231,010.62 |
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| (1) | The number of shares of common stock, $0.01 par value, of Delek Holdco, Inc. (“New Delek common stock”) being registered represents the estimated maximum number of shares of New Delek common stock to be issuable in connection with the Mergers described herein. The estimated maximum number of shares of New Delek common stock to be issued in connection with the Mergers is based upon the sum of (A) 66,755,729, the maximum number of shares of common stock, par value $0.01 per share (“Delek common stock”), of Delek US Holdings, Inc. (“Delek”), estimated to be outstanding immediately prior to the Delek Merger described herein (calculated as the sum of (1) 61,971,183, the number of shares of Delek common stock outstanding as of February 24, 2017, plus (2) 3,618,016, the number of shares of Delek common stock issuable in respect of options or other equity-based awards under Delek’s equity plans outstanding as of February 24, 2017, plus (3) 1,166,530, the number of shares of Delek common stock issuable in respect of additional options or other equity-based awards under Delek’s equity plans that Delek expects to issue from February 25, 2017 through immediately prior to the Delek Merger); and (B) the product obtained by multiplying (x) 38,600,937, the maximum number of shares of common stock, par value $0.01 per share (“Alon common stock”), of Alon USA Energy, Inc. (“Alon”), estimated to be outstanding immediately prior to the Alon Merger described herein that will have the right to receive the merger consideration described herein (calculated as the sum of (1) 71,761,117, the number of shares of Alon common stock outstanding as of February 24, 2017, plus (2) 116,347, the number of shares of Alon common stock expected to be issued from February 25, 2017 through immediately prior to the Alon Merger (other than upon the exercise or settlement of options or other equity-based awards under Alon’s equity plans), plus (3) 404,036, the number of shares of Alon common stock issuable in respect of options or other equity-based awards under Alon’s equity plans outstanding as of February 24, 2017 or issuable upon conversion of other convertible securities of Alon outstanding as of February 24, 2017, plus (4) 10,729, the number of shares of Alon common stock issuable in respect of additional options or other equity-based awards under Alon’s equity plans that Alon expects to issue from February 25, 2017 through immediately prior to the Alon Merger, less (5) 33,691,292, the number of shares of Alon common stock owned by Delek and which shares will not be exchanged for the merger consideration described herein), by (y) 0.504, the exchange ratio in the Alon Merger. |
| (2) | Pursuant to Rules 457(c), 457(f)(1) and 457(f)(3) under the Securities Act of 1933, as amended (the “Securities Act”), and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is equal to the sum of (i) the product obtained by multiplying (x) $23.12 (the average of the high and low sale prices of Delek common stock on February 24, 2017) by (y) 66,755,729 shares of Delek common stock (the maximum number of shares of Delek common stock estimated to be outstanding immediately prior to the Delek Merger as described in Note (1), clause (A), which shares will each be exchanged for one share of New Delek common stock in connection with the Delek Merger, as described above), plus (ii) the product obtained by multiplying (x) $23.12 (the average of the high and low sale prices of Delek common stock on February 24, 2017) by (y) 38,600,937 shares of Alon common stock (the maximum number of shares of Alon common stock estimated to be outstanding immediately prior to the Alon Merger that will have the right to receive the merger consideration described herein as described in note (1), clause (B)) by (z) the exchange ratio of 0.504 of one share of New Delek common stock for each share of Alon common stock in connection with the Alon Merger, as described above). |
| (3) | Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $115.90 per $1,000,000 of the proposed maximum aggregate offering price. |
| The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. |
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐
CALCULATION OF REGISTRATION FEE |
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| Title of each class of securities to be registered | Amount to be registered (1) | Proposed maximum offering price per share | Proposed maximum aggregate offering price (2) | Amount of
registration fee (3) |
| Common Stock, par value $0.01 per share | 5,649,471 |
| N/A | $ | 181,759,855.92 |
| $ | 22,629.10 |
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| (1) | The number of shares of common stock, par value $0.01 per share, of Delek US Holdings, Inc. being registered is based upon an estimate of the maximum number of common units of Alon USA Partners, LP that will be exchanged for such registered securities of Delek US Holdings, Inc. in connection with the merger of Alon USA Partners, LP with a wholly-owned subsidiary of Delek US Holdings, Inc. as described herein, multiplied by the exchange ratio of 0.4900 of a share of common stock of Delek US Holdings, Inc. for each such common unit of Alon USA Partners, LP. |
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| (2) | The proposed maximum aggregate offering price was calculated based upon the market value of the common units representing limited partner interests in Alon USA Partners, LP, the securities to be converted into the right to receive the merger consideration in the merger, in accordance with Rules 457(c) and 457(f) under the Securities Act as follows: the product of (a) $15.765, the average of the high and low prices per unit of the Alon USA Partners, LP common units as reported on the New York Stock Exchange on December 6, 2017, and (b) 11,529,328 the estimated maximum number of Alon USA Partners, LP common units that may be exchanged for the merger consideration in the merger. |
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| (3) | Calculated by multiplying the proposed maximum aggregate offering price by 0.0001245. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission (the “SEC”), acting pursuant to said Section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
The information in this consent statement/prospectus may be changed. These securities may not be sold until the registration statement relating to the securities to be issued in the Mergers described herein has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomesCommission is effective. This joint proxyconsent statement/prospectus shallis not constitute an offer to sell or the solicitation ofthese securities and it is not soliciting an offer to buy nor shall there be any sale of these securities in any jurisdiction in which suchstate where the offer solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.permitted.
PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS
DATED FEBRUARY 27, 2017, SUBJECT TO COMPLETION,
[•], DATED DECEMBER 12, 2017
MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT
To the stockholders of Delek US Holdings, Inc. andDear Unitholders:
On November 8, 2017, Alon USA Energy, Inc.:
On January 2, 2017,Partners, LP (“ALDW”) and Delek US Holdings, Inc. (“Delek”), Alon USA Energy, Inc. (“Alon”), Delek Holdco, Inc., a wholly owned subsidiary of Delek (“HoldCo”), Dione Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Delek Merger Sub”) and Astro Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Alon Merger Sub”) entered into an Agreementagreement and Planplan of Merger, referred tomerger (as it may be amended from time to time) astime, the “merger agreement”“Merger Agreement”), providing for a strategic business combination of Delek and Alon.
We are excitedpursuant to reach this agreement and believe this strategic combination will result in a larger, more diverse company that is well positioned to take advantage of opportunities in the market and better navigate the cyclical nature of our business. We expect to be able to achieve meaningful synergies across the organization and the combination will create a refining system that will be one of the largest buyers of crude from the Permian Basin among the independent refiners.
Under the terms and subject to the conditions set forth in the merger agreement, Delek Merger Subwhich ALDW will merge with Sugarland Mergeco, LLC, an indirect wholly-owned subsidiary of Delek (“Merger Sub” and, intotogether with Delek, the “Delek Parties”), with ALDW continuing as the surviving entity and becoming a wholly-owned subsidiary of Delek (the “Delek Merger”“Merger”), with Delek surviving as a wholly owned subsidiary.
If the Merger is completed, each of HoldCo, a new holding company formedthe common units representing limited partner interests in ALDW (“ALDW Common Units”) not held directly or indirectly by Delek, and Astro Mergeco, Inc.its subsidiaries or ALDW (the “ALDW Public Units”) will merge with andbe converted into Alonthe right to receive 0.4900 (the “Alon Merger”“Exchange Ratio”), with Alon surviving. We refer to the Delek Merger and the Alon Merger together as the “Mergers.” If the Mergers are completed:
Delek’s stockholders will receive one of a share of HoldCo common stock, par value $0.01 per share, referred to as “New Delek common stock”, for each issued and outstanding share of Delek common stock that they own immediately prior to(the “Delek Common Stock” and, such per unit consideration, the effective time of the Delek Merger; and
Alon’s stockholders (other than Delek or any subsidiary of Delek), will be entitled to receive 0.504 shares, referred to as the “exchange ratio,” of New Delek common stock for each issued and outstanding share of Alon common stock that they own immediately prior to the effective time of the Alon Merger, with cash paid in lieu of fractional shares.
The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Mergers.
After the closing of the Mergers, HoldCo will be the publicly traded parent company of Delek and Alon, and will be named “Delek US Holdings, Inc.”
The market value of the stock consideration will fluctuate with the price of Delek common stock.“Merger Consideration”). Based on the closing price of $24.07 per share of Delek common stockCommon Stock on December 30, 2016,November 8, 2017, the last trading day before the public announcement of the signing ofMerger, the merger agreement, theaggregate value of the consideration payableMerger Consideration was approximately $160 million. The Exchange Ratio is fixed and will not be adjusted on account of any change in price of either Delek Common Stock or ALDW Common Units prior to holders of Alon common stock upon completion of the Alon Merger was approximately $12.13 per share.Merger. Based on the closing priceestimated number of $23.19 per shareshares of Delek common stock on February 24, 2017,Common Stock and ALDW Public Units that will be outstanding immediately prior to the last practicable date before the date of filingclosing of the joint proxy statement/prospectus accompanying this notice,Merger, upon the valueclosing of the consideration payable toMerger, former ALDW common unitholders will own approximately 6.5%, and current Delek stockholders will own approximately 93.5%, of Delek, respectively.
The conflicts committee (the “ALDW GP Conflicts Committee”) of the board of directors (the “ALDW GP Board”) of Alon USA Partners GP, LLC, ALDW’s general partner (“ALDW GP” and, together with ALDW, the “ALDW Parties”), by unanimous vote, determined that the Merger Agreement and the transactions contemplated thereby are in the best interests of ALDW and the holders of Alon common stock upon completionALDW Public Units, approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommended the approval of the Alon Merger was approximately $11.69 per shareAgreement and the transactions contemplated thereby, including the Merger, to the ALDW GP Board. Taking into consideration such approval and recommendation, the ALDW GP Board determined that the Merger Agreement and the transactions contemplated thereby are in the best interests of Alon common stock. Alon stockholders should obtain current stock price quotations for Delek common stockALDW and Alon common stock. Delek common stock is traded,the holders of ALDW Public Units, approved the Merger Agreement and after completionthe transactions contemplated thereby, including the Merger, and directed that the Merger Agreement be submitted to a vote of holders of ALDW Common Units and authorized the Mergers, the New Delek common stock is expectedholders of ALDW Common Units to trade, on the New York Stock Exchange, also referredact by written consent pursuant to as the NYSE, under the symbol “DK,” and Alon common stock is traded on the NYSE under the symbol “ALJ.”ALDW’s agreement of limited partnership (the “ALDW Partnership Agreement”).
The Delek Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a)approval and adoption of the Internal Revenue CodeMerger Agreement and the Merger by ALDW requires the affirmative vote or consent of 1986,holders of at least a majority of the outstanding ALDW Common Units (the “Required ALDW Common Unitholder Written Consent”). Pursuant to the terms of a Support Agreement, dated as of November 8, 2017 (as it may be amended from time to time, the “Support Agreement”), by and among ALDW and Alon Assets, Inc., a wholly-owned subsidiary of Delek (“AAI”), AAI, which is referredas of December 1, 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the outstanding ALDW Common Units, has irrevocably agreed to deliver a written consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger (the “AAI Written Consent”), within two business days after the effectiveness of the registration statement of which this consent statement/prospectus forms a part. The delivery of the AAI Written Consent by AAI with respect to the ALDW Common Units it owns will be sufficient to adopt the Merger Agreement and thereby approve the Merger.
The ALDW GP Board has set [●], 2017 as the Internal Revenue Code, and the Delek Merger and the Alon Merger, taken together, are intended to qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. Assuming the Delek Merger qualifies as a “reorganization” and/or an “exchange” within the meaning of Section 351 of the Internal Revenue Code, Delek stockholders generally are not expected to recognize any gain or lossrecord date (the “Merger Vote Record Date”) for U.S. federal income tax purposes upon receipt of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger. Assuming the Alon Merger qualifies as an “exchange” within the meaning of Section 351 of the Internal Revenue Code, (i) U.S.determining holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuantALDW Common Units entitled to execute and deliver written consents with respect to this consent statement/prospectus. If you are a record holder of outstanding ALDW Common Units as of that date, you may complete, date and sign the Alon Merger will not recognize any lossenclosed written consent and will only recognize gainpromptly return it to ALDW. See the extentsection titled “Written Consents of cash received in lieu of a fractional share of New Delek common stock, and (ii) non-U.S. holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger will not recognize any loss in connection with the Alon Merger and will only recognize gain in limited circumstances. See “Material U.S. Federal Income Tax Consequences of the Mergers”ALDW Common Unitholders” beginning on page 200.10 of this consent statement/prospectus.
Each of Delek and Alon will hold a special meeting of its stockholders to consider and vote on matters necessary to complete the transactions contemplated by the merger agreement. Delek and Alon cannot complete the proposed Mergers unless, among other things, Delek stockholders approve the issuance of the shares of New Delek common stock in connection with the Alon Merger, and Alon stockholders adopt the merger agreement and approve the transactions contemplated thereby.
In addition, Delek has entered into voting agreements with Alon, and each of David Wiessman, D.B.W. Holdings (2005) Ltd. (an entity controlled by David Wiessman), Jeff Morris, and Karen Morris, each of which are Alon stockholders and collectively hold approximately 6.0%
of Alon’s outstanding common stock. Each of these Alon stockholders has agreed to vote in favor of the proposals to be voted on by the Alon stockholders at the Alon special meeting.
The obligations of Delek and Alon to complete the Mergers are subject to the satisfaction or waiver of the conditions set forth in the merger agreement, a copy of which is included as part of the accompanying joint proxy statement/prospectus. The joint proxyThis consent statement/prospectus provides you with detailed information about the special meetings, the proposals to be voted on at each company’s special meeting, the proposed MergersMerger and other related matters. It also contains or references additional information aboutALDW and Delek and Alon. You are encouragedencourage you to read the joint proxy statement/prospectus carefully and in its entirety, including the Annexes and the information incorporated into this joint proxy statement/prospectus by reference.entire document carefully. In particular, you should carefullyplease read the section entitled “Risk Factors” beginning on page 4719 of the joint proxythis consent statement/prospectus for a discussion of risks you should consider in evaluatingrelevant to the proposed Mergers and the issuance of shares of New Delek common stock in connection with the Mergers and how they will affect you.
Your vote is very important. To ensure your representation at your company’s special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend your company’s special meeting. Submitting a proxy now will not prevent you from being able to vote in person at your company’s special meeting.
Delek’s board of directors has unanimously determined that the merger agreement, the voting agreements, the Mergers and the other transactions contemplated by the merger agreement and the voting agreements are advisable, fair to and in the best interests of Delek and its stockholders; has unanimously approved the merger agreement, the voting agreements, the Mergers and the other transactions contemplated by the merger agreement and the voting agreements, including the issuance of shares of New Delek common stock in connection with the Alon Merger; and unanimously recommends that Delek stockholders vote “FOR” the issuance of New Delek common stock in connection with the Alon Merger and “FOR” each of the other proposals described in the accompanying joint proxy statement/prospectus.
The Special Committee of the Alon Board of Directors (the “Special Committee”) has unanimously determined that the merger agreement, the Alon Merger and the other transactions contemplated bycombined company.
David Wiessman
Chairman of the merger agreement are advisable, fair to and in the best interestsBoard of
Directors of Alon and its stockholders other than Delek, HoldCo, Delek Merger Sub and Alon Merger Sub (the “Disinterested Stockholders”), and has unanimously approved the merger agreement, the voting agreements and the transactions contemplated thereby. Upon the recommendation of the Special Committee, the Alon Board of Directors, with Messrs. Ezra Uzi Yemin, Assaf Ginzburg, Frederec Green, Mark D. Smith and Avigal Soreq, each an executive officer of Delek, recusing themselves, has determined and declared that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders; has approved the merger agreement, the voting agreements to which Alon is a party, the Alon Merger and the other transactions contemplated by the merger agreement and the voting agreements to which Alon is a party; directed that the merger agreement and the Alon Merger be submitted to Alon’s stockholders for approval; and unanimously recommends that Alon stockholders vote “FOR” the adoption of the merger agreement and the approval of the transactions contemplated thereby, includingUSA Partners GP, LLC
the Alon Merger and “FOR” each of the other proposals described in the accompanying joint proxy statement/prospectus.
Sincerely,
Ezra Uzi Yemin Alan Moret
Chairman, President and Chief Executive Officer Interim Chief Executive Officer
Delek US Holdings, Inc. Alon USA Energy, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGERS OR THE SECURITIESCOMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGERSMERGER OR PASSED UPON THE ADEQUACYDETERMINED IF THIS CONSENT STATEMENT/PROSPECTUS IS TRUTHFUL OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS.COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this joint proxyconsent statement/prospectus is [•[●], 2017 and it iswas first being mailed or otherwise delivered to the stockholders of Delek and Alonunitholders on or about [•[●], 2017.
DELEK US HOLDINGS, INC.
7102 Commerce Way
Brentwood, Tennessee 37207
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [•], 2017
Dear Stockholders of Delek US Holdings, Inc.:
We are pleased to invite you to attend the special meeting of stockholders of Delek US Holdings, Inc. (“Delek”), which will be held at [•] on [•], 2017 at [•], local time (the “Delek special meeting”). The Delek special meeting is being called as provided in an AgreementThis consent statement/prospectus incorporates by reference important business and Plan of Merger, referred to (as it may be amended from time to time) as the “merger agreement”, dated as of January 2, 2017, byfinancial information about ALDW and among Delek, Alon USA Energy, Inc. (“Alon”), Delek Holdco, Inc., a wholly owned subsidiary of Delek (“HoldCo”), Dione Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Delek Merger Sub”) and Astro Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Alon Merger Sub”), providing for a strategic business combination of Delek and Alon.
Undertheir respective subsidiaries from documents filed with the termsSecurities and subject to the conditions set forthExchange Commission (“SEC”) that have not been included in the merger agreement, Delek Merger Sub will mergeor delivered with and into Delek (the “Delek Merger”), with Delek surviving as a wholly owned subsidiary of HoldCo, a new holding company formed by Delek, and Astro Mergeco, Inc. will merge with and into Alon (the “Alon Merger”), with Alon surviving. We refer to the Delek Merger and the Alon Merger together as the “Mergers.” If the Mergers are completed:
Delek’s stockholders will receive one share of HoldCo common stock, par value $0.01 per share, referred to as “New Delek common stock”, for each issued and outstanding share of Delek common stock that they own immediately prior to the effective time of the Delek Merger; and
Alon’s stockholders (other than Delek or any subsidiary of Delek), will be entitled to receive 0.504 shares, referred to as the “exchange ratio,” of New Delek common stock for each issued and outstanding share of Alon common stock that they own immediately prior to the effective time of the Alon Merger, with cash paid in lieu of fractional shares. The exchange ratiothis consent statement/prospectus. This information is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Mergers.
After the closing of the Mergers, HoldCo will be the publicly traded parent company of Delek and Alon, and will be named “Delek US Holdings, Inc.”
Accordingly, the Delek special meeting is being called for the following purposes:
to consider and vote on a proposal to approve the issuance (the “New Delek Share Issuance”) of New Delek common stock to the stockholders of Alon, as consideration for the Alon Merger contemplated by the merger agreement, which is attached as Annex A to the joint proxy statement/prospectus accompanying this notice (the “New Delek Share Issuance Proposal”);
to consider and vote on a proposal to adjourn the Delek special meeting, if necessary or appropriate in the judgment of the Delek Board, to solicit additional proxies if there are not sufficient votes to approve the New Delek Share Issuance Proposal (the “Delek Adjournment Proposal”); and
to transact such other business as may properly be brought before the Delek special meeting, or any adjournment or postponement thereof, by oravailable without charge at the directionSEC’s website at www.sec.gov, as well as from other sources. See “Where You Can Find More Information.”
You may request copies of the Delek Board.
Delek does not plan to transact other business at the special meeting. Please refer to the attached joint proxythis consent statement/prospectus for further information with respect to the business to be transacted at the Delek special meeting.
The Delek Board has fixed the close of business on [•], 2017 as the record date for determination of Delek stockholders entitled to receive notice of, and to vote at, the Delek special meeting or any adjournments or postponements thereof. Only holders of record of shares of Delek common stock at the close of business on the record date are entitled to vote at the special meeting and any adjournment or postponement of the special meeting.
Delek’s board of directors has unanimously determined that the merger agreement, the Mergers and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Delek and its stockholders; has unanimously approved the merger agreement, the Mergers and the other transactions contemplated by the merger agreement, including the New Delek Share Issuance; and unanimously recommends that Delek stockholders vote “FOR” the New Delek Share Issuance Proposal and “FOR” the Delek Adjournment Proposal.
In accordance with the NYSE Listed Company Manual and under Delek's third amended and restated bylaws, approval of the New Delek Share Issuance Proposal requires the affirmative vote of the majority of the votes cast by holders of shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting. Under Delek’s third amended and restated bylaws, approval of the Delek Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting.
Your vote is important. Whether or not you expect to attend in person, we urge you to vote your shares as promptly as possible by:
(1)accessing the Internet website specified on your proxy card;
(2)calling the toll-free number specified on your proxy card; or
(3)marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided,
so that your shares may be represented and voted at the Delek special meeting. If your shares are held in the name of a broker, bank, trust company or other nominee, please follow the instructions on the voting instruction card furnished by the record holder.
Please note that if you hold shares in different accounts, it is important that you vote the shares represented by each account.
The enclosed joint proxy statement/prospectus provides a detailed description of the Mergers and the merger agreement. We urge you to read this joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference carefully and in their entirety. If you have any questionsherein or other information concerning the MergersDelek or this joint proxy statement/prospectus, would like additional copiesALDW, without charge, upon written or need help voting your shares of Delek common stock, please contact Delek’s proxy solicitor:
MORROW SODALI, LLC
470 West Avenue
Third Floor
Stamford, CT 06902
Stockholders Call Toll-Free: (800) 662-5200
International Callers: +1 (203) 658-9400
E-mail: DK@morrowsodali.com
THIS NOTICE, TOGETHER WITH THE JOINT PROXY STATEMENT/PROSPECTUS SETTING FORTH THIS NOTICE, IS BEING MAILED ON OR ABOUT [], 2017.
By Order of the Board of Directors,
Ezra Uzi Yemin
Chairman, President and Chief Executive Officer
ALON USA ENERGY, INC.
12700 Park Central Drive, Suite 1600
Dallas, Texas 75251
NOTICE OF THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [•], 2017
To the Stockholders of Alon USA Energy, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Alon USA Energy, Inc., or Alon, will be held on [•], at [•], local time, at [•], for the following purposes:
To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of January 2, 2017 as such agreement may be amended from time to time, which is referred to as the merger agreement, among Alon, Delek US Holdings, Inc., which is referred to as Delek, Delek Holdco, Inc., Dione Mergeco, Inc., and Astro Mergeco, Inc., which is referred to as the Alon merger proposal;
To consider and vote on a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Alon’s named executive officers that is based on or otherwise relatesoral request to the merger contemplated by the merger agreement, which is referred to as the non-binding compensation advisory proposal;
To consider and vote on a proposal to adjourn the Alon special meeting, if necessary or appropriate in the judgment of the Alon Board, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the Alon merger proposal, which is referred to as the Alon adjournment proposal; and
To transact such other business as may properly be brought before the Alon special meeting, or any adjournment or postponement thereof, by or at the direction of the Alon Board.
The Alon stockholder proposals are described in more detail in the accompanying joint proxy statement/prospectus, which you should read carefully in its entirety before you vote. A copy of the merger agreement is attached as Annex A to the accompanying joint proxy statement/prospectus.
Alon will transact no other business at the Alon special meeting. The record date for the Alon special meeting has been set as [●], 2017. Only Alon stockholders of record as of the close of business on such record date are entitled to notice of, and to vote at, the Alon special meeting or any adjournments and postponements thereof. A complete list of our stockholders of record entitled to vote at the special meeting will be available for inspection at Alon’sapplicable company’s principal executive offices
at least 10 days prior to the dateoffices. The respective addresses and telephone numbers of the special meeting and continuing through the special meeting for any purpose germane to the meeting. The list will also be available at the meeting for inspection by any stockholder present at the meeting.
The board of directors of Alon, which we refer to as the Board, formed a committee consisting solely of six directors of Alon thatsuch principal executive offices are independent of Delek and its affiliates, referred to herein as the Special Committee, to evaluate the merger and other alternatives available to Alon. The Special Committee unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair to, and in the best interest of, Alon and its stockholders (other than Delek or its affiliates), and unanimously recommended that the Board approve, adopt and authorize, and declare advisable, the merger agreement, a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus, and the transactions contemplated therein, including the merger, and that the Board recommend that Alon’s stockholders vote for the adoption of the merger agreement. Based in part on that recommendation, the Board, with Messrs. Ezra Uzi Yemin, Assaf Ginzburg, Frederec Green, Mark D. Smith and Avigal Soreq, each an executive officer of Delek, recusing themselves,(i) determined that the transactions contemplated by the merger agreement, including the merger, are advisable, fair to, and in the best interest of, Alon and its stockholders (other than Delek or its affiliates), (ii) approved, adopted and authorized the merger agreement and the transactions contemplated thereby, including the merger and (iii) directed that the merger agreement be submitted to Alon stockholders for approval. Each of the Special Committee and the Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors. Accordingly, our board of directors unanimously recommends that you vote “FOR” the Alon merger proposal, “FOR” the non-binding compensation advisory proposal and “FOR” the Alon adjournment proposal.
Approval of the Alon merger proposal requires the affirmative vote, in person or by proxy, of holders of (i) a majority of the outstanding shares of Alon common stock entitled to vote on the proposal and (ii) a majority of the issued and outstanding shares of Alon common stock beneficially owned by the holders of Alon common stock other than Delek, HoldCo, Delek Merger Sub, Alon Merger Sub and their respective affiliates. Concurrently with the execution of the merger agreement, Delek entered into a voting and support agreement to vote the approximately 47% of shares of Alon common stock it owns in favor of the Alon merger proposal. A copy of the voting agreement is attached as Annex C to the accompanying joint proxy statement/prospectus.
PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ALON SPECIAL MEETING. IF YOU LATER DESIRE TO REVOKE OR CHANGE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS. FOR FURTHER INFORMATION CONCERNING THE PROPOSALS BEING VOTED UPON, USE OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
Your vote is important. Alon stockholders are requested to complete, date, sign and return the enclosed proxy in the envelope provided, which requires no postage if mailed in the United States, or to submit their votes electronically via the Internet or by telephone. Simply follow
the instructions provided on the enclosed proxy card. Your abstention, failure to submit a proxy or vote in person at the Alon special meeting, or failure to provide your broker, nominee, fiduciary or other custodian, as applicable, with instructions on how to vote your shares, will have the same effect as a vote “AGAINST” the Alon merger proposal.
THIS NOTICE, TOGETHER WITH THE JOINT PROXY STATEMENT/PROSPECTUS SETTING FORTH THIS NOTICE, IS BEING MAILED ON OR ABOUT [●], 2017.
listed below.
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BY ORDER OF THE BOARD OF DIRECTORS,For Delek:
7102 Commerce Way
Brentwood, Tennessee 37027
James RanspotAttention: Investor Relations
Senior Vice President, General Counsel and Corporate Secretary(615) 771-6701
| For ALDW: Dallas, Texas7102 Commerce Way
Dated: [●], 2017Brentwood, Tennessee 37027
Attention: Investor Relations
(615) 771-6701 |
ADDITIONAL INFORMATION
Delek Holdco, Inc. has filed a registration statement on Form S-4To obtain timely delivery of whichthese documents prior to the joint proxy statement/prospectus is a part. This joint proxy statement/prospectus incorporates important business and financial information about Delek and Alon from documents that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference into the joint proxy statement/prospectus (other than certain exhibits or schedules to these documents) by requesting them in writing or by telephone from Delek or Alon at the following addresses and telephone numbers:
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For Delek Stockholders:
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Attention: Corporate Secretary
Telephone: (615) 771-6701
| | For Alon Stockholders:
Alon USA Energy, Inc.
12700 Park Central Drive, Suite 1600
Dallas, Texas 75251
Attention: Investor Relations
Telephone: (972) 367-3600
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In addition, if you have questions about the Mergers or the joint proxy statement/prospectus, would like additional copiesconclusion of the joint proxy statement/prospectus or need to obtain proxy cards or otherconsent process, holders of ALDW Common Units must request the information related to the proxy solicitation, please contact Morrow Sodali, LLC, the proxy solicitor for Delek, toll-free at (800) 662-5200 or international at +1 (203) 658-9400 or by e-mail at: DK@morrowsodali.com, or Morrow Sodali, LLC, the proxy solicitor for Alon, toll-free at (800) 662-5200 or international at +1 (203) 658-9400 or by e-mail at: ALJ@morrowsodali.com.
If you would like to request documents, please do so no later than five business days before the date of the Delek special meeting (which meeting is to be held on [•[●], 2017) or five business days before the date of the Alon special meeting (which meeting is to be held on [•], 2017), as applicable.
For a more detailed description of the information incorporated by reference in the accompanying joint proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 240 of this joint proxy statement/prospectus.
2017.
ABOUT THIS JOINT PROXYCONSENT STATEMENT/PROSPECTUS
This joint proxy statement/prospectus,document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”)SEC by HoldCoDelek (File No. 333-[•]), ), constitutes a prospectus of Delek under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of New Delek common stockCommon Stock to be issued to Alon stockholders and Delek stockholdersALDW unitholders pursuant to the merger agreement. This joint proxy statement/prospectus also constitutes a joint proxy statement for Delek and Alon under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of Delek stockholders and a notice of meeting with respect to the special meeting of Alon stockholders.Merger Agreement.
You should rely only on the information contained or incorporated by reference intoin this joint proxyconsent statement/prospectus. No oneNone of ALDW, Delek or any of their affiliates has been authorized anyone to provide you with information that is different from that contained in, or incorporated by reference into,in this joint proxyconsent statement/prospectus. This joint proxy statement/prospectus is dated [•], 2017, and you should assumeNeither Delek, ALDW nor any of their respective affiliates take any responsibility for, nor can they provide any assurance as to, the reliability of any other information that theothers may give you. The information contained in orthis consent statement/prospectus and the documents incorporated by reference into, this joint proxy statement/prospectus is accurate only as of such date. Neither our mailingtheir respective dates, regardless of the time of delivery of this joint proxyconsent statement/prospectus toprospectus. ALDW’s and Delek’s business, financial condition, results of operations and prospects may have changed since those dates.
CERTAIN DEFINITIONS
On January 2, 2017, Delek stockholders or Alon stockholders, nor the issuanceUS Energy, Inc. (formerly known as Delek US Holdings, Inc.), a Delaware corporation (“Old Delek”), entered into an Agreement and Plan of New Delek common stock in connectionMerger with the Mergers, will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Delek, HoldCo, Delek Merger Sub and Alon Merger Sub has been provided by Delek, and information contained in this joint proxy statement/prospectus regarding Alon has been provided by Alon.
Neither Delek stockholders nor Alon stockholders should construe the contents of this joint proxy statement/prospectus as legal, tax or financial advice. Delek stockholders and Alon stockholders should consult with their own legal, tax, financial or other professional advisors. All summaries of, and references to, the agreements governing the terms of the transactions described in this joint proxy statement/prospectus are qualified by the full copies of and complete text of such agreements in the forms attached hereto as Annexes, or which are available on the Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) of the SEC website at www.sec.gov.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGERS OR THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGERS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Unless otherwise indicated or as the context otherwise requires, any reference in this joint proxy statement/prospectus to:
“Alon” refers to Alon USA Energy, Inc., a Delaware corporation (“Alon Energy”), Delek (formerly known as Delek Holdco, Inc.), a Delaware corporation (also referred to as “New Delek” herein), Dione Mergeco, Inc., a Delaware corporation and its subsidiaries;
“Alon Board” refers to the boardwholly-owned subsidiary of directors of Alon;
“Alon common stock” refers to the common stock, par value $0.01 per share, of Alon;
“Alon Merger” refers to the merger of Alon Merger Sub with and into Alon, with Alon surviving, in accordance with the merger agreement;
“AlonDelek (“Delek Merger Sub” refers to), and Astro Mergeco, Inc., a Delaware corporation and wholly ownedwholly-owned subsidiary of HoldCo;Delek (“Astro Merger Sub”), as amended by the First Amendment to Agreement and Plan of Merger, dated as of February 27, 2017, and the Second Amendment to Agreement and Plan of Merger, dated as of April 21, 2017 (collectively, the “Delek-ALJ Merger Agreement”). Pursuant to the Delek-ALJ Merger Agreement, Certificates of Amendment and Certificates of Merger filed with the Secretary of State of the State of Delaware on June 30, 2017, (i) Old Delek was renamed “Delek US Energy, Inc.” and Delek was renamed “Delek US Holdings, Inc.”; (ii) Delek Merger Sub merged with and into Old Delek (the “Delek Merger”), with Old Delek surviving as a wholly-owned subsidiary of New Delek; and (iii) Astro Merger Sub merged with and into Alon Energy (the “Astro Merger” and, together with the Delek Merger, the “Delek-ALJ Merger”), with Alon Energy surviving as a direct and indirect wholly-owned subsidiary of Delek. The Delek-ALJ Merger was effective as of July 1, 2017 (the “Delek-ALJ Effective Time”). By reason of the Delek-ALJ Merger, at the Delek-ALJ Effective Time, New Delek became the parent public reporting company. On July 3, 2017, New Delek filed a Current Report on Form 8-K for the purpose of establishing Delek as the successor issuer to Old Delek and Alon Energy pursuant to Rule 12g-3(c) under the Exchange Act. In addition, as a result of the Delek-ALJ Merger, the shares of common stock of Old Delek and Alon Energy were delisted from the New York Stock Exchange in July 2017, and their respective reporting obligations under the Exchange Act were terminated.
Except as otherwise specifically noted, or the context otherwise requires, as used in this consent statement/prospectus:
“AAI” refers to Alon Partners”Assets, Inc., a wholly-owned subsidiary of Delek;
“ALDW” refers to Alon USA Partners, LP;
“combined company”ALDW Common Unitholder” refers collectively to HoldCo, Delek anda holder of ALDW Common Units;
“ALDW Common Units” means common units representing limited partner interests in ALDW;
“ALDW GP” refers to Alon followingUSA Partners GP, LLC, the completiongeneral partner of ALDW;
“ALDW GP Conflicts Committee” refers to the conflicts committee of the Mergers;board of directors of ALDW GP;
“ALDW Group Entities” refers to ALDW, ALDW GP, and those entities that are partially or wholly-owned, directly or indirectly by ALDW;
“ALDW Parties” refers to ALDW and ALDW GP;
“ALDW Public Unitholder” refers to a holder of ALDW Public Units;
“ALDW Public Units” means all ALDW Common Units that are not held by Delek, its subsidiaries or ALDW;
“Alon Energy” refers to Alon USA Energy, Inc.;
“Delek” refers to Delek US Holdings, Inc., a Delaware corporation, and its subsidiaries (and, with respect to periods after the completion of the Mergers, refers to HoldCo if the context so requires);
“Delek Board” refers to the boardBoard of directorsDirectors of Delek;
“Delek common stock”Common Stock” refers to the common stock par value $0.01 per share, of Delek;
“Delek Logistics”Parties” refers to Delek Logistics Partners, LP;and Merger Sub;
“Delek Stockholder” refers to a holder of Delek Common Stock;
“Delek US Group Entities” refers to Delek, Merger Sub, and those entities that are partially or wholly-owned, directly or indirectly, by Delek, excluding any ALDW Group Entity;
“Delek-ALJ Merger” refers to the merger, of Delek Merger Sub with and into Delek, with Delek surviving as a wholly owned subsidiary of HoldCo, a new holding company formed by Delek, in accordance with the merger agreement;
“Delek Merger Sub” refers to Dione Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo;
“exchange ratio” refers the number of shares, fixed at 0.504 shares, of New Delek common stock that Alon’s stockholders (other than Delek or any subsidiary of Delek), will be entitled to receive for each issued and outstanding share of Alon common stock that they own immediately prior to the effective time of the Alon Merger, with cash paid in lieu of fractional shares;
“HoldCo” refers to Delek Holdco, Inc., a Delaware corporation and, prior to the Mergers, a wholly owned subsidiary of Delek;
“merger agreement” refersJuly 1, 2017, related to the Agreement and Plan of Merger dated as of January 2, 2017, by and among Old Delek HoldCo, Delek Merger Sub, Alon Merger Sub(and various related entities) and Alon providing for a strategic business combinationEnergy;
“Merger Sub” refers to Sugarland Mergeco, LLC, an indirect wholly-owned subsidiary of Delek and Alon;
Delek;
“merger consideration”New Delek” refers to the exchange ratio provided for inpost Delek-ALJ Merger consolidated registrant formerly known as Delek Holdco, Inc. that was renamed as Delek US Holdings, Inc. and is the successor issuer to Old Delek and Alon Merger of 0.504 shares of New Delek common stock for each outstanding share of Alon common stock;Energy; and
“Mergers”Old Delek” refers to the Delek Merger and the Alon Merger, taken together;US Energy, Inc. (formerly known as Delek US Holdings, Inc.).
“New Delek common stock” refers to HoldCo common stock, par value $0.01 per share, to be issued to holders of Alon common stock and Delek common stock upon completion of the Mergers;
“proposed transaction” or “transactions,” unless the context requires otherwise, mean the Mergers and the other transactions contemplated by the merger agreement, taken as a whole;
“Special Committee” refers to the Special Committee of the Alon Board; and
“we,” “our” and “us” refer to HoldCo, Delek or Alon, or to all of them, as the context requires.
TABLE OF CONTENTS
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ANNEX C - VOTING AGREEMENT (DELEK) | | |
ANNEX D - VOTING AGREEMENT (DAVID WIESSMAN AND D.B.W. HOLDINGS (2005) LTD.) | | |
ANNEX E - VOTING AGREEMENT (JEFF AND KAREN MORRIS) | | |
ANNEX F - FAIRNESSB: OPINION OF J.P. MORGAN SECURITIES LLCFINANCIAL ADVISOR TO ALDW GP CONFLICTS COMMITTEE | | |
ANNEX G - FAIRNESS OPINION OF TUDOR, PICKERING & HOLT & CO. SECURITIES, INC. | | |
vi
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS
The following aresection provides brief answers to commoncertain questions that you may have regarding the merger agreement,Merger Agreement and the proposed transactions, the special meetings of stockholders of Delek and Alon and the consideration to be received in the Mergers. The questions and answers inMerger. Please note that this section maydoes not address all questionsissues that mightmay be important to you as a stockholder of Alon or Delek. To better understand these matters, and for a descriptionan ALDW Common Unitholder. Accordingly, you should carefully read this entire consent statement/prospectus, including each of the legal terms governing the proposed transactions, we urge you to read carefully and in its entirety this joint proxy statement/prospectus, including the Annexes to,annexes, and the documents that have been incorporated by reference into this consent statement/prospectus.
Q. Why am I receiving these materials?
A. This consent statement/prospectus is being provided by ALDW to ALDW Common Unitholders in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240.
Q: What isconnection with the proposed transaction?Merger.
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A: | On January 2, 2017, Delek US Holdings, Inc. (“Delek”), Alon USA Energy, Inc. (“Alon”), Delek Holdco, Inc., a wholly owned subsidiary of Delek (“HoldCo”), Dione Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Delek Merger Sub”) and Astro Mergeco, Inc., a wholly owned subsidiary of HoldCo (“Alon Merger Sub”) entered into an Agreement and Plan of Merger, referredALDW GP and Delek have agreed that Delek will acquire the outstanding ALDW Public Units by merging Merger Sub, an indirect wholly-owned subsidiary of Delek, with and into ALDW with ALDW being the surviving entity and becoming a wholly-owned subsidiary of Delek. The approval and adoption of the Merger Agreement and the Merger by ALDW requires the affirmative vote or consent of holders of at least a majority of the outstanding ALDW Common Units. If you are a record holder of outstanding ALDW Common Units as of the Merger Vote Record Date (as defined below), you may complete, date and sign the enclosed written consent and promptly return it to ALDW. The delivery of the AAI Written Consent by AAI with respect to the ALDW Common Units it owns will be sufficient to adopt the Merger Agreement and thereby approve the Merger. This consent statement/prospectus contains important information about the Merger Agreement, the Merger and the other actions contemplated thereby, and you should read this consent statement/prospectus carefully. Q. Who is entitled to give written consent with respect to the Merger? A. The ALDW GP Board has set [●], 2017 as the record date for determining holders of outstanding ALDW Common Units entitled to sign and deliver written consents with respect to the Merger (the “Merger Vote Record Date”). Holders of outstanding ALDW Common Units as of the close of business on the Merger Vote Record Date will be entitled to consent to the approval and adoption of the Merger Agreement and the Merger using the written consent furnished with this consent statement/prospectus. Q. What unitholder approval is required to adopt the Merger Agreement? A. The approval and adoption of the Merger Agreement and the Merger by ALDW requires the affirmative vote or consent of ALDW Common Unitholders who own at least a majority of the outstanding ALDW Common Units. Pursuant to (as it may be amended from time to time) as the “merger agreement”, providing for a strategic business combination of Delek and Alon. |
Under the terms and subjectof the Support Agreement, AAI, which as of December 1, 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the outstanding ALDW Common Units, has irrevocably agreed to deliver the AAI Written Consent within two business days after the effectiveness of the registration statement of which this consent statement/prospectus forms a part. The delivery of the AAI Written Consent by AAI with respect to the conditions set forth inALDW Common Units it owns will be sufficient to adopt the merger agreement, DelekMerger Agreement and thereby approve the Merger.
Q. What will happen to ALDW as a result of the Merger?
A. If the Merger is successfully completed, Merger Sub will mergebe merged with and into Delek (the “Delek Merger”),ALDW, with DelekALDW being the surviving asentity and becoming a wholly ownedwholly-owned subsidiary of HoldCo, a new holding company formed by Delek, and Alon Merger SubDelek.
Q. What will merge with and into Alon (the “Alon Merger”), with Alon surviving. We referALDW Public Unitholders be entitled to receive in the Delek Merger and the Alon Merger together as the “Mergers.” If the Mergers are completed:Merger?
Delek’s stockholders will receive one share of HoldCo common stock, par value $0.01 per share, referred to as “New Delek common stock”, for each issued and outstanding share of Delek common stock that they own immediately prior to the effective time of the Delek Merger; and
Alon’s stockholders (other than Delek or any subsidiary of Delek),A. Each ALDW Public Unitholder will be entitled to receive 0.504Delek Common Stock in exchange for such ALDW Public Unitholder’s ALDW Public Units at the Exchange Ratio. Holders of ALDW Public Units will not receive any fractional shares referred to asof Delek Common Stock in the “exchange ratio,”Merger. Each record holder of New Delek common stock for each issuedALDW Common Units and outstandingany participating firm that deposits and holds securities through The Depository Trust Company that would have received a fraction of a share of Alon common stock that they own immediatelyDelek Common Stock will instead be entitled to receive a whole share of Delek Common Stock. For additional information regarding exchange procedures, please read “The Merger Agreement—Exchange of Units; No Fractional Shares.”
Q. Where will ALDW Common Units and Delek Common Stock trade after the Merger?
A. ALDW Common Units will no longer be publicly traded following the Merger and will be delisted from the New York Stock Exchange (“NYSE”). Delek Common Stock will continue to trade on the NYSE under the symbol “DK.”
Q. What happens to future distributions with respect to ALDW Public Units?
A. If the date of the closing of the Merger is prior to the effective timerecord date set by the Delek Board in connection with declared dividends, if any, to be paid by Delek to its stockholders, former ALDW Common Unitholders would receive any such dividends on the Delek Common Stock they receive in the Merger if the Merger is consummated before the record date for such dividends. If the date of the Alonclosing of the Merger is after the record date set by the Delek Board in connection with cashdeclared dividends to be paid in lieu of fractional shares. The exchange ratio is fixed andby Delek to its stockholders, then a former ALDW Common Unitholder will not be adjusted to reflect stock price changesreceive dividends for that quarter on the Delek Common Stock it receives in the Merger, but will receive distributions for that quarter declared by ALDW (if any) prior to the closing of the Mergers.Merger, if such former ALDW Common Unitholder was a record holder of such ALDW Common Units on the record date with respect to such distribution. ALDW and Delek will endeavor to coordinate regarding the declaration of any dividends or distributions during the period from the execution of the Merger Agreement to the date that the Merger is consummated with the intent that no ALDW Public Unitholder will fail to be entitled to receive any quarterly distribution by ALDW unless it becomes entitled to receive a quarterly dividend from Delek in respect of the same period. See “Market Prices, Dividend and Distribution Information.”
The structureCurrent holders of Delek Common Stock will continue to receive dividends on their Delek Common Stock at the discretion of the Delek Board. See “Comparison of the Rights of Delek Common Stockholders and ALDW Common Unitholders.”
Q. How can ALDW Common Unitholders return their written consents with respect to the Merger?
A. If you hold ALDW Common Units as of the close of business on the Merger Vote Record Date and you wish to submit your consent with respect to the Merger, you must fill out the enclosed written consent, date and sign it, and promptly return it to ALDW. Once you have completed, dated and signed your written consent, deliver it to ALDW by one of the means described in the section entitled “Written Consents of ALDW Common Unitholders—Submission of Consents.” ALDW does not intend to hold a meeting of ALDW Common Unitholders to consider the Merger Agreement and the Merger.
Q. Can ALDW Common Unitholders change or revoke their written consents?
A. Yes. If you are a record holder of ALDW Common Units on the Merger Vote Record Date, you may revoke your consent at any time before the consents of a sufficient number of ALDW Common Units to approve the Merger Agreement have been delivered to the secretary of ALDW. If you wish to change or revoke your consent before that time, you may do so by sending in a new written consent with a later date by one of the means described in the section entitled “Written Consents of ALDW Common Unitholders—Submission of Consents,” or delivering a notice of revocation to the secretary of ALDW.
Q. If my ALDW Common Units are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically consent for me?
A. No. If you hold your ALDW Common Units in “street name” with a bank, brokerage firm or other nominee, you should follow the instructions provided by your bank, brokerage firm or other nominee.
Q. Should ALDW Common Unitholders tender their ALDW Common Units now?
A. No. After the Merger is completed, ALDW Common Unitholders who hold their ALDW Common Units in certificated or book entry form will receive written instructions for exchanging their ALDW Common Units. If you own ALDW Common Units in “street name,” the Merger Consideration should be credited to your account in accordance with the policies and procedures of your bank, brokerage firm or other nominee within a few days following the closing date of the Merger.
Q. When will the Merger be completed?
A. ALDW and Delek are working to complete the Merger as soon as possible. A number of conditions must be satisfied before ALDW and Delek can complete the Merger. Although ALDW and Delek cannot be sure if or when all of the conditions to the Merger will be satisfied, ALDW and Delek expect to complete the Merger as soon as practicable following the effectiveness of the registration statement of which this consent statement/prospectus forms a part. Please read “The Merger Agreement—Conditions to the Merger.”
Q. What happens if I sell or transfer my ALDW Common Units before the consent process concludes?
A. If you transfer your ALDW Common Units after the Merger Vote Record Date but before the consent process concludes, you will, unless special arrangements are made, retain your right to consent with respect to the Merger. However, if you transfer your ALDW Common Units before the consent process concludes, you will not receive the Delek Common Stock at the Exchange Ratio for the ALDW Common Units you have transferred.
Q. What percentage of Delek Common Stock will current ALDW Common Unitholders own after the successful consummation of the Merger?
A. If the Merger is successfully completed, ALDW Public Unitholders will collectively own approximately 6.5% of the outstanding Delek Common Stock, and existing Delek stockholders will collectively own approximately 93.5% of the outstanding Delek Common Stock.
Q. What are the expected U.S. federal income tax consequences to an ALDW Common Unitholder as a result of the transactions contemplated by the merger agreement is intended to preserve Delek’s U.S. federal income tax basis in the Alon common stock acquired by Delek prior to the proposed merger transactions and to allow the Alon stockholders to exchange in the proposed merger transactions their Alon common stock for New Delek common stock on a tax-deferred basis for U.S. federal income tax purposes, except with respect to cash received instead of a fractional share of New Delek common stock.Merger Agreement?
A.The market value of the stock consideration will fluctuate with the pricereceipt of Delek common stock. Based on the closing price of $24.07 per share of Delek common stock on December 30, 2016, the last trading day before the public announcement of the signing of the merger agreement, the value of the consideration payable to holders of Alon common stock upon completion of the Alon Merger was approximately $12.13 per share. Based on the closing price of $23.19 per share of Delek common stock on February 24, 2017, the last practicable date before the date of filing of this joint proxy statement/prospectus, the value of the consideration payable to holders of Alon common stock upon completion of the Alon Merger was approximately $11.69 per share of Alon common stock. It is currently expected that the former Delek stockholders will hold approximately 76%, and the former Alon stockholders will hold approximately 24%, of the outstanding shares of New Delek common stock immediately following the closing of the transaction.
After the closing of the Mergers, HoldCo will be the publicly traded parent company of Delek and Alon, and will be named “Delek US Holdings, Inc.” The New Delek common stock is expected to trade on the New YorkCommon Stock Exchange under Delek’s ticker symbol, “DK.”
Q: Why am I receiving this joint proxy statement/prospectus?
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A: | You are receiving this joint proxy statement/prospectus because you are a holder of Delek common stock or Alon common stock. |
In order to complete the transactions contemplated by the merger agreement:
the stockholders of Delek must approve the issuance of shares of New Delek common stock to Alon’s stockholders in the Alon Mergerexchange for ALDW Common Units pursuant to the merger agreement, which is referred to as the “New Delek share issuance proposal”; and
the stockholders of Alon must adopt the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus, and approve the transactions contemplated by the merger agreement, including the Alon Merger, which is referred to as the “Alon merger proposal”.
Delek and Alon will hold separate special stockholders’ meetings to obtain these approvals. We are sending you these materials to help you decide how to vote your shares with respect to the matters to be considered at the special meetings. The Delek and Alon boards of directors are using this joint proxy statement/prospectus to solicit proxies of holders of Delek common stock and Alon common stock pursuant to the merger agreement.
This joint proxy statement/prospectus contains important information about the transaction, including the special meetings of the respective stockholders of Delek and Alon. You should read it carefully and in its entirety. The enclosed proxy cards allow you to authorize the voting of your shares without attending your company’s special meeting.
Your vote is important. We encourage you to submit a proxy as soon as possible.
Q: What will Delek stockholders receive in the Delek Merger?
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A: | As a result of the Delek Merger, Delek’s stockholders will automatically receive one share of New Delek common stock for each issued and outstanding share of Delek common stock that they own immediately prior to the effective time of the Delek Merger. |
Q: What will Alon stockholders receive in the Alon Merger?
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A: | Alon’s stockholders (other than Delek or any subsidiary of Delek), will be entitled to receive 0.504 shares, referred to as the “exchange ratio,” of New Delek common stock for each issued and outstanding share of Alon common stock that they own immediately prior to the effective time of the Alon Merger, with cash paid in lieu of fractional shares. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Mergers. |
Q: When do you expect the transaction to be completed?
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A: | As of the date of this joint proxy statement/prospectus, the transaction is expected to close in the second quarter of 2017, but no later than an agreed upon outside date of October 2, 2017. However, the closing of the transaction is subject to various conditions, including the approval of the New Delek share issuance proposal by Delek’s stockholders, and of the Alon merger proposal by the Alon stockholders, as well as necessary regulatory consents and approvals. No assurance can be provided as to when or if the transaction will be completed, and it is possible that factors outside the control of Delek and Alon could result in the transaction being completed at a later time, or not at all. See “The Merger Agreement-Closing and Effective Time of the Mergers” and “The Merger Agreement-Conditions to the Completion of the Mergers” beginning on pages 170 and 189, respectively.
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Q: When and where will the special meetings be held?
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A: | The Delek special meeting will be held at [•], on [•], 2017 at [•], local time. |
The Alon special meeting will be held at [•], on [•], 2017 at [•], local time.
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Q: | What are the proposals on which the Delek stockholders are being asked to vote and what is the recommendation of the board of directors of Delek with respect to each proposal? |
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A: | At the special meeting, the Delek stockholders are being asked to: |
consider and vote on the New Delek share issuance proposal; and
consider and vote on a proposal to adjourn the Delek special meeting, if necessary or appropriate in the judgment of the Delek Board, to solicit additional proxies in the event that there are not sufficient votes at the time of the special meeting to approve the New Delek share issuance proposal, which is referred to as the “Delek adjournment proposal.”
The Delek Board unanimously recommends a vote “FOR” each of the proposals referred to above.
Under Delaware law, the Delek Merger, in which the issued and outstanding shares of Delek common stock will be exchanged on a share-for share basis for newly issued shares of New Delek common stock, does not require the approval of Delek’s stockholders.
You may also be asked to act on other business, if any, that may properly come before the Delek special meeting or any adjournment or postponement thereof by or at the direction of the Delek Board. Delek currently does not contemplate that any other business will be presented at the special meeting of Delek stockholders.
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Q: | What vote is required to approve the proposals being presented at the special meeting of Delek stockholders? |
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A: | To be approved at the special meeting, the New Delek share issuance proposal requires the affirmative vote of the majority of the votes cast by holders of shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting. Approval of the Delek adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting. |
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Q: | Will the Delek stockholders be asked to vote on the New Delek share issuance proposal and the Delek adjournment proposal at the special meeting if the board of directors of Delek has changed its recommendation of such proposals? |
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A: | Yes. Unless the merger agreement is terminated before the special meeting, Delek will notify its stockholders before the special meeting if the board of directors of Delek has changed its recommendation with respect to the New Delek share issuance proposal and/or the Delek adjournment proposal. Despite any such change of recommendation, Delek’s stockholders will be asked to vote on such proposals at the Delek special meeting. |
Q: Will the Delek stockholders be asked to vote on the Delek Merger?
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A: | No. The Delek Merger is a holding company merger not requiring a vote of the stockholders of Delek under the Delaware General Corporation Law. However, Delek’s stockholders will be asked to vote on a proposal to approve the New Delek share issuance as required by the rules of the NYSE. |
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Q: | What are the proposals on which the Alon stockholders are being asked to vote and what is the recommendation of the board of directors of Alon with respect to each proposal? |
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A: | At the Alon special meeting, Alon stockholders are being asked to: |
consider and vote on the Alon merger proposal;
consider and vote on a proposal to approve, by a non-binding advisory vote, certain compensation that may be paid or become payable to Alon’s named executive officers that is based on or otherwise relates to the merger contemplated by the merger agreement, which is referred to as the “non-binding compensation advisory proposal”; and
consider and vote on a proposal to adjourn the Alon special meeting, if necessary or appropriate in the judgment of the Alon Board, to solicit additional proxies in the event there are not sufficient votes at the time of the special meeting to approve the Alon merger proposal, which is referred to as the “Alon adjournment proposal.”
The Special Committee of the Alon Board, referred to as the “Special Committee”, has unanimously determined that the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Alon and its stockholders other than Delek, HoldCo, Delek Merger Sub and Alon Merger Sub (referred to as the “Disinterested Stockholders”), and has unanimously approved the merger agreement and the transactions contemplated thereby. Upon the recommendation of the Special Committee, the Alon Board, with Messrs. Yemin, Ginzburg, Green, Smith and Soreq recusing themselves, has determined and declared that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders; has approved the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement.
The Alon Board unanimously recommends a vote “FOR” each of the proposals referred to above.
You may also be asked to act on other business, if any, that may properly come before the Alon special meeting or any adjournment or postponement thereof by or at the direction of the Alon Board. Alon currently does not contemplate that any other business will be presented at the special meeting of Alon stockholders.
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Q: | What vote is required to approve the proposals being presented at the special meeting of Alon stockholders? |
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A: | Approval of the Alon merger proposal requires the affirmative vote, in person or by proxy, of holders of (i) a majority of the outstanding shares of Alon common stock entitled to vote on the proposal (the “Alon Common Stockholder Approval”) and (ii) a majority of the issued and outstanding shares of Alon common stock beneficially owned by the holders of Alon common stock other than Delek, HoldCo, Delek Merger Sub, Alon Merger Sub and their respective affiliates (the “Alon Disinterested Stockholder Approval”). |
Approval of the non-binding compensation advisory proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted.
If a quorum is present, approval of the Alon adjournment proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon
common stock entitled to vote on the proposal which have actually been voted. If a quorum is not present, approval of the Alon adjournment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Alon common stock present in person or by proxy and entitled to vote on the proposal.
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Q: | Is approval of the “Alon non-binding compensation advisory proposal” a condition to the completion of the Alon Merger? |
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A: | Approval of the Alon non-binding compensation advisory proposal is not a condition to the completion of the Alon Merger. The vote with respect to the Alon non-binding compensation advisory proposal is an advisory vote and, accordingly, will not be binding on Alon, Delek or HoldCo. Further, the underlying plans and arrangements are contractual in nature and are not, by their terms, subject to Alon stockholder approval. Accordingly, regardless of the outcome of the non-binding advisory vote, if the merger agreement is adopted by the Alon stockholders and the Alon Merger is completed, Alon’s named executive officers will receive the “golden parachute compensation” to which they may be, or may become, entitled. |
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Q: | What is the effect if these proposals are not approved by the requisite votes at the special meetings? |
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A: | If the New Delek share issuance proposal is not approved by the requisite vote at the special meeting of Delek’s stockholders, or if the Alon merger proposal is not approved by the requisite vote at the special meeting of Alon’s stockholders, then the transaction will not occur. |
Accordingly, the exchange of Delek common stock and Alon common stock for New Delek common stock described in this joint proxy statement/prospectus would not occur, and Alon would remain an independent public company and its common stock will continue to be listed and traded on the NYSE. If the merger agreement is terminated under specified circumstances, either Delek or Alon (depending on the circumstances) may be required to pay the other party a termination fee, reverse termination fee or other termination-related payment. See the section titled “The Merger Agreement – Termination” of this joint proxy statement/prospectus forshould be a discussion of these and other rights of each of Delek and Alon to terminate the merger agreement.
Q: Who is entitled to vote at the special meetings?
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A: | The board of directors of each of Delek and Alon have fixed [•], 2017 as the record date for each of the special meetings. If you were a Delek stockholder or a Alon stockholder at the close of business on the record date, you are entitled to receive notice of, and vote at, your company’s special meeting. |
Q: If I am a Delek stockholder, how many votes do I have?
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A: | If you are a Delek stockholder, on each of the proposals that will be voted upon at the Delek special meeting, you will be entitled to one vote per share of Delek common stock that you owned as of the record date. As of the close of business on the record date, there were [•] shares of Delek common stock outstanding and entitled to vote. As of that date, approximately [•]% of the outstanding shares of Delek common stock were held by the directors and executive officers of Delek. |
Q: If I am an Alon stockholder, how many votes do I have?
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A: | If you are a holder of Alon common shares, on each of the proposals that will be voted upon at the Alon special meeting, you will be entitled to one vote per share of Alon common stock that you owned as of the record date. As of the close of business on the record date, there were [•] shares of Alon common stock outstanding and entitled to vote. As of that date, approximately [•]% of the outstanding shares of Alon common stock were held by the directors and executive officers of Alon. |
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Q: | Are any Delek stockholders already committed to vote in favor of the New Delek share issuance proposal? |
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A: | No. No voting and support agreements known to Delek or Alon have been entered into which require Delek stockholders to vote in favor of the New Delek share issuance proposal. |
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Q: | Are any Alon stockholders already committed to vote in favor of the Alon merger proposal? |
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A: | Yes. On January 2, 2017, David Wiessman and Mr. Wiessman’s controlled entity, D.B.W. Holdings (2005) Ltd., entered into a voting and support agreement with Delek. As of that date, Wiessman beneficially owned 175,100 shares of Alon common stock and D.B.W. Holdings (2005) Ltd. owned 2,335,441 shares of Alon common stock, representing approximately 3.5% of the outstanding shares of Alon common stock. In addition, on January 2, 2017, Jeff Morris and his spouse Karen Morris entered into a voting and support agreement with Delek. On that date, Mr. Morris and his spouse beneficially owned 1,669,347 shares of Alon common stock and was deemed to beneficially own an additional 232,694 shares of Alon common stock issuable upon exchange of shares of Alon Assets, Inc., collectively representing approximately 2.65% of the outstanding shares of Alon common stock. Finally, on January 2, 2017, Delek entered into a voting and support agreement with Alon. As of that date, Delek owned 33,691,292 shares of Alon common stock representing approximately 47% of the outstanding shares of Alon common stock. The three voting agreements are attached as Annexes C, D and E to this joint proxy statement/prospectus. Each of the voting agreements requires the Alon stockholder party thereto to vote in favor of the Alon merger proposal. |
Q: What constitutes a quorum for each special meeting?
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A: | Holders of a majority of the outstanding shares of Delek common stock entitled to vote at the Delek special meeting, represented in person or by proxy, will constitute a quorum for the Delek special meeting. |
Holders of a majority of the outstanding shares of Alon common stock entitled to vote at the Alon special meeting, represented in person or by proxy, will constitute a quorum for the Alon special meeting.
Q: Who can attend each special meeting?
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A: | If you held shares of Delek’s common stock or Alon common shares as of the record date, you may attend your company’s special meeting. If you are a beneficial owner of such shares held in “street name,” you must provide evidence of your ownership of such shares, which you can obtain from your broker, bank or other nominee, in order to attend your company’s special meeting. |
Q: What if my bank, broker or other nominee holds my shares in “street name”?
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A: | If a bank, broker or other nominee holds your shares for your benefit but not in your own name, such shares are in “street name.” In that case, your bank, broker or other nominee will send you a voting instruction form to use in order to instruct the vote of your shares. The availability of telephone and Internet voting instruction depends on the voting procedures of your bank, broker or other nominee. Please follow the instructions on the voting instruction form they send you. If your shares are held in the name of your bank, broker or other nominee and you wish to vote in person at your company’s special meeting, you must contact your bank, broker or other nominee and request a document called a “legal proxy.” You must bring this legal proxy to the special meeting in order to vote in person. Your bank, broker or other nominee will not vote your shares unless you provide instructions on how to vote. |
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Q: | If I am a Delek stockholder, how do I vote? |
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A: | If you are a holder of record of shares of Delek common stock as of the close of business on the record date, you may submit your proxy before the Delek special meeting in one of the following ways: |
By Internet. Use the Internet at http://www.proxyvote.com to transmit your voting instructions and for the electronic delivery of information. To ensure your shares are voted, please transmit your voting instructions by 11:59 P.M. Eastern Time on [•], 2017. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. The availability of Internet voting instruction for beneficial owners holding shares of Delek common stock in street name will depend on the voting process of your broker, bank or other nominee. Please follow the voting instructions in the materials you receive from your broker, bank or other nominee.
By Phone. Use any touch-tone telephone to dial 1-800-454-8683 to transmit your voting instructions. To ensure your shares are voted, please transmit your voting instructions by 11:59 P.M. Eastern Time on [•], 2017. Have your proxy card in hand when you call and then follow the instructions. If you submit a proxy by telephone, do not return your proxy card. The availability of telephone voting instruction for beneficial owners holding shares of Delek common stock in street name will depend on the voting process of your broker, bank or other nominee. Please follow the voting instructions in the materials you receive from your broker, bank or other nominee.
By Mail. Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
In addition, all stockholders may vote in person at the Delek special meeting. For additional information on voting procedures, see “The Delek Special Meeting of Stockholders” beginning on page 63.
After reading and carefully considering the information contained in this joint proxy statement/prospectus, please submit your proxy or voting instructions as soon as possible even if you plan to attend the Delek special meeting.
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Q: | If I am a Alon stockholder, how do I vote? |
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A: | If you are a holder of record of shares of Alon common stock as of the close of business on the record date, you may submit your proxy before the Alon special meeting in one of the following ways: |
By Internet. Use the Internet at http://www.proxyvote.com to transmit your voting instructions and for the electronic delivery of information. To ensure your shares are voted, please transmit your voting instructions by 11:59 P.M. Eastern Time on [•], 2017. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. The availability of Internet voting instruction for beneficial owners holding shares of Alon common stock in street name will depend on the voting process of your broker, bank or other nominee. Please follow the voting instructions in the materials you receive from your broker, bank or other nominee.
By Phone. Use any touch-tone telephone to dial 1-800-690-6903 to transmit your voting instructions. To ensure your shares are voted, please transmit your voting instructions by 11:59 P.M. Eastern Time on [•], 2017. Have your proxy card in hand when you call and then follow the instructions. If you submit a proxy by telephone, do not return your proxy card. The availability of telephone voting instruction for beneficial owners holding shares of Alon common stock in street name will depend on the voting process of your broker, bank or other nominee. Please follow the voting instructions in the materials you receive from your broker, bank or other nominee.
By Mail. Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to: Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
In addition, all stockholders may vote in person at the Alon special meeting. For additional information on voting procedures, see “The Alon Special Meeting of Stockholders” beginning on page 68.
After reading and carefully considering the information contained in this joint proxy statement/prospectus, please submit your proxy or voting instructions as soon as possible even if you plan to attend the Alon special meeting.
Q: What do I do if I receive more than one set of voting materials?
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A: | You may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are held in more than one name, you will receive more than one proxy card. You may also receive multiple copies of this joint proxy statement/prospectus if you are a stockholder of Delek and Alon. Please complete, sign, date and return each proxy card and voting instruction card you receive, or you may submit a proxy by telephone or Internet by following the instructions on your proxy card. |
Q: How will my proxy be voted?
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A: | If you submit a proxy or voting instructions by completing, signing, dating and mailing your proxy card or voting instruction card, or by Internet or by telephone, your shares will be voted in accordance with your instructions. If you are a stockholder of record as of the record date and you sign, date, and return your proxy card but do not indicate how you want to vote on any particular proposal and do not indicate that you wish to abstain with respect to that proposal, the shares of Delek common stock represented by your proxy will be voted as recommended by the Delek Board with respect to that proposal or the shares of Alon common stock represented by your proxy will be voted as recommended by the Alon Board with respect to that proposal. |
Q: What if I mark “abstain” when voting or do not vote on the proposals?
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A: | If you fail to vote in person or by proxy any shares for which you are the record owner as of the record date or fail to instruct your broker or other nominee on how to vote the shares you hold in street name in each case with respect to any of the proposals, your shares will not be counted as present in determining whether a quorum is present at your company’s special meeting. “Broker non-votes,” if any-which in the case of each of the special meetings is only expected to occur if you instruct your broker or other nominee on how to vote on one but not all proposals-will be counted as present in determining whether a quorum is present at your company’s special meeting. |
If you mark abstain when voting, your shares will still be counted as present in determining whether a quorum is present at your company’s special meeting.
If you are a Delek stockholder, because the New Delek share issuance proposal requires the affirmative vote of the majority of the votes cast by holders of shares of Delek common stock present in person or represented by proxy and entitled to vote at the special meeting, if you fail to vote or abstain from voting on the New Delek share issuance proposal, it will have no effect with respect to the New Delek share proposal. Broker non-votes, if any, will also have no effect on the New Delek share proposal. If you are a Delek stockholder and fail to vote, it will have no effect on the Delek adjournment proposal; however, if you abstain from voting, it and any broker non-votes will have the same effect as a vote against the Delek adjournment proposal.
If you are a holder of Alon common stock, the Alon merger proposal requires (i) the Alon Common Stockholder Approval and (ii) the Alon Disinterested Stockholder Approval. If you fail to vote or abstain with respect to the Alon merger proposal, it and any broker non-votes will have the same effect as a vote “AGAINST” the Alon merger proposal.
Each of the Alon non-binding compensation advisory proposal and the Alon adjournment proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted. If you abstain from voting with respect to either proposal, it and any broker non-votes will have the same effect as a vote “AGAINST” either proposal. If you fail to vote with respect to either proposal, you will not be counted as present for purposes of a quorum with respect to either proposal, and it will have no effect on either proposal, assuming that a quorum is otherwise present.
If a quorum is present, the Alon adjournment proposal requires the affirmative vote of the holders of a majority of all votes cast by holders of Alon common stock. Therefore, if a quorum is present and you fail to vote or abstain from voting on the proposal, it and any broker non-votes will have no effect with respect to the Alon adjournment proposal.
If a quorum is not present, the Alon adjournment proposal requires the affirmative vote of the holders of a majority of the outstanding shares Alon common stock, present or represented by proxy, and entitled to vote on the proposal. Therefore, if a quorum is not present and you fail to vote, it and any broker non-votes will have no effect with respect to the Alon adjournment proposal. If, however, you abstain from voting on the proposal, it will have the same effect as a vote “AGAINST” the Alon adjournment proposal.
Q: Can I change my vote after I have submitted a proxy or voting instruction card?
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A: | Yes. If you are a stockholder of record as of the record date you can change your vote at any time before your proxy is voted at the special meeting of your respective company. If you are a beneficial owner, please follow the instructions in the materials you receive from your broker, bank or other nominee regarding how to change your vote. Stockholders of record can change their vote in one of three ways: |
you can send a signed notice of revocation to the Secretary of Delek or Alon, as appropriate;
you can submit a revised proxy bearing a later date by mail, or by Internet or telephone as described above, provided that, to ensure your new vote is counted, please submit any revised proxy that is submitted by Internet or telephone within the timeframe described above; or
you can attend your company’s special meeting and vote in person, which will automatically cancel any proxy previously given, though your attendance alone will not revoke any proxy that you have previously given.
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Q: | If I am a Delek stockholder, will I be required to exchange my shares in connection with the transaction? |
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A: | If you hold shares of Delek common stock electronically through a broker, upon completion of the Delek Merger, you will automatically receive “book-entry” securities representing an equal number of shares of New Delek common stock as the number of shares of Delek common stock that you electronically held through your broker prior to the Delek Merger. However, if you hold shares of Delek common stock in certificated form, after completion of the Delek Merger, you will be entitled to the same number of shares of New Delek common stock, but will be requested by the exchange agent, American Stock Transfer & Trust Company LLC, to exchange your Delek common stock certificates for certificates or “book-entry” securities representing an equal number of shares of New Delek common stock. |
Q: What happens if I sell my shares of common stock before the special meeting?
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A: | The record dates for the Delek special meeting and the Alon special meeting are earlier than the date that the Mergers will be completed. If you transfer your Delek or Alon shares after the Delek or Alon special meeting record dates but before the Delek or Alon special meetings, you will retain your right to vote at the Delek or Alon special meetings, respectively, but will have transferred the right to receive the merger consideration in the Mergers. In order to receive the merger consideration, you must hold your shares through the effective date of the Mergers. |
Q: Who will solicit and pay the cost of soliciting proxies?
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A: | Delek and Alon have each separately retained Morrow Sodali, LLC, which is referred to as Morrow Sodali, to assist in the solicitation process. Delek and Alon will each pay Morrow Sodali a fee of approximately $12,500, plus customary solicitation charges, as well as reasonable and documented out-of-pocket expenses. Delek and Alon each also agreed to indemnify Morrow Sodali against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions). |
Q: If I am an Alon stockholder, should I send in my certificates now?
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A: | No. If you hold certificates representing Alon common stock, American Stock Transfer & Trust Company LLC, the exchange agent selected to handle the exchange of shares of Alon common stock for the merger consideration, will send you written instructions informing you how to exchange your shares. |
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Q: | Are there any risks that I should consider? |
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A: | Yes. There are risks associated with all business combinations, including the proposed transaction. There are also risks associated with the combined company’s business and the ownership of shares of the combined company’s common stock. We have described certain of these risks and other risks in more detail under “Risk Factors” beginning on page 47. |
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Q: | Are Delek or Alon stockholders entitled to appraisal rights? |
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Q: | What are the material U.S. federal income tax consequences of the Mergers to holders of Delek common stock and Alon common stock? |
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A: | The obligation of Delek to complete the Mergers is conditioned upon the receipt by Delek of an opinion from Baker Botts L.L.P., counsel to Delek, to the effect that (i) the Delek Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, and (ii) the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, taken together with the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. The obligation of Alon to complete the Mergers is conditioned upon the receipt by Alon of an opinion from Vinson & Elkins LLP, counsel to Alon, to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. |
Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Mergers” and assuming the receipt and accuracy of the opinions described above, the U.S. federal income tax consequences of the Mergerstaxable transaction to U.S. holders and non-U.S. holders (each as(as defined in “Material U.S. Federal Income Tax Consequences of the Mergers”) of Delek common stock or Alon common stock will generally be as follows:
U.S. holders and non-U.S. holders of Delek common stock will not recognize gain or loss upon the exchange of their Delek common stock for New Delek common stock pursuant to the Delek Merger.
U.S. holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger will not recognize any loss and will only recognize gain to the extent of cash received in lieu of a fractional share of New Delek common stock as discussed in “Material U.S. Federal Income Tax Consequences of the Mergers-Tax Consequences to U.S. Holders of Alon Common Stock.”
Non-U.S. holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger will not recognize any loss in connection with the Alon merger and will only recognize gain in limited circumstances as discussed in “Material U.S. Federal Income Tax Consequences of the
Mergers-Tax Consequences to Non-U.S. Holders of Alon Common Stock.”
Each Delek stockholder and Alon stockholder should read the discussion under “Material U.S. Federal Income Tax Consequences of the Mergers”Merger”) for U.S. federal income tax purposes. In such case, a U.S. holder will generally recognize capital gain or loss on the receipt of Delek Common Stock in exchange for ALDW Common Units. However, a portion of this gain or loss, which may be substantial (generally increasing in accordance with the length of time a U.S. holder has held its ALDW Common Units and corresponding to the total amount of depreciation deductions allocated to the U.S. holder in prior periods), will be separately computed and taxed as ordinary income or loss to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by ALDW and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods may become available to offset a portion of the gain recognized by such U.S. holder. Please read “Material U.S. Federal Income Tax Consequences of the Merger” for a more complete discussion of the expected material U.S. federal income tax consequences of the Mergers.Merger.
Q. What are the expected U.S. federal income tax consequences for an ALDW Common Unitholder of the ownership of Delek Common Stock after the Merger is completed?
A. Delek is classified as a corporation for U.S. federal income tax purposes and is subject to U.S. federal income tax on its taxable income. A distribution of cash by Delek to a stockholder who is a U.S. holder (as defined in “Material U.S. Federal Income Tax matters canConsequences of the Merger”) generally will be complicated,included in such U.S. holder’s income as ordinary dividend income to the extent of Delek’s current or accumulated “earnings and profits” as determined under U.S. federal income tax principles. Distributions of cash in excess of Delek’s current or accumulated earnings and profits will be treated as a non-taxable return of capital reducing a U.S. holder’s adjusted tax basis in such U.S. holder’s Delek Common Stock and, to the extent the distribution exceeds such stockholder’s adjusted tax basis, as capital gain from the sale or exchange of such Delek Common Stock. Please read “Material U.S. Federal Income Tax Consequences of the Merger” for a more complete discussion of the expected material U.S. federal income tax consequences of owning and disposing of Delek Common Stock received in the MergersMerger.
Q. Are ALDW Common Unitholders entitled to a particular Delek stockholderappraisal rights?
A. No. ALDW Common Unitholders do not have appraisal rights under applicable law or Alon stockholder will depend on such stockholder’s particular facts and circumstances. Delek stockholders and Alon stockholders should consult their own tax advisors to determinecontractual appraisal rights under the specific consequences to themALDW Partnership Agreement or the Merger Agreement.
Q. Who do I call if I have further questions about the Merger Agreement or the Merger?
A. ALDW Common Unitholders may call ALDW’s Investor Relations Department at (615) 435-1366 if they have further questions or if they would like additional copies, without charge, of the Mergers.this consent statement/prospectus.
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Q: | Who can help answer my questions? |
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A: | Delek or Alon stockholders who have questions about the Mergers, the New Delek share issuance or the other matters to be voted on at the special meetings or desire additional copies of this joint proxy statement/prospectus or additional proxy cards should contact: |
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If you are a Delek stockholder:MORROW SODALI, LLC
470 West Avenue
Third Floor
Stamford, CT 06902
Stockholders Call Toll-Free: (800) 662-5200
International Callers: +1 (203) 658-9400
E-mail: DK@morrowsodali.com
| | If you are an Alon stockholder:
MORROW SODALI, LLC
470 West Avenue
Third Floor
Stamford, CT 06902
Stockholders Call Toll-Free: (800) 662-5200
International Callers: +1 (203) 658-9400
E-mail: ALJ@morrowsodali.com
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SUMMARY
This summary highlights selected information contained elsewhere in this joint proxyconsent statement/prospectus and maydoes not contain all the information that may be important to you. Accordingly, we encourageTo fully understand the Merger Agreement and the transactions contemplated thereby, and for a more complete description of the terms of the Merger Agreement, you toshould read carefully this joint proxyentire consent statement/prospectus, carefully and in its entirety, including its Annexes andthe annexes, as well as the documents incorporated by reference into this joint proxyconsent statement/prospectus. The page referencesprospectus, and the other documents to which you are referred. For information on how to obtain the documents that ALDW and Delek have been included in this summary to direct you to a more complete description offiled with the topics presented below. SeeSEC, see “Where You Can Find More Information” beginning on page 240.Information.”
The Merger (page [●])
ALDW GP and Delek have agreed that Delek will acquire the outstanding ALDW Public Units by merging Merger Sub, an indirect wholly-owned subsidiary of Delek, with and into ALDW with ALDW being the surviving entity and becoming a wholly-owned subsidiary of Delek.
Under the terms of the Merger Agreement, each ALDW Public Unit will be converted into the right to receive 0.4900 shares of validly issued, fully paid and non-assessable Delek Common Stock. All fractional shares of Delek Common Stock that an ALDW Public Unitholder would otherwise be entitled to receive as consideration in connection with the Merger will be aggregated and then, if a fractional share of Delek Common Stock results from that aggregation, be rounded up to the Transaction (Page 76)nearest whole share of Delek Common Stock and any such additional Delek Common Stock will become part of the consideration received in connection with the Merger. Any ALDW Common Units that are owned immediately prior to the Merger by ALDW will be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled ALDW Common Units. All ALDW Common Units that are not ALDW Public Units and not canceled as described in the immediately preceding sentence will, in each case, remain outstanding as partnership interests in ALDW, unaffected by the Merger.
Information About the Companies (page [●])
Alon USA Partners, LP
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
ALDW is a publicly traded Delaware limited partnership engaged principally in the business of owning and operating a crude oil refinery in Big Spring, Texas, with a crude oil throughput of 73,000 barrels per day. It refines crude oil into finished products, which are marketed primarily in Central and West Texas, Oklahoma, New Mexico and Arizona through its integrated wholesale distribution network to both Delek’s retail convenience stores and third-party distributors.
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
Delek US Holdings, Inc. is an integrateda diversified downstream energy business focused oncompany with assets in petroleum refining, the wholesale distribution of refined productslogistics, asphalt, renewable fuels and prior to August 2016, convenience store retailing. Prior to August 2016, Delek aggregated its operating units into three reportable segments:The refining logistics and retail. However, in November 2016, Delek sold its retail related assets including MAPCO Express, Inc. and certain related affiliated companies.
Delek’s refining segment operatesconsist of refineries operated in Tyler and Big Spring, Texas, and El Dorado, Arkansas and Krotz Springs, Louisiana with a combined designnameplate crude throughput capacity of 155,000302,000 barrels per day. As of December 1, 2017, Delek, through its subsidiaries, owned 100.0% of ALDW GP and 81.6% of the limited partner interest in ALDW, which owns the crude oil refinery in Big Spring, Texas, with a crude oil throughput capacity of 73,000 barrels per day (“bpd”). Delek’s logistics segment gathers, transports and stores crude oil and markets, distributes, transports and stores refined products in select regions of the southeastern United States and west Texas for its refining segment and third parties.an integrated wholesale marketing business.
Delek owns a 60.7% limited partner interest in Delek Logistics Partners, LP ("DKL") (NYSE: DKL) and a 94.9% interest in the entity that owns the entire 2.0% general partner interest in Delek LogisticsDKL and all of the incentive distribution rights. A substantial majority of Delek Logistics’ assets are currently integral to Delek’s refiningDKL is a growth-oriented master limited partnership focused on owning and marketing operations. Delek also owns a non-controlling equity interest of approximately 47% of the outstanding shares of common stock of Alon.operating midstream energy infrastructure assets.
Delek’s common stock is traded onasphalt operations consist of owned or operated asphalt terminals serving markets from Tennessee to the NYSE underWest Coast through a combination of non-blended asphalt purchased from third parties and production at the trading symbol “DK.” Delek’s principal executive office is located at 7102 Commerce Way, Brentwood, Tennessee 37027 (telephone number (615) 771-6701).
Additional information about DelekBig Spring, Texas and its subsidiaries is includedEl Dorado, Arkansas refineries. The renewables operations consist of plants in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240.
Alon USA Energy, Inc.
Alon USA Energy, Inc. is an independent refinerTexas and marketer of petroleum products, operating primarilyArkansas that produce biodiesel fuel and a renewable diesel facility in the South Central, Southwestern and Western regions of the United States. Alon owns 100% of the general partner and 81.6% of the limited partner interests in Alon USACalifornia.
Partners, LP (NYSE: ALDW), which owns a crude oil refinery in Big Spring, Texas, with a crude oil throughput capacity of 73,000 bpd and an integrated wholesale marketing business. In addition, Alon directly owns a crude oil refinery in Krotz Springs, Louisiana, with a crude oil throughput capacity of 74,000 bpd. Alon also owns crude oil refineries in California, which have not processed crude oil since 2012. Alon owns a majority interest in a renewable fuels project in California, with a throughput capacity of 3,000 bpd. Alon is a marketer of asphalt, which Alon distributes primarily through asphalt terminals located predominately in the Southwestern and Western United States. AlonDelek’s convenience store retail business is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores which also market motor fuels in Centralcentral and Westwest Texas and New Mexico.
Alon’s common stock is traded on the NYSE under the trading symbol “ALJ.” Alon’s principal executive office is located at 12700 Park Central Drive, Suite 1600, Dallas, Texas 75251 (telephone number (972) 367-3600).Sugarland Mergeco, LLC
Additional information about Alon and its subsidiaries is included in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240.7102 Commerce Way
Delek Holdco, Inc.Brentwood, Tennessee 37027
Delek Holdco, Inc., which we refer to as “HoldCo,”(615) 771-6701
Merger Sub is a direct, wholly ownedDelaware limited liability company and an indirect, wholly-owned subsidiary of Delek formed solely to effect the combination of Delek and Alon by merging DelekDelek. Merger Sub its direct, wholly owned subsidiary, with and into Delek, and merging Alon Merger Sub, its direct, wholly owned subsidiary, with and into Alon, in each case, as provided for in the merger agreement. HoldCo has not carriedwas formed on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Following the completion of the transaction, HoldCo will be the parent company of Delek and Alon and will be named “Delek US Holdings, Inc.” The New Delek common stock issued by HoldCo in the Mergers is expected to be listed for trading on the NYSE under Delek’s ticker symbol, “DK.”
HoldCo’s principal executive office is located at 7102 Commerce Way, Brentwood, Tennessee 37027 (telephone number (615) 771-6701).
Dione Mergeco, Inc.
Dione Mergeco, Inc., which we refer to as “Delek Merger Sub,” is a direct, wholly owned subsidiary of HoldCo formedOctober 26, 2017 solely for the purpose of consummating the merger of Delek Merger Sub with and into Delek, as provided for in the merger agreement. Delekhas no operating assets. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Delek Merger Sub’s principal executive office is located at 7102 Commerce Way, Brentwood, Tennessee 37027 (telephone number (615) 771-6701).
Merger.
Astro Mergeco, Inc., which we refer to as “Alon Merger Sub,” is a direct, wholly owned subsidiary of HoldCo formed solely for the purpose of consummating the merger of Alon Merger Sub with and into Alon, as provided for in the merger agreement. Alon Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Alon Merger Sub’s principal executive office is located at 7102 Commerce Way, Brentwood, Tennessee 37027 (telephone number (615) 771-6701).
The Transaction (Page 79)
On January 2, 2017, Delek, Alon, HoldCo, Delek Merger Sub and Alon Merger Sub entered into an Agreement and Plan of Merger, referred to as the “merger agreement”, providing for a strategic business combination of Delek and Alon.
Under the terms and subject to the conditions set forth in the merger agreement, in the Delek Merger, Delek Merger Sub will merge with and into Delek, with Delek surviving as a wholly owned subsidiary of HoldCo, a new holding company formed by Delek. In addition, in the Alon Merger, Alon Merger Sub will merge with and into Alon, with Alon surviving. We refer to the Delek Merger and the Alon Merger together as the “Mergers.” If the Mergers are completed:
Delek’s stockholders will receive one share of HoldCo common stock, par value $0.01 per share, referred to as “New Delek common stock”, for each issued and outstanding share of Delek common stock that they own immediately prior to the effective time of the Delek Merger; and
Alon’s stockholders (other than Delek or any subsidiary of Delek), will be entitled to receive 0.504, which is referred to as the “exchange ratio,” shares of New Delek common stock for each issued and outstanding share of Alon common stock that they own immediately prior to the effective time of the Alon Merger, with cash paid in lieu of fractional shares. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing of the Mergers.
Each New Delek share will be issued in accordance with, and subject to the rights and obligations of, the amended and restated certificate of incorporation of HoldCo, which will be substantially similar to the second amended and restated certificate of incorporation of Delek immediately prior to the effective time of the Delek Merger.
For a comparison of the rights of a holder of shares of New Delek common stock as compared to a holder of Alon common stock, please see “Comparison of the Rights of Holders of New Delek Common Stock and Alon Common Stock” beginning on page 216.
The Delek surviving entity will have the name “Delek US Holdings, Inc.” and the New Delek common stock is expected to be listed for trading on the NYSE under Delek’s current ticker
symbol, “DK.” It is currently expected that the former Delek stockholders will hold approximately 76%, and the former Alon stockholders (other than Delek) will hold approximately 24%, of the outstanding shares of New Delek common stock immediately following the closing of the transaction. The structure of the transaction is depicted below (47% and 53% refer to approximate percentages of outstanding Alon common stock):
The Delek Special Meeting of Stockholders (Page 63)
The special meeting of Delek stockholders will be held at [•], on [•], 2017 at [•], local time. The purpose of the Delek special meeting is to consider and vote on the New Delek share issuance proposal and the Delek adjournment proposal.
Required Approval of the New Delek share issuance proposal is a condition toMerger by the obligation of Delek and Alon to complete the Mergers. ALDW Common Unitholders (page [●])
The approval and adoption of the Delek adjournment proposal is not a condition toMerger Agreement and the obligationMerger by ALDW requires the affirmative vote or consent of either Delek or Alon to complete the Mergers.
Only holders of record of shares of Delek common stock at the close of business on [•], 2017, the record date for the Delek special meeting, will be entitled to notice of, and to vote at, the Delek special meeting or any adjournments or postponements thereof.
Stockholders who hold at least a majority of the sharesoutstanding ALDW Common Units. Pursuant to the terms of Delek common stock issued and outstandingthe Support Agreement, AAI, which as of the close of business on the record date and who are entitled to vote must be present in person or represented by proxy in order to constitute a quorum for the transaction of business at the Delek special meeting.
ApprovalDecember 1, 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the New Delek share issuance proposal requiresoutstanding ALDW Common Units, has irrevocably agreed to deliver the affirmative voteAAI Written Consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, within two business days after the effectiveness of the majorityregistration statement of which this consent statement/prospectus forms a part. The delivery of the votes castAAI Written Consent by holders of shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting. If you fail to vote or abstain
from voting on the New Delek share issuance proposal, it and any broker non-votes will have no effectAAI with respect to the New ALDW Common Units it owns will be sufficient to adopt the Merger Agreement and thereby approve the Merger.
Delek’s Ownership Interest In and Control of ALDW (page [●])
Delek share proposal.
Approvalholds a controlling ownership interest in ALDW. Delek controls ALDW through Delek’s indirect ownership of 100% of the Delek adjournment proposal requires the affirmative votemembership interests of ALDW GP, which owns 100% of the holdersgeneral partner interest in ALDW, and through Delek’s indirect ownership of a majorityapproximately 81.6% of the shareslimited partner interest in ALDW.
Recommendation of Delek common stock present in person or representedthe ALDW GP Conflicts Committee (page [●])
The ALDW GP Conflicts Committee considered the benefits of the Merger Agreement, the Merger and the related transactions as well as the associated risks and, by proxy and entitled tounanimous vote at a meeting held on November 6, 2017, (i) determined that the Delek special meeting. If you are a Delek stockholder and fail to vote, it will have no effect on the Delek adjournment proposal; however, if you abstain from voting, it and any broker non-votes will have the same effect as a vote "AGAINST" the Delek adjournment proposal.
The Alon Special Meeting of Stockholders (Page 68)
The special meeting of Alon stockholders will be held at [•], on [•], 2017 at [•], local time. The purpose of the Alon special meeting is to consider and vote on the Alon merger proposal, the Alon non-binding compensation advisory proposalMerger Agreement and the Alon adjournment proposal.
Approvaltransactions contemplated thereby, including the Merger, are in the best interests of ALDW and the Alon merger proposal is a condition toALDW Public Unitholders, (ii) approved the obligation of DelekMerger Agreement and Alon to complete the Mergers. Thetransactions contemplated thereby, including the Merger (such approval constituting “Special Approval” as defined in the ALDW Partnership Agreement), and (iii) recommended the approval of the Alon non-binding compensation advisory proposalMerger Agreement and the Alon adjournment proposal are not conditionstransactions contemplated thereby, including the Merger, to the obligation of either Delek or Alon to complete the Mergers.
Only holders of record of issued and outstanding shares of Alon common stock asALDW GP Board. For a discussion of the close of business on [●], 2017,many factors considered by the record date for the Alon special meeting, are entitled to notice of,ALDW GP Conflicts Committee in making its determination and to vote at, the Alon special meeting or any adjournment or postponement of the Alon special meeting.
A majority of the shares entitled to vote at the special meeting must be present in person or by proxy at the special meeting in order to constitute a quorum. If a stockholder submits a properly executed proxy card or votes by telephone or the Internet, such stockholder will be considered part of the quorum.
Approval of the Alon merger proposal requires (i) the Alon Common Stockholder Approval and (ii) the Alon Disinterested Stockholder Approval.
Approval of the Alon non-binding compensation advisory proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted.
If a quorum is present, approval, of the Alon adjournment proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted.
If a quorum is not present, approval of the Alon adjournment proposal requires the affirmative vote of holders of a majority of the outstanding shares of Alon common stock present in person or by proxy and entitled to vote on the proposal.
If you fail to vote or abstain with respect to the Alon merger proposal, it and any broker non-votes will have the same effect as a vote “AGAINST” the proposal.
If you abstain from voting with respect to the Alon non-binding compensation advisory proposal or the Alon adjournment proposal, it and any broker non-votes will have the same effect as a vote “AGAINST” either proposal. If you fail to vote with respect to either proposal, you will not be counted as present for purposes of a quorum with respect to either proposal, and it will have no effect on either proposal, assuming that a quorum is otherwise present.
If a quorum is present, the Alon adjournment proposal requires the affirmative vote of the holders of a majority of all votes cast by holders of Alon common stock. Therefore, if a quorum is present and you fail to vote or abstain from voting on the proposal, it and any broker non-votes will have no effect with respect to the Alon adjournment proposal.
If a quorum is not present, the Alon adjournment proposal requires the affirmative vote of the holders of a majority of shares of Alon common stock present in person or by proxy at the special meeting and entitled to vote on the proposal. Therefore, if a quorum is not present and you fail to vote, it and any broker non-votes will have no effect on Alon adjournment proposal. If a quorum is not present and you abstain from voting, it will have the same effect as a vote “AGAINST” the Alon adjournment proposal.
Delek’s please read “The Merger—Reasons for the TransactionALDW GP Conflicts Committee’s Recommendation.”
Taking into consideration such approval and Recommendation ofrecommendation, at a meeting duly called and held on November 6, 2017, the DelekALDW GP Board (Page 112)
The Delek Board has unanimously determined that the merger agreement, the Mergers and the other transactions contemplated by the merger agreement are(i) deemed it advisable fair to and in the best interests of DelekALDW and its stockholders; has unanimouslythe ALDW Public Unitholders that ALDW enter into the Merger Agreement and consummate the Merger, (ii) approved the merger agreement, the MergersMerger Agreement and the other transactionstransaction contemplated by the merger agreement,thereby, including the issuanceMerger, (iii) directed that the Merger Agreement be submitted to a vote of shares of New Delek common stockthe ALDW Common Unitholders and (vi) authorized the ALDW Common Unitholders to act by written consent without a meeting in connection with the Alon Merger; and unanimously recommends that Delek stockholders vote “FOR” the issuance of New Delek common stock in connection with the Alon Merger and “FOR” the Delek adjournment proposal, each described further in this joint proxy statement/prospectus.
The Delek Board considered many factors in making its determination that the merger agreement,consenting to the Merger Agreement and the others transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Delek and its stockholders. For a more complete discussion of these factors, see “The Mergers—Delek’s Reasons for the Mergers and New Delek Share Issuance; Recommendation of the Delek Board” beginning on page 112.
Alon’s Reasons for the Transaction; Recommendations of the Special Committee and the Alon Board (Page 129)
On January 2, 2017, the Special Committee, consisting of directors of Alon who are independent from Delek, and with the advice and assistance of its financial and legal advisors, unanimously determined that the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders and unanimously approved, and recommended that the Alon Board approve, the merger agreement, the voting agreement to which Alon is a party and the transactions contemplated thereby. On the unanimous recommendation of the Special Committee, the Alon Board, with Messrs. Ezra Uzi Yemin, Assaf Ginzburg, Frederec Green, Mark D. Smith and Avigal Soreq, each an executive officer of Delek, recusing themselves, determined and declared that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders; approved the merger agreement, the voting agreement to which Alon is a party, the Alon Merger and the other transactions contemplated by the merger agreement and the voting agreements to which Alon is a party; directed that the merger agreement and the Alon Merger be submitted to Alon’s stockholders for approval; and resolved to recommend that Alon stockholders vote “FOR” the adoption of the merger agreement and the approval of the transactions contemplated thereby, including the Alon Merger, and “FOR” eachMerger. For a further discussion of the other proposals described in this joint proxy statement/prospectus.
The Special Committee considered many factors in making its determination that the merger agreement, the Alon Merger and the others transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders. For a more complete discussion of these factors, see “The Mergers—Alon’s Reasons for the Transaction; Recommendationsrecommendation of the SpecialALDW GP Conflicts Committee to the ALDW GP Board, please read “The Merger—Recommendation of the ALDW GP Conflicts Committee and the Alon BoardALDW GP Board.” beginning on page 129.
Opinion of Delek’sthe Financial Advisor (Page 116)to the ALDW GP Conflicts Committee (page [●])
The Delek Board engaged Tudor, Pickering, Holt & Co. Securities,On November 6, 2017, Houlihan Lokey Capital, Inc. (“TPH”Houlihan Lokey”) to act as Delek’s financial advisor for purposes of the proposed transactions. On December 29, 2016, TPH delivered an, orally rendered its opinion to the Delek BoardALDW GP Conflicts Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the ALDW GP Conflicts Committee dated November 6, 2017), as to, the fairness, from a financial point of view, to Delek of the merger consideration to be paid pursuant to the merger agreement. For purposes of TPH’s opinion, the term “merger consideration” means the exchange ratio provided for in the Alon Merger of 0.504 shares of New Delek common stock for each outstanding share of Alon common stock (other than Alon common stock held by Delek or any subsidiary of Delek).
The full text of TPH’s written opinion, dated December 29, 2016, is attached as Appendix F to this joint proxy statement/prospectus and is incorporated herein by reference in its entirety. We encourage you to read the opinion carefully in its entirety for a description of, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken. TPH’s opinion was provided to the Delek Board in connection with the Delek Board’s consideration of the merger agreement, does not address any other aspect of the merger agreement or the transactions and does not constitute a recommendation as to how Delek, the Delek Board, Alon, the Alon Board or any committee thereof, any holder of interests in Delek,
HoldCo or Alon or any other person should act or vote with respect to such transactions or any other matter. See “The Mergers—Opinion of Delek’s Financial Advisor” beginning on page 116.
Opinion of Alon’s Financial Advisor (Page 134)
Alon retained J.P. Morgan Securities LLC (“J.P. Morgan”) to act as financial advisor to the Special Committee in connection with the proposed Mergers. At the meeting of the Special Committee on January 2, 2017, J.P. Morgan rendered its oral opinion to the Special Committee that, as of such date and based upon and subject toNovember 6, 2017, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the exchange ratio in the proposed Mergers was fair,fairness, from a financial point of view, to the holders of Alon common stock. J.P. Morgan confirmed this oral opinion by delivering its written opinionALDW Common Units, other than the Excluded Holders, of the Exchange Ratio provided for in the Merger pursuant to the Special Committee, dated January 2, 2017.Merger
Agreement. For purposes of Houlihan Lokey’s opinion, the term “Excluded Holders” means Delek, Merger Sub and their respective affiliates.
The full text of the written opinion of J.P. Morgan, dated January 2, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan, is attached as Annex F to this joint proxy statement/prospectus and is incorporated herein by reference. Alon’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s writtenHoulihan Lokey’s opinion was addresseddirected to the SpecialALDW GP Conflicts Committee (in its capacity as such) in connection with and foronly addressed the purposesfairness, from a financial point of its evaluationview, to the holders of ALDW Common Units, other than the Excluded Holders, of the proposed Mergers and was directed onlyExchange Ratio provided for in the Merger pursuant to the exchange ratio in the proposed MergersMerger Agreement and did not address any other aspect or implication of the proposed Mergers. Further,Merger, any related transaction or any other agreement, arrangement or understanding entered into in connection therewith or otherwise. The summary of Houlihan Lokey’s opinion in this consent statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, doeswhich is attached as Appendix B to this consent statement/prospectus and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this consent statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the ALDW GP Conflicts Committee, the ALDW GP Board, ALDW GP, any stockholdersecurity holder of AlonALDW or any other person as tohow such stockholder shouldto act or vote or act with respect to the proposed Mergers or any other matter. For a description of the opinion that the Special Committee received from J.P. Morgan, see “The Mergers—Opinion of Financial Advisormatter relating to the Alon Special CommitteeMerger or otherwise” beginning on page 134 of this joint proxy statement/prospectus..
Delek Stockholder Approval is Not Required
Holders of Delek Common Stock are not required to adopt the Merger Agreement or approve the Merger or the issuance of Delek Common Stock in connection with the Merger.
The Merger Agreement (page [●])
The Merger Agreement is attached to this consent statement/prospectus as Annex A and is incorporated by reference into this consent statement/prospectus. You are encouraged to read the Merger Agreement because it is the legal document that governs the Merger. For a summary of the material terms of the Merger Agreement, (Page 168)please read the section entitled “The Merger Agreement” below.
ConditionsALDW and ALDW GP entered into the Merger Agreement with Delek and Merger Sub. Pursuant to the CompletionMerger Agreement, Merger Sub will be merged with and into ALDW, with ALDW being the surviving entity. Under the terms of the MergersMerger Agreement, at the effective time of the Merger:
UnderEach ALDW Public Unit will be converted into the merger agreement, the respective obligationsright to receive 0.4900 shares of Delek Alon, HoldCo, DelekCommon Stock, and each such ALDW Public Unit will be canceled and retired and will cease to exist.
Each ALDW Common Unit that is owned by ALDW immediately prior to the effective time of the Merger will be automatically canceled and will cease to exist and no consideration will be delivered in exchange for such canceled ALDW Common Units.
The management interest of ALDW GP in ALDW, in its capacity as a general partner and without reference to any ALDW Common Unit held by ALDW GP (the “ALDW GP Interest”), and all ALDW Common Units that are not ALDW Public Units and that are not canceled as described above will, in each case, remain outstanding as partnership interests in ALDW, unaffected by the Merger.
The outstanding limited liability company interest in Merger Sub issued and Alonoutstanding immediately prior to the effective time of the Merger will be converted into an aggregate number of common units representing limited partner interests in the surviving entity of the Merger equal to the number of ALDW Public Units that are converted into the right to receive 0.4900 shares of Delek Common Stock. At the effective time of the Merger, the books and records of ALDW will be revised to reflect the cancellation and retirement of all ALDW Public Units and the conversion of the limited liability company interest in Merger Sub to completecommon units of the Mergerssurviving entity of the Merger, and the existence of ALDW (as the surviving entity of the Merger) shall continue without dissolution.
If, before the effective time of the Merger, the number of issued and outstanding shares of Delek Common Stock or ALDW Common Units are subject to the satisfactionincreased, decreased or changed into a different number of units, shares or other securities (including any different class or series of securities) by reason of any dividend or distribution payable in, or an issuance of, partnership interests, voting securities, equity interests or rights, or by reason of any subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or any such transaction shall be authorized, declared or agreed upon with a record date at or prior to the effective time, ofthen the Delek Merger ofConsideration shall be appropriately adjusted to reflect such change and to provide the following conditions:
Stockholder Approval. The New Delek share issuance proposal must have been approvedsame economic effect contemplated in accordance with the stockholder approval requirement Section 312.03 of the NYSE Listed Company Manual, and the Alon merger proposal must have been approved by (i) the Alon Common Stockholder Approval and (ii) the Alon Disinterested Stockholder Approval.
Regulatory Approval. All applicable waiting and other time periods under antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act, or “HSR Act,” must have expired, lapsed or been terminated and all regulatory clearances must have been obtained.
Merger Agreement.
For a description of the ALDW Common Units and the Delek Common Stock and a description of the comparative rights of holders of the ALDW Common Units and the Delek Common Stock, please read “Comparison of the Rights of Delek Common Stockholders and ALDW Common Unitholders” and “Description of Delek Capital Stock.”
Governmental Approvals. All necessary filings, consentsConditions to the Merger
The obligation of the parties to the Merger Agreement to complete the Merger is subject to the satisfaction or approvals from any governmental authority required to be made or obtained in connection with waiver of certain conditions, including, among others:
the execution and delivery of this consent statement/prospectus to holders of ALDW Common Units at least 20 business days prior to the merger agreement and the consummationclosing of the Mergers mustMerger;
the receipt of all other governmental consents and approvals, the absence of which would, individually or in the aggregate, have been made or obtained, except where the failure to do so could not be reasonably likely to result in a material adverse effect on ALDW or Delek;
the delivery of the Required ALDW Common Unitholder Written Consent in accordance with respect to Delek or Alon.
applicable law;NYSE Listing. The New Delek common stock to be issued in connection with the Mergers must have been approved for listing oncontinued effectiveness of the NYSE.
Effective Registration Statement. The registration statement of which this joint proxyconsent statement/prospectus forms a part mustpart;
the approval for listing on the NYSE of the Delek Common Stock to be effective as declared byissued in the SEC.
Merger, subject to official notice of issuance; andNo Injunction. No orderthe absence of any courtdecree, order, injunction or agency can be in effect, and no law that prohibits the Merger or other legal proceeding by a government authority can prohibitmakes the Mergers or impose any material restriction on the Mergers, Delek or Alon.
Merger unlawful.Under the merger agreement, theThe parties’ obligations of Delek, HoldCo, Delek Merger Sub and Alon Merger Sub to complete the Mergers are also separately subject to the satisfaction or waiver of the following additional conditions:
specifiedcertain fundamental representations and warranties of Alon regarding aspects of itsthe other parties relating to organization and existence, authorization to enter into the Merger Agreement and to complete the transactions contemplated thereby and capitalization the absence of certain changes, and the approvals required under state takeover laws must bebeing true and correct as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date), except for such inaccuracies as would not in the aggregate beall material in amount or effect;respects;
the remaining representations and warranties of Alon regarding its capitalization must be true and correct,the other than small inaccuracies, as of the date of the merger agreement and as of the closing as though made on and as of such date (exceptparties relating to the extent expressly made asabsence of another date, in which case as of such other date);
specified representations and warranties of Alon regarding due organization, corporate authority, and accuracy of certain information provided about Alon must be true and correct in all material respects as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date);
the other representations and warranties of Alon must be true and correct, without regard to materiality, material adverse effect, or similar qualifiers, as of the date of the merger agreement and as of the closing as though made on and as of such date and time (except to the extent expressly made as of another date, in which case as of such other date), other than for such failures to be so true and correctchanges that individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect;
Alon must have performedeffect on the other parties and complied with in all material respects all of its obligations under the merger agreement;
Delek must have received a certificate signed by an executive officer of Alon that the foregoing closing conditions have been satisfied; and
Delek must have received a tax opinion to the effect that (i) the Delek Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, taken together with the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
Under the merger agreement, the obligation of Alon to complete the Mergers is subject to the satisfaction or waiver of the following additional conditions:
specified representations and warranties of Delek regarding the absence of certain changes, andmaterial damage, destruction or loss to any material portion of assets of the approvals required under state takeover laws must beother parties, or their subsidiaries being true and correct as of the dateclosing;
all other representations and warranties of the merger agreementother parties being true and correct as of the closing, as though made onother than certain failures to be true and as of such date (except to the extent expressly made as of another date, in which case as of such other date), except for such inaccuracies ascorrect that would not in the aggregate beresult in a material in amountadverse effect on the other parties making the representations or effect;warranties; and
the representationsother parties’ having performed or complied with all agreements and warranties of Delek regarding its capitalization mustcovenants required to be true and correct, other than small inaccuracies, as ofperformed by it under the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date);
certain representations and warranties of Delek regarding due organization, organizational documents and corporate authority must be true and correctMerger Agreement in all material respects as of the date of the merger agreement and as of the closing as though made on and as of such date (exceptrespects.
Termination
The parties to the extent expressly made asMerger Agreement can mutually agree to terminate the Merger Agreement at any time without completing the Merger. In addition, the Delek Parties, on the one hand, or the ALDW Parties, on the other hand, may terminate the Merger Agreement on their own without completing the Merger in a number of another date, in which case as of such other date);situations, including if:
the other representations and warranties of Delek must be true and correct, without regardMerger has not been consummated on or before June 30, 2018 (so long as the party seeking to materiality, material adverse effect,terminate did not prevent the Merger from occurring by failing to perform or similar qualifiers, as of the date of the merger agreement and as of the closing as though made on and as of such date and time (except to the extent expressly made as of another date, in which case as of such other date), other than for such failures to be so true and correct that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect;
Delek must have performed and complied with in all material respects all ofobserve its obligations under the merger agreement;
Merger Agreement);
Alon must have received a certificate signed by an executive officer of Delek that the foregoing closing conditions have been satisfied;governmental entity has issued a final and
Alon must have received a tax opinion to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, non-appealable order, decree or ruling or taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
See “The Merger Agreement—Conditions to the Completion of the Mergers.”
Non-Solicitation
The merger agreement contains detailed provisions outlining the circumstances in which Delek and Alon may respond to acquisition proposals received from third parties. Under these provisions, each of Delek and Alon has agreed that it and its subsidiaries will (and will use commercially reasonable efforts to cause their respective directors, officers, employees, agents, advisors, and representatives, including investment bankers, financial advisors, attorneys, accountants, collectively referred to as representatives, to) immediately cease discussions with any other person relating to an acquisition proposal (as described in “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Change of Recommendation—Definition of Acquisition Proposal”) and instruct such other person to return or destroy all related confidential information. Furthermore, neither Delek nor Alon nor such persons may, directly or indirectly:
initiate, solicit or knowingly encourage or facilitate the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal (as described below);
participate in any discussions or negotiations relating to an acquisition proposal;
make available to any third party that is reasonably likely to be considering or seeking to make, an acquisition proposal, any non-public information or data relating to Delek or Alon as applicable or their respective business, properties, assets or bylaws (other than as required by law); or
enter into any agreement (whether written or oral, binding or non-binding) providing for or intended to facilitate, an acquisition proposal.
At any time prior to the approval of the Delek issuance proposal by the Delek stockholders or the merger agreement and the Mergers by the Alon stockholders, if either Delek or Alon receives a bona fide unsolicited written acquisition proposal that did not result from a breach of the no-shop provisions of the merger agreement, Delek or Alon, as applicable, may participate in discussions and negotiations regarding such proposal and make available non-public information and data if the party follows certain procedures set forth in the merger agreement despite the non-solicitation provisions described above. In such a case, the applicable board of directors must determine in
good faith after consultation with outside counsel and financial advisors that the proposal constitutes or is reasonably likely to constitute a superior proposal (as described in “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Change of Recommendation—Definition of Superior Proposal”) and failure to take such actions would be inconsistent with their fiduciary duties under Delaware law. The applicable board of directors must also obtain an executed confidentiality agreement from the third party, advise the other party of any request for non-public information, inquiry or request for discussions or negotiations, provide the other party with a copy and any non-public information not previously provided, the material terms of any requests for negotiations, and copies of written materials received in connection therewith (in each case promptly or within 24 hours).
At any time prior to the approval of the Delek issuance proposal by the Delek stockholders or the merger agreement and the Mergers by the Alon stockholders, if either Delek or Alon receives a bona fide acquisition proposal that did not result from a breach of the no-shop provisions of the merger agreement, Delek or Alon, as applicable, may make a change in recommendation if its board of directors (and, in the case of Alon, its independent director committee) determines in good faith after consultation with outside counsel and financial advisors that (a) failure to take such actions would be inconsistent with their fiduciary duties under Delaware law and (b) the proposal is a superior proposal or would be reasonably expect to result in a superior proposal.
Prior to effecting a change in recommendation, Delek or Alon, as applicable, is required to comply with certain “match right” obligations. Specifically, the party wishing to make a change in recommendation must (i) provide the other party written notice three days in advance stating that such action will be taken which includes certain specified information about the superior proposal, (ii) have negotiated in good faith during such three day period to revise the terms of the merger agreement in such a way as may obviate the need for making a change in recommendation, and (iii) following such negotiations, have determined that a failure to effect such a change in recommendation in response to the superior proposal, taking into account any changes proposed by the other party to the merger agreement, continues to be inconsistent with the fiduciary duties of the board of directors under Delaware law.
Termination of the Merger Agreement
Delek and Alon may terminate the merger agreement and abandon the Mergers at any time prior to the effective time of the Delek Merger by mutual written consent. The merger agreement may also be terminated by either Delek or Alon at any time prior to the effective time of the Delek Merger in any of the following situations:
the Mergers do not occur by October 2, 2017, which is referred to as an outside date termination event, provided that a party may not terminate the merger agreement if such party has materially breached the merger agreement and such breach was the cause of the failure to meet the deadline;
the Delek special meeting is held and the Delek stockholders do not approve the Delek issuance proposal at such meeting or at any permitted adjournment or postponement of such meeting, which is referred to as a failed Delek vote termination event, provided
that Delek may not terminate if the failure to obtain approval is caused by Delek breaching the merger agreement;
the Alon special meeting is held and the Alon stockholders do not approve the Alon merger proposal (including the approval by the stockholders other than Delek and its affiliates) at such meeting or at any permitted adjournment or postponement of such meeting, which is referred to as a failed Alon vote termination event, provided that Alon may not terminate if the failure to obtain approval is caused by Alon breaching the merger agreement; or
any law or order permanently restraining, enjoining or otherwise prohibiting the completion ofMerger, so long as the merger becomes final and non-appealable, provided that the terminating party seeking termination has metcomplied with its obligations to cooperate and use reasonable best efforts to bring aboutunder the closing.
In addition, the merger agreement may be terminated by Delek:
if Alon has breached the merger agreement in such a way that the conditions relating to representations and warranties and performance of material obligations cannot be satisfied or is not satisfied within 30 days of written notice or the fifth business day prior to October 2, 2017, which is referred to as an Alon breach termination event;
if a change in recommendation by Alon occurs and the necessary approval of Alon stockholders (including the approval by the stockholders other than Delek and its affiliates) is not obtained;
if Alon breaches its obligationsMerger Agreement (i) with respect to terminatingany filing, submission or initiating acquisition proposal discussionscommunication with a governmental entity having jurisdiction over the Merger and (ii) to attempt to remove the prohibition; or
the other parties breach any of its other “no shop” obligations;
iftheir representations, warranties or agreements in the Delek Board approves, and Delek enters into, a definitive agreement implementing a superior proposal (as described under “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”) and has complied with the merger agreement with respect to terminatingAgreement or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Delek stockholders; or
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• | if Alon has not obtained certain third-party consents prior to the 90th day following the date of the merger agreement, provided that such termination may only occur within five business days after such deadline passes.
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Further, the merger agreement may be terminated by Alon:
if Delek, HoldCo, Delek Merger Sub or Alon Merger Sub has breached the merger agreement in such a way that the conditions relating to representations and warranties and performance of material obligations cannot be satisfied or is not satisfied within 30
days of written notice or the fifth business day prior to October 2, 2017, which is referred to as a Delek breach termination event;
if a change in recommendation by Delek occurs and the necessary approval of Delek stockholders is not obtained;
if Delek breaches its obligations with respect to terminating or initiating acquisition proposal discussions or any of its other “no shop” obligations; or
if the Alon Board approves, and Alon enters into, a definitive agreement implementing a superior proposal (as described under “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”) and has complied with the merger agreement with respect to terminating or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Alon stockholders.
Termination Fee Payable by Alon
The merger agreement requires Alon to pay Delek a termination fee of $15 million, which is referred to as the termination fee, if any of the following occurs:
the merger agreementother parties’ representations or warranties becomes untrue and such breach (i) is terminated due to (i) an outside date termination event provided certain other conditions have been met, (ii) a failed Alon vote termination event,incapable of being cured, or (iii) an Alon breach termination event; and
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◦ | an acquisition proposal with respect to Alon involving 50% or more of the non-“cash or cash equivalent” assets of Alon and its subsidiaries or acquisition of more than 50% of the outstanding shares of Alon common stock has been made directly to the stockholders of Alon generally or has otherwise become publicly known and remains outstandingis not cured, prior to the Alon special meeting; and |
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◦ | within 12 months following termination of the merger agreement, Alon enters into an agreement for or consummates such transaction; |
the merger agreement is terminated by Delek due to a change in recommendation by Alon that occurs before the necessary approval of Alon stockholders (including the approval by the stockholders other than Delek and its affiliates) has been obtained; or
the merger agreement is terminated by Alon due to the Alon Board approving,Termination Date and Alon entering into, a definitive agreement implementing a superior proposal (as described(ii) results in “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”), and Alon has complied with the merger agreement with respect to terminating or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Alon stockholders.
Termination Fee Payable by Delek
The merger agreement requires Delek to pay Alon a termination fee of $20 million, which is referred to as the reverse termination fee, if any of the following occurs:
the merger agreement is terminated due to (i) an outside date termination event provided certain other conditions have been met, (ii) a failed Delek vote termination event, or (iii) a Delek breach termination event; and
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o | an acquisition proposal with respect to Delek involving 50% or more of the non-“cash or cash equivalent” assets of Delek and its subsidiaries or acquisition of more than 50% of the outstanding shares of Delek common stock has been made directly to the stockholders of Delek generally or has otherwise become publicly known and remains outstanding prior to the Delek special meeting; and |
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o | within 12 months following termination of the merger agreement, Delek consummates such transaction; and |
the merger agreement is terminated by Alon due to a change in recommendation by Delek that occurs before the necessary approval of Delek stockholders has been obtained; or
the merger agreement is terminated by Delek due to the Delek Board approving, and Delek entering into, a definitive agreement implementing a superior proposal (as described in “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”), and Delek has complied with the merger agreement with respect to terminating or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Alon stockholders.
Listing of New Delek Common Stock (Page 167)
HoldCo intends to apply to list the shares of New Delek common stock to be issued to the stockholders of Delek in the Delek Merger and to the stockholders of Alon in the Alon Merger on the NYSE, to be traded after the completion of the Mergers under Delek’s ticker symbol, “DK.”
Voting Agreements (Page 196)
Inconnection with the execution of the merger agreement, and as a condition to Delek’s willingnessthe Merger not being satisfied, provided that the party seeking termination is not in breach of its representations and warranties under the Merger Agreement so as to enter into the merger agreement, Jeff Morris and his spouse Karen Morris and David Wiessman and Mr. Wiessman’s controlled entity D.B.W. Holdings (2005) Ltd. entered into two separate voting and support agreements with Delek. Based on information provided by each of themgive rise to Delek and Alon, asa failure of the date ofcondition to the voting agreements:
Wiessman beneficially owned 175,100 shares of Alon common stock and D.B.W. Holdings (2005) Ltd., an entity controlled by Mr. Wiessman, owned 2,335,441 shares of Alon common stock representing approximately 3.5% ofother parties’ obligation to close under the outstanding shares of Alon common stock; andMerger Agreement.
Mr. Morris and his spouse beneficially owned 1,669,347 shares of Alon common stock and may be deemed to beneficially own an additional 232,694 shares of Alon common stock issuable upon exchange of shares of Alon Assets, Inc., collectively representing approximately 2.65% of the outstanding shares of Alon common stock.
In connection with the execution of the merger agreement, and as a condition to Alon’s willingness to enter into the merger agreement, Delek entered into a voting and support agreement with Alon. As of the date of that voting agreement, Delek owned 33,691,292 shares of Alon common stock representing approximately 47% of the outstanding shares of Alon common stock.
Each of the voting agreements requires the Alon stockholder party thereto to vote in favor of the Alon merger proposal. The three voting agreements are attached as Annexes C, D and E to this joint proxy statement/prospectus.
Regulatory Approvals and Third-Party Consents (Page 166)
Delek and Alon have agreed in the merger agreement to cooperate with each other and use (and cause their respective subsidiaries to use) their respective reasonable best efforts to take all actions reasonably necessary, proper or advisable to permit prompt consummation of the Mergers, including using reasonable best efforts to lift injunctions, defend litigation seeking to delay or prevent the Mergers, and prepare documentation, effecting filings, and obtain consents of governments and third parties. Delek is also required to use reasonable best efforts to enter into necessary guarantees in connection with Alon’s effort to obtain certain third-party consents and waivers. Furthermore, Delek and Alon have agreed to consult with each other to obtain material permits, consents and approvals and to keep each other apprised of the status thereof, make an appropriate filing necessary under the HSR Act if the closing of the Mergers is not likely to occur prior to May 2, 2017 (when an existing approval under the HSR Act will expire), notify and consult with each other regarding communications to any governmental authority, and share information necessary for governmental filings or received from governmental authorities in connection with the merger agreement to the extent permitted by law.
Material U.S. Federal Income Tax Consequences of the Mergers (Page 200)Merger (page [●])
The obligationreceipt of Delek to complete the Mergers is conditioned upon the receipt by Delek of an opinion from Baker Botts L.L.P., counsel to Delek, to the effect that (i) the DelekCommon Stock as Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the receipt by Delek stockholders of New Delek common stockConsideration in exchange for their Delek common stockALDW Common Units pursuant to the Delek Merger taken together with the receipt by Alon stockholders of New Delek common stock in exchangeshould be a taxable transaction for their Alon common stock pursuantU.S. federal income tax purposes to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. The obligation of Alon to complete the Mergers is conditioned upon the receipt by Alon of an opinion from Vinson & Elkins LLP, counsel to Alon, to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
Subject to the limitations and qualifications describedU.S. holders (as defined in “Material U.S. Federal Income Tax Consequences of the Mergers” and assumingMerger”). In such case, a U.S. holder who receives Delek Common Stock in exchange for ALDW Common Units pursuant to the receipt and accuracyMerger will recognize gain or loss in an amount equal to the difference between:
the sum of (i) the fair market value of the opinions described above,Delek Common Stock received and (ii) such U.S. holder’s share of ALDW’s nonrecourse liabilities immediately prior to the Merger; and
such U.S. holder’s adjusted tax basis in the ALDW Common Units exchanged therefor (which includes such U.S. holder’s share of ALDW’s nonrecourse liabilities immediately prior to the Merger).
Gain or loss recognized by a U.S. holder on the exchange of ALDW Common Units in the Merger generally will be taxable as capital gain or loss. However, a portion of this gain or loss, which may be substantial (generally increasing in accordance with the length of time a U.S. holder has held its units and corresponding to the total amount of depreciation deductions allocated to the U.S. holder in prior periods), will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by ALDW and its subsidiaries. Passive losses that were not deductible by a U.S. holder in prior taxable periods may become available to offset a portion of the gain recognized by such U.S. holder.
The U.S. federal income tax consequences of the MergersMerger to U.S. holders and non-U.S. holders (each as defined in “an ALDW Common Unitholder will depend on such ALDW Common Unitholder’s own personal tax situation. MaterialAccordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the Merger to you.
Please read “Material U.S. Federal Income Tax Consequences of the Mergers”) of Delek common stock or Alon common stock will generally be as follows:
U.S. holders and non-U.S. holders of Delek common stock will not recognize gain or loss upon the exchange of their Delek common stock for New Delek common stock pursuant to the Delek Merger.
U.S. holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger will not recognize any loss and will only recognize gain to the extent of cash received in lieu of a fractional share of New Delek common stock as discussed in “Material U.S. Federal Income Tax Consequences of the Mergers-Tax Consequences to U.S. Holders of Alon Common Stock.”
Non-U.S. holders of Alon common stock who receive New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger will not recognize any loss in connection with the Alon merger and will only recognize gain in limited circumstances as discussed in “Material U.S. Federal Income Tax Consequences of the Mergers-Tax Consequences to Non-U.S. Holders of Alon Common Stock.”
Each Delek stockholder and Alon stockholder should read the discussion under “Material U.S. Federal Income Tax Consequences of the Mergers”Merger” for a more complete discussion of thecertain U.S. federal income tax consequences of the Mergers. Tax matters can be complicated,Merger.
Other Information Related to the Merger
No Appraisal Rights (page [●])
Holders of ALDW Common Units do not have appraisal rights under applicable law or contractual appraisal rights under the ALDW Partnership Agreement, the Merger Agreement, or otherwise.
Regulatory Matters (page [●])
In connection with the Merger, Delek intends to make all required filings under the Securities Act and the tax consequencesSecurities Exchange Act of 1934, as amended (the “Exchange Act”), as well as any required filings or applications with the NYSE. Delek and ALDW are unaware of any other requirement for the filing of information with, or the obtaining of the Mergersapproval of, governmental authorities in any jurisdiction that is applicable to a particular Delek stockholderthe Merger.
The Merger is not reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and therefore no filings with respect to the Merger were required with the Federal Trade Commission (“FTC”) or Alon stockholder will depend on such stockholder’s particular facts and circumstances. Delek stockholders and Alon stockholders should consult their own tax advisors to determine the specific tax consequences to themAntitrust Division of the Mergers.Department of Justice (“DOJ”).
Officers and DirectorsListing of HoldCo after the Transaction (Page 188)
PriorDelek Common Stock to the closing of the transactions contemplatedbe Issued in the merger agreement, Merger (page [●])
Delek will electCommon Stock is currently listed on the board of directors ofNYSE under the ticker symbol “DK.” It is a condition to closing that the Delek Common Stock to be issued in the boardMerger to ALDW Common Unitholders be approved for listing on the NYSE, subject to official notice of directors of HoldCo and appointissuance.
ALDW Common Units are currently listed on the officers of DelekNYSE under the ticker symbol “ALDW.” If the Merger is completed, ALDW Common Units will cease to be listed on the officers of HoldCo, each to serve until his or her death, permanent disability, resignation or removal or until his or her successor is duly elected or appointed, as applicable, and qualified in accordance with the HoldCo certificate of incorporation and bylaws. Pursuant to the merger agreement, the Special Committee has designated Mr. Wiessman to be appointed to Holdco's board of directors and Ron Haddock to be appointed to Delek Logistics' board of directors. Within 30 days after the closing of the transaction, HoldCo will increase the size of the HoldCo board of directors by one seat and appoint Mr. Wiessman to such newly created seatNYSE and will causebe deregistered under the board of directors of Delek Logistics to increase the size of its board of directors by one seat and appoint Mr. Haddock to such newly created seat.Exchange Act.
For a further descriptionAccounting Treatment (page [●])
The Merger will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, Consolidation (ASC 810). Because Delek controls ALDW both before and after the Merger, the changes in Delek’s ownership interest in ALDW resulting from the Merger will be accounted for as an equity transaction, and no gain or loss will be recognized in Delek’s consolidated income statement. In addition, the tax effects of the governance of HoldCo following the closing of the transaction, see “Description of HoldCo Capital Stock” beginning on page 223, “Comparison of the Rights of Holders of New Delek Common Stock and Alon Common Stock” beginning on page 216 and “The Merger Agreement—Organizational Documents; Directors, Managers and Officers; NYSE Listing” beginning on page 173.
Interests of Delek’s Directors and Officersmerger are reported in the Mergers (Page 153)
In considering the recommendations of the Delek Board, Delek stockholders should be aware that some of the directors and executive officers of Delek may have interests in the transaction that are different from, or are in addition to, the interests of Delek’s stockholders generally. These interests may present such executive officers and directorsaccordance with actual or potential conflicts of interest. These interests include their designation as directors or executive officers of HoldCo following the completion of the transactions, and the service of executive officers and directors of Delek on the Alon Board since May 2015. The Delek Board was aware of these interests during its deliberations on the merits of the transaction and in deciding to recommend that Delek stockholders vote for the New Delek share issuance proposal. See “The Mergers—Background of the Mergers” and “The Mergers—Delek’s Reasons for the Mergers and New Delek Share Issuance; Recommendation of the Delek Board” beginning on pages 79 and 112, respectively.
Interests of Alon’s Directors and Officers in the Mergers (Page 154)
In considering the recommendation of the Alon Board that the Alon stockholders vote to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the Alon Merger, Alon’s stockholders should be aware that aside from their interests as stockholders of Alon, Alon’s directors and executive officers have interests in the Alon Merger that may be different from, or in addition to, those of other stockholders of Alon generally. The members of the Alon Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the Alon Merger, and in recommending to the stockholders of Alon that the merger agreement be approved. See “The Mergers—Background of the Mergers” and “The Mergers—Alon’s Reasons for the Transaction; Recommendations of the Special Committee and the Alon Board” beginning on pages 79 and 129, respectively.
Voting by Delek’s Directors and Executive Officers (Page 63)
As of February 17, 2017, the directors and executive officers of Delek beneficially owned, in the aggregate, 1,028,501 shares (or approximately 1.66%) of the Delek common stock. For additional information regarding the votes required to approve the proposals to be voted on at the Delek special meeting, see “The Delek Special Meeting of Stockholders” beginning on page 63. The directors and executive officers of Delek have informed Delek that they currently intend to vote all of their shares of Delek common stock for the proposals to be voted on at the Delek special meeting.
Voting by Alon’s Directors and Executive Officers (Page 72)
As of February 17, 2017, the directors and executive officers of Alon beneficially owned, in the aggregate, 6,149,402 shares (or approximately 8.6%) of the Alon common stock. For additional information regarding the voting required to approve the proposals to be voted on at the Alon special meeting, see “The Alon Special Meeting of Stockholders” beginning on page 68. The directors and executive officers of Alon have informed Alon that they currently intend to vote all of their Alon common stock for the proposals to be voted on at the Alon special meeting. In addition, pursuant to the voting agreements, David Wiessman, D.B.W. Holdings (2005) Ltd., Jeff Morris, Karen Morris and Delek, who collectively hold approximately 6.0% of the issued and outstanding Alon common stock, agreed to vote their shares of Alon common stock in favor of the Alon merger proposal being presented at the Alon special meeting. For additional information regarding the voting agreements, see “The Voting Agreements” beginning on page 196.
Appraisal Rights (Page 235)
Neither the Alon stockholders nor the Delek stockholders will have appraisal rights under the Delaware General Corporation Law with respect to Mergers. For additional information regarding appraisal rights, see “No Appraisal Rights”ASC 740, Income Taxes (ASC 740).
Comparison of the Rights of Holders of New Delek Common StockStockholders and AlonALDW Common Stock (Page 216)Unitholders (page [●])
Delek is a corporation and ALDW is a limited partnership. Ownership interests in a limited partnership are fundamentally different from ownership interests in a corporation. The rights of AlonDelek stockholders who receive shares of New Delek common stock in the Mergers will beare governed by the certificate of incorporation of HoldCo and the bylaws of HoldCo rather than by the secondDelek’s amended and restated certificate of incorporation (as amended, the “Delek certificate of Alon and theincorporation”), Delek’s amended and restated bylaws (the “Delek bylaws”) and the Delaware General Corporation Law (“DGCL”). The rights of Alon. As a result, Alon stockholdersALDW Common Unitholders are governed by the ALDW Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act (the “Delaware LP Act”). If the Merger is completed, the rights of former ALDW Common Unitholders as Delek Shareholders will have differentbe governed by the Delek certificate of incorporation and Delek bylaws and the DGCL. There are many differences between the rights once they become stockholders of HoldCo dueALDW Common Unitholders and the rights of Delek stockholders. Some of these differences, for example, with respect to distribution/dividend and voting rights, are significant. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist. ALDW Common Unitholders should read carefully the differencesrelevant provisions of the Delek certificate of incorporation and Delek bylaws and the ALDW Partnership Agreement. Copies of the documents referred to in the governing documents of Alon and HoldCo. The key differences arethis summary may be obtained as described in the section entitled “Comparisonunder “Comparison of the Rights of HoldersDelek Common Stockholders and ALDW Common Unitholders.”
Written Consents of NewALDW Common Unitholders (page [●])
Adoption and approval of the Merger Agreement and the Merger requires the affirmative vote or consent of holders owning a majority of the outstanding ALDW Common Units. See “Written Consents of ALDW Common Unitholders.” Pursuant to the terms of the Support Agreement, AAI, which as of [●], 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the outstanding ALDW Common Units, has irrevocably agreed to deliver the AAI Written Consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, within two business days after the effectiveness of the registration statement of which this consent statement/prospectus forms a part. The delivery of the AAI Written Consent by AAI with respect to the ALDW Common Units it owns will be sufficient to adopt the Merger Agreement and thereby approve the Merger.
Summary of Risk Factors
The Merger poses a number of risks to the ALDW Common Unitholders who would become Delek Common Stockholders if the Merger is consummated. Some of these risks include, but are not limited to, those described below and in more detail under the headings “Risk Factors—Risks Related to the Merger” and “Risk Factors—Tax Risks Related to the Merger”:
The number of shares of Delek Common Stock and Alonthat ALDW Public Unitholders will receive in the Merger is based upon a fixed Exchange Ratio. As a result, the market value of the Delek Common Stock” that ALDW Public Unitholders receive for their ALDW Public Units in the Merger will fluctuate until the closing date of the Merger.
The market price of Delek Common Stock is affected by factors different from those affecting the market price of the ALDW Common Units. The price of Delek Common Stock could decline following the Merger.
The Merger is subject to closing conditions that, if not satisfied or waived, will result in the Merger not being consummated, which may cause the market price of the ALDW Common Units to decline.
Financial projections regarding ALDW and Delek may not be achieved.
While the Merger Agreement is in effect, Delek and ALDW may lose opportunities to enter into other transactions with other parties on more favorable terms.
The ALDW Partnership Agreement limits the liability of ALDW GP to the ALDW Common Unitholders, and replaces the default duties of a general partner arising under applicable law with contractual standards under the ALDW
Partnership Agreement. The ALDW Partnership Agreement also restricts the remedies available to ALDW Common Unitholders for actions that might otherwise constitute a breach of ALDW GP’s duties.
Certain directors and executive officers of ALDW GP may have interests that differ in certain respects from ALDW Public Unitholders.
The Merger should be a taxable transaction and the resulting tax liability of an ALDW Common Unitholder, if any, will depend on each such ALDW Common Unitholder’s particular situation.
The U.S. federal income tax treatment of owning and disposing of Delek Common Stock received in the Merger will be different than the U.S. federal income tax treatment of owning and disposing of ALDW Common Units.
In addition, both ALDW and Delek are subject to various risks associated with their respective businesses. Please carefully read this consent statement/prospectus, the documents incorporated herein by reference and the documents to which you are referred. See “Risk Factors” beginning on page 216.[●].
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATAINFORMATION OF DELEK
The following table sets forth selected historical consolidated financial data for Delek, adjusted in respect of all periods for Delek’s sale, in November 2016, of its retail related assets, including MAPCO Express, Inc. and certain related affiliated companies. The historical consolidated financial information for each of the years in the five-year period ended December 31, 2016 is derived from the recasted consolidated financial statements of Delek as of and for each of the years in the five-year period ended December 31, 2016. The historical consolidated financial information for each of the nine months ended September 30, 2017 and 2016 is derived from the condensed consolidated financial statements of Delek as of and for each of the nine months ended September 30, 2017 and 2016. Beginning on July 1, 2017, the Delek-ALJ Effective Time, the historical consolidated financial data of Delek reflects the acquisition of Alon Energy, which was accounted for using the acquisition method as required by ASC 805, Business Combinations, and which requires, among other things, that assets acquired at their fair values and liabilities assumed be recognized on the balance sheet as of the acquisition date. Beginning July 1, 2017, Delek's consolidated results of operations reflect those of the combined entity, inclusive of Alon Energy. You should not assume the results of operations for any past periods indicate results for any future period, including with respect to the future performance of Delek following the date of this joint proxyconsent statement/prospectus or following the completion of the Mergers.Merger. You should read this information in conjunction with Delek’s consolidated financial statements and related notes thereto included in Old Delek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Delek’s condensed consolidated financial statements and related notes thereto included in Delek’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, which isare incorporated by reference into this joint proxyconsent statement/prospectus. See “Where“Where You Can Find More InformationInformation.” beginning on page 240. For financial information giving effect to the MergersMerger and the transactions contemplated by the merger agreement,Merger, see “Unaudited“Unaudited Pro Forma Condensed Combined Financial InformationInformation.” beginning on page 206.
| | | | | Year Ended December 31, | Nine Months Ended September 30, | Year Ended December 31, |
| | | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 |
| Consolidated Statements of Income Data: | | (In millions, except share and per share data) | (In millions, except share and per share data) |
| Net sales | | $ | 4,197.9 |
| | $ | 4,782.0 |
| | $ | 7,019.2 |
| | $ | 7,184.2 |
| | $ | 6,977.0 |
| $ | 4,754.3 |
| $ | 3,113.3 |
| $ | 4,197.9 |
| $ | 4,782.0 |
| $ | 7,019.2 |
| $ | 7,184.2 |
| $ | 6,977.0 |
|
| Insurance proceeds — business interruption | | $ | (42.4 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
| (Loss) income from continuing operations | | $ | (219.7 | ) | | $ | 37.1 |
| | $ | 225.3 |
| | $ | 136.4 |
| | $ | 279.5 |
| |
| Income (loss) from discontinued operations, net of tax | | $ | 86.3 |
| | $ | 6.6 |
| | $ | 0.7 |
| | $ | (0.7 | ) | | $ | (3.5 | ) | |
| Net (loss) income attributable to Delek | | $ | (153.7 | ) | | $ | 19.4 |
| | $ | 198.6 |
| | $ | 117.7 |
| | $ | 272.8 |
| |
| | | | | | | | | | | | |
| Total basic (loss) earnings per share | | $ | (2.49 | ) | | $ | 0.32 |
| | $ | 3.38 |
| | $ | 1.99 |
| | $ | 4.65 |
| |
| | | | | | | | | | | | |
| Total diluted (loss) earnings per share | | $ | (2.49 | ) | | $ | 0.32 |
| | $ | 3.34 |
| | $ | 1.96 |
| | $ | 4.57 |
| |
| Insurance proceeds - business interruption | | — |
| (42.4 | ) | (42.4 | ) | — |
| — |
| — |
| — |
|
| Income (loss) from continuing operations | | $ | 101.6 |
| $ | (187.7 | ) | $ | (219.7 | ) | $ | 37.1 |
| $ | 225.3 |
| $ | 136.4 |
| $ | 279.5 |
|
| (Loss) income from discontinued operations, net of tax | | $ | (4.1 | ) | $ | 5.5 |
| $ | 86.3 |
| $ | 6.6 |
| $ | 0.7 |
| $ | (0.7 | ) | $ | (3.5 | ) |
| Net income (loss) | | $ | 97.5 |
| $ | (182.2 | ) | $ | (133.4 | ) | $ | 43.7 |
| $ | 226.0 |
| $ | 135.7 |
| $ | 276.0 |
|
| Net income (loss) attributable to Delek | | $ | 77.7 |
| $ | (197.9 | ) | $ | (153.7 | ) | $ | 19.4 |
| $ | 198.6 |
| $ | 117.7 |
| $ | 272.8 |
|
| Total basic earnings (loss) per share | | $ | 1.14 |
| $ | (3.19 | ) | $ | (2.49 | ) | $ | 0.32 |
| $ | 3.38 |
| $ | 1.99 |
| $ | 4.65 |
|
| Total diluted earnings (loss) per share | | $ | 1.13 |
| $ | (3.19 | ) | $ | (2.49 | ) | $ | 0.32 |
| $ | 3.34 |
| $ | 1.96 |
| $ | 4.57 |
|
| Weighted average common shares outstanding: | | | | | | | | | | | |
| Basic | | 61,921,787 |
| | 60,819,771 |
| | 58,780,947 |
| | 59,186,921 |
| | 58,719,968 |
| 68,272,918 |
| 61,931,040 |
| 61,921,787 |
| 60,819,771 |
| 58,780,947 |
| 59,186,921 |
| 58,719,968 |
|
| Diluted | | 61,921,787 |
| | 61,320,570 |
| | 59,355,120 |
| | 60,047,138 |
| | 59,644,798 |
| 68,975,974 |
| 61,931,040 |
| 61,921,787 |
| 61,320,570 |
| 59,355,120 |
| 60,047,138 |
| 59,644,798 |
|
| Dividends declared per common share outstanding | | $ | 0.60 |
| | $ | 0.60 |
| | $ | 1.00 |
| | $ | 0.95 |
| | $ | 0.60 |
| $ | 0.45 |
| $ | 0.45 |
| $ | 0.60 |
| $ | 0.60 |
| $ | 1.00 |
| $ | 0.95 |
| $ | 0.60 |
|
| | | |
Consolidated Balance Sheet (as of period end) (1): | | |
| Cash and cash equivalents | | $ | 831.7 |
| $ | 315.3 |
| $ | 689.2 |
| $ | 287.2 |
| $ | 429.8 |
| $ | 383.2 |
| $ | 589.6 |
|
| Assets of discontinued operations held for sale | | 167.2 |
| 471.5 |
| — |
| 478.8 |
| 485.9 |
| 480.6 |
| 437.9 |
|
| Total current assets | | 2,270.6 |
| 1,416.5 |
| 1,396.9 |
| 1,397.5 |
| 1,656.0 |
| 1,810.3 |
| 1,715.0 |
|
| Property, plant and equipment, net | | 2,147.7 |
| 1,113.5 |
| 1,103.3 |
| 1,177.4 |
| 1,099.2 |
| 944.3 |
| 834.2 |
|
| Total assets | | $ | 5,569.1 |
| $ | 3,019.5 |
| $ | 2,979.8 |
| $ | 3,324.9 |
| $ | 2,888.7 |
| $ | 2,840.4 |
| $ | 2,623.7 |
|
| Liabilities of discontinued operations held for sale | | $ | 103.1 |
| $ | 286.7 |
| $ | — |
| $ | 302.8 |
| $ | 259.1 |
| $ | 235.5 |
| $ | 266.4 |
|
| Total current liabilities | | 2,084.2 |
| 1,027.7 |
| 935.2 |
| 1,004.1 |
| 1,057.5 |
| 1,250.3 |
| 1,168.3 |
|
| Total debt, including current maturities | | 1,427.8 |
| 827.7 |
| 832.9 |
| 805.2 |
| 464.8 |
| 313.1 |
| 249.7 |
|
| Total non-current liabilities | | 1,701.3 |
| 1,027.7 |
| 862.1 |
| 966.9 |
| 632.8 |
| 469.7 |
| 377.4 |
|
| Total shareholders' equity | | 1,783.6 |
| 1,147.3 |
| 1,182.5 |
| 1,353.9 |
| 1,198.4 |
| 1,120.4 |
| 1,078.0 |
|
| Total liabilities and shareholders' equity | | $ | 5,569.1 |
| $ | 3,019.5 |
| $ | 2,979.8 |
| $ | 3,324.9 |
| $ | 2,888.7 |
| $ | 2,840.4 |
| $ | 2,623.7 |
|
(1) Certain December 31, 2016 balance sheet amounts reflect reclassifications made in Delek's quarterly report(s) on Form 10-Q to conform to the 2017 balance sheet presentation. |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2016 | | 2015 | | 2014 | | 2013 | | 2012 |
| Consolidated Balance Sheet Data: | | | | (In millions) | | |
| Cash and cash equivalents | | $ | 689.2 |
| | $ | 287.2 |
| | $ | 429.8 |
| | $ | 383.2 |
| | $ | 589.6 |
|
| Assets of discontinued operations held for sale | | — |
| | 478.8 |
| | 485.9 |
| | 480.6 |
| | 437.9 |
|
| Total current assets | | 1,402.2 |
| | 1,397.5 |
| | 1,656.0 |
| | 1,810.3 |
| | 1,715.0 |
|
| Property, plant and equipment, net | | 1,103.3 |
| | 1,177.4 |
| | 1,099.2 |
| | 944.3 |
| | 834.2 |
|
| Total assets | | 2,985.1 |
| | 3,324.9 |
| | 2,888.7 |
| | 2,840.4 |
| | 2,623.7 |
|
| Liabilities of discontinued operations held for sale | | — |
| | 302.8 |
| | 259.1 |
| | 235.5 |
| | 266.4 |
|
| Total current liabilities | | 940.5 |
| | 1,004.1 |
| | 1,057.5 |
| | 1,250.3 |
| | 1,168.3 |
|
| Total debt, including current maturities | | 832.9 |
| | 805.2 |
| | 464.8 |
| | 313.1 |
| | 249.7 |
|
| Total non-current liabilities | | 862.1 |
| | 966.9 |
| | 632.8 |
| | 469.7 |
| | 377.4 |
|
| Total shareholders' equity | | 1,182.5 |
| | 1,353.9 |
| | 1,198.4 |
| | 1,120.4 |
| | 1,078.0 |
|
| Total liabilities and shareholders' equity | | 2,985.1 |
| | 3,324.9 |
| | 2,888.7 |
| | 2,840.4 |
| | 2,623.7 |
|
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATAINFORMATION OF ALONALDW
The following table sets forth selected historical consolidated financial data for Alon. ALDW. As a result of the Delek-ALJ Merger, ALDW became a consolidated subsidiary of Delek and elected to apply “push-down” accounting, which required its assets and liabilities to be adjusted to fair value on the effective date of the Delek-ALJ Merger. Due to the application of push-down accounting, ALDW’s consolidated financial statements are presented in two distinct periods to indicate the application of two different bases of accounting between the periods presented. ALDW’s consolidated financial statements are presented with a black-line division, which delineates the lack of comparability between amounts presented on or after July 1, 2017, and dates prior. The periods prior to the Delek-ALJ Effective Time, July 1, 2017, are identified as “Predecessor” and the period from July 1, 2017, forward is identified as “Successor”. Additionally, ALDW’s accounting policies were conformed to those of Delek at the start of the Successor period, in connection with the Delek-ALJ Merger, effective July 1, 2017. Because of the application of push-down accounting and the conforming of accounting policies, ALDW’s Successor consolidated balance sheet and consolidated statements of operations and comprehensive income (loss) subsequent to the Delek-ALJ Merger are not comparable to the Predecessor’s consolidated balance sheet and consolidated statements of operations and comprehensive income (loss) prior to the Delek-ALJ Merger, and differences could be material.
The historical consolidated financial information for each of the years in the five-year period ended December 31, 2016 is derived from the audited consolidated financial statements of AlonALDW as of and for each of the years in the five-year period ended December 31, 2016, presented on the Predecessor basis of accounting. The historical consolidated financial information for the Predecessor six-month period ended June 30, 2017, the Successor three-month period ended September 30, 2017, and the Predecessor nine-month period ended September 30, 2016 is derived from the condensed consolidated financial statements of ALDW as of and for the Predecessor six-month period ended June 30, 2017, the Successor three-month period ended September 30, 2017, and the Predecessor nine-month period ended September 30, 2016. You should not assume the results of operations for any past periods indicate results for any future period, including with respect to the future performance of AlonALDW following the date of this joint proxyconsent statement/prospectus or following the completion of the Mergers.Merger. You should read this information in conjunction with Alon’sALDW’s consolidated financial statements and related notes thereto included in Alon’sALDW’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and ALDW’s condensed consolidated financial statements and related notes thereto included in ALDW’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2017, which isare incorporated by reference into this joint proxyconsent statement/prospectus. See “Where“Where You Can Find More InformationInformation.” beginning on page 240. For financial information giving effect to the MergersMerger and the transactions contemplated by the merger agreement,Merger Agreement, see “Unaudited“Unaudited Pro Forma Condensed Combined Financial InformationInformation.”
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | | | Predecessor |
| | Period from July 1, 2017 to September 30, 2017 | | | Period from January 1, 2017 to June 30, 2017 | Nine Months Ended September 30, 2016 | December 31, 2016 | December 31, 2015 | December 31, 2014 | December 31, 2013 | December 31, 2012 |
| | (In thousands, except per unit data) |
Statements of Operations Data (1): | | | | | | | | | | |
| Net sales | $ | 495,478 |
| | | $ | 1,066,283 |
| $ | 1,298,723 |
| $ | 1,807,732 |
| $ | 2,157,191 |
| $ | 3,221,373 |
| $ | 3,430,287 |
| $ | 3,476,817 |
|
| Operating income | 38,183 |
| | | 59,409 |
| 23,306 |
| 32,668 |
| 203,506 |
| 217,979 |
| 178,677 |
| 423,352 |
|
| Net income (loss) | $ | 29,236 |
| | | $ | 41,792 |
| $ | (5,288 | ) | $ | (4,404 | ) | $ | 156,899 |
| $ | 169,135 |
| $ | 136,222 |
| $ | 381,898 |
|
| Less: Net income attributable to predecessor operations | — |
| | | — |
| — |
| — |
| — |
| — |
| — |
| 344,778 |
|
| Net income (loss) attributable to Alon USA Partners, LP | $ | 29,236 |
| | | $ | 41,792 |
| $ | (5,288 | ) | $ | (4,404 | ) | $ | 156,899 |
| $ | 169,135 |
| $ | 136,222 |
| $ | 37,120 |
|
Earnings (loss) per unit (1) | $ | 0.47 |
| | | $ | 0.67 |
| $ | (0.08 | ) | $ | (0.07 | ) | $ | 2.51 |
| $ | 2.71 |
| $ | 2.18 |
| $ | 0.59 |
|
| Weighted average common units outstanding (in thousands) | 62,529 |
| | | 62,523 |
| 62,515 |
| 62,516 |
| 62,509 |
| 62,505 |
| 62,502 |
| 62,500 |
|
| Cash distribution per unit | $ | 0.35 |
| | | $ | 0.49 |
| $ | 0.22 |
| $ | 0.37 |
| $ | 3.43 |
| $ | 2.02 |
| $ | 2.76 |
| $ | — |
|
| | | | | | | | | | | |
| Balance Sheet Data (as of period end): | | | | | | | | | | |
| Cash and cash equivalents | $ | 268,572 |
| | | | $ | 203,763 |
| $ | 73,524 |
| $ | 132,953 |
| $ | 106,325 |
| $ | 153,583 |
| $ | 66,001 |
|
| Working capital | (12,615 | ) | | | | 10,460 |
| (73,563 | ) | (53,804 | ) | (4,561 | ) | 18,007 |
| 1,702 |
|
| Total assets | 1,497,710 |
| | | | 825,050 |
| 695,637 |
| 748,584 |
| 765,859 |
| 844,628 |
| 756,166 |
|
| Total debt | 338,125 |
| | | | 291,486 |
| 236,319 |
| 292,082 |
| 297,989 |
| 339,026 |
| 288,054 |
|
| Total debt less cash and cash equivalents | 69,553 |
| | | | 87,723 |
| 162,795 |
| 159,129 |
| 191,664 |
| 185,443 |
| 222,053 |
|
| Partner's equity | 662,683 |
| | | | 111,968 |
| 103,503 |
| 130,957 |
| 188,402 |
| 145,442 |
| 181,726 |
|
___________________________
(1)” beginning on page 206. Earnings (loss) per unit information presented for the year ended December 31, 2012 represents earnings subsequent to the completion of ALDW’s initial public offering in November 2012.
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2016 | | 2015 | | 2014 | | 2013 | | 2012 |
| | (dollars in millions, except share and per share data) |
| STATEMENTS OF OPERATIONS DATA: | | | | | | | | | |
| Net sales | $ | 3,913.4 |
| | $ | 4,338.2 |
| | $ | 6,779.5 |
| | $ | 7,046.4 |
| | $ | 8,017.7 |
|
Loss on impairment of goodwill(1) | $ | — |
| | $ | (39.0 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
| Operating income (loss) | $ | (67.4 | ) | | $ | 203.4 |
| | $ | 201.6 |
| | $ | 149.4 |
| | $ | 269.5 |
|
| Net income (loss) available to stockholders | $ | (82.8 | ) | | $ | 52.8 |
| | $ | 38.5 |
| | $ | 23.0 |
| | $ | 79.1 |
|
| Earnings (loss) per share, basic | $ | (1.17 | ) | | $ | 0.76 |
| | $ | 0.56 |
| | $ | 0.33 |
| | $ | 1.29 |
|
| Weighted average shares outstanding, basic | 70,739,000 |
| | 69,772,000 |
| | 68,985,000 |
| | 63,538,000 |
| | 57,501,000 |
|
| Earnings (loss) per share, diluted | $ | (1.17 | ) | | $ | 0.75 |
| | $ | 0.55 |
| | $ | 0.32 |
| | $ | 1.24 |
|
| Weighted average shares outstanding, diluted | 70,739,000 |
| | 70,714,000 |
| | 69,373,000 |
| | 64,852,000 |
| | 63,917,000 |
|
| Cash dividends per common share | $ | 0.60 |
| | $ | 0.55 |
| | $ | 0.53 |
| | $ | 0.38 |
| | $ | 0.16 |
|
| | | | | | | | | | |
| BALANCE SHEET DATA: | | | | | | | | | |
| Cash and cash equivalents | $ | 136.3 |
| | $ | 234.1 |
| | $ | 215.0 |
| | $ | 224.5 |
| | $ | 116.3 |
|
| Working capital | $ | 40.6 |
| | $ | 78.7 |
| | $ | 126.7 |
| | $ | 60.9 |
| | $ | 87.2 |
|
| Total assets | $ | 2,110.2 |
| | $ | 2,176.1 |
| | $ | 2,191.6 |
| | $ | 2,235.0 |
| | $ | 2,211.1 |
|
| Total debt | $ | 528.0 |
| | $ | 556.0 |
| | $ | 554.5 |
| | $ | 602.1 |
| | $ | 574.5 |
|
| Total debt less cash and cash equivalents | $ | 391.7 |
| | $ | 321.8 |
| | $ | 339.5 |
| | $ | 377.6 |
| | $ | 458.2 |
|
| Total equity | $ | 582.4 |
| | $ | 664.2 |
| | $ | 673.8 |
| | $ | 625.4 |
| | $ | 621.2 |
|
| |
(1)
| During the year ended December 31, 2015, Alon recognized a goodwill impairment loss of $39,028 related to its California refining reporting unit. |
SELECTED UNAUDITED PRO FORMA CONDENSED COMBINEDCONSOLIDATED FINANCIAL INFORMATION
The following table presents selected unaudited pro forma combined financial information aboutfor Delek’s consolidated balance sheet and consolidated statement of operations, after giving effect to the Mergers.Delek-ALJ Merger and the proposed Merger (collectively, the “Alon Mergers”). The pro forma condensed combined balance sheet gives effect to the Mergersproposed Merger as if the transactionstransaction had occurred on December 31, 2016.September 30, 2017. The pro forma combined statement of operations for the year ended December 31, 2016 and nine months ended September 30, 2017 gives effect to the Alon Mergers as if the transactions had become effective on January 1, 2016.
The unaudited pro forma condensed combined financial information includes adjustments which are based on the preliminary purchase price allocation related to the Delek-ALJ Merger as well as certain other assumptions that may change (as further described in the discussion and footnotes in "Unaudited Pro Forma Condensed Combined Financial Information") and therefore is preliminary and may be revised. There can be no assurance that such revisions will not result in material changes. In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing or other restructuring that may result from the Mergers.Alon Mergers (except to the extent that such savings have already been realized related to the Delek-ALJ Merger since the Delek-ALJ Effective Time). The information presented below should be read in conjunction with the historical consolidated financial statements of each of Delek, Alon Energy and Alon,ALDW, including the related notes, filed by each of them with the SEC, and with respect to the unaudited historical financial information of Alon Energy as of June 30, 2017, including the related notes, as furnished with the SEC pursuant to Form 8-K filed by Delek on August 3, 2017, and with the unaudited pro forma condensed combined financial statements of Delek and Alon Energy (inclusive of ALDW), including the related notes, appearing elsewhere in this joint proxyconsent statement/prospectus. See “Where“Where You Can Find More Information”Information” and “Unaudited“Unaudited Pro Forma Condensed Combined Financial Information,” beginning on pages 240 and 206, respectively,Information” for more information. The unaudited pro forma condensed combined financial data are not necessarily indicative of results that actually would have occurred or that may occur in the future had the Alon Mergers been completed on the dates indicated.
| | | (In millions, except share and per share data) | | Year Ended December 31, 2016 | | Nine Months Ended September 30, 2017 | | Year Ended December 31, 2016 |
| Pro Forma Statement of Combined Operations Information: | | | | | | |
| Net sales | | $ | 8,100.9 |
| | $ | 7,003.6 |
| | $ | 8,100.9 |
|
| Net (loss) income from continuing operations | | $ | (75.2 | ) | |
| Net (loss) income from continuing operations attributable to Delek | | $ | (98.5 | ) | |
| Basic & diluted loss per share: | | | |
| Net income (loss) | | | $ | 41.1 |
| | $ | (36.2 | ) |
| Net income (loss) attributable to Delek | | | $ | 28.9 |
| | $ | (60.3 | ) |
| Basic & diluted earnings (loss) per share: | | | | | |
| Basic | | $ | (1.21 | ) | | $ | 0.33 |
| | $ | (0.69 | ) |
| Diluted | | $ | (1.21 | ) | | $ | 0.33 |
| | $ | (0.69 | ) |
|
| | | | |
| (In millions) | | As of September 30, 2017 |
| Pro Forma Balance Sheet Information: | | |
| Total current assets | | $ | 2,267.2 |
|
| Total assets | | $ | 5,565.7 |
|
| Debt | | $ | 1,427.8 |
|
| Total liabilities | | $ | 3,768.1 |
|
| Shareholders' equity | | $ | 1,797.6 |
|
| Non-controlling interest | | $ | 181.2 |
|
|
| | | | |
| (In millions) | | As of December 31, 2016 |
| Pro Forma Combined Balance Sheet Information: | | |
| Total current assets | | $ | 1,836.1 |
|
| Total assets | | $ | 5,146.1 |
|
| Debt | | $ | 1,360.9 |
|
| Total liabilities | | $ | 3,416.4 |
|
| Shareholders' equity | | $ | 1,729.7 |
|
| Non-controlling interest | | $ | 301.1 |
|
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE FINANCIAL DATAAND PER UNIT INFORMATION
The following table sets forth for the year ended December 31, 2016, selected(i) historical per share information forof Delek, common stock on a historical and(ii) the unaudited pro forma combined basis and, for the year ended December 31, 2016, selected per share information of Delek after giving pro forma effect to the Merger and the transactions contemplated thereby, including Delek’s issuance of 0.4900 of a share of Delek Common Stock for Alon common stock on aeach outstanding ALDW Public Unit, and (iii) the historical and equivalent pro forma equivalent basis. Exceptper Common Unit information for ALDW.
The information should be read in conjunction with (i) the summary historical financial information as of and for the year ended December 31, 2016, which is derived from the audited financial statements, the informationincluded elsewhere in the table is unaudited. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Mergers and the other transactions contemplated by the merger agreement had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of Delek or Alon following the date of this joint proxyconsent statement/prospectus, or following the completion of the Mergers. You should read the data with(ii) the historical consolidated financial statements of Delek and ALDW and related notes of Delek and Alon contained in their respective Annual Reports on Form 10-K for the year ended December 31, 2016, both of whichthat are incorporated by reference intoin this joint proxyconsent statement/prospectus. See “Where You Can Find More Information” beginning on page 240.
The pro forma combined dataprospectus and Alon equivalent pro forma data for book value per share gives effect to(iii) the Mergers as if the Mergers had been effective as of December 31, 2016,“Unaudited Pro Forma Condensed Consolidated Financial Statements” and as if the Mergers had been effective as of January 1, 2016related notes included elsewhere in the case of the net loss per share data.this consent statement/prospectus. The unaudited pro forma data combinesper share and per ALDW Common Unit information does not purport to represent what the historicalactual results of Alon into Delek’s consolidated statementoperations of income. While certain adjustments were made for the estimated impact of fair value adjustmentsDelek and other activity related to the Mergers, they are not indicative of what couldALDW would have occurredbeen had the Mergers taken place on January 1, 2016.Merger been completed in another period or to project Delek’s and ALDW’s results of operations that may be achieved if the Merger is completed.
|
| | | | | | |
| | | |
| | Nine Months Ended
September 30, 2017 | Year Ended December 31, 2016 |
| | | |
| Delek Historical Data | | |
| Net income per common share: | | |
| Basic | $ | 1.14 |
| $ | (2.49 | ) |
| Diluted | $ | 1.13 |
| $ | (2.49 | ) |
| Cash dividends declared per share | $ | 0.45 |
| $ | 0.60 |
|
| Book value per share as of period end | $ | 18.18 |
| $ | 14.77 |
|
| ALDW Historical Data | | |
| Net income per ALDW Common Unit: | | |
| Basic | $ | 0.47 |
| $ | (0.07 | ) |
| Diluted | $ | 0.47 |
| $ | (0.07 | ) |
| Cash distributions declared per ALDW Common Unit | $ | 0.35 |
| $ | 0.37 |
|
| Book value per ALDW Common Unit as of period end | $ | 10.60 |
| $ | 1.66 |
|
| Unaudited pro forma combined | | |
| Net income per common share: | | |
| Basic | $ | 0.33 |
| $ | (0.69 | ) |
| Diluted | $ | 0.33 |
| $ | (0.69 | ) |
| Cash dividends declared per share | $ | 0.44 |
| $ | 0.99 |
|
| Book value per share as of period end | $ | 16.92 |
| N/A |
|
Equivalent basis unaudited pro forma combined(1) | | |
| Net income per share: | | |
| Basic | $ | 0.16 |
| $ | (0.34 | ) |
| Diluted | $ | 0.16 |
| $ | (0.34 | ) |
| Cash dividends declared per share | $ | 0.22 |
| $ | 0.49 |
|
| Book value per share as of period end | $ | 8.29 |
| N/A |
|
The(1) Equivalent basis unaudited pro forma combined net loss per share of common stock set forth below were calculated using the methodology as described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 206. Both Delek and Alonamounts have declared dividends on account of their respective common stock during the periods presented in the following table, as shown in the section entitled “Comparative Per Share Market Price and Dividend Information.” The pro forma combined book value per share was calculated by dividing total combined Delek and Alon pro forma common stockholders’ equity by pro forma equivalent shares of common stock. The pro forma Alon equivalent per common share amounts werebeen calculated by multiplying the unaudited pro forma combined per share amounts by the exchange ratio of 0.504.0.4900 Exchange Ratio.
The unaudited pro forma adjustments are based upon available information and certain assumptions that Delek and Alon management believe are reasonable. The unaudited pro forma data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of factors that may result as a consequence of the Mergers or consider any potential impacts of current market conditions or the Mergers on revenues, expense efficiencies, debt refinancing or restructuring, among other factors, nor the impact of possible business model changes. As a result, unaudited pro forma data is presented for illustrative purposes only and does not represent an attempt to predict or suggest future results. Upon completion
of the Mergers, the operating results of Alon will be reflected in the consolidated financial statements of Delek on a prospective basis.
|
| | | | |
| | | Year ended December 31, 2016 |
| Delek historical data | | |
| Net loss per share, basic and diluted | | $ | (2.49 | ) |
| Book value per share | | $ | 14.77 |
|
| Cash dividends per share | | $ | 0.60 |
|
| | | |
| Alon historical data | | |
| Net loss per share, basic and diluted | | $ | (1.17 | ) |
| Book value per share | | $ | 7.28 |
|
| Cash dividends per share | | $ | 0.60 |
|
| | | |
| Delek unaudited pro forma combined data | | |
| Net loss per share, basic and diluted | | $ | (1.21 | ) |
| Book value per share | | $ | 17.61 |
|
| Cash dividends per share | | $ | 0.99 |
|
COMPARATIVE PER SHARE MARKET PRICEPRICES, DIVIDEND AND DIVIDENDDISTRIBUTION INFORMATION
ALDW Common Units and Delek common stock isCommon Stock are listed on the NYSE under the symbolsymbols “ALDW” and “DK,” and Alon common stock is listed on NYSE under the symbol “ALJ.”respectively. The following table sets forth for the periods indicated the high and low reportedper unit sale pricesprice of ALDW Common Units and Delek Common Stock and the cash distributions per unit for each of the last three fiscal years and the current fiscal year. For periods prior to July 1, 2017, the effective date of the Delek-ALJ Merger, information is provided for Delek US Holdings, Inc. (now known as Delek US Energy, Inc.).
|
| | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | ALDW | Delek |
| | High | Low | Distribution(1) | High | Low | Dividend (2) |
| 2014 | | | | | | |
| First Quarter | $ | 16.89 |
| $ | 12.51 |
| $ | 0.69 |
| $ | 35.11 |
| $ | 26.39 |
| $ | 0.10 |
|
| Second Quarter | $ | 20.09 |
| $ | 16.00 |
| $ | 0.13 |
| $ | 34.07 |
| $ | 27.77 |
| $ | 0.10 |
|
| Third Quarter | $ | 20.73 |
| $ | 16.39 |
| $ | 1.02 |
| $ | 36.05 |
| $ | 27.48 |
| $ | 0.10 |
|
| Fourth Quarter | $ | 20.47 |
| $ | 11.63 |
| $ | 0.70 |
| $ | 32.60 |
| $ | 25.15 |
| $ | 0.10 |
|
| 2015 | | | | | | |
| First Quarter | $ | 20.25 |
| $ | 12.26 |
| $ | 0.71 |
| $ | 40.22 |
| $ | 25.38 |
| $ | 0.15 |
|
| Second Quarter | $ | 22.26 |
| $ | 17.50 |
| $ | 1.04 |
| $ | 41.15 |
| $ | 34.96 |
| $ | 0.15 |
|
| Third Quarter | $ | 26.16 |
| $ | 13.84 |
| $ | 0.98 |
| $ | 40.47 |
| $ | 27.32 |
| $ | 0.15 |
|
| Fourth Quarter | $ | 26.67 |
| $ | 20.08 |
| $ | 0.08 |
| $ | 29.90 |
| $ | 22.11 |
| $ | 0.15 |
|
| 2016 | | | | | | |
| First Quarter | $ | 23.14 |
| $ | 9.71 |
| $ — | $ | 24.74 |
| $ | 12.54 |
| $ | 0.15 |
|
| Second Quarter | $ | 13.03 |
| $ | 9.07 |
| $ | 0.14 |
| $ | 17.39 |
| $ | 11.41 |
| $ | 0.15 |
|
| Third Quarter | $ | 12.44 |
| $ | 8.07 |
| $ | 0.15 |
| $ | 18.57 |
| $ | 11.66 |
| $ | 0.15 |
|
| Fourth Quarter | $ | 10.35 |
| $ | 7.63 |
| $ | 0.11 |
| $ | 25.14 |
| $ | 14.76 |
| $ | 0.15 |
|
| 2017 | | | | | | |
| First Quarter | $ | 9.87 |
| $ | 9.07 |
| $ | 0.38 |
| $ | 26.06 |
| $ | 23.44 |
| $ | 0.15 |
|
| Second Quarter | $ | 11.84 |
| $ | 8.65 |
| $ | 0.35 |
| $ | 27.82 |
| $ | 24.08 |
| $ | 0.15 |
|
| Third Quarter | $ | 12.72 |
| $ | 9.97 |
| $ | 0.43 |
| $ | 27.85 |
| $ | 20.65 |
| $ | 0.15 |
|
| Fourth Quarter (through December 11, 2017) | $ | 16.38 |
| $ | 11.35 |
| $ | 0.43 |
| $ | 33.74 |
| $ | 25.02 |
| $ | 0.15 |
|
(1) Represents the cash available for distribution per unit attributable to the quarter indicated.
