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EXHIBIT 1.3
VALERO ENERGY CORPORATION
VEC TRUST I
6,000,000 __% PREMIUM EQUITY PARTICIPATING
SECURITY UNITS-PEPS(SM) UNITS
UNDERWRITING AGREEMENT
June __, 2000
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
J.P. MORGAN SECURITIES INC.
BMO NESBITT BURNS CORP.
As Representatives of the several Underwriters
c/o MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
VEC Trust I, a Delaware statutory business trust formed under the laws
of the State of Delaware (the "TRUST"), and Valero Energy Corporation, a
Delaware corporation (the "COMPANY", and together with the Trust, the
"ISSUERS"), propose to issue and sell to the several Underwriters listed in
Schedule I hereto (the "UNDERWRITERS"), for whom you are acting as
representatives (the "REPRESENTATIVES"), subject to the terms and conditions
stated herein, an aggregate of 6,000,000 __.__% Premium Equity Participating
Security Units-PEPS(SM) Units (the "UNDERWRITTEN SECURITIES") of the Company
the terms of which are set forth in Schedule II hereto. Each PEPS Unit will
consist of (a) a stock purchase contract (a "PURCHASE CONTRACT") under which the
holder of the PEPS Unit will purchase from the Company on August 18, 2003, for
an amount in cash equal to the stated amount per Security of $25 (the "STATED
AMOUNT"), a number of shares of common stock, par value $0.01 per share, of the
Company (the "COMMON STOCK"), as set forth in such Purchase Contract, and (b) a
Trust Preferred Security (a "TRUST PREFERRED SECURITY") having a stated
liquidation amount of $25 per Trust Preferred Security, representing an
undivided beneficial
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ownership interest in the assets of the Trust and guaranteed by the Company to
the extent set forth in the Guarantee Agreement (as defined herein).
Additionally, the Company proposes to issue and sell to the several
Underwriters, for the sole purpose of covering over-allotments in connection
with the sale of the Underwritten Securities, at the option of the Underwriters,
up to an additional 900,000 PEPS Units (the "OPTION SECURITIES"). The
Underwritten Securities and any Option Securities are herein referred to as the
"SECURITIES". In accordance with the terms of a Purchase Contract Agreement (the
"PURCHASE CONTRACT AGREEMENT") to be entered into between the Company and The
Bank of New York, as Purchase Contract Agent (the "PURCHASE CONTRACT AGENT"),
the holders of the PEPS Units will pledge the Trust Preferred Securities to Bank
One Trust Company, N.A., as Collateral Agent (the "COLLATERAL AGENT"), pursuant
to a Pledge Agreement (the "PLEDGE AGREEMENT") to be entered into between the
Company and the Collateral Agent, to secure the holders' obligations to purchase
Common Stock under the Purchase Contracts. The Common Stock will have attached
thereto rights (the "RIGHTS") issued pursuant to a Rights Agreement (the "RIGHTS
AGREEMENT") dated as of July 17, 1997 between the Company and Harris Trust and
Savings Bank, as Rights Agent. The Purchase Contracts, the Purchase Contract
Agreement and the Pledge Agreement are herein collectively referred to as the
"PEPS AGREEMENTS".
The Company will own all of the beneficial ownership interests
represented by the common securities (the "COMMON SECURITIES" and, together with
the Trust Preferred Securities, the "TRUST SECURITIES") of the Trust.
Concurrently with the issuance of the Trust Preferred Securities and the
Company's purchase of all of the Common Securities, the Trust will invest the
proceeds of each thereof in the Company's Senior Deferrable Notes due August 18,
2005 (the "SENIOR DEFERRABLE NOTES") to be issued pursuant to an Indenture,
dated as of December 12, 1997, as amended by the first supplemental indenture
(the "INDENTURE"), between the Company and The Bank of New York, as trustee (the
"INDENTURE TRUSTEE"). The Company will guarantee (the "GUARANTEE") the Trust
Securities to the extent set forth in a Guarantee Agreement (the "GUARANTEE
AGREEMENT") to be entered into between the Company and The Bank of New York as
trustee (the "GUARANTEE TRUSTEE"), for the benefit of the holders from time to
time of the Trust Securities. The Trust Securities will be issued pursuant to
the amended and restated declaration of trust of the Trust (the "AMENDED
DECLARATION"), among the Company, as Sponsor, Jay D. Browning, Donna M. Titzman,
and John D. Gibbons, as the initial regular trustees (the "REGULAR TRUSTEES"),
The Bank of New York, as the initial property trustee (the "PROPERTY TRUSTEE"),
and The Bank of New York (Delaware) as the Delaware Trustee (the "DELAWARE
TRUSTEE" and, together with the Property Trustee and the Regular Trustees, the
"TRUSTEES"), and the holders from time to time of the undivided beneficial
ownership interests in the assets of the Trust.
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The Company has filed with the Securities and Exchange Commission (the
"COMMISSION"), in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder (the
"SECURITIES ACT"), a registration statement on Form S-3 (registration no. 333-
33846), including a related prospectus, relating to the registration of certain
securities of the Issuers, including the PEPS Units, the Purchase Contracts, the
Trust Preferred Securities, the Guarantee, the Senior Deferrable Notes and
shares of Common Stock (the "SHELF SECURITIES"), to be sold from time to time by
the Company. The registration statement as amended at the date of this
Agreement, including information, if any, deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act is hereinafter referred to as the "REGISTRATION STATEMENT," and
the prospectus included therein relating to the Shelf Securities, in the form
first used to confirm sales of the Securities, is hereinafter referred to as the
"BASIC PROSPECTUS." The Basic Prospectus, as supplemented by the prospectus
supplement dated ______, 2000 (the "PROSPECTUS SUPPLEMENT"), relating to the
Securities, in the form first used to confirm sales of the Securities is
hereinafter referred to as the "PROSPECTUS". If the Company has filed an
abbreviated registration statement pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement. Any reference to the term Registration Statement, the
Basic Prospectus, any preliminary form of prospectus previously filed with the
Commission pursuant to Rule 424 of the Securities Act or the Prospectus shall
include the documents incorporated therein by reference. The terms "SUPPLEMENT"
and "AMENDMENT" or "AMEND" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), that are deemed to be
incorporated by reference in the Prospectus.
Concurrently with the offering of PEPS Units, the Company intends to
offer $____ aggregate principal amount of senior notes (the "DEBT OFFERING") and
5,000,000 aggregate shares of its common stock, par value $.01 per share (the
"EQUITY OFFERING").
It is understood that on March 2, 2000, the Company entered into an
agreement, as amended on May 14, 2000 (the "PURCHASE AGREEMENT") with ExxonMobil
Corporation ("EXXONMOBIL") to purchase ExxonMobil's refinery and truck terminal
located in Benicia, California and all Exxon-branded California retail assets
(the "ACQUISITION"). It is understood that the closing of the purchase of the
refinery and certain of the retail assets took place on May 15, 2000 and that
the closing of the purchase of the remaining retail assets took place on June
15, 2000.
