EXHIBIT 1.1
6,800,000 SHARES
VALERO ENERGY CORPORATION
COMMON STOCK (PAR VALUE $0.01 PER SHARE)
UNDERWRITING AGREEMENT
February 5, 2004
February 5, 2004
J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172
Dear Sirs and Mesdames:
Valero Energy Corporation, a Delaware corporation (the "COMPANY"),
proposes to issue and sell to J.P. Morgan Securities Inc. (the "UNDERWRITER"),
an aggregate of 6,800,000 shares of its Common Stock, par value $0.01 per share
(the "UNDERWRITTEN SHARES") and, for the sole purpose of covering
over-allotments in connection with the sale of the Underwritten Shares, up to an
additional 1,020,000 shares of its Common Stock (the "OPTION Shares"). The
Underwritten Shares and the Option Shares are hereinafter referred to as the
"SHARES."
The shares of common stock, par value $0.01 per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby are
hereinafter referred to as the "COMMON STOCK." The Shares will have attached
thereto preferred share purchase rights (the "RIGHTS") issued pursuant to the
Rights Agreement (the "RIGHTS AGREEMENT") dated as of July 17, 1997 between the
Company and 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.
333-84820), including a related prospectus, relating to the registration of
certain shares of Common Stock including the Shares and the related Rights and
certain debt and other securities (the "SHELF SECURITIES"), to be sold from time
to time by the Company. The registration statement as amended at the date of
this Agreement, including information, if any, deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act is hereinafter referred to as the "REGISTRATION STATEMENT,"
and the prospectus included therein relating to the Shelf Securities, in the
form first used to confirm sales of the Shares, is hereinafter referred to as
the "BASIC PROSPECTUS." Any preliminary prospectus supplement relating to the
Shares, together with the Basic Prospectus, is hereinafter referred to as the
"PRELIMINARY PROSPECTUS." The Basic Prospectus, as supplemented by the
prospectus supplement dated February 5, 2004, specifically relating to the
Shares, in the form first used to confirm sales of the Shares is hereinafter
referred to as the "PROSPECTUS." If the Company has
filed an abbreviated registration statement pursuant to Rule 462(b) under the
Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement. Any reference to the term Registration Statement,
the Basic Prospectus, any Preliminary Prospectus or the Prospectus or to any
amendment or supplement to any of the foregoing documents shall include the
documents incorporated therein by reference. The terms "SUPPLEMENT" and
"AMENDMENT" or "AMEND" as used in this Agreement shall include all documents
subsequently filed by the Company with the Commission pursuant to the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), that are deemed to be
incorporated by reference in the Prospectus.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with the Underwriter 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 the Underwriter furnished to the Company in writing by the
Underwriter or its counsel expressly for use therein.
(c) The Preliminary Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in
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all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder.
(d) The Company (i) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and (iii) is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) Each subsidiary of the Company 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.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
(g) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(h) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(i) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(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 Shares, will be
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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.
(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
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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).
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(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.
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(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.
(w) Immediately after any sale of Shares by the Company
hereunder, the aggregate initial offering price of Shares which have
been issued and sold by the Company hereunder and of any securities of
the Company (other than the Shares) that shall have been issued and
sold pursuant to the Registration Statement will not exceed the
aggregate initial offering price of securities registered under the
Registration Statement.
2. Agreements to Sell and Purchase. Upon the basis of the
representations, warranties and covenants herein contained, but subject to the
conditions hereinafter stated, the Company hereby agrees to sell to the
Underwriter, and the Underwriter agrees to purchase from the Company at $51.918
a share (the "PURCHASE PRICE") the Underwritten Shares.
In addition, on the basis of the representations, warranties and
covenants herein contained, but subject to the conditions hereinafter stated,
the Company grants the Underwriter an option to purchase at its election up to
1,020,000 Option Shares at the Purchase Price. Such option is granted for the
sole purpose of covering over-allotments in connection with the sale of the
Underwritten Shares. The Underwriter shall have the option to purchase from the
Company at the Purchase Price the number of Option Shares as to which such
election shall have been exercised.
