VALERO L.P.
1,075,000 Common Units
Representing Limited Partner Interests
UNDERWRITING AGREEMENT
----------------------
Lehman Brothers Inc. August 5, 2003
745 7th Avenue
New York, New York 10019
Dear Sirs:
Valero L.P., a Delaware limited partnership (the "Partnership"), proposes
to issue and sell to Lehman Brothers Inc., as underwriter (the "Underwriter"),
1,075,000 Common Units (the "Firm Units"), each representing a limited partner
interest in the Partnership (the "Common Units"). In addition, the Partnership
proposes to grant to the Underwriter an option to purchase up to an additional
161,250 Common Units, on the terms and for the purposes set forth in Section 2
(the "Option Units"). The Firm Units and the Option Units, if purchased, are
hereinafter collectively called the "Units."
This is to confirm the agreement among the Partnership, Riverwalk
Logistics, L.P., a Delaware limited partnership and the general partner of the
Partnership (the "General Partner"), Valero GP, LLC, a Delaware limited
liability company ("Valero GP"), an indirect wholly owned subsidiary of Valero
Energy Corporation, a Delaware corporation ("Valero Energy"), and the general
partner of the General Partner, Valero Logistics Operations, L.P., a Delaware
limited partnership (the "Operating Partnership"), and Valero GP, Inc., a
Delaware corporation, a direct wholly owned subsidiary of the Partnership and
the general partner of the Operating Partnership (the "OLP General Partner")
(collectively, the "Partnership Parties"), and the Underwriter concerning the
purchase of the Firm Units and the Option Units from the Partnership by the
Underwriter. The Partnership Parties and Skelly-Belvieu Pipeline Company,
L.L.C., a Delaware limited liability company ("Skelly-Belvieu LLC"), are
hereinafter referred to collectively as the "Partnership Entities."
1. Representations, Warranties and Agreements of the Partnership Parties.
Each of the Partnership Parties represents and warrants to, and agrees with, the
Underwriter that:
(a) Definitions. The Partnership and the Operating Partnership have
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended (the "Securities Act"), a registration statement on Form S-3 under
the Securities Act (Commission File No. 333-89978) (the "registration
statement"), including a prospectus subject to completion relating to the Units.
Such registration statement has been declared effective by the Commission. The
term "Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as supplemented or
amended prior to the execution of this Agreement. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Units may commence, the term "Registration Statement" as used in
this Agreement means the registration statement as amended by said
post-effective amendment. If it is contemplated, at the time this Agreement is
executed, that a registration statement or a post-effective amendment will be
filed pursuant to Rule 462(b) or Rule 462(d) under the Securities Act before the
offering of the Units may commence, the term "Registration Statement" as used in
this Agreement includes such registration statement. The term "Basic Prospectus"
as used in this Agreement means the prospectus in the form included in the
Registration Statement at the time that the Registration Statement was declared
effective or in the form in which it has been most recently filed with the
Commission on or prior to the date of this Agreement. "Prospectus" shall mean
the prospectus supplement relating to the Units and the offering thereof that is
first filed pursuant to Rule 424(b) under the Securities Act ("Rule 424(b)")
after the date and time this Agreement is executed and delivered by the parties
hereto, together with the Basic Prospectus. The term "Preliminary Prospectus" as
used in this Agreement means any prospectus relating to the Units that omitted
information to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act and was used after
such effectiveness and prior to the initial delivery of the Prospectus to the
Underwriter.
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(b) Financial Statements and Schedules. All references in this Agreement to
financial statements and schedules and other information which is "contained,"
"included" or "stated" in the Registration Statement, the Basic Prospectus, a
Preliminary Prospectus or the Prospectus (or other references of like import)
shall be deemed to mean and include all such financial statements and schedules
and other information which is incorporated by reference in the Registration
Statement, the Basic Prospectus, a Preliminary Prospectus or the Prospectus, as
the case may be; any reference in this Agreement to the Registration Statement,
the Basic Prospectus, a Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the Securities Act, as of the date of the
Registration Statement, the Basic Prospectus, the Preliminary Prospectus or the
Prospectus, as the case may be; and any reference to any amendment or supplement
to the Registration Statement, the Basic Prospectus, any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include any documents filed
after such date under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which, upon filing, are incorporated by reference therein, as
required by paragraph (b) of Item 12 of Form S-3. As used herein, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference in the Registration Statement, the Basic Prospectus, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto.
