EXHIBIT 1.1
8,460,000 SHARES
VALERO ENERGY CORPORATION
2% MANDATORY CONVERTIBLE PREFERRED STOCK
(LIQUIDATION PREFERENCE $25 PER SHARE)
UNDERWRITING AGREEMENT
October 28, 2003
October 28, 2003
Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10025
Dear Sirs and Mesdames:
Orion Refining Corporation, a Delaware corporation ("ORION"), a
shareholder of Valero Energy Corporation, a Delaware corporation (the
"COMPANY"), proposes to sell to the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS"), an aggregate of 8,460,000 shares of the Company's
2% Mandatory Convertible Preferred Stock, liquidation preference $25 per share,
(the "PREFERRED SHARES"), which is convertible into shares of the Company's
common stock, par value $.01 per share (the "COMMON SHARES" and, together with
the Preferred Shares, the "SHARES"). Orion currently is a debtor and
debtor-in-possession in bankruptcy proceedings pending in the United States
Bankruptcy Court for the District of Delaware (the "BANKRUPTCY COURT") in Case
No. 03-11483 (MFW) (the "BANKRUPTCY CASE"). On October 10, 2003, the Bankruptcy
Court entered an order in the Bankruptcy Case (the "SALE ORDER") that, inter
alia authorizes the sale of the Preferred Shares to the Underwriters in
accordance with the terms of this Agreement.
All outstanding shares of preferred stock, liquidation preference $25
per share, of the Company outstanding are hereinafter referred to as the
"PREFERRED STOCK." The shares of common stock, par value $.01 per share, of the
Company to be issued upon conversion of the Preferred Stock are hereinafter
referred to as the "COMMON STOCK." All outstanding Common Shares will have
attached thereto preferred share purchase rights (the "Rights") issued pursuant
to the Rights Agreement (the "RIGHTS AGREEMENT") dated as of July 17, 1997
between the Company and Computershare Investors Services L.L.C., as Rights
Agent.
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION"), in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder (the
"SECURITIES ACT"), a registration statement on Form S-3 (registration no.
333-106949), including a related prospectus, relating to the registration of the
Preferred Stock and the shares of Common Stock issuable upon conversion of the
Preferred Stock. The registration statement as amended at the date of this
Agreement, including information, if any, deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act is hereinafter referred to as the "REGISTRATION STATEMENT," and
the prospectus included therein, in the form first used to confirm sales of the
Shares, is hereinafter referred to as the "PROSPECTUS." Each preliminary
prospectus included in the Registration Statement prior to the time the
Registration Statement becomes effective is herein referred to as a "PRELIMINARY
PROSPECTUS." If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. Any reference
to the term Registration Statement, any Preliminary Prospectus or the Prospectus
or to any amendment or supplement to any of the foregoing documents shall
include the documents incorporated therein by reference and, in the case of any
reference herein to any Prospectus, also shall include any documents
incorporated by reference therein, and any supplements or amendments thereto.
The terms "SUPPLEMENT" and "AMENDMENT" or "AMEND" as used in this Agreement
shall include all documents subsequently filed by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), that are deemed to be incorporated by reference in the
Prospectus.
1. Representations and Warranties of the Company and Orion.
(A) The Company represents and warrants to and agrees with each of the
Underwriters and Orion that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant
to the Exchange Act and incorporated by reference in the Prospectus
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) the Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will
not contain, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iv)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus
based upon information relating to (i) any Underwriter furnished to the
Company in writing by such Underwriter or its counsel through you
expressly for use therein, or (ii) Orion furnished to the Company in
writing by Orion or its counsel through you expressly for use therein.
(c) The Company (i) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and (iii) is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company which is a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X (a "SIGNIFICANT
SUBSIDIARY") (i) has been duly formed, is validly existing in good
standing under the laws of the jurisdiction of its formation, (ii) has
the corporate, limited liability company, limited partnership or
partnership power and authority to own its property and to conduct its
business as described in the Prospectus and (iii) is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding on the date hereof
have been duly authorized and are validly issued, fully paid and
non-assessable.
(h) The Preferred Shares have been duly authorized and are
validly issued, fully paid and non-assessable and are not subject to
any preemptive or similar rights.
(i) The shares of Common Stock reserved for issuance upon
conversion of the Preferred Shares have been duly authorized and
reserved and, when issued upon conversion of the Preferred Shares in
accordance with the terms of the Preferred Shares, will be validly
issued, fully paid
and non-assessable, and the issuance of the Common Shares will not be
subject to any preemptive or similar rights.
