Exhibit 1.1
VALERO ENERGY CORPORATION
DEBT SECURITIES
Underwriting Agreement
December 10, 2002
To the Representatives named in
Schedule I hereto of the
Underwriters named in
Schedule II hereto
Ladies and Gentlemen:
Valero Energy Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the underwriters named in Schedule II hereto (the
"UNDERWRITERS"), for whom you are acting as representatives (the
"REPRESENTATIVES"), the principal amount of its debt securities identified in
Schedule I hereto (the "Securities"), to be issued under the indenture specified
in Schedule I hereto (the "INDENTURE") between the Company and the Trustee
identified in such Schedules (the "TRUSTEE"). If the firm or firms listed in
Schedule II hereto include only the firm or firms listed in Schedule I hereto,
then the terms "Underwriters" and "Representatives," as used herein, shall each
be deemed to refer to such firm or firms.
The Company has prepared and 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 (collectively, the "SECURITIES ACT"), a registration
statement (the file number of which is set forth in Schedule I hereto) on Form
S-3, relating to certain debt securities (the "SHELF SECURITIES") to be issued
from time to time by the Company. The Company also has filed with, or proposes
to file with, the Commission pursuant to Rule 424 under the Securities Act a
prospectus supplement specifically relating to the Securities. The registration
statement as amended to the date of this Agreement is hereinafter referred to as
the "REGISTRATION STATEMENT" and the related prospectus covering 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 pro-
spectus supplement specifically 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
in this Agreement to the Registration Statement, the Basic Prospectus, any
preliminary form of prospectus (a "PRELIMINARY PROSPECTUS") previously filed
with the Commission pursuant to Rule 424 or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Securities Act which were filed under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "EXCHANGE ACT") on or before the
date of this Agreement or the date of the Basic Prospectus, any preliminary
prospectus or the Prospectus, as the case may be; and any reference to "amend",
"amendment" or "supplement" with respect to the Registration Statement, the
Basic Prospectus, any preliminary prospectus or the Prospectus shall be deemed
to refer to and include any documents filed under the Exchange Act after the
date of this Agreement, or the date of the Basic Prospectus, any preliminary
prospectus or the Prospectus, as the case may be, which are deemed to be
incorporated by reference therein.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Securities to the several
Underwriters as hereinafter provided, and each Underwriter, on the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase, severally and not jointly, from the
Company the respective principal amount of Securities set forth opposite such
Underwriter's name in Schedule II hereto at the purchase price set forth in
Schedule I hereto plus accrued interest, if any, from the date specified in
Schedule I hereto to the date of payment and delivery.
2. The Company understands that the several Underwriters intend (i)
to make a public offering of their respective portions of the Securities and
(ii) initially to offer the Securities upon the terms set forth in the
Prospectus.
3. Payment for the Securities shall be made by wire transfer in
immediately available funds to the account specified by the Company to the
Representatives, no later than noon the Business Day (as defined below) prior to
the Closing Date (as defined below), on the date and at the time and place set
forth in Schedule I hereto (or at such other time and place on the same or such
other date, not later than the fifth
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Business Day (as defined below) thereafter, as you and the Company may agree in
writing). As used herein, the term "BUSINESS DAY" means any day other than a day
on which banks are permitted or required to be closed in New York City. The time
and date of such payment and delivery with respect to the Securities are
referred to herein as the "CLOSING DATE".
Payment for the Securities shall be made against delivery to the
nominee of The Depository Trust Company for the respective accounts of the
several Underwriters of the Securities of one or more global notes (the "GLOBAL
NOTE") representing the Securities, with any transfer taxes payable in
connection with the transfer to the Underwriters of the Securities duly paid by
the Company. The Global Note will be made available for inspection by the
Representatives at such place as the Representatives and the Company shall agree
not later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date.
4. 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
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
Trust Indenture Act of 1939, as amended, 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 (i) that part of the Registration Statement which
constitutes the Statements of Eligibility and Qualification under the
Trust
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Indenture Act of the Trustee (the "FORMS T-1") and (ii) 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) 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.
