<PAGE> 1
EXHIBIT 1.1
5,000,000 SHARES
VALERO ENERGY CORPORATION
COMMON STOCK (PAR VALUE $.01 PER SHARE)
UNDERWRITING AGREEMENT
June__, 2000
<PAGE> 2
June__, 2000
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Salomon Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Valero Energy Corporation, a Delaware corporation (the "COMPANY"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS"), for whom Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, J.P. Morgan Securities Inc., Lehman Brothers Inc. and
Salomon Smith Barney Inc. shall act as representatives (the "REPRESENTATIVES"),
an aggregate of 5,000,000 shares of its Common Stock, par value $.01 per share
(the "FIRM SHARES").
The Company also proposes to issue and sell to the several Underwriters not
more than an additional 750,000 shares of its common stock, par value $.01 per
share, (the "ADDITIONAL SHARES") if and to the extent that the Representatives
shall have determined to exercise, on behalf of the Underwriters, the right to
purchase such shares of common stock granted to the Underwriters in Section 2
hereof. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "SHARES." The shares of common stock, par value $.01 per
share, of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "COMMON STOCK." The
Shares will have attached thereto preferred share purchase rights (the "RIGHTS")
issued pursuant to the Rights Agreement (the "RIGHTS AGREEMENT") dated as of
July 17, 1997 between the Company and Harris Trust and Savings Bank, as Rights
Agent.
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-
1
<PAGE> 3
33846), including a related prospectus, relating to the registration of certain
shares of Common Stock including the Shares and the related Rights and certain
debt and other securities (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 Shares, 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
Shares, in the form first used to confirm sales of the Shares 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 Shares, the Company intends to offer
$_____ aggregate principal amount of senior notes (the "DEBT OFFERING") and
_____ aggregate stated amount of Premium Equity Participating Security Units -
PEPS(sm) Units (the "PEPS UNITS 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 also 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.
1. Representations and Warranties of the Company. The Company 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
2
<PAGE> 4
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 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
3
<PAGE> 5
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
the Company.
(g) 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.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(j) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(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 upon issuance of the Shares, 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
4
<PAGE> 6
exercise of the Rights in accordance with the terms of the Rights
Agreement, will be validly issued, fully paid and non-assessable.
(l) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Rights
Agreement and the Purchase 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 or the Purchase
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.
(m) 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.
(n) 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 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).
(o) There are no legal or governmental investigations or proceedings
pending or threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or
5
<PAGE> 7
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
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.
(p) 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.
(q) The Company is not, and after giving effect to the offering and
sale of the Shares 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.
(r) 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 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 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,
6
<PAGE> 8
state or local regulatory authority in connection with the execution and
delivery of this Agreement, the Purchase Agreement or the Rights 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).
(s) 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).
(t) 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.
(u) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement.
(v) 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
7
<PAGE> 9
(ii) were made by the Company with a reasonable basis and reflect the
Company's good faith estimate of the matters described above.
(w) 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
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.
(x) 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.
(y) 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 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 Company hereby agrees 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
Company at $_____ a share (the "PURCHASE PRICE") the number of Firm Shares set
forth in Schedule I hereto opposite the name of such Underwriter.
8
<PAGE> 10
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 750,000 Additional
Shares at the Purchase Price. If the Representatives, on behalf of the
Underwriters, elect to exercise such option, the Representatives 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 Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased (which
date shall not be less than three business days following such notice, unless
agreed to by both the Underwriters and the Company). 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. Additional Shares
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 Firm
Shares. If any Additional Shares are to be purchased, each Underwriter agrees,
severally and not jointly, to purchase the number of Additional Shares (subject
to such adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule I
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it 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 shares of Common Stock or any securities
convertible into or exercisable or exchangeable for 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 Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Shares 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 or (C) the issuance of securities contemplated by
the Debt Offering and PEPS Units Offering (as described in the Prospectus).
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by
9
<PAGE> 11
you that the Shares are to be offered to the public initially at $___ a share
(the "PUBLIC OFFERING PRICE") and to certain dealers selected by you at a price
that represents a concession not in excess of $____ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $____ a share, to any Underwriter or to
certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares to be sold by the
Company shall be made to the Company in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on ____________, 2000, or at such other time on the same or such other
date, not later than _________, 2000, 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 any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters 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 _______, 2000, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and 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
evidencing the Firm Shares and Additional Shares 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 Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the following further conditions:
(a) no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act and no
proceedings for that purpose shall have been instituted or shall be pending
or, to your knowledge or the knowledge of the Company, shall be
contemplated by the Commission, and any request on the part of the
10
<PAGE> 12
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 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) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares 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 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.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
11
<PAGE> 13
(e) The Underwriters shall have received on the Closing Date an
opinion of Baker Botts L.L.P., outside counsel for the Company, 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 Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights
under the Company's certificate of incorporation or by-laws or under
Delaware General Corporation Law or, to the best of such counsel's
knowledge, any agreement to which the Company is a party;
(iv) the Rights Agreement has been duly authorized by the
Company; the Rights have been duly authorized by the Company and, when
issued upon issuance of the Shares, 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 Rights Agreement, will be validly issued, fully paid and
non-assessable;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) 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);
12
<PAGE> 14
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Rights Agreement and the Purchase Agreement will not contravene
any provision of applicable law or the certificate of incorporation or
by-laws of the Company;
(viii) the statements (A) in the Prospectus under the caption
"Description of Capital Stock", (B) in the Registration Statement in
Item 15 and (C) 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; and
(ix) the Company is not, and after giving effect to the offering
and sale of the Shares 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.
