EXHIBIT 10.15
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CONTRIBUTION AGREEMENT
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By and Among
VALERO PIPELINE COMPANY,
UDS LOGISTICS, LLC, VALERO L.P.
VALERO GP, INC.
and
VALERO LOGISTICS OPERATIONS, L.P.
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March 6, 2003
EXHIBITS AND SCHEDULES
Exhibit A: Description of Assets
Exhibit B: Form of Throughput Commitment Agreement
Exhibit C: Form of Terminalling Agreement
Exhibit D: Form of Assignment
Exhibit E: Form of Closing Tax Certificate
Property Schedule
Schedule 1(b) Permitted Encumbrances
Schedule 3(a)(ii) Consents (VPC)
Schedule 3(b)(ii) Consents (The MLP Parties)
Schedule 4(a) Noncontravention (the Assets)
Schedule 4(b)(ii) Condition of Assets
Schedule 4(c) Material Changes
Schedule 4(g) Environmental Matters
Schedule 4(g)(ii) Environmental Permits
Schedule 5(c) Operation of Assets
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") dated as of March 6,
2003 (the "Effective Date") is by and among Valero Pipeline Company, a Delaware
corporation ("VPC"), UDS Logistics, LLC, a Delaware limited liability company
("UDS Logistics"), Valero L.P., a Delaware limited partnership (the "MLP"),
Valero Logistics Operations, L.P., a Delaware limited partnership (the "OLP")
and Valero GP, Inc., a Delaware corporation and the general partner of the OLP
("OLP-GP"). VPC, UDS Logistics, the MLP, the OLP and the OLP-GP are sometimes
referred to collectively herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, VPC owns all of the assets associated with the pipeline
systems and terminals identified on Exhibit A hereto (such assets being more
particularly described on Exhibit A and referred to herein collectively as the
"Assets");
WHEREAS, VPC desires to contribute the Assets to the OLP in exchange
for a limited partner interest in the OLP representing $150 million (the "OLP
Limited Partner Interest"), and the OLP desires to accept the contribution of
the Assets, subject to the terms and conditions set forth below;
WHEREAS, immediately upon receipt of the OLP Limited Partner
Interest, VPC desires to contribute the OLP Limited Partner Interest to UDS
Logistics in exchange for a membership interest in UDS Logistics representing
$150 million (the "UDS Membership Interest"), and UDS Logistics desires to
accept the contribution of the OLP Limited Partner Interest, subject to the
terms and conditions set forth below; and
WHEREAS, at the Closing, among other things, (i) the OLP and Valero
Marketing and Supply Company, a Delaware corporation ("VMSC"), will enter into a
Throughput Commitment Agreement in the form of Exhibit B (the "Throughput
Agreement"), and (ii) the OLP and VMSC will enter into a Terminalling Agreement
in the form of Exhibit C (the "Terminalling Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
23. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses, but
excluding punitive (except as provided in SECTION 8), exemplary, special or
consequential damages.
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"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended
from time to time; provided, however, that (i) with respect to any of the MLP
Parties, the term "Affiliate" shall exclude each member of the Valero Group and
(ii) with respect to VPC, the term "Affiliate" shall exclude each member of the
MLP Group.
"Agreement" has the meaning set forth in the preface.
"Assets" has the meaning set forth in the recitals.
"Assignment" means the assignment and assumption agreement in the
form of Exhibit D pursuant to which all of the Personal Property Assets will be
assigned and by which all portions of Terminal Real Property not conveyed by the
Deeds will be assigned and conveyed.
"Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
"Best Efforts" means the efforts, time, and costs that a prudent
Person desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have a material adverse effect
on such Person or to require an expense of such Person in excess of $1,000,000.
"Cash Amount" means $150,000,000.
"Casualty" has the meaning set forth in SECTION 11(b).
"CERCLA" has the meaning set forth in SECTION 4(g)(i).
"Closing" has the meaning set forth in SECTION 2(b).
"Closing Date" has the meaning set forth in SECTION 2(b).
"Coastal" means Coastal Liquids Partners, L.P.
"Coastal Lease" means the Pipeline and Terminal Lease Agreement,
dated as of May 25, 2001, by and among Coastal (as Lessor) and VPC and VMSC (as
Lessees).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange rights
or other contracts that could require a Person to issue any of its Equity
Interests or to sell any Equity Interest it owns in another Person; (b) any
other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational
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Documents; and (d) stock appreciation rights, phantom stock, profit
participation, or other similar rights with respect to a Person.
"Common Units" has the meaning set forth in the Amended and Restated
Agreement of Limited Partnership of Valero L.P.
"Conflicts Committee" means the conflicts committee of the board of
directors of Valero GP.
"Contributed OLP Interest" has the meaning set forth in SECTION
2(a)(viii).
"Deed(s)" means a Special Warranty Deed(s) substantially in the form
attached hereto as Exhibit E.
"Effective Date" has the meaning set forth in the preface.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, Preferential Right or other defect in title.
"Environmental Law" and "Environmental Laws" have the meanings set
forth in SECTION 4(g)(i).
"Equipment" means the warehouse inventory (including tools, parts,
supplies and other similar items) owned by VPC and used in connection with VPC's
operations of the Assets.
"Equity Interest" means (a) with respect to a corporation, any and
all shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership, limited liability company,
trust or similar interests, and any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.
"GAAP" means accounting principles generally accepted in the United
States consistently applied.
"Governmental Authority" means the United States or any agency
thereof and any state, county, city or other political subdivision, agency,
court or instrumentality.
"Hazardous Substances" means all materials, substances, chemicals,
gas and wastes which are regulated under any Environmental Law or which may form
the basis for liability under any Environmental Law.
"Indemnified Party" has the meaning set forth in SECTION 8(d)(i).
"Indemnifying Party" has the meaning set forth in SECTION 8(d)(i).
"Intellectual Property Contracts" has the meaning set forth in
SECTION 4(e).
"Knowledge": an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of
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determination. A Person other than a natural person shall be deemed to have
"Knowledge" of a particular fact or other matter if (i) any natural person who
is serving as a director, senior executive officer, partner, member, executor,
or trustee of such Person (or in any similar capacity) or (ii) any employee (or
any natural person serving in a similar capacity) who is charged with the
ultimate responsibility for a particular area of such Person's operations (e.g.,
the manager of the environmental section with respect to knowledge of
environmental matters), at the time of determination had, Knowledge of such fact
or other matter.
"Law" or "Laws" means any statute, code, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
applicable Governmental Authority.
"Lease Purchase Option" means the option held by VPC to purchase the
Assets from Coastal (and its successors and affiliates) pursuant to the Coastal
Lease.
"Material Adverse Effect" means any change or effect relating to the
operations relating to the Assets, taken as a whole, that, individually or in
the aggregate with other changes or effects, materially and adversely affects
the value of the Assets taken as a whole, provided that in determining whether a
Material Adverse Effect has occurred, changes or effects relating to (i) the
refined petroleum product transportation and/or terminalling industry and
refining industry generally (including the price of refined petroleum products
and the costs associated with the storage and/or transportation thereof), (ii)
United States or global economic conditions or hostilities or financial markets
in general, or (iii) the transactions contemplated by this Agreement, shall not
be considered.
"Material Contracts" has the meaning set forth in SECTION 4(e).
"MLP" has the meaning set forth in the preface.
"MLP-GP" means Riverwalk Logistics, L.P., a Delaware limited
partnership and the general partner of the MLP.
"MLP Group" means (i) each of the MLP Parties, (ii) MLP-GP, (iii)
Valero GP, (iv) each Affiliate of each of the MLP Parties in which such MLP
Party owns (directly or indirectly) an Equity Interest and (v) each natural
person that is an Affiliate of any MLP Party solely because of such natural
person's position as an officer (or person performing similar functions),
director (or person performing similar functions) or other representative of any
Person described in (i) - (iv) above, but only to the extent that such natural
person is in its capacity as an officer, director or representative of such
Person.
"MLP Parties" means each of (i) the MLP, (ii) OLP-GP, (iii) the OLP
and (iv) each Affiliate of the entities in (i) - (iii) which is a party to any
Transaction Agreement.
"MLP Party Indemnitees" means, collectively, the MLP Parties and
their Affiliates and each of their respective officers (or Persons performing
similar functions), directors (or Persons performing similar functions),
employees, agents and representatives to the extent acting in such capacity.
"NonAffiliate Purchaser" has the meaning set forth in SECTION 2(d).
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"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
"Offer" has the meaning set forth in SECTION 2(d)(i).
"Offered Assets" has the meaning set forth in SECTION 2(d).
"OLP" has the meaning set forth in the preface.
"OLP-GP" has the meaning set forth in the preface.
"OLP Limited Partner Interest" has the meaning set forth in the
recitals.
"Ordinary Course" means the ordinary course of business consistent
with the applicable Person's past custom and practice (including with respect to
quantity and frequency).
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Party" and "Parties" have the meanings set forth in the preface.