(j) The Rights Agreement has been duly authorized, executed
and delivered by the Company; the Rights have been duly authorized by
the Company and, when issued upon issuance of the Common Shares, will
be validly issued, and the shares of Junior Participating Preferred
Stock, Series I, issuable upon exercise of the Rights, have been duly
authorized by the Company and validly reserved for issuance, and when
issued upon the exercise of the Rights in accordance with the terms of
the Rights Agreement, will be validly issued, fully paid and
non-assessable.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement and
the Rights Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company or
any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries,
taken as a whole, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency that has not
already been obtained is required for the performance by the Company of
its obligations under this Agreement or the Rights Agreement, except
such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares and
except such as shall have been obtained by Orion from the United Sates
Bankruptcy Court for the District of Delaware (the "BANKRUPTCY COURT"),
as to which the Company makes no representation or warranty.
(l) Neither the Company nor any of its subsidiaries is in
violation of its corporate charter or by-laws or other constitutive
document or in default under any agreement, indenture or instrument,
which default could reasonably be expected to have a material adverse
effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, and
no event or condition has occurred or exists which, with the giving of
notice or the lapse of time or both, would result in any such violation
or default which would have such an effect. Except as described in the
Prospectus, neither the Company nor any of its subsidiaries is in
violation of any law, ordinance, governmental rule or regulation or
court decree to which it may be subject, which violation could
reasonably be expected to have a material adverse effect on the
business, properties, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole.
(m) There has not occurred any material adverse change, or any
development involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(n) There are no legal or governmental investigations or
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject, that are required to be
described in the Registration Statement or the Prospectus and are not
so described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(o) The Company is not, and after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus will not be, required to
register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(p) All licenses, permits, consents, certificates of need,
authorizations, certifications, accreditations, franchises, approvals,
grants of rights by, or filings or registrations with, any federal,
state, local or foreign court or governmental or public body,
authority, or other instrumentality or third person (including without
limitation the Federal Energy Regulatory Commission ("FERC")) (any of
the foregoing a "LICENSE") necessary for the Company and its
subsidiaries to own, build, maintain or operate their respective
businesses or properties have been duly authorized and obtained, and
are in full force and effect, except where the failure to so be
obtained or in effect would not, individually or in the aggregate, have
a material adverse effect on the Company and its subsidiaries, taken as
a whole; and the Company and its subsidiaries are in compliance in all
material respects with all provisions thereof; no event has occurred
which permits (or with the passage of time would permit) the revocation
or termination of any License, or which could result in the imposition
of any restriction thereon, which is of such a nature or the effect of
which would reasonably be expected to have a material adverse effect on
the Company and its subsidiaries, taken as a whole; no material License
is the subject of any pending or, to the best of the Company's
knowledge, threatened challenge or revocation which, if such License
were revoked, would reasonably be expected to have a material adverse
effect on the Company and its subsidiaries, taken as a whole; the
Company and its subsidiaries are not required to obtain any material
License that has not already been obtained from, or effect any material
filing or registration that has not already been effected with, the
FERC or any other federal, state or local regulatory authority in
connection with the
execution and delivery of this Agreement or the Rights Agreement; and
except, in each case, as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement).
(q) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole; and except, in each case, as described in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(r) Except as described in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), there are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(s) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(t) The Company has prepared its financial statements on a
consistent basis in accordance with generally accepted accounting
principles.
(u) Neither the Company nor any of its subsidiaries is a
"holding company", a "subsidiary company" or a "holding company", an
"affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company", or a "public utility", as each of such terms is
defined
in the Public Utility Holding Company Act of 1935, as amended, and the
rules and regulations thereunder.
(v) The Company and its subsidiaries have good and
indefeasible title to all items of real property and good and
defensible title to all personal property owned by them and the right
to use all other property used or proposed to be used by them in the
ordinary course of business, in each case free and clear of all liens,
encumbrances and defects except such as are described or referred to in
the Prospectus or such as do not materially adversely affect the value
of such property and do not unreasonably interfere with the use made or
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid, existing
and enforceable leases with such exceptions as are not material and do
not unreasonably interfere with the use made or proposed to be made of
such property and buildings by the Company or its subsidiaries.
(B) Orion represents and warrants to and agrees with the Company and
each of the Underwriters that:
(a) Orion now has and at the Closing Date (as such date is
hereinafter defined) will have good and marketable title to the
Preferred Shares to be sold by Orion, and the requisite corporate power
and authority to effect the sale and delivery of such Preferred Shares
to the Underwriters as contemplated by this Agreement; and upon the
delivery of, against payment for, such Preferred Shares pursuant to
this Agreement, the Underwriters will acquire good and marketable title
thereto, free and clear of any liens, encumbrances, interests and
claims.
(b) Orion has the requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations under
this Agreement. The execution and delivery by Orion of this Agreement
and the consummation by Orion of the transactions herein contemplated
and the performance by Orion of its obligations hereunder will not
require any consent, approval, authorization, or other order of any
court, regulatory body, administrative agency or other governmental
body not already obtained (except as may be required under the
Securities Act, state securities laws or Blue Sky laws) and will not
result in a breach of any of the terms and provisions of, or constitute
a default under, the organizational documents of Orion, or any
indenture, mortgage, deed of trust or other agreement or instrument to
which Orion is a party that would have an adverse effect on the ability
of Orion to perform its obligations under this Agreement, or of any
order, rule or regulation applicable to Orion of the Bankruptcy Court
or any other court or of any regulatory body or administrative agency
or other governmental body having jurisdiction.