(c) No Stop Order. No stop order suspending the effectiveness of the
Registration Statement has been issued and, to the knowledge of the Partnership
Parties, no proceeding for that purpose has been initiated or threatened by the
Commission. The Registration Statement and the Prospectus, and any further
amendments or supplements to the Registration Statement or the Prospectus, do
not and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto, and as of the applicable filing date and on
each Delivery Date as to the Prospectus and any amendment or supplement thereto,
contain an 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; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Operating Partnership or the
Partnership by the Underwriter expressly for use therein; and each of the
statements made by the Partnership or the Operating Partnership in the
Registration Statement, and to be made in the Prospectus and any further
amendments or supplements to the Registration Statement or Prospectus within the
coverage of Rule 175(b) of the rules and regulations of the Commission under the
Securities Act (the "Rules and Regulations"), including (but not limited to) any
statements with respect to future available cash or future cash distributions or
earnings of the Partnership or the Operating Partnership or the anticipated
ratio of taxable income to distributions, was made or will be made with a
reasonable basis and in good faith.
(d) Incorporated Documents. The Incorporated Documents heretofore filed,
when they were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act; any further Incorporated Documents so
filed will, when they are filed, conform in all material respects with the
requirements of the Exchange Act; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
(e) Formation and Qualification of the Partnership and the Operating
Partnership. Each of the Partnership and the Operating Partnership has been duly
formed and is validly existing in good standing as a limited partnership under
the Delaware Revised Uniform Limited Partnership Act (the "Delaware LP Act")
with partnership power and authority to own or lease its properties and to
conduct its business, in each case in all respects as described in the
Registration Statement and the Prospectus. Each of the Partnership and the
Operating Partnership is duly registered or qualified as a foreign limited
partnership for the transaction of business under the laws of each jurisdiction
in which the character of the business conducted by it or the nature or location
of the properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not (i) have
a material adverse effect on the general affairs, management, consolidated
financial position, business prospects, partners' equity, members' equity or
results of operations of the Partnership, the Operating Partnership and
Skelly-Belvieu LLC, taken as a whole (a "Material Adverse Effect"), or (ii)
subject the limited partners of the Partnership or the Operating Partnership to
any material liability or disability.
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(f) Formation and Qualification of Valero GP and Skelly-Belvieu. Each of
Valero GP and Skelly-Belvieu LLC has been duly formed and is validly existing in
good standing as a limited liability company under the Delaware Limited
Liability Company Act (the "Delaware LLC Act") with limited liability company
power and authority to own or lease its properties and to conduct its business
and with respect to Valero GP, to act as the general partner of the General
Partner, in each case in all respects as described in the Registration Statement
and the Prospectus. Each of Valero GP and Skelly-Belvieu LLC is duly registered
or qualified as a foreign limited liability company for the transaction of
business under the laws of each jurisdiction in which the character of the
business conducted by it or the nature or location of the properties owned or
leased by it makes such registration or qualification necessary, except where
the failure so to register or qualify would not (i) have a Material Adverse
Effect or (ii) subject the limited partners of the Partnership or the Operating
Partnership to any material liability or disability.
(g) Formation and Qualification of the General Partner. The General Partner
has been duly formed and is validly existing in good standing as a limited
partnership under the Delaware LP Act with partnership power and authority to
own or lease its properties, to conduct its business and to act as general
partner of the Partnership, in each case in all respects as described in the
Registration Statement and the Prospectus. The General Partner is duly
registered or qualified as a foreign limited partnership for the transaction of
business under the laws of each jurisdiction in which the character of the
business conducted by it or the nature or location of the properties owned or
leased by it makes such registration or qualification necessary, except where
the failure so to register or qualify would not (i) have a Material Adverse
Effect or (ii) subject the limited partners of the Partnership to any material
liability or disability.
(h) Formation and Qualification of the OLP General Partner. The OLP General
Partner has been duly incorporated and is validly existing in good standing
under the Delaware General Corporation Law (the "DGCL") with corporate power and
authority to own or lease its properties, to conduct its business and to act as
general partner of the Operating Partnership, in each case in all respects as
described in the Registration Statement and the Prospectus. The OLP General
Partner is duly registered or qualified as a foreign corporation for the
transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not (i) have
a Material Adverse Effect or (ii) subject the limited partners of the Operating
Partnership to any material liability or disability.
(i) Ownership of General Partner Interest in the Partnership. The General
Partner is the sole general partner of the Partnership with a 2.0% general
partner interest in the Partnership; such general partner interest has been duly
authorized and validly issued in accordance with the Partnership Agreement of
the Partnership (as the same may be amended or restated at or prior to the First
Delivery Date, the "Partnership Agreement"); and the General Partner owns such
general partner interest free and clear of all liens, encumbrances, security
interests, equities, charges or claims.