(2) Represents cash dividends per share of Delek common stockCommon Stock declared and Alon common stock, andpaid in the dividends per share declared by Delek and Alon, for the calendar quarters indicated, including special dividends declared by Delek for each calendar quarter of 2014 and by Alon for the fourth quarter of 2014.presented.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Delek common stock | | Alon common stock |
| | High | | Low | | Dividend Declared | | High | | Low | | Dividend Declared |
| 2014 | | | | | | | | | | | |
| First Quarter | $ | 35.11 |
| | $ | 26.39 |
| | $ | 0.25 |
| | $ | 17.04 |
| | $ | 12.92 |
| | $ | 0.06 |
|
| Second Quarter | $ | 34.07 |
| | $ | 27.77 |
| | $ | 0.25 |
| | $ | 17.58 |
| | $ | 12.43 |
| | $ | 0.06 |
|
| Third Quarter | $ | 36.05 |
| | $ | 27.48 |
| | $ | 0.25 |
| | $ | 17.31 |
| | $ | 12.08 |
| | $ | 0.10 |
|
| Fourth Quarter | $ | 34.56 |
| | $ | 25.15 |
| | $ | 0.25 |
| | $ | 17.17 |
| | $ | 11.64 |
| | $ | 0.31 |
|
| 2015 | | | | | | | | | | | |
| First Quarter | $ | 40.22 |
| | $ | 25.38 |
| | $ | 0.15 |
| | $ | 17.15 |
| | $ | 10.28 |
| | $ | 0.10 |
|
| Second Quarter | $ | 41.15 |
| | $ | 34.96 |
| | $ | 0.15 |
| | $ | 19.09 |
| | $ | 15.41 |
| | $ | 0.15 |
|
| Third Quarter | $ | 40.47 |
| | $ | 27.32 |
| | $ | 0.15 |
| | $ | 23.29 |
| | $ | 16.95 |
| | $ | 0.15 |
|
| Fourth Quarter | $ | 29.90 |
| | $ | 22.11 |
| | $ | 0.15 |
| | $ | 19.84 |
| | $ | 14.65 |
| | $ | 0.15 |
|
| 2016 | | | | | | | | | | | |
| First Quarter | $ | 24.74 |
| | $ | 12.54 |
| | $ | 0.15 |
| | $ | 15.09 |
| | $ | 9.20 |
| | $ | 0.15 |
|
| Second Quarter | $ | 17.39 |
| | $ | 11.41 |
| | $ | 0.15 |
| | $ | 11.75 |
| | $ | 5.93 |
| | $ | 0.15 |
|
| Third Quarter | $ | 18.57 |
| | $ | 11.66 |
| | $ | 0.15 |
| | $ | 8.74 |
| | $ | 5.86 |
| | $ | 0.15 |
|
| Fourth Quarter | $ | 25.14 |
| | $ | 14.76 |
| | $ | 0.15 |
| | $ | 11.94 |
| | $ | 6.98 |
| | $ | 0.15 |
|
| 2017 | | | | | | | | | | | |
First Quarter
(through February 24, 2017) | $ | 26.06 |
| | $ | 21.03 |
| | $ | — |
| | $ | 13.01 |
| | $ | 10.75 |
| | $ | — |
|
The following table presents trading information for Delek common stock and Alon common stock on December 30, 2016, the last full trading day before the public announcement of the proposed acquisition of Alon by Delek, and February 24, 2017, the latest practicable trading day before the date of this joint proxy statement/prospectus.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Delek common stock | | Alon common stock |
| | High | | Low | | Close | | High | | Low | | Close |
| December 30, 2016 | $ | 24.69 |
| | $ | 23.83 |
| | $ | 24.07 |
| | $ | 11.75 |
| | $ | 11.30 |
| | $ | 11.38 |
|
| February 24, 2017 | $ | 23.38 |
| | $ | 22.86 |
| | $ | 23.19 |
| | $ | 11.76 |
| | $ | 11.47 |
| | $ | 11.65 |
|
For illustrative purposes, the following table provides equivalent per share information for Alon common stock on December 30, 2016, the last full trading day before the public announcement of the proposed acquisition of Alon by Delek, and February 24, 2017, the latest practicable trading day before the date of this joint proxy statement/prospectus. Equivalent per share amounts for Alon common stock are calculated by multiplying per share information for Delek common stock by the exchange ratio of 0.504, rounded to the nearest whole cent.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Delek common stock | | Alon common stock |
| | High | | Low | | Close | | High | | Low | | Close |
| December 30, 2016 | $ | 24.69 |
| | $ | 23.83 |
| | $ | 24.07 |
| | $ | 12.44 |
| | $ | 12.01 |
| | $ | 12.13 |
|
| February 24, 2017 | $ | 23.38 |
| | $ | 22.86 |
| | $ | 23.19 |
| | $ | 11.78 |
| | $ | 11.52 |
| | $ | 11.69 |
|
Delek stockholders and Alon stockholders are advised toYou should obtain current market quotations for ALDW Common Units and Delek common stock and Alon common stock. TheCommon Stock, as the market price of ALDW Common Units and Delek common stock and Alon common stockCommon Stock will fluctuate between the date of this joint proxyconsent statement/prospectus and the date on which the Merger is completed and thereafter. You can obtain these quotations from publicly available sources.
As of [●], 2017, there were approximately [●] record holders of ALDW Common Units.
The following table shows the closing sale prices of ALDW Common Units and Delek Common Stock as reported on the NYSE on November 8, 2017, the last full trading day prior to the public announcement of the proposed Merger, and on December 11, 2017, the last practicable trading day prior to the filing date of this consent statement/prospectus. This table also shows the value of each ALDW Common Unit implied by the Merger Consideration being offered, calculated by multiplying the relevant price of a share of Delek Common Stock by the Exchange Ratio of 0.4900.
|
| | | | | | | | | |
| | ALDW | Delek | Implied Value of One ALDW Public Common Unit |
| November 8, 2017 | $ | 13.58 |
| $ | 28.27 |
| $ | 13.85 |
|
| December 11, 2017 | $ | 15.95 |
| $ | 32.59 |
| $ | 16.28 |
|
The market prices of ALDW Common Units and Delek Common Stock have fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate prior to, and in the case of Delek Common Stock, after, completion of the Mergers.Merger. No assurance can be given concerning the market priceprices of Delek common stockCommon Stock or Alon common stockALDW Common Units before the completion of the MergersMerger or the market price of New Delek common stockCommon Stock after the effective timecompletion of the Mergers. ChangesMerger. The Exchange Ratio is fixed in the Merger Agreement, but the market price of Delek common stock prior toCommon Stock (and therefore the completion of the Mergers will affect the market value of the merger consideration that Alon stockholders will receive upon completionMerger Consideration) when received by ALDW Public Unitholders after the Merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, these comparisons may not provide meaningful information to ALDW Common Unitholders in determining whether to consent to the approval and adoption of the AlonMerger Agreement and the Merger.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy ALDW Common Unitholders are encouraged to obtain current market quotations for Delek Common Stock and ALDW Common Units and to review carefully the other information contained in this consent statement/prospectus and the documentsor incorporated by reference into this joint proxy statement/prospectus contain forward-looking statementsherein. For more information, see “Where You Can Find More Information.”
Delek generally expects to pay quarterly dividends, subject to the Delek Board’s approval and compliance with restrictions in Delek’s outstanding financing agreements and the DGCL.
ALDW generally expects to make cash distributions to unitholders of record on the applicable record date within 60 days after the meaningend of each quarter. Aggregate distributions will be equal to the amount of Available Cash generated in such quarter which generally equals ALDW’s cash flow from operations for the quarter, less cash needed for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs that the ALDW GP Board deems necessary or appropriate, including reserves for future ALDW expenses.
ALDW and Delek will endeavor to coordinate regarding the declaration of any dividends or distributions during the period from the execution of the federal securities lawsMerger Agreement to the date that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events in relation to each of Delek, Alon and the combined company, and other statements, concerns or matters that are not historical facts are “forward-looking statements,” as that termMerger is defined under the federal securities laws. Words such as “estimate,” “project,” “plan,” “intend,” “expect,” “anticipate,” “believe,” “would,” “should,” “could” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are found at various places throughout this joint proxy statement/prospectus, including in the section entitled “Risk Factors” beginning on page 47. These forward-looking statements, wherever they occur in this joint proxy statement/prospectus or the documents incorporated by reference, include, but are not limited to, statements regarding the proposed Mergers, integration and transition plans, synergies, opportunities, anticipated future performance and financial position and other factors. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those set forth in Delek’s and Alon’s filingsconsummated with the SEC, including their respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2016, as well as, among others, risks and uncertainties relating to:
the expected timing and likelihood of completionintent that no ALDW Public Unitholder will fail to be entitled to receive any quarterly distribution by ALDW unless it becomes entitled to receive a quarterly dividend from Delek in respect of the proposed Mergers, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed Mergers that could reduce anticipated benefits or cause the parties to abandon the transaction;
the ability to successfully integrate the businesses;
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
the possibility that stockholders of Delek may not approve the issuance of shares of New Delek common stock in the Alon Merger or that stockholders of Alon may not approve the merger agreement;
the parties may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all;
disruption of management time from ongoing business operations due to the proposed transaction;
any announcements relating to the proposed transaction could have adverse effects on the market price of Delek’s common stock or Alon’s common stock;same period.
the proposed transaction and its announcement could have an adverse effect on the ability of Delek and Alon to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally;
problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected;
the combined company may be unable to achieve cost-cutting synergies or it may take longer than expected to achieve those synergies;
the results of any merger-related litigation, settlements and investigations;
uncertainty related to timing and amount of future Delek share repurchases and dividend payments;
risks and uncertainties with respect to the quantities and costs of crude oil Delek is able to obtain and the price of the refined petroleum products Delek ultimately sells;
gains and losses from derivative instruments;
Delek management’s ability to execute its strategy of growth through acquisitions and the transactional risks associated with acquisitions and dispositions;
acquired assets may suffer a diminishment in fair value as a result of which Delek may need to record a write-down or impairment in carrying value of the asset;
changes in the scope, costs, and/or timing of capital and maintenance projects;
operating hazards inherent in transporting, storing and processing crude oil and intermediate and finished petroleum products;
Delek’s competitive position and the effects of competition;
the projected growth of the industries in which we operate;
general economic and business conditions affecting the southern United States; and
other developments in the markets in which Delek and Alon operate, as well as management’s response to any of the aforementioned factors.
Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at or by which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management’s good faith belief with respect to future events, and is subject to risks and
uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.
The parties undertake no obligation to publicly update or revise any such forward-looking statements, except as required by applicable law or regulation.
RISK FACTORS
In addition to the other information contained in or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 44 of this joint proxy statement/prospectus, Delek stockholders should carefully consider the following risks in deciding whether to vote for the approval of the Delek proposals, and Alon stockholdersYou should carefully consider the following risk factors, in deciding whether to vote for the Alon proposals. In addition, stockholders of Delek and stockholders of Alon should read and consider the risks associatedtogether with eachall of the businesses ofother information in this consent statement/prospectus, the documents incorporated herein by reference and the documents to which you are referred herein. In particular, please read Part I, Item 1A, “Risk Factors,” in the Old Delek and Alon because these risks will relate to the combined company. Certain of these risks can be found in Delek’s and Alon’s respective Annual ReportsReport on Form 10-K for the year ended December 31, 2016, bothas amended, and the ALDW Annual Report on Form 10-K for the year ended December 31, 2016 and Part I, Item 1A, “Risk Factors,” in the subsequent Quarterly Reports on Form 10-Q filed by each of Old Delek, New Delek and ALDW, each of which areis incorporated by reference into this joint proxy statement/prospectus. You should carefully read this entire joint proxyherein. Each of these factors could adversely affect the consummation of the Merger, Delek’s business, operating results and financial condition, the value of an investment in Delek Common Stock and ALDW’s business. This consent statement/prospectus also contains forward-looking statements that involve risks and its Annexes and the other documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240 of this joint proxy statement/prospectus.uncertainties. Please read “Cautionary Statement Regarding Forward-Looking Information.”
Risks Related to the MergersMerger
The exchange ratio is fixed and will not be adjusted in the event of any change in the stock prices of either Delek or Alon.
Upon closing of the Alon Merger, each issued and outstanding share of Alon common stock (other than Alon common stock held by Delek or any subsidiary of Delek) will be converted into the right to receive 0.504 shares of New Delek common stock with cash paid in lieu of fractional shares. This exchange ratio is fixed in the merger agreement and will not be adjusted for changes in the market price of either Delek common stock or Alon common stock prior to the completion of the Mergers. Because the exchange ratio is fixed, changes in the price of Delek common stock prior to the Alon Merger will affect the value of the merger consideration that Alon stockholders will receive on the date of the Alon Merger. In addition, HoldCo will issue an amount of shares of New Delek common stock in the Alon Merger based on the number of shares of Alon common stock outstanding asDelek Common Stock that holders of the effective time of the Alon Merger, and the amount of shares of New Delek common stock issuedALDW Common Units will be entitled to receive in the Alon Merger will not changeis based on the price of the shares of Delek common stock or Alon common stock as of the date of the Alon Merger or their relative price, or any changes in their price or relative price prior to the Alon Merger.
Stock price changes may result fromupon a variety of factors (many of which are beyond our control), including the following:
changes in our respective businesses, operations and prospects;
changes in market assessments of the business, operations, and prospects of either company;
investor behavior and strategies, including market assessments of the likelihood that the Mergers will be completed;
interest rates, general market and economic conditions and other factors generally affecting the price of Delek’s and Alon’s common stock; and
federal, state, and local legislation, governmental regulation, and legal developments in the jurisdictions in which Alon and Delek operate.
The price of Delek common stock at the closing of the Mergers may vary from its price on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus, and/or on the dates of the special meetings of Delek and Alon.fixed Exchange Ratio. As a result, the market value represented by the exchange ratio will also vary. For example, based on the range of closing prices of Delek common stock during the period from December 30, 2016, the last full trading day before Delek’s public announcement of the merger agreement to acquire Alon, through February 24, 2017, the latest practicable date before the dateDelek Common Stock that holders of this joint proxy statement/prospectus, the exchange ratio represented a market value ranging from a low of $10.60 to a high of $13.13ALDW Common Units receive for each share of Alon common stock.
The ability of Delek and Alon to complete the Mergers is subject to a number of conditions, including the absence of antitrust or other challenges from governmental entities, which could delay the completion of the Mergers or resulttheir ALDW Common Units in the termination of the merger agreement in accordance with its terms.
In connection with Delek’s acquisition of 47% of Alon’s common stock in May 2015, Notification and Report Forms required by the HSR Act were filed with the Department of Justice and the Federal Trade Commission. The Federal Trade Commission granted early termination of the applicable HSR Act waiting period to the parties in May 2015 and renewed this antitrust approval in May 2016. However, this antitrust approval expires on May 2, 2017. If the Alon Merger is not completed prior to May 2, 2017, an additional antitrust filing with the Department of Justice and Federal Trade Commission will be required. If an additional antitrust filing is required, we cannot assure that this antitrust approval will be granted on terms and conditions acceptable to Delek and Alon, if at all. In addition, we cannot assure you that a challenge to the Mergers will not be made or that, if a challenge is made, it will not succeed.
Regardless of whether an additional antitrust filing is required upon expiration of the existing antitrust approval, completion of the Mergers is subject to the fulfillment of a number of other conditions which make the completion and timing of the transaction uncertain. These conditions include, among others, conditions that the New Delek share issuance proposal be approved by the affirmative vote of a majority of the votes cast by holders of shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting; that the Alon merger proposal be approved by the Alon Common Stockholder Approval and the Alon Disinterested Stockholder Approval; the registration statement on Form S-4 of which this joint proxy statement/prospectus is part, registering the shares of New Delek common stock to be issued in connection with the transaction, be declared effective by the SEC and no stop order suspending effectiveness of the registration be in effect; the NYSE approve the listing of such shares for trading on the NYSE; and no order, decree or injunction of any court or agency of competent jurisdiction or law be in effect that enjoins or otherwise prohibits the Mergers. These conditions to the closing of the Mergers may not be fulfilled in a timely manner or at all, and, accordingly, the Mergers may be delayed or
may not be completed. In addition, if the Mergers are not completed by October 2, 2017, either Delek or Alon may choose not to proceed with the Mergers, and the parties can mutually decide to terminate the merger agreement at any timecould decrease prior to the consummation of the Mergers, beforeMerger.
The Exchange Ratio of 0.4900 shares of Delek Common Stock per ALDW Common Unit is fixed, meaning that it does not change and is not dependent upon the relative values of ALDW Common Units and Delek Common Stock. This means that there is no “price protection” mechanism contained in the Merger Agreement that would adjust the number of shares of Delek Common Stock that holders of ALDW Common Units will receive based on any decreases in the trading price of Delek Common Stock or after stockholder approval. In addition,increases in the trading price of ALDW Common Units. If the price of Delek Common Stock decreases because of changes in Delek’s business, operations or Alonprospects, market reactions to the Merger, general market and economic conditions or other factors, such as the existing or any subsequent litigation challenging the Merger or an announcement by Delek that it will pursue another merger or acquisition or a debt offering, the market value of the consideration received by ALDW Common Unitholders will also decrease. If Delek engages in any such transactions and the market price of Delek Common Stock declines in value as a result, ALDW Common Unitholders will receive less value for their ALDW Common Units than the value calculated pursuant to the Exchange Ratio on the date the Merger was announced. For historical and current market prices of ALDW Common Units and Delek Common Stock, please read “Market Prices, Dividend and Distribution Information.”
The market price of Delek Common Stock is affected by factors different from those affecting the market price of the ALDW Common Units. The price of Delek Common Stock could decline following the Merger.
If the Merger is consummated, holders of ALDW Common Units will become holders of Delek Common Stock. The businesses operated by Delek have different risks associated with them than those associated with ALDW. Accordingly, the performance of Delek Common Stock is likely to be different from the performance of the ALDW Common Units in the absence of the Merger. Delek Common Stock is subject to investment risks and it may electdecline in value due to terminateDelek’s business performance or extrinsic factors affecting the merger agreement in certain other circumstances. See “industry or financial markets generally.
The Merger Agreement—Conditionsis subject to closing conditions that, if not satisfied or waived, will result in the Merger not being consummated, which may cause the market price of the ALDW Common Units to decline.
The obligation of the parties to the Completion ofMerger Agreement to complete the Mergers” beginning on page 189 and “The Merger Agreement—Termination—Termination Rights” beginning on page 192 for a fuller description of these circumstances.
Any delay in completing the Mergers may reduce or eliminate the expected benefits from the transaction.
The Mergers areis subject to a numberthe satisfaction or waiver of certain conditions, beyond Delek’s and Alon’s control that may prevent, delay or otherwise materially adversely affect its completion. Delek and Alon cannot predict whether and when these other conditions will be satisfied. There can be no assurance that either Delek or Alon or both parties will waive any conditionincluding:
the delivery of this consent statement/prospectus to closing that is not satisfied. Furthermore, the requirements for obtaining the required clearances and approvals and the time required to satisfy any other conditionsholders of ALDW Common Units at least 20 business days prior to the closing could delay the completion of the Mergers forMerger;
the receipt of all other governmental consents and approvals, the absence of which would, individually or in the aggregate, have a significant period of timematerial adverse effect on ALDW or prevent Delek;
the transaction from occurring. Any delay in completing the Mergers could cause Delek not to realize some or alldelivery of the benefitsRequired ALDW Common Unitholder Written Consent in accordance with applicable law;
the continued effectiveness of the registration statement of which this consent statement/prospectus forms a part;
the approval for listing on the NYSE of the Delek Common Stock to be issued in the Merger, subject to official notice of issuance; and
the absence of any decree, order, injunction or law that it expects to achieve ifprohibits the MergersMerger or makes the Merger unlawful.
The parties’ obligations are successfully completed within the expected timeframe. See “The Merger Agreement—Conditionsalso subject to the Completionsatisfaction or waiver of the Mergers” beginning on page 189.following conditions:
Failurecertain fundamental representations and warranties of the ALDW Parties or Delek Parties, as the case may be, relating to organization and existence, authorization to enter into the Merger Agreement and to complete the Mergers could negatively impacttransactions contemplated thereby and capitalization being true and correct as of the stock pricesclosing in all material respects;
the representations and warranties of the ALDW Parties or Delek Parties, as the case may be, relating to the absence of changes that would have a material adverse effect on the ALDW Parties or Delek Parties, as the case may be, and the future business and financial resultsabsence of Delek and Alon.
The merger agreement contains a numbermaterial damage, destruction or loss to any material portion of conditions that must be satisfied or waived prior to the completionassets of the Mergers. There canALDW Parties or the Delek Parties, as the case may be, no assurance that allor its subsidiaries being true and correct as of the conditionsclosing;
all other representations and warranties of the ALDW Parties or Delek Parties, as the case may be, being true and correct as of the closing, other than certain failures to be true and correct that would not in the Mergers willaggregate result in a material adverse effect on the ALDW Parties or Delek Parties, as the case may be, so satisfiedmaking the representation or waived. warranty; and
the ALDW Parties or Delek Parties, as the case may be, having performed or complied with all agreements and covenants required to be performed by it under the Merger Agreement in all material respects.
If thethese conditions to the Mergers are not satisfied or waived, Delek and Alon will be unablethe Merger would not occur, which may cause the market price of the ALDW Common Units to complete the merger.
decline.
If the Mergers areMerger does not completed for any reason, includingoccur, ALDW will not benefit from the failure to receive the required approvals of Delek’s and Alon’s respective stockholders, the respective ongoing businesses of Delek or Alon may be adversely affected and Delek and Alon will be subject to several risks, including the following:
being required, under certain circumstances, to pay a termination fee of $20 million,expenses it has incurred in the case of a payment by Delek to Alon, and $15 million, in the case of a payment by Alon to Delek (see “The Merger Agreement—Termination—Termination Fee Payable by Alon” and “The Merger Agreement—Termination—Termination Fee Payable by Delek” beginning on page 194);
having to pay certain costs relating to the proposed Merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and
having expended the time, resources and focus of management of each of the companies on the Mergers that could otherwise have been spent on Delek’s and Alon’sexisting
businesses and the pursuit of other opportunities that could have been beneficial to each company.the Merger.
The Merger may not be completed. If the Mergers do not occur, Delek and Alon may incur these costs without realizing any of the benefits of the Mergers being completed. In addition, if the Mergers areMerger is not completed, Delek and/or Alon may experience negative reactions from the financial markets and from their respective customers and employees. Delek and/or Alon could also be subject to litigation related to any failure to complete the Mergers or to enforcement proceedings commenced against Delek or Alon to perform their respective obligations under the merger agreement. If the Mergers are not completed, Delek and Alon cannot assure their respective stockholders that these risks will not materialize or will not materially affect the business, financial results and stock prices of Alon or Delek.
Furthermore, if the Mergers are terminated and either party’s board of directors seeks an alternative transaction, such party’s stockholders cannot be certain that such party will be able to find a party willing to engage in a transaction on more attractive terms than the Mergers. If the merger agreement is terminated under specified circumstances, either Alon or Delek may be required to pay the other party a termination fee. See the section entitled “The Merger Agreement—Termination” beginning on page 192 for a description of these circumstances.
The merger agreement contains provisions that could discourage a potential competing acquiror from making a competing acquisition proposal.
The merger agreement contains “no shop” provisions that, subject to limited exceptions, restrict the ability of Delek and Alon to initiate, solicit, knowingly encourage or facilitate competing third-party proposals of offers regarding certain acquisition proposals or offers for competing transactions. Further, even if the Alon Board or Delek Board withdraws or modifies its recommendation of the Alon merger proposal or the New Delek share issuance proposal, as applicable, it will still be required to submit the matter to a vote of the Alon stockholders at the Alon special meeting or the vote of the Delek stockholders at the Delek special meeting, as applicable, unless the merger agreement is terminated in accordance with its terms. In addition, Delek generally has an opportunity to offer to modify the terms of the Alon Merger and the merger agreement in response to any competing acquisition proposals (as defined in the merger agreement) that may be made before the Alon Board may withdraw or modify its recommendation. In some circumstances, upon termination of the merger agreement, one of the parties may be required to pay a termination fee to the other party. For additional information, see “The Merger Agreement—Non-Solicitation or Acquisition Proposals; Changes In Recommendation” beginning on page 181 and “—Termination of the Merger Agreement” beginning on page 192.
These provisions could discourage a third party from considering or submitting a potential, competitive acquisition proposal, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the Mergers, or might result in a potential competing acquiror proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
Delek and Alon will incur significant transaction and merger-related costs in connection with the Mergers, which may be in excess of those anticipated by Delek and Alon.
Delek and Alon have incurred and expect to continue to incur substantial costs and expenses relating directly to the Mergers, including fees and expenses payable to financial advisors, other professional fees and expenses, insurance premium costs, fees and costs relating to integration planning activities, regulatory filings and notices, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses.Delek and Alon expect to continue to incur a number of non-recurring costs associated with completing the Mergers, combining the operations of the two companies and achieving desired synergies. These fees and costs have been, and will continue to be, substantial.
The costs described above, as well as other unanticipated costs and expenses, could have an adverse effect on the financial condition and operating results of New Delek following the completion of the Mergers. If the Mergers are not completed, Delek and AlonALDW will have incurred substantial expenses and devoted substantial management time for which no ultimate benefit will have been received by either company.
The pendency of the MergersALDW. Merger-related expenses include independent advisory, legal and related uncertainty could adversely affect the relationships of Delekaccounting fees, and Alon with employees, customers, commercial partners, financing partiesfinancial printing and other third parties.
Uncertainty aboutrelated charges, much of which may be incurred even if the effect of the Mergers on employees, customers, commercial partners and other third parties may have an adverse effect on Alon and Delek. These uncertainties may cause customers, suppliers, commercial partners, financing parties and others that deal with Alon or Delek to seek to change, delay or defer decisions with respect to existing or future business relationships. These uncertainties may impair Alon and Delek’s ability to retain, hire and motivate certain current and prospective employees while the Mergers are pending and for a period of time thereafter, as they may experience uncertainty about their respective future roles with Alon or Delek. If key employees, customers, suppliers, commercial partners, financing parties and other third parties terminate or change, or seek to terminate or change, their existing relationships with Alon or Delek, Alon’s business or Delek’s business, and the combined company’s business as a result, could be harmed.
Merger is not consummated. In addition, if the merger agreement restricts AlonMerger Agreement is terminated under specified circumstances, ALDW would be required to pay certain Merger-related expenses of Delek.
Financial projections regarding ALDW and Delek from entering into certain corporate transactionsmay not be achieved.
In performing its financial analyses and taking other specified actions without the consent of the other party, and generally requires the parties to continue their respective operations in the ordinary course, until completion of the Mergers. These restrictions may prevent Delek and Alon from pursuing attractive business opportunities that may arise prior to the completion of the Mergers. Please see the section entitled “The Merger Agreement—Interim Operations of Alon and Delek Pending the Mergers,” beginning on page 177, for a description of the restrictive covenants to which Delek and Alon are subject.
The consummation of the Mergers may permit counterparties to other agreements to terminate those agreements.
Alon and Delek are parties to certain agreements that give the counterparties to such agreements, including investors and commercial partners, certain rights, including notice, consent and other rights in connection with “change of control” transactions or otherwise, that may give rise to a default by Alon or Delek, as applicable, under the agreements or a right by the counterparty to terminate the agreement. Under certain of these agreements, the Mergers may constitute a “change of control” or otherwise give rise to consent or termination rights and, therefore, the counterparties may assert their rights in connection with the Mergers and claim a default of the agreement by Alon or Delek, as applicable, and/or terminate the agreements, which may adversely affect business and operations of the Combined Company and the value of the New Delek common stock following the Mergers.
Therendering its fairness opinions, of Delek’s and Alon’s respective financial advisors will not reflect changes in circumstances that may have occurred after the date of the opinions.
Delek and Alon have received opinions from their respective financial advisors in connection with the signing of the merger agreement. The opinions delivered to the Delek Board and Alon Special Committee, respectively, state that as of the date of the opinion, based on and subject to the assumptions, limitations and qualifications set forth in the opinion and based on such other matters as each financial advisor considered relevant, the merger consideration to be paid pursuant to the merger agreement was fair from a financial point of view to the parties. The financial advisors’ opinions speak only as of the time each was rendered and not as of the closing of the proposed sale or any other time. Changes in circumstances that have occurred or may occur after the date of the opinions could significantly alter the value, facts or elements on which each opinion was based.
Because Delek and Alon do not currently anticipate asking their respective financial advisors to update their opinions, the opinions will not address the fairness of the per share merger consideration from a financial point of view at the time the Mergers are completed. The Delek Board’s recommendation that Delek stockholders vote “FOR” the New Delek share issuance proposal and the Alon Board’s recommendation that Alon stockholders vote “FOR” the adoption of the merger agreement and the other merger-related matters, however, is made as of the date of this joint proxy statement/prospectus. For a description of the opinions that Delek and Alon received from their respective financial advisors, please see the sections entitled “The Mergers—Opinion of Delek’s Financial Advisor” and “The Mergers—Opinion of Financial Advisor to the Alon Special Committee” beginning on pages 116 and 134, respectively. A copy of the opinion of TPH, Delek’s financial advisor, is attached as Annex G to this joint proxy statement/prospectus, and a copy of the opinion of J.P. Morgan, the financial advisor to the AlonALDW GP Conflicts Committee reviewed and relied on, among other things, internal financial analyses and forecasts for Delek and ALDW, which in the case of ALDW were prepared by employees of Delek who normally render services to ALDW. These financial projections include assumptions regarding future operating cash flows, expenditures and income of ALDW and Delek. These financial projections were not prepared with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties and may not be achieved in full, at all or within projected timeframes. The failure of ALDW’s or Delek’s businesses to achieve projected results, including projected cash flows, could have a material adverse effect on the price of Delek Common Stock, its financial position and its ability to maintain or increase its dividends following the Merger.
The ALDW Partnership Agreement limits the duties of ALDW GP to ALDW Common Unitholders and restricts the remedies available to ALDW Common Unitholders for actions taken by ALDW GP that might otherwise constitute breaches of its duties.
In light of potential conflicts of interest between Delek and ALDW GP, on the one hand, and ALDW and the ALDW Public Unitholders, on the other hand, the ALDW GP Board submitted the Merger and related matters to the ALDW GP Conflicts Committee for, among other things, review, evaluation, negotiation and possible approval of a majority of its members, which is referred to as “Special Approval” in the ALDW Partnership Agreement. Under the ALDW Partnership Agreement:
any resolution or course of action by ALDW GP or its affiliates in respect of a conflict of interest is permitted and deemed approved by all partners of ALDW, and will not constitute a breach of the ALDW Partnership Agreement or of any fiduciary or other duty existing at law, in equity or otherwise or obligation of any type whatsoever, if the resolution or course of action is approved by Special Approval; and
ALDW GP may consult with legal counsel and investment bankers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such persons as to matters that ALDW GP reasonably believes to be within such person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion.
The ALDW GP Conflicts Committee is attached as Annex F to this joint proxy statement/prospectus,reviewed, negotiated and each is incorporated by reference herein in its entirety.evaluated the Merger Agreement, the Support Agreement, the Merger and related matters on behalf of the ALDW Public Unitholders and ALDW. Among other things, the ALDW GP Conflicts
Committee unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interests of ALDW and the ALDW Public Unitholders, approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and recommended the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, to the ALDW GP Board. The duties of ALDW GP, the ALDW GP Board and the ALDW GP Conflicts Committee to ALDW Common Unitholders in connection with the Merger are substantially limited by the ALDW Partnership Agreement.
Certain directors and executive officers of Delek and AlonALDW GP may have interests that differ in certain respects from the Mergers that may be different from, or in addition to, the interests of Delek’s stockholders and Alon’s stockholders generally.ALDW Public Unitholders.
Certain executive officers of Delek and Alon participated in the negotiation of the terms of the merger agreement. The Delek Board approved the merger agreement and the New Delek share issuance and determined that the merger agreement and the transactions contemplated thereby, including the New Delek share issuance, are advisable and in the best interests of Delek and its stockholders. The Special Committee and the Alon Board, upon the recommendation of the Special Committee approved the merger agreement and determined that the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Alon and its stockholders. In considering these facts and the other information contained in this joint proxy statement/prospectus, you should be aware that certain of Delek’s directors and executive officers and certain of Alon’s directors and executive officersALDW GP who are not members of the ALDW GP Conflicts Committee may have interests that differ from, or are in addition to, their interests as holders of ALDW Common Units.
Tax Risks Related to the Merger
The Merger should be a taxable transaction and the resulting tax liability of an ALDW Common Unitholder, if any, will depend on each such ALDW Common Unitholder’s particular situation.
The receipt of Delek Common Stock as Merger Consideration in exchange for ALDW Common Units in the MergersMerger should be treated as a taxable sale by ALDW Common Unitholders of ALDW Common Units for U.S. federal income tax purposes. In such case, the amount of gain or loss recognized by each ALDW Common Unitholder in the Merger will vary depending on each ALDW Common Unitholder’s particular situation, including the value of the Delek Common Stock received by such ALDW Common Unitholder as Merger Consideration in the Merger, the adjusted tax basis of the ALDW Common Units exchanged by such ALDW Common Unitholder in the Merger, and the amount of any suspended passive losses that may be different from, or in additionavailable to the interests of Delek’s or Alon’s stockholders. For example, some Delek directors and executive officers serve on the Alon Board. These interests are described in more detail in the sections entitled “Stock Ownership of Certain Beneficial Owners and Directors and Executive Officers of Delek” beginning on page 229, “The Mergers—Interests of Delek’s Directors and Executive Officers in the Mergers” beginning on page 153, “Stock Ownership of Certain Beneficial Owners and Directors and Executive Officers of Alon” beginning on page 232 and “The Mergers—Interests of Alon’s Directors and Executive Officers in the Mergers” beginning on page 154.
Alon and Delek stockholders will not be entitleda such ALDW Common Unitholder to dissenters’ or appraisal rights in the Mergers.
Dissenters’ or appraisal rights are statutory rights that, if applicable under law, enable stockholders ofoffset a corporation to dissent from an extraordinary transaction, such as the Mergers, and to demand that such corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Under the DGCL, stockholders do not have appraisal rights if the shares of stock they hold, at the record date for determination of stockholders entitled to vote at the meeting of stockholders to act upon the merger or consolidation, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available if stockholders are required by the termsportion of the merger agreement to accept for their shares anything other than (a) sharesgain recognized by such ALDW Common Unitholder.
For a more complete discussion of stock of the surviving corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (c) cash instead of fractional shares or (d) any combination of clauses (a)-(c).
Because Alon common stock is listed on NYSE, a national securities exchange, and is expected to continue to be so listed on the record date, and because the Alon Merger otherwise satisfies the foregoing requirements, holders of Alon common stock will not be entitled to dissenters’ or appraisal rights in the Alon Merger with respect to their shares of Alon common stock. Similarly, holders of Delek common stock will not be entitled to dissenters’ or appraisal rights in the Delek Merger.
Legal proceedings against Delek or Alon could result in an injunction preventing the completion of the Mergers or a judgment resulting in the payment of damages.
Potential plaintiffs may file lawsuits challenging the proposed Mergers. The outcome of any such litigation is uncertain. If any litigation challenging the Mergers is not resolved, the lawsuits could prevent or delay completion of the Mergers and result in substantial costs to Delek and Alon, including any costs associated with the indemnification of its respective directors and officers. One condition to closing the Mergers is that no order, decree or injunction of any court or agency of competent jurisdiction be in effect that enjoins, prohibits or makes illegal consummation of any of the transactions, and no legal proceeding by any governmental authority with respect to the Mergers or other transactions be pending that seeks to restrain, enjoin, prohibit or delay consummation of the Mergers or imposes any material restrictions on the transactions contemplated by the merger agreement. If any lawsuit is filed challenging the Mergers and is successful in obtaining an injunction preventing the parties to the merger agreement from consummating the Mergers, such injunction may delay or prevent the Mergers. As such, if plaintiffs are successful in obtaining an injunction prohibiting the consummation of the Mergers or the other transactions contemplated by the merger agreement, then such injunction may prevent the Mergers from being completed, or from being completed within the expected timeframe.
The defense or settlement of any legal proceedings or future litigation could be time-consuming and expensive, divert the attention of Delek management and/or Alon management away from their regular business, and, if any one of these legal proceedings or any future litigation is adversely resolved against either Delek or Alon, could have a material adverse effect on their respective financial condition, results of operations or liquidity of Delek or the combined company if resolved after the Mergers are completed.
Until the completion of the Mergers or the termination of the merger agreement in accordance with its terms, in consideration of the agreements made by the parties in the merger agreement, Delek and Alon are each prohibited from entering into certain transactions and taking certain actions that might otherwise be beneficial to Delek or Alon and their respective stockholders.
Until the Mergers are completed, the merger agreement restricts each of Delek and Alon from taking specified actions without the consent of the other party, and requires each of Delek and Alon to operate in the ordinary and usual course of business consistent with past practice. Alon is subject to a number of customary interim operating covenants relating to, among other things, its capital expenditures, incurrence of indebtedness, entry into or amendment of certain types of agreements, equity grants and changes in director, employee, independent contractor and consultant compensation. These restrictions may prevent Delek and/or Alon from making appropriate changes to their respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Mergers. See “The Merger Agreement—Interim Operations of Alon and Delek Pending the Mergers” beginning on page 177 for a description of the restrictive covenants applicable to Delek and Alon, respectively.
If the Delek Merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and the Mergers, taken together, are not treated as an “exchange” within the meaning of Section 351 of the Internal Revenue Code, the Delek
stockholders and the Alon stockholders may be required to pay substantial U.S. federal income taxes.
The obligation of Delek to complete the Mergers is conditioned upon the receipt by Delek of an opinion from Baker Botts L.L.P., counsel to Delek, to the effect that (i) the Delek Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, taken together with the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. The obligation of Alon to complete the Mergers is conditioned upon the receipt by Alon of an opinion from Vinson & Elkins LLP, counsel to Alon, to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
These opinions will be based on customary assumptions and representations from Delek and Alon, as well as certain covenants and undertakings by Delek and Alon. If any of the representations, assumptions, covenants, or undertakings upon which the opinions are based is incorrect, incomplete, inaccurate, or violated, the validity of the opinions may be affected and the U.S. federal income tax consequences of the Mergers could differ from those describedMerger, see “Material U.S. Federal Income Tax Consequences of the Merger.”
The U.S. federal income tax treatment of owning and disposing of Delek Common Stock received in this joint proxy statement/prospectus. An opinion of counsel represents such counsel’s best legal judgment but is not binding on the Internal Revenue Service, which we refer to as the “IRS,” or any court. Neither Delek nor Alon intends to obtain a ruling from the IRS with respect toMerger will be different than the U.S. federal income tax consequencestreatment of owning and disposing of ALDW Common Units.
ALDW is classified as a partnership for U.S. federal income tax purposes and, generally, is not subject to entity-level U.S. federal income taxes. Instead, each ALDW Common Unitholder is required to take into account its respective allocated share of ALDW’s items of income, gain, loss and deduction in computing its federal income tax liability as if such ALDW Common Unitholder had earned such income directly, even if no cash distributions are made by ALDW to such ALDW Common Unitholder. A pro rata distribution of cash by ALDW to an ALDW Common Unitholder who is a U.S. holder (as defined in “Material U.S. Federal Income Tax Consequences of the Merger. Consequently, no assurance can be given thatMerger”) is generally not taxable for U.S. federal income tax purposes unless the IRS will not assert, or that a court would not sustain, a position contrary to these opinions. In such case, upon a holder’s exchangeamount of Delek common stock and Alon common stock pursuant to the Mergers for New Delek common stock, such holder would recognize taxable gain or loss as if it sold its Delek common stock or Alon common stock, as applicable.
Risks Related to the Businesscash distributed is in excess of the Combined Company Following the MergersALDW Common Unitholder’s adjusted tax basis in such ALDW Common Units.
Delek is expectedclassified as a corporation for U.S. federal income tax purposes and is subject to incur substantial expenses relatedU.S. federal income tax on its taxable income. A distribution of cash by Delek to the integration of Delek and Alon.
Deleka stockholder who is expected to incur substantial expenses in connection with the integration of the business, policies, procedures, operations, technologies and systems of Alon with those of Delek. There are a large number of systems that must be integrated, including management information, purchasing, administrative, accounting and finance, sales, marketing, billing, payroll and benefits, installation, engineering, infrastructure and regulatory compliance, among others. While Delek has assumed that a certain level of expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of all of the expected integration expenses. Moreover, many of the expenses thatU.S. holder generally will be incurred are, by their nature, difficult to estimate accurately at the present time. These integration expenses likely will resultincluded in Delek taking significant charges against earnings following the completion of the Merger, but the amount and timing of such
charges are uncertain at present, and if such charges are greater than expected, they could offset the cost synergies that Delek expects to achieve from the Alon Merger.
Following the Mergers, the combined company may be unable to integrate successfully the businesses of Delek and Alon and realize the anticipated benefits of the Mergers.
The Mergers involve the combination of two companies which currently operateU.S. holder’s income as independent public companies (exceptordinary dividend income to the extent of Delek’s stock ownershipcurrent or accumulated “earnings and profits,” as determined under U.S. federal income tax principles. Cash distributions in Alonexcess of Delek’s current or accumulated earnings and representation on the Alon Board since May 2015). Following the Mergers, the combined companyprofits will be requiredtreated as a non-taxable return of capital, reducing a U.S. holder’s adjusted tax basis in such stockholder’s Delek Common Stock and, to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail to realize somethe extent the cash distribution exceeds such stockholder’s adjusted tax basis, as gain from the sale or allexchange of such Delek Common Stock. See “Material U.S. Federal Income Tax Consequences of the anticipated benefits of the Mergers if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounterMerger.”
Risks Inherent in the integration process include the following:
the inability to successfully combine the businesses ofan Investment in Delek and Alon in a manner that permits the combined company to achieve the synergies anticipated to result from the Mergers, which would result in the anticipated benefits of the Mergers not being realized partly or wholly in the time frame currently anticipated or at all;
lost sales and customers as a result of certain customers of either of the two companies deciding not to do business with the combined company;
complexities associated with managing the combined businesses;
integrating personnel from the two companies;
creation of uniform standards, controls, procedures, policies and information systems;
potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Mergers; and
performance shortfalls at one or both of the two companies as a result of the diversion of management’s attention caused by completing the Mergers and integrating the companies’ operations.Common Stock
In addition Delek and Alon have operated and, until the completion of the Mergers, will continue to operate, independently (except to the extent of Delek’s stock ownership in Alonrisks described above, Delek is, and representation on the Alon Board since May 2015). It is possible that the integration process could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits of the Mergers, or could reduce the earnings or otherwise adversely affect the business and financial results of the combined company.
Activities undertaken during the pendency of the Mergers to complete the Mergers and the other transactions contemplated by the merger agreement may divert management attention and resources.
If the efforts and actions required of Delek and Alon in order to consummate the Mergers and the other transactions contemplated by the merger agreement are more difficult, costly or time consuming than expected, such efforts and actions could result in the diversion of each company’s management’s attention and resources or the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses, which could adversely affect the business and financial results of Delek or Alon, as applicable.
In connection with the continuing operations of the combined company following the Mergers, Delek may refinance a significant amount of indebtedness and otherwise require additional financing; it cannot guarantee that it will be able to obtain the necessary funds on favorable terms or at all.
Delek may elect to refinance certain of its own or Alon’s indebtedness even if not required to do so by the terms of such indebtedness. In addition, Delek may need or want to raise additional funds for the operations of the combined company following the Mergers. Delek and Alon have been and may continue to be engaged in discussions with certain potential financing sources, funds from which would be used in part to make any such refinancing and to provide a source of additional funds and liquidity for the operations of the combined company following the Mergers. However, the ability of the combined company to obtain such financing will depend on, among other factors, prevailing market conditions at the time of the proposed financing and other factors beyond the control of the combined company. There is no assurance that the combined company will be able to obtain additional financing on terms acceptable to the combined company, or at all.
In connection with the Alon Merger, Delek or one of its subsidiaries will be subject to significant additional indebtedness, which could adversely affect Delek, including by decreasing Delek’s business flexibility and increasing Delek’s interest expense.
As of December 31, 2016, Delek’s consolidated indebtedness was approximately $832.9 million, and Alon’s consolidated indebtedness was approximately $528.0 million. If the Alon Merger is completed, Delek expects that certain entities forming part of the combined company will be subject to substantially all of the consolidated indebtedness of Alon, and the combined company may have to incur additional indebtedness in connection with any extinguishment of such debt, as well as for its ongoing business needs. As a result, it is expected that the combined company will be subject to substantially increased indebtedness in comparison to Delek’s indebtedness on a recent historical basis. This increased indebtedness could have the effect, among other things, of reducing Delek’s flexibility to respond to changing business and economic conditions and increasing Delek’s interest expense. In addition, the amount of cash required to pay interest on the combined company’s indebtedness following completion of the Mergers, and thus the demands on the combined company’s cash resources, will be greater than the amount of cash required to service the indebtedness of Delek prior to the transaction. The increased levels of indebtedness following completion of the Mergers could therefore reduce funds available for working capital, capital expenditures, acquisitions and other general corporate purposes.
Delek’s and Alon’s operations require substantial ongoing capital, and if financing is not available to the combined company on acceptable terms, if and when needed, its operations, growth and prospects could be negatively affected.
Delek’s and Alon’s respective businesses are capital intensive. Following the Mergers, the combined company is expected to incur significant costs on an ongoing basis to continue its operations, produce its current or future products, and to pay any significant unplanned or accelerated expenses or for new significant strategic investments.
Delek may also need or want to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes following the Mergers. Delek’s ability to raise capital from third-party fund investors and lenders to fund its operations and growth, or to refinance its existing indebtedness, will depend on, among other factors, Delek’s financial position and performance, as well as prevailing market conditions and other factors beyond Delek’s control, such as any decisions by credit ratings agencies with respect to credit ratings that they may maintain with respect to Delek. Any concerns regarding Delek’s business and liquidity and the capital structure of Alon and Delek following the Mergers and general market conditions could negatively impact Delek’s ability to access the capital markets or to raise funds on acceptable terms, or at all.
Current Delek and Alon stockholders will have a reduced ownership and voting interest in the combined company after the Mergers and will exercise less influence over the combined company’s management.
Current Delek stockholders currently have the right to vote in the election of the Delek Board and the power to approve or reject any matters requiring stockholder approval under Delaware law and Delek’s certificate of incorporation and bylaws. Current Alon stockholders currently have the right to vote in the election of the Alon Board and the power to approve or reject any matters requiring stockholder approval under Delaware law and Alon’s certificate of incorporation and bylaws. Upon completion of the Mergers, each Delek and Alon stockholder who receives shares of New Delek common stock in the merger will become a stockholder of New Delek with a percentage ownership of New Delek that is smaller than each stockholder’s current percentage ownership of Delek or Alon, respectively. Based on the number of issued and outstanding shares of New Delek common stock and shares of Delek and Alon common stock as of February 24, 2017 and on the exchange ratio of 0.504, after the Mergers the former Delek stockholders are expected to become owners of approximately 76% of the outstanding shares of New Delek common stock immediately following the closing of the transaction, and the former Alon stockholders (other than Delek) are expected to become owners of approximately 24% of the outstanding shares of New Delek common stock immediately following the closing of the transaction.
As a result of the Mergers, current Delek and Alon stockholders will have less influence on the combined company’s management and policies than they now have on the management and policies of Delek and Alon, respectively.
Future equity issuances could result in dilution of New Delek common stock, which could cause the price of New Delek common stock to decline, and future sales of New Delek common stock could depress the market price of New Delek common stock.
HoldCo may from time to time issue additional shares of New Delek common stock after the completion of the Mergers, including to finance the business of the combined company following the Mergers. Such future issuances may be at prices that are below the prevailing or historical market price of Delek or New Delek common stock. Actual or anticipated issuances or sales of substantial amounts of common stock could cause the market price of New Delek common stock to decline and make it more difficult for HoldCo to sell equity securities in the future at a time and on terms that HoldCo deems appropriate. Further, HoldCo’s ability to complete any future capital raise, including any offering of shares of New Delek common stock, on commercially reasonable terms is dependent on market conditions and factors which may be beyond HoldCo’s control, including actual or anticipated fluctuations in HoldCo’s operating results, changes in earnings estimated by securities analysts or HoldCo’s ability to meet those estimates, the operating performance and stock price of comparable companies, changes to the regulatory and legal environment under which HoldCo operates, and domestic and worldwide economic conditions.
The unaudited pro forma condensed combined financial data for Delek included in this joint proxy statement/prospectus is preliminary, and the combined company’s actual financial position and operations after the Mergers may differ materially from the unaudited pro forma financial data included in this joint proxy statement/prospectus.
The unaudited pro forma financial data for Delek included in this joint proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what the combined company’s actual financial position or operations would have been had the Mergers been completed within the expected time frame. The combined company’s actual results and financial position after the Mergers may differ materially and adversely from the unaudited pro forma financial data included in this joint proxy statement/prospectus. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the Alon identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of Alon as of the date of the completion of the Mergers. For more information see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 206.
The prospective financial forecasts for Alon included in this joint proxy statement/prospectus reflect Alon management estimates and Alon’s actual performance may differ materially from the prospective financial forecasts included in this joint proxy statement/prospectus.
The prospective financial forecasts for Alon included in this joint proxy statement/prospectus are based on assumptions of, and information available to, Alon at the time such prospective financial forecasts were prepared. Alon does not know whether the assumptions made will prove correct. Any or all of such information may turn out to be wrong. Such information can be adversely affected by inaccurate assumptions or by known or unknown risks and uncertainties, many of which are beyond Alon’s control. Further, prospective financial forecasts of this type are based on estimates
and assumptions that are inherently subject to factors such as company performance, industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of Alon, including the factors described under “—Other Risk Factors of Delek and Alon” beginning on page 62 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 44, which factors and changes may cause the prospective financial forecasts or the underlying assumptions to be inaccurate. As a result of these contingencies, there can be no assurance that the prospective financial forecasts of Alon will be realized or that actual results will not be significantly higher or lower than projected. In view of these uncertainties, the inclusion of the prospective financial forecasts of Alon in this joint proxy statement/prospectus should not be regarded as an indication that the Delek Board, the Alon Board, Delek, Alon, HoldCo, TPH, J.P. Morgan or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results.
The prospective financial forecasts were not prepared with a view toward public disclosure or toward compliance with U.S. GAAP, published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.
In addition, the prospective financial forecasts have not been updated or revised to reflect information or results after the date the prospective financial forecasts were prepared or as of the date of this joint proxy statement/prospectus. For more information see “The Mergers—Certain Delek and Alon Unaudited Prospective Financial Information” beginning on page 145.
The combined company’s future results will suffer if it does not effectively manage its expanded operations following the Mergers.
Following the Mergers, the size and scope of operations of the business of the combined company will increase beyond the current size and scope of operations of either Delek’s or Alon’s current businesses. In addition, Delek may continue to expand its size and operations through additional acquisitions or other strategic transactions. Delek’s future success depends, in part, upon its ability to manage its expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurance that Delek will be successful or that it will realize the expected economies of scale, synergies and other benefits currently anticipated from the Mergers or anticipated from any additional acquisitions or strategic transactions.
The trading price of Delek and New Delek common stock is likely to continue to be volatile.
The trading price of Delek common stock has been highly volatile and could continue to be, subject to wide fluctuations in response to various factors, some of which are beyond Delek’s control. Delek common stock has experienced an intra-day trading high of $26.06 per share and a low of $11.41 per share since January 1, 2016. The stock market in general, and the market for energy companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including Delek’s, regardless of actual operating performance. In addition, in the past, following periods of volatility
in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Any such stockholder litigation could result in substantial costs and a diversion of the attention and resources of Delek’s management.
Delek’s stock price may be negatively impacted by risks and conditions that apply to Delek, which differ from the risks and conditions applicable to Alon.
Upon completion of the Alon Merger, Alon stockholders will become holders of New Delek common stock. The businesses and markets of Delek and its subsidiaries differ from those of Alon. There is a risk that various factors, conditions and developments that would not affect the price of Alon common stock could negatively affect the price of Delek common stock. Please seedescribed in Old Delek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporatedas updated by reference in this joint proxy statement/prospectus, and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 44 of this joint proxy statement/prospectus for a summary of some of the key factors that might affect Delek and the prices at which Delek or New Delek common stock may trade from time to time.
The shares of New Delek common stock to be received by Alon stockholders as a result of the Alon Merger will have different rights from the shares of Alon common stock currently held by Alon stockholders.
Upon completion of the Alon Merger, Alon stockholders will become holders of New Delek common stock and their rights as stockholders will be governed by HoldCo’s amended and restated certificate of incorporation and amended and restated bylaws, which will be substantially identical to the second amended and restated certificate of incorporation and third amended and restated bylaws of Delek. The rights associated with New Delek common stock are different from the rights associated with Alon common stock. See “Comparison of the Rights of Holders of New Delek Common Stock and Alon Common Stock” beginning on page 216 for a discussion of the different rights associated with New Delek common stock.
The market price of New Delek common stock may decline in the future as a result of the Mergers.
The market price of New Delek common stock may decline in the future as a result of the Mergers for a number of reasons, including if the integration of Delek and Alon is unsuccessful (including for the reasons set forth in the preceding risk factors) or if the combined company fails to achieve the perceived benefits of the Mergers, including financial results, as rapidly as or to the extent anticipated by financial or industry analysts. In addition, the stock market has experienced significant price and volume fluctuations in recent times which, if they continue to occur, could have an adverse effect on the market for, or liquidity of, New Delek common stock, regardless of New Delek’s actual operating performance. These factors are, to some extent, beyond the control of Delek.
The Alon Merger may not be as accretive to Delek’s earnings per share as anticipated, which may negatively affect the market price of New Delek common stock.
Delek currently anticipates that the Alon Merger will be accretive to earnings per share in 2018, assuming certain pre-tax synergies are realized. This expectation, however, is based on preliminary estimates which may materially change, including the currently expected timing of the Alon Merger. Delek could encounter additional transaction-related costs or other factors such as a delay in the closing of the Alon Merger and/or the failure to realize all of the benefits anticipated in the Alon Merger. All of these factors could decrease or delay the expected accretive effect of the Alon Merger and cause a decrease in the market price of New Delek common stock.
HoldCo will record goodwill and other intangible assets that could become impaired and result in material non-cash charges to the results of operations of the combined company in the future.
The Mergers will be accounted for as an acquisition by HoldCo in accordance with accounting principles generally accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of Alon and its subsidiaries will be recorded, as of the completion of the Mergers, at their respective fair values and added to those of HoldCo.
Under the acquisition method of accounting, the total purchase price will be allocated to Alon’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the Mergers. The excess of the purchase price over those fair values will be recorded as goodwill. To the extent the value of goodwill or intangibles becomes impaired, the combined company may be required to incur material non-cash charges relating to such impairment. The combined company’s operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
Other Risk Factors of Delek and Alon
Old Delek’s and Alon’s businesses are and will be subject to the risks described above. In addition, Delek and Alon are, and will continue to be, subject to the risks described in Delek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Alon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, respectively, as, in each case, updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and are incorporated by reference into this joint proxyconsent statement/prospectus. See “Where“Where You Can Find More Information” beginning on page 240Information” for the location of information incorporated by reference in this joint proxyconsent statement/prospectus.
THE DELEK SPECIAL MEETING OF STOCKHOLDERS
Date, TimeCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This consent statement/prospectus, and Placethe documents to which you are referred in this consent statement/prospectus, as well as oral statements made or to be made by ALDW and Delek, include certain “forward-looking statements” within the meaning of the Delek Special MeetingU.S. federal securities laws. Words such as “may,” “will,” “could,” “would,” “anticipate,” “estimate,” “expect,” “predict,” “project,” “guidance,” “continue,” “future,” “potential,” “intend,” “plan,” “assume,” “believe,” “forecast,” “look,” “build,” “focus,” “create,” “work,” “continue” or the negative of Stockholders
The special meetingsuch terms or other variations thereof and words and terms of Delek stockholders will be held at [•], on [•], 2017 at [•], local time.
Purposesimilar substance used in connection with any discussion of the Delek Special Meeting of Stockholders
At the Delek special meeting, Delek stockholders will be asked:
to consider and vote on a proposal to approve the issuance of New Delek common stockfuture plans, actions, or events identify forward-looking statements with respect to the stockholdersbusinesses, strategies and plans of Alon, as consideration forALDW and Delek, their expectations relating to the Alon Merger contemplatedand their future financial condition and performance. ALDW and Delek caution investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements. When considering forward-looking statements, investors should keep in mind the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus (this proposal is referred to as the “New Delek share issuance proposal”);risk factors and
to consider and vote on a proposal to adjourn the Delek special meeting, if necessary or appropriate other cautionary statements described in the judgment of“Risk Factors.” Investors are cautioned not to place undue reliance on forward-looking statements. Among the Delek Board,risks and uncertainties that could cause actual results to solicit additional proxies if therediffer from those described in forward-looking statements are the following:
the risk that the Merger Agreement may be terminated in accordance with its terms or that the Merger may not sufficient votes to approve be consummated timely or at all;
the New Delek share issuance proposal (this proposal is referred to as the “Delek adjournment proposal”).
possibility that ALDW and Delek will transact noincur significant transaction and other business at the special meeting except such business as may properly be brought before the special meeting or any adjournment or postponement thereof by or at the direction of the Delek Board.
Recommendation of the Delek Board of Directors
On December 29, 2016, the Delek Board unanimously determined that the merger agreement, the Mergers and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Delek and its stockholders and unanimously approved the merger agreement, the Mergers and the other transactions contemplated by the merger agreement, including the issuance of shares of New Delek common stockcosts in connection with the Alon Merger.Merger, which may be in excess of those anticipated by ALDW and Delek;
Thethe diversion of management in connection with the Merger and the risk that Delek Board accordingly recommendsmay fail to realize the benefits expected from the Merger;
the risk that Delek may be unable to achieve expected synergies from the Merger or the Delek-ALJ Merger or that it may take longer than expected to achieve those synergies;
the risk that any announcements relating to, or the consummation of or failure to consummate, the Merger could have adverse effects on the market price of Delek stockholders vote “FOR” eachCommon Stock or ALDW Common Units;
volatility in Delek’s and ALDW’s refining margins or fuel gross profit as a result of changes in the prices of crude oil, other feedstocks and refined petroleum products;
Delek’s ability to execute its strategy of growth through acquisitions and the transactional risks inherent in such acquisitions;
Delek’s and ALDW’s assets may suffer a diminishment in fair value, which may require Delek to record a write-down or impairment;
reliability of or changes in costs to operate Delek’s and ALDW’s operating assets;
competition;
effects of and costs relating to compliance or failure to comply with current and future local, state and federal environmental, economic, climate change, safety, tax and other laws, policies and regulations and enforcement initiatives;
diminution in value of long-lived assets may result in an impairment in the carrying value of the Newassets on Delek’s balance sheet and a resultant loss recognized in the statement of operations;
general economic and business conditions affecting the southern United States;
volatility under and risks relating to Delek’s and ALDW’s derivative instruments and hedging strategies for transactions;
deterioration of creditworthiness or overall financial condition of a material counterparty (or counterparties);
unanticipated increases in cost or scope of, or significant delays in the completion of, Delek’s capital improvement and periodic turnaround projects;
risks and uncertainties with respect to the quantities, pricing, availabilities or costs of crude oil, feedstocks or refined petroleum products, including those supplied to Delek’s refineries or pipelines and/or held in Delek’s terminals;
operating hazards, natural disasters, casualty losses, actions of customers or competitors and other matters beyond the control of Delek share issuance proposaland ALDW;
increases in debt levels;
changes in Delek’s ability to continue to access the credit markets on terms applicable to any such financing;
compliance, or failure to comply, with restrictive and financial covenants in various debt agreements;
the inability of Delek’s or ALDW’s subsidiaries to freely make dividends, loans or other cash distributions to Delek or ALDW, respectively;
seasonality;
acts of terrorism aimed at either Delek’s and/or ALDW’s facilities or other facilities that could impair Delek’s and/or ALDW’s ability to produce or transport refined products or receive feedstocks; and
changes in the cost or availability of transportation for crude oil, feedstocks and refined products.
Such factors are difficult to predict and in many cases may be beyond the control of ALDW and Delek. ALDW’s and Delek’s forward-looking statements are based on assumptions that ALDW and Delek, respectively, believe to be reasonable but that may not prove to be accurate. Consequently, all of the forward-looking statements ALDW and Delek make in this document are qualified by the information contained or incorporated by reference herein, including, but not limited to, the information contained under this heading and the information detailed in ALDW’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and its subsequent reports filed with the SEC, and in Old Delek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Old Delek’s and Delek’s subsequent reports filed with the SEC. See “Where You Can Find More Information.”
ALDW and Delek adjournment proposal.undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which they become aware of, except as required by applicable law or regulation. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
Delek Record Date; Stockholders
WRITTEN CONSENTS OF ALDW COMMON UNITHOLDERS
ALDW Common Units Entitled to VoteConsent and Consent Required
Only holdersALDW Common Unitholders of record of shares of Delek common stock at the close of business on [•the Merger Vote Record Date of [●], 2017 the record date for the Delek special meeting, will be entitled to noticeexecute and deliver a written consent with respect to the Merger Agreement and the Merger.
Approval of the Merger Agreement and the Merger
The approval and adoption of the Merger Agreement and the Merger by ALDW requires the affirmative vote or consent of holders of at least a majority of the outstanding ALDW Common Units.
Pursuant to vote at, the Delek special meeting or any adjournments or postponements thereof. A listterms of stockholdersthe Support Agreement, AAI, which as of record entitled[●], 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the outstanding ALDW Common Units, has irrevocably agreed to vote atdeliver the special meetingAAI Written Consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, within two business days after the effectiveness of the registration statement of which this consent statement/prospectus forms a part. The delivery of the AAI Written Consent by AAI with respect to the ALDW Common Units it owns will be available beginningsufficient to adopt the Merger Agreement and thereby approve the Merger.
Submission of Consents
ALDW Common Unitholders may consent to the approval and adoption of the Merger Agreement and the Merger with respect to their ALDW Common Units by completing, dating and signing the written consent furnished with this consent statement/prospectus and returning it to ALDW.
If you hold ALDW Common Units as of the Merger Vote Record Date and you wish to give your written consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to ALDW. Once you have completed, dated and signed the written consent, you may deliver it to ALDW by faxing it to Alon USA Partners, LP, Attention: Melissa Buhrig, Secretary, at least 10 days before and continuing through the special meeting, at our executive offices and principal place(615) 224-7937, by emailing a .pdf copy of businessyour written consent to melissa.buhrig@delekus.com, or by mailing your written consent to Alon USA Partners, LP at 7102 Commerce Way, Brentwood, Tennessee 37027, for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. The list will also be available at the special meeting for examination by any stockholder of record present at the special meeting.
As of the close of business on the record date, there were outstanding a total of [•] shares of Delek common stock entitled to vote at the Delek special meeting. As of the close of business on the record date, approximately [•]% of the outstanding Delek common shares were held by Delek directors and executive officers and their affiliates. We currently expect that Delek’s directors and executive officers will vote their shares in favor of the above-listed proposals, though they are under no obligation to do so.
Quorum
Stockholders who hold at least a majority of the shares of Delek common stock issued and outstanding as of the close of business on the record date and who are entitled to vote must be present in person or represented by proxy in order to constitute a quorum for the transaction of business at the Delek special meeting. Shares of Delek common stock represented at the Delek meeting and entitled to vote but not voted, including shares for which a stockholder directs an “abstention” from voting and broker non-votes (shares held by banks, brokerage firms or nominees that are present in person or by proxy at the Delek special meeting but with respect to which the broker or other stockholder of record is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal), if any, will be counted as present for purposes of establishing a quorum. Shares of Delek common stock held in treasury will not be included in the calculation of the number of shares of Delek common stock represented at the meeting for purposes of determining whether a quorum is present.
Required Vote
In accordance with the provisions of the NYSE Listed Company Manual and Delek's third amended and restated bylaws, approval of the New Delek share issuance proposal requires the affirmative vote of the holders of a majority of the total votes of shares of Delek common stock cast in person or by proxy at the special meeting to approve the New Delek share issuance. Under Delek’s third amended and restated bylaws, approval of the Delek adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Delek common stock present in person or represented by proxy and entitled to vote at the Delek special meeting to approve the Delek adjournment proposal.
Abstentions and Broker Non-Votes
Attention: Investor Relations. If you are a Delek stockholder and fail to vote or fail to instructdo not return your broker or nominee to vote, or abstain from voting,written consent, it will have no effect on the New Delek share issuance proposal, assuming a quorum is present. If you are a Delek stockholder and fail to vote or fail to instruct your broker or nominee to vote with respect to any proposal, it will have no effect on the Delek adjournment proposal; however, if you abstain from voting, it and any broker non-votes will have the same effect as a vote against the Delek adjournment proposal.
Voting on Proxies; Incomplete Proxies
A proxy card is enclosed for your use. Delek requests that you follow the instructions contained on the proxy cardapproval and vote via the Internet, by telephone, or mark, sign and date the accompanying proxy and return it promptly in the enclosed postage-paid envelope. When the accompanying proxy is returned properly executed, the shares of Delek common stock represented by it will be voted at the Delek special meeting or any adjournment thereof in accordance with the instructions contained in the proxy.
If a proxy is returned without an indication as to how the shares of Delek common stock represented are to be voted with regard to a particular proposal, the Delek common stock represented by the proxy will be voted in favor of each such proposal. At the date hereof, management has no knowledge of any business that will be presented for consideration at the special meeting and which would be required to be set forth in this joint proxy statement/prospectus or the related Delek proxy card other than the matters set forth in Delek’s Notice of Special Meeting of Stockholders included in this joint proxy statement/prospectus. If any other matter is properly presented at the Delek special meeting for consideration, the enclosed form of proxy will authorize the proxies named therein to, and it is anticipated that such persons will, vote in accordance with their best judgment on such matter.
Your vote is important. Accordingly, please vote today following the instructions contained on the enclosed proxy card whether or not you plan to attend the Delek special meeting in person.
Shares Held in “Street Name”
If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in “street name”), your broker, bank, trust company or other nominee cannot vote your shares on “non-routine” matters without instructions from you. Alladoption of the proposals to be voted on at the Delek special meeting are non-routine. You should instruct your broker, bank, trust company or other nominee as to how to vote your shares, following the directions from your broker, bank, trust company or other nominee provided to you. Please check the voting form used by your broker, bank, trust company or other nominee. Note, a broker non-vote occurs when there are shares held in “street name” by a broker or other nominee that are present in person or represented by proxy at the meeting but with respect to which the broker or other nominee is not instructed by the beneficial owner of such shares to vote on a particular proposalMerger Agreement and the broker does nottransactions contemplated thereby, including the Merger.
Once a sufficient number of consents to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, have discretionary voting power on such proposal. However, because, as described above, all proposals forbeen received, the special meeting are non-routine, broker non-votesconsent process will only occur with respect to a proposal inconclude. The delivery of the event that a broker receives voting instructions for at least one proposal but not with respect to another proposal. In such an event the shares will not be voted for the uninstructed proposal(s) and such shares will represent broker non-votesAAI Written Consent with respect to the uninstructed proposal(s).
Please note that you may not vote shares held in street nameALDW Common Units owned by returning a proxy card directlyAAI adopting the Merger Agreement will be sufficient to Delek or by voting in person atadopt the Delek special meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank, trust company or other nominee.
Revocability of ProxiesMerger Agreement and Changes to a Delek Stockholder’s Votethereby approve the Merger.
You have the power to revoke your proxyRevocation of Consents
Your consent may be revoked at any time before your proxy is voted at the Delek special meeting.consents of a sufficient number of ALDW Common Units to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, have been delivered to the secretary of ALDW. If you arewish to revoke a stockholder of record, you can revoke your proxy in one of three ways:
you can send a signed notice of revocation;
you can grant a new, valid proxy bearing a later date (including by telephone or through the Internet), provided that to ensure your new proxy is voted, any revised proxy submitted by telephone or Internet should be submitted within the timeframe previously described; or
you can attend the Delek special meeting and vote in person, which will automatically cancel any proxy previously given consent before that time, you may do so by faxing such revocation to Alon USA Partners, LP, Attention: Melissa Buhrig, Secretary, at (615) 224-7937, by emailing a .pdf copy of your written consent to melissa.buhrig@delekus.com, or you can revokeby mailing your proxy in person, but your attendance alone will not revoke any proxy that you have previously given.
If you choose either of the first two methods, your notice of revocation or your new proxy must be received by Delek’s Corporate Secretarywritten consent to Alon USA Partners, LP at 7102 Commerce Way, Brentwood, Tennessee 37027, no later than the beginning of the Delek special meeting. If your shares are held in “street name” by your bank or broker, you should contact your broker to change your vote or revoke your proxy.Attention: Investor Relations.
Expenses
The expense of Proxies
In accordance with the merger agreement, the cost of proxy solicitation for the Delek special meeting will bepreparing, printing and mailing these consent materials is being borne one-half by ALDW and one-half by Delek. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of Delek, some of whom may be considered participants in the solicitation, without additional remuneration, by personal interview, telephone, facsimile or otherwise. Delek will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record on the record date and will provide customary reimbursement to such firms for the cost of forwarding these materials. Delek has retained Morrow Sodali, LLC to assist in its solicitation of proxies and has agreed to pay them a fee of $12,500, plus customary solicitation charges and reasonable expenses, for these services.
Attending the Delek Special Meeting of Stockholders
If you plan to attend the Delek special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” and you wish to vote at the special meeting, you must bring to the special meeting a “legal proxy” executed in your favor from the record holder (your broker, bank, trust company or other nominee) of the shares authorizing you to vote at the special meeting.
In addition, if you are a registered stockholder, please be prepared to provide proper identification, such as a driver’s license or passport. If you hold your shares in “street name,” you will need to provide proof of ownership, such as a recent account statement or letter from your broker, bank, trust company or other nominee proving ownership on the Delek record date, along with proper identification. Stockholders will not be allowed to use cameras, recording devices and other similar electronic devices at the meeting.
Results of the Delek Special Meeting
The preliminary voting results will be announced at the Delek special meeting. In addition, within four business days following (and including) the date of the Delek special meeting, Delek intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, Delek will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four business days of the date that the final results are certified.
DELEK STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE NEW DELEK SHARE ISSUANCE PROPOSAL AND THE OTHER MATTERS TO BE VOTED ON AT THE DELEK SPECIAL MEETING.
Assistance
If you need assistance in completing your proxy card or have questions regarding the Delek special meeting, please contact Delek’s proxy solicitor, Morrow Sodali, LLC at 470 West Avenue, Third Floor, Stamford, CT 06902, call toll-free at (800) 662-5200 or international at +1 (203) 658-9400 or e-mail at DK@morrowsodali.com.
THE ALON SPECIAL MEETING OF STOCKHOLDERSMERGER
Date, Time
General
ALDW GP and PlaceDelek have agreed that Delek will acquire the outstanding ALDW Public Units by merging Merger Sub, an indirect wholly-owned subsidiary of Delek, with and into ALDW with ALDW being the surviving entity and becoming a subsidiary of Delek.
Under the terms of the Special Meeting
This proxy statement/prospectus is being furnished to Alon stockholders as part of the solicitation of proxies by the Alon board for use at the special meeting to be held on [●], at [●], local time, at [●], or at any postponement or adjournment thereof.
Purpose of the Alon Special Meeting of Stockholders
The purpose of the Alon special meeting is as follows:
to consider and vote on the Alon merger proposal;
to consider and vote on the Alon non-binding compensation advisory proposal; and
to consider and vote on the Alon adjournment proposal.
Alon will transact no other business at the Alon special meeting.
Recommendation of the Alon Board of Directors
The Alon board unanimously recommends that Alon stockholders vote:
1. “FOR” the approval of the Alon merger proposal (provided that Messrs. Ezra Uzi Yemin, Assaf Ginzburg, Frederec Green, Mark D. Smith and Avigal Soreq,Merger Agreement, each an executive officer of Delek, recused themselves in the recommendation of the Alon merger proposal);
2. “FOR” the approval of the Alon non-binding compensation advisory proposal; and
3. “FOR” the approval of the Alon adjournment proposal.
See the section entitled “The Mergers—Recommendation of Alon’s Board of Directors and Reasons for the Merger”.
Alon Record Date; Stockholders Entitled to Vote
Only holders of record of issued and outstanding shares of Alon common stock as of the close of business on [●], 2017, the record date for the Alon special meeting, are entitled to notice of, and to vote at, the Alon special meeting or any adjournment or postponement of the Alon special meeting.
As of the close of business on the record date, there were [●] shares of Alon common stock issued and outstanding and entitled to vote at the special meeting. Each Alon stockholder is entitled to one vote for each share of Alon common stock owned as of the record date.
A complete list of Alon stockholders entitled to vote at the special meeting will be available for inspection, for any purpose germane to the meeting, at Alon’s principal place of business during
regular business hours for a period of no less than 10 days before the special meeting and, during the special meeting, at [●].
Quorum
A majority of the shares entitled to vote at the Alon special meeting must be present in person or by proxy at the special meeting in order to constitute a quorum. If you submit a properly executed proxy card or vote by telephone or the Internet, you will be considered part of the quorum.
Abstentions and broker non-votes, if any, will be deemed present and entitled to vote at the special meeting for the purpose of determining the presence of a quorum. Alon common stock held in “street name” with respect to which the beneficial owner fails to give voting instructions to the bank, broker or other nominee with respect to any proposal, and Alon common stock with respect to which the beneficial owner otherwise fails to vote, will not be considered present and entitled to vote at the special meeting for the purpose of determining the presence of a quorum.
If a quorum is not present or if there are not sufficient votes for the approval of the Alon merger proposal, Alon expects that the special meeting will be adjourned to solicit additional proxies. At any subsequent reconvening of the special meeting, all proxies will be voted in the same manner as the manner in which such proxies would have been voted at the original convening of the special meeting, except for any proxies that have been validly revoked or withdrawn prior to the subsequent meeting.
Required Vote
Approval of the Alon merger proposal requires (i) the Alon Common Stockholder Approval and (ii) the Alon Disinterested Stockholder Approval. Therefore, if you do not vote your shares of Alon common stock, abstain from voting or fail to instruct your bank, broker or other nominee to vote on the Alon merger proposal, it will have the same effect as a vote “AGAINST” the Alon merger proposal.
Approval, on an advisory basis, of the non-binding compensation advisory proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted. If you fail to vote, abstain from voting, or fail to submit any instruction to your bank, broker or other nominee with respect to the Alon advisory compensation proposal (i.e., a non-broker vote), it will have no effect on the advisory compensation proposal. The vote on the advisory compensation proposal will not be binding on Delek, Alon, the Alon Board or any of its committees.
If a quorum is present, approval of the Alon adjournment proposal requires the affirmative vote, in person or by proxy, of holders of a majority of the outstanding shares of Alon common stock entitled to vote on the proposal which have actually been voted. If a quorum is present and you fail to vote, abstain from voting or fail to submit any instruction to your bank, broker or other nominee with respect to the Alon adjournment proposal (i.e., a broker non-vote), it will have no effect on the Alon adjournment proposal.
If a quorum is not present, approval of the Alon adjournment proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Alon common stock present in person or by proxy and entitled to vote on the proposal. If a quorum is not present and you abstain from voting on the Alon adjournment proposal, it will have the same effect as a vote “AGAINST” the Alon adjournment proposal. If a quorum is not present and you fail to vote or fail to submit any instruction to your bank, broker or other nominee with respect to the Alon adjournment proposal (i.e., a broker non-vote), it will have no effect on the Alon adjournment proposal.
The matters to be voted on at the Alon special meeting are described in the section entitled “-Alon Proposals” beginning on page 73.
Methods of Voting
Registered stockholders, whether holding shares directly as stockholders of record or beneficially in “street name,” may vote via the Internet by going to the web address provided on the enclosed proxy card and following the instructions for Internet voting; by telephone using the toll-free telephone number listed on the enclosed proxy card; or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.
Stockholders of record may vote in person by ballot at the Alon special meeting or by submitting their proxies:
via the Internet by going to the website shown on your proxy card and following the instructions outlined on the secured website using certain information provided on your proxy card or voting instruction form;
by telephone by using the toll-free number shown on your proxy card, or by following the instructions on your proxy card; or
by completing, signing and returning your proxy or voting instruction card in the accompanying prepaid reply envelope.
Alon stockholders who hold their shares in “street name” by a broker, nominee, fiduciary or other custodian should refer to the proxy card or other information forwarded by their broker, nominee, fiduciary or other custodian for instructions on how to vote their shares.
If you wish to submit your proxy by the Internet or telephone, to ensure your shares are voted please submit your Internet or telephone proxy by [•], Eastern Time, on [•], 2017. If you choose to submit a proxy by mailing a proxy card, your proxy card should be mailed in the accompanying prepaid reply envelope, and your proxy card must be filed with Alon’s Corporate Secretary by the time the special meeting begins.
Voting in Person
Shares held directly in your name as stockholder of record may be voted in person at the Alon special meeting. If you choose to vote your shares in person at the Alon special meeting, please
bring your enclosed proxy card and proof of identification. Even if you plan to attend the Alon special meeting, the Alon Board recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Alon special meeting.
If you are a beneficial holder, you will receive separate voting instructions from your broker, bank or other nominee explaining how to vote your shares. Please note that if your shares are held in “street name” by a broker, bank or other nominee and you wish to vote at the Alon special meeting, you will not be permitted to vote in person unless you first obtain a legal proxy issued in your name from the record owner. You are encouraged to request a legal proxy from your broker, bank or other nominee promptly as the process can be lengthy.
Questions About Voting
If you have any questions about how to vote or direct a vote in respect of your shares of Alon common stock, you may contact Morrow Sodali, LLC, Alon’s proxy solicitor, at:
MORROW SODALI, LLC
470 West Avenue
Third Floor
Stamford, CT 06902
Stockholders Call Toll-Free:
(800) 662-5200
International Callers: +1 (203) 658-9400
Email: ALJ@morrowsodali.com
Revocability of Proxies
If you are a stockholder of record of Alon, whether you vote by telephone, Internet or mail, you can change or revoke your proxy before it is voted at the meeting in one of the following ways:
submit a new proxy card bearing a later date;
vote again by telephone or the Internet at a later time, provided that, to ensure your new vote is counted, you should submit your vote within the timeframe noted above;
give written notice before the meeting to the Alon Corporate Secretary stating that you are revoking your proxy; or
attend the Alon special meeting and vote your shares in person. Please note that your attendance at the meeting will not alone serve to revoke your proxy.
Proxy Solicitation Costs
The enclosed proxy card is being solicited on behalf of the Alon Board. In addition to solicitation by mail, Alon’s directors, officers and employees may solicit proxies in person, by
telephone or by electronic means. These persons will not be specifically compensated for doing this.
Alon has retained Morrow Sodali, LLC to assist in the solicitation process. Alon will pay Morrow Sodali, LLC a fee of approximately $12,500, as well as reasonable and documented out-of-pocket expenses. Alon also has agreed to indemnify Morrow Sodali, LLC against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).
Alon will ask banks, brokers and other custodians, nominees and fiduciaries to forward the proxy solicitation materials to the beneficial owners of shares of Alon common stock held of record by such nominee holders. Alon will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.
No Appraisal Rights
Because holders of Alon common stock are not required to receive consideration other than stock consideration in the Alon Merger, or cash in lieu of fractional shares, and shares of Delek common stock are and the New Delek common stock to be issued as merger consideration will be listed on the NYSE, holders of shares of Alon common stock are not entitled to exercise appraisal rights under Delaware law in connection with the Alon Merger.
Vote of Alon’s Directors, Executive Officers and Significant Stockholders
As of February 17, 2017, Alon directors and executive officers, and their affiliates, as a group, owned and were entitled to vote 6,149,402 shares of Alon common stock, or approximately 8.6% of the total outstanding shares of Alon common stock as of the record date. In addition, as of February 17, 2017, Delek owned and was entitled to vote 33,691,292 shares of Alon common stock, or approximately [●]% of the total outstanding shares of Alon common stock as of the record date.
Concurrently with the execution of the merger agreement, Alon, Delek and each of David Wiessman, D.B.W. Holdings (2005) Ltd. (an entity controlled by David Wiessman), Jeff Morris and Karen Morris entered into voting agreements pursuant to which they have agreed, among other things, to vote all of the shares of Alon common stock beneficially owned by them in favor of the adoption of the merger agreement, on the terms and subject to the conditions set forth in the Alon voting agreements. See “The Voting Agreements.”
Alon currently expects that all of its directors and executive officers and Delek will vote their shares “FOR” the Alon merger proposal, “FOR” the non-binding compensation advisory proposal and “FOR” the Alon adjournment proposal.
Attending the Alon Special Meeting of Stockholders
You are entitled to attend the Alon special meeting only if you were a stockholder of record of Alon at the close of business on the record date or you held your shares of Alon beneficially in
the name of a broker, bank or other nominee as of the record date, or you hold a valid proxy for the Alon special meeting.
If you were a stockholder of record of Alon at the close of business on the record date and wish to attend the Alon special meeting, please so indicate on the appropriate proxy card or as prompted by the Internet or telephone voting system. Your name will be verified against the list of stockholders of record prior to your being admitted to the Alon special meeting.
If a broker, bank or other nominee is the record owner of your shares of Alon common stock, you will need to have proof that you are the beneficial owner as of the record date to be admitted to the Alon special meeting. A recent statement or letter from your broker, bank or other nominee confirming your ownership as of the record date, or presentation of a valid proxy from a broker, bank or other nominee that is the record owner of your shares, would be acceptable proof of your beneficial ownership.
You should be prepared to present photo identification for admittance. If you do not provide photo identification or comply with the other procedures outlined above upon request, you might not be admitted to the Alon special meeting.
Results of the Alon Special Meeting
The preliminary voting results will be announced at the Alon special meeting. In addition, within four business days following (and including) the date of the Alon special meeting, Alon intends to file the final voting results with the SEC on a Current Report on Form 8-K. If the final voting results have not been certified within that four business day period, Alon will report the preliminary voting results on a Current Report on Form 8-K at that time and will file an amendment to the Current Report on Form 8-K to report the final voting results within four business days of the date that the final results are certified.
ALON STOCKHOLDERS SHOULD CAREFULLY READ THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY FOR MORE DETAILED INFORMATION CONCERNING THE ALON MERGER PROPOSAL AND THE OTHER MATTERS TO BE VOTED ON AT THE ALON SPECIAL MEETING.
ALON PROPOSALS
Alon Merger Proposal
It is a condition to the completion of the Mergers that Alon stockholders adopt the merger agreement. In the Delek Merger, each issued and outstanding share of common stock of Delek, or fraction thereof,ALDW Public Unit will be converted into the right to receive one0.4900 shares of validly issued, fully paid and non-assessable shareDelek Common Stock. All fractional shares of HoldCo common stock, par value $0.01 per share, referredDelek Common Stock that a holder of ALDW Common Units would otherwise be entitled to receive as New Delek common stock, or such fraction thereof equal toconsideration in connection with the Merger will be aggregated and then, if a fractional share of New Delek common stock, upon the terms and subjectCommon Stock results from that aggregation, be rounded up to the conditions set forth in the merger agreement. In the Alon Merger, each issued and outstandingnearest whole share of common stockDelek Common Stock and any such additional Delek Common Stock will become part of Alon, par value $0.01 per share, other than Alon common stock heldthe consideration received in connection with the Merger. Any ALDW Common Units that are owned immediately prior to the Merger by Delek or any subsidiary of Delek,ALDW will be converted into the rightautomatically canceled and shall cease to
receive 0.504 validly issued, fully paid exist and non-assessable shares of New Delek common stock, upon the termsno consideration shall be delivered in exchange for such canceled ALDW Common Units. All ALDW Common Units that are not ALDW Public Units and subject to the conditions set forth in the merger agreement, which are described in the section entitled “The Merger Agreement—Merger Consideration” beginning on page 79.
The approval of this proposal by holders of Alon common stock is required by Section 251 of the DGCL. Approval of the Alon merger proposal requires the Alon Common Stockholder Approval. Abstentions and broker non-votes and any other failure to vote or failure to instruct your broker, bank or other nominee how to vote on the Alon merger proposal will have the same effect as a vote “AGAINST” the proposal. In addition, pursuant to the merger agreement, the Alon Disinterested Stockholder Approval is a condition to the completion of the Alon Merger.
The Alon board of directors recommends a vote “FOR” the Alon merger proposal.
Non-Binding Compensation Advisory Proposal
As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, which were enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Alon is required to provide its stockholders the opportunity to vote to approve, on a non-binding, advisory basis, certain compensation that may be paid or become payable to Alon’s named executive officers that is based on or otherwise relates to the Alon Merger,not canceled as described in the section entitled “immediately preceding sentence will, in each case, remain outstanding, unaffected by the Merger.
The Mergers—Interests of Alon’s Directorsapproval and Executive Officers in the Mergers” beginning on page 154. Accordingly, Alon stockholders are being provided the opportunity to cast an advisory vote on such payments.
As an advisory vote, this proposal is not binding upon Alon or the Alon Board, and approval of this proposal is not a condition to completionadoption of the Alon Merger. Because such compensation is payable pursuant to pre-existing contractual arrangements with Alon’s named executive officers, such compensation will be payable, regardless of the outcome of this advisory vote, and regardless of whether the merger agreement is adopted (subject only to the contractual conditions applicable thereto). However, Alon seeks the support of its stockholders and believes that stockholder support is appropriate because Alon has a comprehensive executive compensation program designed to link the compensation of its executives with Alon’s performanceMerger Agreement and the interests of Alon stockholders. Accordingly, holders of Alon common stock are being asked to vote on the following resolution:
“RESOLVED, that the Alon stockholders approve, on an advisory, non-binding basis, certain compensation that may be paid or become payable to the named executive officers of Alon that is based on or otherwise relates to the Alon Merger as disclosed pursuant to Item 402(t) of Regulation S-K under the heading “Interests of Alon’s Directors and Executive Officers in the Mergers.”
Approval of the non-binding compensation advisory proposalby ALDW requires the affirmative vote in person or by proxy,consent of holders of at least a majority of the shares of Alon common stock outstanding and entitledALDW Common Units. Pursuant to vote on the proposal which have actually been voted. Abstentions and broker non-votes and any other failure to vote or failure to instruct your broker, bank or other nominee how to vote on the non-binding compensation advisory proposal will have no effect on the outcometerms of the vote.Support Agreement, AAI, which as of December 1, 2017 beneficially owned 51,000,000 ALDW Common Units representing approximately 81.6% of the outstanding ALDW Common Units, has irrevocably agreed to deliver the AAI Written Consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger, within two business days after the effectiveness of the registration statement of which this consent statement/prospectus forms a part. The delivery of the AAI Written Consent by AAI with respect to the ALDW Common Units it owns will be sufficient to adopt the Merger Agreement and thereby approve the Merger.
Delek’s Ownership Interest in and Control of directors recommends a vote “FOR” the non-binding compensation advisory proposal.ALDW and Delek
Alon Adjournment Proposal
Alon stockholders are also being asked to approve a proposal to adjourn the Alon special meeting, if necessary or appropriate in the judgmentALDW Public Unitholders should be aware that ALDW is controlled by Delek through Delek’s 100% ownership of ALDW GP. ALDW GP owns all of the Alonoutstanding general partner interests in ALDW. As a result, Delek appoints the members of both the ALDW GP Board to solicit additional proxiesand the Delek Board, in favor of the Alon merger proposal if there are not sufficient votes at the time of the Alon special meeting to approve the Alon merger proposal. If the Alon special meeting is adjourned for the purpose of soliciting additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their exercise.
If a quorum is present, approval of the Alon adjournment proposal requires the affirmative vote, in person or by proxy, of holders ofeach case a majority of the shareswhom are affiliated with Delek and its affiliates, and thereby could be seen as controlling all of Alon common stock outstandingALDW’s and entitled to vote on the proposal which have actually been voted. Abstentions and broker non-votes and anyDelek’s decisions, other failure to votethan those involving certain conflicts of interest with Delek or failure to instruct your broker, bank or other nominee how to vote on the Alon adjournment proposal will have no effect on the outcome of the vote.
If a quorum is not present, approval of the Alon adjournment proposal requires thethat require an affirmative vote of holders of a majority of the shares of Alon common stock present in person or by proxy and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes and any other failure to vote or failure to instruct your broker, bank or other nominee how to vote on the adjournment proposal will have no effect on the outcome of the vote.
Approval of the Alon adjournment proposal is not required in order for the Alon special meeting to be adjourned. Under the Alon bylaws, if a quorum is not established with respect to a particular subject matter, stockholders entitled to vote at the Alon special meeting, whether present in person or represented by proxy, have the power to adjourn the Alon special meeting from time to time, without notice other than announcement at the Alon special meeting, until a quorum is present with respect to that subject matter.
The Alon board of directors recommends a vote “FOR” the Alon adjournment proposal.
INFORMATION ABOUT THE PARTIES
Delek US Holdings, Inc.
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Phone: (615) 37027
Delek US Holdings, Inc. is a Delaware corporation formed in April 2001.
Delek is an integrated downstream energy business focused on petroleum refining, the wholesale distribution of refined products and, prior to August 2016, convenience store retailing. Prior to August 2016, Delek aggregated its operating units into three reportable segments: refining, logistics and retail. However, in November 2016, Delek sold its retail related assets, including MAPCO Express, Inc. and certain related affiliated companies (together “MAPCO”), to a U.S. subsidiary of Compañía de Petróleos de Chile COPEC S.A. for total cash consideration of $535.0 million, plus MAPCO’s estimated cash on hand and a working capital adjustment, totaling approximately $16.3 million. At closing, $156.0 million of debt associated with MAPCO was repaid, along with a debt prepayment fee of $13.4 million and an estimated $4.6 million of transaction related costs.
Delek’s refining segment operates refineries in Tyler, Texas and El Dorado, Arkansas with a combined design crude throughput capacity of 155,000 barrels per day. Delek’s logistics segment gathers, transports and stores crude oil and markets, distributes, transports and stores refined products in select regions of the southeastern United States and west Texas for its refining segment and third parties.
Delek owns a 60.7% limited partner interestinterests in Delek Logistics Partners, LP (NYSE: DKL)ALDW pursuant to and a 94.9% interest in the entity thatpercentages specified by the ALDW Partnership Agreement. In addition, Delek, through its ownership of AAI, owns the entire 2.0% general partner interest in Delek Logistics and all of the incentive distribution rights. Delek Logistics was formed by Delek in 2012 to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. Delek Logistics’ initial assets were contributed by Delek and included certain assets formerly owned or used by certain of Delek’s subsidiaries. A substantial majority of Delek Logistics’ assets are currently integral to Delek’s refining and marketing operations.
Delek also owns a non-controlling equity interest of approximately 47% of the outstanding shares of common stock of Alon. Delek’s investment in Alon is accounted for as an equity method investment and the earnings from this equity method investment reflected in Delek’s consolidated statements of income include Delek’s share of net earnings directly attributable to this equity method investment, and amortization of the excess of Delek’s investment balance over the underlying net assets of Alon.
Delek’s common stock is traded on the NYSE under the trading symbol “DK.”
Additional information about Delek and its subsidiaries is included in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240.
Alon USA Energy, Inc.
Alon USA Energy, Inc.
12700 Park Central Drive, Suite 1600
Dallas, Texas 75251
Phone: (972) 367-3600
Alon USA Energy, Inc. is a Delaware corporation formed in 2000.
Alon is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. Alon owns 100% of the general partner and 81.6% of the limited partner interests in the Alon USA Partners, LP (NYSE: ALDW), which ownsALDW.
Certain persons associated with Delek have a crude oil refinery in Big Spring, Texas,relationship with a crude oil throughput capacityALDW. Kevin Kremke, Chief Financial Officer and Executive Vice President of 73,000 barrels per day (“bpd”)Delek, is also Chief Financial Officer, Executive Vice President and an integrated wholesale marketing business. In addition, Alon directly owns a crude oil refinery in Krotz Springs, Louisiana, with a crude oil throughput capacitySecretary of 74,000 bpd. AlonALDW GP. Frederec Green, Chief Operating Officer and Executive Vice President of Delek, is also owns crude oil refineries in California, which have not processed crude oil since 2012. Alon owns a majority interest in a renewable fuels project in California, with a throughput capacityChief Executive Officer and Executive Vice President of 3,000 bpd. AlonALDW GP. David Weissman is a marketer of asphalt, which Alon distributes primarily through asphalt terminals located predominately in the southwestern and western United States. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores which also market motor fuels in Central and West Texas and New Mexico.
Alon’s common stock is traded on the NYSE under the trading symbol “ALJ.”
Additional information about Alon and its subsidiaries is included in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 240.
Delek Holdco, Inc.
Delek Holdco, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Phone: (615) 771-6701
Delek Holdco, Inc. is Delaware corporation formed in December 2016 and a direct, wholly owned subsidiary of Delek. HoldCo was formed solely to effect the combination of Delek and Alon by merging Delek Merger Sub, its direct, wholly owned subsidiary, with and into Delek, and merging Alon Merger Sub, its direct, wholly owned subsidiary, with and into Alon, in each case, as provided for in the merger agreement. HoldCo has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Following the completion of the transaction, HoldCo will be the parent company of Delek and Alon and will be named “Delek US Holdings, Inc.” The New Delek common stock issued by HoldCo in the Mergers is expected to be listed for trading on the NYSE under Delek’s ticker symbol, “DK.”
Dione Mergeco, Inc.
Dione Mergeco, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Phone: (615) 771-6701
Dione Mergeco, Inc. is a Delaware corporation formed in December 2016 and a direct, wholly owned subsidiary of HoldCo. Delek Merger Sub was formed solely for the purpose of consummating the merger of Delek Merger Sub with and into Delek, as provided for in the merger agreement. Delek Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
Astro Mergeco, Inc.
Astro Mergeco, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Phone: (615) 771-6701
Astro Mergeco, Inc. is a Delaware corporation formed in December 2016 and a direct, wholly owned subsidiary of HoldCo. Alon Merger Sub was formed solely for the purpose of consummating the merger of Alon Merger Sub with and into Alon, as provided for in the merger agreement. Alon Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.
THE MERGERS
This discussion of the Mergers is qualified in its entirety by reference to the merger agreement, which is attached to this joint proxy statement/prospectus as Annex A and is incorporated by reference into this joint proxy statement/prospectus. This summary does not purport to be complete and may not contain all of the information about the Mergers that is important to you. You should read the entire merger agreement carefully as it is the legal document that governs the Mergers. This section is not intended to provide you with any factual information about Delek or Alon. Such information can be found elsewhere in this joint proxy statement/prospectus and in the public filings Delek or Alon make with the SEC that are incorporated by reference into this joint proxy statement/prospectus, as described in the section entitled “Where You Can Find More Information” beginning on page 240 of this joint proxy statement/prospectus.
Structure of the Mergers
At the effective timemember of the Delek Merger, Delek Merger Sub will merge withBoard and into Delek, with Delek surviving as a wholly owned subsidiary of HoldCo, a new holding company formed by Delek. Atalso the effective timeexecutive chairman of the Alon Merger, Alon Merger Sub will merge with and into Alon, with Alon surviving.
Merger Consideration
In the Delek Merger, Delek’s stockholders will receive one share of New Delek common stock for each issued and outstanding share of Delek common stock that they own immediately prior to the effective timeALDW GP Board. Certain of the Delek Merger.
In the Alon Merger, Alon’s stockholders (other than Delek foregoing persons also serve as officers, directors and/or any subsidiary of Delek), will be entitled to receive 0.504 shares, referred to as the “exchange ratio,” of New Delek common stock for each issued and outstanding share of Alon common stock that they own immediately prior to the effective timemembers of the Alon Merger, with cash paid in lieumanagement committee of fractional shares. The exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closingother affiliates of the Mergers.Delek.
Background of the MergersMerger
On February 2, 2015, Avigdor Kaplan, thenJanuary 3, 2017, in connection with the announcement of the Delek-ALJ Merger Agreement, Uzi Yemin, the Chairman, President and Chief Executive Officer of Delek, was asked about how the transaction between Old Delek and Alon Israel Oil Company Ltd.Energy could affect ALDW. Mr. Yemin stated:
I think that personally I do not believe in that vehicle [ALDW]. I do believe that refiners need to have a tremendous amount of liquidity, and I do believe that the variable MLP is not a great vehicle for refiners. So today we are doing the first step into simplifying our structure, by trying to combine two companies [Old Delek and Alon Energy] so now we’ll have three public companies [Delek, DKL and ALDW], but the end goal is, and I want to be clear, the end goal is not to have three public companies but to have two. One, the C Corp, if you will, Delek US, and underneath it, a more traditional MLP [DKL], with which we are trying to create a fee-based fixed income vehicle. Honestly, I don’t see ALDW’s long-term future with us.
On May 8, 2017, prior to the consummation of the Delek-ALJ Merger pursuant to the Delek-ALJ Merger Agreement, Old Delek held an earnings call. On this call, Mr. Yemin was again asked about Delek’s plans with respect to ALDW after consummation of the Delek-ALJ Merger. Mr. Yemin stated:
ALDW or Big Spring is a great asset. . . . ALDW, that depends on the yield, and obviously we showed the market that we are patient. So if it makes sense to our shareholders, we’ll look at that. If it’s not, we’ll continue with the structure, and we believe that this is a very good asset. I want to be clear though. I don't believe in having 4 public companies [Old Delek, Alon Energy, DKL and ALDW] for 4 refineries. So that will need to change. But as we all said, we waited for 2 years to complete the Alon transaction. We have time and patience, and we need to make sure that we create the right value for our shareholders.
Later in the call, Mr. Yemin was asked, regarding ALDW, “If you were to take it over, would Delek have a vote on an eventual acquisition? How would the actual roll-up occur as far as the mechanics of it? Would it be up to just minorities? Or would [Delek] also have a vote on it?” Mr. Yemin responded:
That's a legal question. I-that we will need to focus [on]. I think our board is doing that. We just don’t want to take risks that are not needed. So we will look at that situation carefully as the time matures and it gets closer to doing something like that. Obviously, something like that is not feasible between now and closing. So we have time to think about that, but I do think that both options [exist].
With the completion of the Delek-ALJ Merger, effective July 1, 2017, Delek acquired indirect ownership of 81.6% of the outstanding ALDW Common Units and 100% of the outstanding limited liability company interest in ALDW GP, giving Delek effective control over ALDW.
In July 2017, Delek engaged Barclays Capital Inc. ("Barclays") in connection with its consideration of a potential transaction with ALDW.
On August 3, 2017, Delek held its second quarter 2017 earnings call. On this call, Mr. Yemin was again asked about Delek’s plans with respect to ALDW after consummation of the Delek-ALJ Merger. Mr. Yemin stated:
It’s too early to discuss [a timeline for the resolution of ALDW]. We're obviously looking at that. We said all along, it doesn't make sense to have 3 public companies. Or actually, it used to be 4. Now, it's 3. But also it depends on the returns. And if the ALDW [deal] doesn't make sense, we already proved to market that we can be patient. And it makes sense, obviously, to consolidate that thing, but it needs to make sense also from an economic standpoint. . . . We are doing the work that we can pull the trigger. But the trigger, it depends on the market condition. We are doing the work. But we are, obviously, not going to overpay for ALDW. So we need to be patient.
In late August 2017, Mr. Yemin contacted members of the ALDW GP Board to discuss Delek’s preliminary interest in pursuing a potential acquisition by Delek of all ALDW Public Units. Mr. Yemin did not indicate any relevant financial terms, except that stock consideration was expected to be involved. In response to this preliminary interest, Sheldon Stein, an independent member of the ALDW GP Board and a presumptive member of any conflicts committee of the ALDW GP Board to be established for purposes of evaluating a proposed transaction, contacted Houlihan Lokey to discuss Houlihan Lokey’s potential engagement as financial advisor to an ALDW conflicts committee to assist such a committee in responding to any proposal received from Delek regarding a possible ALDW transaction. Subsequently, on August 25, 2017, at the direction of Delek, Barclays contacted Houlihan Lokey, and representatives of the firms had a preliminary discussion with respect to the timing of a possible offer to acquire all ALDW Public Units by Delek or one of its affiliates.
On August 28, 2017, the ALDW GP Board convened in order to discuss Delek’s preliminary interest with respect to an acquisition of all ALDW Public Units. The ALDW GP Board determined to seek “Special Approval,” as defined in the ALDW Partnership Agreement, for any such transaction and, in order to provide such Special Approval if determined appropriate, to establish a conflicts committee pursuant to the ALDW Partnership Agreement consisting solely of qualified independent members of the ALDW GP Board to review any such transaction. Accordingly, the ALDW GP Board appointed Mr. Stein, Ella Ruth Gera and Eitan Raff to the ALDW GP Conflicts Committee and authorized the ALDW GP Conflicts Committee to, among other things, (a) review, evaluate and negotiate a possible transaction with Delek on behalf of ALDW and the ALDW Public Unitholders for the purpose of providing, if appropriate, Special Approval, and to recommend to the ALDW GP Board whether or not to approve the transaction and (b) engage financial, legal and other professional advisors. The ALDW GP Board also authorized compensation for the members of the ALDW GP Conflicts Committee.
Shortly after the meeting of the ALDW GP Board was adjourned, the ALDW GP Conflicts Committee convened for the first time with Mr. Stein, Ms. Gera and Mr. Raff in attendance. At the invitation of the ALDW GP Conflicts Committee, Gardere Wynne Sewell LLP (“Gardere”) attended the meeting as potential legal counsel to the ALDW GP Conflicts Committee. At the initial meeting, the committee appointed Mr. Stein as its chairman and discussed key “first impression” issues arising out of the potential transaction, including
the possibility that any transaction involving an exchange of ALDW Public Units for either cash or equity interests in Delek would be expected to be a taxable transaction to ALDW Public Unitholders. The committee also discussed that Delek’s current control of ALDW, as a result of the Delek-ALJ Merger, and its interest in acquiring the ALDW Public Units for purposes of consolidating ownership of the refinery assets-rather than disposing of its ownership of ALDW Common Units-meant that it was unlikely that any unaffiliated person would be interested in making a credible competing offer for ALDW and the ALDW Public Units. The committee reviewed the requirements for the independent status of each committee member as well as the applicable duties of the committee members under the ALDW Partnership Agreement and applicable law. With respect to the selection of a financial advisor, the committee authorized Gardere to negotiate the terms of Houlihan Lokey’s engagement as financial advisor to the committee. Houlihan Lokey was selected based on Houlihan Lokey’s experience and reputation and its familiarity with ALDW and the industry in which it operates having, among other things, provided financial advisory services to a conflicts committee of the ALDW GP Board in connection with ALDW’s proposed acquisition of a refinery from Alon Israel”Energy in 2014. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers and acquisitions, financings, and financial restructurings. In connection with its engagement, Gardere disclosed to the committee its limited engagement on unrelated matters during the past by Delek, Alon Energy, and their subsidiaries for which the fees paid in the last five years were less than $60,000 in the aggregate. The committee discussed its belief that such limited unrelated matters and limited fees would not compromise Gardere’s independence on behalf of the committee. After discussion, the ALDW GP Conflicts Committee approved the retention of Gardere, and Gardere was retained as legal counsel to the committee. The committee then discussed potential updates to the mandate and scope of authority given to it by the ALDW GP Board.
Following the August 28, 2017 meeting of the ALDW GP Conflicts Committee, Gardere concluded that, on the basis of Mr. Raff’s ownership of a small number of shares of Delek Common Stock as disclosed in an ALDW GP Board director questionnaire, Mr. Raff did not appear to be eligible to serve on the ALDW GP Conflicts Committee pursuant to the terms of the ALDW Partnership Agreement. This view was subsequently confirmed by internal counsel for the ALDW GP, who was also internal counsel to Delek, and, accordingly, Mr. Raff resigned from the committee in a follow up call with Gardere on September 3, 2017.
On September 5, 2017, Mr. Stein and Ms. Gera, as the remaining members of the ALDW GP Conflicts Committee, and Gardere convened to review matters related to qualifications to serve on the ALDW GP Conflicts Committee (including Mr. Raff’s resignation from the committee) and the timing and logistics of a potential transaction with Delek. The committee further reviewed issues relating to whether a potential transaction would be taxable. The committee also reviewed the terms of Houlihan Lokey’s proposed engagement as the committee’s financial advisor. In connection with its engagement, Houlihan Lokey provided the committee with a letter with respect to the relationships of Houlihan Lokey with ALDW, Delek and certain related parties during the prior two years. After reviewing the letter, the committee determined that Houlihan Lokey did not have relationships which would impair Houlihan Lokey’s ability to provide the committee with objective advice regarding a potential transaction with Delek. The committee approved Houlihan Lokey’s engagement, and Houlihan Lokey was retained as its financial advisor.
Also on September 5, 2017, representatives of Houlihan Lokey contacted representatives of management of ALDW and Delek, which were comprised of the same individuals, to begin gathering information regarding ALDW and, given the possibility that shares of Delek Common Stock or other Delek securities would constitute some or all of the proposed consideration in a transaction, Delek and its subsidiaries, and on September 7, 2017, Houlihan Lokey submitted to representatives of management of ALDW and Delek a list of information regarding ALDW that it would like to review.
On September 8, 2017, Gardere contacted internal counsel for ALDW GP, who was also internal counsel to Delek, to discuss the likelihood that the ALDW GP Conflicts Committee would request a revised expanded mandate with respect to a Delek transaction, including the right to reject any proposal and terminate discussions, and a commitment by the ALDW GP Board not to proceed with any transaction with Delek without the affirmative recommendation of the ALDW GP Conflicts Committee. Gardere and representatives of ALDW GP also discussed the due diligence process, including the identity of the ALDW and Delek management from whom information would be requested and obtained and how to ensure the reliability and promptness of the receipt of such information.
On September 12, 2017, Houlihan Lokey submitted a list of information regarding Delek (and additional information regarding ALDW) that it would like to review to the management of ALDW and Delek, as well as Barclays.
On September 13, 2017, representatives of Gardere and Houlihan Lokey had a call to discuss the potential tax effects of a potential transaction with Delek. Representatives of Gardere expressed the preliminary view that any consideration - whether in shares of Delek Common Stock and/or cash - would likely be taxable to the ALDW Public Unitholders, although the tax effects would vary for each particular ALDW Public Unitholder.
On September 14, 2017, the ALDW GP Conflicts Committee, Gardere and Houlihan Lokey held a meeting. In this meeting, the committee discussed specific revisions and updates to the ALDW GP Board resolutions for the purpose of clarifying and expanding the scope of authority of the ALDW GP Conflicts Committee. In particular, the proposed revised resolutions provided the ALDW GP Conflicts Committee with the full authority to accept or reject any proposal by Delek and to terminate discussions between ALDW and Delek. The proposed revised resolutions also made clear that the ALDW GP Board would not proceed with any transaction with Delek without an
affirmative recommendation of the ALDW GP Conflicts Committee. In connection with the due diligence process, the committee discussed in detail (i) the fact that employees and representatives of ALDW who were designated to provide information concerning ALDW for due diligence and financial analysis purposes were — as a result of the principal leadership roles at ALDW GP and ALDW changing after the Delek-ALJ Merger — almost in all cases also employees of Delek and (ii) the potential conflicts and risks this dynamic potentially represented. In order to mitigate such conflicts and risks, the committee determined that confidential information regarding the committee’s process and conclusions would not be provided to any such Delek employees; rather, such employees would be utilized only to facilitate the gathering of information for the committee and its advisors. The committee noted that, although it would, with the assistance of Houlihan Lokey and Gardere, consider alternatives to a transaction with Delek, including the status quo, given Delek’s control of ALDW and its public statements indicating its desire to acquire the ALDW Public Units, an alternative transaction for ALDW involving a third party was unlikely.
Following the September 14, 2017 meeting, Gardere circulated to representatives of ALDW GP for review and execution by the ALDW GP Board updated resolutions to expand the mandate of the ALDW GP Conflicts Committee. The resolutions acknowledged the resignation of Mr. Raff from the ALDW GP Conflicts Committee since its initial formation and provided the committee with (1) the exclusive authority to review and negotiate the terms and conditions of any transaction between ALDW and Delek concerning the acquisition of ALDW Public Units, including, without limitation, form of consideration and price, and to negotiate and approve all documentation relating to such transaction and (2) an express right to reject any proposal with respect to an ALDW-Delek transaction and/or to terminate (or not commence) any discussions with Delek or its affiliates and representatives in respect of a transaction. The resolutions also provided that the ALDW GP Board would not authorize or approve an ALDW-Delek transaction or submit any such transaction to ALDW Public Unitholders for their acceptance or approval (including for purposes of obtaining Special Approval under the ALDW Partnership Agreement) unless and until the ALDW GP Conflicts Committee provided the ALDW Board with its affirmative recommendation in favor of such transaction. The resolutions also set forth the applicable duties of members of the ALDW GP Conflicts Committee as set forth in the ALDW Partnership Agreement. Following its receipt of the proposed update to the committee’s mandate, representatives of ALDW GP and Delek called Gardere to confirm their receipt of the resolutions and to briefly discuss timing and disclosure issues relating to a possible transaction. Delek advised Gardere that Baker Botts L.L.P. (“Baker Botts”), telephoned Ezra Uzi Yemin, would act as outside counsel to Delek.
On September 18, 2017 representatives of Houlihan Lokey, as financial advisor to the ALDW GP Conflicts Committee, and Barclays and Baker Botts, as financial and legal advisors to Delek, met with Kevin Kremke, Executive Vice President and Chief Financial Officer of Delek and Executive Vice President, Chief Financial Officer and Secretary of ALDW GP, Frederec Green, Executive Vice President and Chief Operating Officer of Delek and Executive Vice President and Chief Executive Officer of ALDW GP, Assaf Ginzburg, Executive Vice President of Delek, Avigal Soreq, Executive Vice President and Chief Commercial Officer of Delek, and other representatives of the management of ALDW and Delek in Franklin, Tennessee to receive management presentations regarding ALDW and Delek. Mr. Kaplan advised Mr. YeminGardere participated via telephone. The presentations lasted most of the business day. Representatives of ALDW and Delek reviewed the businesses, financial performance and projections for ALDW and Delek. In order to permit an open exchange of information without Delek's financial advisor being present, representatives of Barclays were excused from a session during which Houlihan Lokey and Gardere on behalf of the ALDW GP Conflicts Committee asked questions, specifically regarding ALDW and the process by which the financial projections for both ALDW and Delek were prepared.
On September 19, 2017, Delek and ALDW entered into a confidentiality agreement.
Also, on September 19, 2017, the ALDW GP Conflicts Committee, Gardere and Houlihan Lokey met to review the information provided during the management presentations the day before. In addition to the committee and its advisors, Messrs. Kremke, Green and Ginzburg and other representatives of ALDW and Delek were present, along with representatives of Baker Botts and Barclays. Representatives of the management of ALDW and Delek led the presentation and members of the committee asked various questions, including questions regarding operational issues and financial performance. Delek also reviewed certain anticipated features of a potential opportunity fortransaction, including its expectation that the consideration paid to acquire all ALDW Public Units would be entirely in the form of Delek to purchase Alon Israel’s shareholdingsCommon Stock. No financial terms of a potential transaction, including any exchange ratio, were discussed in Alon, then representing approximately 55% of Alon’s outstanding common stock. During February 2015, Delek conducted its own preliminarythe presentation. In connection with conducting the due diligence concerning Alon based upon publicly available information.review and its preliminary review of anticipated transaction structure, management of Delek expressed a desire to the ALDW GP Conflicts Committee for an expedited negotiation of any potential transaction proposal. In response, the committee emphasized that, while the ALDW GP Conflicts Committee would seek to move with all deliberate speed to evaluate any proposal, the committee could not commit to any particular timeframe. The opportunity interestedALDW GP Conflicts Committee requested that Gardere and Baker Botts confer after this meeting regarding timing and process considerations.
Later on September 19, 2017, Gardere and Baker Botts spoke regarding timing and process considerations in respect of a potential transaction. Gardere re-emphasized that, once a formal proposal from Delek, if any, was received by the ALDW GP Conflicts Committee, Gardere expected the committee to proceed as promptly as possible to evaluate such proposal and respond to it. Gardere also stressed, however, that-in light of the committee’s responsibilities and desire to negotiate a transaction that was in the best interest of the ALDW Public Unitholders-the committee would not commit to any firm timeline and would take such time as the committee determined was necessary and appropriate to conduct its evaluation and negotiate a transaction. In connection therewith, in order to set expectations as
to timing and promote constructive dialogue between the parties, Gardere also provided a brief update to Baker Botts as to anticipated next steps and timing with respect to Houlihan Lokey’s review of information with respect to ALDW and Delek for several reasons,purposes of its financial analyses. Subsequently, Houlihan Lokey called Barclays to convey similar information.
Subsequent to September 19 and through November 5, 2017 representatives of Houlihan Lokey held a number of follow up diligence calls with ALDW and Delek management to discuss, among other things, financial topics, third quarter performance of ALDW and Delek, and the potential sale by Delek of certain non-core assets. On a number of occasions, representatives of Barclays were present on such calls.
On September 26, 2017, Gardere spoke with internal counsel to ALDW GP and Delek in order to request the status of the proposed resolutions updating the mandate of the ALDW GP Conflicts Committee. ALDW GP internal counsel indicated that such resolutions were acceptable to the ALDW GP Board and had been circulated to its members for formal approval by written consent.
On September 28, 2017, the ALDW GP Conflicts Committee, Gardere and Houlihan Lokey met to further discuss the information that the ALDW GP Conflicts Committee and its advisors had received with respect to ALDW and Delek, as well as certain public trading observations with respect to ALDW and Delek. As part of its discussion, the committee, with the assistance of Houlihan Lokey, reviewed certain structural issues applicable to a potential ALDW-Delek transaction in light of the contemplated all Delek Common Stock consideration that Delek indicated it was considering on September 19, 2017, including Delek’s desirea fixed exchange ratio construct versus a fixed value construct and the possibility of using “collars” on the exchange ratio. The committee discussed certain alternatives to grow,a transaction with Delek, noting ALDW's limited growth prospects and yield-oriented investor base. Gardere briefly discussed with the factALDW GP Conflicts Committee the anticipated timing of the execution of the ALDW GP Board resolutions clarifying and expanding the ALDW GP Conflicts Committee’s mandate. The committee also considered the engagement of Potter Anderson & Coroon, LLP (“Potter Anderson”) as special Delaware counsel to the committee, based on Gardere’s recommendation. The committee also noted that the members of the committee, in their role as members of the ALDW GP Board’s audit committee, were discussing a change in auditors of ALDW, and that Delek was already familiar with Alon givenalso proposing conforming the ALDW’s accounting policies to those of Delek for financial reporting purposes, or pushdown accounting, for the third quarter of 2017, the first full quarter completed since the closing of Delek-ALJ Merger.
On October 5, 2017, Gardere and internal counsel to ALDW GP and Delek held a call in which it was confirmed that both companies were previously associated with Israeli oil and gas companies and had completed their initial public offerings in the United States in the same timeframe, the similarity in sizeall members of the two companies, Delek’s interest in achieving greater geographic diversity in its businessALDW GP Board had approved the resolutions to revise the mandate of the ALDW GP Conflicts Committee, and greater exposure toon October 10, 2017 the ALDW GP Conflicts Committee received a fully executed copy of the resolutions.
On one or more occasions during the Permian Basinfirst two weeks of October, representatives of Houlihan Lokey, on the one hand, and Delek’s previous success in acquiring and integrating Lion Oil Company ineither a staged manner that began with an initial purchaserepresentative of Delek or Barclays, on the other, discussed the expected timing of the delivery of a minority equity interest.written proposal from Delek with respect to the acquisition by Delek of all ALDW Public Units. Delek and Barclays indicated that the ALDW GP Conflicts Committee should expect a proposal at some point following a scheduled meeting of the Delek Board on October 10. On such calls, both Delek and Barclays reiterated Delek’s desire for an accelerated timeframe in which to conclude negotiations following delivery of the Delek proposal and acknowledged that the committee would need to take whatever time it determined was appropriate consistent with its duties under the ALDW Partnership Agreement and applicable law.
Also during February 2015, representatives
On October 10, 2017, the Delek Board held a meeting at which the potential transaction was discussed. Representatives of Delek, including Assaf Ginzburg, Delek’s Chief Financial Officer, and Frederec Green, Delek’s Executive Vice President, engaged outside counsel, including Norton Rose Fulbright US LLP (“Norton Rose Fulbright”)Barclays, Baker Botts and Morris, Nichols, Arsht & Tunnell LLP, (“Morris Nichols”), to discuss legal considerations associated with a potential purchase of Alon Israel’s shares of Alon common stock.
On February 12, 2015, Alon Israel filed a Form 4 with the SEC reflecting its sale of over 3.8 million shares of Alon common stock from February 10, 2015 through February 12, 2015, representing approximately 7% of the Alon common stock then outstanding.
On February 27, 2015, Messrs. Yemin and Ginzburg, along with Delek Vice President Avigal Soreq, met in New York with Mr. Kaplan, Yonel Cohen, then a director of Alon and Chairman of the Board of Alon Israel’s largest shareholder, and Shraga Biran, then a director of Alon and the controlling person of Alon Israel’s largest shareholder. They engaged in a high-level discussion of the opportunity for Delek to purchase Alon Israel’s remaining shares of Alon common stock, without negotiating any terms or reaching an agreement, arrangement or understanding with respect to those shares. Mr. Ginzburg advised Messrs. Kaplan, Cohen and Biran that a purchase would need to occur only with the prior approval of the Alon Board as contemplated by Section 203 of thespecial Delaware General Corporation Law (“Section 203”).
On March 2, 2015, Delek delivered a letter to the Alon Board requesting approval for purposes of Section 203 with respect to the potential purchase by Delek of some or all of the Alon shares held by Alon Israel. In response, the Alon Board formed a special committee consisting of independent directors (the “203 Special Committee”) and authorized it to review, negotiate and evaluate Delek’s request and make a recommendation to the Alon Board.
From March 9, 2015 through March 19, 2015, representatives of Delek and the 203 Special Committee negotiated a stockholder agreement (the “Stockholder Agreement”). Based on the recommendation of the 203 Special Committee, on March 19, 2015, the Alon Board approved Delek’s purchases of the shares of Alon common stock from Alon Israel for purposes of Section 203, and the Stockholder Agreement was executed by the parties later that day.
On March 23 and 24, 2015, Messrs. Yemin, Ginzburg, Green and Soreq, accompanied by Delek Executive Vice President Mark D. Smith, met with Messrs. Kaplan, Cohen and Biran, who were joined by Boaz Biran, then a member of the Alon Board and a director of Alon Israel’s largest shareholder, and Amit Ben Itzhak, then a member of the Alon Board and Chairman of the Board of Alon Israel. They negotiated a confidentiality agreement and a term sheet for Delek’s purchase of all of the shares of Alon common stock then owned by Alon Israel, which were signed on March 24, 2015.
Between March 24, 2015 and April 14, 2015, Delek and Alon Israel negotiated the terms of a stock purchase agreement (the “Stock Purchase Agreement”). On April 14, 2015, the Delek Board discussed and approved a proposal for Delek to purchase the entirety of Alon Israel’s 48% equity
interest in Alon. Members of Delek’s management presented to the Delek Board a summary of the key terms of the proposed Stock Purchase Agreement, including the total consideration of approximately $583 million, a prohibition of the solicitation of competing bids in the period prior to closing, the obligation that Delek reimburse Alon Israel for expenses for five years at $1 million per year, the right of Alon Israel to nominate one seat on the Delek Board so long as it held 7.5% of Delek’s common stock and the registration rights associated with the Delek common stock to be issued to Alon Israel as part of the purchase price consideration. Later the same day, following the Delek Board’s approval of the proposed transaction, Delek entered into the Stock Purchase Agreement with Alon Israel, which provided for Delek’s acquisition of all of the 33,691,292 shares of Alon common stock owned by Alon Israel.
In addition, during early April 2015, Delek negotiated with the 203 Special Committee certain revisions and amendments to the Stockholders Agreement, including a “standstill” provision prohibiting Delek from acquiring additional shares that would result in Delek owning more than 49.99% of the outstanding Alon common stock before the 12-month anniversary of the closing of Delek’s purchase of the Alon shares from Alon Israel. The Amended and Restated Stockholder Agreement, entered into on April 14, 2015, also permitted Delek to nominate its own slate of directors, if it chose to do so, for Alon’s 2016 annual meeting of stockholders.
On May 3, 2015, the Delek Board held a meeting during which the board members discussed the upcoming closing of the purchase of the 48% stake in Alon from Alon Israel. That acquisition was viewed by the Delek Board as consistent with Delek’s growth objective and desire to achieve greater economies of scale. The closing of the purchase occurred on May 14, 2015.
In connection with the closing of the acquisition, five Alon directors who were affiliated with Alon Israel resigned and were replaced as directors by five directors who were affiliated with Delek, Messrs. Yemin, Ginzburg, Green, Smith and Soreq. Additionally, David Wiessman resigned from the position of Executive Chairman of the Alon Board and Jeffrey D. Morris resigned from the position of Vice Chairman of the Alon Board. Messrs. Wiessman and Morris remained on the Alon Board. The Alon Board appointed Mr. Yemin as Chairman of the Alon Board.
On May 26, 2015, Delek filed a Schedule 13D with the SEC disclosing its acquisition of 48% of the Alon common stock and the Stockholder Agreement with Alon.
On May 28, 2015, pursuant to the terms of the Stock Purchase Agreement, Delek increased the size of its board from five to six members and elected Yonel Cohen, Alon Israel’s designee, to the Delek Board. On October 25, 2015, Mr. Cohen resigned from the Delek Board to pursue other business opportunities. The Delek Board seat left vacant by Mr. Cohen’s resignation has not been filled.
On Delek’s earnings conference calls in early May and early August 2015, Mr. Yemin responded to questions regarding Delek’s intentions with respect to a potential acquisition of the remaining outstanding shares of Alon common stock. Mr. Yemin stated that Delek would “need to think seriously” about acquiring the remainder of the Alon shares and that Delek was “not in the business of holding 48% in a company.”
On July 31, 2015, the Alon Board met in person. At the meeting, Mr. Wiessman made reference to Mr. Yemin’s public remarks as well as market rumors and increased communications from stockholders and hedge funds following Delek’s acquisition of its 48% stake. In light of these referenced events, Mr. Wiessman proposed that the Alon Board form the Special Committee, consisting of directors not affiliated with Delek and delegated the authority to be prepared to respond quickly to any offers received with respect to a potential transaction with Delek. Specifically, such Special Committee would consist of Messrs. Wiessman, Morris, Haddock, Yeshayahu Pery, Zalman Segal and Ilan Cohen. Following this meeting, the Special Committee interviewed potential financial and legal advisors, discussed the qualifications of these candidates, solicited the perspectives of members of Alon management on those candidates and determined to engage J.P. Morgan Securities LLC (“J.P. Morgan”) as the Special Committee’s financial advisor and Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) as the Special Committee’s legal counsel.
At a meeting of the Delek Board on August 2, 2015, Mr. Yemin presented Delek’s strategic update to the Delek Board, including a discussion concerning the potential acquisition of the Alon common stock held by the Disinterested Stockholders and the purchase of common units of Alon Partners from its public stockholders.
On September 29, 2015, the Special Committee held a telephonic meeting, and representatives of J.P. Morgan and a representative of Gibson Dunn participated. The Special Committee members determined that Mr. Wiessman would serve as Chairman of the Special Committee and confirmed the engagement of J.P. Morgan and Gibson Dunn. The Special Committee members reviewed and discussed Alon’s current ownership status and the history of Delek’s acquisition of its stock holdings in Alon, as well as their perception of an “overhang” caused by the uncertainty as to whether Delek might acquire the remaining Alon shares. The Special Committee members discussed process considerations for exploring Delek’s possible interest in engaging as part of a review of strategic alternatives. The representative of Gibson Dunn discussed with the Special Committee members their legal and fiduciary duties, as well as best practices regarding process, in connection with the consideration of any transaction. The Special Committee members concluded that Mr. Wiessman should reach out to Mr. Yemin to let him know that the Special Committee was beginning the process of assessing strategic alternatives and would like to know if the Special Committee should be aware of any transaction that Delek would contemplate in the near term.
On October 8, 2015, Mr. Wiessman contacted Mr. Yemin, in Mr. Yemin’s capacity as Chief Executive Officer and Chairman of the Delek Board, regarding the Special Committee process of analyzing strategic alternatives. Mr. Wiessman noted that a transaction between Delek and Alon would be an obvious strategic alternative to analyze and inquired whether there was a transaction that Delek would contemplate in the near term of which the Special Committee should be aware.
Although the Special Committee had been operating on the understanding that the Alon Board had established the Special Committee at its meeting on July 31, 2015, questions arose among the Alon Board members regarding the establishment of the Special Committee. Because of those questions, on October 30, 2015, the Alon Board formally approved the formation of the Special Committee and the authority of the Special Committee to engage financial and legal advisors and
agreed that further resolutions delineating the powers and duties of the Special Committee would subsequently be drafted and approved.
Also on October 30, 2015, Mr. Wiessman and Mr. Yemin, in his capacity as an officer of Delek, met in person. Mr. Yemin told Mr. Wiessman that any deal between Delek and Alon would need to be a stock-for-stock deal due to leverage limitations but that, given the relative movement in the companies’ stock prices since Delek’s purchase of its 48% equity interest in Alon from Alon Israel, it might be difficult for Delek to propose an exchange ratio that would be attractive to the Disinterested Stockholders.
Later that day, the Special Committee met in person, along with representatives of J.P. Morgan and a representative of Gibson Dunn. Representatives of J.P. Morgan made a presentation regarding a potential process timeline, other process considerations and certain preliminary considerations regarding alternatives that could be considered by the Special Committee, including maintaining the status quo, formation of a logistics master limited partnership, the dropdown of the Krotz Springs refinery into Alon Partners, a retail separation, share buybacks, dividend increases and potential transactions with Delek or other potential strategic parties. The representatives of J.P. Morgan emphasized the preliminary nature of their analysis at that point, given that Alon would be finalizing a new financial plan in December as part of its normal year-end strategic planning process. A representative of Gibson Dunn discussed a number of matters relating to fiduciary duties, the provisions of the Stockholder Agreement (including the standstill then applicablecounsel to Delek and the expiration date of such standstill)("Morris Nichols"), Delek’s board nomination rights and alternatives that might be considered by the Special Committee. The Special Committee members discussed the relative movements in the stock prices of Alon and Delek since the acquisition by Delek of its interest in Alon and potential challenges that might be posed by a stock-for-stock merger with Delek, as well as whether adding a special dividend to Alon stockholders might be helpful in dealing with the relative stock price issue.
On November 20, 2015, members of the Alon Board again considered the adoption of resolutions delineating the power and authority of the Special Committee, including the authority to evaluate other transactions that may be alternatives to a transaction with Delek and the authority to reject any transaction with Delek. The Alon Board did not act to adopt such resolutionswere present at that time.
At a meeting of the Delek Board on December 7, 2015, Mr. Yemin presented Delek’s strategic update to the Delek Board, including a discussion of potential synergy opportunities in a transaction between Delek and Alon.
On or about December 15, 2015, Mr. Wiessman and Mr. Haddock (another member of the Special Committee) met in person with Messrs. Yemin, Ginzburg and Green, in their capacities as officers of Delek. Mr. Yemin stated that he believed any deal with Alon would need to be at an exchange ratio reflecting a discount to current Alon market price. Mr. Wiessman stated that such exchange ratio would not be acceptable unless the Disinterested Stockholders were to receive substantial additional value and suggested that Mr. Yemin consider a one-time cash dividend to Alon stockholders. Mr. Yemin stated that, due to market conditions, Delek was unlikely to favor a special dividend.
An in-person meeting of the Special Committee took place on December 16, 2015. A representative of Gibson Dunn attended the meeting. The Special Committee members discussedFollowing the terms of certain of Alon’s convertible debt, which included very significant economic “make whole” payment provisions that would be triggered if Delek’s ownership exceeded 50% (except in the case of a merger with at least 90% stock consideration). The representative of Gibson Dunn and the Special Committee members discussed the possibility of putting in place a stockholder rights plan to “freeze” Delek’s ownership after the expiration of the standstill limitations on May 14, 2016, including the fact that the Alon Board could put a stockholder rights plan in place within a few days if one were deemed necessary.
Representatives of J.P. Morgan then joined the meeting. Mr. Wiessman gave an update regarding the meeting with Mr. Yemin. Representatives of J.P. Morgan discussed the feasibility of a one-time cash dividend to Alon stockholders in connection with a transaction with Delek. The J.P. Morgan representatives gave a presentation regarding strategy and process points and reiterated that the unique synergy opportunities in a transaction between Delek and Alon, as well as current market and other challenges that Alon may face if it attempted to implement certain alternative transactions, meant that a transaction with Delek appeared attractive if it could be achieved on appropriate terms. The Special Committee members discussed the potential synergiesof a transaction with Delek, as well as potential alternatives and agreed that, if it could be achieved on appropriate terms, a transaction with Delek appeared likely to be more advantageous than other alternatives. The Special Committee members then discussed talking points for further communications with Delek. The Special Committee members agreed that such talking points should emphasize (i) that the Special Committee is not interested in a transaction at a discount, (ii) the possibility that the Disinterested Stockholders could receive a $4 per share special dividend in connection with any transaction, (iii) the Special Committee’s views as to potential synergies and the potential attractiveness of a transaction to stockholders of both companies, (iv) the adverse debt “make whole” impact if Delek increased its ownership above 50% other than in a stock-for-stock merger and (v) the Special Committee's consideration of a stockholder rights plan.
On December 23, 2015, Alon and Delek entered into a confidentiality agreement to permit the exchange of certain non-public information. Delek filed an amendment to its Schedule 13D on December 23, 2015 to report the entry into such agreement and Delek’s evaluation of potential transactions. Alon thereafter began sharing certain information with Delek to assist Delek in evaluating potential synergies.
On December 31, 2015, Mr. Wiessman and Mr. Yemin, in his capacity as an officer of Delek, met in person. At the meeting, Mr. Wiessman at the Special Committee’s direction discussed with Mr. Yemin the talking points prepared at the December 16, 2015 meeting.
The Special Committee held a telephonic meeting on January 6, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. Mr. Wiessman gave an update regarding his December 31 meeting with Mr. Yemin.
In early January 2016, Delek released an investor presentation that included some material regarding its investment in Alon. Specifically, the presentation revealed that potential next steps could include an acquisition of the remaining 52% interest in Alon or an acquisition of only enough
shares of Alon common stock to increase Delek’s ownership stake to above 50% to give Delek effective control of Alon.
On January 14, 2016, Delek hired PricewaterhouseCoopers LLP (“PWC”) to act as a consultant to Delek for purposes of integration strategy and planning and identifying, validating and quantifying integration synergy opportunities.
Also in January 2016, in connection with the Delek Board’s strategic review of the company, Delek commenced a disposition process with respect to its retail business. The Delek Board believed that market conditions in the retail space would support a disposition at an attractive valuation, and that the disposition of the retail business would generate liquidity for Delek and be a viable alternative to a dropdown of retail assets to Delek Logistics.
On January 27, 2016, Mr. Wiessman met in person with Mr. Yemin, in his capacity as an officer of Delek. Mr. Yemin told Mr. Wiessman that, because of the relative stock price performance of the two companies, he did not believe a stock-for-stock deal was attractive to Delek unless the exchange ratio was at a significant discount to Alon’s stock price. He also stated that he thought it would be in the best interest of Alon for Delek not to nominate its own slate of directors as permitted by the Stockholder Agreement. He proposed that the current Alon Board largely be renominated, with two new independent directors replacing Messrs. Morris and Pery. At the suggestion of Mr. Wiessman, Mr. Yemin agreed that for one year following the termination of the current standstill restriction, Delek would agree to give 14 days’ prior notice before purchasing any Alon shares that would increase its ownership stake above 50%.
On January 29, 2016, Delek and Alon amended the Stockholder Agreement to provide for the nomination of the directors discussed by Mr. Yemin and Mr. Wiessman. Also on that date, Delek delivered a letter to Mr. Wiessman in his capacity as the Chairman of the Special Committee providing that, during the period from the expiration of Delek’s standstill obligation until May 14, 2017, Delek would provide at least 14 days’ notice prior to any purchases that would increase its Alon ownership stake to above 50% of outstanding shares.
On February 1, 2016, Messrs. Wiessman, Haddock and Morris, as members of the Special Committee, had a telephone conference with representatives of J.P. Morgan and a representative of Gibson Dunn during which Mr. Wiessman provided an update regarding his January 27 meeting with Mr. Yemin and related events. The participants discussed the need to have stockholder rights plan documents ready on short notice after the expiration of the Delek standstill, in case Delek were to deliver notice of its intention to increase its ownership stake above 50%. The Gibson Dunn representative was instructed to prepare such documents to have “on the shelf” and to present them to the Special Committee.
On February 3, 2016, Delek filed an amendment to its Schedule 13D reporting the January 29, 2016 amendment to the Stockholder Agreement.
In mid-February 2016, Mr. Wiessman and Mr. Yemin, in his capacity as an officer of Delek, had a discussion. Mr. Yemin told Mr. Wiessman that Delek was exploring the possibility of an offer that would limit the number of Delek shares to be issued as consideration to approximately 20%,
with the remainder of the consideration payable in cash. Mr. Wiessman informed Mr. Yemin that the Special Committee would expect a substantial premium for any Alon shares purchased for cash because a cash purchase would not provide the Disinterested Stockholders with the opportunity to participate in future benefits from expected synergies at the combined company.
The Special Committee met in person on February 23, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. Mr. Wiessman provided an update about his discussion, with Mr. Yemin. The Special Committee members and representatives of J.P. Morgan discussed the substantial synergies from a stock-for-stock merger and the possibilities as to whether such synergies would mean that Delek stockholders might favor an “at market” stock-for-stock transaction despite the current relative stock prices of the two companies. The Special Committee members discussed drafting a letter, referred to as the Special Committee Proposal Letter, that could be delivered to Delek emphasizing the synergies and the potential benefits of a stock-for-stock transaction at an exchange ratio based on current market prices and maintaining the option for the Special Committee to decide to make the Special Committee Proposal Letter public. Because Mr. Wiessman was planning to meet with Mr. Yemin in the near future, the Special Committee members agreed that the Special Committee Proposal Letter should be finalized but not yet delivered, with Mr. Wiessman being authorized to determine whether to deliver the letter based on the outcome of his meeting with Mr. Yemin.
On February 24, 2016, at its quarterly meeting, the Delek Board discussed strategic alternatives with respect to Delek’s 48% stake in Alon. The Delek Board also discussed changes in market conditions since the purchase of the 48% stake in Alon and the potential impact of these market conditions on the desirability of purchasing the Alon common stock owned by the Disinterested Stockholders. In addition, the Delek Board discussed Delek’s financing options for the acquisition of the Alon common stock owned by the Disinterested Stockholders, alternatives to acquiring the Alon common stock owned by the Disinterested Stockholders and the possible timing of these alternatives.
On March 14, 2016, Delek engaged Tudor Pickering Holt & Co. (“TPH”) to act as a financial advisor with respect to various potential transactions, including a potential transaction involving Alon .
On March 22, 2016, Mr. Wiessman met with Mr. Yemin, in his capacity as an officer of Delek. Mr. Yemin told Mr. Wiessman that Delek was considering a 50% stock/50% cash offer and that Delek understood that such a structure would require a premium for the cash purchase. Mr. Wiessman pointed out that such a structure would trigger significant “make whole” obligations on the part of Alon and would have adverse tax consequences to the Alon stockholders. Mr. Wiessman again raised the possibility of a significant special dividend to Alon stockholders in connection with a transaction, and Mr. Yemin advised that, due to market conditions, he did not see a dividend as something that Delek was likely to favor.
On April 1, 2016, Mr. Wiessman delivered the Special Committee Proposal Letter , to Delek’s CEO:
Ezra Uzi Yemin
Chairman, President and Chief Executive Officer
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
Dear Uzi,
As you are aware, the Board of Alon Energy, Inc. (“Alon”) has formed a Special Committee (the “Committee”) to assess various strategic alternatives available to Alon including a potential business combination with Delek US Holdings, Inc. (“Delek US”). The Committee has retained both financial and legal advisors in our effort to evaluate how to maximize value for all of Alon’s shareholders. Based on our analysis of publicly available information and our preliminary synergy analysis, the Committee believes that a combination of Alon and Delek US would create meaningful value for both companies’ shareholders, particularly given the significant crossover between the two sets of shareholders.
Since Delek US’ initial purchase of the ~48% stake in Alon, there has been significant speculation in the marketplace surrounding a potential subsequent transaction to combine the two companies. Our view is that this uncertainty regarding a potential transaction is a distraction to both management teams, both sets of customers and all shareholders. The Committee believes that the current lack of clarity regarding a potential integration between Alon and Delek US and the current partial ownership structure continue to impair operations at both companies and fails to maximize value for our collective shareholders.
Over the past months, we have engaged in constructive discussions with Delek US, including executing a confidentiality agreement, sharing confidential information and also making members of our management team available. All of this had the goal of better assessing the synergy opportunity available in a combination of our businesses. Unfortunately, we have not received any definitive feedback from Delek US, but our understanding is that based on preliminary work by your team, the annual synergy opportunity is estimated to be in excess of $100 million of savings. Additional work with both of our management teams and advisory teams is required to finalize these estimates, but it is clear that the size of the opportunity is substantial. These synergies represent a unique opportunity to create value for our shareholders that neither company is able to produce without the other.
Also, as part of our discussions, we have requested a proposed structure under which Delek US would be willing to enter into a combination. However, we have not received any substantive proposal from Delek US to date. Given the current operating conditions of our industry and the size of the synergy opportunity that is waiting to be captured, we therefore feel compelled to outline the structure under which we think a transaction could be completed. We are open to market-based suggestions to this structure that will help our collective shareholders capture the value available in a combination of our businesses.
Proposed Transaction Structure:
Consideration: 100% all stock exchange of Alon shares of Delek US. The exchange ratio would be at a market rate based on the 20 trading days volume weighted average price of each stock. As of March 30, 2016, this methodology would equate to a 0.687x exchange ratio of shares and pro forma ownership of approximately 70.77% for Delek US and approximately 29.23% for non-Delek US affiliated shareholders of Alon. We are open to evaluating alternative structures including considerations with a cash component or special dividends to Alon shareholders, but would note that a corresponding premium would be
expected if cash is included given the synergy participation that our shareholders would be foregoing.
Governance: We would expect the combined company to have membership on the combined board of directors consistent with the pro forma ownership that each group of shareholders would represent. Additionally, we are committed to finding the best talent from our two management teams to run the combined company, but would expect Ezra Uzi Yemin to be the combined company CEO.
Diligence: We both operate in the same industry, and as such would expect reciprocal confirmatory diligence could be completed in a matter of weeks. Reciprocal diligence of both companies’ business plans and collaborative evaluation of the full synergy opportunities would be the key areas of focus in the diligence process.
We feel that the outlined transaction structure would be favorably received by both sets of shareholders as market-based and value-creating, and we would expect that, if publicly shared, a combination along these lines would be supported by the public markets. As mentioned, we are open to constructive, market-based feedback regarding this proposed structure, but the value that we believe is available to be captured for our shareholders is so significant that we felt we could not continue to wait for a proposal from Delek US.
The Special Committee has authorized this letter, and we are prepared to immediately commence mutual confirmatory due diligence. Our proposal is conditional upon completion of our confirmatory due diligence and the entry into definitive documentation. Of course, any business combination between Alon and Delek US will require the affirmative vote of holders of a majority of the Alon shares not owned by Delek US or its affiliates, as well as approval by the Special Committee and Alon’s Board of Directors.
This letter is an expression of interest to be used only as a basis for discussion, and does not, and in no event shall be deemed to, constitute a commitment or agreement to consummate any proposed combination or any other transaction, and the parties will not be legally obligated by any of the terms contained in this letter (other than those relating to confidentiality) unless and until we enter into definitive documentation in form and substance satisfactory to the parties.
The Special Committee remains enthusiastic about working with Delek US to complete the proposed transaction, and we look forward to receiving your response so that value can be created for all of our shareholders as quickly as possible.
Best Regards,
/s/ David Wiessman
David Wiessman on behalf of the Special Committee
On April 6, 2016, the Delek Board held a meeting, during which the Special Committee Proposal Letter was discussed. After discussing Delek management’s ongoing assessment of market conditions at that time, Delek’s management and the Delek Board discussed the potential inclusion of a cash component to the transaction consideration. Management advised the Delek Board that management was continuing to develop a detailed analysis of the Special Committee Proposal Letter and would present its analysis to the Delek Board at an upcoming meeting. As a result, the Delek
Board determined that it should defer a response to the Special Committee Proposal Letter until such further analysis was completed.
On April 19, 2016, Mr. Wiessman and Mr. Yemin, in his capacity as an officer of Delek, had a discussion during which Mr. Yemin said that the companies’ relative stock prices continued to make a transaction difficult. He also stated that the synergy analysis conducted thus far by Delek led Delek to believe that the annual synergies might be less than the $100 million amount included in the Special Committee Proposal Letter to Delek.
On May 3, 2016, Alon held its annual stockholders meeting, at which Messrs. William Kacal and Frank Wheeler were elected as new independent directors to replace the two directors who were not nominated for reelection. That same day, at the request of Mr. Wiessman, the Alon Board met in person and appointed Messrs. Kacal and Wheeler to replace the two outgoing members on the Special Committee.
Later that day, the Special Committee met in person, and representatives of J.P. Morgan and Gibson Dunn participated. At the request of Mr. Wiessman, the Special Committee invited Messrs. Yemin and Green, in their capacities as officers of Delek, to the first portion of the meeting. Mr. Wiessman requested that Mr. Yemin briefly address the Special Committee. Mr. Wiessman advised that the Special Committee would be in “listen only” mode. Mr. Yemin stated that, based on work done thus far, Delek believed that synergies from a potential business combination with Alon might be less than the $100 million figure suggested by the Special Committee in its prior letter. He stated that market prices made a deal very difficult and that, at this time, Delek could not support a stock-for-stock deal at an exchange ratio implied by current market prices. He stated that Delek also was concerned with there being adequate liquidity for the combined businesses and that Delek was exploring certain alternatives that could provide liquidity. Mr. Yemin also stated that he hoped that Delek could respond in some fashion to Alon’s letter in the near future, but such response might be somewhat generic.
After Messrs. Yemin and Green left the meeting, the Special Committee members and representatives of J.P. Morgan discussed the points raised by Mr. Yemin, including the desired liquidity levels. A representative of Gibson Dunn then delivered a presentation regarding the “on the shelf” stockholder rights plan documents that were being presented to the Special Committee, along with a discussion of fiduciary duties and other implications of presenting the stockholder rights plan to the Alon Board and implementing the plan if the Special Committee received notice from Delek that it was about to increase its ownership of Alon to more than 50%.
On May 4, 2016, the Delek Board met and discussed, among other things, the Special Committee Proposal Letter. After discussion, the Delek Board determined that it was in the best interest of the Delek stockholders to wait for more favorable market conditions and the creation of additional liquidity before pursuing a business combination with Alon.
On May 6, 2016, Delek held its first quarter earnings call. In response to questions, Mr. Yemin stated that Delek believed with some certainty that a deal could be done with Alon at no premium to the current ratio, but that Delek did not want to do a deal at that ratio. He also said that he believed that the independent directors of Alon understood that it “doesn’t make sense” for there
to be a transaction at an exchange ratio based on current market prices. Mr. Yemin suggested that Delek would work with Alon’s independent directors toward a potential transaction.
On May 13, 2016, Mr. Yemin, in his capacity as an officer of Delek, and Mr. Wiessman met in person. Mr. Yemin again emphasized that, in order to ensure adequate liquidity for a combined company, Delek would need to finalize another transaction prior to any deal with Alon. He told Mr. Wiessman that he expected that Delek would need approximately two months to finalize such a transaction. He also advised that Delek believed that the stock component of any transaction would need to involve an exchange ratio that represented a discount to Alon’s stock price. Mr. Wiessman said that such a discount would be unacceptable to the Special Committee.
On May 18, 2016, the Special Committee received a letter from Delek that read as follows:
May 18, 2016
Copy Via Email
Original Via FedEx
David Wiessman
Special Committee of the Board of Directors
Alon Energy, Inc.
12700 Park Central Drive, Suite 1600
Dallas, TX 75251
Re:Strategic Alternatives
Dear David:
Thank you for your letter that we received on April 1, 2016 which you sent on behalf of the special committee (the “Special Committee”) of the board of directors of Alon Energy, Inc. (“Alon”). Your correspondence stated that the Special Committee has been tasked with assessing various strategic alternatives that may be available to Alon including a potential business combination with Delek US Holdings, Inc. (“Delek”).
We have shared your letter with Delek’s board of directors and discussed the proposal set forth therein. Without commenting on statements contained in your letter, Delek continues to monitor market and company conditions and evaluate opportunities to combine the companies. We will contact you once we believe conditions are more supportive of a discussion regarding this matter.
Sincerely,
DELEK US HOLDINGS, INC.
By:/s/ Ezra Uzi Yemin
Ezra Uzi Yemin
Chairman / President / CEO
On May 22, 2016, Mr. Wiessman sent an email to Delek’s CEO that attached statements made by Mr. Yemin on Delek’s May earnings call. The email read as follows:
Uzi,
Thank you for your letter dated May 18th, 2016 responding to our April 1st, 2016 letter. As you know, the committee members were disappointed that there was no specificity in your response regarding potential next steps. We had no progress for some time now. Because of the lack of clarity around a reasonably path forward, as we discussed, Alon management stopped sharing synergy information that they have been sharing with your team. We would be happy to recommence that work once a reasonable path forward is outlined and to get synergy information from Delek that will move us forward in the process.
I would also like to highlight for you that your recent public comments regarding our discussions and your views on a potential transaction are not conducive to us finding a way toward a transaction that creates value for all of the shareholders. In our view your comments have caused undue volatility in the stocks and because of those public comments the committee advisors are telling us that we should publicly communicate directly with our shareholders as well. With all of this, I would ask that you be much more cautious in your public statements in the future (attached).
I am meeting with the Special Committee next week. I’m not sure exactly where things will go from there but I’m sure we’ll have some form of a formal response to your letter.
See you in your next visit
The Special Committee met telephonically on May 24, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. The Special Committee members discussed recent events and possible next steps. Representatives of J.P. Morgan made a presentation summarizing recent share prices and discussed the possibility of sending another letter to Delek that would reiterate many of the points in the Special Committee’s earlier letter but that would potentially propose an exchange ratio to attempt to minimize “play” that arbitrageurs could attempt with Alon’s stock in the event the letter was made public. The Special Committee members discussed the possibility of making the letter public and determined to deliver the letter but refrain from public disclosure of it pending further consideration.
On May 25, 2016, Mr. Wiessman sent the following letter to Mr. Yemin:
May 25, 2015
Ezra Uzi Yemin
Chairman, President and Chief Executive Officer
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
Dear Uzi,
We received your letter dated May 18th, 2016 responding to our April 1st, 2016 letter. We have reviewed the letter with The Special Committee and are disappointed that there was no specificity in your response regarding potential next steps. Since October 2015, The Special Committee has made multiple attempts to engage Delek US in meaningful dialogue in order to seriously evaluate a transaction; however, we have yet to see a credible path forward.
Since Delek US’ initial purchase of the ~48% stake of Alon, there continues to be significant speculation in the marketplace regarding a potential transaction to combine the two companies. This continued uncertainty is a distraction to both management teams, both sets of customers and all shareholders.
We have attempted to engage in constructive discussions with Delek US over the past months, including executing a confidentiality agreement, sharing confidential information and also making members of our management team available. All of this had the goal of better assessing the synergy opportunity available in a combination of our businesses and allowing time for Delek US to craft a formal proposal and path forward. However, given delays by Delek US, the current operating conditions in our industry and the size of the potential synergies, we felt compelled to outline a structure that we think could be executed and deliver significant value to our collective shareholders and sent you a transaction outlined in a letter on April 1, 2016. Consistent with our letter dated April 1st, 2016 we believe a market-based approach provides an opportunity for both sets of shareholders to immediately capture the value of synergies. As such, we would re-iterate our desire to move forward with a transaction on market-based terms and propose the following transaction structure:
•Consideration: 100% all stock exchange of Alon shares for shares of Delek US. The exchange ratio would be at a market rate based on the 20 trading days volume weighted average price of each stock fixed as of May 24, 2016. The 20-trading-day volume-weighted exchange ratio of 0.615x would equate to pro forma ownership of approximately 72% for Delek US and approximately 28% for non-Delek US affiliated shareholders of Alon. We view this approach to the exchange ratio as market based and consistent with the average exchange ratio of 0.601x since Delek US’ original investment in Alon as well as the current exchange ratio of 0.582x as of market close on May 24, 2016. We continue to be open to evaluating alternative structures including consideration with a cash component or a special dividend to Alon shareholders, but would note that a corresponding premium would be expected if cash is included given the synergy participation that our shareholders would be foregoing and potential tax implications.
•Governance: We continue to expect the combined company to have membership on the combined board of directors consistent with the pro forma ownership that each group of shareholders would represent. Additionally, we are committed to finding the best talent from our two management teams to run the combined company, but would expect the combined Company CEO to be Ezra Uzi Yemin or to be named by Delek US.
•Diligence: We both operate in the same industry, and as such remain committed to completing reciprocal confirmatory diligence in a matter of weeks. Reciprocal diligence of both companies’ business plans and collaborative evaluation of the full synergy opportunities would continue to be key areas of focus in the diligence process.
We feel that the outlined transaction structure would be favorably received by both sets of shareholders as market-based and value-creating. As mentioned, we are open to constructive, market-based feedback regarding this proposed structure, but the value that we believe is available to be captured for our shareholders is so significant that we felt we could not continue to wait for a more specific proposal from Delek US.
Unfortunately, despite the significant investment of Alon time and resources to help Delek US quantify the synergy potential, The Special Committee never received any detailed feedback on the conclusions of the working team. As a result of the unwillingness of Delek US to share any detailed findings related to synergies and in conjunction with lack of clarity
around a reasonable path forward, Alon stopped sending synergy information to Delek US. As such, additional work with both of our management and advisory teams will be required, but based on our preliminary assessment it is clear that size of this synergy opportunity is substantial. These synergies represent a unique opportunity to create value for our collective shareholders that neither company would be able to realize without the other and we remain committed to working together to assess the synergy value collectively. We would be happy to recommence the synergy work once a reasonable path forward is outlined and move forward on a mutual basis to assess potential synergies in greater detail.
We would prefer to continue our discussions privately; however, due to the lack of clarity we have on a reasonable path forward and previous public statements made by Delek US, we reserve the right to release our proposal publicly. Should Delek US have a more specific proposal The Special Committee should consider, we remain open-minded and ready to listen.
Of course, any business combination between Alon and Delek US will require the affirmative vote of holders of a majority of the Alon shares not owned by Delek US or its affiliates, as well as approval by The Special Committee and Alon’s Board of Directors.
This letter is to be used only as a basis for discussion, and does not, and in no event shall be deemed to, constitute a commitment or agreement to consummate any proposed combination or any other transaction, and the parties will not be legally obligated by any of the terms contained in this letter (other than those relating to confidentiality) unless and until we enter into definitive documentation in form and substance satisfactory to the parties.
Best Regards,
David Wiessman on behalf of the Special Committee
On June 9, 2016, Mr. Yemin sent the following response letter to Mr. Wiessman:
June 9, 2016
Via Electronic Mail
David Wiessman
on behalf of the Special Committee of Alon Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
Dear David:
Thank you for your letter dated May 25, 2016. We appreciate Alon Energy, Inc.’s (“Alon”) continued interest in pursuing a combination with Delek US Holdings, Inc. (“Delek”), and we remain open to exploring the merits of a potential transaction.
We agree that synergies represent a key potential benefit of a transaction. We have made meaningful progress in assessing potential synergies and would be happy to share the results of our review thus far. While significant review and analysis remains to be done with respect to potential commercial synergies, our initial work indicates that potential synergies may be smaller than we anticipated. However, we are hopeful that, upon obtaining access to data necessary to complete our review, further incremental synergy opportunities can be
identified. We respectfully request that Alon resume providing synergy information to Delek so that we may continue our work.
Additionally, we are closely monitoring challenging fundamentals currently facing our industry. Companies in our industry broadly, and both Alon and Delek in particular, experienced challenging first quarter operating and financial results. At present, market conditions do not appear to be improving. Further, tight conditions in the credit markets, particularly for refining companies and master limited partnerships, add another layer of uncertainty to our analysis of a transaction. As we highlighted on our first quarter earnings call, our long-term strategy is not to merely maintain our current stake in Alon. However, we also stated that we believe preserving liquidity and financial flexibility are of paramount importance and in the best interests of Delek’s shareholders. We will require a high degree of comfort with respect to pro forma capital needs and available liquidity in connection with any significant transaction or strategic initiative.
Despite these challenges, Delek has retained financial advisors and legal counsel and will continue assessing a potential transaction. We remain highly focused on preserving and enhancing our liquidity and financial flexibility, and we are currently evaluating a variety of options to do so, including the sale of our retail assets to Delek Logistics Partners, LP or others.
Finally, we share Alon’s preference for private discussions. We are happy to discuss any of Alon’s concerns or ideas for a transaction structure with Alon’s Special Committee and its appropriate representatives. However, we believe that any voluntary public disclosure of specific proposals that Alon has made would be premature. Therefore, we ask that you continue to abide by the terms of our confidentiality agreement dated December 23, 2015 and refrain from making any such disclosures. We look forward to maintaining an open, positive line of communication as we continue to evaluate a potential transaction.
I am available to discuss further at your convenience.
Sincerely,
/s/ Ezra Uzi Yemin
Ezra Uzi Yemin
Chairman and CEO of Delek US Holdings, Inc.
The Special Committee met telephonically on June 13, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. Mr. Wiessman told the Special Committee that Mr. Yemin had advised him that Delek needed approximately another month and a half to work on potential liquidity alternatives. The Special Committee members determined that J.P. Morgan and Gibson Dunn should work on talking points for Mr. Wiessman to communicate to Mr. Yemin, which should include the possibility of disclosing publicly that the Special Committee was engaged in a process to explore strategic alternatives. The Special Committee members discussed their understanding of the authority of the Special Committee in light of the fact that, since October 30, 2015, the Alon Board had not taken action to further delineate the authority of the Special Committee, such as by adopting resolutions. After discussion, the Special Committee members concluded that the Special Committee was empowered to explore strategic alternatives beyond a transaction with Delek, as such exploration was necessary to prepare for and fully evaluate any proposal that Delek might make. The Special Committee members also determined that Mr. Wiessman was authorized, if he thought it appropriate after his discussion with Mr. Yemin, to proceed with a press release.
On or around June 14, 2016, Mr. Yemin discussed with Mr. Wiessman telephonically his understanding that the Special Committee had the authority to explore a potential strategic transaction with Delek, but not to review strategic alternatives involving third parties other than Delek.
On June 20, 2016, Mr. Wiessman sent an email to Mr. Yemin as follows:
Uzi, following is a list of discussion points for our call:
We continue to believe in the strategic benefits of a transaction and that a combination would result in substantial value creation for both sets of our collective shareholders
The Special Committee feels the desire to be able to communicate with our shareholders in a similar way that you have with respect to the merits of a potential transaction with Delek US
However, we don’t think public communication is helpful or conducive to doing a deal as long as there is substantive work taking place
As such, we are prepared to continue our discussion privately under the following firm parameters:
Information Exchange: Exchange of information needs to be reciprocal going forward. We are prepared to continue detailed work on synergies; however, going forward we expect all work to be done on a mutual basis with our advisors.
Timing: In our last meeting you asked for another one and half months which brings us to our next board meeting in July. We expect to see significant progress made between now until then with and potentially agree on the transaction terms acceptable to the Special Committee. If progress is not made under this time frame, we would review all additional strategic options.
Exchange Ratio: We view the time between our last letter and the Board meeting as an opportunity to make meaningful progress; not, as an opportunity for the exchange ratio to move in Delek US’s favor as the result of other strategic actions Delek US may pursue. As such, any exchange ratio that the Special Committee would approve would be in line with our commercial terms that we sent in our last letter.
Employee Matters: Some of the committee members feel that all discussions with respect to Delek US employees moving to Alon, including the discussions with Fred Green, should be placed on hold until terms of a transaction are agreed upon. We discussed the matter between the members and we gave a greenlight to Ron Haddock to come back to us with agreed compensation package for Fred Green before we take the final decision on this delicate matter.
Public Disclosure: The Special Committee feels the need to communicate with Alon’s shareholders that it was formed in October 2015 and is currently evaluating strategic alternatives as referenced in the Company’s recent proxy. We continue to be very interested in a transaction with Delek US; however, we feel that we need to make our shareholders
aware that we have hired J.P. Morgan and Gibson Dunn to explore strategic alternative to maximize shareholder value. As such, we expect to release a press release in short order detailing that we have hired advisors and are pursuing strategic alternatives.
We remain eager to begin work expeditiously in conjunction with our advisors such that we can work towards a transaction that will provide significant value to both sets of shareholders
On June 24, 2016, Mr. Yemin sent the following email to Mr. Wiessman:
David, thank you for your note.
While we have articulated Delek’s position in our most recent letter to the Special Committee, I wanted to provide some further perspective in light of some of your points below.
We appreciate your willingness to re-engage on synergy work and are happy to proceed with that work on a reciprocal, mutual basis. While we will dedicate resources and believe we can make meaningful progress in the coming weeks on this front, the six week time frame I mentioned to you was an indication; liquidity considerations and the interests of Delek’s shareholders remain our priority and the basis from which we will assess any next steps and the timing of them.
It is worth noting that Delek respectfully abided by the one year standstill imposed on it by ALJ, which expired only a few weeks ago.
With regard to your comment regarding the Special Committee’s evaluation of strategic alternatives, as we have stated in the past, we don’t expect Delek to sell any of its ALJ shares.
We look forward to working constructively with your team on synergies and mutual due diligence
Uzi
Later that week, Mr. Wiessman sent Mr. Yemin, in his capacity as an officer of Delek, a draft of a proposed press release announcing the formation and authorization of the Special Committee to explore strategic alternatives. On June 29, 2016, Mr. Yemin sent the following email to Mr. Wiessman concerning Delek’s view of the limitations of the Special Committee’s role:
David,
Thank you for the draft press release.
Based upon prior discussions, including discussions at the Alon board, the Special Committee was formed for the purpose of evaluating and negotiating/responding to potential combination proposals between Delek and Alon. The Special Committee was not authorized to review strategic alternatives that don’t involve Delek which is the reason why the committee is comprised of non-Delek affiliated directors. Thus, I don’t believe that the draft press release is correct in describing a broader purpose or authority of the Special Committee.
This is further supported by Alon’s 2016 proxy statement. The Special Committee disclosure appears under the subheading “Transactions with Delek” and states that the Special Committee is to oversee the communications with Delek and to engage with Delek in any discussions concerning a potential business combination with Delek.
Additionally, given that the 2016 proxy statement publicly disclosed the existence and the purpose of the Special Committee when filed in April, I don’t believe that a press release is necessary now to repeat such information.
Please let me know if you have a different opinion on the proposed press release.
Regards,
Uzi
On July 8, 2016, Delek and Alon entered into an amended and restated confidentiality agreement pursuant to which the parties agreed to continue to exchange certain confidential information in furtherance of a possible business combination.
On July 11, 2016, in accordance with the Special Committee’s discussion at its June 13, 2016 telephonic meeting, the following press release was issued:
Alon Energy, Inc. Provides Update on the Activities of its Special Committee to Review Strategic Alternatives
DALLAS, July 11, 2016 /PRNewswire/ -- As noted in the Alon Energy, Inc. (NYSE: ALJ) (“Alon”) proxy statement, filed with the SEC on April 1, 2016, Alon’s Board of Directors has formed a Special Committee (the “Special Committee”). The Special Committee is comprised of directors having no affiliation with Delek US Holdings, Inc. (“Delek”). Since its formation, the Special Committee has reviewed a number of strategic alternatives, a potential business combination with Delek, the analysis of capital investments, shareholder distributions, a sale or merger and a spin-off or separation of a selected business.
The Special Committee has set no timetable for the strategic review process and has not made a decision to pursue any particular transaction, and there can be no assurance that any transaction will be approved or consummated. Alon does not intend to disclose or comment on further developments regarding the review of strategic alternatives until it determines that such disclosure or comment is appropriate or necessary.
The Special Committee has retained J.P. Morgan as its financial advisor and Gibson Dunn as its legal advisor to assist in the assessment of strategic alternatives.
Alon Energy, Inc., headquartered in Dallas, Texas, is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. Alon owns 100% of the general partner and 81.6% of the limited partner interests in Alon Partners, LP (NYSE: ALDW), which owns a crude oil refinery in Big Spring, Texas, with a crude oil throughput capacity of 73,000 barrels per day and an integrated wholesale marketing business. In addition, Alon directly owns a crude oil refinery in Krotz Springs, Louisiana, with a crude oil throughput capacity of 74,000 barrels per day. Alon also owns crude oil refineries in California, which have not
processed crude oil since 2012. Alon is a leading marketer of asphalt, which it distributes primarily through asphalt terminals located predominately in the Southwestern and Western United States. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores which also market motor fuels in Central and West Texas and New Mexico.
Investor Relations Manager
Alon Energy, Inc.
972-367-3808
Investors: Jack Lascar
Dennard ▪ Lascar Associates, LLC
713-529-6600
Media: Blake Lewis
Lewis Public Relations
214-635-3020
On July 13, 2016, the Delek Board held a special meeting where it discussed the current status of a possible business combination with Alon.
On July 14, 2016, representatives of Delek, Alon and J.P. Morgan held a telephonic discussion of potential synergies that could be realized in a transaction between Delek and Alon.
On July 27, 2016, the Special Committee met in person, and representatives of J.P. Morgan and Gibson Dunn participated. Mr. Wiessman reported that Mr. Yemin had advised him that Delek was still working on potential avenues to increase liquidity and still working on synergy analysis and expected to be in a position to make an offer in a few weeks. The Special Committee members discussed the work that would need to be done to confirm likely synergies. The participants discussed their view that the press release had served the purpose of letting other potential bidders know that is the Special Committee was engaged in a process to explore strategic alternatives. Representatives of J.P. Morgan made a presentation regarding a few incoming calls J.P. Morgan had received after the press release was issued, noting that all inquiries related just to particular assets and not to an overall acquisition of Alon.
On July 31, 2016, the Delek Board held its second quarter meeting. The Board and members of management of Delek discussed a range of topics with respect to a potential transaction with Alon, including recent communications, the expiration of Delek's standstill obligations, relative equity performance of the companies, stockholder crossover, and various transaction considerations.
On August 12, 2016, an article appeared in certain press outlets indicating that Carl Icahn, individually or through CVR Energy, was planning to make an offer to acquire Delek. On August 14, 2016, the Special Committee met telephonically to discuss the implications for Alon of a potential Icahn bid for Delek. Representatives of J.P. Morgan and Gibson Dunn participated. The participants discussed the possibility of obtaining Alon Board authorization for the Special Committee to have the discretion to put in place a stockholder rights plan if it determined that such a path was warranted
in order to assure that the Special Committee would have a “seat at the table” in any potential sale of control of Delek. A representative of Gibson Dunn summarized for the Special Committee members certain draft stockholder rights plan documents that had been provided to the Special Committee and discussed certain fiduciary duty and process matters with the Special Committee members. The members agreed that the stockholder rights plan documents should be sent to the full Alon Board. Such documents were so sent on August 17, 2016.
On August 27, 2016, Delek entered into an Equity Purchase Agreement with Compañía de Petróleos de Chile COPEC S.A. and Copec Inc. providing for Delek’s sale of its retail business to Copec Inc. for cash consideration of $535 million. The proceeds of this transaction would provide substantial liquidity to Delek. On August 29, 2016, Delek issued a press release concerning this agreement, the strategic review that led to the decision to sell the retail business in lieu of a dropdown of the retail assets to Delek Logistics and the plan to repay debt associated with the retail assets at the closing of the sale.
On August 28, 2016, the Special Committee met telephonically to further discuss a potential stockholder rights plan, and representatives of J.P. Morgan and Gibson Dunn participated. A representative of Gibson Dunn made a presentation regarding the potential stockholder rights plan. The members concluded that Mr. Wiessman and Mr. Haddock would reach out to Mr. Yemin to ask him to call a meeting of the Alon Board.