(c) Orion has not taken and will not take, directly or
indirectly, any action designed to, or which has constituted, or which
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of the Preferred Stock or Common Shares of
the Company and, other than as permitted by the Securities Act, Orion
will not distribute any prospectus or other offering material in
connection with the offering of the Shares.
(d) The information pertaining to Orion under the caption
"Selling Securityholder" in the Prospectus is complete and accurate in
all material respects.
2. Agreements to Sell and Purchase. Upon the basis of the
representations, warranties and covenants herein contained, and subject to the
conditions hereinafter stated, Orion hereby agrees to sell to the several
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from Orion at $21.67 a share (the "PURCHASE PRICE") the number of
Preferred Shares set forth in Schedule I hereto opposite the name of such
Underwriter.
The Company hereby agrees that, without the prior written consent of the
Underwriters, it will not, during the period ending 45 days after the date of
this agreement, (i) register, offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Preferred Stock or Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers from the Company to
another, in whole or in part, any of the economic consequences of ownership of
the Preferred Stock or Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Preferred Stock, Common
Stock or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to (A) the Shares to be sold hereunder, (B) the grant of options
or Common Stock under the Company's stock and incentive plans as in effect at
the date hereof or the issuance of shares of Common Stock under the Company's
non-employee director stock plan, (C) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and disclosed in the Prospectus, or (E)
the issuance by the Company of unregistered securities in connection with
acquisitions, which securities will not be registered for resale before the end
of the 45-day period.
3. Terms of Public Offering. The Company and Orion are advised
by you that the Underwriters propose to make a public offering of their
respective portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as in your judgment is advisable. The
Company and Orion are further advised by you that the Shares are to be offered
to the public initially at $22.00 a share (the "PUBLIC OFFERING PRICE") and to
certain
dealers selected by you at a price that represents a concession not in excess of
$0.20 a share under the Public Offering Price.
4. Payment and Delivery. Payment for the Preferred Shares to
be sold by Orion shall be made to Orion in Federal or other funds immediately
available in New York City against delivery of such Preferred Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on October 31, 2003, or at such other time on the same or such other date,
not later than November 7, 2003, as shall be mutually agreed upon among the
Company, Orion and you. The time and date of such payment are hereinafter
referred to as the "CLOSING DATE."
The Preferred Shares shall be delivered in electronic form through the
facilities of the Depository Trust Company ("DTC") and registered in such names
and in such denominations as you shall request in writing not later than one
full business day prior to the Closing Date. The Preferred Shares shall be
delivered to DTC on the Closing Date, for the respective accounts of the several
Underwriters, with any transfer taxes payable in connection with the transfer of
the Preferred Shares to the Underwriters duly paid, against payment of the
Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The
obligations of Orion to sell the Preferred Shares to the Underwriters and the
several obligations of the Underwriters to purchase and pay for the Preferred
Shares on the Closing Date are subject to the following further conditions:
(a) no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the Securities Act
and no proceedings for that purpose shall have been instituted or shall
be pending or, to your knowledge or the knowledge of the Company, shall
be contemplated by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel for the Underwriters.
(b) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate an improvement, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated
in the Prospectus.
(c) The Underwriters and Orion shall have received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in Section
5(b)(i) above and to the effect that the representations and warranties
of the Company contained in this Agreement are true and correct as of
the Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(d) The Underwriters and the Company shall have received on
the Closing Date a certificate, dated the Closing Date and signed by an
executive officer of Orion, to the effect that the representations and
warranties of Orion contained in this Agreement are true and correct as
of the Closing Date.
(e) The Underwriters shall be reasonably satisfied that (i)
notice of the application to the Bankruptcy Court for the Sale Order
was properly served on all entities which are purportedly bound by the
Sale Order and all entities whose rights might be infringed or affected
by the Sale Order or the sale of the Preferred Shares to the
Underwriters pursuant to this Agreement; (ii) the Sale Order is not
subject to a stay, appeal or motion for rehearing, reconsideration,
revocation or like relief; (iii) the Sale Order has not been amended or
supplemented since its entry (other than with the consent of the
Underwriters acting reasonably) and is on the Closing Date in full
force and effect; (iv) the Sale Order is final and not subject to any
post-entry review or reconsideration; and (v) the sale of the Preferred
Stock to the Underwriters pursuant to this Agreement will, upon
closing, comply in all material respects with the requirements of the
Sale Order.