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1. Representations and Warranties of the Company. Each of the Issuers
jointly and severally represents and warrants to and agrees with each of the
Underwriters that:
(a) the Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission;
(b) (i) each document, if any, filed or to be filed pursuant
to the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) the Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will
not contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iv)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter or its counsel through you expressly for use therein;
(c) each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder;
(d) the Company (i) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and (iii) is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its
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ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(e) each subsidiary of the Company (i) has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, (ii) has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and (iii) is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or claims;
(f) this Agreement has been duly authorized, executed and
delivered by each of the Company and the Trust;
(g) the Securities and the PEPS Agreements have been duly
authorized and, at the Closing Date or, in the case of Option
Securities and Purchase Contracts constituting part of the Option
Securities, the Option Closing Date (as defined herein), will have been
duly executed and delivered by the Company, and, as of the Closing Date
or the Option Closing Date, as the case may be, assuming due
authorization, execution and delivery by parties thereto other than the
Company, the PEPS Agreements will be valid and legally binding
obligations of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency or
similar laws relating to or affecting creditors' rights generally and
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law); provided, however, that
upon the occurrence of a Termination Event, Section 365(e)(1) of the
Bankruptcy Code (11 U.S.C. Sections 101-1330, as amended) and, based on
a review of applicable case law, Section 541 of the Bankruptcy Code
should not substantively limit the provisions of Section 3.15 and 5.06
of the Purchase Contract Agreement and Section 5.4 of the Pledge
Agreement that require termination of the Purchase Contracts and
release of the Collateral Agent's security interest in the Trust
Preferred Securities or the Treasury Securities. The Securities and the
PEPS
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Agreements conform in all material respects to the descriptions thereof
contained in the Prospectus;
(h) the shares of Common Stock to be issued and sold by the
Company pursuant to the settlement of the Purchase Contracts have been
duly and validly authorized and reserved for issuance. Such Common
Stock, when issued and delivered in accordance with the provisions of
the PEPS Agreements, will be validly issued, fully paid and
non-assessable, and the issuance of such Common Stock will not be
subject to any preemptive or similar rights.
(i) the shares of Common Stock outstanding prior to the
issuance of the Securities have been duly authorized and are validly
issued, fully paid and non-assessable;
(j) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(k) the Rights Agreement has been duly authorized, executed
and delivered by the Company; the Rights have been duly authorized by
the Company and, when issued pursuant to the shares of Common Stock
issued upon settlement of the Purchase Contracts, will be validly
issued, and the shares of Junior Participating Preferred Stock, Series
I, issuable upon exercise of the Rights have been duly authorized by
the Company and validly reserved for issuance, and when issued upon the
exercise of the Rights in accordance with the terms of the Rights
Agreement, will be validly issued, fully paid and non-assessable;
(l) the Remarketing Agreement (the "REMARKETING AGREEMENT")
has been duly authorized by each of the Company and the Trust and when
executed and delivered by each of the Company and the Trust will
constitute a legal, valid and binding obligation of each of the Company
and the Trust, enforceable in accordance with its terms, except as the
enforceability thereof is subject to the effect of (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
laws relating to or affecting creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law); and the Remarketing
Agreement will conform to the description thereof in the Prospectus;
(m) the Senior Deferrable Notes have been duly authorized,
and, when issued and delivered pursuant to the Indenture, will have
been duly executed, authenticated, issued and delivered and will
constitute valid and
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binding obligations of the Company entitled to the benefits provided by
the Indenture; the Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
instrument, enforceable in accordance with its terms, except as the
enforceability thereof is subject to the effect of (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
laws relating to or affecting creditors' rights generally and (ii)
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law); and the Indenture
will conform to the description thereof in the Prospectus;
(n) each of the Guarantee and the Guarantee Agreement has been
duly authorized and when validly executed and delivered by the Company
will constitute a legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as the enforceability
thereof is subject to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws
relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and the Guarantee will
conform to the description thereof in the Prospectus;
(o) each of the Indenture, the Amended Declaration and the
Guarantee Agreement has been duly qualified under the Trust Indenture
Act of 1939, as amended (the "TRUST INDENTURE ACT");
(p) the Trust has been duly created and is validly existing as
a statutory business trust in good standing under the Business Trust
Act of the State of Delaware (the "DELAWARE TRUST ACT") and is a
"grantor trust" for federal income tax purposes, with the trust power
and authority to own property and conduct its business as described in
the Prospectus, and has conducted and will conduct no business other
than the transactions contemplated by this Agreement as described in
the Prospectus; the Trust is not a party to or bound by any agreement
or instrument and after the Trust executes the Amended Declaration, the
Trust will not be a party to or bound by any agreement or instrument
other than this Agreement, the Remarketing Agreement, the Amended
Declaration and the other agreements entered into in connection with
the transactions contemplated hereby; the Trust has no liabilities or
obligations other than those arising out of the transactions
contemplated by this Agreement, the Remarketing Agreement and the
Amended Declaration; and the Trust is not a party to or subject to any
action, suit or proceeding of any nature;
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(q) the Amended Declaration has been duly authorized by the
Company, as Sponsor, and, when duly executed and delivered by the
Company, as Sponsor, and the Regular Trustees (assuming due
authorization, execution and delivery by the Property Trustee and the
Delaware Trustee), will constitute a legal, valid and binding
obligation of the Sponsor and Trustees, enforceable against the Sponsor
and Trustees in accordance with its terms, except as the enforceability
thereof is subject to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws
relating to or affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and the Amended
Declaration will conform to the description thereof contained in the
Prospectus;
(r) the Trust Preferred Securities have been duly authorized
and, when executed and authenticated in accordance with the provisions
of the Amended Declaration and delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will be
validly issued and (subject to the terms of the Amended Declaration)
fully paid and non-assessable undivided beneficial interests in the
assets of the Trust, and the issuance of such Trust Preferred
Securities will not be subject to any preemptive or similar rights.