On August 31, 2016, the Alon Board held a telephonic meeting that was called at the request of Messrs. Wiessman and Haddock. Mr. Wiessman discussed the Special Committee’s concern over the recent market rumors of a potential bid for Delek by Carl Icahn or CVR Energy. Mr. Wiessman noted that the Special Committee had discussed the possibility of Alon adopting a stockholder rights plan that would provide Alon an opportunity to negotiate with such a buyer in advance of any such transaction. The members discussed the application of Section 203, with emphasis on its applicability to a potential acquirer of Delek and, after discussion, unanimously agreed to seek specialized advice on the issue from an outside law firm that would represent the entire Alon Board.
The Delek Board met on September 8, 2016 together with members of Delek management and representatives of TPH to discuss the various alternatives with respect to Delek’s equity investment in Alon. At the meeting, members of management discussed with the Delek Board the current global refining landscape, the United States’ competitive position and the outlook of crude prices. Further, Delek management discussed three potential alternatives with respect to Delek’s investment in Alon, namely (a) holding the current position, (b) purchasing the remaining outstanding equity of Alon or (c) selling Delek’s equity ownership in Alon. Representatives from TPH then discussed a potential acquisition of Alon and various financial and structural considerations. Following further discussion of Delek’s alternatives, the Delek Board authorized Delek management to engage in discussionsmake a proposal to the ALDW GP Conflicts Committee and to negotiate a transaction with Alonthe ALDW GP Conflicts Committee, subject to determine whether an agreement could be reached on terms that would be acceptablefinal approval by the Delek Board.
On October 12, 2017, having not received a proposal, the ALDW GP Conflicts Committee held a meeting with Gardere and Houlihan Lokey to discuss the anticipated timing and process for the committee to receive and review a proposal from Delek concerning the acquisition of the remaining publicly traded equity securities of Alon. The Delek Board reserved the right to review and decide whether to proceed with any possible acquisition of any additional shares of Alon.
On September 13, 2016, Mr. Wiessman and Mr. Yemin, in his capacity as an officer of Delek, met in person. Mr. Yemin told Mr. Wiessmanpotential ALDW-Delek transaction. It was noted again that Delek was planninghad indicated its hope that the ALDW GP Conflicts Committee would be able to makeapprove a transaction proposal
and that Delek would need to amend its Schedule 13D and would provideon an accelerated time frame after the Special Committee with a draftcommittee’s receipt of such amendment prior to filing the amendment with the SEC.
On September 16, 2016, Mr. Yemin, in his capacity as an officer of Delek, telephoned Mr. Wiessman to inform him that the Delek Board had authorized management to engage in discussions with Alon to determine whether an agreement could be reached concerning a potential business combination. Mr. Yemin told Mr. Wiessman that Delek planned to present an offer to the Special Committee and that Delek would file an amendment to its Schedule 13D simultaneously with the presentation of the offer to Alon.
On September 28, 2016, Mr. Yemin, in his capacity as an officer of Delek, and Mr. Haddock had two telephone conversations during which Mr. Yemin emphasized the need and desire of the Delek Board and Delek management to work together with the Special Committee, that Alon and Delek should not surprise each other with unexpected public disclosures or other actions, and Delek’s need for liquidity to enable an acquisition of Alon. Mr. Yemin further explained that, in accordance with SEC requirements, Delek’s Schedule 13D amendment to be filed simultaneously with Delek making any offer to the Special Committee would include a copy of any written offer sent to the Special Committee. Mr. Haddock later called Mr. Yemin to confirm that Alon’s legal counsel agreed with Delek’s legal counsel regarding the requirements of a Schedule 13D amendment. Mr. Yemin informed Mr. Haddock that Delek was considering an all-stock transaction. Mr. Haddock agreed to call Mr. Yemin at a later date to discuss possible next steps.
On October 6, 2016, Mr. Yemin, in his capacity as an officer of Delek, spoke with Mr. Wiessman and advised him that Delek remained concerned about the relative stock prices of the two companies.
Also on October 6, 2016, the Special Committee held a telephonic meeting and representatives of J.P. Morgan and Gibson Dunn participated. Mr. Wiessman reported on his discussion with Mr. Yemin earlier that day. The Special Committee members discussed the problems caused to Alon and its business by the “overhang” of uncertainty as to whether Alon would reach a deal with Delek. The Special Committee discussed the importance of either (i) reaching a deal, if appropriate, or (ii) making it clear that there would be no deal in the near future. J.P. Morgan representatives made a presentation that included an update regarding potential synergies. The J.P. Morgan representatives noted that they had been asked by certain Special Committee members to analyze the feasibility of Alon buying Delek’s shares of Alon common stock. The J.P. Morgan representatives discussed a preliminary analysis of potential asset sales to fund such purchase, as well as various challenges that Alon would face in attempting to execute such transactions, including the scope of asset sales that would be required to fund such purchase and the challenges that the remaining business and Alon would face. The Special Committee members discussed the possibility of attempting to convince Delek to jointly market Alon in its entirety to third parties. The Special Committee members concluded that it was extremely unlikely that Delek would agree to such cooperation but that Mr. Wiessman nevertheless should raise the possibility with Mr. Yemin. The Special Committee members concluded that a letter should be sent to Delek to highlight that, although the Special Committee continued to believe that realizing the synergies associated with a combination would create the most value for the Disinterested Stockholders, the Special Committee
believed that Delek should either (i) sell its Alon shares to Alon or (ii) agree to cooperate to market the entire Alon business to third parties.
On October 9, 2016, Delek, Alon and their respective counsel telephonically discussed the requirement of filing Delek’s offer letter in an amendment to Delek’s Schedule 13D.
On October 13, 2016, the Delek Board held a meeting. During the meeting, members of Delek management provided the Delek Board an update on the status of the potential transaction with Alon.
Also on October 13, 2016, Mr. Wiessman sent a letter to the Delek Board, which read as follows:
Board of Directors
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
To the Board of Directors of Delek US Holdings, Inc. (“Delek US”),
As you are all aware, in response to Delek US’ acquisition of a ~48% stake in Alon Energy Inc. (“Alon” or the “Company”) in April 2015, the Board of Alon formed a Special Committee (the “Committee”) in October 2015. After considering various alternatives, the Committee has concluded and continues to believe that the most value creative opportunity available to Alon shareholders is to realize the synergies associated with a stock-for-stock merger with Delek US. Given the work completed to date, we believe the synergy value is significant and represents meaningful value creation for both Alon and Delek US shareholders. Since its formation, the Committee has made multiple attempts to engage Delek US in meaningful dialogue and taken decisive steps to promote engagement:
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1) | On December 23, 2015, the Committee executed a confidentiality agreement with Delek US to share confidential information and also made members of Alon USA’s management team available in order to assess the synergy opportunity. Alon has subsequently provided information and held discussions with Delek US’ management team. |
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2) | On April 1, 2016, the Committee sent a letter to Delek US outlining a stock-for-stock combination at a market-based exchange ratio. On May 16, 2016, Delek US responded but provided no specificity on timing and stated that they continue “to monitor market and company conditions and evaluate opportunities to combine the companies.” |
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3) | On May 25, 2016, the Committee sent a second letter to Delek US, reconfirming the desire to explore a stock-for-stock combination at a market-based exchange ratio and expressed concern from the lack of a meaningful path forward. Delek US’ response letter on June 9, 2016 continued to lack specificity on timing. |
Consistent with the letters sent to Delek US on April 1, 2016 and May 25, 2016, The Committee remains committed to exploring a market-based, stock-for-stock exchange of Alon shares for shares of Delek US, subject to a customary control premium. The
Committee notes, for the benefit of the Delek US Board, that as of market close on October 11, 2016 the current exchange ratio is 0.527x, and the volume weighted average exchange ratio from April 15, 2015 is 0.563x. We believe a market -based approach provides an opportunity for both sets of shareholders to immediately capture the value of synergies available to both Alon and Delek US shareholders.
Despite our willingness to engage with Delek US and time spent by management teams at both Alon and Delek US, we have yet to receive a formal proposal from Delek US. Furthermore, we lack clarity with respect to the timing of receiving a proposal from Delek US. Due to the prolonged uncertainty around the Company’s future ownership, theDelek. The ALDW GP Conflicts Committee believesin turn reaffirmed its prior determination that, while it is time to take more decisive action for the benefit of all Alon shareholders.
Although a stock-for-stock combination is our preferred path, given the lack of engagement that we have seen thus far from Delek US, the Committee is prepared to pursue other alternatives, including either (a) to use proceeds from non-core asset sales or other sources of capital to purchase from Delek US the ~48% outstanding shares of Alon that are currently owned by Delek US or (b) in the event that Delek US decides not to sell its stake to Alon, then the Committee recommends that the Company agree with Delek US to jointly market the entirety of the Alon business.
The Committee still believes that a stock-for-stock combination with Delek US is in the best interest of its shareholders but due to inaction on this alternative, we believe that one of the other alternatives would put the Company on a path towards a resolution and a viable future.
Of course, any business combination between Alon and Delek US will require the affirmative vote of holders of a majority of the Alon shares not owned by Delek US or its affiliates, as well as approval by The Special Committee and Alon’s Board of Directors.
This letter is to be used only as a basis for discussion, and does not, and in no event shall be deemed to, constitute a commitment or agreement to consummate any proposed combination or any other transaction, and the parties will not be legally obligated by any of the terms contained in this letter (other than those relating to confidentiality) unless and until we enter into definitive documentation in form and substance satisfactory to the parties.
Best Regards,
David Wiessman on behalf of the Special Committee
On October 14, 2016, Mr. Yemin, in his capacity as an officer of Delek, called Mr. Wiessman to advise him that Delek would be delivering a proposal letter to the Special Committee. On the same day, Delek sent the Special Committee the following proposal letter:
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
October 14, 2016
David Wiessman
on behalf of the Special Committee of Alon Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
Dear David:
I am writing on behalf of Delek US Holdings, Inc. (“Delek,” “we,” “us” or “our”) to propose a business combination of Delek and Alon Energy, Inc. (“Alon”). Under our proposal, Delek (or a subsidiary of Delek) would acquire each outstanding share of Alon common stock which Delek does not already own in an all-stock transaction at a fixed exchange ratio of 0.44 Delek shares for each outstanding Alon share. We believe both companies are currently undervalued to differing extents by the market, and our proposal reflects, in the context of the current and prospective challenges facing Delek’s and Alon’s sector, our view of the relative fundamental values of Alon and Delek; each company’s respective outlook and balance sheet profile; and potential synergies for the transaction. We believe this combination would create significant value for the respective stockholders of Delek and Alon in both the near- and long-term, and the 100% equity consideration would allow Alon stockholders, many of whom are also currently Delek stockholders, the opportunity to fully participate in that value creation as it is realized.
This proposal supports the shared mission of Delek and Alon of optimizing and growing stable cash flows from an integrated portfolio of refining, logistics and retail assets. For its part, Delek has taken a number of steps to strengthen its financial position, most recently announcing a definitive agreement to sell our retail subsidiary, which transaction is expected to meaningfully enhance our financial flexibility. A combination with Delek would allow Alon stockholders to take part in a formidable combined company to weather the current downturn in the industry and emerge in a position of substantial strength as margins improve. When taken together, these factors collectively position a combined company to be a peer-leading enterprise in the refinery space for the long-term.
Our board of directors has authorized management to engage in negotiations and the making of this proposal. Delek has engaged Tudor, Pickering, Holt & Co. and Norton Rose Fulbright US LLP as our financial and legal advisors, respectively. Given the all-stock nature of the transaction, our proposal would not be subject to any financing contingency. This proposal does not constitute a legal offer or a binding agreement between us. Such an agreement, if any, would be subject to completion of mutual, customary due diligence for a transaction of this nature and negotiation of definitive transaction documents, the terms and conditions of which would have to be approved by the boards of directors of both Alon and Delek. We will not move forward with the transaction unless the transaction is approved by a special committee of the board of directors of Alon that is comprised entirely of directors that are independent of Delek. In addition, the transaction would be subject to a non-waivable condition requiring the approval of the transaction by the holders of a majority of the shares of Alon not owned by Delek or its affiliates. If the special committee of the board of directors of Alon does not recommend, or the public stockholders of Alon do not approve, the proposed transaction, such determination would not adversely affect our future relationship with Alon. We also expect that our proposal would require approval from Delek stockholders to authorize the issuance of the required shares to close the transaction. Please be aware that this proposal is an expression of interest only, and we reserve the right to withdraw or modify our proposal at any time and for any purpose.
We believe our proposal presents a compelling opportunity for Alon’s stockholders and look forward to your response. I am personally committed to overseeing the successful integration of the companies into a single enterprise, and I and the rest of our senior management team are available at your convenience to discuss any aspect of our proposed transaction.
Sincerely,
/s/ Ezra Uzi Yemin
Ezra Uzi Yemin
Chairman and CEO of Delek US Holdings, Inc.
Substantially simultaneously with the delivery of this proposal letter to the Special Committee, Delek filed an amendment to its Schedule 13D, which disclosed that Delek was continuingwork efficiently to evaluate actions that would relate to an extraordinary corporate transaction with Alon, the acquisition of additional shares of Alon common stock, the acquisition from Alon of a material amount of its assets or the divestiture of Alon common stock owned by Delek. Delek’s Schedule 13D amendment also disclosed the delivery of the offer letter to the Special Committee and attached the letter as an exhibit.
The Special Committee met telephonically on October 15, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. The meeting participants discussed the importance of J.P. Morgan’s gaining access to Delek’s financial advisor, TPH, and developing its understanding of Delek’s model and more information regarding potential synergies.
In addition, on October 15, 2016, members of management of Delek and Alon, representatives of Norton Rose Fulbright and a representative of Gibson Dunn had a conference call regarding the designation and authorization of the Special Committee.
On October 17, 2016, Alon issued a press release acknowledging its receipt of Delek’s proposal letter delivered on October 14, 2016.
On October 24, 2016, Messrs. Yemin, Ginzburg and Green, in their capacities as officers of Delek, and Messrs. Wiessman and Haddock (as representatives of the Special Committee) met at Delek’s headquarters in Brentwood, Tennessee. Each of the parties committed to work quickly and diligently to determine whether terms could be agreed for a strategic transaction between Delek and Alon, and if so, to develop and finalizenegotiate the terms of an agreementany such proposed transaction, it would not commit to any fixed deadline for negotiation and would take the strategic transaction. Mr. Yemin emphasized that Delek strongly desired that a deal between Delek and Alon, if any, be reached no later than the end of November. The representatives of Delek informed the representatives of the Special Committee that Delek had already received clearance under the Hart Scott Rodino Act from the FTC and the DOJ for a transaction between Delek and Alon, and such clearance was effective through the beginning of May 2017. The representatives of the Special Committee communicated that their advisors believed a merger of Delek and Alon should be able to generate significant synergies. Delek expressed the opinion that the market did not fully understand the financial condition or future prospects of either Delek or Alon. The representatives of the Special Committee then requested additional information regarding synergies and noted that such request would be incorporated into their due diligence requests to Delek. The parties then
discussed the expectation that the headquarters of the combined Delek would remain in Brentwood, Tennessee. Mr. Wiessman raised with Mr. Yemin the prospect of Delek being willing to market Alon to third parties, but Mr. Yemin stated that at such time Delek was not contemplating the sale of the Alon shares owned by Delek. Further, the parties discussed the due diligence process and possible communications to the employees of Alon. The representatives of the Special Committee further advised that Shai Even, Alon’s Chief Financial Officer, James Ranspot, Alon’s General Counsel and Alan Moret, Alon’s Senior Vice President, Supply and Logistics, would be the key Alon representatives for purposes of communications related to the possible transaction, due diligence and integration process. The Delek representatives agreed to work with its advisors to provide the Special Committee with a timeline reflecting the steps, milestones and time period necessary to reach a signing and subsequent closing of the transaction. Further, the Delek representatives informed the Special Committee that Delek had started drafting aevaluate any proposed merger agreement and expected to provide a draft to the Special Committee within two weeks. The parties agreed to each explore the need and timing of fairness opinions related to the transaction.
On October 27, 2016, the Special Committee met in person, and representatives of J.P. Morgan and Gibson Dunn participated. J.P. Morgan made a presentation that included, among other things, certain preliminary exchange ratio and liquidity analyses. The Special Committee members discussed the process for Alon to complete a preliminary financial model to be shared with Delek, given that Delek had emphasized that a deal needed to be reached, if at all, by the end of November and given that Alon’s normal year-end strategic planning process would not be completed until December. The Special Committee members discussed the possibility of outgoing calls being made by J.P. Morgan to other parties who might be interested in acquiring Alon or Alon Partners. The Special Committee members concluded that any outreach regarding a sale of Alon in its entirety appeared to be futile given Delek’s unwillingness to approve such a deal in its capacity as an Alon stockholder and that the prior press release had already put third parties on notice of the Special Committee process if any third party wanted to make an offer for Alon. The Special Committee members concluded that other parties likely would not be interested in pursuing a transaction for Alon Partners unless they believed that Delek was willing to support it, but they nevertheless directed that J.P. Morgan representatives should make calls to three identified industry participants regarding Alon Partners. Accordingly, J.P. Morgan approached three parties regarding Alon Partners from mid-November to early December 2016, and each of the three parties declined to pursue a transaction.
At a meeting on October 27, 2016, the Alon Board adopted resolutions delineating the power and authority of the Special Committee, including the power to decline any proposal from Delek and to review and evaluate strategic alternatives, including alternativesnegotiate terms that would not involve a transaction with Delek.
From October 30 through November 1, 2016, the Delek Board held its the third quarter meeting. Members of the Delek Board and Messrs. Ginzburg and Green discussed various transaction-related topics, including a financial model for the acquisition and pro forma financial forecasts based upon several assumed oil pricing benchmark scenarios. Management also discussed an integration plan and factors that might lead to complications in the integration of Alon.
On November 17, 2016, the Special Committee met telephonically, and representatives of J.P. Morgan and Gibson Dunn participated. The participants discussed process and status of diligence matters and process with respect to Alon’s preliminary financial model.
On November 22, 2016, representatives of Delek delivered a draft of the merger agreement Messrs. Wiessman and Haddock, as representatives of the Special Committee.
The Special Committee held a telephonic meeting on December 3, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. In the meeting, representatives of J.P. Morgan reviewed with the Special Committee members the preliminary financial model proposed to be shared with Delek. The Special Committee members discussed that Alon’s annual strategic planning process would not be completed until later in December and could result in changes from the preliminary financial model, but that Delek was indicating that a deal between Delek and Alon, if any, needed to be reached as soon as possible in December. The Special Committee members determined that, given the timing considerations, J.P. Morgan should deliver the preliminary model to Delek. The Special Committee members discussed whether the preliminary model given to Delek should include versions both including and excluding growth projects, given the lack of certainty regarding the growth projects and the possibility that Delek would discount the likelihood of the growth projects. After discussion, the Special Committee members agreed that growth projects should be included in the preliminary model being delivered in the context of negotiations with Delek. The Special Committee members and the representatives of J.P. Morgan and Gibson Dunn noted and discussed the fact that Alon’s annual strategic planning process had historically involved all members of the Alon Board, which would include the Delek representatives on the Alon Board. A representative of Gibson Dunn discussed issues in the draft merger agreement, including issues raised by the lack of mutuality of various deal protections and other provisions, the lack of an obligation for Delek to vote its Alon shares in favor of the Alon Merger or otherwise to support the Alon Merger and the termination fee proposed by Delek. The Special Committee members gave instructions regarding responses that should be included in a revised draft merger agreement to be delivered to Delek.
On December 4, 2016, Mr. Wiessman called Mr. Yemin to discuss whether to proceed with an upcoming yearly strategic planning meeting of the Alon Board that was scheduled in order for the Alon Board to review Alon’s five-year strategic plan prepared by Alon management.
Also on December 4, 2016, Gibson Dunn and Vinson & Elkins LLP (“Vinson & Elkins”), regular outside counsel to Alon, delivered a revised draft merger agreement to Norton Rose Fulbright.
From December 4, 2016 until the execution of the merger agreement on January 2, 2017, the parties and their respective legal advisors exchanged numerous drafts of, and engaged in numerous discussions and negotiations concerning the terms of, the merger agreement (and related disclosure schedules and exhibits). Significant areas of discussion and negotiation included the amount and form of the merger consideration, the tax structure of the transaction, the scope and degree of reciprocity of the representations, warranties and covenants, including the interim operating restrictions and the “no shop” provisions, the tax opinion-related closing condition, provisions relating to the conditions to closing of the transaction and the circumstances in which
either party would be permitted to terminate the agreement, the termination-related fees payable in connection therewith, and the name of the combined company. Documentary and other due diligence by both parties also continued in parallel with the negotiation of the transaction documentation.
From December 5, 2016 through December 8, 2016, various members of management of Delek and Alon and representatives of Norton Rose Fulbright, J.P. Morgan and TPH (through telephonic participation) held a series of meetings at Alon’s offices in Dallas, Texas, during which the parties shared additional non-public information regarding their respective businesses, including information regarding their respective operations, organizational structures, information technology systems and legal due diligence matters.
On December 10, 2016, in advance of the scheduled meeting of the Alon Board to review and finalize Alon’s five-year strategic plan prepared by Alon management, representatives of J.P. Morgan and Gibson Dunn discussed with Mr. Wiessman whether members of the Alon Board other than the Special Committee members should participate in the meeting to review projections for Alon included with Alon’s five-year strategic plan. Later that day, members of management of Delek, representatives of Norton Rose Fulbright, members of management of Alon and representatives of Gibson Dunn and Vinson & Elkins attended a teleconference and, after discussion, the parties determined that the full Alon Board should participate in the review of the strategic plan prepared by Alon management in accordance with Alon’s normal strategic planning process.
On December 12, 2016, representatives of Norton Rose Fulbright, Gibson Dunn, Vinson & Elkins and members of management of Delek and Alon held a teleconference during which the parties discussed the tax structure of the proposed merger transaction.
On December 13, 2016, the Delek Board held a meeting in Charleston, South Carolina. At the invitation of the Delek Board, members of management and representatives of TPH were in attendance. During the meeting, members of management provided the Delek Board an update on the status of the potential transaction with Alon, including the status of due diligence and material open issues in the transaction documentation. Using publicly available information and certain forecasted financial information received from Alon, as modified by Delek management, TPH also discussed a preliminary financial analysis of the potential acquisition of Alon. The Delek Board indicated their willingness to proceed toward finalizing the terms of the transaction with Alon.
On December 14 and 15, 2016, the Alon Board met in person as part of Alon’s regular year-end strategic planning process, where they reviewed and finalized Alon’s five-year strategic plan prepared by Alon management.
On December 15, 2016, the Special Committee met in person, and representatives of J.P. Morgan and Gibson Dunn participated. The participants discussed the status of the J.P. Morgan preliminary valuation analyses and the valuation methods to be employed by J.P. Morgan. A representative of Gibson Dunn discussed with the Special Committee members the revised draft merger agreement that was sent to Delek’s counsel and the likely open issues.
On December 17, 2016, members of management of Delek and Alon and representatives of Norton Rose Fulbright, Morris Nichols, Vinson & Elkins, and Gibson Dunn had a telephonic meeting to discuss the outstanding items in the merger agreement.
The Special Committee held a telephonic meeting on December 21, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. Representatives of J.P. Morgan made a presentation regarding, and the Special Committee members discussed, J.P. Morgan’s preliminary analyses of the valuation of Alon, the valuation of Delek, synergies and value creation in a merger transaction both including growth projects and excluding growth projects. The Special Committee members concluded, based on such preliminary valuation analyses, that the exchange ratio proposed by Delek of 0.44 shares of Delek common stock for each share of Alon common stock appeared to be largely within the valuation parameters. The Special Committee members discussed strategies for negotiating an increase in the exchange ratio, including an emphasis on the relative market prices of Alon and Delek and the Special Committee’s unwillingness to agree to an exchange ratio that did not “clear the market.” The Special Committee members agreed that Mr. Wiessman would be authorized to communicate to Mr. Yemin the message that the proposed exchange ratio was too low and that he should emphasize the market price issues to attempt to increase the exchange ratio. A representative of Gibson Dunn discussed with the Special Committee members the remaining open merger agreement issues, including issues regarding obtaining certain third-party consents and determining a transaction structure that would be treated as a “tax free” reorganization, and the Special Committee members gave instructions for responding to Delek on those issues and asked Mr. Wiessman to discuss the remaining issues with Mr. Yemin.
On December 22, 2016, representatives of Norton Rose Fulbright delivered a draft of the form of the voting agreement, providing for specified Alon stockholders to vote to approve the merger agreement, to the Special Committee and its representatives.
On December 22 and 24, 2016, Mr. Wiessman and Mr. Yemin met in person. On December 22, 2016, they discussed the open merger agreement issues and made progress in resolving most of them. Mr. Wiessman told Mr. Yemin that the Special Committee viewed the 0.44 exchange ratio as too low. Mr. Wiessman emphasized the market price issues and, after discussion, suggested 0.539 shares of Delek common stock for each share of Alon common stock as a ratio that he believed the Special Committee might be willing to recommend. After further discussion on December 23, 2016, Mr. Yemin suggested that Delek might be willing to agree to a ratio of 0.4972 Delek shares for each Alon share. Mr. Wiessman also raised the possibility of a $25 million cash dividend being paid to Alon stockholders (approximately 48% of which would be paid to Delek in view of Delek’s ownership of that portion of the Alon common stock).
On December 24, 2016, Mr. Wiessman and Mr. Yemin further discussed the proposed exchange ratio of 0.4972 and termination fees, and Mr. Wiessman also informed Mr. Yemin that the Special Committee was amenable to any tax structure that would not trigger a federal income tax on the Alon stockholders and that would not require a significant number of third-party consents. Mr. Wiessman also discussed revising the outside termination date for the transaction to four months from nine months, and requested that the Special Committee have the right to designate two members of the Delek Board. Mr. Yemin advised Mr. Wiessman that the nine month outside termination date
was in line with or more aggressive than market standards, and that his request for two board seats was inconsistent with market standards. Messrs. Yemin and Wiessman also discussed the restrictions on the respective parties’ abilities to operate during the period between signing and closing, including Delek’s ability to repurchase its common stock and Alon’s ability to incur additional debt. Mr. Wiessman also asked that the existing retiree medical plan continue for those employees that were already retired at the time of the execution of the merger agreement and the potential liability associated with accelerating the vesting of Alon’s pension plan. Messrs. Wiessman and Yemin also discussed the potential acquisition of two of Alon’s asphalt terminals by Delek Logistics and the use of the proceeds to pay the Alon stockholders a $25 million special dividend.
Also on December 24, 2016, members of management of Delek and Alon and representatives of Vinson & Elkins and Gibson Dunnheld a telephonic meeting to discuss the potential impact of the transaction structure on Alon’s credit facilities and other financial instruments.
The Special Committee held a telephonic meeting on December 26, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. The Special Committee members discussed the exchange ratio and the possibility of a cash dividend and concluded that it would be preferable in lieu of a cash dividend to attempt to negotiate for an increased exchange ratio to maximize participation in expected synergies.
During the week of December 25, 2016, multiple conversations regarding the draft merger agreement and the related voting agreements occurred among representatives of Gibson Dunn, Vinson & Elkins, Norton Rose Fulbright and Morris Nichols, and multiple revised drafts of the merger agreement were exchanged. In addition, Delek concluded that the proposed purchase of two of Alon’s asphalt terminals by Delek Logistics would not be feasible.
On December 27, 2016, Mr. Yemin and Mr. Wiessman held a telephonic meeting to discuss the open issues in the merger agreement. During the teleconference, Mr. Wiessman proposed that the exchange ratio be increased to 0.504 and requested that the Special Committee have the right to nominate one person to the Delek Board and one person to the board of directors of the general partner of Delek Logistics.
On December 27, 2016, members of management of Delek and Alon and representatives of Norton Rose Fulbright, Vinson & Elkins and Gibson Dunn had a telephonic meeting to confirm the use of the “horizontal double dummy” tax structure for purposes of the transaction.
On December 28, 2016, Mr. Yemin, in his capacity as an officer of Delek, and Mr. Wiessman spoke by telephone, and Mr. Yemin stated that Delek’s “best and final” offer (which would still need to be confirmed with the Delek Board the next day) was an exchange ratio of 0.504 Delek shares for each Alon share.
The Special Committee met telephonically later on December 28, 2016, and representatives of J.P. Morgan and Gibson Dunn participated. The Special Committee members discussed the remaining merger agreement issues and gave instructions regarding the potential resolution of those issues. The Special Committee members discussed their belief that the 0.504 exchange ratio was a good result and that there did not appear to be any available alternatives (including continuing as
a “stand-alone” company or pursuing other transactions) that would be as favorable to the Disinterested Stockholders as the merger with Delek. The Special Committee members instructed Mr. Wiessman and Gibson Dunn to attempt to finalize the merger agreement and related documents.
On December 29, 2016, the Delek Board held a special telephonic meeting for the purpose of considering the proposed merger transaction with Alon. At the invitation of the Delek Board, members of Delek management and representatives of TPH and Norton Rose Fulbright were present. Representatives of TPH reviewed with the Delek Board its financial analysis of the proposed merger transaction with Alon. A representative of Norton Rose Fulbright reviewed with the Delek Board the “horizontal double dummy” tax structure proposed to be implemented in the proposed merger transaction with Alon. Such structure was proposed to preserve Delek’s U.S. federal income tax basis in the Alon common stock acquired by Delek prior to the proposed merger transactions and to allow the Alon stockholders to exchange in the proposed merger transactions their Alon common stock for New Delek common stock on a tax-deferred basis for U.S. federal income tax purposes, except with respect to cash received instead of a fractional share of New Delek common stock. Members of Delek management provided the Delek Board an update on the negotiations with Alon management, including a discussion of the requirement that certain consents will be required as a condition to closing, the exchange ratio, restrictions on interim operations, the termination fees to be paid by each of Delek and Alon in certain circumstances, certain representations and warranties and the proposed board seats on the Delek Board and the board of directors of the general partner of Delek Logistics. A representative of TPH then delivered to the Delek Board its oral opinion, which was confirmed by delivery of a written opinion dated December 29, 2016, to the effect that, as of the date of the opinion, based on and subject to the assumptions, limitations and qualifications set forth in the opinion and based on such other matters as TPH considered relevant, the merger consideration to be paid pursuant to the merger agreement was fair, from a financial point of view to Delek. A representative of Norton Rose Fulbright reviewed with the Delek Board their fiduciary duties. After considering and discussing the foregoing and the proposed terms of the merger agreement, and taking into consideration the factors described in the sections entitled “The Mergers-Delek’s Reasons for the Mergers and New Delek Share Issuance; Recommendation of the Delek Board”, “The Mergers-Opinion of Delek’s Financial Advisor” and “The Mergers-Certain Delek and Alon Unaudited Prospective Financial Information” beginning on pages 112, 116 and 145, respectively, the members of the Delek Board unanimously (i) determined that the merger agreement, substantially in the form presented, and the transactions to be consummated thereby, are advisable, fair to and in the best interests of the ALDW Public Unitholders. Information prepared by the tax advisors to ALDW and Delek regarding the estimated tax effects of a possible transaction in which the ALDW Public Unitholders would receive Delek stock on ALDW Public Unitholders was reviewed by Houlihan Lokey with the committee. The committee also discussed the manner in which pre-closing distributions to unitholders of publicly traded master limited partnerships were handled in other similar transactions.
On October 16, 2017, after the close of the US equity markets, Mr. Yemin emailed Mr. Stein and its stockholders and (ii) approved the merger agreement, the Mergers and the other transactions contemplated thereby.
Also on December 30, 2016,Ms. Gera a letter from Delek and Alon exchanged initial drafts of their respective disclosure schedulesaddressed to the merger agreement. Additionally, on December 30, 2016, Messrs. Green,ALDW GP Conflicts Committee proposing a transaction in his capacity as an officerwhich a subsidiary of Delek would be merged into ALDW and Mr. Ranspot had a telephone conversation and discussed certain employee benefit representations.
On December 31, 2016, Mr. Yemin, in his capacity as an officereach ALDW Public Unitholder would receive 0.4481 shares of Delek and Mr. Wiessman had several telephone conversationsCommon Stock in exchange for each ALDW Public Unit (the “Initial Delek Proposal”). The proposal letter with respect to discuss the consents to be included in the list of consents required as a condition to closing, representation on theInitial Delek Board and the board of the general partner of Delek Logistics, the ability of Alon to incur indebtedness with no equity componentProposal stated that consideration for each ALDW Public
during the interim period, share repurchasesUnit implied by Delek during the interim period and company name. Further, on December 31, 2016, members of management of Delek and Alon and representatives of Norton Rose Fulbright, Vinson & Elkins and Gibson Dunn had several telephonic meetings during which they discussed the outstanding issues in the merger agreement, including the consents required as a condition to closing, Alon’s ability to incur indebtedness during the interim period and Delek’s ability to repurchase outstanding stock of Delek during the interim period pursuant to a plan approved by the Delek Board. Later that same day, representatives of Gibson Dunn delivered Norton Rose Fulbright and Delek a revised draft of the merger agreement and representatives of Norton Rose Fulbright delivered Gibson Dunn and Alon revised drafts of the voting agreements.
On January 1, 2017, representatives of Delek, Norton Rose Fulbright, Alon, Gibson Dunn and Vinson & Elkins attended several teleconferences during which the parties discussed the proposed schedule of consents required for closing.
On January 1, 2017, the Special Committee held a telephonic meeting, and representatives of J.P. Morgan and Gibson Dunn participated. The Special Committee members discussed the primary remaining open issue in the merger agreement, which involved the specified third-party consents that, if not obtained within 90 days, would permit Delek to have a one-time ability to terminate the merger agreement.
On January 1 and 2, 2017, Norton Rose Fulbright, Gibson Dunn and Vinson & Elkins exchanged drafts of the merger agreement and the disclosure schedules thereto and the voting agreements, in each case, regarding the final open items. Representatives of Gibson Dunn, Vinson & Elkins, Norton Rose Fulbright and Morris Nichols worked to finalize the merger agreement, including with a telephonic discussion that included Mr. Wiessman and Mr. Yemin.
The Special Committee met telephonically on the morning of January 2, 2017, and representatives of Gibson Dunn participated. The meeting began with a discussion led by a representative of Gibson Dunn regarding fiduciary duties and process considerations. A representative of Gibson Dunn provided a summary of key provisions in the merger agreement. Representatives of J.P. Morgan were then invited to join the meeting and reviewed with the Special Committee J.P. Morgan’s financial analysis of the exchange ratio provided for in the merger agreement and deliveredrepresented a premium of approximately 2.5% to the Special Committee its oral opinion, which was confirmed by delivery of a written opinion dated January 2, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the exchange ratio in the proposed Mergers was fair, from a financial point of view, to holders of Alon common stock, as more fully described below in the section “-Opinion of Financial Advisor to the Alon Special Committee” beginning on page 134 of this joint proxy statement/prospectus.
The Special Committee then unanimously adopted the resolutions determining that the merger agreement, the Mergers and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders and approving, and recommending that the Alon Board approve, the merger agreement, the voting agreement to which Alon is a party and the transactions contemplated thereby.
Later that morning, the Alon Board held a telephonic meeting, and representatives of Gibson Dunn participated. A representative of Gibson Dunn summarized the Special Committee’s receiptclosing price of the J.P. Morgan fairness opinion and the resolutions adopted by the Special Committee. The representativesALDW Common Units of Gibson Dunn then left the meeting. Upon the recommendation of the Special Committee, the Alon Board, with Messrs. Yemin, Ginzburg, Green, Smith and Soreq recusing themselves, adopted resolutions determining and declaring that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders; approving the merger agreement, the voting agreement to which Alon is a party, the Mergers and the other transactions contemplated by the merger agreement; directing that the merger agreement and the Mergers be submitted to Alon stockholders for approval; and resolving to recommend that Alon stockholders vote “FOR” the adoption of the merger agreement and the approval of the transactions contemplated thereby, including the Mergers, and “FOR” each of the other proposals described in the accompanying joint proxy statement/prospectus.
Later that day, the merger agreement was executed and delivered, as of January 2, 2017, by Delek and Alon. Prior to the commencement of trading$11.51 on the New York Stock Exchange on January 3, 2017,October 16, 2017. The proposal letter stated that Delek was interested only in acquiring all of the ALDW Public Units and that Delek had no interest in selling any of its or its affiliates’ ALDW Common Units or interests in the ALDW GP, selling assets to ALDW or the ALDW GP or pursuing other strategic alternatives involving ALDW or ALDW GP. The proposal letter stated that conditions to the transaction were anticipated to be limited, that the vote of the ALDW Common Units owned by Delek and Alonits affiliates would be sufficient under the ALDW Partnership Agreement for approval by ALDW Common Unitholders, that no approval of Delek’s stockholders would be required for the completion of the proposed transaction, and that Delek did not expect the transaction to require any regulatory approvals other than SEC review of the registration statement on Form S-4 with respect to the shares of Delek Common Stock to be issued in the transaction and the listing of such additional shares on the NYSE. Substantially concurrently with the delivery of the proposal letter to Mr. Stein and Ms. Gera, Baker Botts emailed to Gardere the proposal letter and initial drafts of a joint press release announcingMerger Agreement and a Support Agreement, and a representative of Delek forwarded the transaction.proposal letter to Houlihan Lokey.
On October 17, 2017, the ALDW GP Conflicts Committee, Gardere and Houlihan Lokey met to discuss the Initial Delek Proposal. At the request of the ALDW GP Conflicts Committee, representatives of Houlihan Lokey discussed their preliminary financial analyses with respect to ALDW, Delek and the proposed transaction. Also at the request of the ALDW GP Conflicts Committee, Gardere reviewed its initial impressions of the draft agreements that accompanied the Initial Delek Proposal, including the fact that, while the draft Merger Agreement appeared to adopt a “market” approach on structure and a favorable approach as to certainty of closing, certain features were not included, such as (a) assurance that the ALDW Public Unitholders would receive the ALDW’s distribution for the third quarter of 2017 and (b) any voting provisions of substance for the ALDW Public Unitholders, i.e., a “majority of the minority” vote provision. The committee, with the assistance of its legal and financial advisors, discussed that protections concerning payment of ALDW’s third quarter distribution would be very important to the ALDW Public Unitholders. The committee then considered whether to request a majority of the minority voting provision. Although the committee believed such a provision could help assure that the value of the consideration in the Merger was acceptable to ALDW Public Unitholders, such an approval requirement was not required under the ALDW Partnership Agreement and the committee also noted that Delek had previously indicated that such a provision would not be acceptable given the time and inherent uncertainties involved, although the issue was not addressed in the Initial Delek Proposal. In addition, the committee discussed that such a provision would increase the time to close and hence potential uncertainty with respect to a closing. Accordingly, the committee determined not to request such a provision at such time, but would keep it under consideration if Delek proved unwilling to increase its proposed exchange ratio in favor of the ALDW Public Unitholders. The committee then further considered the engagement of Potter Anderson as Delaware legal counsel to the committee. After discussing Potter Anderson’s qualification and determining that a previous engagement for a committee of the board of Alon Energy on an unrelated matter would not impair Potter Anderson’s ability to serve as independent counsel to the committee, the committee reviewed and approved the recommended engagement of Potter Anderson. The committee then determined to adjourn to permit its members further time to consider the information and analyses reviewed and discussed on the call and formulate additional questions, and to provide Gardere with time to develop a more detailed “markup” of the draft Merger Agreement, with a view to reconvening the committee in person on Thursday October 19th.
Delek’s ReasonsOn October 19, 2017, the ALDW GP Conflicts Committee met to discuss the Initial Delek Proposal and other terms of the draft Merger Agreement. At the request of the committee, representatives of Gardere and Houlihan Lokey were also present. Houlihan Lokey reviewed and discussed its updated preliminary financial analyses with respect to ALDW, Delek and the proposed transaction. Following the discussion, the committee determined that the 0.4481 exchange ratio contemplated by the Initial Delek Proposal was inadequate and determined to make a counteroffer on price based on a fixed exchange ratio of 0.53 shares of Delek Common Stock for each ALDW Public Unit. The Committee discussed that such counterproposal level was based on its view that an exchange ratio in the range of 0.48 to 0.50 was likely to be in the best interests of ALDW Public Unitholders and that tactically it would be important to counter at a higher price. The ALDW GP Conflicts Committee instructed Houlihan Lokey to present such counteroffer to Delek. It was also discussed and agreed that Houlihan Lokey, on behalf of the committee, should make clear that protections to ensure that the ALDW Public Unitholders would receive ALDW’s distribution for the Mergersthird quarter of 2017 were very important to the committee.
At the October 19, 2017 meeting, the ALDW GP Conflicts Committee and its advisors also discussed certain other terms in the proposed Merger Agreement and reviewed certain proposed comments to the draft Merger Agreement. In addition to protections with regards to ALDW distributions, the committee proposed that — in light of the conflict issues previously identified and discussed by the committee and the fact that Delek and its officers essentially “sat on both sides” for purposes of verifying representations and performing obligations for the parties under the Merger Agreement — the Merger Agreement should limit Delek’s ability to assert breaches of representations and covenants. The committee reviewed that the conditions in the draft Merger Agreement to each side’s obligations to close the transaction essentially amounted to the absence of a “Material Adverse Effect” on a party, and the committee discussed revisions to the “Material Adverse Effect” definition to further enhance the certainty of closing. Further, in light of Delek’s control of the ALDW GP, the committee proposed clarifying its rights to enforce the Merger Agreement on behalf of ALDW and adding a requirement that it approve any waiver, amendment or termination of the Merger Agreement. The ALDW GP Conflicts Committee directed Gardere to prepare a new draft of the Merger Agreement that could be shared with Baker Botts reflecting such discussion with a view to narrowing the issues other than the exchange ratio.
After the end of the ALDW GP Conflicts Committee meeting on October 19, 2017, Houlihan Lokey called Delek and, as directed by the ALDW GP Conflicts Committee, conveyed the committee’s counterproposal of an exchange ratio of 0.53 and that the ALDW unitholders would receive a third quarter distribution determined in accordance with past practices.
On Friday, October 20, 2017, Mr. Yemin called Mr. Stein to communicate that Delek was willing to raise the exchange ratio to 0.48 shares of Delek Common Stock for each ALDW Public Unit, but he did not have authority from the Delek Board to go higher than 0.48. Mr. Stein responded he would discuss the revised proposal with the ALDW GP Conflicts Committee and its advisors.
Following his conversation with Mr. Yemin on October 20, 2017 and in light of Ms. Gera’s unavailability until the subsequent day, Mr. Stein convened a discussion with Houlihan Lokey and Gardere to discuss Delek’s oral revised proposal of an exchange ratio of 0.48. While the revised exchange ratio was viewed as constructive, in light of the relatively quick counter from Mr. Yemin on behalf of Delek, the fact that limited overall time had occurred in the negotiation process with respect to price and the fact that a price higher than the value implied by a 0.48 exchange ratio would be better for ALDW Public Unitholders in all cases, Mr. Stein, after consulting with Gardere and Houlihan Lokey, decided to make a counterproposal at an exchange ratio of 0.51. At Mr. Stein’s direction on behalf of the ALDW GP Conflicts Committee, Houlihan Lokey called Barclays to acknowledge receipt of the most recent revised Delek proposal conveyed by Mr. Yemin to Mr. Stein and the committee’s counterproposal of an exchange ratio of 0.51. As directed by Delek, Barclays conveyed to Houlihan Lokey that an updated written proposal letter from Mr. Yemin would be sent to members of the ALDW GP Conflicts Committee reflecting the increased exchange ratio of 0.48. This revised proposal letter, sent by email to Mr. Stein and Ms. Gera late in the afternoon of October 20, 2017, proposed a revised fixed exchange ratio of 0.48 new shares of Delek Common Stock for each issued and outstanding ALDW Public Common Unit. The letter noted that the revised proposed exchange ratio represented a premium of approximately 9.8% to the closing price of ALDW Common Units of $11.51 on the New York Stock Exchange on October 16, 2017, the date of the Initial Delek Share Issuance; RecommendationProposal.
On October 23, 2017, upon the direction of Delek, Barclays called Houlihan Lokey to inquire about when to expect comments to the Merger Agreement, and Gardere called Baker Botts to identify and preview the issue that-in light of the fact the same personnel would be substantially verifying representations and warranties and performing obligations on behalf of both Delek and ALDW under the Merger Agreement-the comments of the ALDW GP Conflicts Committee to the proposed Merger Agreement would provide limitations on Delek’s right to assert breaches of the Merger Agreement. Gardere also discussed the importance to the ALDW GP Conflicts Committee of preserving distributions to the ALDW Public Unitholders based on a methodology for calculations of distributions that was consistent with the past practices of the ALDW GP. Later that day, Gardere emailed the proposed revised drafts of the Merger Agreement and the Support Agreement to Baker Botts, noting that the committee reserved the right to make additional comments depending on the progress of price negotiations. The revised Merger Agreement sent to Baker Botts reflected, among other things: provisions setting forth payment of a fixed amount for the ALDW third quarter distribution and clarifying that subsequent pre-closing quarterly distributions to ALDW Common Unitholders would be declared and paid in a manner consistent with past practice; limitations on Delek’s rights to assert covenant breaches of the Merger Agreement by ALDW (unless directed by the ALDW GP Conflicts Committee) or breaches of ALDW’s representations and warranties based on facts existing as of the execution of the Merger Agreement or which were in control of parties to the Merger Agreement; provisions to allow the ALDW GP Conflicts Committee to terminate the Merger Agreement upon the occurrence of an unforeseen intervening event that materially affected valuation; an expanded list of carve outs to the definition of “Material Adverse Effect”; the ALDW GP Conflicts Committee's exclusive right to waive conditions under, terminate or enforce the Merger Agreement; and an uncapped expense reimbursement in the event of a termination of the Merger Agreement in specified circumstances.
On October 24, 2017, Mr. Yemin called Mr. Stein and stated that Delek was not willing to increase the fixed exchange ratio above 0.48 given Delek’s recent relative performance as compared to ALDW, which Mr. Yemin said would be apparent in Delek’s upcoming earnings announcement, scheduled for November 8, 2017 after the market close.
Following Mr. Yemin’s call with Mr. Stein, on October 24, 2017, the ALDW GP Conflicts Committee convened a meeting. The committee, with the assistance of Houlihan Lokey, discussed Delek’s position communicated by Mr. Yemin. Houlihan Lokey confirmed that Delek had told Houlihan Lokey that management of ALDW and Delek expected that Delek’s third quarter financial results and ALDW’s third quarter financial results would both outperform estimates, but that Delek was outperforming more on a relative basis. The committee also discussed the appropriate response by the committee to Delek’s position on the proposed exchange ratio. Given the desirability of achieving the best possible price for ALDW’s Public Unitholders and because the ALDW GP Conflicts Committee was not yet in a position to fully assess how Delek’s position on the companies’ relative performance impacted the committee’s view of value, the ALDW GP Conflicts Committee instructed Houlihan Lokey to convey to Barclays that there would be no change to its proposed exchange ratio of 0.51. Subsequent to the October 24, 2017 meeting, as directed by the ALDW GP Conflicts Committee, representatives of Houlihan Lokey called Barclays to convey the position of the committee.
Later on October 24, 2017, Gardere, Potter Anderson, Baker Botts, Morris Nichols and Mr. Kremke held a conference call to discuss the draft of the Merger Agreement previously sent by Gardere to Baker Botts. The parties discussed the provisions permitting the ALDW GP Conflicts Committee to terminate the Merger Agreement upon the occurrence of an “intervening event,” the rationale for the ALDW GP Conflicts Committee’s treatment of breaches of the Merger Agreement, the requested changes in the definition of “Material
Adverse Effect,” the provisions added with respect to the authority of the ALDW GP Conflicts Committee to control determinations to be made by ALDW under the Merger Agreement, and the provisions addressing the period between signing and closing. With respect to the right to terminate for an “intervening event” reflected in the Merger Agreement, Baker Botts expressed the view that such a provision was not necessary in the Merger Agreement in light of the duties of the ALDW GP Conflicts Committee under the Partnership Agreement, that, in any event, if included, such a provision was typically accompanied by a significant breakup fee payable by the target company as a result of its exercise and that such a fee was impractical in the context of a ALDW-Delek transaction given Delek's ownership of 81.6% of the ALDW Common Units. In addition, Baker Botts and Gardere discussed the provisions regarding distributions to ALDW Common Unitholders, and Baker Botts expressed the view that, given the finalization of the third quarter financials for each of ALDW and Delek, the third quarter distribution should be an amount fixed at the execution of the Merger Agreement to avoid potential disputes and that Delek did not believe it was appropriate to commit to certain standards with respect to the timing or calculation of subsequent distributions if the transaction did not close before the time such distributions were regularly declared and paid.
Later on October 24, 2017, Gardere and Baker Botts had a further discussion regarding the consent solicitation process reflected in the Merger Agreement and matters related to the registration of the shares of Delek Common Stock to be issued in the transaction under the Securities Act.
On October 26, 2017, Baker Botts transmitted a revised draft of the Merger Agreement to Gardere. The revised draft (a) added an express representation that Delek was not aware of any breaches by the ALDW Parties as of execution of the Merger Agreement and-in lieu of provisions with respect to breaches requested by the ALDW GP Conflicts Committee-made clear that actions or omissions directed by Delek would not be deemed breaches of the Merger Agreement by the ALDW Parties, (b) eliminated ALDW’s right to terminate for an “intervening event”, (c) made reciprocal certain additional exceptions to the definition of a “Material Adverse Effect” requested by the ALDW GP Conflicts Committee and (d) provided for a fixed third quarter distribution to the ALDW Common Unitholders (the amount of which would be inserted into the draft following calculations in connection with ALDW’s third quarter performance). Baker Botts also returned a draft of the Support Agreement, which accepted the limited comments of the ALDW GP Conflicts Committee to such agreement.
On October 30, 2017, the ALDW GP Conflicts Committee convened a meeting at which representatives of Gardere and Houlihan Lokey were present. The meeting began with a further update from Houlihan Lokey concerning its ongoing review of information provided by the management of ALDW and Delek relating to the financial performance of Delek and ALDW over the recently completed third quarter. The committee, with the assistance of Houlihan Lokey, also discussed upcoming events that could impact the market prices of shares of Delek Common Stock and ALDW Common Units, including the earnings announcements scheduled for November 8, 2017. The ALDW GP Conflicts Committee discussed the risk that - while likely not a material risk - a meaningful improvement in Delek’s share price as a result of such announcement could cause Delek to revise the exchange ratio in its favor or even delay a transaction. The committee instructed Houlihan Lokey to communicate to Barclays that the committee was standing firm with the proposed exchange ratio of 0.51. Gardere also reviewed the recent negotiations with Delek regarding the Merger Agreement. The committee discussed that Delek had accepted many of the committee’s comments to the Merger Agreement in principle, including that Delek’s right to assert breaches by ALDW should be circumscribed in the Merger Agreement given ALDW’s controlled status, key carve outs to the “Material Adverse Effect” definition and the requirement to obtain approval of the ALDW GP Conflicts Committee for ALDW to take certain material actions under the Merger Agreement; however, Delek had rejected the “intervening event” termination right. Further, the committee concluded that, consistent with prior discussions and the committee’s earlier draft, a “majority of the minority” vote provision would not be requested. The committee determined that, other than the exchange ratio, the most significant open issue in the draft Merger Agreement remained the determination of the Partnership’s distribution amount for the third quarter of 2017 and the protection of distributions thereafter if the transaction did not close prior to the time such distributions were declared, and it directed Gardere to press the latter issue with Baker Botts.
On October 30, 2017, following the meeting of the ALDW GP Conflicts Committee, Gardere and Baker Botts discussed the issue of the amount and timing of distributions to ALDW Public Unitholders in respect of periods following the third quarter. Gardere then later delivered a revised draft of the Merger Agreement reflecting the following terms, among others: (a) a provision which clarified that, if a breach of Delek’s representation regarding its knowledge of ALDW breaches was itself breached, Delek would be limited in asserting the applicable ALDW breaches under the Merger Agreement, (b) certain refinements to the provisions that govern Delek’s actions between signing and closing and (c) alternatives regarding distributions in respect of ALDW Common Units following the third quarter. Also on October 30, 2017, at the instruction of the committee, representatives of Houlihan Lokey contacted representatives of Barclays to communicate that the committee was standing firm with its counterproposal based on an exchange ratio of 0.51 shares of Delek Common Stock for each ALDW Public Unit.
On November 1, 2017, Baker Botts circulated a revised Merger Agreement, substantially accepting the comments forwarded by Gardere the prior day, reflecting an exchange ratio of 0.48 and a third quarter distribution of $0.38 cents per ALDW Common Unit and providing that distributions in respect of any quarter ending December 31, 2017 or thereafter would be in an amount (x) consistent with the ALDW GP Board’s existing cash distribution policy and (y) calculated in a manner substantially consistent with ALDW’s past practice (including in respect of reserves for maintenance capital expenditures, debt service and other contractual obligations, and reserves
for future operating or capital needs) and would have a record date and payment date consistent with past practice with respect to such quarter. In response to an inquiry from Baker Botts, Gardere responded that the legal terms in the Merger Agreement overall were satisfactory and further discussion was not needed between respective counsel.
On November 2, 2017, the ALDW GP Board preliminarily approved a third quarter distribution of $0.38 per ALDW Common Unit. Following the meeting of the ALDW GP Board, the ALDW GP Conflicts Committee met to discuss the proposed ALDW-Delek transaction. Mr. Stein indicated that after the ALDW GP Board meeting, Mr. Yemin had spoken to him and reiterated that Delek could not offer a fixed exchange ratio above 0.48. The committee discussed the conversation and matter at length and, in light of the committee’s view that Mr. Yemin strongly desired to reach an agreement regarding the ALDW acquisition before the announcement of Delek’s and ALDW’s earnings and because an increase in the exchange ratio was not expected to be a significant incremental cost for Delek (but would be a meaningful improvement in the amount of overall consideration to the ALDW Public Unitholders), the members of the committee would communicate to Mr. Yemin that the ALDW GP Conflicts Committee required an increase in the exchange ratio in order to consider recommending a transaction to the ALDW GP Board. The committee then briefly adjourned the meeting to permit Mr. Stein and Ms. Gera to contact Mr. Yemin to request an exchange ratio of 0.50. Mr. Stein and Ms. Gera then called Mr. Yemin and proposed the 0.50 exchange ratio. On the call, Mr. Yemin countered with an exchange ratio of 0.49 of a share of Delek Common Stock for each ALDW Public Unit, which counterproposal was subject to Delek Board approval. On behalf of the ALDW GP Conflicts Committee, Mr. Stein and Ms. Gera tentatively accepted a fixed exchange ratio of 0.49, subject to the committee’s review of such proposal with the assistance of its legal and financial advisors and the approval of the committee.
On November 5, 2017, the Delek Board held a meeting to discuss the status of negotiations with the ALDW Conflicts Committee and consider the terms of the proposed transaction. At the request of the Delek Board,
On December 29, 2016, representatives of Barclays, Baker Botts and Morris Nichols were also present. Messrs. Yemin, Kremke and Green reviewed with the Delek Board (1) determined that the merger agreementterms of the proposed transaction, and representatives of Barclays reviewed with the Delek Board the financial terms of the proposed transaction. Following discussion, the Delek Board approved the Merger Agreement and the transactions contemplated thereby, including the New Delek share issuance, are fair to, advisable and in the best interestsMerger, with a fixed exchange ratio of Delek and its stockholders, (2) approved the merger agreement and the transactions contemplated thereby and (3) resolved to recommend that Delek stockholders vote for the approval and adoption of the merger agreement and the transactions contemplated thereby, including the New Delek share issuance.
Accordingly, the Delek Board recommends that Delek stockholders vote “FOR” the New Delek share issuance proposal and “FOR” the Delek adjournment proposal.
In reaching its decision, the Delek Board, as described under “—Background of the Mergers” above, held a number of meetings, consulted with Delek’s senior management and its legal and financial advisors at Norton Rose Fulbright and TPH, respectively, and considered a number of factors.
The various factors the Delek Board considered that weighed positively in favor of the New Delek share issuance proposal included, among others and not necessarily in order of relative importance:
its belief that the combined company will operate more efficiently to create a refining system that will be one of the largest buyers of crude from the Permian Basin among the independent refiners;
its expectation of substantial synergies associated with the Mergers, including achieving a combination of commercial, operational, cost of capital and corporate synergies in the first full year after the closing of the transaction;
its belief that the combined company will have the ability to unlock logistics value from Alon’s assets through potential drop down to Delek Logistics and create a platform for future logistics projects to support a larger refining system;
its belief that the businesses and corporate cultures of Delek and Alon are complementary and the integration of the two companies can be completed in a timely and efficient manner with minimal disruption to employees; and
its expectation that upon completion of the Mergers, current Delek stockholders will own approximately 76% of the outstanding New Delek common stock.
These expectations and beliefs of the Delek Board are based in part on the following factors that the Delek Board considered:
its knowledge and understanding, based on its discussions with Delek’s management, of Delek’s business, operations, financial condition, earnings, strategy and future prospects;
information and discussions with Delek management, in consultation with representatives of TPH, regarding Alon’s business, operations, financial conditions, earnings, strategy and future prospects, and the results of Delek’s legal, financial and business due diligence review of Alon;
its thorough deliberation and consideration of the Merger and other alternatives to the Merger, including during 12 meetings of the Delek Board over the course of 16 months, as well as with its legal and financial advisors and members of Delek’s management;
management’s knowledge of the prospective environment in which the combined company will operate following the Mergers, including industry, economic and market conditions;
the historical and then-current trading prices and volumes of each of the Delek and Alon common stock;
the fact that the terms of the merger agreement were the product of arm’s-length negotiations between Delek and its advisors, on the one hand, and the Alon Special Committee and its advisors, on the other hand;
the terms of the merger agreement, including:
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o | the fixed exchange ratio in the merger agreement, which will not be increased or reduced, even in the event of a decrease in the price of Delek or Alon common stock, respectively; |
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o | the fact that, as a condition to the completion of the Mergers, the New Delek share issuance proposal must be approved by the affirmative vote of the holders of a majority of the total votes of shares of Delek common stock cast in person or by proxy at the Delek special meeting; |
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o | the fact that the merger agreement requires Alon to use commercially reasonable efforts to cooperate and assist HoldCo in certain debt financing matters and matters relating to Alon’s outstanding convertible notes prior to the effective time of the Alon Merger, as more fully described in the section entitled “The Merger Agreement—Cooperation with Financing and Outstanding Alon Convertible Notes” beginning on page 189;
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o | the right of Delek to receive a termination fee of $15 million if Alon terminates the merger agreement under certain circumstances, as more fully described in the section entitled “The Merger Agreement—Termination—Termination Fee Payable by Alon” beginning on pages 194; and
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o | the fact that under certain circumstances, the Delek Board may change its recommendation in response to a superior proposal, as more fully described in the section entitled “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes in Recommendation” beginning on page 181; and
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the opinion of TPH, delivered on December 29, 2016, to the effect that, as of December 29, 2016 and based on and0.49, subject to the assumptions, limitations and qualifications set forth in the opinion and based on other matters as TPH considered relevant, the merger consideration to be paid pursuant to the proposed merger agreement was fair from a financial point of view to Delek, as more fully described in the section entitled “The Mergers—Opinion of Delek’s Financial Advisor” beginning on page 116;
In addition, the Delek Board considered a variety of risks and other potentially negative factors concerning the merger agreement, the Mergers, the New Delek share issuance, and the other transactions contemplated by the merger agreement. These factors included the following, which are not necessarily listed in order of relative importance:
the risk that because the exchange ratio in the Alon Merger is fixed, Delek cannot be certainfinalization of the market valuedefinitive agreements.
On November 6, 2017, the ALDW GP Conflicts Committee met to consider providing Special Approval of the merger consideration until completionALDW-Delek transaction. At the request of the Alon Merger;
the possibility that the Mergers, the New Delek share issuancecommittee, Houlihan Lokey reviewed and other transactions contemplated by the merger agreement may not be completed on the terms or timeline currently contemplated or at all, including for reasons beyond the control of Delek or Alon;
the risk that failurediscussed its financial analyses with respect to complete the Mergers, the New Delek share issuance and the other transactions contemplated by the merger agreement could negatively affect the price of
Delek common stock and future business and financial results of Delek, and could lead to negative perceptions among investors and other stakeholders;
the ownership dilution to current Delek stockholders as a result of the issuance of Delek common stock to holders of Alon common stock as merger consideration pursuant to the merger agreement;
the potential risk of diverting management focus, employee attention and resources from other strategic opportunities and operational matters while working to complete the proposed transactions and successfully integrate Delek and Alon;
the costs to be incurred in connection with the Mergers, the New Delek share issuance and the other transactions contemplated by the merger agreement, including the fees and expenses associated with completing such transactions;
the risk that Alon may be unable to retain key employees;
the risk of not capturing all of the anticipated operational cost savings and synergies, and the risk that other anticipated benefits of the transactions may not be realized on the expected timeframe or at all;
the challenges of combining Delek with Alon following the Mergers, including technical, financial, operational, accounting and other challenges;
the fact that projections or future results of operations of the combined company are necessarily estimates based on assumptions, and not guarantees as to future financial performance as more fully described under “Certain Delek and Alon Unaudited Prospective Financial Information” beginning on page 145;
the risk that financing may not be available to Delek, Alon or, after the consummation of the Mergers, the combined company, on favorable terms or at all, or, after the consummation of the Mergers, as more fully described in the section entitled “Risk Factors—Risks Related to the Mergers” beginning on page 47;
the risk that the Alon Board changes its recommendation in response to a superior proposal under such circumstances as permitted in the merger agreement, as more fully described under “The Merger Agreement—Non-Solicitation of Acquisition Proposals; Changes in Recommendation” beginning on page 181; and
the risk that payment by Alon to Delek of a termination fee of $15 million if the merger agreement is terminated under certain circumstances, as more fully described in the section entitled “The Merger Agreement—Termination—Termination Fee Payable by Alon” beginning on page 194, may not be sufficient to fully compensate Delek for its losses in such circumstances.
In addition to considering the factors described above, the Delek Board considered the fact that some of Delek’s directors and executive officers have other interests in the Mergers that are
different from, or in addition to, the interests of Delek stockholders generally, as more fully described under “—Interests of Delek’s Directors and Executive Officers in the Mergers” beginning on page 153.
The Delek Board concluded that the potentially negative factors associated with the merger agreement, the Mergers, the New Delek share issuance, and the other transactions contemplated by the merger agreement, were outweighed by the potential benefits that it expected the Delek stockholders would achieve as a result of entering into the merger agreement and consummating the transactions contemplated thereby. Accordingly, the Delek Board determined that the merger agreement and transactions contemplated thereby, including the New Delek share issuance, were advisable and in the best interests ofALDW, Delek and the Delek stockholders.
The foregoing discussionproposed Merger. Thereafter, at the request of the factors considered by the Delek Board is not intended to be exhaustive, but, rather, includes the material factors considered by the Delek Board. In reachingcommittee, Houlihan Lokey orally rendered its decision to approve the merger agreement and transactions contemplated thereby, including the New Delek share issuance, the Delek Board did not quantify or assign any relative weightsopinion to the factors considered, and individual directors may have given different weightscommittee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to different factors. The Delek Board considered all these factorsthe committee dated November 6, 2017), as a whole, including thorough discussions with, and questioningto, as of Delek’s management and Delek’s financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.
This explanation of Delek’s reasons for the Mergers and other information presented in this section is forward-looking in nature and should be read in light of the sections entitled “Risk Factors” beginning on page 47 and “Cautionary Statement Regarding Forward-Looking Statements” on beginning on page 44.
Opinion of Delek’s Financial Advisor
Introduction
The Delek Board retained TPH to act as Delek’s financial advisor and provide an opinion in connection with the Alon Merger. The Delek Board instructed TPH to evaluatesuch date, the fairness, from a financial point of view, to Delekthe holders of ALDW Common Units, other than the Excluded Holders, of the merger consideration to be paidExchange Ratio provided for in the Merger pursuant to the merger agreement.Merger Agreement. Gardere subsequently reviewed the proposed terms of the Merger Agreement and the Support Agreement. The ALDW GP Conflicts Committee (a) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interest of ALDW and the ALDW Public Unitholders, (b) approved the Merger Agreement and the transactions contemplated thereby, including the Merger (such approval constituting the Special Approval), and (c) resolved to recommend to the ALDW GP Board, the approval of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger.
On December 29, 2016,November 7, 2017, the ALDW GP Board convened a meeting. All directors other than David Wiessman were in attendance. At the request of the ALDW GP Conflicts Committee, representatives of Gardere and Houlihan Lokey were also in attendance. At the request of the ALDW GP Board, Mr. Stein reviewed the ALDW GP Conflicts Committee’s process and its recommendation as to price. The members of the ALDW GP Board asked several questions regarding the process and recommendation of the ALDW GP Conflicts Committee and the proposed resolutions of the ALDW GP Board. Based on the recommendation of the ALDW GP Conflicts Committee, the ALDW GP Board then (a) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interest of ALDW and the ALDW Public Unitholders, (b) approved the Merger Agreement and the transactions contemplated thereby, including the Merger and (c) directed that the Merger Agreement be submitted to a vote of the ALDW Common Unitholders and authorized the ALDW Common Unitholders to act by written consent pursuant to Section 13.11 of the ALDW Partnership Agreement in respect of such vote. The ALDW GP Board also approved certain other resolutions relating to matters called for under the Merger Agreement. Such approval was made subject to the finalization of the definitive agreements.
On November 7 and 8, 2017, ALDW GP finalized the financial results for the third quarter. In connection with that process, ALDW GP recalculated ALDW’s available cash and determined that available cash was sufficient to pay a distribution of $0.43 per ALDW Common Unit. Such revised third quarter distribution was reflected in an update to the draft Merger Agreement.
On November 8, 2017, the Delek Parties and the ALDW Parties executed the Merger Agreement and announced the transaction pursuant to a joint press release.
Recommendation of the ALDW GP Conflicts Committee and the ALDW GP Board
The ALDW Conflicts Committee consists of two independent directors: Sheldon Stein (Chairman) and Ella Ruth Gera. The ALDW GP Board authorized the ALDW GP Conflicts Committee to, among other things, review, evaluate and negotiate the proposed Merger on behalf of ALDW and the ALDW Public Unitholders for the purpose of providing, if appropriate, “Special Approval” pursuant to Section 7.9(a) of the ALDW Partnership Agreement and to evaluate the terms and conditions, and determine the advisability of, the Merger, and to make a recommendation to the ALDW GP Board whether to approve the Merger.
The ALDW Conflicts Committee retained Gardere as its legal counsel, Potter Anderson as its special Delaware counsel and Houlihan Lockey as its financial advisor, each of which the ALDW GP Conflicts Committee believed would be able to provide objective advice regarding a potential transaction with Delek. The ALDW GP Conflicts Committee, with the assistance of its financial and legal advisors, reviewed and evaluated ALDW, Delek and the proposed Merger, considered withholding Special Approval and maintaining the status quo, and conducted extensive negotiations with representatives from ALDW and Delek with respect to the Merger Agreement and other related agreements.
The ALDW GP Conflicts Committee considered the benefits of the Merger Agreement, the Merger and the related transactions as well as the associated risks and, by unanimous vote at a meeting held on November 6, 2017, (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are in the best interests of ALDW and the ALDW Public Unitholders, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger (such approval constituting “Special Approval” as defined in the ALDW Partnership Agreement), and (iii) recommended the approval of the Delek Board held to evaluateMerger Agreement and the transactions TPH delivered an opinioncontemplated thereby, including the Merger, to the ALDW GP Board.
Taking into consideration such approval and recommendation, at a meeting duly called and held on November 6, 2017, the ALDW GP Board (i) deemed it advisable and in the best interests of ALDW and the ALDW Public Unitholders that ALDW enter into the Merger Agreement and consummate the Merger, (ii) approved the Merger Agreement and the transaction contemplated thereby, including the Merger, (iii) directed that the Merger Agreement be submitted to a vote of the ALDW Common Unitholders and (vi) authorized the ALDW Common Unitholders to act by written consent without a meeting in connection with consenting to the Merger Agreement and the transactions contemplated thereby, including the Merger.
Recommendation Factors
Under the ALDW Partnership Agreement, whenever ALDW GP makes a determination or takes any other action in its capacity as the general partner of December 29, 2016ALDW, ALDW GP must make such determination or take such other action in good faith and based on andis not subject to any other or different standard under applicable law (other than the assumptions, limitationsimplied contractual covenant of good faith and qualifications set forthfair dealing). In order for a determination or other action to not be deemed be in “good faith” for purposes of the opinion and based onALDW Partnership Agreement, ALDW GP must believe that the determination or other matters as TPH considered relevant,action was adverse to the merger considerationinterests of ALDW. Nothing in this consent statement/prospectus or the actions or determinations of ALDW GP, the ALDW GP Board, or the ALDW GP Conflicts Committee described in this consent statement/prospectus should be read to be paidmean that ALDW GP, the ALDW GP Board or the ALDW GP Conflicts Committee have assumed any obligations to ALDW or its limited partners (whether fiduciary, contractual, implied, or otherwise) other than those obligations that may exist pursuant to the proposedALDW Partnership Agreement. You are urged to read the full text of the ALDW Partnership Agreement, which is incorporated by reference into this consent statement/prospectus. See “Where You Can Find More Information.”
The ALDW GP Conflicts Committee viewed the following factors as generally positive or favorable in reaching its determinations and recommendation with respect to the Merger (the order of which does not necessarily reflect their relative significance):
The exchange ratio of 0.49 of a share of Delek Common Stock for each outstanding ALDW Public Unit represents an implied value of $13.56 based upon the closing price of shares of Delek Common Stock and ALDW Common Units on November 3, 2017, and represents an implied premium of approximately (a) 3.0% to the closing price of ALDW Common Units on November 3, 2017 and (b) 41.2% to the closing price of $9.60 on December 30, 2016 (the last trading day prior to the first time Delek publicly announced its intention on January 3, 2017 to acquire the ALDW Public Units).
The exchange ratio of 0.49 of a share of Delek Common Stock for each outstanding ALDW Public Unit represents an implied premium of approximately (a) 19.9% to the 10-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on December 30, 2016, (b) 18.7% to the 20-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on December 30, 2016 and (c) 14.9% to the 30-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on December 30, 2016.
The exchange ratio of 0.49 of a share of Delek Common Stock for each outstanding ALDW Public Unit represents an implied premium of approximately (a) 3.6% to the 10-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on November 3, 2017, (b) 5.7% to the 20-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on November 3, 2017 and (c) 6.8% to the 30-trading day volume-weighted average ratio of ALDW Common Units to shares of Delek Common Stock for the period ended on November 3, 2017.
The exchange ratio of 0.49 of a share of Delek Common Stock for each outstanding ALDW Public Unit is near the high end of the range of implied exchange ratios (Delek Common Stock for ALDW Public Unit) since December 30, 2016 of between 0.37 and 0.52 and the average exchange ratio of 0.43 for the period from December 30, 2016 through November 3, 2017.
The exchange ratio is fixed and, therefore, the implied value of the consideration payable to ALDW Public Unitholders will increase in the event that, prior to the closing of the Merger, the market price of Delek Common Stock increases.
The Merger is expected to provide ALDW Public Unitholders with equity ownership in an entity which, relative to ALDW, has (a) a more diversified portfolio of assets, (b) greater opportunities to enhance growth, profit margins and equity holders’ returns and (c) a more flexible capital allocation program and lower cost of capital to invest in value-enhancing growth opportunities.
The Merger is also expected to provide ALDW Public Unitholders, through their ownership of Delek common stock, the ultimate control party of ALDW, the opportunity to participate more directly in the anticipated benefits and synergies of the recent Delek-ALJ Merger, including, but not limited to, $85 million to $105 million in announced annual run rate synergies projected to be achieved by 2018 relating to procurement efficiencies, resource-sharing, consolidation of corporate functions and cost of capital efficiencies.
The Merger is expected to generate various synergies which, if they occur, will benefit ALDW Public Unitholders through their ownership of Delek common stock, including (a) an improved cost of capital, (b) the elimination of public company expenses of ALDW and (c) Delek’s potential to unlock value in ALDW assets through the drop down of such assets to DKL.
The ALDW business involves certain key risks and uncertainties on a stand-alone basis, which may limit distributions or result in highly variable distributions to ALDW Common Unitholders. These risks include (a) ALDW being a single asset business tied to commodities prices and susceptible to business disruption and (b) ALDW having potentially material contingent obligations, including future payments in connection with (i) the Consent Decree resolving alleged violations at ALDW refinery assets of the Federal Clean Air Act and (ii) commitments in respect of Renewable Identification Numbers (RINs), tradeable credits used to demonstrate compliance with renewable fuel standard (RFS) requirements of the U.S. Environmental Protection Agency.
Delek management has recently indicated that it is unlikely to pursue drop down transactions with ALDW, further curtailing growth opportunities for ALDW.
The Merger will eliminate the potential for conflicts of interest between Delek, the ultimate control party of ALDW through the ALDW GP, and ALDW.
Delek’s status as a corporation and its size following the Merger is expected to provide a number of benefits relative to ALDW’s master limited partnership (“MLP”) structure, including that (a) corporations attract a broader set of investors as compared to MLPs because certain types of institutional investors face prohibitions or limitations on investing in entities other than corporations, (b) Delek can pursue acquisition targets that may not have been available to ALDW because MLPs, in order to retain their tax status, may only own assets that generate sufficient qualifying income, (c) ALDW Public Unitholders would have enhanced voting and other rights as shareholders of a corporation as opposed to unitholders of an MLP controlled exclusively by a general partner and (d) the directors of a corporation, as compared to the general partner of an MLP, are generally subject to a higher standard of care in respect of the interests of its public shareholders than an MLP.
The average trading volume of shares of Delek Common Stock is approximately 7x greater than that of ALDW Common Units on a number of shares or units traded basis and approximately 16x greater on a dollar traded basis based on the 30 day trading period as of November 3, 2017, implying that ALDW Public Unitholders will have significantly greater liquidity via owning shares of Delek Common Stock.
Variable distribution MLPs such as ALDW have a limited universe of investors and are increasingly out of favor in the equity market, potentially further depressing valuations and liquidity (it is notable, the committee believes, CVR Refining, LP is the only other publicly traded refinery variable distribution MLP).
The ALDW GP Conflicts Committee selected and retained its own legal and financial advisors with substantial knowledge and experience with respect to public merger agreementand acquisition transactions and MLPs and ALDW’s industry generally.
The financial analyses reviewed by Houlihan Lokey with the ALDW GP Conflicts Committee as well as the oral opinion of Houlihan Lokey rendered to the ALDW GP Conflicts Committee on November 6, 2017 (which was fairsubsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the ALDW GP Conflicts Committee dated November 6, 2017), as to, as of such date, the fairness, from a financial point of view, to Delek.the holders of ALDW Common Units, other than the Excluded Holders, of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement.
The terms and conditions of the Merger were determined through arms-length negotiations between the ALDW GP Conflicts Committee with the assistance of its legal and financial advisors, on the one hand, and Delek and its representatives and advisors, on the other hand.
In the ALDW GP Conflict Committee’s judgment, the exchange ratio and the other terms and conditions set forth in the Merger Agreement, including the following, were the best terms to which Delek was willing to agree:
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| ◦ | Limited Conditions to the Merger - the fact that Delek’s obligation to close the Merger is subject to a limited number of conditions, including (a) mutual conditions such as (i) delivery of consent statement/prospectus to holders of ALDW Common Units at least 20 business days prior to the closing of the Merger and (ii) the continued effectiveness of the registration statement of which this consent statement/prospectus forms a part and (b) the “bringdown” of ALDW’s representations and warranties, which are subject in nearly all cases to a “Material Adverse Effect” standard. |
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| ◦ | Definition of “Material Adverse Effect” - the fact that the definition of “Material Adverse Effect” contains a number of exceptions that may not be taken into account in determining whether there has been a “Material Adverse Effect” on ALDW (except in certain cases if the impact is materially disproportionate to the adverse impact on similarly situated parties), including changes in the market price or trading volume of the ALDW Common Units, changes, effects, states of fact, developments, events or occurrences affecting the prices of oil, gas, natural gas, natural gas liquids or other commodities (including occurrences affecting the spread in prices between unrefined and refined commodities), any legal proceedings commenced or threatened by or involving ALDW or any of its subsidiaries or any current or former equityholder thereof arising out of or related to the Merger Agreement or the transactions contemplated by the Merger Agreement or the failure of ALDW to meet any internal or external projections, forecasts or estimates of revenues, earnings or other financial or operating metrics for any period. |
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| ◦ | Knowledge or Direction of ALDW Breaches by Delek Carved Out - the fact that (a) Delek and its affiliates have represented that Delek is not aware of any breach of representations or warranties by ALDW as of the execution of the Merger Agreement and that, if such representation by Delek as to its knowledge of breaches is inaccurate, Delek cannot assert the applicable breach by ALDW as a failure of a condition to Delek’s obligations to consummate the Merger and (b) Delek cannot assert any breaches of covenants of the Merger Agreement by ALDW if the applicable actions or omissions were taken at the direction of or on behalf of Delek or its representatives. |
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| ◦ | Distributions - the fact that Delek committed to make distributions to ALDW Common Unitholders (a) in respect of the quarter ended September 30, 2017, in the amount of $0.38 (which amount was subsequently revised before execution of the Merger Agreement to $0.43) per ALDW Common Unit and (b) if the effective time of the Merger has not occurred prior to the record date (the timing of which will be consistent with ALDW’s past practice) for distributions in respect of any quarter ending December 31, 2017 or thereafter, then for, any such quarter, in an amount (x) consistent with the ALDW GP Board’s existing cash distribution policy and (y) calculated in a manner substantially consistent with ALDW’s past practice (including in respect of reserves for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs), and with a record date and a payment date consistent with past practice with respect to such quarter. |
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| ◦ | Interim Business Restrictions - the fact that there are essentially no restrictions on the conduct of the business of ALDW following the execution of the Merger Agreement and pending the closing of the Merger and that Delek has agreed not to take certain material actions, including paying dividends other than regular quarterly cash dividends or actions that could adversely affect Delek Common Stock. |
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| ◦ | Enforcement - the fact that consents, waivers, amendments or modifications in the Merger Agreement and decisions or determinations by ALDW to (y) terminate the Merger Agreement pursuant to the termination provisions set forth therein or (z) enforce the Merger Agreement, may be granted, taken, made or directed by the ALDW GP Conflicts |
Committee (without the need to obtain any further approval of the ALDW GP Board) and in all cases require the approval of the ALDW GP Conflicts Committee.
The likelihood that Delek would complete the Merger in timely fashion, given, among other things, (a) the strength and stability of Delek’s business, (b) the limited conditions to the closing of the Merger, (c) the absence of any required regulatory approvals and (d) the limited procedural and equityholder approval requirements for completion, including the fact that (i) the approval of ALDW Common Units held by AAI would be sufficient for approval of the transaction under the ALDW Partnership Agreement, (ii) AAI entered into the Support Agreement pursuant to which it irrevocably agreed to deliver a written consent adopting and approving in all respects the Merger Agreement and the transactions contemplated thereby, including the Merger and (iii) the absence of any corresponding vote of Delek Stockholders on the transaction.
The ALDW GP Conflicts Committee’s belief that there are limited viable alternative transactions for ALDW in lieu of a transaction with Delek, in light of the controlling position of Delek through the indirect ownership of ALDW GP and 81.6% of the ALDW Common Units, and Delek’s stated unwillingness to sell its ownership of ALDW GP and its ALDW Common Units.
The ALDW GP Conflicts Committee believes a number of factors relating to procedural safeguards were positive with respect to the fairness of the Merger Consideration to the ALDW Public Unitholders, including:
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| ◦ | The ALDW GP Conflicts Committee consists of two directors who are independent of Delek and its affiliates and satisfy the requirements to serve on the ALDW GP Conflicts Committee under the ALDW Partnership Agreement. |
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| ◦ | Other than (a) the committee fees for serving on the ALDW GP Conflicts Committee received by or payable to them of an aggregate of $78,000 (through November 8, 2017) and which are not contingent upon the consummation of the Merger and (b) customary D&O insurance coverage, none of the ALDW GP Conflicts Committee members has interests in the Merger different from, or in addition to, those of the ALDW Public Unitholders. |
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| ◦ | The ALDW GP Conflicts Committee affirmatively proposed and received an enlarged scope of authority from the ALDW GP Board, including the authority to review, evaluate and negotiate the terms and conditions of the Merger and determine whether the Merger was in the best interest of ALDW Public Unitholders and the right not to commence, or to terminate at any time, discussions with Delek with regards to a potential transaction. |
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| ◦ | The ALDW GP Board resolved not to approve the Merger (or any transaction with Delek) without the prior approval and affirmative recommendation of the ALDW GP Conflicts Committee. |
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| ◦ | The ALDW GP Conflicts Committee was advised by Gardere and Potter Anderson as its legal counsel and Houlihan Lokey as its financial advisor, each of whom the ALDW GP Conflicts Committee believed would provide it with objective advice regarding a potential transaction with Delek. |
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| ◦ | The ALDW GP Conflicts Committee, with the assistance of its legal and financial advisors, engaged in active negotiations with Delek and its representatives regarding the Merger Consideration and the other terms of the Merger Agreement. |
The ALDW GP Conflicts Committee viewed the following factors as generally negative in arriving at its determinations and recommendation with respect to the Merger (the order of which does not necessarily reflect their relative significance):
The Merger will be a taxable transaction to ALDW Public Unitholders generally for U.S. federal income tax purposes, but ALDW Public Unitholders will not receive any cash in the Merger that they can use to satisfy tax obligations resulting from the Merger.
Following the Merger, Delek’s income of the resulting combined entity will be subject to double taxation (at the Delek company and stockholder levels) for U.S federal income tax purposes, while ALDW’s income is currently subject to only one level of taxation (at the ALDW Common Unitholder level).
ALDW Public Unitholders will receive Delek Common Stock that is expected to pay a lower dividend as compared to the historical annualized and expected annualized distribution on the ALDW Common Units for the foreseeable future, and any such dividends will be determined by the Delek Board on an entirely discretionary basis.
Ownership of Delek Common Stock could expose ALDW Public Unitholders to certain incremental business risks that they do not have as owners of ALDW Common Units, including (a) the challenges and uncertainties associated with the integration into
Delek of Alon Energy, (b) Delek’s challenges in implementing a growth program at its Krotz Springs refinery and (c) persisting business challenges at Delek’s El Dorado and Tyler refineries.
The exchange ratio is fixed and, therefore, the implied value of the consideration payable to ALDW Public Unitholders will decrease in the event that, prior to the closing of the Merger, the market price of Delek Common Stock decreases.
The risks that the potential benefits of the transaction, including synergies between Delek and ALDW and anticipated value enhancing growth opportunities that underpin the rationale for the transaction for ALDW Public Unitholders, may not be achieved.
ALDW Public Unitholders will be foregoing the potential benefits of having concentrated exposure to the performance of ALDW’s refinery assets which benefit from recent market conditions (favorable “crack spread” and Midland differential patterns) and the potential for further upside in crack spreads relative to recent levels.
Certain provisions of the Merger Agreement, including:
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| ◦ | No “Fiduciary Out” - The absence of any right for the ALDW GP Board to pursue or enter into any alternative transaction for ALDW that may arise or in the event that an intervening event were to reveal or result in a substantial increase in the value of ALDW. |
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| ◦ | Interim Business Restrictions on Delek - The limited pre-closing restrictions on Delek with regard to its business, despite ALDW Public Unitholders receiving shares of Delek Common Stock in the Merger, the value of which will reflect changes in such business. |
The ALDW GP Conflicts Committee also considered certain procedural safeguards that it believes were and are not present, including the fact that:
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| ◦ | No appraisal rights are available to ALDW Public Unitholders in connection with the Merger or the other transactions contemplated by the Merger Agreement. |
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| ◦ | Although the Merger requires the approval of majority of the ALDW Common Units, there is no condition that a majority of the ALDW Public Unitholders support the Merger through a vote (a so-called “majority of the minority” vote). |
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| ◦ | The ALDW GP Conflicts Committee was not authorized to, and did not, conduct an auction process or other solicitation of interest from third parties for a strategic transaction involving ALDW. |
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| ◦ | While no specific issues came to the attention of the ALDW GP Conflicts Committee with respect to information it was provided, the ALDW GP Conflicts Committee was aware that Delek, as the control party of ALDW GP, controlled the delivery and presentation of information the committee received for purposes of evaluating the Merger and the fairness of the Merger Consideration to the ALDW Public Unitholders. |
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| ◦ | The fact that the ALDW GP’s executive officers and directors may have interests in the transaction that are different from, or in addition to, those of the ALDW Public Unitholders. |
The risk of litigation in connection with the execution of the Merger Agreement and the consummation of the Merger that may result in significant costs and diversion of management focus.
The risk that the Merger may not be completed in a timely manner or that the Merger may not be consummated as a result of the failure to satisfy the conditions contained in the Merger Agreement.
In view of the variety of factors and the quality and amount of information considered, the ALDW GP Conflicts Committee did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall analysis of the Merger. The individual members of the ALDW GP Conflicts Committee may have given different weight to different factors.
The explanation of the reasoning of the ALDW GP Conflicts Committee and certain information above are forward-looking in nature and, therefore, the information should be read in light of the factors discussed in the sections entitled “Cautionary Statement Regarding Forward-Looking Information” and “Risk Factors.”
In reaching its conclusions regarding the Merger, the ALDW GP Board not only considered the process by which the ALDW GP Conflicts Committee made its recommendation but also considered the matters described above and considered by the ALDW GP Conflicts Committee. As in the case of the ALDW GP Conflicts Committee, in view of the variety of factors and the quality and amount of information considered, the ALDW GP Board as a whole did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination but conducted an overall review of the Merger. Individual members of the ALDW GP Board may have given different weight to different factors.
Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties
The approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, by the members of the ALDW GP Conflicts Committee constitutes “Special Approval” under the ALDW Partnership Agreement. Under Section 7.9(c) of the ALDW Partnership Agreement, whenever a potential conflict of interest exists, such as consideration of the Merger Agreement and the transactions contemplated thereby, including the Merger, any resolution or course of action by ALDW GP or its affiliates in respect of such conflict of interest will be permitted and deemed approved by ALDW, all of the partners of ALDW, each person who acquires an interest in an ALDW Partnership Interest (as defined in the ALDW Partnership Agreement) and each other person who is bound by the ALDW Partnership Agreement, and shall not constitute a breach of the ALDW Partnership Agreement, of any agreement contemplated therein, or of any fiduciary or other duty existing at law, in equity or otherwise or obligation of any type whatsoever, if the resolution or course of action is approved by Special Approval, namely approval by a majority of the members of the ALDW GP Conflicts Committee.
Under Section 7.10(b) of the ALDW Partnership Agreement, any action taken or omitted to be taken by ALDW GP in reliance upon the advice or opinion speaks onlyof an investment banker, among others, as to matters reasonably believed to be in such person’s professional or expert competence shall be “conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion.”
Opinion of the Financial Advisor to ALDW GP Conflicts Committee
On November 6, 2017, Houlihan Lokey orally rendered its opinion to the ALDW GP Conflicts Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the ALDW GP Conflicts Committee dated November 6, 2017), as to, as of November 6, 2017, the date andfairness, from a financial point of view, to the time it was rendered and not asholders of ALDW Common Units, other than the Excluded Holders, of the timeExchange Ratio provided for in the transactions may be completedMerger pursuant to the Merger Agreement.
Houlihan Lokey’s opinion was directed to the ALDW GP Conflicts Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, to the holders of ALDW Common Units, other than the Excluded Holders, of the Exchange Ratio provided for in the Merger pursuant to the Merger Agreement and did not address any other aspect or implication of the Merger, any related transaction or any other time. The opinion does not reflect changes that may occuragreement, arrangement or may have occurred after its delivery, which could significantly alter the value, factsunderstanding entered into in connection therewith or elements on which the opinion was based.
The full text of TPH’s written opinion, which describes, among other things, the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken, is attached as Appendix F to this joint proxy statement/prospectus and is incorporated by reference in its entirety.otherwise. The summary of TPH’sHoulihan Lokey’s opinion set forth in this joint proxyconsent statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached as Appendix B to this consent statement/prospectus and describes the opinion. Delek’s stockholders are urged to readprocedures followed, assumptions made, qualifications and limitations on the TPH opinion carefullyreview undertaken and in its entirety. TPH delivered its opinion for the information and assistance of the Delek Board in connection with its evaluation of the Alon Merger. TPH’s opinion does not constitute a recommendation to any stockholder as to how to vote or actother matters considered by Houlihan Lokey in connection with the proposed Alonpreparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this consent statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the ALDW GP Conflicts Committee, the ALDW GP Board, ALDW GP, any security holder of ALDW or any other person as tohow to act or vote with respect to any matter relating to the Merger or any related matter.otherwise.
In connection with rendering its opinion, TPH reviewed, amongHoulihan Lokey made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Among other things:things, Houlihan Lokey:
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| 1. | reviewed a draft, received by Houlihan Lokey on November 6, 2017, of the Merger Agreement; |
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| 2. | reviewed certain publicly availablebusiness and financial information relating to ALDW and Delek that Houlihan Lokey deemed to be relevant; |
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| 3. | reviewed certain information relating to the historical, current and future operations, financial condition and prospects of ALDW and Delek made available to Houlihan Lokey by ALDW and Delek, including (a) financial projections (and adjustments thereto) prepared by or discussed with the management of ALDW and Delek relating to ALDW for the fiscal years ending December 31, 2017 through December 31, 2022 (the “ALDW Projections”), (b) financial projections (and adjustments thereto) prepared by or discussed with the management of ALDW and Delek relating to Delek for the fiscal years ending December 31, 2017 through December 31, 2022 giving effect to potential contributions of assets by Delek or |
certain of its subsidiaries to DKL, an affiliate of Delek, in exchange for cash and limited partnership interests in DKL (the “Potential Drop-Down Transactions”) currently contemplated by Delek (the “Delek Projections Including Potential Drop-Down Transactions”), (c) financial projections (and adjustments thereto) prepared by or discussed with the financial termsmanagement of the draft of the merger agreement dated December 28, 2016;
annual reportsALDW and Delek relating to stockholders and Annual Reports on Form 10-K of Alon for the five years ended December 31, 2015;
annual reports to stockholders and Annual Reports on Form 10-K of Delek for the fivefiscal years endedending December 31, 2015;
2017 through December 31, 2022 that do not give effect to the Potential Drop-Down Transactions (the “Delek Projections Excluding Potential Drop-Down Transactions” and, together with the Delek Projections Including Potential Drop-Down Transactions, the “Delek Projections”), and (d) certain interim reports to stockholdersfinancial and Quarterly Reports on Form 10-Q of Alon, Delek, Delek Logisticsoperating estimates and Alon Partners;
certain other communications from Alon and Delek to their respective stockholders;
certain internal financial information and forecasts (a) for Alon,assumptions prepared by management of Alon and adjusted by management of Delek, and (b) for Delek, prepared byor discussed with the management of Delek (the “Forecasts”);
certain publicly available research analyst reports with respect to the future financial performance of Alon and Delek; and
certain cost savings and operating synergies projected by the management of Delek to result from the transactions (the “Synergies”).
TPH also held discussions with members of the senior managements of AlonALDW and Delek regarding their assessment offor the strategic rationale for,period following the ALDW Projections and the potential benefits of, the transactionsDelek Projections (the “Terminal Period”) including such management’s estimates and the past and current business operations, financial condition and future prospects of their respective entities. In addition, TPH reviewed the reported price and trading activity for Alon common stock and Delek common stock, comparedassumptions regarding certain financial and stock market informationoperating data for Alonthe refineries of ALDW and Delek with similar informationincluding, among other things, benchmark crack spreads, expected capture rates, normalized throughputs, normalized operating expenses and normalized capital expenditures for certain other companies the securities of which are publicly traded, reviewedTerminal Period (collectively, the financial terms of certain recent business combinations in the oil and gas refining, logistics and retail industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as TPH considered appropriate.“Terminal Period Assumptions”);
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| 4. | spoke with certain members of the management of ALDW and Delek and certain of their representatives and advisors regarding the respective businesses, operations, financial condition and prospects of ALDW and Delek, the Merger and related matters; |
For purposes of its opinion, TPH assumed
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| 5. | compared the financial and operating performance of ALDW and Delek with that of other companies with publicly traded equity securities that Houlihan Lokey deemed to be relevant; |
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| 6. | reviewed publicly available information on benchmark crack spreads for the refineries of ALDW and Delek including historical and future estimates of such crack spreads; |
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| 7. | reviewed the current and historical market prices for certain of ALDW’s and Delek’s publicly traded securities; and |
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| 8. | conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate. |
Houlihan Lokey relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, accounting, legal, tax, regulatorydata, material and other information providedfurnished, or otherwise made available, to it, discussed with or reviewed by or for it, or publicly available. The Forecastsavailable, and Synergies reflect certain assumptions regardingdid not assume any responsibility with respect to such data, material and other information. In addition, management of ALDW and Delek advised Houlihan Lokey, and Houlihan Lokey assumed, that (a) the oil and gas industry and future commodity prices and associated crack spreads that are subject to significant uncertainty and volatility and that, if different than assumed, could have a material impact on TPH’s analysis and its opinion. In that regard, TPH assumed with the Delek Board’s consent that the Forecasts and SynergiesALDW Projections were reasonably prepared in good faith on a basisbases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of ALDW, (b) the Delek Projections Including Potential Drop-Down Transactions were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of Delek giving effect to the Potential Drop-Down Transactions, (c) the Delek Projections Excluding Potential Drop-Down Transactions were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of Delek without giving effect to the Potential Drop-Down Transactions, and (d) the Terminal Period Assumptions were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to such financial and operating estimates and assumptions for the refineries of ALDW and Delek for the Terminal Period. Management of ALDW and Delek also advised Houlihan Lokey, and Houlihan Lokey assumed, that (a) the ALDW Projections and the Delek Projections reflected certain cost savings, operating efficiencies, and other synergies expected by such management to result from Delek’s acquisition of Alon Energy, the closing of which was announced on June 30, 2017 and became effective July 1, 2017 (the “Prior Transaction Synergies”), and (b) the ALDW Projections and the Delek Projections were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such managements as to the Prior Transaction Synergies, including, without limitation, the allocation of the Prior Transaction Synergies as between ALDW and Delek. For purposes of its analyses and opinion, at the ALDW GP Conflicts Committee’s direction, Houlihan Lokey assumed that they provided a reasonable basis upon which to evaluate the transactions and that such Forecasts andPrior Transaction Synergies would be realized in the amounts and at the time periods contemplated thereby. TPHindicated by the ALDW Projections and the Delek Projections. Houlihan Lokey expressed no view or opinion with respect to any such Forecast orthe ALDW Projections, the Delek Projections, the Terminal Period Assumptions, the Prior Transaction Synergies or the respective assumptions on which they were basedbased. At the ALDW GP Conflicts Committee’s direction, Houlihan Lokey used and further assumed, among other things, that (i) HoldCo has not had, and will not have at closing, any historical operations or liabilities in any way material to TPH’s analysis and (ii) that each share of HoldCo common stock will have a value equal torelied upon the value of one share of Delek common stock. TPH also assumed withALDW Projections, the Delek Board’s consentProjections Excluding Potential Drop-Down Transactions and the Terminal Period Assumptions for purposes of its analyses and opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that (i)there had been no change in the executed merger agreement (together with any exhibitsbusiness, assets, liabilities, financial condition, results of operations, cash flows or prospects of ALDW or Delek since the respective dates of the most recent financial statements and schedules thereto)other information, financial or otherwise, provided to Houlihan Lokey that would not differ in any respectbe material to its analyses or opinion, fromand that there was no information or any facts that would make any of the draft versioninformation reviewed by Houlihan Lokey incomplete or misleading. With the ALDW GP Conflicts Committee’s consent, Houlihan Lokey also relied upon and assumed that (a) the supply and off-take agreements with J. Aron & Company to which ALDW and Delek are parties would not be terminated and would be extended or renewed indefinitely on terms substantially identical to the current terms thereof,
(b) Delek’s AltAir/Paramount, Bakersfield and Long Beach California facilities (collectively, the “Idle Refineries”) had, and whenever sold would have, a value that exceeds the amount of any contingent liabilities associated with such refineries, (c) Delek would be able to obtain the tax credits for which it examined, referenced above, (ii)had or intended to apply as provided to Houlihan Lokey by the management of ALDW and Delek, and (d) there would be no change in the laws or regulations applicable to the blending of renewable fuels or the purchase of renewable fuel identification numbers that would be material to its analyses or opinion.
Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the merger agreementMerger Agreement and all other related documents and instruments that are referred to therein were true and correct, (iii)(b) each party to the merger agreementMerger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (iv)(c) all conditions to the consummation of the transactionsMerger would be satisfied without amendment or waiver thereof, (v)and (d) the transactions would have the tax consequences described in discussions with, and materials furnished to TPH by, management of Delek and reflected in the Forecasts, (vi) the transactionsMerger would be consummated in a timely manner in accordance with the terms described in the merger agreementMerger Agreement and such other related documents and instruments, without any amendments or modifications thereto and (vii) all governmental, regulatory or other consents or approvals necessary for the consummation of the transactions would be obtained without any adverse effect on Alon, Delek, HoldCo, Delek Merger Sub, Alon Merger Sub, the holders of HoldCo common stock, Delek common stock or Alon common stock or the expected benefits of the transactions in any way meaningful to TPH’s analysis. TPH also assumed that there had been no material changes in the business, operations, financial condition and prospects of Delek, HoldCo or Alon or any of their affiliates since the date of the most recent financial statements and other information provided to it. TPH did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Alon or any of its subsidiaries or Delek or any of its subsidiaries and was not furnished with any such evaluation or appraisal. TPH’s opinion did not address any legal, regulatory, tax or accounting matters.
TPH’s opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to TPH as of, December 29, 2016. TPH assumed no obligation to update, revise or reaffirm its opinion and expressly disclaimed any responsibility to do so based on circumstances, developments or events that occur or of which TPH becomes aware after the date its opinion was rendered.
The estimates contained in TPH’s analysis and the results from any particular analysis are not necessarily indicative of future results, which may be significantly more or less favorable than suggested by any analysis. In addition, analyses relating to the value of businesses or assets neither purport to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, TPH’s analysis and estimates are inherently subject to substantial uncertainty.
In arriving at its opinion, TPH did not attribute any particular weight to any particular analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Several analytical methodologies were employed by TPH in its analyses, and no one single method of analysis should be regarded as critical to the overall conclusion reached by TPH. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. Accordingly, TPH believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all analyses and all factors in their entirety, could create a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by TPH, therefore, is based on the application of TPH’s own experience and judgment to all analyses and factors considered by it, taken as a whole. The issuance of TPH’s opinion was reviewed and approved by its fairness opinion committee.
TPH’s opinion addresses only the fairness from a financial point of view, as of December 29, 2016, to Delek of the consideration to be paid pursuant to the merger agreement. TPH’s opinion did not address the underlying business decision of Delek to engage in the transactions, or the relative merits of the transactions as compared to any other alternative transactions that might be available to Delek. TPH did not express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the transactions, including, without limitation, the fairness of the transactions to, or any consideration to be paid or received in connection therewith by, creditors or other constituencies of Alon, Delek or HoldCo; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Alon or Delek, or any class of such persons, in connection with the transactions, whether relative to the merger consideration pursuant to the merger agreement or otherwise. TPH did not express any opinion as to the price at which the shares of HoldCo common stock, Delek common stock or Alon common stock will trade at any time.
The data and analyses summarized in this joint proxy statement/prospectus are from TPH’s presentation to Delek’s Board delivered on December 29, 2016, which primarily used market closing prices as of December 27, 2016. The analyses summarized below include information presented in tabular format. To fully understand the financial analyses performed, the tables must be considered together with the textual summary of the analyses. For purposes of its analysis, TPH defined EBITDA as net income plus income taxes, interest expense (less interest income), depreciation and amortization.
Summary of TPH’s Analyses
Discounted Cash Flow Analyses
TPH performed separate discounted cash flow analyses of Delek and Alon by calculating the estimated present value of the standalone unlevered, after-tax free cash flows that Delek and Alon were forecasted to generate, in each case as of December 27, 2016. For these analyses, TPH used cash flow estimates for Delek and Alon through 2020, in each case as reflected in the Forecasts. TPH calculated terminal values for Delek and Alon using two different exit valuation methodologies, which are described below.
Projected EBITDA Exit
For its discounted cash flow analyses of Delek and Alon utilizing a projected EBITDA exit, TPH applied unlevered discount rates ranging from 7.0% to 11.0% to each company’s (i) estimated annual free cash flow and (ii) estimated terminal value at the end of 2020 based on estimated 2021 EBITDA as discussed below. The discount rates applicable to Delek and Alon were based, among other things, on TPH’s judgment of the estimated range of the weighted average cost of capital based on an analysis of Delek and Alon and the selected comparable companies (as described below). The terminal values were calculated by applying forward EBITDA multiples ranging from 3.5x to 5.5x. The terminal value forward EBITDA multiples were selected based on TPH’s judgment with reference to EBITDA trading and transaction multiples calculated for the selected comparable companies. TPH applied such ranges of forward EBITDA multiples to Delek’s and Alon’s estimated 2021 EBITDA, as set forth in the Forecasts, to determine their respective terminal values. The ranges of estimated free cash flow and terminal values were then discounted to present values as of December 31, 2016 using the range of discount rates referred to above. The resulting enterprise values were then adjusted by subtracting the book value of debt and non-controlling interests, and adding cash and cash equivalents and, with respect to Alon, net derivative assets, to calculate each entity’s respective common equity price per share. From this analysis, TPH estimated an implied price per share range for Delek common stock of $23.29 to $38.11 and of $10.98 to $21.32 for Alon common stock.
Normalized EBITDA Exit
TPH performed the same calculations described above using, in the terminal value calculation, Delek’s and Alon’s respective average estimated 2017-2021 EBITDA, as set forth in the Forecasts, to determine their respective terminal values. From this analysis, TPH estimated an implied price per share range for Delek common stock of $18.67 to $29.70 and of $9.22 to $18.14 for Alon common stock.
Implied Exchange Ratios
Based upon the implied price per share ranges for Delek and Alon calculated in its discounted cash flow analyses described above, TPH calculated an implied exchange ratio of Alon’s price per share to Delek’s price per share, as shown in the table below. For each comparison, TPH compared (i) the highest price per share for Alon to the lowest price per share for Delek to derive the highest exchange ratio implied by each set of reference ranges, (ii) the median price per share for Alon to the median price per share for Delek to derive the median exchange ratio implied by each set of reference ranges and (iii) the lowest price per share for Alon to the highest price per share for Delek
to derive the lowest exchange ratio implied by each set of reference ranges. The implied exchange ratios resulting from this analysis were:
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| | | |
| Maximum | Median | Minimum |
Projected EBITDA Exit | 0.92x | 0.52x | 0.29x |
Normalized EBITDA Exit | 0.97x | 0.56x | 0.31x |
The implied exchange ratios were compared to the proposed exchange ratio per Alon common share in the transactions of 0.504x.
Trading Comparables Analyses
TPH reviewed and analyzed certain financial information including valuation multiples related to selected comparable publicly-traded refining companies, whose business characteristics TPH believed, based on its experience with companies in the refining industry, to be similar to Delek’s and Alon’s. However, no selected company or group of companies is identical to Delek or Alon. These companies are CVR Energy, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc. and Valero Energy Corporation. The preceding companies are referred to in this discussion as the “selected comparable companies.”
TPH believes that purely quantitative analyses are not, in isolation, determinative in the context of the Alon Merger and that qualitative judgments concerning differences between the financial and operating characteristics and prospects of Delek, Alon and the selected comparable companies that could affect the public trading values of each also are relevant. TPH calculated and compared the ratio of each member of the selected comparable companies’ (i) enterprise value, which is referred to in this discussion as “EV,” calculated as the market capitalization of each company in the selected comparable companies, plus book value of debt, preferred equity and non-controlling interests, less cash and cash equivalents, to its (ii) estimated projected EBITDA. All of these calculations were performed and based on publicly available financial data and closing prices as of December 27, 2016. The EBITDA estimates for each member of the selected comparable companies used by TPH in its analyses were based on publicly available consensus estimates as reported by FactSet Research Systems Inc. The median of EV to EBITDA for the selected comparable companies was 13.6x, 7.8x and 7.1x for 2016E, 2017E and 2018E, respectively, with ranges in EV to EBITDA of 8.3x to 16.9x, 6.1x to 9.6x and 5.4x to 7.9x, respectively, for transactions in the 10th to 90th percentiles.
TPH applied each range of EV to EBITDA multiples for the selected comparable companies discussed above to the respective estimated EBITDA of Delek and Alon based on the Forecasts. The resulting enterprise values were then adjusted by subtracting the book value of debt and non-controlling interests, and, with respect to Alon, its net renewable identification number (“RIN”) deficit, which represents the period end obligation related to Alon’s RINs financing transactions for the purchase of RINs necessary to satisfy regulatory requirements to blend biofuels into refined products, and with respect to Delek, certain transaction taxes expected to be paid in Q1 2017, and
adding cash and cash equivalents to calculate each entity’s respective common equity value. From this analysis, TPH estimated an implied price per share range for Delek and Alon common stock.
Implied Exchange Ratios
Based upon the implied price per share ranges for Delek and Alon calculated in its trading comparables analyses described above, TPH calculated an implied exchange ratio of Alon’s price per share to Delek’s price per share, as shown in the table below. For each comparison, TPH compared (i) the highest price per share for Alon to the lowest price per share for Delek to derive the highest exchange ratio implied by each set of reference ranges, (ii) the median price per share for Alon to the median price per share for Delek to derive the median exchange ratio implied by each set of reference ranges and (iii) the lowest price per share for Alon to the highest price per share for Delek to derive the lowest exchange ratio implied by each set of reference ranges. The implied exchange ratios resulting from this analysis were:
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| Maximum | Median | Minimum |
EV/2016E EBITDA | 0.99x | 0.41x | 0.11x |
EV/2017E EBITDA | 0.92x | 0.53x | 0.29x |
EV/2018E EBITDA | 1.20x | 0.78x | 0.48x |
The implied exchange ratios were compared to the proposed exchange ratio per Alon common share in the transactions of 0.504x.
Corporate Transactions Analyses
Using publicly available information and third-party research, TPH reviewed certain transactions in the oil and gas refining industry located in North America. TPH conducted a precedent transactions analysis to assess how similar transactions were valued. No selected transactions were identical to the proposed transactions. Accordingly, TPH believes that purely quantitative analyses are not, in isolation, determinative in the context of the transactions and that qualitative judgments concerning differences between the financial and operating characteristics and prospects of Delek and Alon and the selected precedent transactions that could affect the values are also relevant. The following list sets forth the selected transactions (the “selected comparable transactions”) reviewed:
Tesoro Corporation/Western Refining, Inc. (2016)
Western Refining, Inc./Northern Tier Energy LP (2015)
Western Refining, Inc./Northern Tier Energy LP (2013)
Icahn Enterprises L.P./CVR Energy, Inc. (2012)
Holly Corporation/Frontier Oil Corporation (2011)
Western Refining, Inc./Giant Industries, Inc. (2006)
Alon USA Energy, Inc./Paramount Petroleum Corporation (2006)
Marathon Oil Corporation/Ashland Inc. (2005)
Valero Energy Corporation/Premcor Inc. (2005)
Frontier Oil Corporation/Holly Corporation (2003)
Valero Energy Corporation/Ultramar Diamond Shamrock (2001)
Phillips Petroleum Corporation/Tosco Corporation (2001)
TPH determined that the median ratio of transaction value to estimated EBITDA for the first fiscal year (“FY1”) period for the selected comparable transactions was 6.1x, with a range in transaction value to estimated EBITDA for the FY1 period of 3.4x to 8.5x for transactions in the 10th to 90th percentiles. From this analysis, TPH estimated an implied price per share range for Delek and Alon common stock. Based upon these implied price per share ranges for Delek and Alon, TPH calculated an implied exchange ratio of Alon’s price per share to Delek’s price per share. TPH compared (i) the highest price per share for Alon to the lowest price per share for Delek to derive the highest exchange ratio implied by the reference range, (ii) the median price per share for Alon to the median price per share for Delek to derive the median exchange ratio implied by the reference range and (iii) the lowest price per share for Alon to the highest price per share for Delek to derive the lowest exchange ratio implied by the reference range. The implied exchange ratios resulting from this analysis were:
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| Maximum | Median | Minimum |
Corporate Transactions Analysis | 1.47x | 0.46x | 0.08x |
The implied exchange ratios were compared to the proposed exchange ratio per Alon common share in the transactions of 0.504x.
Sum-of-the-Parts Analyses
Delek
TPH analyzed Delek as the sum of the separate implied values (adjusted for corporate expenses) of (i) its Refining Segment (“Refining”), the segment of Delek’s business that owns and operates Delek’s petroleum refineries and includes Delek’s renewable production facilities; (ii) its Logistics Segment (“Logistics”), the segment of Delek’s business that consists of Delek’s interest in Delek Logistics L.P., a publicly traded master limited partnership, its general partner and its subsidiaries; and (iii) its equity ownership stake in Alon (“Alon Equity”).
Refining
TPH quantified the implied value of Refining by applying selected EBITDA multiples to the aggregate estimated 2017 EBITDA (as reflected in the Forecasts) of Delek’s refinery located in Tyler, Texas, its refinery located in El Dorado, Arkansas and its combined renewables production business. The EBITDA multiples TPH applied ranged from 5.0x to 7.0x and were selected based on TPH’s judgment with reference to EBITDA trading and transaction multiples calculated for comparable refining companies. From this analysis, TPH estimated an implied value for Refining of $972 million to $1,361 million.
Logistics
The implied value of Logistics was calculated as the market value of Delek’s ownership interest in Delek Logistics L.P., based on the common units’ market price as of December 27, 2016, plus the implied value of the general partner interest and related incentive distribution rights. TPH quantified the value of the general partner interest and incentive distribution rights by applying selected general partner cash flow multiples to Delek management’s estimate of the 2017 payout in respect of such interests. The general partner cash flow multiples TPH applied ranged from 17.5x to 22.5x and were selected based on TPH’s judgment with reference to cash flow multiples calculated for comparable general partners. From this analysis, TPH estimated an implied value for Logistics of $687 million to $762 million.
Alon Equity
The implied value of Alon Equity was calculated as the market value of Delek’s ownership interest in Alon, based on the shares’ market price as of December 27, 2016. From this analysis, TPH calculated an implied value of $397 million.
Adjustments
TPH quantified the corporate expense adjustments to estimated EBITDA by applying the Refining EBITDA multiples to the estimated 2017 corporate adjustments, based on the Forecasts. From this analysis, TPH estimated implied corporate expense adjustments of $254 million to $355 million.
TPH then calculated a range of implied net asset values of Delek by subtracting net debt from the aggregate implied values of Refining, Logistics, and Alon Equity, adjusted for corporate expenses, as described above. The net debt adjustment TPH applied included adjustments related to the discounted value of Delek’s net derivative liabilities, certain transaction taxes expected to be paid in Q1 2017, and Delek’s cash and cash equivalents. TPH then calculated a range of implied prices per share of Delek common stock by dividing the resulting net asset values by the fully diluted number of shares of Delek common stock provided by Delek management. This calculation implied a price per share range for Delek common stock of $30.36 to $36.10.
Alon
TPH analyzed Alon as the sum of the separate implied values (adjusted for corporate expenses) of (i) its Refining Segment (“Refining”), the segment of Alon’s business that owns and
operates Alon’s petroleum refineries; (ii) its Asphalt Segment (“Asphalt”), the segment of Alon’s business that consists of Alon Asphalt Company; (iii) its Retail/Branded Marketing Segment (“Retail”), the segment of Alon’s business that consists of Alon Brands, Inc.; (iv) its west coast operations and remaining selling general and administrative expenses (“West Coast and Corporate”).
Refining
TPH quantified the implied value of Refining by applying selected EBITDA multiples to the aggregate estimated 2017 EBITDA (as reflected in the Forecasts) of Alon’s refinery located in Big Spring, Texas, and its refinery located in Krotz Springs, Louisiana. The EBITDA multiples TPH applied ranged from 5.0x to 7.0x and were selected based on TPH’s judgment with reference to EBITDA trading and transaction multiples calculated for comparable refining companies. From this analysis, TPH estimated an implied value for Refining of $904 million to $1,266 million.
Asphalt
TPH calculated the implied value of Asphalt by applying the Refining EBITDA multiples to the estimated 2017 EBITDA of Alon Asphalt Company, based on the Forecasts. From this analysis, TPH estimated an implied value for Asphalt of $125 million to $175 million.
Retail
TPH quantified the implied value of Retail by applying selected EBITDA multiples to the aggregate estimated 2017 EBITDA (as reflected in the Forecasts) of Alon Brands, Inc. The EBITDA multiples TPH applied ranged from 8.0x to 10.0x and were selected based on TPH’s judgment with reference to EBITDA multiples calculated for comparable retail companies. From this analysis, TPH estimated an implied value for Retail of $243 million to $304 million.
WestCoast andCorporate
TPH quantified the implied value of West Coast and Corporate by applying the Refining EBITDA multiples to the estimated 2017 EBITDA (as reflected in the Forecasts) attributable to the combined performance of certain of Alon’s west coast operations and by using Delek management’s estimated sale value for other west coast operations that were expected to be divested, less Alon’s 2017 corporate expense adjustments to estimated EBITDA not included in the other segments. From this analysis, TPH estimated an implied asset value for Other Adjustments of ($62) million to ($107) million.
TPH then calculated a range of implied net asset values of Alon by subtracting (i) net debt and (ii) the market value of minority interest from the aggregate implied values of Refining, Asphalt, Retail and West Coast and Corporate, adjusted for corporate expenses, as described above, and adding the value of Alon’s equity method investments. The net debt adjustment TPH applied included adjustments related to the discounted value of Alon’s net RIN deficit, net derivative assets, based on Alon’s September 30, 2016 balance sheet, and Alon’s cash and cash equivalents. Alon’s equity method investments include asphalt terminals located in Fernley, Nevada and Brownswood, Texas, both in which Alon holds a 50% interest. TPH then calculated a range of implied prices per
share of Alon common stock by dividing the resulting net asset values by the fully diluted number of shares of Alon common stock provided by Delek management. This calculation implied a price per share range for Alon common stock of $9.63 to $15.58.
Implied Exchange Ratios
Based upon the “sum-of-the-parts” implied price per share ranges for Delek and Alon common stock, TPH calculated an implied exchange ratio of Alon’s price per share to Delek’s price per share. TPH compared (i) the highest price per share for Alon to the lowest price per share for Delek to derive the highest exchange ratio implied by the reference range, (ii) the median price per share for Alon to the median price per share for Delek to derive the median exchange ratio implied by the reference range and (iii) the lowest price per share for Alon to the highest price per share for Delek to derive the lowest exchange ratio implied by the reference range. The implied exchange ratios resulting from this analysis were:
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| | | |
| Maximum | Median | Minimum |
Sum-of-the-Parts | 0.51x | 0.38x | 0.27x |
The implied exchange ratios were compared to the proposed exchange ratio per Alon common share in the transactions of 0.504x.
Relative Contribution
TPH calculated the implied ownership of the Alon unaffiliated stockholders in the surviving entity on an illustrative pro forma basis based on the relative contributions of:
historical EBITDA for the years ended December 31, 2014 and 2015;
estimated EBITDA for the year ending December 31, 2016 per Wall Street consensus;
estimated EBITDA for each of the three years ending December 31, 2017, 2018 and 2019 based on the Forecasts;
refining capacity;
complexity-adjusted refining capacity;
historical crude throughput for the years ended December 31, 2014 and 2015;
estimate crude throughput for the years ending December 31, 2017, 2018 and 2019 based on the Forecasts; and
estimated cash flow per share for each of the three years ending December 31, 2016, 2017 and 2018, based on Wall Street consensus.
This calculation indicated an implied range of exchange ratios of Alon’s price per share to Delek’s price per share of approximately 0.28x to 1.63x.
EBITDA Multiple-Implied Future Equity Value
TPH calculated the implied values of the future equity value of Delek for the fiscal years 2017 to 2020 on a standalone basis and pro forma for the acquisition of Alon, in each case based on the Forecasts and the Synergies. This calculation was prepared for illustrative purposes only and TPH did not express any opinion as to the actual price at which the shares of Delek common stock will trade at any time. For this calculation, TPH first derived the theoretical enterprise value of Delek for the fiscal years 2017 to 2020 by applying an FY1 forward EBITDA multiple of 4.5x to the standalone and pro forma EBITDA projections for Delek contained in the Forecasts (as adjusted to reflect the Synergies). TPH then calculated the implied equity value by, among other things, deducting the forecasted net debt for each applicable year from the theoretical enterprise value, and dividing by the forecasted share count. The foregoing calculation resulted in an implied pro forma equity value per share of Delek common stock of $27.26 for 2017, $34.18 for 2018, $37.73 for 2019 and $49.22 for 2020, and an implied standalone equity value per share for shares of Delek common stock of $21.04 for 2017, $25.81 for 2018, $28.75 for 2019 and $40.05 for 2020.
Pro Forma Discounted Cash Flow
TPH performed a discounted cash flow calculation of Delek on a pro forma basis by calculating the estimated present value of the pro forma unlevered, after-tax free cash flows that Delek was forecasted to generate following the Alon Merger, in each case as of December 27, 2016. For this analysis, TPH used pro forma cash flow estimates for Delek through 2020, in each case as reflected in the Forecasts (as adjusted to reflect the Synergies). TPH used the same discount rates and exit valuation methodologies used in the discounted cash flow analysis of Delek on a standalone basis, described above. The projected EBITDA exit methodology yielded an implied price per share range for Delek common stock of $30.89 to $53.17, and the normalized EBITDA exit methodology yielded an implied price per share range for Delek common stock of $25.36 to $43.10.
General
TPH and its affiliates, including Perella Weinberg Partners, as part of their investment banking business, are regularly engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes.
TPH and its affiliates also engage in securities trading and brokerage, private equity activities, investment management activities, equity research and other financial services, and in the ordinary course of these activities, TPH and its affiliates may from time to time acquire, hold or sell, for their own accounts and for the accounts of their customers, (i) equity, debt and other securities (including derivative securities) and financial instruments (including bank loans and other obligations) of Delek, any of the other parties to the transactions and any of their respective affiliates
and (ii) any currency or commodity that may be material to the parties or otherwise involved in the transactions and the other matters contemplated by the Agreement.
In addition, TPH and its affiliates and certain of its and their employees, including members of the team performing services in connection with the transactions, as well as certain private equity funds and investment management funds associated or affiliated with TPH in which they may have financial interests, may from time to time acquire, hold or make direct or indirect investments in or otherwise finance a wide variety of companies, including the parties to the transactions, other potential purchasers or transaction participants or their respective affiliates.
TPH is an internationally recognized investment banking firm that is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. The Delek Board selected TPH to act as its financial advisor in connection with the transactions on the basis of TPH’s experience in transactions similar to the transactions described in the merger agreement, its reputation in the investment community and its familiarity with Delek and its business.
TPH acted as financial advisor to Delek in connection with the transactions. TPH expects to receive fees for its services, the principal portion of which is contingent upon the consummation of the transactions, and Delek has agreed to reimburse its expenses and indemnify TPH and certain related parties against certain liabilities arising out of its engagement. TPH has previously and may in the future provide investment banking or other financial services to Alon or any of the other parties to the transactions or their respective stockholders, affiliates or portfolio companies in the future. In connection with such investment bankingor other financial services, TPH may receive compensation.
The description set forth above constitutes a summary of the analyses employed and factors considered by TPH in rendering its opinion to the Delek Board. TPH believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses and factors, could create an incomplete view of the process underlying its opinion. The preparation of a fairness opinion is a complex, analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis or summary description.
No company or transaction used in the analyses of comparable transactions summarized above is identical or directly comparable to Delek, Alon or the transactions. Accordingly, these analyses must take into account differences in the financial and operating characteristics of the selected publicly traded companies and differences in the structure and timing of the selected transactions and other factors that would affect the public trading value and acquisition value of the companies considered.
Pursuant to the terms of the Delek Board’s engagement of TPH, TPH became entitled to receive (i) a cash transaction fee of $2.0 million contingent upon closing of the transactions contemplated in the merger agreement and (ii) additional fees of $0.6 million not contingent upon
closing of the transactions contemplated in the merger agreement. At Delek’s discretion, TPH may also receive an additional fee to be paid only if Delek, in its sole discretion, determines that the quality and amount of advice and services justified such additional compensation. In addition, Delek has agreed to reimburse TPH for its reasonable out-of-pocket expenses incurred in connection with the engagement, including fees and disbursements of its legal counsel. Delek also agreed to indemnify TPH, its affiliates and their respective officers, directors, partners, agents, employees and controlling persons for certain liabilities related to or arising out of its rendering of services under its engagement, including liabilities under federal securities laws, or to contribute to payments TPH may be required to make in respect of these liabilities.
Alon’s Reasons for the Transaction; Recommendations of the Special Committee and the Alon Board
On January 2, 2017, the Special Committee, consisting of directors of Alon who are independent from Delek, and with the advice and assistance of its financial and legal advisors, unanimously determined that the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders and unanimously approved, and recommended that the Alon Board approve, the merger agreement, the voting agreement to which Alon is a party and the transactions contemplated thereby. On the unanimous recommendation of the Special Committee, the Alon Board, with Messrs. Ezra Uzi Yemin, Assaf Ginzburg, Frederec Green, Mark D. Smith and Avigal Soreq, each an executive officer of Delek, recusing themselves, determined and declared that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders; approved the merger agreement, the voting agreement to which Alon is a party, the Alon Merger and the other transactions contemplated by the merger agreement and the voting agreements to which Alon is a party; directed that the merger agreement and the Alon Merger be submitted to Alon’s stockholders for approval; and resolved to recommend that Alon stockholders vote “FOR” the adoption of the merger agreement and the approval of the transactions contemplated thereby, including the Alon Merger, and “FOR” each of the other proposals described in this joint proxy statement/prospectus.
Accordingly, the Alon Board of directors recommends Alon stockholders vote “FOR” the Alon merger proposal, “FOR” the Alon non-binding compensation advisory proposal and “FOR” the Alon adjournment proposal.
In the course of reaching its determination and making its recommendations, as described in the section entitled “The Mergers—Background of the Mergers” beginning on page 129, the Special Committee held multiple meetings, consulted with Alon’s senior management and its financial and legal advisors and considered a number of factors. Making its determination and making its recommendation, the Alon Board considered the Special Committee’s unanimous recommendation and the fact that the Special Committee consists entirely of directors who are not affiliated with Delek.
The various factors the Special Committee considered and weighed positively in favor of the merger agreement, the Alon Merger and the other transactions contemplated by the merger agreement included, among others and not necessarily in order of relative importance:
the Special Committee’s review and understanding, based on its discussions with Alon’s management, of Alon’s business, operations, prospects and objectives, including capital needs and other risk factors set forth in Alon’s annual report on Form 10-K for the fiscal year ending December 31, 2015, as supplemented by subsequent filings made pursuant to the Exchange Act, including prospects and risks if Alon were to remain a standalone company;
information and discussions with Alon’s management regarding Delek’s business, operations and prospects;
the expectation, based on information and assumptions provided by Delek after discussion with Alon management regarding the apparent reasonable basis for such assumptions, of substantial expected synergies associated with the Mergers, and the fact that the Disinterested Stockholders would participate in the value creation resulting from such synergies through their ownership of New Delek common stock as a result of the Mergers;
the Special Committee’s belief that the combined companies would create the ability to leverage a larger system from an operational and commercial standpoint, with a more diverse set of business platforms;
the Special Committee’s belief that the combined companies would have a stronger balance sheet and enhanced liquidity as compared to Alon on a standalone basis;
the potential for unlocking additional value from Alon’s logistical assets through future potential drop-down transactions with Delek Logistics;
the Special Committee’s belief that the completion of the Mergers would resolve the uncertainty that has impacted the stability of Alon’s employee base and otherwise impacted Alon;
the Special Committee’s view of the benefits of the Mergers as compared to possible alternatives, including remaining as a standalone company, formation of a logistics master limited partnership, the drop down of the Krotz Springs refinery into Alon Partners, a retail separation, share buybacks or dividend increases;
the Special Committee’s belief that it would not likely be feasible to consummate an alternative business combination transaction with a third party due to Delek’s indications that it would be unwilling, as a stockholder, to vote in favor of any such transaction;
the fact that the exchange ratio represents a fixed number of shares of New Delek common stock, which permits the Disinterested Stockholders to benefit from any increase in the trading price of Delek common stock between announcement and closing of the Mergers;
the fact that the final exchange ratio, which is higher than the implied exchange ratio in Delek’s acquisition of its shares in Alon from Alon Israel, was achieved by the Special Committee after extensive arm’s-length negotiations, and the Special Committee’s belief that the final exchange ratio is the best exchange ratio that could be achieved for the Disinterested Stockholders under the circumstances;
the Special Committee’s expectation that, for U.S. federal income tax purposes, the Delek Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and the Mergers taken together will qualify as an exchange within the meaning of Section 351 of the Internal Revenue Code; and
the oral opinion of J.P. Morgan delivered to the Special Committee, which was confirmed by delivery of a written opinion dated January 2, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the exchange ratio in the proposed Mergers, was fair, from a financial point of view, to holders of Alon common stock, as more fully described below in the section “-Opinion of Financial Advisor to the Alon Special Committee” beginning on page 134 of this joint proxy statement/prospectus. The full text of the written opinion of J.P. Morgan, dated January 2, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in rendering the opinion, is attached as Annex F to this joint proxy statement/prospectus.
The Special Committee also considered various aspects of the merger agreement including the following, which are not necessarily in order of relative importance:
the fact that the merger agreement cannot be amended, or its provisions waived, without the approval of the Special Committee;
the obligation of Delek to vote its Alon shares in favor of the Alon Merger pursuant to Delek’s voting agreement with Alon;
the fact that the merger agreement permits the Special Committee, under certain circumstances, to furnish information to and conduct negotiations with third parties in connection with any unsolicited proposals by such third parties for a business combination transaction;
the Special Committee’s ability to withdraw or change its recommendation in favor of the merger agreement or, subject to certain conditions and the payment of a termination fee, to terminate the merger agreement to accept a superior proposal;
the fact that there are limited circumstances in which Delek can terminate the merger agreement or the Delek Board can change its recommendation that its stockholders approve the New Delek share issuance proposal, as further described under “The Merger Agreement-Termination” and “-Non-Solicitation of Acquisition Proposals;
Changes of Recommendation,” and if the merger agreement is terminated by Alon as a result of a change in recommendation by the Delek Board or by Delek in order to accept a superior proposal, then Delek has must pay Alon a fee of $20 million;
the fact that the merger agreement provides Alon with the right to specifically enforce Delek’s obligations under the merger agreement; and
the nature of the closing conditions included in the merger agreement, as well as the likelihood of satisfaction of such conditions.
The Special Committee also considered the following factors relating to the procedural safeguards that it believed would ensure the fairness of the Mergers and permit the Special Committee to effectively represent the interests of the Disinterested Stockholders:
the fact that the Special Committee consists entirely of directors who are unaffiliated with Delek and have no financial interest in the Mergers that is different from that of Alon and the Disinterested Stockholders other than as discussed below under “The Mergers—Interests of Alon’s Directors and Executive Officers in the Mergers” beginning on page 154;
the fact that the merger agreement and the Mergers must be approved by the affirmative vote of (i) the holders of at least a majority of the outstanding shares of Alon common stock and (ii) the holders of at least a majority of the outstanding shares of Alon common stock held by Disinterested Stockholders;
the fact that the merger agreement cannot be amended, or its provisions waived, without the approval of the Special Committee;
the fact that, as part of its review of Alon’s alternatives, the Special Committee considered, and obtained advice of its financial and legal advisors with respect to, potential alternatives to the Mergers;
the fact that a press release had been issued indicating that the Special Committee was reviewing strategic alternatives but no indications of interest from third parties for acquisitions involving the entire company or Alon Partners had been received;
the authority granted to the Special Committee by the Alon Board to negotiate the terms of any agreement with Delek or to determine not to pursue any agreement with Delek;
the fact that the Special Committee held more than 20 meetings to evaluate alternatives for Alon; and
the fact that the Special Committee was aware that it had no obligation to recommend the approval of the Mergers or any other transactions.
In the course of reaching its determinations and making its recommendations, the Special Committee also considered a variety of risks and other potentially negative factors, including the following:
the fact that, while the Mergers are expected to be completed, there can be no assurance that all closing conditions will be satisfied;
the one-time right of Delek to terminate the merger agreement if certain third-party consents are not obtained within 90 days following the date of the merger agreement;
the potential for the diversion of management and employee attention from Alon’s operations, and the potential for employee attrition, during the period prior to the closing of the Mergers;
the fact that the Special Committee cannot be certain of the market value of the consideration to be received by the Disinterested Stockholders due to the fixed nature of the exchange ratio;
the risks inherent in owning shares of New Delek common stock, including the risk factors set forth in Delek’s quarterly report on Form 10-Q for the quarterly period ended September 30, 2016;
the risk that the anticipated transaction synergies will not be realized or will take longer than expected to materialize;
the restrictions contained in the merger agreement on the conduct of Alon’s business prior to the closing of the Mergers coupled with the fact that the period of time needed to consummate the Mergers cannot be known with certainty, which could delay or prevent Alon from pursuing business opportunities that arise prior to the closing of the Mergers;
the prohibition set forth in the merger agreement on the ability of the Special Committee to solicit offers from third parties for alternative business combination transactions;
the fact that the merger agreement permits the Delek Board in certain circumstances to modify or withdraw its recommendation that Delek stockholders vote in favor of the New Delek Share Issuance Proposal or to terminate the merger agreement to pursue a superior proposal upon payment of a $20 million fee and the risk that such fee may not be sufficient to fully compensate Alon for its losses in such circumstances;
the transaction costs to be incurred in connection with the Mergers; and
the possibility that Alon could be required to pay a $15 million fee if the merger agreement is terminated under certain circumstances, including termination by Delek following a withdrawal of, or adverse change in, the recommendation by the Special
Committee that the Alon stockholders approve the Alon merger proposal or the termination of the merger agreement by Alon in order to pursue a superior transaction with a third party.
The Special Committee members considered all of these factors as a whole and, on balance, unanimously concluded that they supported a determination that the merger agreement and the transactions contemplated thereby, including the Mergers, are advisable, fair to and in the best interests of Alon and the Disinterested Stockholders.
The foregoing discussion of factors considered is not exhaustive. In view of the wide variety of factors considered by the Special Committee in connection with the evaluation of the Mergers and the complexity of these matters, the Special Committee did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors described above and any other factors, individual members of the Special Committee may have viewed factors differently or given different weight or merit to different factors. In considering the recommendation of the Alon Board to approve and adopt the merger agreement, Alon stockholders should be aware that Alon’s executive officers and directors may have interests in the Mergers that are different from, or in addition to, those of Alon stockholders generally. The Alon Board and the Special Committee were aware of these interests during their respective deliberations on the merits of the Mergers and in deciding to recommend that Alon stockholders vote “FOR” the Alon merger proposal. See the section entitled “The Mergers—Interests of Alon Directors and Officers in the Mergers” beginning on page 154.
Opinion of Financial Advisor to the Alon Special Committee
Pursuant to an engagement letter dated October 29, 2015 (the “JPM Engagement Letter”), Alon retained J.P. Morgan to act as financial advisor to the Special Committee in connection with the proposed Transactions.
At the meeting of the Special Committee on January 2, 2017, J.P. Morgan rendered its oral opinion to the Special Committee that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the exchange ratio in the proposed Mergers, was fair, from a financial point of view, to holders of Alon common stock. J.P. Morgan confirmed its January 2, 2017 oral opinion by delivering its written opinion to the Special Committee, dated January 2, 2017.
The full text of the written opinion of J.P. Morgan, dated January 2, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan, is attached as Annex F to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Alon’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Special Committee (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Mergers, was directed only to the exchange ratio in the proposed Mergers and did not address any other aspect of the proposed Mergers. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any class of securities, creditors or
other constituencies of Alon or as to the underlying decision by Alon to engage in the proposed Mergers. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified n its entirety by reference to the full text of such opinion. The opinion does not constitute a recommendation to any stockholder of Alon as to how such stockholder should vote with respect to the proposed Mergers or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:
reviewed the merger agreement;
reviewed certain publicly available business and financial information concerning Alon and Delek and the industries in which they operate;
compared the financial and operating performance of Alon and Delek with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Alon common stock and Delek common stock and certain publicly traded securities of such other companies;
reviewed certain internal financial analyses and forecasts prepared by or at the direction of the managements of Alon and Delek relating to their respective businesses, which were approved and provided to J.P. Morgan by the Special Committee, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the proposed Mergers (the “Synergies”); and
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of this opinion.
In addition, J.P. Morgan held discussions with certain members of the management of Alon and Delek with respect to certain aspects of the proposed Mergers, and the past and current business operations of Alon and Delek, the financial condition and future prospects and operations of Alon and Delek, the effects of the proposed Mergers on the financial condition and future prospects of Alon and Delek and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morganthereto. Houlihan Lokey relied upon and assumed, without independent verification, that (i) the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Alon and Delek or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Alon or Delek under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Alon and Delek to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the proposed Mergers and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and willMerger would be consummated as described
in the merger agreement. J.P. Morgan also assumeda manner that the representations and warranties made by Alon, Delek, HoldCo, Delek Merger Sub and Alon Merger Sub in the merger agreement and the related agreements were and will be true and correctcomplies in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expertwith all applicable federal and relied on the assessments made by advisors to Alon with respect to such issues. J.P. Morgan further assumed thatstate statutes, rules and regulations, and (ii) all material governmental, regulatory, orand other consents and approvals necessary for the consummation of the proposed Mergers willMerger would be obtained withoutand that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any adverse effect on Alonassets of ALDW or Delek, or otherwise have an effect on the contemplatedMerger, ALDW or Delek or any expected benefits of the proposed Mergers.
The projections for Alon providedMerger that would be material to J.P. Morgan byits analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the Special Committee (the “Alon Projections”) and the projections for Alon, excluding growth projects, provided to J.P. Morgan by the Special Committee (the “Alon Projections Excluding Growth Projects”) were prepared by Alon management and approved by the Special Committee. The projections for Delek provided to J.P. Morgan by the Special Committee (the “Delek Projections”) were prepared by Delek management and approved by the Special Committee. Neither Alon nor Delek publicly discloses internal management projectionsfinal form of the type provided to J.P. Morgan byMerger Agreement would not differ in any respect from the Special Committeedraft of the Merger Agreement identified above.
Furthermore, in connection with J.P. Morgan’sits opinion, Houlihan Lokey was not requested to, and did not, make any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of ALDW, Delek or any other party, nor was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey did not undertake any independent analysis of the proposed Mergers, and such projections were not prepared withany potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which ALDW or Delek was or may have been a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain andparty or was or may be beyond the controlhave been subject, or of management,any governmental investigation of any possible unasserted claims or other contingent liabilities to which ALDW or Delek was or may have been a party or was or may have been subject, including, without limitation, factors relatedlimitations, any contingent liabilities that could be associated with the Idle Refineries.
Houlihan Lokey was not requested to, general economic and competitive conditions and prevailingdid not, initiate any discussions or negotiations with, or solicit any indications of interest rates. Accordingly, actual results could vary significantly from, those set forth in such projections. For more information regarding the use of projections, please referthird parties with respect to the section entitled “-Certain Delek and Alon Unaudited Prospective Financial Information” beginning on page 145Merger, the securities, assets, businesses or operations of this joint proxy statement/prospectus.
J.P. Morgan’sALDW or any other party, or any alternatives to the Merger. Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to J.P. MorganHoulihan Lokey as of, the date of suchits opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion,In addition, as the ALDW GP Conflicts Committee was aware, future commodity prices and that J.P. Morgan doesother factors associated with the oil and gas industry, including crack spreads, are subject to significant uncertainty and volatility and, if different than assumed, could have a material impact on Houlihan Lokey’s analyses and opinion. Houlihan Lokey did not have anyundertake, and is under no obligation, to update, revise, reaffirm or reaffirm such opinion. J.P. Morgan’swithdraw its opinion, is limitedor otherwise comment on or consider events occurring or coming to its attention after the date of its opinion, including potential changes in U.S. trade, environmental and tax laws, regulations and government policies and the enforcement thereof as has been or may be proposed by parts of the federal government. Houlihan Lokey did not express any opinion as to what the value of Delek Common Stock actually would be when issued pursuant to the Merger or the price or range of prices at which ALDW Common Units or Delek Common Stock might be purchased or sold, or otherwise be transferable, at any time. Houlihan Lokey assumed that the shares of Delek Common Stock to be issued in the Merger to the holders of ALDW Common Units would be listed on the New York Stock Exchange.
Houlihan Lokey’s opinion was furnished for the use of the ALDW GP Conflicts Committee (in its capacity as such) in connection with its evaluation of the Merger and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Under the terms of Houlihan Lokey’s engagement by the ALDW GP Conflicts Committee, ALDW agreed that Houlihan Lokey was acting as an independent contractor and that Houlihan Lokey was not acting as an agent or fiduciary of the ALDW GP Conflicts Committee, ALDW, ALDW GP, the security holders or creditors of ALDW or any other person or entity in connection with its engagement. Houlihan Lokey’s opinion was not intended to be, and did not constitute, a recommendation to the ALDW GP Conflicts Committee, the ALDW GP Board, ALDW GP, any security holder of ALDW or any other party as to how to act or vote with respect to any matter relating to the Merger or otherwise.
Houlihan Lokey’s opinion only addressed the fairness, from a financial point of view, to the holders of Alon common stockALDW Common Units other than the Excluded Holders of the exchange ratioExchange Ratio provided for in the proposed Mergers,Merger pursuant to the Merger Agreement and J.P. Morgan has expressed nodid not address any other aspect or implication of the Merger, any related transaction or any agreement, arrangement or understanding entered into in connection therewith or otherwise. Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the ALDW GP Conflicts Committee, the ALDW GP Board, ALDW GP, ALDW, Delek, their respective security holders or any other party to proceed with or effect the
Merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Merger or otherwise (other than the Exchange Ratio to the extent expressly specified in its opinion), (iii) the fairness of any considerationportion or aspect of the Merger to the holders of any other class of securities, creditors or other constituencies of AlonALDW, Delek or any other party, except if and only to the underlying decision by Alon to engageextent expressly set forth in the proposed Mergers. Furthermore, J.P. Morgan expressed nolast sentence of its opinion, with respect(iv) the relative merits of the Merger as compared to any alternative business strategies or transactions that may be available to ALDW, Delek or any other party, (v) the fairness of any portion or aspect of the Merger to any one class or group of ALDW’s, Delek’s or any other party’s security holders or other constituents vis-à-vis any other class or group of ALDW’s, Delek’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not ALDW, Delek, their respective security holders or any other party was receiving or paying reasonably equivalent value in the Merger, (vii) the solvency, creditworthiness or fair value of ALDW, Delek or any other participant in the Merger, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or natureany other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the proposed Mergers, orMerger, any class of such persons or any other party, relative to the exchange ratio applicableExchange Ratio or otherwise. Furthermore, Houlihan Lokey did not express any opinion, counsel or interpretation regarding matters that require legal, regulatory, environmental, accounting, insurance, tax or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the ALDW GP Conflicts Committee, on the assessments by the ALDW GP Conflicts Committee, the ALDW GP Board, ALDW GP, ALDW, Delek and their respective advisors, as to all legal, regulatory, accounting, insurance and tax matters with respect to ALDW, Delek and the Merger or otherwise.
In preparing its opinion to the holdersALDW GP Conflicts Committee, Houlihan Lokey performed a variety of Alon common stock inanalyses, including those described below. The summary of Houlihan Lokey’s analyses is not a complete description of the proposed Mergers oranalyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the fairnessfinancial, comparative and other analytical methods employed and the adaptation and application of any such compensation. J.P. Morgan expressed no opinion asthese methods to the priceunique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.
In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company or business used in Houlihan Lokey’s analyses for comparative purposes is identical to ALDW or Delek and an evaluation of the results of those analyses is not entirely mathematical.The estimates contained in the ALDW Projections and the Delek Projections and the implied reference range values indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which Alon common stockbusinesses or Delek common stock will trade at any future time.
The termssecurities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of ALDW and Delek. Much of the merger agreementinformation used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.
Houlihan Lokey’s opinion was only one of many factors considered by the ALDW GP Conflicts Committee in evaluating the Merger. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the Exchange Ratio or of the views of the ALDW GP Conflicts Committee with respect to the Merger or the Exchange Ratio. The type and amount of consideration payable pursuant to the Merger Agreement were determined through arm’s length negotiation between the SpecialALDW GP Conflicts Committee and Delek, and the decision to enter into the merger agreementMerger Agreement was solely that of the SpecialALDW GP Conflicts Committee the Alon Board and the DelekALDW GP Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Special Committee in its evaluation of the proposed Mergers and should not be viewed as determinative of the views of
the Special Committee, the Alon Board or Alon management with respect to the proposed Mergers or the consideration.Financial Analyses
In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Special Committee on January 2, 2017.
The following is a summary of the material financial analyses undertakenperformed by J.P. Morgan in connection with rendering its opinion to the Special Committee on January 2, 2017 and contained in the presentation delivered to the Special Committee on such dateHoulihan Lokey in connection with the renderingpreparation of suchits opinion and does not purport to be a complete descriptionreviewed with the ALDW GP Conflicts Committee on November 6, 2017. The order of the analyses does not represent relative importance or data presentedweight given to those analyses by J.P. Morgan. Some of the summaries of the financialHoulihan Lokey. The analyses summarized below include information presented in tabular format. The tables arealone do not intended to stand alone, and in order to more fully understandconstitute a complete description of the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary.analyses. Considering the data set forthin the tables below without considering the full narrative description of the financial analyses, includingas well as the methodologies underlying, and the assumptions, underlying the analyses,qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of J.P. Morgan’sHoulihan Lokey’s analyses.
Public Trading Multiples.Using publicly available information, J.P. Morgan compared selectedFor purposes of its analyses, Houlihan Lokey reviewed a number of financial datametrics, including:
Enterprise Value — generally, the value as of Alon and Delek with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to the businesses of Alon and Delek or aspects thereof.
For Alon, the companies selected by J.P. Morgan were as follows:
PBF Energy Inc.
Delek
For Delek, the companies selected by J.P. Morgan were as follows:
PBF Energy Inc.
Alon
Nonea specified date of the reviewed companies includedrelevant company’s outstanding equity securities (taking into account outstanding options and other securities convertible, exercisable or exchangeable into or for equity securities of the company) plus the amount of debt outstanding, preferred stock and non-controlling interests, and less the amount of cash and cash equivalents on its balance sheet.
Adjusted EBITDA — generally, the amount of the relevant company’s earnings before interest, taxes, depreciation and amortization for a specified time period, as adjusted for certain non-recurring items and, in the analysis are identical or directly comparablecase of Delek, also adjusted (i) to Alon or Delek. These companies were selected for each of Aloninclude earnings in non-consolidated joint ventures attributable to Delek and Delek, among other reasons, because they are publicly traded companies with operations(ii) to exclude EBITDA in ALDW and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similarDKL attributable to those of Alon and Delek. However, certain of these companies may have characteristics that are materially different from those of Alon and Delek. The analyses necessarily involve complex considerations and judgments concerning differencesminority interests.
Unless the context indicates otherwise, enterprise values used in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect Alon or Delek.
Using publicly available information, J.P. Morgananalysis described below were calculated for each selected company,using the ratioclosing price of the company’s firm value (calculated as the market valuecommon stock or units of the company’s common stock on a fully diluted basis, plus any debtselected companies listed below as of November 3, 2017, the estimates of future financial performance of ALDW and minority interest, less unconsolidated investments and cash and cash equivalents) to the consensus equity research analyst estimateDelek relied upon for the company’s EBITDA (calculated as earnings before interest, tax, depreciation and amortization) for the year
ending December 31, 2017 (the “2017E FV/EBITDA”) and the year ending December 31, 2018 (the “2018E FV/EBITDA”). The following tables summarize the results of this review:
For Alon:
|
| | | |
2017E FV/EBITDA | 2018E FV/EBITDA |
Mean | Median | Mean | Median |
6.5x | 6.5x | 5.4x | 5.4x |
For Delek:
|
| | | |
2017E FV/EBITDA | 2018E FV/EBITDA |
Mean | Median | Mean | Median |
6.7x | 6.7x | 5.6x | 5.6x |
Basedfinancial analyses described below were based on the results of this analysis, J.P. Morgan selected multiple reference ranges for 2017E FV/EBITDA and 2018E FV/EBITDA of 6.0x - 7.5x and 5.0x - 6.0x, respectively, for each of Alon and Delek.
After applying such ranges to the EBITDA for Alon for the year ending December 31, 2017 and the year ending December 31, 2018, based on certain publicly available financial forecasts relating to the business and financial prospects of Alon, derived from a consensus of selected research analysts (the “Alon Consensus Street Estimates”) and the AlonALDW Projections the analysis indicated an implied per share equity value range for Alon as set forth below, rounded to the nearest $0.05:
|
| | |
Implied per share price range |
| 2017E | 2018E |
Alon Consensus Street Estimates | $8.70 - $12.35 | $8.85 - $11.80 |
Alon Projections | $15.90 - $20.70 | $17.45 - $21.60 |
After applying the multiple reference ranges to the EBITDA for Delek for the year ending December 31, 2017 and the year ending December 31, 2018, based on certain publicly available financial forecasts relating to the business and financial prospects of Delek, derived from a consensus of selected research analysts (the “Delek Consensus Street Estimates”) and the Delek Projections Excluding Potential Drop-Down Transactions, and the analysis indicated an implied per share equity value rangeestimates of the future financial performance of the selected companies listed below were based on publicly available consensus research analyst estimates for Delek as set forth below, rounded to the nearest $0.05:those companies.
|
| | |
| Implied per share price range |
| 2017E | 2018E |
Delek Consensus Street Estimates | $21.80 - $26.90 | $22.15 - $26.25 |
Delek Projections | $26.05 - $32.15 | $24.90 - $29.55 |
Sum-of-the-PartsSelected Companies Analysis. J.P. Morgan conducted a sum‑of‑the‑parts analysisHoulihan Lokey reviewed certain financial data for each of Alon and Delek. A sum-of-the-parts analysis reviews a company’s operating performance andselected companies with publicly traded equity securities that Houlihan Lokey deemed relevant. The financial data reviewed included:
outlook on a segment-by-segment basis and compares each segment’s performance to a group of publicly traded companies to determine an implied market value for the enterprise as a whole.
J.P. Morgan performed a sum-of-the-parts analysis for the following segments of Alon:
Refining & Asphalt
Logistics
Retail
California Refineries and Alt-Air
Corporate G&A, Other
The following table sets forth the companies reviewed by J.P. Morgan in the Refining & Asphalt, Logistics and Retail segments:
|
| | |
Refining & Asphalt | Logistics | Retail |
PBF Energy Inc. | NuStar Energy L.P. | Alimentation Couche-Tard Inc. |
| PBF Logistics LP | Casey’s General Stores, Inc. |
| Delek Logistics Partners, LP | Murphy USA Inc. |
| TransMontaigne Partners LP | |
| World Point Terminals, LP | |
| Arc Logistics Partners LP | |
None of the reviewed companies included in the analysis are identical or directly comparable to Alon’s segments. However, these companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of the analysis, may be considered similar to the relevant segments of Alon. However, certain of these companies may have characteristics that are materially different from those of Alon. The analysis necessarily involves complex considerations and judgments concerning differences in financial and operational characteristics of the reviewed companies and other factors that could affect the companies differently than they would affect the relevant segments of Alon.
For each of these companies, J.P. Morgan calculated firmEnterprise value as a multiple of projected 2017estimated adjusted EBITDA for ALDW and 2018Delek’s next fiscal year, or “NFY (2017E) Adjusted EBITDA”;
Enterprise value as a multiple of estimated adjusted EBITDA for the year following ALDW and Delek’s next fiscal year, or “NFY + 1 (2018E) Adjusted EBITDA”; and
Enterprise value as a multiple of estimated adjusted EBITDA for ALDW and Delek’s next fiscal year following NFY + 1, or “NFY + 2 (2019E) Adjusted EBITDA.”
The following table summarizes the results of this review:selected companies for ALDW and corresponding multiples were:
|
| | | | |
| 2017E FV/EBITDA | 2018E FV/EBITDA |
Mean | Median | Mean | Median |
Refining & Asphalt | 5.2x | 5.2x | 4.5x | 4.5x |
Logistics | 10.8x | 10.5x | 10.3x | 10.9x |
Retail | 8.5x | 9.0x | 7.7x | 8.0x |
Based on the foregoing, J.P. Morgan determined EBITDA multiple ranges of 3.5x - 4.5x, 9.0x - 10.0x and 7.0x - 8.0x for Alon’s Refining & Asphalt, Logistics and Retail segments, respectively. For purposes of the analysis, J.P. Morgan assumed a value of $125 million for the California Refineries and Alt-Air segment, which is equal to Alon management’s estimated cash proceeds from the potential sale of the Paramount, Bakersfield and Long Beach refineries and Alt-
Air project. For the Corporate G&A, Other segment, J.P. Morgan calculated firm value to EBITDA multiple ranges of 6.2x - 7.2x and 5.3x - 6.3x (which represent the weighted average multiple of the Refining & Asphalt, Logistics and Retail segments) for the Alon Consensus Street Estimates and the Alon Projections, respectively. J.P. Morgan then applied the foregoing EBITDA multiple ranges to the 2017 EBITDA forecasts for Alon’s segments. Such forecasts were based on the Alon Consensus Street Estimates and the Alon Projections. Based on this analysis, J.P. Morgan calculated an implied per share price range for Alon common stock as set forth below, rounded to the nearest $0.05:
|
| |
| | Implied per share price range | Enterprise Value to Adjusted EBITDA |
Alon Consensus Street Estimates | $11.40 - $13.85 |
Alon Projections | $15.60 - $18.90 |
J.P. Morgan also performed a sum-of-the-parts analysis for the following segments of Delek:
Refining
Logistics
Corporate G&A, Other
The following table sets forth the companies reviewed by J.P. Morgan in the Refining and Logistics segments:
|
| NFY (2017E) | | NFY + 1 (2018E) | | NFY + 2 (2019E) |
| Refining MLPs | Logistics | | | | | |
| CVR Refining, LP | | 5.2x | | 5.3x | | 5.4x |
| | | | | | |
| C-Corp Refiners | | | | | | |
| Andeavor | | 9.1x | | 7.3x | | 6.9x |
| Holly Frontier Corporation | | 8.4x | | 7.3x | | 6.8x |
| Marathon Petroleum Corporation | | 8.4x | | 7.7x | | 7.8x |
| Par Pacific Holdings, Inc. | | 9.0x | | 7.8x | | 5.1x |
| PBF Energy Inc. | NuStar Energy L.P. | 7.6x | | 5.8x | | 5.7x |
| Phillips 66 | PBF Logistics LP | 10.6x | | 8.9x | | 8.1x |
| Valero Energy Corporation | TransMontaigne Partners LP |
| | World Point Terminals, LP7.2x |
| | Arc Logistics Partners LP6.3x | | 6.3x |
None of the reviewed companies included in the analysis are identical or directly comparable to Delek’s segments. However, these companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of the analysis, may be considered similar to the relevant segments of Delek. However, certain of these companies may have characteristics that are materially different from those of Delek. The analysis necessarily involves complex considerations and judgments concerning differences in financial and operational characteristics of the reviewed companies and other factors that could affect the companies differently than they would affect the relevant segments of Delek.
For each of these companies, J.P. Morgan calculated firm value as a multiple of projected 2017 and 2018 EBITDA. The following table summarizesALDW. Taking into account the results of this review:the selected companies analysis for ALDW, Houlihan Lokey applied multiple ranges of 4.00x to 5.00x to ALDW’s NFY (2017E) Adjusted EBITDA, 4.00x to 5.00x to ALDW’s NFY + 1 (2018E) Adjusted EBITDA and 4.50x to 5.50x to ALDW’s NFY + 2 (2019E) Adjusted EBITDA. The selected companies analysis indicated implied value reference ranges per ALDW Common Unit of $12.64 to $16.07 based on the NFY (2017E) Adjusted EBITDA multiple, $12.38 to $15.76 based on the NFY + 1 (2018E) Adjusted EBITDA multiple and $11.32 to $14.08 based on the NFY + 2 (2019E) Adjusted EBITDA multiple.
The selected companies for Delek and corresponding multiples were:
|
| | | | |
| 2017E FV/EBITDA | 2018E FV/EBITDA |
Mean | Median | Mean | Median |
Refining | 5.2x | 5.2x | 4.5x | 4.5x |
Logistics | 10.7x | 9.5x | 10.0x | 10.2x |
Based on the foregoing, J.P. Morgan determined EBITDA multiple ranges of 4.0x - 5.0x and 11.0x - 12.0x for Delek’s Refining and Logistics segments, respectively. For the Corporate G&A, Other segment, J.P. Morgan calculated firm value to EBITDA multiple ranges of 7.1x - 8.1x and 6.7x - 7.7x (which represents the weighted average multiple of the Refining and Logistics segments) for the Delek Consensus Street Estimates and the Delek Projections, respectively. J.P. Morgan then applied the foregoing EBITDA multiple ranges to the 2017 EBITDA forecasts for Delek’s segments. Such forecasts were based on the Delek Consensus Street Estimates and the Delek Projections. Based on this analysis, J.P. Morgan calculated an implied per share price range for Delek common stock as set forth below, rounded to the nearest $0.05:
|
| |
| | Implied per share price range | Enterprise Value to Adjusted EBITDA |
Delek Consensus Street Estimates | $25.55 - $28.90 | NFY (2017E) | | NFY + 1 (2018E) | | NFY + 2 (2019E) |
Delek ProjectionsRefining Companies | $28.70 - $32.75 | | | | | |
| Andeavor | | 9.1x | | 7.3x | | 6.9x |
| CVR Refining, LP | | 5.2x | | 5.3x | | 5.4x |
| HollyFrontier Corporation | | 8.4x | | 7.3x | | 6.8x |
| Marathon Petroleum Corporation | | 8.4x | | 7.7x | | 7.8x |
| Par Pacific Holdings, Inc. | | 9.0x | | 7.8x | | 5.1x |
| PBF Energy Inc. | | 7.6x | | 5.8x | | 5.7x |
| Phillips 66 | | 10.6x | | 8.9x | | 8.1x |
| Valero Energy Corporation | | 7.2x | | 6.3x | | 6.3x |
| | | | | | |
| Logistics MLPs | | | | | | |
| Andeavor Logistics LP [1] | | 11.5x | | 8.4x | | 7.7x |
| Blueknight Energy Partners, L.P. | | 10.7x | | 9.8x | | 9.2x |
| Holly Energy Partners, L.P. [1] | | 11.6x | | 10.2x | | 10.0x |
| NuStar Energy L.P. | | 11.4x | | 9.9x | | 8.8x |
| PBF Logistics LP | | 10.0x | | 8.2x | | 6.4x |
| Transmontaigne Partners L.P. | | 9.5x | | 9.2x | | 8.4x |
| Valero Energy Partners LP | | 11.3x | | 8.4x | | 6.5x |
| | | | | | |
| Retail & Marketing Companies | | | | | | |
| Alimentation Couche-Tard Inc. | | 14.5x | | 12.9x | | 11.6x |
| Casey's General Stores, Inc. | | 10.1x | | 9.3x | | 8.6x |
| Murphy USA Inc. | | 8.3x | | 7.7x | | 7.2x |
[1] Does not reflect the issuance of units in connection with the recently announced IDR buy-in transactions.
Delek. Taking into account the results of the selected companies analysis for Delek, Houlihan Lokey applied multiple ranges of 7.00x to 8.00x to Delek’s NFY (2017E) Adjusted EBITDA, 6.00x to 7.00x to Delek’s NFY + 1 (2018E) Adjusted EBITDA and 5.75x to 6.75x to Delek’s NFY + 2 (2019E) Adjusted EBITDA. The selected companies analysis indicated implied value reference ranges per share of Delek Common Stock of $32.31 to $36.71 based on the NFY (2017E) Adjusted EBITDA multiple, $28.59 to $33.86 based on the NFY + 1 (2018E) Adjusted EBITDA multiple and $27.25 to $32.52 based on the NFY + 2 (2019E) Adjusted EBITDA multiple.
The selected companies analysis indicated an implied exchange ratio reference range of 0.34x to 0.50x of a share of Delek Common Stock for each ALDW Common Unit based on the NFY (2017E) Adjusted EBITDA multiple, 0.37x to 0.55x of a share of Delek Common Stock for each ALDW Common Unit based on the NFY + 1 (2018E) Adjusted EBITDA multiple and 0.35x to 0.52x of a share of Delek Common Stock for each ALDW Common Unit based on the NFY + 2 (2019E) Adjusted EBITDA multiple, as compared to the Exchange Ratio in the Merger of 0.49x of a share of Delek Common Stock for each ALDW Common Unit.
Discounted Cash Flow Analysis. J.P. Morgan conducted
ALDW. Houlihan Lokey performed a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share for Alon common stock and Delek common stock.
J.P. Morgan calculated the unlevered free cash flows that Alon is expected to generate from fiscal year 2017 through fiscal year 2026 based upon the Alon Projections and the Alon Projections Excluding Growth Projects. For each set of projections, J.P. Morgan also calculated a range of terminal values of Alon at the end of the ten year period ending on December 31, 2026 by applying a perpetual growth rate ranging from 0.0% to 1.0% to the unlevered free cash flow of Alon during the terminal period of the projections. The unlevered free cash flows and the range of terminal values were then discounted to present values as of December 31, 2016 using a range of discount rates from 9.5% to 11.5%. This discount rate range was based upon J.P. Morgan’s analysis of the weighted average cost of capital of Alon.
Based on the foregoing, this analysis indicated implied per share equity value ranges for Alon common stockALDW based on the AlonALDW Projections and the Alon Projections Excluding Growth Projects as set forth below, rounded to the nearest $0.05:
|
| |
| Implied per share equity value range |
Alon Projections | $15.40 - $20.70 |
Alon Projections Excluding Growth Projects | $12.70 - $16.40 |
The range of implied per share equity values for Alon was compared to Alon’s closing share price of $11.87 as of December 28, 2016 and to the implied offer price of $12.51 as of December 28, 2016.
J.P. Morgan also calculated the unlevered free cash flows that Delek is expected to generate from fiscal year 2017 through fiscal year 2026 based upon the Delek Projections. J.P. Morgan also calculated a range of terminal values of Delek at the end of the ten year period ending on December 31, 2026 by applying aTerminal Period Assumptions. Houlihan Lokey applied perpetual growth raterates ranging from 0.0%-1.0% to 1.0% to the unlevered free cash flow of Delek during the terminal period of the projections. The unlevered free cash flows and the
range of terminal values were then discounted to present values as of December 31, 2016 using a range of, discount rates ranging from 9.5%9.25% to 11.5%10.25% and a tax rate of 35.0%. This discount rate range was based upon J.P. Morgan’s analysis of the weighted average cost of capital of Delek.
Based on the foregoing, thisThe discounted cash flow analysis indicated an implied value reference range per share equity value range for Delek as set forth below, roundedALDW Common Unit of $15.57 to the nearest $0.05:$20.74.
|
| |
| Implied per share equity value range |
Delek Projections | $29.65 - $41.15 |
The range of implied per share equity values for Delek was compared to Delek’s closing share price of $24.82 as of December 28, 2016.
J.P. Morgan also conducted an additional. Houlihan Lokey performed a discounted cash flow analysis of Delek based on the present value of the Synergies, which reflect operational, corporateDelek Projections Excluding Potential Drop-Down Transactions and commercial synergies net of implementation costs. The Synergies were discounted to present value using a range of discount rates from 9.5% to 11.5% and aTerminal Period Assumptions. Houlihan Lokey applied perpetual growth raterates ranging from 0.0% to 1.0%2.0%, discount rates ranging from 8.50% to 9.50% and a tax rate of 35.0%. The discounted cash flow analysis indicated aan implied value reference range per share of Delek Common Stock of $29.53 to $40.88.
The discounted cash flow analysis indicated an implied exchange ratio reference range of implied values for the Synergies of $673.0 million0.38x to $864.0 million.
Relative Value Analysis. Based upon the implied valuations for each of Alon and Delek as derived above under “Trading Multiples Analysis”, “Sum-of-the-Parts Analysis” and “Discounted Cash Flow Analysis”, J.P. Morgan calculated a range of implied exchange ratios0.70x of a share of Alon common stockDelek Common Stock for each ALDW Common Unit, as compared to the Exchange Ratio in the Merger of 0.49x of a share of Delek common stock, and then compared that range of implied exchange ratios to the exchange ratio.Common Stock for each ALDW Common Unit.
For each of the analyses referred to above, J.P. Morgan calculated the ratio implied by dividing the low end of each range of implied equity values of Alon
Other Matters
Houlihan Lokey was engaged by the high end of each range of implied equity values of Delek. J.P. Morgan also calculatedALDW GP Conflicts Committee to act as its financial advisor in connection with the ratio implied by dividing the high end of each range of implied equity values of Alon by the low end of each range of implied equity values of Delek.
In each case, the implied exchange ratios were compared to the exchange ratio of 0.504x and did not include any Synergies. This analysis indicated the following implied exchange ratios:
|
| |
Comparison | Range of Implied Exchange Ratios |
Consensus street estimates | |
| |
Trading Multiples Analysis | |
FV/2017E EBITDA (6.0x - 7.5x) | 0.324x - 0.566x |
FV/2018E EBITDA (5.0x - 6.0x) | 0.337x - 0.532x |
| |
Sum-of-the-Parts Analysis | 0.394x - 0.543x |
| |
Alon and Delek projections | |
| |
Trading Multiples Analysis | |
FV/2017E EBITDA (6.0x - 7.5x) | 0.494x - 0.794x |
FV/2018E EBITDA (5.0x - 6.0x) | 0.591x - 0.868x |
| |
Sum-of-the-Parts Analysis | 0.477x - 0.658x |
| |
Discounted Cash Flow Analysis (Alon Projections) | 0.375x - 0.698x |
Discounted Cash Flow Analysis (Alon Projections Excluding Growth Projects) | 0.309x - 0.553x |
Value Creation Analysis. J.P. Morgan conducted an analysis of the theoretical value creation to the holders of Alon common stock that compared the estimated implied equity value of Alon on a standalone basis, excluding Delek’s equity ownership,Merger. The ALDW GP Conflicts Committee engaged Houlihan Lokey based on the midpoint values determined in J.P. Morgan’s discounted cash flow analysis described above,Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to the estimated implied equity value of Alon common stock pro forma for the transactions contemplated by the merger agreement. J.P. Morgan calculated the pro forma implied equity value of Alon common stock by (1) adding the sum of: (a) the implied equity value of Alon on a standalone basis determined in J.P. Morgan’s discounted cash flow analysis described above, excluding Delek’s equity ownership, (b) the implied equity value of Delek using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above and (c) the estimated present value of the Synergies of $755 million, which is the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above, and (2) multiplying such sum of the estimated valuations described above by the approximate pro forma equity ownership of the combined company by the holders of Alon common stock.
Based on the assumptions described above, this analysis indicated implied pro forma accretion in economic equity value to the holders of Alon common stock as set forth below:
|
| |
| Implied Pro Forma Accretion in Economic Equity Value |
Alon Projections | 19.1% |
Alon Projections Excluding Growth Projects | 42.4% |
Miscellaneous. The foregoing summary of certain materialprovide financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Alon or Delek. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Alon or Delek. However, the companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Alon or Delek. The analysis necessarily involves complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Alon or Delek.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securitiesadvisory services in connection with mergers and acquisitions, investments for passivefinancings, and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selectedfinancial restructurings. Pursuant to adviseHoulihan Lokey’s engagement by the SpecialALDW GP Conflicts Committee, with respectHoulihan Lokey is entitled to the proposed Mergers on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Alon and the industries in which it operates.
Alon has agreed to pay J.P. Morgan an estimateda transaction fee of approximately $7.0 million, $0.25 million of which became payable to J.P. Morgan upon execution of the JPM Engagement Letter, $2.0 million of which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder$2,900,000, a substantial portion of which is contingent upon the consummation of the proposed Mergers. In addition, AlonMerger. Houlihan Lokey also became entitled to a fee of $1,000,000 upon its notification to the ALDW GP Conflicts Committee that it was prepared to render its opinion to the ALDW GP Conflicts Committee which is fully creditable against the transaction fee. ALDW has also agreed to reimburse J.P. MorganHoulihan Lokey for itscertain expenses incurred in connection with its services, including the fees and disbursements of counsel,to indemnify Houlihan Lokey and will indemnify J.P. Morgan against certain related parties for certain potential liabilities and arising out of J.P. Morgan’sHoulihan Lokey’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, neither J.P. Morgan nor its affiliates have had any other material financial advisory or other material commercial or investment banking relationships with Alon or Delek. In
In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, ALDW, Delek, or any other party that may be involved in the Merger and their businesses, J.P. Morganrespective affiliates or any currency or commodity that may be involved in the Merger.