"Permitted Encumbrances" means any of the following:
(a) all agreements, leases, instruments, documents, liens,
encumbrances, which are described in any Schedule or Exhibit to this Agreement;
(b) any undetermined or inchoate liens or charges constituting
or securing the payment of expenses which were incurred incidental to the
conduct of the business or the operation, repair, construction, improvement or
maintenance of the Assets;
(c) materialman's, mechanics', repairman's, employees',
contractors', operators' or other similar liens, security interests or charges
for liquidated amounts arising in the Ordinary Course, securing amounts the
payment of which is not delinquent and that will be paid in the Ordinary Course;
(d) any liens for Taxes not yet delinquent;
(e) any liens or security interests created by Law or reserved
in leases, rights-of-way or other real property interests for rental or for
compliance with the terms of such leases, rights-of-way or other real property
interests, provided payment of the debt secured is not delinquent;
(f) all consents, approvals, authorizations or permits of, or
filings with or notifications to, any Person which is required to be obtained,
made or complied with for or in
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connection with any sale, assignment, transfer or encumbrance of any Asset or
any interest therein;
(g) any titles or rights asserted by any Person to (i)
tidelands, or lands comprising the shores or beds of navigable or perennial
rivers and steams, lakes, bays or other bodies of water, (ii) lands beyond the
line of the harbor or bulkhead lines as established or changed by any
Governmental Body, (iii) filled-in lands or artificial islands, (iv) statutory
water rights, including riparian rights, and (v) the area extending from the
line of mean low tide of any body of water to the line of vegetation, or the
rights of access to that area or any easement along or across that area;
(h) all prior reservations of minerals in and under or that may
be produced from any of the lands constituting part of the Assets or on which
any of the Assets are located, other than mineral reservations that would be
reasonably expected to interfere in a material respect with the operation of the
Assets as currently operated by VPC;
(i) all liens, charges, leases, easements, restrictive
covenants, encumbrances, contracts, agreements, instruments, obligations,
discrepancies, conflicts, shortages in area or boundary lines, encroachments or
protrusions, or overlapping of improvements, defects, irregularities and other
matters affecting the Assets which individually or in the aggregate are not such
as to unreasonably and materially interfere with or prevent any material
operations conducted on the Assets by VPC in the manner operated on the Closing
Date;
(j) any defect that has been cured by the applicable statutes of
limitations or statutes for prescription;
(k) any defect affecting (or the termination or expiration of)
any easement, right-of-way, leasehold interest, license or other real property
interest which has been replaced by an easement, right-of-way, leasehold
interest, license or other real property interest constituting part of the
Assets covering substantially the same rights to use the land or the portion
thereof used by VPC in connection with VPC's business conducted on the Assets;
(l) the failure to locate on the ground a "blanket" or similar
easement or right-of-way;
(m) rights reserved to or vested in any Governmental Body to
control or regulate any of the Assets and all Laws of such authorities,
including any building or zoning ordinances and all Environmental Laws;
(n) any agreement, contract, lease, easement, instrument, lien,
encumbrance, permit, amendment, extension or other matter entered into by a
Party to the Agreement in accordance with the terms of this Agreement or in
compliance with the approvals or directives of the other Party made pursuant to
this Agreement.
"Person" means an individual or entity, including any partnership,
corporation, association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, or Governmental Authority (or
any department, agency or political subdivision thereof).
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"Personal Property Assets" has the meaning set forth in Exhibit A.
"Pipeline Real Property Interests" means (i) the easements,
rights-of-way, surface leases, fee interests, and licenses described in Parts I
and II of the Property Schedule and (ii) all right, title and interest of VPC in
and to any other easements, rights-of-way, surface leases, fee interests, and
licenses on which the Pipeline Systems are currently located, together with all
properties described in the definition of Pipeline Systems which are real
property improvements to the properties described in clauses (i) and (ii) above.
"Pipeline Real Property Interests Assignments" means assignments of
the Pipeline Real Property Interests substantially in the form of those
assignments that VPC received or will receive from Coastal in connection with
the closing of the Lease Purchase Option.
"Pipeline Systems" has the meaning set forth in Exhibit A.
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.
"Post-Closing Tax Return" means any Tax Return that is required to
be filed for any of the Assets with respect to a Post-Closing Tax Period.
"Pre-Closing Environmental Matters" has the meaning set forth in
SECTION 8(b)(iv).
"Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Assets with respect to a Pre-Closing Tax Period.
"Preferential Rights" has the meaning set forth in SECTION 4(h).
"Prime Rate" means the prime rate reported in the Wall Street
Journal at the time such rate must be determined under the terms of this
Agreement.
"Private Placement" has the meaning set forth in SECTION 2(a)(i).
"Property Schedule" means the property schedule attached to this
Agreement.
"Public Offering Amount" has the meaning set forth in the recitals.
"Records" has the meaning set forth in SECTION 6(c).
"Redemption" has the meaning set forth in SECTION 2(a)(iii).
"Required Permits" has the meaning set forth in SECTION 4(g)(ii).
"Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.
"Straddle Return" means a Tax Return for a Straddle Period.
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"Subject Insurance Policies" means those material policies of
insurance that VPC or any of its Affiliates maintain covering any Assets.
"Taking" has the meaning set forth in SECTION 11(b)(ii)(c).
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), custom duties, capital stock, franchise, profits, withholding,
social security (or similar excises), unemployment, disability, ad valorem, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Records" means all Tax Returns and Tax-related work papers
relating to the Assets.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Terminals" has the meaning set forth in Exhibit A.
"Terminal Real Property" has the meaning set forth in Exhibit A.
"Terminal Fee Real Property" has the meaning set forth in SECTION
2(c)(iv).
"Third Party Claim" has the meaning set forth in SECTION 8(d)(i).
"Third Party Offer" has the meaning set forth in SECTION 2(d).
"Throughput Agreement" has the meaning set forth in the recitals.
"Title Company" means LandAmerica Financial Group (or other mutually
agreed title company).
"Title Policy" means an owner's title policy covering the portion of
the Terminals and Terminal Fee Real Property that constitutes land and
improvements to real property issued by the Title Company in the amount of
$10,000,000. Such Title Policy shall be in the standard form promulgated by the
Texas State Board of Insurance or other appropriate Governmental Authority.
"Transaction" has the meaning set forth in SECTION 5(b).
"Transaction Agreements" means this Agreement, the Assignment, the
Deeds, the Pipeline System Real Property Interest Assignments, the Throughput
Commitment Agreement, the Terminalling Agreement, and all other agreements,
documents, certificates or instruments executed and delivered in connection with
the transactions contemplated herein and therein.
"Transfer Taxes" has the meaning set forth in SECTION 9(e).
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"UDS Logistics" has the meaning set forth in the preface.
"UDS Membership Interests" has the meaning set forth in the
recitals.
"Underwriting Agreement" has the meaning set forth in SECTION
7(a)(vi).
"Unit Offering" has the meaning set forth in SECTION 2(a)(ii).
"Unknown Pre-Closing Environmental Matters" has the meaning set
forth in SECTION 8(b)(iv).
"Valero GP" means Valero GP, LLC, a Delaware limited liability
company and the general partner of MLP-GP.
"Valero Group" means, excluding members of the MLP Group, (i) each
Affiliate of Valero Energy Corporation in which Valero Energy Corporation owns
(directly or indirectly) an Equity Interest and (ii) each natural person that is
an Affiliate of any Person described in (i) above solely because of such natural
person's position as an officer (or person performing similar functions),
director (or person performing similar functions) or other representative of any
Person described in (i) above, but only to the extent that such natural person
is acting in its capacity as an officer, director or representative of such
Person.
"VMSC" has the meaning set forth in the recitals.
"VPC" has the meaning set forth in the preface.
"VPC Indemnitees" means, collectively, VPC and its Affiliates and
each of their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents, and
representatives.
"VPC Parties" means each of (i) VPC, (ii) UDS Logistics, (iii)
Valero Energy Corporation and (iv) each Affiliate of VPC in which Valero Energy
Corporation owns (directly or indirectly) an Equity Interest and which is a
party to any Transaction Agreement (but excluding any MLP Parties).
24. Concurrent Transactions.
(a) Contribution of Assets. Subject to the terms and
conditions of this Agreement, the Parties agree that the following transactions
will occur in the following order:
(i) the MLP will cause the OLP to borrow from its credit
facility and the MLP proposes to cause the OLP to issue long-term
debt (the "Private Placement") to institutional investors pursuant
to Rule 144A promulgated under the Securities Act of 1933 (which
indebtedness shall be guaranteed by the MLP);
(ii) the MLP proposes to issue additional Common Units,
representing limited partner interests in the MLP, to the public in
exchange for cash (the "Unit Offering");
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(iii) using a portion of the net proceeds from the
Private Placement, the MLP will redeem (the "Redemption") a
sufficient number of Common Units owned by UDS Logistics to reduce,
in conjunction with the Unit Offering, the aggregate, combined
ownership interest of UDS Logistics and Valero GP in the MLP to
49.5% or less;
(iv) except as provided in SECTION 11(d), VPC will
contribute to the OLP, in exchange for the OLP Limited Partner
Interest, all of VPC's right, title and interest in and to the
Assets free and clear of any Encumbrances other than Permitted
Encumbrances;
(v) VPC will contribute to UDS Logistics, in exchange
for the UDS Membership Interest (or, in the alternative, as provided
in SECTION 11(d), for cash) the OLP Limited Partner Interest, free
and clear of any Encumbrances;
(vi) the OLP, on behalf of the MLP, will pay the Cash
Amount to UDS Logistics in exchange for the right to be assigned the
OLP Limited Partner Interest from UDS Logistics;
(vii) UDS Logistics will contribute to the MLP, in
exchange for the payment of the Cash Amount from the OLP, on behalf
of the MLP, the OLP Limited Partner Interest, free and clear of any
Encumbrances;
(viii) the MLP will contribute to OLP-GP such portion of
the OLP Limited Partner Interest (the "Contributed OL Interest") as
is necessary for OLP-GP to maintain its 0.01% general partner
interest in the OLP; and
(ix) the Contributed OLP Interest will be immediately
converted into a general partner interest in the OLP.
(b) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at One Valero
Place, San Antonio, Texas, 78212, commencing at 10:00 a.m., local time, on the
fifth business day following the date as of which the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby has occurred (other than conditions with respect to actions
each Party shall take at the Closing itself) or such other date as the Parties
may mutually determine (the "Closing Date").
(b) Deliveries at the Closing. At the Closing:
(i) VPC shall deliver to the MLP Parties the
various certificates, instruments, and documents referred to in
SECTIONS 7(a) AND 9(g);
(ii) the MLP Parties shall deliver to VPC
the various certificates, instruments, and documents referred to in
SECTION 7(b);
(iii) the applicable Parties shall execute
and deliver each of (A) the Assignment; (B) the Throughput
Commitment Agreement; (C) the Terminalling Agreement; and (D) the
Pipeline System Real Property Interests Assignments;
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(iv) VPC shall execute and delivery to the Title
Company for recording a Deed with respect to the each of the fee
parcels included within the Terminal Real Property (the "Terminal
Fee Real Property"), conveying such fee parcels to the OLP;
(v) UDS Logistics shall issue to VPC the UDS
Membership Interest;
(vi) the OLP, on behalf of the MLP, shall pay to
UDS Logistics the Cash Amount;
(vii) the applicable Parties shall execute
and/or deliver, or cause to be executed and/or delivered, such other
consideration, documents, assets and interests as set forth in
SECTION 2(a) above;
(viii) the applicable Parties shall execute
and/or deliver, or cause to be executed and/or delivered, each other
Transaction Agreement not listed above; and
(ix) the Title Company shall issue the Title
Policy to OLP with respect to the Terminal Fee Real Property, or, in
the alternative, issue a binding commitment to issue the Title
Policy to the OLP.