Holders of the Trust Preferred Securities will be entitled to the same
limitation of personal liability as that extended to stockholders of
private corporations for profit organized under the General Corporation
Law of the State of Delaware. The Common Securities have been duly
authenticated under the Amended Declaration and, when issued and
delivered to the Company against payment therefor as described in the
Prospectus, will be validly issued undivided beneficial interests in
the assets of the Trust, and the issuance of such Common Securities
will not be subject to any preemptive rights;
(s) the Trust is not, nor with the giving of notice or lapse
of time or both would be, in violation of or in default under, nor will
the execution, delivery and performance by the Trust of its obligations
under this Agreement, the Remarketing Agreement and the Trust
Securities, the purchase of the Senior Deferrable Notes by the Trust
from the Company, the distribution of the Senior Deferrable Notes upon
the liquidation of the Trust in the circumstances contemplated by the
Amended Declaration, or the consummation by the Trust of the
transactions contemplated in this Agreement, the Amended Declaration or
the Remarketing Agreement (the "TRUST TRANSACTIONS"), result in a
violation of any statute or order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Trust or any
of its assets. Except for permits and similar
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authorizations required under the Act, the qualification of the Amended
Declaration under the Trust Indenture Act and the securities or Blue
Sky laws of certain jurisdictions, and except for such permits and
authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or
financial institution is required for the consummation of the Trust
Transactions;
(t) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Rights Agreement, the Purchase Agreement, the Securities, the PEPS
Agreements, the Amended Declaration, the Guarantee, the Guarantee
Agreement, the Senior Deferrable Notes, the Indenture and the
Remarketing Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company or
any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency that has not
already been obtained is required for the performance by the Company of
its obligations under this Agreement, the Rights Agreement, the
Purchase Agreement, the Securities, the PEPS Agreements, the Amended
Declaration, the Guarantee, the Guarantee Agreement, the Senior
Deferrable Notes, the Indenture or the Remarketing Agreement, except
such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Securities;
(u) neither the Company nor any of its subsidiaries is in
violation of its corporate charter or by-laws or other constitutive
document or in default under any agreement, indenture or instrument,
which default could reasonably be expected to have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, and
no event or condition has occurred or exists which, with the giving of
notice or the lapse of time or both, would result in any such violation
or default which would have such an effect. Neither the Company nor any
of its subsidiaries is in violation of any law, ordinance, governmental
rule or regulation or court decree to which it may be subject, which
violation could reasonably be expected to have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
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(v) the Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; and except, in each case, as described in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement);
(w) except as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), there are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(x) there are no legal or governmental investigations or
proceedings pending or threatened to which the Trust, the Company or
any of the Company's subsidiaries is a party or to which any of the
properties of the Trust, the Company or any of the Company's
subsidiaries is subject, that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required;
(y) the statements, (including the assumptions described
therein) included in the Company's filing on Form 8-K dated as of March
17, 2000 (i) are within the coverage of Rule 175(b) under the Act to
the extent such data constitute forward looking statements as defined
in Rule 175(c) and
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(ii) were made by the Company with a reasonable basis and reflect the
Company's good faith estimate of the matters described above;
(z) the Company has prepared its financial statements on a
consistent basis in accordance with generally accepted accounting
principles. The pro forma financial statements of the Company, and the
related notes thereto, included in the Prospectus present fairly in all
material respects the pro forma financial position of the Company, as
of the dates indicated and the results of its operations for the
periods specified; the pro forma combined financial information, and
the related notes thereto, included in the Prospectus has been prepared
in accordance with the applicable requirements of the Exchange Act and
is based upon good faith estimates and assumptions believed by the
Company to be reasonable;
(aa) neither the Company nor the Trust is, and after giving
effect to the offering and sale of the Securities and the application
of the proceeds thereof as described in the Prospectus, neither will
be, required to register as an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;
(bb) the Purchase Agreement has been duly authorized, executed
and delivered by, and constitutes a valid and binding obligation of,
the Company and, to the knowledge of the Company, ExxonMobil; the
Purchase Agreement is in full force and effect as of the date hereof
and neither the Company, nor, to the knowledge of the Company,
ExxonMobil, is, or with the giving of notice or lapse of time or both
would be, in violation of or in default under the Purchase Agreement,
except for violations and defaults which individually or in the
aggregate would not be material to the Company and its subsidiaries,
taken as a whole;
(cc) all licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals,
grants of rights by, or filings or registrations with, any federal,
state, local or foreign court or governmental or public body,
authority, or other instrumentality or third person (including without
limitation the Federal Energy Regulatory Commission ("FERC")) (any of
the foregoing a "LICENSE") necessary for either the Company and its
subsidiaries to own, build, maintain or operate their respective
businesses or properties have been duly authorized and obtained, and
are in full force and effect, except where the failure to so be
obtained or in effect would not, individually or in the aggregate, have
a material adverse effect on the Company and its subsidiaries, taken as
a whole; and the Company and its subsidiaries are in
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compliance in all material respects with all provisions thereof; no
event has occurred which permits (or with the passage of time would
permit) the revocation or termination of any License, or which could
result in the imposition of any restriction thereon, which is of such a
nature or the effect of which would reasonably be expected to have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; no material License is the subject of any pending or, to the
best of the Company's knowledge, threatened challenge or revocation
which, if such License were revoked, would reasonably be expected to
have a material adverse effect on the Company and its subsidiaries,
taken as a whole; the Company and its subsidiaries are not required to
obtain any material License that has not already been obtained from, or
effect any material filing or registration that has not already been
effected with, the FERC or any other federal, state or local regulatory
authority in connection with the execution and delivery of this
Agreement, the Rights Agreement, the Purchase Agreement, the
Securities, the PEPS Agreements, the Amended Declaration, the
Guarantee, the Guarantee Agreement, the Senior Deferrable Notes, the
Indenture or the Remarketing Agreement; and except, in each case, as
described in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement);
(dd) there has not occurred any material adverse change, or
any development involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business or
operations of either the Trust or the Company and its subsidiaries,
taken as a whole, from that set forth in the Prospectus (exclusive of
any amendments or supplements thereto subsequent to the date of this
Agreement);
(ee) neither the Company nor any of its subsidiaries is a
"holding company", a "subsidiary company" or a "holding company", an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", or a "public utility", as each of such terms is
defined in the Public Utility Holding Company Act of 1935, as amended,
and the rules and regulations thereunder; and
(ff) the Company and its subsidiaries have good and
indefeasible title to all items of real property and good and
defensible title to all personal property owned by them and the right
to use all other property used or proposed to be used by them in the
ordinary course of business, in each case free and clear of all liens,
encumbrances and defects except such as are described or referred to in
the Prospectus or such as do not materially adversely affect the value
of such property and do not
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unreasonably interfere with the use made or proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held
by them under valid, existing and enforceable leases with such
exceptions as are not material and do not unreasonably interfere with
the use made or proposed to be made of such property and buildings by
the Company or its subsidiaries.
2. Agreements to Sell and Purchase. The Issuers hereby agree to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Issuers at $25.00 per PEPS Unit (the "PURCHASE PRICE") the number of
Underwritten Securities set forth in Schedule I hereto opposite the name of such
Underwriter.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Issuers agree to sell to
the Underwriters the Option Securities, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 900,000 Option
Securities at the Purchase Price. If you, on behalf of the Underwriters, elect
to exercise such option, you shall so notify the Company in writing not later
than 30 days after the date of this Agreement, which notice shall specify the
number of Option Securities to be purchased by the Underwriters and the date on
which such Option Securities are to be purchased. Such date may be the same as
the Closing Date (as defined below) but not earlier than the Closing Date nor
later than ten business days after the date of such notice. Option Securities
may be purchased as provided in Section 4 hereof solely for the purpose of
covering over-allotments made in connection with the offering of the
Underwritten Securities. If any Option Securities are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of Option
Securities (subject to such adjustments to eliminate fractional units as you may
determine) that bears the same proportion to the total number of Option
Securities to be purchased as the number of Underwritten Securities set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Underwritten Securities.
The Issuers hereby agree that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, they will not,
during the period ending 90 days after the date of the final prospectus
supplement included in the Prospectus, (i) register, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any Securities,
Purchase Contracts or shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Securities, Purchase
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<PAGE> 14
Contracts or Common Stock or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Securities, Purchase Contracts or Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Securities, Purchase Contracts or Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) the issuance by the Company of shares
of Common Stock pursuant to, or the grant of options under the Company's
existing stock option, employee benefit or dividend reinvestment plans (as
described in the Prospectus), or (C) the issuance of shares of Common Stock
pursuant to the Equity Offering.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable. The Company is further
advised by you that the Securities are to be offered to the public initially at
$25.00 per Security (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $o per
Security under the Public Offering Price, and that any Underwriter may allow,
and such dealers may reallow, a concession, not in excess of $o per Security, to
any Underwriter or to certain other dealers.