(d) Each subsidiary of the Company which is a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X (a "Significant
Subsidiary") (i) has been duly formed, is validly existing in good
standing under the laws of the jurisdiction of its formation, (ii) has
the corporate, limited liability company, limited partnership or
partnership 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) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The Securities have been duly authorized, and, when issued
and delivered pursuant to this Agreement, 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,
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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 Securities and
the Indenture will conform to the descriptions thereof in the
Prospectus.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture and the Securities will not contravene any provision of
applicable law or the certificate of incorporation or by-laws of the
Company or any agreement, indenture or 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 Indenture or the
Securities, 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.
(i) 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.
(j) 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).
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(k) 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 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.
(l) 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.
(m) The Company is 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.
(n) 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
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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
Indenture or the Securities; and except, in each case, as described in
the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
(o) 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).
(p) 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.
(q) 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, if any,
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; any such pro forma financial information,
and the related notes thereto, included in the Prospectus have been
prepared in accordance with the applicable requirements of the
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Exchange Act and are based upon good faith estimates and assumptions
believed by the Company to be reasonable.
(r) Neither the Company nor any of its subsidiaries is a
"holding company", a "subsidiary company" of 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.
(s) 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.
(t) Immediately after any sale of Securities by the Company
hereunder, the aggregate initial offering price of Securities which
have been issued and sold by the Company hereunder and of any
securities of the Company (other than the Securities) that shall have
been issued and sold pursuant to the Registration Statement will not
exceed the aggregate initial offering price of securities registered
under the Registration Statement.
5. The Company covenants and agrees with each of the several
Underwriters as follows:
(a) to file the Prospectus in a form approved by you pursuant
to Rule 424 under the Securities Act not later than the Commission's
close of business on the second Business Day following the date of
determination of the offering price of the Securities or, if
applicable, such earlier time as may be required by Rule 424(b);
(b) to furnish to you, without charge, five conformed copies
of the Registration Statement (including exhibits thereto) and for
delivery to each other
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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 5(e) below, as many copies of the Prospectus and any
supplements and amendments thereto or to the Registration Statement as
you may reasonably request;
(c) from the date hereof and prior to the Closing Date, to
furnish to you a copy of any proposed amendment or supplement to the
Registration Statement or the Prospectus, for your review, and not to
file any such proposed amendment or supplement to which you reasonably
object;
(d) to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Securities, and during such
same period, to advise you promptly, and to confirm such advice in
writing, (i) when any amendment to the Registration Statement shall
have become effective, (ii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for any additional information, (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation or
threatening of any proceeding for that purpose, and (iv) of the receipt
by the Company of any notification with respect to any suspension of
the qualification of the Securities for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and to use its best efforts to prevent the issuance of
any such stop order or notification and, if issued, to obtain as soon
as possible the withdrawal thereof;
(e) if, during such period after the first date of the public
offering of the Securities as in the opinion of counsel for the
Underwriters a prospectus relating to the Securities is required by law
to be delivered in connection with sales by an Underwriter or dealer,
any event shall occur 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 when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement
the Prospectus to comply with law, forthwith to prepare and furnish, at
the expense of the Company, 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, such amendments or supplements to
the Prospectus
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as may be necessary 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 will comply with law;
(f) 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 continue such qualification in effect
so long as reasonably required for distribution of the Securities;
(g) 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 September 30, 2003 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder;
(h) during the period beginning on the date hereof and
continuing to and including the Business Day following the Closing
Date, not to offer, sell, contract to sell or otherwise dispose of any
debt securities of or guaranteed by the Company which are substantially
similar to the Securities;
(i) to use the net proceeds received by the Company from the
sale of the Securities pursuant to this Agreement in the manner
specified in the Prospectus under the caption "Use of Proceeds"; and
(j) whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all costs and expenses incident to the performance of
its obligations hereunder, including without limiting the generality of
the foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution, authentication and delivery of the Securities,
including any expenses of the Trustee, (ii) incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or
qualification and determination of eligibility for investment of the
Securities under the laws of such jurisdictions as the Underwriters may
designate (including fees of counsel for the Underwriters and their
disbursements), (iv) related to any filing with National Association of
Securities Dealers, Inc., (v) in connection with the printing
(including word processing and duplication costs) and delivery of this
Agreement, the Indenture, the Preliminary and Supplemental Blue Sky
Memoranda and the furnishing to
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Underwriters and dealers of copies of the Registration Statement and
the Prospectus, including mailing and shipping, as herein provided,
(vi) payable to rating agencies in connection with the rating of the
Securities, (vii) incurred by the Company in connection with a "road
show" presentation to potential investors and (viii) related to the
cost and charges of any transfer agent.