(j) Ownership of Limited Partner Interests in the Partnership. As of the
date hereof, and immediately prior to the issuance of the Units, the issued and
outstanding limited partner interests of the Partnership consist of 12,205,822
Common Units, 9,599,322 Subordinated Units and the Incentive Distribution
Rights, as such term is defined in the Partnership Agreement. UDS Logistics, LLC
("UDS Logistics"), a Delaware limited liability company and an indirect wholly
owned subsidiary of Valero Energy, owns 614,572 Common Units and 9,599,322
Subordinated Units (the "Sponsor Units"), Valero GP owns 73,319 Common Units and
the General Partner owns all of the Incentive Distribution Rights. All
outstanding Common Units, Subordinated Units and Incentive Distribution Rights
and the limited partner interests represented thereby have been duly authorized
and validly issued in accordance with the Partnership Agreement, and are fully
paid (to the extent required under the Partnership Agreement) and nonassessable
(except as such nonassessability may be affected by matters described in the
Partnership's registration statement on Form S-1 (No. 333-43668) under the
caption "The Partnership Agreement--Limited Liability," which is incorporated by
reference into the Partnership's registration statement on Form 8-A (File No.
1-16417) (the "Form 8-A")). UDS Logistics owns the Sponsor Units, and the
General Partner owns the Incentive Distribution Rights, in each case, free and
clear of all liens, encumbrances, security interests, equities, charges or
claims.
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(k) Ownership of General Partner Interest in the Operating Partnership. The
OLP General Partner is the sole general partner of the Operating Partnership
with a 0.01% general partner interest in the Operating Partnership; such general
partner interest has been duly authorized and validly issued in accordance with
the Partnership Agreement of the Operating Partnership (as the same may be
amended or restated at or prior to the First Delivery Date, the "Operating
Partnership Agreement"); and the OLP General Partner owns such general partner
interest free and clear of all liens, encumbrances, security interests,
equities, charges or claims.
(l) Ownership of Limited Partner Interest in the Operating Partnership. The
Partnership is the sole limited partner of the Operating Partnership with a
99.99% limited partner interest in the Operating Partnership; such limited
partner interest has been duly authorized and validly issued in accordance with
the Operating Partnership Agreement and will be fully paid (to the extent
required under the Operating Partnership Agreement) and nonassessable (except as
such nonassessability may be affected by matters described or incorporated by
reference into the Form 8-A); and the Partnership owns such limited partner
interest free and clear of all liens, encumbrances, security interests,
equities, charges or claims.
(m) Ownership of Skelly-Belvieu LLC. The Operating Partnership owns a 50%
profits interest and a 49% capital interest in Skelly-Belvieu LLC (the
"Skelly-Belvieu Interests"); such interests are duly authorized and validly
issued in accordance with the Members Agreement of Skelly-Belvieu LLC (as the
same may be amended at or prior to the First Delivery Date, the "Skelly-Belvieu
Agreement"), and are fully paid (to the extent required under the Skelly-Belvieu
Agreement) and nonassessable (except as such nonassessability may be affected by
Section 18-607 of the Delaware LLC Act); and the Operating Partnership owns such
interests free and clear of all liens, encumbrances, security interests,
equities, charges or claims.
(n) Ownership of General Partner Interest in the General Partner. Valero GP
is the sole general partner of the General Partner with a 0.1% general partner
interest in the General Partner; such general partner interest has been duly
authorized and validly issued in accordance with the Partnership Agreement of
the General Partner (as the same may be amended or restated at or prior to the
First Delivery Date, the "General Partner Partnership Agreement"), and Valero GP
owns such general partner interest free and clear of all liens, encumbrances,
security interests, equities, charges or claims.
(o) Ownership of Limited Partner Interest in the General Partner. UDS
Logistics is the sole limited partner of the General Partner with a 99.9%
limited partner interest in the General Partner; such limited partner interest
has been duly authorized and validly issued in accordance with the General
Partner Partnership Agreement and will be fully paid (to the extent required
under the General Partner Partnership Agreement) and nonassessable (except as
such nonassessability may be affected by Section 17-607 of the Delaware LP Act),
and UDS Logistics owns such limited partner interest free and clear of all
liens, encumbrances, security interests, equities, charges or claims.