The Company hereby guarantees the timely performance by the Trust of
its obligations under this Agreement. As compensation to the Underwriters for
their commitments hereunder, and in view of the fact that the Trust will
purchase the Senior Deferrable Notes, the Company hereby agrees to pay at the
Closing Date to the Representatives for the accounts of the several Underwriters
a commission in the amount of $___ per Security (the "UNDERWRITING COMMISSION").
4. Payment and Delivery. Payment for the Underwritten Securities to be
sold by the Issuers shall be made to the Issuers in Federal or other funds
immediately available in New York City against delivery to you for the
respective accounts of the several Underwriters of the certificates for the
Underwritten Securities, or delivery to a securities intermediary designated by
you of such certificates and crediting to your securities account at such
securities intermediary for the account of the several Underwriters of security
entitlements in respect of the Underwritten Securities, against, in either case,
crediting to the securities account of the Collateral Agent of security
entitlements in respect of the Trust Preferred Securities constituting a part of
the Underwritten Securities as set forth in the Pledge Agreement, and payment to
you of the Underwriting Commission with respect to the Underwritten Securities
by wire transfer in immediately available funds to an account specified by you
to the Company shall be made at 10:00 a.m., New York City time, on the fourth
business day after the date of this
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<PAGE> 15
Agreement, or at such other time on the same or such other date, not later than
nine business days after the date of this Agreement as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "CLOSING DATE."
Payment for the Option Securities shall be made to the Issuers in
Federal or other funds immediately available in New York City against delivery
to the Representatives for the accounts of the several Underwriters of the
certificates for the Option Securities purchased by the Underwriters, or
delivery to a securities intermediary designated by the Representatives of such
certificates and crediting to your securities account at such securities
intermediary for the accounts of the several Underwriters of security
entitlements in respect of such Option Securities, against, in either case,
crediting to the securities account of the Collateral Agent of security
entitlements in respect of the Trust Preferred Securities constituting a part of
such Option Securities as set forth in the Pledge Agreement, and payment to the
Representatives of the Underwriting Commission with respect to such Option
Securities in the manner set forth above shall be made at 10:00 a.m., New York
City time, on the date specified in the notice described in Section 2 or at such
other time on the same or on such other date, in any event not later than 10
business days after the expiration of the Underwriters' option to purchase
Option Securities as shall be designated in writing by you. The time and date of
such payment are hereinafter referred to as the "OPTION CLOSING DATE".
The certificates, if any, for the Securities purchased by the
Underwriters shall be registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates,
if any, evidencing the Underwritten Securities or Option Securities shall be
delivered to you on the Closing Date or the Option Closing Date, as the case may
be, for the respective accounts of the several Underwriters, with any transfer
taxes payable in connection with the transfer of the Underwritten Securities or
Option Securities to the Underwriters duly paid, against payment of the Purchase
Price and the Underwriting Commission with respect to such Securities.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Securities to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Securities on the Closing Date
are subject to the following further conditions:
(a) no stop order suspending the effectiveness of the
Registration Statement or suspending the qualification of the
Indenture, the Guarantee Agreement or the Amended Declaration shall
have been instituted or shall be pending or, to your knowledge or the
knowledge of
15
<PAGE> 16
the Company, shall be contemplated by the Commission, and any request
on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel for the
Underwriters.
(b) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does
not indicate an improvement, in the rating accorded any of the
Company's securities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Trust, the Company and the Company's
subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Securities on the terms
and in the manner contemplated in the Prospectus.
(c) The Purchase Agreement shall be in full force and effect
and no amendment thereto shall have been entered into and none of the
conditions to closing set forth thereon shall have been waived (except
in either case prior to the date hereof, with your consent or such
thereof as would not be reasonably likely to have a material adverse
effect on the Company and its subsidiaries taken as a whole).
(d) The Underwriters shall have received on the Closing Date:
(i) a certificate, dated the Closing Date and signed by
an executive officer of the Company, to the effect set forth
in Section 5(b)(i) and 5(c) above and to the effect that the
representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and
that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date; and
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<PAGE> 17
(ii) a certificate, dated the Closing Date and signed by a
Regular Trustee of the Trust to the effect that the
representations and warranties of the Trust contained in this
Agreement are true and correct as of the Closing Date, and
that the Trust has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(e) The Underwriters shall have received on the Closing Date
an opinion of Baker Botts L.L.P., outside counsel for the Issuers,
dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iii) the Securities and the PEPS Agreements have
been duly authorized, executed and delivered, and each is a
valid and legally binding agreement of the Company,
enforceable in accordance with their respective terms, subject
to applicable bankruptcy, insolvency or similar laws relating
to or affecting creditors' rights generally and general
principles of equity, and the Securities and the PEPS
Agreements conform as to legal matters to the descriptions
thereof contained in the Prospectus;
(iv) the Rights Agreement has been duly authorized by
the Company, the Rights have been duly authorized by the
Company and, when issued with the shares of common stock to be
issued and sold by the Company upon the settlement of the
Purchase Contracts, will be validly issued, and the Shares of
Junior Participating Preferred Stock, Series I, issuable upon
exercise of the Rights have been duly authorized by the
Company and, when issued upon such exercise in accordance with
the terms of the
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<PAGE> 18
Rights Agreement, will be validly issued, fully paid and
non-assessable;
(v) the shares of Common Stock to be issued and sold
by the Company pursuant to the settlement of the Purchase
Contracts have been duly and validly authorized and reserved
for issuance, and such shares of Common Stock, when issued and
delivered in accordance with the provisions of the PEPS
Agreements, will be validly issued, fully paid and
non-assessable, and the issuance of such shares of Common
Stock will not be subject to any preemptive or similar rights;
(vi) this Agreement has been duly authorized,
executed and delivered by each of the Trust and the Company;
(vii) the Purchase Agreement has been duly
authorized, executed and delivered by the Company and
represents a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as the
enforceability thereof is subject to the effect of (A)
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws relating to or affecting creditors'
rights generally and (B) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(viii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Rights Agreement, the Purchase Agreement,