6. The several obligations of the Underwriters hereunder shall be
subject to the following conditions:
(a) the representations and warranties of the Company
contained herein are true and correct on and as of the Closing Date as
if made on and as of the Closing Date and the Company shall have
complied with all agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
(b) the Prospectus shall have been filed with the Commission
pursuant to Rule 424 within the applicable time period prescribed for
such filing by the rules and regulations under the Securities Act; no
stop order suspending the effectiveness of the Registration Statement
shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your satisfaction;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, 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;
(d) since the respective dates as of which information is
given in the Prospectus there shall not have been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any prospective material adverse change, or any
development involving a material adverse change, in or affecting the
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus, the effect of which in the judgment of
the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the
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delivery of the Securities on the terms and in the manner contemplated
in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date a certificate of an executive officer of the Company, with
specific knowledge about the Company's financial matters, satisfactory
to you to the effect set forth in Sections 6(a), 6(b), 6(c) and 6(d)
(with respect to the respective representations, warranties, agreements
and conditions of the Company) and to the further effect that there has
not occurred any prospective material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, business, prospects, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, taken as a whole, from that set forth
or contemplated in the Registration Statement;
(f) 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 and 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 have been duly authorized and,
when issued and delivered by the Company and, when duly
authenticated in accordance with the terms of the Indenture
and delivered to and paid for by the Underwriters in
accordance with the terms of this Agreement, will constitute
valid and binding obligations of the Company enforceable
against the Company in accordance with their terms and
entitled to the benefits provided by the Indenture 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);
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(iv) the Indenture has been duly authorized, executed
and delivered by the Company and constitutes a valid and
binding instrument of the Company enforceable against the
Company in accordance with its terms 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); and the
Indenture has been duly qualified under the Trust Indenture
Act;
(v) this Agreement has been duly authorized, executed
and delivered by the Company;
(vi) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement, the Indenture and the Securities will not
contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company;
(vii) the statements (A) in the Basic Prospectus under
the caption "Description of the Debt Securities", (B) in the
Prospectus under the caption "Description of the Notes", and
(C) in the Registration Statement in Item 15, 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
(viii) the Company is 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.
In addition, such counsel shall state that no facts have come
to such counsel's attention to lead 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 or the Forms T-1 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
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and other financial and statistical data and the Forms T-1 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 and the Forms T-1 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.
(g) 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 Significant Subsidiary of the Company has
been duly formed, is validly existing in good standing under
the laws of the jurisdiction of its formation, has the
corporate, limited liability company, limited partnership or
partnership 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 execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement, the Indenture and the Securities will not
contravene any agreement, indenture or 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,
14
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 Indenture or the Securities, 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;
(iv) the statements (A) in the Prospectus under the
captions "Risk Factors-Compliance with and changes in
environmental laws could adversely affect our performance" and
"-A patent dispute with Unocal could adversely affect us," (B)
in the Registration Statement in Item 15 and (C) incorporated
by reference into the Prospectus under the caption "Item
1-Business-Environmental Matters and "Item 3-Legal
Proceedings" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2001, 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;
(v) 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;
(vi) no facts have come to such counsel's attention
to lead 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
15
aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole; and
(vii) the documents incorporated by reference in the
Prospectus (except for the financial statements and schedules
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 no facts have come
to such counsel's attention to lead 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 and the Forms T-1 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 included therein and
the Forms T-1 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 included therein and the Forms T-1 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(f) and 6(g) above shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(h) on the Closing Date, Ernst & Young LLP shall have
furnished to you a letter 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
16
statements and certain financial information contained in the
Registration Statement and the Prospectus; and
(i) you shall have received on and as of the Closing Date an
opinion of Davis Polk & Wardwell, counsel to the Underwriters, in form
and substance satisfactory to you.