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(p) Ownership of Valero GP and UDS Logistics. Valero Energy indirectly,
through one or more direct or indirect wholly owned subsidiaries, owns a 100%
membership interest in each of Valero GP and UDS Logistics; such membership
interests are duly authorized and validly issued in accordance with the
respective limited liability company agreements of Valero GP and UDS Logistics
(in each case, as the same may be amended or restated at or prior to the First
Delivery Date, the "Valero GP LLC Agreement" and the "UDS Logistics LLC
Agreement", respectively), and are fully paid (to the extent required under the
Valero GP LLC Agreement and the UDS Logistics LLC Agreement, as applicable) and
nonassessable (except as such nonassessability may be affected by Section 18-607
of the Delaware LLC Act); and such member interests are owned free and clear of
all liens, encumbrances, security interests, equities, charges or claims.
(q) No Other Ownership. Other than (i) the Partnership's ownership of its
limited partner interest in the Operating Partnership and the stock of the OLP
General Partner and (ii) the Operating Partnership's ownership of the
Skelly-Belvieu Interests and Valero Internacional, S. de R.L. de C.V., neither
the Partnership nor the Operating Partnership owns, and at each Delivery Date,
neither will own, directly or indirectly, any equity or long-term debt
securities of any corporation, partnership, limited liability company, joint
venture, association or other entity. Other than (i) the General Partner's
ownership of its partnership interests in the Partnership and (ii) the OLP
General Partner's ownership of its partnership interests in the Operating
Partnership, neither the General Partner nor the OLP General Partner owns, and
at each Delivery Date neither will own, directly or indirectly, any equity or
long-term debt securities of any corporation, partnership, limited liability
company, joint venture, association or other entity.
(r) Valid Issuance of Firm Units. At the First Delivery Date or the Second
Delivery Date, as the case may be, the Firm Units or the Option Units, as the
case may be, and the limited partner interests represented thereby will be duly
authorized by the Partnership and, when issued and delivered to the Underwriter
against payment therefor in accordance with the terms hereof, will be validly
issued, fully paid (to the extent required under the Partnership Agreement) and
nonassessable (except as such nonassessability may be affected by Section 17-607
of the Delaware LP Act and as otherwise disclosed in the Prospectus).
(s) No Preemptive Rights, Registration Rights or Options. Except as
described in the Prospectus or for rights that have been waived, there are no
preemptive rights or other rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any partnership or membership
interests or capital stock in the Partnership Entities, in each case pursuant to
the organizational documents or any agreement or other instrument to which any
Partnership Entity is a party or by which any of them may be bound. Neither the
filing of the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any rights for or relating to the
registration of any Units or other securities of the Partnership or any of its
Subsidiaries, other than as provided in the Prospectus and the Partnership
Agreement or as have been waived. Except for options granted pursuant to
employee benefits plans, qualified unit option plans or other employee
compensation plans, there are no outstanding options or warrants to purchase any
partnership or membership interests or capital stock in any Partnership Entity.
Each of the Partnership Parties has all requisite right, power and authority to
execute and deliver this Agreement and to perform its respective obligations
hereunder. The Partnership has all requisite power and authority to issue, sell
and deliver the Units in accordance with and upon the terms and conditions set
forth in this Agreement, the Partnership Agreement, the Registration Statement
and Prospectus. All action required to be taken by the Partnership Parties or
any of their partners, members or stockholders for the due and proper
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby has been duly and validly taken.
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(t) Due Authorization of this Agreement. This Agreement has been duly
authorized, executed and delivered by each of the Partnership Parties.
(u) Operative Documents. At or before the First Delivery Date:
(i) the Partnership Agreement will be duly authorized, executed and
delivered by the General Partner will be a valid and legally binding agreement
of the General Partner, enforceable against the General Partner in accordance
with its terms;
(ii) the Operating Partnership Agreement will be duly authorized, executed
and delivered by the OLP General Partner and the Partnership and will be a valid
and legally binding agreement of the OLP General Partner and the Partnership in
accordance with its terms; and
(iii) the General Partner Partnership Agreement will be duly authorized,
executed and delivered by Valero GP and UDS Logistics and will be a valid and
legally binding agreement of Valero GP and UDS Logistics, enforceable against
Valero GP and UDS Logistics in accordance with its terms; provided that, with
respect to each agreement described in this Section 1(u), the enforceability
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(v) No Violations. None of the (i) offering, issuance and sale of the
Units, (ii) execution, delivery and performance by each of the Partnership
Parties of this Agreement or (iii) consummation of the transactions contemplated
hereby (A) constitutes or will constitute a violation of the certificate of
limited partnership, agreement of limited partnership, certificate of formation,
limited liability company agreement, certificate or articles of incorporation or
bylaws or other organizational documents of any of the Partnership Entities, (B)
constitutes or will constitute a breach or violation of, or a default under (or
an event which, with notice or lapse of time or both, would constitute such a
default), any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which any of the Partnership Entities is a party or
by which any of them or any of their respective properties may be bound, (C)
violates or will violate any statute, law or regulation or any order, judgment,
decree or injunction of any court or governmental agency or body directed to any
of the Partnership Entities or any of their properties in a proceeding to which
any of them or their property is a party or (D) results or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of any of the Partnership Entities, which breaches, violations or
defaults, in the case of clauses (B), (C) or (D), would, individually or in the
aggregate, have a Material Adverse Effect.