The Underwriter may exercise the option to purchase the Option Shares
at any time (but not more than once) on or before the thirtieth day following
the date of this Agreement, by written notice from the Underwriter to the
Company. Such notice shall set forth the aggregate number of Option Shares as to
which the option is being exercised and the date and time when the Option Shares
are to be delivered and paid for which may be the same date and time as the
Closing Date (as hereinafter defined) but shall not be earlier than the Closing
Date nor later than the tenth full business day after the date of such notice.
Any such notice
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shall be given at least two business days prior to the date and time of delivery
specified therein.
The Company hereby agrees that, without the prior written consent of
the Underwriter, it will not, during the period ending 90 days after the date of
the final prospectus supplement included in the Prospectus, (i) register, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (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 Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder, (B)
transactions by any person other than the Company relating to shares of Common
Stock or other securities of the Company acquired in the open market, (C) 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, (D) 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 90-day period.
3. Terms of Public Offering. The Company is advised by you that you
propose to make a public offering of the Shares as soon after the Registration
Statement and this Agreement have become effective as in your judgment is
advisable. The Company is further advised by you that the Shares are to be
offered to the public initially at $53.25 a share (the "PUBLIC OFFERING PRICE")
and to certain dealers selected by you at a price that represents a concession
not in excess of $0.80 a share under the Public Offering Price.
4. Payment and Delivery. Payment for the Shares to be sold by the
Company shall be made to the Company in Federal or other funds immediately
available in New York City against delivery of such Shares for the account of
the Underwriter in the case of the Underwritten Shares at 10:00 a.m., New York
City time, on February 10, 2004, or at such other time on the same or such other
date, not later than February 17, 2004, as shall be designated in writing by you
or in the case of the Option Shares, on the date and at the time specified by
the Underwriter in the written notice of the Underwriter's election to purchase
the Option Shares. The time and date of such payment for the Underwritten Shares
are hereinafter referred to as the "CLOSING DATE" and the time and date of such
payment for the
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Option Shares, if other than the Closing Date, are hereinafter referred to as
the "OPTION CLOSING DATE."
The 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 or the Option Closing Date, as the case may be.
The Shares shall be delivered to DTC on the Closing Date or the Option Closing
Date, as the case may be, for the account of the Underwriter, with any transfer
taxes payable in connection with the transfer of the Shares to the Underwriter
duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriter's Obligations. The obligations of the
Company to sell the Underwritten Shares to the Underwriter and the obligations
of the Underwriter to purchase and pay for the Underwritten Shares on the
Closing Date and the obligations of the Company to sell the Option Shares to the
Underwriter and the obligations of the Underwriter to purchase and pay for the
Option Shares on the Option Closing Date are subject to the following further
conditions:
(a) the Prospectus shall have been filed with the Commission
pursuant to Rule 424 within the applicable time period prescribed for
such filing by the rules and regulations under the Securities Act; no
stop order suspending the effectiveness of the Registration Statement
shall 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 Underwriter.