Houlihan Lokey in the past provided financial advisory services to a conflicts committee of the ALDW GP Board in connection with ALDW’s proposed acquisition of a refinery from Alon Energy in 2014, for which Houlihan Lokey received fees of approximately $225,000. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and other financial services to ALDW, Delek, other participants in the Merger or certain of their respective affiliates in the future, for which Houlihan Lokey and its affiliates may actively tradereceive compensation. Furthermore, in connection with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its affiliates may have in the debtpast acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity securitiesholders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or financial instruments (including derivatives, bank loansgroups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, ALDW, Delek, other obligations)participants in the Merger or certain of Alon or Delektheir respective affiliates, for their own accounts or for the accounts of customerswhich advice and accordingly, theyservices Houlihan Lokey and such affiliates have received and may at any time hold long or short positions in such securities or other financial instruments.receive compensation.
Certain Delek and Alon Unaudited ProspectiveProjected Financial Information
Management of ALDW and Delek prepared (a) unaudited forecasted financial information for the full fiscal years 2017 through 20212022 for ALDW on a standalone basis, (b) unaudited forecasted financial information for the full fiscal years 2017 through 2022 for Delek on a standalone basis giving effect to potential contributions of assets by Delek or certain of its subsidiaries to DKL in exchange for cash and limited partnership interests in DKL, and (c) unaudited forecasted financial information for the full fiscal years 2017 through 2022 for Delek on a stand-alone basis and, using Alon'sthat do not give effect to potential contributions of assets by Delek or certain of its subsidiaries to DKL. The ALDW forecasted financial information reflects the projected impact of conforming of certain accounting policies to those used by Delek, but it does not include the impact of any fair value adjustments resulting from the application of the acquisition method of accounting related to the Delek-ALJ Merger. The unaudited forecasted financial information provided by Alon, prepared unaudited forecasted financial information for the years 2017 through 2021 for Alon on a standalone basis. Alon prepared unaudited forecasted financial information for the years 2017 through 2021 for Alon on a standalone basis. The unaudited forecasted financial informationalso does not give effect to the Mergers. The unaudited forecasted financial information was prepared separately by each of Delek and Alon using, in some cases, different assumptions, and is not intended to be added together. Adding the unaudited forecasted financial information together for Delek and Alon would not represent the results the combined company will achieve if the Mergers are completed and does not represent forecasted financial information for the combined company if the merger is completed.Merger.
Neither Delek nor Alon,ALDW, as a matter of course, makes public long-term projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, the unaudited forecasted financial information set forth below was made available to the ALDW GP Conflicts Committee and the Board of Directors of Delek Board, the Alon Board, TPH and/or J.P. Morgan in
connection with thetheir evaluation of the Mergers.Merger. Such unaudited forecasted financial information also was provided to Houlihan Lokey who were authorized to use and rely upon such forecasts for purposes of providing financial advice to the ALDW GP Conflicts Committee. The inclusion of this information should not be regarded as an indication that any of Delek, Alon, TPH, J.P. MorganALDW, the ALDW GP Conflicts Committee, Houlihan Lokey or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results. Readers of this joint proxy statement/prospectusdocument are cautioned not to place undue relianceweight on the unaudited forecasted financial information.
The unaudited forecasted financial information was, in general, prepared solely for internal use and is subjective in many respects. As a result, there can be no assurance that the forecasted results will be realized or that actual results will not be significantly higher or lower than estimated. Since the unaudited forecasted financial information covers multiple years, such information by its nature becomes less predictive with each successive year. The estimates and assumptions underlying the unaudited forecasted financial information involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions which may not be realized and that are inherently subject to significant uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of Delek and/or AlonALDW and will be beyond the control of the combined company. Delek stockholders and Alon stockholdersALDW Common Unitholders are urged to review the SEC filings of ALDW for a description of risk factors with respect to the business of ALDW and the SEC filings of Delek for a description of risk factors with respect to the business of Delek and the SEC filings of Alon for a description of risk factors with respect to the business of Alon.Delek. See the sections entitled “ Cautionary“Cautionary Statement Regarding Forward-Looking Statements ”Information” and “ Where“Where You Can Find More InformationInformation.” beginning on pages 44 and 240, respectively. Delek stockholders and Alon stockholdersALDW Common Unitholders are also urged to review the section of this consent statement/prospectus entitled “Risk Factors“Risk Factors.” beginning on page 47. The unaudited forecasted financial
information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or GAAPgenerally accepted accounting principles in the United States (“GAAP”) (including because certain metrics are non-GAAP measures) but, in the view of each of Delek’sDelek and Alon’s management, as applicable,ALDW GP, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of Delek's and Alon's managements'management’s knowledge and belief, the expected course of action and the expected future financial performance of Delek and Alon,ALDW, as applicable. However, this information is not fact and shouldis not be relied upon as being necessarily indicativepredictive of actual future results, and readers of this joint proxyconsent statement/prospectus are cautioned not to place undue relianceweight on the unaudited forecasted financial information. Certain tables contained herein may not sum due to rounding. Neither of the independent registered public accounting firmsfirm of Delek or AlonALDW nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the unaudited forecasted financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability.achievability, and the independent accounting firms of Delek or ALDW assume no responsibility for, and disclaim any association with, the unaudited forecasted financial information. The report of the independent registered public accounting firm of ALDW contained in ALDW’s Annual Report on Form 10-K for the year ended December 31, 2016, which is incorporated by reference into this document, relates to the historical financial information of ALDW. The report of the independent registered public accounting firm of Delek contained in Old Delek’s Annual Report on Form 10-K for the year ended December 31, 2016, and the report of the independent registered public accounting firm of Alon contained in Alon’s Annual Report on Form 10-K for the year ended December 31, 2016, both of which areis incorporated by reference into this joint proxy statement/prospectus, relatedocument, relates to the historical financial information of Delek and Alon, respectively. They doDelek. It does not extend to the unaudited forecasted financial information and should not be read to do so. Furthermore, the unaudited forecasted financial information does not take into account any circumstances or events occurring after the date they were prepared.
NEITHER DELEK NOR ALONAND ALDW DO NOT INTEND TO UPDATE OR OTHERWISE REVISE THE UNAUDITED FORECASTED FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED BY LAW.
Unaudited Forecasted Financial Information Prepared by Delek
Delek.ALDWProjections
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| | (in millions, except per unit amounts) |
Statements of Income Data (1), (2), (3) | | | | | | |
| Big Spring gross refining profit | $ | 335 |
| $ | 336 |
| $ | 295 |
| $ | 424 |
| $ | 424 |
| $ | 412 |
|
| Big Spring refining operating expenses | (99) |
| (92) |
| (90) |
| (93) |
| (92) |
| (93) |
|
Total refining contribution margin | $ | 235 |
| $ | 243 |
| $ | 205 |
| $ | 332 |
| $ | 332 |
| $ | 320 |
|
| SG&A and corporate | (31) |
| (32) |
| (32) |
| (32) |
| (32) |
| (32) |
|
| Total EBITDA | $ | 204 |
| $ | 211 |
| $ | 173 |
| $ | 299 |
| $ | 300 |
| $ | 287 |
|
| Depreciation and amortization | (58) |
| (62) |
| (66) |
| (69) |
| (70) |
| (72) |
|
| Operating income | $ | 146 |
| $ | 149 |
| $ | 107 |
| $ | 231 |
| $ | 229 |
| $ | 216 |
|
| Interest expense | (34) |
| (33) |
| (34) |
| (33) |
| (33) |
| (33) |
|
| Income before taxes | $ | 112 |
| $ | 116 |
| $ | 73 |
| $ | 197 |
| $ | 196 |
| $ | 183 |
|
| Provision for income taxes | (1) |
| (1) |
| (1) |
| (2) |
| (2) |
| (2) |
|
| Net income | $ | 111 |
| $ | 114 |
| $ | 73 |
| $ | 195 |
| $ | 194 |
| $ | 181 |
|
| | | | | | | |
| Average ALDW Common Units outstanding | 62.5 |
| 62.5 |
| 62.5 |
| 62.5 |
| 62.5 |
| 62.5 |
|
| Average ALDW Public Units outstanding | 11.5 |
| 11.5 |
| 11.5 |
| 11.5 |
| 11.5 |
| 11.5 |
|
| | | | | | | |
| Earnings per ALDW Common Unit | $ | 1.77 |
| $ | 1.83 |
| $ | 1.16 |
| $ | 3.13 |
| $ | 3.11 |
| $ | 2.89 |
|
| | | | | | | |
| Statements of Cash Flow Data | | | | | | |
Cash available for distribution (4) | $ | 85 |
| $ | 68 |
| $ | 65 |
| $ | 217 |
| $ | 216 |
| $ | 213 |
|
___________________________
(1) The following table presents select unauditedALDW forecasted financial information reflects projected impact of conforming of certain accounting policies to those used by Delek, forbut it does not include the fiscal years ending 2017 through 2021 prepared by Delek’s management and providedimpact of any fair value adjustments resulting from the application of the acquisition method of accounting related to the Delek Board, TPHDelek-ALJ Merger.
(2) 2017 figures do not reflect pro forma impact of Delek-ALJ Merger, which became effective July 1, 2017 and Alon, which is referredprojected to asresult in annual run-rate synergies of $14.7 million allocated specifically to ALDW.
(3) Figures reflect planned turnaround in 2019 for Big Spring.
(4) Unlevered free cash flows incorporate certain adjustments (relative to the "Delek unaudited forecasted financial information":cash available for distribution figures shown above) related to interest and principal repayments on debt, reserves for future capital expenditures, taxes and changes in net working capital, among other items.
|
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, |
| (in millions, except per share data) | | 2017E | | 2018E | | 2019E | | 2020E | | 2021E |
| Income Statement Items | | | | | | | | | | |
| Operating income | | $ | 138.1 |
| | $ | 171.4 |
| | $ | 226.1 |
| | $ | 230.7 |
| | $ | 342.7 |
|
| Depreciation and amortization expense | | $ | 118.4 |
| | $ | 122.4 |
| | $ | 126.7 |
| | $ | 129.2 |
| | $ | 131.4 |
|
Earnings before interest, income taxes, and depreciation and amortization expenses ("EBITDA")(a) | | $ | 256.5 |
| | $ | 293.8 |
| | $ | 352.8 |
| | $ | 360.0 |
| | $ | 474.2 |
|
| Net earnings attributable to Delek | | $ | 52.0 |
| | $ | 72.4 |
| | $ | 109.8 |
| | $ | 119.1 |
| | $ | 190.3 |
|
| Weighted average basic shares outstanding | | 63.2 |
| | 63.2 |
| | 62.2 |
| | 60.2 |
| | 56.2 |
|
| Basic earnings per share | | $ | 0.82 |
| | $ | 1.15 |
| | $ | 1.76 |
| | $ | 1.98 |
| | $ | 3.39 |
|
| Cash Flow Items | | | | | | | | | | |
| Cash flow from operations | | $ | 158.6 |
| | $ | 228.6 |
| | $ | 295.7 |
| | $ | 303.9 |
| | $ | 374.1 |
|
| Capital expenditures | | (88.6 | ) | | (159.2 | ) | | (84.9 | ) | | (77.1 | ) | | (54.0 | ) |
| Investment in joint ventures | | (4.0 | ) | | — |
| | (7.5 | ) | | — |
| | — |
|
| Leverage free cash flow | | 65.9 |
| | 69.3 |
| | 203.3 |
| | 226.8 |
| | 320.2 |
|
| Dividends | | (37.9 | ) | | (37.9 | ) | | (37.3 | ) | | (36.1 | ) | | (33.7 | ) |
| Share repurchases | | — |
| | — |
| | (50.0 | ) | | (50.0 | ) | | (150.0 | ) |
| Logistics public distributions | | (23.4 | ) | | (25.3 | ) | | (27.9 | ) | | (30.7 | ) | | (33.7 | ) |
| Purchase of Delek Logistics Partners' LP units | | (18.0 | ) | | — |
| | — |
| | — |
| | — |
|
| Cash flow prior to external financing | | $ | (13.4 | ) | | $ | 6.1 |
| | $ | 88.1 |
| | $ | 110.0 |
| | $ | 102.7 |
|
| |
| EBITDA, which is defined as net earnings plus depreciation and amortization expense, interest and financing costs and income tax expense is a non-GAAP financial measure because it excludes amounts included in net earnings, the most directly comparable measure calculated in accordance with GAAP. This measure should not be considered as an alternative to net earnings or other measures derived in accordance with GAAP. |
The DelekALDW unaudited forecasted financial information is based on various assumptions, including the following principal assumptions:
Refinery utilization was assumed to range between 85% and 96%, between 2017E and 2021E, driven by turnaround and maintenance with flat refining capacity; |
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| Benchmarks (per barrel) | | | | | | |
| West Texas Intermediate (“WTI”) (Cushing) | $ | 49.81 |
| $ | 49.92 |
| $ | 60.48 |
| $ | 74.95 |
| $ | 80.36 |
| $ | 86.50 |
|
| Differentials (per barrel) | | | | | | |
| Midland – WTI (Cushing) | $ | (0.760 | ) | $ | (1.040 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) |
| West Texas Sweet (“WTS”) – WTI (Cushing) | $ | (1.17 | ) | $ | (1.250 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) |
| Crack Spreads (per barrel) | | | | | | |
| Ultra-low-sulfur diesel (“ULSD”) 5-3-2 | $ | 13.75 |
| $ | 13.85 |
| $ | 13.80 |
| $ | 18.17 |
| $ | 18.22 |
| $ | 17.43 |
|
| High-sulfur diesel (“HSD”) 5-3-2 | $ | 11.75 |
| $ | 12.06 |
| $ | 9.94 |
| $ | 14.73 |
| $ | 14.73 |
| $ | 13.13 |
|
| Refining Margins (per barrel) | | | | | | |
| Big Spring | $ | 11.83 |
| $ | 11.44 |
| $ | 10.81 |
| $ | 14.34 |
| $ | 14.57 |
| $ | 13.96 |
|
| Refining Utilization | | | | | | |
| Big Spring | 99% |
| 99 | % | 92 | % | 100 | % | 99 | % | 100 | % |
| Total Crude (barrels per day) | | | | | | |
| Big Spring | 72,676 |
| 72,118 |
| 67,000 |
| 73,000 |
| 72,000 |
| 73,000 |
|
Refining margin at Delek's Tyler refinery was assumed to range between approximately $8 and $12 per barrel, between 2017E and 2021E;
Refining margin at Delek's El Dorado refinery was assumed to range between approximately $7 and $10 per barrel, between 2017E and 2021E;
Delek Logistics' volumes growth was assumed to be relatively flat, between 2017E and 2021E;
There was an assumed drop down of approximately $5 million of EBITDA from Delek's refining segment to Delek Logistics in 2017E; and
Net earnings attributable to Delek assumes no earnings from Delek's equity investment in Alon
The estimates and assumptions underlying the DelekALDW unaudited forecasted financial information are inherently uncertain and, though considered reasonable by the management of ALDW and Delek as of the date of the preparation of such unaudited forecasted financial information, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the unaudited forecasted financial information, including, among other things, the matters described in the sections entitled “Cautionary“Cautionary Statement Regarding Forward-Looking Statements”Information” and “Risk Factors“Risk Factors.” beginning on pages 44 and 47, respectively and in Delek's Annual Report on Form 10-K for the year ended December 31, 2016. Accordingly, there can be no assurance that the forecasted results are indicativenecessarily predictive of the actual future performance of Delek,ALDW, or that actual results will not differ materially from those presented in the DelekALDW unaudited forecasted financial information. Inclusion of the DelekALDW unaudited forecasted financial information in this joint proxyconsent statement/prospectus should not be regarded as a representation by any person that the results contained in the DelekALDW unaudited forecasted financial information will be achieved.
The DelekALDW unaudited forecasted financial information is not included in this joint proxyconsent statement/prospectus in order to induce any stockholderALDW Common Unitholder to vote in favor of any of the proposals at the Delek special meeting or the Alon special meeting or to acquire securities of Delek.
Alon. The following table presents select unaudited forecasted financial information of Alon for the fiscal years ending 2017 through 2021 prepared by Delek management and providedconsent to the Delek Board and to TPH, which is referred to as the "Alon modified unaudited forecasted financial information." Such Alon modified unaudited forecasted financial information was prepared by Delek management from the Alon Projections Excluding Growth Projects prepared by Alon, which also reflects such other modifications as Delek believed were prudent.Merger.
Delek Projections Including Potential Drop-Down Transactions (1)
|
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, |
| (in millions, except per share data) | | 2017E | | 2018E | | 2019E | | 2020E | | 2021E |
| Income Statement Items | | | | | | | | | | |
| Operating income | | 96.1 |
| | 209.5 |
| | 230.9 |
| | 233.8 |
| | 245.6 |
|
| Depreciation and amortization expense | | 117.8 |
| | 112.6 |
| | 121.4 |
| | 130.9 |
| | 136.0 |
|
Earnings before interest, income taxes, and depreciation and amortization expenses ("EBITDA")(a) | | 213.9 |
| | 322.1 |
| | 352.2 |
| | 364.7 |
| | 381.5 |
|
| Net (loss) earnings attributable to Alon | | (18.9 | ) | | 61.3 |
| | 80.1 |
| | 79.9 |
| | 90.9 |
|
| Weighted average basic shares outstanding | | 71.9 |
| | 71.9 |
| | 71.9 |
| | 71.9 |
| | 71.9 |
|
| Basic (loss) earnings per share | | $ | (0.26 | ) | | $ | 0.85 |
| | $ | 1.11 |
| | $ | 1.11 |
| | $ | 1.26 |
|
| Cash Flow Items | | | | | | | | | | |
| Cash flow from operations | | 94.7 |
| | 197.6 |
| | 222.7 |
| | 234.7 |
| | 250.6 |
|
| Capital expenditures | | (90.1 | ) | | (127.0 | ) | | (229.0 | ) | | (157.2 | ) | | (55.0 | ) |
| Net proceeds from sale of assets | | 68.5 |
| | 15.0 |
| | — |
| | — |
| | — |
|
| Leverage free cash flow | | 73.1 |
| | 85.6 |
| | (6.3 | ) | | 77.5 |
| | 195.6 |
|
| Dividends | | (43.0 | ) | | (43.0 | ) | | (43.0 | ) | | (43.0 | ) | | (43.0 | ) |
| Share repurchases | | — |
| | — |
| | — |
| | — |
| | — |
|
| Public partnership distributions | | (12.3 | ) | | (20.2 | ) | | (15.6 | ) | | (31.6 | ) | | (35.5 | ) |
| Cash flow prior to external financing | | 17.8 |
| | 22.5 |
| | (64.9 | ) | | 2.9 |
| | 117.2 |
|
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| | (in millions, except per share amounts) |
Statements of Income Data (2) | | | | | | |
| Gross refining profit | $ | 642 |
| $ | 862 |
| $ | 804 |
| $ | 1,231 |
| $ | 1,227 |
| $ | 1,176 |
|
| Refining operating expenses | (301) |
| (394) |
| (395) |
| (394) |
| (395) |
| (397) |
|
Total refining contribution margin (3) | $ | 342 |
| $ | 468 |
| $ | 409 |
| $ | 836 |
| $ | 832 |
| $ | 780 |
|
| DKL contribution margin | 124 |
| 145 |
| 180 |
| 181 |
| 182 |
| 182 |
|
| Retail contribution margin | 25 |
| 50 |
| 56 |
| 62 |
| 69 |
| 75 |
|
| Renewables contribution margin | 23 |
| 26 |
| 26 |
| 7 |
| 7 |
| 7 |
|
| Other segment contribution margin | 30 |
| 18 |
| 21 |
| (11) |
| (11) |
| (11) |
|
| SG&A and corporate | (156) |
| (135) |
| (127) |
| (130) |
| (131) |
| (136) |
|
Total EBITDA (4) | $ | 387 |
| $ | 572 |
| $ | 565 |
| $ | 945 |
| $ | 946 |
| $ | 897 |
|
| Depreciation and amortization | (165) |
| (221) |
| (232) |
| (242) |
| (250) |
| (257) |
|
| Operating income | $ | 222 |
| $ | 351 |
| $ | 333 |
| $ | 703 |
| $ | 696 |
| $ | 640 |
|
| Interest expense | (85) |
| (113) |
| (114) |
| (111) |
| (107) |
| (103) |
|
Income from joint ventures (5) | 95 |
| 24 |
| 25 |
| 25 |
| 25 |
| 25 |
|
| Income before taxes | $ | 232 |
| $ | 262 |
| $ | 244 |
| $ | 617 |
| $ | 614 |
| $ | 562 |
|
| Provision for income taxes | (64) |
| (76) |
| (68) |
| (193) |
| (192) |
| (175) |
|
| Minority interest - DKL | (22) |
| (25) |
| (36) |
| (31) |
| (29) |
| (29) |
|
| Minority interest - ALDW | (13) |
| (21) |
| (13) |
| (36) |
| (36) |
| (33) |
|
| Net income | $ | 134 |
| $ | 140 |
| $ | 126 |
| $ | 358 |
| $ | 357 |
| $ | 325 |
|
| | | | | | | |
| Average shares outstanding | 71.8 |
| 81.4 |
| 78.6 |
| 72.9 |
| 67.2 |
| 61.4 |
|
| | | | | | | |
| Earnings per share | $ | 1.86 |
| $ | 1.72 |
| $ | 1.61 |
| $ | 4.91 |
| $ | 5.32 |
| $ | 5.29 |
|
| | | | | | | |
| Statement of Cash Flow Data | | | | | | |
| Cash flow per share | $ | 2.54 |
| $ | 3.62 |
| $ | 5.73 |
| $ | 9.51 |
| $ | 10.03 |
| $ | 10.20 |
|
Adjusted cash flow per share (6) | $ | 2.06 |
| $ | 3.13 |
| $ | 5.08 |
| $ | 8.39 |
| $ | 8.80 |
| $ | 8.86 |
|
| |
(a)___________________________ (1) The Board of Delek intends to pursue drop-down transactions to the extent perceived to be value enhancing (and income/cash flow accretive in the long term) to Delek stockholders. (2) 2017 figures not stated on a pro forma basis to reflect impact of Delek-ALJ Merger, which became effective July 1, 2017 and is projected to result in annual run-rate operating synergies of approximately $85 million and cost of capital synergies of approximately $20 million. (3) El Dorado expected to have a turnaround in 2018, Big Spring expected to have a turnaround in 2019 and Krotz Springs expected to have a turnaround in 2020. (4) Figures reflect $54.9 million of annual Blenders Tax Credits in each of 2017, 2018 and 2019 and assume continued operations of certain non-core assets that are collectively at below break-even EBITDA on an annual basis. Figures differ from Adjusted EBITDA due to (i) inclusion of Blenders Tax Credits, (ii) exclusion of income from joint ventures, and (iii) inclusion of earnings attributable to minority interests in ALDW and DKL. (5) Income from joint ventures represents pro rata earnings attributable to DKL from Caddo Pipeline and Rio Pipeline joint ventures and pro rata earning attributable to Delek from Nevada asphalt terminal and Texas asphalt terminal joint ventures. (6) Excludes projected distributions by ALDW to the outstanding ALDW Public Unitholders and projected distributions to all common units of DKL that are not held by Delek, its subsidiaries or ALDW (the “DKL Public Unitholders”), in each case as reflected in the table below. | | | | | | | | | | | | | | | | | | | | | | Year Ended December 31, | | | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E | | | (in millions) | | Distributions to ALDW Public Unitholders | $ | 9 |
| $ | 13 |
| $ | 12 |
| $ | 40 |
| $ | 40 |
| $ | 39 |
| | Distributions to DKL Public Unitholders | $ | 25 |
| $ | 27 |
| $ | 39 |
| $ | 41 |
| $ | 43 |
| $ | 43 |
|
| EBITDA, which is defined as net earnings plus depreciation and amortization expense, interest and financing costs and income tax expense is a non-GAAP financial measure because it excludes amounts included in net earnings, the most directly comparable measure calculated in accordance with GAAP. This measure should not be considered as an alternative to net earnings or other measures derived in accordance with GAAP. |
The AlonDelek unaudited forecasted financial information is based on various assumptions, including the following principal assumptions:
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| Benchmarks (per barrel) | | | | | | |
| WTI (Cushing) | $ | 49.81 |
| $ | 49.92 |
| $ | 60.48 |
| $ | 74.95 |
| $ | 80.36 |
| $ | 86.50 |
|
| Differentials (per barrel) | | | | | | |
| Midland – WTI (Cushing) | $ | (0.760 | ) | $ | (1.040 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) |
| WTS – WTI (Cushing) | $ | (1.170 | ) | $ | (1.250 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) |
| LLS – WTI (Cushing) | $ | 1.98 |
| $ | 1.84 |
| $ | 1.90 |
| $ | 1.90 |
| $ | 1.90 |
| $ | 1.90 |
|
| Crack Spreads (per barrel) | | | | | | |
| ULSD 5-3-2 | $ | 13.75 |
| $ | 13.85 |
| $ | 13.80 |
| $ | 18.17 |
| $ | 18.22 |
| $ | 17.43 |
|
| HSD 5-3-2 | $ | 11.75 |
| $ | 12.06 |
| $ | 9.94 |
| $ | 14.73 |
| $ | 14.73 |
| $ | 13.13 |
|
| Refining Margins (per barrel) | | | | | | |
Big Spring (1) | $ | 12.22 |
| $ | 11.44 |
| $ | 10.81 |
| $ | 14.34 |
| $ | 14.57 |
| $ | 13.96 |
|
| Tyler | $ | 6.97 |
| $ | 7.95 |
| $ | 7.55 |
| $ | 11.16 |
| $ | 11.01 |
| $ | 10.39 |
|
| El Dorado | $ | 6.48 |
| $ | 5.60 |
| $ | 5.50 |
| $ | 9.15 |
| $ | 9.07 |
| $ | 8.21 |
|
Krotz Springs (1) | $ | 5.64 |
| $ | 5.48 |
| $ | 4.89 |
| $ | 8.54 |
| $ | 8.95 |
| $ | 8.37 |
|
| Refining Utilization | | | | | | |
Big Spring (1) | 100 | % | 99 | % | 92 | % | 100 | % | 99 | % | 100 | % |
| Tyler | 92 | % | 97 | % | 97 | % | 97 | % | 89 | % | 97 | % |
| El Dorado | 93 | % | 86 | % | 93 | % | 93 | % | 93 | % | 93 | % |
Krotz Springs (1) | 95 | % | 97 | % | 97 | % | 90 | % | 97 | % | 96 | % |
Retail (1) | | | | | | |
| Sites | 302 |
| 305 |
| 310 |
| 315 |
| 320 |
| 325 |
|
| Fuel volume (per thousand gallons) | 352 |
| 715 |
| 722 |
| 729 |
| 737 |
| 744 |
|
| Fuel margin (per gallon) | $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
|
Asphalt (1) | | | | | | |
| Total tons sold (millions of tons) | 260 |
| 490 |
| 490 |
| 490 |
| 490 |
| 490 |
|
| Gross margin (per ton) | $ | 115.50 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
|
| Total Crude (barrels per day) | | | | | | |
Big Spring (1) | 73,000 |
| 72,118 |
| 67,000 |
| 73,000 |
| 72,000 |
| 73,000 |
|
| Tyler | 68,852 |
| 72,504 |
| 72,504 |
| 72,500 |
| 66,668 |
| 72,504 |
|
| El Dorado | 74,141 |
| 68,419 |
| 74,501 |
| 74,500 |
| 74,501 |
| 74,501 |
|
Krotz Springs (1) | 70,413 |
| 72,007 |
| 72,007 |
| 66,303 |
| 72,007 |
| 70,674 |
|
___________________________
(1)Figures for 2017 are based on assumptions for second half of 2017 (post Delek-ALJ Merger).
Refining barrels per day sold at Alon'sDelek Projections Excluding Potential Drop-Down Transactions
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| | (in millions, except per share amounts) |
Statements of Income Data (1) | | | | | | |
| Gross refining profit | $ | 642 |
| $ | 874 |
| $ | 849 |
| $ | 1,275 |
| $ | 1,271 |
| $ | 1,221 |
|
| Refining operating expenses | (301) |
| (394) |
| (395) |
| (394) |
| (395) |
| (397) |
|
Total refining contribution margin (2) | $ | 342 |
| $ | 480 |
| $ | 453 |
| $ | 881 |
| $ | 876 |
| $ | 824 |
|
| DKL contribution margin | 121 |
| 121 |
| 123 |
| 124 |
| 125 |
| 125 |
|
| Retail contribution margin | 25 |
| 50 |
| 56 |
| 62 |
| 69 |
| 75 |
|
| Renewables contribution margin | 23 |
| 26 |
| 26 |
| 7 |
| 7 |
| 7 |
|
| Other segment contribution margin | 33 |
| 30 |
| 33 |
| 1 |
| 1 |
| 1 |
|
| SG&A and corporate | (156) |
| (135) |
| (127) |
| (130) |
| (131) |
| (136) |
|
Total EBITDA (3) | $ | 387 |
| $ | 572 |
| $ | 565 |
| $ | 945 |
| $ | 946 |
| $ | 897 |
|
| Depreciation and amortization | (165) |
| (221) |
| (232) |
| (242) |
| (250) |
| (257) |
|
| Operating income | $ | 222 |
| $ | 351 |
| $ | 333 |
| $ | 703 |
| $ | 696 |
| $ | 640 |
|
| Interest expense | (84) |
| (110) |
| (108) |
| (104) |
| (100) |
| (96) |
|
Income from joint ventures (4) | 95 |
| 24 |
| 25 |
| 25 |
| 25 |
| 25 |
|
| Income before taxes | $ | 233 |
| $ | 266 |
| $ | 250 |
| $ | 624 |
| $ | 621 |
| $ | 569 |
|
| Provision for income taxes | (64) |
| (78) |
| (75) |
| (198) |
| (197) |
| (180) |
|
| Minority interest - DKL | (22) |
| (22) |
| (22) |
| (22) |
| (22) |
| (22) |
|
Minority interest - ALDW | (13) |
| (21) |
| (13) |
| (36) |
| (36) |
| (33) |
|
| Net income | $ | 134 |
| $ | 144 |
| $ | 139 |
| $ | 368 |
| $ | 366 |
| $ | 334 |
|
| | | | | | | |
| Average shares outstanding | 71.8 |
| 81.4 |
| 78.6 |
| 72.9 |
| 67.2 |
| 61.4 |
|
| | | | | | | |
| Earnings per share | $ | 1.86 |
| $ | 1.77 |
| $ | 1.77 |
| $ | 5.05 |
| $ | 5.45 |
| $ | 5.43 |
|
| | | | | | | |
| Statement of Cash Flow Data | | | | | | |
| Cash flow per share | $ | 2.55 |
| $ | 3.63 |
| $ | 5.72 |
| $ | 9.53 |
| $ | 10.06 |
| $ | 10.24 |
|
Adjusted cash flow per share (5) | $ | 2.06 |
| $ | 3.15 |
| $ | 5.21 |
| $ | 8.58 |
| $ | 9.05 |
| $ | 9.13 |
|
___________________________
(1) 2017 figures not stated on a pro forma basis to reflect impact of Delek-ALJ Merger, which became effective July 1, 2017 and is projected to result in annual run-rate operating synergies of approximately $85 million and cost of capital synergies of approximately $20 million.
(2) El Dorado expected to have a turnaround in 2018, Big Spring refinery was assumedexpected to range between approximately 68,700have a turnaround in 2019 and 74,200 between 2017E and 2021E, driven by turnaround and maintenance with flat refining capacity;
Refining barrels per day sold at Alon's Krotz Springs refinery was assumedexpected to range between approximately 68,300have a turnaround in 2020.
(3) Figures reflect $54.9 million of annual Blenders Tax Credits in each of 2017, 2018 and 77,000 between 2017E2019 and 2021E, drivenassume continued operations of certain non-core assets that are collectively at below break-even EBITDA on an annual basis. Figures differ from Adjusted EBITDA due to (i) inclusion of Blenders Tax Credits, (ii) exclusion of income from joint ventures, and (iii) inclusion of earnings attributable to minority interests in ALDW and DKL.
(4) Income from joint ventures represents pro rata earnings attributable to DKL from Caddo Pipeline and Rio Pipeline joint ventures and pro rata earning attributable to Delek from Nevada asphalt terminal and Texas asphalt terminal joint ventures.
(5) Excludes projected distributions by turnaroundALDW to the outstanding ALDW Public Unitholders and maintenance with flat refining capacity;projected distributions to all common units of DKL that are not held by Delek, its subsidiaries or ALDW (the “DKL Public Unitholders”), in each case as reflected in the table below.
Refining margin at Alon's Big Spring refinery was assumed to range from $10 to $14 per barrel, between 2017E and 2021E; andRefining margin at Alon's Krotz Springs refinery was assumed to range from $5 to $7 per barrel, between 2017E and 2021E. |
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| | (in millions) |
| | | | | | | |
| Distributions to ALDW Public Unitholders | $ | 9 |
| $ | 13 |
| $ | 12 |
| $ | 40 |
| $ | 40 |
| $ | 39 |
|
| Distributions to DKL Public Unitholders | $ | 26 |
| $ | 27 |
| $ | 28 |
| $ | 28 |
| $ | 29 |
| $ | 29 |
|
The Delek unaudited forecasted financial information is based on various assumptions, including the following principal assumptions:
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017E | 2018E | 2019E | 2020E | 2021E | 2022E |
| Benchmarks (per barrel) | | | | | | |
| WTI (Cushing) | $ | 49.81 |
| $ | 49.92 |
| $ | 60.48 |
| $ | 74.95 |
| $ | 80.36 |
| $ | 86.50 |
|
| Differentials (per barrel) | | | | | | |
| Midland – WTI (Cushing) | $ | (0.760 | ) | $ | (1.040 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) | $ | (0.850 | ) |
| WTS – WTI (Cushing) | $ | (1.170 | ) | $ | (1.250 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) | $ | (1.050 | ) |
| LLS – WTI (Cushing) | $ | 1.98 |
| $ | 1.84 |
| $ | 1.90 |
| $ | 1.90 |
| $ | 1.90 |
| $ | 1.90 |
|
| Crack Spreads (per barrel) | | | | | | |
| ULSD 5-3-2 | $ | 13.75 |
| $ | 13.85 |
| $ | 13.80 |
| $ | 18.17 |
| $ | 18.22 |
| $ | 17.43 |
|
| HSD 5-3-2 | $ | 11.75 |
| $ | 12.06 |
| $ | 9.94 |
| $ | 14.73 |
| $ | 14.73 |
| $ | 13.13 |
|
| Refining Margins (per barrel) | | | | | | |
Big Spring (1) | $ | 12.22 |
| $ | 11.44 |
| $ | 10.81 |
| $ | 14.34 |
| $ | 14.57 |
| $ | 13.96 |
|
| Tyler | $ | 6.97 |
| $ | 7.95 |
| $ | 7.55 |
| $ | 11.16 |
| $ | 11.01 |
| $ | 10.39 |
|
| El Dorado | $ | 6.48 |
| $ | 5.60 |
| $ | 5.50 |
| $ | 9.15 |
| $ | 9.07 |
| $ | 8.21 |
|
Krotz Springs (1) | $ | 5.64 |
| $ | 5.48 |
| $ | 4.89 |
| $ | 8.54 |
| $ | 8.95 |
| $ | 8.37 |
|
| Refining Utilization | | | | | | |
Big Spring (1) | 100 | % | 99 | % | 92 | % | 100 | % | 99 | % | 100 | % |
| Tyler | 92 | % | 97 | % | 97 | % | 97 | % | 89 | % | 97 | % |
| El Dorado | 93 | % | 86 | % | 93 | % | 93 | % | 93 | % | 93 | % |
Krotz Springs (1) | 95 | % | 97 | % | 97 | % | 90 | % | 97 | % | 96 | % |
Retail (1) | | | | | | |
| Sites | 302 |
| 305 |
| 310 |
| 315 |
| 320 |
| 325 |
|
| Fuel volume (per thousand gallons) | 352 |
| 715 |
| 722 |
| 729 |
| 737 |
| 744 |
|
| Fuel margin (per gallon) | $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
| $ | 0.20 |
|
Asphalt (1) | | | | | | |
| Total tons sold (millions of tons) | 260 |
| 490 |
| 490 |
| 490 |
| 490 |
| 490 |
|
| Gross margin (per ton) | $ | 115.50 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
| $ | 104.09 |
|
| Total Crude (barrels per day) | | | | | | |
Big Spring (1) | 73,000 |
| 72,118 |
| 67,000 |
| 73,000 |
| 72,000 |
| 73,000 |
|
| Tyler | 68,852 |
| 72,504 |
| 72,504 |
| 72,500 |
| 66,668 |
| 72,504 |
|
| El Dorado | 74,141 |
| 68,419 |
| 74,501 |
| 74,500 |
| 74,501 |
| 74,501 |
|
Krotz Springs (1) | 70,413 |
| 72,007 |
| 72,007 |
| 66,303 |
| 72,007 |
| 70,674 |
|
___________________________
(1)Figures for 2017 are based on assumptions for second half of 2017 (post Delek-ALJ Merger).
The estimates and assumptions underlying the AlonDelek unaudited forecasted financial information are inherently uncertain and, though considered reasonable by the management of AlonALDW and Delek as of the date of the preparation of such unaudited forecasted financial information, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties
that could cause actual results to differ materially from those contained in the unaudited forecasted financial information, including, among other things, the matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 44 and 47, respectively and in Alon's Annual Report on Form 10-K for the year ended December 31, 2016 incorporated by reference in this joint proxy statement/prospectus. Accordingly, there can be no assurance that the forecasted results are indicative of the future performance of Alon, or that actual results will not differ materially from those presented in the Alon unaudited forecasted financial information. Inclusion of the Alon unaudited forecasted financial information in this joint proxy statement/prospectus should not be regarded as a representation by any person that the results contained in the Alon unaudited forecasted financial information will be achieved.
The Alon unaudited forecasted financial information is not included in this joint proxy statement/prospectus in order to induce any stockholder to vote in favor of any of the proposals at the Delek special meeting or the Alon special meeting or to acquire securities of Delek.
Unaudited Forecasted Financial Information Prepared by Alon
The following table presents select preliminary unaudited forecasted financial information of Alon for the fiscal years ending 2016 through 2021 prepared by Alon’s management at the request of the Special Committee and provided to the Alon Board, J.P. Morgan and Delek (the “Preliminary Alon Projections”).
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | CY2016E | | CY2017E | | CY2018E | | CY2019E | | CY2020E | | CY2021E |
| (dollars in millions, except per barrel data) | | | | | | | | | | | | |
| Big Spring | | | | | | | | | | | | |
| Total refinery throughput | | 71,249 |
| | 74,220 |
| | 74,235 |
| | 68,713 |
| | 74,235 |
| | 74,235 |
|
| Refinery operating margin per barrel | | $ | 8.57 |
| | $ | 11.27 |
| | $ | 13.00 |
| | $ | 14.36 |
| | $ | 14.06 |
| | $ | 14.10 |
|
| Refinery direct operating expense per barrel | | $ | 3.69 |
| | $ | 3.62 |
| | $ | 3.77 |
| | $ | 4.36 |
| | $ | 3.80 |
| | $ | 3.80 |
|
| | | | | | | | | | | | | |
| Krotz Springs | | | | | | | | | | | | |
| Total refinery throughput | | 65,241 |
| | 68,338 |
| | 72,693 |
| | 77,000 |
| | 71,000 |
| | 77,000 |
|
| Refinery operating margin per barrel | | $ | 4.56 |
| | $ | 6.34 |
| | $ | 8.06 |
| | $ | 8.82 |
| | $ | 8.56 |
| | $ | 8.57 |
|
| Refinery direct operating expense per barrel | | $ | 4.00 |
| | $ | 3.37 |
| | $ | 3.34 |
| | $ | 3.26 |
| | $ | 3.44 |
| | $ | 3.32 |
|
| | | | | | | | | | | | | |
| Total adjusted EBITDA | | $ | 85 |
| | $ | 232 |
| | $ | 362 |
| | $ | 440 |
| | $ | 535 |
| | $ | 548 |
|
| Capital expenditures | | (76 | ) | | (149 | ) | | (229 | ) | | (262 | ) | | (149 | ) | | (58 | ) |
| Adjusted EBITDA less capital expenditures | | $ | 9 |
| | $ | 83 |
| | $ | 132 |
| | $ | 178 |
| | $ | 386 |
| | $ | 489 |
|
| | | | | | | | | | | | | |
| Other cash flow items: | | | | | | | | | | | | |
| Depreciation and amortization | | $ | 147 |
| | $ | 112 |
| | $ | 112 |
| | $ | 118 |
| | $ | 130 |
| | $ | 128 |
|
| Changes in net working capital | | $ | (7 | ) | | $ | 10 |
| | $ | 6 |
| | $ | 1 |
| | $ | (13 | ) | | $ | 2 |
|
| Net asset proceeds | | $ | — |
| | $ | 59 |
| | $ | 63 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| MLP distributions | | $ | (7 | ) | | $ | (12 | ) | | $ | (21 | ) | | $ | (20 | ) | | $ | (51 | ) | | $ | (56 | ) |
The following table presents select unaudited forecasted financial information of Alon for the fiscal years ending 2016 through 2021 prepared by Alon’s management as part of Alon’s regular year-end strategic planning process and provided to the Alon Board, J.P. Morgan and Delek (the “Alon Projections”):
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | CY2016E | | CY2017E | | CY2018E | | CY2019E | | CY2020E | | CY2021E |
| (dollars in millions, except per barrel data) | | | | | | | | | | | | |
| Big Spring | | | | | | | | | | | | |
| Total refinery throughput | | 71,502 |
| | 76,012 |
| | 73,017 |
| | 74,201 |
| | 82,449 |
| | 79,517 |
|
| Refinery operating margin per barrel | | $ | 9.17 |
| | $ | 12.42 |
| | $ | 13.09 |
| | $ | 15.67 |
| | $ | 17.88 |
| | $ | 19.94 |
|
| Refinery direct operating expense per barrel | | $ | 3.73 |
| | $ | 3.59 |
| | $ | 3.74 |
| | $ | 3.68 |
| | $ | 3.30 |
| | $ | 3.43 |
|
| | | | | | | | | | | | | |
| Krotz Springs | | | | | | | | | | | | |
| Total refinery throughput | | 66,988 |
| | 73,812 |
| | 77,256 |
| | 75,525 |
| | 70,818 |
| | 77,256 |
|
| Refinery operating margin per barrel | | $ | 4.48 |
| | $ | 6.86 |
| | $ | 8.26 |
| | $ | 9.64 |
| | $ | 10.95 |
| | $ | 13.61 |
|
| Refinery direct operating expense per barrel | | $ | 4.17 |
| | $ | 3.20 |
| | $ | 3.06 |
| | $ | 3.13 |
| | $ | 3.33 |
| | $ | 3.06 |
|
| | | | | | | | | | | | | |
| Total adjusted EBITDA | | $ | 84 |
| | $ | 265 |
| | $ | 344 |
| | $ | 428 |
| | $ | 543 |
| | $ | 676 |
|
| Capital expenditures | | $ | (67 | ) | | $ | (129 | ) | | $ | (238 | ) | | $ | (360 | ) | | $ | (176 | ) | | $ | (80 | ) |
| Adjusted EBITDA less capital expenditures | | $ | 17 |
| | $ | 135 |
| | $ | 106 |
| | $ | 68 |
| | $ | 368 |
| | $ | 596 |
|
| | | | | | | | | | | | | |
| Other cash flow items: | | | | | | | | | | | | |
| Depreciation and amortization | | $ | 146 |
| | $ | 127 |
| | $ | 109 |
| | $ | 117 |
| | $ | 135 |
| | $ | 142 |
|
| Changes in net working capital | | $ | 9 |
| | $ | 45 |
| | $ | (6 | ) | | $ | (3 | ) | | $ | (3 | ) | | $ | (3 | ) |
| Net asset proceeds | | $ | 17 |
| | $ | 87 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| MLP distributions | | $ | (4 | ) | | $ | (16 | ) | | $ | (17 | ) | | $ | (12 | ) | | $ | (44 | ) | | $ | (53 | ) |
In reviewing the Alon Projections, the Special Committee, Alon’s management and J.P. Morgan discussed the assumptions underlying the Alon Projections, including the lack of certainty in the growth projects reflected in the Alon Projections. Following these discussions, the Special Committee directed Alon’s management, with the assistance of J.P. Morgan, to produce select unaudited forecasted financial information of Alon for the fiscal years ending 2016 through 2021 based on the Alon Projections that excluded growth projects (the “Alon Projections Excluding Growth Projects”). The following table presents the Alon Projections Excluding Growth Projects, which were provided to the Alon Board and J.P. Morgan:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | CY2016E | | CY2017E | | CY2018E | | CY2019E | | CY2020E | | CY2021E |
| (dollars in millions) | | | | | | | | | | | | |
| Total adjusted EBITDA | | $ | 84 |
| | $ | 265 |
| | $ | 325 |
| | $ | 342 |
| | $ | 406 |
| | $ | 509 |
|
| Capital expenditures | | $ | (48 | ) | | $ | (70 | ) | | $ | (113 | ) | | $ | (198 | ) | | $ | (131 | ) | | $ | (66 | ) |
| Adjusted EBITDA less capital expenditures | | $ | 36 |
| | $ | 194 |
| | $ | 211 |
| | $ | 144 |
| | $ | 276 |
| | $ | 443 |
|
| | | | | | | | | | | | | |
| Other cash flow items: | | | | | | | | | | | | |
| Depreciation and amortization | | $ | 145 |
| | $ | 124 |
| | $ | 99 |
| | $ | 98 |
| | $ | 114 |
| | $ | 121 |
|
| Changes in NWC | | $ | (1 | ) | | $ | 45 |
| | $ | (5 | ) | | $ | (2 | ) | | $ | (2 | ) | | $ | (2 | ) |
| Net asset proceeds | | $ | 17 |
| | $ | 87 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| MLP distributions | | $ | (4 | ) | | $ | (16 | ) | | $ | (16 | ) | | $ | (10 | ) | | $ | (33 | ) | | $ | (40 | ) |
The estimates and assumptions underlying the Alon Preliminary Projections, the Alon Projections and the Alon Projections Excluding Growth Projects are inherently uncertain and, though considered reasonable by the management of Alon as of the date of the preparation of such unaudited forecasted financial information, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those contained in the unaudited forecasted financial information, including, among other things, the matters described in the sections entitled “Cautionary“Cautionary Statement Regarding Forward-Looking Statements”Information” and “Risk Factors“Risk Factors.” beginning on pages 44 and 47, respectively. Accordingly, there can be no assurance that the forecasted results are indicativenecessarily predictive of the actual future performance of Alon,Delek, or that actual results will not differ materially from those presented in the AlonDelek unaudited forecasted financial information. Inclusion of the AlonDelek unaudited forecasted financial information in this joint proxyconsent statement/prospectus should not be regarded as a representation by any person that the results contained in the AlonDelek unaudited forecasted financial information will be achieved.
The AlonDelek unaudited forecasted financial information is not included in this joint proxyconsent statement/prospectus in order to induce any stockholderALDW unitholder to vote in favor of anyconsent to the Merger.
Reasons of the proposals atDelek Board for the Alon special meeting orMerger
In evaluating the Merger, the Delek special meeting orBoard consulted with management and Delek’s legal and financial advisors. The Delek Parties’ reasons for the Merger include, but are not limited to:
A Simplified Corporate Structure. After the Delek-ALJ Merger, on a consolidated basis Delek included three public reporting companies. The Merger simplifies Delek’s structure by eliminating one public reporting company and the
associated public company costs. Delek also believes that simplification will improve the ability of management to acquire securitiesefficiently manage working capital and growth capital projects. Additionally, the elimination of Alon.future distributions to ALDW Public Unitholders should allow this cash to be reallocated to growth investments.
Improved Access to Drop Downs. The Merger is expected to facilitate the contribution of midstream and logistics assets in Big Spring, Texas to DKL. The Delek Board and the management of Delek expect contributions to DKL will create meaningful value for Delek stockholders.
Tax Basis Step-up. The Merger allows Delek to receive a tax basis step-up associated with the acquisition of the ALDW Public Units.
Cost of Capital Advantages. Delek believes that the Merger facilitates the refinancing of ALDW’s debt on more attractive terms.
Interests of Delek’s Directors and Executive OfficersCertain Persons in the MergersMerger
In consideringThe following table sets forth information with respect to the recommendationsbeneficial ownership of the Delek Board, Delek stockholders should be aware that someALDW Common Units as of theNovember 30, 2017 of each director and named executive officer of ALDW GP, and all directors and executive officers of DelekALDW GP as a group. In addition, the table presents information about each person known by ALDW to beneficially own 5% or more of ALDW Common Units. The amounts and percentage of units or shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may have interestsbe deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he or she has no economic interest. Unless otherwise indicated by footnote, the beneficial owner exercises sole voting and investment power over the units. Additionally, unless otherwise indicated by footnote, the percentage of outstanding ALDW Common Units is calculated on the basis of 62,529,328 of ALDW Common Units outstanding as of November 30, 2017.
|
| | | | | | |
| | | Beneficial Unit Ownership |
| Directors, Executive Officers and 5% Unitholders | | Number of ALDW Common Units | | Percentage of Outstanding ALDW Common Units |
| Directors and Executive Officers: | | | | |
| Frederec Green | | — |
| | | — |
| Ezra Uzi Yemin | | — |
| | | — |
| Kevin Kremke | | — |
| | | — |
| David Wiessman | | — |
| | | — |
| Jeff D. Morris | | — |
| | | — |
| Snir Wiessman | | — |
| | | — |
| Eitan Raff | | 8,915 |
| | | * |
| Sheldon Stein | | 8,256 |
| | | * |
| Ella Ruth Gera | | 7,352 |
| | | * |
| Yeshayahu Pery | | 4,805 |
| | | * |
| Alan Moret | | — |
| | | — |
| Shai Even | | — |
| | | — |
Jimmy C. Crosby (1) | | — |
| | | — |
Claire Hart (1) | | — |
| | | — |
Michael Oster (1) | | — |
| | | — |
James Ranspot (1) | | — |
| | | — |
Kyle McKeen (1) | | — |
| | | — |
Jeff Brorman (1) | | — |
| | | — |
| All directors and executive offers as a group (14 persons) | | 29,328 |
| | | * |
| 5% or more Unitholders: | | | | | |
Delek US Holdings, Inc. (2) | | 51,000,000 |
| | | 81.6% |
_____________________________
* Indicates less than 1%
(1) Officer resigned effective July 27,2017, as disclosed in the transaction that are different from, or are in addition to, the interestsALDW Form 8-K dated July 27, 2017.
(2) Delek US Holdings, Inc. holds its ALDW Common Units through one of Delek’s stockholders generally. These interests may present such executive officers and directors with actual or potential conflicts of interest. These interests include their designation as directors or executive officers of HoldCo following the completionits subsidiaries, Alon Assets, Inc. Delek US Holdings, Inc. owns 100% of the transactions,Class A voting common stock in Alon Assets, Inc. and the service99.79% of executive officersall outstanding common stock. The remaining 0.21% of outstanding common stock, which is Class B non-voting common stock, is owned by Jeff Morris. Delek US Holdings, Inc. also indirectly owns ALDW GP, which manages and directorsoperates ALDW and has a non-economic general partner interest in ALDW. Voting and investment determinations of Delek on the Alon Board since May 2015. The Delek Board was awareUS Holdings, Inc. are made by its board of these interests during its deliberations on the meritsdirectors, which is comprised of the transactionfollowing members: Ezra Uzi Yemin, William J. Finnerty, Carlos E. Jorda, Charles H. Leonard, Gary M. Sullivan, Jr., Shlomo Zohar, and in deciding to recommend that Delek stockholders vote for the New Delek share issuance proposal. See “—BackgroundDavid Wiessman. As a result of, and by virtue of the Mergers” and “—Delek’s Reasons forrelationships described above, each of the Merger and New Delek Share Issuance; Recommendationmembers of the Delek Board.”Board may be deemed to exercise voting and dispositive power with respect to securities held by Alon Assets, Inc.
Service as Directors of AlonMessrs. Ezra Uzi Yemin, Chairman, President and Chief Executive Officer of Delek, Assaf Ginzburg, Executive Vice President and Chief Financial Officer of Delek, Frederec Green Executive Vice President and Chief Operating Officer of Delek, Mark D. Smith, Executive Vice President of Delek, and Avigal Soreq, Executive Vice President of Delek, each serve on the Alon Board, of which Mr. Ezra Uzi Yemin is also the Chairman. Messrs. Yemin, Ginzburg, Green, Smith and Soreq were appointed to the Alon Board in connection with Delek’s acquisition of approximately 47% of the issued and outstanding Alon common stock in May 2015. None of Messrs. Yemin, Ginzburg, Green, Smith and Soreq have received compensation from Alon in connection with service on the Alon Board.No Appraisal Rights
Merger-Related Compensation for Delek’s Named Executive Officers
The rules promulgated by the SEC under Section 14A of the Exchange Act generallyDelaware law does not require companies to seek a non-binding advisory vote from stockholders with respect to certain compensation that will or may become payable to their named executive officersappraisal rights in connection with a merger. Delek is not seeking this non-binding, advisory vote from its stockholders because none of Delek’s named executive officers are entitledmerger involving a Delaware limited partnership pursuant to any such merger-related compensation that would otherwise require such a vote. For information regarding the interests of Delek’s named executive officers in the Merger, see “The Mergers—Interests of Delek’s Directors and Executive Officers in the Mergers.”
Interests of Alon’s Directors and Executive Officers in the Mergers
In considering the recommendationSection 17-212 of the Alon Board that the Alon stockholders voteDelaware LP Act. However, a partnership agreement or an agreement of merger or consolidation may provide contractual appraisal rights with respect to approve and adopt the merger agreement and the transactions contemplated by the merger agreement, including the Alon Merger, Alon’s stockholders should be aware that aside from theira partnership interest or another interest in a limited partnership for any class or group or series of partners or partnership interests as stockholders of Alon, Alon’s directors and executive officers have interests in the Alon Merger that may be different from, or in addition to, those of other stockholders of Alon generally. In the case of Alon's directors, these interests include (1) potential service on the Delek Board or the board of directors of the general partner of Delek Logistics if selected by the Special Committee pursuant to its right to nominate one person to each such board of directors, as described in the merger agreement, and (2) Mr. Wiessman’s indirect ownership of approximately 1% of Delek’s outstanding shares of common stock through his indirect ownership in Bielsol Investments (1987) Ltd., a privately owned Israeli company and shareholder of Alon Israel, the beneficial owner of approximately 9.7% of Delek's outstanding shares of common stock. The members of the Alon Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the Alon Merger, and in recommending to the stockholders of Alon that the merger agreement be approved. Prior to the execution of the merger agreement, Mr. Wiessman disposed of his indirect ownership interests in Bielsol Investments (1987) Ltd., and no longer owns, directly or indirectly, any shares of Delek common stock. See “-Background of the Mergers” and “-Alon’s Reasons for the Transaction; Recommendations of the Special Committee and the Alon Board.” Alon’s stockholders should take these interests into account in deciding whether to vote “FOR” the approval of the merger agreement. These interests are described in more detail below, and certain of them are quantified in the narrative and the tables below.
Treatment of Alon’s Incentive Plan Restricted Stock Awards
Effective upon the Alon Merger, a proportional number of shares of restricted Alon common stock granted to Messrs. Moret, Even, McKeen and Oster on January 9, 2017 (the “January Awards”) will vest. To determine the proportional number of shares of Alon common stock that will vest, the total number of shares of Alon common stock granted under the January Awards will be multiplied by the quotient of (i) the number of days that have elapsed between January 1, 2017 and the date of the Alon Merger, divided by (ii) 365. All remaining unvested shares of Alon common stock granted pursuant to the January Awards will remain outstanding and be converted into restricted stock awards denominated in shares of New Delek common stock as described below.
Effective immediately prior to the effective time of the Alon Merger, each outstanding share of unvested restricted Alon common stock granted to any employee or director of Alon, any of its subsidiaries or any of its predecessors under the Alon USA Energy, Inc. 2005 Incentive Compensation Plan (the “Alon Incentive Plan”) will automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into a restricted stock award denominated in shares of New Delek common stock. Each converted restricted stock award shall continue to have and be subject to substantially the same terms and conditions as were applicable to such restricted stock award immediately before the effective time of the merger (including vesting conditions, accumulated dividends and other dividend rights), except that each restricted stock award shall be converted to cover that number of shares of New Delek common stock equal to the product (rounded down to the nearest whole number) of (A) the number of shares of Alon common stock underlying such existing restricted stock award and (B) the exchange ratio, which is 0.504.
Quantification of Payments for Alon’s Incentive Plan Restricted Stock Awards
As described above, all outstanding unvested restricted stock awards held by Alon’s executive officers and directors will be assumed by HoldCo and will remain subject to substantially the same terms and conditions as were applicable to such awards immediately prior to the effective time of the merger. The following table sets forth, as of February 17, 2017, for each of Alon’s directors and executive officers who hold Alon Incentive Plan restricted stock awards, the aggregate number of Alon Incentive Plan restricted stock awards held by such individuals and the estimated value of the underlying shares of New Delek common stock.
|
| | | |
| Name | Position | Number of Shares of Restricted Stock (#)(3) | Value ($)(4) |
| Paul Eisman(1) | Former Chief Executive Officer | 0 | $0 |
| Alan Moret(2) | Interim Chief Executive Officer | 30,756 | $384,450 |
| Jeff Morris | Vice Chairman – Alon USA Partners, LP | 0 | $0 |
| Michael Oster | Senior Vice President of Mergers & Acquisitions | 21,968 | $374,600 |
| Shai Even | Senior Vice President and Chief Financial Officer | 30,756 | $384,450 |
| James Ranspot | Senior Vice President and General Counsel | 126,560 | $1,582,000 |
| Kyle McKeen | Chief Executive Officer of Alon Brands, Inc. | 21,968 | $374,600 |
| Jimmy Crosby | Senior Vice President - Refining | 153,360 | $1,917,000 |
| David Wiessman | Executive Director | 0 | $0 |
| Ezra Uzi Yemin | Chairman of the Board of Directors | 0 | $0 |
| Zalman Segal | Director | 4,356 | $54,450 |
| Ron W. Haddock | Director | 4,356 | $54,450 |
| Ilan Cohen | Director | 4,356 | $54,450 |
| Assaf Ginzburg | Director | 0 | $0 |
| Frederec Green | Director | 0 | $0 |
| Mark D. Smith | Director | 0 | $0 |
| Avigal Soreq | Director | 0 | $0 |
| William Kacal | Director | 2,800 | $35,000 |
| Franklin Wheeler | Director | 2,800 | $35,000 |
| |
(1) | Mr. Eisman terminated service as Alon’s Chief Executive Officer effective December 31, 2016. As such, he has no outstanding shares of restricted stock that would be affected by the Mergers. |
| |
(2) | Mr. Moret was named Alon’s Interim Chief Executive Officer on January 2, 2017. |
(3) The number of Alon restricted stock awards held by each individual within the table above is subject to change based upon any vesting or forfeiture event that could occur after February 24, 2017 but prior to the closing of the Mergers. Alon does not expect that any additional awards will be granted pursuant to the Alon Incentive Plan prior to the close of the Mergers.
| |
(4) | For purposes of this table, the per share value of New Delek common stock underlying each share of converted restricted stock was estimated to be equal to $12.50, determined by multiplying the exchange ratio (0.504) by $24.81, the average closing price of Delek common stock over the first five business days following the first public announcement of the Mergers. The actual value of the New Delek common stock received at the time of the Mergers will depend upon the price of New Delek common stock following the Mergers. The value that each |
current Alon director or executive officer could receive upon a sale or other disposition of any New Delek common stock to be received in the Mergers cannot be determined until such a sale or disposition occurs.
Employment Agreements
Alon has entered into employment agreements with each of its executive officers. As of February 27, 2017, it is unknown whether Alon’s executive officers will be terminated in connection with any amendment of a partnership agreement, any merger or consolidation in which the Alon Merger. However, should any of Alon’s executive officers be terminated under circumstances as described herein, the employment agreements provide for certain compensation and benefits to each of those executives as described below.
Paul Eisman. On December 31, 2016, the employment agreement between Alon and Paul Eisman, Alon’s Chief Executive Officer and President, expired in accordance with its terms and Mr. Eisman’s service as the Chief Executive Officer and President of Alon ceased.
Alan Moret. Mr. Moret was named Alon’s Interim Chief Executive Officer on January 2, 2017. Pursuantlimited partnership is a constituent party to the terms of Mr. Moret’s employment agreement, if Mr. Moret is terminated without Cause (as defined below), Alon determines not to renew his employment agreement,merger or he resigns upon at least 90 days’ prior written notice for Good Reason (as defined below), he will be entitled to receive his base salary through the termination date,consolidation, any annual bonus earned, but unpaid asconversion of the date of termination forlimited partnership to another business form, any previously completed calendar year, a lump sum severance payment equaltransfer to five times his current base salary, and continuation of health coverage through November 26, 2020, with Mr. Moret required to payor domestication or continuance in any jurisdiction by the current employee premium for such continued coverage. The agreement makes Mr. Moret subject to a covenant not to solicit the business of Alon’s clients or customers during the term of his employment and for two years following termination, and a covenant not to solicit for employment any person who is or has been employed by Alon during the 12 months prior to the solicitation during the term of his employment and for a period of one year thereafter. The agreement also prohibits Mr. Moret from disclosing Alon’s confidential information received through his employment for two years following termination.
For purposes of Mr. Moret’s employment agreement, the following terms are generally defined as follows:
“Cause” means his (i) continued failure to substantially perform his duties under the employment agreement (other than as a result of total or partial incapacity due to physical or mental illness) for a period of 30 days following written notice by Alon to him of such failure; (ii) commission of a material act of illegality, theft or dishonesty in the course of his duties relating to Alon’s activities, assets operations or employees; (iii) an act or acts on his part constituting a felony under the laws of California; (iv) his willful malfeasance or willful misconduct in connection with his duties; or (v) his breach of the restrictive covenants set forth in the employment agreement.
“Good Reason” means the occurrence of one of the following, but only upon notice in writing from Mr. Moret to Alon describing the event that constitutes good reason and Alon’s failure to correct such event within 30 days after receiving such notice: (i) his election not to extend his employment under the terms of the employment agreement;
(ii) a reduction in his base salary or annual bonus opportunity or target bonus (other than general reductions that affect at least the majority of the salaried employees); (iii) a substantial diminution of his duties; (iv) a transfer of his workplace by more than 35 miles from his prior workplace, provided that the transfer increases his commuting distance; or (v) the involuntary removal of Paul Eisman, in his capacity as President and Chief Executive Officer of Alon,limited partnership, or the removal or resignation of David Wiessman, in his capacity as Chairman of the Board of Alon.
Jeff Morris. Mr. Morris’s employment agreement does not provide for any severance or benefits upon a termination or change in control. Pursuant to the terms of Mr. Morris’s employment agreement, Mr. Morris is subject to covenants not to compete and not to interfere with employment relationships during and for nine months and one year following the term of his employment, respectively. The agreement also prohibits Mr. Morris from disclosing Alon’s proprietary information received through his employment.
Michael Oster. Pursuant to the terms of Mr. Oster’s employment agreement, if Mr. Oster is terminated without Cause (as defined below) or resigns upon at least 30 days’ prior written notice for Good Reason (as defined below), he will be entitled to receive his base salary through the termination date, a prorated share of his annual bonus and a severance payment equal to nine months’ base salary. The agreement makes Mr. Oster subject to a covenant not to compete during the term of his employment, which covenant would have continued post-employment, but terminated after Mr. Oster’s fifth year of employment with Alon, and a covenant not to interfere with employment relationships during the term of his employment and for one year following the termination of his employment. The agreement also prohibits Mr. Oster from disclosing Alon’s proprietary information received through his employment.
For purposes of Mr. Oster’s employment agreement, the following terms are generally defined as follows:
“Cause” means, as to Mr. Oster, his (i) conviction of a felony or misdemeanor where imprisonment is imposed for more than 30 days; (ii) commission of any act of theft, fraud, dishonesty, or falsification of any records of Alon or any employment records; (iii) improper disclosure of confidential information; (iv) any intentional action that has a material detrimental effect on Alon’s reputation or business; (v) any material breach of his employment that is not cured within 10 business days following receipt by Mr. Oster of written notice of such breach; or (vi) unlawful appropriation of a corporate opportunity; (vii) intentional misconduct in connection with the performance of his duties.
“Good Reason” means, as to Mr. Oster, the occurrence of one of the following: (i) without Mr. Oster's prior written consent, the reduction of his base compensation or the percentage of his base compensation established as Mr. Oster’s maximum target bonus percentage for purposes of the annual cash bonus plan; (ii) any material breach of the employment agreement that is not cured within 10 business days following receipt by Alon of written notice of such breach; or (iii) the delivery of written notice that Alon does not wish to automatically renew the Mr. Oster’s employment.
Shai Even. Pursuant to the terms of Mr. Even’s employment agreement, if Mr. Even is terminated without Cause (as defined below), resigns upon at least 30 days’ prior written notice for Good Reason (as defined below), or, if upon a change in control his employment agreement is not assumed by the acquiring person or is terminated at his election following the change in control, he will be entitled to receive his base salary through the termination date, a prorated share of his annual bonus and a severance payment equal to three years’ base salary. The agreement makes Mr. Even subject to a covenant not to compete during the term of his employment, which covenant would have continued post-employment, but terminated after Mr. Even’s fifth year of employment with Alon, and a covenant not to interfere with employment relationships during the term of his employment and for one year following the termination of his employment. The agreement also prohibits Mr. Even from disclosing Alon’s proprietary information received through his employment.
For purposes of Mr. Even’s employment agreement, the following terms are generally defined as follows:
“Cause” means, as to Mr. Even, his (i) conviction of a felony or misdemeanor where imprisonment is imposed for more than 30 days; (ii) commission of any act of theft, fraud, dishonesty, or falsification of any records of Alon or any employment records; (iii) improper disclosure of confidential information; (iv) any intentional action that has a material detrimental effect on Alon’s reputation or business; (v) any material breach of Mr. Even’s employment that is not cured within 10 business days following receipt by Mr. Even of written notice of such breach; or (vi) unlawful appropriation of a corporate opportunity; (vii) intentional misconduct in connection with the performance of his duties.
“Good Reason” means, as to Mr. Even, the occurrence of one of the following: (i) without Mr. Even's prior written consent, the reduction of Mr. Even’s base compensation or the percentage of his base compensation established as his maximum target bonus percentage for purposes of the annual cash bonus plan; (ii) any material breach of the employment agreement that is not cured within 10 business days following receipt by Alon of written notice of such breach; (iii) Alon requires Mr. Even to be based at an office or location that is more than thirty-five miles from the location at which he was based as of the commencement date of his employment, other than in connection with reasonable travel requirements of Alon’s business; (iv) the delivery of written notice that Alon does not wish to automatically renew Mr. Even’s employment; or (v) at any time on or after the date that is 90 calendar days following the closing of a “Fundamental Transaction.”
“Fundamental Transaction” means, as to Mr. Even, a transaction in which (i) Alon shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not Alon is the surviving corporation) another person or persons, (B) sell, assign, transfer, convey or otherwise disposesale of all or substantially all of the properties or assets of Alon to another person, (C) allow another person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50%
of the outstanding voting stock of Alon (not including any shares of voting stock of Alon held by the person or persons making or party to, or associated or affiliated with the persons making or party to, such purchase, tender or exchange offer), (D) consummate a securities purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than the 50% of the outstanding share of voting stock of Alon (not including any shares of voting stock of Alon held by the Person or Persons making or party to, or associated or affiliated with the persons making or party to, such securities purchase agreement or other business combination), or (E) reorganize, recapitalize or reclassify its common stock, or (ii) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3limited partnership’s assets. ALDW Common Unitholders do not have contractual appraisal rights under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by the issued and outstanding common stock and any corporate functions or groups of personnel (i.e., treasury, credit, tax, legal, information technology, supply) are relocated or transferred from or to such person’s corporate offices.
James Ranspot. Pursuant to the terms of Mr. Ranspot’s employment agreement, if Mr. Ranspot is terminated without Cause (as defined below), resigns upon at least 30 days’ prior written notice for Good Reason (as defined below), or, if upon a change in control his employment agreement is not assumed by the acquiring person or is terminated at his election following the change in control, he will be entitled to receive his base salary through the termination date, a prorated share of his annual bonus and a severance payment equal to two years’ base salary. The agreement makes Mr. Ranspot subject to a covenant not to compete during the term of his employment, which covenant would have continued post-employment, but terminated after Mr. Ranspot’s fifth year of employment with Alon, and a covenant not to interfere with employment relationships during the term of his employment and for one year following the termination of his employment. The agreement also prohibits Mr. Ranspot from disclosing Alon’s proprietary information received through his employment.
For purposes of Mr. Ranspot’s employment agreement, the following terms are generally defined as follows:
“Cause” means, as to Mr. Ranspot, his (i) conviction of a felony or misdemeanor where imprisonment is imposed for more than 30 days; (ii) commission of any act of theft, fraud, dishonesty, or falsification of any records of Alon or any employment records; (iii) improper disclosure of confidential information; (iv) any intentional action that has a material detrimental effect on Alon’s reputation or business; (v) any material breach of Mr. Ranspot’s employment that is not cured within 10 business days following receipt by Mr. Ranspot of written notice of such breach; or (vi) unlawful appropriation of a corporate opportunity; (vii) intentional misconduct in connection with the performance of his duties.
“Good Reason” means, as to Mr. Ranspot, the occurrence of one of the following: (i) without Mr. Ranspot's prior written consent, the reduction of Mr. Ranspot’s base compensationALDW Partnership Agreement or the percentage of his base compensation established as his maximum target bonus percentageMerger Agreement.
for purposes of the annual cash bonus plan; (ii) any material breach of the employment agreement that is not cured within 10 business days following receipt by Alon of written notice of such breach; (iii) Alon requires Mr. Ranspot to be based at an office or location that is more than thirty-five miles from the location at which he was based as of the commencement date of his employment, other than in connection with reasonable travel requirements of Alon’s business; (iv) the delivery of written notice that Alon does not wish to automatically renew Mr. Ranspot’s employment; or (v) at any time on or after the date that is 90 calendar days following the closing of a “Fundamental Transaction.”
“Fundamental Transaction” means, as to Mr. Ranspot, a transaction in which (i) Alon shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not Alon is the surviving corporation) another person or persons, (B) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of Alon to another person, (C) allow another person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding voting stock of Alon (not including any shares of voting stock of Alon held by the person or persons making or party to, or associated or affiliated with the persons making or party to, such purchase, tender or exchange offer), (D) consummate a securities purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than the 50% of the outstanding share of voting stock of Alon (not including any shares of voting stock of Alon held by the Person or Persons making or party to, or associated or affiliated with the persons making or party to, such securities purchase agreement or other business combination), or (E) reorganize, recapitalize or reclassify its common stock, or (ii) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by the issued and outstanding common stock and any corporate functions or groups of personnel (i.e., treasury, credit, tax, legal, information technology, supply) are relocated or transferred from or to such person’s corporate offices.
Kyle McKeen. Pursuant to the terms of Mr. McKeen’s employment agreement, if Mr. McKeen is terminated without Cause (as defined below) or resigns upon at least 30 days’ prior written notice for Good Reason (as defined below), he will be entitled to receive his base salary through the termination date, a prorated share of his annual bonus and a severance payment equal to one year’s base salary. The agreement makes Mr. McKeen subject to a covenant not to compete during the term of his employment and for one year following termination of his employment, and a covenant not to interfere with employment relationships during the term of his employment and for one year following the termination of his employment. The agreement also prohibits Mr. McKeen from disclosing Alon’s proprietary information received through his employment.
For purposes of Mr. McKeen’s employment agreement, the following terms are generally defined as follows:
“Cause” means, as to Mr. McKeen, his (i) conviction of a felony or misdemeanor where imprisonment is imposed for more than 30 days; (ii) commission of any act of theft, fraud,
dishonesty, or falsification of any records of Alon or any employment records; (iii) improper disclosure of confidential information; (iv) any intentional action that has a material detrimental effect on Alon’s reputation or business; (v) any material breach of Mr. McKeen’s employment that is not cured within 10 business days following receipt by Mr. McKeen of written notice of such breach; or (vi) unlawful appropriation of a corporate opportunity; (vii) intentional misconduct in connection with the performance of his duties.
“Good Reason” means, as to Mr. McKeen, the occurrence of one of the following: (i) without Mr. McKeen’s prior written consent, the reduction of Mr. McKeen’s base compensation or the percentage of his base compensation established as his maximum target bonus percentage for purposes of the annual cash bonus plan; (ii) any material breach of the employment agreement that is not cured within 10 business days following receipt by Alon of written notice of such breach; or (iii) the delivery of written notice that Alon does not wish to automatically renew Mr. McKeen’s employment.
Jimmy C. Crosby. Pursuant to the terms of Mr. Crosby’s employment agreement, if Mr. Crosby is terminated without Cause (as defined below) or resigns upon at least 30 days’ prior written notice for Good Reason (as defined below), he will be entitled to receive his base salary through the termination date, a prorated share of his annual bonus and a severance payment equal to nine months’ base salary. The agreement makes Mr. Crosby subject to a covenant not to compete during the term of his employment and for nine months following the termination of his employment, and a covenant not to interfere with employment relationships during the term of his employment and for one year following the termination of his employment. The agreement also prohibits Mr. Crosby from disclosing Alon’s proprietary information received through his employment.
For purposes of Mr. Crosby’s employment agreement, the following terms are generally defined as follows:
“Cause” means, as to Mr. Crosby, his (i) conviction of a felony or misdemeanor where imprisonment is imposed for more than 30 days; (ii) commission of any act of theft, fraud, dishonesty, or falsification of any records of Alon or any employment records; (iii) improper disclosure of confidential information; (iv) any intentional action that has a material detrimental effect on Alon’s reputation or business; (v) any material breach of Mr. Crosby’s employment that is not cured within 10 business days following receipt by Mr. Crosby of written notice of such breach; or (vi) unlawful appropriation of a corporate opportunity; (vii) intentional misconduct in connection with the performance of his duties.
“Good Reason” means, as to Mr. Crosby, the occurrence of one of the following: (i) without Mr. Crosby’s prior written consent, the reduction of Mr. Crosby’s base compensation or the percentage of his base compensation established as his maximum target bonus percentage for purposes of the annual cash bonus plan; (ii) any material breach of the employment agreement that is not cured within 10 business days following receipt by Alon of written notice of such breach; or (iii) the delivery of written notice that Alon does not wish to automatically renew Mr. Crosby’s employment.
David Wiessman. Pursuant to an understanding between Alon and Mr. Wiessman (based on the Agreement of Principles of Employment to which Mr. Wiessman and Alon were previously parties), if Mr. Wiessman’s consulting arrangement is terminated by Alon, Alon will be required to pay Mr. Wiessman (1) a fee equal to the product of (i) 200% of his monthly fee multiplied by (ii) the number of years of Mr. Wiessman's service with Alon since August 2000 and (2) 12 months of severance. Upon termination of the arrangement by Mr. Wiessman following a 30-day notice period, Alon will be required to pay Mr. Wiessman a fee equal to the product of (a) 100% of his monthly fee multiplied by (b) the number of years of Mr. Wiessman's service with Alon since August 2000.
The amounts set forth below reflect the estimate of the cash severance payments that certain of the current Alon executive officers could receive pursuant to their employment agreements if they are terminated without Cause or terminate for Good Reason following the merger.
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Name | Potential Cash Severance ($) |
Paul Eisman(1) | $0 |
Alan Moret | $1,843,500 |
Shai Even | $1,044,900 |
Jeff Morris | $0 |
James Ranspot | $607,000 |
Jimmy Crosby | $228,000 |
Kyle McKeen | $347,700 |
Michael Oster | $240,000 |
David Wiessman(2) | $1,518,913 |
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(1) | On December 31, 2016, the employment agreement between Alon and Mr. Eisman expired in accordance with its terms and Mr. Eisman’s service as the Chief Executive Officer and President of Alon ceased. As such, he would receive no severance for a termination in connection with the Alon Merger. |
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(2) | For Mr. Wiessman, the amount above assumes termination of the consulting arrangement by Alon. |
Indemnification and Insurance
The merger agreement provides that, for a period of six years from the effective time, HoldCo shall cause the Astro Surviving Entity to indemnify, defend and hold harmless, to the fullest extent permitted by applicable law, each present and former director and officer of Alon or any of its subsidiaries against any costs or expenses, including attorneys’ fees (including the advancement of such costs and expenses), judgments, fines, losses, claims, damages, liabilities or settlements incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or related to such person’s service as a director or officer of Alon or its subsidiaries prior to the effective time of the merger. For additional information see “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 166.
Merger-Related Compensation for Alon’s Named Executive Officers
Item 402(t) of Regulation S‑K requires disclosure of any arrangement or understanding with Alon’s named executive officers concerning any type of compensation, whether present, deferred or contingent, that is based on or otherwise relates to the Alon Merger. The individuals disclosed within this section are Alon’s executive officers for the most recently completed fiscal year.
The table set forth below details the amount of estimated payments and benefits that each of Alon’s current named executive officers could potentially receive under their employment agreements and restricted stock awards issued pursuant to the terms of the Alon Incentive Plan. Because such payments and benefits are payable pursuant to pre-existing contractual arrangements with Alon’s named executive officers, such payments and benefits will be payable, regardless of the outcome of this advisory vote and regardless of whether the merger agreement is adopted (subject only to the contractual conditions applicable thereto). However, Alon seeks the support of its stockholders and believes that stock holder support is appropriate because Alon has a comprehensive executive compensation program designed to link the compensation of its executives with Alon’s performance and the interests of Alon stockholders.
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| Name | Cash ($)(2) | Equity ($)(3) | Total |
| Paul Eisman(1) | $0 | $0 | $0 |
| Shai Even | $1,044,900 | $384,450 | $1,429,350 |
| Jeff Morris | $0 | $0 | $0 |
| Michael Oster | $240,000 | $374,600 | $614,600 |
| Kyle McKeen | $347,700 | $374,600 | $722,300 |
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(1) | On December 31, 2016, the employment agreement between Alon and Mr. Eisman expired in accordance with its terms and Mr. Eisman’s service as the Chief Executive Officer and President of the company ceased. As such, he would receive no severance or other benefits as a result of the Mergers. |
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(2) | The estimated lump sum severance payments in this column would be paid under the executive’s employment agreement and would be considered “double-trigger” payments, meaning that they would become payable only in connection with a termination, for Cause or for Good Reason in connection with the Alon Merger. If at the time of the termination, the executive is considered to be a “specified employee” under Section 409A of the Internal Revenue Code, the payment will be delayed until the first day of the seventh month following the date of such termination of employment and will bear interest at the prime rate of interest as published in the Wall Street Journal on the first business day following the date of the executive's termination of employment.
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(3) | The estimated equity values in this column would be considered “double-trigger” payments, because the Alon restricted stock awards will be assumed by HoldCo and continue to be subject to substantially the same terms and conditions as were applicable to such restricted stock awards immediately before the effective time of the Alon Merger, including with regards to vesting. Acceleration of the awards will only occur upon the executive’s termination of employment without Cause or for Good Reason. For purposes of this column, the per share value of New Delek common stock underlying each share of converted restricted stock was estimated to be equal to $12.50, determined by multiplying the exchange ratio (0.504) by $24.81, the average closing price of Delek common stock over the first five business days following the first public announcement of the merger agreement. The actual value received upon a termination of employment following the Mergers cannot be determined until termination of employment occurs. |
Treatment of Alon Equity Awards
Effective upon the Alon Merger, a proportional number of shares of restricted Alon common stock granted to Messrs. Even, McKeen and Oster on January 9, 2017 (the “January Awards”) will vest. To determine the proportional number of shares of Alon common stock that will vest, the total number of shares of Alon common stock granted under the January Awards will be multiplied by the quotient of (i) the number of days that have elapsed between January 1, 2017 and the date of the Alon Merger, divided by (ii) 365. All remaining unvested shares of Alon common stock granted pursuant to the January Awards will remain outstanding and be converted into restricted stock awards denominated in shares of New Delek common stock as described below.
Effective immediately prior to the effective time of the Alon Merger, each outstanding share of unvested restricted Alon common stock granted to any employee or director of Alon, any of its subsidiaries or any of its predecessors under the Alon Incentive Plan will automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into a restricted stock award denominated in shares of New Delek common stock. Each converted restricted stock award shall continue to have and be subject to substantially the same terms and conditions as were applicable to such restricted stock award immediately before the effective time of the merger (including vesting conditions, accumulated dividends and other dividend rights), except that each restricted stock award shall be converted to cover that number of shares of New Delek common stock equal to the product (rounded down to the nearest whole number) of (A) the number of shares of Alon common stock underlying such existing restricted stock award and (B) the exchange ratio, which is 0.504.
For more detailed narrative and tabular information about conversion of restricted stock awards held by Alon’s named executive officers, see “Interests of Alon’s Directors and Executive Officers in the Merger” beginning on page 154.
Employee Benefits
Delek has agreed to the following terms with respect to Alon employees and their benefit plans:
To recognize certain unions designated by Alon as the exclusive representative of the applicable bargaining unit;
To continue to honor all Alon benefit plans and compensation arrangements, including medical benefits to certain retirees substantially similar to those in effect immediately before the Alon Merger;
To fully vest participants in the Alon pension plan for involuntary terminations that occur within 180 days of closing or December 31, 2017 (whichever comes first);
To cause HoldCo or Delek benefit plans to recognize employee’s service with Alon for purposes of vesting and eligibility (but not for purposes of benefit accrual), to waive certain pre-existing condition limitations for continuing employees, and to provide credit
for deductibles, co-payments and out-of-pocket maximums for continuing employees; and
To credit continuing employees with accrued vacation and personal holiday time subject to certain conditions.
The merger agreement required Alon to amend its benefits plan relating to retiree medical benefits to provide that no additional retirees will be eligible to receive retiree medical benefits following the date of the merger agreement.
Indemnification; Directors’ and Officers’ Insurance
The parties to the merger agreement have agreed that, from and after the effective time of the Mergers, HoldCo and the Alon surviving entity will, for a period of six years, indemnify and hold harmless (and subject to certain conditions to provide advancement of expenses to) each present and former director and officer of Alon and its subsidiaries in connection with any claim or legal proceeding and, among other things, any resulting losses, expenses, fines, penalties and settlements. HoldCo further agreed to cause the Alon surviving entity to maintain the indemnification obligations it has with respect to such persons under its organizational documents and existing indemnification agreements for a period of at least six years following the Mergers unless otherwise required by law.
In addition, HoldCo or the Alon surviving entity is required to maintain the fiduciary liability insurance policies covering the indemnified persons with benefits and levels of coverage no less advantageous to the indemnified parties than Alon’s existing policies, subject to a premium cap of 300% of the current Alon annual premium.
The indemnified persons described in the first paragraph of this section will have the right to enforce the provisions of the merger agreement relating to their indemnification.
Regulatory ApprovalsMatters
In connection with the Merger, Delek intends to make all required filings under the Securities Act and Third-Party Consents
the Exchange Act, as well as any required filings or applications with the NYSE. Delek and Alon have agreed inALDW are unaware of any other requirement for the merger agreement to cooperatefiling of information with, each other and use (and cause their respective subsidiaries to use) their respective reasonable best efforts to take all actions reasonably necessary, proper or advisable to permit prompt consummationthe obtaining of the Mergers, including using reasonable best effortsapproval of, governmental authorities in any jurisdiction that is applicable to lift injunctions, defend litigation seeking to delay or prevent the Mergers, and prepare documentation, effecting filings, and obtain consents of governments and third parties. DelekMerger.
The Merger is also required to use reasonable best efforts to enter into necessary guarantees in connection with Alon’s effort to obtain certain third-party consents and waivers. Furthermore, Delek and Alon have agreed to consult with each other to obtain material permits, consents and approvals and to keep each other apprised of the status thereof, make an appropriate filing necessarynot reportable under the HSR Act, if the closing of the Mergers is not likely to occur prior to March 21, 2017, notify and consult with each other regarding communications to any governmental authority, and share information necessary for governmentaltherefore no filings or received from governmental authorities in connection with the merger agreement to the extent permitted by law.
Exchange of Shares in the Mergers
Delek has selected its transfer agent, American Stock Transfer & Trust Company LLC, to serve as the exchange agent and to handle the exchange of shares of Delek common stock and Alon common stock for the merger consideration.
At the effective time of the Delek Merger, HoldCo will cause Delek Merger Sub and Alon Merger Sub to deposit with the exchange agent New Delek common stock for exchange in accordance with the merger agreement. In addition, HoldCo will deposit with the exchange agent, as necessary from time to time after the effective time of the Delek Merger, if applicable, cash sufficient to make payments for dividends with respect to the shares of Delek common stock or New Delek common stock as further described in the section entitled “The Merger Agreement—Dividends and Distributions on Shares of New Delek common stock” beginning on page 174 and for payments in lieu of fractional shares of New Delek common stock.
Prior to the closing of the Mergers, the exchange agent will provide appropriate transmittal materials to holders of record of shares of Delek common stock and Alon common stock (other than Alon and its subsidiaries, Delek and its subsidiaries, holders of stock options or restricted stock of Delek, and holders of restricted stock of Alon) advising such holders of the procedure to obtain the applicable merger consideration.
Stockholders should not return their stock certificateswere required with the enclosed proxy card, and stockholders should not forward their stock certificates to the exchange agent without appropriate transmittal materials.
From and after the effective time of the Delek Merger, there will be no further transfers on the stock transfer books of Delek of the shares of Delek common stock or on the stock transfer books of Alon of the shares of Alon common stock that were outstanding immediately prior to the effective time of the Delek Merger. If, after the effective time of the Alon Merger, any certificate of a share of either Delek or Alon common stock is presented to HoldCoFTC or the exchange agent for transfer, it will be canceled and exchanged for the merger consideration to which the holder of the certificate is entitled pursuant to the merger agreement upon the receipt by the transfer agent of all transfer or other taxes required by the delivery of the merger consideration by the transferee.DOJ.
Listing of New Delek Common Stock
Under the merger agreement, Delek will cause the shares of New Delek common stock to be issued in the Mergers to be approved for listing on NYSE, subject to official notice of issuance. It is a condition to the completion of the Mergers that the New Delek common stock to be issued to Alon stockholders pursuant to the Alon Merger be approved for listing on NYSE, subject to official notice of issuance.
De-Listing and Deregistration of Alon Common Stock
Upon the completion of the Alon Merger, the Alon common stock currently listed on NYSE will cease to be quoted on NYSE and will subsequently be deregistered under the Exchange Act. This will make certain provisions of the Exchange Act, such as the requirement of furnishing a proxy or information statement in connection with stockholder meetings, no longer applicable to Alon.
Following the Mergers, it is expected that shares of New Delek common stock will be traded on the NYSE under Delek’s ticker symbol, “DK.”
Accounting Treatment of the Mergers
Delek prepares its financial statementsThe Merger will be accounted for in accordance with U.S. GAAP. The accounting guidance for business combinations, which is referred to asFinancial Accounting Standards Board Accounting Standards Codification (ASC) 805, requires810, Consolidation (ASC 810). Because Delek controls ALDW both before and after the useMerger, the changes in Delek’s ownership interest in ALDW resulting from the Merger will be accounted for as an equity transaction, and no gain or loss will be recognized in Delek’s consolidated income statement. In addition, the tax effects of the acquisition method of accounting for the Mergers, which requires the determination of the acquirer, the purchase price, the acquisition date, the fair value of the assets and liabilities of the acquiree and the measurement of goodwill. Delek will be treated as the acquirer for accounting purposes.merger are reported in accordance with ASC 740, Income Taxes (ASC 740).
THE MERGER AGREEMENT
This section describesThe following is a summary of the material terms of the merger agreement, which was executed on January 2, 2017 and amended on February 27, 2017. The description of the merger agreement in this section and elsewhere in this joint proxy statement/prospectusMerger Agreement. This summary is qualified in its entirety by reference to the complete text of the merger agreement,Merger Agreement, a copy of which is attached to this consent statement/prospectus as Annex A to this joint proxy statement/prospectus and is incorporated into this consent statement/prospectus by reference herein in its entirety. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you.reference. You are encouraged toshould read the merger agreement carefullyMerger Agreement because it, and in its entirety because itnot this consent statement/prospectus, is the legal document that governs the Mergers.terms of the Merger.
Explanatory Note Regarding the Merger Agreement and the Summary of the Merger Agreement: Representations, Warranties and Covenants in the Merger Agreement Are Not Intended to Function or Be Relied on as Public Disclosures.
The merger agreementMerger Agreement and the summary of its terms in this summary areconsent statement/prospectus have been included solely to provide you with information regardingabout the terms and conditions of the merger agreement. Factual disclosures about Delek, Alon, or any of their respective subsidiaries or affiliates contained in this joint proxy statement/prospectus or in Delek’s or Alon’s public reports filed with the SEC may supplement, update or modify the factual disclosures about Delek or Alon, as applicable, contained in the merger agreement.Merger Agreement. The representations, warranties and covenants madecontained in the merger agreement by Delek, Alon, HoldCo, Delek Merger Sub, and Alon Merger SubAgreement were made solelyby the parties thereto only for the purposes of the merger agreement and as of specific datesMerger Agreement and were qualified and subject to importantcertain limitations and exceptions agreed to by Delek, Alon, HoldCo, Delek Merger Sub, and Alon Merger Subthe parties thereto in connection with negotiating the terms of the merger agreement.Merger Agreement. In particular, in your review of the representations and warranties contained in the merger agreementMerger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated withfor the principal purposespurpose of establishing the
circumstances in which a party to the merger agreement may have the right not to complete the Mergers if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating contractual risk betweenamong the parties to the merger agreement,Merger Agreement rather than establishingto establish matters as facts. The representations and warranties may also be subject to a contractual standard of materiality or material adverse effect different from those generally applicable to stockholdersDelek and ALDW and reports and documents filed with the SEC and in some cases weremay be qualified by disclosures made by one party to the matters contained in the respective disclosure letters that Delek and Alon delivered to each other, in connection with the merger agreement, which disclosures wereare not necessarily reflected in the merger agreement.Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this joint proxyconsent statement/prospectus, may have changed since the date of the merger agreement. Investors should not rely onMerger Agreement, and subsequent developments or new information qualifying a representation or warranty may have been included in or incorporated by reference into this consent statement/prospectus.
For the merger agreementforegoing reasons, the representations, warranties and covenants or any descriptions thereof as characterizationsof those provisions should not be read alone. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this consent statement/prospectus or incorporated by reference into this consent statement/prospectus.
ALDW and Delek will provide additional disclosure in their public reports to the extent they become aware of the actual stateexistence of any material facts of Delek, Alon, HoldCo, Delekthat are required to be disclosed under federal securities law and that might otherwise contradict the representations and warranties contained in the Merger Sub,Agreement and Alon Merger Sub or any of their respective subsidiaries or affiliates.will update such disclosure as required by the federal securities laws.
Pursuant toStructure of the merger agreement, Delek will acquire Alon in a transaction involving two separate mergers. Currently, HoldCo is a wholly owned subsidiary of Delek, and both Delek Merger Sub and Alon Merger Sub are wholly owned subsidiaries of HoldCo. The merger agreement provides that, upon the terms and subject to the conditions in the merger agreement, and in accordance with the Delaware General Corporation Law, or the DGCL, at the effective time, Delek
Merger Sub will merge with and into ALDW, and each ALDW Public Unitholder will be entitled to receive 0.4900 shares of Delek Common Stock in exchange for each ALDW Common Unit that such holder owns immediately prior to the first merger, which is referred to aseffective time of the Delek Merger. As a result of the Delek Merger, the separate corporate existence of Delek Merger Sub will cease and DelekALDW and its subsidiaries will continue as the surviving corporation, which is referred to as the Delek surviving entity. The Delek surviving entity will have the name “Delek US Energy, Inc.” following the Delek Merger and will be a wholly owned subsidiarybecome subsidiaries of HoldCo. HoldCo will amend its certificate of incorporation and bylaws simultaneously with the Delek Merger to change its name to “Delek US Holdings, Inc.” In connection with the Delek Merger, each outstanding share of Delek common stock will be canceled and converted into the right to receive one share of common stock in HoldCo, or New Delek common stock, as further described in the section entitled “—Merger Consideration” below.
The merger agreement also provides that, upon the terms and subject to the conditions in the merger agreement, and in accordance with the DGCL, a second merger will occur immediately following the Delek Merger whereby Alon Merger Sub will merge with and into Alon, which is referred to as the Alon Merger. As a result of the Alon Merger, the separate corporate existence of Alon Merger Sub will cease, and Alon will continue as the surviving corporation, referred to as the Alon surviving entity, and which will be a wholly owned subsidiary of HoldCo. The Alon surviving entity will continue to be named “Alon USA Energy, Inc.” In connection with the Alon Merger, shares of Alon common stock (other than those owned by Delek or its subsidiaries) will be canceled and converted into the right to receive 0.504, which is referred to as the “exchange ratio”, shares of New Delek common stock as further described in the section entitled “—Merger Consideration” below.Delek.
ClosingWhen the Merger Becomes Effective
The parties to the Merger Agreement will cause a certificate of merger to be executed and Effective Timefiled with the Delaware Secretary of the Mergers
Unless otherwise mutually agreed to in writing between Delek and Alon, the closing of the Mergers will take placeState on the thirdnext business day followingafter the day on which the last condition to becompleting the Merger is satisfied or waived, of the conditions to completion of the merger, described in the section entitled “—Conditions to the Completion of the Merger” beginning on page 189, has been satisfiedas soon as practicable thereafter or waived (other than those conditions which by their nature cannot be satisfied until the closing date).
Assuming timely satisfaction of the necessary closing conditions,at such other time as the parties currently expect the closing of the Mergers to occur in the second quarter of 2017, but no later than an agreed upon outside date of October 2, 2017.may agree. The Delek Merger will become effective at the time whenand on the date on which the certificate of merger for the Delek Merger has been dulyis filed with the Secretary of State of the State of Delaware, or at such later time and date or time as Delek and Alon mayon which the parties agree in writing and specify in the certificate of merger formerger. This time is referred to as the Delek Merger. Alon and HoldCo will cause a certificate of merger for the Alon Merger to be duly filed with the Secretary of State“effective time of the State of Delaware. The Alon Merger will become effective immediately after the Delek Merger becomes effective.
Merger.”
Merger Consideration
As a resultEffect of the Delek Merger each share (or fractional share)
At the effective time of the Merger:
Each ALDW Public Unit will be converted into the right to receive 0.4900 shares of Delek common stockCommon Stock, and each such ALDW Public Unit will be canceled and retired and will cease to exist.
Each ALDW Common Unit that is owned by ALDW immediately prior to the effective time of the Merger will be automatically canceled and will cease to exist and no consideration shall be delivered in exchange for such canceled ALDW Common Unit.
The ALDW GP Interest and all ALDW Common Units that are not ALDW Public Units and that are not canceled as described above will, in each case, remain outstanding, unaffected by the Merger.
The outstanding limited liability company interest in Merger Sub issued and outstanding immediately prior to the effective time of the Merger will be converted into an aggregate number of common units representing limited partner interests in the surviving entity of the Merger equal to the number of ALDW Public Units that are converted into the right to receive 0.4900 shares of Delek Common Stock. At the effective time of the Merger, the books and records of ALDW will be revised to reflect the cancellation and retirement of all ALDW Public Units and the conversion of the limited liability company interest in Merger Sub to common units of the surviving entity of the Merger, and the existence of ALDW (as the surviving entity of the Merger) shall continue without dissolution.
If, before the effective time of the Merger, the number of issued and outstanding shares of Delek Common Stock or ALDW Common Units are increased, decreased or changed into a different number of units, shares or other securities (including any different class or series of securities) by reason of any dividend or distribution payable in, or an issuance of, partnership interests, voting securities, equity interests or rights, or by reason of any subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or any such transaction shall be authorized, declared or agreed upon with a record date at or prior to the effective time, then the Merger Consideration shall be appropriately adjusted to reflect such change and to provide the same economic effect contemplated in the Merger Agreement.
At the effective time of the Merger, each outstanding ALDW Common Unit that is subject to outstanding restricted unit awards (the “ALDW Restricted Unit Awards”) pursuant to the ALDW 2012 Long-Term Incentive Plan, adopted as of November 26, 2012, that is not vested and does not vest in accordance with its terms (as set forth in the applicable award agreement) as a result of the transactions contemplated by the Merger Agreement, including the Merger, and that is outstanding as of immediately prior to the effective time of the Merger will become fully vested and will be converted into the right to receive one share (or equivalent fractional share)a number of Newshares of Delek common stock, without interest.
As a resultCommon Stock equal to the number of the Alon Merger,ALDW Common Units subject to each share of Alon common stock issued and outstandingsuch ALDW Restricted Unit Award immediately prior to the effective time of the Alon Merger (other than Alon common stock held by Delek or any subsidiary of Delek), will be converted into the right to receive 0.504 shares of New Delek common stock, without interest.
Alon stockholders will not be entitled to receive any fractional shares of New Delek common stock in the Alon Merger, and no Alon stockholders will be entitled to dividends, voting rights or any other rights in respect of any fractional shares of New Delek common stock. Alon stockholders that would have otherwise been entitled to receive a fractional share of New Delek common stock will instead be entitled to receive, in lieu of fractional shares, an amount in cash, without interest, equal to the product of the volume-weighted average of the price per share of Alon common stock on the NYSE, as reported on the NYSE Composite Transactions Reporting System, for the 20 consecutive full trading days ending on the full trading day immediately preceding the date on which the effective time of the Delek Merger occurs, multiplied by the fraction ofExchange Ratio (rounded up to the next whole share).
For a share of New Delek common stock to which the holder would otherwise be entitled.
At the effective timedescription of the Delek MergerALDW Common Units and the Alon Merger, all sharesDelek Common Stock and a description of the comparative rights of holders of the ALDW Common Units and the Delek Common Stock, please read “Comparison of the Rights of Delek common stockCommon Stockholders and Alon common stock (other than Alon common stock held by Delek, which will remain outstanding) will cease to be outstanding, will be canceledALDW Common Unitholders” and will cease to exist, and each certificate formerly representing any such shares“Description of Delek common stock or Alon common stock, and each non-certificated share of Delek common stock or Alon common stock represented by book-entry (other than, in the case of the Alon Merger, Alon common stock held by Delek, which will remain outstanding) will thereafter represent only the right to receive, without interest, the applicable amount of New Delek common stock and (with respect to the Alon common stock) the right, if any, to receive cash in lieu of fractional shares into which such shares have been converted and any distribution or dividend on shares of New Delek common stock issued in the Mergers payable after the effective times.Capital Stock.”
TreatmentExchange of Equity Awards
Treatment of Delek Restricted Stock Awards, Stock Options and Stock Appreciation Rights in the Delek Merger
At the effective time of the Delek Merger, each outstanding restricted stock award, stock appreciation right, and stock option granted under Delek’s long-term incentive plans, whether vested or unvested, will automatically be assumed by HoldCo and converted into a restricted stock award, stock appreciation right, or stock option, as applicable, denominated in shares of New Delek common
stock with substantially the same terms and conditions (including expiration date and vesting, exercise and dividend rights, as applicable). The exercise price and number of shares purchasable with respect to each stock appreciation right and stock option will be determined in a manner consistent with the requirements of Sections 409A and 424 of the Internal Revenue Code.
Treatment of Alon Restricted Stock Awards in the Alon Merger
At the effective time of the Alon Merger, each outstanding restricted stock award granted under Alon’s equity plans, whether vested or unvested, will automatically be assumed by HoldCo and converted into a restricted stock award denominated in shares of New Delek common stock with substantially the same terms and conditions (including vesting conditions, accumulated dividends and dividend rights), except that the number of shares New Delek common stock covered by the restricted stock award will equal the product, rounded down to the nearest whole number, of the number of shares of Alon common stock underlying the award multiplied by the exchange ratio.
Units; No Fractional Shares Exchange ProceduresAgent
Delek has selected its transfer agent,expects to appoint American Stock Transfer & Trust Company LLC (“Exchange Agent”) to serveact as the exchange agent for the payment of the Delek Common Stock and any dividends and other distributions pursuant to handle the exchangeMerger Agreement. At or prior to the closing of the Merger, Delek will (i) reserve with the Exchange Agent the shares of Delek common stockCommon Stock to be issued in the Merger and Alon common stock for(ii) authorize the merger considerationExchange Agent to exchange shares of Delek Common Stock as described above.above under “—Effect of the Merger.” Delek will pay all costs and fees of the Exchange Agent and all expenses associated with the exchange process.
AtAfter the effective time of the Delek Merger, HoldCo will cause Delek Merger Sub and Alon Merger Sub to deposit with the exchange agent New Delek common stock for exchange in accordance with the merger agreement. In addition, HoldCo will deposit with the exchange agent, as necessary from time to time after the effective time of the Delek Merger, if applicable, cash sufficient to make payments for dividends with respect to the shares of Delek common stock or New Delek common stock as further described in the section entitled “—Dividends and Distributions on Shares of New Delek common stock” beginning on page 174 and for payments in lieu of fractional shares of New Delek common stock.
Prior to the closing of the Mergers, the exchange agent will provide appropriate transmittal materials to holders of record of shares of Delek common stock and Alon common stock (other than Alon and its subsidiaries, Delek and its subsidiaries, holders of stock options or restricted stock of Delek, and holders of restricted stock of Alon) advising such holders of the procedure to obtain the applicable merger consideration.
Stockholders should not return their stock certificates with the enclosed proxy card, and stockholders should not forward their stock certificates to the exchange agent without appropriate transmittal materials.
From and after the effective time of the Delek Merger, there will be no further transfers on the stockrecords of ALDW or its transfer booksagent of Delek of the shares of Delek common stock,ALDW Common Units. If ALDW Common Units are presented to ALDW or on the stockits transfer books of Alon of the shares of Alon common stock, that were outstanding immediately prior to the effective time of the Delek Merger and the Alon Merger, respectively. If,agent for transfer after the effective time of the Delek Merger, any certificate of a share of either Delek or Alon common stock is presented to
HoldCo or the exchange agent for transfer, itthey will be canceled and exchanged for the merger consideration to which the holder of the certificate is entitled pursuant to the merger agreement upon the receipt by the transfer agent of all transfer or other taxes required by theagainst delivery of the merger consideration by the transferee.Delek Common Stock.
TerminationExchange of Units for Shares; No Fractional Shares
If you are a holder of record of ALDW Public Units as of the Exchange Fund
Any portioneffective time of the exchange fund that remains unclaimed by holders of Delek common stock or Alon common stock for one yearMerger, the Exchange Agent will mail to you a transmittal letter and instructions explaining how to surrender your ALDW Common Units to the Exchange Agent after the effective time of the Delek Merger orMerger.
Holders of ALDW Public Units who deliver a properly completed and signed transmittal letter and any other documents required by the Alon Merger, as applicable, will be deliveredinstructions to HoldCo. Thereafter, holders of Delek common stock and Alon common stockthe transmittal letter to the Exchange Agent, together with their ALDW Common Unit certificates (if any), will be entitled to look onlyreceive:
the number of whole Delek Common Shares to HoldCo, Delek, Delekwhich such holder is entitled in accordance with the Merger SubAgreement and Alon Merger Sub with respect toas described above under “—Effect of the payment of any per share merger consideration (and/or cash in lieu ofMerger”; and
if after aggregating all fractional shares and/or dividends or distributions with respect to such per share merger consideration, as contemplated by the merger agreement), without any interest thereon. Such amounts will be subject to applicable escheat and similar laws.
Lost, Stolen or Destroyed Share Certificates
If a certificate for shares of Delek common stockCommon Stock that a ALDW Common Unitholder would otherwise be entitled to receive as consideration for the Merger (after taking into account all ALDW Common Units held by such ALDW Common Unitholder) a fractional share of Delek Common Stock results from that aggregation, that amount of aggregated shares of Delek Common Stock rounded up to the nearest whole share of Delek Common Stock (no person that is not a record holder of ALDW Common Units or Alon common stock has been lost, stolen or destroyed, then, before a holderparticipating firm that deposits and holds securities through The Depository Trust Company (a “DTC Participant”) will be entitled to receive the per share merger consideration (and/or cash in lieu ofhave any fractional shares and/of Delek Common Stock rounded up, and none of Delek, AAI or dividends or distributionALDW shall have any obligation with respect to such per share merger consideration, as contemplated by the merger agreement), suchany person that is not a record holder will need to make an affidavit of that fact and, if requested by HoldCo, postALDW Common Units or a bond (in such amount as is customary and upon such terms as may be required by HoldCo) as indemnity against any claim that may be made against HoldCo with respect to such certificate.DTC Participant).
Adjustments to Prevent Dilution
In the event of any reclassification, stock split, stock distribution or stock dividends, combinations or exchanges with respect to, or rights in respect of shares of Alon common stock or Delek common stock, the exchange ratio and number of shares of New Delek common stock will be correspondingly adjusted to provide the holders of such common stock the same economic effect as contemplated by the merger agreement prior to such event.
Organizational Documents; Directors, Managers and Officers; NYSE Listing
Organizational Documents
PriorConditions to the effective timeMerger
The obligation of the Delek Merger, the certificate of incorporation of HoldCo and the bylaws of Holdco will be amended to meet the requirements of Section 251(g)(7)(i)(A) of the DGCL. At the effective time of the Delek Merger, the certificate of incorporation and bylaws of HoldCo will be amended to change HoldCo's name to "Delek US Holdings, Inc."
At the effective time of the Delek Merger, the certificate of incorporation of Delek Merger Sub will be amended to meet the requirements of Section 251(g) of the DGCL and to make certain other amendments permitted by Section 251(g) of the DGCL and, as so amended, will be the
certificate of incorporation of the Delek surviving entity until thereafter amended as permitted by applicable law, and the bylaws of Delek Merger Sub as in effect immediately priorparties to the effective time ofMerger Agreement to complete the Delek Merger will be the bylaws of the Delek surviving entity until thereafter amended as provided therein or by applicable law.
At the effective time of the Alon Merger, the certificate of incorporation and bylaws of Alon Merger Sub as in effect immediately prioris subject to the effective timesatisfaction or waiver of certain conditions, including, among others:
the Alon Merger will be the certificatedelivery of incorporation and bylaws of the Alon surviving entity until thereafter amended as provided therein or by applicable law.
Directors and Officers
Priorthis consent statement/prospectus to ALDW Common Unitholders at least 20 business days prior to the closing of the transactions contemplatedMerger;
the receipt of all other governmental consents and approvals, the absence of which would, individually or in the merger agreement, Delek will elect aggregate, have a material adverse effect on ALDW or Delek;
the boarddelivery of directors of Delek to be the board of directors of HoldCo and appoint the officers of Delek to be the officers of HoldCo, each to serve until his or her death, permanent disability, resignation or removal or until his or her successor is duly elected or appointed, as applicable, and qualifiedRequired ALDW Common Unitholder Written Consent in accordance with applicable law;
the HoldCo certificate of incorporation and bylaws. As permitted by the merger agreement, the Special Committee has designated Mr. Wiessman to be appointed to HoldCo's board of directors and Mr. Haddock to be appointed to Delek Logistics' board of directors. Within 30 days after the closingcontinued effectiveness of the transaction, HoldCo will increase registration statement of which this consent statement/prospectus forms a part;
the size ofapproval for listing on the HoldCo board of directors by one seat and appoint Mr. Wiessman to the newly created seat and will cause Delek Logistics to increase the size of its board of directors by one seat and appoint Mr. Haddock to the newly created seat.
The directors and officers of Delek Merger Sub immediately prior to the effective timeNYSE of the Delek Common Stock to be issued in the Merger, will be subject to official notice of issuance; and
the directors and officersabsence of any decree, order, injunction or law that prohibits the Merger or makes the Merger unlawful.
The parties’ obligations are also subject to the satisfaction or waiver of the Delek surviving entity, eachfollowing conditions:
certain fundamental representations and warranties of other parties relating to serve until his or her death, permanent disability, resignation or removal or until his or her successor is duly electedorganization and qualified in accordance withexistence, authorization to enter into the certificate of incorporationMerger Agreement and bylawsto complete the transactions contemplated thereby and capitalization being true and correct as of the Delek surviving entity.closing in all material respects;
The directorsthe representations and officerswarranties of Alon Merger Sub immediately priorother parties relating to the effective timeabsence of changes that would have a material adverse effect on such other parties, and the absence of material damage, destruction or loss to any material portion of assets of such other parties or their subsidiaries being true and correct as of the Alon Merger will be the directorsclosing;
all other representations and officers, respectively,warranties of the Alon surviving entity, each to serve until his or her death, permanent disability, resignation or removal or until his or her successor is duly electedother parties being true and qualified in accordance with the certificate of incorporation and bylawscorrect as of the Alon surviving entity.closing, other than certain failures to be true and correct that would not in the aggregate result in a material adverse effect on the party making the representation or warranty; and
NYSE Listing
As promptly as practicable following the completion of the Alon Merger, Alon securities willother parties having performed or complied with all agreements and covenants required to be delisted from the NYSE and Alon will terminate its registration and reporting obligationsperformed by it under the Exchange Act.Merger Agreement in all material respects.
Dividends and Distributions on Shares of New Delek common stock
No dividend or other distribution with respect to shares of New Delek common stock for which shares of Delek common stock or Alon common stock are to be exchanged in connection
with the Mergers will be paid (but such dividends or other distributions will nevertheless accrue) until the certificates representing such shares of Delek common stock or Alon common stock, as applicable (or affidavits of loss in lieu of such certificates), or book-entry shares representing such shares, are properly surrendered for exchange in accordance with the merger agreement. Following the surrender of book-entry shares, certificates or affidavits of loss in lieu of such certificates, there will be issued or paid in respect of each share of New Delek common stock into which the shares of Delek common stock or Alon common stock, represented by such book-entry shares, certificates or affidavits of loss have been converted, without interest, the dividend or other distribution on the appropriate payment date.
Representations and Warranties
The merger agreementMerger Agreement contains customary and, in certain cases,generally reciprocal representations and warranties by Alon and Delek that are subject, in some cases, to specified exceptions and qualifications contained ineach of the merger agreement, in forms, statements, certifications, reports or other documents filed with or furnishedparties to the SEC by Alon or Delek, as applicable, after December 31, 2015Merger Agreement, many of which provide that the representation and priorwarranty does not extend to January 2, 2017 or inmatters where the disclosure letters delivered by Alon and Delek to each other in connection with the merger agreement. These representations and warranties relate to, among other things:
organization, good standing and qualification to do business;
capitalization, including the number of authorized and outstanding shares; the number of shares of granted and reserved for issuance under incentive compensation plans; the due authorizationfailure of the sharesrepresentation and warranty to be issued upon conversion of convertible debt (with respect to Alon) or the ownership of Alon capital stock (with respect to Delek); and ownership of subsidiaries and unitsaccurate would not result in Alon Partners and its general partner (with respect to Alon);
power and authority of Alon or Delek to perform its obligations under the merger agreement and the approval of the Alon Board or the Delek Board, as applicable;
consents required under various contracts of Alon and Delek in connection with the closing of the merger agreement;
governmental consents and approvals required in connection with the closing of the merger agreement;
financial reports and filings with the SEC since January 1, 2015, compliance with generally accepted accounting principles and internal controls relating to financial reporting;
the absence of liabilities not shown on Alon’s or Delek’s respective SEC filings;
the operation of Alon or Delek in the ordinary course of business since December 31, 2015;
compliance with law since January 1, 2014 and outstanding proceedings or threats of proceedings;
possession and compliance with necessary permits to operations;
tax matters;
environmental matters, such as permits, proceedings, and liabilities;
intellectual property matters;
insurance policies;
the absence of undisclosed broker’s or finder’s fees;
compliance with anti-corruption, money laundering laws, and export control laws;
accuracy of information provided by Alon or Delek to be included in this registration statement;
Alon’s or Delek’s relationships with its affiliates; and
the absence of approvals required under state takeover laws.
The merger agreement also contains additional representations and warranties by Alon relating to the following, among other things:
contracts material to Alon’s business;
employee benefit matters, including compliance with applicable law, payments due as a result of the transactions contemplated in the merger agreement, and other liabilities;
labor matters and collective bargaining matters, including compliance with employment laws;
owned and leased real property matters;
Alon’s relationships with its customers and suppliers;
Alon’s receipt of a fairness opinion; and
data breaches of Alon.
Many of the representations and warranties contained in the merger agreement are qualified by (i) a “material adverse effect” standard (further described in the paragraph below), (ii) a general materiality standard or (iii) a knowledge standard. Some representations and warranties are qualified by a combination of the foregoing qualifiers.
A “material adverse effect” means a material adverse effect on the party making the representation and warranty. These representations and warranties concern, among other things:
organization and existence;
authorization to enter into the Merger Agreement and to complete the Merger and the other transactions contemplated thereby;
absence of defaults, breaches and other conflicts caused by entering into the Merger Agreement and completing the Merger;
capitalization and ownership of limited partner interests;
reports filed with the SEC and internal controls;
accuracy of financial statements and absence of undisclosed liabilities;
title to real properties and rights-of-way;
absence of litigation and violation of laws;
absence of changes that would have a material adverse effect;
absence of material damage, destruction or loss to any material portion of assets;
tax matters;
absence of violations or liabilities under environmental laws;
compliance with applicable licenses and permits;
material contracts;
employees and employee benefits;
insurance matters;
condition of assets;
investment company act;
brokerage arrangements;
approvals under state takeover laws;
financial advisor opinions; and
accuracy of information in this registration statement.
In addition, Delek has represented to ALDW that, as of the date of the Merger Agreement (the “Execution Date”), to Delek’s knowledge:
certain fundamental representations and warranties of ALDW relating to organization and existence, authorization to enter into the Merger Agreement and to complete the transactions contemplated thereby and capitalization were true and correct as of the Execution Date in all material respects,
the representations and warranties of ALDW relating to the absence of changes that would have a material adverse effect on ALDW and the absence of material damage, destruction or loss to any material portion of assets of ALDW or its subsidiaries were true and correct as of the Execution Date; and
all other representations and warranties of ALDW were true and correct as of the Execution Date, other than certain failures to be true and correct that would not in the aggregate result in a material adverse effect on ALDW.
For purposes of the Merger Agreement, “material adverse effect” means any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on or a material adverse change in (i) the business, assets, liabilities, properties, business, operations,condition (financial or otherwise) or results of operations of Alon and itsALDW, ALDW GP, or ALDW’s subsidiaries (the “ALDW Group Entities”), on the one hand, or Delek, Merger Sub or Delek’s subsidiaries (other than any ALDW Group Entity), on the other hand (the “Delek US Group Entities”), taken as a whole, whole; provided, however, that any adverse changes, effects, events
or Delek and its subsidiaries, taken as a whole,occurrences resulting from or the ability of Alon or Delek, respectively,due to consummate the merger transactions on a timely basis, excluding any effects of any of the following (unlessshall be disregarded in determining whether there has been a material adverse effect: (a) changes, effects, states of fact, developments, events or occurrences affecting the caseindustries in which any ALDW Group Entity or the Delek US Group Entity, as applicable, operates (including any political or regulatory changes or changes in applicable law); (b) changes, effects, states of fact, developments, events or occurrences affecting the first four items below, such event disproportionately affects either AlonUnited States or Delek):
actions taken by Alon at Delek’s written direction;
global economic conditions or financial, credit, debt, securities or other capital markets in general; (c) any outbreak of, acts of or escalation of hostilities, terrorism, war or other similar national emergency or any natural disasters (including hurricanes, earthquakes, tornadoes, floods or tsunamis) or force majeure events; (d) the announcement or pendency of the merger agreement;
Merger Agreement or the transactions contemplated thereby; (e) changes or anticipated changes in trading prices or volume of Alon’s or Delek’s common stock;
failure to meet financial projections or forecasts;
changes inany laws or accounting regulations; and
legal proceedings.
Exceptregulations or principles applicable to the extent that they primarily relate only to, haveALDW Parties or Delek Parties, as the effectcase may be, or any of primarily relating only to,its subsidiaries or disproportionately adversely affect Alon the interpretation of any of the foregoing; (f) any legal proceedings commenced or threatened by or involving the ALDW Parties or Delek Parties, as the case may be,or its subsidiaries or any current or former equityholder thereof arising out of or related to the Merger Agreement or the transactions contemplated by the Merger Agreement; (g) any actions required to be taken by an ALDW Group Entity, on the one hand, or a Delek US Group Entity, on the other hand, under any law or contract existing as of the Execution Date; (h) changes, effects, states of fact, developments, events or occurrences affecting the prices of oil, gas, natural gas, natural gas liquids or other commodities (including occurrences affecting the spread in prices between unrefined and its subsidiaries,refined commodities); (i) ALDW or ALDW GP, on the followingone hand, or Delek or Merger Sub, on the other hand, taking any action required or contemplated by the Merger Agreement; (j) with respect to Delek only, changes, effects, states of fact, developments, events or occurrences at any ALDW Group Entity; (k) any change in the market price or trading volume of the shares of common stock or other equity securities of ALDW or Delek (it being understood and agreed that the foregoing shall not preclude any other party to the Merger Agreement from asserting that any facts or occurrences giving rise to or contributing to such change that are alsonot otherwise excluded from the definition of material adverse effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a “materialmaterial adverse effect”:
changeseffect); or (l) any failure of the ALDW Group Entities, on the one hand, or the Delek US Group Entities, on the other hand, to meet any internal or external projections, forecasts or estimates of revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the foregoing shall not preclude any other party to the Merger Agreement from asserting that any facts or occurrences giving rise to or contributing to such failure set forth in certain marketsthis clause (l) that are not otherwise excluded from the definition of material adverse effect should be deemed to constitute, or be taken into account in determining whether there has been a material adverse effect); provided that, in the United States;case of clauses (a), (b), (c), (e) and (h) the adverse impact on the ALDW Group Entities, on the one hand, or the Delek US Group Entities, on the other hand, taken as a whole, is not materially disproportionate to the adverse impact on similarly situated parties, or (ii) the ability of any of the ALDW and ALDW GP, on the one hand, or Delek and Merger Sub, on the other hand, to perform their obligations under the Merger Agreement or to consummate the transactions contemplated by the Merger Agreement.
changes in general economic conditions in the petroleum refining, marketing, transportation and storage industries generally in the United States;
the outbreak of hostilities, national emergency, war, and terrorism in the United States; and
natural disasters.
Interim OperationsCovenants and Other Agreements
Prior to the closing of Alonthe Merger, the parties have agreed that no party to the Merger Agreement will take any action prohibited by the Merger Agreement or fail to take any action required by the Merger Agreement that, in either case, would be reasonably likely to materially delay the consummation of the Merger or result in the failure of a condition to closing. Each party has also agreed to promptly notify the other party in writing of (i) any event, condition or circumstance that could reasonably be expected to result in any of the conditions to closing not being satisfied and (ii) any material breach of any covenant, obligation or agreement contained in the Merger Agreement.
Prior to the closing of the Merger and unless ALDW consents in writing (which consent may not be unreasonably withheld), Delek Pendinghas generally agreed not to, agreed to not permit ALDW GP to cause the Mergersamendment of the ALDW Partnership Agreement or the ALDW GP limited liability company agreement, in each case to the extent that any amendment would reasonably be expected to (i) prohibit, prevent or materially hinder, impede or delay the ability of the parties to satisfy any conditions to or the consummation of the Merger or the other transactions contemplated by the Merger Agreement or (ii) adversely impact the holders of ALDW Public Units in any material respect.
UnderPrior to the closing of the Merger and unless ALDW consents in writing (which consent may not be unreasonably withheld), and subject to specified exceptions, Delek has generally agreed not to (and has agreed to cause its subsidiaries, other than DKL and its subsidiaries, not to):
make any change in its governing documents in any manner that would reasonably be expected to prohibit or materially impede or delay the Merger or the consummation of the other transactions contemplated by the Merger Agreement;
adversely affect the terms of the merger agreement, Alon has agreed that, subject to certain exceptionsDelek Common Stock in the merger agreement and the disclosure letter it delivered to Delekany material respect;
declare, set aside or pay any dividend or distribution payable in connection with the merger agreement, from the datecash, stock or property in respect of the merger agreement until the effective time of the Alon Merger, unless Delek gives its approval in writing (such approval not to be unreasonably withheld, delayed or conditioned), and except as otherwise expressly contemplated by the merger agreement, Alon will, and will cause its subsidiaries to:
conduct its business and operations according to its ordinary and usual course of business consistent with past practice; and
use commercially reasonable efforts to:
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o | preserve intact its business organization; |
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o | maintain its rights, franchises and permits; |
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o | keep available the services of its current directors and officers and employees who are integral to the operation of the Alon businesses as presently conducted; and |
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o | preserve the goodwill of and to maintain satisfactory relationships with those people, including customers, suppliers and distributors having significant business relationships with Alon. |
In addition, Alon has agreed that, subject to certain exceptions set forth in the merger agreement and the disclosure letter it delivered to Delek in connection with the merger agreement, from the date of the merger agreement until effective time of the Alon Merger, except as otherwise expressly required by the merger agreement, contracts with labor unions, the limited partnership agreement of Alon Partners or intercompany agreements within Alon and its subsidiaries, required by applicable law, and as Delek may approve in writing (such approval not to be unreasonably withheld, delayed or conditioned), Alon will not, and will not permit its subsidiaries to do the following, among other things:
issue, create or approve any additional equity securities except in connection with outstanding restrictedcapital stock, awards or the conversion of outstanding convertible securities;
issue any additional equity interests other than pursuant to existing Alon equity plans in the ordinary course of business consistent with past practice;
acquire or amend the terms of, any equity interests or rights of Alon or its subsidiaries, other than pursuant existing Alon equity awards or the Alon Partners Incentive Plan;
pay dividends or distributions on any equity securities, other thanregular quarterly cash dividends (i) by a subsidiary, (ii) of Alon on a quarterly basis up to $0.15 per share, or (iii) of Alon Partners in the ordinary course and consistent with past practice;
amend the certificates of incorporation or bylaws of Alon or any subsidiary, other than to effect ministerial changes;
dispose of or acquire any assets other than in the ordinary course of business or involving less than $10,000,000, or enter into any merger or change its entity type;
enter or modify, renew or extend a material contract other than in the ordinary course of business;
incur any material capital expenditure except for those approved by the Alon Board on December 14, 2016 and December 15, 2016, emergency capital expenditures, capital expenditures necessary to maintain the safety and integrity of any asset and capital expenditures which are unanimously approved by the Alon Board;
commence or settle any material claim, claim in excess of $5,000,000 (excluding any amounts covered by insurance), or claim relating to the Mergers;
pay any material claim other than payments disclosed or reserved against in the most recent audited financial statements or in the ordinary course of business consistent with past practice;
cause any material intellectual property to lapse, be abandoned or canceled, or fall into the public domain, other than actions or omissions in the ordinary course of business consistent with past practice;
change its accounting principles, practices or methods subject to certain exceptions, or its timing of collection of accounts receivable or payment of accounts payable;
fail to use commercially reasonable efforts to maintain reasonable and customary insurance;
change its tax elections, settle or compromise any material tax matter, or change its methods of reporting income or deductions for tax purposes, except as may be required by applicable Law;
except as necessary to carry out the Mergers, (i) change the benefits or rights under any benefit plan, (ii) grant or change any severance or similar compensation to employees, directors or contractors other than severanceDelek Common Stock in the ordinary course of business consistent with past practice or (iii) change Alon’s plans or policy benefiting Alon’s directors or officersand other than individends or distributions with a record date after the ordinary courseclosing of business;
except in each case as required to comply with law, the merger agreement or any existing benefit plan, (i) grant any non-retail employee, director or contractor additional compensation or benefits other than in the ordinary course of business consistent with past practice, or (ii) grant or change any equity award to employees, directors or contractors;
forgive any loans to employees, officers or directors or their affiliates;
enter into any contract with any officer, director or affiliate (other than subsidiaries) or any of their respective associates or immediate family members;
(i) terminate any officer or employee with the title of vice president or above, except in cases of willful failure to perform the duties or responsibilities of his employment, serious misconduct, or conviction of a crime, or (ii) significantly reduce Alon’s workforce;
except as required pursuant to the terms and conditions of any existing company benefit plan, (i) enter into any material collective bargaining agreement or other material works council or labor union agreement, or (ii) amend or renew any collective bargaining agreement or other works council or labor union agreement without first using disclosing the relevant bargaining strategy to Delek;Merger;
(i) incur any indebtedness other than (A) indebtedness for borrowed money approved by the Alon Board so long as such indebtedness or lien does not include any rights insolely with respect of shares of Alon equity securities, (B) advances pursuant to and permitted under Alon’s existing revolving credit agreement or (C) guarantees or sureties for the benefit of Alon subsidiaries or (ii) create any liens on its assets or properties other than to secure indebtedness permitted under clause (i)(A);
make any loans or investments except pursuant to material contracts in existence on the date of the merger agreement;
authorize, recommend, propose or announce an intention toDelek, adopt a plan or agreement of complete or partial dissolution, liquidation or liquidation;restructuring or a plan or agreement of reorganization under any bankruptcy or similar law;
knowinglysettle any claims, demands, lawsuits or state or proceedings seeking damages or an injunction or other equitable relief where such settlements would, in the aggregate, have a material adverse effect on Delek; or
agree, in writing or otherwise, to take any of the foregoing actions, or take any action that may resultor agree, in (i) inaccuracy of a representation and warranty set forthwriting or otherwise, to take any action, including proposing or undertaking any merger, consolidation or acquisition, in the merger agreementeach case, that would allow for a terminationreasonably be expected to prohibit, prevent or materially hinder, impede or delay the ability of this Agreement, (ii)the parties to satisfy any of the conditions to the obligations of Alon not being satisfied, (iii) any material delay or prevention of the consummation of the Mergers,Merger or (iv) a material violation the merger agreement;
convene any stockholder meeting other than the Alon special meeting to approve the merger agreement, except as required by applicable law, the NYSE or Alon’s organizational documents;
except as otherwise allowedtransactions contemplated by the merger agreement, take any action to exempt any person from, or make any acquisition of securities of Alon by any person notMerger Agreement.
The Merger Agreement contains additional agreements between the parties thereto, including agreements regarding, among other things (and subject to, any state takeover statute or similar statute or regulation that applies to Alon, including the restrictions on “business combinations” set forth in Section 203 of the DGCL; or
agree or commit to do any of the above.
Subject to certain exceptions and limitations):
providing access to information with respect to the ALDW Parties or Delek Parties, as the case may be;
(i) cooperating regarding the preparation of this consent statement/prospectus, (ii) causing the Delek Common Stock issued in the merger agreementMerger to be approved for trading on the NYSE and (iii) making all required filings under applicable state securities and “blue sky” laws;
using commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the disclosure letter deliveredtransactions contemplated by the Merger Agreement and (ii) defend any lawsuits or other proceedings challenging the Merger Agreement or the consummation of the transactions contemplated thereby or seek to Alonhave lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated thereby;
making certain public announcements in connection with the merger agreement, Delek has agreed that, fromMerger Agreement or the date of the merger agreement until effective time of the Alon Merger, unless Alon gives its approval in writing (such approval not to be unreasonably withheld, delayed or conditioned) and except as otherwise expresslytransactions contemplated by the merger agreement, that Delek will, and will cause its subsidiaries to:thereby;
conduct its business and operations according to its ordinary and usual course of business consistent with past practice; and
use commercially reasonable efforts to:
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o | preserve intact its business organization; |
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o | maintain its rights, franchises and permits; |
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o | keep available the services of its current directors and officers and employees who are integral to the operation of the Delek businesses as presently conducted; and |
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o | preserve the goodwill of and to maintain satisfactory relationships with those people, including customers, suppliers and distributors having significant business relationships with Delek. |
In addition, Delek has agreed that, subject to certain exceptions set forth in the merger agreement and the disclosure letter it delivered to Alonpaying expenses incurred in connection with the merger agreement, fromMerger Agreement;
cooperating fully with respect to any filing, submission or communication with a governmental entity having jurisdiction over the Merger;
tax matters;
coordinating the declaration of any dividends or distributions in respect of Delek Common Stock and ALDW Common Units and the record and payment dates relating thereto;
obtaining certain consents of auditors for the inclusion of financial statements;
cooperating prior to the closing date of the merger agreement until effective timeMerger with the financing activities of the Alon Merger, exceptDelek Parties;
taking all such steps as otherwise expressly requiredmay be necessary or appropriate to cause the transactions contemplated by the merger agreement, contractsMerger Agreement, including any dispositions of ALDW Common Units (including derivative securities with labor unions, the limited partnership agreementrespect to such ALDW Common Units) or acquisitions of shares of Delek Logistics, intercompany agreements withinCommon Stock (including derivative securities with respect to such shares Delek and its subsidiaries, or by applicable law, and except as Alon may approve in writing (such approval not to be unreasonably withheld, delayed or conditioned), Delek will not, and will not permit its subsidiaries to doCommon Stock) resulting from the following, among other things:
conduct its business other than in the ordinary course except as would not reasonably be expected to have a material adverse effect;
issue, create or approve any additional equity securities or rights therein except in connection with equity awards currently outstanding or allowed to be granted;
acquire or amend the terms of, any equity interests or rights of Delek or its subsidiaries, other than pursuant existing Delek or Delek Logistics equity awards and redemptions of common stock of less than $150 million pursuant to Delek’s existing stock buyback plan;
merge, consolidate or enter into any other business combination transaction or make any acquisition or disposition that would prevent or delay the Mergers;
pay special or extraordinary dividends other than consistent with past practice and approvedtransactions contemplated by the Delek Board;
amend the certificates of incorporation or bylaws of Delek or any subsidiary, other than to effect ministerial changes;
authorize, recommend, propose or announce an intention to adopt a plan of complete or partial dissolution or liquidation;
knowingly take any action that may result in (i) inaccuracy of a representation and warranty set forth in the merger agreement that would allow for a termination of thisMerger Agreement (ii) any of the conditionsby each individual who is subject to the obligationsreporting requirements of Delek not being satisfied, (iii) any material delay or prevention of the consummation of the Mergers or (iv) a material violation the merger agreement; or
agree or commit to do any of the above.
Non-Solicitation of Acquisition Proposals; Changes of Recommendation
Non-Solicitation
The merger agreement contains detailed provisions outlining the circumstances in which Delek and Alon may respond to acquisition proposals received from third parties. Under these provisions, each of Delek and Alon has agreed that it and its subsidiaries will (and will use commercially reasonable efforts to cause their respective directors, officers, employees, agents, advisors, and representatives, including investment bankers, financial advisors, attorneys, accountants, collectively referred to as representatives, to) immediately cease discussions with any other person relating to an acquisition proposal (as described below in “—Definition of Acquisition Proposal”) and instruct such other person to return or destroy all related confidential information. Furthermore, neither Delek nor Alon nor such persons may, directly or indirectly:
initiate, solicit or knowingly encourage or facilitate the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal;
participate in any discussions or negotiations relating to an acquisition proposal;
make available to any third party that is reasonably likely to be considering or seeking to make, an acquisition proposal, any non-public information or data relating to Delek or Alon as applicable or their respective business, properties, assets or bylaws (other than as required by law); or
enter into any agreement (whether written or oral, binding or non-binding) providing for or intended to facilitate, an acquisition proposal.
Delek Restrictions on Changes of Recommendation
The Delek Board has recommended that its stockholders vote in favor of the issuance by HoldCo of the New Delek common stock as merger consideration. Subject to certain exceptions described below, the Delek Board may not:
fail to include in this joint proxy statement/prospectus its recommendation that Delek stockholders approve the Delek issuance proposal;
withhold or withdraw, or qualify or modify in a manner that is adverse to Alon, its recommendation that Delek stockholders approve the share issuance proposal, or its approval of the merger agreement or the merger, or publicly propose to do so;
adopt, approve, recommend to its stockholders, endorse or otherwise declare advisable any acquisition proposal for Delek, or resolve, agree or publicly propose to do so, except as set forth below; or
make any public statement in connection with a tender offer or exchange offer other than a “stop, look and listen” communication of the type contemplated by Rule 14d-9(f)Section 16(a) of the Exchange Act which includes a reaffirmation of its recommendation that Delek stockholders approve the issuance proposal.
The taking of any of the actions described in any of the four bullets above is referred to as a change in recommendation with respect to Delek.
Alon Restrictions on Changes of Recommendation
The Alon Board and its committee of independent directors has recommended that its stockholders approve the merger agreement and Mergers. Similarly, andALDW, or will become subject to certain exceptions described below, neither the Alon Board nor its committee of independent directors may:
fail to include in this joint proxy statement/prospectus its recommendation that Alon stockholders approve the merger agreement and the Mergers;
withhold or withdraw, or qualify or modify in a manner that is adverse to Delek, its recommendation that Alon stockholders approve the merger agreement and the Mergers, or its approval of the merger agreement or the merger, or publicly propose to do so;
adopt, approve, recommend to its stockholders, endorse or otherwise declare advisable any acquisition proposal for Alon, or resolve, agree or publicly propose to do so, except as set forth below; or
make any public statement in connection with a tender offer or exchange offer other than a “stop, look and listen” communication of the type contemplated by Rule 14d-9(f) of the Exchange Act which includes a reaffirmation of its recommendation that Alon stockholders approve the issuance proposal.
The taking of any of the actions described in any of the four bullets above is referred to as a change in recommendation with respect to Alon.
No-Shop Exceptions; Permitted Changes of Recommendation and Permitted Termination to Enter into a Superior Proposal
At any time prior to the approval of the New Delek share issuance proposal by the Delek stockholders or the Alon merger proposal by the Alon stockholders, respectively, if either Delek or Alon receives a bona fide unsolicited written acquisition proposal that did not result from a breach of the no-shop provisions of the merger agreement, Delek or Alon, as applicable, may participate in discussions and negotiations regarding such proposal and make available non-public information and data if the party follows certain procedures set forth in the merger agreement despite the non-solicitation provisions described above. In such a case, the applicable board of directors must determine in good faith after consultation with outside counsel and financial advisors that the proposal constitutes or is reasonably likely to constitute a superior proposal (as described below in “—Definition of Superior Proposal”) and failure to take such actions would be inconsistent with their fiduciary duties under Delaware law. The applicable board of directors must also obtain an executed confidentiality agreement from the third party, advise the other party of any request for non-public information, inquiry or request for discussions or negotiations, provide the other party with a copy of any non-public information not previously provided, the material terms of any requests
for negotiations, and copies of written materials received in connection therewith (in each case promptly or within 24 hours).
At any time prior to the approval of the New Delek share issuance proposal by the Delek stockholders or the Alon merger proposal by the Alon stockholders, if either Delek or Alon receives a bona fide acquisition proposal that did not result from a breach of the no-shop provisions of the merger agreement, Delek or Alon, as applicable, may make a change in recommendation if its board of directors (and, in the case of Alon, its independent director committee) determines in good faith after consultation with outside counsel and financial advisors that (a) failure to take such actions would be inconsistent with their fiduciary duties under Delaware law and (b) the proposal is a superior proposal or would be reasonably expected to result in a superior proposal.
Prior to effecting a change in recommendation, Delek or Alon, as applicable, is required to comply with certain “match right” obligations. Specifically, the party wishing to make a change in recommendation must (i) provide the other party written notice three days in advance stating that such action will be taken which includes certain specified information about the superior proposal, (ii) have negotiated in good faith during such three day period to revise the terms of the merger agreement in such a way as may obviate the need for making a change in recommendation, and (iii) following such negotiations, have determined that a failure to effect such a change in recommendation in response to the superior proposal, taking into account any changes proposed by the other party to the merger agreement, continues to be inconsistent with the fiduciary duties of the board of directors under Delaware law.
Definition of Acquisition Proposal
For purposes of the merger agreement, the term “acquisition proposal” means, with respect to Delek:
any proposal or offer from any third party with respect to a direct or indirect purchase, acquisition, transfer, sale or disposition of (i) more than 50% in value of the assets (or the assets generating more than of 50% of the cash flow, net revenue or net income) of Delek and its subsidiaries, taken as a whole, or (ii) more than 15% of the outstanding equity securities of Delek; or
any tender offer or exchange offer from a third party that if consummated would result in, a third party beneficially owning more than 15% of the outstanding equity securities of Delek.
For purposes of the merger agreement, the term “acquisition proposal” means, with respect to Alon:
any proposal or offer from any third party with respect to a direct or indirect purchase, acquisition, transfer, sale or disposition of (i) more than 15% in value of the assets (or the assets generating more than of 15% of the cash flow, net revenue or net income) of Alon and its subsidiaries, taken as a whole, or (ii) more than 15% of the outstanding equity securities of Alon; or
any tender offer or exchange offer from a third party that if consummated would result in, a third party beneficially owning more than 15% of the outstanding equity securities of Alon.
Definition of Superior Proposal
For purposes of the merger agreement, the term “superior proposal” means a written acquisition proposal not solicited in violation of the “no-shop” provisions of the merger agreement that the board of directors of Delek or Alon (acting through the independent director committee, in the case of Alon), as applicable, believes in good faith to be a bona fide proposal, has determined in good faith, after consultation with its outside financial and legal advisors, (i) is reasonably capable of being consummated in accordance with its terms and (ii) if consummated, would be more favorable to the stockholders (in the case of Alon, other than Delek and its affiliates) from a financial point of view than the transaction contemplated by the merger agreement. In determining whether an acquisition proposal is more favorable to its stockholders for purposes of the preceding sentence, the board of directors of Delek or Alon, as applicable (acting through the independent director committee, in the case of Alon), is required to take into account any proposed revisions to the merger agreement by the other party to the merger agreement and all other relevant factors (including all legal, financial and regulatory aspects of the proposal and the person making the proposal and whether approval of the equity owners of such person is required),
For purposes of determining whether an acquisition proposal is a superior proposal with respect to Alon, only acquisition proposals involving (i) more than 75% in value of the assets (or the assets generating more than of 75% of the cash flow, net revenue or net income) of Alon and its subsidiaries, taken as a whole or (ii) more than 75% of the outstanding equity securities of Alon may be considered.
For purposes of determining whether an acquisition proposal is a superior proposalreporting requirements with respect to Delek, only acquisition proposals involving (i) more than 50% in value of the assets (or the assets generating more than of 50% of the cash flow, net revenue or net income) of Delek and its subsidiaries, taken as a whole or (ii) more than 75% of the outstanding equity securities of Delek mayto be considered.
Special Stockholder Meetings
Delek Special Meeting
Delek has agreed to convene and hold a meeting of its stockholders to consider and vote upon the Delek issuance proposal as promptly as practicable after this registration statement is declared effective, and in any event within 60 days, after the joint proxy statement/prospectus has been on file with the SEC for 10 days, or the date that the SEC has confirmed that it has no further comments to it. Delek may postpone or adjourn its special meeting (a) if Alon consents, (b) due to absence of a quorum or receipt of insufficient proxies to approve the Delek issuance proposal, or (c) to allow reasonable additional time to file, transmit and review amended disclosure that the Delek Board has determined in good faith after consultation with outside legal counsel is necessary
exempt under applicable law. Delek may not postpone or adjourn for the reasons listed in (b) more than twice. Alon may request an adjournment for the reasons listed in (b), but Delek is not required to adjourn more than twice at the request of Alon, and no such adjournment is required to last for more than 15 business days.
Unless there has been a change in recommendation, the Delek Board is required to take all lawful action necessary, proper or advisable on its part to solicit the approval by Delek stockholders (including the approval by the stockholders other than Alon and its affiliates) of the Delek issuance proposal.
Alon Special Meeting
Alon has agreed to convene and hold a meeting of its stockholders to consider and vote upon the Alon merger proposal, the Alon non-binding compensation advisory proposal and the Alon adjournment proposal as promptly as practicable after this registration statement is declared effective, and in any event within 60 days, after the joint proxy statement/prospectus has been on file with the SEC for 10 days, or the date that the SEC has confirmed that it has no further comments to it. Alon may postpone or adjourn its special meeting (a) if Delek consents, (b) due to absence of a quorum or receipt of insufficient proxies to approve the merger agreement and the Mergers (including for approval by the stockholders other than Delek and its affiliates), or (c) to allow reasonable additional time to file, transmit and review amended disclosure that the Alon Board (with prior recommendation of the independent director committee) has determined in good faith after consultation with outside legal counsel is necessary under applicable law. Alon may not postpone or adjourn for the reasons listed in (b) more than twice. Delek may request an adjournment for the reasons listed in (b), but Alon is not required to adjourn more than twice at the request of Delek, and no such adjournment is required to last for more than 15 business days.
Unless there has been a change in recommendation, the Alon Board is required to take all lawful action necessary, proper or advisable on its part to solicit the approval by Alon stockholders (including the approval by the stockholders other than Delek and its affiliates) of the Alon merger proposal.
Timing of Special Meetings
Under the terms of the merger agreement, Delek and Alon are required to cooperate to schedule and convene the Delek special meeting and the Alon special meeting on the same day, and to establish the same record date for both the Delek special meeting and the Alon special meeting.
Reasonable Best Efforts; Regulatory Filings and Other Actions
Reasonable Best Efforts
Delek and Alon have agreed in the merger agreement to cooperate with each other and use (and cause their respective subsidiaries to use) their respective reasonable best efforts to take all actions reasonably necessary, proper or advisable to permit prompt consummation of the Mergers, including using reasonable best efforts to lift injunctions, defend litigation seeking to delay or
prevent the Mergers, and prepare documentation, effecting filings, and obtain consents of governments and third parties. Delek is also required to use reasonable best efforts to enter into necessary guarantees to in connection with Alon’s effort to obtain certain third-party consents and waivers. Furthermore, Delek and Alon have agreed to consult with each other to obtain material permits, consents and approvals and to keep each other apprised of the status thereof, make an appropriate filing necessaryRule 16b-3 promulgated under the HSR Act if the closing of the Mergers is not likely to occur prior to May 2, 2017 (when an existing approval under the HSR Act will expire), notifyExchange Act; and consult with each other regarding communications to any governmental authority, and share information necessary for governmental filings or received from governmental authorities in connection with the merger agreement to the extent permitted by law.
Antitrust Objections
Delek and Alon have agreed to take the necessary actions to resolve objections, if any, raised by the Antitrust Division of the United States Department of Justice, the Federal Trade Commission or state antitrust enforcement authorities under antitrust laws with respect to the Mergers. The parties have agreed that nothing in the merger agreement requires or will be construed to require Delek or Alon or any of its affiliates to take any action with respect to the material divestiture, holding separate, license or limitation on their respective assets.
Access to Information
Subject to applicable law, Delek and Alon and their respective subsidiaries have agreed to allow the other party access to various records and personnel. Neither is required to allow invasive environmental testing or jeopardize attorney-client privilege or any contractual obligation. No information gained by either party may be used for any purpose other than consummation of the Mergers or the stockholder meetings and recommendation changes described above.
Takeover Laws
Delek and Alon have agreed not to take any action that would cause the Mergers to be subject to requirements imposed by any takeover laws, and that if any takeover statute is or may become applicable to the Mergers, each of them will take all necessary steps to exempt (or to ensure continued exemption of) the Mergers from, or challenge the validity or applicability of, the applicable takeover law.
Reservation and Listing of New Delek Common Stock
Delek has agreed to cause HoldCo to reserve the New Delek common stock for issuance and use commercially reasonable efforts to cause such stock to be approved for listing on the NYSE prior to the effective time of the Delek Merger.
Employee Matters
Delek has agreed toMerger, (i) eliminating, or revoking, diminishing or eliminating the following terms with respect to Alon employees and their benefit plans:
to recognize certain unions designated by Alon as the exclusive representativeauthority of the applicable bargaining unit;ALDW GP Conflicts Committee or (ii) removing, or causing the removal of, any director of the ALDW GP Board that is a member of the ALDW GP Conflicts Committee either as a member of the ALDW GP Board or the ALDW GP Conflicts Committee without the affirmative vote of each of the other members of the ALDW GP Conflicts Committee.
to continue to honor all Alon benefit plans and compensation arrangements, including medical benefits to certain retirees substantially similar to those in effect immediately beforeIn addition, the Alon Merger;
to fully vest participantsparties have agreed in the Alon pension plan for involuntary terminations that occur byMerger Agreement to coordinate the earlier of 180 days of closing or December 31, 2017;
to cause HoldCo or Delek benefit plans to recognize employee’s service with Alon for purposes of vesting and eligibility (but not for purposes of benefit accrual), to waive certain pre-existing condition limitations for continuing employees, and to provide credit for deductibles, co-payments and out-of-pocket maximums for continuing employees; and
to credit continuing employees with accrued vacation and personal holiday time subject to certain conditions.
The merger agreement required Alon to amend its benefits plan relating to retiree medical benefits to provide that no additional retirees will be eligible to receive retiree medical benefits following the date of the merger agreement.
Transaction Litigation
Under the terms of the merger agreement, Alon is required to give Delek the opportunity to participate in Alon’s defense or settlementdeclaration of any litigation against Alondividends or its directors relating to the Mergers. Alon has agreed that it will not settle any such litigation without the prior written consent of Delek.
Election to HoldCo Board of Directors
As permitted by the merger agreement, the Special Committee has designated Mr. Wiessman to be appointed to HoldCo's board of directors. Within 30 days after the closing of the transaction, HoldCo will increase the size of the HoldCo board of directors by one seat and appoint Mr. Wiessman to the newly created seat.HoldCo has further agreed to use commercially reasonable efforts to cause Mr. Wiessman to be re-nominated and stand for election at the 2017 and 2018 annual meetings provided that he continues to satisfy HoldCo’s director qualifications.
Additionally, within 30 days after the closing, Delek and HoldCo have agreed to cause the size of the board of directors of the general partnerdistributions in respect of Delek Logistics to be increased by one seatCommon Stock and appoint Mr. Haddock toALDW Common Units and the newly created seat. HoldCo has further agreed to use commercially reasonable efforts to cause Mr. Haddock to be re-elected to such board of directors for terms not less than two years following the closing date provided that he continues to satisfy HoldCo’s director qualifications.
In each case, in the event the designee to either the HoldCo board or the general partner’s board resigns, dies or is unable to perform such person’s duties as a director, HoldCo will have no obligation to maintain the nomination or position of a designee.
Dividend Cooperation
Alon has agreed to coordinate with Delek the declaration, setting of record dates and payment dates of dividends on shares of Alon common stockrelating thereto so that holders of shares of Alon common stock do notALDW
Common Units shall receive, dividends on both shares of Alon common stock and shares of Delek common stock received in the mergerfor any quarter, either (i) distributions in respect of any calendar quarterALDW Common Units or fail to receive a dividend on either shares of Alon common stock or shares of Delek common stock received in the merger(ii) dividends in respect of any calendar quarter.
Tax Treatment
Delek and Alon have agreedCommon Stock that they receive in exchange therefor in the Merger. Subject to use their commercially reasonable efforts (i) to cause the Delek Merger to qualify as a “reorganization” within the meaning of Section 368(a)provisions of the Internal Revenue Code, (ii) to cause the Delek MergerALDW Partnership Agreement and the Alon Merger, taken together, to qualify as an “exchange” within the meaning of Section 35118-607 of the Internal Revenue Code,Delaware LP Act, the ALDW GP Board has declared, and (iii)caused ALDW to obtain various tax opinionspay, distributions in respect of the ALDW Common Units (a) in respect of the quarter ended September 30, 2017, in the amount of $0.43 per ALDW Common Unit, with a record date of November 13, 2017 and with a payment date occurring on or prior to that effect. Assuming such tax opinions are obtained, the parties agree to treat the merger transactions as such. DelekNovember 22, 2017 and Alon agree to deliver various certificates and take such actions to maintain or refrain from taking such actions that may jeopardize such characterization.
Cooperation with Financing and Outstanding Alon Convertible Notes
Alon has agreed to use, and to cause its subsidiaries and their respective representatives to use, commercially reasonable efforts to cooperate to assist Delek in certain debt financing matters as reasonably requested. Delek has agreed to indemnify Alon and others from losses suffered as a result of such assistance. Additionally, Alon has agreed to take certain actions required by the indenture governing Alon’s outstanding convertible notes in connection with the execution of and performance of its obligations pursuant to the merger agreement prior(b) if the effective time of the Alon Merger andhas not occurred prior to provided advance copiesthe record date (the timing of which will be consistent with ALDW’s past practice) for distributions in respect of any noticesquarter ending December 31, 2017 or documents to Delek before they are delivered. Alon has also agreed to cooperate with Delekthereafter, then for, any such quarter, in entering into a supplemental indenture reasonably satisfactory to Delekan amount (x) consistent with the trustee under theALDW GP Board’s existing indenture.cash distribution policy and (y) calculated in a manner substantially consistent with ALDW’s past practice (including in respect of reserves for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs), and with a record date and a payment date consistent with past practice with respect to such quarter.
ConditionsIndemnification and Insurance
Subject to certain terms and conditions specified in the CompletionMerger Agreement, Delek has agreed to:
for a period of six years following the effective time of the Mergers
Under the merger agreement, the respective obligationsMerger, honor all rights to indemnification, advancement of Delek, Alon, HoldCo, Delek Merger Subexpenses, elimination of liability and Alon Merger Sub to complete the Mergers are subject to the satisfaction,exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the Delek Merger of(including the following conditions:
Stockholder Approval. The Delek issuance proposal must have been approved in accordance with the stockholder approval requirement Section 312.03 of the NYSE Listed Company Manual, and the Alon merger proposal must have been approved by
(i) the Alon Common Stockholder Approval and (ii) the Alon Disinterested Stockholder Approval.
Regulatory Approval. All applicable waiting and other time periods under antitrust laws, including the HSR Act, must have expired, lapsed or been terminated and all regulatory clearances must have been obtained.
Governmental Approvals. All necessary filings, consents or approvals from any governmental authority required to be made or obtained in connection with the execution and delivery of the merger agreement and the consummation of the Mergers must have been made or obtained, except where the failure to do so could not be reasonably likely to result in a material adverse effect with respect to Delek or Alon.
NYSE Listing. The New Delek common stock to be issued in connection with the Mergers must have been approved for listing on the NYSE.
Effective Registration Statement. The registration statement of which this joint proxy statement/prospectus forms a part must be effective as declaredtransactions contemplated by the SEC.
No Injunction. No order of any court or agency can be in effect, and no law or other legal proceeding by a government authority can prohibit the Mergers or impose any material restriction on the Mergers, Delek or Alon.
Under the merger agreement, the obligations of Delek, HoldCo, Delek Merger Sub and Alon Merger Sub to complete the Mergers are subject to the satisfaction or waiver of the following additional conditions:
specified representations and warranties of Alon regarding aspects of its capitalization, the absence of certain changes, and the approvals required under state takeover laws must be true and correctAgreement) existing as of the date of the merger agreementMerger Agreement in favor of certain past and aspresent directors and officers of ALDW and its subsidiaries;
ensure that the governing documents of ALDW and ALDW GP (or their successor entities), for a period of six years following the effective time of the closing as though made onMerger, contain provisions no less advantageous with respect to indemnification, advancement of expenses, elimination of liability and asexculpation of their present and former directors, officers, employees and agents than are set forth in the governing documents of such date (except to the extent expressly made as of another date, in which case as of such other date), except for such inaccuracies as would not in the aggregate be material in amount or effect;
the remaining representations and warranties of Alon regarding its capitalization must be true and correct, other than small inaccuracies,entities as of the date of the merger agreementMerger Agreement;
maintain officers’ and asdirectors’ liability insurance covering certain past and present directors and officers of ALDW and its subsidiaries who are or were covered by the closing as though made onexisting officers’ and as of such date (exceptdirectors’ liability insurance applicable to the extent expressly made asALDW Group Entities for a period of another date, in which case as of such other date);
specified representations and warranties of Alon regarding due organization, corporate authority, and accuracy of certain information provided about Alon must be true and correct in all material respects as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date);
the other representations and warranties of Alon must be true and correct, without regard to materiality, material adverse effect or similar qualifiers, as of the date of the merger agreement and as of the closing as though made on and as of such date and time (except to the extent expressly made as of another date, in which case as of such other date), other than for such failures to be so true and correct that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect;
Alon must have performed and complied with in all material respects all of its obligations under the merger agreement;
Delek must have received a certificate signed by an executive officer of Alon that the foregoing closing conditions have been satisfied; and
Delek must have received a tax opinion to the effect that (i) the Delek Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, taken together with the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
Under the merger agreement, the obligation of Alon to complete the Mergers is subject to the satisfaction or waiver of thesix years following additional conditions:
specified representations and warranties of Delek regarding the absence of certain changes and the approvals required under state takeover laws must be true and correct as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date), except for such inaccuracies as would not in the aggregate be material in amount or effect;
the representations and warranties of Delek regarding its capitalization must be true and correct, other than small inaccuracies, as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date);
certain representations and warranties of Delek regarding due organization, organizational documents and corporate authority must be true and correct in all material respects as of the date of the merger agreement and as of the closing as though made on and as of such date (except to the extent expressly made as of another date, in which case as of such other date);
the other representations and warranties of Delek must be true and correct, without regard to materiality, material adverse effect or similar qualifiers, as of the date of the merger agreement and as of the closing as though made on and as of such date and time (except to the extent expressly made as of another date, in which case as of such other date),
other than for such failures to be so true and correct that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect;
Delek must have performed and complied with in all material respects all of its obligations under the merger agreement;
Alon must have received a certificate signed by an executive officer of Delek that the foregoing closing conditions have been satisfied; and
Alon must have received a tax opinion to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
Termination
Termination Rights
Delek and Alon may terminate the merger agreement and abandon the Mergers at any time prior to the effective time of the Delek Merger by mutual written consent.Merger; and
The merger agreement may also be terminated by either Delek or Alon at any time prior tomaintain in effect the six year “tail” policy obtained in connection with the Delek-ALJ Merger.
Termination
Before the effective time of the Merger, the Merger Agreement may be terminated:
by mutual written agreement of the parties thereto duly authorized by the Delek Board, on behalf of Delek, and by the ALDW GP Conflicts Committee and the ALDW GP Board, on behalf of ALDW;
by ALDW or Delek, if:
the Merger has not been consummated on or before June 30, 2018 (Delek may not enforce this termination right based on the Merger not being consummated on or before June 30, 2018 if the Delek Parties or the ALDW Parties fail to perform or observe in any material respect any of their respective obligations under the Merger Agreement in any manner that shall have been the principal cause of, or resulted in, the failure of the following situations:
the Mergers do not occur by October 2, 2017, which is referred to as an outside date termination event, provided that a party may not terminate the merger agreement if such party has materially breached the merger agreement and such breach was the causeconsummation of the failureMerger to meet the deadline;occur on or before such date);
the Delek special meeting is helda governmental entity has issued a final and the Delek stockholders do not approve the Delek issuance proposal at such meetingnon-appealable order, decree or atruling or taken any permitted adjournment or postponement of such meeting, which is referred to as a failed Delek vote termination event, provided that Delek may not terminate if the failure to obtain approval is caused by Delek breaching the merger agreement;
the Alon special meeting is held and the Alon stockholders do not approve the Alon merger proposal (including the approval by the stockholders other than Delek and its affiliates) at such meeting or at any permitted adjournment or postponement of such meeting, which is referred to as a failed Alon vote termination event, provided that Alon may not terminate if the failure to obtain approval is caused by Alon breaching the merger agreement; or
any law or orderaction permanently restraining, enjoining or otherwise prohibiting the completion ofMerger, so long as the merger becomes final and non-appealable, provided that the
terminating party seeking termination has metcomplied with its obligations to cooperate and use reasonable best efforts to bring aboutunder the closing.
In addition, the merger agreement may be terminated by Delek:
if Alon has breached the merger agreement in such a way that the conditions relating to representations and warranties and performance of material obligations cannot be satisfied or is not satisfied within 30 days of written notice or the fifth business day prior to October 2, 2017, which is referred to as an Alon breach termination event;
if a change in recommendation by Alon occurs and the necessary approval of Alon stockholders (including the approval by the stockholders other than Delek and its affiliates) is not obtained;
if Alon breaches its obligationsMerger Agreement (i) with respect to terminatingany filing, submission or initiating acquisition proposal discussionscommunication with a governmental entity having jurisdiction over the Merger and (ii) to attempt to remove the prohibition; or
the other party breaches any of its other “no shop” obligations;
ifrepresentations, warranties or agreements in the Delek Board approves, and Delek enters into, a definitive agreement implementing a superior proposal (as described under “—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”) and has complied with the merger agreement with respect to terminatingMerger Agreement or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Delek stockholders; or
if Alon has not obtained certain third-party consents prior to the 90th day following the date of the merger agreement, provided that such termination may only occur within five business days after such deadline passes.
Further, the merger agreement may be terminated by Alon:
if Delek, HoldCo, Delek Merger Sub or Alon Merger Sub has breached the merger agreement in such a way that the conditions relating to representations and warranties and performance of material obligations cannot be satisfied or is not satisfied within 30 days of written notice or the fifth business day prior to October 2, 2017, which is referred to as a Delek breach termination event;
if a change in recommendation by Delek occurs and the necessary approval of Delek stockholders is not obtained;
if Delek breaches its obligations with respect to terminating or initiating acquisition proposal discussions or any of its other “no shop” obligations; or
if the Alon Board approves, and Alon enters into, a definitive agreement implementing a superior proposal (as described under “Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”) and has complied with the merger agreement with respect to terminating or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Alon stockholders.
Termination Fee Payable by Alon
The merger agreement requires Alon to pay Delek a termination fee of $15 million, which is referred to as the termination fee, if any of the following occurs:
other party’s representations or warranties becomes untrue and such breach (i) is incapable of being cured, or is not cured, prior to the merger agreementTermination Date and (ii) results in a condition to the Merger not being satisfied, provided that the party seeking termination is terminated duenot in breach of its representations and warranties under the Merger Agreement so as to (i) an outside date termination event provided certain other conditions have been met, (ii) a failed Alon vote termination event, or (iii) an Alon breach termination event; and
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o | an acquisition proposal with respect to Alon involving 50% or more of the non-“cash or cash equivalent” assets of Alon and its subsidiaries or acquisition of more than 50% of the outstanding shares of Alon common stock has been made directly to the stockholders of Alon generally or has otherwise become publicly known and remains outstanding prior to the Alon special meeting; and |
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o | within 12 months following termination of the merger agreement, Alon enters into an agreement for or consummates such transaction; |
the merger agreement is terminated by Delek duegive rise to a change in recommendation by Alon that occurs beforefailure of the necessary approval of Alon stockholders (including the approval by the stockholders other than Delek and its affiliates) has been obtained; or
the merger agreement is terminated by Alon duecondition to the Alon Board approvingother party’s obligation to close under the Merger Agreement; provided further that this right to terminate the Merger Agreement will not be available to a party if, at such time, the conditions
to the other party’s obligation to close described in the second paragraph under “—Conditions to the Merger” cannot be satisfied (with or without the passage of time).
Notwithstanding anything to the contrary contained in the Merger Agreement, Delek may not assert (individually or collectively with other breaches) any breach by ALDW or ALDW GP of any of representation or warranty made by them in the Merger Agreement (whether made as of the closing date or any earlier date) as a basis for (x) the failure of any condition to be satisfied, (y) the termination of the Merger Agreement pursuant to the last bullet above or (z) ALDW’s inability to terminate the Merger Agreement pursuant to the proviso in the third bullet above, in each case, if and Alon entering into a definitive agreement implementing a superior proposal (as described under “Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”), and Alon has complied withto the merger agreementextent that, with respect to terminating or initiating acquisition proposal discussions, prior to obtainingsuch breach, Delek was in breach of its representation and warranty described in the necessary approval of Alon stockholders.second paragraph under “—Representations and Warranties.”
Termination Fee Payable by DelekAmendment, Consents and Waiver
The merger agreement requires DelekSubject to pay Alon a termination fee of $20 million, which is referredcompliance with applicable law, prior to as the reverse termination fee, if anyclosing of the following occurs:
Merger, any provision of the mergerMerger Agreement may be (a) consented to or waived in writing by the party benefited by the provision or (b) amended or modified at any time by an agreement is terminated duein writing by the parties to (i) an outside datethe Merger Agreement; provided, however, that, in addition to any other approvals required by the ALDW Parties’ constituent documents or under the Merger Agreement, the foregoing consents, waivers, amendments or modifications in clauses (a) and (b) and any decision or determination by ALDW to (y) terminate the Merger Agreement pursuant to the termination event provided certain other conditions have been met, (ii) a failed Delek vote termination event,provisions applicable to ALDW described above or (iii) a Delek breach termination event; and
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o | an acquisition proposal with respect to Delek involving 50% or more of the non-“cash or cash equivalent” assets of Delek and its subsidiaries or acquisition of more than 50% of the outstanding shares of Delek common stock has been made directly to the stockholders of Delek generally or has otherwise become publicly known and remains outstanding prior to the Delek special meeting; and |
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o | within 12 months following termination of the merger agreement, Delek consummates such transaction; and |
(z) enforce the merger agreement is terminatedMerger Agreement, may be granted, taken, made or directed only by Alon duethe ALDW GP Conflicts Committee (without the need to a change in recommendation by Delek that occurs before the necessaryobtain any further approval of Delek stockholders has been obtained; or
the merger agreement is terminated by Delek due toALDW GP Board) and in all cases requires the Delek Board approving, and Delek entering into, a definitive agreement implementing a superior proposal (as described under “—Non-Solicitation of Acquisition Proposals; Changes of Recommendation—Definition of Superior Proposal”), and Delek has complied with the merger agreement with respect to terminating or initiating acquisition proposal discussions, prior to obtaining the necessary approval of Alon stockholders.the ALDW GP Conflicts Committee.
Expenses
Whether
INFORMATION ABOUT THE COMPANIES
Alon USA Partners, LP
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
ALDW is a publicly traded Delaware limited partnership engaged principally in the business of owning and operating a crude oil refinery in Big Spring, Texas, with a crude oil throughput of 73,000 barrels per day. It refines crude oil into finished products, which are marketed primarily in Central and West Texas, Oklahoma, New Mexico and Arizona through its integrated wholesale distribution network to both Delek’s retail convenience stores and other third-party distributors.
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
Delek is a diversified downstream energy company with assets in petroleum refining, logistics, asphalt, renewable fuels and convenience store retailing. The refining assets consist of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas and Krotz Springs, Louisiana with a combined nameplate crude throughput capacity of 302,000 barrels per day. As of December 1, 2017, Delek, through its subsidiaries, owns 100.0% of ALDW GP and 81.6% of the limited partner interest in ALDW.
Delek’s logistics operations primarily consist of DKL. Delek owns a 60.7% limited partner interest in DKL and a 94.9% interest in the entity that owns the entire 2.0% general partner interest in DKL and all of the incentive distribution rights. DKL is a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure assets.
Delek’s asphalt operations consist of owned or operated asphalt terminals serving markets from Tennessee to the West Coast through a combination of non-blended asphalt purchased from third parties and production at the Big Spring, Texas and El Dorado, Arkansas refineries. The renewables operations consist of plants in Texas and Arkansas that produce biodiesel fuel and a renewable diesel facility in California.
Delek’s convenience store retail business is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores in central and west Texas and New Mexico.
Sugarland Mergeco, LLC
7102 Commerce Way
Brentwood, Tennessee 37027
(615) 771-6701
Merger Sub is a Delaware limited liability company and an indirect, wholly-owned subsidiary of Delek. Merger Sub was formed on October 26, 2017 solely for the purpose of consummating the Merger and has no operating assets. Merger Sub has not the Mergers are completed, all costscarried on any activities to date, except for activities incidental to its formation and expenses incurredactivities undertaken in connection with the merger agreement, the Mergers and the other transactions contemplated by the merger agreement will be paid by the party incurring the expense, except that any expenses to be paid in connection with any additional antitrust filings will be paid by Delek.
Indemnification; Directors’ and Officers’ Insurance
The parties to the merger agreement have agreed that, from and after the effective time of the Mergers, HoldCo and the Alon surviving entity will indemnify and hold harmless (and subject to certain conditions to provide advancement of expenses to) each present and former director and officer of Alon and its subsidiaries in connection with any claim or legal proceeding and, among other things, any resulting losses, expenses, fines, penalties and settlements. HoldCo further agreed to cause the Alon surviving entity to maintain the indemnification obligations it has with respect to such persons under its organizational documents and existing indemnification agreements for a period of at least six years following the Mergers unless otherwise required by law.