the Securities, the PEPS Agreements, the Guarantee, the
Guarantee Agreement, the Indenture, the Senior Deferrable
Notes, the Amended Declaration and the Remarketing Agreement
will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company;
(ix) the statements (A) in the Prospectus Supplement
under the captions "Description of Capital Stock,"
"Description of the PEPS Units", "Description of the Purchase
Contracts", "Certain Provisions of the Purchase Contracts, the
Purchase Contract Agreement and the Pledge Agreement",
"Description of the Trust Preferred Securities", "Description
of the Senior Deferrable Notes", "Description of the
Guarantee", "ERISA Considerations", (B) in the Base
Prospectus, as supplemented by the Prospectus Supplement,
under the captions "The Trust",
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<PAGE> 19
"Description of Common Stock", "Description of Debt
Securities", "Description of Trust Preferred Securities",
"Description of the Guarantee", "Relationship Among the Trust
Preferred Securities, the Debt Securities and the Guarantee",
and "Description of Stock Purchase Contracts And Stock
Purchase Units" (C) in the Registration Statement in Item 15
and (D) incorporated by reference into the Prospectus under
the caption "Description of Securities to be Registered" in
the report on Form 8-A/A dated July 17, 1997, in each case
insofar as such statements constitute summaries of legal
matters, accurately present the information called for with
respect to such legal matters, documents and proceedings and
accurately summarize the matters referred to therein;
(x) the Company and the Trust are not, and after
giving effect to the offering and sale of the Securities and
the application of the proceeds thereof as described in the
Prospectus will not be, required to register as an "investment
company" as such term is defined in the Investment Company Act
of 1940, as amended;
(xi) each of the Guarantee Agreement and the
Guarantee has been duly authorized, validly executed and
delivered by the Company and is a valid and binding obligation
of the Company, enforceable in accordance with its terms,
except as the enforceability thereof is subject to the effect
of (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws relating to or affecting
creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and the
Guarantee Agreement and the Guarantee conform to the
description thereof in the Prospectus;
(xii) the Amended Declaration has been duly
authorized, duly executed by the proper officers of the
Company and the Regular Trustees and delivered by the Company,
and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as the enforceability thereof is subject to the effect
of (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws relating to or affecting
creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and the
Amended
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<PAGE> 20
Declaration conforms as to legal matters to the description
thereof in the Prospectus;
(xiii) the Senior Deferrable Notes have been duly
authorized, and, when issued and delivered pursuant to the
Indenture, will have been duly executed, authenticated, issued
and delivered and will constitute valid and binding
obligations of the Company entitled to the benefits provided
by the Indenture; the Indenture has been duly authorized,
executed and delivered by the Company and is duly qualified
under the Trust Indenture Act and constitutes a valid and
binding instrument, enforceable in accordance with its terms,
except as the enforceability thereof is subject to the effect
of (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws relating to or affecting
creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); the Indenture
will conform to the description thereof in the Prospectus;
(xiv) (i) the Trust will be classified as a grantor
trust for United States federal income tax purposes and not as
an association taxable as a corporation; (ii) the Senior
Deferrable Notes will be classified as indebtedness of the
Company and deductions for interest on the Senior Deferrable
Notes will not be disallowed under section 163(l) of the
Internal Revenue Code and (iii) the statements set forth in
the Prospectus under the caption "United States Federal Income
Tax Consequences" insofar as they purport to constitute
summaries of matters of United States federal tax laws and
regulations or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein
in all material respects;
(xv) the Purchase Contract Agreement, the Pledge
Agreement, the Purchase Contracts and the Securities have been
duly authorized, executed and delivered by the Company, and
each is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and general principals
of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); provided, however, that upon
the occurrence of a Termination Event, Section 365(e) of the
Bankruptcy Code (11 U.S.C. Sections 101-1330, as amended) and,
based on a review of the
20
<PAGE> 21
applicable case law (of which there is very little that
supports - or refutes - these conclusions), Section 541 of the
Bankruptcy Code should not substantively limit the provisions
of Section 3.15 and 5.06 of the Purchase Contract Agreement
and Section 5.4 of the Pledge Agreement that require
termination of the Purchase Contracts and release of the
Collateral Agent's security interest in the Trust Preferred
Securities or the Treasury Securities; provided, however, that
the foregoing opinion is subject to the powers of the
Bankruptcy Court under Section 105(a) of the Bankruptcy Code;
(xvi) The Pledge Agreement is effective to create in
favor of the Collateral Agent for the benefit of the Company,
a valid security interest under the New York Uniform
Commercial Code as in effect on the date hereof in the State
of New York (the "UCC") in the security entitlements in
respect of the Pledged Trust Preferred Securities and the
Pledged Treasury Securities (as each is defined in the Pledge
Agreement) that are from time to time credited to the
Collateral Account (as described in Section 4 of the Pledge
Agreement) and, subject to Article 9.306 of the UCC, the
proceeds thereof, to secure the obligations of the Holders
under the Purchase Contracts; and
(xvii) The security interest of the Collateral Agent
in security entitlements with respect to the Pledged Trust
Preferred Securities and the Pledged Treasury Securities (as
each is defined under the Pledge Agreement) that are from time
to time credited to the Collateral Account (as described in
Section 4 of the Pledge Agreement) will be perfected, and the
Collateral Agent will have "control" (within the meaning of
Article 8-106 of the UCC) thereof, once the Securities
Intermediary has indicated by book entry that such financial
assets have been credited to the Collateral Account, provided
that, the Securities Intermediary has agreed that it will
comply with "entitlement orders" originated by the Collateral
Agent without further consent by the "entitlement holder" (as
each is defined in Article 8-102(a)(7) and (8)). Under Section
4.3 of the Pledge Agreement, the Securities Intermediary has
agreed that it will comply with entitlement orders originated
by the Collateral Agent, as the secured party, with respect to
the Collateral Account without further consent by the Purchase
Contract Agent, the entitlement holder with respect to such
security entitlements. Under Section 8-510 of the UCC,
assuming that neither the Collateral Agent nor the Company has
any notice of any adverse claim to such security entitlements,
insofar as Articles 8 and 9 of the UCC are applicable thereto,
no action based on an adverse claim to such security
entitlements, whether framed in conversation, repletion,
constructive trust, equitable lien or other theory, may be
asserted against the Collateral Agent or the Company. In
giving our opinions contained in this paragraph (xvii) we have
relied upon the representations of the Securities Intermediary
contained in, and have assumed compliance by the Securities
Intermediary with its undertakings set forth in, Sections 4.1,
4.2, 4.3, 4.4, 4.5 and 4.9 of the Pledge Agreement.