(f) The Underwriters and Orion shall have received on the
Closing Date an opinion of Baker Botts L.L.P., outside counsel for the
Company, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus;
(ii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iii) the Preferred Shares have been duly authorized
and validly issued and are fully paid and non-assessable and
are not subject to any preemptive or similar rights under the
Company's certificate of incorporation or by-laws or under
Delaware General Corporation Law or, to the best of such
counsel's knowledge, any agreement to which the Company is a
party;
(iv) the shares of Common Stock reserved for issuance
upon conversion of the Preferred Shares have been duly
authorized and reserved and, when issued upon conversion of
the Preferred Shares in accordance with the terms of the
Preferred Shares, will be validly issued, fully paid and
non-assessable, and the issuance of the shares of Common Stock
will not be subject to any preemptive or similar rights under
the Company's certificate of incorporation or by-laws or under
Delaware General Corporation Law or, to the best of such
counsel's knowledge, any agreement to which the Company is a
party;
(v) the Rights Agreement has been duly authorized by
the Company; the Rights have been duly authorized by the
Company and, when issued upon issuance of the Common Shares,
will be validly issued, and the Shares of Junior Participating
Preferred Stock, Series I, issuable upon exercise of the
Rights have been duly authorized by the Company and, when
issued upon such exercise in accordance with the terms of the
Rights Agreement, will be validly issued, fully paid and
non-assessable;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company;
(vii) the execution and delivery by the Company of,
and the performance by the Company of its obligations under,
this Agreement and the Rights Agreement will not contravene
any provision of applicable law or the certificate of
incorporation or by-laws of the Company;
(viii) the statements (A) in the Prospectus under the
captions "Description of the Convertible Preferred Stock" and
"Description of Valero Capital Stock", (B) in the Registration
Statement in Item 15 and (C) incorporated by reference into
the Prospectus under the caption "Information We Incorporate
By Reference" in the report on Form 8-A/A dated May 10, 2001,
in each case insofar as such statements constitute summaries
of legal matters, accurately present the information called
for with respect to such legal matters, documents and
proceedings and accurately summarize the matters referred to
therein; and
(ix) the Company is not required to register as an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
In addition, such counsel shall state that nothing
has come to such counsel's attention to cause such counsel to believe
that (A) the Registration Statement and Prospectus (except for
financial statements and schedules and other financial and statistical
data included therein as to which such counsel need not comment) do not
comply as to form in all material respects with the Securities Act and
the applicable rules and regulations of the Commission thereunder or
(B)(i) (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became
effective or at the time of the execution of this Agreement contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief) the Prospectus contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) The Underwriters and Orion shall have received on the
Closing Date an opinion of Jay D. Browning, Esq., Vice President and
Corporate Secretary of the Company, to the effect that:
(i) the Company is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each Significant Subsidiary of the Company has
been duly formed, is validly existing in good standing under
the laws of the jurisdiction of its formation, has the
corporate, limited liability company, limited partnership or
partnership power and
authority to own its property and to conduct its business and
is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property
requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(iii) the Common Shares outstanding prior to the
issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(iv) all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(v) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement and the Rights Agreement will not contravene any
agreement or other instrument binding upon the Company or any
of its subsidiaries that is known to such counsel and material
to the Company and its subsidiaries, taken as a whole, or to
the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency that has not already
been obtained is required for the performance by the Company
of its obligations under this Agreement or the Rights
Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the
offer and sale of the Shares;
(vi) the statements (A) in the Prospectus under the
captions "Risk Factors-Compliance with and changes in
environmental laws could adversely affect our performance" and
"-A patent dispute with Unocal could adversely affect us," (B)
in the Registration Statement in Item 15 and (C) incorporated
by reference into the Prospectus under the caption "Item
1-Business & Properties-Environmental Matters" and "Item
3-Legal Proceedings" in the Company's Annual Report on Form
10-K for the year ended December 31, 2002, in each case
insofar as such statements constitute summaries of legal
matters, accurately present the information called for with
respect to such legal matters, documents and proceedings and
accurately summarize the matters referred to therein;
(vii) after due inquiry, such counsel does not know
of any legal or governmental investigations or proceedings
pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes,
regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that
are not described or filed as required;
(viii) nothing has come to such counsel's attention
to cause such counsel to believe that the Company and its
subsidiaries (A) are not in compliance with any and all
applicable Environmental Laws, (B) have not received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses or (C) are not in compliance with all terms and
conditions of any such permit, license or approval, except as
described in the Prospectus and except where such
noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses
or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries,
taken as a whole; and
(ix) the documents incorporated by reference in the
Prospectus (except for the consolidated financial statements
and other financial or statistical data included therein or
omitted therefrom, as to which such counsel need express no
opinion), as of the dates they were filed with the Commission
or to the extent such documents were subsequently amended
prior to the date hereof, at the time so amended, complied as
to form in all material respects with the requirements of the
Exchange Act and the regulations thereunder.