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 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.
13
<PAGE> 15
(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) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
(iv) 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;
(v) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Rights Agreement and the Purchase 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
14
<PAGE> 16
under this Agreement, the Rights Agreement or the Purchase 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," and (B) 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 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;
(viii) nothing has come to such counsel's attention to 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
15
<PAGE> 17
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
(ix) 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 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 6(e) and 6(f) above shall be rendered to the Underwriters
at the request of the Company and shall so state therein.
(f) 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.
(g) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing
16
<PAGE> 18
Date, as the case may be, in form and substance satisfactory to the
Underwriters, from each of the following independent public accountants:
(i) Arthur Andersen LLP (with respect to the financial statements of the
Company) and (ii) PricewaterhouseCoopers (with respect to financial
statements of the assets acquired pursuant to the Acquisition), containing
statements and information of the type ordinarily 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.
(h) 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.
The several obligations of the Underwriters to purchase Additional Shares
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 Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the agreements of
the Underwriters herein contained, the Company covenants with each Underwriter
as follows:
(a) To furnish to you, without charge, 5 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 Shares 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
17
<PAGE> 19
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 Shares 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 Shares 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
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 Shares 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 amended or supplemented, will
comply with law.
(e) To endeavor to qualify the Shares 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 earning statement covering the
twelve-month period ending June 30, 2001 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
18
<PAGE> 20
(g) To comply with all rules and regulations of the New York Stock
Exchange in respect of the listing of the Shares and to use its best
efforts to cause the Shares to be eligible for trading thereon.
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 its obligations
under this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares 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 herein above specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(e) 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 or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with any required review and qualification of the offering of the Shares by the
National Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to listing
the Shares on the New York Stock Exchange, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) 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 Shares, 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
(ix) 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
19
<PAGE> 21
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 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 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 Company, the directors of the Company, the officers of the
Company who sign the Registration Statement and each person, if any, who
controls the Company 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
20
<PAGE> 22
misleading, but only with reference to information relating to such Underwriter
furnished to 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 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 (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
control persons of any Underwriters, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In the case of any such separate firm for the
Company, and such directors, officers and control persons of the Company, such
firm shall be designated in writing by the Company. 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 second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement
21
<PAGE> 23
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 appropriate to reflect the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party or
parties on the other hand from the offering of the Shares 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
indemnifying party or parties on the one hand and of the indemnified party or
parties 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 the Company
on the one hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective proportions
as the net proceeds from the offering of the Shares (before deducting expenses)
received by the Company and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of 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
Shares 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
22
<PAGE> 24
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 Shares
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 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 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 the
Company, its officers or directors or any person controlling the Company and
acceptance of and payment for any of the Shares.
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
23
<PAGE> 25
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 Shares 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 Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares 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 Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares 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
Shares 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 Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares 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 Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares 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.
24
<PAGE> 26
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.
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,
VALERO ENERGY CORPORATION
By:
-------------------------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO.
INCORPORATED
CREDIT SUISSE FIRST BOSTON
CORPORATION
J.P. MORGAN SECURITIES INC.
LEHMAN BROTHERS INC.
SALOMON SMITH BARNEY INC.
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By:
-----------------------------------
Name:
Title:
25
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITERS TO BE PURCHASED
------------ ---------------------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Credit Suisse First Boston Corporation......................
J.P. Morgan Securities Inc..................................
Lehman Brothers Inc.........................................
Salomon Smith Barney Inc....................................
---------------------
Total:...............
=====================
</TABLE>
<PAGE> 28
EXHIBIT A
[FORM OF EQUITY LOCK-UP LETTER]
______, 2000
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
J.P. Morgan Securities Inc.
Lehman Brothers Inc.
Salomon Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING
AGREEMENT") with Valero Energy Corporation, a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several underwriters named therein, including Morgan Stanley (the
"UNDERWRITERS"), of shares (the "SHARES") of the common stock, par value $.01
per share, of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, he will not, during the period commencing on the
date hereof and ending 90 days after the date of the final prospectus supplement
relating to the Public Offering (the "PROSPECTUS SUPPLEMENT"), (1) 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, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or (2) 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 Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to the sale of any securities to the Underwriters pursuant to the Underwriting
Agreement or the sale of Premium Equity Participating Security Units (PEPS(sm)
Units) pursuant to any other underwriting
<PAGE> 29
agreement entered into between the Company and Morgan Stanley, as lead
underwriter. In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, he will not, during the
period commencing on the date hereof and ending 90 days after the date of the
final Prospectus Supplement, make any demand for or exercise any right with
respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company's transfer agent and registrar against the transfer of the
undersigned's shares of Common Stock except in compliance with the foregoing
restrictions.
The undersigned understands that the Company and the Underwriters are relying
upon this Lock-Up Agreement in proceeding toward consummation of the Public
Offering. The undersigned further understands that this Lock-Up Agreement is
irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters. Notwithstanding anything
herein to the contrary, this agreement will terminate if the Underwriting
Agreement is terminated prior to the delivery of the Shares thereunder.
Very truly yours,
-----------------------------------------
(Name)
-----------------------------------------
(Address)
2