In addition, such counsel shall state that nothing has come to
such counsel's attention to cause such counsel to believe that (A) the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included therein
as to which such counsel need not comment) do not comply as to form in
all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder or (B)(i) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time
the Registration
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<PAGE> 22
Statement became effective or at the time of the execution of this
Agreement contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(e) The Underwriters shall have received on the Closing Date
an opinion of Jay D. Browning, Esq., Corporate Secretary and Managing
Attorney, Corporate Law for the Company, to the effect that:
(i) the Company is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(iii) all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(iv) the shares of Common Stock outstanding prior to
the issuance of the Securities have been duly authorized and
are validly issued, fully paid and non-assessable;
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<PAGE> 23
(v) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement, the Rights Agreement, the Purchase Agreement, the
Securities, the PEPS Agreements, the Amended Declaration, the
Guarantee, the Guarantee Agreement, the Senior Deferrable
Notes, the Indenture and the Remarketing Agreement will not
contravene any agreement or other instrument binding upon the
Company or any of its subsidiaries that is known to such
counsel and material to the Company and its subsidiaries,
taken as a whole, or to the best of such counsel's knowledge,
any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency
that has not already been obtained is required for the
performance by the Company of its obligations under this
Agreement, the Rights Agreement, the Purchase Agreement, the
Securities, the PEPS Agreements, the Amended Declaration, the
Guarantee, the Guarantee Agreement, the Senior Deferrable
Notes, the Indenture or the Remarketing Agreement, except such
as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Shares;
(vi) the statements (A) in the Prospectus under the
captions "Summary-The Benicia Acquisition and Related
Financings," "The Benicia Acquisition and Related Financings,"
"Business-Environmental Matters" and "-Legal Proceedings" and
"Risk Factors-Compliance with and changes in environmental
laws could adversely affect our performance" and "-the outcome
of the Unocal patent dispute may adversely affect our
business," (B) in the Registration Statement in Item 15 and
(C) incorporated by reference into the Prospectus under the
captions (i) "Item 1-Business-Environmental Matters and "Item
2-Legal Proceedings" in the Company's Annual Report on Form
10-K for the year ended December 31, 1999 and (ii) "Item
1-Legal Proceedings" in the Company's quarterly report on Form
10-Q for the quarter ended March 31, 2000, in each case
insofar as such statements constitute summaries of legal
matters, accurately present the information called for with
respect to such legal matters, documents and proceedings and
accurately summarize the matters referred to therein;
(vii) after due inquiry, such counsel does not know
of any legal or governmental investigations or proceedings
pending or
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<PAGE> 24
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;
(ix) nothing has come to such counsel's attention
that would cause such counsel to believe that the Company and
its subsidiaries (A) are not in compliance with any and all
applicable Environmental Laws, (B) have not received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses or (C) are not in compliance with all terms and
conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such
permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole; and
(x) the documents incorporated by reference in the
Prospectus (except for the consolidated financial statements
and other financial or statistical data included therein or
omitted therefrom, as to which such counsel need express no
opinion), as of the dates they were filed with the Commission
or to the extent such documents were subsequently amended
prior to the date hereof, at the time so amended, complied as
to form in all material respects with the requirements of the
Exchange Act and the regulations thereunder.
In addition, such counsel shall state that nothing has come to
such counsel's attention to cause such counsel to believe that (A) the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included therein
as to which such counsel need not comment) do not comply as to form in
all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder or (B)(i) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time
the Registration
24
<PAGE> 25
Statement became effective or at the time of the execution of this
Agreement contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
The opinions of Baker Botts L.L.P. and Jay D. Browning, Esq.
referred to in paragraphs 7(c) and 7(d) above shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
In giving the foregoing opinions, such counsel may rely on the
opinion of Richards, Layton & Finger, P.A. with respect to all matters
of Delaware law. Such counsel shall state that you and they are
justified in relying on such opinions, policies and certificates.
(f) Richards, Layton & Finger, P.A. shall have furnished to
the Underwriters its written opinion, as special Delaware counsel to
the Issuers, addressed to the Underwriters and dated such Closing Date,
in form and substance satisfactory to the Underwriters, to the effect
that:
(i) the Trust has been duly created and is validly
existing in good standing as a business trust under the
Delaware Trust Act. Under the Delaware Trust Act and the
Amended Declaration, the Trust has the business trust power
and authority to own property and to conduct its business as
described in the Prospectus, as amended and supplemented, and
to enter into and perform its obligations under this Agreement
and the Trust Securities;
(ii) the Common Securities have been duly authorized
by the Amended Declaration and, when issued and delivered by
the Trust to the Company against payment therefor in
accordance with the terms of the Amended Declaration and as
described in the Prospectus, will be validly issued and
(subject to the terms in this paragraph) fully paid undivided
beneficial interests in the assets of the Trust (such counsel
may note that the holders of Common Securities will be subject
to the withholding provisions of Section 10.4 of the Amended
Declaration, will be required to make payment or provide
indemnity or security as set forth in the Amended Declaration
and will be liable for the debts and
25
<PAGE> 26
obligations of the Trust to the extent provided in Section
9.1(b) of the Amended Declaration); under the Delaware Trust
Act and the Amended Declaration, the issuance of the Common
Securities is not subject to preemptive rights;
(iii) the Trust Preferred Securities have been duly
authorized by the Amended Declaration and, when issued and
delivered in accordance with the terms of the Amended
Declaration against payment therefor as set forth herein, the
Trust Preferred Securities will be validly issued and (subject
to the terms in this paragraph) fully paid and non-assessable
undivided beneficial interests in the assets of the Trust, the
Holders of the Trust Preferred Securities will be entitled to
the benefits of the Amended Declaration (subject to the
limitations set forth in clause (v) below) and will be
entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware
(such counsel may note that the holders of Trust Preferred
Securities will be subject to the withholding provisions of
Section 10.4 of the Amended Declaration and will be required
to make payment or provide indemnity or security as set forth
in the Amended Declaration); under the Delaware Trust Act and
the Amended Declaration, the issuance of the Trust Preferred
Securities is not subject to preemptive rights;
(iv) under the Delaware Trust Act and the Amended
Declaration, all necessary trust action has been taken to duly
authorize the execution, delivery and performance by the Trust
of this Agreement and the Remarketing Agreement;
(v) assuming the Amended Declaration has been duly
authorized by the Company and has been duly executed and
delivered by the Company and the Regular Trustees, and
assuming due authorization, execution and delivery of the
Amended Declaration by the Property Trustee and the Delaware
Trustee, the Amended Declaration constitutes a valid and
binding obligation of the Company and the Regular Trustees,
enforceable against the Company and the Regular Trustees in
accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy,
insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance or transfer and other
similar laws relating to or affecting the rights and remedies
of creditors generally, (ii) principles of equity, including
applicable law relating
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to fiduciary duties (regardless of whether considered and
applied in a proceeding in equity or at law), and (iii) the
effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution;
(vi) the issuance and sale by the Trust of the Trust
Securities, the purchase by the Trust of the Senior Deferrable
Notes, the execution, delivery and performance by the Trust of
this Agreement, the consummation by the Trust of the
transactions contemplated by the Underwriting Agreement and
compliance by the Trust with its obligations thereunder do not
violate any of the provisions of the Certificate of Trust or
the Amended Declaration or any applicable Delaware law or
administrative regulation; and
(vii) assuming that the Trust derives no income from
or connected with sources within the State of Delaware and has
no assets, activities (other than having a Delaware Trustee as
required by the Delaware Trust Act and the filing of documents
with the Secretary of State of Delaware) or employees in the
State of Delaware, no filing with, or authorization, approval,
consent, license, order, registration, qualification or decree
of, any Delaware court or Delaware governmental authority or
agency (other that as may be required under the securities or
blue sky laws of the state of Delaware, as to which such
counsel need express no opinion) is necessary or required to
be obtained by the Trust solely in connection with the due
authorization, execution and delivery by the Trust of this
Agreement or the offering, issuance, sale or delivery of the
Trust Preferred Securities.