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(w) No Consents. No permit, consent, approval, authorization, order,
registration, filing or qualification ("consent") of or with any court,
governmental agency or body is required for the execution, delivery and
performance by each of the Partnership Parties of this Agreement, the offering,
issuance and sale and of the Units, or the consummation of the transactions
contemplated hereby, except (i) for such consents required under the Securities
Act, the Exchange Act and state securities or "Blue Sky" laws, (ii) for such
consents which have been, or prior to the First Delivery Date will be, obtained,
and (iii) for such consents which, if not obtained, would not, individually or
in the aggregate, have a Material Adverse Effect.
(x) No Default. None of the Partnership Parties is in (i) violation of its
certificate or agreement of limited partnership, limited liability company
agreement, certificate or articles of incorporation or bylaws or other
organizational documents, (ii) violation in any material respect of any law,
statute, ordinance, administrative or governmental rule or regulation applicable
to it or of any decree of any court or governmental agency or body having
jurisdiction over it or (iii) breach, default (or an event which, with notice or
lapse of time or both, would constitute such a default) or violation in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any agreement,
indenture, lease or other instrument to which it is a party or by which it or
any of its properties may be bound, which breach, default or violation, in the
case of clause (iii), would, if continued, have a Material Adverse Effect, or
could materially impair the ability of any of the Partnership Parties to perform
their obligations under this Agreement. To the knowledge of the Partnership
Parties, no third party to any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which any of the Partnership
Parties is a party or by which any of them is bound or to which any of their
properties is subject, is in default under any such agreement, which breach,
default or violation would, if continued, have a Material Adverse Effect.
(y) Independent Public Accountants. Ernst & Young LLP, who have certified
certain audited financial statements in the Registration Statement and the
Prospectus, are independent public accountants with respect to the Partnership
Entities within the meaning of the Securities Act and the Rules and Regulations.
Arthur Andersen LLP were independent public accountants with respect to the
Partnership Entities as required by the Securities Act and the Rules and
Regulations.
(z) Financial Statements. The historical financial statements (including
the related notes and supporting schedules) included in the Registration
Statement, any Preliminary Prospectus and the Prospectus (and any amendment or
supplement thereto) present fairly in all material respects the financial
position, results of operations and cash flows of the entities purported to be
shown thereby on the basis stated therein at the respective dates or for the
respective periods to which they apply and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except to the extent disclosed therein. The selected
historical information included in the Registration Statement, any Preliminary
Prospectus and the Prospectus (and any amendment or supplement thereto) under
the captions "Capitalization," "Ratio of Earnings to Fixed Charges" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are accurately presented in all material respects and prepared on a
basis consistent with the audited and unaudited historical consolidated
financial statements from which they have been derived.
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(aa) No Distribution of Other Offering Materials. None of the Partnership
Entities has distributed or, prior to the completion of the distribution of the
Units, will distribute, any prospectus (as defined under the Securities Act) in
connection with the offering and sale of the Units other than the Registration
Statement, any Preliminary Prospectus, the Prospectus or other materials, if
any, permitted by the Securities Act, including Rule 134 of the Rules and
Regulations.
(bb) Conformity to Description of Units. The statements set forth in the
Prospectus under the caption "Description of Common Units," insofar as it
purports to constitute a summary of the terms of the Units, is a fair summary in
all material respects.