(c) Right of First Offer. Should the board of directors
of Valero GP determine at any time after the Closing Date (either
through an unsolicited bona fide offer from a Person that is not an
Affiliate of the Valero Group (a "Third Party Offer") or through an
offer solicited by any of the MLP Parties) that it is in the best
interests of the MLP Parties to divest the entirety of (or a
substantial portion of) any of the Pipeline Systems or any of the
Terminals (the "Offered Assets"), Valero GP shall promptly notify VPC
of such determination and deliver to VPC all information prepared by or
on behalf of Valero GP relating to the potential divestiture. As soon
as practicable but in any event within 30 days after receipt of such
notification and information, VPC shall notify Valero GP that either
(a) VPC has elected not to pursue the opportunity to acquire the
Offered Assets, in which case the MLP shall be free to offer and divest
the Offered Assets to (1) the Person that initiated the Third Party
Offer (the "Third Party Offeror") or (2) a Person that is not an
Affiliate of the Valero Group (a "NonAffiliate Purchaser"), or (b) VPC
has elected to pursue the opportunity to acquire the Offered Assets, in
which event the following procedures shall be followed:
(i) VPC shall submit a good faith offer to
Valero GP to acquire the Offered Assets (the "Offer") on the terms
and for the consideration stated in the Offer;
(ii) VPC and Valero GP shall negotiate in good
faith for 90 days after receipt of such Offer by Valero GP, the terms
on which the Offered Assets will be acquired by VPC. Valero GP shall
provide all information concerning the operations and finances of the
Offered Assets as may be reasonably requested by VPC.
(A) If VPC and Valero GP agree on such terms
within 90 days after the receipt by Valero GP of the
Offer, VPC shall acquire the Offered Assets on such
terms after such agreement has been reached;
provided, however, that the acquisition consideration
to be paid by VPC may not be less than the
acquisition consideration offered in the Third Party
Offer.
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(B) If VPC and Valero GP are unable to agree
on the terms of an acquisition during such 90-day
period, the MLP is free to divest the Offered Assets
to (1) the Third Party Offeror within 180 days of the
termination of such 90-day period; provided that such
Third Party Offer is not less than 95% of the
acquisition consideration last offered by VPC or (2)
a NonAffiliate Purchaser; provided that any such
divestiture to a NonAffiliate Purchaser must be for
an acquisition consideration of not less than 95% of
the acquisition consideration last offered by VPC and
on the same material terms and conditions as last
offered by VPC; provided, further, that if such
NonAffiliate Purchaser shall offer less than 95% of
the acquisition consideration last offered by VPC or
offer to purchase the Assets on terms and conditions
materially less favorable to the MLP than those last
offered by VPC, the MLP must first give VPC notice
and a right to match the offer from the NonAffiliate
Purchaser during a 15-day period after notification
of same from MLP to VPC.
(C) During such 90-day period Valero GP
shall be free to make capital expenditures to
maintain the Offered Assets.
(iii) If, after the expiration of the 180-day period
referred to in clause (ii)(B) above, no NonAffiliate Purchaser
or Third Party Offeror has acquired the Offered Assets and
Valero GP confirms its determination that it is in the best
interests of the MLP Parties to divest the Offered Assets,
Valero GP shall comply with the provisions of this SECTION
2(d) once again; provided that if Valero GP and VPC are unable
to reach agreement during the 90-day period referenced in
clause (ii)(B) above, the parties will engage an independent
investment banking firm of national reputation to determine
the value of the Offered Assets and shall furnish VPC and
Valero GP with its opinion of such value within 30 days of its
engagement. VPC and Valero GP shall share equally the fees and
expenses of such investment banking firm. Upon receipt of such
opinion, Valero GP will have the option to
(A) cause the MLP to divest the Offered
Assets for an amount equal to the value as determined
by such investment banking firm on terms
substantially similar to the relevant terms of this
Agreement or
(B) decline to divest the Offered Assets.
25. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of VPC. VPC hereby
represents and warrants to the MLP Parties as follows as of the Effective Date:
(i) Organization and Good Standing. VPC is a corporation
duly incorporated, validly existing, and in good standing under the
Laws of the state of Delaware. VPC is in good standing under the Laws
of the state of Texas and in each other jurisdiction which requires
such qualification, except where the lack of such qualification would
not have a Material Adverse Effect.
12
(ii) Authorization of Transaction. Each VPC Party has
full power and authority (including full entity power and authority) to
execute and deliver each Transaction Agreement to which such VPC Party
is a party and to perform its obligations thereunder. Each Transaction
Agreement to which any VPC Party is a party constitutes the valid and
legally binding obligation of such VPC Party, enforceable against such
VPC Party in accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting creditors' rights generally, and
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Except as set forth on SCHEDULE 3(a)(II), no VPC Party need give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority or any other Person in order
to consummate the transactions contemplated by this Agreement or any
other Transaction Agreement to which such VPC Party is a party.
(iii) Noncontravention. Except for filings specified in
SCHEDULE 3(a)(ii) and filings and notifications required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended, the
"HSR Act"), neither the execution and delivery of any Transaction
Agreement, nor the consummation of any of the transactions contemplated
thereby, shall (A) violate any Laws to which any VPC Party is subject
or any provision of the Organizational Documents of any VPC Party or
(B) result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which any VPC Party is a party or by which it is bound or to which
any of its assets or any of the Assets are subject, except for such
violations, defaults, breaches, or other occurrences that do not,
individually or in the aggregate, have a material adverse effect on the
ability of VPC or any other VPC Party to consummate the transactions
contemplated by such Transaction Agreement.
(iv) Brokers' Fees. No VPC Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which any of the MLP Parties could become liable or obligated.
(b) Representations and Warranties of the MLP Parties. Each of
the MLP Parties hereby represents and warrants to VPC as follows as of the
Effective Date:
(i) Organization of the MLP Parties. Each of the MLP
Parties is a limited liability company, limited partnership or
corporation duly organized, validly existing, and in good standing
under the Laws of the state of Delaware. Each of the MLP Parties is in
good standing under the Laws of the state of Texas, or will be
qualified to do business in Texas prior to the Closing, and in each
other jurisdiction which requires such qualification, except where the
lack of such qualification in each instance would not have a Material
Adverse Effect.
(ii) Authorization of Transaction. Each of the MLP
Parties has full power and authority (including full entity power and
authority) to execute and deliver
13
each Transaction Agreement to which it is a party and to perform its
obligations thereunder. Each Transaction Agreement to which such MLP
Party is a party constitutes the valid and legally binding obligation
of such MLP Party, enforceable against such MLP Party in accordance
with its terms and conditions, subject, however, to the effects of
bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally, and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Except for approval by the Conflicts
Committee and as set forth on SCHEDULE 3(b)(ii) and any filings under
the HSR Act, no MLP Party needs to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
Governmental Authority or any other Person in order to consummate the
transactions contemplated by this Agreement or any other Transaction
Agreement.
(iii) Noncontravention. Except for the filings specified
in SCHEDULE 3(b)(ii), neither the execution and delivery of any
Transaction Agreement to which any MLP Party is a party, nor the
consummation of any of the transactions contemplated thereby, shall (A)
violate any Laws to which such MLP Party is subject or any provision of
its Organizational Documents or (B) result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the
right to accelerate, terminate, modify, or cancel, or require any
notice, approval or consent under any agreement, contract, lease,
license, instrument, or other arrangement to which any MLP Party is a
party or by which it is bound or to which any of its assets is subject,
except for such violations, defaults, breaches, or other occurrences
that do not, individually or in the aggregate, have a material adverse
effect on the ability of any MLP Party to consummate the transactions
contemplated by such Transaction Agreement.
(iv) Brokers' Fees. Other than a customary fee paid to
A.G. Edwards & Sons in connection with its assessment of the fairness
of the Transaction to the MLP and to the holders of the Common Units
(other than any of the Valero Group), no MLP Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which VPC could become liable or obligated.
(v) Investment. Each of the MLP Parties is familiar with
investments of the nature of the Assets, understands that this
investment involves substantial risks, has investigated the Assets, and
has substantial knowledge and experience in financial and business
matters such that it is capable of evaluating, and has evaluated, the
merits and risks inherent in purchasing the Assets, and is able to bear
the economic risks of such investment. Each of the MLP Parties has had
the opportunity to visit with VPC and its applicable Affiliates and
meet with their representative officers and other representatives to
discuss the operations, assets, liabilities and financial condition of
the Assets, has received materials, documents and other information
that such MLP Party deems necessary or advisable to evaluate the
Assets. Each of the MLP Parties has made its own independent
examination, investigation, analysis and evaluation of the Assets,
including its own estimate of the value of the Assets. Each of the MLP
Parties has undertaken such due diligence (including a review of the
assets, properties, liabilities, books, records and contracts
constituting part of the Assets) as such MLP Party deems adequate.
14
Notwithstanding the other provisions of this subsection (v), the MLP
Parties have relied on the truth and accuracy of the representations
and warranties made by VPC in SECTION 4(l) in making the
representations and warranties in this subsection (v) and the MLP
Parties shall not be considered to have breached any representation or
warranty contained in this subsection (v) if any of the representations
and warranties made by VPC in SECTION 4(l) are not true or are
inaccurate.
26. Representations and Warranties Concerning the Assets. VPC hereby
represents and warrants to the MLP Parties as follows as of the Effective Date:
(a) Noncontravention. Except as set forth in SCHEDULE 4(a), neither the
execution and delivery of any Transaction Agreement to which any VPC Party is a
party, nor the consummation of any of the transactions contemplated thereby,
shall (i) violate any Laws to which any of the Assets is subject or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, require any notice or trigger any rights to payment or other
compensation, or result in the imposition of any Encumbrance on any of the
Assets under, any agreement, contract, lease, license, instrument, or other
arrangement to which any of the Assets is subject, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, right to payment or other compensation, or
Encumbrance would not have a Material Adverse Effect, or would not materially
adversely affect the ability of any VPC Party to consummate the transactions
contemplated by such Transaction Agreement.
(b) Title to and Condition of Assets
(i) At Closing, VPC will convey to the OLP: (A) good and
indefeasible title to the Terminal Real Property; (B) good and
indefeasible title to the Pipeline System Real Property Interests;
provided that notwithstanding anything to the contrary in this
Agreement, VPC's obligations under SECTION 6(c) shall be the sole
remedy for any breach of this subsection (B); and (C) good and
marketable title to the Personal Property Assets; in each case free and
clear of all Encumbrances, except for Permitted Encumbrances.