In addition, such counsel shall state that nothing has come to
such counsel's attention to cause such counsel to believe that (A) the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included therein
as to which such counsel need not comment) do not comply as to form in
all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder or (B)(i) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time
the Registration Statement became effective or at the time of the
execution of this
Agreement contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) (except for
financial statements and schedules and other financial and statistical
data as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
The opinions of Baker Botts L.L.P. and Jay D. Browning,
Esq. referred to in paragraphs 5(f) and 5(g) above shall be rendered to
the Underwriters and Orion at the request of the Company and shall so
state therein.
(h) The Underwriters shall have received on the Closing Date
opinions of Vinson & Elkins L.L.P., and Morris, Nichols, Arsht and
Tunnel, counsel for Orion, dated the Closing Date substantially in the
forms attached hereto as Exhibit A and Exhibit B respectively.
In rendering such opinion, Vinson & Elkins L.L.P. may rely as
to matters governed by the laws of states other than Texas or Federal
laws on local counsel in such jurisdictions, provided that in each case
Vinson & Elkins L.L.P. shall state that they believe that they and the
Underwriters are justified in relying on such other counsel.
(i) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date in form and substance satisfactory to the
Underwriters.
(j) The Underwriters shall have received, on the Closing Date,
a letter dated the Closing Date in form and substance satisfactory to
the Underwriters, from Ernst & Young LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a
"cut-off date" not earlier than the date hereof.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters and Orion herein contained, the Company covenants
with each Underwriter and Orion as follows:
(a) To furnish to you, without charge, two conformed copies of
the Registration Statement (including exhibits and documents
incorporated by reference thereto) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without
charge, prior to 10:00
a.m. New York City time on the business day next succeeding the date of
this Agreement and, during the period mentioned in Section 6(d) below,
as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) During the period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, before amending or
supplementing the Registration Statement or the Prospectus, (including
by filing any document that would as a result thereof be incorporated
by reference in the Prospectus) to furnish to you a copy of each such
proposed amendment, supplement or other document and not to file any
such proposed amendment, supplement or other document to which you
reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) During the period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, to file promptly all
documents required to be filed with the Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(d) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of
counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare,
file with the Commission and furnish, at its own expense, to the
Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus, so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(e) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and to maintain such qualifications for as long as
the Underwriters shall reasonably request.
(f) To make generally available to the Company's security
holders and to you as soon as practicable an earnings statement
covering the twelve-month period ending December 31, 2004 that
satisfies the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
(g) To comply with all rules and regulations of the New York
Stock Exchange in respect of the listing of the Common Shares and to
use its best efforts to cause the Common Shares to be eligible for
trading thereon.
7. Expenses. Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, the Company
agrees to pay or cause to be paid all expenses incident to the performance of
its obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities herein above specified, (ii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(e) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iii) all filing fees and the
reasonable fees and disbursements of counsel to the Underwriters incurred in
connection with any required review and qualification of the offering of the
Shares by the National Association of Securities Dealers, Inc., (iv) all fees
and expenses in connection with the preparation and filing of the registration
statement on Form 8-A relating to the Common Stock and all costs and expenses
incident to listing the Common Shares on the New York Stock Exchange, (v) the
cost of printing certificates representing the Shares, (vi) the costs and
charges of any transfer agent, registrar or depositary, (vii) the costs and
expenses of the Company relating to investor presentations on any one "road
show" undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the officers of the Company and any such
consultants, and (viii) all other costs and expenses incident to the performance
of the obligations of
the Company hereunder for which provision is not otherwise made in this Section,
provided that the Underwriters agree to pay all of the costs and expenses
relating to any "road show" relating directly to the Underwriters, including the
cost of chartering any aircraft. It is understood that (i) except as provided in
this Section, Section 8 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriters and Orion will pay all of their
respective costs and expenses, including fees and disbursements of their
respective counsel, stock transfer taxes payable on resale of any of the Shares
by the Underwriters and any advertising expenses connected with any offers the
Underwriters may make, and (ii) Orion will pay all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon.
8. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, Orion, the directors of Orion, the
officers of Orion and each person, if any, who controls any Underwriter or Orion
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to Orion furnished to the Company in writing by Orion
directly or through counsel expressly for use therein or relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
or through your counsel expressly for use therein; provided, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
losses, claims, damages or liabilities, unless such failure is the result of
noncompliance by the Company with Section 6(a) hereof.