In addition, HoldCo or the Alon surviving entity is required to maintain the fiduciary liability insurance policies covering the indemnified persons with benefits and levels of coverage no less advantageous to the indemnified parties than Alon’s existing policies, subject to a premium cap of 300% of the current Alon annual premium.
The indemnified persons described in the first paragraph of this section will have the right to enforce the provisions of the merger agreement relating to their indemnification.
Modification and Amendment
Subject to applicable law, the merger agreement may be amended, modified or supplemented in writing at any time by the parties, and the party benefited by any provision may waive such provision in writing; however, after the approval by the Alon stockholders of the Alon merger proposal, no amendment can be made to the merger consideration or that adversely affects the rights of the Alon stockholders without their approval.Merger.
Remedies
In the event of termination of the merger agreement pursuant to the provisions described under “—Termination” beginning on page 192, the merger agreement (other than certain provisions as set forth in the merger agreement) will become void and of no effect with no liability on the part of any party to the merger agreement (or of any of its representatives or affiliates). However, except as otherwise expressly provided in the merger agreement, no termination of the merger agreement will relieve any party to the merger agreement of any liability or damages to the other parties resulting from any willful material breach of the merger agreement.
If either Delek or Alon pays the termination fee or the reverse termination fee, as applicable, in the circumstances contemplated by the merger agreement, such payment will be the sole and exclusive remedy of the receiving party against the paying party.
The parties are entitled to an injunction or injunctions to prevent breaches of the merger agreement, and to enforce specifically the terms of the merger agreement without the necessity of posting a bond. The parties further waive the defense to such an action that there is an adequate remedy at law.
THE VOTING AGREEMENTS
This section describes the material terms of the voting agreements, which were executed on January 2, 2017. The description in this section and elsewhere in this joint proxy statement/prospectus is qualified in its entirety by reference to the complete text of the voting agreements, copies of which are attached as Annexes C, D and E to this joint proxy statement/prospectus and are incorporated by reference herein in its entirety. This summary does not purport to be complete and may not contain all of the information about the voting agreements that is important to you. You are encouraged to read each voting agreement carefully and in its entirety.
Inconnection with the execution of the merger agreement, and as a condition to Delek’s willingness to enter into the merger agreement, Jeff Morris and his spouse Karen Morris and David Wiessman and Mr. Wiessman’s controlled entity D.B.W. Holdings (2005) Ltd. entered into two separate voting and support agreements with Delek. Based on information provided by each of them to Delek and Alon, as of the date of the voting agreements:
Wiessman beneficially owned 175,100 shares of Alon common stock and D.B.W. Holdings (2005) Ltd., an entity controlled by Mr. Wiessman, owned 2,335,441 shares of Alon common stock representing approximately 3.5% of the outstanding shares of Alon common stock; and
Mr. Morris and his spouse beneficially owned 1,669,347 shares of Alon common stock and may be deemed to beneficially own an additional 232,694 shares of Alon common stock issuable upon exchange of shares of Alon Assets, Inc., collectively representing approximately 2.65% of the outstanding shares of Alon common stock.
In connection with the execution of the merger agreement, and as a condition to Alon’s willingness to enter into the merger agreement, Delek entered into a voting and support agreement with Alon. As of the date of that voting agreement, Delek owned 33,691,292 shares of Alon common
stock representing approximately 47% of the outstanding shares of Alon common stock as of such date.
The foregoing shares of Mr. Wiessman, D.B.W. Holdings (2005) Ltd., Mr. Morris and his spouse, and Delek are referred to as the existing shares, and together with any shares of Alon common stock such stockholders acquire beneficial ownership on or after the date of the voting agreements, are referred to as the “subject shares.”
Voting
At the Alon special meeting and any other meeting or in any written consent action of Alon stockholders, Mr. Wiessman, D.B.W. Holdings (2005) Ltd. and Mr. Morris and his spouse have agreed to vote or cause to be voted the subject shares as follows:
in favor of the Mergers and the merger agreement and any other transactions or matters contemplated by the merger agreement;
in favor of any proposal to adjourn or postpone the meeting to a later date if there are not sufficient votes to adopt the merger agreement or if there are not sufficient shares present in person or by proxy at the meeting to constitute a quorum;
in favor of any other matter necessary to complete the transactions contemplated by the merger agreement;
against any purchase, acquisition, transfer, sale or disposition of more than 15% of the value of the Alon assets or equity securities or any tender offer or exchange offer for more than 15% of the outstanding Alon equity securities other than the Mergers;
against any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of Alon under the merger agreement or of the voting agreement; and
against any action, proposal, transaction or agreement that could reasonably be expected to impede, interfere with, frustrate, delay, discourage, adversely affect or inhibit the timely consummation of the Mergers or the fulfillment of conditions under the merger agreement or change in any manner the voting rights of any class of shares of Alon.
At the Alon special meeting and any other meeting or in any written consent action of Alon stockholders, Delek has agreed to vote or cause to be voted its subject shares in the same manner with respect to only the items set forth in the first two bullet points above.
Mr. Wiessman, D.B.W. Holdings (2005) Ltd, Mr. Morris and his spouse have granted to Delek, and Delek has granted to Alon under their respective voting agreements, a proxy as their attorney-in-fact to vote the subject shares in accordance with the matters described above until termination of the applicable voting agreement.
Prohibition on Transfers
Until the termination of their respective voting agreements, Mr. Wiessman, D.B.W. Holdings (2005) Ltd., Mr. Morris and his spouse, and Delek have agreed not to, directly or indirectly:
transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber the subject shares;
grant any proxies or powers of attorney, or any other authorization or consent with respect to any or all of the subject shares in respect of any matter addressed by the respective voting agreement;
deposit any of the subject shares into a voting trust or enter into a voting agreement or arrangement with respect to any of the subject shares or grant any proxy or power of attorney with respect thereto that is inconsistent with the respective voting agreement;
enter into any contract with respect to the transfer, sale, offer, exchange, assignment, pledge or other disposal of or encumbrance of the subject shares; or
take any other action that would restrict, limit or interfere with the performance of their obligations under their respective voting agreement.
Under the terms of each voting agreement, any purported transfer, sale, offer, exchange, assignment, pledge or other disposal of or encumbrance of the subject shares without Delek’s (with respect to Mr. Wiessman, D.B.W. Holdings (2005) Ltd., Mr. Morris and his spouse) or Alon’s (with respect to Delek) consent is not effective.
Termination
The voting agreements applicable to Mr. Wiessman, D.B.W. Holdings (2005) Ltd., and Mr. Morris and his spouse will terminate upon the earliest to occur of (i) the effective time of the Mergers, (ii) a change in recommendation by Alon that is permitted by the merger agreement, and (iii) the termination of the merger agreement. In addition to those occurrences, the Delek voting agreement is terminable earlier if a change in recommendation by Delek that is permitted by the merger agreement occurs.
FUTURE LIQUIDITY NEEDS OF THE COMBINED COMPANY
As of December 31, 2016, Delek had $689.2 million in principal sources of liquidity available from its cash and cash equivalents. While Delek expects that its current sources of liquidity, including cash and cash equivalents, together with its current projections of cash flow from operating activities, and unused revolver credit commitments will provide it with adequate liquidity based on its current plans through at least the end of the current fiscal year, Delek may raise funds in the future, including through potential equity or debt offerings, subject to market conditions and recognizing that Delek cannot be certain that additional funds would be available to it on favorable terms or at all. The amount and timing of funds that Delek may raise is undetermined and would vary based on a number of factors, including Delek and the combined company’s liquidity needs as well as access to current and future sources of liquidity. For additional information, see “Risk Factors” beginning on page 47.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS
The following is a general discussion of the material U.S. federal income tax consequences of the Delek Merger to U.S. holders and non-U.S. holders (each as defined below) of Delek common stock and of the Alon Merger to U.S. holders and non-U.S. holders of Alon common stock. This discussion is limited such holders that hold their shares of Delek common stock or Alon common stock as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, which we refer to as the “Internal Revenue Code.” This discussion is based upon the Internal Revenue Code, U.S. Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service, which we refer to as the “IRS,” and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). Any such change or interpretation could affect the continuing validity of this discussion.
This discussion is for general information only and does not purport to address all aspects of U.S. federal income taxation that may be relevant to particular holders of Delek common stock or Alon common stock in light of their particular facts and circumstances and does not apply to holders of Delek common stock or Alon common stock that are subject to special rules under the U.S. federal income tax laws (including, for example, banks and other financial institutions, dealers in securities or currencies, traders in securities that elect to apply a mark-to-market method of accounting, insurance companies, mutual funds, tax-exempt entities, entities or arrangements treated as partnerships for U.S. federal income tax purposes or other flow-through entities (and investors therein), subchapter S corporations, retirement plans, individual retirement accounts or other tax-deferred accounts, real estate investment trusts, regulated investment companies, holders liable for the alternative minimum tax, certain former citizens or former long-term residents of the United States, U.S. holders having a “functional currency” other than the U.S. dollar, holders who hold shares of Delek common stock or Alon common stock as part of a hedge, straddle, constructive sale, conversion transaction or other integrated transaction, “controlled foreign corporations,” “passive foreign investment companies,” holders that hold (or that held, directly or constructively, at any time during the five year period ending on the date of the Mergers) 5% or more of the Delek common stock or Alon common stock (except as specifically provided below), and holders who acquired their shares of Delek common stock or Alon common stock through the exercise of an employee stock option or otherwise as compensation or through a tax-qualified retirement plan). This discussion does not address any considerations under U.S. federal tax laws other than those pertaining to the income tax, nor does it address any considerations under any state, local or non-U.S. tax laws, under the alternative minimum tax, under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations issued thereunder and intergovernmental agreements entered into pursuant thereto).
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of Delek common stock or Alon common stock, the tax treatment of a person treated as a partner in such partnership generally will depend on the status of the partner and upon the activities of the partnership. Persons that for U.S. federal income tax purposes are treated as a
partner in a partnership holding shares of Delek common stock or Alon common stock should consult their tax advisors regarding the tax consequences of the Mergers to them.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Delek common stock or Alon common stock, as applicable, that is, for U.S. federal income tax purposes:
An individual who is citizen or resident of the United States;
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
an estate the income of which is subject to U.S. federal income tax regardless of its source; or
a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.
For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner of Delek common stock or Alon common stock that is neither a U.S. holder nor a partnership for U.S. federal income tax purposes and does not hold (or has not held, directly or constructively, at any time during the five year period ending on the date of the Mergers) 5% or more of the Delek common stock or Alon common stock (except as specifically provided below).
This discussion of the material U.S. federal income tax consequences of the Mergers is for general information only and is not intended to be, and should not be construed as, tax advice. Holders of Delek common stock and Alon common stock should consult their own tax advisors with respect to the particular tax consequences to them of the Mergers, including the applicability and effect of any U.S. federal, U.S. state or local or non-U.S. tax laws or any applicable tax treaty.
Tax Treatment of the Mergers
The obligation of Delek to complete the Mergers is conditioned upon the receipt by Delek of an opinion from Baker Botts L.L.P., counsel to Delek, to the effect that (i) the Delek Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and (ii) the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, taken together with the receipt by Alon stockholders of New Delek common stock in exchange for their Alon common stock pursuant to the Alon Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. The obligation of Alon to complete the Mergers is conditioned upon the receipt by Alon of an opinion from Vinson & Elkins LLP, counsel to Alon, to the effect that the receipt by Alon stockholders of New Delek common stock in exchange for their
Alon common stock pursuant to the Alon Merger, taken together with the receipt by Delek stockholders of New Delek common stock in exchange for their Delek common stock pursuant to the Delek Merger, will qualify as an “exchange” within the meaning of Section 351 of the Internal Revenue Code. Provided such opinions are received, Delek, HoldCo, and Alon intend to report the Mergers for U.S. federal income tax purposes in a manner consistent with such treatment.
In rendering these opinions, counsel will rely upon customary assumptions and representations from Delek and Alon, as well as on certain covenants and undertakings by Delek and Alon. If any of the representations, assumptions, covenants, or undertakings upon which those opinions are based is incorrect, incomplete, inaccurate or violated, the validity of the opinions may be affected and the U.S. federal income tax consequences of the Mergers could differ from those described in this joint proxy statement/prospectus.
None of these opinions will be binding on the IRS or the courts. Delek and Alon have not requested and do not intend to request any ruling from the IRS as to the U.S. federal income tax consequences of the Mergers. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to any of those set forth below. Accordingly, each Delek stockholder and each Alon stockholder should consult its tax advisor with respect to the particular tax consequences of the Mergers to such holder, including the consequences if the IRS successfully challenged (i) the qualification of the Delek Merger as a “reorganization” within the meaning of Section 368 of the Internal Revenue Code and (ii) the qualification of the receipt by the Delek stockholders and the Alon stockholders of New Delek common stock in exchange for their Delek common stock and Alon common stock, respectively, pursuant to Mergers, taken together, as an “exchange” within the meaning of Section 351 of the Internal Revenue Code.
Tax Consequences to U.S. Holders and Non-U.S. Holders of Delek Common Stock
Assuming the receipt and accuracy of the opinion of Baker Botts L.L.P. described above, the U.S. federal income tax consequences of the Delek Merger to a U.S. holder or a non-U.S. holder of Delek common stock will be as follows:
no gain or loss will be recognized by such holder upon the exchange of its Delek common stock for New Delek common stock in the Delek Merger;
the aggregate basis of the New Delek common stock received in the Delek Merger by such holder will be the same as the aggregate basis of the Delek common stock surrendered in exchange therefor; and
such holder’s holding period in the New Delek common stock received in the Delek Merger will include the holding period of the Delek common stock surrendered in exchange therefor.
Tax Consequences to U.S. Holders of Alon Common Stock
In General
Assuming the receipt and accuracy of the opinion of Vinson & Elkins LLP described above, the U.S. federal income tax consequences of the Alon Merger to a U.S. holder of Alon common stock will be as follows:
gain, but not loss, will be recognized by such U.S. holder upon the exchange of its Alon common stock for New Delek common stock and cash in lieu of a fractional share of New Delek common stock in the Alon Merger equal to the lesser of: (1) the excess, if any, of (i) the sum of the fair market value of New Delek common stock received in the Alon Merger and the amount of cash received in lieu of a fractional share of New Delek common stock in the Alon Merger over (ii) the stockholder’s tax basis in the Alon common stock surrendered in the Alon Merger (clause (1), the “Realized Gain”), and (2) the amount of cash received in lieu of a fractional share of New Delek common stock in the Alon Merger (the lesser of clause (1) and (2), the “Section 351(b) Gain”).
the aggregate basis of the New Delek common stock received in the Alon Merger by such U.S. holder will be the same as the aggregate basis of the Alon common stock surrendered in exchange therefor, reduced by the amount of cash such U.S. holder received in lieu of a fractional share of New Delek common stock and increased by such U.S. holder’s Section 351(b) Gain; and
such U.S. holder’s holding period of New Delek common stock received in the Alon Merger will include the holding period of the Alon common stock surrendered in exchange therefor.
Cash In Lieu of a Fractional Share
The tax treatment of cash received in lieu of a fractional share of New Delek common stock pursuant to the Alon Merger is not entirely certain. The receipt of cash in lieu of a fractional share of New Delek common stock may be treated as the receipt of cash in exchange for Alon common stock in connection with the Alon Merger, which would be treated as described above under “—Tax Consequences to U.S. Holders of Alon Common Stock-In General.” It is possible, however, that the receipt of cash in lieu of a fractional share may be treated as if the U.S. holder received the fractional share in the Alon Merger and then received the cash in a redemption of the fractional share, in which case the U.S. holder should generally recognize gain or loss equal to the difference between the amount of the cash received instead of the fractional share and the U.S. holder’s tax basis allocable to such fractional share.
Tax Consequences to Non-U.S. Holders of Alon Common Stock
A non-U.S. holder will generally not be subject to U.S. federal income tax or withholding tax on any Realized Gain or Section 351(b) Gain in connection with the Alon Merger unless:
any Section 351(b) Gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment of the non-U.S. holder in the United States);
the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year in which the Section 351(b) Gain is triggered and certain other conditions are met; or
Alon is or has been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five year period ending on the date of the Alon Merger or the non-U.S. holder’s holding period for Alon common stock, and, as described below, the non-U.S. holder owns or is deemed to own more than 5% of Alon’s outstanding common stock during that same period.
In the case of the first bullet point above, Section 351(b) Gain generally will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if such non-U.S. holder were a U.S. holder. A non-U.S. holder described in the first bullet that is a corporation also may be subject to an additional branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on its “effectively connected earnings and profits” for the taxable year, subject to certain adjustments.
In the case of the second bullet point above, Section 351(b) Gain will be subject to U.S. federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty), but may be offset by U.S. source capital losses, if any, of the non-U.S. holder, provided such non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
Regarding the third bullet point above, Alon believes that it currently is, and has been, a USRPHC. Nevertheless, so long as the common stock of Alon is considered to be regularly traded on an established securities market, non-U.S. holders who have never beneficially owned (or been deemed to own under certain attribution rules) more than 5% of the Alon common stock will not be subject to U.S. federal income tax on any Reazlied Gain or any Section 351(b) Gain in connection with the Alon Merger solely as a result of Alon’s USRPHC status. Alon believes that its common stock is regularly traded on an established securities market for these purposes. Accordingly, only Alon shareholders who are non-U.S. holders and who hold, or have held, more than 5% of Alon’s common stock may be subject to U.S. federal income tax on any Realized Gain as a consequence of the Alon Merger and should consult their tax advisors regarding the potential U.S. federal income tax consequences with respect to the Alon Merger.
Reporting Requirements
Holders of shares of Delek common stock who owned immediately before the Delek Merger at least 5% percent (by vote or value) of the total outstanding shares of Delek common stock, or owned shares of Delek common stock with a tax basis of $1 million or more, are required to attach a statement to their U.S. federal income tax returns for the year in which the Delek Merger is
completed that contains the information set forth in U.S. Treasury Regulations Section 1.368-3(b). Such statement must include the fair market value, determined immediately before the Delek Merger, of all of such holder’s Delek common stock exchanged pursuant to the Delek Merger and such holder’s tax basis, determined immediately before the Delek Merger, in its Delek common stock.
Holders of Delek common stock or Alon common stock that receive New Delek common stock and, upon consummation of the Mergers, own New Delek common stock representing at least 5.0% of the total combined voting power or value of the total outstanding New Delek common stock, are required to attach to their U.S. federal income tax returns for the year in which the Mergers are completed, and maintain a permanent record of, a statement containing the information listed in U.S. Treasury Regulations section 1.351-3. The facts to be disclosed by a holder include the aggregate fair market value of, and the holder’s basis in, the Delek common stock or the Alon common stock, as applicable, exchanged pursuant to the Mergers.
Backup Withholding and Information Reporting
Payments of cash, including cash received in lieu of a fractional share of New Delek common stock, to a U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding (currently, at a rate of 28%), unless the U.S. holder provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable requirements of the backup withholding rules. Certain holders (such as corporations and non-U.S. holders) are exempt from backup withholding. Holders exempt from backup withholding may be required to comply with certification requirements and identification procedures in order to establish an exemption from information reporting and backup withholding or otherwise avoid possible erroneous backup withholding. Any amount withheld under the backup withholding rules is not an additional tax and may be refunded or credited against such holder’s U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following sets forth the unaudited pro forma condensed combined financial statements of Delek after giving effect to the Delek-ALJ Merger, whereby Delek obtained an indirect controlling interest in ALDW effective July 1, 2017, and the proposed Mergers.Merger, whereby Delek will acquire the remaining non-controlling interest in ALDW. Such unaudited pro forma condensed combined financial statements of Delek have been prepared to assist investors in analyzing the future prospects of the combined company. The unaudited pro forma condensed combined statement of operations, or “pro forma statement of operations” gives effect to the Alon Mergers as if consummated on January 1, 2016. The unaudited pro forma condensed combined balance sheet, or “pro forma balance sheet,” gives effect to the MergersMerger as if consummated on December 31, 2016.September 30, 2017. The pro forma balance sheet as of December 31, 2016 combinesSeptember 30, 2017 includes the consolidated balance sheetssheet of Delek, which includes the consolidated financial statements of Alon Energy inclusive of the ALDW non-controlling interest, and Alon asby virtue of December 31, 2016.pro forma adjustment, giving effect to the proposed acquisition of the remaining non-controlling interest in ALDW. The pro forma statement of operations for the year ended December 31, 2016 and the nine months ended September 30, 2017 combines the results of operations of Delek and Alon Energy for the year ended December 31, 2016. The historical consolidated financial information has been adjusted in2016 and the nine months ended September 30, 2017, giving effect, by virtue of pro forma financial statements belowadjustment, to reflect the proposed acquisition of the non-controlling interest of ALDW and the related pro forma impactissuance of events that are directly attributable to the transactions contemplated by the merger agreement, factually supportable and,shares of Delek Common Stock in connection with such acquisition with respect to theits effect on pro forma statement of operations, are expected to have a continuing impact on the combined results.earnings per share. These pro forma financial statements do not include the effects of any transactions that took place subsequent to December 31, 2016.September 30, 2017.
The pro forma financial statements have been prepared with respect to the Delek-ALJ Merger using the acquisition method of accounting for business combinations under U.S. GAAP. UnderGAAP, based on the acquisition method of accounting, the total estimatedactual purchase consideration will be determined at the closing dateprice as of the Mergers. Delek will recordDelek-ALJ Effective Time and the preliminary purchase price allocation reflected in Delek's unaudited consolidated financial statements as of September 30, 2017. Such preliminary purchase price allocation includes the recording of all assets acquired and liabilities assumed at their respective acquisition- dateacquisition-date fair values with any excess purchase price allocated to goodwill. The Delek historical financial statements reflectgoodwill, as well as the elimination of Delek’s previously held 47% interest in Alon Energy accounted for under the equity method of accounting, which has been eliminated through pro forma adjustments. Delek will also be required to remeasureadjustments, including the equityrelated gain on remeasurment of that investment interest(recognized in Alon to fair valueconnection with the Delek-ALJ Merger) and record any gain or loss equal to the amount that the fair value is below or above the carrying value. Delek’s estimate of the fair valuepreviously recognized impairment of the equity investment interest as of the closing date of the Mergers is preliminary and will not be final until the final valuations are completed.method investment.
As of the date of this joint proxyconsent statement/prospectus, Delek has not completed the detailed valuation study necessary to arrive at the required finalfinalized its estimates of the fair value of the Alon Energy assets to be acquired and the liabilities to be assumed and the related allocation of purchase price, nor has it identified all adjustments necessary to conform Alon’s accounting policies to Delek’s accounting policies.price. A final determination of the fair value of Alon’s assets and liabilities, including intangible assets with both indefinite or finite lives, will be based on the actual net tangible and intangible assets and liabilities of Alon that exist as of the closing date of the Mergers and, therefore, cannot be made prior to the completion of the Mergers. In addition, the value of the consideration to be paid by Delek upon the consummation of the Mergers will be determined based on the closing price of Delek’s common stock on the closing date of the Mergers. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma financial statements presented below. Delek estimated the fair value of Alon’s assets and liabilities based on discussions with Alon’s management, preliminary valuation studies, due diligence and information presented in Alon’s SEC filings. Until the Mergers are completed, both companies are limited in their ability
to share certain information. Upon completion of the Mergers, a final determination of fair value of Alon’sEnergy’s assets and liabilities, will be performed.completed within the measurement period provided by GAAP, not to exceed one year from the Delek-ALJ Effective Time. Any increases or decreases in the fair value of assets acquired and liabilities assumed upon completion of the final valuations will result in adjustments to the unaudited pro forma balance sheet and/or statements of operations. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocationfinancial statements presented herein.herein and is not necessarily indicative of the operating results and financial position that would have been achieved.
Assumptions and estimates underlying the adjustments to the unaudited pro forma financial statements, which are referred to as the pro forma adjustments, are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the unaudited pro forma financial statements to give effect to pro forma events that are: (1) directly attributable to the Alon Mergers, (2) factually supportable, and (3) with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results of Delek and Alon Energy, inclusive of ALDW, following the Alon Mergers. As of the Delek-ALJ Effective Time, the accounting policies of both Alon Energy and ALDW have been conformed to those of Delek. However, the pro forma statements of operations do not contain adjustments to conform the accounting policies for historical periods, as such adjustments are not practicable to determine. The unaudited pro forma financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Alon Mergers occurred on the dates indicated. Further, the unaudited pro forma financial statements do not purport to project the future operating results or financial position of the combined company following the Alon Mergers.
The unaudited pro forma financial statements, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, do not reflect the benefits of the expected cost savings (or associated costs to achieve such savings), opportunities to earn additional revenue, or other factors that may result as a consequence of the Alon Mergers and, accordingly, do not attempt to predict ouror suggest futuresfuture results. The unaudited pro forma statements of operations also excludethe effects of certain identifiable transactions costs associated with the Mergers, costsDelek-ALJ Merger to the extent they have been incurred as of September 30, 2017. Additionally, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Merger are not included in the unaudited pro forma statements of operations. Costs incurred through September 30, 2017 associated with any restructuring or integration activities resulting from the Mergers, impacts that would have occurred hadDelek-ALJ Merger are included in the revaluation of inventory been performed as of January 1, 2016, and expenses associated with accelerated vesting of compensation awards asperiod in which they are currently not known, andwere actually incurred, to the extent they occur,that such costs are expected to be non-recurring and will not have been incurred at the closing dateseparately identifiable for purposes of the Mergers.pro forma adjustment. However, such costs could affect the combined company following the Alon Mergers in the period the costs are incurred or recorded. Further, the audited pro forma financial statements do not reflect the effect of any regulatory actions that may impact the results of the combined company following the Alon Mergers.
The pro forma financial statements have been derived from and should be read in conjunction with the consolidated financial statements and the related notes of Old Delek, Alon Energy and AlonALDW included in their respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2016, incorporated hereinthe Old Delek Quarterly Report on Form 10-Q for the six months ended June 30, 2017, the unaudited historical financial information of Alon Energy as of June 30, 2017, including the related notes, as furnished with the SEC pursuant to Form 8-K filed by reference.Delek on August 3, 2017, and the Delek and ALDW Quarterly Reports on Form 10-Q for the three months ended September 30, 2017.
Delek US Holdings, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the yearnine months ended December 31, 2016September 30, 2017
| | | | | Historical | | | | | Historical six months ended June 30, 2017 | | Historical three months ended September 30, 2017 | | | | |
| | | Delek | | Alon | | Adjustments | | Notes | | Total Combined | Delek | | Alon Energy | | Delek Consolidated | | Adjustments | | Notes | | Total Pro Forma Combined |
| | | (in millions, except share and per share data) | |
| (in millions, except share and per share data) | | (in millions, except share and per share data) |
| Net sales | | 4,197.9 |
| | 3,913.4 |
| | (10.4 | ) | | (a) | | 8,100.9 |
| $ | 2,412.8 |
| | $ | 2,269.7 |
| | $ | 2,341.5 |
| | $ | (20.4 | ) | | (a) | | $ | 7,003.6 |
|
| Operating costs and expenses: | | | | | | | | | | | | | | | | | |
| Cost of goods sold | | 3,812.9 |
| | 3,376.8 |
| | (10.4 | ) | | (a) | | 7,179.3 |
| 2,193.5 |
| | 1,918.5 |
| | 1,988.1 |
| | (20.4 | ) | | (a) | | 6,079.7 |
|
| Operating expenses | | 249.3 |
| | 262.7 |
| | — |
| | 512.0 |
| 123.3 |
| | 131.8 |
| | 153.2 |
| | | | 408.3 |
|
| Insurance proceeds - business interruption | | (42.4 | ) | | — |
| | — |
| | (42.4 | ) | |
| General and administrative expenses | | 106.1 |
| | 194.1 |
| | — |
| | 300.2 |
| 54.0 |
| | 96.4 |
| | 61.8 |
| | (29.9 | ) | | (b) | | 182.3 |
|
| Depreciation and amortization | | 116.4 |
| | 145.6 |
| | (64.5 | ) | | (b) | | 197.5 |
| 58.5 |
| | 72.1 |
| | 46.9 |
| | (37.7 | ) | | (c) | | 139.8 |
|
| Other operating income, net | | 4.8 |
| | 1.6 |
| | — |
| | 6.4 |
| 0.3 |
| | | | 0.7 |
| | | | 1.0 |
|
| Total operating costs and expenses | | 4,247.1 |
| | 3,980.8 |
| | (74.9 | ) | | 8,153.0 |
| 2,429.6 |
| | 2,218.8 |
| | 2,250.7 |
| | (88.0 | ) | | 6,811.1 |
|
| Operating (loss) income | | (49.2 | ) | | (67.4 | ) | | 64.5 |
| | (52.1 | ) | (16.8 | ) | | 50.9 |
| | 90.8 |
| | 67.6 |
| | 192.5 |
|
| Interest expense | | 54.4 |
| | 69.7 |
| | — |
| | 124.1 |
| 28.4 |
| | 33.5 |
| | 34.1 |
| | (13.1 | ) | | (d) | | 82.9 |
|
| Interest income | | (1.5 | ) | | — |
| | — |
| | (1.5 | ) | (1.8 | ) | | — |
| | (0.9 | ) | | | | (2.7 | ) |
| Loss (income) from equity method investments | | 43.4 |
| | (9.8 | ) | | (42.2 | ) | | (c) | | (8.6 | ) | |
| Loss on impairment of equity method investment | | 245.3 |
| | — |
| | (245.3 | ) | | (f) | | — |
| |
| Other expense (income), net | | 0.4 |
| | (0.7 | ) | | — |
| | (0.3 | ) | |
| (Income) loss from equity method investments | | (4.6 | ) | | (2.0 | ) | | (5.1 | ) | | 3.2 |
| | (e) | | (8.5 | ) |
| Gain on remeasurement of equity method investment | | — |
| | — |
| | (190.1 | ) | | 190.1 |
| | (f) | | — |
|
| Other expenses (income), net | | 0.1 |
| | (0.5 | ) | | 0.8 |
| | | | 0.4 |
|
| Total non-operating expenses (income), net | | 342.0 |
| | 59.2 |
| | (287.5 | ) | | 113.7 |
| 22.1 |
| | 31.0 |
| | (161.2 | ) | | 180.2 |
| | | 72.1 |
|
| (Loss) income before income taxes | | (391.2 | ) | | (126.6 | ) | | 352.0 |
| | (165.8 | ) | (38.9 | ) | | 19.9 |
| | 252.0 |
| | (112.6 | ) | | 120.4 |
|
| Income tax (benefit) expense | | (171.5 | ) | | (46.8 | ) | | 127.7 |
| | (d) | | (90.6 | ) | (22.0 | ) | | 4.9 |
| | 133.5 |
| | (41.2 | ) | | (g) | | 75.2 |
|
| Net (loss) income from continuing operations | | (219.7 | ) | | (79.8 | ) | | 224.3 |
| | (75.2 | ) | (16.9 | ) | | 15.0 |
| | 118.5 |
| | (71.4 | ) | | 45.2 |
|
Net loss from discontinued operations
| | — |
| | — |
| | (4.1 | ) | | — |
| | | (4.1 | ) |
Net (loss) income
| | (16.9 | ) | | 15.0 |
| | 114.4 |
| | (71.4 | ) | | 41.1 |
|
| Net income attributed to non-controlling interest | | 20.3 |
| | 3.0 |
| | — |
| | 23.3 |
| 9.8 |
| | 5.5 |
| | 10.0 |
| | (13.1 | ) | | (i) | | 12.2 |
|
| Net (loss) income from continuing operations attributable to Delek | | (240.0 | ) | | (82.8 | ) | | 224.3 |
| | (98.5 | ) | |
| Basic & diluted loss per share: | | | | | | | | | |
| Net (loss) income attributable to Delek | | $ | (26.7 | ) | | $ | 9.5 |
| | $ | 104.4 |
| | $ | (58.3 | ) | | | $ | 28.9 |
|
| Basic & diluted income per share: | | | | | | | | | | | |
| Basic | | (3.88 | ) | | (1.17 | ) | | | | (1.21 | ) |
|
| |
|
| | | | | | $ | 0.33 |
|
| Diluted | | (3.88 | ) | | (1.17 | ) | | | | (1.21 | ) |
| |
| | | | | | $ | 0.33 |
|
| Weighted average common shares outstanding: | | | | | | | | | |
Weighted average common shares outstanding (1): | | | | | | | | | | |
| Basic | | 61,921,787 |
| | 70,739,000 |
| | (51,548,543 | ) | | (e) | | 81,112,244 |
| | | | | 68,272,918 |
| | $ | 18,483,234 |
| | (j) | | 86,756,152 |
|
| Diluted | | 61,921,787 |
| | 70,739,000 |
| | (51,548,543 | ) | | (e) | | 81,112,244 |
| | | | | 68,975,974 |
| | 18,483,234 |
| | (j) | | 87,459,208 |
|
(1) The pro forma weighted average common shares outstanding is calculated using Delek's consolidated weighted average shares outstanding for the nine months ended September 30, 2017, as adjusted for pro forma adjustments.
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial InformationInformation.
Delek US Holdings, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet asStatement of Operations
For the year ended December 31, 2016
(in millions)
|
| | | | | | | | | | | | | | | | | | |
| | | Historical | | | | |
| December 31, 2016 | | Delek | | Alon | | Adjustments | | Notes | | Total Combined |
| Assets | | | | | | | | | | |
| Current assets: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 689.2 |
| | $ | 136.3 |
| | $ | (27.2 | ) | | (g) | | $ | 798.3 |
|
| Accounts receivable | | 265.9 |
| | 134.7 |
| | — |
| | | | 400.6 |
|
| Accounts receivable from related party | | 0.1 |
| | — |
| | — |
| | | | 0.1 |
|
| Income tax receivable | | — |
| | 33.0 |
| | — |
| | | | 33.0 |
|
| Inventories, net of lower of cost or market valuation | | 392.4 |
| | 130.5 |
| | (10.2 | ) | | (m) | | 512.7 |
|
| Deferred income tax asset | | — |
| | 14.9 |
| | (14.9 | ) | | (n) | | — |
|
| Other current assets | | 54.6 |
| | 36.8 |
| | — |
| | | | 91.4 |
|
| Total current assets | | 1,402.2 |
| | 486.2 |
| | (52.3 | ) | | | | 1,836.1 |
|
| Property, plant and equipment, net | | 1,103.3 |
| | 1,366.9 |
| | 76.1 |
| | (h) | | |
| | | | | | | (123.0 | ) | | (m) | | 2,423.3 |
|
| Goodwill | | 12.2 |
| | 62.9 |
| | 454.1 |
| | (m) | | 529.2 |
|
| Other intangibles, net | | 26.7 |
| | — |
| | 19.0 |
| | (i) | | |
| | | | | | | 31.0 |
| | (m) | | 76.7 |
|
| Equity method investments | | 360.0 |
| | 33.4 |
| | (259.0 | ) | | (l) | | 134.4 |
|
| Other non-current assets | | 80.7 |
| | 160.8 |
| | (19.0 | ) | | (i) | | |
| | | | | | | (76.1 | ) | | (h) | | 146.4 |
|
| Total assets | | $ | 2,985.1 |
| | $ | 2,110.2 |
| | $ | 50.8 |
| | | | $ | 5,146.1 |
|
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | | Historical | | | | |
| December 31, 2016 | | Delek | | Alon | | Adjustments | | Notes | | Total Combined |
| Liabilities and Stockholders' Equity | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | |
| Accounts payable | | $ | 494.6 |
| | $ | 328.6 |
| | $ | — |
| | | | $ | 823.2 |
|
| Accounts payable to related party | | 1.8 |
| | — |
| | — |
| | | | 1.8 |
|
| Current portion of long-term debt and capital lease obligations | | 84.4 |
| | 16.4 |
| | — |
| | | | 100.8 |
|
| Obligation under Supply and Offtake Agreement | | 124.6 |
| | — |
| | — |
| | | | 124.6 |
|
| Accrued expenses and other current liabilities | | 235.1 |
| | 100.5 |
| | (13.8 | ) | | (g) | | 321.8 |
|
| Total current liabilities | | 940.5 |
| | 445.5 |
| | (13.8 | ) | | | | 1,372.2 |
|
| Non-current liabilities: | | | | | | | | | | |
| Long-term debt and capital lease obligations, net of current portion | | 748.5 |
| | 511.6 |
| | — |
| | | | 1,260.1 |
|
| Environmental liabilities, net of current portion | | 6.2 |
| | — |
| | 41.4 |
| | (k) | | 47.6 |
|
| Asset retirement obligations | | 5.2 |
| | — |
| | 12.5 |
| | (j) | | 17.7 |
|
| Deferred tax liabilities | | 76.2 |
| | 381.9 |
| | (14.9 | ) | | (n) | | 557.9 |
|
| | | | | | | 114.7 |
| | (l) | | |
| Other non-current liabilities | | 26.0 |
| | 188.8 |
| | (12.5 | ) | | (j) | | |
| | | | | | | (41.4 | ) | | (k) | | 160.9 |
|
| Total non-current liabilities | | 862.1 |
| | 1,082.3 |
| | 99.8 |
| | | | 2,044.2 |
|
| Stockholders' equity: | | | | | | | | | | |
| Preferred stock | | — |
| | — |
| | — |
| | | | — |
|
| Common stock | | 0.7 |
| | 0.7 |
| | 0.2 |
| | (m) | | |
| | | | | | | (0.7 | ) | | (m) | | 0.9 |
|
| Additional paid-in capital | | 650.5 |
| | 530.6 |
| | 436.8 |
| | (m) | | |
| | | | | | | (530.6 | ) | | (m) | | (25.0 | ) |
| Accumulated other comprehensive loss | | (20.8 | ) | | (26.1 | ) | | (4.2 | ) | | (l) | | |
| | | | | | | 26.1 |
| | (m) | | (25.0 | ) |
| Treasury stock | | (160.8 | ) | | — |
| | — |
| | | | (160.8 | ) |
| Retained earnings | | 522.3 |
| | 15.9 |
| | (114.7 | ) | | (l) | | |
| | | | | | | 132.0 |
| | (l) | | |
| | | | | | | (13.4 | ) | | (g) | | |
| | | | | | | (15.9 | ) | | (m) | | 526.2 |
|
| Non-controlling interest in subsidiaries | | 190.6 |
| | 61.3 |
| | 49.2 |
| | (m) | | 301.1 |
|
| Total stockholders' equity | | 1,182.5 |
| | 582.4 |
| | (35.2 | ) | | | | 1,729.7 |
|
| Total liabilities and stockholders' equity | | $ | 2,985.1 |
| | $ | 2,110.2 |
| | $ | 50.8 |
| | | | $ | 5,146.1 |
|
|
| | | | | | | | | | | | | | | | | |
| | Historical | | | | | | |
| | Delek | | Alon Energy | | Adjustments | | Notes | | Total Pro Forma Combined |
| (in millions, except share and per share data) |
| Net sales | $ | 4,197.9 |
| | $ | 3,913.4 |
| | $ | (10.4 | ) | | (a) | | $ | 8,100.9 |
|
| Operating costs and expenses: | | | | | | | | | |
| Cost of goods sold | 3,812.9 |
| | 3,376.8 |
| | (10.4 | ) | | (a) | | 7,179.3 |
|
| Operating expenses | 249.3 |
| | 262.7 |
| | — |
| | | | 512.0 |
|
| Insurance proceeds - business interruption | (42.4 | ) | | — |
| | — |
| | | | (42.4 | ) |
| General and administrative expenses | 106.1 |
| | 194.1 |
| | (13.7 | ) | | (b) | | 286.5 |
|
| Depreciation and amortization | 116.4 |
| | 145.6 |
| | (76.8 | ) | | (c) | | 185.2 |
|
| Other operating income, net | 4.8 |
| | 1.6 |
| | — |
| | | | 6.4 |
|
| Total operating costs and expenses | 4,247.1 |
| | 3,980.8 |
| | (100.9 | ) | | | | 8,127.0 |
|
| Operating (loss) income | (49.2 | ) | | (67.4 | ) | | 90.5 |
| | | | (26.1 | ) |
| Interest expense | 54.4 |
| | 69.7 |
| | (29.4 | ) | | (d) | | 94.7 |
|
| Interest income | (1.5 | ) | | — |
| | — |
| | | | (1.5 | ) |
| Loss (income) from equity method investments | 43.4 |
| | (9.8 | ) | | (42.2 | ) | | (e) | | (8.6 | ) |
| Loss on impairment of equity method investment | 245.3 |
| | — |
| | (245.3 | ) | | (f) | | — |
|
| Other expenses (income), net | 0.4 |
| | (0.7 | ) | | — |
| | | | (0.3 | ) |
| Total non-operating expenses (income), net | 342.0 |
| | 59.2 |
| | (316.9 | ) | | | | 84.3 |
|
| (Loss) income before income taxes | (391.2 | ) | | (126.6 | ) | | 407.4 |
| | | | (110.4 | ) |
| Income tax (benefit) expense | (171.5 | ) | | (46.8 | ) | | 144.1 |
| | (g) | | (74.2 | ) |
| Net (loss) income from continuing operations | (219.7 | ) | | (79.8 | ) | | 263.3 |
| | | | (36.2 | ) |
Net income from discontinued operations
| 86.3 |
| | — |
| | (86.3 | ) | | (h) | | — |
|
Net (loss) income
| (133.4 | ) | | (79.8 | ) | | 177.0 |
| | | | (36.2 | ) |
| Net income attributed to non-controlling interest | 20.3 |
| | 3.0 |
| | 0.8 |
| | (i) | | 24.1 |
|
| Net (loss) income attributable to Delek | $ | (153.7 | ) | | $ | (82.8 | ) | | $ | 176.2 |
| | | | $ | (60.3 | ) |
| Basic & diluted income per share: | | | | | | | | | |
| Basic | $ | (2.48 | ) | | $ | (1.17 | ) | | | | | | $ | (0.69 | ) |
| Diluted | $ | (2.48 | ) | | $ | (1.17 | ) | | | | | | $ | (0.69 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic | 61,921,787 |
| | 70,739,000 |
| | (45,838,834 | ) | | (j) | | 86,821,953 |
|
| Diluted | 61,921,787 |
| | 70,739,000 |
| | (45,838,834 | ) | | (j) | | 86,821,953 |
|
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial InformationInformation.
Delek US Holdings, Inc.
Unaudited Pro Forma Condensed Balance Sheet as of September 30, 2017
(in millions)
|
| | | | | | | | | | | | | | | |
| | | | Historical | | | | | |
| | | September 30, 2017 | Delek Consolidated | Adjustments | | Notes | | Total Pro Forma |
| Assets | | | | | | |
| Current assets: | | | | | | |
| | Cash and cash equivalents | $ | 831.7 |
| $ | (3.4 | ) | | (k) | | $ | 828.3 |
|
| | Accounts receivable | 495.5 |
| | | | | 495.5 |
|
| | Accounts receivable from related party | 0.3 |
| | | | | 0.3 |
|
| | Income tax receivable | 693.5 |
| | | | | 693.5 |
|
| | Inventories, net of lower of cost of market valuation | 167.2 |
| | | | | 167.2 |
|
| | Other current assets | 82.4 |
| | | | | 82.4 |
|
| | | Total current assets | 2,270.6 |
| (3.4 | ) | — |
| | | 2,267.2 |
|
| Property, plant and equipment, net | 2,147.7 |
| — |
| | | | 2,147.7 |
|
| | | | | | | | | |
| Goodwill | 796.9 |
| | | | | 796.9 |
|
| Other intangibles, net | 91.7 |
| | | | | 91.7 |
|
| Equity method investments | 141.4 |
| | | | | 141.4 |
|
| Other non-current assets | 120.8 |
| | | | | 120.8 |
|
| | | | | | | | | |
| Total assets | $ | 5,569.1 |
| $ | (3.4 | ) | | | | $ | 5,565.7 |
|
| | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | |
| Current liabilities: | | | | | | |
| | Accounts payable | $ | 800.9 |
| | | | | $ | 800.9 |
|
| | Accounts payable to related party | 2.8 |
| | | | | 2.8 |
|
| | Current portion of long-term debt and capital lease obligations | 351.0 |
| | | | | 351.0 |
|
| | Obligation under Supply and Offtake Agreement | 386.7 |
| | | | | 386.7 |
|
| | Liabilities associated with assets held for sale | 103.1 |
| | | | | 103.1 |
|
| | Accrued expenses and other current liabilities | 439.7 |
| | | | | 439.7 |
|
| | | Total current liabilities | 2,084.2 |
| — |
| | | | 2,084.2 |
|
| Non-current liabilities: | | | | | | |
| | Long-term debt and capital lease obligations, net of current portion | 1,076.8 |
| | | | | 1,076.8 |
|
| | Environmental liabilities, net of current portion | 69.8 |
| | | | | 69.8 |
|
| | Asset retirement obligations | 52.1 |
| | | | | 52.1 |
|
| | Deferred tax liabilities | 464.5 |
| (17.4 | ) | | (m) | | 447.1 |
|
| | Other non-current liabilities | 38.1 |
| | | | | 38.1 |
|
| | | | | | | | | |
| | | Total non-current liabilities | 1,701.3 |
| (17.4 | ) | | | | 1,683.9 |
|
| Stockholders' Equity | | | | | | |
| | Preferred stock | — |
| | | | | — |
|
| | Common stock | 0.8 |
| 0.1 |
| | (l) | | 0.9 |
|
| | Additional paid-in capital | 905.9 |
| 121.9 |
| | (l) | | |
| | | | | 17.4 |
| | (m) | | 1,045.2 |
|
| | Accumulated other comprehensive loss | 5.1 |
| | | | | 5.1 |
|
| | Treasury stock | — |
| | | | | — |
|
| | Retained earnings | 568.6 |
| (3.4 | ) | | (k) | | 565.2 |
|
| | Non-controlling interest | 303.2 |
| (122.0 | ) | | (l) | | 181.2 |
|
| Total stockholders' equity | 1,783.6 |
| 14.0 |
| | | | 1,797.6 |
|
| Total liabilities and stockholders' equity | $ | 5,569.1 |
| $ | (3.4 | ) | | | | $ | 5,565.7 |
|
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Notes to Unaudited Pro Forma Condensed Combined Financial Information
NOTE 1 - BASIS OF PRO FORMA PRESENTATION
MergersDelek-ALJ Merger
On January 2, 2017, Old Delek (Commission File No. 001-32868), entered into the Delek-ALJ Merger Agreement, as amended, with Alon HoldCo,Energy, Delek (also referred to as “New Delek” herein), Delek Merger Sub and AlonAstro Merger Sub have entered into a merger agreement pursuant to which, on the terms and subjectSub. Pursuant to the conditions included inDelek-ALJ Merger Agreement, Certificates of Amendment and Certificates of Merger filed with the merger agreement,Secretary of State of the State of Delaware on June 30, 2017, (i) Old Delek has agreed to acquire Alon by means of a merger wherewas renamed “Delek US Energy, Inc.” and Delek was renamed “Delek US Holdings, Inc.”; (ii) the Delek Merger Sub will merge into Delek,was consummated, with Old Delek surviving as a wholly ownedwholly-owned subsidiary of HoldCo, a new holding company formed by Delek. In addition, inNew Delek; and (iii) the AlonAstro Merger Alon Merger Sub will merge with and into Alon,was consummated, with Alon surviving.Energy surviving as a direct and indirect wholly-owned subsidiary of Delek. The Delek-ALJ Mergers were effective as of July 1, 2017. By reason of the Delek-ALJ Mergers, at the Delek-ALJ Effective Time, New Delek became the parent public reporting company.
As a result of the Mergers, Alon’sDelek-ALJ Merger, Alon Energy’s stockholders (other than Old Delek or any subsidiary of Delek), will be entitled to receivereceived 0.504, which is referred to as the “exchange ratio,” shares of New Delek common stockCommon Stock for each issued and outstanding share of Alon Energy common stock that they ownsuch stockholders owned immediately prior to the effective time of the Alon Merger,Delek-ALJ Effective Time, with cash paid in lieu of fractional shares.
The Delek-ALJ Merger constituted a business combination under GAAP, requiring the allocation of purchase price consideration to the fair value of assets acquired and liabilities assumed, in accordance with the acquisition method of accounting.
As a result of the Delek-ALJ Merger, Delek acquired an indirect controlling interest in ALDW. Such acquisition method accounting and corresponding purchase price allocation was pushed down to ALDW for its separate financial statement reporting purposes. The proposed Merger will result in the acquisition by Delek of the remaining non-controlling interest in ALDW, which is required to be accounted for as an equity transaction rather than a business combination under GAAP and, therefore, no remeasurement of assets and liabilities of ALDW at fair value is required.
Delek-ALJ Preliminary Purchase Price Allocation
As disclosed in Delek’s Quarterly Report on Form 10-Q as of and for the three and nine months ended September 30, 2017, Delek has determined a preliminary purchase price allocation as of September 30, 2017 with respect to the acquisition of Alon Energy (inclusive of ALDW). Total purchase price consideration included the issuance of approximately 19.3 million of incremental shares of Delek Common Stock, as well as the fair value of the pre-existing equity method investment in Alon Energy and additional consideration. The components of the consideration transferred were as follows (dollars in millions, except per share amounts):
|
| | | |
| Delek Common Stock issued | 19.3 |
|
| Ending price per share of Delek Common Stock immediately before the Delek-ALJ Effective Time | $ | 26.44 |
|
| Total value of common stock consideration | $ | 509.0 |
|
Additional consideration (1) | 21.7 |
|
Fair value of Delek’s pre-existing equity method investment in Alon Energy (2) | 449.0 |
|
| Total purchase price consideration | $ | 979.7 |
|
(1)Additional consideration includes the fair value of certain equity instruments originally indexed to Alon Energy stock that were exchanged for instruments indexed to Delek’s Common Stock, as well as the fair value of certain share-based payments that were required to be exchanged for awards indexed to Delek’s Common Stock in connection with the Delek-ALJ Merger.
Completion of the Mergers are subject to regulatory approval in addition to the approval by stockholders of both companies. As of the date of this joint proxy statement/prospectus, the merger is expected to be completed during the second quarter of 2017, but no later than an agreed upon outside date of October 2, 2017. For further information on the Mergers, see the sections entitled “(2)The Mergers” and “The Merger Agreement” beginning on page 79 and 168, respectively.
Purchase Consideration
For purposes of the unaudited pro forma financial statements a total preliminary purchase consideration for the Alon Merger consists of approximately $437.0 million, which consists of shares and the fair value of Delek’s pre-existing 47% equity interestmethod investment in Alon. Under the terms of the Merger Agreement, the share consideration is currently valued at approximately $11.48 per share of Alon common stock,Energy was based on the closingquoted market price of Delek’s stock on February 17,shares of Alon Energy.
As of September 30, 2017, of $22.77 per share. The total new Delek shares issued are 19,190,457 shares based on the total Alon shares outstanding at February 21, 2017, less shares owned by Delek of 33,691,292, exchanged athas completed a ratio of 0.504. The following table summarizes the preliminary calculation of total purchase consideration:
|
| | | | |
| Number of shares issued by Delek in exchange for Alon shares based on Alon shares outstanding at February 21, 2017 of 71,767,595 based on Delek's closing price on February 17, 2017 of $22.77 | | $ | 437.0 |
|
| Fair value of Delek’s pre-existing 47% equity interest in Alon, based on a preliminary estimate of fair value as discussed in Note 2 below | | 386.8 |
|
| Total preliminary purchase consideration | | $ | 823.8 |
|
Unaudited Pro Forma Financial Statements
The unaudited pro forma financial statements have been prepared assuming the Mergers are accounted for using the acquisition method of accounting under U.S. GAAP with Delek as the acquiring entity. Accordingly,price allocation under the acquisition method of accounting the total estimated purchase price is allocated to the acquired net tangible and identifiable intangible assets acquired and liabilities assumed of Alon based on their respective fair values, as further described below.
The unaudited pro forma financial statements combine the historical statements of operations and balance sheets of Delek and Alon. The historical consolidated financial statements have been adjusted in the unaudited pro forma financial statements to give effect to pro forma events that are: (1) directly attributable to the Mergers; (2) factually supportable; and (3) with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results of Delek and Alon following the Mergers. Pro forma adjustments have then been madeDelek-ALJ Merger, subject to the combined results to reflect the impactfinalization of the Mergersestimates and related transactions as if they had been consummated on January 1, 2016, for purposes of the statements of combined operations presentedother preliminary and December 31, 2016, for the combined balance sheet presented. Also, for the purposes of the pro forma financial statements, Delek's historical statement of operations does not include discontinued operations. Additionally, certain pro forma adjustments were made to conform accounting policies used by Alon to those of Delek and eliminate transactions between the two companiesincomplete valuations that must be completed during the periods presented. However, the unaudited pro forma financial statements maymeasurement period, not reflect all adjustments necessary to conform the accounting policies of Alon to those of Delek due to limitations on the availability of information as of the date of this joint proxy statement/prospectus.
The pro forma adjustments represent management’s estimates based on information available as of the date of this joint proxy statement/prospectus and are subject to change as additional information becomes available and additional analysis is performed. The unaudited pro forma financial statements do not reflect the impact of possible revenue or earnings enhancements, cost savings from operating efficiencies or synergies, or asset dispositions. Also, the unaudited pro forma financial statements do not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the Mergers that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Mergers are not included in the unaudited pro forma statements of operations. However, the impact of such transaction expenses is reflected in the unaudited pro forma balance sheet as a decrease to retained earnings and a decrease to cash.
Note 2 - Purchase Accounting
Purchase Price
The total preliminary estimated purchase consideration described above has been allocated to Alon’s tangible and intangible assets acquired and liabilities assumed for purposes of these unaudited pro forma financial statements, based on their estimated relative fair values assuming the Mergers were completed on the unaudited pro forma balance sheet date presented. The final allocation will be based upon valuations and other analysis for which there is currently insufficient information to
make a definitive allocation. Accordingly, the purchase price allocation adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma financial statements. The final purchase price allocation will be determined after the Mergers are consummated and after completion of a thorough analysis to determine the fair value of Alon’s tangible assets and liabilities, including fixed assets, identifiable intangible assets and liabilities, and goodwill. As a result, the final acquisition accounting adjustments, including those resulting from conforming Alon’s accounting policies to those of Delek, could differ materiallyexceed one year from the pro forma adjustments presented herein.Delek-ALJ Effective Time. Any increase or decrease in the fair value of Alon’sAlon Energy’s tangible and identifiable intangible assets and liabilities, as compared to the information shown herein, would also change the portion of purchase price allocable to goodwill and could impact the operating results of the combined company
following the Alon Mergers due to differences in depreciation and amortization related to the assets and liabilities. A hypothetical 10% change in Delek’s closing stockThe preliminary allocation of the aggregate purchase price as of February 17,September 30, 2017 would have an approximate $82.0 million impact on the purchase price and subsequent goodwill balance.
The total preliminary estimated purchase price was allocatedis summarized as follows based on Alon’s December 31, 2016 balance sheet (in millions):
| | | Cash | | $ | 136.3 |
| $ | 215.3 |
|
| Receivables | | 134.7 |
| 176.9 |
|
| Inventories | | 120.3 |
| 255.5 |
|
| Prepayments and other current assets | | 69.8 |
| |
| Prepaids and other current assets | | 31.4 |
|
Property, plant and equipment(a) | | 1,320.0 |
| 1,183.1 |
|
| Acquired intangibles | | 50.0 |
| |
| Equity method investments | | 31.0 |
|
| Acquired intangible assets | | 65.0 |
|
| Goodwill | | 517.0 |
| 784.8 |
|
| Other non-current assets | | 99.1 |
| 37.0 |
|
| Accounts payable | | (328.6 | ) | (259.7 | ) |
| Obligation under Supply & Offtake Agreements | | (198.0 | ) |
| Current portion of environmental liabilities | | (7.5 | ) |
| Other current liabilities | | (100.5 | ) | (266.5 | ) |
| Environmental liabilities and asset retirement obligations, net of current portion | | (141.7 | ) |
| Deferred income taxes | | (367.0 | ) | (280.4 | ) |
| Debt | | (528.0 | ) | (568.0 | ) |
| Other non-current liabilities | | (188.8 | ) | (78.5 | ) |
| Non-controlling interest | | (110.5 | ) | |
| Total preliminary estimated purchase price | | $ | 823.8 |
| |
| Fair value of net assets acquired | | $ | 979.7 |
|
| |
(a)
| Estimated useful lives ranging from 3 to 40 years have been assumed based onAs of September 30, 2017, the preliminary valuation. |
The fair value of property, plant and equipment is estimated at $1,320.0$1,183.1 million. This preliminary fair value estimate is based on a valuation using a combination of the income, cost and market approaches. The range of estimated useful lives disclosed above is based on historical information about similar assets, engineering information, and expectations about obsolescence in the future. As of the date of this joint proxy statement/prospectus, Delek has not had sufficient accessestimated the blended remaining useful life based on the preliminary estimates of remaining useful lives by asset group that was developed in order for Delek to Alon’s records to perform a comprehensive reviewrecognize depreciation on these assets during the three months ended September 30, 2017. As the fair value of Alon’s property, plant and equipment. Delek expects
that, as it obtains more information, the preliminary estimate disclosed above, range ofequipment is further assigned to specific assets with specific useful lives, such estimates of periodic depreciation expense may be revised. Therefore, the amount of depreciation expense following the merger may differ significantly between periods based upon the final value assigned to, and resulting depreciation may change materially.useful lives used for, each specifically acquired property, plant and equipment asset.
As of September 30, 2017, Delek has estimated the fair value of identifiable intangible assets at $50.0 million.$65.0 million, of which $51.0 have been preliminarily identified as having definite lives ranging from five to ten years. This fair value is based on a preliminary valuation completed for the business enterprise, along with the related tangible assets, using a combination of the income method, cost method and comparable market transactions. Although Delek expects to recognize intangible assets associated with customer relationships, trademarks, trade names, franchise rights and liquor licenses, as of the time of this joint proxy statement/prospectus, Delek has not been able to allocate the aggregate fair value of intangible assets between definite-life and indefinite-life intangible assets. Additionally, Delek expects to identify additional intangible assets as Delek gains a better understanding of Alon’s business after the completion of the Mergers. Delek will consider the asset’s history, accounting by Alon, Delek’s plans for the continued use and marketing of the asset, and how a market participant would use the asset in determining whether the intangible asset has an indefinite or definite life. For the purposes of the unaudited pro forma financial statements, Delek has assigned the entire $50.0 million in preliminary fair value to definite-lived intangible assets with estimated useful lives of 5 to 10 years. The amortization related to the fair value of definite-lived intangible asset is reflected as a pro forma adjustment to the statements of operations using the straight-line method.
The identifiable intangible assets and related amortization are preliminary as of the date of this joint proxy statement/prospectus and have been based on discussions with Alon’s management, preliminary valuation studies, due diligence and information presented in public filings. As discussed above, the amount that will ultimately be allocated to identifiable intangible assets and liabilities, and the related amount of amortization, may differ materially from this preliminary allocation. In addition, the periods impacted by amortization expense will ultimately be based upon the periods in which Delek expects to derive the associated economic benefits or detriments. Therefore, the amount of amortization expense following the merger may differ significantly between periods based upon the final value assigned to, and amortization methodology and useful lives used for, each identifiable intangible asset.
Unaudited Pro Forma Financial Statements
The unaudited pro forma financial statements combine the historical statements of operations and balance sheets of Delek and Alon Energy. Pro forma adjustments have then been made to the combined results to reflect the impact of the Alon Mergers and related transactions as if they had been consummated on January 1, 2016, for purposes of the statements of combined operations presented, and September 30, 2017, for the combined balance sheet presented. Certain pro forma adjustments were made to eliminate transactions between the two companies during the periods presented. The pro forma statement of operations for the nine months ended September 30, 2017 reflect the discontinued operations associated with Delek’s equity interests in (or substantially all of the assets of) Delek’s subsidiaries associated with Delek’s Paramount and Long Beach, California refineries and Delek’s California renewable fuels facility, which were acquired as part of the Delek-ALJ Merger (the “California Discontinued Entities”), as part of Delek’s historical consolidated results of operations for the three months ended September 30, 2017. Delek has not retrospectively presented the discontinued operations for the California Discontinued Entities for previous periods in the pro forma presentation because of the impracticability of doing so, and because the majority of these assets have been non-operating during the pro forma periods, and therefore their results of operations are believed to be immaterial to the statements of operations and, therefore, would not significantly enhance the pro forma presentation.
However, because the assets and liabilities associated with the California Discontinued Entities are significant, and as such assets and liabilities were classified as held for sale in Delek’s Quarterly Report on Form 10-Q as of and for the three and nine months ended September 30, 2017, the September 30, 2017 pro forma balance sheet reflects the California Discontinued Entities in assets held for sale and liabilities associated with the assets held for sale. Additionally, Old Delek’s 2016 historical statement of operations does not include discontinued operations of Old Delek’s former retail segment (disclosed in Old Delek’s Annual Report on Form 10-K as of and for the year ended December 31, 2016), as it was disposed in 2016.
The pro forma adjustments represent management’s estimates based on information available as of the date of this consent statement/prospectus and are subject to change as additional information becomes available and additional analysis is performed. The unaudited pro forma financial statements do not reflect the impact of possible revenue or earnings enhancements, cost savings from operating efficiencies or synergies, or asset dispositions to the extent that such benefits were not realized and recognized in the historical financial statements following the Delek-ALJ Merger. Also, the unaudited pro forma financial statements do not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs incurred by Delek related to the Alon Mergers that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Merger are not included in the unaudited pro forma statements of operations. However, the impact of such transaction expenses incurred as of September 30, 2017 with respect to the Delek-ALJ Merger is reflected in the unaudited pro forma balance sheet as a decrease to retained earnings and a decrease to cash.
NOTE 3-PRO2-PRO FORMA ADJUSTMENTS
Statements of Operations
The unaudited pro forma statements of operations reflect the following adjustments:
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| (a) | To eliminate transactions between Delek and Alon Energy for purchases and sales of refined product reducing revenue and the associated cost of goods soldsold. |
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| (b) | To eliminate non-recurring transaction-related costs incurred during the historical periods. |
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| (c) | To adjust depreciation and amortization expense for incremental depreciation and amortization resulting fromas a result of the recognition of the estimated fair value of property, plant and equipment and intangible assets as outlined in Note 2 above1 above. The lower depreciation expense compared to the historical Alon Energy amount is due primarily to the lower estimated fair value of gross property plant and equipment derived from the preliminary purchase price allocation, the estimated remaining useful lives of the assets and the reduction of amortization expense of deferred turnaround and catalysts costs which are included in the estimated acquisition-date fair value of the refining equipment. |
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(c)(d) | To retrospectively reflect adjustments to interest expense, including the impact of discounts or premiums created by the difference in fair value and outstanding amounts as of the acquisition date (collectively, the “new effective yield”), by applying the new effective yield to historical outstanding amounts in the pro forma period and reversing previously recognized interest expense. |
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| (e) | To eliminate Delek’s equity income in Alon asEnergy for periods prior to the closing of the Mergers will result in Delek obtaining full control of AlonDelek-ALJ Merger. |
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(d)(f) | To eliminate the impairment charge recognized on the equity method investment in Alon Energy during the year ended December 31, 2016, and to eliminate the gain on remeasurement of the equity method investment in Alon Energy recognized during the nine months ended September 30, 2017. |
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| (g) | To record the tax effect on pro forma adjustments at a combined U.S. (federal and state) income tax statutory blended rate of 36.3%36.58% and 35.37% for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. |
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(e)(h) | For the year ended December 31, 2016 only, to remove the net income from discontinued operations related to the retail segment that was disposed in 2016. |
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| (i) | To reverse the effect of the non-controlling interest in ALDW on net income. |
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| (j) | To adjust the weighted average number of shares outstanding based on 0.504 of a sharethe incremental shares of Delek common stockCommon Stock issued in connection with the Delek-ALJ Merger, and for each share of Alon common stock outstanding as of February 21, 2017, as follows: |
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Basic: | | |
Elimination of Alon historical weighted average shares | | (70,739,000 | ) |
Delekthe estimated incremental shares issued | | 19,190,457 |
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Weighted average shares adjustment, net | | (51,548,543 | ) |
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(f) | To remove Delek's impairment of its equity method investment relatedDelek Common Stock to Alon which was recordedbe issued in connection with the Delek 2016 statement of operationsMerger. |
Combined Balance Sheet
The unaudited pro forma balance sheet reflects the following adjustments:
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(g)(k) | To record the payment of estimated aggregate transaction costs of $27.2 million for both Delek and Alonthat have not yet been paid associated with the MergersMerger with a corresponding offset to retained earnings. These costs include estimates for accounting, employee retention costs, legal, and other professional fees |
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(h) | To reclassify Alon’s unamortized balance of deferred turnaround and catalyst costs from other non-current assets to property plant and equipment in order to conform to Delek’s financial statement presentation |
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(i) | To reclassify Alon’s intangible assets, net from other non-current assets to other intangibles, net in order to conform to Delek’s financial statement presentation |
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(j) | To reclassify Alon’s asset retirement obligations from other non-current liabilities to asset retirement obligations in order to conform to Delek’s financial statement presentation |
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(k) | To reclassify Alon’s environmental accrual from other non-current liabilities to environmental liabilities, net of current portion, in order to conform to Delek’s financial statement presentationfees. |
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| (l) | To eliminate Delek’s equity method investment in Alon as the close of the Mergers will result in Delek obtaining full control of Alon and to record the gain and related deferred income tax impact from the excess of fair value of Delek’s pre-existing 47%non-controlling interest in Alon over its carrying value. The gain is based onALDW with a preliminary calculationcorresponding increase in common stock and additional paid-in capital to reflect incremental shares of fair value usingDelek Common Stock issued in connection with the best information available at this time (see Note 2 above). The adjustment is calculated as follows:Merger. |
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| Fair value of Delek’s pre-existing 47% equity interest in Alon | | $ | 386.8 |
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| Carrying value of previously held equity interest | | (259.0 | ) |
| Reversal of accumulated other comprehensive loss from equity method investment | | 4.2 |
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| Gain on excess of fair value over carrying value | | $ | 132.0 |
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| Reversal of deferred tax asset attributable to equity method accounting | | $ | 114.7 |
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| (m) | To record the estimated preliminary purchase price allocation disclosed in Note 2 above |
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(n) | To reclassify Alon’s deferred tax assetsasset associated with the book-tax basis difference created by the Merger, with a corresponding increase to deferred tax liabilities to conform to Delek’s financial statement presentation.additional paid-in capital. |
COMPARISON OF THE RIGHTS OF HOLDERS OF NEW DELEK COMMON STOCKSTOCKHOLDERS AND ALON
ALDW COMMON STOCKUNITHOLDERS
Alon, DelekThe following describes the material differences between the current rights of ALDW Common Unitholders and HoldCo are all organized under the laws of the State of Delaware. As holdersrights of Delek common stock and Alon common stock, yourCommon Stockholders. The rights with respect theretoof Delek stockholders are governed by Delaware law, includingthe DGCL, Delek’s certificate of incorporation and Delek’s bylaws, each as amended from time to time. The rights of ALDW Common Unitholders are governed by the Delaware General Corporation Law, or “DGCL.”
LP Act and ALDW’s certificate of limited partnership and the ALDW Partnership Agreement. You should refer to each such document for a complete description of the rights of Delek stockholders and ALDW Common Unitholders, respectively. If the Mergers are completed, holders of Alon common stock and Delek common stockMerger is consummated, ALDW Common Unitholders who surrender their ALDW Common Units will become holders of New Delek common stock issued by HoldCo. YourCommon Stock, and their rights with respect to the Newas Delek common stock issued in exchange for your Delek common stock or Alon common stockstockholders will continue to be governed by Delaware law, including the DGCL.
In connection with the completionDGCL and Delek’s certificate of the Delek Merger, theincorporation, as then in effect and as may be amended from time to time, and Delek’s bylaws, as then in effect and as may be amended from time to time. For Delek’s certificate of incorporation and bylaws, of HoldCo will be amended and restatedeach as currently in effect, please refer to be substantiallyDelek’s Current Report on Form 8-K filed with the same as the second amended and restatedSEC on July 3, 2017. For ALDW’s certificate of incorporation and third amended and restated bylaws of Delek in effect immediately priorlimited partnership, please refer to ALDW’s Registration Statement on Form S-1 filed with the Delek Merger. As a result,SEC on August 31, 2012. For the shares of New Delek common stock issued in exchange for shares of Delek common stock in the Delek Merger will represent substantially the same rights under Holdco’s organizational documents as the rights previously represented by shares of Delek common stock.
However, differences in rights of holders of Alon capital stock and New Delek common stock may arise from differences between the certificates of incorporation and bylaws of Alon and HoldCo.
This section summarizes material differences between the rights of Alon and HoldCo stockholders.
The following summary is not a complete statement of the rights of the stockholders of either of Alon or HoldCo or a complete description of the specific provisions referred to below. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist.ALDW Partnership Agreement, please see ALDW’s Current Report on Form 8-K filed on November 26, 2012. This summary is qualified in its entirety by reference to the DGCL, and Alon’s and HoldCo’s organizational documents, which you are urged to read carefully. In the case of HoldCo, the summary below refers to the provisions of HoldCo’s amended and restatedDelek’s certificate of incorporation, Delek’s bylaws, the Delaware LP Act, ALDW’s certificate of limited partnership and amendedthe ALDW Partnership Agreement.
Purpose and restated bylaws as such organizational documents will be in effect upon completionTerm of the Mergers. Alon and HoldCo have filed with the SEC their respective organizational documents summarized below and will send copies of these documents to you, without charge, upon your request. For additional information, see “Where You Can Find More Information” beginning on page 240.
Existence
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| ALDW | Delek |
HoldCo Capital Stock
(including New Delek common stock)
ALDW’s stated purpose under the ALDW Partnership Agreement is to engage in any business activity that is approved by ALDW’s general partner and that lawfully may be conducted by a limited partnership organized under Delaware law, provided that ALDW’s general partner shall not cause ALDW to take any action that the general partner determines would be reasonably likely to cause ALDW to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes. | Alon Capital StockDelek’s stated purpose is to engage in any lawful act or activity for which a corporation may be organized under the DGCL. |
Authorized Capital StockALDW has a perpetual existence until its dissolution in accordance with the ALDW Partnership Agreement. | Delek is to have perpetual existence unless and until terminated pursuant to the DGCL and the terms of Delek’s certificate of incorporation and bylaws. |
Authorized Equity Securities
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| ALDW | Delek |
| ALDW is authorized to issue an unlimited number of additional securities of ALDW and options, rights, warrants and appreciation rights relating to securities of ALDW for any purpose at any time and from time to time to such persons for such consideration and on such terms and conditions as the general partner of ALDW shall determine, all without the approval of any ALDW Common Unitholder. Each additional security of ALDW or option, right, warrant or appreciation right relating to such security authorized to be issued by ALDW pursuant to the ALDW Partnership Agreement may be issued in one or more classes, or one or more series of any such classes, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of securities of ALDW), as shall be fixed by the general partner of ALDW. ALDW’s general partner holds no incentive distribution rights. | HoldCoDelek is authorized to issue 120,000,000 shares divided into two classes consisting of:
1.• 110,000,000 shares of common stock, par value $0.01, of which 1,00081,452,109 shares are issued and outstanding as of the date hereof and owned by Delek;hereof; and
2.• 10,000,000 shares of preferred stock, par value $0.01.
The HoldCo boardDelek Board is authorized to issue the preferred stock in one or more series.series without the approval of any Delek Stockholder. |
Dividends and Distributions
| Alon is authorized to issue 165,000,000 shares divided into two classes consisting of:
1. 150,000,000 shares of common stock, par value $0.01; and
2. 15,000,000 shares of preferred stock, par value $0.01.
The Alon board is authorized to issue the preferred stock in one or more series.
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| ALDW | | Delek |
Common Stock |
Each holder of a share of common stock of HoldCo is entitledALDW generally expects to one vote for each share heldmake cash distributions to unitholders of record on the applicable record date within 60 days after the end of each quarter. Distributions will be equal to the amount of Available Cash generated in such quarter. “Available Cash” for each quarter generally equals ALDW’s cash flow from operations for the quarter, less cash needed for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs that the board of directors of ALDW’s general partner deems necessary or appropriate, including reserves for ALDW’s expenses in the quarters in which planned turnarounds and catalyst replacement occur. | Delek generally expects to pay quarterly dividends, subject to the board of directors’ discretion and compliance with restrictions in Delek’s outstanding financing agreements and the DGCL. |
Mergers; Business Combinations
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| ALDW | Delek |
A merger or consolidation of ALDW requires the prior consent of ALDW’s general partner. However, the general partner will have no duty or obligation to consent to any merger, consolidation or conversion and may decline to do so free of any fiduciary duty or obligation whatsoever to ALDW or its limited partners, including any duty to act in good faith or in the best interest of ALDW or the limited partners. In addition, the ALDW Partnership Agreement generally prohibits ALDW’s general partner, without the prior approval of the holders of a majority of the ALDW Common Units, from causing ALDW to, among other things, sell, exchange or otherwise dispose of all or substantially all of ALDW’s assets in a single transaction or a series of related transactions, including by way of merger, consolidation, other combination or sale of ownership interests of ALDW’s subsidiaries. ALDW’s general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of ALDW’s or its subsidiaries’ assets without such approval. ALDW’s general partner may also sell all or substantially all of ALDW’s or its subsidiaries’ assets under a foreclosure or other realization upon those encumbrances without such approval.
| Under the DGCL, the consummation of a merger or consolidation requires the adoption of a resolution approving an agreement of merger or consolidation and declaring its advisability by the board of directors of a corporation that is a constituent corporation in the merger or consolidation and requires that the agreement of merger or consolidation be adopted by the affirmative vote of a majority of the outstanding stock of that corporation entitled to vote thereon at an annual or special meeting for the purpose of acting on the agreement. There are limited exceptions under the DGCL providing that a merger may be effected without stockholder approval, including that no vote of the stockholders of a constituent corporation is required where that constituent corporation is the surviving corporation and: • such corporation’s certificate of incorporation is not amended in the merger; • the stockholders of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations and rights, immediately after the effective date of the merger; and • either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger, or the authorized unissued shares or the treasury shares of common stock of the surviving corporation to be issued or delivered under the plan of merger plus those initially issuable upon conversion of any other shares, securities or obligations to be issued or delivered under such plan do not exceed 20% of the shares of common stock of such corporation outstanding immediately prior to the effective date of the merger. |
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| ALDW | Delek |
ALDW’s general partner may consummate any merger without the prior approval of ALDW’s unitholders if ALDW is the surviving entity in the transaction, ALDW’s general partner has received an opinion of counsel regarding limited liability and tax matters, the transaction would not result in an amendment to the ALDW Partnership Agreement (other than an amendment that the general partner could adopt without the consent of other partners), each matter voted onof ALDW’s units will be an identical unit of ALDW following the transaction, and the partnership securities to be issued do not exceed 20% of ALDW’s outstanding partnership interests immediately prior to the transaction. If the conditions specified in the ALDW Partnership Agreement are satisfied, ALDW’s general partner may convert ALDW or any of ALDW’s subsidiaries into a new limited liability entity or merge ALDW or any of ALDW’s subsidiaries into, or convey all of ALDW’s assets to, a newly formed entity if the sole purpose of that conversion, Merger or conveyance is to effect a mere change in ALDW’s legal form into another limited liability entity, ALDW’s general partner has received an opinion of counsel regarding limited liability and tax matters, and the general partner determines that the governing instruments of the new entity provide the limited partners and the general partner with the same rights and obligations as contained in the ALDW Partnership Agreement. | The DGCL contains a business combination statute that protects domestic corporations subject to its provisions from hostile takeovers and from actions following such a takeover, by prohibiting some transactions once an acquiror has gained a significant holding in the corporation. Section 203 of the DGCL generally prohibits “business combinations,” generally including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an interested stockholder who beneficially owns 15% or more of a corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless: (i) the board of directors of the target corporation has approved, before the acquisition date, either the business combination or the transaction that resulted in the person becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owns at least 85% of the corporation’s voting stock (excluding, for purposes of determining the voting stock outstanding, shares owned by directors who are officers and shares owned by employee stock plans in which participants do not have the right to determine confidentially whether shares will be tendered in a tender or exchange offer); or (iii) after the person or entity becomes an interested stockholder, the business combination is approved by the board of directors and authorized at a meeting of stockholders.stockholders (and not by written consent) by the vote of at least 66 2⁄3% of the outstanding voting stock not owned by the interested stockholder. Delek is subject to the provisions of Section 203 of the DGCL. |
| Each holderALDW Common Unitholders are not entitled to appraisal rights under the ALDW Partnership Agreement or applicable Delaware law in the event of a sharemerger or consolidation. | Under Section 262 of commonthe DGCL, the rights of stockholders to obtain a judicial appraisal of the fair value for their shares, referred to as appraisal rights, may be available in connection with a statutory merger or consolidation in certain specific situations if the stockholders have neither voted in favor of nor consented in writing to the merger or consolidation. However, unless otherwise provided in the certificate of incorporation, no appraisal rights are available under Delaware law to holders of shares of any class of stock of Alonwhich is entitled to one vote for each shareeither (1) listed on a national securities exchange, or (2) held of record onby more than 2,000 stockholders, unless such stockholders are required by the applicable recordterms of the merger to accept anything other than: • shares of stock of the surviving corporation; • shares of stock of another corporation which, as of the effective date on each matter voted on atof the merger or consolidation, are of the kind described in (1) or (2) above; • cash instead of fractional shares of such stock; or • any combination of the above three bullets. Appraisal rights are not available under Delaware law in the event of the sale of all or substantially all of a meetingcorporation’s assets or the adoption of stockholders.an amendment to its certificate of incorporation, unless such rights are granted in the corporation’s certificate of incorporation. Delek’s certificate of incorporation does not grant such rights. Delek is not a constituent corporation in the Merger, and no appraisal rights are available to the holders of Delek Common Stock in connection with the Merger. |
Management
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Number and Qualification of Directors | |
| ALDW | Delek |
| ALDW GP is the general partner of ALDW and manages ALDW’s operations and activities on ALDW’s behalf. AAI is a wholly-owned subsidiary of Delek and the sole member of ALDW GP. Members of the ALDW GP Board are chosen by AAI, and not by the ALDW Common Unitholders. | The HoldCoIn accordance with the DGCL, except as otherwise provided in the DGCL and Delek’s certificate of incorporation, Delek’s business and affairs are managed by or under the direction of the Delek Board.
Delek’s bylaws provide that HoldCo’s board of directorsthe Delek Board will consist of not less than 3three nor more than 15 directors, and that the number is to be fixed and determined from time to time by the HoldCo board of directors.Delek Board. Prior to the closing of the transaction, the Special Committee’s designee will be appointed to the HoldCo board of directors as further described in “The Merger Agreement-Election to HoldCo Board of Directors” beginning on page 188.
| | The Alon certificate of incorporation provides that Alon’s board of directors will consist of not less than 3 nor more than 12 directors, and the number will be fixed from time to time in the manner provided in the Alon bylaws The Alon bylaws provide that the number of directors may be determined from time to time only by (i) a vote of a majority of the whole board that Alon would have if there were no vacancies or (ii) the affirmative vote of the holders of at least a majority of the stock entitled to vote, voting together as a single class. |
Election and Term of Directors |
HoldCo’s bylaws provide that HoldCo’s directors are elected at the annual meeting of stockholders, and that each director shall hold office until his or her successor is elected and qualified or until such director’s earlier resignation or removal. Elections of directors are determined by a plurality of the votes cast. | | Subject to the rights, if any, of the holders of any series of preferred stock to elect additional directors, Alon’s directors are elected at each annual meeting of stockholders and each director holds office for a term expiring at the next annual meeting of stockholders, until his or her successor is elected and qualified or such director’s earlier resignation or removal. Elections of directors are determined by a plurality of the votes cast.
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Removal of Directors |
The HoldCo certificate of incorporation allows any director or the entire board of directors to be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of at least 66 2/3% of all of the issued and outstanding shares of capital stock entitled to vote on the election of directors at a meeting of stockholders called for that purpose; provided however, that if the board of directors, by an affirmative vote of at least66 2/3% of the entire board of directors, recommends the removal of a director to the stockholders, such removal may be effected by the affirmative vote of the holders of at least a majority of all of the issued and outstanding shares of capital stock entitled to vote on the election of directors at a meeting of the stockholders called for that purpose.
| | Subject to the rights, if any, of the holders of any series of preferred stock to elect additional directors, stockholders may remove any director from office only for cause and with the affirmative vote of the stockholders of at least a majority of the voting power of the outstanding stock entitled to vote, voting together as a single class, but only at a meeting of the stockholders called for such purpose. |
Limitations on Director Liability
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Vacancies on the Board Of Directors |
The HoldCo bylaws provide that any vacancy on HoldCo the board of directors or any newly created directorship may be filled by a majority of the directors then in office or a sole remaining director, though less than a quorum. Such newly appointed director shall hold office until the next election and until his or her successor shall be duly elected and qualified unless sooner displaced.ALDW | | Subject to the rights, if any, of the holders of any series of preferred stock to elect additional directors, the Alon certificate of incorporation provides that any vacancy on the board of directors or any newly created directorship may be filled solely by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director. Such newly elected director shall hold office until the annual meeting of stockholders and until his or her successor has been duly elected and qualified. No decrease in the number of directors constituting the board may shorten the term of any incumbent director. |
Stockholder Action by Written Consent |
The HoldCo certificate of incorporation requires any action of stockholders to be effected at a duly called meeting, and such action may not be effected by a consent in writing. | | The Alon certificate of incorporation requires any action of stockholders to be effected at a duly called meeting, and such action may not be effected by a consent in writing. |
Quorum for Stockholder Meetings |
The holders of a majority of HoldCo’s capital stock issued and outstanding, present in person or by proxy and entitled to vote constitutes a quorum for any meetings of the stockholders. If a quorum is not present, the stockholders present have the power to adjourn the meeting until a quorum is present or represented. | | Except as may be provided for by the rights of preferred stock, the holders of a majority of Alon’s stock issued and outstanding, present in person or by proxy and entitled to vote constitutes a quorum for any meetings of the stockholders. If a quorum is not present, the stockholders present have the power to adjourn the meeting until a quorum is present or represented. |
Special Meetings of Stockholders |
The HoldCo bylaws provide that a special meeting of the stockholders may be called by the chairman of the board or the president. The secretary shall call a special meeting upon written request of a majority of the board of directors. | | The Alon bylaws provide that a special meeting of the stockholders may only be called by (i) the chairman of the board, (ii)the president or (iii) the secretary within 10 calendar days after receipt of a written request of a majority of the total number of directors that Alon would have if there were no vacancies. |
Notice of Stockholder Meetings |
Written notice of annual and special meetings of stockholders shall be given to stockholders entitled to vote not less than 10 nor more than 60 days before such meeting. Written notice of an adjournment need not be given if such adjournment is not for more than 30 calendar days and no new record date is fixed for the adjourned meeting. Notices of special meetings shall include the purpose of the meeting. | | Written notice of annual and special meetings of stockholders shall be given not less than 10 nor more than 60 calendar days before the date of such meeting. Written notice of an adjournment need not be given if such adjournment is not for more than 30 calendar days and no new record date is fixed for the adjourned meeting. Notices of special meetings shall include the purpose of the meeting. |
Advance Notice Requirements for Stockholder Nominations and Other Business |
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With respect to nominations of directors and business to be considered at an annual meeting, a stockholder notice must be in writing, meeting the requirements of the HoldCo bylaws, and be delivered to the Secretary at the principal executive office of HoldCo not less than 90 calendar days, nor more than 120 calendar days, prior to the first anniversary of the preceding year’s annual meeting, except that in the event that the date of any annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be so delivered not earlier than 90 calendar days prior to such annual meeting and not later than 10 days following the day on which public announcement of the date of such meeting is first made by HoldCo. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for submitting stockholder’s notice as described above.
Nominations must also comply with the applicable provisions of the Exchange Act. The chairman of the meeting shall determine whether a nomination or proposed business meets the provisions of the HoldCo bylaws and, if any nomination or proposed business was not made or proposed in compliance with HoldCo’s bylaws, the chairman may declare that such non-compliant proposal or nomination be disregarded.
| | With respect to nominations of directors and requests of business to be considered at an annual meeting, a stockholder notice must be in writing, meeting the requirements of the Alon bylaws, and be delivered to the principal executive offices of Alon by the date not less than 60 nor more than 90 calendar days prior to the first anniversary of the date on which Alon first mailed its proxy materials for the preceding year’s annual meeting, except that in the event that the date of the meeting is more than 30 calendar days before or after such anniversary date, notice by the stockholder must be so delivered and not later than close of business on the later of:
(a) the 90th calendar day prior to the date of such annual meeting; or
(b) the 10th calendar day following the day on which public disclosure of the date of such meeting is first made.
Nominations must also comply with the applicable provisions of the Exchange Act. The presiding officer of any annual meeting shall determine whether a nomination or proposed business was made in accordance with the provisions of the Alon bylaws.
At a special meeting of stockholders, only such business may be conducted or considered as was specified in the notice of meeting given by or at the direction of the Chairman, the President or a majority of the board or otherwise properly brought before the meeting by the presiding officer or by a majority of the total number of directors that Alon would have if there were no vacancies.
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Amendment of the Certificate of Incorporation |
Under Section 242 of the DGCL, a certificate of incorporation may be amended upon a resolution of the HoldCo board of directors and approved by:
(a) the holders of a majority of the outstanding shares entitled to vote; and
(b) a majority of the outstanding shares of each class entitled to a class vote, if any.
The HoldCo certificate of incorporation provides that the affirmative vote of 66 2/3% of the issued and outstanding capital stock entitled to vote shall be required to amend, repeal or adopt any provisions inconsistent with certain provisions of the HoldCo certificate of incorporation unless the HoldCo board of directors unanimously recommends such amendment or repeal, in which case only a majority vote of such stock is required. Those articles are summarized in this table in the subsections entitled “Amendment of Bylaws,” “Limitations on Director Liability,” “Indemnification”, and “Removal of Directors”.
| | Under Section 242 of the DGCL, a certificate of incorporation may be amended upon a resolution of the board of directors and approved by:
(a) the holders of a majority of the outstanding shares entitled to vote; and
(b) a majority of the outstanding shares of each class entitled to a class vote, if any.
The Alon certificate of incorporation provides that its Article VII relating to directors and elections may only be amended or repealed by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares entitled to vote, voting together as a single class.
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Amendment of Bylaws |
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The HoldCo certificate of incorporation and bylaws provides that the board of directors is authorized to amend or repeal any and all of the bylaws of HoldCo, and the bylaws may also be amended or repealed by the affirmative vote of the holders of at least 66 2/3% of the issued and outstanding shares of capital stock of HoldCo entitled to vote thereon voting as a single class. | | The Alon certificate of incorporation and bylaws provide that the bylaws may be amended or repealed at any meeting of the stockholders except as described below provided such amendment was referenced in the notice of such meeting or at any meeting of the board of directors provided that no amendment adopted by the board of directors may vary or conflict with any amendment adopted by the stockholders.
Certain named bylaws may not be amended or repealed by the stockholders except as provided in the following sentence, such as those relating to the time and place for the election of board members. Provisions inconsistent with such bylaws may only be adopted by the stockholders by the affirmative vote of the holders of at least a majority of the voting power of the outstanding shares entitled to vote. Additional bylaws which are subject to this amendment provision are summarized in this table in the subsections entitled “Number and Qualification of Directors”, “Removal of Directors”, “Vacancies on the Board Of Directors”, “Advance Notice Requirements for Stockholder Nominations and Other Business”, and “Special Meetings of Stockholders.”
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Forum SelectionDelek |
The HoldCo certificate of incorporationduties that ALDW’s general partner owes to the ALDW Common Unitholders and to ALDW are prescribed by law and the ALDW Partnership Agreement. The Delaware LP Act provides that unless HoldCo consentsDelaware limited partnerships may, in writingtheir partnership agreements, expand, restrict or eliminate the fiduciary duties otherwise owed by a general partner. The ALDW Partnership Agreement contains provisions that limit the general partner’s fiduciary duties to ALDW and the ALDW Common Unitholders. The ALDW Partnership Agreement also restricts the remedies available to the selectionALDW Common Unitholders for actions taken that might, without those limitations, constitute breaches of an alternative forum,fiduciary duty. The ALDW Partnership Agreement contains provisions that waive or give consent to conduct by ALDW’s general partner and its affiliates that might otherwise raise issues as to compliance with fiduciary duties or applicable law. For example, the soleALDW Partnership Agreement provides that when ALDW’s general partner is acting in its capacity as ALDW’s general partner, it must act in good faith and exclusive forum for certain actions shallwill not be subject to any other standard under applicable law or any other agreement. The general partner will be deemed to be acting in good faith unless the Court of Chancery of the State of Delaware. These actions include:
(a)general partner subjectively believed its act or omission was adverse to ALDW’s interests. In any derivative action or proceeding brought on behalf of HoldCo;
(b)by ALDW, any action asserting a claim of breach of fiduciary duty owed bylimited partner or any director, officer or other employee of HoldCo to HoldCo or HoldCo’s stockholders;
(c) any action asserting a claim arising pursuant to any provision of Delaware law or HoldCo’s certificate of incorporation or bylaws; or
(d) any action asserting a claim against HoldCo governedperson bound by the internal affairs doctrine.ALDW Partnership Agreement, the person bringing such proceeding will have the burden of proving that the general partner was not acting in good faith. The ALDW Partnership Agreement further provides that when the general partner is acting in its individual capacity as opposed to in its capacity as ALDW’s general partner, the general partner is entitled, to the fullest extent permitted by law, to act free of any fiduciary duty. These standards reduce the obligations to which ALDW’s general partner would otherwise be held.
In addition to the other more specific provisions limiting the obligations of ALDW’s general partner, the ALDW Partnership Agreement also provides that ALDW’s general partner and its officers and directors will not be liable for monetary damages to ALDW, the ALDW Common Unitholders or their assignees for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that ALDW’s general partner or its officers and directors acted in bad faith or in the case of a criminal matter, acted with knowledge that such person’s conduct was unlawful. | | Alon does not have a forum selection clause. |
Limitation on Director Liability |
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The HoldCoDelek’s certificate of incorporation provides that a director is not personally liable to HoldCoDelek or its stockholders for monetary damages for breach of a fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to HoldCoDelek or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. IfDelek’s certificate of incorporation also provides that if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director will be eliminated or limited to the fullest extent permitted by the DGCL, as amended. Any repeal or modification by the stockholders of HoldCoDelek of the limitation on director liability as provided in HoldCo’sDelek’s certificate of incorporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of HoldCoDelek existing at the time of such repeal or modification. | |
The DGCL provides thatConflicts of Interest and Special Approval
Under the ALDW Partnership Agreement, whenever a corporation may include inpotential conflict of interest exists or arises between ALDW’s general partner or any of its certificateaffiliates, on the one hand, and ALDW or any ALDW Common Unitholder, on the other hand, any resolution or course of incorporation a provision eliminating the liability of a director to the corporationaction by ALDW’s general partner or its stockholders for monetary damages foraffiliates in respect of such conflict of interest will be permitted and deemed approved by ALDW and all ALDW Common Unitholders, and will not constitute a breach of the director’s fiduciary duties, except liability for any breachALDW Partnership Agreement, if the resolution or course of action in respect of such conflict of interest is: (i) approved by “Special Approval” or (ii) approved by the vote of ALDW Common Unitholders holding a majority of the ALDW Common Units that not owned by ALDW’s general partner and its affiliates). “Special Approval” under the ALDW Partnership Agreement means approval by a majority of the members of the ALDW GP Conflicts Committee. | Conflicts of Interest Under Section 144 of the DGCL , certain transactions between Delek and an interested officer or director are not void or voidable solely because of the officer’s or director’s duty of loyaltyinterest if: • the material facts are disclosed or known to the corporation’sDelek Board (or committee thereof) and a majority of the disinterested directors vote to authorize the transaction in good faith; • the material facts are disclosed or known to the stockholders for acts or omissions notentitled to vote thereon and the transaction is specifically approved in good faith or that involve intentional misconduct or knowing violation of law, under Section 174by vote of the DGCL (which deals generally with unlawful payments of dividends, stock repurchases and redemptions) and for anystockholders; or • the transaction from whichis fair to the director derived an improper personal benefit.corporation at the time it is authorized, approved or ratified by the Delek Board (or committee thereof) or the stockholders. |
Indemnification
The Alon certificate of incorporation provides that an Alon director is not personally liable to Alon or its stockholders for monetary damages for or with respect to any acts or omissions |
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| ALDW | Delek |
Under the ALDW Partnership Agreement, in most circumstances, ALDW will indemnify the performance of his or her duties as a director of Alonfollowing persons, to the fullest extent permitted by law, from and against any and all losses, claims, damages or similar events unless there has been a final, non-appealable judgment entered by a court of competent jurisdiction determining that, with respect to the DGCLmatter for which such person is seeking indemnification, such person acted in bad faith or, in the case of a criminal matter, acted with knowledge that such person’s conduct was unlawful: ALDW’s general partner, any departing general partner of ALDW, any person who is or was an affiliate of a general partner or any departing general partner of ALDW, any person who is or was a member, manager, partner, director, officer, fiduciary or trustee of any of the preceding entities, any person who is or was serving as an officer, director, member, manager, partner, fiduciary or trustee of another person at the same now existsrequest of ALDW’s general partner, any departing general partner of ALDW, any affiliate of the general partner or hereafterany departing general partner of ALDW, any person who controls the general partner or departing general partner of ALDW, or any person designated by the general partner of ALDW. Any indemnification under the provisions of the ALDW Partnership Agreement will only be out of ALDW’s assets. Unless it otherwise agrees, ALDW’s general partner will not be personally liable for, or have any obligation to contribute or lend funds or assets to ALDW to enable ALDW to effectuate, indemnification. ALDW may be amended.purchase insurance against liabilities asserted against and expenses incurred by persons for ALDW’s activities, regardless of whether ALDW would have the power to indemnify any such person against liabilities under the ALDW Partnership Agreement. |
Indemnification and Insurance |
The HoldCoDelek’s certificate of incorporation provides that HoldCoDelek will indemnify any officer or director against any and all of the expenses, liabilities or other losses of any nature to the fullest extent permitted by the DGCL. The rights conferred on any such person by the indemnification provisions of the certificate of incorporation are not exclusive of any other rights such person may be entitled to under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, while holding such office. The rights to indemnification will continue as to a covered person who has ceased to be an officer or director and shall continue to the benefit of his or her heirs, executors and administrators.
The HoldCoDelek’s certificate of incorporation also provides that HoldCoDelek may purchase and maintain insurance on behalf of any person who was or is a director, officer, employee or agent of HoldCoDelek or serving at the request of HoldCoDelek as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability, whether or not HoldCoDelek would have the power to indemnify such person against such liability under the DGCL.
| | The Alon certificate of incorporation provides Delek's bylaws provide that Alon will indemnify any person who is made party toexpenses (including attorney's fees) incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by reason of the fact that such person is or was a director or officer of Alon or is or was service at the request of Alon, while a director or officer, of another enterprise, to the fullest extent permitted by the DGCL (or as broadened by later amendments thereto) against all reasonably incurred expense, liability and loss. Such indemnification is limited in the case of proceedings initiated by the indemnified person to proceedings authorized by the board of directors or proceedings to enforce these indemnification provisions. The Alon certificate of incorporation also provides for the advancement of expenses, such as attorneys’ fees,Delek in advance of the final disposition of asuch action, suit or proceeding with an appropriate repaymentupon receipt of any undertaking where required by or on behalf of the DGCL.
The Alon certificate further providesdirector or officer to repay such amount if it shall ultimately be determined that in any suit brought by the indemnitee to enforce a right to indemnification or advancement of expenses, the burden of proving that the indemniteesuch person is not entitled to be indemnified by Delek.
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Election of Directors/General Partner
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| ALDW | Delek |
| ALDW Common Unitholders have no right to elect ALDW’s general partner unless the general partner has been removed or withdrawn, as described below, and have no right to elect the directors of the ALDW general partner. | Delek’s bylaws provide that Delek’s directors are elected at the annual meeting of stockholders, and that each director shall hold office until his or her successor is on Alon.elected and qualified or until such director’s earlier resignation or removal. Elections of directors are determined by a plurality of the votes cast. |
Removal of Directors; Withdrawal or Removal of General Partner
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| ALDW | Delek |
ALDW’s general partner may voluntarily withdraw as general partner by giving 90 days’ written notice to the ALDW Common Unitholders. Withdrawal of the general partner pursuant to the ALDW Partnership Agreement will not constitute a breach of the ALDW Partnership Agreement. The rights are non-exclusive,general partner’s withdrawal must be approved by ALDW Common Unitholders holding at least a majority of the outstanding ALDW Common Units (excluding the ALDW Common Units held by the general partner and Alonits affiliates), and the general partner must deliver to ALDW an opinion of counsel that the withdrawal, following the selection of a successor general partner, will not cause ALDW or its subsidiaries to be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes or result in the loss of the limited liability of any limited partner. the ALDW Partnership Agreement provides for other events of withdrawal, including specified bankruptcy events. ALDW’s general partner may additionally maintain insurancebe removed as the general partner if such removal is approved by a vote of ALDW Common Unitholders who own at least 66 2⁄3% of the outstanding ALDW Common Units, voting as a single class, including ALDW’s Common Units held by ALDW’s general partner and its affiliates, and ALDW receives an opinion of counsel regarding limited liability and tax matters. Any removal of ALDW’s general partner is also subject to protect itselfthe approval of a successor general partner by the vote of ALDW’s Common Unitholders who own a majority of the outstanding ALDW Common Units, including those held by ALDW’s general partner and its affiliates. Removal of ALDW’s general partner will also result in its removal as the general partner of any affiliated entities. | Delek’s certificate of incorporation allows any directorofficer, employee or agentthe entire board of directors to be removed from office at any time, with or without cause, but only by the affirmative vote of the Company or another enterprise against any expense, liability or loss, whether or not Alon would haveholders of at least 66 2/3% of all of the powerissued and outstanding shares of capital stock entitled to indemnify such person against such expense, liability or loss undervote on the DGCL. Alon may grant rights to indemnification and advancementelection of expenses to such persons as authorized bydirectors at a meeting of stockholders called for that purpose; provided however, that if the board of directors, by an affirmative vote of at least 66 2/3% of the entire board of directors, recommends the removal of a director to the stockholders, such removal may be effected by the affirmative vote of the holders of at least a majority of all of the issued and outstanding shares of capital stock entitled to vote on the election of directors at a meeting of the stockholders called for that purpose. |
Advance Notice Requirements for Stockholder Nominations and Other Business
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| ALDW | Delek |
| Not applicable. | With respect to nominations of directors and business to be considered at an annual meeting, a stockholder notice must be in writing, meeting the requirements of Delek’s bylaws, and be delivered to Delek’s Secretary at the principal executive office of Delek not less than 90 calendar days, nor more than 120 calendar days, prior to the first anniversary of the preceding year’s annual meeting, except that in the event that the date of any annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be so delivered not earlier than 90 calendar days prior to such annual meeting and not later than 10 days following the day on which public announcement of the date of such meeting is first made by Delek. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for submitting stockholder’s notice as described above. Nominations and proposals of business must also comply with the applicable provisions of the Exchange Act. The chairman of the meeting shall determine whether a nomination or proposed business meets the provisions of Delek’s bylaws and, if any nomination or proposed business was not made or proposed in compliance with Delek’s bylaws, the chairman may declare that such non-compliant proposal or nomination be disregarded. |
Limited Call Rights
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| ALDW | Delek |
| If at any time ALDW’s general partner and its affiliates hold more than 90% of the then-issued and outstanding limited partner interests of any class, ALDW’s general partner will have the right, which it may assign in whole or in part to its affiliates or to ALDW, to purchase all, but not less than all, of the outstanding limited partner interests of that class that are held by unaffiliated persons as of a record date to be selected by ALDW’s general partner, on at least 10 but not more than 60 days’ notice. The purchase price in the event of a purchase under these circumstances would be the greater of (1) the current market price (as defined in the ALDW partnership agreement) of the limited partner interests of the class as of the date three days before the date the notice is mailed to the limited partners as provided in the ALDW Partnership Agreement and (2) the highest price paid by ALDW’s general partner or any of its affiliates for any limited partner interest of the class purchased within the 90 days preceding the date ALDW’s general partner mails notice of its election to purchase the limited partner interests. | Not applicable. |
Preemptive Rights
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| ALDW | Delek |
ALDW’s general partner has the right, which it may from time to time.time assign in whole or in part to any of its affiliates, to purchase partnership securities from ALDW whenever, and on the same terms that, ALDW issues partnership securities to persons other than the general partner and its affiliates, to the extent necessary to maintain the percentage interests of the general partner and its affiliates equal to that which existed immediately prior to the issuance of such partnership securities. The ALDW Common Unitholders have no preemptive rights to acquire additional ALDW Common Units or other partnership interest in ALDW. | Holders of Delek Common Stock have no preemptive rights under Delek’s certificate of incorporation to acquire additional shares of Delek Common Stock or other securities of Delek. |
Amendment of Governing Documents
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| ALDW | Delek |
| Amendments to the ALDW Partnership Agreement may be proposed only by ALDW’s general partner. However, to the fullest extent permitted by law, ALDW’s general partner will have no duty or obligation to propose or approve any amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to ALDW or the ALDW Common Unitholders. In order to adopt a proposed amendment, other than the amendments discussed below under “No Unitholder Approval,” ALDW’s general partner is required to seek written approval of the holders of the number of ALDW Common Units required to approve the amendment or call a meeting of the ALDW Common Unitholders to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a majority of the outstanding ALDW Common Units (which is referred to, with respect to ALDW, as a “unit majority”). However, other than the amendments discussed below under “—No Unitholder Approval,” an amendment of the ALDW Partnership Agreement must be approved by the ALDW Common Unitholders who own at least 90% of the outstanding ALDW Common Units unless ALDW receives an opinion of counsel to the effect that such amendment will not affect the limited liability of any limited partner under applicable law. | Under Section 242 of the DGCL, Delek’s certificate of incorporation may be amended upon a resolution of the Delek Board and approved by: • the holders of a majority of the outstanding shares of Delek capital stock entitled to vote thereon; and • a majority of the outstanding shares of each class of Delek capital stock entitled to vote thereon as a class, if any. No such stockholder vote would be required under Section 242 of the DGCL to change Delek's name. Delek’s certificate of incorporation provides that the affirmative vote of 66 2/3% of Delek’s issued and outstanding capital stock entitled to vote thereon shall be required to amend, repeal or adopt any provisions inconsistent with certain provisions of Delek’s certificate of incorporation unless the Delek Board unanimously recommends such amendment, repeal or adoption, in which case only a majority vote of the issued and outstanding Delek stock entitled to vote on the election of directors is required. Those articles are summarized in this table in the subsections entitled "Amendment of Governing Documents," “Limitations on Director Liability,” “Indemnification” and “Removal of Directors; Withdrawal or Removal of General Partner.” |
Stockholder Rights Plan |
HoldCo is not partyProhibited Amendments No amendment to the ALDW Partnership Agreement may be made that would: • enlarge the obligations of any limited partner without his or her consent, unless approved by the holders of at least a rights plan. | | Alon is not party to a rights plan. |
Quorum and Actsmajority of the Boardtype or class of Directorslimited partner interests so affected; or• enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by ALDW to ALDW’s general partner or any of its affiliates without the consent of ALDW’s general partner, which consent may be given or withheld at its option. The provision of the ALDW Partnership Agreement preventing the amendments having the effects described in any of the clauses above can be amended upon the approval of the holders of at least 90% of the outstanding ALDW units voting together as a single class (including units owned by ALDW’s general partner and its affiliates). | Prohibited Amendments Not applicable. |
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| ALDW | Delek |
No Unitholder Approval ALDW’s general partner generally may make amendments to the ALDW Partnership Agreement without the approval of any limited partner: • to reflect a change in the name of ALDW, the location of ALDW’s principal place of business, ALDW’s registered agent or its registered office; • to reflect the admission, substitution, withdrawal or removal of partners in accordance with the ALDW Partnership Agreement; • to reflect a change that ALDW’s general partner determines to be necessary or advisable to qualify or to continue ALDW’s qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that ALDW and its subsidiaries will not be treated as associations taxable as corporations or otherwise taxed as entities for federal income tax purposes; • to reflect a change in ALDW’s fiscal year or taxable year and related changes; • that is necessary, in the opinion of ALDW’s counsel, to prevent ALDW or ALDW’s general partner or its directors, officers, agents or trustees, from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, whether or not substantially similar to plan asset regulations currently applied or proposed; • that ALDW’s general partner determines to be necessary or appropriate for the creation, authorization or issuance of additional partnership securities or derivative instruments relating to ALDW’s partnership securities; • that is expressly permitted in the ALDW Partnership Agreement to be made by ALDW’s general partner acting alone; • that is effected, necessitated or contemplated by a Merger Agreement that has been approved under the terms of the ALDW Partnership Agreement; • that ALDW’s general partner determines to be necessary or appropriate to reflect and account for the formation by ALDW of, or its investment in, any corporation, partnership, joint venture, limited liability company or other entity, as otherwise permitted by the ALDW Partnership Agreement; • in connection with certain mergers, conversions or conveyances set forth in the ALDW Partnership Agreement; and • that are amendments substantially similar to any of the matters described above.
| No Stockholder Approval Delek’s certificate of incorporation and bylaws provides that the board of directors is authorized to amend or repeal any and all of the bylaws of Delek, and the bylaws may also be amended or repealed by the affirmative vote of the holders of at least 66 2/3% of the issued and outstanding shares of capital stock of Delek entitled to vote thereon voting as a single class. |
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No Unitholder Approval (continued) In addition, ALDW’s general partner may amend the ALDW Partnership Agreement without the approval of any limited partner or if ALDW’s general partner determines that such amendment: • does not adversely affect ALDW’s limited partners (or any particular class of limited partners) in any material respect; • is necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; • is necessary or appropriate to facilitate the trading of ALDW Common Units or to comply with any rule, regulation, guideline or requirement of any national securities exchange on which the ALDW Common Units are or will be listed or admitted for trading; • is necessary or appropriate for any action taken by ALDW’s general partner relating to a pro rata distribution of partnership interests to all record holders or splits or combinations of units under the provisions of the ALDW Partnership Agreement; or • is required to effect the intent expressed in ALDW’s registration statement on Form S-1 filed with the SEC in connection with ALDW’s initial public offering, as amended or supplemented, or of the provisions of the ALDW Partnership Agreement or are otherwise contemplated by the ALDW Partnership Agreement. | |
Dissolution and Liquidation
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| ALDW | Delek |
ALDW will continue as a limited partnership until terminated under the ALDW Partnership Agreement. ALDW will dissolve upon: • the withdrawal or removal of ALDW’s general partner or any other event that results in its ceasing to be ALDW’s general partner other than by reason of a transfer of its general partner interest in accordance with the ALDW Partnership Agreement or withdrawal or removal following approval and admission of a successor; • the election of ALDW’s general partner to dissolve ALDW, if approved by the holders of a majority of the outstanding ALDW Common Units; • the entry of a decree of judicial dissolution of ALDW; or • there being no limited partners, unless ALDW is continued without dissolution in accordance with applicable Delaware law. | Under the DGCL, Delek will continue its existence after dissolution for a term of three years or for such longer period as the Delaware Court of Chancery will direct in its discretion, to enable Delek to prosecute and defend suits and wind up its business, including disposing of its property to discharge liabilities and to distribute to its stockholders any remaining assets. |
Upon a dissolution under the first bullet above, the holders of a majority of ALDW Common Units may also elect, within specific time limitations, to continue ALDW’s business on the same terms and conditions described in the ALDW Partnership Agreement by appointing as a successor general partner an entity approved by the holders of a majority of the then outstanding ALDW Common Units, subject to ALDW’s receipt of an opinion of counsel relating to certain tax and limited liability matters. If ALDW dissolves in accordance with the ALDW Partnership Agreement, ALDW will sell or otherwise dispose of ALDW’s assets in liquidation. ALDW will first apply the proceeds of liquidation to the payment of ALDW’s creditors. ALDW will distribute any remaining proceeds to ALDW’s Common Unitholders and ALDW’s general partner in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of ALDW’s assets in liquidation. | |
Voting Rights; Meetings; Action by Written Consent
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| ALDW | Delek |
ALDW Common Unitholders are entitled to vote on the following matters: • certain amendments to the ALDW Partnership Agreement; • the merger of ALDW or the sale of substantially all of ALDW’s assets; • the dissolution of ALDW; and • the withdrawal or removal of the general partner of ALDW and the appointment of a successor general partner. | Each Delek Common Stockholder is entitled to one vote for each share held of record on the applicable record date on each matter voted on at a meeting of stockholders. |
| Except as described below in “—Anti-Takeover Provisions,” regarding a person or group owning 20% or more of any class of units then outstanding, record holders of units on the record date will be entitled to notice of, and to vote at, meetings of ALDW Common Unitholders and to act upon matters for which approvals may be solicited. ALDW Common Units that are owned by Ineligible Holders (as defined in the ALDW Partnership Agreement) will be voted by ALDW’s general partner and ALDW’s general partner will cast the votes on those ALDW Common Units in the same ratios as the votes of the ALDW Common Unitholders who own the other ALDW Common Units are cast. | |
| ALDW’s general partner does not hold annual meetings. Any action that is required or permitted to be taken by the ALDW Common Unitholders may be taken either at a meeting of the ALDW Common Unitholders or without a meeting if consents in writing describing the action so taken are signed by ALDW Common Unitholders who have the number of ALDW Common Units necessary to authorize or take that action at a meeting. Meetings of the ALDW Common Unitholders may be called by ALDW’s general partner or by ALDW Common Unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. ALDW Common Unitholders may vote either in person or by proxy at meetings. | Delek’s bylaws provide that a special meeting of the stockholders may be called by Delek’s chairman of the board or the president. Delek’s secretary shall call a special meeting upon written request of a majority of the board of directorsdirectors. Delek’s certificate of incorporation requires any action of stockholders to be effected at a duly called meeting, and such action may not be effected by a consent in writing. |
| The holders of a majority of the outstanding units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater percentage. | The holders of a majority of Delek’s capital stock issued and outstanding, present in person or by proxy and entitled to vote thereat constitutes a quorum atfor any meeting, and the votemeetings of the majority of the directors present at a meeting withstockholders. If a quorum is an act ofnot present, the board of directors. Adjournments for a lack of quorum are permitted without notice by any directorsstockholders present have the power to adjourn the meeting until a quorum is present.present or represented. |
Anti-Takeover Provisions
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| ALDW | A majorityDelek
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| The ALDW Partnership Agreement contains specific provisions that are intended to discourage a person or group from attempting to remove ALDW’s general partner or otherwise change the management of ALDW’s general partner. See “—Removal of Directors; Withdrawal or Removal of General Partner.” | See “Description of Delek Capital Stock—Anti-Takeover Effects of Certain Provisions of Delek’s Amended and Restated Certificate of Incorporation and Delek’s Amended and Restated Bylaws” and “—Anti-Takeover Effects of Delaware Law” |
| If any person or group other than ALDW’s general partner and its affiliates acquires beneficial ownership of 20% or more of any class of ALDW units, that person or group loses voting rights on all of its ALDW units. This loss of voting rights does not apply to any person or group that acquires the ALDW units from ALDW’s general partner or its affiliates and any transferees of that person or group approved by ALDW’s general partner or to any person or group who acquires the units with the prior approval of ALDW’s general partner. | Delek is not party to a rights plan. |
Section 203 of the total number of directors that Alon would have if there were no vacancies constitutes a quorum for the transaction of business. Adjournments for a lack of quorum are permitted without notice by any directors present until a quorum is present.An actDGCL does not apply to ALDW.
| Section 203 of the majority of the directors present at a meeting with a quorum is an act of the board of directors, however, the Alon bylaws limit modification of certain resolutions adopted April 14, 2015 dealing with the appointment and removal of the chairman and amending the bylawsDGCL applies to the affirmative vote of at least 90% of the total number of directors that Alon would have if there were no vacancies. The chairman of the board may not be removed without a similar 90% vote until following the 2017 Annual Meeting of stockholders.Delek. See “—Mergers; Business Combinations” above. |
Taxation
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| ALDW | Delek |
ALDW is classified as a partnership for U.S. federal income tax purposes and, generally, is not subject to entity-level taxation. Each ALDW Common Unitholder receives a Schedule K-1 from ALDW reflecting such ALDW Common Unitholder’s share of ALDW’s items of income, gain, loss, and deduction for each taxable year. | See “Material U.S. Federal Income Tax Consequences of the Merger.” |
DESCRIPTION OF HOLDCODELEK CAPITAL STOCK
The following is a summary of HoldCo’sDelek’s capital stock and certain provisions of HoldCo’s amended and restatedDelek’s certificate of incorporation and amended and restated bylaws, as such documents will be in effect upon the completion of the Mergers.bylaws. This summary does not purport to be complete and is qualified in its entirety by the provisions of the form of HoldCo’s amended and restatedDelek’s certificate of incorporation and amended and restated bylaws, which have been filed with the SEC.SEC, as well as the DGCL.
General
HoldCo’sDelek’s authorized capital stock will consistconsists of 120,000,000shares, of which 110,000,000shares are common stock, par value $0.01 per share, and 10,000,000shares are preferred stock, par value $0.01 per share. 1,000[●] shares of New Delek common stock areCommon Stock were issued and outstanding as of the date of this proxyconsent statement/prospectus, and noshares of preferred stock are issued and outstanding.
Common Stock
Holders of New Delek common stockCommon Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights in connection with the election of directors. HoldCo’s certificate of incorporation providesDelek’s bylaws provide that all elections of directors shall be determined by a plurality of the votes cast. Accordingly, subject to any preferential rights of HoldCo’sDelek’s preferred stock, all directors standing for election at a meeting shall be elected by a plurality of the votes cast by the holders of New Delek common stockCommon Stock present at the meeting and entitled to vote in the election.
Subject to any preferential rights of HoldCo’sDelek’s preferred stock, the outstanding holders of New Delek common stockCommon Stock are entitled to receive any dividends that may be declared by HoldCo’s board of directors out of legally available funds.the Delek Board. In the event of HoldCo’sDelek’s liquidation, dissolution or winding up, holders of New Delek common stockCommon Stock will, subject to compliance with any applicable requirements of the DGCL, be entitled to receive proportionately any of HoldCo’sDelek’s assets remaining after the payment of liabilities and any preferential rights of HoldCo’sDelek’s preferred stock then outstanding.
Holders of New Delek common stockCommon Stock have no preemptive, subscription, redemption, conversion or sinking fund rights. The outstanding shares of New Delek common stockCommon Stock are validly issued and fully paid. All shares of New Delek common stockCommon Stock have equal rights and preferences. The rights, preferences and privileges of the holders of New Delek common stockCommon Stock are subject to and may be adversely affected by the rights of holders of shares of any series of HoldCoDelek preferred stock that HoldCoDelek may designate and issue in the future.
Preferred Stock
HoldCo’s board of directorsThe Delek Board may, from time to time, authorize the issuance of one or more classes or series of preferred stock without stockholder approval. Though HoldCoDelek has no current
intention to issue any shares of its preferred stock, HoldCo’s amended and restatedDelek’s certificate of incorporation permits HoldCoDelek to issue up to 10,000,000 shares of preferred stock, par value $0.01 per share.stock. Subject to the provisions of HoldCo’s amended and restatedDelek’s certificate of incorporation and limitations prescribed by law, HoldCo’s board of directorsthe Delek Board is authorized to adopt resolutions to issue shares, establish the number of shares constituting any series, establish the voting powers, if any, determine designations, preferences, powers and relative rights, qualifications, limitations or restrictions on shares of HoldCoDelek preferred stock, including dividend rights, redemption rights, conversion rights and liquidation preferences, in each case without any action or vote by HoldCo’sDelek’s stockholders.
The issuance of HoldCoDelek preferred stock may adversely affect the rights of Delek New common stockholders by, among other things:
restricting dividends on Delek New common stock;Common Stock;
diluting the voting power of Delek New common stock;Common Stock;
impairing the liquidation rights of Delek New common stock;Common Stock; or
delaying or preventing a change in control without further action by the stockholders.
As a result of these or other factors, the issuance of HoldCoDelek preferred stock could have an adverse impact on the market price of New Delek common stock.Common Stock.
Anti-Takeover Effects of Certain Provisions of HoldCo’sDelek’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
HoldCo’s amended and restatedDelek’s certificate of incorporation and amended and restated bylaws contain provisions that could make it more difficult to acquire control of HoldCoDelek by means of a tender offer, open market purchases, a proxy contest or otherwise. A description of these provisions is set forth below.
Preferred Stock
We believeDelek believes that the availability of the preferred stock under HoldCo’s amended and restatedDelek’s certificate of incorporation provides HoldCoDelek with flexibility in addressing corporate issues that may arise. Having these authorized shares available for issuance will allow HoldCoallows Delek to issue shares of preferred stock without the expense and delay of a special meeting of stockholders. The authorized shares of HoldCoDelek preferred stock, as well as shares of New Delek common stock,Common Stock, will be available for issuance without further action by HoldCoDelek stockholders, unless action is required by applicable law or the rules of any stock exchange on which HoldCo’sDelek’s securities may be listed. HoldCo’s board of directorsThe Delek Board has the power, subject to applicable law, to issue one or more series of preferred stock that could, depending on the terms of any such series, impede the completion of a merger, tender offer or other takeover attempt that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their shares over the prevailing market price of HoldCo’sDelek’s then outstanding capital stock.
Advance Notice Procedure
HoldCo’s amended and restatedDelek’s bylaws provide an advance procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting of stockholders. Only persons nominated by, or at the direction of, HoldCo’s board of directorsthe Delek Board or by a stockholder who has given proper and timely notice to HoldCo’sDelek’s secretary prior to the meeting, will be eligible for election as a director. Similarly, except for business proposals submitted by, or at the direction of, HoldCo’s board of directors,the Delek Board, a business proposal may only be brought before an annual meeting by a stockholder who has given proper and timely notice to HoldCo’sDelek’s secretary prior to the meeting. In addition, any proposed business other than the nomination of persons for election to HoldCo’s board of directorsthe Delek Board must constitute a proper matter for stockholder action. For such notice to be timely, it must be received by HoldCo’sDelek’s secretary not less than 90 calendar days nor more than 120 calendar days prior to the one-year anniversary of the preceding year’s annual meeting (or if the date of the annual meeting is more than 30 days before or more than 30 days after the one-year anniversary of the previous year’s annual meeting, not earlier than 90 calendar days prior to such meeting and not later than 10 calendar days after public disclosure of the date of such meeting is first made by HoldCo)Delek). These advance notice provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempt to obtain control of HoldCo.Delek.
Special Meetings of Stockholders; No Action on Written Consent
HoldCo’s amended and restatedDelek’s bylaws provide that special meetings of stockholders may be called only by HoldCo’sDelek’s chairman of the board, president or by HoldCo’s secretary upon written request of a majority of HoldCo’s board of directors.the Delek Board. In addition, HoldCo’s amended and restatedDelek’s certificate of incorporation provides that no action may be taken by stockholders except at an annual or special meeting of stockholders and expressly prohibits action by written consent in lieu of a meeting. These provisions make it more difficult for stockholders to take action opposed by HoldCo’s board of directors.the Delek Board.
Certificate of Incorporation and Bylaws Amendments
HoldCo’sDelek’s certificate of incorporation generally requires the affirmative vote of the holders of at least 66 2/3% of the voting power of HoldCo’sDelek’s capital stock in order to amend certain of its provisions, including any provisions concerning (i) the amendment of the bylaws, (ii) the limitations of liability of directors, (iii)(ii) indemnification of directors and officers, (iv)(iii) the power of HoldCoDelek to purchase and maintenance ofmaintain insurance by HoldCoDelek on behalf of any director, officer, employee or agent thereof, (v)(iv) the removal of any director or the entire board of directors,Delek Board, and (vi)(v) the percentage of votes represented by capital stock required to approve certain amendments to the certificate of incorporation. These voting requirements will make it more difficult for stockholders to make changes in the certificate of incorporation that would be designed to facilitate the exercise of control over HoldCo.Delek. In addition, the requirement of approval by at least a 66 2/3% stockholder vote will enable the holders of a minority of the voting securities of HoldCoDelek to prevent the holders of a majority or more of such securities from amending such provisions.
In addition, the amended and restatedDelek’s certificate of incorporation provides that stockholders may only adopt, amend or repeal the bylaws by the affirmative vote of 66 2/3% of ourDelek outstanding voting stock. In contrast, HoldCo’s amendedstock entitled to vote thereon and restated certificate of incorporation grants HoldCo’s board of directorsthe Delek Board the authority to adopt, alter, amend or repeal any and all of the bylaws of HoldCoDelek without the approval of stockholders.
Size of the Board of Directors; Removal; Filling of Vacancies
HoldCo’s amended and restatedDelek’s certificate of incorporation provides that the number of directors constituting HoldCo’s board of directorsthe Delek Board shall be fixed and determined by the directors as set forth in HoldCo’s amended and restatedDelek’s bylaws. HoldCo’s amended and restatedDelek’s bylaws provide that HoldCo’s board of directorsthe Delek Board will consist of not less than three and not more than 15 persons, with the exact number fixed from time to time by the majority vote of HoldCo’s board of directors. HoldCo’s amended and restatedDelek Board. Delek’s certificate of incorporation allows HoldCo’sDelek’s stockholders to remove any director, or HoldCo’sDelek’s entire board of directors, with or without cause, generally upon the affirmative vote of 66 2/3% of HoldCo’sDelek’s outstanding shares of capital stock entitled to vote on the election of directors. As a result of these provisions, HoldCo’sDelek’s stockholders cannot unilaterally (i) increase the size of HoldCo’s board of directorsthe Delek Board without amending HoldCo’s amended and restatedDelek’s certificate of incorporation or (ii) remove any director, or HoldCo’sthe entire board of directors,Delek Board, without the affirmative vote of 66 2/3% of HoldCo’sDelek’s outstanding shares of capital stock entitled to vote on the election of directors. In addition, HoldCo’s amended and restatedDelek’s certificate of incorporation provides that any vacancy on HoldCo’s board of directors,
the Delek Board, including one created by an increase in the number of directors, may be filled by a majority of the directors then in office (even if less than a quorum), or by a sole remaining director.
Limitation on Liability and Indemnification Matters
HoldCo’s amended and restatedDelek’s certificate of incorporation limits the liability of directors to the fullest extent permitted by Delaware law. The effect of these provisionsthis provision is to eliminate the ability of HoldCoDelek and HoldCo’sDelek’s stockholders, through stockholders’ derivative suits on behalf of HoldCo,Delek or otherwise, to recover monetary damages against a director for breachcertain breaches of fiduciary duty as a director, including breaches resulting from grossly negligent behavior. However, exculpation does not apply if the directors breached their duty of loyalty to HoldCoDelek or HoldCo’sDelek’s stockholders, acted in bad
faith, knowingly or intentionally violated the law, authorized illegal dividends, repurchases or redemptions (as described under Section 174 of the DGCL) or derived an improper personal benefit from their actions as directors. HoldCo’s amended and restatedDelek’s certificate of incorporation further provides that if the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of the directors will be eliminated or limited to the fullest extent permitted by the DGCL, as amended. In addition, HoldCo’s amended and restated bylaws provideDelek’s certification of incorporation provides that HoldCoDelek will indemnify its directors and officers to the fullest extent permitted by Delaware law.
Fromlaw and after the completionDelek's bylaws provide that expenses (including attorney's fees) incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by Delek in advance of the Mergers, HoldCo willfinal disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by Delek.
Delek is bound by separate indemnification agreements with each of its directors and executive officers that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements will require HoldCo,Delek, among other things, to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers.
In addition, HoldCo’s amended and restatedDelek’s certificate of incorporation authorizes HoldCoDelek to maintain directors’ and officers’ liability insurance to provide its directors and officers with insurance coverage for losses arising from claims based on breaches of fiduciary duty, negligence, errors and other wrongful acts.
These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit HoldCoDelek and its stockholders. In addition, the stockholders’ investmenttrading price of the Delek Common Stock may be adversely affected to the extent HoldCoDelek pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions and/or separate indemnification agreements.
Anti-Takeover Effects of Delaware Law
HoldCoDelek is a Delaware corporation that is subject to Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified in the law, an “interested stockholder” of a Delaware corporation shall not engage in any “business combination” with the corporation for a three-year period following the time that the stockholder became an interested stockholder, unless:
prior to such time, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding specified shares)shares for the purposes of determining the voting stock outstanding); or
on or subsequent to such time, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, upon the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder.
Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the “interested stockholder”.stockholder.” Except as otherwise specified in Section 203, an interested stockholder is generally defined to include:
any person that is the owner (as defined in Section 203) of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the date of determination; and
the affiliates and associates of any such person.
Under some circumstances, Section 203 makes it more difficult for a person who would be an “interested stockholder” to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage any entity interested in acquiring HoldCoDelek to negotiate in advance with HoldCo’s board of directorsthe Delek Board because the stockholder approval requirement would be avoided if HoldCo’s board of directorsthe Delek Board approves either the business combination or the transaction that results in such entity becoming an interested stockholder. These provisions also may make it more difficult to accomplish transactions involving HoldCoDelek that HoldCo’sDelek’s stockholders may otherwise deem to be in their best interests.
Listing
After the completion of the Mergers, the New Delek common stockCommon Stock is expected be listed for trading on the NYSE under Delek’sthe ticker symbol “DK.”
Transfer Agent and Registrar
The transfer agent and registrar for the New Delek common stock will be Delek’s transfer agent and registrar,Common Stock is American Stock Transfer & Trust Company LLC.
STOCK OWNERSHIP
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS AND EXECUTIVE OFFICERS OF DELEKTHE MERGER
The following table setsis a discussion of certain material U.S. federal income tax consequences to U.S. holders (as defined below) of the Merger and of owning and disposing of Delek Common Stock received in the Merger. This discussion is based upon current provisions of the Code, existing and proposed Treasury regulations (the “Treasury Regulations”) promulgated under the Code and judicial authority and administrative interpretations, all as of the date of this document, and all of which are subject to change, possibly with retroactive effect, or are subject to differing interpretations. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. No ruling has been or is expected to be sought from the Internal Revenue Service (the “IRS”) with respect to any of the tax consequences discussed below. As a result, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below.
This discussion is limited to U.S. holders of ALDW Common Units that hold their ALDW Common Units, and will hold their Delek Common Stock received in the Merger, as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address any tax consequences arising under the Medicare tax on net investment income or the alternative minimum tax, nor does it address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to income taxes. Furthermore, this discussion does not address all aspects of U.S. federal income taxation that may be applicable to U.S. holders in light of their particular circumstances or to U.S. holders that may be subject to special rules under U.S. federal income tax laws, including, without limitation:
a bank, insurance company or other financial institution;
a tax-exempt or governmental organizations;
a real estate investment trust;
an S corporation or other pass-through entity (or an investor in an S corporation or other pass-through entity);
a regulated investment company or a mutual fund;
a “controlled foreign corporation” or a “passive foreign investment company”;
a dealer or broker in stocks and securities, or currencies;
a trader in securities that elects mark-to-market treatment;
a holder of ALDW Common Units that received such ALDW Common Units through the exercise of an employee option, pursuant to a retirement plan or otherwise as compensation;
a holder of options, or holders of restricted units or bonus units, granted under any ALDW benefit plan;
a person whose functional currency is not the U.S. dollar;
a holder of ALDW Common Units that holds such ALDW Common Units as part of a hedge, straddle, appreciated financial position, conversion or other “synthetic security” or integrated investment or risk reduction transaction; or
a U.S. expatriate.
If a partnership, or any entity treated as a partnership for U.S. federal income tax purposes, holds ALDW Common Units, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership and upon certain informationdeterminations made at the partner level. A partner in a partnership holding ALDW Common Units should consult its own tax advisor about the U.S. federal income tax consequences of the Merger and of owning and disposing of Delek Common Stock received in the Merger.
For purposes of this discussion, “U.S. holder” is a beneficial owner of ALDW Common Units or Delek Common Stock that is for U.S. federal income tax purposes:
an individual citizen or resident of the U.S.;
a corporation (or any other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;
an estate, whose income is subject to U.S. federal income tax regardless of its source; or
a trust (i) the administration of which is subject to the primary supervision of a U.S. court and that has one or more U.S. persons that have the authority to control all substantial decisions of the trust or (ii) that has made a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person.
THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND IS NOT A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER OR THE RECEIPT, OWNERSHIP AND DISPOSITION OF DELEK COMMON STOCK RECEIVED IN THE MERGER. EACH HOLDER OF ALDW COMMON UNITS IS STRONGLY URGED TO CONSULT WITH AND RELY UPON ITS OWN TAX ADVISOR AS TO THE SPECIFIC FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER AND THE RECEIPT, OWNERSHIP AND DISPOSITION OF DELEK COMMON STOCK RECEIVED IN THE MERGER, TAKING INTO ACCOUNT ITS OWN PARTICULAR CIRCUMSTANCES.
Tax Consequences of the Merger to U.S. Holders of ALDW Common Units
Tax Characterization of the Merger. The receipt of Delek Common Stock as Merger Consideration in exchange for ALDW Common Units pursuant to the Merger should be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, the Merger should be treated as a taxable sale of a U.S. holder’s ALDW Common Units in exchange for the Delek Common Stock received as Merger Consideration in the Merger. The remainder of this discussion assumes that the Merger will be treated as a taxable transaction.
Amount and Character of Gain or Loss Recognized. A U.S. holder who receives Delek Common Stock as Merger Consideration in exchange for ALDW Common Units pursuant to the Merger will recognize gain or loss in an amount equal to the difference between (i) the sum of (A) the fair market value of the Delek Common Stock received and (B) such U.S. holder’s share of ALDW’s nonrecourse liabilities immediately prior to the Merger, and (ii) such U.S. holder’s adjusted tax basis in the ALDW Common Units exchanged therefor (which includes such U.S. holder’s share of ALDW’s nonrecourse liabilities immediately prior to the Merger).
A U.S. holder’s initial tax basis in ALDW Common Units purchased with cash equaled, at the time of such purchase, the amount such holder paid for the ALDW Common Units plus the U.S. holder’s share of ALDW’s nonrecourse liabilities. Over time that basis would have (i) increased by the U.S. holder’s share of ALDW’s income and by any increases in the U.S. holder’s share of ALDW’s nonrecourse liabilities, and (ii) decreased, but not below zero, by distributions from ALDW, by the U.S. holder’s share of ALDW’s losses, by any decreases in the U.S. holder’s share of ALDW’s nonrecourse liabilities and by the U.S. holder’s share of ALDW’s expenditures that are not deductible in computing taxable income and are not required to be capitalized.
Except as noted below, gain or loss recognized by a U.S. holder on the exchange of ALDW Common Units in the Merger will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which may be substantial (generally increasing in accordance with the length of time a U.S. holder has held its ALDW Common Units and corresponding to the total amount of depreciation deductions allocated to the U.S. holder in prior periods), will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to “unrealized receivables,” including depreciation recapture, or to “inventory items” owned by ALDW and its subsidiaries. Ordinary income attributable to unrealized receivables and inventory items may exceed net taxable gain realized upon the exchange of an ALDW Common Unit pursuant to the Merger and may be recognized even if there is a net taxable loss realized on the exchange of such U.S. holder’s ALDW Common Units pursuant to the Merger. Consequently, a U.S. holder may recognize both ordinary income and capital loss upon the exchange of ALDW Common Units in the Merger.
Capital gain or loss recognized by a U.S. holder will generally be long-term capital gain or loss if the U.S. holder has held its ALDW Common Units for more than one year as of the Effective Time of the Merger. If the U.S. holder is an individual, such long-term capital gain will generally be eligible for reduced rates of taxation. Capital losses recognized by a U.S. holder may offset capital gains and, in the case of individuals, no more than $3,000 of ordinary income. Capital losses recognized by U.S. holders that are corporations only may be used to offset capital gains.
The amount of gain or loss recognized by each U.S. holder in the Merger will vary depending on such U.S. holder’s particular situation, including the value of the Delek Common Stock received as Merger Consideration by such U.S. holder in the Merger, the adjusted tax basis of the ALDW Common Units exchanged by such U.S. holder in the Merger, and the amount of any suspended passive losses that may be available to a particular U.S. holder to offset a portion of the gain recognized by such U.S. holder. Passive losses that were not deductible by a U.S. holder in prior taxable periods because they exceeded such U.S. holder’s share of ALDW’s income may be deducted in full upon such U.S. holder’s taxable disposition of its entire investment in ALDW pursuant to the Merger. Each U.S. holder is strongly urged to consult its tax advisor with respect to the beneficial ownershipunitholder’s specific tax consequences of Delek common stock asthe Merger, taking into account its own particular circumstances.
ALDW Items of February 17, 2017, for:
each of Delek’s directors;
each of Delek’s named executive officers as of December 31, 2016;
all of Delek’s current directorsIncome, Gain, Loss and executive officers as a group; and
each person or group known by Delek or Alon, basedDeduction for the Taxable Period Ending on the filings pursuant to Section 13(d) or Section 13(g) underDate of the Exchange Act, to own beneficially more than 5%Merger. A U.S. holder will be allocated its share of Delek’s common stock.
The beneficial ownership set forth inALDW’s items of income, gain, loss and deduction for the following table has been determinedtaxable period of ALDW that includes the Effective Date of the Merger in accordance with the rulesterms of the SEC,ALDW partnership agreement. A U.S. holder will be subject to U.S. federal income taxes on any such allocated income and gain even if such U.S. holder does not receive a cash distribution from ALDW. Any such income and gain allocated to such U.S. holder will increase such U.S. holder’s tax basis in its ALDW Common Units and, therefore, will reduce the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicatedgain, or increase the loss, recognized by such U.S. holder resulting from the footnotes below,Merger. Any losses or deductions allocated to a U.S. holder will decrease such U.S. holder’s tax basis in its ALDW Common Units and, therefore, will increase the gain, or reduce the loss, recognized by such U.S. holder resulting from the Merger.
Tax Basis and Holding Period in Delek and Alon believe, based on the information furnished to them, that the persons and entities namedCommon Stock Received in the table below have sole voting and investment power with respect to allMerger. A U.S. holder’s tax basis in the shares of Delek common stock that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 61,970,962Common Stock it receives in the Merger will equal the fair market value of such shares. A U.S. holder’s holding period in the shares of Delek common stock outstanding at February 17, 2017. In computingCommon Stock received in the numberMerger will begin on the day after the Effective Date of sharesthe Merger.
Tax Consequences to U.S. Holders of Owning and Disposing of Shares of Delek common stock beneficially owned by a person and the percentage ownership of such person, all shares of common stock subject to options that are currently exercisable or exercisable within 60 days of February 17, 2017 and restricted stock unit awards subject to settlement within 60 days of February 17, 2017 are deemed to be outstanding. However, these shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listedCommon Stock Received in the table below is c/oMerger
Distributions on Delek US Holdings, Inc., 7102 Commerce Way, Brentwood, Tennessee 37027.
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| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership of Common Stock (1) | | Percentage of Common Stock (2) |
| Beneficial Owners of More Than 5% of Common Stock: | |
| Alon Israel Oil Company, Ltd. | 6,000,000 | (3) | 9.68% |
| Dimensional Fund Advisors LP | 5,239,282 | (4) | 8.45% |
| The Vanguard Group - 23-1945930 | 4,547,853 | (5) | 7.34% |
| BlackRock, Inc. | 3,779,542 | (6) | 6.10% |
| Wellington Management Group LLP | 3,834,641 | (7) | 6.19% |
| Point72 Asset Management, L.P. | 3,149,509 | (8) | 5.08% |
| Directors and NEOs: | | | |
| Ezra Uzi Yemin | 512,569 | | * |
| William J. Finnerty | 17,979 | | * |
| Carlos E. Jordá | 41,704 | | * |
| Charles H. Leonard | 32,584 | | * |
| Gary M. Sullivan, Jr. | 12,974 | | * |
| Shlomo Zohar | 41,079 | | * |
| Assaf Ginzburg | 72,067 |
| | * |
| Frederec Green | 167,577 |
| | * |
| Mark D. Smith | 5,480 |
| | * |
| Anthony L. Miller | 5,248 |
| | * |
| All directors, NEOs and executive officers as a group (14 persons) | 1,028,501 |
| | 1.66% |
| |
* | Less than 1% of the issued and outstanding shares of our Common Stock or issued and outstanding common units of Delek Logistics, as applicable. |
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(1) | For purposes of this table, a person is deemed to have “beneficial ownership” of any securities when such person has the right to acquire them within 60 days after February 17, 2017. For non-qualified stock options (“NQSOs”) and time-vested restricted stock units (“RSUs”) under our 2006 Long-Term Incentive Plan (the "2006 Plan") and 2016 Long-Term Incentive Plan (the "2016 Plan"), we report shares equal to the number of NQSOs or RSUs that are vested or that will vest within 60 days of February 17, 2017. For stock appreciation rights ("SARs") under the 2006 Plan and 2016 Plan, we report the shares that would be delivered upon exercise of SARs that are vested or that will vest within 60 days of February 17, 2017 (which is calculated by multiplying the number of SARs by the difference between the $22.77 fair market value of our Common Stock at February 17, 2017 and the exercise price divided by $22.77). For purposes of computing the percentage of outstanding securities held by each person named above, any securities which such person has the right to acquire within 60 days after February 17, 2017 are deemed to be outstanding but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. |
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(2) | Percentage of our Common Stock is based upon 61,970,962 issued and outstanding shares on February 17, 2017 (excluding securities held by, or for the account of, the registrant or its subsidiaries). Percentage of Delek Logistics' common units is based upon 24,328,607 common units issued and outstanding on February 17, 2017. |
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(3) | Beneficial ownership information is based on information contained in a Schedule 13D/A filed with the SEC on May 19, 2015 by Alon Israel Oil Company, Ltd. ("Alon Israel"), an Israeli corporation, with an address of Europark (France Building), Kibbutz Yakum, 60972, Israel. Alon Israel has sole voting and sole dispositive power with respect to all shares. |
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(4) | According to a Schedule 13G/A filed with the SEC on February 9, 2017 by Dimensional Fund Advisors LP with an address of Building One, 6300 Bee Cave Road, Austin, Texas 78746. Dimensional Fund Advisors LP has sole voting power with respect to 5,166,097 shares and sole dispositive power with respect to all shares. |
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(5) | According to a Schedule 13G/A filed with the SEC on February 9, 2017 by The Vanguard Group-23-1945930 with an address of 100 Vanguard Boulevard, Malvern, Pennsylvania 19355, The Vanguard Group-23-1945930 has sole voting power with respect to 70,555 shares, sole dispositive power with respect to 4,474,564 shares, shared voting power with respect to 5,417 shares and shared dispositive power with respect to 73,289 shares. |
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(6) | According to a Schedule 13G/A filed with the SEC on January 23, 2017 by BlackRock, Inc. with an address of 55 East 52nd Street, New York, New York 10055, BlackRock, Inc. has sole voting power with respect to 3,625,964 shares and sole dispositive power with respect to all shares. |
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(7) | Beneficial ownership information is based on information contained in a Schedule 13G filed with the SEC on February 9, 2017 by Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP. The address for Wellington Management Group, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP is c/o Wellington Management Company LLP, 280 Congress Street, Boston, Massachusetts, 02210. Wellington Management Group LLP does not have sole voting power or sole dispositive power with respect to any shares, has shared voting power with respect to 1,942,742 shares and shared dispositive power with respect to all shares. Wellington Group Holdings LLP does not have sole voting power or sole dispositive power with respect to any shares, has shared voting power with respect to 1,942,742 shares and shared dispositive power with respect to all shares. Wellington Investment Advisors Holdings LLP does not have sole voting power or sole dispositive power with respect to any shares, has shared voting power with respect to 1,942,742 shares and shared dispositive power with respect to all shares. Wellington Management Company does not have sole voting power or sole dispositive power with respect to any shares, has shared voting power with respect to 1,748,578 shares and shared dispositive power with respect to 3,554,277 shares. |
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND DIRECTORS AND
EXECUTIVE OFFICERS OF ALON
The following table presents information regarding the number. For U.S. federal income tax purposes, distributions of shares of Alon common stock beneficially owned as of February 17, 2017 (except as noted in the footnotes below)cash by each of Alon’s directors, each named executive officer of Alon and all directors and executive officers of Alon asDelek to a group. In addition, the table presents information about each person known by Alon to beneficially own 5% or more of Alon’s outstanding common stock. Unless otherwise indicated by footnote, the beneficial owner exercises sole voting and investment power over the shares. Additionally, unless otherwise indicated by footnote, the percentage of outstanding shares is calculated on the basis of 71,761,117 shares of Alon common stock outstanding as of February 17, 2017.
Unless otherwise noted below, the address of each beneficial owner listed in the table below is 12700 Park Central Dr., Suite 1600, Dallas, TX 75251.
|
| | | | | |
| Name of Beneficial Owner | Beneficial Share Ownership |
| Number of Shares | | Percent of Outstanding Shares |
| Directors and Executive Officers: | | | |
| Ilan Cohen | 5,962 |
| | * |
|
| Assaf Ginzburg | — |
| | — |
|
| Frederec Green | — |
| | — |
|
| Ron W. Haddock | 34,756 |
| | * |
|
| Jeff D. Morris (1) | 1,785,694 |
| | 2.5 | % |
| Zalman Segal | 22,256 |
| | * |
|
| Mark D. Smith | — |
| | — |
|
| Avigal Soreq | — |
| | — |
|
| Franklin Wheeler | 4,800 |
| | * |
|
| William Kacal | 2,800 |
| | * |
|
| David Wiessman (2) | 2,510,541 |
| | 3.5 | % |
| Ezra Uzi Yemin | — |
| | — |
|
| Jimmy Crosby | 112,777 |
| | * |
|
| Paul Eisman | 488,067 |
| | * |
|
| Shai Even | 163,014 |
| | * |
|
| Claire Hart | 569,449 |
| | * |
|
| Kyle McKeen | 97,638 |
| | * |
|
| Alan Moret | 198,881 |
| | * |
|
| Michael Oster | 61,943 |
| | * |
|
| James Ranspot | 90,824 |
| | * |
|
| All directors and executive officers as a group (20 persons) | 6,149,402 |
| | 8.6 | % |
| | | | |
| 5% or more Stockholders: | | | |
| Delek US Holdings, Inc. (3) | 33,691,292 |
| | 46.9 | % |
| Dimensional Fund Advisors LP (4) | 6,033,200 |
| | 8.4 | % |
| |
(1) | Jeff D. Morris (Special Advisor to Alon and the Vice Chairman of the board of directors of the general partner of Alon Partners) owns shares of non-voting stock of Alon Assets, Inc., or Alon Assets. Alon Assets is a subsidiary of Alon through which Alon conducts substantially all of its business. As of February 17, 2017, there were 298,490 shares of capital stock of Alon Assets outstanding. Mr. Morris owns 621.97 shares of non-voting stock of Alon Assets, which could be exchanged into 116,347 shares of our common stock. |
| |
(2) | Shares beneficially owned by Mr. Wiessman include 2,335,441 shares held by D.B.W. Holdings (2005) Ltd. and 175,100 shares held directly. |
| |
(3)
| Shares beneficially owned are based on Schedule 13D/A filed with the SEC on January 3, 2017 by Delek US Holdings, Inc. Delek’s address is 7102 Commerce Way, Brentwood, Tennessee 37027. |
| |
(4) | Shares beneficially owned are based on Schedule 13G/A filed with the SEC on February 9, 2017 by Dimensional Fund Advisors LP. Dimensional Fund Advisors LP’s address is 6300 Bee Cave Road, Austin, TX 78746. Dimensional Fund serves as an investment advisor to four investment companies and serves as investment manager or sub-advisor to certain other comingled funds, group trusts and separate accounts (collectively, the “funds”). In its role as investment advisor, sub-advisor and/or manager, Dimensional Fund may be deemed the beneficial owner of all shares held by the funds; however, all such shares are owned by the funds. The funds have the right to receive or the power to direct the receipt of, dividends from, or the proceeds from the sale of, such securities in their respective accounts. None of the four funds are known to have such rights or powers with respect to more than five percent of Alon’s common stock. |
NO APPRAISAL RIGHTS
Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as the Mergers, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction.
Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the DGCL. Section 262 of the DGCL provides that stockholders have the right, in some circumstances, to dissent from certain corporate actions (including mergers) and to instead demand payment of the fair value of their shares. Stockholders do not have appraisal rightsU.S. holder with respect to shares of any classDelek Common Stock received in the Merger will generally be included in a U.S. holder’s income as ordinary dividend income to the extent of Delek’s current or seriesaccumulated “earnings and profits” as determined under U.S. federal income tax principles. Distributions of stock ifcash in excess of Delek’s current or accumulated earnings and profits will be treated as a non-taxable return of capital reducing a U.S. holder’s adjusted tax basis in such U.S. holder’s shares of Delek Common Stock and, to the extent the distribution exceeds such U.S. holder’s adjusted tax basis, as capital gain from the sale or exchange of such shares of stock,Delek Common Stock. Dividends received by a corporate U.S. holder may be eligible for a dividend received deduction, subject to applicable limitations. Dividends received by an individual U.S. holder may be taxed at the lower applicable long-term capital gains rate if such dividends are treated as “qualified dividend income” for U.S. federal income tax purposes.
Sale, Exchange, Certain Redemptions or depositary receiptsOther Taxable Dispositions of Delek Common Stock. Upon the sale, exchange, certain redemptions or other taxable dispositions of Delek Common Stock received in respect thereof, are eitherthe Merger, a U.S. holder will generally recognize capital gain or loss equal to the difference between (i) listed on a national securities exchange or (ii) heldthe amount of record by more than 2,000 holders, unlesscash and the stockholders receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), orfair market value of any other corporation thatproperty received upon such taxable disposition of shares of Delek Common Stock and (ii) the U.S. holder’s adjusted tax basis in such shares of Delek Common Stock. Such capital gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period in the shares of Delek Common Stock disposed of is publicly listed or held by more than 2,000 holdersone year at the time of record, cash in lieusuch taxable disposition. Long-term capital gains of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Therefore, because Alon’s common stocknon-corporate taxpayers are generally taxed at reduced rates. Capital losses recognized by a U.S. holder may offset capital gains and, Delek’s common stock are listed on the NYSE, and will receive in the Mergers only shares of New Delek common stock, which will be publicly listed on the NYSE, and cash in lieu of fractional shares in the case of individuals, no more than $3,000 of ordinary income. Capital losses recognized by U.S. holders that are corporations may only be used to offset capital gains.
Information Reporting and Backup Withholding
Information returns may be required to be filed with the AlonIRS in connection with the Merger holders of Alon common stock and Delek common stock will not be entitled to appraisal rights in the Mergersconnection with distributions made with respect to, their sharesor dispositions of, Alon common stockDelek Common Stock received in the Merger. A U.S. holder may be subject to U.S. backup withholding on payments made pursuant to the Merger or on distributions made with respect to, or on payments made pursuant to dispositions of, Delek common stock.Common Stock received in the Merger unless such holder provides proof of an applicable exemption or a correct taxpayer identification number and otherwise complies with the applicable requirements of the backup withholding rules. Any amount withheld under the U.S. backup withholding rules is not an additional tax and will generally be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.
LEGAL MATTERS
The validity of the shares of New Delek common stockCommon Stock to be issued in connection with the Mergers and being offered herebyMerger will be passed upon for HoldCo by Baker Botts L.L.P. Certain U.S. federal income tax consequences relating to the Mergers will also be passed upon for Delek and HoldCo by Baker Botts L.L.P and for Alon by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
Delek
The consolidated financial statements of Delek US Holdings, Inc. (now known as Delek US Energy, Inc.) appearing in Delek US Holdings, Inc.’s Annual Report (Form 10-K) for the year ended December 31, 2016 (including the schedule appearing therein), and the effectiveness of Delek US Holdings, Inc.’s internal control over financial reporting as of December 31, 2016, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Alon USA Partners, LP as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2016 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Alon USA Energy, Inc. as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, and management'smanagement’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2016 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
FUTURE STOCKHOLDER PROPOSALS
Delek
Delek (or HoldCo, as the case may be) will hold an annual meeting in 2017 regardless of whether the Mergers have been completed. Delek’s third amended and restated bylaws and HoldCo’s amended and restated bylaws to be in effect upon completion of the Mergers require stockholders to furnish timely written notice of their intent to nominate a director or bring any other matter before a stockholder meeting, whether or not they wish to include their proposal in Delek’s proxy materials (or HoldCo’s proxy materials, as the case may be), and to provide additional information specified in Delek’s third amended and restated bylaws. In general, notice was required to have been received by the Corporate Secretary at its principal executive offices no earlier than January 5, 2017, nor later than February 4, 2017, provided that if the date of the Annual Meeting is advanced more than 30 calendar days prior to or delayed by more than 30 calendar days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th calendar day prior to such annual meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is first made.
Additional information regarding Delek’s procedures is located in Delek’s proxy statement on Schedule 14A filed with the SEC on April 5, 2016. See “Where You Can Find More Information” beginning on page 240.
Alon
Alon will hold an annual meeting in 2017 only if the Mergers have not already been completed. If an annual meeting is held, Alon’s amended and restated bylaws require stockholders to furnish timely written notice of their intent to nominate a director or bring any other matter before a stockholder meeting, whether or not they wish to include their proposal in Alon’s proxy materials, and to furnish additional information specified in Alon’s amended and restated bylaws. In general, notice was required to have been received no earlier than December 31, 2016, nor later than January 30, 2017; provided that if the date of the annual meeting is advanced more than 30 calendar days prior to or delayed by more than 30 calendar days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of the 90th calendar day prior to such annual meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is first made.
Additional information regarding Alon’s procedures is located in Alon’s proxy statement on Schedule 14A filed with the SEC on April 1, 2016. See “Where You Can Find More Information” beginning on page 240.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, neither the Delek Board nor the Alon Board knows of any matters that will be presented for consideration at either the Delek special meeting or the Alon special meeting other than as described in this joint proxy statement/prospectus. If any other matters come before either of the meetings or any adjournments or postponements of the meetings and are voted upon, the enclosed proxies will confer discretionary authority on the individuals named as proxies to vote the shares represented by the proxies as to any other matters. The individuals named as proxies intend to vote in accordance with their best judgment as to any other matters.
WHERE YOU CAN FIND MORE INFORMATION
DelekALDW and AlonDelek file annual, quarterly and specialother reports proxy statements and other information with the SEC under the Exchange Act.SEC. You may read and copy any of this information at the SEC’s Public Reference Roompublic reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or 202-942-8090 for further information on the Public Reference Room.public reference room. The SEC also maintains an Interneta website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, including DelekALDW and Alon,Delek, who file reports and information electronically with the SEC. The reports and other information filed by ALDW and Delek with the SEC are also available at the website www.delekus.com. Delek’s web address and the web addresses of that site is www.sec.gov.
Investors may also consult Delek’s or Alon’s website for more information concerning the Mergers described in this joint proxy statement/prospectus. Delek’s website is www.DelekUS.com. Alon’s website is www.alonusa.com. InformationSEC and ALDW have been included on either website is not incorporated by reference into this joint proxy statement/prospectus.as inactive textual references only. The information contained on thethose websites of Delek, Alon and the SEC (except for the filings described below) is expressly not incorporated by reference into this joint proxyconsent statement/prospectus.
HoldCo has filed with the SECThis document, which forms part of a registration statement on Form S-4 filed with the SEC by Delek (File No. 333- ), constitutes a prospectus of which this joint proxy statement/prospectus forms a part. The registration statement registersDelek under Section 5 of the shares of NewSecurities Act with respect to the Delek common stockCommon Stock to be issued to Delek stockholders in connection withALDW Common Unitholders pursuant to the Delek Merger andAgreement, as such agreement may be amended from time to Alon stockholders in connection with the Alon Merger. The registration statement, including the attached annexes and exhibits, contains additional relevant information about New Delek common stock. The rules and regulations of the SEC allow Delek and Alon to omit certain information included in the registration statement from this joint proxy statement/prospectus.time.
In addition, the SEC allows DelekALDW and AlonDelek to disclose important information to you by referring you to other documents filed separately with the SEC. This information is considered to be a part of this joint proxyconsent statement/prospectus, except for any information that is superseded by information included directly in this joint proxyconsent statement/prospectus.prospectus or incorporated by reference subsequent to the date of this consent statement/prospectus as described below. Statements contained in this consent statement/prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance ALDW Common Unitholders are referred to the copy of the contract or other document filed with the SEC, each statement being qualified in all respects by such reference.
This joint proxyconsent statement/prospectus incorporates by reference the documents listed below that ALDW and Delek hashave previously filed or will file with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K).SEC. They contain important information about Delek, itsthe companies and their financial condition, business and other matters.
Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Current Reports on Form 8-K filed on January 3, 2017 and January 31, 2017.
In addition, Delek incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K) after the date of this joint proxy statement/prospectus and prior to the date of the Delek special meeting. Such documents are considered to be a part of this joint proxy statement/prospectus, effective as of the date such documents are filed. In the event of conflicting information in these documents,prospects. You should analyze the information in this consent statement/prospectus and the latest filed document should be considered correct.additional information in the documents described under the heading “Documents Incorporated By Reference.”
You may obtainrequest copies of this consent statement/prospectus and any of the documents listed above from the SEC, through the SEC’s website and the address described aboveincorporated by reference herein or fromother information concerning Delek by requesting them in writing or by telephone at the following address:
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Attention: Corporate Secretary
Telephone: (615) 771-6701
These documents are available from DelekALDW, without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibitupon written or oral request to the registration statementapplicable company’s principal executive offices. The respective addresses and telephone numbers of which this joint proxy statement/prospectus forms a part.such principal executive offices are listed below.
This joint proxy statement/prospectus also incorporates by reference the |
| |
For Delek: Delek US Holdings, Inc. 7102 Commerce Way Brentwood, Tennessee 37027 Attention: Investor Relations (615) 771-6701 | For ALDW: Alon USA Partners, LP 7102 Commerce Way Brentwood, Tennessee 37027 Attention: Investor Relations (615) 771-6701 |
To obtain timely delivery of these documents listed below that Alon has previously filed or will file with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K). They contain important information about Alon, its financial condition and other matters.
Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Current Reports on Form 8-K and Form 8-K/A filed on January 3, 2017 (two filings) and January 12, 2017 (other than the portions of those documents deemed not to be filed).
In addition, Alon incorporates by reference any future filings it makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K) after the date of this joint proxy statement/prospectus and prior to the dateconclusion of the Alon special meeting. Such documents are considered to be a part of this joint proxy statement/prospectus, effective as of the date such documents are filed. In the event of conflicting information in these documents,consent process, ALDW Common Unitholders must request the information in the latest filed document should be considered correct.
You may obtain any of the documents listed above from the SEC, through the SEC’s website and the address described above or from Alon by requesting them in writing or by telephone at the following address:
Alon USA Energy, Inc.
12700 Park Central Drive, Suite 1600
Dallas, Texas 75251
Attention: Investor Relations
Telephone (972) 367-3600
These documents are available from Alon without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibit to the registration statement of which this joint proxy statement/prospectus forms a part.
If you are a stockholder of Delek or Alon and would like to request documents, please do so by [•no later than [●], 2017 to receive them before the Delek special meeting and the Alon special meeting. If you request any documents from Delek or Alon, Delek or Alon will mail them to you by first class mail, or another equally prompt means, within one business day after Delek or Alon receives your request.2017.
This joint proxy statement/prospectus is a prospectus of HoldCo and is a joint proxy statement of Delek and Alon for the Delek special meeting and the Alon special meeting. You should rely only on the information contained or incorporated by reference in this joint proxyconsent statement/prospectus. None of ALDW, Delek or any of their affiliates has authorized anyone to provide you with information different from that contained or incorporated by reference in this consent statement/prospectus. Neither Delek, ALDW nor Alon has authorized anyoneany of their respective affiliates take any responsibility for, nor can they provide any assurance as to, the reliability of any other information that others may give anyyou. The information or make any representation about the Mergers or Delek or Alon that is different from, or in addition to, that contained in this joint proxyconsent statement/prospectus and the documents incorporated by reference is accurate only as of its respective dates, regardless of the time of delivery of this consent statement/prospectus. ALDW’s and Delek’s business, financial condition, results of operations and prospects may have changed since those dates.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows Delek and ALDW to “incorporate by reference” certain information in documents Delek and ALDW file with the SEC, which means that Delek and ALDW can disclose important information to you in this consent statement/prospectus by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this consent statement/prospectus, except for any information superseded by information in this consent statement/prospectus, or information filed subsequently that is incorporated by reference and information in any consent statement/prospectus supplement. These documents contain important business and financial information about Delek and ALDW, including information concerning financial performance, and Delek and ALDW each urge you to read them.
On January 2, 2017, Delek US Energy, Inc. (formerly known as Delek US Holdings, Inc.), a Delaware corporation (“Old Delek”) (Commission File No. 001-32868), entered into an Agreement and Plan of Merger with Alon USA Energy, Inc., a Delaware corporation (“Alon Energy”), Delek (formerly known as Delek Holdco, Inc.), a Delaware corporation (also referred to as “New Delek” herein), Dione Mergeco, Inc., a Delaware corporation and wholly-owned subsidiary of Delek (“Delek Merger Sub”), and Astro Mergeco, Inc., a Delaware corporation and wholly-owned subsidiary of Delek (“Astro Merger Sub”), as amended by the First Amendment to Agreement and Plan of Merger, dated as of February 27, 2017, and the Second Amendment to Agreement and Plan of Merger, dated as of April 21, 2017 (collectively, the “Delek-ALJ Merger Agreement”). Pursuant to the Delek-ALJ Merger Agreement, Certificates of Amendment and Certificates of Merger filed with the Secretary of State of the materialsState of Delaware on June 30, 2017, (i) Old Delek was renamed “Delek US Energy, Inc.” and Delek was renamed “Delek US Holdings, Inc.”; (ii) Delek Merger Sub merged with and into Old Delek (the “Delek Merger”), with Old Delek surviving as a wholly-owned subsidiary of New Delek; and (iii) Astro Merger Sub merged with and into Alon Energy (the “Astro Merger” and. together with the Delek Merger, the “Delek-ALJ Merger”), with Alon Energy surviving as a direct and indirect wholly-owned subsidiary of Delek. The Delek-ALJ Merger was effective as of July 1, 2017 (the “Delek-ALJ Effective Time”). By reason of the Delek-ALJ Merger, at the Delek-ALJ Effective Time, New Delek became the parent public reporting company. On July 3, 2017, New Delek filed a Current Report on Form 8-K filed for the purpose of establishing Delek as the successor issuer to Old Delek and Alon Energy pursuant to Rule 12g-3(c) under the Exchange Act. In addition, as a result of the Delek-ALJ Merger, the shares of common stock of Old Delek and Alon Energy were delisted from the New York Stock Exchange in July 2017, and their respective reporting obligations under the Exchange Act were terminated.
Delek and ALDW incorporate by reference into this consent statement/prospectus all of the following documents (other than, in each case, documents or information deemed to have been furnished and not filed in accordance with SEC rules):
ALDW’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017;
ALDW’s Quarterly Reports on Form 10-Q for the quarter ended March 31, 2017, filed on May 9, 2017, for the quarter ended June 30, 2017, filed on August 2, 2017, and for the quarter ended September 30, 2017, filed on November 9, 2017;
ALDW’s Current Reports on Form 8-K filed on January 20, 2017, August 3, 2017, August 11, 2017, October 10, 2017and November 9, 2017 (two reports);
Old Delek’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 28, 2017;
Old Delek’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 9, 2017;
Delek’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed on August 7, 2017, and for the quarter ended September 30, 2017, filed on November 9, 2017;
Old Delek’s Current Reports on Form 8-K filed on January 3, 2017, January 31, 2017, February 14, 2017, February 28, 2017, March 27, 2017, May 9, 2017, May 11, 2017, May 31, 2017, June 6, 2017, June 19, 2017, June 22, 2017 and June 29, 2017;
Delek’s Current Reports on Form 8-K filed on July 3, 2017, July 13, 2017, October 30, 2017, November 9, 2017 (two reports), November 13, 2017, November 22, 2017, November 27, 2017, December 4, 2017 and December 7, 2017; and
Alon Energy's Annual Report on Form 10-K for the year ended December 31, 2016, filed on February 27, 2017.
All additional documents filed by Delek or ALDW with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the filing of this consent statement/prospectus and prior to the date on which the Merger is consummated are also deemed to be incorporated by reference. However, any documents or portions thereof or any exhibits thereto that Delek or Alon hasALDW furnishes to, but do not file with, the SEC shall not be incorporated or deemed to be incorporated by reference into this joint proxyconsent statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this joint proxy statement/prospectus speaks only as of the date of this joint proxy statement/prospectus unless the information specifically indicates that another date applies. Neither our mailing of this joint proxy statement/prospectus to Delek or Alon stockholders, nor the issuance by HoldCo of shares of New Delek common stock pursuant to the Mergers, will create any implication to the contrary.