(ii) To VPC's Knowledge, except as disclosed in SCHEDULE
4(b)(ii) or as otherwise disclosed prior to the date hereof in writing
to the MLP Parties, the Assets are in good operating condition and
repair (normal wear and tear excepted), are free from patent and latent
defects, are suitable for the purposes for which they are currently
used and are not in need of maintenance or repairs except for ordinary
routine maintenance and repairs that, in the aggregate, do not exceed
$250,000.
(iii) There are no borrowings, loan agreements, promissory
notes, pledges, mortgages, guaranties, liens and similar liabilities
(direct and indirect), or Encumbrances that are secured by or
constitute an Encumbrance on the Assets (other than Permitted
Encumbrances).
(iv) VPC has not caused any work or improvements to be
performed upon or made to any of the Assets for which there remains
outstanding any payment
15
obligation that would or might serve as the basis for any claim, lien,
charge or Encumbrance in favor of the Person which performed the work.
(v) Except as set forth in SCHEDULE 4, VPC has not leased or
subleased any parcel or any portion of the Real Property Interests to
any other Person.
(vi) Except as set forth in SCHEDULE 4 and excluding any
representation or warranty relating to Environmental Laws, VPC has not
received any written notice to the effect that (i) any betterment
assessments have been levied against, or condemnation or re-zoning
proceedings are pending or threatened with respect to the Assets, or
(ii) any zoning, building or similar law or regulation is or will be
violated by the continued maintenance, operation or use of any
buildings or other improvements on the Assets as used and operated on
the date of this Agreement. There are no outstanding abatement
proceedings or appeals with respect to the assessment of the Assets for
the purpose of real property taxes, and there is no written agreement
with any Governmental Authority with respect to such assessments or tax
rates on the Assets. SCHEDULE 4 sets forth a list of material leases
related to the Assets where VPC is the (sub)lessee or lessor.
(vii) All pipelines, pipeline easements, utility lines,
utility easements and other easements, leaseholds, servitudes and
rights-of-way burdening or benefiting any of the Assets will not at
Closing unreasonably and materially interfere with or prevent any
material operations conducted on the Assets by VPC in the Ordinary
Course as of the date hereof. Except as set forth on SCHEDULE 4 and for
Permitted Encumbrances, with respect to any pipeline, utility, access
or other easements, servitudes or leaseholds located on or directly
serving the Assets and owned or used by VPC in connection with its
operations at the Assets: (A) VPC either has the contractual right to
use or is the exclusive or non-exclusive legal and beneficial owner of
the respective easement and leasehold established thereunder; (B) such
leaseholds, easements and the rights and interests of VPC thereunder
are in all material respects in full force and effect; and (C) to VPC's
knowledge, no material defaults exist thereunder and no events or
conditions exist which, with or without notice of lapse of time or
both, would constitute a material default thereunder or result in a
termination; provided, however, that clauses (A) and (B) above shall
not apply to the Pipeline System or Pipeline System Real Property
Interests and, in lieu thereof, the OLP has agreed to rely on the
representations and warranties in SECTION 4(b)(i).
(viii) VPC has good and valid title to the Equipment, free and
clear of all Encumbrances except Permitted Encumbrances.
(c) Material Change. Except as set forth in SCHEDULE 4(c), since
December 31, 2001:
(i) there has not been any Material Adverse Effect;
(ii) the Assets have been operated and maintained in the
Ordinary Course;
16
(iii) to VPC's Knowledge, there has not been any material
damage, destruction or loss to any material portion of the Assets,
whether or not covered by insurance;
(iv) there has been no purchase, sale or lease of any material
asset included in the Assets;
(v) there is no contract, commitment or agreement to do any of
the foregoing, except as expressly permitted hereby.
(d) Legal Compliance. Each VPC Party, with respect to the Assets,
has complied with all applicable Laws, except where the failure to comply would
not have a Material Adverse Effect. VPC makes no representations or warranties
in this SECTION 4(d) with respect to Environmental Laws, for which the sole
representations and warranties of VPC are set forth in SECTION 4(g).
(e) Intellectual Property and Material Contracts. To the knowledge
of VPC, SCHEDULE 4(e) sets forth (i) a true and complete list of all material
Intellectual Property, (ii) the name of the Person who owns such Intellectual
Property, (iii) in the case of such Intellectual Property not owned by VPC,
other than licenses for software having a value of less than $1,000.00 per
license, identifying information regarding the agreement pursuant to which VPC
uses any such Intellectual Property ("Intellectual Property Contracts") and (iv)
any other material contracts not otherwise listed on any schedule hereto to
which any VPC Party is a party and which pertains to the operations of the
Assets by VPC in the Ordinary Course (the "Material Contracts"). Except as
otherwise specified on SCHEDULE 4(e), VPC has the right to assign to the OLP the
Intellectual Property, Intellectual Property Contracts and the Material
Contracts, upon the consummation of the transactions contemplated hereunder. To
the knowledge of VPC, no VPC Party is in material breach of any agreement,
commitment, contractual understanding, license, sublicense, assignment, or
indemnification which relates to any of the Intellectual Property Contracts or
the Material Contracts.
(f) Litigation. (i) VPC is not, with respect to the Assets, (A)
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (B) the subject of any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction, or is the subject
of any pending or, to VPC's Knowledge, threatened claim, demand, or notice of
violation or liability from any Person, except where any of the foregoing would
not have a Material Adverse Effect.
(ii) Except as identified on SCHEDULE 4(f), no VPC Party has
Knowledge of any Basis for any present or future injunction, judgment, order,
decree, ruling, or charge or action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, against any of them giving rise
to any Obligation to which any of the Assets would be subject.
(g) Environmental Matters. Except as set forth in SCHEDULE 4(g):
(i) VPC, with respect to the Assets, has been in compliance
with all applicable local, state, and federal laws, rules, regulations,
and orders regulating or
17
otherwise pertaining to (a) the use, generation, migration, storage,
removal, treatment, remedy, discharge, release, transportation,
disposal, or cleanup of pollutants, contamination, hazardous wastes,
hazardous substances, hazardous materials, toxic substances or toxic
pollutants, (b) surface waters, ground waters, ambient air and any
other environmental medium on or off any lease or (c) the environment
or health and safety-related matters; including the following as from
time to time amended and all others whether similar or dissimilar: the
Comprehensive Environmental Response, Compensation, and Liability Act
of 1980 (as amended by the Superfund Amendments and Reauthorization Act
of 1986 "CERCLA"), the Resource Conservation and Recovery Act of 1976,
as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984, the Hazardous Materials Transportation Act, as
amended, the Toxic Substance Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, and all regulations
promulgated pursuant thereto, and common law principles, including
nuisance, trespass and negligence as applicable to environmental
matters described above (collectively, the "Environmental Laws," and,
individually, an "Environmental Law"), except for such instances of
noncompliance that individually or in the aggregate do not have a
Material Adverse Effect.
(ii) VPC has obtained all permits, licenses, franchises,
authorities, consents, registrations, orders, certificates, waivers,
exceptions, variances and approvals, and has made all filings, paid all
fees, and maintained all material information, documentation, and
records, as necessary under applicable Environmental Laws for operating
the Assets as they are presently operated, and all such permits,
licenses, franchises, authorities, consents, approvals, and filings
remain in full force and effect, except for such matters that
individually or in the aggregate do not have a Material Adverse Effect.
SCHEDULE 4(g)(ii) sets forth a complete list of all material permits,
licenses, franchises, authorities, consents, and approvals issued or
granted by any Governmental Authority, as necessary under applicable
Environmental Laws for operating the Assets as they are presently
operated (the "Required Permits"), and held in the name of the
appropriate VPC Party as indicated on such schedule.
(iii) Except as would not have a Material Adverse Effect, (x)
there are no pending or, to the knowledge of any VPC Party, threatened
claims, demands, actions, administrative proceedings or lawsuits
against VPC with respect to the Assets and VPC has not received notice
of any of the foregoing and (y) none of the Assets is subject to any
outstanding injunction, judgment, order, decree or ruling under any
Environmental Laws.
(iv) VPC has not received any written notice that VPC, with
respect to the Assets, is or may be a potentially responsible party
under CERCLA or any analogous state law in connection with any site
actually or allegedly containing or used for the treatment, storage or
disposal of Hazardous Substances.
(v) All Hazardous Substances or solid wastes generated,
transported, handled, stored, treated or disposed by, in connection
with or as a result of the operation of VPC or the conduct of VPC, have
been transported only by carriers maintaining valid authorizations
under applicable Environmental Laws and treated, stored, disposed of or
otherwise handled only at facilities maintaining valid
18
authorizations under applicable Environmental Laws and such carriers
and facilities have been and are operating in compliance with such
authorizations and are not the subject of any existing, pending or
threatened action, investigation or inquiry by any Governmental
Authority or other Person in connection with any of the Environmental
Laws, except for such matters that individually or in the aggregate do
not have a Material Adverse Effect.
VPC makes no representation or warranty regarding any compliance or failure to
comply with, or any actual or contingent liability under, any Environmental Law,
except as expressly set forth in this SECTION 4(g). For purposes of this SECTION
4(g), each reference to VPC or VPC Parties shall be deemed to include VPC
Parties and their Affiliates.
(h) Preferential Purchase Rights. Except for the Right of First
Offer, the Right of First Refusal set forth in SECTION 2(d), and those
identified on SCHEDULE 2(h), there are no preferential purchase rights, rights
of refusal to purchase, purchase options or other rights held by any Person not
a party to this Agreement to purchase or acquire any or all of the Assets, in
whole or in part, that would be triggered or otherwise affected as a result of
the transactions contemplated by this Agreement ("Preferential Rights").
(i) Prohibited Events. None of the matters described in SECTION
5(c) have occurred since December 31, 2001.
(j) Regulatory Matters No VPC Party is (i) a "holding company," a
"subsidiary company" of a "holding company," an "affiliate" of a "holding
company," or a "public utility," as each such term is defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder. Other than the Pipeline Systems, which are presently
subject to regulation by the Texas Railroad Commission, none of the Assets are
subject to regulation by the Federal Energy Regulatory Commission or rate
regulation or comprehensive nondiscriminatory access regulation under any
federal laws or the laws of any state or other local jurisdiction.