(b) Orion agrees to indemnify and hold harmless the Company,
the directors of the Company, the officers of the Company who sign the
Registration Statement, each Underwriter and each person, if any, who
controls the Company or any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to Orion furnished to the
Company in writing by Orion directly or through counsel expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the directors of the Company,
the officers of the Company who sign the Registration Statement, Orion
and each person, if any, who controls the Company or Orion within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
any amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such Underwriter
furnished to the Company in writing by such Underwriter through you or
through your counsel expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or
supplements thereto.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 8(a), 8(b) or 8(c),
such person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may
designate in such proceeding and shall pay the fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or
(ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if
any, who control any Underwriter within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, (ii) the
fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section, and (iii) the fees
and expenses of more than one separate firm (in addition to any local
counsel) for Orion and all persons, if any, who control Orion within
the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm
for the Underwriters and such control persons of any Underwriters, such
firm shall be designated in writing by the Underwriters. In the case of
any such separate firm for the Company, and such directors, officers
and control persons of the Company, such firm shall be designated in
writing by the Company. In the case of any such separate firm for Orion
and such control persons of Orion, such firm shall be designated in
writing by Orion. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder
by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(e) To the extent the indemnification provided for in Section
8(a), 8(b) or 8(c) is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such
subsection, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities (i) in
such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause 8(e)(i) above is
not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(e)(i)
above but also the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by
the Company and Orion on the one hand and the Underwriters on the other
hand in connection with the offering of the Shares shall be deemed to
be in the same respective proportions as the net proceeds from the
offering of the Shares (before deducting expenses) received by Orion
and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of
the Prospectus, bear to the aggregate Public Offering Price of the
Shares; provided, however, that nothing herein shall be construed to
prevent the Company and Orion from allocating any such losses, claims,
damages or liabilities between themselves pursuant to a separate
agreement between such parties. The relative fault of the Company and
Orion on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company or Orion on the one hand or by the Underwriters on the
other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Underwriters' respective obligations to contribute
pursuant to this Section 8 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(f) The Company, Orion and the Underwriters agree that it
would not be just or equitable if contribution pursuant to this Section
8 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in Section 8(e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, (i) no Underwriter
shall be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount
of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission, and (ii) Orion shall not be required to contribute
any amount in excess of the proceeds received by Orion from the
Underwriters in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 8 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in
this Section 8 and the representations, warranties and other statements
of the Company contained in this Agreement shall remain operative and
in full force and effect regardless of any termination of this
Agreement, any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, or the Company or Orion, their
officers or directors or any person controlling the Company or Orion
and acceptance of and payment for any of the Shares.
9. Termination. This Agreement shall be subject to termination
by notice given by you to the Company and Orion, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange or the National
Association of Securities Dealers, Inc., (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your
judgment, is material and adverse and (b) in the case of any of the events
specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or together
with any other such event, makes it, in your judgment, impracticable to market
the Shares on the terms and in the manner contemplated in the Prospectus.
10. Effectiveness; Defaulting Underwriters. This Agreement
shall become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date, any Underwriter or Underwriters shall fail or
refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs is more than one-tenth the aggregate number of Shares
to be purchased, and arrangements satisfactory to you, the Company and Orion for
the purchase of such Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or Orion. In any such case you, the
Company or Orion shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company or Orion to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company or Orion shall be unable to perform its
obligations under this Agreement, the non-complying party will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
11. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
12. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
13. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed a
part of this Agreement.
14. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be given to Citigroup Global Markets Inc., 388 Greenwich
Street, New York, New York 10013 (telefax: 212-816-7457); Attention: General
Counsel, and to Lehman Brothers, 745 Seventh Avenue, New York, New York 10025
(telefax: 212-526-0943); Attention: Syndicate Department. Notices to the Company
shall be given to it at One Valero Place, San Antonio, Texas, 78212 (telefax:
210-370-2646); Attention: Corporate Secretary. Notices to Orion shall be given
to it at Orion Refinery Corp., P.O. Box 537, Norco, Louisiana 70079; Attention:
Mr. Richard S. Rayzor.
Very truly yours,
VALERO ENERGY CORPORATION
By: /s/ Michael S. Ciskowski
------------------------------------------
Name: Michael S. Ciskowski
Title: Executive Vice President and
Chief Financial Officer
ORION REFINING CORPORATION
By: /s/ Steven L. Victor
------------------------------------------
Name: Steven L. Victor
Title: Chief Restructuring Officer
Accepted as of the date hereof,
on behalf of the Underwriters
named in Schedule I hereto
CITIGROUP GLOBAL MARKETS INC.
By: /s/ Mario Rodriguez
-------------------------------------------
Name: Mario Rodriguez
Title: Managing Director
Global Energy Investment Banking
LEHMAN BROTHERS INC.
By: /s/ Joe Castle
-------------------------------------------
Name: Joe Castle
Title: Senior Vice President
SCHEDULE I
<Table>
<Caption>
NUMBER OF SHARES TO BE
UNDERWRITERS PURCHASED
- ------------------------------------------------------------ ----------------------
Citigroup Global Markets Inc................................ 4,230,000
Lehman Brothers Inc......................................... 4,230,000
----------------------
Total:............................................. 8,460,000
</Table>
EXHIBIT A
October __, 2003
Citigroup Global Markets Inc.