(b) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date or the Option Closing Date, as the case
may be:
(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,
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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 Underwriter shall have received on and dated as of the
Closing Date or the Option Closing Date, as the case may be, a
certificate 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 such 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 such 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 Underwriter shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Baker Botts
L.L.P., outside counsel for the Company, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(iii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights under the
Company's certificate of incorporation or by-laws or under
Delaware General Corporation Law or, to the best of such
counsel's knowledge, any agreement to which the Company is a
party;
(iv) the Rights Agreement has been duly authorized by
the Company; the Rights have been duly authorized by the
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Company and, when issued upon issuance of the Shares, will be
validly issued, and the Shares of Junior Participating
Preferred Stock, Series I, issuable upon exercise of the
Rights have been duly authorized by the Company and, when
issued upon such exercise in accordance with the terms of the
Rights Agreement, will be validly issued, fully paid and
non-assessable;
(v) this Agreement has been duly authorized, executed
and delivered by the Company;
(vi) the 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;
(vii) the statements (A) in the Prospectus under the
caption "Description of Capital Stock", (B) in the
Registration Statement in Item 15 and (C) incorporated by
reference into the Prospectus under the caption "Description
of Registrant's Securities to be Registered" 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
(viii) the Company is not, and after giving effect to
the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus will not be,
required to register as an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that nothing has come to such
counsel's attention to cause such counsel to believe that (A) the Registration
Statement and Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such counsel
need not comment) do not comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder or (B) (i) (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not express any
belief) the Registration Statement and the prospectus included therein at the
time the Registration Statement became effective or at the time of the execution
of this Agreement contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements
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therein not misleading or (ii) (except for financial statements and schedules
and other financial and statistical data as to which such counsel need not
express any belief) the Prospectus contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(e) The Underwriter shall have received on the Closing Date or
the Option Closing Date, as the case may be, 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 shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(iv) all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(v) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement 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
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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
13
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(d) and 5(e) above shall be rendered to the Underwriter at the
request of the Company and shall so state therein.
(f) The Underwriter shall have received on the Closing Date or
the Option Closing Date, as the case may be, an opinion of Davis Polk &
Wardwell, counsel for the Underwriter, dated such closing date in form
and substance satisfactory to the Underwriter.
(g) The Underwriter shall have received, on the Closing Date
or the Option Closing Date, as the case may be, a letter dated such
closing date in form and substance satisfactory to the Underwriter,
from Ernst &
14
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 or the Option Closing Date, as the case may be, shall use a
"cut-off date" not earlier than the date hereof.
(h) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and William E. Greehey, Gregory C.
King, William R. Klesse, Michael Ciskowski and Keith D. Booke relating
to sales and certain other dispositions of shares of Common Stock or
certain other securities, delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriter herein contained, the Company covenants with the Underwriter
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 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 Underwriter
the Prospectus is required by law to be delivered in connection with
sales by the Underwriter or a 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 Underwriter
the Prospectus is required by law to be delivered in connection with
sales by the Underwriter or a dealer, to file promptly all documents
required to be
15
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 Underwriter
the Prospectus is required by law to be delivered in connection with
sales by the Underwriter or a 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 Underwriter, 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 Underwriter
and to the dealers (whose names and addresses you will furnish to the
Company) to which Shares may have been sold by you 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 Underwriter 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 March 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 Shares and to use its
best efforts to cause the Shares to be eligible for trading thereon.
(h) To use the net proceeds received by the Company from the
sale of the Shares pursuant to this Agreement in the manner specified
in the Prospectus under the caption "Use of Proceeds."
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
16
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
Underwriter and dealers, in the quantities herein above specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriter, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(e) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriter in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriter incurred in connection with
any required review and qualification of the offering of the Shares by the
National Association of Securities Dealers, Inc., (v) all fees and expenses in
connection with the preparation and filing of the registration statement on Form
8-A relating to the Common Stock and all costs and expenses incident to listing
the Shares on the New York Stock Exchange, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the officers of the Company and any such consultants, and
(ix) all other costs and expenses incident to the performance of the obligations
of the Company hereunder for which provision is not otherwise made in this
Section, that the Underwriter agrees to pay all of the costs and expenses
relating to any "road show" relating directly to the Underwriter, including the
cost of chartering any aircraft. It is understood that except as provided in
this Section, Section 8 entitled "Indemnity and Contribution", and the last
paragraph of Section 10 below, the Underwriter will pay all of its costs and
expenses, including fees and disbursements of its counsel, stock transfer taxes
payable on resale of any of the Shares by the Underwriter and any advertising
expenses connected with any offers it may make.