(k) Intercompany Transactions. There are no outstanding
receivables, payables and other intercompany agreements between VPC and any of
its Affiliates that relate to the Assets (other than in connection with VPC role
as a carrier on the Pipeline Systems and a terminal operator of the Terminals
and VMSC's role as a shipper on the Pipeline Systems and a customer at the
Terminals.)
(l) Material Information. VPC has provided to the MLP Parties all
material information concerning the operations by VPC of, and finances of, the
Assets as has been requested by any of the MLP Parties to date and such
information is complete and correct in all material respects and does not omit
to state a material fact necessary to make the statements and information
contained therein not misleading in light of the circumstances in which they are
made. To VPC's knowledge, there is not any fact that has not been disclosed to
the MLP Parties pertaining particularly to any of the Assets (as opposed to
public information concerning general industry or economic conditions or
governmental policies) which materially and adversely affect
19
any of the Assets or the use, ownership, financing, operation, maintenance or
repair of any of the Assets at any time after the Closing.
(m) Tax Matters. Except as set forth in SCHEDULE 4(m) or as would
not have a Material Adverse Effect:
(i) VPC and its Affiliates have filed, or caused to be filed,
on a timely basis all Tax Returns with respect to the Assets that they
were required to file and such Tax Returns are accurate in all material
respects;
(ii) All Taxes shown as due by VPC or its Affiliates on any
such Tax Returns have been timely paid; and
(iii) There is no dispute or claim concerning any Tax
liability of VPC or any of its Affiliates related to the Assets claimed
or raised in writing by any Governmental Authority.
(n) Sufficiency of Assets. The Assets constitute substantially all
the assets currently used by VPC in conducting its business in connection with
the Pipeline Systems and the Terminals prior to the Closing.
(o) Disclaimer of Representations and Warranties Concerning
Personal Property, Equipment and Fixtures. Each of the MLP Parties acknowledges
that (i) it has had and pursuant to this Agreement shall have before Closing
access to the Assets and the officers and employees of VPC and (ii) in making
the decision to enter into this Agreement and consummate the transactions
contemplated hereby, each of the MLP Parties has relied solely on the basis of
its own independent investigation and upon the express representations,
warranties, covenants, and agreements set forth in this Agreement and the other
Transaction Agreements. Accordingly, each of the MLP Parties acknowledges that,
except as expressly set forth in this Agreement, VPC has not made, and VPC MAKES
NO AND DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED,
AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING (i) THE QUALITY,
CONDITION, OR OPERABILITY OF ANY PERSONAL PROPERTY, EQUIPMENT, OR FIXTURES, (ii)
THEIR MERCHANTABILITY, (iii) THEIR FITNESS FOR ANY PARTICULAR PURPOSE, OR (iv)
THEIR CONFORMITY TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, AND ALL
PERSONAL PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE CONDITION
IN WHICH THE SAME EXISTS.
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27. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:
(a) General. Each of the MLP Parties shall use its Best Efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including causing the occurrence of VPC's conditions to Closing in SECTION 7(b).
VPC shall use its Best Efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement, including causing the occurrence of
the MLP Parties' conditions to Closing in SECTION 7(a).
(b) Notices and Consents. Each of the Parties shall give any
notices to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the transaction contemplated
by this Agreement (the "Transaction"), so as to permit the Closing to occur not
later than 9:00 a.m. (San Antonio time) on March 31, 2003.
(c) Operation of Assets. VPC shall not, without the written consent
of the OLP (which consent shall not be unreasonably withheld or delayed), except
as expressly contemplated by this Agreement or as contemplated by SCHEDULE 5(c),
engage in any practice, take any action, omit to take any action or enter into
any transaction outside the Ordinary Course that could reasonably be expected to
have a Material Adverse Effect. Without limiting the generality of the
foregoing, without the written consent of the MLP (which consent shall not be
unreasonably withheld or delayed), except as expressly contemplated by this
Agreement or SCHEDULE 5(c), prior to the Closing VPC shall not do any of the
following:
(i) sell, lease or otherwise dispose of any Assets or cause or
allow any part of the Assets to become subject to an Encumbrance,
except for Permitted Encumbrances;
(ii) initiate or settle any litigation, complaint, rate filing
or administration proceeding relating to the Assets.
(d) Full Access. VPC shall permit, and shall cause its Affiliates
to permit, representatives of the MLP Parties to have full access at all
reasonable times, and in a manner so as not to unreasonably interfere with the
normal business operations of VPC and its Affiliates, to all premises,
properties, personnel, books, records (including Tax records), contracts, and
documents pertaining to any of the Assets.
(e) Required Permits. Each of the VPC Parties and the MLP Parties
shall use its Best Efforts to take all action and to do all things necessary,
proper, or advisable in order to transfer the Required Permits to the OLP or
otherwise to assist the OLP in obtaining such Required Permits in its own right.
28. Post-Closing Covenants. The Parties agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties shall take such further action
21
(including the execution and delivery of such further instruments and documents)
as the other Party reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to indemnification
therefor under SECTION 8).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date involving the Assets, the other Party shall cooperate with the
contesting or defending Party and its counsel in the defense or contest, make
available its personnel, and provide such testimony and access to its books and
records (other than books and records which are subject to privilege or to
confidentiality restrictions) as shall be necessary in connection with the
defense or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under SECTION 8).
(c) Pipeline System Real Property Interests. In connection with the
closing of the Lease Purchase Option, not all of the Pipeline System Real
Property Interests were or may be conveyed or were or may be otherwise conveyed
with potential title defects (other than Permitted Encumbrances) that VPC has
agreed with Coastal may be remedied after the closing of the Lease Purchase
Option. To the extent not remedied as of the Closing Date hereunder, VPC agrees
to use its Best Efforts to take such further actions as the Parties agree are
reasonably necessary or advisable to remedy such defects; provided that for
purposes of this SECTION 6(c), VPC's use of its "Best Efforts" shall be deemed
to include expenditures up to $1,500,000 (and not $1,000,000 as set forth in the
definition of "Best Efforts" herein). VPC further covenants to convey to the OLP
any Pipeline System Real Property Interests conveyed to VPC by Coastal
subsequent to the Closing Date hereunder promptly following their conveyance to
VPC.
(d) Delivery and Retention of Records. On the Closing Date, VPC
shall deliver or cause to be delivered to the MLP Parties, copies of Tax Records
and all other files, books, records, information and data relating to the Assets
(other than Tax Records) that are in the possession or control of VPC (the
"Records"). The MLP Parties agree to (i) hold the Records and not to destroy or
dispose of any thereof for a period of seven years from the Closing Date or such
longer time as may be required by Law, provided that, if it desires to destroy
or dispose of such Records during such period, it shall first offer in writing
at least 60 days before such destruction or disposition to surrender them to VPC
and if VPC does not accept such offer within 20 days after receipt of such
offer, such MLP Party may take such action and (ii) afford VPC, its accountants,
and counsel, during normal business hours, upon reasonable request, at any time,
full access to the Records to the extent that such access may be requested for
any legitimate purpose at no cost to VPC (other than for reasonable
out-of-pocket expenses); provided that such access shall not be construed to
require the disclosure of Records that would cause the waiver of any
attorney-client, work product, or like privilege; provided, further that in the
event of any litigation nothing herein shall limit any Party's rights of
discovery under applicable Law.
(e) Required Permits. Each of the VPC Parties and the MLP Parties
shall use its Best Efforts to take all action and to do all things necessary,
proper, or advisable in order to
22
transfer the Required Permits to the OLP or otherwise to assist the OLP in
obtaining such Required Permits in its own right.
29. Conditions to Obligation to Close.
(a) Conditions to Obligation of the MLP Parties. The obligation of
each of the MLP Parties to consummate the transactions to be performed by such
MLP Party in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties of VPC contained in
SECTIONS 3(a) and 4 must be true and correct in all material respects
(without, for purposes of determining whether or not this condition is
satisfied as of the Closing, giving effect to any supplement to the
Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, awareness or concepts of similar import, or any
qualification or limitation as to monetary amount or value, except with
respect to (A) the representations and warranties in SECTION 4(b)(ii)
and (B) the representations and warranties in SECTION 4(C)(iii), for
which in each such case qualifications as to Knowledge shall be given
effect) as of the date of this Agreement and at Closing (except for
those which refer to a specific date, which must be true and correct as
of such date);
(ii) VPC must have performed and complied in all material
respects with its covenants hereunder through the Closing (without, for
purposes of determining whether or not this condition is satisfied as
of the Closing, giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value);
(iii) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental Authority to enjoin the consummation of any
of the transactions contemplated by this Agreement;
(iv) the MLP Parties must have obtained all material
Governmental Authority and third party consents, including any material
consents specified in SECTION 3(b)(II) and including the consents
required by the corresponding Schedule and the 30-day waiting period
under the HSR Act shall have expired or been terminated prior to the
expiration thereof and all other approvals required under the HSR Act
shall have been issued;
(v) VPC must have delivered to the MLP Parties a certificate
to the effect that each of the conditions specified in SECTIONS 7(a)(i)
- (iv) is satisfied in all respects;
(vi) the MLP and a group of underwriters must have executed
and delivered an Underwriting Agreement (the "Underwriting Agreement")
with respect to a public offering of common units representing limited
partner interests in the MLP with an aggregate offering amount of up to
$200 million (not including the underwriters' over-allotment
23
option) and the closing of the transactions contemplated therein must
have occurred;
(vii) one or more of the MLP Parties and a group of note
purchasers must have executed and delivered a Note Purchase Agreement
with respect to the Private Placement with an aggregate principal
amount of up to $250 million (the "Note Purchase Agreement") and the
closing of the transactions contemplated thereby must have occurred;
(viii) one or more of the MLP Parties shall have entered into
arrangements under the OLP's revolving credit facility to borrow such
additional amount as is necessary for the MLP and OLP to fund the
aggregate amount of the Cash Amount, the cash amount required under the
Contribution Agreements entered into as the date hereof by the MLP
Parties with Valero Refining Company-California and with Valero
Refining-Texas, L.P. for the contribution of specified feedstock
storage tanks as identified therein, the additional cash amount
required for the Redemption as well as the aggregate transaction costs
with respect to all transactions contemplated above (expected to be
approximately $2 million), and the closing of the borrowing transaction
must have occurred;
(ix) the MLP Parties must have duly and validly authorized the
terms of the Underwriting Agreement, the Note Purchase Agreement and
the borrowing by the OLP as contemplated in clauses (vi), (vii) and
(viii) above;
(x) the proceeds of the equity and debt financing for the
transactions contemplated hereby as outlined in clauses (vi), (vii) and
(viii) above must have been received by the MLP Parties on terms
substantially the same as authorized by the MLP Parties; and
(xi) the MLP's public offering of its common units and the
Redemption, on an aggregate basis, must have caused the aggregate
ownership interest of Valero Energy in the MLP to be 49.5% or less.