AGREEMENT AND PLAN OF MERGER
AMONGdated as of
November 8, 2017
by and among
DELEK US HOLDINGS, INC.,
DELEK HOLDCO, INC.,
DIONESUGARLAND MERGECO, INC.,
ASTRO MERGECO, INC.,
ANDLLC,
ALON USA ENERGY, INC.PARTNERS, LP,
and
DATED AS OF
JANUARY 2, 2017ALON USA PARTNERS GP, LLC
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| | | | |
| ARTICLE I DEFINITIONS | |
| Section 1.1 | Definitions | 2 |
|
| Section 1.2 | Rules of Construction | 8 |
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| ARTICLE II MERGER | |
| Section 2.1 | Closing of the Merger | 9 |
|
| Section 2.2 | Exchange of MLP Public Units | 10 |
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| Section 2.3 | Treatment of MLP Restricted Unit Awards | 12 |
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| ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE MLP PARTIES | |
| Section 3.1 | Organization and Existence | 12 |
|
| Section 3.2 | Authority and Approval | 12 |
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| Section 3.3 | No Conflict; Consents | 13 |
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| Section 3.4 | Capitalization; Limited Partner Interests | 13 |
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| Section 3.5 | SEC Documents; Internal Controls | 14 |
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| Section 3.6 | Financial Statements; Undisclosed Liabilities | 14 |
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| Section 3.7 | Real Property; Rights-of-Way | 15 |
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| Section 3.8 | Litigation; Laws and Regulations | 15 |
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| Section 3.9 | No Adverse Changes | 15 |
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| Section 3.10 | Taxes | 15 |
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| Section 3.11 | Environmental Matters | 16 |
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| Section 3.12 | Licenses; Permits | 16 |
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| Section 3.13 | Contracts | 16 |
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| Section 3.14 | Employees and Employee Benefits | 16 |
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| Section 3.15 | Insurance | 17 |
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| Section 3.16 | Condition of Assets | 17 |
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| Section 3.17 | Investment Company Act | 17 |
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| Section 3.18 | Brokerage Arrangements | 17 |
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| Section 3.19 | State Takeover Laws | 17 |
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| Section 3.20 | Opinion of Financial Advisor | 17 |
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| Section 3.21 | Information Supplied | 17 |
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| Section 3.22 | Waivers and Disclaimers | 17 |
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| Section 3.23 | Non-Reliance | 18 |
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| ARTICLE IV REPRESENTATION AND WARRANTIES OF THE PARENT PARTIES | |
| Section 4.1 | Organization and Existence | 18 |
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| Section 4.2 | Authority and Approval | 18 |
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| Section 4.3 | No Conflict; Consents | 19 |
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| Section 4.4 | Capitalization | 19 |
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| Section 4.5 | SEC Documents; Internal Controls | 20 |
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| Section 4.6 | Financial Statements; Undisclosed Liabilities | 20 |
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| Section 4.7 | Real Property; Rights-of-Way | 21 |
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| Section 4.8 | Litigation; Laws and Regulations | 21 |
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| Section 4.9 | No Adverse Changes | 21 |
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| Section 4.10 | Taxes | 21 |
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| Section 4.11 | Environmental Matters | 22 |
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| Section 4.12 | Licenses; Permits | 22 |
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| Section 4.13 | Contracts | 22 |
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| Section 4.14 | Employees and Employee Benefits | 22 |
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| Article I | | CERTAIN DEFINITIONS | | 2 |
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| 1.1 | | Certain Definitions | | 2 |
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| Article II | | THE MERGERS; EFFECTS OF THE MERGERS | | 16 |
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| 2.1 | | The Mergers | | 16 |
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| 2.2 | | Certificate of Incorporation and Bylaws | | 16 |
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| 2.3 | | Directors and Officers | | 17 |
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| 2.4 | | Closing | | 18 |
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| Article III | | MERGER CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES | | 18 |
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| 3.1 | | Merger Consideration | | 18 |
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| 3.2 | | Rights as Stockholders; Share Transfers | | 20 |
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| 3.3 | | Closing of Stock Transfer Books | | 20 |
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| 3.4 | | Exchange of Certificates | | 20 |
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| 3.5 | | Anti-Dilution Provisions | | 23 |
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| Article IV | | COMPANY REPRESENTATIONS AND WARRANTIES | | 24 |
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| 4.1 | | Organization, General Authority and Standing | | 24 |
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| 4.2 | | Capitalization | | 24 |
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| 4.3 | | Power and Authority | | 27 |
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| 4.4 | | No Violations or Defaults | | 28 |
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| 4.5 | | Consents and Approvals | | 28 |
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| 4.6 | | Financial Reports and SEC Documents; Internal Controls | | 29 |
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| 4.7 | | Absence of Undisclosed Liabilities | | 30 |
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| 4.8 | | Absence of Certain Changes | | 30 |
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| 4.9 | | Compliance with Law; Legal Proceedings | | 31 |
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| 4.10 | | Permits | | 31 |
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| 4.11 | | Material Contracts | | 31 |
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| 4.12 | | Tax Matters | | 33 |
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| 4.13 | | Employee Benefits | | 35 |
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| 4.14 | | Labor Matters | | 38 |
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| 4.15 | | Envrionmental Matters | | 39 |
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| 4.16 | | Real Property | | 40 |
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| 4.17 | | Intellectual Property | | 41 |
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| 4.18 | | Anti-Corruption | | 42 |
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| 4.19 | | Insurance | | 44 |
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| 4.20 | | No Brokers | | 45 |
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| 4.21 | | Customers and Suppliers | | 45 |
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| 4.22 | | Company Information | | 45 |
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| 4.23 | | Affiliate Transactions | | 45 |
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| 4.24 | | Company Fairness Opinion | | 46 |
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| 4.25 | | State Takeover Laws | | 46 |
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| 4.26 | | Data Breaches | | 46 |
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| Article V | | BUYER PARTIES REPRESENTATIONS AND WARRANTIES | | 46 |
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| 5.1 | | Organization, General Authority and Standing | | 46 |
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| 5.2 | | Capitalization | | 47 |
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| 5.3 | | Power and Authority | | 48 |
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| 5.4 | | No Violations or Defaults | | 49 |
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| 5.5 | | Consents and Approvals | | 49 |
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| 5.6 | | Financial Reports and SEC Documents; Internal Controls | | 50 |
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| 5.7 | | Absence of Undisclosed Liabilities | | 51 |
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| 5.8 | | Absence of Certain Changes | | 51 |
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| 5.9 | | Compliance with Law; Legal Proceedings | | 52 |
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| 5.10 | | Permits | | 52 |
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| 5.11 | | Tax Matters | | 52 |
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| 5.12 | | Environmental Matters | | 53 |
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| 5.13 | | Intellectual Property | | 54 |
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| 5.14 | | Anticorruption | | 55 |
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| 5.15 | | Insurance | | 57 |
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| 5.16 | | No Brokers | | 57 |
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| 5.17 | | Parent Information | | 57 |
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| 5.18 | | Affiliate Transactions | | 58 |
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| 5.19 | | Ownership of Company Capital Stock | | 58 |
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| 5.20 | | State Takeover Laws | | 58 |
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| Article VI | | CONDUCT OF BUSINESS PENDING THE MERGER | | 58 |
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| 6.1 | | Conduct of Business of the Company and its Subsidiaries | | 58 |
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| 6.2 | | Conduct of Business of Parent and its Subsidiaries | | 62 |
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| Article VII | | COVENANTS | | 64 |
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| 7.1 | | Reasonable Best Efforts; Third Party Approvals | | 64 |
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| 7.2 | | Stockholder Approvals | | 66 |
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| 7.3 | | Registration Statement on Form S-4 and the Joint Proxy Statement/Prospectus | | 70 |
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| 7.4 | | Press Releases; Schedule 13D Amendment | | 72 |
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| 7.5 | | Access; Information | | 72 |
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| 7.6 | | Acquisition Proposals; No Solicitation | | 73 |
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| 7.7 | | Takeover Laws | | 74 |
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| 7.8 | | New Common Stock Reserve and Listing | | 74 |
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| 7.9 | | Indemnification; Directors’ and Officers’ Insurance | | 74 |
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| 7.10 | | Notification of Certain Matters | | 77 |
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| 7.11 | | Rule 16b-3 | | 77 |
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| 7.12 | | Dividend Record Dates | | 77 |
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| 7.13 | | Conversion of Equity Awards | | 77 |
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| 7.14 | | Employee Matters | | 79 |
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| 7.15 | | Cooperation with Financing | | 80 |
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| 7.16 | | Treatment of Company Convertible Notes | | 80 |
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| 7.17 | | Securityholder Litigation | | 81 |
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| 7.18 | | Tax Matters | | 81 |
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| 7.19 | | NYSE Delisting and Termination of Exchange Act Registration | | 82 |
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| 7.20 | | Control of Operations | | 82 |
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| 7.21 | | Director Appointment | | 82 |
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| Article VIII | | CONDITIONS TO CONSUMMATION OF THE MERGERS | | 83 |
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| 8.1 | | Conditions to Each Party’s Obligation to Effect the Mergers | | 83 |
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| 8.2 | | Conditions to Obligations of Buyer Parties | | 83 |
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| 8.3 | | Conditions to Obligations of the Company | | 85 |
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| Article IX | | TERMINATION | | 86 |
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| 9.1 | | Termination | | 86 |
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| 9.2 | | Fees and Expenses | | 88 |
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| 9.3 | | Effect of Termination | | 89 |
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| Article X | | MISCELLANEOUS | | 90 |
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| 10.1 | | Notices | | 90 |
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| 10.2 | | Waiver; Amendment | | 91 |
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| 10.3 | | Counterparts | | 92 |
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| 10.4 | | Governing Law | | 92 |
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| 10.5 | | Confidentiality | | 92 |
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| 10.6 | | Entire Understanding; No Third-Party Beneficiaries | | 92 |
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| 10.7 | | Severability | | 92 |
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| 10.8 | | Jurisdiction | | 92 |
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| 10.9 | | Waiver of Jury Trial | | 93 |
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| 10.10 | | Specific Performance | | 93 |
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| 10.11 | | No Recourse | | 93 |
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| 10.12 | | Interpretation | | 93 |
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| 10.13 | | Survival | | 94 |
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| Section 4.15 | Labor Matters | 23 |
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| Section 4.16 | Insurance | 23 |
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| Section 4.17 | Condition of Assets | 23 |
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| Section 4.18 | Investment Company Act | 23 |
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| Section 4.19 | Brokerage Arrangements | 23 |
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| Section 4.20 | State Takeover Laws | 23 |
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| Section 4.21 | Information Supplied | 24 |
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| Section 4.22 | Parent Knowledge | 24 |
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| Section 4.23 | Waivers and Disclaimers | 24 |
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| Section 4.24 | Non-Reliance | 24 |
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| ARTICLE V ADDITIONAL AGREEMENTS, COVENANTS, RIGHTS AND OBLIGATIONS | |
| Section 5.1 | Conduct of Parties | 24 |
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| Section 5.2 | Access to Information; Confidentiality | 25 |
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| Section 5.3 | Certain Filings | 26 |
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| Section 5.4 | Commercially Reasonable Efforts; Further Assurances | 26 |
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| Section 5.5 | No Public Announcement | 27 |
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| Section 5.6 | Expenses | 27 |
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| Section 5.7 | Regulatory Issues | 27 |
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| Section 5.8 | Tax Matters | 27 |
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| Section 5.9 | D&O Insurance | 27 |
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| Section 5.10 | Dividends and Distributions | 28 |
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| Section 5.11 | Consent to Use of Financial Statements; Financing Cooperation | 28 |
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| Section 5.12 | Section 16 Matters | 28 |
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| Section 5.13 | Conflicts Committee | 28 |
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| ARTICLE VI CONDITIONS TO CLOSING | |
| Section 6.1 | Conditions to Each Party's Obligations | 29 |
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| Section 6.2 | Conditions to the Parent Parties' Obligations | 29 |
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| Section 6.3 | Conditions to the MLP Parties' Obligations | 29 |
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| Section 6.4 | Frustration of Conditions | 30 |
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| Section 6.5 | Performance by MLP General Partner | 30 |
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| Section 6.6 | Effect of Breach of Section 4.22 | 30 |
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| ARTICLE VII TERMINATION | |
| Section 7.1 | Termination by Mutual Consent | 30 |
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| Section 7.2 | Termination by MLP or Parent | 30 |
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| Section 7.3 | Termination by MLP | 30 |
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| Section 7.4 | Termination by Parent | 31 |
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| Section 7.5 | Effect of Certain Terminations | 31 |
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| Section 7.6 | Survival | 31 |
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| Section 7.7 | Enforcement of this Agreement | 31 |
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| ARTICLE VIII MISCELLANEOUS | |
| Section 8.1 | Notices | 31 |
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| Section 8.2 | Governing Law; Jurisdiction; Waiver of Jury Trial | 32 |
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| Section 8.3 | Entire Agreement; Amendments, Consents and Waivers | 32 |
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| Section 8.4 | Binding Effect; No Third-Party Beneficiaries; and Assignment | 33 |
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| Section 8.5 | Severability | 33 |
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| Section 8.6 | Counterparts | 33 |
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AGREEMENT AND PLAN OF MERGER
ThisTHIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of January 2,November 8, 2017 (this(the “AgreementExecution Date”), is entered into by and among Delek US Holdings, Inc., a Delaware corporation (“Parent”), Delek Holdco, Inc.,Sugarland Mergeco, LLC, a Delaware corporationlimited liability company and aan indirect wholly owned subsidiary of Parent (“HoldCo”), Dione Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“ParentMerger Sub”) and Astro Mergeco, Inc., Alon USA Partners, LP, a Delaware corporation and wholly owned subsidiary of HoldColimited partnership (“Astro Merger Sub” and, together with HoldCo and Parent Merger Sub, the “HoldCo PartiesMLP”), and Alon USA Energy,Partners GP, LLC, a Delaware limited liability company and the general partner of MLP (“MLP General Partner”).
WITNESSETH:
WHEREAS, Parent and MLP desire to combine their businesses on the terms and conditions set forth in this Agreement;
WHEREAS, MLP has required, as a condition to its willingness to enter into this Agreement, that Alon Assets, Inc., a Delaware corporation (the “(“Company”). Each of the HoldCo Parties and Parent may be referred to herein individually as a “Buyer Party” and collectively as the “Buyer Parties.” Each of HoldCo, Parent, the Company, Parent Merger Sub and Astro Merger Sub may be referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the board of directors of the Company (the “Company Board”) previously formed a special committee (the “Independent Director Committee”) consisting only of directors that are independent and disinterested from Parent;
WHEREAS, the board of directors of Parent (the “Parent BoardAAI”), has unanimously approvedsimultaneously herewith enters into a Support Agreement, dated as of the Execution Date (the “Support Agreement”), pursuant to which, among other things, AAI agrees to support the Merger (as defined below) and declared advisable, fairthe other transactions contemplated hereby, on the terms and subject to the conditions provided for in the Support Agreement;
WHEREAS, the MLP Conflicts Committee (as defined below), by unanimous vote, (a) determined that this Agreement and the transactions contemplated hereby are in the best interest of ParentMLP and Parent’s stockholders,the Holders (as defined below) of MLP Public Units (as defined below), (b) approved this Agreement and the transactions contemplated hereby, including the Merger Transactions(the foregoing constituting MLP Special Approval (as defined below)), includingand (c) resolved to recommend to the MergersMLP Board (as defined below) the approval of this Agreement and the consummation of the transactions contemplated hereby, including the Merger;
WHEREAS, upon the receipt of the recommendation of the MLP Conflicts Committee, at a meeting duly called and held, the MLP Board (a) determined that this Agreement and the transactions contemplated hereby are in the best interest of MLP and the Holders of MLP Public Units, (b) approved this Agreement and the transactions contemplated hereby, including the Merger and (c) directed that this Agreement be submitted to which Parent is a constituent corporation and has approvedvote of the Voting AgreementsHolders of MLP Common Units (as defined below) (to which Parent is a party)and authorized the Holders of MLP Common Units to act by written consent pursuant to Section 13.11 of the MLP Partnership Agreement (as defined below);
WHEREAS,, the Independent Director CommitteeParent Board (as defined below) has (a) determined and declared that this Agreement and the transactions contemplated hereby, including the Mergers (the “Merger, Transactions”), are advisable, fair to, and in the best interestinterests of the CompanyParent and the Disinterested Stockholders (as defined below)its stockholders and has(b) approved this Agreement, the consummation of the Merger Transactions, and the Voting Agreements (to which the Company is a party);
WHEREAS, the Company Board, upon the recommendation of the Independent Director Committee, has: (i) determined and declared thatadvisable this Agreement and the Merger Transactions are advisable, fair to, andissuance of shares of common stock of Parent, par value $0.01 per share (“Parent Common Stock”), in the best interest of the Company and the Disinterested Stockholders, (ii) approved this Agreement, the consummation ofconnection with the Merger Transactions,(the “Parent Stock Issuance”); and the Voting Agreements (to which the Company is a party), and (iii) directed that this Agreement and the Merger Transactions be submitted to the Company Stockholders for approval and recommended that the Company Stockholders approve the Agreement and Merger Transactions;
WHEREAS, Delek US Energy, Inc., a Delaware corporation (“DEI”), in its capacity as the boardsole member of directors of each of the HoldCo PartiesMerger Sub, has approved and declared advisable this Agreement and the Merger Transactions,transactions contemplated hereby, including the Mergers as to which each HoldCo Party is a constituent corporation;Merger.
WHEREAS, the Astro Merger requires the affirmative vote (the “Disinterested Stockholder Approval”) of the holders of a majority of the issued and outstanding shares of Company Common Stock beneficially owned by the Company Stockholders other than the Buyer Parties and their respective Affiliates (the “Disinterested Stockholders”);
WHEREAS, the Supporting Persons have simultaneously herewith entered into individual voting and support agreements (collectively, the “Voting Agreements”) with Parent (in the case of the Voting
Agreements signed by individuals) and the Company to agree to vote shares of the Company beneficially owned by such Person in favor of the adoption of this Agreement; and
WHEREAS, the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for U.S. federal income Tax purposes (and, where applicable, state and local income Tax purposes), the Parties intend that (i) the Parent Merger (as defined below) qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) the Mergers (as defined below), taken together, qualify as an exchange within the meaning of Section 351 of the Code, and (iii) this Agreement be, and is hereby adopted as, a “plan of reorganization” within the meaning of Sections 354, 361 and 368 of the Code and the Treasury Regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the Partiesparties hereto agree as follows:
ARTICLE I
CERTAIN
DEFINITIONS
Section 1.1CertainDefinitionsDefinitions. . As used inIn this Agreement, unless the context otherwise requires, the following terms shall have the meaningsfollowing meanings:
“AAI” has the meaning set forth below.in the Recitals.
“Affiliate” shall mean,has the meaning set forth in Rule 405 of the rules and regulations under the Securities Act, unless otherwise expressly stated herein; provided, however, that prior to the Closing (i) with respect to any Person, any other Person that directly or indirectly Controls, is Controlled by or is under common Control with, such Person; provided, that (a)the Parent and its Affiliates (other thanGroup Entities, the Company and its Subsidiaries)term “Affiliate” shall not be deemed to be Affiliatesexclude each of the CompanyMLP Group Entities, and its Subsidiaries and (b)(ii) with respect to the Company and its SubsidiariesMLP Group Entities, the term “Affiliate” shall not be deemed to be Affiliatesexclude each of the Parent and its Affiliates (other than the Company and its Subsidiaries) for any purpose hereunder.Group Entities.
“Agreement” shall havehas the meaning set forth in the introductory paragraph to this Agreement.Preamble.
“AstroCertificate of MergerBook-Entry MLP Common Units” shall havehas the meaning set forth in Section 2.1(b)2.1(c)(ii).
“Astro Effective TimeBusiness Day” shall havemeans any day other than a Saturday, a Sunday or a day on which the Federal Reserve Bank sitting in New York, New York is closed.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act.
“Certificate of Merger” has the meaning set forth in Section 2.1(b)(ii).
“Astro MergerClosing” shall havehas the meaning set forth in Section 2.1(b)(i)2.1(a).
“Astro Merger ConsiderationClosing Date” shall havehas the meaning set forth in Section 3.1(b)(i)2.1(a).
“AstroMerger SubCode” shall havemeans the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” has the meaning set forth in Section 5.2.
“Consent Statement/Prospectus” has the meaning set forth in Section 5.3(a).
“D&O Insurance” has the meaning set forth in Section 5.9(b).
“DEI” has the meaning set forth in the introductory paragraph to this Agreement.Recitals.
“Astro PartnersDelaware Courts” shall mean Alon USAhas the meaning set forth in Section 8.2.
“DKL Entities” means Delek Logistics GP, LLC, a Delaware limited liability company, and the entities that are partially or wholly owned, directly or indirectly by Delek Logistics GP, LLC, including Delek Logistics Partners, LP, a Delaware limited partnership, and the entities that are partially or wholly owned, directly or indirectly by Delek Logistics Partners, LP.
“Astro Partners LTIPDLLCA” means the Delaware Limited Liability Company Act, as amended.
“DRULPA” means the Delaware Revised Uniform Limited Partnership Act, as amended.
“DTC Participant” means a participating firm that deposits and holds securities through The Depository Trust Company.
“Effective Time” has the meaning set forth in Section 2.1(b).
“Employee Benefit Plan” means any “employee benefit plan” (within the meaning of Section 3(3) of ERISA), and any equity-based purchase, option, change-in-control, collective bargaining, incentive, employee loan, deferred compensation, pension, profit-sharing, retirement, bonus, retention bonus, employment, severance and other employee benefit or fringe benefit plan, agreement, program, policy or other arrangement, whether or not subject to ERISA (including any funding mechanism now in effect or required in the future), whether formal or informal, oral or written, legally binding or not, maintained by, sponsored by or contributed to by, or obligated to be contributed to by, the entity in question or with respect to which the entity in question has any obligation or liability, whether secondary, contingent or otherwise.
“Environmental Laws” means, without limitation, the following laws, in effect as of the Closing Date, as amended: (i) the Resource Conservation and Recovery Act; (ii) the Clean Air Act; (iii) CERCLA; (iv) the Federal Water Pollution Control Act; (v) the Safe Drinking Water Act; (vi) the Toxic Substances Control Act; (vii) the Emergency Planning and Community Right-to Know Act; (viii) the National Environmental Policy Act; (ix) the Pollution Prevention Act of 1990; (x) the Oil Pollution Act of 1990; (xi) the Hazardous Materials Transportation Act; (xii) the Occupational Safety and Health Act; and (xiii) all laws, statutes, rules, regulations, orders, judgments, decrees promulgated or issued with respect to the foregoing Environmental Laws by Governmental Entities with jurisdiction in the premises and any other federal, state or local statutes, laws, ordinances, rules, regulations, orders, codes, decisions, injunctions or decrees that regulate or otherwise pertain to the protection of human health, safety or the environment, including but not limited to the management, control, discharge, emission, treatment, containment, handling, removal, use, generation, permitting, migration, storage, release, transportation, disposal, remediation, manufacture, processing or distribution of Hazardous Materials that are or may present a threat to human health or the environment.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means, with respect to any Person, any trade or business, whether or not incorporated, that together with such Person is a single employer for purpose of Section 414(b), (c), (m) or (o) of the Code.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Agent” has the meaning set forth in Section 2.2(a).
“Exchange Fund” has the meaning set forth in Section 2.2(a).
“Execution Date” has the meaning set forth in the Preamble.
“GAAP” means United States generally accepted accounting principles applied on a consistent basis during the periods involved.
“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation or formation, bylaws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement, operating agreement, unanimous equityholder agreement or declaration or other similar governing documents of such Person.
“Governmental Entity” means any federal, state, tribal, provincial, municipal, foreign or other government, governmental court, department, commission, board, bureau, regulatory or administrative agency or instrumentality.
“Hazardous Material” means any substance, whether solid, liquid, or gaseous: (i) which is listed, defined, or regulated as a “hazardous material,” “hazardous waste,” “solid waste,” “hazardous substance,” “toxic substance,” “pollutant,” or “contaminant,” or words of similar meaning or import found in any applicable Environmental Law; or (ii) which is or contains asbestos, polychlorinated biphenyls, radon, urea formaldehyde foam insulation, explosives, or radioactive materials; or (iii) any petroleum, petroleum hydrocarbons, petroleum substances, petroleum or petrochemical products, natural gas, crude oil and any components, fractions, or derivatives thereof, any oil or gas exploration or production waste, and any natural gas, synthetic gas and any mixtures thereof; or (iv) radioactive material, waste and pollutants, radiation, radionuclides and their progeny, or nuclear waste including used nuclear fuel; or (v) which causes or poses a threat to cause contamination or nuisance on any properties, or any adjacent property or a hazard to the environment or to the health or safety of persons on or about any properties.
“Holders” means, when used with reference to shares of the Parent Common Stock or the MLP Common Units, the holders of such shares or units shown from time to time in the registers maintained by or on behalf of Parent or MLP, respectively, and, solely for purposes of Section 2.1(e), shall meaninclude DTC Participants.
“Knowledge” as used in this Agreement with respect to a party hereto, means the actual knowledge of that party’s designated personnel, after reasonable inquiry. The designated personnel for the Parent Parties are set forth on Schedule A-1 hereto. The designated personnel for the MLP Parties are set forth on Schedule A-2 hereto.
“Laws” means all statutes, regulations, codes, tariffs, ordinances, decisions, administrative interpretations, writs, injunctions, stipulations, statutory rules, orders, judgments, decrees and terms and conditions of any grant of approval, permission, authority, permit or license of any court, Governmental Entity, statutory body or self-regulatory authority (including the NYSE).
“Letter of Transmittal” has the meaning set forth in Section 2.2(b).
“Liens” means any mortgage, restriction (including restrictions on transfer), deed of trust, lien, security interest, preemptive right, option, right of first offer or refusal, lease or sublease, claim, pledge, conditional sales contract, charge, encroachment or encumbrance.
“Merger” means the merger of Merger Sub with and into MLP, with MLP as the sole surviving entity.
“Merger Consideration” has the meaning set forth in Section 2.1(c)(i).
“Merger Sub” has the meaning set forth in the Preamble.
“MLP” has the meaning set forth in the Preamble.
“MLP Board” means the Board of Directors of MLP General Partner.
“MLP Certificate” has the meaning set forth in Section 2.1(c)(ii).
“MLP Common Units” means the “Common Units,” as defined in the MLP Partnership Agreement.
“MLP Conflicts Committee” means the Conflicts Committee (as defined in the MLP Partnership Agreement) of the MLP Board.
“MLP D&O Indemnified Parties” means any Person (together with such Person’s heirs, executors and administrators) who is or was, or at any time prior to the Effective Time becomes, an “Indemnitee,” as defined in the MLP Partnership Agreement; provided that a Person shall not be an MLP D&O Indemnified Party by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services.
“MLP Disclosure Letter” means the disclosure letter prepared by MLP and delivered to Parent concurrently herewith.
“MLP Financial Statements” has the meaning set forth in Section 3.6(a).
“MLP General Partner” has the meaning set forth in the Preamble.
“MLP General Partner Interest” means the “General Partner Interest,” as defined in the MLP Partnership Agreement.
“MLP GP LLC Agreement” means the Limited Liability Company Agreement of MLP General Partner, dated as of August 17, 2012.
“MLP Group Entities” means the MLP Parties and the MLP Subsidiaries.
“MLP Long-Term Incentive Plan” means the Alon USA Partners, LP 2012 Long-Term Incentive Plan, adopted as of November 26, 2012.
“AstroMLP Material Adverse Effect” means any change, effect, event or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on or a material adverse change in (i) the business, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the MLP Group Entities, taken as a whole; provided, however, that any adverse changes, effects, events or occurrences resulting from or due to any of the following shall be disregarded in determining whether there has been an MLP Material Adverse Effect: (a) changes, effects, states of fact, developments, events or occurrences affecting the industries in which MLP or any MLP Subsidiary operates (including any political or regulatory changes or changes in applicable Law); (b) changes, effects, states of fact, developments, events or occurrences affecting the United States or global economic conditions or financial, credit, debit, securities or other capital markets in general; (c) any outbreak of, acts of or escalation of hostilities, terrorism, war or other similar national emergency or any natural disasters (including hurricanes, earthquakes, tornadoes, floods or tsunamis) or force majeure events; (d) the announcement or pendency of this Agreement or the transactions contemplated hereby; (e) changes or anticipated changes in any Laws or accounting regulations or principles applicable to MLP or any of the MLP Subsidiaries or the interpretation of any of the foregoing; (f) any legal proceedings commenced or threatened by or involving the MLP or any of the MLP Subsidiaries or any current or former equityholder thereof arising out of or related to this Agreement or the transactions contemplated by this Agreement; (g) any actions required to be taken by MLP or any MLP Subsidiary under any Law or contract existing as of the Execution Date; (h) changes, effects, states of fact, developments, events or occurrences affecting the prices of oil, gas, natural gas, natural gas liquids or other commodities (including occurrences affecting the spread in prices between unrefined and refined commodities); (i) the MLP Parties taking any action required or contemplated by this Agreement; (j) any change in the market price or trading volume of the limited partnership interests or other equity securities of MLP (it being understood and agreed that the foregoing shall not preclude any other party to this Agreement from asserting that any facts or occurrences giving rise to or contributing to such change set forth in this clause (j) that are not otherwise excluded from the definition of MLP Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, an MLP Material Adverse Effect); or (k) any failure of the MLP Group Entities to meet any internal or external projections, forecasts or estimates of revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the foregoing shall not preclude any other party to this Agreement from asserting that any facts or occurrences giving rise to or contributing to such failure set forth in this clause (k) that are not otherwise excluded from the definition of MLP Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been an MLP Material Adverse Effect); provided that, in the case of clauses (a), (b), (c), (e) and (h) the adverse impact on the MLP Group Entities, taken as a whole, is not materially disproportionate to the adverse impact on similarly situated parties, or (ii) the ability of either of the MLP Parties to perform their obligations under this Agreement or to consummate the transactions contemplated by this Agreement.
“MLP Material Contract” shall have the meaning ascribed to such term in Section 3.13.
“MLP Parties” means MLP and MLP General Partner.
“MLP Partnership Agreement” shall meanmeans the First Amended and Restated Agreement of Limited Partnership of Alon USA Partners, LP,MLP, dated November 26, 2012.2012, as heretofore amended, and as further amended from time to time after the Execution Date in accordance with this Agreement.
“AstroSurviving EntityMLP Partnership Interest” shall havemeans “Partnership Interest,” as defined in the MLP Partnership Agreement.
“MLP Public Units” means the MLP Common Units other than the MLP Common Units held directly or indirectly by the Parent Group Entities or by MLP.
“MLP Restricted Unit Award” has the meaning set forth in Section 2.1(b)(i)3.4(a).
“Anti-Corruption LawsMLP SEC Reports” shall havehas the meaning set forth in Section 4.18(a)3.5(a).
“Antitrust LawsMLP Special Approval” shall meanmeans “Special Approval,” as defined in the Sherman Antitrust Act, as amended, the Clayton Antitrust Act of 1914, as amended, the HSR Act, the Federal Trade Commission Act, as amended and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition.MLP Partnership Agreement.
“Book-Entry SharesMLP Subsidiaries” shall havemeans the entities that are partially or wholly owned, directly or indirectly, by MLP.
“MLP Vote” has the meaning set forth in Section 3.2.
“Business DayMultiemployer Plan” shall mean any day other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or required by applicable Law to be closed.
“Buyer Party” and “Buyer Parties” shall have the meaning set forth in the introductory paragraph to this Agreement.
“Certificate” shall havehas the meaning set forth in Section 3.24.14(b).
“Certificates of MergerNotice” shall mean the Astro Certificate of Merger and the Parent Certificate of Merger.
“Claim” shall havehas the meaning set forth in Section 7.9(a)8.1.
“ClosingNYSE” shall havemeans the New York Stock Exchange.
“Orders” has the meaning set forth in Section 2.43.8(a).
“Closing DateParent” shall havehas the meaning set forth in the Preamble.
“Parent Aggregated Group” has the meaning set forth in Section 2.44.14(b).
“CodeParent Associated Employees” shall mean the Internal Revenue Code of 1986, as amended.
“Company” shall have the meaning set forth in the introductory paragraph to this Agreement.
“CompanyAcquisition Proposal” shall mean any inquiry, proposal or offer from or by any Person or “group” (as such term is used in Section 13(d) of the Exchange Act) other than the Buyer Parties or their respective Subsidiaries, whether or not in writing, relating to: (a) any direct or indirect purchase, acquisition, transfer, sale or disposition (whether by way of merger, share exchange, consolidation, business combination or similar transaction and whether in a single transaction or a series of related transactions) of (i) more than an amount equal to 15% in value of the assets of the Company and its Subsidiaries, taken as a whole, (ii) more than 15% of the outstanding equity securities of the Company or (iii) assets that generate more than 15% of the cash flow, net revenues or net income of the Company and its Subsidiaries, taken as a whole; or (b) any tender offer or exchange offer that, if consummated, would result in any such Person or “group” beneficially owning (within the meaning of Rule 13d-3 under the Exchange Act) more than 15% of the outstanding equity securities of the Company.
“Company Assets” shall havehas the meaning set forth in Section 7.1(d)4.15(a).
“Company Balance Sheet DateParent Benefit Plan” shall havemeans any Employee Benefit Plan maintained by, sponsored by or contributed to by, or obligated to be contributed to by any Parent Group Entity.
“Parent Board” means the Board of Directors of Parent.
“Parent Common Stock” has the meaning set forth in the Recitals.
“Parent Disclosure Letter” means the disclosure letter prepared by Parent and delivered to MLP concurrently herewith.
“Parent Financial Statements” has the meaning set forth in Section 4.74.6(a).
“Company Benefit PlanParent Group Entities” shall havemeans the meaning set forth in Section 4.13(a).
“Company Board” shall have the meaning set forth in the recitals to this Agreement.
“Company Board Approval” shall have the meaning set forth in Section 4.3(b).
“Company Bylaws” shall mean the bylaws of the Company as of the date of this Agreement.
“Company Certificate” shall mean the certificate of incorporation of the Company as of the date of this Agreement.
“Company Change in Recommendation” shall have the meaning set forth in Section 7.2(a)(i).
“Company Common Stock” shall have the meaning set forth in Section 3.1(b)(i).
“Company Convertible Notes” shall mean the Company’s 3.00% Convertible Senior Notes in the aggregate outstanding principal amount of $150 million due 2018 which were issued pursuant to the Company Convertible Notes Indenture.
“Company Convertible Notes Indenture” shall mean that certain Indenture, dated as of September 16, 2013, by and between the Company and U.S. Bank National Association, as trustee.
“CompanyConvertible Securities” shall mean (i) the Company Convertible Notes, (ii) that certain Base Warrant Confirmation dated as of September 10, 2013, by and between the Company and Barclays Capital Inc., acting as agent for Barclays Bank PLC, (iii) that certain Base Warrant Confirmation dated as of September 10, 2013, by and between the Company and Goldman, Sachs & Co., (iv) that certain Additional Warrant Confirmation dated as of September 11, 2013, by and between the Company and Barclays Capital Inc., acting as agent for Barclays Bank PLC and (v) that certain Additional Warrant Confirmation dated as of September 11, 2013, by and between the Company and Goldman, Sachs & Co.
“Company Disclosure Letter” shall mean the disclosure letter dated the date of this Agreement and delivered by the Company to the BuyerParent Parties with respect to this Agreement on the date hereof.
“Company Environmental Permit” shall have the meaning set forth in Section 4.15(b).
“Company Equity Plans” shall mean the Alon USA Energy, Inc. Second Amended and Restated 2005 Incentive Compensation Plan and the Alon USA Energy, Inc. 2016 Fair Market Value Stock Purchase Plan.
“Company ERISA Affiliate” shall have the meaning set forth in Section 4.13(a).
“Company Intellectual Property” shall mean any and all Intellectual Property Rights that are owned by the Company or any of itsParent Subsidiaries.
“CompanyParent Material ContractAdverse Effect” shall have the meaning set forth in Section 4.11(a).
“Company Owned Real Property” shall have the meaning set forth in Section 4.16(a).
“Company Permits” shall have the meaning set forth in Section 4.10.
“Company Pension Plan” shall mean the Alon USA Pension Plan, as amended and restated, effective August 31, 2011.
“Company Preferred Stock” shall have the meaning set forth in Section 4.2(a).
“Company Products” shall mean all products and services developed, manufactured, made commercially available, marketed, distributed, supported, sold, imported for resalemeans any change, effect, event or licensed out byoccurrence that, individually or on behalf of the Company or any of its Subsidiaries.
“CompanyQualifying Acquisition Transaction” shall have the meaning set forth in Section 9.2(b)(iv).
“Company Real Property Lease” shall have the meaning set forth in Section 4.16(b).
“Company Recommendation” shall have the meaning set forth in Section 4.3(b).
“Company Registered Intellectual Property” shall mean all Intellectual Property Rights that have been registered with or by any Governmental Authority or quasi-public legal authority (including domain name registrars), or any applications for any of the foregoing, that is part of the Company Intellectual Property.
“Company Revolving Credit Agreement” shall mean that certain Second Amended Revolving Credit Agreement dated May 23, 2013 (originally dated June 22, 2006) by and among Alon USA, LP, the Guarantor Companies party thereto, the financial institutions party thereto, Israel Discount Bank of New York, and Bank Leumi USA, as amended by the First Amendment and Consent to Second Amended Revolving Credit Agreement dated November 11, 2014 and the Second Amendment to Second Amended Revolving Credit Agreement and Partial Release dated May 6, 2015.
“Company SEC Documents” shall have the meaning set forth in Article IV.
“Company Stockholders” shall mean the holders of outstanding shares of Company Common Stock and Company Preferred Stock.
“Company Stockholders Meeting” shall have the meaning set forth in Section 4.3(b).
“CompanySuperior Proposal” shall mean a written Company Acquisition Proposal (except that reference to 15% within the definition of “Company Acquisition Proposal” shall be replaced by 75%) made by a third party to the Company or the Company Board and not solicited in violation of Section 7.6(b), for consideration, which the Company Board (acting through the Independent Director Committee) believes in good faith to be a bona fide proposal and on such other terms and conditions which the Company Board (acting through the Independent Director Committee) determines in good faith (after consultation with its financial and legal advisors) and taking into account at the time of determination any proposal by Parent to amend the terms of this Agreement and all other relevant factors (including all legal, financial and regulatory aspects of the proposal and the Person making the proposal and whether approval of the equity owners of such Person is required), is reasonably capable of being consummated in accordance with its terms and which, if consummated, would be more favorable to the Disinterested Stockholders (solely in their capacity as such) from a financial point of view than the Merger Transactions.
“Company Terminable Breach” shall have the meaning set forth in Section 9.1(c)(i).
“Company Termination Fee” shall mean a cash amount equal to $15,000,000.
“Confidentiality Agreement” shall mean a confidentiality agreement with provisions that are not less restrictive in the aggregate, has had or would reasonably be expected to any Person receiving confidential information pursuant thereto thanhave a material adverse effect on or a material adverse change in (i) the provisionsbusiness, assets, liabilities, properties, condition (financial or otherwise) or results of operations of the Transaction Confidentiality Agreement are to Parent;Parent Group Entities, taken as a whole (including the ownership of the MLP Group Entities); provided, however, that such Confidentiality Agreement shall (a) have a term of not less than two (2) years, and (b) provide that all non‑public information pertainingany adverse changes, effects, events or occurrences resulting from or due to the Buyer Parties and their Subsidiaries and the Company and its Subsidiaries be protected as confidential information thereunder, subject to customary exceptions; provided, further, that the Company may amend or waive the terms of such Confidentiality Agreement in its discretion,
except that Parent shall have the right to approve or consent to any amendment or waiver (i) of the two-year or more term of the Confidentiality Agreement or (ii) that would have the effect of causing any non-public information pertaining to the Buyer Parties and their Subsidiaries and the Company and its Subsidiaries that is protected as confidential information under the Transaction Confidentiality Agreement not to be protected as confidential information under the Confidentiality Agreement.
“Consent Deadline” shall mean 5:00 p.m. on the 90th day following the date of this Agreement.
“Continuing Employee” shall mean an employee of the Company or any of the Company’s Subsidiaries who is employed immediately prior tofollowing shall be disregarded in determining whether there has been a Parent Material Adverse Effect: (a) changes, effects, states of fact, developments, events or occurrences affecting the Closing and who remainsindustries in the employ of any of the Buyer Parties, the Surviving Entities, the Companywhich Parent or any of its or their Subsidiaries after the Closing.
“Control” shall mean the power to direct or cause the direction of management or policies of a Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Converted Company Restricted Stock Award” shall have the meaning set forth in Section 7.13(a).
“Converted Parent Restricted Stock Award” shall have the meaning set forth in Section 7.13(b).
“Converted Option” shall have the meaning set forth in Section 7.13(c).
“Converted SAR” shall have the meaning set forth in Section 7.13(d).
“Creditors’ Rights” shall have the meaning set forth in Section 4.3(a).
“DGCL” shall mean the Delaware General Corporation Law.
“Director Qualifications” means Parent’s, HoldCo’s or the general partner of Parent Logistics Partners’, to the extent applicable, qualifications for members of its board of directors, including any requirements under Parent’s Board of Directors Governance Guidelines, applicable Law (including fiduciary duties), requirements of the exchange on which Parent’s, HoldCo’s or Parent Logistics Partners’, to the extent applicable, securities are traded, and requirements promulgated by the SEC.
“Disinterested Stockholders” shall have the meaning set forth in the recitals to this Agreement.
“Disinterested Stockholder Approval” shall have the meaning set forth in the recitals to this Agreement.
“Environmental Laws” shall mean any and all applicable Laws relating to pollution, protection, preservation, remediation or restoration of the environment (including soils, subsurface soils, surface waters, groundwaters, or ambient atmosphere) or natural resources or preservation or protection of occupational human health or workplace safety (to the extent such health or safety relate to exposure to Hazardous Materials), including such applicable Laws relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, transport, or handling of, or exposure of any person or property to, Hazardous Materials, including the Clean Air Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Superfund Amendments and Reauthorization Act, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act, the Federal Hazardous Materials Transportation Law, the Occupational Safety and Health Act, the Endangered Species Act, the National Environmental Policy Act, and the Oil Pollution Act, as each has been adopted in the United
States and as amended from time to time prior to the Closing Date and all other similar or analogous applicable environmental conservation and protection laws of any U.S. or non-U.S. Governmental Authority.
“Environmental Permits” shall mean any Permit required under any Environmental Law.
“ERISA” shall have the meaning set forth in Section 4.13(a).
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
“Exchange Agent” shall have the meaning set forth in Section 3.4(a).
“Exchange Fund” shall have the meaning set forth in Section 3.4(a).
“Exchange Ratio” shall have the meaning set forth in Section 3.1(b)(i).
“ExistingCompanyRestricted Stock Award” shall mean each award of restricted shares of Company Common Stock granted pursuant to any Company Equity Plan.
“ExistingParentRestricted Stock Award” shall mean each award of restricted shares of Parent Common Stock granted pursuant to the Parent Equity Plans.
“Existing Parent Stock Appreciation Right” shall mean each stock appreciation right to purchase shares of Parent Common Stock granted pursuant to the Parent Equity Plans.
“Existing Parent Stock Option” shall mean each option to purchase shares of Parent Common Stock granted pursuant to the Parent Equity Plans.
“FCPA” shall have the meaning set forth in Section 4.18(a).
“GAAP” shall have the meaning set forth in Section 4.6(b).
“Government Official” shall mean any (a) officer, employee or representative of a Governmental Authority or instrumentality thereofSubsidiary operates (including any state-ownedpolitical or controlled enterprise)regulatory changes or of a public international organization,changes in applicable Law); (b) political party or official thereof or any candidate for any political office or (c) any Person acting for or on behalf of any such Governmental Authority or instrumentality thereof.
“Governmental Authority”shall mean any (a) multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board or bureau or agency, domestic or foreign, (b) subdivision, agent, commission, board, or authority of any of the foregoing, or (c) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under, or for the account of, any of the foregoing.
“Hazardous Material” shall mean any substance that is regulated under any Environmental Law including any: (a) chemical, product, material, substance or waste defined as or included in the definition of “hazardous substance,” “hazardous material,” “hazardous waste,” “restricted hazardous waste,” “extremely hazardous waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant,” or words of similar meaning or import found in any Environmental Law; (b) petroleum hydrocarbons, petroleum products, petroleum substances, natural gas or crude oil or any
components, fractions, or derivatives thereof; and (c) asbestos containing materials, polychlorinated biphenyls, radioactive materials, urea formaldehyde foam insulation, or radon gas.
“HoldCo” shall have the meaning set forth in the introductory paragraph to this Agreement.
“HoldCo Bylaws” shall have the meaning set forth in Section 2.1(a)(i).
“HoldCo Certificate” shall have the meaning set forth in Section 2.1(a)(i).
“HoldCo Nominee” shall have the meaning set forth in Section 7.21(a).
“HoldCo Parties” shall have the meaning set forth in the introductory paragraph to this Agreement.
“HoldCo Plans” shall have the meaning set forth in Section 7.14(a).
“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indebtedness”of any Person shall mean, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practice); (d) all indebtedness, obligations or liabilities of others secured by (or for which the holder of such indebtedness, obligation or liability has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the indebtedness, obligation or liability secured thereby have been assumed; limited, however, to the lesser of (i) the amount of its liability or (ii) the book value of such property; (e) all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP that are applicable to the circumstances as of the date of this Agreement; (f) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit; (g) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, surety bonds, or similar facilities, or other extensions of credit whether or not representing obligations for borrowed money; (h) the amount of deferred revenue attributed to any forward sale of production for which such Person has received payment in advance other than on ordinary trade terms; (i) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; (j) any obligations of such Person in respect to interest rate, commodity and currency related derivative instruments, swaps, hedges or similar arrangements or derivatives, (k) all reimbursement, payment or other obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used or acquired by such Person, even though the rights and remedies of the lessor, seller or lender thereunder may be limited to repossession or sale of such property; (l) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any equity interests or Rights of such Person; (m) all monetary obligations under any receivables factoring, receivable sales or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off balance sheet financing or similar financing of such Person; (n) all obligations of such Person under any inventory financing transaction and any renewable identification number (RIN) financing transaction; (o) Indebtedness of others as described in clauses (a) through (n) above in any manner guaranteed by such Person or for which it is or may become contingently liable; and (p) all obligations of the kind referred to in clauses (a) through (o) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on
property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation.
“Indemnification Expenses” shall have the meaning set forth in Section 7.9(a).
“Indemnification Obligations” shall have the meaning set forth in Section 7.9(b).
“Indemnified Persons” shall have the meaning set forth in Section 7.9(a).
“Independent Director Committee” shall have the meaning set forth in the recitals to this Agreement.
“Independent Director Committee Recommendation” shall have the meaning set forth in Section 4.3(b).
“Infringement” or “Infringe” shall mean that (or an assertion that) a given item infringes, misappropriates, dilutes, constitutes unauthorized use of or otherwise violates the Intellectual Property Rights of any Person.
“Intellectual Property Rights” shall mean worldwide (a) patents and patent applications and industrial design rights and other governmental grants for the protection of inventions or industrial designs, rights in inventions (whether or not patentable), discoveries, and improvements, methods, and processes (b) copyrights, copyright registrations and applications for copyright registration, rights in works of authorship (including computer programs, in source code and executable code form, architecture, and documentation), moral rights, rights of publicity and privacy and mask work rights, (c) rights in proprietary and confidential information, trade secrets, and know-how, databases, data compilations and collections, and customer and technical data, (d) trademarks, trade names, logos, service marks, designs, emblems, signs, insignia, slogans, other similar designations of source or origin, together with the goodwill of the Company or the Company’s business symbolized by any of the foregoing, (e) domain names and web addresses, (f) any registrations or applications for registration for any of the foregoing, including any provisionals, divisions, continuations, continuations-in-part, renewals, reissuances, re-examinations and extensions (as applicable), (g) analogous rights to those set forth above and any other intellectual property rights in any jurisdiction and (h) rights to sue for past, present and future Infringement of the rights set forth above.
“Involuntary Termination” shall mean a termination by HoldCo or its Subsidiaries of a participant’s employment without “Cause” or termination by such participant for “Good Reason.” For purposes of this definition of Involuntary Termination, “Cause” shall mean: (a) conviction of, or a plea of nolo contender with respect to, a felony or a misdemeanor where imprisonment is imposed for more than thirty (30) days; (b) commission of any act of theft, fraud, dishonesty, or falsification of any employment or company records; (c) improper disclosure of confidential information; (d) any intentional action having a material detrimental effect on the employer’s reputation or business; (e) unlawful appropriation of a corporate opportunity; or (f) intentional misconduct in connection with the performance of any of the participant’s duties; and “Good Reason” shall mean, without the participant’s written consent, (y) a material reduction in base compensation, or (z) the requirement that the participant be based at an office or location that is more than fifty (50) miles from the location at which the participant was based on the Closing Date, provided that the participant provides his employer with written notice of his objection to and with a right to cure such event or condition within twenty (20) days following the first occurrence of such material diminution in base salary or relocation.
“Joint Proxy Statement/Prospectus” shall have the meaning set forth in Section 7.3(a).
“Knowledge” shall mean, (a) with respect to the Company, the actual knowledge after reasonable investigation, including making inquiry of the person or persons with the primary responsibility for the applicable subject matter, of any of the persons set forth on Section 1.1 of the Company Disclosure Letter and (b) with respect to the Buyer Parties, the actual knowledge after reasonable investigation, including making inquiry of the person or persons with the primary responsibility for the applicable subject matter, of any of the persons set forth on Section 1.1 of the Parent Disclosure Letter.
“Law” shall mean any statute, law (including common law), rule, regulation, requirement, directive, ordinance, code, governmental determination, writ, decree, injunction, judgment, settlement, order, treaty, convention or governmental certification requirement, in each case, to the extent legally enforceable by any U.S. or non-U.S. Governmental Authority.
“Legal Proceedings” shall mean any complaint, claim, action, cause of action, demand, lawsuit, mediation, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Letter of Transmittal” shall have the meaning set forth in Section 3.4(b).
“Lien” shall have the meaning set forth in Section 4.2(e).
“Logistics Partners Nominee” shall have the meaning set forth in Section 7.21(b).
“Material Adverse Effect” shall mean, with respect to the Company or Parent, respectively, any statechanges, effects, states of fact, change, development, condition, occurrencedevelopments, events or other effect that, individually or in the aggregate, is or would reasonably be expected to be material and adverse to (i) the financial condition, assets, properties, business, operations, or results of operations of the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, respectively, or (ii) the ability of the Company or Parent, respectively, to consummate the Merger Transactions on a timely basis; provided, however, none of the following changes, events, developments, conditions, occurrences or effects (either alone or in combination) will be taken into account for purposes of determining whether or not a Material Adverse Effect has occurred pursuant to clause (i): (a) changes in the general economic, financial, credit or securities markets inaffecting the United States including prevailing interest rates or currency rates, or regulatory or political conditions and changes in oil, natural gas, condensate or natural gas liquids prices or prices of other commodities, including changes in price differentials; (b) changes in generalglobal economic conditions or financial, credit, debt, securities or other capital markets in the petroleum refining, marketing, transportation and storage industries generally in the United States (including in each case changes in law affecting such industries);general; (c) theany outbreak of, acts of or escalation of hostilities, involving the United States, the declaration by the United States of aterrorism, war or other similar national emergency or warany natural disasters (including hurricanes, earthquakes, tornadoes, floods or the occurrence of any other calamitytsunamis) or crisis, including acts of terrorism;force majeure events; (d) any hurricane, tornado, flood, earthquake or other natural disaster; (e) with respect to the Company only, any action taken by the Company at the written direction of Parent; (f) the announcement or pendency of this Agreement or the transactions contemplated hereby; (e) changes or anticipated changes in any Laws or accounting regulations or principles applicable to Parent or any of the Parent Subsidiaries or the interpretation of any of the foregoing; (f) any legal proceedings commenced or threatened by or involving the Parent Group Entities or any current or former equityholder thereof arising out of or related to this Agreement or the transactions contemplated by this Agreement; (g) any actions required to be taken by Parent or any Parent Subsidiary under any Law or contract existing as of the Execution Date; (h) changes, effects, states of fact, developments, events or occurrences affecting the prices of oil, gas, natural gas, natural gas liquids or other commodities (including foroccurrences affecting the avoidancespread in prices between unrefined and refined commodities); (i) the Parent Parties taking any action required or contemplated by this Agreement; (j) changes, effects, states of doubt, performance of obligations under this Agreement); (g)fact, developments, events or occurrences at any MLP Group Entity; (k) any change in the market price or trading volume of the shares of common stock or other equity securities of such PersonParent (it being understood and agreed that the exception in this clause (g)foregoing shall not preclude any Partyother party to this Agreement from asserting that theany facts circumstances, changes, events, developments, conditions,or occurrences or effects giving rise to or contributing to such change that are not otherwise excluded
from the definition of Parent Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been, or would reasonably be expected to be, a Parent Material Adverse Effect); or (l) any failure of the Parent Group Entities to meet any internal or external projections, forecasts or estimates of revenues, earnings or other financial or operating metrics for any period (it being understood and agreed that the foregoing shall not preclude any other party to this Agreement from asserting that any facts or occurrences giving rise to or contributing to such failure set forth in this clause (l) that are not otherwise excluded from the definition of Parent Material Adverse Effect should be deemed to constitute, or be taken into account in determining whether there has been a Parent Material Adverse Effect); (h) any failure to meet any financial projections or estimates or forecasts of revenues, earnings or other financial metrics for any period (it being understood and agreed that the exception in this clause (h)provided shall not preclude any Party from asserting that, in the facts, circumstances, changes, events, developments, conditions, occurrences or effects giving rise to such failure should be deemed to
constitute, or be taken into account in determining whether there has been, a Material Adverse Effect); (i) changes in any Laws or regulations applicable to such Person or applicable accounting regulations or the interpretations thereof; and (j) any legal proceedings commenced by or involving any current or former member, partner, or stockholdercase of such Person (on their own behalf or on behalf of such Person) arising out of or related to this Agreement or the transactions contemplated hereby; provided, however, that (x) any change, event, development, circumstance, condition, occurrence or effect referred to in clauses (a), (b), (c) or, (d)(e) will beand (h) the adverse impact on the Parent Group Entities, taken into account for purposes of determining whether oras a whole, is not a Material Adverse Effect has occurred if andmaterially disproportionate to the extent that such change, event, development, circumstance, condition, occurrence or effect primarily relates only to (or has the effect of primarily relating only to) and disproportionately and adversely affects such Person, as compared to otheradverse impact on similarly situated Persons operating inparties, or (ii) the industries in which such Person operates and (y) the exception in clause (g) shall not apply toability of any representation or warranty in Article IV or Article V if the primary purpose of such representation or warranty on its face is to address the consequences resulting from the consummation of the Merger Transactions.Parent Parties to perform their obligations under this Agreement or to consummate the transactions contemplated by this Agreement.
“MergersParent Material Contract” shall have the meaning set forthascribed to such term in Section 2.1(b)(i).
“Merger Consideration” shall have the meaning set forth in Section 3.1(b)(i).
“Merger Transactions” shall have the meaning set forth in the recitals to this Agreement.
“Money Laundering Laws” shall have the meaning set forth in Section 4.18(f).
“Multiemployer Plan” shall have the meaning set forth in Section 4.13(a).
“New Common Stock” shall mean the common stock, par value $0.01 per share, of HoldCo, to be issued and delivered in accordance with applicable Laws and the HoldCo Certificate pursuant to the terms of Article III.
“Notice of Proposed Recommendation Change” shall have the meaning set forth in Section 7.2(b)(i).
“NYSE” shall mean the New York Stock Exchange.
“OFAC” shall have the meaning set forth in Section 4.18(g).
“Other Parties” shall mean, with respect to the Company, the Buyer Parties, and with respect to the Buyer Parties, the Company.
“Outside Date” shall have the meaning set forth in Section 9.1(b)(i).
“Parent” shall have the meaning set forth in the introductory paragraph to this Agreement.
“Parent Acquisition Proposal” shall mean any inquiry, proposal or offer from or by any Person or “group” (as such term is used in Section 13(d) of the Exchange Act) other than the Company or its Subsidiaries, whether or not in writing, relating to: (a) any direct or indirect purchase, acquisition, transfer, sale or disposition (whether by way of merger, share exchange, consolidation, business combination or similar transaction and whether in a single transaction or a series of related transactions) of (i) more than 50% in value of the assets of Parent and its Subsidiaries, taken as a whole (ii) more than 15% of the outstanding equity securities of Parent or (iii) assets that generate more than 50% of the cash flow, net revenue or net income of Parent and its Subsidiaries, taken as a whole; or (b) any tender offer or exchange offer that, if
consummated, would result in any such Person or “group” beneficially owning (within the meaning of Rule 13d-3 under the Exchange Act) more than 15% of the outstanding equity securities of Parent.
“Parent Assets” shall have the meaning set forth in Section 7.1(d)4.13.
“Parent Balance Sheet DatePartially Owned Entities” shall havemeans the meaning set forth in Section 5.7.Partially Owned Entities of Parent.
“Parent Benefit Plan” shall mean each “employee pension benefit plan” (as defined in Section 3(2) of ERISA) (whether or not subject to ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) (whether or not subject to ERISA) and any other plan, program, agreement, arrangement, policy, practice, contract, fund or commitment providing for pension, severance or retention benefits, profit-sharing, fees, bonuses, retention, stock ownership, stock options, stock appreciation, stock purchase or other stock-related benefits, incentive or deferred compensation, vacation benefits, life or other insurance (including any self-insured arrangements), health or medical benefits, dental benefits, employee assistance programs, salary continuation, unemployment benefits, disability or sick leave benefits, workers’ compensation benefits, relocation, post-employment or retirement benefits (including compensation, pension, health, medical and life insurance benefits) or other form of benefits which is or has been maintained, administered, participated in or contributed to by Parent or any entity (whether or not incorporated) that, together with Parent, would be treated as a single employer under Section 414 of the Code and of ERISA Section 4001 and covers any employee, former employee or independent contractor of Parent or any of its Subsidiaries, or with respect to which Parent or any of its Subsidiaries has any material liability; provided, however, that Parent Benefit Plans shall not include any “multiemployer plan” (as defined in Section 3(37) of ERISA).
“Parent Board” shall have the meaning set forth in the recitals to this Agreement.
“Parent Board Approval” shall have the meaning set forth in Section 5.3(a).
“Parent Bylaws” shall have the meaning set forth in Section 5.2(b).
“Parent Certificate” shall have the meaning set forth in Section 5.2(b).
“ParentCertificate of Merger” shall have the meaning set forth in Section 2.1(a)(iii).
“Parent Change in Recommendation” shall have the meaning set forth in Section 7.2(a)(ii).
“Parent Common Stock” shall have the meaning set forth in Section 3.1(a)(i).
“Parent Director QualificationsParties” means Parent’s, HoldCo’s or the general partner of Parent Logistics Partners’ qualifications, to the extent applicable, for members of its board of directors, including any requirements under Parent’s Board of Directors Governance Guidelines, applicable Law (including fiduciary duties), requirements of the exchange on which Parent’s, HoldCo’s or Parent Logistics Partners’ securities, to the extent applicable, are traded, and requirements promulgated by the SEC.
“Parent Effective Time” shall have the meaning set forth in Section 2.1(a)(iii).
“Parent Disclosure Letter” shall mean the disclosure letter dated the date of this Agreement and delivered by the Buyer Parties to the Company with respect to this Agreement on the date hereof.
“Parent Environmental Permit” shall have the meaning set forth in Section 5.12(b).
“Parent Equity Plans” shall mean the Delek US Holdings, Inc. 2006 Long-Term Incentive Plan and the Delek US Holdings, Inc. 2016 Long-Term Incentive Plan.
“Parent Intellectual Property” shall mean any and all Intellectual Property Rights that are owned by Parent or any of its Subsidiaries.
“Parent Logistics Partners” shall mean Delek Logistics Partners, L.P.
“Parent Logistics Partners LTIP” shall mean the Delek Logistics GP, LLC 2012 Long-Term Incentive Plan.
“Parent Merger” shall have the meaning set forth in Section 2.1(a)(ii).
“Parent Merger Consideration” shall have the meaning set forth in Section 3.1(a)(i).
“ParentMerger Sub” shall have the meaning set forth in the introductory paragraph to this Agreement.
“Parent Permits” shall have the meaning set forth in Section 5.10.Sub.
“Parent Preferred Stock” shall havehas the meaning set forth in Section 5.2(a)4.4(a).
“Parent ProductsSEC Reports” shall mean all products and services developed, manufactured, made commercially available, marketed, distributed, supported, sold, imported for resale or licensed out by or on behalf of Parent or any of its Subsidiaries.
“ParentQualifying Acquisition Transaction” shall havehas the meaning set forth in Section 9.2(c)(iv)4.5(a).
“Parent RecommendationStock Issuance” shall havehas the meaning set forth in the Recitals.
“Parent Subsidiaries” means the entities that are partially or wholly owned, directly or indirectly, by Parent, excluding any MLP Group Entity.
“Partially Owned Entity” means, with respect to a specified Person, an entity that is directly or indirectly owned in part by such specified Person, but is not directly or indirectly wholly owned by such specified Person.
“Party Group” means the MLP Parties, on the one hand, and the Parent Parties, on the other hand. A reference to a Party Group is a reference to each of the members of such Party Group.
“Pension Plan” has the meaning set forth in Section 5.3(a)4.14(b).
“Parent Registered Intellectual PropertyPermits” shall mean all Intellectual Property Rights that have been registered, filed, certified or otherwise perfected or recorded with or by any Governmental Authority or quasi-public legal authority (including domain name registrars), or any applications for any of the foregoing, that is part of the Parent Intellectual Property.
“Parent SEC Documents” shall have the meaning set forth in Article V.
“Parent Share Price” shall mean, as of any date, the volume-weighted average price of a share of Parent Common Stock as reported on the NYSE Composite Transactions Reporting System for the twenty (20) consecutive NYSE full trading days (in which shares of Parent Common Stock are traded on the NYSE) ending at the close of regular hours trading on the NYSE on the full trading day preceding such date.
“Parent Stockholders” shall mean the holders of outstanding shares of Parent Common Stock.
“Parent Stockholders Meeting” shall havehas the meaning set forth in Section 5.3(a)3.12(a).
“Parent Superior ProposalPermitted Lien” shall mean a written Parent Acquisition Proposal (exceptmeans all: (i) mechanics’, materialmen’s, carriers’, workmen’s, repairmen’s, vendors’, operators’ or other like Liens, if any, that reference to 15% withindo not materially detract from the definitionvalue of “Parent Acquisition Proposal” shall be replaced by 75%) made by a third party to Parent or materially interfere with the use of any of the assets of the Parent BoardGroup Entities or MLP Group Entities, as applicable, subject thereto; (ii) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (iii) title defects or Liens (other than those constituting Liens for the payment of indebtedness), if any, that do not solicitedor would not, individually or in violationthe aggregate, impair in any material respect the use or occupancy of Section 7.6(b), for consideration, whichthe assets of the Parent Board believesGroup Entities or MLP Group Entities, as applicable, taken as a whole; (iv) Liens for Taxes that are not due and payable; and (v) Liens supporting surety bonds, performance bonds and similar obligations issued in good faith to be a bona fide proposal and on such other terms and conditions
whichconnection with the businesses of the Parent Board determines in good faith (after consultation with its financial and legal advisors) and taking into account at the time of determination any proposal by the Company to amend the terms of this Agreement and all other relevant factors (including all legal, financial and regulatory aspects of the proposal and the Person making the proposal and whether approval of the equity owners of such Person is required), is reasonably capable of being consummated in accordance with its terms and which, if consummated, would be more favorable to the Parent Stockholders (solely in their capacityGroup Entities or MLP Group Entities, as such) from a financial point of view than the Merger Transactions.applicable.
“ParentSurviving EntityPerson” shall havemeans an individual, partnership, corporation, association, trust, limited liability company, joint venture, unincorporated organization or other entity or Governmental Entity.
“Proceedings” has the meaning set forth in Section 2.1(a)(ii).
“Parent Terminable Breach” shall have the meaning set forth in Section 9.1(d)(i).
“Party” and “Parties” shall have the meaning set forth in the introductory paragraph to this Agreement.
“PBGC” shall mean the Pension Benefit Guaranty Corporation.
“Permit” shall mean franchises, tariffs, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders of any Governmental Authority.
“Permitted Lien” shall mean (a) Liens for Taxes, except for Taxes not yet delinquent, that are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established in the most recent financial statements contained in the Company SEC Documents or Parent SEC Documents, as applicable; (b) mechanics’, carriers’, workmen’s, repairmen’s, materialmen’s and other Liens arising by operation of Law; (c) pledges or deposits to secure obligations under workers’ compensation Laws or similar Laws or to secure public or statutory obligations; (d) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each case in the ordinary course of business; (e) easements, encroachments, declarations, covenants, conditions, reservations, limitations and rights of way (unrecorded and of record) and other similar restrictions or encumbrances of record, zoning, building and other similar ordinances, regulations, variances and restrictions, and all defects or irregularities in title, including any condition or other matter, if any, that may be shown or disclosed by a current and accurate survey or physical inspection; (f) pledges or deposits to secure the obligations under the Company’s existing credit facilities and other existing indebtedness of the Company; (g) Liens or security interests that arise from agreements entered into in accordance with Section 6.1; and (h) existing Liens as of the date of this Agreement securing the existing Indebtedness and operating leases of any Party.
“Person” shall mean any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority or any group comprised of two or more of the foregoing.
“Prohibited Person” shall have the meaning set forth in Section 4.18(g).
“Receiving Party” shall have the meaning set forth in Section 7.6(c)3.8(a).
“Registration Statement” shall havehas the meaning set forth in Section 4.53.21.
“Release” shall mean any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, migrating, injecting, escaping, leaching, dispersion, migration, dumping, or disposing into the indoor (with ambient atmosphere) or outdoor environment.
“Representatives” shall mean,means, with respect to a Person, its directors, officers employees, agents and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative.
“Required Company Vote” shall have the meaning set forth in Section 4.3(c).
“Required Parent Vote” shall have the meaning set forth in Section 5.3(b).
“Restated Certificate” shall have the meaning set forth in Section 2.2.
“Reverse Termination Fee” shall mean a cash amount equal to $20,000,000.managerial employees.
“Rights” shall mean, with respect to any Person, (a)subscriptions, options, restricted units, equity appreciation rights, profits interests or other equity-based interests, warrants, calls, convertible or exchangeable securities, rights, preemptive rights, subscriptions, callspreferential purchase rights, rights of first refusal or otherany similar rights, convertible securities, exchangeable securities,commitments or agreements or commitments of any character obligating such Person (orproviding for the general partnerissuance of such Person) to issue, transferany partnership interests, voting securities or sell any capital stock or other equity interestinterests of such Person, including any representing the right to purchase or otherwise receive any of its Subsidiariesthe foregoing or any securities convertible into or exchangeable or exercisable for such capital stockpartnership interests, voting securities or equity interestsinterests.
“Rights-of-Way” means consents, easements, rights of way, permits and licenses from a Person granting the right to another Person to use or (b) contractual obligationsoccupy one or more parcels of such Person (or the general partner of such Person) to repurchase, redeem or otherwise acquire any capital stock or other equity interest in such Person or any of its Subsidiaries or any such securities or agreements listed in clause (a) of this definition.land.
“Sarbanes-Oxley Act” shall meanhas the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder.meaning set forth in Section 3.5(a).
“SEC” shall mean U.S.means the United States Securities and Exchange Commission.
“Securities Act” shall meanmeans the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Share IssuanceSubsidiaries” shall havemeans, when used with reference to Parent or MLP, the Parent Subsidiaries or the MLP Subsidiaries, respectively.
“Support Agreement” has the meaning set forth in the Recitals.
“Surrender” means, when used with reference to an MLP Public Unit, the proper delivery of an MLP Certificate (or lost certificate affidavit as contemplated by Section 2.2(b)) or the proper completion, with respect to a Book-Entry MLP Common Unit, of all procedures necessary, in either case, to effect the transfer of such MLP Public Unit in accordance with the terms of the Letter of Transmittal or such other procedures as may be reasonably established by the Exchange Agent.
“Surviving Entity” has the meaning set forth in Section 5.3(a)2.1(b).
“Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, partnership, trust or other entity of which such Person (whether alone, directly, or indirectly through, or together with, one or more of its subsidiaries) (i) is a general partner of or holds a majority of the voting interests of a partnership or (ii) owns a majority of the equity interests that are generally entitled to vote for the election of the board of directors or governing body of such corporation, limited liability company, partnership, trust or other entity; provided, however, that in no case shall the Company be deemed a Subsidiary of any Person for purposes of this Agreement. For the avoidance of doubt, (a) Astro Partners shall be deemed to be a Subsidiary of the Company; and (b) Parent Logistics Partners shall be deemed to be a Subsidiary of Parent.
“Supporting Persons” shall mean Parent and the following individuals, and any Person who holds Company Common Stock for the beneficial ownership (as defined in Rule 13d-3 adopted by the SEC under the Exchange Act) of such Person: David Wiessman and Jeff Morris.
“Surviving Entities” shall have the meaning set forth in Section 2.1(b)(i).
“Takeover Laws” shall mean any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other anti-takeover Laws.
“Tax Law” shall mean any Law relating to Taxes.
“Tax Return” shall mean any return, declaration, report, estimate, information return or statement (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any information return, claim for refund, amended return or declaration of estimated Taxes (and including any amendments with respect thereto).
“Tax” or “Taxes” shall mean (a) any andmeans all U.S. federal, state, local or foreign or provincial taxes, charges, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, customs duties, fees, escheat or unclaimed property obligations, assessments and similar charges,however denominated, including any and all interest, penalties fines,or other additions to tax or additional amountsthat may become payable in respect thereof, imposed by any Governmental Authority with respect theretoEntity, which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including federal income taxes and (b) any liability forstate income taxes), gross receipts taxes, net proceeds taxes, alternative or add-on minimum taxes, sales taxes, use taxes, real property gains or transfer taxes, ad valorem taxes, property taxes, value-added taxes, franchise taxes, production taxes, severance taxes, windfall profit taxes, withholding taxes, payroll taxes, employment taxes, excise taxes and other obligations of the payment of amounts described in clause (a) of any other Person (other than any other Partysame or similar nature to any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of applicable state, local, or foreign Law), as a transferee or successor, by contract, or otherwise.the foregoing.
“Transaction Confidentiality AgreementTax Return” shall mean that First Amended And Restated Confidentiality Agreement between Parentmeans all reports, estimates, declarations of estimated Tax, information statements and the Company, dated as of July 8, 2016.returns relating to, or required to be filed in connection with, any Taxes, including information returns or reports with respect to backup withholding and other payments to third parties.
“Voting AgreementsTermination Date” shall have the meaning set forth in the recitals to this Agreement.
“WARN Act” shall havehas the meaning set forth in Section 4.14(e).
ARTICLE II
THE MERGERS; EFFECTS OF THE MERGERS
2.1The Mergers7.2(a).
(a)The Parent Merger“.Willful Breach
(i)Prior” means a material breach of any of the covenants or other agreements contained in this Agreement that is a consequence of an act or omission undertaken or not undertaken by the breaching party with the Knowledge that the taking of, or failure to the Parent Effective Time, Parent and HoldCo shall take, all requisite actionsuch act would, or would be reasonably expected to, cause or constitute a material breach of such covenant or agreement; it being acknowledged and agreed, without limitation, that any failure by any party to consummate the certificate of incorporation of HoldCo (the “HoldCo Certificate”) and the bylaws of HoldCo (the “HoldCo Bylaws”) to comply with Section 251(g) of the DGCL at the Parent Effective Time and thereafter until amendedMerger in accordance with the terms thereof andof this Agreement after the applicable Law. Subject to the terms and conditions in Article VI have been satisfied or waived shall constitute a Willful Breach of this Agreement.
“Written Consent” means approval of this Agreement and the transactions contemplated hereby, including the Merger, by written consent without a meeting in accordance with the DGCL, HoldCo shall amend the HoldCo CertificateSection 13.11 and the HoldCo Bylaws, as applicable, simultaneously with the Parent Merger to change HoldCo’s name, to be effective asSection 14.3 of the Parent Effective Time, to “Delek US Holdings, Inc.”MLP Partnership Agreement of the holders of MLP Common Units constituting a Unit Majority (as defined in the MLP Partnership Agreement).
(ii)Section 1.2 Subject to the terms and conditionsRules of Construction. The division of this Agreement into articles, sections and in accordance withother portions and the DGCL, atinsertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an “Article” or “Section” followed by a number or a letter refer to the specified Article or Section of this Agreement. The terms “this Agreement,” “hereof,” “herein” and “hereunder” and similar expressions refer to this Agreement (including the MLP Disclosure Letter and the Parent Effective Time, Parent Merger SubDisclosure Letter) and not to any particular Article, Section or other portion hereof. Unless otherwise specifically indicated or the context otherwise requires, (a) all references to “dollars” or “$” mean United States dollars, (b) words importing the singular shall merge withinclude the plural and into Parent (the “ParentMergervice versa and words importing any gender shall include all genders, (c) “include,”), “includes” and “including” shall be deemed to be followed by the separate existence of Parent Merger Sub shall cease, and Parent shall survive and continue to exist as a Delaware corporation withwords “without limitation,” (d) the name “Delek US Energy, Inc.” (Parent, as the surviving entityword “extent” in the Parent Merger, sometimes being referredphrase “to the extent” shall mean the degree to hereinwhich a subject or thing extends, and such phrase shall not mean simply “if,” and (e) all words used as accounting terms shall have the “ParentSurviving Entity”).meanings assigned to them under GAAP. In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. Reference to any party hereto is also a reference to such party’s permitted successors and assigns. The Exhibits attached to this Agreement are hereby incorporated by reference into this Agreement and form part hereof. Unless otherwise indicated, all references to an “Exhibit” followed by a number or a letter refer to the specified Exhibit to this Agreement. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, it is the intention of the parties hereto that this Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any Person by virtue of the authorship of any of the provisions of this Agreement. Further, prior drafts of this Agreement or the fact that any clauses have been added, deleted or otherwise modified from any prior drafts of this Agreement shall not be used as an aid of construction or otherwise constitute evidence of the intent of the parties hereto; and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of such prior drafts.
ARTICLE II
MERGER
(iii)Section 2.1 Closing of the Merger
(a)Closing Date. Subject to the satisfaction or waiver of the conditions (other than those conditions that are not legally permitted to be waived) to closing set forth in Article VIIIVI, the closing (the “Closing”) of the Merger and the other transactions contemplated by this Section 2.1 shall be held at the offices of Baker Botts L.L.P., 910 Louisiana Street, Houston, Texas 77002 on the next Business Day following the satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of all of the conditions set forth in Article VI (other than conditions that would normally be satisfied on the Closing Date, but subject to satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of those conditions) commencing at 9:00 a.m., local time, or such other place, date and time as may be mutually agreed upon in writing by the parties hereto. The “Closing Date,” as referred to herein, shall mean the date on which the Closing actually occurs.
(b)Effective Time. Concurrently with or as soon as practicable onfollowing the Closing, Date, Parent and MLP shall properly execute and filecause a
certificate of merger effecting the Merger (the “ParentCertificate of Merger”), in accordance with Section 251 of the DGCL, with the office of the Secretary of State of the State of Delaware and make all other filings or recordings required by the DGCL in connection with the Parent Merger. The Parent Merger shall become effective at the time of filing of the Parent Certificate of Merger to be filed with the Secretary of State of the State of Delaware, or such laterduly executed in accordance with the relevant provisions of DRULPA and DLLCA, as applicable (the date and time of such filing (or, if agreed by the parties hereto, such later time and date as may be agreedexpressed therein as the effective date and time of the Merger) being the “Effective Time”). Upon the terms and subject to by Parentthe conditions of this Agreement, at the Effective Time, Merger Sub shall merge with and into MLP, the Companyseparate existence of Merger Sub shall cease, and set forthMLP shall continue as the surviving limited partnership in such Parent Certificate ofthe Merger (the “ParentSurviving Entity”).
(c)Effect of the Merger on Equity Securities. Subject in each case to Section 2.1(d) and (e), at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, MLP, MLP General Partner, any Holder of MLP Common Units, any Holder of Parent Common Stock, or any other Person:
(i)Conversion of MLP Public Units. Each of the MLP Public Units outstanding immediately prior to the Effective Time shall be converted into the right to receive 0.4900 shares of validly issued, fully paid and nonassessable Parent Common Stock (such number of shares of Parent Common Stock, the “Merger Consideration”).
(ii)Rights of Holders of MLP Public Units. Each MLP Public Unit, upon being converted into the right to receive the Merger Consideration pursuant to this Section 2.1(c), shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each Holder of such MLP Public Units immediately prior to the Effective Time shall thereafter cease to be a limited partner of MLP or have any rights with respect to such MLP Public Units, except the right to receive the Merger Consideration and any distributions to which former Holders of MLP Public Units become entitled all in accordance with this Article II upon the Surrender of (A) a certificate that immediately prior to the Effective Time represented MLP Public Units (an “MLP Certificate”) or (B) uncertificated MLP Public Units represented by book-entry (“Book-Entry MLP Common Units”), together with such properly completed and duly executed Letter of Transmittal and such other documents in accordance with Section 2.2.
(iii)Treatment of MLP-Owned Common Units and Parent-Owned Partnership Interests. Any MLP Common Units that are owned immediately prior to the Effective Time by MLP shall be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled MLP Common Units. The MLP General Partner Interest and all MLP Common Units that are not MLP Public Units or not canceled pursuant to the first sentence of this clause (iii) shall, in each case, remain outstanding as partnership interests in the Surviving Entity, unaffected by the Merger.
(iv)Equity of Merger Sub. The outstanding limited liability company interest in Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into an aggregate number of common units representing limited partner interests in the Surviving Entity equal to the number of MLP Public Units that are converted into the right to receive the Merger Consideration pursuant to Section 2.1(c)(i). At the Effective Time, the books and records of MLP shall be revised to reflect the cancellation and retirement of all MLP Public Units and the conversion of the limited liability company interest in Merger Sub to common units of the Surviving Entity, and the existence of MLP (as the Surviving Entity) shall continue without dissolution.
(d)Other Effects of the Merger. The Merger shall be conducted in accordance with and shall have the effects set forth in this Agreement and the applicable provisions of DRULPA and DLLCA. At the DGCL. Without limitingEffective Time, (i) the generalitycertificate of limited partnership of MLP shall continue as the certificate of limited partnership of the foregoing, at the Parent Effective Time, all the property, rights, privileges, powers and franchises of Parent and Parent Merger Sub shall vest in the Parent Surviving Entity, and all debts, liabilities(ii) the MLP Partnership Agreement shall remain unchanged and dutiesshall continue as the agreement of limited partnership of the Surviving Entity, until duly amended in accordance with applicable Law and the terms of the MLP Partnership Agreement.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued in the Merger. Notwithstanding any other provision of this Agreement, all fractional shares of Parent Common Stock that a Holder of MLP Common Units would otherwise be entitled to receive as Merger Consideration (after taking into account all MLP Common Units held by such Holder) will be aggregated and then, if a fractional share of Parent Common Stock results from that aggregation, be rounded up to the nearest whole share of Parent Common Stock (and, for the avoidance of doubt, no Person that is not a record holder of MLP Common Units or a DTC Participant will be entitled hereunder to have any fractional shares of Parent Common Stock rounded up, and none of Parent, AAI or the Surviving Entity shall have any obligation pursuant to this sentence with respect to any Person that is not a record holder of MLP Common Units or a DTC Participant) and any such additional Parent Common Stock shall become part of the Merger Consideration.
(f)Certain Adjustments. If between the Execution Date and the Effective Time, whether or not permitted pursuant to the terms of this Agreement, the number of outstanding MLP Common Units or shares of Parent Common Stock shall be increased, decreased or changed into a different number of units, shares or other securities (including any different class or series of securities) by reason of any dividend or distribution payable in, or an issuance of, partnership interests, voting securities, equity interests or Rights, or by reason of any subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or any such transaction shall be authorized, declared or agreed upon with a record date at or prior to the Effective Time, then the Merger Consideration, and any other similarly dependent items shall be appropriately adjusted to reflect fully the effect of such transaction and to provide to Parent, MLP, Merger Sub and the Holders of MLP Restricted Unit Awards and MLP Public Units the same economic effect as contemplated by this Agreement prior to such event, and thereafter, all references in this Agreement to the Merger Consideration, and any other similarly dependent items shall becomebe references to the debts, liabilitiesMerger Consideration, and dutiesany other similarly dependent items, as so adjusted; provided, however, that nothing in this Section 2.1(f) shall be deemed to permit or authorize any party hereto to effect any such dividend or distribution payable in equity securities or Rights, subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or the authorization, declaration or agreement to do such transaction that it is not otherwise authorized or permitted to be undertaken pursuant to this Agreement.
Section 2.2 Exchange of MLP Public Units
(a) Exchange Agent. Prior to the mailing of the Consent Statement/Prospectus, Parent Surviving Entity, allshall appoint American Stock Transfer & Trust Company, LLC to act as provided underexchange agent (the “Exchange Agent”) for the applicable Lawspayment of the StateMerger Consideration and any dividends and other distributions pursuant to Section 2.2(c). At or prior to the Closing, Parent shall (i) reserve with the Exchange Agent the shares of Delaware.Parent Common Stock to be issued pursuant to Section 2.1(c)(i), and (ii) authorize the Exchange Agent to exchange shares of Parent Common Stock in accordance with this Section 2.2. Parent shall, from time to time, deposit with the Exchange Agent any additional cash or other consideration as and when necessary to pay any dividends and other distributions pursuant to Section 2.2(c) (and shall authorize the Exchange Agent to pay out the same). Such Parent Common Stock and any cash or other consideration deposited with the Exchange Agent shall hereinafter be referred to as the “Exchange Fund.” Parent shall pay all costs and fees of the Exchange Agent and all expenses associated with the exchange process. Any shares of Parent Common Stock and any other funds deposited with the Exchange Agent shall be returned to Parent after the earlier to occur of (x) payment in full of all amounts due to the Holders of MLP Public Units under this Article II and (y) the expiration of the period specified in Section 2.2(e).
(b)The Astro MergerExchange Procedures. Promptly after the Effective Time, Parent shall, or shall cause the Exchange Agent to, mail to each Holder, as of the Effective Time, of MLP Public Units whose MLP Public Units were converted into the right to receive the Merger Consideration a form of letter of transmittal (the “Letter of Transmittal”) (which shall specify that delivery shall be effected, and risk of loss and title to the MLP Certificates shall pass, only upon proper delivery of the MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) to the Exchange Agent or, in the case of Book-Entry MLP Common Units, upon adherence to the procedures set forth in the Letter of Transmittal, and which shall be in customary form and have such other reasonable provisions as Parent and MLP may agree prior to the Effective Time) and instructions for effecting the Surrender of such MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units in exchange for, as applicable, whole shares of Parent Common Stock and any dividends or distributions payable pursuant to Section 2.2(c). Subject to Section 2.2(c), upon Surrender to the Exchange Agent of such MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units, together with such properly completed and duly executed Letter of Transmittal and such other documents as may reasonably be required by the Exchange Agent, the Holder of an MLP Certificate (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units shall be entitled to receive in exchange therefor, as applicable, (i) that number of whole shares of Parent Common Stock (which shall be in uncertificated book-entry form unless a physical certificate is requested) to which such Holder is entitled pursuant to Section 2.1(c)(i) and (ii) any dividends or distributions payable pursuant to Section 2.2(c) to
which such Holder is entitled. The instructions for effecting the Surrender of MLP Certificates shall set forth procedures that must be taken by the Holder of any MLP Certificate that has been lost, destroyed or stolen; it shall be a condition to the right of such Holder to receive the Merger Consideration and any distributions payable pursuant to Section 2.2(c) that the Exchange Agent shall have received, along with the Letter of Transmittal, a duly executed lost certificate affidavit, including an agreement to indemnify Parent for losses suffered by Parent because of such lost certificate, in customary form, signed exactly as the name or names of the registered Holder or Holders of MLP Public Units appeared on the books of MLP immediately prior to the Effective Time, together with a customary bond and such other documents, in each case, as Parent may reasonably require in connection therewith. After the Effective Time, there shall be no further transfer on the records of MLP or its transfer agent of MLP Certificates or Book-Entry MLP Common Units (provided, however, that the foregoing shall not restrict the transfer of any MLP Partnership Interest other than the MLP Public Units after the Effective Time); and if such MLP Certificates or Book-Entry MLP Common Units are presented to MLP or its transfer agent for transfer, they shall be canceled against delivery of the appropriate Merger Consideration and any dividends and other distributions payable pursuant to Section 2.2(c) as hereinabove provided. Until Surrendered as contemplated by this Section 2.2(b), each MLP Certificate or Book-Entry MLP Common Unit in respect of MLP Public Units shall be deemed at any time after the Effective Time to represent only the right to receive upon such Surrender the appropriate Merger Consideration, together with any dividends and other distributions payable pursuant to Section 2.2(c) or (d). No interest will be paid or will accrue on any dividends and other distributions payable pursuant to Section 2.2(c) or (d).
(i)(c) Dividends and Distributions with Respect to Unexchanged MLP Public Units. No dividends or other distributions with respect to shares of Parent Common Stock issued in the Merger with a record date after the Effective Time shall be paid to the Holder of any MLP Certificate or Book-Entry MLP Common Units not Surrendered with respect to such shares of Parent Common Stock issuable in respect thereof until the Surrender of such MLP Certificate or Book-Entry MLP Common Units in accordance with this Section 2.2. Subject to the termseffect of applicable Laws, Parent shall pay, or cause the Exchange Agent to pay, to the Holder of each MLP Certificate or Book-Entry MLP Common Units, without interest, (i) at the time of Surrender of such MLP Certificate or Book-Entry MLP Common Units, the amount of dividends or other distributions previously paid with respect to the whole shares of Parent Common Stock issuable with respect to such MLP Certificate or Book-Entry MLP Common Units that have a record date after the Effective Time and conditionsa payment date on or prior to the time of this Agreement,Surrender and (ii) at the appropriate payment date, the amount of dividends and distributions payable with respect to such whole shares of Parent Common Stock with a record date after the Effective Time and prior to such Surrender and a payment date subsequent to such Surrender.
(d) No Further Ownership Rights in MLP Public Units. All Merger Consideration issued upon the Surrender for exchange of MLP Certificates or Book-Entry MLP Common Units in accordance with the DGCL, atterms of this Article II shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the AstroMLP Public Units heretofore represented by such MLP Certificates or Book-Entry MLP Common Units (including all rights to common units arrearages), subject, however, to Parent’s obligation, with respect to MLP Public Units outstanding immediately prior to the Effective Time, Astro Merger Sub shall mergeto pay any distributions with and into the Company (the “AstroMerger” and together with the Parent Merger, “the “Mergers”), the separate existence of Astro Merger Sub shall cease, and the Company shall survive and continue to exist as a Delaware corporation with the name “Alon USA Energy, Inc.” (the Company, as the surviving entity in the Astro Merger, sometimes being referred to herein as the “AstroSurviving Entity” and together with the Parent Surviving Entity, the “Surviving Entities”).
(ii)Subjectrecord date prior to the satisfactionEffective Time that may have been declared or waiver of the conditions set forth in Article VIII, as soon as practicablemade by MLP on the Closing Date, the Parties shall cause a certificate of merger,such MLP Public Units in accordance with the terms of this Agreement (the “on or prior to the Effective Time and that remain unpaid at the Closing Date.
(e) AstroCertificateTermination of MergerExchange Fund”), to be properly executed and filed with the office. Any portion of the Secretary of StateExchange Fund that remains undistributed to the Holders of the State of Delaware in accordance withMLP Certificates or Book-Entry MLP Common Units for 18 months after the DGCL. The Astro MergerClosing Date shall become effective immediately following thebe delivered to Parent, Effective Time (the “Astro Effective Time”)upon demand, and shall have the effects set forth in this Agreement and the applicable provisionsany Holders of the DGCL. Without limitingMLP Certificates or Book-Entry MLP Common Units who have not theretofore complied with this Section 2.2 shall thereafter look only to Parent and only as general creditors thereof for payment of their claim for the generalityMerger Consideration and any distributions with respect to MLP Common Units or shares of the foregoing, at the Astro Effective Time, all the property, rights, privileges, powers and franchises of the Company and Astro Merger Sub shall vest in the Astro Surviving Entity, and all debts, liabilities and duties of the Company and Astro Merger Sub shall become the debts, liabilities and duties of the Astro Surviving Entity, all as provided under the applicable Laws of the State of Delaware.Parent Common Stock to which such Holders may be entitled.
2.2Certificate of Incorporation and Bylaws.
(a)(f) Parent Surviving EntityNo Liability. AtTo the Parent Effective Time, the certificate of incorporationextent permitted by applicable Law, none of Parent, Merger Sub, asMLP, MLP General Partner or the Exchange Agent shall be liable to any Person in effectrespect of any Merger Consideration or distribution properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any MLP Certificates or Book-Entry MLP Common Units shall not have been Surrendered immediately prior to such date on which any Merger Consideration or any distributions with respect to MLP Common Units or shares of Parent Common Stock in respect of such MLP Certificate or Book-Entry MLP Common Units would escheat to or become the Parent Effective Timeproperty of any Governmental Entity, any such units or distributions in respect of such MLP Certificates or Book-Entry MLP Common Units shall, be amended to meet the requirements of Section 251(g)(7)(i)(A) of the DGCL and as so amended shall be the certificate of incorporation of the Parent Surviving Entity until thereafter amended asextent permitted by applicable Law. AtLaw, become the property of Parent, Effective Time, the bylawsfree and clear of all claims or interest of any Person previously entitled thereto.
(g) Withholding Rights. Parent, Merger Sub and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement, without duplication, such amounts, which may include shares of Parent Common Stock, as in effect immediately priorParent, Merger Sub or the Exchange Agent reasonably deems to be 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 Parent, Merger Sub or the Exchange Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made by Parent, Merger Sub or the Exchange Agent, as the case may be.
(h) No Dissenters’ Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated by this Agreement.
Section 2.3 Treatment of MLP Restricted Unit Awards.
(a) At the Effective Time, shall be the bylaws of the Parent Surviving Entity until thereafter amendedeach MLP Restricted Unit Award that is not vested and does not vest in accordance with its terms the certificate of incorporation(as set forth in an applicable award agreement) as a result of the Parent Surviving Entity, ortransactions contemplated by this Agreement and that is outstanding as permitted by applicable Law.
(b)Astro Surviving Entity. At the Astro Effective Time, the certificate of incorporation of Astro Merger Sub as in effect immediately prior to the Astro Effective Time shall become fully vested and shall be converted into the certificateright to receive a number of incorporationshares of Parent Common Stock equal to the Astro Surviving Entity until thereafter amended as permitted by applicable Law. At the Astro Effective Time, the bylawsnumber of Astro Merger Sub as in effectMLP Common Units subject to each such MLP Restricted Unit Award immediately prior to the Astro Effective Time shall bemultiplied by the bylaws ofMerger Consideration (rounded up to the Astro Surviving Entity until thereafter amendednext whole share) as soon as practicable after the Effective Date, along with any corresponding accrued but unpaid DERs (as defined in accordancethe MLP Long-Term Incentive Plan) with its terms, the certificate of incorporation of the Astro Surviving Entity, or as permitted by applicable Law.respect to any MLP Restricted Unit Awards.
2.3Directors and Officers.
(a)HoldCo.(b) Prior to the Closing, ParentEffective Time, MLP and MLP General Partner shall take all action necessary to (i) elect as directorseffectuate the provisions of HoldCo, effectivethis Section 2.3. MLP and MLP General Partner shall ensure that, as of immediately following the Parent Effective Time, no holder of an MLP Restricted Unit Award or participant in the directors of Parent immediately priorMLP Long-Term Incentive Plan shall have any rights thereunder to the Parent Effective Time and (ii) appoint as officers of HoldCo, effective asacquire, or other rights in respect of, the Parent Effective Time,equity of MLP, the officers of Parent immediately prior to the Parent Effective Time, in each case until their respective death, permanent disability, resignationSurviving Entity or removal or until their respective successors are duly elected or appointed, as applicable, and qualified in accordance with the HoldCo Certificate and the HoldCo Bylaws.
(b)Parent Surviving Entity. The directors of Parent Merger Sub immediately prior to the Parent Effective Time and the officers of Parent Merger Sub immediately prior to the Parent Effective Time shall be the directors and officers, respectively,any of the Parent Surviving Entity until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified in accordance with the certificate of incorporation and bylaws of the Parent Surviving Entity.
(c)Astro Surviving Entity. The directors of Astro Merger Sub immediately prior to the Astro Effective Time and the officers of Astro Merger Sub immediately prior to the Astro Effective Time shall be the directors and officers, respectively, of the Astro Surviving Entity until their respective death, permanent disability, resignation or removal or until their respective successors are duly elected and qualified in accordance with the certificate of incorporation and bylaws of the Astro Surviving Entity.
2.4Closing. Subject to the satisfaction or waiver of the conditions set forth in Article VIII, the closing of the Mergers and the other Merger Transactions shall occur (the “Closing”) on (i) the third Business Day after the day on which the last of the conditions set forth in Article VIII (excluding conditions that, by their nature, cannot be satisfied until the Closing Date) shall have been satisfied or (to the extent permitted by Law) waived in accordance with the terms of this Agreement (or the first Business Day if the final such condition to be satisfied is the Required Company Vote or the Required Parent Vote) or (ii) such other date to which Parent and the Company may agree in writing. The date on which the Closing occurs is referred to as the “Closing Date.” The Closing of the Merger Transactions shall take place at the offices of Parent, 7102 Commerce Way, Brentwood, Tennessee 37027, at 9:00 a.m. local time on the Closing Date.MLP Subsidiaries.
ARTICLE IIIII
MERGER CONSIDERATION; ELECTION AND EXCHANGE PROCEDURES
3.1Merger ConsiderationSection 2.1. Closing of the Merger
(a)Closing Date. Subject to the satisfaction or waiver of the conditions (other than those conditions that are not legally permitted to be waived) to closing set forth in Article VI, the closing (the “Closing”) of the Merger and the other transactions contemplated by this Section 2.1 shall be held at the offices of Baker Botts L.L.P., 910 Louisiana Street, Houston, Texas 77002 on the next Business Day following the satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of all of the conditions set forth in Article VI (other than conditions that would normally be satisfied on the Closing Date, but subject to satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of those conditions) commencing at 9:00 a.m., local time, or such other place, date and time as may be mutually agreed upon in writing by the parties hereto. The “Closing Date,” as referred to herein, shall mean the date on which the Closing actually occurs.
(b)Effective Time. Concurrently with or as soon as practicable following the Closing, Parent and MLP shall cause a certificate of merger effecting the Merger (the “Certificate of Merger”) to be filed with the Secretary of State of the State of Delaware, duly executed in accordance with the relevant provisions of DRULPA and DLLCA, as applicable (the date and time of such filing (or, if agreed by the parties hereto, such later time and date as may be expressed therein as the effective date and time of the Merger) being the “Effective Time”). AtUpon the Parentterms and subject to the conditions of this Agreement, at the Effective Time, Merger Sub shall merge with and into MLP, the separate existence of Merger Sub shall cease, and MLP shall continue as the surviving limited partnership in the Merger (the “Surviving Entity”).
(c)Effect of the Merger on Equity Securities. Subject in each case to Section 2.1(d) and (e), at the Effective Time, by virtue of the Parent Merger and without any action on the part of the Buyer Parties, Parent, Merger Sub, MLP, MLP General Partner, any Holder of MLP Common Units, any Holder of Parent Common Stock, or any Parent Stockholder:other Person:
(i)Parent Common StockConversion of MLP Public Units. Each share of common stock of Parent or fraction thereof, par value $0.01 per share (“Parent Common Stock”), issued andthe MLP Public Units outstanding immediately prior to the Parent Effective Time (other than Parent Common Stock held in the treasury of Parent, all of which shall be canceled without any consideration being exchanged therefor) shall be converted at the Parent Effective Time into the right to receive one0.4900 shares of validly issued, fully paid and non‑assessable share of New Common Stock or such fraction thereof equal to the fractional share ofnonassessable Parent Common Stock (the “ParentMerger Consideration”). As(such number of the Parent Effective Time, all such shares of Parent Common Stock, the “Merger Consideration”).
(ii)Rights of Holders of MLP Public Units. Each MLP Public Unit, upon being converted into the right to receive the Merger Consideration pursuant to this Section 2.1(c), shall no longercease to be outstanding and shall automatically be cancelledcanceled and retired and shall cease to exist, and each Holder of such MLP Public Units immediately prior to the Effective Time shall thereafter only representcease to be a limited partner of MLP or have any rights with respect to such MLP Public Units, except the right to receive the Parent Merger Consideration and any dividends or other distributions payable pursuant to which former Holders of MLP Public Units become entitled all in accordance with this Section 3.4(c)Article II.
(ii)Parent Equity Awards. The Existing Parent Stock Options, Existing Parent Restricted Stock Awards and Existing Parent Stock Appreciation Rights shall be converted into similar rights with respect upon the Surrender of (A) a certificate that immediately prior to the NewEffective Time represented MLP Public Units (an “MLP Certificate”) or (B) uncertificated MLP Public Units represented by book-entry (“Book-Entry MLP Common StockUnits”), together with such properly completed and duly executed Letter of Transmittal and such other documents in accordance with Section 7.132.2.
(b)(iii)Astro MergerTreatment of MLP-Owned Common Units and Parent-Owned Partnership Interests. At the Astro Effective Time, by virtue of the Astro Merger and without any action on the part of the Buyer Parties, the Company or any Company Stockholder:
(i)CompanyAny MLP Common Stock. Subject to Sections 3.4(e) and 3.5, each share of common stock of the Company, par value $0.01 per share (“Company Common Stock”), issued and outstandingUnits that are owned immediately prior to the Astro Effective Time (other than (x) Company Common Stock owned by Parent and its Subsidiaries which shall remain outstanding and (y) the Company or held in the treasury of the Company, whichMLP shall be canceled without any consideration being exchanged therefor) shall, subject to Section 3.5, be converted at the Astro Effective Time into the right to receive and be exchangeable for 0.504 (the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of New Common Stock (the “AstroMerger Consideration,” and together with the Parent Merger Consideration, the “Merger Consideration”). As of the Astro Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be cancelledcanceled and shall cease to exist and no consideration shall thereafter only represent the right to receive the Astro Merger Consideration, any dividendsbe delivered in exchange for such canceled MLP Common Units. The MLP General Partner Interest and all MLP Common Units that are not MLP Public Units or other distributions payablenot canceled pursuant to the first sentence of this Section 3.4(c)clause (iii) and any cash in lieu of fractional shares of New Common Stock payable pursuant to Section 3.4(e),shall, in each case, to be issued or paidremain outstanding as partnership interests in accordance with such sections, without interest.the Surviving Entity, unaffected by the Merger.
(ii)(iv)Company Equity Awardsof Merger Sub. The Existing Company Restricted Stock Awards shall be converted into similar rights with respect to the New Common Stockoutstanding limited liability company interest in accordance with Section 7.13.
(iii)Astro Merger Sub Common Stock. Each share of common stock, $0.01 par value, of Astro Merger Sub issued and outstanding immediately prior to the Astro Effective Time shall be converted into and become aan aggregate number of shares of common stock ofunits representing limited partner interests in the Astro Surviving Entity calculated as follows: (A)equal to the number of outstanding shares of common stock of the Company (including for this purpose all Existing Company Restricted Stock Awards) outstanding at the Astro Effective Time minus (B) 33,691,292.
(c)Rights as HoldCo Stockholders. From and after the Parent Effective Time or the Astro Effective Time, as applicable, except forMLP Public Units that are converted into the right to receive the Merger Consideration and any cash in lieu of fractional shares of New Common Stock to be paid pursuant to Section 3.4(c) upon compliance with Section 3.4(c), the Parent Stockholders and Company Stockholders will not be and will not have any rights as, holders of New Common Stock (including any rights to vote, or any rights to receive distributions on, any New Common Stock), until such time that such holders have delivered the required documentation and surrendered any Certificates or Book-Entry Shares as contemplated by Section 3.4(b) or have otherwise complied with Section 3.4(h).
3.2Rights as Stockholders; Share Transfers2.1(c)(i). At the Parent Effective Time, the books and Astrorecords of MLP shall be revised to reflect the cancellation and retirement of all MLP Public Units and the conversion of the limited liability company interest in Merger Sub to common units of the Surviving Entity, and the existence of MLP (as the Surviving Entity) shall continue without dissolution.
(d)Other Effects of the Merger. The Merger shall be conducted in accordance with and shall have the effects set forth in this Agreement and the applicable provisions of DRULPA and DLLCA. At the Effective Time, respectively, each(i) the certificate of limited partnership of MLP shall continue as the certificate of limited partnership of the Surviving Entity, and (ii) the MLP Partnership Agreement shall remain unchanged and shall continue as the agreement of limited partnership of the Surviving Entity, until duly amended in accordance with applicable Law and the terms of the MLP Partnership Agreement.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued in the Merger. Notwithstanding any other provision of this Agreement, all fractional shares of Parent Common Stock that a Holder of MLP Common Units would otherwise be entitled to receive as Merger Consideration (after taking into account all MLP Common Units held by such Holder) will be aggregated and then, if a fractional share of Parent Common Stock and Company Common Stock, respectively, shall no longerresults from that aggregation, be outstanding and shall automatically be canceled and shall ceaserounded up to exist, and each Parent Stockholder and Company Stockholder holding a certificate representingthe nearest whole share of Parent Common Stock (and, for the avoidance of doubt, no Person that is not a record holder of MLP Common Units or Company Common Stock, as applicable (a “Certificate”), and each Parent Stockholder or Company Stockholder holding non-certificated stock represented by book-entry, as applicable (“Book‑Entry Shares”), shall cease toa DTC Participant will be a Parent Stockholder or Company Stockholder, as applicable, and ceaseentitled hereunder to have any rights with respect thereto, except the right to receive (a) the Merger Consideration, (b) and any cash to be paid in lieu of any fractional shares of NewParent Common Stock rounded up, and none of Parent, AAI or the Surviving Entity shall have any obligation pursuant to this sentence with respect to any Person that is not a record holder of MLP Common Units or a DTC Participant) and any such additional Parent Common Stock shall become part of the Merger Consideration.
(f)Certain Adjustments. If between the Execution Date and the Effective Time, whether or not permitted pursuant to the terms of this Agreement, the number of outstanding MLP Common Units or shares of Parent Common Stock shall be increased, decreased or changed into a different number of units, shares or other securities (including any different class or series of securities) by reason of any dividend or distribution payable in, or an issuance of, partnership interests, voting securities, equity interests or Rights, or by reason of any subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or any such transaction shall be authorized, declared or agreed upon with a record date at or prior to the Effective Time, then the Merger Consideration, and any other similarly dependent items shall be appropriately adjusted to reflect fully the effect of such transaction and to provide to Parent, MLP, Merger Sub and the Holders of MLP Restricted Unit Awards and MLP Public Units the same economic effect as contemplated by this Agreement prior to such event, and thereafter, all references in this Agreement to the Merger Consideration, and any other similarly dependent items shall be references to the Merger Consideration, and any other similarly dependent items, as so adjusted; provided, however, that nothing in this Section 2.1(f) shall be deemed to permit or authorize any party hereto to effect any such dividend or distribution payable in equity securities or Rights, subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or the authorization, declaration or agreement to do such transaction that it is not otherwise authorized or permitted to be undertaken pursuant to this Agreement.
Section 2.2 Exchange of MLP Public Units
(a) Exchange Agent. Prior to the mailing of the Consent Statement/Prospectus, Parent shall appoint American Stock Transfer & Trust Company, LLC to act as exchange agent (the “Exchange Agent”) for the payment of the Merger Consideration and any dividends and other distributions pursuant to Section 2.2(c). At or prior to the Closing, Parent shall (i) reserve with the Exchange Agent the shares of Parent Common Stock to be issued pursuant to Section 2.1(c)(i), and (ii) authorize the Exchange Agent to exchange shares of Parent Common Stock in accordance with this Section 3.4(e), and (c) any cash amounts payable in accordance with Section 3.4(c) following such stockholder’s compliance with Section 3.4(b) or Section 3.4(h), in each case, to be issued or paid, without interest, in consideration therefor in accordance with Section 3.4.
3.3Closing of Stock Transfer Books. At the Parent Effective Time and Astro Effective Time, respectively, the stock transfer books of each of Parent and the Company, respectively, shall be closed and no transfer of Parent Common Stock or Company Common Stock, as applicable, shall thereafter be made. If, after the Parent Effective Time or Astro Effective Time, respectively, Certificates are presented to the Parent Surviving Entity or Astro Surviving Entity, as applicable, for transfer, they shall be canceled and exchanged for the Merger Consideration as provided in this Article III.
3.4Exchange of Certificates.
(a)Exchange Agent. Prior to the Parent Effective Time,2.2. Parent shall, appoint a Person (such as, but not limitedfrom time to a commercial bank or trust company) reasonably acceptable to the Company to act as exchange agent hereunder for the purpose of exchanging the shares of Company Common Stock and Parent Common Stock for shares of New Common Stock and cash in lieu of fractional shares of New Common Stock as required by this Article III (the “Exchange Agent”). At the Parent Effective Time, HoldCo shall cause Astro Merger Sub and Parent Merger Sub totime, deposit with the Exchange Agent forany additional cash or other consideration as and when necessary to pay any dividends and other distributions pursuant to Section 2.2(c) (and shall authorize the benefit ofExchange Agent to pay out the holders of the applicable shares of Companysame). Such Parent Common Stock and Parent Common Stock, for exchange in accordance with this Article III, through the Exchange Agent, shares of New Common Stock. HoldCo agrees to make available to the Exchange Agent, from time to time as needed,any cash sufficient to make payments for any dividends pursuant to Section 3.4(c) and payments in lieu of any fractional shares of New Common Stock pursuant to
Section 3.4(e), in each case without interest. Any cash (including for any fractional shares of New Common Stock in accordance with Section 3.4(e) and any dividends with respect to New Common Stock in accordance with Section 3.4(c)) and shares of New Common Stockor other consideration deposited with the Exchange Agent shall hereinafter be referred to as the ““Exchange Fund.” Parent shall pay all costs and fees of the Exchange Fund.” TheAgent and all expenses associated with the exchange process. Any shares of Parent Common Stock and any other funds deposited with the Exchange Agent shall pursuantbe returned to irrevocable instructions, deliverParent after the Merger Consideration contemplatedearlier to be paid foroccur of (x) payment in full of all amounts due to the sharesHolders of Company Common Stock or Parent Common Stock, as applicable, pursuant toMLP Public Units under this Agreement. Except as contemplated by Sections 3.4(c)Article II and 3.4(e),(y) the Exchange Fund shall not be used for any other purpose.expiration of the period specified in Section 2.2(e).
(b)Exchange Procedures.Promptly after the Astro Effective Time, HoldCoParent shall, instructor shall cause the Exchange Agent to, mail to each record holder of shares of Parent Common StockHolder, as of the Parent Effective Time, and Company Common Stock as of MLP Public Units whose MLP Public Units were converted into the Astro Effective Time (in each case, other than (x) holdersright to receive the Merger Consideration a form of Existing Company Restricted Stock Awards, Existing Parent Restricted Stock Awards, and Existing Parent Stock Options and (y) the Company and its Subsidiaries and Parent and its Subsidiaries) (i) a letter of transmittal (the “Letter of Transmittal”) (which shall specify that in respect of certificated shares of Company Common Stock or Parent Common Stock, as applicable, delivery shall be effected, and risk of loss and title to the MLP Certificates shall pass, only upon proper delivery of the MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) to the Exchange Agent or, in the case of Book-Entry MLP Common Units, upon adherence to the procedures set forth in the Letter of Transmittal, and which shall be in customary form and agreed to byhave such other reasonable provisions as Parent and the CompanyMLP may agree prior to the Parent Effective Time) (the “Letter of Transmittal”) and (ii) instructions (which shall be in customary form and agreed to by Parent and the Company prior to the Parent Effective Time) for use in effecting the surrenderSurrender of thesuch MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry SharesMLP Common Units in exchange for, the Merger Consideration. Upon proper surrenderas applicable, whole shares of Certificates, ifParent Common Stock and any for cancellationdividends or distributions payable pursuant to Section 2.2(c). Subject to Section 2.2(c), upon Surrender to the Exchange Agent of such MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units, together with such letters of transmittal, properly completed and duly executed Letter of Transmittal and such other documents (including in respect of Book-Entry Shares) as may reasonably be required pursuant to such instructions, each holder who held sharesby the Exchange Agent, the Holder of Companyan MLP Certificate (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Stock or Parent Common Stock, as applicable, immediately prior to the Parent Effective Time or Astro Effective Time, respectively, (other than (x) holders of Existing Company Restricted Stock Awards, Existing Parent Restricted Stock Awards, and Existing Parent Stock Options and (y) the Company and its Subsidiaries and Parent and its Subsidiaries)Units shall be entitled to receive in exchange therefor, (A)as applicable, (i) that number of whole shares of NewParent Common Stock which(which shall be in uncertificated book-entry form unless a physical certificate is requested) to which such Holder is entitled pursuant to Section 2.1(c)(i) and (ii) any dividends or distributions payable pursuant to Section 2.2(c) to
which such Holder is entitled. The instructions for effecting the Surrender of MLP Certificates shall represent, inset forth procedures that must be taken by the aggregate, the numberHolder of shares of New Common Stockany MLP Certificate that such holder has been lost, destroyed or stolen; it shall be a condition to the right of such Holder to receive the Merger Consideration and any distributions payable pursuant to this Article III (after taking into account all sharesSection 2.2(c) that the Exchange Agent shall have received, along with the Letter of Company Common StockTransmittal, a duly executed lost certificate affidavit, including an agreement to indemnify Parent for losses suffered by Parent because of such lost certificate, in customary form, signed exactly as the name or Parent Common Stock, as applicable, then held by such holder)names of the registered Holder or as applicable (B) a check or electronic transferHolders of MLP Public Units appeared on the books of MLP immediately prior to the accountEffective Time, together with a customary bond and such other documents, in each case, as Parent may reasonably require in connection therewith. After the Effective Time, there shall be no further transfer on the records of such holder in an amount equal toMLP or its transfer agent of MLP Certificates or Book-Entry MLP Common Units (provided, however, that the aggregate amount of cash that such holder hasforegoing shall not restrict the right to receive pursuant to this Article III (after taking into account all shares of Company Common Stock or Parent Common Stock, as applicable, then held by such holder), consistingtransfer of any cash payable in lieuMLP Partnership Interest other than the MLP Public Units after the Effective Time); and if such MLP Certificates or Book-Entry MLP Common Units are presented to MLP or its transfer agent for transfer, they shall be canceled against delivery of any fractional shares of New Common Stock pursuant to Section 3.4(e)the appropriate Merger Consideration and any dividends pursuant to Section 3.4(c). No interest shall be paid or accrued on any Merger Consideration, any cash payment in lieu of fractional shares of New Common Stock, or any dividendand other distributions payable pursuant to Section 3.4(c). In the event of a transfer of ownership of shares of Company Common Stock or Parent Common Stock that has not been registered in the transfer records of the Company or Parent,2.2(c) as applicable, the Merger Consideration payable in respect of such shares may be paid to a transferee, if the Certificate representing such shares or evidence of ownership of the Book-Entry Shares is presented to the Exchange Agent, and, in the case of both certificated and book-entry shares of Company Common Stock or Parent Common Stock, as applicable, accompanied by all documents reasonably required to evidence and effect such transfer, and the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other Taxes required by reason of the delivery of the Merger Consideration in any name other than that of the record holder of such shares of Company Common Stock or Parent Common Stock,
as applicable, or shall establish to the satisfaction of the Exchange Agent that such Taxes have been paid or are not payable.hereinabove provided. Until such required documentation has been delivered and Certificates, if any, or Book-Entry Shares have been surrendered,Surrendered as contemplated by this Section 3.42.2(b), each MLP Certificate or Book-Entry SharesMLP Common Unit in respect of MLP Public Units shall be deemed at any time after the Parent Effective Time or Astro Effective Time, as applicable, to represent only the right to receive upon such delivery and surrenderSurrender the appropriate Merger Consideration, payable in respect of shares of Company Common Stock or Parent Common Stock, as applicable, any cash amounts payable in lieu of fractional shares of New Common Stock andtogether with any dividends and other distributions payable pursuant to Section 3.4(c)2.2(c) or (d). No interest will be paid or will accrue on any dividends and other distributions payable pursuant to Section 2.2(c) or (d).
(c)HoldCo Dividends and Distributions with Respect to Unexchanged Shares.MLP Public Units. No dividends declared or madeother distributions with respect to shares of NewParent Common Stock issued in the Merger with a record date after the Effective Time shall be paid to the Holder of any MLP Certificate or Book-Entry MLP Common Units not Surrendered with respect to such shares of Parent Common Stock issuable in respect thereof until the Surrender of such MLP Certificate or Book-Entry MLP Common Units in accordance with this Section 2.2. Subject to the effect of applicable Laws, Parent shall pay, or cause the Exchange Agent to pay, to the Holder of each MLP Certificate or Book-Entry MLP Common Units, without interest, (i) at the time of Surrender of such MLP Certificate or Book-Entry MLP Common Units, the amount of dividends or other distributions previously paid with respect to the whole shares of Parent Common Stock issuable with respect to such MLP Certificate or Book-Entry MLP Common Units that have a record date after the Effective Time and a payment date on or prior to the time of Surrender and (ii) at the appropriate payment date, the amount of dividends and distributions payable with respect to such whole shares of Parent Common Stock with a record date after the Astro Effective Time shall be paid to a Company Stockholder or Parent Stockholder with respect to shares of New Common Stock that such holder would be entitled to receive in accordance herewith and no cash payment in lieu of fractional shares of New Common Stock shall be paid to any such holder until such holder shall have delivered the required documentation and surrendered any Certificates or Book-Entry Shares as contemplated by Section 3.4(b) or otherwise complied with Section 3.4(h). Subject to applicable Law, following compliance with the requirements of Section 3.4(b) or Section 3.4(h), there shall be paid to such holder of New Common Stock issuable in exchange therefor, without interest, (i) promptly after the time of such compliance, the amount of any cash payable in lieu of fractional shares of New Common Stock to which such holder is entitled pursuant to Section 3.4(e) and an amount in cash equal to any dividend with respect to shares of New Common Stock with a record date after the Astro Effective Time and a payment date prior to such compliance with Section 3.4(b) or Section 3.4(h), payable with respect to such shares of New Common Stock,Surrender and (ii) on the appropriate payment date with respect thereto, the amount of dividends declared by Parent in respect of the Parent Common Stock or by HoldCo in respect of the New Common Stock with a record date after the Parent Effective Time but prior to such delivery and surrender and with a payment date subsequent to such compliance payable with respect to such shares of New Common Stock.Surrender.
(d)No Further Ownership Rights in Shares.MLP Public Units. All sharesMerger Consideration issued upon the Surrender for exchange of NewMLP Certificates or Book-Entry MLP Common Stock delivered and cash paid upon conversion of a share of Company Common Stock or Parent Common StockUnits in accordance with the terms hereof (including any cash paid pursuant to Section 3.4(c) or 3.4(e))of this Article II shall be deemed to have been deliveredissued (and paid) in full satisfaction of all rights pertaining to the MLP Public Units heretofore represented by such share.
(e)Fractional NewMLP Certificates or Book-Entry MLP Common Stock. No certificates or scrip representing fractional shares of New Common Stock or book-entry credit ofUnits (including all rights to common units arrearages), subject, however, to Parent’s obligation, with respect to MLP Public Units outstanding immediately prior to the same shall be issued or delivered in exchange for Company Common Stock, and such fractional interests of Company Common Stock will not entitleEffective Time, to pay any distributions with a record date prior to the owner thereof to vote or to have any rights as a holder of any share of New Common Stock. Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock converted in the Astro Merger who would otherwiseEffective Time that may have been entitled to receive a fraction of a share of New Common Stock (after taking into account all shares of Company Common Stock exchangeddeclared or made by MLP on such holder, as applicable) shall receive, in lieu thereof, cash (without interest and rounded up to the nearest whole cent) in an amount equal to the product of (i) the Parent Share Priceas of the Closing Date and (ii) the fraction of a share of New Common Stock that such holder would otherwise be entitled to receive pursuant to this Article III. As promptly as practicable after the determination of the amount of cash, if any, to be paid to holders of fractional interests, Parent and/or HoldCo shall deposit such amount with the Exchange Agent and shall cause the Exchange Agent to forward payments to such holders of fractional interests subject to andMLP Public Units in accordance with the terms hereof.of this Agreement on or prior to the Effective Time and that remain unpaid at the Closing Date.
(f)(e) Termination of Exchange Fund. Any portion of the Exchange Fund constituting shares of New Common Stock or cash that remains undistributed to the Parent StockholdersHolders of the MLP Certificates or Company StockholdersBook-Entry MLP Common Units for 18 months after one (1) year following the Parent Effective Time or Astro Effective Time, respectively,Closing Date shall be delivered to HoldCo ifParent, upon demand, and when demanded by HoldCo and, from and after such delivery, any former holdersHolders of shares of Parentthe MLP Certificates or Book-Entry MLP Common Stock or Company Common StockUnits who have not theretofore complied with this Article IIISection 2.2 shall thereafter look only to the HoldCo PartiesParent and only as general creditors thereof for payment of their claim for the Merger Consideration payableand any distributions with respect to MLP Common Units or shares of Parent Common Stock to which such Holders may be entitled.
(f) No Liability. To the extent permitted by applicable Law, none of Parent, Merger Sub, MLP, MLP General Partner or the Exchange Agent shall be liable to any Person in respect of any Merger Consideration or distribution properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any MLP Certificates or Book-Entry MLP Common Units shall not have been Surrendered immediately prior to such date on which any Merger Consideration or any distributions with respect to MLP Common Units or shares of Parent Common Stock in respect of such shares, any cash in lieu of a fractional share of NewMLP Certificate or Book-Entry MLP Common Stock to which they are entitled pursuant to Section 3.4(e), or any dividends or distributions with respect to shares of New Common Stock to which they are entitled pursuant to Section 3.4(c) following compliance with Section 3.4(b) or Section 3.4(h), in each case, without any interest thereon. Any amounts remaining unclaimed by Parent Stockholders or Company Stockholders immediately prior to such time as such amountsUnits would otherwise escheat to or become the property of any Governmental AuthorityEntity, any such units or distributions in respect of such MLP Certificates or Book-Entry MLP Common Units shall, to the extent permitted by applicable Law, be held by HoldCobecome the property of Parent, free and be subject to applicable escheat, abandoned propertyclear of all claims or similar laws.interest of any Person previously entitled thereto.
(g)No Liability. To the fullest extent permitted by Law, none of the Buyer Parties, the Company, the Surviving Entities or their respective Representatives shall be liable to any holder of shares of Company Common Stock or Parent Common Stock for any of the Merger Consideration (including any dividends with respect to Parent Common Stock) delivered to a Government Official pursuant to any abandoned property, escheat or similar Law.
(h)Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder of Company Common Stock or Parent Common Stock claiming such Certificate to be lost, stolen or destroyed and, if required by HoldCo, the posting by such holder of Company Common Stock or Parent Common Stock of an indemnity agreement or a bond, in a customary amount, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall pay the Merger Consideration payable in respect of shares of Company Common Stock or Parent Common Stock represented by such Certificate and any payments to which the holders thereof are entitled pursuant to Section 3.4(c) or Section 3.4(e)Withholding Rights.
(i)Withholding. The Parent, Merger Sub and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement, to any holder ofwithout duplication, such amounts, which may include shares of Company Common Stock or Parent Common Stock, such amounts as Parent, Merger Sub or the Exchange Agent reasonably deems to be 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, with respect to the making of such payment; provided, however, that the Exchange Agent shall provide reasonable notice to the applicable holders of shares of Company Common Stock or Parent Common Stock prior to withholding any amounts pursuant to this Section 3.4(i).Law. To the extent that amounts are so deducted and withheld or paid over to or deposited with the relevant Governmental Entity by Parent, Merger Sub or the Exchange Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of shares of Company Common Stock or Parent Common StockPerson in respect of whom such deduction and withholding was made by the Exchange Agent.
(j)Investment of the Exchange Fund. HoldCo shall causeParent, Merger Sub or the Exchange Agent, to invest any cash included in the Exchange Fund as directed by HoldCo on a daily basis, in HoldCo’s sole discretion; provided, however, that no such investment or loss thereon shall affect the amounts payable or the timing of the amounts payable to Company Stockholders or Parent Stockholders pursuant to the other provisions of this Section 3.4. Any interest and other income resulting from such investments shall be paid promptly to HoldCo.
3.5Anti-Dilution Provisions. In the event of any subdivisions, reclassifications, stock splits, stock distributions or stock dividends, combinations or exchanges with respect to, or Rights in respect of, shares of Company Common Stock (as permitted pursuant to Section 6.1) or shares of Parent Common Stock (as permitted pursuant to Section 6.2), the Exchange Ratio and the number of shares of New Common Stock to be delivered as Merger Consideration in the Merger, and any other similar dependent item, as the case may be, shall be correspondingly adjusted to provide to the holders of shares of Company Common Stock and to Parent the same economic effect as contemplated by this Agreement prior to such event.
ARTICLE IV
COMPANY REPRESENTATIONS AND WARRANTIES
Other than with respect to the representations and warranties in Section 4.4 (No Violations or Defaults), which shall be qualified only to the extent explicitly set forth therein and except as disclosed in any report, statement, form, schedule or other document filed or furnished by the Company or any of its Subsidiaries with the SEC subsequent to December 31, 2015 (collectively, “Company SEC Documents”) that is publicly available prior to the date of this Agreement (excluding any disclosures included therein to the extent they are cautionary, predictive or forward-looking in nature, including those in any risk factor section of such documents), the Company hereby represents and warrants with respect to itself and its respective Subsidiaries to the Buyer Parties, as follows:
4.1Organization, General Authority and Standing.
(a)The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. The Company (i) has the requisite corporate power and authority to own and lease all of its properties and assets and to carry on its business as it is now being conducted, (ii) is duly qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or the conduct of its business requires it to be so qualified and (iii) has in effect all federal, state, local and foreign governmental authorizations and permits necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted, except where the failure to have such power and authority, to be so qualified or to have such authorizations and permits in effect would not have a Material Adverse Effect with respect to the Company.
(b)True, correct and complete copies of the Company Certificate and the Company Bylaws, each as in effect as of the date of this Agreement, have previously been made available to the Buyer Parties.
(c)Section 4.1(c) of the Company Disclosure Letter sets forth, as of the date of this Agreement, the name and jurisdiction of organization of each (i) Subsidiary of the Company and (ii) entity (other than the Subsidiaries of the Company) in which the Company or any Subsidiary of the Company owns any interest. Each Subsidiary of the Company (i) is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, (ii) has the requisite entity power and authority to own and lease all of its properties and assets and to carry on its business as it is now being conducted and (iii) has in effect all federal, state, local and foreign governmental authorizations and permits necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted, except where the failure to have such power and authority, to be so qualified or to have such authorizations and permits in effect would not have a Material Adverse Effect with respect to the Company.be.
4.2(h) Capitalization.
(a)As of the date of this Agreement, the authorized capital stock of the Company consists of (i) 150,000,000 shares of Company Common Stock, of which, as of the close of business on December 30, 2016, 71,591,768 shares were issued and outstanding and (ii) 15,000,000 shares of preferred stock of the Company, par value $0.01 per share (“Company Preferred Stock”), of which, as of the date of this Agreement, no shares were issued and outstanding. As of the date of this Agreement, no shares of Company Common Stock and no shares of Company Preferred Stock were held in the Company’s treasury. In addition, as of close of business on December 30, 2016, there were outstanding Existing Company Restricted Stock Awards with respect to an aggregate of 480,573 shares of Company Common Stock and Company Convertible Securities with respect to an aggregate of 10,975,650 shares of Company Common Stock.
(b)As of the close of business on December 30, 2016, an aggregate of 3,023,281 shares of Company Common Stock were reserved for issuance but not yet granted under the Alon USA Energy, Inc. Second Amended and Restated 2005 Incentive Compensation Plan and 388,681 shares of Company Common Stock were reserved for issuance but not yet granted under the Alon USA Energy, Inc. 2016 Fair Market Value Stock Purchase Plan. Since December 30, 2016 and through the date of this Agreement, no awards have been granted and no additional shares of Company Common Stock have become subject to issuance under any Company Equity Plan. Section 4.2(b) of the Company Disclosure Letter sets forth as of the date of this Agreement a list of each outstanding award granted under any Company Equity Plan and: (A) the name of the holder of such Existing Company Restricted Stock Award; (B) the number of shares of Company Common Stock subject to such outstanding Existing Company Restricted Stock Award; (C) if applicable, the exercise price, purchase price, or similar pricing of such Existing Company Restricted Stock Award; (D) the date on which such Existing Company Restricted Stock Award was granted or issued; and (E) the applicable vesting, repurchase, or other lapse of restrictions schedule, and the extent to which such Existing Company Restricted Stock Award is vested and exercisable as of the date hereof. All shares of Company Common Stock subject to issuance under any Company Equity Plan, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, and non-assessable.
(c)Except as set forth in Section 4.2(c) of the Company Disclosure Letter, since December 30, 2016, and prior to the date of this Agreement, the Company has not issued any shares of Company Common Stock or Company Preferred Stock, has not granted any restricted stock, options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, or exchangeable securities, or entered into any other agreements or commitments of any character that might require it to issue any shares of Company Common Stock or Company Preferred Stock, or granted any other awards in respect of any shares of Company Common Stock or Company Preferred Stock and has not split, combined or reclassified any of its shares of capital stock, other than shares of Company Common Stock or Company Preferred Stock issuable upon lapse of the Existing Company Restricted Stock Awards or upon the conversion of Company Convertible Securities.
(d)All of the issued and outstanding shares of Company Common Stock and Company Preferred Stock (i) have been duly authorized and validly issuedin accordance with applicable Laws and the Company Certificate, (ii) are fully paid and nonassessable and (iii) are not subject to and were not issued in violation of any option, right of first refusal, preemptive right, subscription right or any similar right or any provision of applicable Law, the Company Certificate, the Company Bylaws or any contract to which the Company is a party or by which it is otherwise bound.At the
time of issuance, all such shares that may be issued upon the exercise or vesting of, or pursuant to, Existing Company Restricted Stock Awards or upon the conversion of the Company Convertible Securities (i) will be duly authorized and validly issuedin accordance with applicable Laws and the Company Certificate, (ii) will be fully paid and nonassessable and (iii) will not be subject to or issued in violation of (A) any option, right of first refusal, preemptive right, subscription right or any similar right or (B) any provision of applicable Law, the Company Certificate, the Company Bylaws or any contract to which the Company is a party or by which it is otherwise bound.
(e)Except as set forth in Section 4.2(e) of the Company Disclosure Letter, the Company or another of its wholly owned Subsidiaries is the record and beneficial owner of all the outstanding shares of capital stock or other equity ownership interests of each Subsidiary (other than Astro Partners) of the Company (except for directors’ qualifying shares or the like), free and clear of any lien, mortgage, pledge, charge, irrevocable proxy, security interest or encumbrance of any kind (each, a “Lien”), other than Liens arising under the Company Revolving Credit Agreement, and all of such shares or equity ownership interests (i) are duly authorized and validly issued in accordance with applicable Laws and the organizational documents of such Subsidiary, (ii) are fully paid and nonassessable and (iii) are not subject to or were not issued in violation of any option, right of first refusal, preemptive right, subscription right or any similar right under any provision of applicable Law, the organizational documents of such Subsidiary or any contract to which such Subsidiary is a party or by which it is otherwise bound.
(f)As of the date of this Agreement, except for the Existing Company Restricted Stock Awards, the Company Convertible Securities and except for equity securities owned by the Company in its Subsidiaries (other than Astro Partners), and except as set forth in Section 4.2(f) of the Company Disclosure Letter, (i) there are no shares of capital stock, partnership interests, limited liability company interests or other equity securities of the Company or any of its Subsidiaries issued or authorized and reserved for issuance and (ii) there are no outstanding shares of restricted stock or Rights, or any commitment to authorize, issue or sell the same or any such equity securities, except pursuant to this Agreement.
(g)Except as set forth in Section 4.2(g) of the Company Disclosure Letter, the Company does not own beneficially, directly or indirectly, any capital stock or other equity ownership interests of any Person or any interest in a partnership or joint venture of any kind.
(h)As of the date of this Agreement, no bonds, debentures, notes or other indebtedness of the Company having the right to vote on any matters on which Company Stockholders may vote are issued or outstanding (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Company Common Stock may vote, other than the Company Convertible Notes. As of the date of this Agreement, the Conversion Rate (as defined in the Company Convertible Notes Indenture as in effect on the date of this Agreement) is 73.1710 shares of Common Stock (as defined in the Company Convertible Notes Indenture as in effect on the date of this Agreement) per $1,000 principal amount of Company Convertible Notes.
(i)As of the date of this Agreement, the issued and outstanding limited partnership interests of Astro Partners consists of 62,520,220 common units, of which 51,000,000 were owned directly or indirectly by the Company.The sole general partner of Astro Partners is Alon USA Partners GP, LLC, which is a wholly owned subsidiary of the Company. All of the outstanding equity interests of Astro Partners were duly authorized and validly issued, free and clear of all Liens except for Liens set forth in Section 4.2(i) of the Company Disclosure Letter, in accordance with the Astro Partnership
Agreement and are fully paid (to the extent required by such agreement) and non-assessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act ). Each Subsidiary of Astro Partners is wholly owned by Astro Partners.
(j)As of the close of business on December 30, 2016, an aggregate of 3,104,764 common units of Astro Partners were reserved for issuance but not yet granted under the Astro Partners LTIP. As of the close of business on December 30, 2016, 14,185 common units of Astro Partners were reserved for issuance pursuant to outstanding award agreements under the Astro Partners LTIP. Since June 30, 2016 and through the date hereof, no awards have been granted and no additional common units of Astro Partners have become subject to issuance under the Astro Partners LTIP. Section 4.2(j) of the Company Disclosure Letter sets forth as of the date of this Agreement a list of each outstanding award granted under the Astro Partners LTIP and: (A) the name of the holder of such award; (B) the number of common units of Astro Partners subject to such outstanding award; (C) if applicable, the exercise price, purchase price, or similar pricing of such award; (D) the date on which such award was granted or issued; (E) the applicable vesting, repurchase, or other lapse of restrictions schedule, and the extent to which such award is vested and exercisable as of the date hereof; and (F) the date on which such award expires, if applicable. All common units subject to issuance under the Astro Partners LTIP, upon issuance in accordance with the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized and validly issued, free and clear of all Liens, and will be fully paid (to the extent required by such agreement) and non-assessable (except as such nonassessability may be affected by Sections 17-303, 17-607 and 17-804 of the Delaware Revised Uniform Limited Partnership Act ).
4.3Power and Authority.
(a)The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and the Voting Agreements and, subject to the Required Company Vote and the filing of the Certificates of Merger with the Secretary of State of the State of Delaware, to consummate the Merger Transactions. Subject to the Required Company Vote, this Agreement and the Merger Transactions have been duly and validly authorized by all necessary corporate action by the Company. This Agreement and the Voting Agreements have been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company (assuming the due execution and delivery of this Agreement by, or on behalf of, the Other Parties and the due execution and delivery of the Voting Agreements by the other parties thereto), enforceable against it in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) (collectively, “Creditors’ Rights”)).
(b)The Company Board (upon the Independent Director Committee Recommendation) has, by resolutions duly adopted by the requisite vote of each of the Independent Director Committee (the “Independent Director Committee Recommendation”) and the Company Board (the “Company Board Approval”) and not subsequently rescinded or modified in any way, (i) determined and declared that this Agreement and the Merger Transactions are advisable, fair to, and in the best interest of, the Company and the Disinterested Stockholders, (ii) approved this Agreement, the consummation of the Merger Transactions, and the Voting Agreements (to which the Company is a party), and (iii) directed that this Agreement and the Merger Transactions be submitted to the
Company Stockholders for approval at a meeting of the Company Stockholders (the “Company Stockholders Meeting”) and recommended that the Company Stockholders approve this Agreement and the Merger Transactions (the “Company Recommendation”).
(c)The affirmative vote of the holders of the majority of the outstanding shares of Company Common Stock is the only vote of the holders of any class or series of Company capital stock that shall be required by Law or the Company Certificate or Company Bylaws to adopt this Agreement and to consummate the Merger Transactions. The Company has agreed with the Buyer Parties to subject the approval of this Agreement and the consummation of the Merger Transactions to the Disinterested Stockholder Approval (such approval, together with the vote referenced in the preceding sentence, the “Required Company Vote”).
4.4No Violations or Defaults. Except as set forth in Section 4.4 of the Company Disclosure Letter and subject to the declaration of effectiveness of the Registration Statement, required filings under federal and state securities laws and with the NYSE, assuming the other consents and approvals contemplated by Section 4.5 and Article VIII are obtained and assuming the consents, waivers and approvals specified in Section 7.1 are obtained, the execution, delivery and performance of this Agreement and the Voting Agreements and the consummation of the Merger Transactions by the Company do not and will not (a) except as would not reasonably be expected to have a material impact on the Company and its Subsidiaries, taken as a whole, or as set forth in Section 4.4 of the Company Disclosure Letter, (i) violate, conflict with, or result in a breach of any provision of, or require any consent, waiver or approval or result in a default or loss or reduction of any rights (or give rise to any right of termination, cancellation, modification or acceleration, or trigger any requirement or option for additional consideration, or any event that, with the giving of notice, the passage of time or otherwise, would constitute a default or loss or reduction of any rights or give rise to any such right) under any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of trust, license, franchise, lease, contract, agreement, joint venture or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is subject or bound, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the Company or any of its Subsidiaries or by which any of their respective assets are bound or (iii) result (or, with the giving of notice, the passage of time or otherwise, would result) in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, (b) constitute a breach or violation of, or a default under, the Company Certificate or the Company Bylaws or other similar governing documents of any of the Company’s Subsidiaries or (c) cause the Merger Transactions to be subject to Takeover Laws.
4.5Consents and ApprovalsDissenters’ Rights. No consents, approvalsdissenters’ or authorizations of, or filings or registrations with, or notifications to, any Governmental Authority are necessary in connection with (a) the execution and delivery by the Company of this Agreement or the Voting Agreements or (b) the consummation by the Company of the Merger Transactions, except for (i) the filing with the SEC of the Joint Proxy Statement/Prospectus in a definitive form relating to the matters toappraisal rights shall be submitted to the Company Stockholders at the Company Stockholders Meeting and to the Parent Stockholders at the Parent Stockholders Meeting and of a registration statement on Form S-4 in which the Joint Proxy Statement/Prospectus will be included as a prospectus, in connection with the registration under the Securities Act of the New Common Stock to be issued as Merger Consideration (such registration statement and any amendments or supplements thereto, the “Registration Statement”), and the declaration of effectiveness by the SEC of the Registration Statement, (ii) the filing of the Certificates of Merger with the Secretary of State of the State of Delaware, (iii) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules of the NYSE, (iv) 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 New Common Stock pursuant to this
Agreement, (v) any notices or filings under the HSR Act, or any notices, filings or approvals under any other applicable competition, merger control, antitrust or similar Law or regulation, and (vi) such other consents, authorizations, approvals, filings or registrations the absence or unavailability of which would not reasonably be expected to have a Material Adverse Effect with respect to the Company or its Subsidiaries.
4.6Financial Reports and SEC Documents; Internal Controls.
(a)Since January 1, 2015, all reports, including the Annual Reports on Form 10-K, the Quarterly Reports on Form 10-Q and the Current Reports on Form 8‑K, forms, schedules, statements, exhibits and other documents required to be filed or furnished by the Company and Astro Partners, with or to the SEC have been or will be timely filed or furnished. The Company SEC Documents, as of their respective filing dates, (i) complied in all material respects as to form with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Except as set forth in Section 4.6(a) of the Company Disclosure Letter, no Subsidiary of the Company or Astro Partners (other than Astro Partners itself) is required to file reports, forms or other documents with the SEC pursuant to the Exchange Act. There are no outstanding comments from, or unresolved issues raised by, the staff of the SEC with respect to the Company SEC Documents. To the Company’s Knowledge, no enforcement action has been initiated against the Company or Astro Partners relating to disclosures contained or omitted from any Company SEC Document.
(b)The historical financial statements of the Company and Astro Partners and their consolidated Subsidiaries contained in or incorporated by reference into any Company SEC Document (including the related notes and schedules thereto) (i) comply in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, and (ii) have been prepared in accordance with U.S. generally accepted accounting principles consistently applied during the periods involved (“GAAP”) and fairly present in all material respects the consolidated financial position, results of operations, stockholders’ equity and cash flows, as the case may be, of the Company or entities to which they relate as of the dates or for the periods to which such financial statements relate, in each case in accordance with GAAP, except in each case as may be noted therein, subject to normal year-end audit adjustments in the case of unaudited statements. All of the Company’s Subsidiaries are consolidated for accounting purposes.
(c)The Company and its Subsidiaries make and keep books, records, and accounts and have devised and maintain a system of internal controls, in each case as required pursuant to Section 13(b)(2) under the Exchange Act. The Company and its Subsidiaries have established and maintain disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and the applicable listing standards of the NYSE. Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by the Company and its Subsidiaries in the reports that the Company files under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to its management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. The Company has disclosed, based on its most recent evaluation prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of
the Company Board (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a‑15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. Except as set forth in Section 4.6(c) of the Company Disclosure Letter, to the Knowledge of the Company, there is no applicable accounting rule, consensus or pronouncement that has been adopted by the SEC, the Financial Accounting Standards Board, the Emerging Issues Task Force or any similar body as of, but is not in effect as of, the date of this Agreement that, if implemented, would reasonably be expected to have a Material Adverse Effect with respect to the Company.
(d)Except as set forth in Section 4.6(d) of the Company Disclosure Letter, since December 31, 2015 through the date of this Agreement, to the Knowledge of the Company, (i) none of the Company, any of its Subsidiaries or any director, officer, or auditor of the Company 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 the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or officer of the Company.
(e)The principal executive officer and principal financial officer of the Company have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the statements contained in any such certifications are complete and correct, and neither the Company nor its officers have received notice from any Governmental Authority questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications.
4.7Absence of Undisclosed Liabilities. Except as disclosed in the audited financial statements (or notes thereto) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “Company Balance Sheet Date”), and in the financial statements (or notes thereto) included in subsequent Company SEC Documents filed by the Company or Astro Partners prior to the date of this Agreement, neither the Company nor any of its consolidated Subsidiaries had at the Company Balance Sheet Date, or has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise and whether due or to become due and whether or not required to be recorded or reflected on a balance sheet under GAAP) of any nature, except (i) liabilities, obligations or contingencies that (1) are accrued or reserved against in the financial statements of the Company included in the Company SEC Documents filed prior to the date of this Agreement, or reflected in the notes thereto, (2) were incurred since the Company Balance Sheet Date in the ordinary course of business which would not reasonably be expected to have a Material Adverse Effect with respect to the Company or (3) relate to this Agreement, the Merger Transactions or the proposal of the Buyer Partiesavailable with respect to the Merger or (ii) liabilities, obligations or contingencies that (1) would not reasonably be expected to have a Material Adverse Effect with respect to the Company or (2) have been discharged or paid in full prior to the date ofother transactions contemplated by this Agreement.
4.8Section 2.3 AbsenceTreatment of Certain Changes. Since the Company Balance Sheet Date, (a) there has not been a Material Adverse Effect with respect to the Company (including its Subsidiaries), (a) through the date of this Agreement, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course of business in all material respects consistent with past practice, except for the negotiation, execution, delivery and performance of this Agreement and except as set forth in Section 4.8(c) of the Company Disclosure Letter, since (a) neither the Company nor any of its Subsidiaries has taken any action that, if taken after the date of this Agreement without the consent of Parent, would constitute a breach of clause (f), (g), (h), (i), (j), (k), (m), (o), (q), or (x) of Section 6.1.
4.9Compliance with Law; Legal Proceedings. Except as set forth in Section 4.9 of the Company Disclosure Letter, the Company and each of its Subsidiaries is and has been since January 1, 2014 in compliance with and is not in default under or in violation of any applicable Law, except where such non-compliance, default or violation would not reasonably be expected to have a Material Adverse Effect with respect to the Company. Except as set forth in Section 4.9 of the Company Disclosure Letter, since January 1, 2014, neither the Company nor any of its Subsidiaries has received any written notice or, to the Knowledge of the Company, other communication from any Governmental Authority regarding any actual or possible violation of, or failure to comply with, any Law, except as would not reasonably be expected to have a Material Adverse Effect with respect to the Company. Except as set forth in Section 4.9 of the Company Disclosure Letter, there are no Legal Proceedings pending or, to the Knowledge of the Company, threatened by any Governmental Authority with respect to the Company or any of its Subsidiaries or Legal Proceedings pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective properties, at law or in equity before any Governmental Authority, and there are no writs, injunctions, orders, judgments or decrees of any Governmental Authority against the Company or any of its Subsidiaries, in each case except for those that do not or would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
4.10Permits. The Company and each of its Subsidiaries are in possession of all Permits (excluding Environmental Permits) necessary for the Company and its Subsidiaries to own, lease and operate their properties and assets and to carry on their businesses as they are now being conducted (“Company Permits”), except where the failure to have any of the Company Permits would not reasonably be expected to have a Material Adverse Effect with respect to the Company. All of the Company Permits are issued in the correct entity’s name. All Company Permits are in full force and effect, except where the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect with respect to the Company. No suspension or cancellation of any of the Company Permits is pending or, to the Knowledge of the Company, threatened, except where such suspension or cancellation would not reasonably be expected to have a Material Adverse Effect with respect to the Company. Except as set forth in Section 4.10 of the Company Disclosure Letter, the Company and its Subsidiaries are not, and since December 31, 2014, have not been, in violation or breach of, or default under, any Company Permit, except where such violation, breach or default would not reasonably be expected to have a Material Adverse Effect with respect to the Company. As of the date of this Agreement, to the Knowledge of the Company, no event or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of the Company or any of its Subsidiaries under, any Company Permit, or has caused (or would cause) an applicable Governmental Authority to fail or refuse to issue, renew or extend any Company Permit (in each case, with or without notice or lapse of time or both), except for violations, breaches, defaults, losses, accelerations or failures that would not reasonably be expected to have a Material Adverse Effect with respect to the Company.MLP Restricted Unit Awards.
4.11Material Contracts.
(a)Section 4.11(a) of At the Company Disclosure Letter lists as of the date of this Agreement, and the Company has made available to the Buyer Parties copies that are true, correct and complete in all material respects of, all contracts, agreements, commitments, arrangements, licenses (including with respect to Intellectual Property Rights), leases (including with respect to personal property, but excluding real property leases) and other instruments to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their respective personal properties or assets is bound (but which, for the avoidance of doubt, shall not include Company Benefit Plans) that:
(i)would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or disclosed by the Company on a Current Report on Form 8-K;
(ii)contain covenants that materially limit the ability of the Company or any of its Subsidiaries to compete in any business or with any Person or in any geographic area, or to sell, supply or distribute any of the Company’s services or products (including any non-compete, exclusivity, or “most-favored-nation” provisions) or which, following the consummation of the Merger, could materially restrict or purport to restrict such ability of the Surviving Entities or HoldCo;
(iii)provide for or govern the formation, creation, operation, management or control of any strategic partnership or joint venture of the Company and its Subsidiaries;
(iv)along with other similar licenses or other grant of Company Intellectual Property, agreements, contain a license or other grant of rights to use Intellectual Property Rights that by its terms calls for more than $500,000 collectively in royalties for such license or rights to use such Intellectual Property Rights to or from the Company or its Subsidiaries (including covenants not to sue and patent cross-licenses) excluding with respect to licenses or rights granted to the Company or its Subsidiaries, licenses for commercially available software or “open source software” or under a similar licensing or distribution model;
(v)involve the joint development of products or technology with a third party with products or technology requiring an investment by the Company in excess of $500,000;
(vi)other than solely among wholly owned Subsidiaries of the Company, relate to (A) Indebtedness having an outstanding principal amount in excess of $5,000,000 or (B) conditional sale arrangements, the sale, securitization or servicing of loans or loan portfolios, inEffective Time, each case, in connection with which the aggregate actual contingent obligations of the Company and its Subsidiaries under such contract are greater than $5,000,000;
(vii)were entered into after December 30, 2016, or have not yet been consummated, and involve the acquisition or disposition, directly or indirectly (by merger or otherwise), of a business or capital stock or other equity interests of another Person;
(viii)by their terms call for aggregate payments by the Company or any of its Subsidiaries or to the Company or any of its Subsidiaries under such contract of more than $1,000,000 in any one (1) year (including by means of royalty payments) other than contracts
made in the ordinary course of business consistent with past practice and other than any Company Benefit Plan;
(ix)are with respect to any acquisition by the Company or any of its Subsidiaries pursuant to which the Company or any of its Subsidiaries has (A) any continuing indemnification obligations or (B) any “earn-out” or other contingent payment obligations, in each case, greater than $1,000,000; or
(x)are entered into between any present or former director or executive officer of the Company (or any of their Affiliates), on the one hand, and the Company or a Subsidiary of the Company, on the other hand, and that by their terms call for in excess of $100,000 in potential future payments, other than (A) for purposes of employee benefits or relocation and (B) items which would not arise to a related party transaction under Item 404 of Regulation S-K of the Exchange Act.
Each contract of the type described in clauses (i) through (x) of this Section 4.11(a) is referred to herein as a “CompanyMaterial Contract.”
(b)To the extent not available in any report, statement, form, schedule, exhibit or other document filed or furnished by the Company or any of its Subsidiaries with the SEC, the Company has delivered or made available to Parent a true, correct and complete copy of each written Company Material Contract (as amended to date), subject to the confidentiality obligations therein to the extent that (i) such confidentiality obligations are described in Section 4.11(a) of the Company Disclosure Letter and (ii) Company has unsuccessfully used its commercially reasonable efforts to obtain a waiver of such confidentiality obligations from the counterparty, listed in Section 4.11(a) of the Company Disclosure Letter. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company: (i) each Company Material Contract is valid and binding on the Company or the Subsidiary of the CompanyMLP Restricted Unit Award that is a party theretonot vested and to the Knowledge of the Company, each other party thereto, and is in full force and effect and enforceabledoes not vest in accordance with its terms except to the extent that they have previously expired in accordance with their terms; (ii) the Company, its Subsidiaries and, to the Knowledge of the Company, each other party thereto, have performed and complied with all obligations required to be performed or complied with by them under each Company Material Contract; and (iii) there is no default under any Company Material Contract by the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any other party thereto.
4.12Tax Matters. Except as(as set forth in Section 4.12 of the Company Disclosure Letter:
(a)All material Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries, have been duly and timely filed (taking into account any extensions of time within which to file).
(b)All Tax Returns filed by the Company or any of its Subsidiaries are true, correct and complete in all material respects.
(c)All Taxes shown to be due on such Tax Returns and all other material Taxes, if any, required to be paid by the Company or its Subsidiaries for all periods ending through the date of
this Agreement have been paid or adequate reserves have been established on the balance sheet of the Company and its consolidated Subsidiaries included in the Company SEC Documents.
(d)There are no material Liens with respect to Taxes, other than Permitted Liens, on any asset of Company or any of its Subsidiaries.
(e)There is no material claim against the Company 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 Taxes or Tax Returns of or with respect to the Company or any of its Subsidiaries.
(f)No material (i) audit or examination or (ii) refund litigation with respect to any Tax Return or Taxes of the Company or any of its Subsidiaries is pending. As of the date of this Agreement, neither the Company nor any of its Subsidiaries has granted any requests, agreements, consents or waivers to extend the statutory period of limitationsan applicable to the assessment of any Taxes with respect to any Tax Returns.
(g)Neither the Company nor any of its Subsidiaries (i) is a party to any Tax allocation, Tax sharing, Tax indemnity or similar agreement (excluding commercial and debt agreements entered into in the ordinary course of business the primary purpose of which does not relate to Taxes) or (ii) is under an obligation under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or as transferee or successor, such that, in each of clauses (i) and (ii), the Company or any of its Subsidiaries is, on or after the date of this Agreement, liable for any amount of Taxes of another Person (other than the Company or any of its Subsidiaries).
(h)Each of the Company’s Subsidiaries is currently either (i) properly classified as a partnership for U.S. federal income Tax purposes or (ii) properly disregarded as an entity separate from its respective owner for U.S. federal income Tax purposes pursuant to Treasury Regulation Section 301.7701-3(b).
(i)Each of the Company’s Subsidiaries that is classified as a partnership for U.S. federal income Tax purposes has in effect a valid election under Section 754 of the Code.
(j)Astro Partners is properly classified as a partnership for U.S. federal income Tax purposes, and not as an association or a publicly traded partnership taxable as a corporation under Section 7704 of the Code and has been properly treated as such since its formation.
(k)The Company and each of its Subsidiaries have withheld from their employees (and timely paid to the appropriate Governmental Authority) proper and accurate amounts for all periods through the date of this Agreement in compliance with all Tax withholding provisions of applicable Tax Laws (including income, social security, and employment Tax withholding for all types of compensation).
(l)The Company and each of its Subsidiaries have withheld (and timely paid to the appropriate Governmental Authority) proper and accurate amounts for all periods through the date of this Agreement in compliance with all Tax withholding provisions of applicable Tax Laws other than provisions of employee withholding (including withholding of Tax on dividends, interest, and royalties and similar income earned by nonresident aliens and foreign corporations and withholding of Tax on United States real property interests).
(m)None of the Company or its Subsidiaries has “participated” in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(n)The Company is not aware of any fact or circumstance that would reasonably be expected to prevent (i) the Parent Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code or (ii) the Mergers, taken together, from qualifying as an exchange within the meaning of Section 351 of the Code.
(o)No disallowance of a deduction under Section 162(m) or Section 280G of the Code, or imposition of an excise tax under Section 4999 of the Code, for any amount paid or payable by the Company or any of its Subsidiaries as employee compensation, whether under any contract, plan, program or arrangement, understanding or otherwise, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company, eitheraward agreement) as a result of the Merger or otherwise.
(p)Section 4.12(p) of the Company Disclosure Letter sets forth (i) the amount on December 30, 2016 (and determined based on information available as of the date of this Agreement) of net operating losses, capital losses and alternative minimum tax credits and other credits of the consolidated group of which the Company is the common parent for U.S. federal income Tax purposes, (ii) dates of expiration of such items and (iii) any limitations on such items. As of the date of this Agreement, neither the Company nor any of its Subsidiaries has undergone an ownership change (within the meaning of Section 382(g)(1) of the Code).
4.13Employee Benefits.
(a)Section 4.13(a) of the Company Disclosure Letter contains a true, correct and complete list identifying each material Company Benefit Plan. For purposes of this Agreement, “CompanyBenefit Plan” means each “employee pension benefit plan” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) (whether or not subject to ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) (whether or not subject to ERISA) and any other plan, program, agreement, arrangement, policy, practice, contract, fund or commitment providing for pension, severance or retention benefits, profit-sharing, fees, bonuses, retention, stock ownership, stock options, stock appreciation, stock purchase or other stock-related benefits, incentive or deferred compensation, vacation benefits, life or other insurance (including any self-insured arrangements), health or medical benefits, dental benefits, employee assistance programs, salary continuation, unemployment benefits, disability or sick leave benefits, workers’ compensation benefits, relocation, post-employment or retirement benefits (including compensation, pension, health, medical and life insurance benefits) or other form of benefits which is or has been maintained, administered, participated in or contributed to by the Company or any entity (whether or not incorporated) that, together with the Company, would be treated as a single employer under Section 414 of the Code and of ERISA Section 4001 (a “Company ERISA Affiliate”) and covers any employee, former employee or independent contractor of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any material liability; provided, however, that Company Benefit Plans shall not include any “multiemployer plan” (as defined in Section 3(37) of ERISA) (a “Multiemployer Plan”). Prior to the date of this Agreement, the Company has provided or made available to Parent true, correct and complete copies of each of the following, as applicable, with respect to each Company Benefit Plan: (i) the plan document or agreement; (ii) a written description if such plan is not set forth in a written document; (iii) each trust, insurance, annuity or other funding contract or agreement related thereto,
if any; (iv) the most recent (A) Form 5500 and attached schedules, (B) audited financial statements, (C) actuarial or other valuation reports and (D) summary plan description; (v) the most recent determination or opinion letter, if any, received from the Internal Revenue Service; (vi) any material written communications to or from any Governmental Authority; (vii) the most recent non-discrimination tests performed under the Code; and (viii) copies of material notices, letters and other correspondence from the Internal Revenue Service, U.S. Department of Labor, Pension Benefit Guaranty Corporation, SEC or other Governmental Authority.
(b)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, with respect to each Company Benefit Plan, (i) all payments due from the Company or any of its Subsidiaries to date have been timely made or accrued in accordance with GAAP, (ii) each such Company Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service with respect to such qualification or has pending or has time remaining in which to file, an application for such determination from the Internal Revenue Service, and to the Knowledge of the Company, no event or circumstance exists or has occurred that has or is likely to adversely affect the qualified status of such Company Benefit Plan and with respect to any such Company Benefit Plan that has been terminated prior to the execution of this Agreement, the applicable sponsor of the plan received a favorable determination letter from the Internal Revenue Service with respect to its termination, (iii) there are no actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened with respect to such Company Benefit Plan or against the assets of such Company Benefit Plan and (iv) it has been operated and administered in compliance with its terms and with all applicable Laws, including ERISA and the Code (including Section 409A of the Code), and all applicable orders, in each case, in all material respects.
(c)Except (i) as set forth in Section 4.13(c) of the Company Disclosure Letter and (ii) as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, as to any Company Benefit Plan that is subject to Title IV of ERISA, (i) there has been no event or condition which presents the risk of a plan termination, (ii) the plan has not failed to meet any minimum funding standards, whether waived or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code, (iii) no “reportable event” within the meaning of Section 4043 of ERISA has occurred, (iv) no notice of intent to terminate the plan has been given under Section 4041 of ERISA, (v) no proceeding has been instituted under Section 4042 of ERISA to terminate the plan, (vi) no liability to the PBGC has been incurred and (vii) the assets of the plan equal or exceed the actuarial present value of the benefit liabilities based on reasonable actuarial assumptions and the asset valuation principles established by the PBGC.
(d)At no time during the six (6) years immediately preceding the date of this Agreement has the Company, any of its Subsidiaries or any Company ERISA Affiliate had any obligation to contribute to or incurred any withdrawal liability (within the meaning of Section 4201 of ERISA) with respect to any Multiemployer Plan and the Company, its Subsidiaries and each Company ERISA Affiliate has no liability with respect to any outstanding claims for withdrawal liability that were previously assessed by any Multiemployer Plan. Except as set forth in Section 4.13(d) of the Company Disclosure Letter, no Company Benefit Plan is (i) a “defined benefit plan” (as defined in Section 414 of the Code), (ii) a “multiple employer” plan (as defined in Section 4063 or 4064 of ERISA or Section 413 of the Code) (in each case under clause (i) or (ii) whether or not subject to ERISA) or (iii) subject to Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. Except as set forth in
Section 4.13(d) of the Company Disclosure Letter, with respect to each Company Benefit Plan that is a “welfare plan” (as defined in Section 3(1) of ERISA) (whether or not subject to ERISA), neither the Company, nor any of its Subsidiaries, nor any Company ERISA Affiliate has any material liability with respect to an obligation to provide welfare benefits, including death or medical benefits (whether or not insured), with respect to any Person beyond such Person’s retirement or other termination of service, other than coverage mandated by Section 4980B of the Code, by state Law (or other Law) or company-paid or subsidized healthcare coverage required by any employment, severance or similar plan or arrangement, or disability benefits under any employee welfare plan that have been fully provided for by insurance or otherwise.
(e)Except as, individually or in the aggregate, has not had and would not reasonably be expected to result in a material liability with respect to the Company and its Subsidiaries taken as a whole, to the Knowledge of the Company, no Company Benefit Plan is under audit or is the subject of an investigation by the Internal Revenue Service, the U.S. Department of Labor, the SEC, the PBGC or any other Governmental Authority (and, without regard to the Knowledge of the Company, the Company has not received written notice of any such audit or investigation) nor, to the Knowledge of the Company, is any such audit or investigation threatened or anticipated with respect to any Company Benefit Plan.
(f)Except as specifically contemplated in this Agreement, with respect to each current employee, director or independent contractor of the Company or any of its Subsidiaries, the consummation of the Merger Transactions will not, either alone or upon the occurrence of any additional or subsequent events, whether contingent or otherwise: (i) result in any payment or benefit becoming due or payable to, or required to be provided to, or materially increase any amounts or benefits otherwise payable or due to, any such Person, except to the extent such payment or benefit is provided pursuant to the Company’s severance plans or employment agreements as in effect on the date of this Agreement (which has been provided pursuant to Section 4.13(a)), or the forgiveness of any indebtedness of such Person, (ii) result in the acceleration of the time of payment, vesting or funding of any compensation or benefits payable to any such Person, (iii) give rise to any additional service or benefit credits under, or result in any breach of or default under, any Company Benefit Plan, (iv) trigger any other material obligation to any such Person, (iv) limit or restrict the right to amend, terminate or transfer the asset of any Company Benefit Plan on or following the Astro Effective Time or (v) result in any amount failing to be deductible by reason of Section 280G of the Code. There is no contract, agreement, arrangement or policy to which the Company or any Company ERISA Affiliate is a party or by which it is bound to compensate any employee of the Company or its Subsidiaries for excise Taxes paid pursuant to Section 4999 of the Code.
(g)To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has disseminated in writing any legally binding intent or commitment to create or implement any additional employee benefit plan that would be a Company Benefit Plan if in existence on the date of this Agreement, or to amend, modify or terminate any Company Benefit Plan, in each case that would result in the incurrence of a material liability by the Company and its Subsidiaries taken as a whole. Each Company Benefit Plan can be amended or terminated after the Closing in accordance with its terms without material liabilities to Parent, the Company or any of their Affiliates.
(h)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, neither the Company, nor any of its Subsidiaries nor any Company ERISA Affiliate has unfunded liabilities with respect to any Company Benefit Plan that is a “pension plan” (within the meaning of Section 3(2) of ERISA)
that covers current or former non-U.S. employees of the Company or any of its Subsidiaries that, if required to be immediately funded, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.
(i)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, neither the Company, nor any of its Subsidiaries, nor any Company ERISA Affiliate, nor any of the Company Benefit Plans, nor any trust created thereunder, nor, to the Knowledge of the Company, any trustee or administrator thereof, has engaged in a prohibited transaction (within the meaning of Section 406 of ERISA and Section 4975 of the Code) in connection with which the Company, any of its Subsidiaries or any of the Company Benefit Plans that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.
(j)With respect to any employee pension benefit plan, within the meaning of Section 3(2) of ERISA, that is not a Company Benefit Plan, but that is sponsored, maintained or contributed to, or has been sponsored, maintained or contributed to within the six-year period preceding the Astro Effective Time by any Company ERISA Affiliate, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company, (i) no withdrawal liability, within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal liability has not been satisfied, (ii) no liability to the PBGC has been incurred by a Company ERISA Affiliate, which liability has not been satisfied, (iii) no violation of funding requirements under Section 302 of ERISA has been incurred, and (iv) all contributions (including installments) required by Section 302 of ERISA have been timely made.
4.14Labor Matters.
(a)Except as set forth in Section 4.14(a) of the Company Disclosure Letter, neither the Company nor any Subsidiary of the Company is a party to the terms of any collective bargaining agreement or other agreement with any labor union or representative of its employees, and no such agreements are being negotiated. Except as set forth in Section 4.14(a) of the Company Disclosure Letter, no grievance or other legal action arising out of any collective bargaining agreement with the Company or any Subsidiary of the Company exists or is, to the Knowledge of the Company, threatened except as would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
(b)As of the date of this Agreement there is not pending, and at no time during the past three (3) years have there been, any labor disputes existing or, to the Knowledge of the Company, threatened involving strikes, work stoppages, slowdowns, picketing or any other interference with work or production, or any other concerted action by employees except as would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
(c)Except as set forth in Section 4.14(c) of the Company Disclosure Letter, as of the date of this Agreement, no current officer of the Company who is named in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 under the heading “Executive Officers of Registrant” has given written notice to the Company of his or her intent to terminate employment with the Company.
(d)Except as has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company: (i) the Company and each of its Subsidiaries (1) is and for the past three (3) years has been in compliance with all applicable Laws relating to employment
and employment practices and those Laws relating to terms and conditions of employment, wages and hours, occupational safety and health and workers’ compensation and (2) has no charges or complaints relating to unfair labor practices or unlawful employment practices pending or, to the Knowledge of the Company, threatened against it before any Governmental Authority, and (ii) to the Knowledge of the Company, neither the Company nor any of its Subsidiaries has any liability with respect to any misclassification of any person as an independent contractor rather than as an “employee.”
(e)Except as would not result in any material liability to the Company and its Subsidiaries taken as a whole, in the six months prior to the date of this Agreement, neither the Company nor any of its Subsidiaries has effectuated (i) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act (the “WARN Act”) or any similar Law) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any of its Subsidiaries or (ii) a “mass layoff” (as defined in the WARN Act, or any similar Law) affecting any site of employment or facility of the Company or any of its Subsidiaries.
4.15Environmental Matters. Except (i) as set forth in Section 4.15 of the Company Disclosure Letter and (ii) as has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company:
(a)The Company and each of its Subsidiaries and their respective properties, assets and operations are and, since January 1, 2014, have been in compliance with Environmental Laws.
(b)The Company and each of its Subsidiaries are in possession of all Environmental Permits necessary for the Company and its Subsidiaries to own, lease or operate their properties and assets and to carry on their businesses as they are now being conducted (“Company Environmental Permits”). All of the Company Environmental Permits are issued in the correct entity’s name. All Company Environmental Permits are in full force and effect. No suspension or cancellation of any of the Company Environmental Permits is pending or, to the Knowledge of the Company, threatened. The Company and its Subsidiaries are not, and since December 31, 2014 have not been, in violation or breach of, or default under, any Company Environmental Permit. As of the date of this Agreement, to the Knowledge of the Company, no event or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of the Company or any of its Subsidiaries under, any Company Environmental Permit, or has caused (or would cause) an applicable Governmental Authority to fail or refuse to issue, renew or extend any Company Environmental Permit (in each case, with or without notice or lapse of time or both).
(c)There are no pending or, to the Knowledge of the Company, threatened Legal Proceedings against the Company or any of its Subsidiaries or, to the Knowledge of the Company, otherwise adversely affecting any of their respective properties, assets or operations under any Environmental Laws that, in each case, has not been fully resolved.
(d)There has been no Release of any Hazardous Material by the Company or any of its Subsidiaries that would reasonably be expected to result in any investigatory, remedial or corrective action obligation on the part of the Company or any of its Subsidiaries under Environmental Laws.
(e)Neither the Company nor any of its Subsidiaries has received any written notice asserting an alleged liability or obligation under any Environmental Law with respect to any
investigatory, remedial or corrective activity as a result of any Release of Hazardous Materials at any real property offsite the properties of the Company or any of its Subsidiaries where the Company or such Subsidiary transported or disposed or arranged for the transport or disposal of any Hazardous Materials and, to the Knowledge of the Company, there are no circumstances that would reasonably be likely to result in the receipt of such notice.
(f)Neither the Company nor any of its Subsidiaries has entered into, or to the Knowledge of the Company is otherwise subject to, any agreements, consents, orders, decrees or judgments pursuant to Environmental Law that, to the Knowledge of the Company, prevent or limit the current or future use or operation of their properties.
(g)To the Knowledge of the Company, there has been no exposure of any person or property to any Hazardous Material in connection with the operations of the Company and its Subsidiaries that would reasonably be expected to form the basis of a claim for damages or compensation against the Company or its Subsidiaries.
(h)The Company has made available to Parent complete and accurate copies of all internal and external environmental assessments, reports, audits, studies and other similar documents addressing liabilities or obligations under Environmental Law with respect to the Company and its Subsidiaries’ properties, assets and operations that are in the possession or control of the Company or its Subsidiaries.
(i)This Agreement and the Merger Transactions will not result in (i) the termination or revocation of, or a right of termination or cancellation under, any Company Environmental Permit or (ii) any liabilities for site investigation or cleanup, or require the prior consent of any Person, pursuant to Environmental Laws, including so-called “transaction-triggered” or “responsible property transfer” requirements.
(j)Notwithstanding any other provision of this Article IV to the contrary, this Section 4.15 contains the sole and exclusive representations and warranties of the Company and its Subsidiaries with respect to matters arising under Environmental Laws; provided, however, the provisions of this Section 4.15(j) shall not qualify, limit, diminish or impair the representations and warranties set forth in Sections 4.4, 4.5 , 4.6, 4.7 or 4.8 with respect to matters arising under Environmental Laws.
4.16Real Property.
(a)Section 4.16(a) of the Company Disclosure Letter sets forth a true, correct and complete list of all real property owned or ground leased as of the date of this Agreement by the Company or any of its Subsidiaries (the “CompanyOwned Real Property”), including the address and primary use of such property. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, the Company or one of its Subsidiaries has good, marketable and valid title to each of the Company Owned Real Properties, free and clear of all Liens other than Permitted Liens. Except as set forth in Section 4.16(a)of the Company Disclosure Letter, there are no purchase options, rights of first refusal or similar purchase rights outstanding with respect to any of the Company Owned Real Property, except for such options or rights the exercise of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company. Neither the Company nor any of its Subsidiaries has received written notice of any pending condemnation and, to the Knowledge of the Company, there is no condemnation threatened,
with respect to any of the Company Owned Real Property, except for such condemnations, individually or in the aggregate, which have not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company. Except as set forth in Section 4.16(a) of the Company Disclosure Letter and as would not reasonably be expected to have a Material Adverse Effect with respect to the Company, (i) each lease or sublease pursuant to which the Company or any of its Subsidiaries leases or subleases all or a portion of any Company Owned Real Property to a third party as of the date of this Agreement is valid, binding and in full force and effect, (ii) all rent and other sums and charges payable by the lessee or sublessee thereunder are current and (iii) no termination event or condition or uncured default on the part of the lessee or sublessee thereunder exists.
(b)Section 4.16(b) of the Company Disclosure Letter sets forth a list that is true, correct and complete of all leases, subleases and other agreements relating to material assets of the Company or any of its Subsidiaries as of the date of this Agreement under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property (a “Company Real Property Lease”). Except as, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect with respect to the Company, each Company Real Property Lease is valid, binding and in full force and effect, and all rent and other sums and charges payable by the Company or any of its Subsidiaries as tenants thereunder are current. Except as, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect with respect to the Company, no termination event or condition or uncured default of a material nature on the part of the Company or, if applicable, its Subsidiary or, to the Knowledge of the Company, the landlord thereunder exists under any Company Real Property Lease. Except as, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect with respect to the Company, the Company and each of its Subsidiaries has a good and valid leasehold interest in each parcel of real property leased by it pursuant to a Company Real Property Lease, free and clear of all Liens, other than Permitted Liens. Except as, individually or in the aggregate, has not had or would not reasonably be expected to have a Material Adverse Effect with respect to the Company, neither the Company nor any of its Subsidiaries has received written notice of any pending condemnation and, to the Knowledge of the Company, there is no condemnation threatened in writing, with respect to any property leased pursuant to any of the Company Real Property Leases.
4.17Intellectual Property.