7. The Company agrees to indemnify and hold harmless each
Underwriter, each affiliate of any Underwriter which assists such Underwriter in
the distribution of the Securities 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 the legal fees and other
expenses reasonably incurred in connection with any suit, action or proceeding
or any claim asserted) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, 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
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives 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 Securities, 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 Securities 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 5(b) hereof.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Representatives expressly for use in
the Registration
17
Statement, the Prospectus, any amendment or supplement thereto, or any
preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "INDEMNIFIED PERSON") shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person 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 Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person 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 Person shall not, in connection with any
proceeding or related proceeding 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 Indemnified Persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the Underwriters,
each affiliate of any Underwriter which assists such Underwriter in the
distribution of the Securities and such control persons of Underwriters shall be
designated in writing by the first of the named Representatives on Schedule I
hereto and any such separate firm for the Company, its directors, its officers
who sign the Registration Statement and such control persons of the Company or
authorized representatives shall be designated in writing by the Company. The
Indemnifying Person 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 Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the third sentence of this paragraph, the Indemnifying Person
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 Person of the aforesaid request and (ii)
such Indemnifying Person shall not have reimbursed the
18
Indemnified Person in accordance with such request prior to the date of such
settlement. No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person 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 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 (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 (i) above but also the relative fault of the Company on the one
hand and the Underwriters on the other 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 shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of such Securities (before deducting expenses) received by the Company and the
total underwriting discounts and the commissions received by the Underwriters
bear to the aggregate public offering price of the Securities. The relative
fault of the Company on the one hand and the Underwriters on the other 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 Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 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 the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person 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
Person in connection with investigating or defending any such action
19
or claim. Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter 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 Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective principal amount of the Securities set forth opposite their names in
Schedule I hereto, and not joint.
The remedies provided for in this Section 7 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.
The indemnity and contribution agreements contained in this Section 7
and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter or by or on behalf
of the Company, its officers or directors or any other person controlling the
Company and (iii) acceptance of and payment for any of the Securities.
8. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Representatives, by notice given to
the Company, if 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 or guaranteed by 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 the judgment of the Representatives,
is material and adverse and which, in the judgment of the Representatives, makes
it impracticable to market the Securities on the terms and in the manner
contemplated in the Prospectus.
9. If, on the Closing Date, any one or more of the Underwriters shall
fail or refuse to purchase Securities which it or they have agreed to purchase
under this
20
Agreement, and the aggregate principal amount of Securities which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of the Securities,
the other Underwriters shall be obligated severally in the proportions that the
principal amount of Securities set forth opposite their respective names in
Schedule II hereto bears to the aggregate principal amount of Securities set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as the Representatives 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 principal amount
of Securities that any Underwriter has agreed to purchase pursuant to Section 1
be increased pursuant to this Section 9 by an amount in excess of one-tenth of
such principal amount of Securities without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail
or refuse to purchase Securities and the aggregate principal amount of
Securities with respect to which such default occurs is more than one-tenth of
the aggregate principal amount of Securities to be purchased, and arrangements
satisfactory to you and the Company for the purchase of such 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. 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.
10. (a) 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 or any condition of the Underwriters' obligations cannot be
fulfilled, the Company agrees to 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 expenses of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering of Securities.
(b) If this Agreement shall be terminated by the Underwriters
pursuant to Section 8 or 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 or any condition
of the Underwriters' obligations cannot be fulfilled, the Company
agrees that it will purchase from
21
UBS Warburg LLC (or such affiliate as UBS Warburg LLC may designate)
$150 million aggregate principal amount of the Company's 6.75% Notes
due December 15, 2032 (the "Old Securities") for $178,200,529 and will
pay such amount immediately by wire transfer of immediately available
funds to an account designated by UBS Warburg LLC, and UBS Warburg
agrees to sell (or cause its affiliate) to sell such Old Securities to
the Company; provided that if UBS AG has not yet purchased the Old
Securities at the time the Agreement is terminated, UBS Warburg LLC may
elect instead to cause UBS AG to assign all of its rights and
obligations to purchase the Old Securities to the Company, and the
Company agrees that upon such an assignment it will assume all of the
rights and obligations of UBS AG to purchase the Old Securities and
will immediately pay to UBS Warburg LLC $28,200,529 by wire transfer of
immediately available funds to an account designated by UBS Warburg
LLC. Upon any such termination and satisfaction of the Company's
obligations under this Section 10(b), all agreements entered into in
connection with the Old Securities shall terminate.