The MLP Parties may waive any condition specified in this SECTION 7(a) if Valero
GP, on behalf of all of the MLP Parties, executes a writing so stating at or
before the Closing.
(b) Conditions to Obligation of VPC. The obligation of VPC to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) The closing of the Lease Purchase Option shall have
occurred;
(ii) the representations and warranties of the MLP Parties
contained in SECTION 3(b) must be true and correct in all material
respects (without, for purposes of determining whether or not this
condition is satisfied as of the Closing, giving effect to any
supplement to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary amount or
value) as of the date of this Agreement and at
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Closing (except for those which refer to a specific date, which must be
true and correct as of such date);
(iii) each of the MLP Parties must have performed and complied
in all material respects with each of its covenants hereunder through
the Closing (without, for purposes of determining whether or not this
condition is satisfied as of the Closing, giving effect to any
supplement to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary amount or
value);
(iv) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental Authority to enjoin the consummation of any
of the transactions contemplated by this Agreement;
(v) VPC must have obtained all material Governmental Authority
and third party consents, including material consents specified in
SECTIONS 3(a)(II) and 4(a) and including the consents required by the
corresponding Schedules and the 30-day waiting period under the HSR Act
shall have expired or been terminated prior to the expiration thereof
and all other approvals required under the HSR Act shall have been
issued; and
(vi) Valero GP, on behalf of the MLP Parties, must have
delivered to VPC a certificate to the effect that each of the
conditions specified in SECTIONS 7(b)(i) - (IV) is satisfied in all
respects.
VPC may waive any condition specified in this SECTION 7(b) if it executes a
writing so stating at or before the Closing.
30. Remedies for Breaches of this Agreement.
(a) Survival . (i) All of the representations and warranties of VPC
contained in SECTIONS 3(a) and 4 (other than SECTIONS 3(a)(i), 3(a)(ii),
4(b)(i), 4(f)(ii) and 4(m)) shall survive the Closing hereunder for a period of
three years after the Closing Date; (ii) the representations and warranties of
VPC contained in SECTIONS 3(a)(i), 3(a)(ii), and 4(b)(i) shall survive the
Closing forever, (iii) the representations and warranties of VPC contained in
SECTION 4(m) shall survive the Closing with respect to any given claim that
would constitute a breach of such representation or warranty until 90 days after
the expiration of the statute of limitations applicable to the underlying Tax
matter giving rise to that claim, and (iv) the representations and warranties of
VPC contained in SECTION 4(f)(ii) shall survive the Closing for a period of one
year after the Closing Date. The representations and warranties of the MLP
Parties contained in SECTION 3(b) (other than in SECTIONS 3(b)(i) and 3(b)(ii))
shall survive the Closing for a period of three years after the Closing Date.
The representations and warranties of the MLP Parties contained in SECTIONS
3(b)(i) and 3(b)(ii) shall survive the Closing forever. The covenants and
obligations contained in SECTIONS 2 and 6 and all other covenants and
obligations contained in this Agreement (including, but not limited to, those
contained in SECTIONS 8(b)(iii), 8(b)(iv) and
25
8(b)(v)) shall survive the Closing forever, unless a shorter period is expressly
identified in this Agreement with respect thereto.
(b) Indemnification Provisions for Benefit of the MLP Parties.
(i) VPC agrees to release and indemnify the MLP Party
Indemnitees from and against any Adverse Consequences suffered by the
MLP Party Indemnitees arising out of, in connection with or relating to
any breach of the representations and warranties made by VPC in this
Agreement to the extent that (x) such representations and warranties
survive the Closing pursuant to SECTION 8(a) and (y) any MLP Party
makes a written claim for indemnification against VPC pursuant to
SECTION 11(g) within such period of survival. However, VPC shall not
have any obligation to release and indemnify the MLP Party Indemnitees
from and against any such Adverse Consequences (A) until the MLP Party
Indemnitees, in the aggregate, have suffered Adverse Consequences by
reason of all such breaches in excess of an aggregate amount equal to
1% of the Cash Amount (the "1% Threshold") (after which point VPC shall
be obligated to release and indemnify the MLP Party Indemnitees from
and against all Adverse Consequences by reason of all such breaches,
including those Adverse Consequences included in the calculation of
whether or not the 1% Threshold had been met), (B) to the extent the
Adverse Consequences the MLP Party Indemnitees, in the aggregate,
exceeds an aggregate ceiling amount equal to 50% of the Cash Amount
(after which point VPC shall have no obligation to release and
indemnify the MLP Party Indemnitees from and against further such
Adverse Consequences); provided, however, that the threshold amount
with respect to breaches of SECTION 4(b)(ii) shall be $250,000 and not
the 1% Threshold. For purposes of calculating any Adverse Consequences
in connection with this SECTION 8(b)(i), any supplement to the
Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, or any qualification or limitation as to monetary
amount or value set forth in SECTIONS 3(a) OR 4 shall be disregarded.
(ii) In the event: (x) VPC breaches any of its covenants or
obligations in SECTIONS 2 or 6 or any other covenants or obligations in
this Agreement (other than SECTIONS 3, 4 AND 8(b)(i)) (in each case
above without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value); (y) there is an applicable
survival period pursuant to SECTION 8(a); and (z) any MLP Party makes a
written claim for indemnification against VPC pursuant to SECTION 11(g)
within such survival period, then VPC agrees to release and indemnify
the MLP Party Indemnitees from and against any Adverse Consequences
suffered by the MLP Party Indemnitees.
(iii) VPC shall release, defend, indemnify and hold harmless
the MLP Party Indemnitees against any Adverse Consequences resulting by
reason of joint and several liability with VPC arising by reason of
having been required to be aggregated with VPC under section 414(o) of
the Code, or having been under "common control" with VPC, within the
meaning of Section 4001(a)(14) of ERISA.
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(iv) VPC shall release, defend and indemnify the MLP Party
Indemnitees from and against any Adverse Consequences suffered by the
MLP Party Indemnitees with respect to any environmental condition,
claim or loss with respect to (a) any of the Assets arising as a result
of events occurring or conditions existing on or prior to the Closing
Date, including the matters disclosed in SCHEDULE 4(g) and (b) any real
or personal property on which the Assets are or, prior to the Effective
Date, have been located, arising prior to or as of the date of this
Agreement (all of the foregoing being collectively referred to as
"Pre-Closing Environmental Matters"). Notwithstanding the foregoing,
with respect to Pre-Closing Environmental Matters that were not as of
the Closing known to VPC or otherwise expressly identified in writing
to any of the Parties ("Unknown Pre-Closing Environmental Matters"),
VPC's indemnity under this SECTION 8 shall expire as of the tenth
anniversary of the Closing Date, after which all such Unknown
Pre-Closing Environmental Matters shall be assumed by the OLP. In
addition, prior to the fifth anniversary of the Closing Date, VPC shall
bear the burden of proving that any subsequently identified
environmental conditions, claims or losses relate to operations at the
Assets after the Closing Date, and from and after the fifth anniversary
of the Closing Date, the OLP shall bear the burden of proving that any
subsequently identified environmental conditions, claims or losses
relate to operations at the Assets prior to the Closing Date.
(v) VPC shall release, defend, indemnify and hold harmless the
MLP Party Indemnitees against any Adverse Consequences suffered by the
MLP Party Indemnitees with respect to, any outstanding injunction,
judgment, order, decree, ruling, or charge, or any pending or
threatened action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, or any other Adverse
Consequences suffered by the MLP Party Indemnitees as a result of
third-party claims relating to the Assets on or before the Closing
Date.
(vi) Notwithstanding anything to the contrary contained in
SECTIONS 8(b)(i) and (ii), VPC shall not have any obligation to
indemnify any MLP Party Indemnitee to the extent that the payment
thereof would cause VPC's aggregate indemnity payments under SECTION
8(b) (but excluding SECTIONS 8(b)(iii), 8(b)(iv) and 8(b)(v)) to exceed
100% of the Cash Amount.
(vii) To the extent any MLP Party Indemnitee becomes liable
to, and is ordered to and does pay to any third party, punitive,
exemplary, special or consequential damages caused by a breach by VPC
of any representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or consequential
damages shall be deemed actual damages to such MLP Party Indemnitee and
included within the definition of Adverse Consequences for purposes of
this SECTION 8.
(viii) Except for the rights of indemnification provided in
this SECTION 8 and SECTION 9, each of the MLP Parties hereby waives any
claim or cause of action pursuant to common or statutory law or
otherwise against VPC arising from any breach by VPC of any of its
representations, warranties or covenants under this Agreement or the
transactions contemplated hereby.
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(c) Indemnification Provisions for Benefit of VPC.
(i) In the event: (x) any of the MLP Parties breaches any of
its representations, warranties or covenants contained herein; (y)
there is an applicable survival period pursuant to SECTION 8(a); and
(z) VPC makes a written claim for indemnification against such MLP
Party pursuant to SECTION 11(g) within such survival period, then each
of the MLP Parties agrees to release and indemnify the VPC Indemnitees
from and against the entirety of any Adverse Consequences suffered by
such VPC Indemnitees.
(ii) To the extent any VPC Indemnitee becomes liable to, and
is ordered to and does pay to any third party, punitive, exemplary,
special or consequential damages caused by a breach by any of the MLP
Parties of any representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or consequential
damages shall be deemed actual damages to such VPC Indemnitee and
included within the definition of Adverse Consequences for purposes of
this SECTION 8.
(iii) Except for the rights of indemnification provided in
this SECTION 8, VPC hereby waives any claim or cause of action pursuant
to common or statutory law or otherwise against the MLP Parties arising
from any breach by any of the MLP Parties of any of its
representations, warranties or covenants under this Agreement or the
transactions contemplated hereby.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this SECTION 8, then the
Indemnified Party shall promptly (and in any event within fifteen
business days after receiving notice of the Third Party Claim) notify
the Indemnifying Party thereof in writing.