(a)Section 4.17(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of all Company Registered Intellectual Property. There are no proceedings or actions before any court or tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) to which the Company or any of its Subsidiaries is or was a party, that are still pending or have been raised in the past six (6) years, and in which claims are or were raised relating to the validity, enforceability, scope, ownership or Infringement of any of the Company Registered Intellectual Property, except for such proceedings or actions which, individually or in the aggregate, have not had and would not reasonably be expected to have, a Material Adverse Effect with respect to the Company. To the Knowledge of the Company, each item of Company Registered Intellectual Property is subsisting, valid and enforceable, and is in good standing with the relevant Governmental Authority, including with respect to the payment of maintenance and other fees, except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company and except
to the extent a court or tribunal has made a contrary determination as set forth in Section 4.17(a) of the Company Disclosure Letter.
(b)Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, the Company or a Subsidiary thereof is the sole owner of each item of Company Registered Intellectual Property and, to the Knowledge of the Company, the owner of each other item of Company Intellectual Property, in each case free and clear of any Liens other than Permitted Liens and, immediately following the Mergers, the Company and its Subsidiaries will have the same rights thereto as they had prior to the Mergers, except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect with respect to the Company. In the past three (3) years, neither the Company nor any of its Subsidiaries has transferred ownership of or granted any exclusive license (or agreed to any restrictions that have substantially the same effect thereof) with respect to the use, transfer or licensing of, any Company Intellectual Property, except for such transfer, grant or agreement that, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
(c)To the Knowledge of the Company, the Company and its Subsidiaries own or have a valid right to use all Intellectual Property Rights that are used in or necessary for the conduct of the business of the Company and its Subsidiaries and, immediately following the Mergers, the Company and its Subsidiaries will have the same rights thereto as they had prior to the Mergers, in each case, except as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company.
(d)To the Knowledge of the Company, neither the operation of the business of the Company and its Subsidiaries as currently conducted or as it has been conducted for the past six (6) years by the Company or any of its Subsidiaries, nor, to the Knowledge of the Company, do any Company Products, Infringe any Intellectual Property Rights of any Person, and no previously asserted written claims of Infringement against the Company or any of its Subsidiaries remain outstanding or unresolved, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
(e)To the Knowledge of the Company, neither this Agreement nor the Merger Transactions, including the assignment to HoldCo by operation of Law or otherwise of any contracts to which the Company or any of its Subsidiaries is a party, will cause any of the following: (i) HoldCo or any of its Affiliates to grant or to be obligated to grant to any third party (1) any covenant not to sue with respect to, or (2) any right to or with respect to, any material Intellectual Property Rights owned by, or licensed to, the Company or any of its Subsidiaries immediately prior to the Closing, (ii) HoldCo or any of its Affiliates to be bound by, or subject to, any non-compete with respect to the operation or scope of their respective businesses, or (iii) HoldCo, any of its Affiliates or the Company or any of its Subsidiaries to be obligated to pay any material royalties or other material fees or consideration with respect to Intellectual Property Rights of any third party in excess of those payable by the Company or its Subsidiaries in the absence of this Agreement or the Merger Transactions.
4.18Anti-Corruption.
(a)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, none of the Company,
any Subsidiary of the Company or any director, officer or, to the Knowledge of the Company, any Affiliate, agent, distributor, employee, or other Person acting on behalf of the Company or its Subsidiaries is aware of or has, directly or indirectly, taken any action that would cause the Company or any of its Subsidiaries to be in violation of the United States Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), or any other anticorruption or anti-bribery Laws applicable to the Company, any of its Subsidiaries or any of its Affiliates (collectively with the FCPA, the “Anti-Corruption Laws”).
(b)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, none of the Company, any Subsidiary of the Company or any director, officer or, to the Knowledge of the Company, any Affiliate, agent, distributor, employee, or other Person acting on behalf of the Company or its Subsidiaries is aware of or has taken any act in furtherance of an offer, payment, promise to pay, authorization, or ratification of the payment, directly or indirectly, of any gift, money or anything of value to a Government Official or any other Person while knowing or having a reasonable belief that all or some portion of it would be given to a Government Official and used for the purpose of: (A) influencing any act or decision of a Government Official or other Person, including a decision to fail to perform official functions, (B) inducing any Government Official or other Person to do or omit to do any act in violation of the lawful duty of such official, (C) securing any improper advantage, or (D) inducing any Government Official to use influence with any Governmental Authority in order to effect any act or decision of such Governmental Authority, in order to assist the Company, any Subsidiary of the Company or any Affiliate of the Company in obtaining or retaining business with, or directing business to, any Person, in each case, in violation of any applicable Anticorruption Laws.
(c)As of the date of this Agreement, to the Knowledge of the Company, (i) there is no investigation of or request for information from the Company or any of its Subsidiaries by any Governmental Authority regarding the Anticorruption Laws, and (ii) there is no other audit, review, inspection, survey, examination, allegation, investigation or inquiry by any Governmental Authority regarding the Company or any of its Subsidiaries’ actual or possible violation of the Anticorruption Laws.
(d)No Legal Proceeding by or before any Governmental Authority involving the Company or any of its Subsidiaries or Affiliates, or any of their respective officers, directors, agents, distributors, employees, or other Persons acting on their behalf, with respect to any applicable Anticorruption Laws is pending or, to the Knowledge of the Company, threatened. Since January 1, 2014, no civil or criminal penalties have been imposed on the Company or any of its Subsidiaries or Affiliates with respect to violations of any applicable Anticorruption Law, except as have already been disclosed in the Company SEC Documents, nor have any disclosures been submitted to any Governmental Authority with respect to violations of Anticorruption Laws.
(e)The Company and each of its Subsidiaries has established and implemented reasonable internal controls and procedures intended to ensure compliance with the Anticorruption Laws.
(f)Except as would not constitute a Material Adverse Effect with respect to the Company, the operations of the Company and its Subsidiaries are and have been, since January 1, 2014, conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Money Laundering Laws”) and no Legal Proceeding by or before any Governmental Authority or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Knowledge of the Company, threatened.
(g)The Company and its Affiliates have complied with all applicable statutory and regulatory requirements relating to export controls and trade sanctions, including, in each case to the extent applicable, the Export Administration Regulations (15 C.F.R. Parts 730 et seq.), the International Traffic in Arms Regulations (22 C.F.R. Parts 120-130), section 999 of the Code, the Trading with the Enemy Act of 1917 (50 U.S.C. §§ 1-44), the International Emergency Economic Powers Act (50 U.S.C. §§1701–1706), the Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901-1908, 8 U.S.C. 1182), and the regulations, rules, and executive orders administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) and any similar rules or regulations of the European Union or other jurisdiction, except as would not constitute a Material Adverse Effect with respect to the Company. Except as would not constitute a Material Adverse Effect with respect to the Company, none of the Company, its directors or officers or, to the Knowledge of the Company, none of its Affiliates, shareholders, or employees has, directly or indirectly, engaged in any transaction or dealing in property or interests in property of, received from or made any contribution of funds, goods, or services to or for the benefit of, provided any payments or material assistance to, or otherwise engaged in or facilitated any transactions with a Prohibited Person. For the purposes of this Agreement, “Prohibited Person” means (i) any individual or entity that has been determined by competent authority to be the subject of a prohibition on such conduct in any law, regulation, rule, or executive order administered by OFAC; (ii) the government, including any political subdivision, agency or instrumentality thereof, of any country against which the United States maintains comprehensive economic sanctions or embargoes; (iii) any individual or entity that acts on behalf of or is owned or controlled by the government of a country against which the United States maintains comprehensive economic sanctions or embargoes; (iv) any individual or entity that has been identified on the OFAC Specially Designated Nationals and Blocked Persons List (Appendix A to 31 C.F.R. Ch. V), as amended from time to time, or 50% or more of which is owned, directly or indirectly, by any such individual or entity; or (v) any individual or entity that has been designated on any similar list or order published by the U.S. government.
(h)Since January 1, 2014, no civil or criminal penalties have been imposed on the Company or, to the Knowledge of the Company, any of the Affiliates of the Company with respect to violations of applicable Laws relating to export control or trade sanctions, nor have any voluntary disclosures relating to export control and trade sanctions issues been submitted to any Governmental Authority. To the Knowledge of the Company, the Company and its Affiliates have not been since January 1, 2014 and are not now under any administrative, civil or criminal investigation or indictment involving alleged violations of any applicable Laws relating to export controls or trade sanctions, except as would not constitute a Material Adverse Effect with respect to the Company. No Governmental Authority has notified the Company or, to the Knowledge of the Company, any of the Affiliates of the Company in writing since January 1, 2014 of any actual or alleged violation or breach of any applicable Laws relating to export controls or trade sanctions, except as would not constitute a Material Adverse Effect with respect to the Company. To the Knowledge of the Company, none of the Company or its Affiliates has, since January 1, 2014, undergone or is undergoing any internal or external audit, review, inspection, investigation, survey or examination of records relating to the Company’s or any of its Affiliates’ export activity the result of which would constitute a Material Adverse Effect with respect to the Company.
4.19Insurance. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company, the Company and its Subsidiaries have all material policies of insurance covering the Company, its Subsidiaries or any of their respective employees, properties or assets, including policies of life, property, fire, workers’ compensation, products liability, directors’ and officers’ liability and other casualty and liability insurance, that is in a form and amount that is customarily carried by Persons conducting business similar to that of the Company and which is adequate (in terms of amount and losses and risks covered) for the operation of its business and ownership of its assets and properties, or as is required under the terms of any contract or agreement. With respect to each such insurance policy, (i) the policy is in full force and effect and all premiums due thereon have been paid, and (ii) neither the Company nor any of its Subsidiaries is in breach or default, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time or both, would constitute such a breach or default, or permit termination or modification of, any such policy, in each case, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company. There is no material claim pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies and there has been no threatened termination of, material alteration in coverage, or material premium increase with respect to, any such policies, except for such claims, threatened terminations, material alterations and material premium increases which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to the Company.
4.20No Brokers. No action has been taken by or on behalf of the Company that would give rise to any valid claim against any Party for a brokerage commission, finder’s fee or other like payment with respect to the Merger Transactions, excluding fees to be paid to J.P. Morgan Securities, Inc.
4.21Customers and Suppliers. Except as set forth in Section 4.21 of the Company Disclosure Letter, since January 1, 2014 through the date of this Agreement: (a) no customer or supplier of the Company or any of its Subsidiaries has canceled or otherwise terminated its relationship with the Company or any of its Subsidiaries except as would not constitute a Material Adverse Effect with respect to the Company; (b) no customer or supplier of the Company or any of its Subsidiaries has threatened to cancel or otherwise terminate its relationship with the Company or any of its Subsidiaries or its usage of the services of the Company or any of its Subsidiaries, except as would not constitute a Material Adverse Effect with respect to the Company; and (c) the Company and its Subsidiaries have no direct or indirect ownership interest that is material to the Company and its Subsidiaries taken as a whole in any customer or supplier of the Company or any of its Subsidiaries.
4.22Company Information. The information relating to the Company and its Subsidiaries that is provided by the Company or its representatives for inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus and the Registration Statement, or in any other document filed with any other Governmental Authority in connection with the Merger Transactions, will not (i) in the case of the Form S-4, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it is declared effective under the Securities Act, and (ii) in the case of the Joint Proxy Statement/Prospectus, at the date it is first mailed to each of the Company’s and Parent’s stockholders or at the time of each of the Company Stockholders Meeting and the Parent Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Form S-4 and the Joint Proxy Statement/Prospectus (except for such portions thereof that relate only to Parent or any of its Subsidiaries) will comply as to form in all material respects with the provisions of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act.
4.23Affiliate Transactions. As of the date of this Agreement, there are no transactions, contracts, arrangements, commitments or understandings between the Company or any of its Subsidiaries, on the one hand, and any of the Company’s Affiliates (other than wholly owned Subsidiaries of the Company), on the other hand, that would be required to be disclosed by the Company under Item 404 of Regulation S-K under the Securities Act which have not been so disclosed in the Company SEC Documents.
4.24Company Fairness Opinion. Prior to the execution of this Agreement, the Independent Director Committee has received an opinion from J.P. Morgan Securities, LLC to the effect that, as of the date of such opinion and subject to certain assumptions, qualifications, limitations and other matters stated therein, the Merger Consideration is fair, from a financial point of view, to the Disinterested Stockholders.
4.25State Takeover Laws. No approvals are required under Takeover Laws in connection with the performance by the Company of its obligations under this Agreement or the Voting Agreements.
4.26Data Breaches. Except as set forth in Section 4.26 of the Company Disclosure Letter, neither the Company, nor any of its Subsidiaries has issued, and neither the Company nor any of its Subsidiaries has been notified by any Governmental Authority or otherwise has any Knowledge that it is required to issue, any notifications to data owners under any Law relating to the actual or suspected unauthorized access or acquisition of personally identifiable information, or protected health information as required by applicable Laws. Except as set forth in Section 4.26 of the Company Disclosure Letter, the Company has no Knowledge of any such actual or suspected unauthorized access or acquisition of such information that would require such notifications. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has been required by a Governmental Authority to undergo any investigation from any Governmental Authority with respect to privacy or data security of personally identifiable information or other protected data and, to the Knowledge of the Company, is not subject to any current investigation by any Governmental Authority (including as a result of any complaints from any individuals provided to such Governmental Authority) regarding the same. The Company is in material compliance with all applicable requirements under Law relating to personally identifiable information, other data protected by applicable Laws and data security. To the Company’s Knowledge, the Company has obtained the requisite consents from providers of personally identifiable information and protected health information.
ARTICLE V
BUYER PARTIES REPRESENTATIONS AND WARRANTIES
Except as disclosed in any report, statement, form, schedule or other document filed or furnished by Parent or any of its Subsidiaries with the SEC subsequent to December 31, 2015 (collectively, “Parent SEC Documents”) that is publicly available prior to the date of this Agreement (excluding any disclosures included therein to the extent they are cautionary, predictive or forward-looking in nature, including those in any risk factor section of such documents), the Buyer Parties hereby warrant and represent with respect to themselves and their respective Subsidiaries to the Company, as follows:
5.1Organization, General Authority and Standing.
(a)Each of the Buyer Parties is a corporation duly organized or formed, as applicable, validly existing and in good standing under the Laws of the State of Delaware. Each Buyer Party (i) has the requisite corporate power and authority to own and lease all of its properties and assets and to carry on its business as it is now being conducted, (ii) is duly qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or the conduct of its business requires it to be so qualified, and (iii) has in effect all federal, state, local, and foreign governmental authorizations and permits necessary for it to own or lease its properties and assets
and to carry on its business as it is now conducted, except where the failure to have such power and authority, to be so qualified or to have such authorizations and permits in effect would not have a Material Adverse Effect with respect to Parent.
(b)True, correct and complete copies of the Parent Certificate and the Parent Bylaws, each as in effect as of the date of this Agreement, have previously been made available to the Company.
(c)Section 5.1(c) of the Parent Disclosure Letter sets forth, as of the date of this Agreement, the name and jurisdiction of organization of each (i) Subsidiary of Parent and (ii) entity (other than the Subsidiaries of Parent) in which Parent or any Subsidiary of Parent owns any interest.Each Subsidiary of Parent (i) is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, (ii) has the requisite entity power and authority to own and lease all of its properties and assets and to carry on its business as it is now being conducted and (iii) has in effect all federal, state, local and foreign governmental authorizations and permits necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted, except where the failure to have such power and authority, to be so qualified or to have such authorizations and permits in effect would not have a Material Adverse Effect with respect to the Buyer Parties.
5.2Capitalization.
(a)As of December 29, 2016, the authorized capital stock of Parent consists of (i) 110,000,000 shares of Parent Common Stock, of which, as of December 29, 2016, 61,954,934 shares were issued and outstanding and (ii) 10,000,000 shares of preferred stock of Parent, par value $0.01 per share (“Parent Preferred Stock”), of which, as of December 29, 2016, no shares were issued and outstanding.As of December 29, 2016, 5,195,791 shares of Parent Common Stock and no shares of Parent Preferred Stock were held in Parent’s treasury.In addition, as of December 29, 2016, there were outstanding Existing Parent Stock Options to purchase an aggregate of 51,496 shares of Parent Common Stock, Existing Parent Stock Appreciation Rights to purchase an aggregate of 2,512,887 shares of Parent Common Stock, and Existing Parent Restricted Stock Awards with respect to an aggregate of 881,813 shares of Parent Common Stock. Since December 30, 2016 and prior to the date of this Agreement, Parent has not issued any shares of Parent Common Stock or Parent Preferred Stock, has not granted any restricted stock, options, warrants, preemptive rights, subscriptions, calls or other rights, convertible securities, or exchangeable securities, or entered into any other agreements or commitments of any character that might require it to issue any shares of Parent Common Stock or Parent Preferred Stock, or granted any other awards in respect of any shares of Parent Common Stock or Parent Preferred Stock and has not split, combined or reclassified any of its shares of capital stock, other than shares of Parent Common Stock or Parent Preferred Stock issuable upon exercise of the Existing Parent Stock Options, Existing Parent Restricted Stock Awards or Existing Parent Stock Appreciation Rights.
(b)All of the issued and outstanding shares of Parent Common Stock and Parent Preferred Stock (i) have been duly authorized and validly issued in accordance with applicable Laws and the Second Amended and Restated Certificate of Incorporation of Parent (the “Parent Certificate”), (ii) are fully paid and non-assessable and (iii) are not subject to and were not issued in violation of any option, right of first refusal, preemptive right, subscription right or any similar right or any provision of applicable Law, the Parent Certificate, the Third Amended and Restated Bylaws of Parent (the “Parent Bylaws”) or any contract to which Parent is a party or by which it is otherwise bound.At the time of issuance, all such shares that may be issued upon the exercise or
vesting of, or pursuant to, Existing Parent Stock Options, Existing Parent Restricted Stock Awards or Existing Parent Stock Appreciation Rights (i) will be duly authorized and validly issuedin accordance with applicable Laws and the Parent Certificate, (ii) will be fully paid and nonassessable and (iii) will not be subject to or issued in violation of (A) any option, right of first refusal, preemptive right, subscription right or any similar right or (B) any provision of applicable Law, the Parent Certificate, the Parent Bylaws or any contract to which Parent is a party or by which it is otherwise bound. The shares of New Common Stock to be issued in accordance with this Agreement have been duly authorized and, when issued, will be fully paid and non-assessable and will not be subject to or issued in violation of (i) any option, right of first refusal, preemptive right, subscription right or any similar right or (ii) any provision of applicable Law, the HoldCo Certificate, the HoldCo Bylaws or any contract to which HoldCo or Parent is a party or by which it is otherwise bound.
(c)As of the date of this Agreement, except as set forth in Section 5.2(a) and in Section 5.2(c) of the Parent Disclosure Letter, (i) there are no shares of capital stock, partnership interests, limited liability company interests or other equity securities of Parent issued or authorized and reserved for issuance and (ii) except for equity securities owned by Parent in Subsidiaries of Parent, there are no outstanding shares of restricted stock or Rights, or any commitment to authorize, issue or sell the same or any such equity securities, except pursuant to this Agreement.
(d)Except as set forth in Sections 5.1(c) and 5.2(d) of the Parent Disclosure Letter, Parent does not own beneficially, directly or indirectly, any capital stock or other equity ownership interests of any Person or any interest in a partnership or joint venture of any kind.
(e)All of the issued and outstanding capital stock of each of Astro Merger Sub and Parent Merger Sub is owned directly by HoldCo. Each of Astro Merger Sub and Parent Merger Sub has outstanding no Rights, or any commitment to authorize, issue or sell the same or any such equity securities, except pursuant to this Agreement. Each of HoldCo, Astro Merger Sub and Parent Merger Sub has not conducted any business prior to the date of this Agreement and has no, and prior to the Astro Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Mergers and the Merger Transactions.
(f)As of the date of this Agreement, no bonds, debentures, notes or other indebtedness of Parent having the right to vote on any matters on which Parent Stockholders may vote is issued or outstanding.
5.3Power and Authority.
(a)Each of the Buyer Parties has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and the Voting Agreements and, subject to securing the Required Parent Vote and the filing of the Certificates of Merger with the Secretary of State of the State of Delaware, to consummate the Merger Transactions. Subject to securing the Required Parent Vote, this Agreement, the Voting Agreements and the Merger Transactions have been duly and validly authorized by all necessary corporate action by the Buyer Parties. This Agreement and the Voting Agreements have been duly and validly executed and delivered by each Buyer Party and constitutes a valid and binding agreement of each Buyer Party (assuming the due execution and delivery of this Agreement and the Voting Agreements by, or on behalf of, the Other Parties and the due execution and delivery of the Voting Agreements by the other parties thereto), enforceable against each such Buyer Party in accordance with its terms except as such enforceability may be limited by Creditors’ Rights. The Parent Board has, by resolutions duly adopted by the
requisite vote of the Parent Board (the “Parent Board Approval”) and not subsequently rescinded or modified in any way, unanimously (i) determined and declared that this Agreement and the Merger Transactions are advisable, fair to, and in the best interest of, the Parent and the Parent Stockholders, (ii) approved this Agreement, the transactions contemplated thereby, and the Voting Agreements (to which it is a party), (iii) recommended that the Parent Stockholders vote in favor of the issuance by HoldCo of the New Common Stock as Merger Consideration (the “Share Issuance,” and the recommendation the “Parent Recommendation”) and has directed that the Share Issuance be submitted to the Parent Stockholders for adoption at a duly held meeting of the Parent Stockholders for such purpose (the “Parent Stockholders Meeting”).
(b)The affirmative vote of a majority of the votes cast at the Parent Stockholder Meeting on Parent’s proposal, to be set forth in the Joint Proxy Statement/Prospectus, with respect to the Share Issuance consisting of (i) New Common Stock that upon issuance will have voting power in excess of twenty percent (20%) of the voting power of Parent Common Stock outstanding before the Share Issuance or (ii) a number of shares of New Common Stock that upon issuance will be in excess of twenty percent (20%) of the number of shares of Parent Common stock outstanding before the Share Issuance, in either case in accordance the shareholder approval requirement set forth in Section 312.03 of the NYSE Listed Company Manual (the “Required Parent Vote”), is the only vote required of the holders of any class or series of Parent’s capital stock that shall be necessary to approve the Share Issuance.
5.4No Violations or Defaults. Except as set forth in Section 5.4 of the Parent Disclosure Letter and subject to the declaration of effectiveness of the Registration Statement, required filings under federal and state securities laws and with the NYSE, assuming the other consents and approvals contemplated by Section 5.5 and Article VIII are obtained and assuming the consents, waivers and approvals specified in Section 7.1 are obtained, the execution, delivery and performance of this Agreement and the Voting Agreements and the consummation of the Merger Transactions by the Buyer Parties do not and will not (a) except as would not reasonably be expected to have a Material Adverse Effect with respect to Parent, (i) violate, conflict with, or result in a breach of any provision of, or require any consent, waiver or approval or result in a default or loss or reduction of any rights (or give rise to any right of termination, cancellation, modification or acceleration, or trigger any requirement or option for additional consideration, or any event that, with the giving of notice, the passage of time or otherwise, would constitute a default or loss or reduction of any rights or give rise to any such right) under any of the terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of trust, license, franchise, lease, contract, agreement, joint venture or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective properties or assets is subject or bound, (ii) contravene or conflict with or constitute a violation of any provision of any Law binding upon or applicable to the Buyer Parties or any of their respective Subsidiaries or by which any of their respective assets are bound or (iii) result (or, with the giving of notice, the passage of time or otherwise, would result) in the creation or imposition of any Lien on any asset of the Buyer Parties or any of their respective Subsidiaries, (b) constitute a breach or violation of, or a default under, the organizational documents or other similar governing documents of any Buyer Party or (c) cause the Merger Transactions to be subject to Takeover Laws.
5.5Consents and Approvals. Except as set forth in Section 5.5 of the Parent Disclosure Letter, no consents, approvals or authorizations of, or filings or registrations with, or notifications to, any Governmental Authority are necessary in connection with (a) the execution and delivery by the Buyer Parties of this Agreement or the Voting Agreements or (b) the consummation by the Buyer Parties of the Merger Transactions, except for (i) the filing with the SEC of the Joint Proxy Statement/Prospectus and the Registration Statement, and the declaration of effectiveness by the SEC of the Registration Statement, (ii) the
filing of the Certificates of Merger with the Secretary of State of the State of Delaware, (iii) any consents, authorizations, approvals, filings or exemptions in connection with compliance with the rules of the NYSE, (iv) 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 New Common Stock pursuant to this Agreement, (v) any notices or filings under the HSR Act, or any notices, filings or approvals under any other applicable competition, merger control, antitrust or similar Law or regulation, and (vi) such other consents, authorizations, approvals, filings or registrations the absence or unavailability of which would not reasonably be expected to have a Material Adverse Effect with respect to Parent.
5.6Financial Reports and SEC Documents; Internal Controls.
(a)Since January 1, 2015, all reports, including but not limited to the Annual Reports on Form 10-K, the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K, forms, schedules, statements, exhibits and other documents required to be filed or furnished by Parent and Parent Logistics Partners, with or to the SEC have been or will be timely filed or furnished. The Parent SEC Documents, as of their respective filing dates, (i) complied in all material respects as to form with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary of Parent or Parent Logistics Partners (other than Parent Logistics Partners itself) is required to file reports, forms or other documents with the SEC pursuant to the Exchange Act. There are no outstanding comments from, or unresolved issues raised by, the staff of the SEC with respect to the Parent SEC Documents. To Parent’s Knowledge, no enforcement action has been initiated against Parent or Parent Logistics Partners relating to disclosures contained or omitted from any Parent SEC Document.
(b)The historical financial statements of Parent and its consolidated Subsidiaries contained in or incorporated by reference into any Parent SEC Document (including the related notes and schedules thereto) (i) comply in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, and (ii) have been prepared in accordance with GAAP and fairly present in all material respects the consolidated financial position, results of operations, stockholders’ equity and cash flows, as the case may be, of Parent or entities to which they relate as of the dates or for the periods to which such financial statements relate, in each case in accordance with GAAP, except in each case as may be noted therein, subject to normal year-end audit adjustments in the case of unaudited statements. All of Parent’s Subsidiaries are consolidated for accounting purposes.
(c)Parent and its Subsidiaries make and keep books, records, and accounts and have devised and maintain a system of internal controls, in each case as required pursuant to Section 13(b)(2) under the Exchange Act. Parent and its Subsidiaries have established and maintain disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and the applicable listing standards of the NYSE. Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Parent and its Subsidiaries in the reports that Parent files under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to its management as appropriate to allow timely decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. Parent has disclosed, based on its most recent evaluation prior to the date of this Agreement, to Parent’s outside auditors and the audit committee of the Parent Board (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls over financial reporting.To the Knowledge of Parent, there is no applicable accounting rule, consensus or pronouncement that has been adopted by the SEC, the Financial Accounting Standards Board, the Emerging Issues Task Force or any similar body as of, but is not in effect as of, the date of this Agreement that, if implemented, would reasonably be expected to have a Material Adverse Effect with respect to Parent.
(d)Since December 31, 2015 through the date of this Agreement, to the Knowledge of Parent, (i) none of Parent, any of its Subsidiaries or any director, officer, or auditor of Parent 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 Parent or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices and (ii) no attorney representing Parent or any of its Subsidiaries, whether or not employed by Parent or any of its Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by Parent or any of its officers, directors, employees or agents to the Parent Board or any committee thereof or to any director or officer of Parent.
(e)The principal executive officer and principal financial officer of Parent have made all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act, and the statements contained in any such certifications are complete and correct in all material respects, and neither Parent nor its officers have received notice from any Governmental Authority questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications.
5.7Absence of Undisclosed Liabilities. Except as disclosed in the audited financial statements (or notes thereto) included in Parent’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “Parent Balance Sheet Date”), and in the financial statements (or notes thereto) included in subsequent Parent SEC Documents filed by Parent prior to the date of this Agreement, neither Parent nor any of its consolidated Subsidiaries had at the Parent Balance Sheet Date, or has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise and whether due or to become due and whether or not required to be recorded or reflected on a balance sheet under GAAP) of any nature, except (i) liabilities, obligations or contingencies that (1) are accrued or reserved against in the financial statements of Parent included in the Parent SEC Documents filed prior to the date of this Agreement, or reflected in the notes thereto, (2) were incurred since the Parent Balance Sheet Date in the ordinary course of business which would not reasonably be expected to have a Material Adverse Effect with respect to Parent or (3) relate to this Agreement, the Merger Transactions or the proposal of the Buyer Parties with respect to the Merger or (ii) liabilities, obligations or contingencies that (1) would not reasonably be expected to have a Material Adverse Effect with respect to Parent or (2) have been discharged or paid in full prior to the date of this Agreement.
5.8Absence of Certain Changes. Since the Parent Balance Sheet Date, (a) there has not been a Material Adverse Effect with respect to Parent, (b) through the date of this Agreement, Parent and its
Subsidiaries have conducted their respective businesses only in the ordinary course of business in all material respects consistent with past practice, except for the negotiation, execution, delivery and performance of this Agreement and (c) Parent has not taken any action that, if taken after the date of this Agreement without the consent of the Company, would constitute a breach of Section 6.2(g).
5.9Compliance with Law; Legal Proceedings. Parent and each of its Subsidiaries is and has been since January 1, 2014 in compliance with and is not in default under or in violation of any applicable Law, except where such non-compliance, default or violation would not reasonably be expected to have a Material Adverse Effect with respect to Parent. Since January 1, 2014, neither Parent nor any of its Subsidiaries has received any written notice or, to the Knowledge of Parent, other communication from any Governmental Authority regarding any actual or possible violation of, or failure to comply with, any Law, except as would not reasonably be expected to have a Material Adverse Effect with respect to Parent. There are no Legal Proceedings pending or, to the Knowledge of Parent, threatened by any Governmental Authority with respect to Parent or any of its Subsidiaries or Legal Proceedings pending or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries or any of their respective properties, at law or in equity before any Governmental Authority, and there are no writs, injunctions, orders, judgments or decrees of any Governmental Authority against Parent or any of its Subsidiaries, in each case except for those that do not or would not reasonably be expected to have, a Material Adverse Effect with respect to Parent.
5.10Permits. Parent and each of its Subsidiaries are in possession of all Permits (excluding Environmental Permits) necessary for Parent and its Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses as they are now being conducted (the “Parent Permits”), except where the failure to have any of the Parent Permits would not reasonably be expected to have a Material Adverse Effect with respect to Parent. All of the Parent Permits are issued in the correct entity’s name. All of the Parent Permits are in full force and effect, except where the failure to be in full force and effect would not reasonably be expected to have a Material Adverse Effect with respect to Parent. No suspension or cancellation of any of the Parent Permits is pending or, to the Knowledge of Parent, threatened, except where such suspension or cancellation would not reasonably be expected to have a Material Adverse Effect with respect to Parent. Parent and its Subsidiaries are not, and since December 31, 2014, have not been, in violation or breach of, or default under, any Parent Permit, except where such violation, breach or default would not reasonably be expected to have a Material Adverse Effect with respect to Parent. As of the date of this Agreement, to the Knowledge of Parent, no event or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of Parent or any of its Subsidiaries under, any Parent Permit, or has caused (or would cause) an applicable Governmental Authority to fail or refuse to issue, renew or extend any Parent Permit (in each case, with or without notice or lapse of time or both), except for violations, breaches, defaults, losses, accelerations or failures that would not reasonably be expected to have a Material Adverse Effect with respect to Parent.
5.11Tax Matters. Except as set forth in Section 5.11 of the Parent Disclosure Letter:
(a)All material Tax Returns required to be filed by or with respect to Parent or any of its Subsidiaries, have been duly and timely filed (taking into account any extensions of time within which to file).
(b)All Tax Returns filed by Parent or any of its Subsidiaries are true, correct and complete in all material respects.
(c)All Taxes shown to be due on such Tax Returns and all other material Taxes, if any, required to be paid by Parent or its Subsidiaries for all periods ending through the date of this
Agreement have been paid or adequate reserves have been established on the balance sheet of Parent and its consolidated Subsidiaries included in the Parent SEC Documents.
(d)There are no material Liens with respect to Taxes, other than Permitted Liens, on any asset of Parent or any of its Subsidiaries.
(e)There is no material claim against Parent or any of its Subsidiaries for any Taxes, and no assessment, deficiency or adjustment has been asserted, proposed or threatened with respect to any Taxes or Tax Returns of or with respect to Parent or any of its Subsidiaries.
(f)No material (i) audit or examination or (ii) refund litigation with respect to any Tax Return of Parent or any of its Subsidiaries is pending. As of the date of this Agreement, neither Parent nor any of its Subsidiaries has granted any requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes with respect to any Tax Returns.
(g)Neither Parent nor any of its Subsidiaries (i) is a party to any Tax allocation, Tax sharing, Tax indemnity agreement or similar agreement (excluding commercial and debt agreements entered into in the ordinary course of business the primary purpose of which does not relate to Taxes) or (ii) is under an obligation under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or as transferee or successor, such that, in each of clauses (i) and (ii), Parent or any of its Subsidiaries is, on or after the date of this Agreement, liable for any amount of Taxes of another Person (other than Parent or any of its Subsidiaries).
(h)Parent Logistics Partners is properly classified as a partnership for U.S. federal income Tax purposes, and not as an association or a publicly traded partnership taxable as a corporation under Section 7704 of the Code and has been properly treated as such since its formation.
(i)None of Parent or its Subsidiaries has “participated” in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
(j)Parent is not aware of any fact or circumstance that would reasonably be expected to prevent (i) the Parent Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Codeor (ii) the Mergers, taken together, from qualifying as an exchange within the meaning of Section 351 of the Code.
5.12Environmental Matters. Except as has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent:
(a)Parent and each of its Subsidiaries and their respective properties, assets and operations is and, since January 1, 2014 have been in compliance with Environmental Laws.
(b)Parent and each of its Subsidiaries are in possession of all Environmental Permits necessary for Parent and its Subsidiaries to own, lease and operate their properties and assets and to carry on their businesses as they are now being conducted (“Parent Environmental Permits”). All of the Parent Environmental Permits are issued in the correct entity’s name. All Parent Environmental Permits are in full force and effect. No suspension or cancellation of any of the Parent Environmental Permits is pending or, to the Knowledge of Parent, threatened. Parent and its Subsidiaries are not, and since December 31, 2014 have not been, in violation or breach of, or default under, any Parent Environmental Permit. As of the date of this Agreement, to the Knowledge of
Parent, no event or condition has occurred or exists which would result in a violation of, breach, default or loss of a benefit under, or acceleration of an obligation of Parent or any of its Subsidiaries under, any Parent Environmental Permit, or has caused (or would cause) an applicable Governmental Authority to fail or refuse to issue, renew or extend any Parent Environmental Permit (in each case, with or without notice or lapse of time or both).
(c)There are no pending or, to the Knowledge of Parent, threatened Legal Proceedings against Parent or any of its Subsidiaries or, to the Knowledge of Parent, otherwise adversely affecting any of their respective properties, assets or operations under any Environmental Laws that, in each case, has not been fully resolved.
(d)There has been no Release of any Hazardous Material by Parent or any of its Subsidiaries from the properties of Parent or any of its Subsidiaries that would reasonably be expected to result in any investigatory, remedial or corrective action obligation on the part of Parent or any of its Subsidiaries under Environmental Laws.
(e)Neither Parent nor any of its Subsidiaries has received any written notice asserting an alleged liability or obligation under any Environmental Law with respect to any investigatory, remedial or corrective activity as a result of any Release of Hazardous Materials at any real property offsite the properties of Parent or any of its Subsidiaries where Parent or such Subsidiary transported or disposed or arranged for the transport or disposal of any Hazardous Materials and, to the Knowledge of Parent, there are no circumstances that would reasonably be likely to result in the receipt of such notice.
(f)Neither Parent nor any of its Subsidiaries entered into, or to the Knowledge of Parent is otherwise subject to, any agreements, consents, orders, decrees or judgments pursuant to Environmental Law that to the Knowledge of Parent, prevent or limit the current or future use or operation of their properties.
(g)To the Knowledge of Parent, there has been no exposure of any person or property to any Hazardous Material in connection with the operations of Parent and its Subsidiaries that would reasonably be expected to form the basis of a claim for damages or compensation against Parent or its Subsidiaries.
(h)Parent has made available to the Company complete and accurate copies of all internal and external environmental assessments, reports, audits, studies and other similar documents addressing liabilities or obligations under Environmental Law with respect to Parent and its Subsidiaries’ properties, assets and operations that are in the possession or control of Parent or its Subsidiaries.
(i)Notwithstanding any other provision of this Article V to the contrary, Section 5.11 contains the sole and exclusive representations and warranties of Parent and its Subsidiaries with respect to matters arising under Environmental Laws; provided, however, the provisions of this Section 5.12(i) shall not qualify, limit, diminish or impair the representations and warranties set forth in Sections 5.4, 5.5, 5.6, 5.7 or 5.8 with respect to matters arising under Environmental Laws.
5.13Intellectual Property.
(a)Section 5.13(a) of the Parent Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of all Parent Registered Intellectual Property. There are no
proceedings or actions before any court or tribunal (including the United States Patent and Trademark Office or equivalent authority anywhere in the world) to which Parent or any of its Subsidiaries is or was a party, that are still pending or have been raised in the past six (6) years, and in which claims are or were raised relating to the validity, enforceability, scope, ownership or Infringement of any of the Parent Registered Intellectual Property, except for such proceedings or actions which, individually or in the aggregate, have not had and would not reasonably be expected to have, a Material Adverse Effect with respect to Parent. To the Knowledge of Parent, each item of Parent Registered Intellectual Property is subsisting, valid and enforceable, and is in good standing with the relevant Governmental Authority, including with respect to the payment of maintenance and other fees, except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent and except to the extent a court or tribunal has made a contrary determination as set forth in Section 5.13(a) of the Parent Disclosure Letter.
(b)Except as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent, Parent or a Subsidiary thereof is the sole owner of each item of Parent Registered Intellectual Property and, to the Knowledge of Parent, the owner of each other item of Parent Intellectual Property, in each case free and clear of any Liens other than Permitted Liens and, immediately following the Mergers, Parent and its Subsidiaries will have the same rights thereto as they had prior to the Mergers, except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect with respect to Parent. In the past three (3) years, neither Parent nor any of its Subsidiaries has transferred ownership of or granted any exclusive license (or agreed to any restrictions that have substantially the same effect thereof) with respect to the use, transfer or licensing of, any Parent Intellectual Property, except for such transfer, grant or agreement that, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent.
(c)To the Knowledge of Parent, Parent and its Subsidiaries own or have a valid right to use all Intellectual Property Rights that are used in the conduct of the business of Parent and its Subsidiaries and, immediately following the Mergers, Parent and its Subsidiaries will have the same rights thereto as they had prior to the Mergers, in each case, except as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Parent.
(d)To the Knowledge of Parent, neither the operation of the business of Parent and its Subsidiaries as currently conducted or as it has been conducted for the past six (6) years by Parent or any of its Subsidiaries, nor, to the Knowledge of Parent, do any Parent Products, Infringe any Intellectual Property Rights of any Person, and no previously asserted written claims of Infringement against Parent or any of its Subsidiaries remain outstanding or unresolved, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent.
5.14Anticorruption.
(a)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent, none of Parent, any Subsidiary of Parent or any director, officer or, to the Knowledge of Parent, any Affiliate, agent, distributor, employee, or other Person acting on behalf of Parent is aware of or has, directly or indirectly, taken
any action that would cause Parent or any of its Subsidiaries to be in violation of the FCPA, or any other Anticorruption Laws.
(b)Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent, none of Parent, any Subsidiary of Parent or any director, officer or, to the Knowledge of Parent, any Affiliate, agent, distributor, employee, or other Person acting on behalf of Parent or its Subsidiaries is aware of or has taken any act in furtherance of an offer, payment, promise to pay, authorization, or ratification of the payment, directly or indirectly, of any gift, money or anything of value to a Government Official or any other Person while knowing or having a reasonable belief that all or some portion of it would be given to a Government Official and used for the purpose of: (A) influencing any act or decision of a Government Official or other Person, including a decision to fail to perform official functions, (B) inducing any Government Official or other Person to do or omit to do any act in violation of the lawful duty of such official, (C) securing any improper advantage, or (D) inducing any Government Official to use influence with any Governmental Authority in order to effect any act or decision of such Governmental Authority, in order to assist Parent, any Subsidiary of Parent or any Affiliate of Parent in obtaining or retaining business with, or directing business to, any Person, in each case, in violation of any applicable Anticorruption Laws.
(c)As of the date of this Agreement, to the Knowledge of Parent, (i) there is no investigation of or request for information from Parent or any of its Subsidiaries by any Governmental Authority regarding the Anticorruption Laws, and (ii) there is no other audit, review, inspection, survey, examination, allegation, investigation or inquiry by any Governmental Authority regarding Parent or any of its Subsidiaries’ actual or possible violation of the Anticorruption Laws.
(d)No Legal Proceeding by or before any Governmental Authority involving Parent or any of its Subsidiaries or Affiliates, or any of their respective directors, officers, employees, or agents, or anyone acting on behalf of Parent or its Subsidiaries, with respect to any applicable Anticorruption Laws is pending or, to the Knowledge of Parent, threatened. Since January 1, 2014, no civil or criminal penalties have been imposed on Parent or any of its Subsidiaries or Affiliates with respect to violations of any applicable Anticorruption Law, except as have already been disclosed in the Parent SEC Documents, nor have any disclosures been submitted to any Governmental Authority with respect to violations of Anticorruption Laws.
(e)Parent and each of its Subsidiaries has established and implemented reasonable internal controls and procedures intended to ensure compliance with the Anticorruption Laws.
(f)Except as would not constitute a Material Adverse Effect with respect to Parent, the operations of Parent and its Subsidiaries are and have been, since January 1, 2014, conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Money Laundering Laws and no Legal Proceeding by or before any Governmental Authority or any arbitrator involving Parent or any of its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Knowledge of Parent, threatened.
(g)Parent and its Affiliates have complied with all applicable statutory and regulatory requirements relating to export controls and trade sanctions, including, in each case to the extent applicable, the Export Administration Regulations (15 C.F.R. Parts 730 et seq.), the International Traffic in Arms Regulations (22 C.F.R. Parts 120-130), section 999 of the Code, the Trading with the Enemy Act of 1917 (50 U.S.C. §§ 1-44), the International Emergency Economic Powers Act (50
U.S.C. §§1701–1706), the Foreign Narcotics Kingpin Designation Act (21 U.S.C. 1901-1908, 8 U.S.C. 1182), and the regulations, rules, and executive orders administered by OFAC and any similar rules or regulations of the European Union or other jurisdiction, except as would not constitute a Material Adverse Effect with respect to Parent. Except as would not constitute a Material Adverse Effect with respect to Parent, none of Parent, its directors or officers, or to the Knowledge of Parent, none of its Affiliates, shareholders, or employees has, directly or indirectly, engaged in any transaction or dealing in property or interests in property of, received from or made any contribution of funds, goods, or services to or for the benefit of, provided any payments or material assistance to, or otherwise engaged in or facilitated any transactions with a Prohibited Person.
(h)Since January 1, 2014, no civil or criminal penalties have been imposed on Parent or, to the Knowledge of Parent, the Affiliates of Parent with respect to violations of applicable Laws relating to export control or trade sanctions, nor have any voluntary disclosures relating to export control and trade sanctions issues been submitted to any Governmental Authority. To the Knowledge of Parent, Parent and its Affiliates have not been since January 1, 2014 and are not now under any administrative, civil or criminal investigation or indictment involving alleged violations of any applicable Laws relating to export controls or trade sanctions, except as would not constitute a Material Adverse Effect with respect to Parent. No Governmental Authority has notified Parent or, to the Knowledge of the Parent, the Affiliates of Parent, in writing since January 1, 2014 of any actual or alleged violation or breach of any applicable Laws relating to export controls or trade sanctions, except as would not constitute a Material Adverse Effect with respect to Parent. To the Knowledge of Parent, none of Parent or its Affiliates has, since January 1, 2014, undergone or is undergoing any internal or external audit, review, inspection, investigation, survey or examination of records relating to Parent’s or any of its Affiliates’ export activity the results of which would constitute a Material Adverse Effect with respect to Parent.
5.15Insurance. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent, Parent and its Subsidiaries have all material policies of insurance covering Parent, its Subsidiaries or any of their respective employees, properties or assets, including policies of life, property, fire, workers’ compensation, products liability, directors’ and officers’ liability and other casualty and liability insurance, that is in a form and amount that is customarily carried by Persons conducting business similar to that of Parent and which is adequate (in terms of amount and losses and risks covered) for the operation of its business and ownership of its assets and properties, or as is required under the terms of any contract or agreement. With respect to each such insurance policy, (i) the policy is in full force and effect and all premiums due thereon have been paid, and (ii) neither Parent nor any of its Subsidiaries is in breach or default, and neither Parent nor any of its Subsidiaries has taken any action or failed to take any action which, with notice or the lapse of time or both, would constitute such a breach or default, or permit termination or modification of, any such policy, in each case, except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent. There is no material claim pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies and there has been no threatened termination of, material alteration in coverage, or material premium increase with respect to, any such policies, except for such claims, threatened terminations, material alterations and material premium increases which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect with respect to Parent.
5.16No Brokers. No action has been taken by Parent that would give rise to any valid claim against any Party for a brokerage commission, finder’s fee or other like payment with respect to the Merger Transactions, excluding fees to be paid to Tudor Pickering Holt & Co.
5.17Parent Information. The information relating to Parent and its Subsidiaries that is provided by Parent or its representatives for inclusion in the Joint Proxy Statement/Prospectus and Registration Statement, or in any other document filed with any other Governmental Authority in connection with the Merger Transactions, will not (i) in the case of the Registration Statement, at the time the Registration Statement is filed with the SEC, at any time it is amended or supplemented or at the time it is declared effective under the Securities Act, and (ii) in the case of the Joint Proxy Statement/Prospectus, at the date it is first mailed to each of the Company’s and Parent’s stockholders or at the time of each of the Company Stockholders Meeting and the Parent Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Registration Statement and the Joint Proxy Statement/Prospectus (except for such portions thereof that relate only to the Company or any of its Subsidiaries) will comply as to form in all material respects with the provisions of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act.
5.18Affiliate Transactions. As of the date of this Agreement, there are no transactions, contracts, arrangements, commitments or understandings between Parent or any of its Subsidiaries, on the one hand, and any of Parent’s Affiliates (other than wholly owned Subsidiaries of Parent), on the other hand, that would be required to be disclosed by Parent under Item 404 of Regulation S-K under the Securities Act.
5.19Ownership of Company Capital Stock. As of the date of this Agreement, Parent owns 33,691,292 shares of Company Common Stock, which represent all capital stock in the Company held by any Buyer Party or any of its respective Subsidiaries.
5.20State Takeover Laws. No approvals are required under Takeover Laws in connection with the performance by the Buyer Parties of their obligations under this Agreement or the Voting Agreements.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1Conduct of Business of the Company and its Subsidiaries. Except (i) as expressly permitted or required by this Agreement, (ii) required by applicable Law, (iii) as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), or (iv) as set forth in Section 6.1 of the Company Disclosure Letter, during the period from the date of this Agreement to the Astro Effective Time, the Company will conduct and will cause each of its Subsidiaries, including Astro Partners (to the extent not in conflict with the agreement of limited partnership of Astro Partners in effect as of the date of this Agreement), to conduct its business and operations according to its ordinary and usual course of business consistent with past practice and the Company will use and will cause each of its Subsidiaries, including Astro Partners (to the extent not in conflict with the agreement of limited partnership of Astro Partners in effect as of the date of this Agreement), to use commercially reasonable efforts to preserve intact its business organization, maintain its rights, franchises and permits, keep available the services of its current directors and officers and employees who are integral to the operation of their businesses as presently conducted and preserve the goodwill of and maintain satisfactory relationships with those Persons, including customers, suppliers and distributors, having significant business relationships with the Company or any of its Subsidiaries. Except (u) as required by any collective bargaining agreement or obligation or other contract with a labor union in effect as of the date of this Agreement, (v) as expressly permitted or required by this Agreement, (w) as required by applicable Law, (x) as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), (y) as set forth in the corresponding subsection in Section 6.1 of the Company Disclosure Letter or (z) for intercompany transactions between the Company’s Subsidiaries or the Company and its Subsidiaries, during the period from the date of this Agreement to the
Astro Effective Time, the Company shall not, and shall cause each of its respective Subsidiaries, including Astro Partners (to the extent not in conflict with the agreement of limited partnership of Astro Partners in effect as of the date of this Agreement), not to:
(a)(i) issue, grant, sell or otherwise permit to become outstanding, or authorize the creation of, or approve any rights plan with respect to, any additional equity securities (including any Company Preferred Stock) (other than shares of Company Common Stock issuable upon the vesting or settlement of Existing Company Restricted Stock Awards outstanding on the date of this Agreement or granted in accordance with the terms of this Agreement or upon the conversion of the Company Convertible Securities, in each case in accordance with the terms thereof) or any additional Rights or (ii) enter into any agreement with respect to the foregoing, except, in each case, as required pursuant to the terms and conditions of, and within authorization limits in, any Company Benefit Plan as in effect on the date of this Agreement;
(b)issue any additional equity interests that are subject to new grants of restricted stock, phantom stock, stock options, distribution equivalent rights, stock appreciation rights or similar equity-based employee Rights, other than pursuant to the terms of any Company Equity Plan or the Astro Partners LTIP in the ordinary course of business consistent with past practice;
(c)purchase, redeem or otherwise acquire, directly or indirectly, or amend the terms of, any equity interests or Rights of the Company or its Subsidiaries, other than the issuance of any Company Common Stock upon the settlement of any grants made under any Company Equity Plan or the Astro Partners LTIP that are outstanding on the date of this Agreement in accordance with the terms as of the date of this Agreement of those grants;
(d)declare, set aside, make or pay dividends or distributions (whether in cash, stock or property) on any shares of its equity securities, other than cash dividends (i) paid to the Company or one of its Subsidiaries by a Subsidiary of the Company with regard to its capital stock or other equity interests and other than any such transaction by a wholly owned Subsidiary of the Company which remains a wholly owned Subsidiary after consummation of such transaction, (ii) of the Company on a quarterly basis until the Closing Date up to $0.15 per share of Company Common Stock outstanding or (iii) of Astro Partners in the ordinary course and consistent with past practice;
(e)amend the Company Certificate or the Company Bylaws or the certificate of incorporation or bylaws (or other similar governing documents) of any Subsidiary of the Company, in each case as in effect on the date of this Agreement, other than for amendments that solely effect ministerial changes to such documents;
(f)(i) sell, lease, license or dispose any portion of its assets, business or properties other than (A) in the ordinary course of business or (B) any such transaction (or series of related transactions) not to exceed $10,000,000, (ii) acquire, by merger or otherwise, or lease any assets or all or any portion of the business or property of any other entity other than (A) in the ordinary course of business consistent with past practice or (B) any such transaction (or series of related transactions) not to exceed $10,000,000, (iii) merge, consolidate or enter into any other business combination transaction or agreement with any Person or (iv) convert from a corporation or limited liability company, as the case may be, to any other business entity;
(g)other than in the ordinary course of business, enter into any Company Material Contract;
(h)other than in the ordinary course of business, modify, amend, renew or extend, in any material respect, terminate or assign, or waive or assign any rights under, any Company Material Contract;
(i)incur any material capital expenditure or any obligations, liabilities or indebtedness in respect thereof, including any additions to amounts carried under operating leases utilized in lieu of capital spending, except for (i) capital expenditures contained in the capital expenditure budget for the Company’s 2017 fiscal year approved by the Company Board during meetings which occurred on December 14, 2016 and December 15, 2016, (ii) any capital expenditures made in response to any emergency, whether caused by war, terrorism, weather events, public health events, outages or otherwise, (iii) any capital expenditures that the Company reasonably determines are necessary to maintain the safety and integrity of any asset or property in response to any unanticipated and subsequently discovered events, occurrences or developments or (iv) any capital expenditures which are unanimously approved by the Company Board;
(j)commence, initiate, waive, release, assign, settle or compromise any claim, action or proceeding, including any state or federal regulatory proceeding, seeking damages or injunction or other equitable relief, that (i) involves an amount in excess of $5,000,000 (excluding any amounts that are covered by any insurance policies of the Company or its Subsidiaries, as applicable), (ii) is material to the Company and its Subsidiaries, taken as a whole, or (iii) is a claim, action or proceeding relating to the Merger Transactions or this Agreement;
(k)pay, discharge or satisfy any material claim, liability or obligation (absolute, accrued or unaccrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities (i) to the extent of the amounts disclosed, reflected or reserved against in the most recent audited financial statements (or the notes thereto) of the Company included in the Company SEC Documents filed prior to the date of this Agreement, or (ii) in the ordinary course of business consistent with past practice and not in violation of this Section 6.1;
(l)take or omit to take any action that would cause any material Company Intellectual Property, including with respect to any registrations or applications for registration, to lapse, be abandoned or canceled, or fall into the public domain, other than actions or omissions in the ordinary course of business consistent with past practice and not otherwise in violation of this Section 6.1.
(m)implement or adopt any material change in its (i) accounting principles, practices or methods, other than as may be required by GAAP or other applicable regulatory authorities, or (ii) timing of collection of accounts receivable or payment of accounts payable;
(n)fail to use commercially reasonable efforts to maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as has been customarily maintained;
(o)(i) change in any material respect any of its express or deemed elections relating to Taxes, including elections for any and all joint ventures, partnerships, limited liability companies or other investments where it has the capacity to make such binding election, (ii) settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or (iii) change in any material respect any of its methods of reporting income or deductions for U.S. federal income Tax purposes from those employed in the preparation of its U.S. federal income Tax return for the most recent taxable year for which a return has been filed, except as may be required by applicable Law;
(p)except as set forth in Section 7.14(c), (i) adopt, enter into, terminate or amend, or increase or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under, any Company Benefit Plan, (ii) grant any severance, termination, change in control, retention or similar pay or compensation or benefit to any current or former director, employee, independent contractor or consultant of the Company or any of its Subsidiaries or modifications thereto or increases therein, other than severance payments in the ordinary course of business consistent with past practice, or (iii) establish, adopt, enter into, amend or terminate any plan, policy, program, fund, contract, arrangement or agreement for the benefit of any current or former directors or officers of the Company or any of its Subsidiaries or any of their beneficiaries;
(q)except in each case as required to comply with any applicable Law or except as required to comply with any Company Benefit Plan, as in effect as of the date of this Agreement, or the terms of this Agreement, (A) with respect to any current or former director, employee, independent contractor or consultant of the Company or any Subsidiary (except for store-level employees involved in the retail business), grant any such individual any increase in compensation, bonus or other benefits, or grant any type of compensation or benefits to any such individual not previously receiving or entitled to receive such type of compensation or benefit, or pay any bonus of any kind or amount to any such individual, other than increases in compensation or benefits or the payment of bonuses in the ordinary course of business consistent with past practice, or (B) pay any benefit or grant or amend any award (including in respect of stock options, stock appreciation rights, performance units, restricted stock or other stock-based or stock-related awards or the removal or modification of any restrictions in any Company Benefit Plan or awards made thereunder) to any current or former director, employee, independent contractor or consultant of the Company or any Subsidiary, except (i) as required to comply with any applicable Law or any Company Benefit Plan in effect as of the date of this Agreement or (ii) in the ordinary course of business consistent with past practice;
(r)forgive any loans to employees, officers or directors or any of their respective Affiliates;
(s)enter into any contract with any officer, director or Affiliate (other than a wholly owned Subsidiary of the Company) of the Company or any of their respective “associates” or “immediate family” members (as such terms are defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act), including any contract pursuant to which the Company has an obligation to indemnify such officer, director, Affiliate or family member;
(t)(i) terminate the employment of any officer or employee with the title of vice president or above, except as a direct result of such officer’s or employee’s (A) willful failure to perform the duties or responsibilities of his employment, (B) engaging in serious misconduct, or (C) being convicted of or entering a plea of guilty to any crime, or (ii) undertake (A) any material reduction in force, or (B) without prior consultation with Parent, any reduction in force that is subject to WARN Act, in each case, in respect of the employees of the Company or its Subsidiaries;
(u)except as required pursuant to the terms and conditions of any Company Benefit Plan, in each case, as in effect on the date of this Agreement, (i) enter into any material collective bargaining agreement or other material works council or labor union agreement, or (ii) without first using commercially reasonable efforts to disclose to Parent, in reasonable detail, the bargaining strategy of the Company or any Subsidiary of the Company, as applicable, amend or renew any
collective bargaining agreement or other works council or labor union agreement in effect as of the date of this Agreement or entered into pursuant to the foregoing clause (i);
(v)(i) incur, create, assume, guarantee, endorse or otherwise become liable or responsible for any Indebtedness other than (A) Indebtedness for borrowed money (and any associated Liens) approved by the Company Board provided that such Indebtedness does not include any Rights in respect of shares of Company Common Stock or Company Preferred Stock, (B) advances pursuant to and permitted under the Company Revolving Credit Agreement (directly, contingently or otherwise) or (C) guarantees or sureties for the benefit of any Subsidiary or (ii) create any Lien on its assets or property or the assets or property of its Subsidiaries to secure Indebtedness existing as of the date of this Agreement or for any other purpose (other than Liens permitted under clause (i)(A) of this Section 6.1(v)).
(w)make any loans, advances or capital contributions to, or investments in, any other Person (other than any Subsidiary), except in each case pursuant to Company Material Contracts in existence on the date of this Agreement, in accordance with their terms as in effect on the date of this Agreement;
(x)authorize, recommend, propose or announce an intention to adopt a plan of complete or partial dissolution or liquidation;
(y)knowingly take any action that is intended or is reasonably likely to result in (i) inaccuracy of a representation and warranty set forth in this Agreement that would allow for a termination of this Agreement, (ii) any of the conditions set forth in Section 8.3 not being satisfied, (iii) any material delay or prevention of the consummation of the Merger Transactions or (iv) a material violation of any provision of this Agreement;
(z)convene any regular or special meeting (or any adjournment or postponement thereof) of the stockholders of the Company other than the Company Stockholders Meeting, except as required by applicable Law or the NYSE or as required by the Company Certificate and Company Bylaws;
(aa)except in connection with actions permitted by Section 7.6, take any action to exempt any Person from, or make any acquisition of securities of the Company by any Person not subject to, any state takeover statute or similar statute or regulation that applies to the Company with respect to a Company Acquisition Proposal or otherwise, including the restrictions on “business combinations” set forth in Section 203 of the DGCL, except for the Buyer Parties or any of their respective Subsidiaries or Affiliates, or the transactions contemplated by this Agreement; or
(bb)authorize, resolve, agree or commit to do anything prohibited by clauses (a) through (aa) of this Section 6.1.
6.2Conduct of Business of Parent and its Subsidiaries. Except for actions (i) as expressly permitted or required by this Agreement, (ii) required by applicable Law, (iii) as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), (iv) set forth on the corresponding subsection on Section 6.2 of the Parent Disclosure Letter or (v) for intercompany transactions between Parent’s Subsidiaries or Parent and its Subsidiaries, during the period from the date of this Agreement to the Parent Effective Time, Parent will conduct and will cause its Subsidiaries, including Parent Logistics Partners (to the extent not in conflict with the agreement of limited partnership of Parent Logistics Partners in effect as of the date of this Agreement), to conduct their respective businesses and
operations according to their ordinary and usual course of business consistent with past practice and Parent will use and will cause each of its Subsidiaries, including Parent Logistics Partners (to the extent not in conflict with the agreement of limited partnership of Parent Logistics Partners in effect as of the date of this Agreement), to use commercially reasonable efforts to preserve intact its business organization, maintain its rights, franchises and permits, keep available the services of its current directors and officers and employees who are integral to the operation of their businesses as presently conducted and preserve the goodwill of and maintain satisfactory relationships with those Persons, including customers, suppliers and distributors, having significant business relationships with the Company or any of its Subsidiaries. Except (u) as required by any collective bargaining agreement or other contract with a labor union in effect as of the date of this Agreement, (v) as expressly permitted or required by this Agreement, (w) as required by applicable Law, (x) as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), (y) as set forth in the corresponding subsection on Section 6.2 of the Parent Disclosure Letter or (z) for intercompany transactions between Parent’s Subsidiaries or Parent and its Subsidiaries, during the period from the date of this Agreement to the Parent Effective Time, Parent shall not, and shall cause each of its respective Subsidiaries, including Parent Logistics Partners (to the extent not in conflict with the agreement of limited partnership of Parent Logistics Partners in effect as of the date of this Agreement), not to:
(a)conduct its business and the business of its Subsidiaries other than in the ordinary course except as would not reasonably be expected to have a Material Adverse Effect with respect to Parent;
(b)(i) issue, grant, sell or otherwise permit to become outstanding, or authorize the creation of any additional equity securities other than (A) shares of Parent Common Stock issuable upon exercise of the Existing Parent Stock Options, upon the vesting or settlement of Existing Parent Restricted Stock Awards or Existing Parent Stock Appreciation Right outstanding on the date of this Agreement or granted in accordance with the terms of this Agreement in each case in accordance with the terms thereof or (B) in the ordinary course; (ii) issue, grant, sell or otherwise permit to become outstanding, or authorize the creation of any additional Rights outside the ordinary course; or (iii) enter into any agreement with respect to the foregoing, except, in each case, as required pursuant to the terms and conditions of, and within authorization limits in, any Parent Benefit Plan as in effect on the date of this Agreement;
(c)purchase, redeem or otherwise acquire, directly or indirectly, or amend the terms of, any equity interests of Parent or its Subsidiaries, other than (i) the issuance of any Parent Common Stock upon the settlement of any grants made under any Parent Equity Plan or the Parent Logistics Partners LTIP that are outstanding on the date of this Agreement in accordance with the terms of such grants as of the date of this Agreement or (ii) redemptions of Parent Common Stock in an amount not to exceed $150 million pursuant to Parent’s stock buy-back plan which has been authorized by the Parent Board prior to the date of this Agreement;
(d)merge, consolidate or enter into any other business combination transaction or agreement with any Person or make any acquisition or disposition that would prevent or materially delay the consummation of the Merger Transactions;
(e)make or declare dividends or distributions (i) to the holders of Parent Common Stock that are special or extraordinary dividends or distributions other than such dividends or distributions as are consistent with past practice made pursuant to applicable approvals of the Parent Board or (ii) to the holders of any other stock of or interests in Parent, other than dividends or
distributions which constitute regular quarterly dividends to such Parent Stockholders consistent with past practice;
(f)amend the Parent Certificate or the Parent Bylaws or the certificate of incorporation or bylaws (or other similar governing documents) of any Subsidiary of Parent, in each case as in effect on the date of this Agreement, other than for amendments that solely effect ministerial changes to such documents;
(g)with respect to Parent and any material Subsidiaries, authorize, recommend, propose or announce an intention to adopt a plan of complete or partial dissolution or liquidation of such Person;
(h)knowingly take any action that is intended or is reasonably likely to result in (i) any inaccuracy of a representation and warranty set forth in this Agreement that would allow for a termination of this Agreement, (ii) any of the conditions set forth in Section 8.2 not being satisfied, (iii) any material delay or prevention of the consummation of the Merger Transactions or (iv) a material violation of any provision of this Agreement; or
(i)authorize, resolve, agree or commit to do anything prohibited by clauses (a) through (h) of this Section 6.2.
ARTICLE VII
COVENANTS
7.1Reasonable Best Efforts; Third Party Approvals.
(a)Subject to the terms and conditions of this Agreement, each Party shall cooperate with the Other Parties and use (and shall cause their respective Subsidiaries to use) their respective reasonable best efforts in good faith (subject to, and in accordance with, applicable Laws) to take, or cause to be taken, all actions, and to do, or cause to be done, and assist and cooperate with the Other Parties in doing, all things necessary, proper, desirable or advisable, so as to permit and enable prompt consummation of the Merger Transactions, including (i) using reasonable best efforts to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the Parties to consummate the Merger Transactions, (ii) using reasonable best efforts to defend any litigation seeking to enjoin, prevent or delay the consummation of the Merger Transactions or seeking material damages with respect thereto and (iii) using reasonable best efforts to prepare all documentation, to effect all filings, to obtain all permits, consents, approvals and authorizations of all Governmental Authorities and third parties necessary to consummate the Merger Transactions, to comply with the terms and conditions of such permits, consents, approvals and authorizations and to cause the Merger to be consummated as promptly as practicable, and (iv) using reasonable best efforts to obtain the consents and waivers listed in Section 9.1(c)(v) of the Company Disclosure Letter prior to the Consent Deadline and, in the case of Parent, using reasonable best efforts to enter into guarantees necessary in connection with obtaining the consents and waivers referenced in this clause (iv) to replace guarantees of the Company outstanding as of the date of this Agreement.
(b)Subject to the other terms and conditions herein provided and without limiting the foregoing, each of the Buyer Parties and the Company shall (and shall cause their respective Subsidiaries to):
(i)consult with the Other Parties with respect to obtaining all material permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary or advisable to consummate the Merger Transactions, and each Party will keep the Other Parties apprised of the status of material matters relating to completion of the Merger Transactions;
(ii)If it becomes reasonably likely that the Closing will not occur prior to March 21, 2017, make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated by this Agreement as promptly as practicable and advisable (or on a date that is mutually agreed to by the Parties) and to supplyoutstanding as promptly as practicable and advisable any additional information and documentary material that may be requested by any Governmental Authority pursuant to the HSR Act or any other Antitrust Law and, subject to Section 7.1(d), use reasonable best efforts to take, or cause to be taken (including by their respective Subsidiaries), all other actions consistent with this Section 7.1 necessary to obtain expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable (and in any event no later than the Outside Date);
(iii)unless otherwise prohibited by applicable Law, promptly notify the Other Parties of any communication concerning this Agreement or the Merger Transactions to that Party from any Governmental Authority and consult with and permit the Other Party to review in advance any proposed communication concerning this Agreement or any of the Merger Transactions to any Governmental Authority;
(iv)unless otherwise prohibited by applicable Law,upon request, promptly furnish the Other Parties with all information concerning itself, its Subsidiaries, directors, officers, stockholders and unitholders and such other matters as may be reasonably necessary or advisable in connection with any required filing, notice or application made by or on behalf of such Other Party or any of such Other Party’s Subsidiaries to any Governmental Authority in connection with the Merger Transactions; and
(v)unless otherwise prohibited by applicable Law,promptly furnish to the Other Parties copies of all correspondence, filings and communications between it and its Affiliates and any Governmental Authority with respect to the Merger Transactions.
(c)Notwithstanding anything in this Agreement to the contrary, Parent shall have the unilateral right to direct the antitrust defense of the Merger Transactions in any investigation or litigation by, or negotiations with, any Governmental Authority or other person relating to the Merger Transactions or regulatory filings under applicable Antitrust Law. The Company shall not make any offer, acceptance or counter-offer to or otherwise engage in negotiations or discussions with any Governmental Authority with respect to any proposed settlement, consent decree, commitment or remedy, or, in the event of litigation, discovery, admissibility of evidence, timing or scheduling, except as specifically requested by or agreed with Parent. The Company shall use reasonable best efforts to provide full and effective support of Parent in all material respects in all such investigations, litigation, negotiations and discussions to the extent requested by Parent.
(d)Without limiting the foregoing, the Buyer Parties and the Company shall take all such action as may be necessary to resolve such objections, if any, that the Antitrust Division of the United States Department of Justice, the Federal Trade Commission or state antitrust enforcement
authorities may assert under Antitrust Laws with respect to the Merger Transactions, and to avoid or eliminate, and minimize the impact of, each and every impediment under Antitrust Laws that may be asserted by any Governmental Authority with respect to the Merger Transactions so as to enable the Closing to occur as soon as reasonably possible (and in any event no later than the Outside Date); provided, however, that nothing contained in this Agreement requires Parent or the Company or their respective Subsidiaries to take, or cause to be taken, or agree to take, any action with respect to any of the assets, businesses or product lines of the Company or any of its Subsidiaries (“Company Assets”), or of Parent, HoldCo or any of their Subsidiaries (including the Surviving Entities) (“Parent Assets”), or any combination thereof, if such action (whether taken with respect to Company Assets or Parent Assets), individually or in the aggregate, would result in the divestiture, sale, hold separate, license or limitation of the conduct on business that, individually or taken together, would reasonably be expected to be material and adverse to the Company and its Subsidiaries, taken as a whole or Parent and its Subsidiaries, taken as a whole.
7.2Stockholder Approvals.
(a)Stockholder Meetings
(i)Company Stockholder Meeting. Subject to the terms and conditions of this Agreement, the Company shall, as promptly as practicable after the Registration Statement is declared effective, (i) take, in accordance with applicable Law, applicable stock exchange rules, the Company Certificate and the Company Bylaws, all action necessary to establish a record date for, duly call, give notice of, convene and (ii) hold the Company Stockholders Meeting to consider and vote solely upon the approval of this Agreement and the Merger Transactions, the advisory “say on golden parachute compensation” vote required by Rule 14a-21(c) under the Exchange Act in connection therewith and any other matters required under applicable Law to be considered at the Company Stockholders Meeting, and to adjourn the Company Stockholders Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the other proposals (including with respect to the Disinterested Stockholder Approval). Subject to the Registration Statement having been declared effective, such Company Stockholders Meeting shall in any event be no later than sixty (60) days after (i) the tenth (10th) day after the preliminary Joint Proxy Statement/Prospectus therefor has been filed with the SEC if by such date the SEC has not informed the Company that it intends to review the Joint Proxy Statement/Prospectus or (ii) if the SEC has, by the tenth (10th) day after the preliminary Joint Proxy Statement/Prospectus therefor has been filed with the SEC, informed the Company that it intends to review the Joint Proxy Statement/Prospectus, the date on which the SEC confirms that it has no further comments on the Joint Proxy Statement/Prospectus. The Company may postpone or adjourn the Company Stockholders Meeting solely (i) with the consent of Parent; (ii) (A) due to the absence of a quorum or (B) if the Company has not received proxies representing a sufficient number of shares to approve this Agreement and the Merger Transactions (including with respect to the Disinterested Stockholder Approval), whether or not a quorum is present, to solicit additional proxies; or (iii) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the Independent Director Committee or the Company Board (which, in any event, shall require the prior affirmative recommendation of the Independent Director Committee) has determined in good faith after consultation with outside legal counsel is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s stockholdersimmediately prior to the Company Stockholders Meeting; provided, that the Company may not postpone or
adjourn the Company Stockholders Meeting more than a total of two times pursuant to clause (ii)(A) or clause (ii)(B) of this Section 7.2(a)(i). Notwithstanding the foregoing, the CompanyEffective Time shall at the request of Parent, to the extent permitted by Law, adjourn the Company Stockholders Meeting to a date specified by Parent for the absence of a quorum or if the Company has not received proxies representing a sufficient number of shares for the approval of this Agreement and the Merger Transactions; provided, that the Company shall not be required to adjourn the Company Stockholders Meeting more than two (2) times pursuant to this sentence, and no such adjournment pursuant to this sentence shall be required to be for a period exceeding fifteen (15) Business Days. Subject to Section 7.2(b)(i) or (ii), the Company Recommendation and the Independent Director Committee Recommendation shall be madebecome fully vested and shall be included inconverted into the Joint Proxy Statement/Prospectus, and the Company shall take all reasonable lawful action to solicit and obtain the Required Company Vote (including the Disinterested Stockholder Approval). Except as provided in Section 7.2(b)(i) or (ii), neither the Independent Director Committee nor the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) shall (w) take any action, make any statement or give any direction to cause directly or indirectly the failure to include the Company Recommendation or the Independent Director Committee Recommendation in the Joint Proxy Statement/Prospectus, (x) withhold, withdraw, amend, modify or qualify, or publicly propose to withhold, withdraw, amend, modify or qualify, in any manner adverse to Parent, the Company Recommendation, the Independent Director Committee Recommendation or the Company Board Approval, (y) approve, adopt or recommend, or publicly propose to approve, adopt or recommend, any Company Acquisition Proposal or (z) make any public statement regarding any Company Acquisition Proposal or tender or exchange offer that fails to include a reaffirmation of the Company Recommendation and the Independent Director Committee Recommendation (other than a “stop, look and listen” communication by the Company Board pursuant to Rule 14d-9(f) of the Exchange Act in connection with a tender offer or exchange offer provided such statement includes a reaffirmation of the Company Recommendation) (any action described in this sentence being referred to as a “Company Change in Recommendation”).
(ii)Parent Stockholder Meeting. Subject to the terms and conditions of this Agreement, Parent shall, as promptly as practicable after the Registration Statement is declared effective, (i) take, in accordance with applicable Law, applicable stock exchange rules, the Parent Certificate and the Parent Bylaws, all action necessary to establish a record date for, duly call, give notice of, convene and (ii) hold the Parent Stockholders Meeting to consider and vote solely upon the approval of the Share Issuance and any other matters required under applicable Law to be considered at the Parent Stockholders Meeting, and to adjourn the Parent Stockholders Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the other proposals. Subject to the Registration Statement having been declared effective, such Parent Stockholders Meeting shall in any event be no later than sixty (60) days after (i) the tenth (10th) day after the preliminary Joint Proxy Statement/Prospectus therefor has been filed with the SEC if by such date the SEC has not informed Parent that it intends to review the Joint Proxy Statement/Prospectus or (ii) if the SEC has, by the tenth (10th) day after the preliminary Joint Proxy Statement/Prospectus therefor has been filed with the SEC, informed Parent that it intends to review the Joint Proxy Statement/Prospectus, the date on which the SEC confirms that it has no further comments on the Joint Proxy Statement/Prospectus. Parent may postpone or adjourn the Parent Stockholders Meeting solely (i) with the consent of the Company; (ii)
(A) due to the absence of a quorum or (B) if Parent has not received proxies representing a sufficient number of shares to approve the Share Issuance, whether or not a quorum is present, to solicit additional proxies; or (iii) to allow reasonable additional time for the filing and mailing of any supplemental or amended disclosure which the Parent Board has determined in good faith after consultation with outside legal counsel is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by Parent’s stockholders prior to the Parent Stockholders Meeting; provided, that Parent may not postpone or adjourn the Parent Stockholders Meeting more than a total of two (2) times pursuant to clause (ii)(A) or clause (ii)(B) of this Section 7.2(a)(ii). Notwithstanding the foregoing, Parent shall, at the request of the Company, to the extent permitted by Law, adjourn the Parent Stockholders Meeting to a date specified by the Company for the absence of a quorum or if Parent has not received proxies representing a sufficient number of shares for the approval of the Share Issuance; provided, that Parent shall not be required to adjourn the Parent Stockholders Meeting more than two times pursuant to this sentence, and no such adjournment pursuant to this sentence shall be required to be for a period exceeding fifteen (15) Business Days. Subject to Section 7.2(b)(i), the Parent Recommendation shall be made and shall be included in the Joint Proxy Statement/Prospectus, and Parent shall take all reasonable lawful action to solicit and obtain the Required Parent Vote. Except as provided in Section 7.2(b)(i), the Parent Board shall not (w) take any action, make any statement or give any direction to cause directly or indirectly the failure to include the Parent Recommendation in the Joint Proxy Statement/Prospectus, (x) withhold, withdraw, amend, modify or qualify, or publicly propose to withhold, withdraw, amend, modify or qualify, in any manner adverse to the Company, the Parent Recommendation or the Parent Board Approval (y) approve, adopt or recommend, or publicly propose to approve, adopt or recommend, any Parent Acquisition Proposal or (z) make any public statement regarding any Parent Acquisition Proposal or tender or exchange offer that fails to include a reaffirmation of the Parent Recommendation (other than a “stop, look and listen” communication by the Parent Board pursuant to Rule 14d-9(f) of the Exchange Act in connection with a tender offer or exchange offer provided such statement includes a reaffirmation of the Parent Recommendation) (any action described in this sentence being referred to as a “Parent Change in Recommendation”).
(iii)Parent and the Company shall cooperate to schedule and convene the Parent Stockholders Meeting and the Company Stockholders Meeting on the same date and to establish the same record date for both the Parent Stockholders Meeting and the Company Stockholders Meeting. Each of Parent’s and the Company’s obligations pursuant to this Section 7.2(a) shall not be affected by (A) the commencement, public proposal, public disclosure or communication to the Company or to Parent of any Company Acquisition Proposal or Parent Acquisition Proposal, respectively or (B) the occurrence of a Company Change in Recommendation or a Parent Change in Recommendation.
(b)Permitted Changes in Recommendation.
(i)Notwithstanding Section 7.2(a), at any time prior to obtaining the Required Company Vote (in the case of the Company) or the Required Parent Vote (in the case of Parent), either the Independent Director Committee or the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) (in the case of the Company) or the Parent Board (in the case of Parent) may, in response to a bona fide unsolicited written Company Acquisition Proposal or Parent
Acquisition Proposal, respectively, that did not result from a breach of Section 7.6(b), make a Company Change in Recommendation or a Parent Change in Recommendation, as applicable, if it has determined in good faith, after consultation with its outside legal counsel and financial advisors, that (i) failure to make a Company Change in Recommendation or Parent Change in Recommendation, as applicable, would be inconsistent with the directors’ exercise of their fiduciary obligations to the Company Stockholders or Parent Stockholders, as applicable, under applicable Law and (ii) such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, constitutes or would reasonably be expected to lead to or result in a Company Superior Proposal or a Parent Superior Proposal, as applicable; provided, however, that neither the Independent Director Committee nor the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) (in the case of the Company) or the Parent Board (in the case of Parent) shall be entitled to exercise its right to makereceive a Company Change in Recommendation or a Parent Change of Recommendation, as applicable, pursuant to this sentence unless (A) such Party has provided to the Other Party three (3) Business Days’ prior written notice (such notice, a “Notice of Proposed Recommendation Change”) advising the Other Party that the Company Board or the Independent Director Committee, as applicable (in the case of the Company) or the Parent Board (in the case of Parent), intends to take such action, specifying the reasons therefor in reasonable detail, including that the Company Board or the Independent Director Committee, as applicable (in the case of the Company) or the Parent Board (in the case of Parent), has determined that the Company Acquisition Proposal or the Parent Acquisition Proposal is a Company Superior Proposal or a Parent Superior Proposal, as applicable, and specifying the terms and conditions of such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, and the identity of the Person making such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable (including whether approval of the equity owners of such Person is required) (it being understood that any material amendment to the terms of any such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, shall require a new Notice of Proposed Recommendation Change and an additional three (3) Business Day period), (B) such Party has provided to the Other Party all materials and information delivered or made available to the Person or “group” (as such term is used in Section 13(d) of the Exchange Act) of Persons making such determined Company Superior Proposal or Parent Acquisition Proposal (to the extent not previously provided to the Other Party), (C) such Party, the Company Board or the Independent Director Committee, as applicable (in the case of the Company) or the Parent Board (in the case of Parent), has negotiated, and has caused its respective Representatives to negotiate, in good faith with the Other Party during such notice period to enable the Other Party to revise the terms of this Agreement such that it would obviate the need for making the Company Change in Recommendation or the Parent Change in Recommendation, and (D) following the end of such notice period, the Independent Director Committee or the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) (in the case of the Company), or the Parent Board (in the case of Parent), shall have considered in good faith any changes to this Agreement proposed by the Other Party and shall have determined (after consultation with its outside legal counsel and financial advisors) that the failure to make a Company Change in Recommendation or Parent Change in Recommendation, as applicable, would continue to be inconsistent with the directors’ exercise of their fiduciary obligations to the Company Stockholders or Parent Stockholders, as applicable, under applicable Law and that the Company Acquisition Proposal or the Parent Acquisition Proposal, as applicable, continues to be a Company Superior Proposal or a Parent Superior
Proposal, as applicable, even if the revisions proposed by the Other Party were to be given effect. Any Company Change in Recommendation or Parent Change in Recommendation shall not invalidate the approval of this Agreement or any other approval of the Company Board or the Independent Director Committee or the Parent Board, including in any respect that would have the effect of causing any state (including Delaware) takeover statute or other similar statute to be applicable to the Merger Transactions.
(ii)Notwithstanding Section 7.2(a)(i), at any time prior to obtaining the Required Company Vote, either the Independent Director Committee or the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) may make a Company Change in Recommendation if it has determined in good faith, after consultation with its outside legal counsel and financial advisors, that failure to make a Company Change in Recommendation would be inconsistent with the directors’ exercise of their fiduciary obligations to the Company Stockholders under applicable Law; provided, however, that neither the Company Board nor the Independent Director Committee shall be entitled to exercise its right to make a Company Change in Recommendation pursuant to this sentence unless (i) the Company has provided to Parent a Notice of Proposed Recommendation Change advising Parent that the Independent Director Committee or the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) intends to take such action, specifying the reasons therefor in reasonable detail, (ii) the Company, the Company Board and the Independent Director Committee, as applicable, has negotiated, and has caused its respective Representatives to negotiate, in good faith with Parent during such notice period to enable Parent to revise the terms of this Agreement such that it would obviate the need for making the Company Change in Recommendation, and (iii) following the end of such notice period, the Company Board or the Independent Director Committee, as applicable, shall have considered in good faith any changes to this Agreement proposed by Parent and shall have determined (after consultation with its outside legal counsel and financial advisors) that the failure to make a Company Change in Recommendation would continue to be inconsistent with the directors’ exercise of their fiduciary obligations to the Company Stockholders under applicable Law even if such revisions proposed by Parent were to be given effect. Any Company Change in Recommendation shall not invalidate the approval of this Agreement or any other approval of the Company Board or the Independent Director Committee, including in any respect that would have the effect of causing any state (including Delaware) takeover statute or other similar statute to be applicable to the Merger Transactions.
(c)Nothing contained in this Agreement shall prevent the Company, the Company Board or the Independent Director Committee from taking and disclosing to the Company Stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act (or any similar communication to Company Stockholders) or from making any legally required disclosure to the Company Stockholders.
7.3Registration Statement on Form S-4 and the Joint Proxy Statement/Prospectus.
(a)As soon as practicable following the date of this Agreement, the Company and Parent shall jointly prepare and cause to be filed with the SEC a proxy statement (as amended or supplemented from time to time, the “Joint Proxy Statement/Prospectus”) with respect to the Parent Stockholders Meeting and the Company Stockholders Meeting. As soon as practicable following
the date of this Agreement, Parent shall prepare (with the Company’s reasonable cooperation) and cause to be filed with the SEC the Registration Statement, in which the Joint Proxy Statement/Prospectus will be included as a prospectus. Parent agrees to use commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as practicable after filing thereof and to keep the Registration Statement effective for so long as necessary to consummate the Merger Transactions. The Buyer Parties also agree to use commercially reasonable efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the Merger Transactions (other than qualifying to do business in any jurisdiction in which it is not so qualified or filing a general consent to service of process). Each of Parent and the Company agrees to furnish to the Other Party all information concerning Parent and its Subsidiaries or the Company and its Subsidiaries, as applicable, and the officers, directors, stockholders and equity holders of Parent and the Company and any applicable Affiliates, as applicable, and to take such other action as may be reasonably requested in connection with the foregoing. No filing of the Registration Statement (or any amendment or supplement thereto) will be made by Parent or the Company and no filing or mailing of the Joint Proxy Statement/Prospectus (or any amendment or supplement thereto) will made by Parent or the Company, in each case, without providing the Other Party a reasonable opportunity to review and comment thereon.
(b)Each of the Company and Parent agrees, as to itself and its Subsidiaries, that (i) none of the information supplied or to be supplied by it for inclusion or incorporation by reference in the Registration Statement will, at the time the Registration Statement and each amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Joint Proxy Statement/Prospectus and any amendment or supplement thereto will, at the date of mailing to the holders of Parent Common Stock and Company Common Stock and at the time of the Company Stockholders Meeting and Parent Stockholder Meeting, not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each of the Company and Buyer Parties further agrees that, if it shall become aware prior to the Closing Date of any information that would cause any of the statements in the Registration Statement or the Joint Proxy Statement/Prospectus to be false or misleading with respect to any material fact, or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not false or misleading, it will promptly inform the Other Parties thereof and take the necessary steps to correct such information in an amendment or supplement to the Registration Statement or the Joint Proxy Statement/Prospectus, and, to the extent required under applicable Law, disseminate such amendment or supplement to the holders of Parent Common Stock and Company Common Stock; provided, however, that informing the Other Parties and filing and disseminating any such amendment or supplement shall not affect or be deemed to modify any representation or warranty made by any Party to this Agreement or otherwise affect the remedies available to any Party under this Agreement. No amendment or supplement to the Registration Statement will be made by Parent, and no amendment or supplement to the Joint Proxy Statement/Prospectus will be made by Parent or the Company, in each case, without providing the Other Party a reasonable opportunity to review and comment thereon.
(c)The Parties shall notify each other promptly upon receiving oral or written notice of the time when the Registration Statement has become effective or any amendment or supplement thereto has been filed, the issuance of any stop order or the suspension of the qualification of the
New Common Stock issuable in connection with the Merger Transactions for offering or sale in any jurisdiction.
(d)The Parties shall notify each other promptly of the receipt of any comments from the SEC or the staff of the SEC and of any request by the SEC or the staff of the SEC for amendments or supplements to the Joint Proxy Statement/Prospectus or the Registration Statement or for additional information and shall supply each other with copies of (i) all correspondence between it or any of its Representatives, on the one hand, and the SEC or the staff of the SEC, on the other hand, with respect to the Joint Proxy Statement/Prospectus, the Registration Statement or the Merger Transactions and (ii) all orders of the SEC relating to the Registration Statement.
(e)Each of the Company and Parent agrees to use commercially reasonable efforts to cause the Joint Proxy Statement/Prospectus to be mailed to the Company Stockholders and the Parent Stockholders as soon as practicable after the Registration Statement is declared effective by the SEC under the Securities Act.
7.4Press Releases; Schedule 13D Amendment. The Parties shall issue a joint press release with respect to the execution of this Agreement and the Mergers, which press release shall be reasonably satisfactory to Parent and the Company. In addition, Parent shall file an amendment to its existing Schedule 13D in respect of the Company Common Stock, reporting the execution of this Agreement and the Mergers and such other matters as required therein in accordance with applicable Law. Prior to a Company Change in Recommendation, if any, neither the Company nor Parent shall, without the prior consent (which consent shall not be unreasonably withheld, conditioned or delayed) of (a) the Company, in the case of Parent, and (b) Parent, in the case of the Company, issue any press release or written statement for general circulation relating to the Merger Transactions, except as otherwise required by applicable Law or the rules of the NYSE, in which case it will consult with the Other Parties before issuing any such press release or written statement.
7.5Access; Information.
(a)Upon reasonable notice and subject to applicable Laws relating to the exchange of information, each Party shall, and shall cause its Subsidiaries to, afford the Other Parties and their respective Representatives access, during normal business hours throughout the period prior to the Astro Effective Time, to all of its properties, books, contracts, commitments, personnel and historical records as reasonably requested and, during such period, it shall and shall cause its Subsidiaries to, furnish promptly to such Person and its Representatives a copy of each material report, schedule and other document filed by it during such period pursuant to the requirements of federal or state securities Law (other than reports or documents that Parent or the Company or their respective Subsidiaries, as the case may be, are not permitted to disclose under applicable Law). Notwithstanding the foregoing, neither the Company nor Parent nor any of their respective Subsidiaries shall be required to (i) allow invasive sampling or testing of their respective properties or improvements thereon as a part of or in connection with any environmental investigation or review including with respect to the presence, Release or threatened Release of, or exposure to, any Hazardous Materials; or (ii) provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any Law, fiduciary duty or binding agreement entered into prior to the date of this Agreement.
(b)The Buyer Parties and the Company, respectively, will not use any information obtained pursuant to this Section 7.5 (to which it was not entitled under Law or any agreement other
than this Agreement) for any purpose unrelated (i) to the consummation of the Merger Transactions or (ii) the matters contemplated by Section 7.2 in accordance with the terms thereof, and will hold all information and documents obtained pursuant to this Section 7.5 in confidence. No investigation by either Party of the business and affairs of the Other Parties shall affect or be deemed to modify or waive any representation, warranty, covenant or agreement in this Agreement, or the conditions to any Party’s obligation to consummate the Merger Transactions.
7.6Acquisition Proposals; No Solicitation.
(a)Each of the Company and Parent shall, and each shall cause its Subsidiaries, and each shall use commercially reasonable efforts to cause its and their respective Representatives, to (i) immediately cease and terminate any solicitation, encouragement, discussions or negotiations with any Person that may be ongoing with respect to, or that would reasonably be expected to lead to, a Company Acquisition Proposal or a Parent Acquisition Proposal and (ii) immediately instruct such Person (and any of such Person’s Representatives) to promptly return or destroy all confidential information concerning the Company and its Subsidiaries (in the case of the Company) or Parent and its Subsidiaries (in the case of Parent).
(b)Each of the Company and Parent shall not, and each shall cause its Subsidiaries, and each shall use commercially reasonable efforts to cause its and their respective Representatives, not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or facilitate (including by way of furnishing information) any inquiries regarding, or the making or submission of any proposal or offer that constitutes, or may reasonably be expected to lead to, a Company Acquisition Proposal or a Parent Acquisition Proposal, as applicable, (ii) conduct, continue or renew or engage or participate in any discussions or negotiations regarding any Company Acquisition Proposal or a Parent Acquisition Proposal, as applicable, (iii) furnish to any Person that is reasonably likely to be considering or seeking to make an Acquisition Proposal (other than the Buyer Parties or any Representatives of the Buyer Parties, in the case of the Company, and other than the Company or any Representatives of the Company, in the case of Parent) any non-public information or data relating to the Company or any of its Subsidiaries (in the case of the Company) or relating to Parent or any of its Subsidiaries (in the case of Parent) or afford any such Person access to the business, properties, assets, or, except as required by Law or the Company Bylaws or Parent Bylaws, as applicable, books or records of the Company or Parent, as applicable, or any of its Subsidiaries or (iv) enter into, or authorize the Company or any of its Subsidiaries (in the case of the Company) or Parent or any of its Subsidiaries (in the case of Parent) to enter into, any letter of intent, memorandum of understanding, agreement or understanding (whether written or oral, binding or nonbinding) of any kind providing for, or deliberately intended to facilitate a Company Acquisition Proposal or a Parent Acquisition Proposal, as applicable (other than a Confidentiality Agreement entered into in accordance with this Section 7.6(b)).
(c)Notwithstanding Section 7.6(b), at any time prior to obtaining the Required Company Vote or the Required Parent Vote, the Independent Director Committee or the Company Board (which in any event shall require the prior affirmative recommendation of the Independent Director Committee) (in the case of the Company) or the Parent Board (in the case of Parent) may take the actions described in clauses (ii) and (iii) of Section 7.6(b) with respect to any Person that makes a bona fide unsolicited written Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, after the date of this Agreement that did not result from a breach of Section 7.6(b) (a “Receiving Party”), if (A) the Company Board (in the case of the Company), or the Parent Board (in the case of Parent), after consultation with its outside legal counsel and financial advisors,
determines in good faith that such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, constitutes or is reasonably likely to result in a Company Superior Proposal or Parent Superior Proposal, as applicable, and at the time of taking such actions, such Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, continues to constitute or remains reasonably likely to result in a Company Superior Proposal or Parent Superior Proposal, as applicable, and that the failure to take such action would be inconsistent with its fiduciary duties under the Company Bylaws or applicable Law, and (B) prior to furnishing any such non-public information to such Receiving Party, the Company or Parent, as applicable, receives from such Receiving Party an executed Confidentiality Agreement. Each of the Company and Parent shall as promptly as practicable (in all events within 24 hours) provide to the Other Party a copy of such Confidentiality Agreement and shall provide to the Other Party any non-public information with respect to the Party and its Subsidiaries that was not previously provided or made available to the Other Party prior to or substantially concurrent with providing or making available such non-public information to such other Person. Each of the Company and Parent shall, as promptly as practicable (and in any event within 24 hours), advise the Other Party in writing of any request for non-public information or any Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, received from any Person or “group,” including the identity of such Person or “group,” or any inquiry or request for discussions or negotiations with respect to any Company Acquisition Proposal or Parent Acquisition Proposal, as applicable, and the material terms of such request, Company Acquisition Proposal or Parent Acquisition Proposal, or inquiry, as well as the identity of the Person or “group” making such request, proposal or inquiry. Each of the Company and Parent shall, as promptly as practicable (and in all events within 24 hours), provide to the Other Party copies of any written materials received by such Party or any of its Subsidiaries or Representatives in connection with any of the foregoing and the identity of the Person or “group” making any such request, Company Acquisition Proposal or Parent Acquisition Proposal, or inquiry.
(d)The Company and Parent each shall keep the Other Party fully informed of the status of any material developments regarding or material changes in any Company Acquisition Proposal or Parent Acquisition Proposal on a reasonably current basis (and in all events within 24 hours of such material development or change). Each of the Company and Parent agrees that it and their Subsidiaries will not enter into any Confidentiality Agreement or any other agreement with any Person that prohibits the Company or Parent or any of their Subsidiaries from providing any information to the Other Party in accordance with Section 7.5 or this Section 7.6. Each of the Company and Parent will use commercially reasonable efforts to enforce (and shall not amend or waive any material terms of) any such agreement at the request of or on behalf of the Other Party.
7.7Takeover Laws. Neither the Company nor the Buyer Parties shall take any action that would cause the Merger Transactions to be subject to requirements imposed by any Takeover Laws, and each of them shall take all necessary steps within its control to exempt (or ensure the continued exemption of) the Merger Transactions from, or if necessary challenge the validity or applicability of, any applicable Takeover Law, as now or hereafter in effect, including Takeover Laws of any state that purport to apply to this Agreement or the Merger Transactions.
7.8New Common Stock Reserve and Listing. Parent shall cause HoldCo to (i) reserve the New Common Stock, from its authorized and unissued common stock, for issuance in connection with the Mergers and (ii) use its commercially reasonable efforts to cause the shares of New Common Stock to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Parent Effective Time.
7.9Indemnification; Directors’ and Officers’ Insurance.
(a)Without limiting any additional rights that any director, officer, trustee, employee, agent, or fiduciary may have under any of the organizational and governing documents of the Company and its Subsidiaries or under indemnification agreements between the Indemnified Persons and the Company and its Subsidiaries, in each case, as in effect as of the date of this Agreement, from and after the Astro Effective Time, HoldCo and the Astro Surviving Entity, jointly and severally, will, to the fullest extent authorized or permitted by applicable Law: (i) indemnify and hold harmless each person who is now, or has been or becomes at any time prior to the Astro Effective Time, an officer or director of the Company or any of its Subsidiaries and also with respect to any such Person, in such Person’s capacity as a director or officer serving at the request of or on behalf of the Company or any of its Subsidiaries and together with such Person’s heirs, executors or administrators (collectively, the “Indemnified Persons”) in connection with any Claim or Legal Proceeding and any losses, claims, damages, liabilities, costs, Indemnification Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) resulting therefrom; and (ii) promptly pay on behalf of or, within fifteen (15) days after any request for advancement, advance to each of the Indemnified Persons (provided the Indemnified Person provides an undertaking to repay such advances if it is ultimately determined by a final and nonappealable judicial determination that such Indemnified Person is not entitled to indemnification hereunder), any Indemnification Expenses incurred in defending, serving as a witness with respect to or otherwise participating with respect to any Claim or Legal Proceeding in advance of the final disposition of such Claim or Legal Proceeding, including payment on behalf of or advancement to the Indemnified Person of any Indemnification Expenses incurred by such Indemnified Person in connection with enforcing any rights with respect to such indemnification or advancement, in each case without the requirement of any bond or other security.The indemnification and advancement obligations of HoldCo and the Astro Surviving Entity pursuant to this Section 7.9(a) extend to acts or omissions occurring at or before the Astro Effective Time and any Claim or Legal Proceeding relating thereto (including with respect to any acts or omissions occurring in connection with the approval of this Agreement and the consummation of the Merger Transactions and the transactions contemplated by this Agreement, including the consideration and approval thereof and the process undertaken in connection therewith and any Claim or Legal Proceeding relating thereto), and all rights to indemnification and advancement conferred hereunder continue as to any Indemnified Person who has ceased to be a director or officer of the Company or any of its Subsidiaries after the date of this Agreement.As used in this Section 7.9: (x) the term “Claim” means any threatened, asserted, pending or completed action or proceeding, whether instituted by any Party hereto, any Governmental Authority or any other Person, that any Indemnified Person in good faith reasonably believes would be likely to result in the institution of any Legal Proceeding, arising out of or pertaining to matters that relate to such Indemnified Person’s duties or service as a director, officer, employee, member, trustee or other fiduciary of the Company or of any of its Subsidiaries or as a trustee of (or in a similar capacity with) any compensation and benefit plan of any thereof; (y) the term “Indemnification Expenses” means documented out of pocket attorneys’ fees and expenses and all other reasonable and documented out of pocket costs, expenses and obligations (including experts’ fees, travel expenses, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim for which indemnification is sought pursuant to this Section 7.9(a), including any Legal Proceeding relating to a claim for indemnification or advancement brought by an Indemnified Person.Neither HoldCo nor the Astro Surviving Entity will settle, compromise or consent to the entry of any judgment
in any actual or threatened Claim or Legal Proceeding in respect of which indemnification has been or reasonably could be sought by such Indemnified Person hereunder without the prior consent of the Indemnified Person (which consent shall not be unreasonably withheld, conditioned or delayed).
(b)Without limiting the foregoing, HoldCo shall cause the Astro Surviving Entity to agree that all rights to indemnification existing in favor of the Indemnified Persons as provided in the organizational and governing documents (and any successor organizational and governing documents) of the Company and its Subsidiaries or under indemnification agreements between the Indemnified Persons and the Company and its Subsidiaries, in each case, as in effect as of the date of this Agreement with respect to matters occurring prior to the Astro Effective Time (the “Indemnification Obligations”) shall survive the Merger and shall continue in full force and effect as obligations of the Astro Surviving Entity for a period of not less than six (6) years after the Astro Effective Time unless otherwise required by Law; provided, that all rights to indemnification in respect of any claim asserted or made during such period shall continue until the final disposition of such claim.
(c)For a period of six (6) years from the Astro Effective Time, the organizational and governing documents of the Company and its Subsidiaries will contain provisions no less favorable with respect to indemnification, advancement of expenses, exculpation and limitations on liability of directors and officers than are set forth as of the date of this Agreement in the organizational and governing documents of the Company and its Subsidiaries or under existing indemnification agreements between the Indemnified Persons and the Company and its Subsidiaries, which provisions will not be amended, repealed or otherwise modified for a period of six (6) years from the Astro Effective Time in any manner that would affect materially and adversely the rights thereunder of individuals who, at or prior to the Astro Effective Time, were Indemnified Persons, unless such modification is required by Law and then only to the minimum extent required by Law; provided, however, that any such modification shall be prospective only and shall not limit or eliminate any such right with respect to any Claim or Legal Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to modification; provided, further, that all rights to indemnification in respect of any Legal Proceeding pending or asserted or any Claim made within such period continue until the disposition of such Legal Proceeding or resolution of such Claim.
(d)For a period of six (6) years from the Astro Effective Time, HoldCo or the Astro Surviving Entity shall maintain in full effect the current directors’ and officers’ liability and fiduciary liability insurance policies covering the Indemnified Persons (but may substitute therefore other policies of at least the same coverage and amounts containing terms and conditions that are no less advantageous to the Indemnified Person so long as that substitution (i) does not result in gaps or lapses in coverage) with respect to claims arising from facts or events that existed or occurred prior to or at the Astro Effective Time (including in connection with this Agreement or the Merger Transactions) and (ii) is from an insurance carrier, to the extent available, with the same or better credit rating as the Company’s current insurance carrier with respect to directors’ and officers’ liability insurance and fiduciary liability insurance; provided, that in no event shall HoldCo or the Astro Surviving Entity be required to expend an amount pursuant to this Section 7.9(c) in excess of 300% of the current annual premium paid by the Company for its existing coverage in the aggregate and if such comparable coverage cannot be obtained by paying an aggregate premium equal to or below 300% of the current annual premium, the Astro Surviving Entity shall only be required to maintain as much coverage as can be maintained by paying an aggregate premium equal to 300% of such amount.If HoldCo or the Astro Surviving Entity elects, then HoldCo or the Astro Surviving Entity
may, on or prior to the Astro Effective Time, purchase a “tail policy” with respect to acts or omissions occurring or alleged to have occurred prior to the Astro Effective Time that were committed or alleged to have been committed by such Indemnified Persons in their capacities as such.
(e)This Section 7.9 shall survive the consummation of the Merger and is intended to benefit, and shall be enforceable by each Indemnified Person (notwithstanding that such Persons are not parties to this Agreement) and their respective heirs and legal representatives. The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Person is entitled, whether pursuant to Law, contract or otherwise.
(f)HoldCo will cause the Astro Surviving Entity to perform all of the obligations of the Astro Surviving Entity under this Section 7.9.
(g)If HoldCo or the Astro Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity resulting from 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 provision shall be made so that the successors and assigns of HoldCo or the Astro Surviving Entity, as the case may be, shall assume the applicable obligations set forth in this Section 7.9.
7.10Notification of Certain Matters. Each of the Company and Parent shall give prompt notice to the other of (a) any fact, event or circumstance known to it that (i) would reasonably be expected, individually or taken together with all other facts, events and circumstances known to it, to result in any Material Adverse Effect with respect to it or (ii) could cause or constitute a material breach of any of its representations, warranties, covenants or agreements contained herein, and (b) (i) any change in its financial condition or business that results in, or would reasonably be expected to result in, a Material Adverse Effect with respect to it or (ii) any Legal Proceedings or governmental complaints, investigations or hearings, to the extent such Legal Proceedings, complaints, investigations, or hearings relate to this Agreement or the Merger Transactions or result in a Material Adverse Effect with respect to it; provided, however, that the delivery of any notice pursuant to this Section 7.10 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice.
7.11Rule 16b-3.Prior to the Parent Effective Time, each of Parent and the Company shall use commercially reasonable efforts to cause any dispositions of Company Common Stock or Parent Common Stock (including derivative securities with respect to Company Common Stock or Parent Common Stock) resulting from the Merger Transactions by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company or Parent, as applicable, to be exempt under Rule 16b-3 promulgated under the Exchange Act, such efforts to include all steps required to be taken in accordance with the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
7.12Dividend Record Dates.The Company shall coordinate with Parent to designate the record dates and payment dates for the Company’s quarterly dividends to coincide with the record dates and payment dates for Parent’s quarterly dividends, it being the intention of the Parties that holders of Parent Common Stock and Company Common Stock shall not receive two dividends, or fail to receive one dividend, for any single calendar quarter with respect to their Parent Common Stock and Company Common Stock.
7.13Conversion of Equity Awards.
(a)At the Astro Effective Time, each Existing Company Restricted Stock Award that is outstanding under any Company Equity Plan immediately before the Astro Effective Time, whether vested or unvested, shall, automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into a restricted stock award denominated in shares of New Common Stock (each, a “Converted Company Restricted Stock Award”). Each Converted Company Restricted Stock Award shall continue to have and be subject to substantially the same terms and conditions as were applicable to such Existing Company Restricted Stock Award immediately before the Astro Effective Time (including vesting conditions, accumulated dividends and other dividend rights), except that each Converted Company Restricted Stock Award shall cover that number of shares of New Common Stock equal to the product (rounded down to the nearest whole number) of (A) the number of shares of Company Common Stock underlying such Existing Company Restricted Stock Award and (B) the Exchange Ratio.
(b)At the Parent Effective Time, each Existing Parent Restricted Stock Award that is outstanding under any Parent Equity Plan immediately before the Parent Effective Time, whether vested or unvested, shall, automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into a restricted stock award denominated in shares of New Common Stock (each, a “Converted Parent Restricted Stock Award”). Each Converted Parent Restricted Stock Award shall continue to have and be subject to substantially the same terms and conditions as were applicable to such Existing Parent Restricted Stock Award immediately before the Parent Effective Time (including vesting conditions, accumulated dividends and other dividend rights), and each Converted Parent Restricted Stock Award shall cover that number of shares of New Common Stock equal to the number of shares of ParentMLP Common Stock underlying such Existing Parent Restricted Stock Award.
(c)At the Parent Effective Time, each Existing Parent Stock Option that is outstanding under any Parent Equity Plan immediately before the Parent Effective Time, whether vested or unvested, shall, automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into an option to purchase shares of New Common Stock (each, a “Converted Option”). Each Converted Option shall continue to have and beUnits subject to substantially the same terms and conditions as were applicable toeach such Existing Parent Stock Option immediately before the Parent Effective Time (including expiration date, vesting conditions and exercise provisions), and each Converted Option shall be exercisable for that number of shares of New Common Stock equal to the number of shares of Parent Common Stock subject to the Existing Parent Stock Option immediately before the Parent Effective Time; provided, however, that the exercise price and the number of shares of New Common Stock purchasable under each Converted Option shall be determined in a manner consistent with the requirements of Section 409A of the Code and the applicable Treasury Regulations promulgated thereunder (including Treasury Regulation Section 1.409A-1(b)(5)(v)(D)); provided, further, that in the case of any Existing Parent Stock Option to which Section 422 of the Code applies, the exercise price and the number of shares of New Common Stock purchasable under such Converted Option shall be determined in accordance with the foregoing in a manner that satisfies the requirements of Section 424(a) of the Code.
(d)At the Parent Effective Time, each Existing Parent Stock Appreciation Right that is outstanding under any Parent Equity Plan immediately before the Parent Effective Time, whether vested or unvested, shall, automatically and without any required action on the part of any holder or beneficiary thereof, be assumed by HoldCo and converted into an appreciation right to purchase
shares of New Common Stock (each, a “Converted SAR”). Each Converted SAR shall continue to have and be subject to substantially the same terms and conditions as were applicable to such Existing Parent Stock Appreciation Right immediately before the Parent Effective Time (including expiration date, vesting conditions and exercise provisions), and each Converted SAR shall be exercisable for that number of shares of New Common Stock equal to the number of shares of Parent Common Stock subject to the Existing Parent Stock Appreciation Right immediately before the Parent Effective Time; provided, however, that the exercise price and the number of shares of New Common Stock purchasable under each Converted SAR shall be determined in a manner consistent with the requirements of Sections 409A and 424 of the Code and the applicable Treasury Regulations promulgated thereunder (including Treasury Regulation Section 1.409A-1(b)(5)(v)(D)).
7.14Employee Matters.
(a)From and after the Astro Effective Time, HoldCo and the Surviving Entities shall (i) recognize the applicable union(s) designated in Section 4.14(a) of the Company Disclosure Letter as the exclusive representative of the applicable bargaining unit referenced on such Schedule; (ii) continue to honor all Company Benefit Plans (including by adopting or otherwise continuing to honor all collective bargaining agreements and other contracts between the Company or any of its Subsidiaries and any labor union or other representative of employees) and compensation arrangements and agreements in accordance with their terms as in effect immediately before the Astro Effective Time, including continuing to provide medical benefits under a HoldCo Plan (as defined below) to any Company retiree who is receiving medical benefits from the CompanyMLP Restricted Unit Award immediately prior to the date of this Agreement that are substantially similarEffective Time multiplied by the Merger Consideration (rounded up to the benefits being received immediately prior to the Astro Effective Time; (iii) fully vest any Company Pension Plan participant in such participant’s pension benefit upon the occurrence of an Involuntary Termination that occurs within the earlier of one hundred eighty (180) days after the Closing Date or December 31, 2017; and (iv) cause any employee benefit plans and compensation arrangements established, maintained or contributed to by HoldCo, Parent or any of their Affiliates (including the Company and its Subsidiaries) that cover any of the Continuing Employees following the Closing (collectively, the “HoldCo Plans”) to (except to the extent prohibited by any collective bargaining agreement or obligation): (x) recognize the pre‑Closing service of participating Continuing Employees with the Company and its Subsidiaries for purposes of vesting and eligibility to participate (but not for purposes of benefit accrual), except to the extent such service credit would result in a duplication of benefits for the same period, (y) with respect to any HoldCo Plan that provides medical benefits, waive any pre‑existing condition limitations for participating Continuing Employees, and (z) provide credit to each participating Continuing Employee for amounts paid by such Continuing Employee prior to the Closing during the year in which the Closing occurs under any analogous Company Benefit Plan during the same period for purposes of applying deductibles, co-payments and out-of-pocket maximumsnext whole share) as though such amounts had been paid in accordance with the terms of such HoldCo Plan; provided, that nothing herein shall limit the right of the Company, HoldCo or the Surviving Entities to amend or terminate such plans, arrangements and agreements in accordance with their terms.
(b)Unless prohibited by any collective bargaining agreement or obligation, HoldCo shall cause the Company and its Subsidiaries to credit under any applicable HoldCo Plans each Continuing Employee with all vacation and personal holiday time that such Continuing Employee has accrued pursuant to Company Benefit Plans but has not used as of the Closing; provided, that any such credited accruals may be used only during the calendar year in which the Closing occurs.
(c)As soon as practicable after the date of this Agreement,Effective Date, along with any corresponding accrued but unpaid DERs (as defined in the Company shall amend each applicable Company Benefit Plan providing retiree medical benefits to provide that no individual who is not eligible for retiree medical benefits under such Company Benefit Plan immediately prior to the date of this Agreement will be eligible to receive retiree medical benefits under such Company Benefit Plan on or after the date of this Agreement.
(d)Without limiting the generality of Section 7.14(a), the Company acknowledges and agrees that all provisions contained in this AgreementMLP Long-Term Incentive Plan) with respect to the Continuing Employees are included for the sole benefit of the Company, HoldCo and the Surviving Entities, and that nothing in this Agreement, whether express or implied, shall create any third party beneficiary or other rights (i) in any other Person, including any employees, former employees, employee representatives, any participant in any Company Benefit Plan or other benefit plan or arrangement, or any dependent or beneficiary thereof, or (ii) to continued employment with the Company, HoldCo, the Surviving Entities, or any of their respective Subsidiaries.MLP Restricted Unit Awards.
(e)Nothing contained herein, whether express or implied, shall be treated as an amendment or other modification of any Company Benefit Plan or other employee benefit plan or arrangement, or shall limit the right of HoldCo, the Surviving Entities, the Company or any of their Subsidiaries, to amend, terminate or otherwise modify any such Company Benefit Plan or other employee benefit plan or arrangement following the Closing in accordance with its terms. In the event that (i) a party other than HoldCo, the Company or any of their Subsidiaries makes a claim or takes other action to enforce any provision in this Agreement as an amendment to any Company Benefit Plan or other employee benefit plan or arrangement, and (ii) such provision is deemed in any judicial proceeding to be an amendment to such Company Benefit Plan or other employee benefit plan or arrangement even though not explicitly designated as such in this Agreement then such provision,
(b) Prior to the extent covered by such deemed amendment, shall lapse retroactivelyEffective Time, MLP and shall have no amendatory effect.
7.15Cooperation with Financing. From and after the date of this Agreement, the Company shall, and shall cause each of its Subsidiaries and use commercially reasonable efforts to cause its and their Representatives (including their auditors) to, use its and their commercially reasonable efforts to provide all cooperation (including providing reasonably available financial and other information regarding the Company and its Subsidiaries for use in marketing and offering documents and to enable HoldCo to prepare pro forma financial statements) as reasonably requested by HoldCo to assist HoldCo in the arrangement, refinancing or repayment of any bank debt financing or any capital markets debt financing or any solicitation of any consent or waiver required under any agreement relating to indebtedness, in each case, in connection with the Mergers and the Merger Transactions, and any other amounts required to be paid in connection with the consummation of the Mergers and the solicitation of any consents or waivers. HoldCo shall indemnify and hold harmless the Company and its respective Subsidiaries from and against any and all losses or damages actually suffered or incurred by them directly in connection with their assistance or activities in connection with the arrangement of any such bank debt financing or any capital markets debt financing.
7.16Treatment of Company Convertible Notes.Within the time periods required by the terms of the Company Convertible Notes Indenture, the CompanyMLP General Partner shall take all actions required therein, to the extent such actions are within the Company’s control, to be performed by it or its Subsidiaries prior to the Astro Effective Time as a result of the execution and delivery of, and the performance by the Company of its obligations pursuant to, this Agreement, the Mergers, and the other Merger Transactions, including the giving of any notices that may be required prior to the Astro Effective Time and the delivery to the trustee or other applicable Person of any documents or instruments, certificates or opinions of counsel to such trustee
or other applicable Person, in each case in connection with such transactions or otherwise required pursuant to any agreement governing the terms of the Company Convertible Notes; provided, that the Company shall deliver a copy of any such notice or other document, instrument, certificate or opinion of counsel to Parent at least five (5) Business Days prior to delivering or entering into such notice or other document, instrument, certificate or opinion of counsel in accordance with the terms of the Company Convertible Notes Indenture. Without limiting the generality of the foregoing, prior to the Astro Effective Time, the Company agrees to cooperate with Parent by (i) executing and delivering at the Astro Effective Time, a supplemental indenture to the Company Convertible Notes Indenture and related officer’s certificate and opinion of counsel, in each case in form and substance reasonably acceptable to Parent, and (ii) using commercially reasonable efforts to cause the trustee under the Company Convertible Notes Indenture to execute at the Astro Effective Time such supplemental indenture.
7.17Securityholder Litigation. The Company shall give Parent the opportunity to participate, subject to a customary joint defense agreement, in, but not control, the defense or settlement of any litigation against the Company or its directors relating to the Merger Transactions, and no settlement shall be agreed to without Parent’s prior written consent.
7.18Tax Matters.
(a)For U.S. federal income Tax purposes (and, where applicable, state and local income Tax purposes), the Parties intend that (i) the Parent Merger qualify as a “reorganization” within the meaning of Section 368(a) of the Code, (ii) the Mergers, taken together, qualify as an exchange within the meaning of Section 351 of the Code, and (iii) this Agreement be, and is hereby adopted, as a “plan of reorganization” within the meaning of Sections 354, 361, and 368 of the Code and the Treasury Regulations promulgated thereunder.
(b)Parent and the Company shall each use commercially reasonable efforts to (i) cause (A) the Parent Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (B) the Mergers, taken together, to qualify as an exchange within the meaning of Section 351 of the Code, and (ii) obtain the Tax opinions set forth in Section 8.2(c) and Section 8.3(c). Provided that Parent and the Company shall have received the opinions of counsel referred to in Section 8.2(c) and Section 8.3(c), (i) the Parties shall treat (A) the Parent Merger as a “reorganization” within the meaning of Section 368(a) of the Code, and (B) the Mergers, taken together, as an exchange within the meaning of Section 351 of the Code, and (ii) no Party shall take any position U.S. federal income Tax purposes (and, where applicable, state and local income Tax purposes) inconsistent therewith, except to the extent otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.
(c)Officers of Parent, the Company, HoldCo, Parent Merger Sub, and Astro Merger Sub shall execute and deliver to Vinson & Elkins LLP, tax counsel for the Company, and Norton Rose Fulbright US LLP, tax counsel for Parent, certificates in the form agreed to by the Parties at such time or times as may reasonably be requested by such firms, in connection with such tax counsels’ delivery of the opinions pursuant to Section 8.2(c) and Section 8.3(c). Each of Parent, the Company, HoldCo, Parent Merger Sub, and Astro Merger Sub shall use commercially reasonable efforts (i) not to take or cause to be taken any action that would cause to be untrue (or fail to take or cause not to be taken any action which would cause to be untrue) any of the certifications and representations included in the certificates described in this Section 7.18 and (ii) to cause each tax counsel to issue its opinion pursuant to Section 8.2(c) and Section 8.3(c), as applicable.
(d)Neither Parent nor the Company will take (or fail to take) any action which action (or failure to act) would reasonably be expected to cause (i) the Parent Merger to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code or (ii) the Mergers, taken together, to fail to qualify as an exchange within the meaning of Section 351 of the Code.
(e)Between the date of this Agreement and the Closing Date, the Company shall prepare all Tax Returns for any Tax period which are required to be filed on or before the Closing Date (taking extensions into account) using accounting methods, principles and positions consistent with those used for prior Tax periods, unless a change is required by applicable Law or regulation. All such Tax Returns shall be timely filed and all related Taxes paid on or before the Closing Date.
7.19NYSE Delisting and Termination of Exchange Act Registration. Each of the Parties agrees to take, or cause to be taken, all actions reasonably necessary prior to the Astro Effective Time to cause the Company’s securities to be delisted from the NYSE and for the termination of the Company’s registration and reporting obligations under the Exchange Act as soon as reasonably practicable following the Astro Effective Time.
7.20Control of Operations.Without limiting any Party’s rights or obligations under this Agreement (including pursuant to Sections 6.1 and 6.2), the Parties understand and agree that (a) nothing contained in this Agreement will give any Party, directly or indirectly, the right to control, direct or influence any Other Party’s operations prior to the Astro Effective Time and (b) prior to the Astro Effective Time, each Party will exercise, consistent with the terms and conditions of this Agreement (including Sections 6.1 and 6.2), complete control and supervision over its operations.
7.21Director Appointment.
(a)Within thirty (30) days after the Closing Date, Parent and HoldCo shall take all actions necessary to cause the board of directors of HoldCo to be increased in size by one seat and to appoint an individual (“HoldCo Nominee”) to such newly created position as designated by the Independent Director Committee prior to the Closing Date (provided that HoldCo Nominee satisfies the Parent Director Qualifications) to hold office in accordance with the HoldCo Certificate and HoldCo Bylaws. HoldCo shall use commercially reasonable efforts to cause HoldCo Nominee to be re-nominated by the nominating committee of HoldCo and stand for election at the 2017 (to the extent applicable) and the 2018 annual meetings of the stockholders of HoldCo so long as HoldCo Nominee continues to meet the Parent Director Qualifications. In the event HoldCo Nominee resigns, dies or otherwise is unable to perform his duties as a director of HoldCo, then HoldCo shall no longer be obligated to maintain HoldCo Nominee on the board of directors of HoldCo or the seat on the board held by HoldCo Nominee.
(b)Within thirty (30) days after the Closing Date, Parent and HoldCo shall cause all actions to be taken to (i) cause the board of directors of the general partner of Parent Logistics Partners to be increased in size by one seat and to appoint an individual (the “Logistics Partners Nominee”) to such newly created position as designated by the Independent Director Committee prior to the Closing Date (provided that Logistics Partners Nominee satisfies the Parent Director Qualifications) to hold office in accordance with the limited liability company agreement of the general partner of Parent Logistics Partners. HoldCo shall use commercially reasonable efforts to cause Logistics Partners Nominee to be re-elected to the board of directors of the general partner of Parent Logistics Partners for terms to be no less than two (2) years after the Closing Date so long as Logistics Partners Nominee continues to meet the Parent Director Qualifications. In the event
Logistics Partners Nominee resigns, dies or otherwise is unable to perform his duties as a director, then HoldCo shall no longer be obligated to maintain Logistics Partners Nominee on the board of directors of the board of directors of the general partner of Parent Logistics Partners or the seat on such board held by Logistics Partners Nominee.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGERS
8.1Conditions to Each Party’s Obligation to Effect the Mergers. The respective obligations of each of the Parties to effect the Mergers shall be subject to the satisfaction or, to the extent permitted by applicable Law, the waiver on or prior to the Parent Effective Time of the following conditions:
(a)Stockholder Approval.Each of the Required Company Vote and the Required Parent Vote shall have been obtained; provided, that no Party may waive the requirement to obtain the Disinterested Stockholder Approval.
(b)Regulatory Approval.(i) Any waiting period applicable to the Merger Transactions under the HSR Act shall have been terminated or shall have expired and (ii) all applicable waiting and other time periods under Antitrust Laws, other than the HSR Act, shall have expired, lapsed or been terminated (as appropriate) and all regulatory clearances shall have been obtained.
(c)Governmental Approvals. All filings required to be made prior to the Parent Effective Time with, and all other consents, approvals, permits and authorizations required to be obtained prior to the Parent Effective Time from, any Governmental Authority in connection with the execution and delivery of this Agreement and the consummation of the Merger Transactions by the Parties or their respective Affiliates shall have been made or obtained, except where the failure to obtain such consents, approvals, permits and authorizations could not be reasonably likely to result in a Material Adverse Effect with respect to Parent or the Company; provided, however, that, prior to invoking this condition, the invoking Party shall have complied fully with its obligations under Section 7.1.
(d)NYSE Listing. The New Common Stock to be issued in connection with the Mergers shall have been approved for listing on the NYSE, subject to official notice of issuance.
(e)Effective Registration Statement. The Registration Statement shall have been declared effective by the SEC under the Securities Act, and no stop order suspending the effectiveness of the Registration Statement shall be in effect and no proceedings for that purpose may be pending or threatened by the SEC.
(f)No Injunction. No order, decree or injunction of any court or agency of competent jurisdiction shall be in effect, and no Law shall have been enacted or adopted, that enjoins, prohibits or makes illegal consummation of any of the Merger Transactions, and no Legal Proceeding by any Governmental Authority with respect to the Mergers or the other Merger Transactions shall be pending that seeks to restrain, enjoin, prohibit or delay consummation of the Mergers or such other Merger Transaction or to impose any material restrictions or requirements thereon or on the Buyer Parties or the Company with respect thereto; provided, however, that, prior to any Party making a claim that this condition has not been satisfied, such Party shall have complied fully with its obligations under Section 7.1.
8.2Conditions to Obligations of Buyer Parties. The obligations of the Buyer Parties to effect the Mergers are further subject to the satisfaction or, to the extent permitted by applicable Law, the waiver by Parent on or prior to the Closing Date of each of the following conditions:
(a)Representations and Warranties. (i) The representations and warranties of the Company set forth in Sections 4.2(d), 4.2(e), 4.8(a) and 4.25 shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), (ii) the representations and warranties of the Company set forth in Section 4.2 (other than Section 4.2(d) and 4.2(e)) shall be true and correct, other than any inaccuracies that are de minimis in the context of a transaction of this magnitude, as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), (iii) the representations and warranties of the Company set forth in Sections 4.1(a), 4.3(a), 4.3(b) and 4.22, shall be true and correct (without giving effect to any limitation as to materiality or, “Material Adverse Effect” set forth therein) in all material respects as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (iv) the representations and warranties of the Company set forth in this Agreement other than those representations and warranties specifically identified in clauses (i), (ii) and (iii) of this Section 8.2(a) shall be true and correct (without giving effect to any limitation as to materiality or, “Material Adverse Effect” set forth therein) as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct individually or in the aggregate has not had, and would not reasonably be expected to have, a Material Adverse Effect with respect to the Company.
(b)Performance of Obligations of the Company. Each and all of the agreements and covenants of the Company to be performed and complied with pursuant to this Agreement on or prior to the Parent Effective Time shall have been duly performed and complied with in all material respects.
(c)Tax Opinion. Parent shall have received the opinion of Norton Rose Fulbright US LLP, counsel to Parent (or other nationally recognized tax counsel reasonably satisfactory to Parent, which the Parties agree shall include Vinson & Elkins LLP for purposes of this Section 8.2(c)), in form and substance reasonably satisfactory to Parent, dated the Closing Date, rendered on the basis of facts, representations and assumptions set forth in such opinion and the certificates obtained from officers of Parent, the Company, HoldCo, Parent Merger Sub, and Astro Merger Sub, all of which are consistent with the state of facts existing as of the Parent Effective Time, to the effect that (i) the Parent Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) the receipt by the holders of shares Parent Common Stock of New Common Stock in exchange for Parent Common Stock pursuant to the Parent Merger, taken together with the receipt by the holders of shares of Company Common Stock of New Common Stock in exchange for Company Common Stock pursuant to the Astro Merger, will qualify for U.S. federal income tax purposes as an exchange within the meaning of Section 351 of the Code. In rendering the opinion described in this Section 8.2(c), Norton Rose Fulbright US LLP shall have
received and may rely upon the certificates and representations referred to in Section 7.18(c) and this Section 8.2(c).
(d)Certificate. The Company shall have delivered to Parent a certificate, dated the Closing Date, signed by the Chief Executive Officer or another senior executive officer of the Company certifying to the effect that the conditions set forth in Sections 8.2(a) and 8.2(b) have been satisfied.
8.3Conditions to Obligations of the Company. The obligations of the Company to effect the Mergers are further subject to the satisfaction or, to the extent permitted by applicable Law, the waiver by the Company on or prior to the Closing Date of each of the following conditions:
(a)Representations and Warranties. (i) The representations and warranties of the Buyer Parties set forth in Sections 5.8(a) and 5.20 shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), (ii) the representations and warranties of the Buyer Parties set forth in Section 5.2 shall be true and correct, other than any inaccuracies that are de minimis in the context of a transaction of this magnitude, as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), (iii) the representations and warranties of the Buyer Parties set forth in Sections 5.1(a), 5.1(b), 5.3(a), 5.3(b) and 5.17 shall be true and correct (without giving effect to any limitation as to materiality or, “Material Adverse Effect” set forth therein) in all material respects as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (i) the representations and warranties of the Buyer Parties set forth in this Agreement other than those representations and warranties specifically identified in clauses (i), (ii) and (iii) of this Section 8.3(a) shall be true and correct (without giving effect to any limitation as to materiality or, “Material Adverse Effect” set forth therein) as of the date of this Agreement and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct individually or in the aggregate has not had, and would not reasonably be expected to have, a Material Adverse Effect with respect to the Buyer Parties.
(b)Performance of Obligations of the Buyer Parties. Each and all of the agreements and covenants of the Buyer Parties to be performed and complied with pursuant to this Agreement on or prior to the Parent Effective Time shall have been duly performed and complied with in all material respects.
(c)Tax Opinion. The Company shall have received the opinion of Vinson & Elkins LLP, counsel to the Company (or other nationally recognized tax counsel reasonably satisfactory to Parent, which the Parties agree shall include Norton Rose Fulbright US LLP for purposes of this Section 8.3(c)), in form and substance reasonably satisfactory to the Company, dated the Closing Date, rendered on the basis of facts, representations and assumptions set forth in such opinion and the certificates obtained from officers of Parent, the Company, HoldCo, Parent Merger Sub, and Astro Merger Sub, all of which are consistent with the state of facts existing as of the Astro Effective
Time, to the effect that the receipt by the holders of shares of Company Common Stock of New Common Stock in exchange for Company Common Stock pursuant to the Astro Merger, taken together with the receipt by the holders of shares of Parent Common Stock of New Common Stock in exchange for Parent Common Stock pursuant to the Parent Merger, will qualify for U.S. federal income tax purposes as an exchange within the meaning of Section 351 of the Code. In rendering the opinion described in this Section 8.3(c), Vinson & Elkins LLP shall have received and may rely upon the certificates and representations referred to in Sections 7.18(c) and this Section 8.3(c).
(d)Certificate. Parent shall have delivered to the Company a certificate, dated the Closing Date, signed by the Chief Executive Officer or another senior executive officer of the Buyer Parties certifying to the effect that the conditions set forth in Sections 8.3(a) and 8.3(b) have been satisfied.
ARTICLE IX
TERMINATION
9.1Termination. Notwithstanding anything herein to the contrary, this Agreement may be terminated and the Mergers may be abandoned at any time prior to the Parent Effective Time whether before or after the Required Company Vote or the Required Parent Vote has been obtained:
(a)by the mutual consent of Parent and the Company;
(b)by either Parent or the Company, upon written notice to the other, if:
(i)the Mergers have not been consummated by October 2, 2017, subject to extension by the mutual agreement of the Company and Parent (the “Outside Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 9.1(b)(i) shall not be available to a Party whose failure to fulfill any material obligation under this Agreement or other material breach of this Agreement has been the primary cause of, or resulted in, the failure of the Mergers to have been consummated on or before such Outside Date;
(ii)any Governmental Authority has issued a statute, rule, order, decree or regulation or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the consummation of the Mergers or making the Mergers illegal and such statute, rule, order, decree, regulation or other action shall have become final and nonappealable, provided that the terminating Party is not then in material breach of Section 7.1;
(iii)the Required Company Vote shall not have been obtained upon a vote taken at the Company Stockholders Meeting (including adjournments or postponements thereof) permitted by Section 7.2(a)(i); provided, however, that the Company shall not be permitted to terminate this Agreement pursuant to this Section 9.1(b)(iii) if the failure to obtain such Required Company Vote is primarily caused by any action or failure to act of the Company that constitutes a breach of this Agreement; or
(iv)the Required Parent Vote shall not have been obtained upon a vote taken at the Parent Stockholder Meeting (including adjournments or postponements thereof) permitted by Section 7.2(a)(ii); provided, however, that Parent shall not be permitted to terminate this Agreement pursuant to this Section 9.1(b)(iv) if the failure to obtain such
Required Parent Vote is primarily caused by any action or failure to act of Parent that constitutes a breach of this Agreement.
(c)by Parent, upon written notice to the Company, if:
(i)the Company shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 8.2(a) or 8.2(b), and (ii) is incapable of being satisfied or cured by the Company prior to the Outside Date or, if capable of being satisfied or cured, is not satisfied or cured by the Company within the earlier of (x) thirty (30) days following receipt of written notice from Parent of such breach or failure to perform and (y) the fifth (5th) Business Day prior to the Outside Date (such breach being a “Company Terminable Breach”); provided, that Parent is not then in Parent Terminable Breach of any representation, warranty, covenant or other agreement by Parent contained in this Agreement;
(ii)a Company Change in Recommendation has occurred and the Required Company Vote shall not have been obtained at the time of such termination;
(iii)the Company shall have breached or failed to perform in any material respect any of its obligations under Section 7.6;
(iv)at any time prior to obtaining the Required Parent Vote if the Parent Board shall have approved, and Parent shall concurrently enter into, a definitive agreement providing for the implementation of a Parent Superior Proposal; provided, that Parent shall have complied with its obligations under Section 7.6 and shall have paid (or shall concurrently pay) the fee due under Section 9.2(c); or
(v)the Company has not obtained the consents or waivers listed in Section 9.1(c)(v) of the Company Disclosure Letter prior to the Consent Deadline, provided that Parent provides written notice to the Company of termination pursuant to this subsection on or before the fifth (5th) Business Day following the Consent Deadline.
(d)by the Company, upon written notice to Parent, if:
(i)Any of the Buyer Parties shall have breached or failed to perform any of its respective representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) would give rise to the failure of a condition set forth in Section 8.3(a) or 8.3(b), and (ii) is incapable of being satisfied or cured by any of the Buyer Parties prior to the Outside Date or, if capable of being satisfied or cured, is not satisfied or cured by any of the Buyer Parties within the earlier of (x) thirty (30) days following receipt of written notice from the Company of such breach or failure to perform and (y) the fifth (5th) Business Day prior to the Outside Date (such breach being a “Parent Terminable Breach”); provided, that the Company is not then in Company Terminable Breach of any representation, warranty, covenant or other agreement by the Company contained in this Agreement;
(ii)a Parent Change in Recommendation has occurred and the Required Parent Vote shall not have been obtained at the time of such termination;
(iii)Parent shall have breached or failed to perform in any material respect any of its obligations under Section 7.6; or
(iv)at any time prior to obtaining the Required Company Vote if the Company Board shall have approved, and the Company shall concurrently enter into, a definitive agreement providing for the implementation of a Company Superior Proposal; provided, that the Company shall have complied with its obligations under Section 7.6 and shall have paid (or shall concurrently pay) the fee due under Section 9.2(b).
9.2Fees and Expenses.
(a)Whether or not the Mergers are consummated, except as otherwise specifically provided herein, all costs and expenses incurred in connection with this Agreement and the Merger Transactions shall be paid by the Party incurring such expenses, except that any expenses to be paid in connection with any additional filings under the Antitrust Laws shall be paid by Parent;
(b)The Company shall pay to Parent or its designee the Company Termination Fee, by wire transfer of immediately available funds to an account or accounts designated in writing by Parent, as follows:
(i)if (A) this Agreement is terminated pursuant to (1) Section 9.1(b)(i) prior to the Company Stockholders Meeting and the conditions in Section 8.1(b) and Section 8.1(f) (with respect to orders, decrees and injunctions under the Antitrust Laws) shall have been satisfied, (2) Section 9.1(b)(iii) (relating to the failure to obtain the Required Company Vote), or (3) Section 9.1(c)(i) (relating to the failure of the Company’s representations or compliance with covenants); (B) following the date of this Agreement and prior to the termination of this Agreement, a proposal for a Company Qualifying Acquisition Transaction shall have been made to the Company or shall have been made directly to the stockholders of the Company generally or shall have otherwise become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make such a proposal, in the case of a termination under Section 9.1(b)(iii), and such proposal or announcement of an intention to make such proposal shall not have been publicly withdrawn at least two (2) Business Days prior to the Company Stockholders Meeting; and (C) within twelve (12) months following the termination of this Agreement, the Company enters into an agreement providing for, or consummates, a Company Qualifying Acquisition Transaction (as defined below), then the Company shall pay or cause to be paid the Company Termination Fee to Parent upon the consummation of a Company Qualifying Acquisition Transaction;
(ii)if this Agreement is terminated by Parent pursuant to Section 9.1(c)(ii), then the Company shall pay or cause to be paid the Company Termination Fee to Parent promptly, and in any event not more than two (2) Business Days following such termination; or
(iii)if this Agreement is terminated by the Company pursuant to Section 9.1(d)(iv), then concurrently with (and as a condition to) such termination, the Company shall pay or cause to be paid the Company Termination Fee to Parent.
(iv)As used herein, “CompanyQualifying Acquisition Transaction” means any Acquisition Proposal involving (A) 50% or more of the non- “cash or cash equivalent” assets of the Company and its Subsidiaries, taken as a whole; or (B) acquisition by any
person (other than Parent or any of its Subsidiaries or Affiliates) of 50% or more of the outstanding shares of Company Common Stock.
(c)Parent shall pay to the Company or its designee the Reverse Termination Fee, by wire transfer of immediately available funds to an account or accounts designated in writing by the Company, as follows:
(i)if (A) this Agreement is terminated pursuant to (1) Section 9.1(b)(i) prior to the Parent Stockholders Meeting and the conditions in Section 8.2(b) and Section 8.1(f) (with respect to orders, decrees and injunctions under the Antitrust Laws) shall have been satisfied, (2) Section 9.1(b)(iv) (relating to the failure to obtain the Required Parent Vote), or (3) Section 9.1(d)(i) (relating to the failure of the Buyer Parties’ representations or compliance with covenants); (B) following the date of this Agreement and prior to the termination of this Agreement, a proposal for a Parent Qualifying Acquisition Transaction shall have been made to Parent or shall have been made directly to the stockholders of Parent generally or shall have otherwise become publicly known or any Person shall have publicly announced an intention (whether or not conditional) to make such a proposal, in the case of a termination under Section 9.1(b)(iv), and such proposal or announcement of an intention to make such proposal shall not have been publicly withdrawn at least ten (10) Business Days prior to the Parent Stockholders Meeting; and (C) within twelve (12) months following the termination of this Agreement, Parent enters into an agreement providing for, or consummates, a Parent Qualifying Acquisition Transaction, then Parent shall pay or cause to be paid the Reverse Termination Fee to the Company upon the consummation of a Parent Qualifying Acquisition Transaction;
(ii)if this Agreement is terminated by the Company pursuant to Section 9.1(d)(ii), then Parent shall pay or cause to be paid the Reverse Termination Fee to the Company promptly, and in any event not more than two (2) Business Days following such termination; or
(iii)if this Agreement is terminated by Parent pursuant to Section 9.1(c)(iv), then concurrently with (and as a condition to) such termination, Parent shall pay or cause to be paid the Reverse Termination Fee to the Company.
(iv)As used herein, “Parent Qualifying Acquisition Transaction” means any Acquisition Proposal involving (A) 50% or more of the non- “cash or cash equivalent” assets of Parent and its Subsidiaries, taken as a whole; or (B) acquisition by any person (other than the Company or any of its Subsidiaries or Affiliates) of 50% or more of the outstanding shares of Parent Common Stock.
(d)Each of the Parties acknowledges thateffectuate the provisions of this Section 9.1 are2.3. MLP and MLP General Partner shall ensure that, as of immediately following the Effective Time, no holder of an integral part of the transactions contemplated hereby and that, without these agreements, the other PartyMLP Restricted Unit Award or Other Parties would not enter into this Agreement. The Parties agree thatparticipant in the event that the Company pays the Company Termination Fee to Parent or Parent pays the Reverse Termination Fee to the Company, no Party to this AgreementMLP Long-Term Incentive Plan shall have further liabilityany rights thereunder to any Other Party of any kindacquire, or other rights in respect of, this Agreement and the transactions contemplated hereby.
9.3Effectequity of Termination. If this Agreement is terminated in accordance with Section 9.1, this Agreement shall forthwith become null and void and, except as set forth in Section 9.2, there shall be no liabilityMLP, the Surviving Entity or obligation on the part of the Buyer Parties, the Company or their respective Affiliates or
Representatives; provided, that (i) Sections 4.20, 5.16, 7.5(b), 9.2 and this Section 9.3 and Article X will survive termination hereof and (ii) except as provided in Section 9.2(d), no Party shall be relieved from any liabilities or damages (which the Parties acknowledge and agree may include, in addition to reimbursement of expenses and out-of-pocket costs, and to the extent proven, other damages suffered by any Other Party calculated based on loss suffered by any such Other Party’s stockholders (taking into consideration all relevant matters and equitable considerations), which shall be deemed in such event to be damages of any such Other Party and not of any such Other Party’s stockholders themselves and may only be pursued by such Other Party through actions expressly approved by (i) its board of directors, in the case of the Buyer Parties or (ii) the Independent Director Committee, in the case of the Company) as a result of any willful and material breach by any Party of any of such Party’s representations, warranties, covenants or other agreements set forth in this Agreement. For purposes of this Section 9.3, “willful and material breach” shall mean a material breach that is a consequence of an act or a failure to take such act by the breaching party with the knowledge that the taking of such act (or the failure to take such act) would cause a material breach of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1Notices. All notices, requests, demands and other communications required or permitted to be given or made hereunder to any Party shall be in writing (including telecopy) and shall be deemed to have been duly given if personally delivered, faxed (with confirmation of receipt), mailed by registered or certified mail (return receipt requested) or delivered via electronic mail (with confirmation of receipt) to such Party at its address set forth below or such other address as such Party may specify by notice to the Parties hereto.
If to a Buyer Party, to:
Mark Cox, EVP
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
Mark.Cox@delekus.com
Fax: 615.224.1185
with a copy (which shall not constitute notice) at the same physical address to:
General Counsel
Amber.Ervin@delekus.com
Fax: 615.224.6362
and a copy (which shall not constitute notice) to:
Daniel L. Mark, Esq.
Norton Rose Fulbright US LLP
1301 McKinney
Houston, TX 77010-3095
daniel.mark@nortonrosefulbright.com
Fax: 713.651.5246
If to the Company, to:
James Ranspot
Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
James.Ranspot@alonusa.com
Fax: 972-367-3724
and with a copy (which shall not constitute notice) to:
Gillian Hobson
Vinson & Elkins LLP
1001 Fannin Street, Suite 2500
Houston, TX 77002
GHobson@velaw.com
Fax: 713.615.5794
and
David Wiessman
Chairman of the Special Committee of the Board of Directors
Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
David.Wiessman@alonusa.com
Fax: 972-367-3724
and with a copy (which shall not constitute notice) to:
Jay Tabor
Gibson Dunn & Crutcher LLP
2100 McKinney Avenue, Suite 1100
Dallas, TX 7520
JTabor@gibsondunn.com
Fax: 214.571.2980
Notices shall be deemed to have been received (a) on the date of receipt if (i) delivered by hand or overnight courier service or (ii) upon receipt of an appropriate electronic answerback or confirmation when so delivered by fax or electronic mail (to such number or email address specified above or another number or address as such Person may subsequently designate by notice given hereunder) if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during recipient’s normal business hours or (b) on the date three (3) Business Days after dispatch by certified or registered mail.
10.2Waiver; Amendment. Subject to compliance with applicable Law, prior to the Closing, any provision of this Agreement may be (i) waived in writing by the Party benefited by the provision, or (ii) amended, modified or supplemented at any time, whether before or after the Required Company Vote is obtained, by an agreement in writing between the Parties; provided, however, that, after the Required
Company Vote is obtained, no amendment or supplement shall be made to the nature or amount of the Merger Consideration or that adversely affects the rights of the Company Stockholders hereunder without the approval of the Company Stockholders except as permitted by Law; and provided, further, in addition to any other approvals required by the Parties’ constituent documents or under this Agreement, the foregoing waivers, amendments, supplements or modifications in clauses (i) and (ii) are approved by the Independent Director Committee. Unless otherwise expressly set forth in this Agreement, whenever a determination, decision, approval, consent or agreement of the Company is required pursuant to this Agreement (including any determination to exercise or refrain from exercising any rights under Article IX or to enforce the terms of this Agreement (including Section 10.10), such determination, decision, approval, consent or agreement must be authorized by the Independent Director Committee, and such action shall not require approval of the holders of Company Common Stock. The failure of a Party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.
10.3Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one Agreement. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic transmission (e.g., “pdf”) shall be effective as delivery of a manually executed counterpart hereof.
10.4Governing Law. This Agreement and all claims based on any matter arising out of or in connection with this Agreement or the Merger Transactions shall be governed by, and interpreted in accordance with, the Laws of the State of Delaware (except to the extent that mandatory provisions of federal law govern), without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.
10.5Confidentiality. Each of the Parties shall, and shall use commercially reasonable efforts to cause its Representatives to, maintain the confidentiality of all information provided in connection herewith to the extent required by, and subject to the limitations of, Section 7.5(b).
10.6Entire Understanding; No Third-Party Beneficiaries. This Agreement (including the documents referred to or listed herein), the Voting Agreements and the Transaction Confidentiality Agreement constitutes the entire agreement between and among the Parties pertaining to the subject matter hereof and the Merger Transactions and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties, and there are no warranties, representations or other agreements between or among the Parties in connection with the subject matter hereof except as set forth specifically herein and in the Transaction Confidentiality Agreement. Except as contemplated by Section 7.9, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the Parties or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
10.7Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permittedMLP Subsidiaries.
by applicable Law in an acceptable manner to the end that the Merger Transactions are fulfilled to the fullest extent possible.
10.8Jurisdiction. The Parties agree that to the fullest extent permitted by Law, any Legal Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement, the Voting Agreements or the Merger Transactions shall be brought in the Delaware Court of Chancery, and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Legal Proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such Legal Proceeding in any such court or that any such Legal Proceeding brought in such court has been brought in an inconvenient forum, or that this Agreement, or the subject matter hereof, may not be enforced in or by such court. Process in any such Legal Proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that to the fullest extent permitted by law, service of process on such Party as provided in Section 10.1 shall be deemed effective service of process on such Party for matters between the Parties.
10.9Waiver of Jury Trial. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE VOTING AGREEMENTS OR THE MERGER TRANSACTIONS.
10.10Specific Performance. Each of the Parties acknowledges and agrees that the rights of each Party to consummate the Mergers and the other transactions contemplated by this Agreement are special, unique and of extraordinary character and that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or damage would be caused for which money damages would not be an adequate remedy. Accordingly, each Party agrees that, in addition to any other available remedies a Party may have in equity or at law, each Party shall be entitled to enforce specifically the terms and provisions of this Agreement and to obtain an injunction restraining any breach or violation or threatened breach or violation of the provisions of this Agreement in the Court of Chancery of the State of Delaware without necessity of posting a bond or other form of security. In the event that any action or proceeding should be brought in equity to enforce the provisions of this Agreement, no Party shall allege, and each Party hereby waives the defense, that there is an adequate remedy at law.
10.11No Recourse. This Agreement may only be enforced against, and any claims or causes of action that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement may only be made against, the entities that are expressly identified as Parties, and no past, present or future Affiliate, director, officer, employee, incorporator, member, manager, partner, stockholder, agent, attorney or representative of any Party shall have any liability for any obligations or liabilities of the Parties or for any claim based on, in respect of, or by reason of, the Merger Transactions.
10.12Interpretation.
(a)When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an 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 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.” The words
“hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. If a word or phrase is defined, its other grammatical forms have a corresponding meaning. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. A defined term has its defined meaning throughout this Agreement and each Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined. The term “cost” includes expense and the term “expense” includes cost. All references to a specific time of day in this Agreement shall be based upon Central Standard Time or Central Daylight Savings Time, as applicable, on the date in question. The word “or” will have the inclusive meaning represented by the phrase “and/or” unless the context requires otherwise. Time periods within or following which any payment is to be made or an act is to be done shall be calculated by excluding the day on which the time period commences and including the day on which the time period ends and by extending the period to the next Business Day following if the last day of the time period is not a Business Day.
(b)The Parties hereto have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
10.13Survival. All representations, warranties, agreements and covenants contained in this Agreement shall not survive the Closing or the termination of this Agreement if this Agreement is terminated prior to the Closing; provided, however, that if the Closing occurs, the agreements of the Parties that by their terms apply, or are to performed in whole or in part, after the Astro Effective Time shall survive the Closing, and if this Agreement is terminated prior to the Closing, the agreements of the Parties in Sections 7.5(b), 9.2, 9.3 and Article X and the Transaction Confidentiality Agreement shall survive such termination.
(Signature Pages Follow)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first referred to above.
COMPANY:
ALON USA ENERGY, INC.
By: /s/ James Ranspot
Name: James Ranspot
Title: SVP, General Counsel & Secretary
PARENT:
DELEK US HOLDINGS, INC.
By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
By: /s/Frederec Green
Name: Frederec Green
Title: EVP & COO
HOLDCO:
DELEK HOLDCO, INC.
By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
By: /s/Frederec Green
Name: Frederec Green
Title: EVP & COO
PARENT MERGER SUB:
DIONE MERGECO, INC.
By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
By: /s/Frederec Green
Name: Frederec Green
Title: EVP & COO
ASTRO MERGER SUB:
ASTRO MERGECO, INC.
By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
By: /s/Frederec Green
Name: Frederec Green
Title: EVP & COO
Execution Version
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of February 27, 2017 (this “Amendment”), is entered into by and among Delek US Holdings, Inc., a Delaware corporation (“Parent”), Delek Holdco, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“HoldCo”), Dione Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“ParentMerger Sub”) and Astro Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“Astro Merger Sub” and, together with HoldCo and Parent Merger Sub, the “HoldCo Parties”), and Alon USA Energy, Inc., a Delaware corporation (the “Company”). Each of the HoldCo Parties and Parent may be referred to herein individually as a “Buyer Party” and collectively as the “Buyer Parties.” Each of HoldCo, Parent, the Company, Parent Merger Sub and Astro Merger Sub may be referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, the Parties entered into that certain Agreement and Plan of Merger dated January 2, 2017 (the “Merger Agreement”);
WHEREAS, the Required Company Vote (as such term is defined in the Merger Agreement) has not yet been obtained, and the Parties desire to amend the Merger Agreement pursuant to Section 10.2 of the Merger Agreement and make such other related agreements as are described in this Amendment;
NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the Parties agree as follows:
ARTICLE I
AMENDMENTS
1.1 Timing of HoldCo Certificate and HoldCo Bylaw Amendments.The final sentence of Section 2.1(a)(i) of the Merger Agreement is hereby amended to read as follows:
“Subject to the terms and conditions of this Agreement, and in accordance with the DGCL, HoldCo shall amend the HoldCo Certificate and the HoldCo Bylaws, as applicable, prior to or simultaneously with the Parent Merger to change HoldCo’s name, to be effective prior to or as of the Parent Effective Time, to “Delek US Holdings, Inc.” ”
1.2 Parent Surviving Entity. The initial sentence of Section 2.2(a) of the Merger Agreement is hereby amended to read as follows:
“At the Parent Effective Time, the certificate of incorporation of Parent as in effect immediately prior to the Parent Effective Time shall be amended (i) to meet the requirements of Section 251(g)(7)(i)(A) of the DGCL and (ii) to reduce the total number of shares of stock
of all classes of stock which the corporation shall have the authority to issue to 1,001 shares, consisting of 1,000 shares of common stock, par value $0.01 per share, and one share of preferred stock, par value $0.01 per share and, as so amended, shall be the certificate of incorporation of the Parent Surviving Entity until thereafter amended as permitted by applicable law.”
1.3 HSR Refiling Deadline. The date “March 21, 2017” in Section 7.1(b)(ii) of the Merger Agreement is hereby amended to read “May 2, 2017”.
1.4 Law Firm. Sections 7.18(c), Section 8.2(c), and Section 8.3(c) of the Merger Agreement are hereby amended to replace all references to “Norton Rose Fulbright US LLP” with “Baker Botts L.L.P.”
1.5 Notice Address. The notice address for the second copy of notices in Section 10.1 of the Merger Agreement referencing Daniel L. Mark, Esq. is hereby amended to read:
“Daniel L. Mark, Esq.
Baker Botts L.L.P.
910 Louisiana
Houston, TX 77002
dan.mark@bakerbotts.com
Fax: 713.229.7723”
ARTICLE II
MISCELLANEOUS
MERGER
Section 2.1Definitions. Unless the context otherwise requires, the capitalized terms used in this Amendment shall have the meanings set forth in Closing of the Merger Agreement.
2.2 (a)CounterpartsClosing Date. . This Amendment may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Amendment by facsimileSubject to the satisfaction or other customary means of electronic transmission (e.g., “pdf”) shall be effective as delivery of a manually executed counterpart hereof.
2.3 References. Each reference to this “Agreement” or other similar terms in the Merger Agreement or in any related document shall, unless the context otherwise requires, mean the Merger Agreement as amended by this Amendment.
2.4 Construction. This Amendment shall be governed by allwaiver of the provisions of the Merger Agreement, includingconditions (other than those relatingconditions that are not legally permitted to construction, enforcement, notices, governing law and othersbe waived) to closing set forth in Article XVI, the closing (the “Closing”) of the Merger and the other transactions contemplated by this Section 2.1 shall be held at the offices of Baker Botts L.L.P., 910 Louisiana Street, Houston, Texas 77002 on the next Business Day following the satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of all of the conditions set forth in Article VI (other than conditions that would normally be satisfied on the Closing Date, but subject to satisfaction or waiver (other than those conditions that are not legally permitted to be waived) of those conditions) commencing at 9:00 a.m., local time, or such other place, date and time as may be mutually agreed upon in writing by the parties hereto. The “Closing Date,” as referred to herein, shall mean the date on which the Closing actually occurs.
(b)Effective Time. Concurrently with or as soon as practicable following the Closing, Parent and MLP shall cause a certificate of merger effecting the Merger (the “Certificate of Merger”) to be filed with the Secretary of State of the State of Delaware, duly executed in accordance with the relevant provisions of DRULPA and DLLCA, as applicable (the date and time of such filing (or, if agreed by the parties hereto, such later time and date as may be expressed therein as the effective date and time of the Merger) being the “Effective Time”). Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Merger Sub shall merge with and into MLP, the separate existence of Merger Sub shall cease, and MLP shall continue as the surviving limited partnership in the Merger (the “Surviving Entity”).
(c)Effect of the Merger on Equity Securities. Subject in each case to Section 2.1(d) and (e), at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, MLP, MLP General Partner, any Holder of MLP Common Units, any Holder of Parent Common Stock, or any other Person:
(i)Conversion of MLP Public Units. Each of the MLP Public Units outstanding immediately prior to the Effective Time shall be converted into the right to receive 0.4900 shares of validly issued, fully paid and nonassessable Parent Common Stock (such number of shares of Parent Common Stock, the “Merger Consideration”).
(ii)Rights of Holders of MLP Public Units. Each MLP Public Unit, upon being converted into the right to receive the Merger Consideration pursuant to this Section 2.1(c), shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each Holder of such MLP Public Units immediately prior to the Effective Time shall thereafter cease to be a limited partner of MLP or have any rights with respect to such MLP Public Units, except the right to receive the Merger Consideration and any distributions to which former Holders of MLP Public Units become entitled all in accordance with this Article II upon the Surrender of (A) a certificate that immediately prior to the Effective Time represented MLP Public Units (an “MLP Certificate”) or (B) uncertificated MLP Public Units represented by book-entry (“Book-Entry MLP Common Units”), together with such properly completed and duly executed Letter of Transmittal and such other documents in accordance with Section 2.2.
(iii)Treatment of MLP-Owned Common Units and Parent-Owned Partnership Interests. Any MLP Common Units that are owned immediately prior to the Effective Time by MLP shall be automatically canceled and shall cease to exist and no consideration shall be delivered in exchange for such canceled MLP Common Units. The MLP General Partner Interest and all MLP Common Units that are not MLP Public Units or not canceled pursuant to the first sentence of this clause (iii) shall, in each case, remain outstanding as partnership interests in the Surviving Entity, unaffected by the Merger.
(iv)Equity of Merger Sub. The outstanding limited liability company interest in Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into an aggregate number of common units representing limited partner interests in the Surviving Entity equal to the number of MLP Public Units that are converted into the right to receive the Merger Consideration pursuant to Section 2.1(c)(i). At the Effective Time, the books and records of MLP shall be revised to reflect the cancellation and retirement of all MLP Public Units and the conversion of the limited liability company interest in Merger Sub to common units of the Surviving Entity, and the existence of MLP (as the Surviving Entity) shall continue without dissolution.
(d)Other Effects of the Merger. The Merger shall be conducted in accordance with and shall have the effects set forth in this Agreement and the applicable provisions of DRULPA and DLLCA. At the Effective Time, (i) the certificate of limited partnership of MLP shall continue as the certificate of limited partnership of the Surviving Entity, and (ii) the MLP Partnership Agreement shall remain unchanged and shall continue as the agreement of limited partnership of the Surviving Entity, until duly amended in accordance with applicable Law and the terms of the MLP Partnership Agreement.
(e)No Fractional Shares. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued in the Merger. Notwithstanding any other provision of this Agreement, all fractional shares of Parent Common Stock that a Holder of MLP Common Units would otherwise be entitled to receive as Merger Consideration (after taking into account all MLP Common Units held by such Holder) will be aggregated and then, if a fractional share of Parent Common Stock results from that aggregation, be rounded up to the nearest whole share of Parent Common Stock (and, for the avoidance of doubt, no Person that is not a record holder of MLP Common Units or a DTC Participant will be entitled hereunder to have any fractional shares of Parent Common Stock rounded up, and none of Parent, AAI or the Surviving Entity shall have any obligation pursuant to this sentence with respect to any Person that is not a record holder of MLP Common Units or a DTC Participant) and any such additional Parent Common Stock shall become part of the Merger Consideration.
(f)Certain Adjustments. If between the Execution Date and the Effective Time, whether or not permitted pursuant to the terms of this Agreement, the number of outstanding MLP Common Units or shares of Parent Common Stock shall be increased, decreased or changed into a different number of units, shares or other securities (including any different class or series of securities) by reason of any dividend or distribution payable in, or an issuance of, partnership interests, voting securities, equity interests or Rights, or by reason of any subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or any such transaction shall be authorized, declared or agreed upon with a record date at or prior to the Effective Time, then the Merger Consideration, and any other similarly dependent items shall be appropriately adjusted to reflect fully the effect of such transaction and to provide to Parent, MLP, Merger Sub and the Holders of MLP Restricted Unit Awards and MLP Public Units the same economic effect as contemplated by this Agreement prior to such event, and thereafter, all references in this Agreement to the Merger Consideration, and any other similarly dependent items shall be references to the Merger Consideration, and any other similarly dependent items, as so adjusted; provided, however, that nothing in this Section 2.1(f) shall be deemed to permit or authorize any party hereto to effect any such dividend or distribution payable in equity securities or Rights, subdivision, reclassification, split, split-up, combination, merger, consolidation, reorganization, exchange or other similar transaction, or the authorization, declaration or agreement to do such transaction that it is not otherwise authorized or permitted to be undertaken pursuant to this Agreement.
Section 2.2 Exchange of MLP Public Units
(a) Exchange Agent. Prior to the mailing of the Consent Statement/Prospectus, Parent shall appoint American Stock Transfer & Trust Company, LLC to act as exchange agent (the “Exchange Agent”) for the payment of the Merger Consideration and any dividends and other distributions pursuant to Section 2.2(c). At or prior to the Closing, Parent shall (i) reserve with the Exchange Agent the shares of Parent Common Stock to be issued pursuant to Section 2.1(c)(i), and (ii) authorize the Exchange Agent to exchange shares of Parent Common Stock in accordance with this Section 2.2. Parent shall, from time to time, deposit with the Exchange Agent any additional cash or other consideration as and when necessary to pay any dividends and other distributions pursuant to Section 2.2(c) (and shall authorize the Exchange Agent to pay out the same). Such Parent Common Stock and any cash or other consideration deposited with the Exchange Agent shall hereinafter be referred to as the “Exchange Fund.” Parent shall pay all costs and fees of the Exchange Agent and all expenses associated with the exchange process. Any shares of Parent Common Stock and any other funds deposited with the Exchange Agent shall be returned to Parent after the earlier to occur of (x) payment in full of all amounts due to the Holders of MLP Public Units under this Article II and (y) the expiration of the period specified in Section 2.2(e).
(b) Exchange Procedures. Promptly after the Effective Time, Parent shall, or shall cause the Exchange Agent to, mail to each Holder, as of the Effective Time, of MLP Public Units whose MLP Public Units were converted into the right to receive the Merger Consideration a form of letter of transmittal (the “Letter of Transmittal”) (which shall specify that delivery shall be effected, and risk of loss and title to the MLP Certificates shall pass, only upon proper delivery of the MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) to the Exchange Agent or, in the case of Book-Entry MLP Common Units, upon adherence to the procedures set forth in the Letter of Transmittal, and which shall be in customary form and have such other reasonable provisions as Parent and MLP may agree prior to the Effective Time) and instructions for effecting the Surrender of such MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units in exchange for, as applicable, whole shares of Parent Common Stock and any dividends or distributions payable pursuant to Section 2.2(c). Subject to Section 2.2(c), upon Surrender to the Exchange Agent of such MLP Certificates (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units, together with such properly completed and duly executed Letter of Transmittal and such other documents as may reasonably be required by the Exchange Agent, the Holder of an MLP Certificate (or lost certificate affidavit as contemplated by this Section 2.2(b)) or Book-Entry MLP Common Units shall be entitled to receive in exchange therefor, as applicable, (i) that number of whole shares of Parent Common Stock (which shall be in uncertificated book-entry form unless a physical certificate is requested) to which such Holder is entitled pursuant to Section 2.1(c)(i) and (ii) any dividends or distributions payable pursuant to Section 2.2(c) to
which such Holder is entitled. The instructions for effecting the Surrender of MLP Certificates shall set forth procedures that must be taken by the Holder of any MLP Certificate that has been lost, destroyed or stolen; it shall be a condition to the right of such Holder to receive the Merger Consideration and any distributions payable pursuant to Section 2.2(c) that the Exchange Agent shall have received, along with the Letter of Transmittal, a duly executed lost certificate affidavit, including an agreement to indemnify Parent for losses suffered by Parent because of such lost certificate, in customary form, signed exactly as the name or names of the registered Holder or Holders of MLP Public Units appeared on the books of MLP immediately prior to the Effective Time, together with a customary bond and such other documents, in each case, as Parent may reasonably require in connection therewith. After the Effective Time, there shall be no further transfer on the records of MLP or its transfer agent of MLP Certificates or Book-Entry MLP Common Units (provided, however, that the foregoing shall not restrict the transfer of any MLP Partnership Interest other than the MLP Public Units after the Effective Time); and if such MLP Certificates or Book-Entry MLP Common Units are presented to MLP or its transfer agent for transfer, they shall be canceled against delivery of the appropriate Merger Consideration and any dividends and other distributions payable pursuant to Section 2.2(c) as hereinabove provided. Until Surrendered as contemplated by this Section 2.2(b), each MLP Certificate or Book-Entry MLP Common Unit in respect of MLP Public Units shall be deemed at any time after the Effective Time to represent only the right to receive upon such Surrender the appropriate Merger Consideration, together with any dividends and other distributions payable pursuant to Section 2.2(c) or (d). No interest will be paid or will accrue on any dividends and other distributions payable pursuant to Section 2.2(c) or (d).
(c) Dividends and Distributions with Respect to Unexchanged MLP Public Units. No dividends or other distributions with respect to shares of Parent Common Stock issued in the Merger with a record date after the Effective Time shall be paid to the Holder of any MLP Certificate or Book-Entry MLP Common Units not Surrendered with respect to such shares of Parent Common Stock issuable in respect thereof whichuntil the Surrender of such MLP Certificate or Book-Entry MLP Common Units in accordance with this Section 2.2. Subject to the effect of applicable Laws, Parent shall pay, or cause the Exchange Agent to pay, to the Holder of each MLP Certificate or Book-Entry MLP Common Units, without interest, (i) at the time of Surrender of such MLP Certificate or Book-Entry MLP Common Units, the amount of dividends or other distributions previously paid with respect to the whole shares of Parent Common Stock issuable with respect to such MLP Certificate or Book-Entry MLP Common Units that have a record date after the Effective Time and a payment date on or prior to the time of Surrender and (ii) at the appropriate payment date, the amount of dividends and distributions payable with respect to such whole shares of Parent Common Stock with a record date after the Effective Time and prior to such Surrender and a payment date subsequent to such Surrender.
(d) No Further Ownership Rights in MLP Public Units. All Merger Consideration issued upon the Surrender for exchange of MLP Certificates or Book-Entry MLP Common Units in accordance with the terms of this Article II shall be deemed to have been set forth herein, mutatis mutandisissued (and paid) in full satisfaction of all rights pertaining to the MLP Public Units heretofore represented by such MLP Certificates or Book-Entry MLP Common Units (including all rights to common units arrearages), unlesssubject, however, to Parent’s obligation, with respect to MLP Public Units outstanding immediately prior to the context otherwise requires.Effective Time, to pay any distributions with a record date prior to the Effective Time that may have been declared or made by MLP on such MLP Public Units in accordance with the terms of this Agreement on or prior to the Effective Time and that remain unpaid at the Closing Date.
2.5(e) RatificationTermination of Exchange Fund. TheAny portion of the Exchange Fund that remains undistributed to the Holders of the MLP Certificates or Book-Entry MLP Common Units for 18 months after the Closing Date shall be delivered to Parent, upon demand, and any Holders of the MLP Certificates or Book-Entry MLP Common Units who have not theretofore complied with this Section 2.2 shall thereafter look only to Parent and only as general creditors thereof for payment of their claim for the Merger Consideration and any distributions with respect to MLP Common Units or shares of Parent Common Stock to which such Holders may be entitled.
(f) No Liability. To the extent permitted by applicable Law, none of Parent, Merger Sub, MLP, MLP General Partner or the Exchange Agent shall be liable to any Person in respect of any Merger Consideration or distribution properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. If any MLP Certificates or Book-Entry MLP Common Units shall not have been Surrendered immediately prior to such date on which any Merger Consideration or any distributions with respect to MLP Common Units or shares of Parent Common Stock in respect of such MLP Certificate or Book-Entry MLP Common Units would escheat to or become the property of any Governmental Entity, any such units or distributions in respect of such MLP Certificates or Book-Entry MLP Common Units shall, to the extent permitted by applicable Law, become the property of Parent, free and clear of all claims or interest of any Person previously entitled thereto.
(g) Withholding Rights. Parent, Merger Sub and the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement, without duplication, such amounts, which may include shares of Parent Common Stock, as Parent, Merger Sub or the Exchange Agent reasonably deems to be 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 Parent, Merger Sub or the Exchange Agent, such amounts shall be treated for all purposes of this Agreement as amendedhaving been paid to the Person in respect of whom such deduction and withholding was made by Parent, Merger Sub or the Exchange Agent, as the case may be.
(h) No Dissenters’ Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated by this Amendment,Agreement.
Section 2.3 Treatment of MLP Restricted Unit Awards.
(a) At the Effective Time, each MLP Restricted Unit Award that is not vested and does not vest in accordance with its terms (as set forth in an applicable award agreement) as a result of the transactions contemplated by this Agreement and that is outstanding as of immediately prior to the Effective Time shall become fully vested and shall be converted into the right to receive a number of shares of Parent Common Stock equal to the number of MLP Common Units subject to each such MLP Restricted Unit Award immediately prior to the Effective Time multiplied by the Merger Consideration (rounded up to the next whole share) as soon as practicable after the Effective Date, along with any corresponding accrued but unpaid DERs (as defined in the MLP Long-Term Incentive Plan) with respect to any MLP Restricted Unit Awards.
(b) Prior to the Effective Time, MLP and MLP General Partner shall take all action necessary to effectuate the provisions of this Section 2.3. MLP and MLP General Partner shall ensure that, as of immediately following the Effective Time, no holder of an MLP Restricted Unit Award or participant in the MLP Long-Term Incentive Plan shall have any rights thereunder to acquire, or other rights in respect of, the equity of MLP, the Surviving Entity or any of the MLP Subsidiaries.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MLP PARTIES
Except (i) as set forth in a section of the MLP Disclosure Letter corresponding to the applicable section of this Article III to which such disclosure applies (provided that (1) any information set forth in one section of the MLP Disclosure Letter shall be deemed to qualify each other section hereof to which its relevance is reasonably apparent on its face and (2) the mere inclusion of an item as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had, or is reasonably likely to have, a MLP Material Adverse Effect) or (ii) as disclosed in the MLP SEC Reports (excluding any disclosures set forth in such MLP SEC Report under the heading “Risk Factors,” in any section related to forward-looking statements or any other disclosures included therein to the extent they are solely predictive in nature) filed on or after January 1, 2015 and prior to the Execution Date (without giving effect to any MLP SEC Report or any amendment to any MLP SEC Report in each case filed on or after the Execution Date), MLP and, with respect to itself where provided for in this Article III, the MLP General Partner each hereby represents and warrants to the Parent Parties that:
Section 3.1Organization and Existence
(a)Each of the MLP Group Entities is an entity duly organized or formed, as applicable, validly existing and in good standing under the Laws of its respective jurisdiction of organization or formation and has all requisite power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted in all material respects.