388 Greenwich Street
New York, NY
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10025
Re: Orion Refining Corporation
8,460,000 Shares of Preferred Stock
Ladies and Gentlemen:
We have acted as counsel for Orion Refining Corporation, a Delaware
corporation (the "Selling Stockholder") and a stockholder of Valero Energy
Corporation, a Delaware corporation (the "Company"), in connection with the
purchase by you (the "Underwriters") from the Selling Stockholder pursuant to
the Underwriting Agreement dated October __, 2003 (the "Underwriting Agreement")
among the Underwriters, the Company and the Selling Stockholder, of an aggregate
of 8,460,000 shares of the Company's 2% Mandatory Convertible Preferred Stock,
liquidation preference $25 per share (the "Preferred Shares").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including: (a) the Registration Statement on Form S-3
(Registration No. 333-106949)(the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") on July 11, 2003 and
Amendment No. 1 thereto filed with the Commission on August 18, 2003, Amendment
No. 2 thereto filed with the Commission on September 18, 2003 and Amendment No.
3 thereto filed with the Commission on October 14, 2003 with respect to the
registration of the sale of up to 8,460,000 Preferred Shares under the
Securities
Act of 1933 (the "Securities Act"); (b) the final prospectus dated October __,
2003, as filed with the Commission pursuant to Rule 424(b) under the Securities
Act (the "Base Prospectus"); (c) the final Prospectus Supplement dated October
__, 2003 to the Base Prospectus (the "Prospectus Supplement" and together with
the Base Prospectus, the "Prospectus"); (d) the Underwriting Agreement; and (e)
certificates representing the Preferred Shares. As to questions of fact material
to this opinion and not independently established by us, we have relied, to the
extent we have deemed appropriate, upon certificates of officers or
representatives of the Company or the Selling Stockholder. Capitalized terms
used but not defined herein are used with the same meanings ascribed to them in
the Underwriting Agreement.
Based on the foregoing, we are of the opinion that no consent,
approval, authorization or filing with any Texas or Federal governmental
authority is required to be obtained or made by the Selling Stockholder in
connection with the execution and delivery by the Selling Stockholder of the
Underwriting Agreement or the consummation of the sale of the Preferred Stock to
the Underwriters pursuant to the Underwriting Agreement, except for any
consents, approvals, authorizations or filings required pursuant to state
securities or blue sky laws or pursuant to state or Federal bankruptcy laws (as
to which we express no opinion) and those consents, approvals, authorizations or
filings already obtained or made.
The foregoing relates only to requirements of Texas and Federal law
that are of general application and that, in our experience, are likely to have
application to transactions of the nature herein referenced (and not to
requirements of any law that might be implicated by reason of the specific
business activities of any of the above referenced entities).
We express no opinion herein as to any matters governed by any law
other than the laws of the State of Texas and the Federal law of the United
States of America.
We are furnishing this opinion to you solely for your benefit. This
opinion may not be relied upon by any other person or for any other purpose or
used, circulated, quoted or otherwise referred to for any other purpose.
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EXHIBIT B
October __, 2003
Citigroup Global Markets Inc.
388 Greenwich Street
New York, NY
Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10025
Re: Orion Refining Corporation
Ladies and Gentlemen:
We have acted as special Delaware and bankruptcy counsel to Orion
Refining Corporation, a Delaware corporation ("Orion") and a debtor and
debtor-in-possession in a case pending under Chapter 11 of Title 11 of the
United States Code in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"), in connection with the authorization,
execution and delivery by Orion of the Underwriting Agreement dated October __,
2003 (the "Underwriting Agreement") by and among Orion, Valero Energy
Corporation, Lehman Brothers Inc. and Citigroup Global Markets Inc. in
accordance with the Order: (A) Authorizing The Debtor To Enter Into Underwriting
Agreement With Valero Energy Corporation, Lehman Brothers, Inc. And Citigroup
Global Markets Inc. In Connection With The Debtor's Monetization Of Certain
Preferred Stock; (B) Approving Underwriting Agreement; (C) Authorizing The
Debtor To Sell Preferred Stock Free And Clear Of All Liens, Claims, Interests
And Encumbrances; and (D) Granting Related Relief, dated October 9, 2003 (D.I.
620) (the "Sale Order"). Capitalized terms used herein and not otherwise defined
are used as defined in the Underwriting Agreement.