(ii) The Indemnifying Party shall have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; provided,
however, that the Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld or delayed unreasonably) unless the judgment or
proposed settlement involves only the payment of money damages and does
not impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in SECTION 8(d)(ii), the
Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) The Indemnified Party may not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party which
consent shall not be withheld
28
unreasonably; provided that no such consent will be required if the
Indemnifying Party has denied in writing its obligations to indemnify
the Indemnified Party hereunder or if the Indemnifying Party has not
responded to the Indemnified Party's written request for consent within
10 business days of the Indemnifying Party's receipt thereof.
(e) Determination of Amount of Adverse Consequences. The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the actual loss suffered by the Indemnified Party (i.e. reduced by
any insurance proceeds or other payment or recoupment received, realized or
retained by the Indemnified Party as a result of the events giving rise to the
claim for indemnification net of any expenses related to the receipt of such
proceeds, payment or recoupment, including retrospective premium adjustments, if
any), as such actual loss is reduced by any reduction in Taxes of the
Indemnified Party (or the affiliated group of which it is a member) occasioned
by such loss or damage. The amount of the actual loss and the amount of the
indemnity payment shall be computed by taking into account the timing of the
loss or payment, as applicable, using a Prime Rate plus 2% interest or discount
rate, as appropriate. Upon the request of the Indemnifying Party, the
Indemnified Party shall provide the Indemnifying Party with information
sufficient to allow the Indemnifying Party to calculate the amount of the
indemnity payment in accordance with this SECTION 8(e). An Indemnified Party
shall take all reasonable steps to mitigate damages in respect of any claim for
which it is seeking indemnification and shall use reasonable efforts to avoid
any costs or expenses associated with such claim and, if such costs and expenses
cannot be avoided, to minimize the amount thereof.
(f) Tax Treatment of Indemnity Payments. All indemnification payments
made under this Agreement, including any payment made under SECTION 9, shall be
treated as increases or decreases to the Cash Amount for Tax purposes.
31. Tax Matters.
(a) Tax Returns. VPC shall prepare or cause to be prepared and file or
cause to be filed when due all Pre-Closing Tax Returns with respect to the
Assets. VPC shall timely pay or cause to be timely paid any Taxes due with
respect to such Pre-Closing Tax Returns. The MLP Parties shall prepare or cause
to be prepared and file or cause to be filed when due any Post-Closing Tax
Returns with respect to the Assets. The MLP Parties shall timely pay (or cause
to be timely paid) any Taxes due with respect to such Post-Closing Tax Returns.
(b) Straddle Periods. The MLP Parties shall be responsible for Taxes
with respect to the Assets related to the portion of any Straddle Period
occurring after the Closing Date. VPC shall be responsible for such Taxes
relating to the portion of any Straddle Period occurring before and on the
Closing Date. If applicable Law shall not permit the Closing Date to be the last
day of a period, then (i) real or personal property Taxes with respect to the
Assets shall be allocated based on the number of days in the partial period
before and after the Closing Date and (ii) all other Taxes shall be allocated on
the basis of the actual activities or attributes of the Assets for each partial
period as determined from the books and records of VPC and its Affiliates.
29
(c) Straddle Returns. The MLP Parties shall prepare any Straddle
Returns and deliver same to VPC for review and comment at least 45 days prior to
the due date (including any extension) for filing each such Straddle Return,
together with a statement setting forth the allocation of taxable income and
Taxes under SECTION 9(b) and the amount of Tax that VPC owes. VPC and the MLP
Parties agree to consult with each other to attempt to resolve in good faith any
issue arising as a result of VPC's review of such Straddle Return and mutually
to consent to the filing thereof as promptly as possible. Not later than five
days before the due date for the payment of Taxes with respect to any such
Straddle Return, VPC shall pay or cause to be paid to the MLP Parties either (i)
if the MLP Parties and VPC are in agreement as to the amount of Taxes owed by
VPC, that amount, or (ii) if the MLP Parties and VPC cannot agree on the amount
of Taxes owed by VPC, the maximum amount of Taxes reasonably determined by VPC
to be owed by it, in which case (A) VPC and the MLP Parties shall refer the
dispute to an independent "Big-Four" accounting firm agreed to by the MLP
Parties and VPC to arbitrate the dispute within ten days following the payment
of the undisputed amount, (B) the determination of such accounting firm as to
the amount of Taxes owing by VPC with respect to a Straddle Return shall be
binding on both VPC and the MLP Parties, (C) VPC and the MLP Parties shall
equally share the fees and expenses of the accounting firm, and (D) within five
days after the determination by such accounting firm, if necessary, the
appropriate Party shall pay the other Party any amount which is determined by
such accounting firm to be owed. VPC shall be entitled to reduce its obligation
to pay Taxes with respect to a Straddle Return by the amount of any estimated
Taxes paid with respect to such Taxes on or before the Closing Date.
(d) Tax Indemnification. VPC agrees to indemnify the MLP Party
Indemnitees from and against any Adverse Consequences with respect to (i) Taxes
with respect to the Assets for any Pre-Closing Tax Period and the portion of any
Straddle Period occurring on or before the Closing Date and (ii) Transfer Taxes.
The MLP Parties agree to indemnify VPC from and against any Adverse Consequences
with respect to Taxes with respect to the Assets for any Post-Closing Tax Period
and the portion of any Straddle Period occurring after the Closing Date.
Notwithstanding anything to the contrary in this Agreement, the covenants and
obligations of the Parties sets forth in this SECTION 9 shall be unconditional
and absolute and shall remain in effect until thirty days after the expiration
of all statutes of limitation applicable to such covenants and obligations. The
limitation on the indemnity obligations of VPC pursuant to SECTION 8(b) shall
not apply to the indemnity obligations of VPC for Adverse Consequences related
to Taxes under this SECTION 9(d).
(e) Transfer Taxes. VPC shall file all necessary Tax Returns and other
documentation with respect to all transfer, documentary, sales, use, stamp,
registration and other similar Taxes and fees arising out of or in connection
with the transactions effected pursuant to this Agreement (the "Transfer Taxes")
and shall be liable for and shall timely pay such Transfer Taxes. If required by
applicable Law, the MLP Parties shall, and shall cause their Affiliates to, join
in the execution of any such Tax Returns and other documentation.
(f) Tax Refunds. If any of the MLP Parties or any Affiliate of the MLP
Parties receives a refund of any Taxes that VPC is responsible for hereunder, or
if VPC or any Affiliate of VPC receives a refund of any Taxes that any of the
MLP Parties is responsible for hereunder, the party receiving such refund shall,
within 30 days after receipt of such refund, remit it to the party who has
responsibility for such Taxes hereunder. For the purpose of this SECTION 9(f),
the
30
term "refund" shall include a reduction in Tax and the use of an overpayment as
a credit or other tax offset, and receipt of a refund in respect thereof shall
be deemed to occur upon the filing of a return or an adjustment thereto claiming
the benefit of such reduction, overpayment or offset.
(g) Closing Tax Certificate. On the Closing Date, VPC shall deliver
to the MLP Parties a certificate (in the form attached hereto as Exhibit F)
signed under penalties of perjury (i) stating it is not a foreign corporation,
foreign partnership, foreign trust or foreign estate, (ii) providing its U.S.
Employer Identification Number, and (iii) providing its address, all pursuant to
Section 1445 of the Code.
32. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement, as provided below:
(i) the MLP Parties and VPC may terminate this Agreement by
mutual written consent at any time before the Closing;
(ii) the MLP Parties may terminate this Agreement by giving
written notice to VPC at any time before Closing (A) in the event VPC
has breached any representation, warranty or covenant contained in this
Agreement in any material respect, the MLP Parties have notified VPC of
the breach, the breach has continued without cure for a period of 10
days after the notice of breach and such breach would result in a
failure to satisfy a condition to the MLP Parties' obligation to
consummate the transactions contemplated hereby; or (B) if the Closing
shall not have occurred on or before 9:00 a.m. (San Antonio time) on
April 30, 2003 (unless the failure results primarily from the MLP
Parties itself breaching any representation, warranty or covenant
contained in this Agreement);
(iii) VPC may terminate this Agreement by giving written
notice to the MLP Parties at any time before the Closing (A) in the
event any of the MLP Parties has breached any representation, warranty
or covenant contained in this Agreement in any material respect, VPC
has notified such MLP Party of the breach, the breach has continued
without cure for a period of 10 days after the notice of breach and
such breach would result in a failure to satisfy a condition to VPC's
obligation to consummate the transactions contemplated hereby; or (B)
if the Closing shall not have occurred on or before 9:00 a.m. (San
Antonio time) April 30, 2003 (unless the failure results primarily from
VPC breaching any representation, warranty or covenant contained in
this Agreement);
(iv) the MLP Parties or VPC may terminate this Agreement if
any court of competent jurisdiction or any governmental, administrative
or regulatory authority, agency or body shall have issued an order,
decree or ruling or shall have taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action
shall have become final and nonappealable; and
31
(v) the MLP Parties or VPC may terminate this Agreement if the
Underwriting Agreement is terminated for any reason.
(b) Effect of Termination. Except as provided in SECTION 8 and
except for the obligations under SECTION 10 and SECTION 11, if any Party
terminates this Agreement pursuant to SECTION 10(a), all rights and obligations
of the Parties hereunder shall terminate without any liability of any Party to
any other Party (except for any liability of any Party then in breach).
33. Miscellaneous.
(a) Public Announcements. Any Party is permitted to issue a press
release or make a public announcement concerning this Agreement without the
other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
separate and simultaneous press releases promptly following the execution of
this Agreement by all Parties.