8. Indemnity and Contribution. (a) The Company agrees to indemnify and
hold harmless the Underwriter and each person, if any, who controls the
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,
17
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 the Underwriter
furnished to the Company in writing by the Underwriter or through its 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 the Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares, or any person controlling the
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 the 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) The Underwriter agrees to indemnify and hold harmless the Company,
the directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to the Underwriter furnished to
the Company in writing by the Underwriter or through its counsel expressly for
use in the Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 8(a) or 8(b), such person (the "INDEMNIFIED PARTY")
18
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 the Underwriter and all persons, if any, who
control the Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriter and such
control persons of the Underwriter, such firm shall be designated in writing by
the Underwriter. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement 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
19
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a) or
8(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such subsection, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriter on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriter, in each case as set forth
in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriter on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriter or through its counsel
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriter agree that it would not be just or
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, the Underwriter shall not 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 the Underwriter has otherwise been
required to pay by reason of
20
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this Section
8 and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of any termination of this Agreement, any investigation made by or on
behalf of the Underwriter or any person controlling the Underwriter, or the
Company, its officers or directors or any person controlling the Company 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, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date or, with respect to the Option
Shares, prior to the Option 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. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
If this Agreement shall be terminated by the Underwriter because of any
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, or if for any reason the
Company shall be unable to perform its obligations under this Agreement, the
Company will reimburse the Underwriter for all out-of-pocket expenses (including
the fees and disbursements of their counsel) reasonably incurred by the
Underwriter in connection with this Agreement or the offering contemplated
hereunder.
21
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 Underwriter shall be
given to J.P. Morgan Securities Inc., 277 Park Avenue, Ninth Floor, New York,
New York 10172 (telefax: 212-622-8358), Attention Hank Wilson, 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.
22
Very truly yours,
VALERO ENERGY CORPORATION
By: /s/ Keith D. Booke
-------------------------------------
Name: Keith D. Booke
Title: Executive Vice President and
Chief Administrative Officer
Accepted as of the date hereof
J.P. MORGAN SECURITIES INC.
By: /s/ Arnold Evans
-------------------------------
Name: Arnold Evans
Title: Vice President
EXHIBIT A
FORM OF EQUITY LOCK-UP LETTER
______, 2004
J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172
Dear Sirs and Mesdames:
The undersigned understands that J.P. Morgan Securities Inc. (the
"UNDERWRITER") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with Valero Energy Corporation, a Delaware corporation
(the "COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by
the Underwriter of shares (the "SHARES") of the common stock, par value $0.01
per share, of the Company (the "COMMON STOCK").
To induce the Underwriter to continue its efforts in connection with
the Public Offering, the undersigned hereby agrees that, without the prior
written consent of the Underwriter, he will not, during the period commencing on
the date hereof and ending 90 days after the date of the final prospectus
supplement relating to the Public Offering (the "PROSPECTUS SUPPLEMENT"), (1)
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, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the sale of any securities to the Underwriter
pursuant to the Underwriting Agreement or pursuant to any other underwriting
agreement entered into between the Company and the Underwriter, as lead
underwriter [and, in addition, shall not apply to the sale of _________ shares
of Common Stock]. In addition, the undersigned agrees that, without the prior
written consent of the Underwriter, he will not, during the period commencing on
the date hereof and ending 90 days after the date of the final Prospectus
Supplement, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. The undersigned also
A-1
agrees and consents to the entry of stop transfer instructions with the
Company's transfer agent and registrar against the transfer of the undersigned's
shares of Common Stock except in compliance with the foregoing restrictions.
The undersigned understands that the Company and the Underwriter are
relying upon this Lock-Up Agreement in proceeding toward consummation of the
Public Offering. The undersigned further understands that this Lock-Up Agreement
is irrevocable and shall be binding upon the undersigned's heirs, legal
representatives, successors and assigns.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriter. Notwithstanding anything
herein to the contrary, this agreement will terminate if the Underwriting
Agreement is terminated prior to the delivery of the Shares thereunder.
Very truly yours,
-------------------------------------------
(Name)
-------------------------------------------
(Address)
A-2