In rendering this opinion, we have examined and relied upon copies of
the following documents in forms provided to us: the Underwriting Agreement; the
Sale Order; the Certificate of Incorporation of Orion filed with the Office of
the Secretary of State of the State of Delaware; the By-Laws of Orion; certain
corporate records and minutes of Orion, including without limitation,
resolutions of the board of directors of Orion approving and authorizing the
execution and delivery by Orion of the Underwriting Agreement in accordance with
the Sale and Order; and an Officer's Certificate given by the Secretary of Orion
dated October ___, 2003 attached to this Opinion (the "Officer Certificate");
Certificates given by the directors of Orion dated October ___, 2003 attached to
the Officer
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Certificate (the "Director Certificates"); that certain Security Agreement made
by Orion and certain other parties party thereto in favor of General Electric
Capital Corporation ("GECC"), as Administrative Agent, dated as of February 28,
2002 (the "Security Agreement"), granting GECC an irrevocable proxy with full
power of substitution (the "Original Proxy") to exercise voting rights with
respect to all shares of stock of Orion (the "Shares") held by Special
Situations Holdings X LLC-Orion ("CSFB"); a letter from GECC to CSFB dated
October ___, 2003 attached hereto granting CSFB voting rights with respect to
the Shares (the "CSFB Proxy"); a letter from CSFB to E. Baines Manning dated
October ___, 2003 attached hereto granting Mr. Manning voting rights with
respect to the Shares (the "Manning Proxy" and, together with the Original Proxy
and the CSFB Proxy, the "Proxies"); and a written consent dated October ___,
2003 executed by Mr. Manning and delivered to the Secretary of Orion at the
principal place of business thereof (the "Consent"). In such examinations, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as copies or drafts of documents to be executed
and the legal capacity of natural persons to complete the execution of
documents. We have further assumed for purposes of this opinion: (i) the due
formation or organization, valid existence and good standing of each entity that
is a party to the documents examined by us under the laws of the jurisdiction of
its formation or organization; (ii) except to the extent addressed by our
opinion set forth in paragraph 1, below, the due adoption, authorization,
execution and delivery by, or on behalf of, each of the parties thereto of the
above-referenced documents by each of the signatories thereto; (iii) that the
Underwriting Agreement constitutes a legal, valid and binding agreement of each
of the parties thereto and is enforceable against each of the parties thereto in
accordance with its terms; and (iv) that the documents examined by us express
the entire understanding of the parties thereto with respect to the subject
matter thereof and have not been supplemented, amended or otherwise modified. We
have also assumed that the Proxies are valid and enforceable in accordance with
their terms and that Mr. Manning is duly authorized pursuant thereto to execute
and deliver the Consent. No opinion is expressed with respect to the
requirements of, or compliance with, federal or state securities or blue sky
laws. We have not reviewed any documents other than those identified above in
connection with this opinion and we have assumed that there are no documents
that are contrary to or inconsistent with the opinions expressed herein.
Further, we express no opinion with respect to any offering materials relating
to the Preferred Shares and assume no responsibility for their contents. As to
any fact material to our opinion, other than those assumed, we have relied
without independent investigation on the above-referenced documents and on the
accuracy, as of the date hereof, of the matters therein contained.
To the extent our opinion set forth in paragraph 3 below relates to the
requirement for any consent, approval, waiver, license or authorization or other
action by or filing with any Delaware governmental authority, our opinion
relates only to requirements of Delaware law that are of general application and
that, in
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our experience, are likely to have application to transactions of the nature
herein referenced (and not to requirements of law that might be implicated by
reason of the specific business activities of any of the above-referenced
entities). For purposes of our opinion set forth in paragraph 4 below, we have
relied exclusively on a review of the docket of the Bankruptcy Court on October
___, 2003.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law and federal bankruptcy law, it is our opinion that:
1. The Underwriting Agreement has been duly authorized, executed and
delivered on behalf of Orion.
2. Orion has the requisite corporate power and authority to execute and
deliver the Underwriting Agreement and to sell, assign, transfer and deliver the
Preferred Shares to be sold by Orion pursuant to the Underwriting Agreement.
3. No consent, approval, waiver, license or authorization or other
action by or filing with the Bankruptcy Court or any other Delaware governmental
authority is required in connection with the execution and delivery by Orion of
the Underwriting Agreement and the sale, assignment, transfer and delivery of
the Preferred Shares to be sold by Orion pursuant to the Underwriting Agreement.
4. The Sale Order has been entered, is in full force and effect in
accordance with its terms and has not been amended, stayed, vacated or
rescinded. Pursuant to paragraph 7 of the Sale Order, upon consummation of the
sale of the Preferred Shares pursuant to the procedures established by the Sale
Order and Orion's receipt of the purchase price for the Preferred Shares, the
Preferred Shares shall be free and clear of all liens, claims, interests and
encumbrances of any kind and nature.
This opinion speaks only as of the date hereof and is based on our
understandings and assumptions as to the present facts and our review of the
above-referenced documents and the application of Delaware law and federal
bankruptcy law as the same exist on the date hereof, and we undertake no duty to
update or supplement this opinion for the benefit of any person or entity with
respect to any facts or circumstances that may hereafter come to our attention
or any changes in facts or law that may hereafter occur or take effect. This
opinion is intended solely for the benefit of the addresses hereof in connection
with the transactions contemplated hereby and may not be relied upon by any
other person or entity or for any other purpose without our prior written
consent.
Very truly yours,
MORRIS, NICHOLS, ARSHT AND TUNNEL
Jonathan I. Lessner
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