(b) Insurance; Casualty; Condemnation. (i) The MLP Parties
acknowledge and agree that, following the Closing, any Subject Insurance
Policies shall be terminated or modified to exclude coverage of all or any
portion of the Assets by VPC or any of its Affiliates, and, as a result, the MLP
Parties shall be obligated at or before Closing to obtain at their sole cost and
expense replacement insurance, including insurance required by any third party
to be maintained for or by the Assets. Notwithstanding the foregoing, VPC
acknowledges that initially such insurance described in the preceding sentence
may be maintained under an umbrella policy of Valero Energy Corporation with OLP
as a named insured (and for which OLP shall reimburse Valero Energy Corporation
for its proportionate cost), but the OLP agrees that it will endeavor in good
faith to obtain insurance in its own name if commercially and economically
practicable. Each of the MLP Parties further acknowledges and agrees that the
MLP Parties may need to provide to certain Governmental Authorities and third
parties evidence of such replacement or substitute insurance coverage for the
continued operations of the Assets. If any claims are made or losses occur prior
to the Closing Date that relate solely to the Assets and such claims, or the
claims associated with such losses, properly may be made against the policies
retained by VPC or its Affiliates after the Closing, then VPC shall use its Best
Efforts so that the MLP Parties can file, notice, and otherwise continue to
pursue these claims pursuant to the terms of such policies; provided, however,
nothing in this Agreement shall require VPC to maintain or to refrain from
asserting claims against or exhausting any retained policies.
(ii) (A) VPC shall give the MLP Parties prompt notice of
(i) any fire or other casualty affecting the Assets (a "Casualty")
between the Effective Date and the Closing Date and (ii) any actual,
pending or proposed Taking of all or any portion of the Assets.
(B) In the event the Assets (or any material portion
thereof) suffers a Casualty subsequent to the Effective Date, but
prior to the Closing Date, VPC shall elect either (i) to repair or
make adequate provision for the repair of such Assets prior to
Closing or (ii) to provide the MLP Parties with a credit against the
Cash Amount in an amount agreed upon by VPC and the MLP Parties to
represent the reduction in the value of the Assets by reason of the
Casualty, taking into account any repairs actually made by VPC to
such Assets prior to the Closing Date. If the reduction in the value
of the Assets by reason of the
32
Casualty exceeds 25% of the Cash Amount, the MLP Parties shall have
the option to terminate this Agreement without any further
obligation of any of the Parties or their Affiliates pursuant
hereto.
(C) If after the Effective Date and prior to the Closing
Date, all or any portion of the Assets is taken by condemnation or
eminent domain or by agreement in lieu thereof with any person or
entity authorized to exercise such rights (a "Taking"), and the
mutually-agreed value of the Assets subject to such Taking, when
aggregated with all other Takings occurring during such time period,
equal:
i. less than 25% of the Cash Amount, the
Closing shall take place as provided herein
without abatement of the Cash Amount, and
there shall be assigned to the MLP Parties
at the Closing all interest of VPC in any
award which may be payable to VPC on account
of such Taking; or
ii. 25% or more of the Cash Amount, the MLP
Parties shall have the option to terminate
this Agreement without any further
obligation of any of the parties or their
affiliates pursuant hereto; provided that if
the MLP Parties elects to proceed with the
Closing, the Closing shall take place as
provided herein without abatement of the
Cash Amount, and there shall be assigned to
the MLP Parties at the Closing all interest
of VPC in any award which may be payable to
VPC on account of such Taking.
(D) In the event condemnation proceedings for a Taking of all
or any portion of the Assets are commenced prior to the Closing Date,
the MLP Parties and VPC shall have joint control of such proceedings
and shall cooperate in their efforts in response to such proceedings.
(c) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties, the VPC
Parties, the MLP Parties and their respective successors and permitted assigns.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Prior to the Closing the MLP Parties may not
assign this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of VPC; provided, however, without the prior
written approval of VPC, the MLP Parties and its permitted successors and
assigns may assign any or all of its rights, interests or obligations under this
Agreement to an Affiliate of any of the MLP Parties, including designating one
or more Affiliates of any of the MLP Parties to be the assignee of some or any
portion of the Assets. Notwithstanding the foregoing, VPC may assign its right
under SECTION 2(a)(iv) to receive the OLP Limited Partner Interest to a person
described in Treasury Regulation Section 1.1031(k)-1(g)(4) (a "Qualified
Intermediary"). The Qualified Intermediary will be obligated to, and will,
assign such right to receive the OLP Limited Partner Interest to UDS Logistics.
Such assignment shall be deemed to fulfill VPC's obligations under SECTION
2(a)(v) hereof. If VPC elects to assign its right to receive the OLP Limited
Partner Interest as provided in the preceding sentence, then the Qualified
Intermediary shall assign its right to receive the OLP Limited Partner Interest
to UDS Logistics and UDS Logistics, in lieu of issuing the UDS Membership
Interest to VPC, shall assign its right to received the Cash Amount as set forth
in SECTION 2(a)(vi) hereof to the Qualified Intermediary,
33
in exchange for the assignment by the Qualified Intermediary of the right to
receive the OLP Limited Partner Interest.
(e) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but which together shall constitute
one and the same instrument.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to VPC: One Valero Place
San Antonio, Texas 78212
Attn: Mike Ciskowski
Telecopy:210-370-2270
If to the MLP Parties: Valero Logistics Operations, L.P.
6000 North Loop 1604 West
San Antonio, TX 78249
Attn: Curt Anastasio
Telecopy: 210-370-2304
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. VENUE FOR ANY ACTION
ARISING UNDER THIS AGREEMENT SHALL LIE EXCLUSIVELY IN ANY STATE OR FEDERAL COURT
IN BEXAR COUNTY, TEXAS.
34
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
MLP Parties and VPC. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
held to be invalid or unenforceable in any situation in any court of competent
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
(k) Transaction Expenses. Each of the MLP Parties and VPC shall
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby;
provided that all costs of obtaining the Title Policy shall be paid by VPC and
all recording costs incurred in connection with the recordation of the Deeds and
the Pipeline System Real Property Interests Assignments shall be shared by VPC
and OLP on a 50/50 basis.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include the plural,
and vice versa. All references herein to Exhibits, Schedules, Articles, Sections
or subdivisions thereof shall refer to the corresponding Exhibits, Schedules,
Article, Section or subdivision thereof of this Agreement unless specific
reference is made to such exhibits, articles, sections or subdivisions of
another document or instrument. The terms "herein," "hereby," "hereunder,"
"hereof," "hereinafter," and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or covenant given in the correlated Section hereof on the date of such
certificate. Additionally, any representation, warranty or covenant made in any
such certificate shall be deemed to be made herein.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Entire Agreement. THIS AGREEMENT (INCLUDING THE TRANSACTION
AGREEMENTS AND OTHER DOCUMENTS REFERRED TO HEREIN) CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES AND SUPERSEDES
35
ANY PRIOR UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS BY OR AMONG THE
PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY WAY TO THE
SUBJECT MATTER HEREOF. The rights and obligations created by this Agreement are
separate and independent from any rights and obligations created by any
Assignment. Accordingly, none of the representations, warranties, covenants or
indemnities included in any Assignment shall be merged into this Agreement or
otherwise restrict or limit the effect of this Agreement, but each shall survive
as provided in each such agreement. To the extent that there is a conflict
between the express terms of this Agreement and any Assignment, this Agreement
shall control.
(o) Further Assurances. The Parties agree to execute such
additional instruments, agreements and documents, and to take such other
actions, as may be reasonably necessary to effect the purposes of this
Agreement.
*****
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date set forth in the preamble.
VALERO PIPELINE COMPANY
Name: /s/ Michael S. Ciskowski
-------------------------------------------
Title: Senior Vice President
------------------------------------------
UDS LOGISTICS, LLC
Name: /s/ Raymond F. Gaddy
-------------------------------------------
Title: President
------------------------------------------
VALERO L.P.
By: Riverwalk Logistics, L.P.
its General Partner
By: Valero GP, LLC
its General Partner
Name: /s/ Curtis V. Anastasio
--------------------------------------------
Title: Chief Executive Officer and President
-------------------------------------------
VALERO GP, INC.
Name: /s/ Curtis V. Anastasio
--------------------------------------------
Title: Chief Executive Officer and President
-------------------------------------------
VALERO LOGISTICS OPERATIONS, L.P.
By: Valero GP, Inc.
its General Partner
Name: /s/ Curtis V. Anastasio
--------------------------------------------
Title: Chief Executive Officer and President
-------------------------------------------
37
EXHIBIT A
The Assets include the Pipeline Systems Interests, the Terminal Real Property
Interests, and the Personal Property Assets (as each term is defined below or in
the Agreement).
"PIPELINE SYSTEMS" MEAN THE FOLLOWING:
(a) the refined petroleum products pipeline (the "Houston System")
extending from "Origin Station," which is adjacent to the Corpus East Refinery
operated by an affiliate of VPC, to VPC's Almeda terminal, Pasadena (Kinder
Morgan) interface tanks and Hobby terminal, all in Harris County, Texas, as more
fully described in PART 1-EXHIBIT A-1 of the Property Schedule hereto;
(b) the refined petroleum products pipeline (the "San Antonio System")
extending from VPC's Tribble Lane Station adjacent to the Corpus East Refinery
operated by an affiliate of VPC to VPC's San Antonio terminal (acquired from
Coastal) in Bexar County, Texas, as more fully described in PART 1-EXHIBIT A-2
of the Property Schedule hereto; and
(c) the refined petroleum products pipeline (the "R.P. Valley System")
extending from VPC's Tribble Lane Station to VPC's Edinburg terminal in Hidalgo
County, Texas, as more fully described in PART 1-EXHIBIT A-3 of the Property
Schedule hereto;
in each case together with all of VPC's piping, valves, taps and side valves,
regulators, meters, pumps, station piping and other equipment used exclusively
for the transportation of refined petroleum products through each pipeline
system described above.
"TERMINALS" mean the refined petroleum product terminal facilities located on
the Terminal Real Property and used exclusively for the operation, control or
maintenance of such refined petroleum product terminal facilities, including
those facilities at the Almeda Terminal specifically described in Part IV of the
Property Schedule. In instances where such facilities are located on a leased
Terminal Real Property, such facilities are subject to the rights of the lessor
under the lease of such Terminal Real Property.
"TERMINAL REAL PROPERTY" means (i) the fee parcels described in Part II of the
Property Schedule, together with the improvements to real property located
thereon, (ii) the leasehold interests described in Part III of the Property
Schedule, together with fee or leasehold interests in the improvements to real
property located on such leasehold interests, and (iii) any other part of the
Terminals that constitutes real property in which VPC or any Controlled
Affiliate has an interest.
"PERSONAL PROPERTY ASSETS" means all of VPC's (and any of its Controlled
Affiliates) interest in the Pipeline Systems (to the extent that they constitute
tangible personal property), the Terminals (to the extent that they constitute
tangible personal property), the Material Contracts and the Intellectual
Property and the Equipment.