(b)Each of the MLP Group Entities is duly licensed or qualified to do business and is in good standing in the states in which the character of the properties and assets owned or held by it or the nature of the business conducted by it requires it to be so licensed or qualified, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(c)MLP has made available to Parent true and complete copies of the Governing Documents of each MLP Group Entity in effect as of the Execution Date. All such Governing Documents are in full force and effect and no MLP Party is in violation of any provisions thereof.
Section 3.2 Authority and Approval. Each of the MLP Parties has all respects ratified,requisite limited liability company or limited partnership power and authority to execute and deliver this Agreement, and subject to receipt of the MLP Vote, to consummate the transactions contemplated hereby and to perform all of the terms and conditions hereof to be performed by it. The execution and delivery of this Agreement by each of the MLP Parties, and subject to receipt of the MLP Vote, the consummation of the transactions contemplated hereby and the performance of all of the terms and conditions hereof to be performed by the MLP Parties have been duly authorized and approved by all requisite partnership or limited liability company action on the part of each of the MLP Parties. At a meeting duly called and confirmed.held, the MLP Conflicts Committee, by unanimous vote, in good faith (a) determined that this Agreement and the transactions contemplated hereby are in the best interest of MLP and the Holders of MLP Public Units, (b) approved this Agreement and the transactions contemplated hereby, including the Merger (the foregoing constituting MLP Special Approval), and (c) resolved to recommend to the MLP Board the approval of this Agreement and the consummation of the transactions contemplated hereby, including the Merger. Upon the receipt of the recommendation of the MLP Conflicts Committee, at a meeting duly called and held, the MLP Board (a) determined that this Agreement and the transactions contemplated hereby are in the best interest of MLP and the Holders of MLP Public Units, (b) approved this Agreement and the transactions contemplated hereby, including the Merger, and (c) directed that this Agreement be submitted to a vote of Holders
of MLP Common Units and authorized the Holders of MLP Common Units to act by written consent pursuant to Section 13.11 of the MLP Partnership Agreement. The adoption of this Agreement by the affirmative vote or consent of the Holders of at least a Unit Majority (as defined in the MLP Partnership Agreement) (the “MLP Vote”) is the only vote or approval of partnership interests in MLP necessary to approve and adopt this Agreement and approve and consummate the transactions contemplated by this Agreement, including the Merger. This Agreement has been duly executed and delivered by each of the MLP Parties and, assuming due authorization, execution and delivery by the Parent Parties, constitutes the valid and legally binding obligation of each of the MLP Parties, enforceable against each of the MLP Parties in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a Proceeding at law or in equity).
Section 3.3 No Conflict; Consents
(a) Subject to the consent, approval, license, permit, order, authorization, filings and notices referred to in Section 3.3(b) and receipt of the MLP Vote, the execution, delivery and performance of this Agreement by each of the MLP Parties does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not, (i) contravene, violate, conflict with any of, result in any breach of, or require the consent of any Person under, the terms, conditions or provisions of the Governing Documents of any of the MLP Group Entities; (ii) contravene, conflict with or violate any provision of applicable Laws; (iii) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, deed of trust, mortgage, debenture, note, agreement, contract, commitment, license, concession, permit, lease, joint venture, obligation or other instrument to which any of the MLP Group Entities is a party or by which any of the MLP Group Entities or any of its assets are bound; or (iv) result in the creation of any Lien (other than Permitted Liens) on any of the assets or businesses of any of the MLP Group Entities under any such indenture, deed of trust, mortgage, debenture, note, agreement, contract, commitment, license, concession, permit lease, joint venture, obligation or other instrument, except in the case of clauses (ii), (iii) and (iv), for those items that would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization of, or any filing with or notice to, any Governmental Entity is required to be obtained or made by any of the MLP Group Entities in connection with the execution, delivery, and performance of this Agreement or the consummation of the transactions contemplated hereby or thereby, except (i) as have been waived or obtained or with respect to which the time for asserting such right has expired, (ii) for (A) such filings and reports as may be required pursuant to the applicable requirements of the Securities Act, the Exchange Act, and any other applicable state or federal securities, takeover and “blue sky” Laws, (B) any filings and approvals required under the rules and regulations of the NYSE, or (C) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or (iii) for those which would not, individually or in the aggregate, have an MLP Material Adverse Effect (including such consents, approvals, licenses, permits, orders or authorizations that are not customarily obtained prior to the Closing and are reasonably expected to be obtained in the ordinary course of business following the Closing).
Section 3.4 Capitalization; Limited Partner Interests
(a) As of November 6, 2017, the outstanding capitalization of MLP consists of 62,529,328 MLP Common Units and the MLP General Partner Interest. All of such MLP Common Units and the limited partner interests represented thereby have been duly authorized and validly issued in accordance with the MLP Partnership Agreement, and are fully paid (to the extent required under the MLP Partnership Agreement) and nonassessable (except as such nonassessability may be affected by Sections 17-303, 17‑607 and 17-804 of the DRULPA and the MLP Partnership Agreement). The MLP General Partner is the sole owner of the MLP General Partner Interest and the MLP General Partner Interest has been duly authorized and validly issued in accordance with the MLP Partnership Agreement. As of November 6, 2017, 3,125,000 MLP Common Units were reserved for issuance under the MLP Long-Term Incentive Plan, of which (x) 22,844 MLP Common Units were subject to outstanding restricted unit awards (the “MLP Restricted Unit Awards”) and (y) no MLP Common Units were subject to outstanding options, unit appreciation rights, phantom units, or equity awards of any other kind. All MLP Common Units reserved for issuance under the MLP Long-Term Incentive Plan, when issued in accordance with the terms thereof, are or will be duly authorized, validly issued, fully paid and non-assessable (except as such nonassessability may be affected by Sections 17-303, 17‑607 and 17-804 of the DRULPA and the MLP Partnership Agreement). Except as set forth above in this Section 3.4(a), as of the Execution Date there are no MLP Common Units, partnership interests, voting securities or equity interests of MLP issued and outstanding or any Rights issued or granted by, or binding upon, MLP, except as set forth in the MLP SEC Reports (without giving effect to any MLP SEC Report or any amendment to any MLP SEC Report in each case filed on or after the Execution Date) or the MLP Partnership Agreement as in effect on the Execution Date, except for awards granted under the MLP Long-Term Incentive Plan, or except as expressly contemplated by this Agreement. Except as set forth in the MLP Partnership Agreement as in effect on the Execution Date, there are no outstanding obligations of MLP or any MLP Group Entity to repurchase, redeem or otherwise acquire any MLP Common Units or other partnership interests, voting securities or equity interests or any Rights of MLP or any MLP Group Entity. There are no outstanding bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with the limited partners of MLP on any matter.
(b) Section 3.4(b) of the MLP Disclosure Letter sets forth a true and complete list of the MLP Subsidiaries as of the Execution Date. As of the Execution Date, all of the outstanding shares of capital stock or other equity or voting interests of each MLP Subsidiary owned directly or indirectly by the MLP Parties (i) are owned, beneficially and of record free and clear of all Liens in the percentages set out on Section 3.4(b) of the MLP Disclosure Letter and (ii) have been duly authorized and are validly issued, fully paid (with respect to MLP Subsidiaries that are limited liability companies or limited partnerships, to the extent required under the limited liability company agreement or limited partnership agreement of the applicable MLP Subsidiary) and nonassessable (with respect to MLP Subsidiaries that are limited liability companies or limited partnerships, except as such nonassessability may be affected by Sections 18-607 and 18-804 of the DLLCA, by Sections 17‑303, 17-607 and 17-804 of the DRULPA or by the Texas Limited Partnership Law and the Governing Documents of the applicable entity).
(c) Other than ownership interests in the MLP Subsidiaries set forth on Section 3.4(b) of the MLP Disclosure Letter, MLP does not own beneficially, directly or indirectly, any equity securities or other ownership interests of any Person as of the Execution Date. There are no outstanding Rights issued or granted by, or binding upon, any of the MLP Subsidiaries as of the Execution Date.
(d)Except as set forth in this Section 3.4, neither MLP nor any MLP Subsidiary has issued any compensatory equity or equity-linked award that remains outstanding, nor has any such entity committed to issue any such award.
Section 3.5 SEC Documents; Internal Controls
(a) Since January 1, 2015, all reports, including but not limited to the Annual Reports on Form 10-K, the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K (whether filed on a voluntary basis or otherwise), forms, schedules, certifications, prospectuses, registration statements and other documents required to be filed or furnished by MLP or any MLP Subsidiary with or to the SEC have been or will be timely filed or furnished (the “MLP SEC Reports”). Each of the MLP SEC Reports (i) complied in all material respects with the requirements of applicable Law (including the Exchange Act, the Securities Act and the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder (the “Sarbanes-Oxley Act”)), and (ii) as of its effective date (in the case of MLP SEC Reports that are registration statements filed pursuant to the requirements of the Securities Act) and as of its filing date did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except for any statements (x) in any MLP SEC Report that may have been modified by an amendment to such report or a subsequent report filed with the SEC prior to the Execution Date or (y) with respect to information supplied in writing by or on behalf of Parent, as to which MLP makes no representation or warranty.
(b) No MLP Subsidiary is required to file reports, forms or other documents with the SEC pursuant to the Exchange Act. There are no outstanding comments from, or unresolved issues raised by, the staff of the SEC with respect to the MLP SEC Reports. No enforcement action has been initiated against MLP relating to disclosures contained or omitted from any MLP SEC Report.
(c) MLP makes and keeps books, records, and accounts and has devised and maintains a system of internal controls, in each case, as required pursuant to Section 13(b)(2) under the Exchange Act. MLP has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and the applicable listing standards of the NYSE. Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by MLP in the reports that it files under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to its management as appropriate to allow timely decisions regarding required disclosure.
(d) Since January 1, 2015, the principal executive officer and principal financial officer of the MLP General Partner have made all certifications (without qualification or exceptions to the matters certified, except as to Knowledge) required by the Sarbanes-Oxley Act, and the statements contained in any such certifications are complete and correct in all material respects, and none of such entities or its officers have received notice from any Governmental Entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certification. As of the Execution Date, and except as disclosed in an MLP SEC Report filed with the SEC prior to the Execution Date, none of such entities has any Knowledge of any material weaknesses in the design or operation of such internal controls over financial reporting.
Section 3.6 Financial Statements; Undisclosed Liabilities
(a) MLP’s Annual Report on Form 10-K filed with the SEC on February 27, 2017 sets forth a true and complete copy of the consolidated audited statements of operations, partners’ equity and cash flows for each of the three years in the period ended December 31, 2016 and balance sheets as of December 31, 2016 and 2015 for MLP, including the notes thereto, and MLP’s Quarterly Report on
Form 10-Q filed by MLP with the SEC on August 2, 2017 sets forth a true and complete copy of the consolidated unaudited statements of operations, partners’ equity and cash flows for the six month period ended June 30, 2017 and balance sheet as of June 30, 2017 for MLP (the referenced financial statements set forth in such Form 10-K and Form 10-Q of MLP are collectively referred to as the “MLP Financial Statements”). The MLP Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes thereto) and present fairly in all material respects the consolidated financial position of MLP as of such dates and the consolidated results of operations and cash flows of MLP for such periods, except as otherwise noted therein and subject, in the case of the unaudited financial statements, to normal and recurring adjustments and the absence of certain notes that are included in audited financial statements. Except as set forth in the MLP Financial Statements, there are no off-balance sheet arrangements that would, individually or in the aggregate, have an MLP Material Adverse Effect. MLP has not had any disagreement with its independent public accounting firm that required disclosure in the MLP SEC Reports.
(b) There are no liabilities or obligations of MLP, MLP General Partner or the MLP Subsidiaries required to be included on a balance sheet prepared under GAAP (whether or not known or unknown and whether accrued, absolute, contingent or otherwise) and there are no facts or circumstances that would reasonably be expected to result in any such liabilities or obligations, whether arising in the context of federal, state or local judicial, regulatory, administrative or permitting agency Proceedings, other than (i) liabilities or obligations reflected or reserved against in the MLP Financial Statements, (ii) current liabilities incurred in the ordinary course of business since December 31, 2016, (iii) liabilities and obligations incurred under or in accordance with this Amendment,Agreement or in connection with the transactions contemplated by this Agreement, and (iv) liabilities or obligations (whether known or unknown and whether accrued, absolute, contingent or otherwise) that would not, individually or in the aggregate, have an MLP Material Adverse Effect.
Section 3.7 Real Property; Rights-of-Way
(a) Each of the MLP Group Entities has good, valid and marketable title to all real property, good and valid leasehold interest in each material lease, sublease and other agreement under which the MLP Group Entities uses or occupies or has the right to use or occupy any material real property and good title to all tangible personal property owned by the MLP Group Entities that is sufficient for the operation of their respective businesses as presently conducted, free and clear of all Liens (except Permitted Liens), except as would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(b) (i) There are no pending Proceedings to modify the zoning classification of, or to condemn or take by power of eminent domain, all or any of the assets of the MLP Group Entities and (ii) none of the MLP Parties have Knowledge of any such threatened Proceeding, which (in the case of clause (i) or (ii)), if pursued, would, individually or in the aggregate, have an MLP Material Adverse Effect. To the extent located in jurisdictions subject to zoning, the assets of the MLP Group Entities that are real property (owned or leased) are properly zoned for the existence, occupancy and use of all of the improvements located on the owned and leased real property and on the Rights-of-Way held by any of the MLP Group Entities, except as would not, individually or in the aggregate, have an MLP Material Adverse Effect.
Section 3.8 Litigation; Laws and Regulations. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect:
(a) There are no (i) civil, criminal, regulatory or administrative actions, suits, claims, hearings, arbitrations, inquiries, subpoenas, investigations or proceedings (“Proceedings”) pending or, to the Knowledge of the MLP Parties, threatened against the MLP Group Entities, their assets, or any of the operations of the MLP Group Entities related thereto or (ii) judgments, orders, decrees or injunctions of any Governmental Entity, whether at law or in equity (“Orders”) against the MLP Group Entities, their assets, or any of the operations of the MLP Group Entities related thereto.
(b) None of the MLP Group Entities (i) is in violation of or in default under its Governing Documents or (ii) is in violation of any applicable Law, except in the case of clause (ii) for such violations or defaults that would not, individually or in the aggregate, have an MLP Material Adverse Effect.
Section 3.9 No Adverse Changes. Except as described in the MLP Financial Statements, with respect to any of the MLP Group Entities, since December 31, 2016, there has not been an MLP Material Adverse Effect.
Section 3.10 Taxes. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect (a) all Tax Returns required to be filed by or with respect to MLP or any of the MLP Subsidiaries or their assets have been filed on a timely basis (taking into account all extensions of due dates); (b) all Taxes owed by MLP or any of the MLP Subsidiaries, which are or have become due, have been timely paid; (c) there are no Liens on any of the assets of MLP or any of the MLP Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax on any of such assets, other than Permitted Liens; (d) there is no pending Proceeding for assessment or collection of Taxes and no Tax assessment, deficiency or adjustment has been asserted or proposed with respect to MLP or any of the MLP Subsidiaries or their assets; (e) each of MLP and any of the MLP Subsidiaries that is classified as a partnership for U.S. federal tax purposes has in effect an election under Section 754 of the Code; (f) MLP is currently (and has been since its formation)
either (i) properly classified as a partnership for U.S. federal income tax purposes or (ii) properly disregarded as an entity separate from its respective owner for U.S. federal income tax purposes pursuant to Treasury Regulation Section 301.7701-3(b); (g) at least 90% of the gross income of MLP for each taxable year since its formation through and including the current taxable year has been income that is “qualifying income” within the meaning of Section 7704(d) of the Code; and (h) each MLP Subsidiary is currently (and has been since its respective acquisition by MLP) either (i) properly classified as a partnership for U.S. federal income tax purposes or (ii) properly disregarded as an entity separate from its respective owner for U.S. federal income tax purposes pursuant to Treasury Regulation Section 301.7701-3(b).
Section 3.11 Environmental Matters. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect: (a) the MLP Group Entities, their assets and their operations relating thereto are in compliance with applicable Environmental Laws; (b) no circumstances exist with respect to the MLP Group Entities, their assets or their operations relating thereto that give rise to an obligation by the MLP Group Entities to investigate or remediate the presence or release, on-site or offsite, of Hazardous Materials under any applicable Environmental Laws; (c) the MLP Group Entities, their assets or their operations related thereto are not subject to any pending or, to the Knowledge of the MLP Parties, threatened Proceeding under any Environmental Law (including designation as a potentially responsible party under CERCLA or any similar local or state Law); (d) all notices, permits, permit exemptions, licenses or similar authorizations, if any, required to be obtained or filed by the MLP Group Entities, with respect to their assets or their operations relating thereto have been duly obtained or filed and are valid and currently in effect; and (e) there has been no release of any Hazardous Material into the environment by the MLP Group Entities, their assets, or their operations relating thereto, except in compliance with applicable Environmental Law.
Section 3.12 Licenses; Permits
(a) The MLP Group Entities have all licenses, franchises, tariffs, grants, easements, variances, exceptions, permits and authorizations (other than environmental permits) issued or granted by Governmental Entities that are necessary for the conduct of their respective businesses as now being conducted or have obtained valid waivers therefrom (collectively, “Permits”), except where the failure to obtain such Permit would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(b) All Permits are validly held by the MLP Group Entities and are in full force and effect, except as would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(c) The MLP Group Entities have complied with all terms and conditions of the MergerPermits, except as would not, individually or in the aggregate, have an MLP Material Adverse Effect. No suspension or cancellation of any Permit is pending or, to the Knowledge of the MLP Parties, threatened, except as would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(d) The Permits will not be subject to suspension, modification, revocation or non-renewal as a result of the execution and delivery of this Agreement shall remainor the consummation of the transactions contemplated hereby, except, in each case, as would not, individually or in the aggregate, have an MLP Material Adverse Effect.
(e) No Proceeding is pending or, to the Knowledge of the MLP Parties, threatened with respect to any alleged failure by the MLP Group Entities to have any material Permit necessary for the operation of any asset or the conduct of their businesses or to be in compliance therewith.
Section 3.13 Contracts. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect, with respect to each of the MLP Group Entities: (i) each MLP Material Contract to which such entity is a party is, assuming due authorization, execution and delivery by the other party or parties thereto, a legal, valid and binding obligation on, and enforceable against, such entity, and is in full force and effect.
(Signature Pages Follow)effect; (ii) such entity that is a party to each MLP Material Contract is not in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by any such party, or permit termination, modification, or acceleration, under the MLP Material Contract; and (iii) to the Knowledge of the MLP Parties, no other party to any MLP Material Contract is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by such other party, or permit termination, modification or acceleration under any MLP Material Contract other than in accordance with its terms nor has any other party repudiated any provision of the MLP Material Contract. For purposes of this Section 3.13, “MLP Material Contracts” means contracts or other agreements filed with or publicly furnished to the SEC prior to the Execution Date to which MLP is a party to or bound by as of the Execution Date and are “material contracts” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
Annex B
Section 3.14 Employees and Employee Benefits
IN WITNESS WHEREOF(a) Employees. MLP has not, since its inception, ever had any employees. MLP is not party to, nor bound by, any collective bargaining agreements or any other labor-related agreements with any labor union or labor organization. There are no strikes, lockouts, work stoppages, slowdowns or other material labor disputes against or affecting, in any material respect, MLP.
(b) Employee Benefits. MLP does not maintain, sponsor or contribute to, nor is required to contribute to, any Employee Benefit Plan, other than reimbursements of costs as may be provided in intercompany agreements. There does not exist now, nor do any circumstances exist that reasonably could be expected to result in any liability of MLP with respect to, any Employee Benefit Plan now maintained or previously maintained by Alon USA Energy, Inc. or any ERISA Affiliate (or to which such an entity ever contributed or was required to contribute), other than reimbursements of costs as may be provided in intercompany agreements.
Section 3.15 Insurance. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect, (a) the businesses and assets of the MLP Group Entities are covered by, and insured under, insurance policies underwritten by reputable insurers that include coverages and related limits and deductibles that are customarily carried by Persons conducting business similar to that of MLP, (b) all such insurance policies are in full force and effect and all premiums due and payable on such policies have been paid, and (c) no notice of cancellation of, material premium increase of, or indication of an intention not to renew, any such insurance policy has been received by the MLP Parties other than in the ordinary course of business.
Section 3.16 Condition of Assets. Except as would not, individually or in the aggregate, have an MLP Material Adverse Effect, the assets of the MLP Group Entities have been maintained and repaired in the same manner as would a prudent operator of such assets, and are adequate for the purposes for which they are currently used.
Section 3.17 Investment Company Act. MLP is not subject to regulation under the Investment Company Act of 1940, as amended.
Section 3.18 Brokerage Arrangements. Except for MLP’s obligations to Houlihan Lokey Capital, Inc., the fees and expenses of which will be paid by MLP, none of the MLP Parties have causedhas entered (directly or indirectly) into any agreement with any Person that would obligate the MLP Parties to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this AmendmentAgreement or the transactions contemplated hereby.
Section 3.19 State Takeover Laws. MLP has taken all action necessary to be executedrender inapplicable to this Agreement and the transactions contemplated hereby, including the Merger, any potentially applicable state takeover Laws and any applicable takeover provision of the MLP Partnership Agreement or other Governing Documents of MLP.
Section 3.20 Opinion of Financial Advisor. The MLP Conflicts Committee has received the opinion of Houlihan Lokey Capital, Inc., dated as of the date first referredof the MLP Special Approval, to above.
COMPANY:
ALON USA ENERGY, INC.
By:/s/ James Ranspot
Name: James Ranspot
Title: SVP, GCthe effect that, as of the date thereof and Secretary
PARENT:
DELEK US HOLDINGS, INC.
By:subject to the assumptions, limitations, qualifications and other matters considered in connection with the preparation thereof, the Merger Consideration to be received by the Holders of MLP Common Units other than Parent, Merger Sub and their affiliates pursuant to this Agreement is fair, from a financial point of view, to such Holders./s Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
By:Section 3.21 /s/ Frederec Green Information Supplied
Name: Frederec Green
Title: EVP & COO
HOLDCO:
DELEK HOLDCO, INC.
. To the Knowledge of the MLP Parties, none of the information supplied (or to be supplied) in writing by or on behalf of MLP specifically for inclusion or incorporation by reference in the registration statement on Form S-4 to be filed with the SEC by Parent with respect to the issuance of shares of Parent Common Stock in connection with the Merger (as amended or supplemented from time to time, the “Registration Statement”) will, at the time the Registration Statement, or any amendment or supplement thereto, is filed with the SEC or at the time it becomes effective under the Securities Act, 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 made therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, MLP makes no representation or warranty with respect to information supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference in any of the foregoing documents.
By:Section 3.22 /s Assaf Ginzburg Waivers and Disclaimers. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES AND OTHER COVENANTS AND AGREEMENTS MADE BY THE MLP PARTIES IN THIS AGREEMENT, THE MLP PARTIES HAVE NOT MADE, DO NOT MAKE, AND SPECIFICALLY NEGATE AND DISCLAIM ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THEIR ASSETS INCLUDING THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THEIR ASSETS GENERALLY, INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THEIR ASSETS, (B) THE INCOME TO BE DERIVED FROM THEIR ASSETS, (C) THE SUITABILITY OF THEIR ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THEIR ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THEIR ASSETS. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT, NEITHER THE MLP PARTIES NOR ANY OF THEIR AFFILIATES SHALL BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR
Name: Assaf Ginzburg
Title: EVP & CFOINFORMATION PERTAINING TO THE MLP PARTIES, THEIR BUSINESSES OR THEIR ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. THE PROVISIONS OF THIS SECTION 3.22 HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE MLP GROUP ENTITIES, THEIR BUSINESSES OR THEIR ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT.
By:Section 3.23 /s/ Frederec Green Non-Reliance
Name: Frederec Green
Title: EVP & COO. The MLP Group Entities have conducted their own independent investigation, review and analysis of the Parent Group Entities, and acknowledge that they have been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the Parent Group Entities for such purpose. The MLP Parties acknowledge and agree that in making their decision to enter into this Agreement and to consummate the transactions contemplated hereby, the MLP Parties have relied solely upon their own investigation and the express representations and warranties of the Parent Group Entities set forth in this Agreement and the statements in the Parent SEC Reports. THE MLP PARTIES ACKNOWLEDGE AND AGREE THAT THE PARENT GROUP ENTITIES HAVE SPECIFICALLY DISCLAIMED AND DO HEREBY SPECIFICALLY DISCLAIM ANY SUCH OTHER REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) MADE BY THE PARENT GROUP ENTITIES OR ANY OTHER PERSON FOR WHOM ANY PARENT GROUP ENTITY MAY BE LIABLE.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT PARTIES
Except (i) as set forth in a section of the Parent Disclosure Letter corresponding to the applicable section of this Article IV to which such disclosure applies (provided that (1) any information set forth in one section of the Parent Disclosure Letter shall be deemed to qualify each other section hereof to which its relevance is reasonably apparent on its face and (2) the mere inclusion of an item as an exception to a representation or warranty shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had, or is reasonably likely to have, a Parent Material Adverse Effect) or (ii) as disclosed in the Parent SEC Reports (excluding any disclosures set forth in such Parent SEC Report under the heading “Risk Factors,” in any section related to forward-looking statements or any other disclosures included therein to the extent they are solely predictive in nature) filed on or after January 1, 2015 and prior to the Execution Date (without giving effect to any Parent SEC Report or any amendment to any Parent SEC Report in each case filed on or after the Execution Date), Parent hereby represents and warrants to the MLP Parties tha:
Section 4.1Organization and Existence
(a) Each of the Parent Group Entities is an entity duly organized or formed, as applicable, validly existing and in good standing under the Laws of its respective jurisdiction of organization or formation and has all requisite power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted in all material respects.
[Signature Page(b) Each of the Parent Group Entities is duly licensed or qualified to Amendmentdo business and is in good standing in the states in which the character of the properties and assets owned or held by it or the nature of the business conducted by it requires it to Merger Agreement]be so licensed or qualified, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, have a Parent Material Adverse Effect.
Annex B
(c) Parent has made available to MLP true and complete copies of the Governing Documents of each Parent Party in effect as of the Execution Date. All such Governing Documents are in full force and effect and no Parent Party is in violation of any provisions thereof.
PARENT MERGER SUB:
DIONE MERGECO, INC.
By:/s Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO(d) All of the issued and outstanding capital stock of DEI is owned, beneficially and of record, by Parent. All of the issued and outstanding limited liability company interests of Merger Sub are owned, beneficially and of record, by DEI. Merger Sub was formed solely for the purpose of engaging in the Merger and the other transactions contemplated by this Agreement. Merger Sub has not incurred, directly or indirectly, any obligations or conducted any business other than incident to its formation and pursuant to this Agreement, the Merger and the other transactions contemplated hereby.
By:Section 4.2 /s/ Frederec Green Authority and Approval
Name: Frederec Green
Title: EVP & COO. Each of the Parent Parties has all requisite corporate or limited liability company power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform all of the terms and conditions hereof to be performed by it. The execution and delivery of this Agreement by each of the Parent Parties, the consummation of the transactions contemplated hereby and the performance of all of the terms and conditions hereof to be performed by the Parent Parties have been duly authorized and approved by all requisite corporate or limited liability company action on the part of each of the Parent Parties. At a meeting duly called and held, the Parent Board (a) determined that this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance, are in the best interests of Parent and its stockholders and (b) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger and the Parent Stock Issuance. No vote or approval of the stockholders of Parent is necessary to approve the Parent Stock Issuance and approve and consummate the
ASTRO MERGER SUB:
ASTRO MERGECO, INC.
By:/s Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFOtransactions contemplated by this Agreement, including the Merger. This Agreement has been duly executed and delivered by each of the Parent Parties and, assuming due authorization, execution and delivery by the MLP Parties, constitutes the valid and legally binding obligation of each of the Parent Parties, enforceable against each of the Parent Parties in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a Proceeding at law or in equity).
By:Section 4.3 /s/ Frederec Green No Conflict; Consents
Name: Frederec Green
Title: EVP & COO
(a) Subject to the consent, approval, license, permit, order, authorization, filings and notices referred to in Section 4.3(b), the execution, delivery and performance of this Agreement by each of the Parent Parties does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not, (i) contravene, violate, conflict with any of, result in any breach of, or require the consent of any Person under, the terms, conditions or provisions of the Governing Documents of any of the Parent Group Entities; (ii) contravene, conflict with or violate any provision of applicable Laws; (iii) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, deed of trust, mortgage, debenture, note, agreement, contract, commitment, license, concession, permit, lease, joint venture, obligation or other instrument to which any of the Parent Group Entities is a party or by which any of the Parent Group Entities or any of its assets are bound; or (iv) result in the creation of any Lien (other than Permitted Liens) on any of the assets or businesses of any of the Parent Group Entities under any such indenture, deed of trust, mortgage, debenture, note, agreement, contract, commitment, license, concession, permit lease, joint venture, obligation or other instrument, except in the case of clauses (ii), (iii) and (iv), for those items that would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(b) No consent, approval, license, permit, order or authorization of, or any filing with or notice to, any Governmental Entity is required to be obtained or made by any of the Parent Group Entities in connection with the execution, delivery, and performance of this Agreement or the consummation of the transactions contemplated hereby, except (i) as have been waived or obtained or with respect to which the time for asserting such right has expired, (ii) for (A) such filings and reports as may be required pursuant to the applicable requirements of the Securities Act, the Exchange Act, and any other applicable state or federal securities, takeover and “blue sky” Laws, (B) any filings and approvals required under the rules and regulations of the NYSE, or (C) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or (iii) for those which would not, individually or in the aggregate, have a Parent Material Adverse Effect (including such consents, approvals, licenses, permits, orders or authorizations that are not customarily obtained prior to the Closing and are reasonably expected to be obtained in the ordinary course of business following the Closing).
[Signature Page to Amendment to Merger Agreement]Section 4.4 Capitalization
VOTING, IRREVOCABLE PROXY AND SUPPORT AGREEMENT
This Voting, Irrevocable Proxy and Support Agreement (this “Agreement”), dated as(a) The authorized capital stock of January 2, 2017, is by and between Delek US Holdings, Inc., a Delaware corporation (“Parent”) and Alon USA Energy, Inc., a Delaware corporation (the “Company” and, collectively with Parent the “Parties” and each, a “Party”).
WHEREAS, Parent owns 33,691,292consists of 120,000,000 shares, of commonwhich 10,000,000 shares are preferred stock, par value $0.01 per share (the “Parent Preferred Stock”), and 110,000,000 shares are Parent Common Stock. As of November 6, 2017, (i) 81,452,109 shares of Parent Common Stock were issued and outstanding and no shares of Parent Common Stock were held by Parent in its treasury, and (ii) no shares of Parent Preferred Stock were issued and outstanding. Except as set forth above in this Section 4.4(a), as of the Company (“CompanyExecution Date there are not any shares of capital stock, voting securities or other equity interests of Parent issued and outstanding or any Rights issued or granted by, or binding upon, Parent, except as set forth in the Parent SEC Reports (without giving effect to any Parent SEC Report or any amendment to any Parent SEC Report in each case filed on or after the Execution Date), except for awards granted under Parent’s employee benefit, stock option, incentive and stock purchase plans, or as expressly contemplated by this Agreement. There are no outstanding obligations of Parent or any Parent Group Entity to repurchase, redeem or otherwise acquire any capital stock, voting securities or other equity interests or any Rights of Parent or any Parent Group Entity. There are no outstanding bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with stockholders of Parent on any matter. The shares of Parent Common Stock”), representing approximately 47% to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and nonassessable.
(b) Section 4.4(b) of the Parent Disclosure Letter sets forth a true and complete list of the Parent Subsidiaries as of the Execution Date. As of the Execution Date, all of the outstanding capital stock, voting securities or other equity interests of each Parent Subsidiary owned directly or indirectly by the Parent Parties (i) are owned, beneficially and of record free and clear of all Liens in the percentages set out on Section 4.4(b) of the Parent Disclosure Letter and (ii) have been duly authorized and are validly issued, fully paid (with respect to Parent Subsidiaries that are limited liability companies or limited partnerships, to the extent required under the limited liability company agreement or limited partnership agreement of the applicable Parent Subsidiary) and nonassessable (with respect to Parent Subsidiaries that are limited liability companies or limited partnerships, except as such nonassessability may be affected by Sections 18-607 and 18-804 of the DLLCA, by Sections 17-303, 17-607 and 17-804 of the DRULPA or by the Texas Limited Liability Company Common Stock;Law and the Governing Documents of the applicable entity).
(c) Other than ownership interests in the Parent Subsidiaries set forth on Section 4.4(b) of the Parent Disclosure Letter and ownership interests in the MLP Group Entities, Parent does not own beneficially, directly or indirectly, any equity securities or other ownership interests of any Person as of the Execution Date. There are no outstanding Rights issued or granted by, or binding upon, any of the Parent Subsidiaries as of the Execution Date.
Section 4.5 SEC Documents; Internal Controls
WHEREAS, concurrently with
(a) Since January 1, 2015, all reports, including but not limited to the executionAnnual Reports on Form 10-K, the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K (whether filed on a voluntary basis or otherwise), forms, schedules, certifications, prospectuses, registration statements and other documents required to be filed or furnished by Parent or any Parent Subsidiary with or to the SEC have been or will be timely filed or furnished (the “Parent SEC Reports”). Each of the Parent SEC Reports (i) complied in all material respects with the requirements of applicable Law (including the Exchange Act, the Securities Act and the Sarbanes-Oxley Act), and (ii) as of its effective date (in the case of Parent SEC Reports that are registration statements filed pursuant to the Securities Act) and as of its filing date did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except for any statements (x) in any Parent SEC Report that may have been modified by an amendment to such report or a subsequent report filed with the SEC prior to the Execution Date or (y) with respect to information supplied in writing by or on behalf of MLP, as to which Parent makes no representation or warranty.
(b) Except for Delek Logistics Partners, LP, no Parent Subsidiary is required to file reports, forms or other documents with the SEC pursuant to the Exchange Act. There are no outstanding comments from, or unresolved issues raised by, the staff of the SEC with respect to the Parent SEC Reports. No enforcement action has been initiated against Parent relating to disclosures contained or omitted from any Parent SEC Report.
(c) Parent makes and keeps books, records, and accounts and has devised and maintains a system of internal controls, in each case, as required pursuant to Section 13(b)(2) under the Exchange Act. Parent has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and the applicable listing standards of the NYSE. Such disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Parent in the reports that it files under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to its management as appropriate to allow timely decisions regarding required disclosure.
(d) Since January 1, 2015, the principal executive officer and principal financial officer of Parent have made all certifications (without qualification or exceptions to the matters certified, except as to Knowledge) required by the Sarbanes-Oxley Act, and the statements contained in any such certifications are complete and correct in all material respects, and none of such entities or its officers have received notice from any Governmental Entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certification. As of the Execution Date, and except as disclosed in a Parent SEC Report filed with the SEC prior to the Execution Date, none of such entities has any Knowledge of any material weaknesses in the design or operation of such internal controls over financial reporting.
Section 4.6 Financial Statements; Undisclosed Liabilities
(a) Parent’s Annual Report on Form 10-K filed with the SEC on February 28, 2017 sets forth a true and complete copy of the consolidated audited statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2016 and balance sheets as of December 31, 2016 and 2015 for Parent, including the notes thereto, and Parent’s Quarterly Report on Form 10-Q filed on August 7, 2017 sets forth a true and complete copy of the consolidated unaudited statements of income, comprehensive income, changes in equity and cash flows for the six month period ended June 30, 2017 and balance sheet as of June 30, 2017 for Parent (the referenced financial statements set forth in such Form 10-K and Form 10-Q of Parent are collectively referred to as the “Parent Financial Statements”). The Parent Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated in the notes thereto) and present fairly in all material respects the consolidated financial position of Parent as of such dates and the consolidated results of income and cash flows of Parent for such periods, except as otherwise noted therein and subject, in the case of the unaudited financial statements, to normal and recurring adjustments and the absence of certain notes that are included in audited financial statements. Except as set forth in the Parent Financial Statements, there are no off-balance sheet arrangements that would, individually or in the aggregate, have a Parent Material Adverse Effect. Parent has not had any disagreement with its independent public accounting firm that required disclosure in the Parent SEC Reports.
(b) There are no liabilities or obligations of Parent or the Parent Subsidiaries required to be included on a balance sheet prepared under GAAP (whether or not known or unknown and whether accrued, absolute, contingent or otherwise) and there are no facts or circumstances that would reasonably be expected to result in any such liabilities or obligations, whether arising in the context of federal,
state or local judicial, regulatory, administrative or permitting agency Proceedings, other than (i) liabilities or obligations reflected or reserved against in the Parent Financial Statements, (ii) current liabilities incurred in the ordinary course of business since December 31, 2016, (iii) liabilities and obligations incurred under or in accordance with this Agreement or in connection with the transactions contemplated by this Agreement, and (iv) liabilities or obligations (whether known or unknown and whether accrued, absolute, contingent or otherwise) that would not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.7 Real Property; Rights-of-Way
(a) Each of the Parent Group Entities has good, valid and marketable title to all real property, good and valid leasehold interest in each material lease, sublease and other agreement under which the Parent Group Entities uses or occupies or has the right to use or occupy any material real property and good title to all tangible personal property owned by the Parent Group Entities that is sufficient for the operation of their respective businesses as presently conducted, free and clear of all Liens (except Permitted Liens), except as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(b) (i) There are no pending Proceedings to modify the zoning classification of, or to condemn or take by power of eminent domain, all or any of the assets of the Parent Group Entities and (ii) none of the Parent Parties have Knowledge of any such threatened Proceeding, which (in the case of clause (i) or (ii)), if pursued, would, individually or in the aggregate, have a Parent Material Adverse Effect. To the extent located in jurisdictions subject to zoning, the assets of the Parent Group Entities that are real property (owned or leased) are properly zoned for the existence, occupancy and use of all of the improvements located on the owned and leased real property and on the Rights-of-Way held by any of the Parent Group Entities, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.8 Litigation; Laws and Regulations. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect:
(a) There are no (i) Proceedings pending or, to the Knowledge of the Parent Parties, threatened against the Parent Group Entities (other than the Parent Partially Owned Entities), their assets, or any of the operations of the Parent Group Entities (other than the Parent Partially Owned Entities) related thereto or (ii) Orders against the Parent Group Entities (other than the Parent Partially Owned Entities), their assets, or any of the operations of the Parent Group Entities (other than the Parent Partially Owned Entities) related thereto.
(b) To the Knowledge of the Parent Parties, there are no (i) Proceedings pending or threatened against or affecting the Parent Partially Owned Entities, their assets, or any of the operations of the Parent Partially Owned Entities related thereto or (ii) Orders against or affecting the Parent Partially Owned Entities, their assets, or any of the operations of the Parent Partially Owned Entities related thereto.
(c) None of the Parent Group Entities (other than the Parent Partially Owned Entities) and, to the Knowledge of the Parent Parties, no Parent Partially Owned Entity (i) is in violation of or in default under its Governing Documents or (ii) is in violation of any applicable Law, except in the case of clause (ii) for such violations or defaults that would not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.9 No Adverse Changes. Except as described in the Parent Financial Statements, (x) with respect to any Parent Partially Owned Entity, to the Knowledge of the Parent Parties, and (y) with respect to any other Parent Group Entities:
(a) since December 31, 2016, there has not been a Parent Material Adverse Effect; and
(b) since December 31, 2016, neither Parent nor any other Parent Group Entity has taken any action described in Section 5.1(b) that, if taken after the date of this Agreement and prior to the Effective Time without the prior written consent of MLP, would violate such provisions.
Section 4.10 Taxes. Except as would not, individually or in the aggregate, have a Parent Delek Holdco Inc.,Material Adverse Effect and, only with respect to any Parent Partially Owned Entity, to the Knowledge of the Parent Parties, (a) all Tax Returns required to be filed by or with respect to Parent or any of the Parent Subsidiaries or their assets have been filed on a Delaware corporation and wholly owned subsidiarytimely basis (taking into account all extensions of due dates); (b) all Taxes owed by Parent or any of the Parent Subsidiaries, which are or have become due, have been timely paid; (c) there are no Liens on any of the assets of Parent (“or any of the Parent Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax on any of such assets, other than Permitted Liens; (d) there is no pending Proceeding for assessment or collection of Taxes and no Tax assessment, deficiency or adjustment has been asserted or proposed with respect to Parent or any of the Parent Subsidiaries or their assets, and (e) Parent has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code in the two years prior to the date of this Agreement or in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with the transactions contemplated by this Agreement.
Section 4.11 HoldCoEnvironmental Matters. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect: (a) the Parent Group Entities, their assets and their operations relating thereto are in compliance with applicable Environmental Laws; (b) no circumstances exist with respect to the Parent Group Entities, their assets or their operations relating thereto that give rise to an obligation by the Parent Group Entities to investigate or remediate the presence or release, on-site or offsite, of Hazardous Materials under any applicable Environmental Laws; (c) the Parent Group Entities, their assets or their operations related thereto are not subject to any pending or, to the Knowledge of the Parent Parties, threatened Proceeding under any Environmental Law (including designation as a potentially responsible party under CERCLA or any similar local or state Law); (d) all notices, permits, permit exemptions, licenses or similar authorizations, if any, required to be obtained or filed by the Parent Group Entities, with respect to their assets or their operations relating thereto have been duly obtained or filed and are valid and currently in effect; and (e) there has been no release of any Hazardous Material into the environment by the Parent Group Entities, their assets, or their operations relating thereto, except in compliance with applicable Environmental Law.
Section 4.12 Licenses; Permits
(a) The Parent Group Entities have all Permits, except where the failure to obtain such Permit would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(b) All Permits are validly held by the Parent Group Entities and are in full force and effect, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(c) The Parent Group Entities have complied with all terms and conditions of the Permits, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect. No suspension or cancellation of any Permit is pending or, to the Knowledge of the Parent Parties, threatened, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(d) The Permits will not be subject to suspension, modification, revocation or non-renewal as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except, in each case, as would not, individually or in the aggregate, have a Parent Material Adverse Effect.
(e) No Proceeding is pending or, to the Knowledge of the Parent Parties, threatened with respect to any alleged failure by the Parent Group Entities to have any material Permit necessary for the operation of any asset or the conduct of their businesses or to be in compliance therewith.
Section 4.13 Contracts. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, with respect to each of the Parent Group Entities (but, with respect to any Parent Partially Owned Entity, to the Knowledge of the Parent Parties): (i) each Parent Material Contract to which such entity is a party is, assuming due authorization, execution and delivery by the other party or parties thereto, a legal, valid and binding obligation on, and enforceable against, such entity, and is in full force and effect; (ii) such entity that is a party to each Parent Material Contract is not in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by any such party, or permit termination, modification, or acceleration, under the Parent Material Contract; and (iii) to the Knowledge of the Parent Parties, no other party to any Parent Material Contract is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by such other party, or permit termination, modification or acceleration under any Parent Material Contract other than in accordance with its terms nor has any other party repudiated any provision of the Parent Material Contract. For purposes of this Section 4.13, “Parent Material Contracts” mean contracts or other agreements (whether written or oral) which are a “material contracts” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
Section 4.14 Employees and Employee Benefits.
(a) Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, (i) each Parent Benefit Plan that is intended to be qualified under Section 401(a) of the Code is and has been so qualified in form, and (ii) each Parent Benefit Plan is and has been operated and maintained in compliance with its terms and the provisions of all applicable Laws, rules and regulations, including, without limitation, ERISA and the Code
(b) Section 4.14(b) of the Parent Disclosure Letter sets forth (i) each Parent Benefit Plan that is subject to Title IV or Section 302 of ERISA or Section 412 of the Code (each, a “Pension Plan”) and (ii) each Parent Benefit Plan that is a “multiemployer plan” within the meaning of Section 3(37) of ERISA (each, a “Multiemployer Plan”). Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, with respect to each Pension Plan that any Parent Party (or any entity treated as a single employer with any Parent Party for purposes of Section 414 of the Code or Section 4001(a)(14) of ERISA (the “Parent Aggregated Group”)) has maintained within the last six years or had any obligation to contribute to within the past six years, (i) except for an event described in Section 4043(c)(3) of ERISA, there has, during the past six years, been no “reportable event,”) as that term is defined in Section 4043 of
ERISA, for which the 30-day reporting requirement has not been waived, and the transactions contemplated by this Agreement will not result in such a “reportable event” for which a waiver does not apply, (ii) none of the Parent Group Entities or any member of the Parent Aggregated Group has incurred any direct or indirect liability under Title IV of ERISA other than liability for premiums to the Pension Benefit Guaranty Corporation that have been timely paid and other than any liabilities for which the Parent Group Entities have no direct or indirect responsibility or obligation (other than with respect to the Parent Partnership Agreement), Dione Mergeco, Inc.,(iii) 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 that, in either case, would reasonably be expected to give rise to a Delaware corporationLien on any of the assets of the Parent Group Entities, (iv) no such Pension Plan is in “at risk” status, within the meaning of Section 430 of the Code or Section 303 of ERISA, and wholly owned subsidiary(v) no notice of HoldCo (“intent to terminate any such Pension Plan has been filed with the Pension Benefit Guaranty Corporation, no amendment terminating any such Pension Plan has been adopted and no proceedings to terminate any such Pension Plan have been instituted by the Pension Benefit Guaranty Corporation. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, (A) no Multiemployer Plan is, or is reasonably expected to be, insolvent or in reorganization, or in “critical” or “endangered” status as defined in Section 432 of the Code or Section 305 of ERISA, and (B) none of the Parent Group Entities nor any member of the Parent Aggregated Group has or may reasonably be expected to incur any withdrawal liability (as defined in Section 4201 of ERISA) with respect to any Multiemployer Plan.
(c) No action is pending or, to the Knowledge of the Parent Parties, threatened against, by or on behalf of any Parent Benefit Plan or the assets, fiduciaries or administrators thereof (other than claims for benefits in the ordinary course) that would have a Parent Material Adverse Effect. No Parent Benefit Plan and none of the Parent Parties with respect to any Parent Benefit Plan is the subject of an audit or investigation by the IRS, the Department of Labor, the Pension Benefit Guaranty Corporation or any other governmental authority, nor is any such audit or investigation pending or, to the Knowledge of the Parent Parties, threatened that would have a Parent Material Adverse Effect. None of the assets of any Parent Group Entity is, or may reasonably be expected to become, the subject of any Lien arising under ERISA or the Code that would have a Parent Material Adverse Effect.
Section 4.15 ParentLabor Matters.Merger Sub”), Astro Mergeco, Inc., a Delaware corporation and wholly owned subsidiary
(a) There is no labor strike, or other material labor dispute, slowdown or stoppage pending or, to the Knowledge of HoldCo (“Astro Merger Sub”the Parent Parties, threatened against the Parent Group Entities with respect to any of the employees of any of the Parent Group Entities (collectively, the “Parent Associated Employees”), and the Parent Group Entities have not experienced any such labor strike or material labor dispute, slowdown or stoppage during the past three years.
(b) With respect to current, former and prospective Parent Associated Employees, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, the Parent Group Entities and each member of the Parent Aggregated Group are in compliance with all applicable Laws, statutes, rules and regulations respecting employment and employment practices, terms and conditions of employment, wages and hours, pay equity, discrimination in employment, wrongful discharge, collective bargaining, fair labor standards, occupational health and safety, personal rights or any other labor and employment-related matters.
Section 4.16 Insurance. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, (a) the businesses and assets of the Parent Group Entities are covered by, and insured under, insurance policies underwritten by reputable insurers that include coverages and related limits and deductibles that are customarily carried by Persons conducting business similar to that of Parent, (b) all such insurance policies are in full force and effect and all premiums due and payable on such policies have been paid, and (c) no notice of cancellation of, material premium increase of, or indication of an intention not to renew, any such insurance policy has been received by the Parent Parties other than in the ordinary course of business.
Section 4.17 Condition of Assets. Except as would not, individually or in the aggregate, have a Parent Material Adverse Effect, the assets of the Parent Group Entities have been maintained and repaired in the same manner as would a prudent operator of such assets, and are adequate for the purposes for which they are currently used.
Section 4.18 Investment Company haveAct. Parent is not, nor immediately after the Closing will be, subject to regulation under the Investment Company Act of 1940, as amended.
Section 4.19 Brokerage Arrangements. Except for Parent’s obligations to Barclays Capital Inc., the fees and expenses of which will be paid by Parent, none of the Parent Parties has entered (directly or indirectly) into anany agreement with any Person that would obligate the Parent Parties to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this Agreement or the transactions contemplated hereby.
Section 4.20 State Takeover Laws. Parent has taken all action necessary to render inapplicable to this Agreement and Planthe transactions contemplated hereby, including the Merger, any potentially applicable state takeover Laws and any applicable takeover provision of the Governing Documents of Parent.
Section 4.21 Information Supplied. None of the information supplied (or to be supplied) in writing by or on behalf of Parent specifically for inclusion or incorporation by reference in the Registration Statement will, at the time the Registration Statement, or any amendment or supplement thereto, is filed with the SEC or at the time it becomes effective under the Securities Act, 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 made therein, in light of the circumstances under which they are made, not misleading. Notwithstanding the foregoing, Parent makes no representation or warranty with respect to information supplied by or on behalf of MLP for inclusion or incorporation by reference in any of the foregoing documents.
Section 4.22 Parent Knowledge. As of the Execution Date, to Parent’s Knowledge: (a) the representations and warranties in (i) Section 3.1(a), Section 3.2 and Section 3.4(a) are true and correct in all material respects as of the Execution Date (except to the extent such representations and warranties expressly relate to a specific date, in which case as of such specific date) and (ii) Article III (other than Section 3.1(a), Section 3.2, Section 3.4(a) and Section 3.9) are true and correct (without regard to any materiality, “MLP Material Adverse Effect” and similar qualifiers therein) as of the Execution Date (except for representations and warranties made as of a specific date, in which case such representations and warranties are so true and correct as of such specific date), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, result in an MLP Material Adverse Effect and (b) the representation and warranty set forth in Section 3.9 is true and correct in all respects as of the Execution Date.
Section 4.23 Waivers and Disclaimers. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES AND OTHER COVENANTS AND AGREEMENTS MADE BY THE PARENT PARTIES IN THIS AGREEMENT, THE PARENT PARTIES HAVE NOT MADE, DO NOT MAKE, AND SPECIFICALLY NEGATE AND DISCLAIM ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THEIR ASSETS INCLUDING, THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THEIR ASSETS GENERALLY, INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THEIR ASSETS, (B) THE INCOME TO BE DERIVED FROM THEIR ASSETS, (C) THE SUITABILITY OF THEIR ASSETS FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THEIR ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THEIR ASSETS. EXCEPT TO THE EXTENT PROVIDED IN THIS AGREEMENT, NEITHER THE PARENT PARTIES NOR ANY OF THEIR AFFILIATES SHALL BE LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PARENT PARTIES, THEIR BUSINESSES OR THEIR ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. THE PROVISIONS OF THIS SECTION 4.23 HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE PARENT GROUP ENTITIES, THEIR BUSINESSES OR THEIR ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN THIS AGREEMENT.
Section 4.24 Non-Reliance. Parent has conducted its own independent investigation, review and analysis of the MLP Group Entities, and acknowledges that it has been provided adequate access to the personnel, properties, assets, premises, books and records, and other documents and data of the MLP Group Entities for such purpose. Parent acknowledges and agrees that in making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Parent has relied solely upon its own investigation and the express representations and warranties of the MLP Group Entities set forth in this Agreement and the statements in the MLP SEC Reports. PARENT ACKNOWLEDGES AND AGREES THAT THE MLP GROUP ENTITIES HAVE SPECIFICALLY DISCLAIMED AND DO HEREBY SPECIFICALLY DISCLAIM ANY SUCH OTHER REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) MADE BY THE MLP GROUP ENTITIES OR ANY OTHER PERSON FOR WHOM ANY MLP GROUP ENTITY MAY BE LIABLE.
ARTICLE V
ADDITIONAL AGREEMENTS, COVENANTS,
RIGHTS AND OBLIGATIONS
Section 5.1 Conduct of Parties
(a) Except (i) as provided in this Agreement, (ii) as required by applicable Law, or (iii) as consented to in writing by MLP (which consent shall not be unreasonably withheld), during the period from the Execution Date until the Effective Time, Parent shall not take any action to cause, and shall not permit the MLP General Partner to cause, the amendment of the MLP Partnership Agreement or the MLP GP LLC Agreement, in each case, to the extent that any amendment would reasonably be expected to (A) prohibit, prevent or
materially hinder, impede or delay the ability of the parties to satisfy any conditions to or the consummation of the Merger or the other transactions contemplated by this Agreement or (B) adversely impact the Holders of MLP Public Units in any material respect.
(b) Except (i) as provided in this Agreement, (ii) as set forth in the Parent Disclosure Letter, (iii) as required by applicable Law, (iv) as provided in any Parent Material Contract in effect as of the Execution Date or (v) as consented to in writing by MLP (such consent shall not be unreasonably withheld), during the period from the Execution Date to the Effective Time, Parent shall not, and shall not permit any Parent Group Entity (other than the DKL Entities) to:
(i) (A) amend Parent’s certificate of incorporation or bylaws in any manner that would reasonably be expected to prohibit, prevent or materially hinder, impede or delay the ability of the parties to satisfy any of the conditions to or the consummation of the Merger or the other transactions contemplated by this Agreement or (B) adversely affect the terms of the Parent Common Stock in any material respect, or (C) declare, set aside or pay any dividend or distribution payable in cash, stock or property in respect of any capital stock, other than regular quarterly cash dividends on the Parent Common Stock in the ordinary course of business consistent with past practice and other than dividends or distributions with a record date after the Effective Time;
(ii) solely with respect to Parent, adopt a plan or agreement of complete or partial liquidation, dissolution or restructuring or a plan or agreement of reorganization under any bankruptcy or similar Law;
(iii) settle any claims, demands, lawsuits or Proceedings seeking damages or an injunction or other equitable relief where such settlements would, in the aggregate, have a Parent Material Adverse Effect; or
(iv) agree, in writing or otherwise, to take any of the foregoing actions, or take any action or agree, in writing or otherwise, to take any action, including proposing or undertaking any merger, consolidation or acquisition, in each case, that would reasonably be expected to prohibit, prevent or materially hinder, impede or delay the ability of the parties to satisfy any of the conditions to or the consummation of the Merger or the other transactions contemplated by this Agreement.
(c) From the Execution Date until the Closing Date, neither MLP nor Parent shall, nor shall it cause or permit any of its Subsidiaries to, take any action prohibited by this Agreement or fail to take any action required by this Agreement that, in either case, would be reasonably likely to materially delay the consummation of the Merger or result in the failure of a condition to closing pursuant to Article VI.
(d) From the Execution Date until the Closing Date, each of Parent and MLP shall, and shall cause its Subsidiaries to, promptly notify the other party in writing of (i) any event, condition or circumstance that could reasonably be expected to result in any of the conditions set forth in Article VI not being satisfied at the Effective Time, and (ii) any material breach by the notifying party of any covenant, obligation, or agreement contained in this Agreement; provided, however, that the delivery of any notice pursuant to this Section 5.1(d) shall not limit or otherwise affect the remedies available hereunder to the notified party.
Section 5.2 Access to Information; Confidentiality. Subject to applicable Laws, upon reasonable notice, each Party Group shall (and shall cause the members of such Party Group to) afford the officers, employees, counsel, accountants and other representatives and advisors of the requesting Party Group reasonable access, during normal business hours from the Execution Date until the Closing Date, to its properties, books, contracts and records as well as to their management personnel; provided that such access shall be provided on a basis that minimizes the disruption to the operations of the disclosing Party Group and the members of its Party Group. The disclosing Party Group shall not be responsible to the requesting Party Group for personal injuries sustained by the requesting Party Group’s officers, employees, counsel, accountants and other representatives and advisors in connection with the access provided pursuant to this Section 5.2, and shall be indemnified and held harmless by the requesting Party Group for any losses suffered by the disclosing Party Group or its officers, employees or representatives in connection with any such personal injuries. Subject to applicable Laws, during such period, each Party Group shall (and shall cause the members of such Party Group to) furnish promptly to the other Party Group (i) 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 pursuant to the Securities Act, the Exchange Act and the rules of any Governmental Entity thereunder), as applicable (other than documents which such Party Group is not permitted to disclose under applicable Laws) and (ii) all information concerning the disclosing Party Group’s business, properties and personnel as the requesting Party Group may reasonably request, including all information relating to environmental matters. Notwithstanding the foregoing, a Party Group shall have no obligation to disclose or provide access to any information the disclosure of which such Party Group has concluded may jeopardize any privilege available to such Party Group relating to such information or would be in violation of a confidentiality obligation binding on such Party Group. Except for disclosures permitted by the terms of the Confidentiality Agreement, dated as of September 19, 2017 between Parent and MLP (as the sameit may be amended from time to time, the “MergerAgreement”“Confidentiality Agreement”), providingeach party shall hold information received from the other party pursuant to this Section 5.2 in confidence in accordance with the terms of the Confidentiality Agreement.
Section 5.3 Certain Filings
(a) As promptly as practicable following the Execution Date (i) each of the MLP Parties and the Parent Parties shall cooperate in the preparation of the Registration Statement (including the joint consent statement/prospectus constituting a part thereof (the “Consent Statement/Prospectus”)), (ii) Parent shall use its reasonable best efforts to cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on the NYSE (subject, if applicable, to notice of issuance) prior to the Effective Time, and (iii) the parties hereto shall make all required filings under applicable state securities and “blue sky” Laws; provided, however, that no such filings shall be required in any jurisdiction where, as a result thereof, Parent would become subject to general service of process or to taxation or qualification to do business as a foreign corporation doing business in such jurisdiction solely as a result of such filing. Parent shall file the Registration Statement with the SEC as promptly as reasonably practicable. Each of Parent and MLP shall use all commercially reasonable efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as practicable after filing thereof and keep the Registration Statement effective until the earlier of the consummation of certain mergers (the “Mergers”) pursuant to the termstransactions contemplated by this Agreement and conditions of the Merger Agreement;
WHEREAS, as a condition to its willingness to enter into the Merger Agreement, the Company has required that Parent execute and deliver this Agreement;
WHEREAS, in order to induce the Company to enter into the Merger Agreement, Parent is willing to make certain representations, warranties, covenants and agreements with respect to the 33,691,292 shares of Company Common Stock beneficially owned by Parent (the “Original Shares” and, together with any additional shares of Company Common Stock pursuant to Section 6 hereof, collectively the “Shares”); and
WHEREAS, Parent has pledged the Company Common Stock under that certain Amended and Restated Pledge and Security Agreement (Term Loan) (the “Pledge Agreement”)dated May 14, 2015 in favor of Fifth Third Bank, as Lead Collateral Agent for the Secured Creditors (each as defined therein) (in such capacity, “Collateral Agent”).
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties agree as follows:
1.Definitions.
For purposestermination of this Agreement capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
2.Representations of Parent.
Parent represents and warrants to the Company that:
(a)(i) Parent is the sole record and beneficial owner (as such term is defined in Rule 13d-3 of the Exchange Act) of and has good title to all of the Original Shares free and clear of all Liens (except as set forth in this Agreement, the Pledge Agreement and pursuant to any applicable restrictions on transfer under the Exchange Act), and (ii) except pursuant hereto and the Pledge Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Parent is a party relating to the pledge, disposition or voting of any of the Original Shares and there are no voting trusts or voting agreements with respect to the Original Shares.
(b)Subject to the Pledge Agreement, Parent has, and will have at the time of the Company Stockholders Meeting with respect to the matters covered by Section 3(a), the sole right to vote and direct the vote of, and to dispose of and direct the disposition of, the Original Shares, and none of the Original Shares is subject to any agreement, arrangement or restriction with respect to the Original Shares that would prevent or delay Parent’s ability to perform its obligations hereunder. Other than the Pledge Agreement, there are no agreements or arrangements of any kind, contingent or otherwise, obligating Parent to Transfer (as defined in Section 5) or cause to be Transferred, any of the Original Shares, and no Person has any contractual or other right or obligation to purchase or otherwise acquire any of the Original Shares.
(c)Parent does not beneficially own any shares of Company Common Stock other than the Original Shares.
(d)Subject to the Pledge Agreement, Parent has full power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Parent’s obligations hereunder (including the irrevocable proxy described in Section 3(b)). This Agreement has been duly and validly executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms. Each of Parent and MLP shall furnish to the other party all information concerning the Parent Group Entities or the MLP Group Entities, as applicable, and to take such other action as may be reasonably requested in connection with the foregoing. No filing of, or amendment or supplement to, the Registration Statement or the Consent Statement/Prospectus will be made by Parent or MLP, in each case without providing the other party a reasonable opportunity to review and comment thereon.
(e)Subject
(b) Each of the Parent Parties and the MLP Parties agrees, as to obtaining any consents required under the Pledge Agreement,itself and its Subsidiaries, that (i) none of the executioninformation supplied or to be supplied by it for inclusion or incorporation by reference in the Registration Statement will, at the time the Registration Statement and deliveryeach amendment or supplement thereto, if any, becomes effective under the Securities Act, contain any untrue statement of this Agreementa material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) none of the information supplied or to be supplied by Parent,it for inclusion or incorporation by reference in the consummation by ParentConsent Statement/Prospectus and any amendment or supplement thereto will, at the date the Consent Statement/Prospectus is mailed to the Holders of MLP Common Units, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the Parent Parties and the MLP Parties further agrees that, if it shall become aware prior to the Closing Date of any information that would cause any of the statements in the Registration Statement or the Consent Statement/Prospectus to be false or misleading with respect to any 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 false or misleading, it will promptly inform the other party thereof and take the necessary steps to correct such information in an amendment or supplement to the Registration Statement or Consent Statement/Prospectus.
(c) Each of MLP and Parent shall (i) promptly notify the other of receipt of any comments from the SEC or its staff or any other applicable government official and of any requests by the SEC or its staff or any other applicable government official for amendments or supplements to any of the filings with the SEC in connection with the Merger and other transactions contemplated hereby or compliance by Parentfor additional information and (ii) promptly supply the other with copies of all correspondence between MLP or any of the provisions hereof will conflict withits representatives, or result in a breach, or constitute a default (with or without notice of lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument or Law applicable to Parent or to Parent’s property or assets. There is no (i) action, proceeding or investigation pending or threatened against Parent or any of its Affiliates;representatives, as the case may be, on the one hand, and the SEC or its staff or any other applicable government official, on the other hand, with respect thereto. Parent and MLP shall use their respective commercially reasonable efforts to respond to any comments of the SEC or its staff with respect to the Consent Statement/Prospectus or the Registration Statement as promptly as practicable.
(d) MLP General Partner shall distribute to the Holders of MLP Common Units the Consent Statement/Prospectus, which shall include a form of consent that may be executed by Holders of MLP Common Units in connection with the Written Consent, as promptly as practicable after the Registration Statement is declared effective under the Securities Act.
Section 5.4 Commercially Reasonable Efforts; Further Assurances. From and after the Execution Date, upon the terms and subject to the conditions hereof, each of the parties hereto shall use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and to do or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable and (ii) defend any lawsuits or other Proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated by this Agreement or seek to have lifted or rescinded any injunction or restraining order or other Order adversely affecting the ability of the parties to consummate the transactions contemplated hereby, including the Merger. Without limiting the foregoing but subject to the other terms of this Agreement, the parties hereto, from time to time, whether before, at or after the Closing Date, shall execute and deliver, or cause to be executed and delivered, such instruments of assignment, transfer, conveyance, endorsement, direction or authorization as may be necessary to consummate and make effective the transactions contemplated by this Agreement. Notwithstanding the foregoing, nothing in this Agreement will require any party hereto to hold separate or make any divestiture not expressly contemplated herein of any asset or otherwise agree to any restriction on its operations or other condition in order to obtain any consent or approval or other clearance required by this Agreement.
Section 5.5 No Public Announcement. On the Execution Date, Parent and MLP shall issue a joint press release with respect to the execution of this Agreement and the Merger, which press release shall be reasonably satisfactory to Parent and MLP Conflicts Committee. From and after the Execution Date, neither MLP nor Parent shall issue any other press release or make any other public announcement concerning this Agreement or the transactions contemplated by this Agreement (to the extent not previously issued or made in accordance with this Agreement) (other than public announcements at industry road shows and conferences or as may be required by applicable Law or by obligations pursuant to any listing agreement with the NYSE, in which event the party making the public announcement or press release shall, to the extent practicable, notify Parent and MLP Conflicts Committee in advance of such public announcement or press release) without the prior approval of Parent and MLP Conflicts Committee, which approval shall not be unreasonably withheld, delayed or conditioned.
Section 5.6 Expenses. Subject to Sections 7.5 and 7.7, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement, including legal fees, accounting fees, financial advisory fees and other professional and non-professional fees and expenses, shall be paid by the party hereto incurring such expenses, except that Parent and MLP shall each pay for one-half of (a) any filing fees with respect to the Registration Statement and the Consent Statement/Prospectus and (b) the costs of printing and mailing of the Consent Statement/Prospectus; provided that, (i) if this Agreement is terminated by MLP pursuant to Section 7.3, Parent shall bear all of the costs and expenses of all parties incurred in connection with this Agreement and (ii) if this Agreement is terminated by Parent pursuant to Section 7.4, MLP shall bear all of the costs and expenses of all parties incurred in connection with this Agreement.
Section 5.7 Regulatory Issues. MLP and Parent shall cooperate fully with respect to any filing, submission or communication with a Governmental Entity having jurisdiction over the Merger. Such cooperation shall include each of the parties hereto: (a) providing, in the case of oral communications with a Governmental Entity, advance notice of any such communication and, to the extent permitted by applicable Law, an opportunity for the other party to participate; (b) providing, in the case of written communications, an opportunity for the other party to comment on any such communication and provide the other with a final copy of all such communications; and (c) complying promptly with any request for information from a Governmental Entity (including an additional request for information and documentary material), unless directed not to do so by the other party hereto. All cooperation shall be conducted in such a manner so as to preserve all applicable privileges.
Section 5.8 Tax Matters. For U.S. federal income tax purposes (and for purposes of any applicable state, local or foreign Tax that follows the U.S. federal income tax treatment), the parties shall treat the Merger (a) with respect to the Holders of MLP Public Units, as a taxable sale of such MLP Common Units to DEI and (b) with respect to DEI, as a purchase of MLP Public Units from the Holders of such MLP Common Units. The Merger Consideration payable to the Holders of MLP Public Units shall be deemed to be (i) transferred from Parent to DEI in a tax free transaction pursuant to Section 351 of the Code, and (ii) immediately thereafter transferred from DEI to the Holders of MLP Public Units in accordance with the terms of this Agreement. The parties further agree that, pursuant to Treasury Regulation Sections 1.1032-3, the deemed transfer of the Merger Consideration from DEI to the Holders of MLP Public Units does not trigger the recognition of gain by DEI for U.S. federal income tax purposes, and the basis of Parent in stock of DEI shall be increased by the value of the Merger Consideration. The parties will prepare and file all Tax Returns consistent with the foregoing and will not take any inconsistent position on any Tax Return, or during the course of any audit, litigation or other proceeding with respect to Taxes, except as otherwise required by applicable Law following a final determination by a court of competent jurisdiction or other administrative settlement with or final administrative decision by the relevant Governmental Entity.
Section 5.9 D&O Insurance
(a) For a period of six years after the Effective Time, Parent shall, and shall cause the MLP Group Entities to, honor all rights to indemnification, advancement of expenses, elimination of liability and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time (including the transactions contemplated by this Agreement) now existing in favor of the MLP D&O Indemnified Parties as provided in the Governing Documents of any MLP Group Entity, under applicable Delaware Law or otherwise, and shall ensure that the Governing Documents of MLP and MLP General Partner (or their successor entities) shall, for a period of six years following the Effective Time, contain provisions no less advantageous with respect to indemnification, advancement of expenses, elimination of liability and exculpation of their present and former directors, officers, employees and agents than are set forth in the Governing Documents of MLP and MLP General Partner as of the Execution Date.
(b) For a period of six years after the Effective Time, Parent shall maintain officers’ and directors’ liability insurance covering each MLP D&O Indemnified Party who is or at any time prior to the Effective Time was covered by the existing officers’ and directors’ liability insurance applicable to the MLP Group Entities (“D&O Insurance”) with respect to acts or omissions, or alleged acts or omissions, occurring or allegedly occurring on or after July 1, 2017 and prior to the Effective Time (whether claims, actions or other Proceedings relating thereto are commenced, asserted or claimed before or after the Effective Time); provided, however, that Parent shall not be required to pay an annual premium for the D&O Insurance for the MLP D&O Indemnified Parties in excess of 300% of the current annual premium currently paid by the MLP Group Entities for such insurance. In addition, Parent shall maintain in effect the six-year
“tail” policy obtained in connection with Alon USA Energy, Inc.’s merger with and into Astro Mergerco, Inc. on June 30, 2017. Parent shall have the right to cause such coverage to be provided under (i) Parent’s corporate officers’ and directors’ liability insurance program or (ii) outstanding writ, injunction, order, judgmentthe applicable D&O Insurance by obtaining a six-year “tail” policy on terms and conditions no less advantageous to the MLP D&O Indemnified Parties than the existing D&O Insurance, and, in either such case, such coverage shall satisfy the provisions of this Section 5.9
(c) The provisions of this Section 5.9 shall survive the consummation of the Merger and the other transactions contemplated by this Agreement for a period of six years and expressly are intended to benefit each of the MLP D&O Indemnified Parties and are enforceable thereby; provided, however, that in the event that any claim or decreeclaims for indemnification or advancement set forth in this Section 5.9 are asserted or made within such six-year period, all rights to indemnification and advancement in respect of any Governmental Authoritysuch claim or claims shall continue until disposition of all such claims. The rights of any MLP D&O Indemnified Party under this Section 5.9 shall be in addition to whichany other rights such MLP D&O Indemnified Party may have under the Governing Documents of any MLP Group Entity or applicable Law.
(d) In the event Parent or any of its Affiliates are subjectsuccessors or bound,assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving entity in each case, that could
prevent, materially delay, hindersuch consolidation or impair the exercise by the Companymerger or (ii) transfers all or substantially all of its rights underproperties and assets to any Person, then and in either such case, Parent shall cause proper provision to be made so that its successors and assigns, as the case may be, shall assume the obligations set forth in this Agreement or the performance bySection 5.9; provided, that no such assumption shall release Parent offrom its obligations under this Agreement.Section 5.9.
(f)Section 5.10 Except as providedDividends and Distributions. After the Execution Date until the Effective Time, each of Parent and MLP shall endeavor to coordinate with the other regarding the declaration of any dividends or distributions in respect of Parent Common Stock and MLP Common Units and the record dates and payment dates relating thereto, it being the intention of the parties that Holders of MLP Common Units shall receive, for any quarter, either (i) distributions in respect of MLP Common Units or (ii) dividends in respect of Parent Common Stock that they receive in exchange therefor in the PledgeMerger. Subject to the provisions of the MLP Partnership Agreement and Section 18-607 of the DRULPA, the MLP Board shall declare, and shall cause MLP to pay, distributions in respect of the MLP Common Units (a) in respect of the quarter ended September 30, 2017, in the amount of $0.43 per MLP Common Unit, with a record date of November 13, 2017 and with a payment date occurring on or prior to November 22, 2017 and (b) if the Effective Time has not occurred prior to the record date (the timing of which shall be consistent with MLP’s past practice) for distributions in respect of any quarter ending December 31, 2017 or thereafter, then for, any such quarter, in an amount (x) consistent with the MLP Board’s existing cash distribution policy and (y) calculated in a manner substantially consistent with MLP’s past practice (including in respect of reserves for maintenance capital expenditures, debt service and other contractual obligations, and reserves for future operating or capital needs), and with a record date and a payment date consistent with past practice with respect to such quarter.
Section 5.11 Consent to Use of Financial Statements; Financing Cooperation. The MLP Parties hereby consent to the Parent Group Entities’ use of and reliance on any audited or unaudited financial statements, including the MLP Financial Statements, relating to the MLP Group Entities reasonably requested by the Parent Parties to be used in any financing or other activities of the Parent Parties permitted hereby, including any filings that the Parent Parties desire to make with the SEC. In addition, the MLP Parties will use commercially reasonable efforts, at the Parent Parties’ sole cost and expense, to obtain the consent of KPMG LLP (with respect to certain consolidated financial statements of MLP) and Ernst & Young LLP (with respect to certain consolidated financial statements of MLP) to the inclusion of the financial statements referenced above in appropriate filings with the SEC. Prior to the Closing, the MLP Parties will provide the Parent Parties such information, and make available such personnel, as the Parent Parties may reasonably request in order to assist any of the Parent Group Entities in connection with financing activities permitted hereby, including any public offerings to be registered under the Securities Act or private offerings.
Section 5.12 Section 16 Matters. Prior to the Effective Time, the MLP Board and the Parent Board shall take all such steps as may be necessary or appropriate to cause the transactions contemplated thereby, Stockholder hasby this Agreement, including any dispositions of MLP Common Units (including derivative securities with respect to such MLP Common Units) or acquisitions of shares of Parent Common Stock (including derivative securities with respect to such shares Parent Common Stock) resulting from the transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to MLP, or will become subject to such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 5.13 Conflicts Committee. Prior to the Effective Time, none of the MLP Group Entities shall (and none of Parent Group Entities shall, or shall cause the MLP Group Entities to), without the consent of the MLP Conflicts Committee, eliminate the MLP Conflicts Committee, or revoke or diminish the authority of the MLP Conflicts Committee, or remove or cause the removal of any director of the MLP Board that is a member of the MLP Conflicts Committee either as a member of such board or such committee without the affirmative vote of the members of the MLP Board, including the affirmative vote of each of the other members of the MLP Conflicts Committee. For the avoidance of doubt, this Section 5.13 shall not takenapply to the filling in accordance with the provisions of the applicable Governing Documents of any vacancies caused by the death, incapacity or resignation of any director.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Each Party’s Obligations. The obligation of the parties hereto to proceed with the Closing is subject to the satisfaction on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived (to the extent legally permissible) in writing, in whole or in part, as to a party by such other parties:
(a) Consent Statement. The Consent Statement/Prospectus shall have been cleared by the SEC and mailed to Holders of MLP Common Units (in accordance with Regulation 14A of the Exchange Act) at least 20 Business Days prior to the Closing.
(b) Approvals. The parties hereto shall have received all governmental consents and approvals, the absence of which would, individually or in the aggregate, have an MLP Material Adverse Effect or a Parent Material Adverse Effect.
(c) Written Consent. The Written Consent shall have been obtained in accordance with applicable Law and filed with the minutes of proceedings of MLP, and such Written Consent shall not have been amended, modified, withdrawn, terminated or revoked; provided, however, that this Section 6.1(c) shall not imply that the Written Consent is permitted by the MLP Partnership Agreement or applicable Law to be amended, modified, withdrawn, terminated or revoked following its execution by Holders of MLP Common Units constituting a Unit Majority (as defined in the MLP Partnership Agreement).
(d) Registration Statement. The Registration Statement shall have become effective under the Securities Act, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC or any other Governmental Entity.
(e) NYSE Listing. The Parent Common Stock to be issued in the Merger shall have been approved for listing on the NYSE subject to official notice of issuance.
(f) No Governmental Restraint. No order, decree or injunction of any Governmental Entity shall be in effect, and no Laws shall have been enacted or adopted, that enjoin, prohibit or make illegal the consummation of any of the transactions contemplated by this Agreement, and no action, proceeding or investigation by any Governmental Entity with respect to the Merger or the other transactions contemplated by this Agreement shall be pending that seeks to restrain, enjoin, prohibit or delay consummation of the Merger or such other transactions or to impose any material restrictions or requirements thereon or on the Parent Parties or the MLP Parties with respect thereto.
Section 6.2 Conditions to the Parent Parties’ Obligations. The obligation of the Parent Parties to proceed with the Closing is subject to the satisfaction on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived in writing, in whole or in part, by the Parent Parties (in their sole discretion):
(a) Representations and Warranties; Performance. (i) The representations and warranties of the MLP Parties set forth in (x) Section 3.1(a), Section 3.2, and Section 3.4(a) shall be true and correct in all material respects as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to a specific date, in which case as of such specific date), and (y) Article III (other than Section 3.1(a), Section 3.2, Section 3.4(a) and Section 3.9) shall be true and correct (without regard to any materiality, “MLP Material Adverse Effect” and similar qualifiers therein) as of the Closing, as if remade on the date thereof (except for representations and warranties made as of a specific date, which shall be true and correct as of such specific date), except where the failure of such representations and warranties to be true and correct would not, individually or in the aggregate, result in an MLP Material Adverse Effect, (ii) the representation and warranty set forth in Section 3.9 shall be true and correct as of the Closing Date as if made on the date thereof and (iii) each of the MLP Parties shall have performed or complied with all agreements and covenants required to be performed by it hereunder prior to the Closing Date that have materiality, “MLP Material Adverse Effect” or similar qualifiers, and shall have performed or complied in all material respects with all other agreements and covenants required to be performed by it hereunder prior to the Closing Date that are not so qualified.
(b) Parent shall have received a certificate, dated as of the Closing Date, of an executive officer of MLP General Partner certifying to the matters set forth in Section 6.2(a).
Section 6.3 Conditions to the MLP Parties’ Obligations. The obligation of the MLP Parties to proceed with the Closing is subject to the satisfaction on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived in writing, in whole or in part, by the MLP Parties (in their sole discretion):
(a) Representations and Warranties; Performance. (i) The representations and warranties of the Parent Parties set forth in (x) Section 4.1(a), Section 4.2 (other than the third sentence thereof), and Section 4.4(a) shall be true and correct in all material respects
as of the Closing Date as if made as of the Closing Date (except to the extent such representations and warranties expressly relate to a specific date, in which case as of such specific date), (y) the third sentence of Section 4.2 shall be true and correct in all material respects as of the Closing Date as if made as of the Closing Date and (z) Article IV (other than Section 4.1(a), Section 4.2, Section 4.4(a) and Section 4.9(a)) shall be true and correct (without regard to any materiality, “Parent Material Adverse Effect” and similar qualifiers therein) as of the Closing, as if remade on the date thereof (except for representations and warranties made as of a specific date, which shall be true and correct as of such specific date), except where the failure of such representations and warranties to be true and correct would reasonably be expected to (i) constitutenot, individually or in the aggregate, result in a Parent Material Adverse Effect, (ii) the representation and warranty set forth in Section 4.9(a) shall be true and correct as of the Closing Date as if made on the date thereof, and (iii) each of the Parent Parties shall have performed or complied with all agreements and covenants required to be performed by it hereunder prior to the Closing Date that have materiality, “Parent Material Adverse Effect” or similar qualifiers, and shall have performed or complied in all material respects with all other agreements and covenants required to be performed by it hereunder prior to the Closing Date that are not so qualified.
(b) MLP General Partner shall have received a certificate, dated as of the Closing Date, of an executive officer of Parent certifying to the matters set forth in Section 6.3(a).
Section 6.4 Frustration of Conditions. No party may assert a breach hereof; (ii) makeof this Agreement by any representationother party, or warrantyassert the failure of Stockholderany condition set forth in this Section 2 untrueArticle VI to be satisfied, if such breach or incorrect;failure was caused, in whole or (iii) havein part, by the effect of preventingasserting party, including the asserting party’s failure to act in good faith or disabling Stockholder from performingthe asserting party’s failure to observe any of its obligations under this Agreement.
3.Section 6.5 AgreementPerformance by MLP General Partner. Parent shall cause MLP General Partner to Vote Shares; Irrevocable Proxy.
(a)Subjectcause MLP and the MLP Subsidiaries to obtaining any consent required undercomply with the Pledge Agreement, Parent agrees during the termprovisions of this Agreement to voteAgreement. Notwithstanding the Shares at the Company Stockholders Meeting in favor of (1) the Mergersforegoing, it is understood and the Merger Agreement andagreed that actions or inactions by MLP, MLP General Partner or any other transactions or matters contemplated by the Merger Agreement, (2) any proposal to adjourn or postpone the Company Stockholders Meeting to a later date if there areMLP Group Entity shall not sufficient votes to adopt the Merger Agreement or if there are not sufficient shares present in person or by proxy at such meeting to constitute a quorum.
(b)Subject to obtaining any required consent pursuant to the Pledge Agreement, Parent hereby appoints the Company and any designee of the Company, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote during the term of this Agreement with respect to the Shares in accordance with Section 3(a). This proxy and power of attorney is given to secure the performance of the obligations and duties of Parent under this Agreement. Parent shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this Agreement, including without limitation this proxy. This proxy and power of attorney granted by Parent are irrevocable during the term of this Agreement, shall be and shall be deemed to be coupled withbreaches or violations or failures to perform by MLP, MLP General Partner of any MLP Group Entity of any of the provisions of this Agreement (including for purposes of Section 6.2(a)) if such action or inaction was or was not taken, as applicable, at the direction of (or on behalf of) Parent or any Representative of any Parent Group Entity (whether or not such Representative is acting in his or her capacity as a Representative of a Parent Group Entity or an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Parent with respectMLP Group Entity).
Section 6.6 Effect of Breach of Section 4.22. Notwithstanding anything to the Shares. The powercontrary contained in this Agreement, the Parent Parties may not assert (individually or collectively with other breaches) any breach by the MLP Parties of attorney granted by Parent herein isany representation or warranty set forth in Article III (whether made as of the Closing Date or any earlier date) as a durable powerbasis for (x) the failure of attorney and shall survive the dissolution or bankruptcy of Parent. The proxy and power of attorney granted hereunder shall terminate uponany condition (including Section 6.2(a)) to be satisfied, (y) the termination of this Agreement. The Company mayAgreement pursuant to Section 7.4 or (z) for MLP’s inability to terminate this proxyAgreement pursuant to the proviso in Section 7.3, in each case, if and to the extent that, with respect to such breach, Parent was in breach of its representation and warranty set forth in Section 4.22.
ARTICLE VII
TERMINATION
Section 7.1 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Effective Time by the mutual written agreement of the parties hereto duly authorized by Parent Board, on behalf of Parent, and by the MLP Conflicts Committee, on behalf of MLP.
Section 7.2 Termination by MLP or Parent. At any time prior to the Effective Time, this Agreement may be terminated by MLP or Parent if:
(a) the Effective Time shall not have occurred on or before June 30, 2018 (the “Termination Date”); provided that the right to terminate this Agreement pursuant to this Section 7.2(a) shall not be available to Parent if the Parent Parties or the MLP Parties fail to perform or observe in any material respect any of their respective obligations under this Agreement in any manner that shall have been the principal cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or
(b) a Governmental Entity shall have issued an Order or taken any other action (including the enactment of any statute, rule, regulation or executive order) permanently restraining, enjoining or otherwise prohibiting the Merger and such Order other action (including the enactment of any statute, rule, regulation or executive order) shall have become final and non-appealable; provided, however, that the Person seeking to terminate this Agreement pursuant to this Section 7.2(b) shall have complied with Section 5.3 and Section 5.4.
Section 7.3 Termination by MLP. This Agreement may be terminated by MLP at any time prior to the Effective Time if the Parent Parties shall have breached or failed to perform any of their respective representations, warranties, covenants or agreements set forth in this Agreement (or if any of the representations or warranties of the Parent Parties set forth in this Agreement shall fail to be true), which breach or failure (a) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in
Section 6.3(a) (with or without the passage of time) and (b) is incapable of being cured, or is not cured, by the Parent Parties prior to the Termination Date; provided that the right to terminate this Agreement pursuant to this Section 7.3 shall not be available to MLP if, at such time, the condition set forth in Section 6.2(a) cannot be satisfied (with or without the passage of time).
Section 7.4 Termination by Parent. Subject to Section 6.5 and Section 6.6, this Agreement may be terminated by Parent at any time prior to the Effective Time if the MLP Parties shall have breached or failed to perform any of their respective representations, warranties, covenants or agreements set forth in this Agreement (or if any of the representations or warranties of the MLP Parties set forth in this Agreement shall fail to be true), which breach or failure (a) would (if it occurred or was continuing as of the Closing Date) give rise to the failure of a condition set forth in Section 6.2(a) (with or without the passage of time) and (b) is incapable of being cured, or is not cured, by the MLP Parties prior to the Termination Date; provided that the right to terminate this Agreement pursuant to this Section 7.4 shall not be available to Parent if, at its sole election bysuch time, the condition set forth in Section 6.3(a) cannot be satisfied (with or without the passage of time).
Section 7.5 Effect of Certain Terminations. In the event of termination of this Agreement pursuant to this Article VII, written notice thereof shall be given to the other party or parties, specifying the provision of this Agreement pursuant to which such termination is made, and this Agreement shall forthwith become null and void and there shall be no liability on the part of any party to this Agreement and all rights and obligations of the parties hereto under this Agreement shall terminate, except the last sentence of Section 5.2 and the provisions of Section 5.5, Section 5.6, Article VII and Article VIII shall survive such termination; provided, however, that nothing shall relieve any party hereto from any liability for any Willful Breach of any covenant or other agreement contained in this Agreement.
Section 7.6 Survival. None of the representations, warranties, agreements, covenants or obligations in this Agreement or in any instrument delivered pursuant to Parent.this Agreement shall survive the consummation of the Merger, except for those covenants and agreements contained herein that by their terms apply or are to be performed in whole or in part after the Effective Time.
Section 7.7 Enforcement of this Agreement. The Partiesparties hereto acknowledge and agree that neither the Company, nor anyan award of its Affiliates or any designees of the Company, shall owe any duty (fiduciary or otherwise), or incur any liability of any kind to Parent or any of its Affiliates, in connection with or as a result of the exercise of the powers granted to Parent by this Section 3(b).
4.No Voting Trusts or Other Arrangement.
Parent agrees that Parent will not, and will not permit any entity under Parent’s control to, deposit any of the Shares in a voting trust, grant any proxies with respect to the Shares or subject any of the Shares to any arrangement with respect to the voting of the Shares other than agreements entered into with the Company.
5.Transfer and Encumbrance.
Subject to the Pledge Agreement, Parent agrees that during the term of this Agreement, Parent will not, directly or indirectly, (i) transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber (“Transfer”) any of the Shares or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any of the Shares or Parent’s voting or economic interest therein, (ii) grant any proxies or powers of attorney, or any other authorization or consent with respect to any or all of its Shares in respect of any matter addressed by this Agreement, (iii) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to any of the Shares or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement, (iv) enter into any Contract with respect to the Transfer of any Shares, or (v) take any other action, thatmoney damages would restrict, limit or interfere with the performance of the Company’s obligations hereunder. Subject to the Collateral Agent exercising any rights or remedies under the Pledge Agreement, any attempted Transfer of Shares or any interest therein in violation of this Section 5 shall be null and void.
6.Additional Shares.
Parent agrees that all shares of Company Common Stock that Parent purchases, acquires the right to vote or otherwise acquires beneficial ownership of (as defined in Rule 13d-3 of the Exchange Act) after the execution of this Agreement shall be subject to the terms of this Agreement and shall constitute Shares for all purposes of this Agreement.
7.Termination.
This Agreement shall terminate upon the earliest to occur of (i) the Effective Time, (ii) a Company Change in Recommendation or a Parent Change in Recommendation made in accordance with Section 7.2(b) of the Merger Agreement and (iii) the date on which the Merger Agreement is terminated in accordance with its terms. Upon termination of this Agreement, no Party shall have any further obligations or liabilities under this Agreement; provided, however, that (a) nothing set forth in this Section 7 shall relieve any Party from liabilityinadequate for any breach of this Agreement occurringby any party and any such breach would cause the non-breaching parties irreparable harm. Accordingly, the parties hereto agree that prior to the termination hereof; and (b) the provisions of Section 7, Section 10 and Section 11 shall survive any termination of this Agreement.
8.Reserved.
9.Entire Agreement.
This Agreement, together within the Mergerevent of any breach or threatened breach of this Agreement supersedes all prior agreements, writtenby one of the parties, the parties will also be entitled, without the requirement of posting a bond or oral, between the Parties with respectother security, to the subject matter hereofequitable relief, including injunctive relief and contains the entire agreement between the Parties with respect to the subject matter hereof. This Agreement mayspecific performance, provided such party is not in material default hereunder. Such remedies will not be amendedthe exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by bothequity to each of the Parties. No waiver ofparties.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by any provisions hereof by either Party shall be deemedparty to another party (each, a waiver of any other provisions hereof by such Party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such Party.
10.Notices.
All notices, requests, claims, demands, and other communications hereunder“Notice”) shall be in writing and shall be deemed to have been given (a) when delivered in person or by hand (with written confirmationcourier service requiring acknowledgment of receipt), (b) when receivedreceipt of delivery or mailed by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sentU.S. registered or certified mail, postage prepaid and return receipt requested, or by facsimile or e-mail, of a portable document format (“PDF”) document (with confirmation of transmission) if sent during normal business hours of the recipient,as follows; provided, that copies to be delivered below shall not be required for effective notice and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10):not constitute notice:
Annex C
If to any of the MLP Parties, addressed to:
If to Parent, to:Alon USA Partners, LP
Mark Cox, EVP
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 3702712700 Park Central Drive
Suite 1600
Dallas, Texas 75251
Attention: MLP Conflicts Committee
Facsimile: (972) 392-8380
E-mail: SStein@sgws.com
with a copy to (which shall not constitute notice) at:
Gardere Wynne Sewell LLP
2021 McKinney Avenue
Suite 1600
Dallas, Texas 75201
Attention: Evan D. Stone
Facsimile: (214) 999-3906
E-mail: estone@gardere.com
If to any of the same physical addressParent Parties, addressed to:
General Counsel
Amber.Ervin@DelekUS.com
and
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 37027
Attention: Kevin Kremke
Facsimile: (615) 435-1359
E-mail: kevin.kremke@delekus.com
with a copy to (which shall not constitute notice) to::
Daniel L. Mark, Esq.
Norton Rose Fulbright
Delek US LLP
1301 McKinney
Houston, TX 77010-3095Holdings, Inc.
If to Company, to:7102 Commerce Way
James Ranspot
Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251Brentwood, Tennessee 37027
and with a copy (which shall not constitute notice) to:Attention: General Counsel
Gillian A. Hobson, Esq.Facsimile: (615) 435-1359
Vinson & Elkins LLPE-mail: melissa.buhrig@delekus.com
1001 FanninBaker Botts L.L.P.
910 Louisiana Street Suite 2500
Houston, TXTexas 77002
Attention: Joshua Davidson
Andrew J. Ericksen
Facsimile: (713) 229-2727
E-mail: joshua.davidson@bakerbotts.com
aj.ericksen@bakerbotts.com
Notice given by personal delivery, courier service or mail shall be effective upon actual receipt. Notice given by facsimile or e-mail shall be effective upon written confirmation of receipt by facsimile, e-mail or otherwise. Any party may change any address to which Notice is to be given to it by giving Notice as provided above of such change of address.
andSection 8.2
David Wiessman
ChairmanGoverning Law; Jurisdiction; Waiver of Jury Trial. To the Special Committeemaximum extent permitted by applicable Law, the provisions of the Board of Directors
Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
and with a copy (which shall not constitute notice) to:
Jay Tabor
Gibson Dunn & Crutcher LLP
2100 McKinney Avenue, Suite 1100
Dallas, TX 7520
11.Miscellaneous.
(a)Thisthis Agreement shall be governed by and interpretedconstrued and enforced in accordance with the Laws of the State of Delaware, (exceptwithout regard to principles of conflicts of law. Each of the parties hereto agrees that this Agreement involves at least $100,000 and that this Agreement has been entered into in express reliance upon 6 Del. C. § 2708. Each of the parties hereto irrevocably and unconditionally confirms and agrees that it is and shall continue to be (a) subject to the extent that mandatory provisionsjurisdiction of federal law govern), without giving effect to any choice or conflict of law provision or rule (whetherthe courts of the State of Delaware or any other jurisdiction) that would causeand of the application of Laws of any jurisdiction other than those offederal courts sitting in the State of Delaware, and (b) subject to service of process in the State of Delaware.
(b)Each of the Parties agrees thatparty hereto hereby irrevocably and unconditionally (i) consents and submits to the fullest extent permitted by Law, any Legal Proceeding seeking to enforce any provisionexclusive personal jurisdiction and venue of or based on any matter arising out of or in connection with, this Agreement or the Merger Transactions shall be brought in the Delaware Court of Chancery (or, solely if such court does not have jurisdiction, the Complex Commercial Litigation Division of the Delaware Superior Court of Chancery declines to accept jurisdiction over any matter, any federal or if such division does not have jurisdictionstate court located in the State of Delaware) (the “Delaware Courts”) for any actions, suits or proceedings arising out of or relating to this Agreement or the Legal Proceeding istransactions contemplated by this Agreement (and agrees not assigned to commence any litigation relating thereto except in such division, the Delaware Superior Court, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware)courts), and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Legal Proceeding and irrevocably(ii) waives to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such Legal Proceedinglitigation in the Delaware Courts and agrees not to plead or claim in any Delaware Court that such court or that any such Legal Proceedinglitigation brought in such courttherein has been brought in anany inconvenient forum, (c) acknowledges and agrees that any controversy that may arise under this Agreement is likely to involve complicated and difficult issues, and therefore each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation directly or thatindirectly arising or relating to this Agreement or the transactions contemplated by this Agreement, and (d) agrees to service of process upon such party in any such action or proceeding shall be effective if such process is given as a notice in accordance with Section 8.1 or in any manner prescribed by the Laws of the State of Delaware. Nothing in this Section 8.2 shall affect the right of any party to serve legal process in any other manner permitted by Law.
Section 8.3 Entire Agreement; Amendments, Consents and Waivers
(a) This Agreement, the Support Agreement, the Confidentiality Agreement and the exhibits and schedules hereto and thereto constitute the entire agreement between and among the parties hereto pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and there are no warranties, representations or other agreements between or among the parties in connection with the subject matter hereof except as set forth specifically herein or contemplated hereby. Except as expressly set forth in this Agreement (including the representations and warranties set forth in Articles III and IV), (i) the parties acknowledge and agree that neither the MLP Group Entities nor any other Person has made, and the Parent Group Entities are not relying upon, any covenant, representation or warranty, expressed or implied, as to the MLP Group Entities or as to the accuracy or completeness of any information regarding any MLP Group Entity furnished or made available to any Parent Group Entity, (ii) the parties hereto acknowledge and agree that, except as set forth in this Agreement, neither the Parent Group Entities nor any other Person has made, and the MLP Group Entities are not relying upon, any covenant, representation or warranty, expressed
or implied, as to the Parent Group Entities or as to the accuracy or completeness of any information regarding any Parent Group Entity furnished or made available to any MLP Group Entity, and (iii) the MLP Parties and the Parent Parties shall not have or be subject to any liability to any Parent Group Entity or any other Person or any MLP Group Entity or any other Person, as applicable, or any other remedy in connection herewith, based upon the distribution to any Parent Group Entity or any MLP Group Entity of, or any Parent Group Entity’s or any MLP Group Entity’s use of or reliance on, any such information or any information, documents or material made available to the Parent Group Parties or MLP Group Parties, as applicable, in any “data rooms,” “virtual data rooms,” management presentations or in any other form in expectation of, or in connection with, the transactions contemplated hereby.
(b) Subject to compliance with applicable Law, prior to the Closing, any provision of this Agreement may be (i) consented to or waived in writing by the party benefited by the provision or (ii) amended or modified at any time by an agreement in writing by the parties hereto; provided, however, that, in addition to any other approvals required by the MLP Parties’ constituent documents or under this Agreement, the foregoing consents, waivers, amendments or modifications in clauses (i) and (ii), and any decision or determination by MLP to (x) terminate this Agreement pursuant to Section 7.2 or Section 7.3, (y) waive any conditions set forth in Article VI and proceed to Closing or (z) enforce this Agreement (including pursuant to Section 7.7), may be granted, taken, made or directed by the MLP Conflicts Committee (without the need to obtain any further approval of the MLP Board) and in all cases shall require the approval of the MLP Conflicts Committee. No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the parties hereto. The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.
Section 8.4 Binding Effect; No Third-Party Beneficiaries; and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto and their respective permitted successors and assigns, any rights, benefits or obligations hereunder, except (i) as provided in Section 5.9 and (ii) for the right of the Holders of MLP Common Units to receive the Merger Consideration after the Closing (a claim by the Holders of MLP Common Units with respect to which may not be enforcedmade unless and until the Closing shall have occurred). No party hereto may assign, transfer, dispose of or otherwise alienate this Agreement or any of its rights, interests or obligations under this Agreement (whether by operation of law or otherwise). Any attempted assignment, transfer, disposition or alienation in or by such court. Process in any such Legal Proceeding may be served on any Party anywhere in the world, whether within or without the jurisdictionviolation of any such court. Without limiting the foregoing, each Party agrees that to the fullest extent permitted by law, service of process on such Party as provided in Section 10this Agreement shall be deemed effective service of process on such Party for matters between the Parties.null, void and ineffective.
(c)EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE MERGER TRANSACTIONS. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS AGREEMENT OR THE MERGER TRANSACTIONS, AS APPLICABLE, AND THAT SUCH LEGAL PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
(d)Section 8.4 Severability.If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of lawapplicable Law, or public policy, all other conditions andor provisions of this Agreement shall nevertheless remain in full force and effect.effect so long as the economic or legal substance of the transactions contemplated by this Agreement are not affected in any matter materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Partiesparties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Partiesparties hereto as closely as
possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the fullest extent permitted by applicable Law in an acceptable manner to the end that the Merger Transactions are fulfilled to the fullest extent possible.
(e)Section 8.5 Counterparts. This Agreement may be executed in any number ofmultiple counterparts each of which shall be deemed an original and all of which when taken together, shall constitute one Agreement. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic transmission (e.g., PDF) shall be effective as delivery of a manually executed counterpart hereof.
(f)Each Party shall execute and deliver such additional documents and instruments and take such further actions as may be necessary or desirable to effect the transactions contemplated by this Agreement.
(g)The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
(h)The obligations of Parent set forth in this Agreement shall not be effective or binding upon Parent until after such time as the Merger Agreement is executed and delivered by the Company, Parent and, HoldCo, Parent Merger Sub, Astro Merger Sub and the Parties agree that there is not and has not been any other agreement, arrangement or understanding between the Parties with respect to the matters set forth herein.
(i)No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party. Any assignment contrary to the provisions of this Section 11(i) shall be null and void.instrument.
[SIGNATURE PAGE FOLLOWS]
Annex C
Signature page follows.]
IN WITNESS WHEREOF, the Partiesparties hereto have executed and deliveredcaused this Agreement to be signed by their respective officers or agents hereunto duly authorized, all as of the date first written above.
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| |
| PARENT | MLP |
| DELEK US HOLDINGS, INC. | ALON USA PARTNERS, LP By: ALON USA PARTNERS GP, LLC, its general partner
|
| By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
|
| | |
By:/s/ Assaf Ginzburg Name:Assaf Ginzburg Title:Executive Vice President | By:/s/ Frederec Green Name:Frederec Green Title:EVP & COOExecutive Vice President and Chief Executive Officer |
|
| |
| | |
ALON USA ENERGY, INC.By:/s/ Avigal Soreq
Name:Avigal Soreq Title:Executive Vice President and Chief Commercial Officer | By:/s/ Kevin Kremke Name:Kevin Kremke Title:Executive Vice President and Chief Financial Officer
|
| | |
| MERGER SUB | MLP GENERAL PARTNER |
| SUGARLAND MERGECO, LLC | ALON USA PARTNERS GP, LLC |
| |
By:/s/ James RanspotEzra Uzi Yemin Name:Ezra Uzi Yemin Title:President and Chief Executive Officer | Name: By:James Ranspot/s/ Frederec Green
Name:Frederec Green Title:Executive Vice President and Chief Executive Officer |
| |
Title: By:SVP, GC & Secretary/s/ Danny Norris
Name:Danny Norris Title:Vice President and Chief Accounting Officer | By:/s/ Kevin Kremke Name:Kevin Kremke Title:Executive Vice President and Chief Financial Officer |
VOTING, IRREVOCABLE PROXY AND SUPPORT AGREEMENTNovember 6, 2017
This Voting, Irrevocable Proxy and Support Agreement (this “Agreement”), dated as
Alon USA Partners LP
7616 LBJ Freeway, Suite 300
Dallas, TX 75251
Attn: The Conflicts Committee of January 2, 2017, is by and between the undersigned stockholders (collectively referred to herein as “Stockholder��) and Delek US Holdings, Inc., a Delaware corporation (“Parent” and, collectively with Stockholder, the “Parties” and each, a “Party”).
WHEREAS, Stockholder is a stockholderBoard of Directors of Alon USA Energy, Inc., a Delaware corporationPartners GP, LLC, the general partner of Alon USA Partners, LP
Dear Members of the Conflicts Committee:
We understand that Alon USA Partners, LP (the “Company”“Company”);
WHEREAS, concurrently with the execution of this Agreement, Parent, Delek Holdco, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“HoldCo”), Dione Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“ParentMerger Sub”), Astro Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“Astro Merger Sub”), and the Company, have entered intends to enter into an Agreement and Plan of Merger (as(the “Agreement”) by and among Delek US Holdings, Inc. (the “Acquiror”), Sugarland Mergeco, LLC, an indirect wholly-owned subsidiary of the same may be amended from time to time,Acquiror (“Merger Sub”), the “MergerAgreement”Company and Alon USA Partners GP, LLC, the general partner of the Company (the “General Partner”), providing for the consummation of certain mergers (the “Mergers”) pursuant to which, among other things, (a) Merger Sub will merge with the terms and conditionsCompany (the “Transaction”), (b) each of the Merger Agreement;
WHEREAS, Stockholder has been provided with a copyoutstanding common units (the “Company Common Units”) of the Merger Agreement in the form to be executedCompany other than Company Common Units held by the parties thereto;
WHEREAS, as a condition to its willingness to enterAcquiror, Merger Sub and their affiliates will be converted into the Merger Agreement, Parent has required that Stockholder execute and deliver this Agreement; and
WHEREAS, in orderright to induce Parent to enter into the Merger Agreement, Stockholder is willing to make certain representations, warranties, covenants and agreements with respect to thereceive 0.4900 (the “Exchange Ratio”) shares of common stock, par value $0.01 per share of the Company (“Company Common Stock”) beneficially owned by Stockholder and set forth on Exhibit A hereto (the “Original Shares” and, together with any additional shares of Company Common Stock pursuant to Section 6 hereof, collectively the “Shares”).
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties agree as follows:
1.Definitions.
For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
2.Representations of Stockholder.
Stockholder represents and warrants to Parent that:
(a)(i) Stockholder is the record and beneficial owner (as such term is defined in Rule 13d-3 of the Exchange Act) of and has good title to all of the Original Shares free and clear of all Liens (except as set forth in this Agreement and pursuant to any applicable restrictions on transfer under the Exchange Act), and (ii) except pursuant hereto, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Stockholder is a party relating to the pledge, disposition or voting of any of the Original Shares and there are no voting trusts or voting agreements with respect to the Original Shares.
(b)Stockholder has, and will have at the time of the Company Stockholders Meeting with respect to the matters covered by Section 3(a), the right to vote and direct the vote of, and to dispose of and direct the disposition of, the Original Shares, and none of the Original Shares is subject to any agreement, arrangement or restriction with respect to the Original Shares that would prevent or delay Stockholder’s ability to perform its obligations hereunder. There are no agreements or arrangements of any kind, contingent or otherwise, obligating Stockholder to Transfer (as defined in Section 5) or cause to be Transferred, any of the Original Shares, and no Person has any contractual or other right or obligation to purchase or otherwise acquire any of the Original Shares.
(c)Stockholder does not beneficially own any shares of Company Common Stock other than (i) the Original Shares and (ii) any options, warrants or other rights to acquire any additional shares of Company Common Stock or any security exercisable for or convertible into shares of Company Common Stock as set forth on Exhibit A hereto.
(d)Stockholder has full power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Stockholder’s obligations hereunder (including the irrevocable proxy described in Section 3(b)). This Agreement has been duly and validly executed and delivered by Stockholder and constitutes the legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms.
(e)None of the execution and delivery of this Agreement by Stockholder, the consummation by Stockholder of the transactions contemplated hereby or compliance by Stockholder with any of the provisions hereof will conflict with or result in a breach, or constitute a default (with or without notice of lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument or Law applicable to Stockholder or to Stockholder’s property or assets. There is no (i) action, proceeding or investigation pending or threatened against Stockholder or any of its controlled Affiliates; or (ii) outstanding writ, injunction, order, judgment or decree of any Governmental Authority to which Stockholder or any of its controlled Affiliates are subject or bound, in each case, that could prevent, materially delay, hinder or impair the exercise by Parent of its rights under this Agreement or the performance by Stockholder of its obligations under this Agreement.
(f)No consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority or other Person on the part of Stockholder is required in connection with the valid execution and delivery of this Agreement. No consent of Stockholder’s spouse is necessary under any “community property” or other laws in order for Stockholder to enter into and perform its obligations under this Agreement unless Stockholder’s spouse has also executed this Agreement as Stockholder (in which case the term “Stockholder” shall refer to both spouses). Stockholder has not taken any action that would or would reasonably be expected to (i) constitute or result in a breach hereof; (ii) make any representation or warranty of Stockholder set forth in this Section 2 untrue or incorrect; or (iii) have the effect of preventing or disabling Stockholder from performing any of its obligations under this Agreement.
3.Agreement to Vote Shares; Irrevocable Proxy.
(a)Stockholder agrees during the term of this Agreement to vote the Shares, and to cause any holder of record of any Shares to vote: (i) at the Company Stockholders Meeting in favor of (1) the Mergers and the Merger Agreement and any other transactions or matters contemplated by the Merger Agreement, (2) any proposal to adjourn or postpone the Company Stockholders Meeting to a later date if there are not sufficient votes to adopt the Merger Agreement or if there are not sufficient shares present in person or by proxy at such meeting to constitute a quorum, (ii) in favor of any other matter necessary to consummate the transactions contemplated by the Merger Agreement, in each case at every meeting (or in connection with any action by written consent) of the Company Stockholders at which such matters are considered and at every adjournment or postponement thereof, and (iii) against (1) any Company Acquisition Proposal, (2) any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or of Stockholder under this Agreement and (3) any action, proposal, transaction or agreement that could reasonably be expected to impede, interfere with, frustrate, delay, discourage, adversely affect or inhibit the timely consummation of the Mergers or the fulfillment of Parent’s, the Company’s, HoldCo’s, Parent Merger Sub’s or Astro Merger Sub’s conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of the Company (including any amendments to the Company Certificate or Company Bylaws).
(b)Stockholder hereby appoints Parent and any designee of Parent, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote during the term of this Agreement with respect to the Shares in accordance with Section 3(a). This proxy and power of attorney is given to secure the performance of the obligations and duties of Stockholder under this Agreement. Stockholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this Agreement, including without limitation this proxy. This proxy and power of attorney granted by Stockholder are irrevocable during the term of this Agreement, shall be and shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Stockholder with respect to the Shares. The power of attorney granted by Stockholder herein is
a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Stockholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement. Parent may terminate this proxy with respect to Stockholder at any time at its sole election by written notice provided to Stockholder. The Parties acknowledge and agree that neither Parent, nor any of its Affiliates or any designees of Parent, shall owe any duty (fiduciary or otherwise), or incur any liability of any kind to Stockholder or any of its Affiliates, in connection with or as a result of the exercise of the powers granted to Parent by this Section 3(b).
4.No Voting Trusts or Other Arrangement.
Stockholder agrees that Stockholder will not, and will not permit any entity under Stockholder’s control to, deposit any of the Shares in a voting trust, grant any proxies with respect to the Shares or subject any of the Shares to any arrangement with respect to the voting of the Shares other than agreements entered into with Parent.
5.Transfer and Encumbrance.
Stockholder agrees that during the term of this Agreement, Stockholder will not, directly or indirectly, (i) transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber (“Transfer”) any of the Shares or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any of the Shares or Stockholder’s voting or economic interest therein, (ii) grant any proxies or powers of attorney, or any other authorization or consent with respect to any or all of its Shares in respect of any matter addressed by this Agreement, (iii) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to any of the Shares or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement, (iv) enter into any Contract with respect to the Transfer of any Shares;, or (v) take any other action, that would restrict, limit or interfere with the performance of the Stockholder’s obligations hereunder. Any attempted Transfer of Shares or any interest therein in violation of this Section 5 shall be null and void. This Section 5 shall not prohibit a Transfer of the Shares by Stockholder to any member of Stockholder’s immediate family, or to a trust for the benefit of Stockholder or any member of Stockholder’s immediate family, or upon the death of Stockholder; provided, that a Transfer referred to in this sentence shall be permitted only if, as a precondition to such Transfer, the transferee agrees in a writing, reasonably satisfactory in form and substance to Parent, to be bound by all of the terms of this Agreement.
6.Additional Shares.
Stockholder agrees that all shares of Company Common Stock that Stockholder purchases, acquires the right to vote or otherwise acquires beneficial ownership of (as defined in Rule 13d-3 of the Exchange Act) after the execution of this Agreement shall be subject to the terms of this Agreement and shall constitute Shares for all purposes of this Agreement.
7.Termination.
This Agreement shall terminate upon the earliest to occur of (i) the Effective Time, (ii) a Company Change in Recommendation made in accordance with Section 7.2(b) of the Merger Agreement and (iii) the date on which the Merger Agreement is terminated in accordance with its terms. Upon termination of this Agreement, no Party shall have any further obligations or liabilities under this Agreement; provided, however, that (a) nothing set forth in this Section 7 shall relieve any Party from liability for any breach of this Agreement occurring prior to the termination hereof; and (b) the provisions of Section 7, Section 11 and Section 12 shall survive any termination of this Agreement.
8.No Agreement as Director or Officer.
Stockholder makes no agreement or understanding in this Agreement in Stockholder’s capacity as a director or officer of the Company or any of its subsidiaries (if Stockholder holds such office), and nothing in this Agreement: (a) will limit or affect any actions or omissions taken by Stockholder in such Stockholder’s capacity as such a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement or (b) will be construed to prohibit, limit or restrict Stockholder from exercising such Stockholder’s fiduciary duties as an officer or director to the Company and its stockholders.
9.Specific Performance.
Each Party acknowledges that it will be impossible to measure in money the damage to the other Party if a Party fails to comply with any of the obligations imposed by this Agreement, that every such obligation is material and that, in the event of any such failure, the other Party will not have an adequate remedy at law or damages. Accordingly, each Party agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, is the appropriate remedy for any such failure and will not oppose the seeking of such relief on the basis that the other Party has an adequate remedy at law. Each Party agrees that it will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with the other Party’s seeking or obtaining such equitable relief.
10.Entire Agreement.
This Agreement supersedes all prior agreements, written or oral, between the Parties with respect to the subject matter hereof and contains the entire agreement between the Parties with respect to the subject matter hereof. This Agreement may not be amended or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by both of the Parties. No waiver of any provisions hereof by either Party shall be deemed a waiver of any other provisions hereof by such Party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such Party.
11.Notices.
All notices, requests, claims, demands, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by facsimile or e-mail of a portable document format (“PDF”) document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11):
If to Parent, to:
Mark Cox, EVP
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
with a copy (which shall not constitute notice) at the same physical address to:
General Counsel
Amber.Ervin@DelekUS.com
and a copy (which shall not constitute notice) to:
Daniel L. Mark, Esq.
Norton Rose Fulbright US LLP
1301 McKinney
Houston, TX 77010-3095
If to Stockholder, to the address or facsimile number set forth for Stockholder on Exhibit A hereof.
with a copy (which shall not constitute notice) to:
Gillian A. Hobson, Esq.
Vinson & Elkins LLP
1001 Fannin Street, Suite 2500
Houston, TX 77002
12.Miscellaneous.
(a)This Agreement shall be governed by, and interpreted in accordance with, the Laws of the State of Delaware (except to the extent that mandatory provisions of federal law govern), without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.
(b)Each of the Parties agrees that to the fullest extent permitted by Law, any Legal Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the Merger Transactions shall be brought in the Delaware Court of Chancery (or, if such court does not have jurisdiction, the Complex Commercial Litigation Division of the Delaware Superior Court, or, if such division does not have jurisdiction or the Legal Proceeding is not assigned to such division, the Delaware Superior Court, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware), and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Legal Proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such Legal Proceeding in any such court or that any such Legal Proceeding brought in such court has been brought in an inconvenient forum, or that this Agreement, or the subject matter hereof, may not be enforced in or by such court. Process in any such Legal Proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that to the fullest extent permitted by law, service of process on such Party as provided in Section 11 shall be deemed effective service of process on such Party for matters between the Parties.
(c)EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE MERGER TRANSACTIONS. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS AGREEMENT OR THE MERGER TRANSACTIONS, AS APPLICABLE, AND THAT SUCH LEGAL PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
(d)If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the Merger Transactions are fulfilled to the fullest extent possible.
(e)This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one Agreement. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic transmission (e.g., PDF) shall be effective as delivery of a manually executed counterpart hereof.
(f)Each Party shall execute and deliver such additional documents and instruments and take such further actions as may be necessary or desirable to effect the transactions contemplated by this Agreement.
(g)The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
(h)The obligations of Stockholder set forth in this Agreement shall not be effective or binding upon Stockholder until after such time as the Merger Agreement is executed and delivered by Parent, HoldCo, Parent Merger Sub, Astro Merger Sub, and the Company, and the Parties agree that there is not and has not been any other agreement, arrangement or understanding between the Parties with respect to the matters set forth herein.
(i)No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party. Any assignment contrary to the provisions of this Section 12(i) shall be null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.
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| | | DELEK US HOLDINGS, INC.
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| | | By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
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| | | By: /s/ Frederec Green
Name: Frederec Green
Title: EVP & COO
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| | | STOCKHOLDER
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| | | By: /s/ David Wiessman
Name: David Wiessman
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| | | D.B.W. Holdings (2005) Ltd.
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| | | By: /s/ David Wiessman
Name: David Wiessman
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Exhibit A – Shares of Company Common Stock Beneficially Owned
David Wiessman: 175,100 shares of Company Common Stock.
D.B.W. Holdings (2005) Ltd.: 2,335,441 shares of Company Common Stock.
Notice Address of Stockholder:
c/o Alon USA Energy, Inc,
12700 Park Central Dr., Suite 1600
Dallas, Texas 75251
972-367-3724
VOTING, IRREVOCABLE PROXY AND SUPPORT AGREEMENT
This Voting, Irrevocable Proxy and Support Agreement (this “Agreement”), dated as of January 2, 2017, is by and between the undersigned stockholder (“Stockholder”) and Delek US Holdings, Inc., a Delaware corporation (“Parent” and, collectively with Stockholder, the “Parties” and each, a “Party”).
WHEREAS, Stockholder is a stockholder of Alon USA Energy, Inc., a Delaware corporation (the “Company”);
WHEREAS, concurrently with the execution of this Agreement, Parent, Delek Holdco, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“HoldCo”), Dione Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“ParentMerger Sub”), Astro Mergeco, Inc., a Delaware corporation and wholly owned subsidiary of HoldCo (“Astro Merger Sub”), and the Company, have entered into an Agreement and Plan of Merger (as the same may be amended from time to time, the MergerAgreement”), providing for the consummation of certain mergers (the “Mergers”) pursuant to the terms and conditions of the Merger Agreement;
WHEREAS, Stockholder has been provided with a copy of the Merger Agreement in the form to be executed by the parties thereto;
WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has required that Stockholder execute and deliver this Agreement; and
WHEREAS, in order to induce Parent to enter into the Merger Agreement, Stockholder is willing to make certain representations, warranties, covenants and agreements with respect to the shares of common stock, par value $0.01 per share, of the Company (“Company Common Stock”) beneficially owned by Stockholder and set forth on Exhibit A hereto (the “Original Shares” and, together with any additional shares of Company Common Stock pursuant to Section 6 hereof, collectively the “Shares”).
NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties agree as follows:
1.Definitions.
For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.
2.Representations of Stockholder.
Stockholder represents and warrants to Parent that:
(a)(i) Stockholder is the record and beneficial owner (as such term is defined in Rule 13d-3 of the Exchange Act) of and has good title to all of the Original Shares free and clear of all Liens (except as set forth in this Agreement and pursuant to any applicable restrictions on transfer under the Exchange Act), and (ii) except pursuant hereto, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Stockholder is a party relating to the pledge, disposition or voting of any of the Original Shares and there are no voting trusts or voting agreements with respect to the Original Shares.
(b)Stockholder has, and will have at the time of the Company Stockholders Meeting with respect to the matters covered by Section 3(a), the right to vote and direct the vote of, and to dispose of and direct the disposition of, the Original Shares, and none of the Original Shares is subject to any agreement, arrangement or restriction with respect to the Original Shares that would prevent or delay Stockholder’s ability to perform its obligations hereunder. There are no agreements or arrangements of any kind, contingent or otherwise, obligating Stockholder to Transfer (as defined in Section 5) or cause to be Transferred, any of the Original Shares, and no Person has any contractual or other right or obligation to purchase or otherwise acquire any of the Original Shares.
(c)Stockholder does not beneficially own any shares of Company Common Stock other than (i) the Original Shares and (ii) any options, warrants or other rights to acquire any additional shares of Company Common Stock or any security exercisable for or convertible into shares of Company Common Stock as set forth on Exhibit A hereto.
(d)Stockholder has full power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Stockholder’s obligations hereunder (including the irrevocable proxy described in Section 3(b)). This Agreement has been duly and validly executed and delivered by Stockholder and constitutes the legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms.
(e)None of the execution and delivery of this Agreement by Stockholder, the consummation by Stockholder of the transactions contemplated hereby or compliance by Stockholder with any of the provisions hereof will conflict with or result in a breach, or constitute a default (with or without notice of lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument or Law applicable to Stockholder or to Stockholder’s property or assets. There is no (i) action, proceeding or investigation pending or threatened against Stockholder or any of its controlled Affiliates; or (ii) outstanding writ, injunction, order, judgment or decree of any Governmental Authority to which Stockholder or any of its controlled Affiliates are subject or bound, in each case, that could prevent, materially delay, hinder or impair the exercise by Parent of its rights under this Agreement or the performance by Stockholder of its obligations under this Agreement.
(f)No consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority or other Person on the part of Stockholder is required in connection
with the valid execution and delivery of this Agreement. No consent of Stockholder’s spouse is necessary under any “community property” or other laws in order for Stockholder to enter into and perform its obligations under this Agreement unless Stockholder’s spouse has also executed this Agreement as Stockholder (in which case the term “Stockholder” shall refer to both spouses). Stockholder has not taken any action that would or would reasonably be expected to (i) constitute or result in a breach hereof; (ii) make any representation or warranty of Stockholder set forth in this Section 2 untrue or incorrect; or (iii) have the effect of preventing or disabling Stockholder from performing any of its obligations under this Agreement.
3.Agreement to Vote Shares; Irrevocable Proxy.
(a)Stockholder agrees during the term of this Agreement to vote the Shares, and to cause any holder of record of any Shares to vote: (i) at the Company Stockholders Meeting in favor of (1) the Mergers and the Merger Agreement and any other transactions or matters contemplated by the Merger Agreement, (2) any proposal to adjourn or postpone the Company Stockholders Meeting to a later date if there are not sufficient votes to adopt the Merger Agreement or if there are not sufficient shares present in person or by proxy at such meeting to constitute a quorum, (ii) in favor of any other matter necessary to consummate the transactions contemplated by the Merger Agreement, in each case at every meeting (or in connection with any action by written consent) of the Company Stockholders at which such matters are considered and at every adjournment or postponement thereof, and (iii) against (1) any Company Acquisition Proposal, (2) any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or of Stockholder under this Agreement and (3) any action, proposal, transaction or agreement that could reasonably be expected to impede, interfere with, frustrate, delay, discourage, adversely affect or inhibit the timely consummation of the Mergers or the fulfillment of Parent’s, the Company’s, HoldCo’s, Parent Merger Sub’s or Astro Merger Sub’s conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of the Company (including any amendments to the Company Certificate or Company Bylaws).
(b)Stockholder hereby appoints Parent and any designee of Parent, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote during the term of this Agreement with respect to the Shares in accordance with Section 3(a). This proxy and power of attorney is given to secure the performance of the obligations and duties of Stockholder under this Agreement. Stockholder shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this Agreement, including without limitation this proxy. This proxy and power of attorney granted by Stockholder are irrevocable during the term of this Agreement, shall be and shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Stockholder with respect to the Shares. The power of attorney granted by Stockholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Stockholder. The proxy and power of attorney granted hereunder shall terminate upon the
termination of this Agreement. Parent may terminate this proxy with respect to Stockholder at any time at its sole election by written notice provided to Stockholder. The Parties acknowledge and agree that neither Parent, nor any of its Affiliates or any designees of Parent, shall owe any duty (fiduciary or otherwise), or incur any liability of any kind to Stockholder or any of its Affiliates, in connection with or as a result of the exercise of the powers granted to Parent by this Section 3(b).
4.No Voting Trusts or Other Arrangement.
Stockholder agrees that Stockholder will not, and will not permit any entity under Stockholder’s control to, deposit any of the Shares in a voting trust, grant any proxies with respect to the Shares or subject any of the Shares to any arrangement with respect to the voting of the Shares other than agreements entered into with Parent.
5.Transfer and Encumbrance.
Stockholder agrees that during the term of this Agreement, Stockholder will not, directly or indirectly, (i) transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber (“Transfer”) any of the Shares or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any of the Shares or Stockholder’s voting or economic interest therein, (ii) grant any proxies or powers of attorney, or any other authorization or consent with respect to any or all of its Shares in respect of any matter addressed by this Agreement, (iii) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to any of the Shares or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement, (iv) enter into any Contract with respect to the Transfer of any Shares;, or (v) take any other action, that would restrict, limit or interfere with the performance of the Stockholder’s obligations hereunder. Any attempted Transfer of Shares or any interest therein in violation of this Section 5 shall be null and void. This Section 5 shall not prohibit a Transfer of the Shares by Stockholder to any member of Stockholder’s immediate family, or to a trust for the benefit of Stockholder or any member of Stockholder’s immediate family, or upon the death of Stockholder; provided, that a Transfer referred to in this sentence shall be permitted only if, as a precondition to such Transfer, the transferee agrees in a writing, reasonably satisfactory in form and substance to Parent, to be bound by all of the terms of this Agreement.
6.Additional Shares.
Stockholder agrees that all shares of Company Common Stock that Stockholder purchases, acquires the right to vote or otherwise acquires beneficial ownership of (as defined in Rule 13d-3 of the Exchange Act) after the execution of this Agreement shall be subject to the terms of this Agreement and shall constitute Shares for all purposes of this Agreement.
7.Termination.
This Agreement shall terminate upon the earliest to occur of (i) the Effective Time, (ii) a Company Change in Recommendation made in accordance with Section 7.2(b) of the Merger Agreement and (iii) the date on which the Merger Agreement is terminated in accordance with its terms. Upon termination of this Agreement, no Party shall have any further obligations or liabilities under this Agreement; provided, however, that (a) nothing set forth in this Section 7 shall relieve any Party from liability for any breach of this Agreement occurring prior to the termination hereof; and (b) the provisions of Section 7, Section 11 and Section 12 shall survive any termination of this Agreement.
8.No Agreement as Director or Officer.
Stockholder makes no agreement or understanding in this Agreement in Stockholder’s capacity as a director or officer of the Company or any of its subsidiaries (if Stockholder holds such office), and nothing in this Agreement: (a) will limit or affect any actions or omissions taken by Stockholder in such Stockholder’s capacity as such a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement or (b) will be construed to prohibit, limit or restrict Stockholder from exercising such Stockholder’s fiduciary duties as an officer or director to the Company and its stockholders.
9.Specific Performance.
Each Party acknowledges that it will be impossible to measure in money the damage to the other Party if a Party fails to comply with any of the obligations imposed by this Agreement, that every such obligation is material and that, in the event of any such failure, the other Party will not have an adequate remedy at law or damages. Accordingly, each Party agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, is the appropriate remedy for any such failure and will not oppose the seeking of such relief on the basis that the other Party has an adequate remedy at law. Each Party agrees that it will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with the other Party’s seeking or obtaining such equitable relief.
10.Entire Agreement.
This Agreement supersedes all prior agreements, written or oral, between the Parties with respect to the subject matter hereof and contains the entire agreement between the Parties with respect to the subject matter hereof. This Agreement may not be amended or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by both of the Parties. No waiver of any provisions hereof by either Party shall be deemed a waiver of any other provisions hereof by such Party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such Party.
11.Notices.
All notices, requests, claims, demands, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by facsimile or e-mail of a portable document format (“PDF”) document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 11):
If to Parent, to:
Mark Cox, EVP
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, TN 37027
with a copy (which shall not constitute notice) at the same physical address to:
General Counsel
Amber.Ervin@DelekUS.com
and a copy (which shall not constitute notice) to:
Daniel L. Mark, Esq.
Norton Rose Fulbright US LLP
1301 McKinney
Houston, TX 77010-3095
If to Stockholder, to the address or facsimile number set forth for Stockholder on Exhibit A hereof.
with a copy (which shall not constitute notice) to:
Gillian A. Hobson, Esq.
Vinson & Elkins LLP
1001 Fannin Street, Suite 2500
Houston, TX 77002
12.Miscellaneous.
(a)This Agreement shall be governed by, and interpreted in accordance with, the Laws of the State of Delaware (except to the extent that mandatory provisions of federal law govern), without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the State of Delaware.
(b)Each of the Parties agrees that to the fullest extent permitted by Law, any Legal Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the Merger Transactions shall be brought in the Delaware Court of Chancery (or, if such court does not have jurisdiction, the Complex Commercial Litigation Division of the Delaware Superior Court, or, if such division does not have jurisdiction or the Legal Proceeding is not assigned to such division, the Delaware Superior Court, or, if such other court does not have jurisdiction, the United States District Court for the District of Delaware), and each of the Parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Legal Proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such Legal Proceeding in any such court or that any such Legal Proceeding brought in such court has been brought in an inconvenient forum, or that this Agreement, or the subject matter hereof, may not be enforced in or by such court. Process in any such Legal Proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that to the fullest extent permitted by law, service of process on such Party as provided in Section 11 shall be deemed effective service of process on such Party for matters between the Parties.
(c)EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE MERGER TRANSACTIONS. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING WHATSOEVER BETWEEN OR AMONG THEM RELATING TO THIS AGREEMENT OR THE MERGER TRANSACTIONS, AS APPLICABLE, AND THAT SUCH LEGAL PROCEEDING WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
(d)If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the Merger Transactions are fulfilled to the fullest extent possible.
(e)This Agreement may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one Agreement. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic transmission (e.g., PDF) shall be effective as delivery of a manually executed counterpart hereof.
(f)Each Party shall execute and deliver such additional documents and instruments and take such further actions as may be necessary or desirable to effect the transactions contemplated by this Agreement.
(g)The Parties have participated jointly in the negotiation and drafting of this Agreement with the assistance of counsel and other advisors and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement or interim drafts of this Agreement.
(h)The obligations of Stockholder set forth in this Agreement shall not be effective or binding upon Stockholder until after such time as the Merger Agreement is executed and delivered by Parent, HoldCo, Parent Merger Sub, Astro Merger Sub, and the Company, and the Parties agree that there is not and has not been any other agreement, arrangement or understanding between the Parties with respect to the matters set forth herein.
(i)No Party may assign any of its rights or obligations under this Agreement without the prior written consent of the other Party. Any assignment contrary to the provisions of this Section 12(i) shall be null and void.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.
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| | | DELEK US HOLDINGS, INC.
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| | | By: /s/ Assaf Ginzburg
Name: Assaf Ginzburg
Title: EVP & CFO
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| | | By: /s/ Frederec Green
Name: Frederec Green
Title: EVP & COO
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| | | | |
| | | STOCKHOLDER
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| | | By: /s/ Jeff Morris
Name: Jeff Morris
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| | | By: /s/ Karen Morris
Name: Karen Morris
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Exhibit A – Shares of Company Common Stock Beneficially Owned
The Stockholder owns 1,669,347 shares of Company Common Stock and may be deemed to beneficially own an additional 232,694 shares of Company Common Stock issuable upon exchange of shares of Alon Assets, Inc.
Notice Address of Stockholder:
c/o Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, Texas 75251
972-367-3724
January 2, 2017
The Independent Director Committee
Alon USA Energy, Inc.
12700 Park Central Dr., Suite 1600
Dallas, TX 75251
Members of the Independent Director Committee:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.01 per share (the “CompanyAcquiror Common Stock”), of Alon USA Energy, Inc. (the “Company”) of the Exchange Ratio (as defined below) in the proposed Transaction (as defined below). Pursuant to the Agreement and Plan of Merger, dated as of January 2, 2017 (the “Agreement”), among the Company, Delek US Holdings, Inc. (the “Acquiror”), Delek Holdco, Inc., a wholly owned subsidiary of the Acquiror (“New Holdco”), Dione Mergeco, Inc., a wholly owned subsidiary of New Holdco (“Parent Merger Sub”), and Astro Mergeco, Inc., a wholly owned subsidiary of New Holdco (“Astro Merger Sub”) (i) Parent Merger Sub will merge with and into the Acquiror with the Acquiror continuing as the surviving entity and a wholly owned subsidiary of New Holdco (the “Parent Merger”), and each outstanding share of Acquiror’s common stock, par value $0.01 per share (the “Acquiror Common Stock”), other than shares of Acquiror Common Stock held in treasury, will be converted into the right to receive one share of New Holdco’s common stock, par value $0.01 per share (the “New Holdco Common Stock”), and (ii) immediately following the effective time of the Parent Merger, Astro Merger Sub will merge with and into the Company with the Company continuing as the surviving entity and a wholly owned subsidiary of New Holdco (the “Astro Merger”, and together with the Parent Merger, the “Transaction”), and each outstanding share of Company Common Stock, other than shares of Company Common Stock held in treasury or owned by the Acquiror and its subsidiaries, will be converted into the right to receive 0.504 shares (the “Exchange Ratio”) of New Holdco Common Stock.
In connection with preparing our opinion, we have (i) reviewed the Agreement; (ii) reviewed certain publicly available business and financial information concerning the Company and the Acquiror, and the industries in which they operate; (iii) compared the financial and operating performanceCompany will become an indirect wholly-owned subsidiary of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market pricesAcquiror.
The Conflicts Committee (the “Committee”) of the Company Common Stock and the Acquiror Common Stock and certain publicly traded securitiesBoard of such other companies; (iv) reviewed certain internal financial analyses and forecasts prepared by or at the directionDirectors (the “Board”) of the managements ofGeneral Partner has requested that Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) provide an opinion (the “Opinion”) to the Company and the Acquiror relating to their respective businesses, which were approved and provided to us by the independent director committee of the board of directors of the Company (the “Independent Director Committee”), as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Transaction (the “Synergies”); and (v) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Company and the Acquiror with respect to certain aspects of the Transaction, and the past and current business operations of the Company and the Acquiror, the financial condition and future prospects and operations of the Company and the Acquiror, the effects of the Transaction on the financial condition and future prospects of the Company and the Acquiror, and certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company and the Acquiror or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our engagement letter with the Company, we did not assume any obligation to undertake any such independent verification. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by managementCommittee as to the expected future results of operations and financial condition of the Company and the Acquiror to which such analyses or forecasts relate. We express no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the Agreement. We have also assumed that the representations and warranties made by the Company, the Acquiror, New Holdco, Parent Merger Sub and Astro Merger Sub in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or the Acquiror or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Common Stock of the Exchange Ratio in the proposed Transaction and we express no opinion as to the fairness of any consideration to be paid in connection with the Transaction to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Exchange Ratio applicable to the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock, the Acquiror Common Stock or the New Holdco Common Stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. Please be advised that during the two years preceding the date of this letter, neither we nor our affiliates have had any other material financial advisory or other material commercial or investment banking relationships with the Company or the Acquiror. In addition, we and our
affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of the Company and the Acquiror. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company or the Acquiror for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinionwhether, as of the date hereof, that the Exchange Ratio provided for in the proposed Transaction pursuant to the Agreement is fair, from a financial point of view, to the holders of the Company Common Stock.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided toUnits, other than the Independent Director Committee (in its capacity as such) in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
/s/ J.P. Morgan Securities LLC
J.P. MORGAN SECURITIES LLC
December 29, 2016
Board of Directors of
Delek US Holdings, Inc.
7102 Commerce Way
Brentwood, Tennessee 32027
Dear Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to Delek US Holdings, Inc. (“Parent”) of the Astro Merger Consideration (as defined below) to be paid pursuant to the Agreement and Plan of Merger (the “Agreement”), to be entered into by and among Parent, a newly incorporated wholly owned subsidiary of Parent (“HoldCo”), a newly incorporated wholly owned subsidiary of HoldCo (“Parent Merger Sub”), a second newly incorporated wholly owned subsidiary of HoldCo (“Alon Merger Sub”, and together with ParentAcquiror, Merger Sub the “Merger Subs”), and Alon USA Energy, Inc. (the “Company”). The Agreement provides, among other things, that Parent shall cause Parent Merger Sub to merge with and into Parent (the “Parent Merger”), pursuant to which Parent will be the surviving corporation, and in connection therewith each issued and outstanding share of Parent Common Stock (other than Parent Common Stock held in the treasury of Parent) will be converted into the right to receive one share of common stock, par value $0.01 per share, of HoldCo (the “HoldCo Common Stock”). Following completion of the Parent Merger, the Agreement provides that Alon Merger Sub will merge with and into the Company (the “Merger”) pursuant to which the Company will be the surviving corporation, and each issued and outstanding share of Company Common Stock (other than Company Common Stock owned by Parent and its Subsidiaries, all of which shall remain outstanding, and other than Company Common Stock owned by Holdco or any Subsidiary of Holdco (other than Parent and its Subsidiaries) or the Company or held in the treasury of the Company, all of which shall be canceled without any consideration) will be converted into the right to receive 0.504 shares of HoldCo Common Stock (the “Astro Merger Consideration”). The transactions contemplated by the Agreement are referred to herein as the “Transactions.” Capitalized terms used but not defined herein shall have the meanings given to them in the Agreement.
Tudor, Pickering, Holt & Co. Securities, Inc. (“TPH”) and its affiliates, including Perella Weinberg Partners, as part of their investment banking business, are regularly engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes.TPH and its affiliates also engage in securities trading and brokerage, private equity activities, investment management activities, equity research and other financial services, and in the ordinary course of these activities, TPH and its affiliates may from time to time acquire, hold or sell, for their own accounts and for the accounts of their customers, (i) equity, debt and other securities (including derivative securities) and financial instruments (including bank loans and other obligations) of Parent, any of the other Parties and any of their respective affiliates and (ii) any currency or commodity that may be material to(collectively, the Parties or otherwise involved in the Transactions and the other matters contemplated by the Agreement. In addition, TPH and its affiliates and certain of its and their employees, including members of the team performing services in connection with the Transactions, as well as certain private equity funds and investment management funds associated or affiliated with TPH in which they may have financial interests, may from time to time acquire, hold or make direct or indirect investments in or otherwise finance a wide variety of companies, including the Parties, other potential purchasers or Transaction participants or their respective affiliates. We have acted as financial advisor to Parent in connection with the Transactions“Excluded Holders”).We expect to receive fees for our services, the principal portion of which is contingent upon the consummation of the Transaction, and Parent has agreed to reimburse our expenses and indemnify us and certain related parties against certain liabilities arising out of our engagement. We have previously and we may in the future provide investment banking or other
Heritage Plaza | 1111 Bagby, Suite 5100 | Houston, Texas 77002 | www.TudorPickeringHolt.com
Tudor, Pickering, Holt & Co. Securities, Inc. | Tudor, Pickering, Holt & Co. Advisors, LLC | Members FINRA/SIPC
1
financial services to the Company or any of the other Parties or their respective stockholders, affiliates or portfolio companies in the future. In connection with such investment bankingor other financial services, we may receive compensation.
In connection with this opinion,Opinion, we have reviewed, amongmade such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, (i) the financial terms of the draft of the Agreement dated December 28, 2016; (ii) annual reports to stockholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 2015; (iii) annual reports to stockholders and Annual Reports on Form 10-K of Parent for the five years ended December 31, 2015; (iv) certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company, Parent, Delek Logistics Partners, LP and Alon USA Partners, LP; (v) certain other communications from the Company and Parent to their respective stockholders; (vi) certain internal financial information and forecasts for the Company prepared by management of the Company and adjusted by management of Parent and for Parent prepared by the management of Parent (the “Forecasts”); (vii) certain publicly available research analyst reports with respect to the future financial performance of the Company and Parent; and (viii) certain cost savings and operating synergies projected by the management of Parent to result from the Transactions (the “Synergies”). The Forecasts and Synergies reflect certain assumptions regarding the oil and gas industry and future commodity prices and associated crack spreads that are subject to significant uncertainty and volatility and that, if different than assumed, could have a material impact on our analysis and this opinion. We also have held discussions with members of the senior managements of the Company and Parent regarding their assessment of the strategic rationale for, and the potential benefits of, the Transactions and the past and current business operations, financial condition and future prospects of their respective entities. In addition, we have reviewed the reported price and trading activity for Company Common Stock and Parent Common Stock, compared certain financial and stock market information for the Company and Parent with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the oil and gas refining, logistics and retail industry specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as we considered appropriate.have:
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| 1. | reviewed a draft, received by us on November 6, 2017, of the Agreement; |
For purposes of our opinion,
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| 2. | reviewed certain publicly available business and financial information relating to the Company and the Acquiror that we deemed to be relevant; |
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| 3. | reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the Company and the Acquiror made available to us by the Company and the Acquiror, including (a) financial projections (and adjustments thereto) prepared by or discussed with the management of the Company and the Acquirorrelating to the Company for thefiscal years ending December 31, 2017 through December 31, 2022 (the “Company Projections”), (b) financial projections (and adjustments thereto) prepared by or discussed with the management of the Company and the Acquirorrelating to the Acquiror for thefiscal years ending December 31, 2017 through December 31, 2022 giving effect to potential contributions of assets by the Acquiror or certain of its subsidiaries to Delek Logistics Partners, LP, an affiliate of the Acquiror (“Delek Logistics Partners”), in exchange for cash and limited partnership interests in Delek Logistics Partners (the “Potential Drop-Down Transactions”) currently contemplated by the Acquiror (the “Acquiror Projections Including Potential Drop-Down Transactions”), (c) financial projections (and adjustments thereto) prepared by or discussed with the management of the Company and the Acquirorrelating to the Acquiror for thefiscal years ending December 31, 2017 through 2022 that do not give effect to the Potential Drop-Down Transactions (the “Acquiror Projections Excluding Potential Drop-Down Transactions” and, together with the Acquiror Projections Including Potential Drop-Down Transactions, the “Acquiror Projections”), and (d) certain financial and operating estimates and assumptions prepared by or discussed with the management of the Company and the Acquiror for the period following the Company Projections and the Acquiror Projections (the “Terminal Period”) including such management’s estimates and assumptions regarding certain financial and operating data for the refineries of the Company and Acquiror including, among other things, benchmark crack spreads, expected capture rates, normalized throughputs, normalized operating expenses and normalized capital expenditures for the Terminal Period (collectively, the “Terminal Period Assumptions”); |
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| 4. | spoken with certain members of the management of the Company and the Acquiror and certain of their representatives and advisors regarding the respective businesses, operations, financial condition and prospects of the Company and the Acquiror, the Transaction and related matters; |
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| 5. | compared the financial and operating performance of the Company and the Acquiror with that of other companies with publicly traded equity securities that we deemed to be relevant; |
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| 6. | reviewed publicly available information on benchmark crack spreads for the refineries of the Company and the Acquiror including historical and future estimates of such crack spreads; |
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| 7. | reviewed the current and historical market prices for certain of the Company’s and the Acquiror’s publicly traded securities; and |
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| 8. | conducted such other financial studies, analyses and inquiries and considered such other information and factors as we deemed appropriate. |
We have assumed and relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, accounting, legal, tax, regulatorydata, material and other information providedfurnished, or otherwise made available, to us, discussed with or reviewed by or for us, or publicly available.available, and do not assume any responsibility with respect to such data, material and other information. In that regard,addition, management of the Company and the Acquiror have advised us, and we have assumed, with your consent that (a) the Forecasts and SynergiesCompany Projections have been reasonably prepared in good faith on a basisbases reflecting the best currently available estimates and judgments of Parentsuch management as to the future financial results and condition of the Company, (b) the Acquiror Projections Including Potential Drop-Down Transactions have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Acquiror giving effect to the Potential Drop-Down Transactions, (c) the Acquiror Projections Excluding Potential Drop-Down Transactions have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial results and condition of the Acquiror without giving effect to the Potential Drop-Down Transactions, and (d) the Terminal Period Assumptions have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to such financial and operating estimates and assumptions for the refineries of the Company and Acquiror for the Terminal Period. Management of the Company and the Acquiror have also advised us, and we have assumed, that (a) the Company Projections and the Acquiror Projections reflect certain cost savings, operating efficiencies, and other synergies expected by such management to result from the Acquiror’s acquisition of Alon USA Energy, Inc. which was completed in June 2017 (the “Prior Transaction Synergies”) and (b) the Company Projections and the Acquiror Projections have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such managements as to the Prior Transaction Synergies, including, without limitation, the allocation of the Prior Transaction Synergies as between the Company and the Acquiror. For purposes of our analyses and this Opinion we have at your direction assumed that they provide a reasonable basis upon which to evaluate the Prior Transaction and that such Forecasts and Synergies will be realized in the amounts and at the time periods contemplated thereby.indicated by the Company Projections and the Acquiror Projections. We express no view or opinion with respect to any such Forecast orthe Company Projections, the Acquiror Projections, the Terminal Period Assumptions, the Prior Transaction Synergies or the respective assumptions on which they are based andbased. At the Committee’s direction, we have furtherused and relied upon the Company Projections, the Acquiror Projections Excluding Potential Drop-Down Transactions and the Terminal Period Assumptions for purposes of our analyses and this Opinion. In addition, we have relied upon and assumed, amongwithout independent verification, that there has been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company or the Acquiror since the respective dates of the most recent financial statements and other things,information, financial or otherwise, provided to us that (i) HoldCo has not had, and will not have at closing, any historical operations or liabilities in any way material to our analysis and (ii) that each share of HoldCo Common Stock will have a value equal to the value of one share of Parent Common Stock. We have also assumed with your consent that (i) the executed Agreement (together with any exhibits and schedules thereto) will not differ in any respectwould be material to our analyses or opinion fromthis Opinion, and that there is no information or any facts that would make any of the draft versioninformation reviewed by us incomplete or misleading. With your consent we have examined, referenced above, (ii)also relied upon and assumed, that (a) the supply and off-take agreements with J. Aron & Company to which the Company and the Acquiror are parties will not be terminated and will be extended or renewed indefinitely on terms substantially identical to the current terms thereof, (b) the Acquiror’s AltAir/Paramount, Bakersfield and Long Beach California facilities (collectively, the “Idle Refineries”) have, and whenever sold will have, a value that exceeds the amount of any contingent liabilities associated with such refineries, (c) the Acquiror will be able to obtain the tax credits for which it has or intends to apply as provided to us by the management of the Company and the Acquiror, and (d) there will be no change in the laws or regulations applicable to the blending of renewable fuels or the purchase of renewable fuel identification numbers that would be material to our analyses or this Opinion.
We have relied upon and assumed, without independent verification, that (a) the representations and warranties of all Partiesparties to the Agreement and all other related documents and instruments that are referred to therein are true and correct, (iii)(b) each Partyparty to the Agreement and such other related documents and instruments will fully and timely perform all of the covenants and agreements required to be performed by such Party, (iv)party, (c) all conditions to the consummation of the TransactionsTransaction will be satisfied without amendment or waiver thereof, (v)and (d) the Transactions will have the tax consequences described in discussions with, and materials furnished to us by, management of Parent and reflected in the Forecasts, (vi) the TransactionsTransaction will be consummated in a timely manner in accordance with the terms described in the Agreement and such other related documents and instruments, without any amendments or modifications theretothereto. We have relied upon and (vii)assumed, without independent verification, that (i) the Transaction will be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, orand other consents orand approvals necessary for the consummation of the TransactionsTransaction will be obtained withoutand that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would result in the disposition of any adverseassets of the Company or the Acquiror, or otherwisehave an effect on the Company, Parent, HoldCo,Transaction, the Merger Subs, the holders of HoldCo Common Stock, Parent Common Stock or Company Common Stock or the Acquiror or any expected benefits of the Transactions in any way meaningfulTransaction that would be material to our analysis. We have also assumed that there have been no material changes in the business, operations, financial condition and prospects of Parent, HoldCoanalyses or the Company or any of their affiliates since the date of the most recent financial statements and other information provided to us.this Opinion. In addition, we have relied upon and assumed, without independent verification, that the final form of the Agreement will not differ in any respect from the draft of the Agreement identified above.
Furthermore, in connection with this Opinion, we have not been requested to make, and have not made, anany physical inspection or independent appraisal or evaluation or appraisalof any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company, the Acquiror or any other party, nor were we provided with any such appraisal or evaluation. We did not estimate, and express no opinion regarding, the liquidation value of any entity or business. We have undertaken no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, (includingto which the Company or the Acquiror is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company or the Acquiror is or may be a party or is or may be subject, including, without limitations, any contingent derivativeliabilities that may be associated with the Idle Refineries.
We have not been requested to, and did not, initiate any discussions or off-balance-sheetnegotiations with, or solicit any indications of interest from, third parties with respect to the Transaction, the securities, assets, and liabilities)businesses or operations of the Company or any of its subsidiariesother party, or Parent or
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Tudor, Pickering, Holt & Co. Securities, Inc. | Tudor, Pickering, Holt & Co. Advisors, LLC | Members FINRA/SIPC
2
any of its subsidiaries and we have not been furnished with any such evaluation or appraisal. Our opinion does not address any legal, regulatory, tax or accounting matters.
Our opinion does not address the underlying business decision of Parent to engage in the Transactions, or the relative merits of the Transactions as compared to any other alternative transaction that might be available to Parent. This opinion addresses only the fairness from a financial point of view, as of the date hereof, to Parent of the payment of the Astro Merger Consideration pursuantalternatives to the Agreement. We do not express any view on, and our opinion does not address, any other term or aspect of the Agreement or the Transactions, including, without limitation, the fairness of the Transactions to, or any consideration paid or received in connection therewith by, creditors or other constituencies of the Company, Parent or HoldCo; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or Parent, or any class of such persons, in connection with the Transactions, whether relative to the Astro Merger Consideration pursuant to the Agreement or otherwise. We are not expressing any opinion as to the price at which the shares of HoldCo Common Stock, Parent Common Stock or Company Common Stock will trade at any time. Our opinionTransaction. This Opinion is necessarily based on financial, economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof. In addition, as you are aware, future commodity prices and other factors associated with the oil and gas industry, including crack spreads, are subject to significant uncertainty and volatility and, if different than assumed, could have a material impact on our analyses and this Opinion. We assumehave not undertaken, and are under no obligation, to update, revise, reaffirm or reaffirm our opinion and expressly disclaim any responsibility to do so basedwithdraw this Opinion, or otherwise comment on circumstances, developments or consider events occurring or of which we become awarecoming to our attention after the date hereof. Our opinionhereof, including potential changes in U.S. trade, environmental and engagementtax laws, regulations and government policies and the enforcement thereof as have been or may be proposed by parts of the federal government. We are not on behalfexpressing any opinion as to what the value of and are not intended to confer any rights or remedies upon, any holder of Parentthe Acquiror Common Stock actually will be when issued pursuant to the Transaction or HoldCothe price or range of prices at which the Company Common Units or Acquiror Common Stock may be purchased or sold, or otherwise be transferable, at any other person. Our advisory services andtime.We have assumed that the opinion expressed herein are provided solelyshares of Acquiror Common Stock to be issued in the Transaction to the holders of Company Common Units will be listed on the New York Stock Exchange.
This Opinion is furnished for the information and assistanceuse of the Board of Directors of ParentCommittee (in its capacity as such) in connection with its considerationevaluation of the Transactions,Transaction and such opinionmay not be used for any other purpose without our prior written consent. This Opinion is not intended to be, and does not constitute, a recommendation to the Committee, the Board, the General Partner any security holder or any other party as to how the Board of Directors, Parent, the Company or its Board of Directors or any committee thereof, any holder of interests in Parent, HoldCo or the Company or any other person shouldto act or vote with respect to such Transactionsany matter relating to the Transaction or otherwise.
In the ordinary course of business, certain of our employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, the Acquiror, or any other matter.party that may be involved in the Transaction and their respective affiliates or any currency or commodity that may be involved in the Transaction.
Houlihan Lokey in the past provided financial advisory services to a conflicts committee of the Board of the General Partner in connection with the Company’s proposed acquisition of a refinery from Alon USA Energy, Inc. in 2014, for which Houlihan Lokey received compensation. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and other financial services to the Company, the Acquiror, other participants in the Transaction or certain of their respective affiliates in the future, for which Houlihan Lokey and its affiliates may receive compensation. Furthermore, in connection with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, the Company, the Acquiror, other participants in the Transaction or certain of their respective affiliates, for which advice and services Houlihan Lokey and such affiliates have received and may receive compensation.
Houlihan Lokey has acted as financial advisor to the Committee in connection with, and has participated in certain of the negotiations leading to, the Transaction and will receive a fee for such services, a substantial portion of which is contingent upon the consummation of the Transaction. In addition, we will receive a fee for rendering this Opinion, which is not contingent upon the successful completion of the Transaction. In addition, the Company has agreed to reimburse certain of our expenses and to indemnify us and certain related parties for certain potential liabilities arising out of our engagement.
This Opinion only addresses the fairness, from a financial point of view, to the holders of Company Common Units other than the Excluded Holders of the Exchange Ratio provided for in the Transaction pursuant to the Agreement and does not address any other aspect or implication of the Transaction, any related transaction or any agreement, arrangement or understanding entered into in connection therewith or otherwise. We have not been requested to opine as to, and this Opinion does not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Committee, the Board, the General Partner, the Company, the Acquiror, their respective security holders or any other party to proceed with or effect the Transaction, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Transaction or otherwise
(other than the Exchange Ratio to the extent expressly specified herein), (iii) the fairness of any portion or aspect of the Transaction to the holders of any class of securities, creditors or other constituencies of the Company, the Acquiror or any other party, except if and only to the extent expressly set forth in the last sentence of this Opinion, (iv) the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available for the Company, the Acquiror or any other party, (v) the fairness of any portion or aspect of the Transaction to any one class or group of the Company’s, the Acquiror’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s, the Acquiror’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the Company, the Acquiror, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Transaction, (vii) the solvency, creditworthiness or fair value of the Company, the Acquiror or any other participant in the Transaction, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Transaction, any class of such persons or any other party, relative to the Exchange Ratio or otherwise. Furthermore, we are not expressing any opinion, counsel or interpretation regarding matters that require legal, regulatory, environmental, accounting, insurance, tax or other similar professional advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, we have relied, with the consent of the Committee, on the assessments by the Committee, the Board, the General Partner, the Company, the Acquiror and their respective advisors, as to all legal, regulatory, accounting, insurance and tax matters with respect to the Company, the Acquiror and the Transaction or otherwise. The issuance of this opinion has been reviewed andOpinion was approved by TPH’s fairness opinion committee.a committee authorized to approve opinions of this nature.
Based upon and subject to the foregoing, and in reliance thereon, it is our opinion that, as of the date hereof, the Astro Merger Consideration to be paidExchange Ratio provided for in the Transaction pursuant to the Agreement is fair, from a financial point of view, to Parent.the holders of Company Common Units other than the Excluded Holders.
Very truly yours,
Tudor, Pickering, Holt & Co. Securities, Inc./s/ Houlihan Lokey Capital, Inc
By: /s/Robert Wheeler
Name: Robert Wheeler
Title: Managing Director HOULIHAN LOKEY CAPITAL, INC.
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Tudor, Pickering, Holt & Co. Securities, Inc. | Tudor, Pickering, Holt & Co. Advisors, LLC | Members FINRA/SIPC
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS; UNDERTAKINGSPROSPECTUS
Item 20. Indemnification of DirectorsOfficers and OfficersDirectors
Delaware General Corporation Law
Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”) provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from which the director derived an improper personal benefit.
Subsection (a) of Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides that any indemnification under subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of Section 145. Such determination shall be made, with respect to a person who is a director or officer of the corporation at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith; that expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in Section 145 of the DGCL; that any indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 of the DGCL shall not be deemed exclusive of any other rights to which the indemnified party may be entitled; that any indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of such person’s
heirs, executors and administrators; and that the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145.
Certificate of Incorporation
The registrant’sRegistrant’s amended and restated certificate of incorporation provides that, to the fullest extent permitted by the DGCL, as the same exists or hereafter may be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for the breach of any fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.
Bylaws
The registrant’sRegistrant’s amended and restated bylaws provide that the registrantRegistrant shall indemnify any director or officer of the corporation, and may indemnify any other person, who (a) was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful, and (b) was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.
These descriptions of director liability and indemnification provisions are intended as a summary only and are qualified in their entirety by reference to HoldCo’sthe Registrant’s amended and restated certificate of incorporation and amended and restated bylaws, each of which has been filed with the SEC.
Indemnification Agreements
The registrantRegistrant has entered into indemnification agreements with its directors and executive officers which would require the registrant,Registrant, among other things, to indemnify them against certain liabilities which may arise by reason of their status.
In addition, under the merger agreement, the registrant will indemnify and hold harmless all past and present directors and officers of Alon following the closing of the Mergers for liability arising out of the fact that each such person was a director or officer of Alon prior to the date of the merger agreement.
Insurance
The registrantRegistrant maintains directors’ and officers’ liability insurance for its directors and officers.
Item 21. Exhibits and Financial Statement Schedules
The agreements included as exhibits to this consent statement/prospectus contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
Item 21. may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Delek and ALDW acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, they are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading. Additional information about Delek and ALDW may be found elsewhere in this registration statement and other public filings, which are available without charge through the SEC’s website at www.sec.gov. See “Where You Can Find More Information.”
(a) Exhibits.
The following Exhibitsexhibits are filed as part of or are incorporated by reference in, this Registration Statement:
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Exhibit Number | | Description |
2.1 | | Agreement and Plan of Merger dated as of January 2, 2017, among Delek US Holdings, Inc., Delek Holdco, Inc., Dione Mergeco, Inc., Astro Mergeco, Inc. and Alon USA Energy, Inc.* (included as Annex A to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
2.2 | | First Amendment to Agreement and Plan of Merger dated as of February 27, 2017, among Delek US Holdings, Inc., Delek Holdco, Inc., Dione Mergeco, Inc., Astro Mergeco, Inc. and Alon USA Energy, Inc.* (included as Annex B to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
3.1 | | Certificate of Incorporation of Delek Holdco, Inc. |
3.2 | | Bylaws of Delek Holdco, Inc. |
3.3 | | Form of Amended and Restated Certificate of Incorporation of Delek Holdco, Inc. to be in effect upon the closing of the Mergers. |
3.4 | | Form of Amended and Restated Bylaws of Delek Holdco, Inc. to be in effect upon the closing of the Mergers. |
3.5 | | Indenture related to the 3.00% Convertible Senior Notes due 2018, dated as of September 16, 2013, among Alon USA Energy, Inc. and U.S. Bank National Association, as trustee (including form of 3.00% Convertible Senior Note due 2018) (incorporated by reference to Exhibit 4.1 to Alon USA Energy, Inc.’s Current Report on Form 8-K, filed September 16, 2013). |
5.1+ | | Opinion of Baker Botts LLP as to the validity of the securities being registered |
8.1+ | | Opinion of Baker Botts LLP regarding certain tax matters |
8.2+ | | Opinion of Vinson & Elkins LLP regarding certain tax matters |
10.1 | | Voting, Irrevocable Proxy and Support Agreement dated as of January 2, 2017, by and between Delek US Holdings, Inc. and Alon USA Energy, Inc. (included as Annex C to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
registration statement:
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10.2 | | Voting, Irrevocable Proxy |
Exhibit Number | | Exhibit Description |
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| 2.1†* | | Agreement and Support AgreementPlan of Merger, dated as of January 2,November 8, 2017, by and betweenamong Delek US Holdings, Inc., David WiessmanSugarland Mergeco, LLC, Alon USA Partners, LP, and D.B.W. Holdings (2005) Ltd.Alon USA Partners GP, LLC (included as Annex DA to the joint proxyconsent statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
10.3 | |
| 3.1 | | Voting, Irrevocable Proxy |
21.1 | |
| 3.2 | | Subsidiaries |
23.1+ | |
| 3.3 | | |
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| 3.4 | | |
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| 3.5 | | |
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| 5.1* | | |
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| 10.1 | | |
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| 21.1* | | |
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| 23.1* | | |
23.2+ | | Consent of Vinson & Elkins LLP (included in Exhibit 8.2) |
23.323.2* | | |
23.4 | |
| 23.3* | | |
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| 23.4* | | |
99.1 | |
| 24.1* | | Consent |
99.2 | |
| 99.1* | | |
99.3 | |
| 99.2* | | |
99.4 | | Form of Proxythe Unitholders of Alon USA Energy, Inc.Partners, LP |
99.5 | | Consent of David Wiessman to be named as a director of Delek Holdco, Inc. |
| * | Filed herewith | |
(b) Financial Statement Schedules.
* Annexes, schedules and exhibits have been omitted pursuant |
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| † | Pursuant to Item 601(b)(2) of Regulation S-K. DelekS-K, the Registrant agrees to furnish supplementally a copy of any omitted attachmentschedule or exhibit to the SecuritiesAgreement and Exchange Commission on a confidential basisPlan of Merger to the SEC upon request.+ To be filed by amendment.
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Financial statement schedules are omitted because they are not required or the required information is shown in the consolidated financial statements or the notes thereto incorporated by reference in the consent statement/prospectus that forms a part of this registration statement.
Item 22. Undertakings
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(a) | The undersigned registrant hereby undertakes: |
a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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(i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
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(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; |
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(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement;
provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(i)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, ifpurchaser:
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectusprospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness; provided,effectiveness. Provided, however,, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;use.
(5) Thatb) The undersigned registrant hereby undertakes that, for the purposepurposes of determining any liability of the registrant under the Securities Act of 1933, to any purchaser in the initial distributioneach filing of the securities: that in a primary offering of securitiesregistrant’s annual report pursuant to Section 13(a) or Section 15(d) of the undersigned registrantSecurities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(i) | any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
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(ii) | any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
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(iii) | the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
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(iv) | any other communication that is an offer in the offering made by the undersigned registrant to the purchaser; |
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(b) | The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to sectionSection 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(c) | The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. |
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(d) | (1) The undersigned registrant hereby undertakes as follows: That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with |
respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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(e) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
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(f) | The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the joint proxy/registration statement through the date of responding to the request. |
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(g) | The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the joint proxy/registration statement when it became effective. |
c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statementRegistration Statement on Form S-4 to be signed on its behalf by the undersigned, hereuntothereunto duly authorized in the City of Brentwood, State of Tennessee, on February 27,December 12, 2017.
DELEK HOLDCO,US HOLDINGS, INC.
By:
By: /s//s/ Ezra Uzi Yemin
Name: Ezra Uzi Yemin
Title: President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below appoints Ezra Uzi Yemin, Frederec Green, Kevin Kremke and Assi Ginzburg, and each of them, any of whom may act without the joinder of the other, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them of their or his substitute and substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statementRegistration Statement has been signed by the following persons in the capacities and on the dates indicated.
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| Signature | Title | Date |
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| /s/ Ezra Uzi Yemin | Director (Chairman), President, and Chief Executive Officer (Principal Executive Officer) | February 27,December 12, 2017 |
| Ezra Uzi Yemin | (Principal Executive Officer) | |
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/s/ Assaf GinzburgKevin Kremke | Director, Executive Vice President and Chief Financial Officer
| December 12, 2017 |
| Kevin Kremke | (Principal Financial Officer and Principal Accounting Officer) | February 27, |
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| /s/ William J. Finnerty | Director | December 12, 2017 |
Assaf Ginzburg |
EXHIBIT INDEX
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Exhibit NumberWilliam J. Finnerty | | Description |
2.1 | | Agreement and Plan of Merger dated as of January 2, 2017, among Delek US Holdings, Inc., Delek Holdco, Inc., Dione Mergeco, Inc., Astro Mergeco, Inc. and Alon USA Energy, Inc.* (included as Annex A to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
2.2/s/ Carlos E. Jorda | Director | December 12, 2017 |
| Carlos E. Jorda | | First Amendment to Agreement and Plan of Merger dated as of February 27, 2017, among Delek US Holdings, Inc., Delek Holdco, Inc., Dione Mergeco, Inc., Astro Mergeco, Inc. and Alon USA Energy, Inc.* (included as Annex B to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
3.1 | | Certificate of Incorporation of Delek Holdco, Inc. |
3.2/s/ Charles H. Leonard | Director | December 12, 2017 |
| Charles H. Leonard | | Bylaws of Delek Holdco, Inc. |
3.3 | | Form of Amended and Restated Certificate of Incorporation of Delek Holdco, Inc. to be in effect upon the closing of the Mergers. |
3.4/s/ Gary M. Sullivan, Jr. | Director | December 12, 2017 |
| Gary M. Sullivan, Jr. | | Form of Amended and Restated Bylaws of Delek Holdco, Inc. to be in effect upon the closing of the Mergers. |
3.5 | | Indenture related to the 3.00% Convertible Senior Notes due 2018, dated as of September 16, 2013, among Alon USA Energy, Inc. and U.S. Bank National Association, as trustee (including form of 3.00% Convertible Senior Note due 2018) (incorporated by reference to Exhibit 4.1 to Alon USA Energy, Inc.’s Current Report on Form 8-K, filed September 16, 2013). |
5.1+/s/ Shlomo Zohar | Director | December 12, 2017 |
| Shlomo Zohar | | Opinion of Baker Botts LLP as to the validity of the securities being registered |
8.1+ | | Opinion of Baker Botts LLP regarding certain tax matters |
8.2+/s/ David Wiessman | Director | December 12, 2017 |
| David Wiessman | | Opinion of Vinson & Elkins LLP regarding certain tax matters |
10.1 | | Voting, Irrevocable Proxy and Support Agreement dated as of January 2, 2017, by and between Delek US Holdings, Inc. and Alon USA Energy, Inc. (included as Annex C to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
10.2 | | Voting, Irrevocable Proxy and Support Agreement dated as of January 2, 2017, by and between Delek US Holdings, Inc., David Wiessman and D.B.W. Holdings (2005) Ltd. (included as Annex D to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
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Exhibit Number | | Description |
10.3 | | Voting, Irrevocable Proxy and Support Agreement dated as of January 2, 2017, by and between Delek US Holdings, Inc., Jeff Morris and Karen Morris (included as Annex E to the joint proxy statement/prospectus forming a part of this Registration Statement on Form S-4 and incorporated herein by reference). |
21.1 | | Subsidiaries of Delek Holdco, Inc. |
23.1+ | | Consent of Baker Botts LLP (included in Exhibits 5.1 and 8.1) |
23.2+ | | Consent of Vinson & Elkins LLP (included in Exhibit 8.2) |
23.3 | | Consent of KPMG LLP, independent registered public accounting firm |
23.4 | | Consent of Ernst & Young LLP, independent registered public accounting firm |
99.1 | | Consent of Tudor, Pickering, Holt & Co. Securities, Inc. |
99.2 | | Consent of J.P. Morgan Securities LLC |
99.3 | | Form of Proxy of Delek US Holdings, Inc. |
99.4 | | Form of Proxy of Alon USA Energy, Inc. |
99.5 | | Consent of David Wiessman to be named as a director of Delek Holdco, Inc. |
* Annexes, schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Delek agrees to furnish supplementally a copy of any omitted attachment to the Securities and Exchange Commission on a confidential basis upon request.
+ To be filed by amendment.
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