(g) a written opinion of counsel shall have been furnished to
the Underwriters by counsel to The Bank of New York, as Property
Trustee and Guarantee Trustee, addressed to the Underwriters and dated
such Closing Date, in form and substance satisfactory to the
Underwriters, to the effect that:
(i) each of the Property Trustee and the Guarantee
Trustee is a national banking association with all necessary
power and authority to execute and deliver and perform their
respective obligations under the terms of the Amended
Declaration and the Guarantee Agreement;
(ii) the execution, delivery and performance by the
Property Trustee of the Amended Declaration and the execution,
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<PAGE> 28
delivery and performance by the Guarantee Trustee of the
Guarantee Agreement have been duly authorized by all necessary
corporate action on the part of the Property Trustee and the
Guarantee Trustee, respectively, and the Amended Declaration
has been duly executed and delivered by the Property Trustee
and the Guarantee Agreement has been duly executed and
delivered by the Guarantee Trustee and each constitutes the
valid and binding agreement of the Property Trustee and the
Guarantee Trustee, respectively, enforceable against the
Property Trustee and the Guarantee Trustee, respectively, in
accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
(iii) the execution, delivery and performance of the
Amended Declaration and the Guarantee Agreement by the
Property Trustee and the Guarantee Trustee, respectively, do
not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee and the Guarantee Trustee,
respectively; and
(iv) no consent, approval or authorization of, or
registration with or notice to, any federal banking authority
is required for the execution, delivery or performance by the
Property Trustee and the Guarantee Trustee of the Amended
Declaration and the Guarantee Agreement, respectively.
(h) A written opinion of counsel shall have been furnished to
the Underwriters by counsel to The Bank of New York (Delaware), as
Delaware Trustee, addressed to the Underwriters and dated such Closing
Date, in form and substance satisfactory to the Underwriters, to the
effect that:
(i) the Delaware Trustee has been duly incorporated
and is validly existing as a Delaware corporation in good
standing under the laws of the State of Delaware with all
necessary power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of the
Amended Declaration;
(ii) the execution, delivery and performance by the
Delaware Trustee of the Amended Declaration has been duly
authorized by all necessary corporate action on the part of
the
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<PAGE> 29
Delaware Trustee. The Amended Declaration has been duly
executed and delivered by the Delaware Trustee and constitutes
the valid and binding agreement of the Delaware Trustee
enforceable against the Delaware Trustee in accordance with
its terms, subject to bankruptcy, insolvency, moratorium,
receivership, reorganization, liquidation, fraudulent
conveyance or transfer and other similar laws relating to or
affecting the rights and remedies of creditors generally,
principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied
in a proceeding in equity or at law), and (iii) the effect of
applicable public policy on the enforceability of provisions
relating to indemnification or contribution;
(iii) the execution, delivery and performance of the
Amended Declaration by the Delaware Trustee do not conflict
with or constitute a breach of the charter or by-laws of the
Delaware Trustee; and
(iv) no consent, approval or authorization of, or
registration with or notice to, any Delaware or federal
banking authority is required for the execution, delivery or
performance by the Delaware Trustee of the Amended
Declaration.
(i) A written opinion of counsel shall have been furnished to
the Underwriters by counsel to The Bank of New York, as Purchase
Contract Agent, addressed to the Underwriters and dated such Closing
Date, in form and substance satisfactory to the Underwriters, to the
effect that:
(i) the Purchase Contract Agent is duly incorporated
as a New York banking corporation with all necessary power and
authority to execute, deliver and perform its obligations
under the Purchase Contract Agreement and the Pledge
Agreement;
(ii) the execution, delivery and performance by the
Purchase Contract Agent of the Purchase Contract Agreement and
the Pledge Agreement, and the authentication and delivery of
the PEPS Units and the Treasury PEPS Units have been duly
authorized by all necessary corporate action on the part of
the Purchase Contract Agent, and the Purchase Contract
Agreement and the Pledge Agreement have been duly executed and
delivered by the Purchase Contract Agent, and constitute the
valid and binding agreements of the Purchase Contract Agent,
enforceable against the Purchase Contract Agent in accordance
with their
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<PAGE> 30
terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing;
(iii) the execution, delivery and performance of the
Purchase Contract Agreement and the Pledge Agreement by the
Purchase Contract Agent does not conflict with or constitute a
breach of the charter or by-laws of the Purchase Contract
Agent; and;
(iv) no consent, approval or authorization of, or
registration with or notice to, any state or federal
governmental authority or agency is required for the
execution, delivery or performance by the Purchase Contract
Agent of the Purchase Contract Agreement and the Pledge
Agreement.
(j) A written opinion of counsel shall have been furnished to
the Underwriters by counsel to Bank One Trust Company, N.A., as
Collateral Agent and Securities Intermediary, addressed to the
Underwriters and dated such Closing Date, in form and substance
satisfactory to the Underwriters, to the effect that:
(i) the Collateral Agent and Securities Intermediary
are duly incorporated as a New York banking corporation with
all necessary power and authority to execute, deliver and
perform its obligations under the Pledge Agreement;
(ii) the execution, delivery and performance by the
Collateral Agent and Securities Intermediary of the Pledge
Agreement have been duly authorized by all necessary corporate
action on the part of the Collateral Agent and Securities
Intermediary. The Pledge Agreement has been duly executed and
delivered by the Collateral Agent and Securities Intermediary,
and constitute the valid and binding agreements of the
Collateral Agent and Securities Intermediary, enforceable
against the Collateral Agent and Securities Intermediary in
accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
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<PAGE> 31
(iii) the execution, delivery and performance of the
Pledge Agreement by the Collateral Agent and Securities
Intermediary does not conflict with or constitute a breach of
the charter or by-laws of the Collateral Agent and Securities
Intermediary; and
(iv) no consent, approval or authorization of, or
registration with or notice to, any state or federal
governmental authority or agency is required for the
execution, delivery or performance by the Collateral Agent and
Securities Intermediary of the Pledge Agreement.
(k) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date in form and substance satisfactory to the
Underwriters.
(l) The Underwriters shall have received, on the date hereof
and the Closing Date, (i) Arthur Andersen LLP (with respect to the
financial statements of the Company) and (ii) PricewaterhouseCoopers
(with respect to the financial statements of the assets acquired
pursuant to the Acquisition) shall have furnished to you letters, dated
such date, in form and substance satisfactory to you, containing
statements and information of the type customarily included in
accountants "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(m) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and William E. Greehey, Gregory C.
King and John D. Gibbons relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.
(n) The Securities shall have been approved for listing,
subject only to official notice of issuance, on the New York Stock
Exchange.
The several obligations of the Underwriters to purchase Option
Securities hereunder are subject to the delivery to the Underwriters on the
Option Closing Date of such documents as you may reasonably request with respect
to the good standing of the Company, the due authorization and issuance of the
Option Securities and other matters related to the issuance of the Option
Securities.
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6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, each of the Issuers jointly and severally
covenants with each Underwriter as follows:
(a) To furnish to you, without charge, four conformed copies
of the Registration Statement (including exhibits and documents
incorporated by reference thereto) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and, during the period mentioned
in Section 6(d) below, as many copies of the Prospectus, any documents
incorporated by reference therein and any supplements and amendments
thereto or to the Registration Statement as you may reasonably request.
(b) During the period after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, before amending or
supplementing the Registration Statement or the Prospectus, (including
by filing any document that would as a result thereof be incorporated
by reference in the Prospectus) to furnish to you a copy of each such
proposed amendment, supplement or other document and not to file any
such proposed amendment, supplement or other document to which you
reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) During the period after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, to file promptly all
documents required to be filed with the Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(d) If, during such period after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to
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<PAGE> 33
amend or supplement the Prospectus to comply with applicable law,
forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Securities may have
been sold by you on behalf of the Underwriters and to any other dealers
upon request, either amendments or supplements to the Prospectus, so
that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as
so amended or supplemented, will comply with law.