11. This Agreement shall inure to the benefit of and be binding upon
the Company, each affiliate of any Underwriter which assists such Underwriter in
the distribution of the Securities, the Underwriters, any controlling persons
referred to herein and their respective successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm or corporation any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by you
jointly or by the first of the named Representatives set forth in Schedule I
hereto alone on behalf of the Underwriters, and any such action taken by you
jointly or by the first of the named Representatives set forth in Schedule I
hereto alone shall be binding upon the Underwriters. 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 at the address set forth in Schedule
I hereto. Notices to the Company shall be given to it at Valero Energy
Corporation, One Valero Place, San Antonio, Texas 78212 (facsimile: (210)
370-2490); Attention: Corporate Secretary.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
22
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of laws provisions thereof.
23
Very truly yours,
VALERO ENERGY CORPORATION
By: /s/ John D. Gibbons
-------------------------------------------
John D. Gibbons
Executive Vice President and
Chief Financial Officer
Accepted: December 10, 2002
UBS WARBURG LLC
Acting severally on behalf of itself and the several Underwriters listed in
Schedule II hereto.
By: /s/ Michael Jamieson
----------------------------------
Name: Michael Jamieson
Title: Executive Director
By: /s/ Scott D. Whitney
----------------------------------
Name: Scott D. Whitney
Title: Director
UBS Warburg
SCHEDULE I
Representatives: UBS Warburg LLC
---------------------------------------------
Underwriting Agreement dated: December 10, 2002
-----------------------------------------------
Registration Statement No.: 333-84820
-----------------------------------------------
Title of Securities: 6.70% Notes due 2013
-----------------------------------------------
Aggregate principal amount: $180,000,000
-----------------------------------------------
Purchase Price: 99.35%
-----------------------------------------------
Price to Public: 100% of the principal amount of the Securities,
plus accrued interest, if any,
from December 16, 2002 to the
Closing Date.
Indenture: Indenture dated as of December 12, 1997 between
the Company and The Bank of New York, as Trustee.
Maturity: January 15, 2013
-----------------------------------------------
Interest Rate: 6.70%
-----------------------------------------------
Interest Payment Dates: January 15 and July 15, beginning July 15, 2003
-----------------------------------------------
Closing Date and Time of Delivery: December 16, 2002
-----------------------------------------------
Closing Location: Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
-----------------------------------------------
Address for Notices to Underwriters: UBS Warburg LLC
677 Washington Boulevard
Stamford, CT 06901
Attn: Fixed Income Syndicate
(203) 719-1088
-----------------------------------------------
Payment for Notes: Notwithstanding anything herein or in Section 3 of
the Underwriting Agreement to the contrary, the
Company agrees that the Underwriters' obligation
to purchase and pay for the Securities at the
Purchase Price specified above shall be satisfied
in full on the Closing Date only by (i) the tender
by or on behalf of UBS Warburg LLC of $150 million
aggregate principal amount of the Company's 6.75%
Notes due December 15, 2032 (the "Old Securities")
(the "Purchase Price Securities Component") (in
exchange for $180 million aggregate principal
amount of the Securities with an initial Price to
Public equal to $180 million) and (ii) the payment
of $629,471 in cash to the Company (the "Purchase
Price Cash Component").
Payment of the Purchase Price
Securities Component shall be made
to the Company by transfer by or
on behalf of UBS Warburg LLC of
$150 million aggregate principal
amount of the Old Securities to
the Company. Payment of the
Purchase Price Cash Component
shall be made to the Company by
wire transfer of immediately
available funds to a bank account
designated by the Company.
Upon payment of the Purchase Price
Securities Component and the
Purchase Price Cash Component and
delivery to UBS Warburg LLC of
certificates for the Securities,
all agreements entered into in
connection with the Old Securities
shall terminate.
Pursuant to the terms of the Old
Securities, the Company expressly
consents to transfer of the Old
Securities by UBS AG, London
Branch to UBS Warburg LLC and from
UBS Warburg LLC to the Trustee on
behalf of the Company.
----------------------------------------------------
SCHEDULE II
PRINCIPAL AMOUNT
Underwriter OF SECURITIES PURCHASED
----------- -----------------------
UBS Warburg LLC........................................ $180,000,000
Total.................................................. $180,000,000