(e) To endeavor to qualify the Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request and to maintain such qualifications for as
long as the Underwriters shall reasonably request.
(f) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve month period ending ____________, 2001 that
satisfies the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
(g) To use its best efforts to effect the listing of the
Securities and the shares of Common Stock issuable upon settlement of
the Purchase Contracts on The New York Stock Exchange.
7. Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the
Company agrees to pay or cause to be paid all expenses incident to the
performance of the obligations of the Issuers under this Agreement,
including: (i) the fees, disbursements and expenses of the Issuers'
counsel and the Issuers' accountants in connection with the
registration and delivery of the Securities under the Securities Act
and all other fees or expenses in connection with the preparation and
filing of the Registration Statement, any preliminary prospectus, the
Prospectus and amendments and supplements to any of the foregoing,
including all printing costs associated therewith, and the mailing and
delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related
to the transfer and delivery of the Securities to the Underwriters,
including any transfer or other taxes payable thereon, (iii) the cost
of printing or producing any Blue Sky memorandum in connection with the
offer and sale of the Securities under state securities laws and all
expenses in connection with the qualification of the Securities
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<PAGE> 34
for offer and sale under state securities laws as provided in Section
6(c) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky memorandum, (iv) all
filing fees and the reasonable fees and disbursements of counsel to the
Underwriters, if any, incurred in connection with the review and
qualification of the offering of the Securities by the National
Association of Securities Dealers, Inc., (v) any fees charged by rating
agencies for the rating of the Securities, (vi) all costs and expenses
incident to listing the Securities and the shares of Common Stock
issuable upon settlement of the Purchase Contracts constituting part of
the Securities on any national securities exchanges, (vii) the cost of
printing any certificates representing the Securities, (viii) the costs
and charges of any transfer agent, registrar or depositary for the
Securities, (ix) the costs and expenses of the Company relating to
investor presentations on any "road show" undertaken in connection with
the marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the officers of the Company
and any such consultants, and (x) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section. It is understood
that except as provided in this Section, Section 8 entitled "Indemnity
and Contribution", and the last paragraph of Section 10 below, the
Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on
resale of any of the Shares by them and any advertising expenses
connected with any offers they may make.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact
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<PAGE> 35
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you or through your counsel
expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Trust and the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Trust and the Company, the directors of the Company, the
officers of the Company who signed the Registration Statement, the Trustees and
each person, if any, who controls the Company or the Trust within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof, any preliminary prospectus
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Trust and
the Company in writing by such Underwriter through you or through your counsel
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b) such person (the "INDEMNIFIED PARTY")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified
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<PAGE> 36
party to represent the indemnified party and any others the indemnifying party
may designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Morgan Stanley &
Co. Incorporated in the case of parties indemnified pursuant to Section 8(a),
and by the Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the third and fourth sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such subsection, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is
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appropriate to reflect the relative benefits received by each of the Trust and
the Company on the one hand and the Underwriters on the other hand from the
offering of the Securities or (ii) if the allocation provided by clause 8(d)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Trust or the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by each of the Trust and the Company on the one hand and the Underwriters on the
other hand in connection with the offering of the Securities shall be deemed to
be in the same respective proportions as the net proceeds from the offering of
Securities (before deducting expenses) received by the Company and the Trust,
and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth below the table on the cover of the
Prospectus, bear to the total price to public of the Securities. The relative
fault of the Trust or the Company on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters' respective obligations to contribute pursuant to this Section
8 are several in proportion to the respective number of Securities they have
purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this
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Section 8 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section
8 and the representations, warranties and other statements of the Trust and the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of any termination of this Agreement, any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Trust or the Company, its officers or directors or any
person controlling the Trust or the Company and acceptance of and payment for
any of the Securities.
For purposes of this Section 8 only, references to the Registration
Statement and Prospectus shall include the information included in the Company's
Form 8-K dated March 17, 2000, notwithstanding the fact that such information
was amended and superceded by the Company's Form 8-K/A dated May 15, 2000.
9. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange or the National Association
of Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
9(a)(i) through 9(a)(iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Securities
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Securities to be purchased on such date, the other
Underwriters
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shall be obligated severally in the proportions that the number of Underwritten
Securities set forth opposite their respective names in Schedule I bears to the
aggregate number of Underwritten Securities set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Securities that any Underwriter has agreed
to purchase pursuant to this Agreement be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Securities without the
written consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Underwritten Securities and the
aggregate number of Underwritten Securities with respect to which such default
occurs is more than one-tenth of the aggregate number of Underwritten Securities
to be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Underwritten Securities are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Option Securities and the
aggregate number of Option Securities with respect to which such default occurs
is more than one-tenth of the aggregate number of Option Securities to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Option Securities or (ii)
purchase not less than the number of Option Securities that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
39
<PAGE> 40
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
14. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to the Underwriters shall be
given to the Representatives, c/o Morgan Stanley & Co. Incorporated, 1585
Broadway, New York, New York 10036 (telefax: 212-761-0588); Attention: Syndicate
Department. Notices to the Company shall be given to it at One Valero Place, San
Antonio, Texas, 78212 (telefax: 210-370-2646); Attention: Corporate Secretary.
Very truly yours,
VEC TRUST I
By: VALERO ENERGY
CORPORATION, as
Sponsor
By:
-----------------------------------
Name:
Title:
VALERO ENERGY
CORPORATION
By:
-----------------------------------
Name:
Title:
40
<PAGE> 41
Accepted as of the date hereof.
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
J.P. MORGAN SECURITIES INC.
BMO NESBITT BURNS CORP.
Acting severally on behalf of themselves and the several Underwriters
named in Schedule I hereto
By: MORGAN STANLEY & CO. INCORPORATED
By:
-----------------------------
Name:
Title:
41
<PAGE> 42
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm
Securities
to be
Underwriter Purchased
----------- ----------
<S> <C>
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
BMO Nesbitt Burns Corp.
Total
</TABLE>
42
<PAGE> 43
SCHEDULE II
Title of Securities:
__% PEPS(SM) Units
Registration Statement:
Registration Statement No. 333-33846
Number of Firm Securities:
____ PEPS(SM) Unit
Number of Option Securities:
____ PEPS(SM) Unit
Price to Public:
$25 per PEPS(SM) Unit
Purchase Price by Underwriters:
$25 per PEPS(SM) Unit
Commission Payable to Underwriters:
$__ Per PEPS(SM) Unit
Distribution Rate on Trust Preferred Securities:
___% of the stated liquidation preference of $25 per annum
Specified funds for payment of purchase price:
Federal (same day) funds
Reference Price:
$____
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<PAGE> 44
Threshold Appreciation Price:
$____
Closing Price of Valero Common Stock on June __, 2000:
$____
Payment Dates:
February 18, May 18, August 18 and November 18
Purchase Contract Settlement Date:
August 18, 2003
Maturity of Trust Preferred Security:
August 18, 2005
Stock Exchange Listing:
New York Stock Exchange
Closing Date:
June __, 2000
Closing Location:
____
Names and addresses of Representatives:
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
BMO Nesbitt Burns Corp.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
44