(cc) No Omitted Descriptions. Other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to which any of the
Partnership Entities is a party or of which any property of any of the
Partnership Entities is the subject which, if determined adversely to the
Partnership Entities, could reasonably be expected to, individually or in the
aggregate have a Material Adverse Effect and, to the best of the Partnership
Parties' knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(dd) Title to Property. The Operating Partnership and Skelly-Belvieu LLC
have good and indefeasible title to all real property and good title to all
personal property described in the Prospectus owned by the Partnership Entities,
free and clear of all liens, claims, security interests or other encumbrances
except (i) as described in the Prospectus or (ii) such as do not materially
interfere with the use of such properties taken as a whole as they have been
used in the past and as they are to be used in the future as described in the
Prospectus; provided, that, with respect to title to pipeline rights-of-way, the
Partnership Parties represent only that (A) the Operating Partnership and
Skelly-Belvieu LLC have sufficient title to enable them to use and occupy the
pipeline rights-of-way as they have been used and occupied in the past and are
to be used and occupied in the future as described in the Prospectus and (B) any
lack of title to the pipeline rights-of-way will not have a material adverse
effect on the ability of the Operating Partnership and Skelly-Belvieu LLC to use
and occupy the pipeline rights-of-way as they have been used and occupied in the
past and are to be used and occupied in the future as described in the
Prospectus and will not materially increase the cost of such use and occupation.
All real property and buildings held under lease or license by the Partnership
Entities are or will be held by the Operating Partnership and Skelly-Belvieu LLC
under valid and subsisting and enforceable leases or licenses with such
exceptions as do not materially interfere with the use of such properties taken
as a whole as they have been used in the past and are to be used in the future
as described in the Prospectus.
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(ee) Permits. Each of the Partnership Entities has such permits, consents,
licenses, franchises, certificates and authorizations of governmental or
regulatory authorities ("permits") as are necessary to own its properties and to
conduct its business in the manner described in the Prospectus, subject to such
qualifications as may be set forth in the Prospectus and except for such permits
which, if not obtained, would not, individually or in the aggregate, have a
Material Adverse Effect; each of the Partnership Entities has fulfilled and
performed, or will fulfill and perform, all its material obligations with
respect to such permits which are due to have been fulfilled and performed by
such date and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any impairment
of the rights of the holder of any such permit, except for such revocations,
terminations and impairments that would not, individually or in the aggregate,
have a Material Adverse Effect subject in each case to such qualification as may
be set forth in the Prospectus; and, except as described in the Prospectus, none
of such permits contains or will contain any restriction that is materially
burdensome to the Partnership, the Operating Partnership and Skelly-Belvieu,
taken as a whole.
(ff) Books and Records. Each of the Operating Partnership and the
Partnership (i) makes and keeps books, records and accounts, which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of assets and (ii) maintains systems of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(gg) Disclosure Controls. The Partnership has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 under
the Exchange Act), which (i) are designed to ensure that material information
relating to the Partnership, including its consolidated subsidiaries, is made
known to Valero GP's principal executive officer and its principal financial
officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared;
(ii) have been evaluated for effectiveness as of a date within 90 days prior to
the filing of the Partnership's most recent annual or quarterly report filed
with the Commission; and (iii) are effective in all material respects to perform
the functions for which they were established.
(hh) No Identified Problems Resulting from Disclosure Controls. Based on
the evaluation of its disclosure controls and procedures, the Partnership is not
aware of (i) any significant deficiency in the design or operation of internal
controls which could adversely affect the Partnership's ability to record,
process, summarize and report financial data or any material weaknesses in
internal controls; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Partnership's
internal controls.
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(ii) No Significant Changes in Internal Controls. Since the date of the
most recent evaluation of such disclosure controls and procedures, there have
been no significant changes in internal controls or in other factors that could
significantly affect internal controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
(jj) Taxes. Each of the Partnership Entities has filed (or has obtained
extensions with respect to) all material federal, state and foreign income and
franchise tax returns required to be filed through the date hereof, which
returns are complete and correct in all material respects, and has timely paid
all taxes shown to be due pursuant to such returns, other than those (i) which,
if not paid, would not have a Material Adverse Effect, or (ii) which are being
contested in good faith and for which adequate reserves have been established in
accordance with generally accepted accounting principles.
(kk) Related Party Transactions. No relationship, direct or indirect,
exists between or among the Partnership Entities on the one hand, and the
directors, officers, partners, customers or suppliers of the General Partner and
its Affiliates (other than the Partnership Entities) on the other hand, which is
required to be described in the Prospectus which is not so described.
(ll) Environmental Compliance. The Partnership Entities (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 and the
environment or imposing liability or standards of conduct concerning any
Hazardous Material (as hereinafter defined) ("Environmental Laws"), (ii) have
received all permits required of them under applicable Environmental Laws to
conduct their respective businesses, (iii) are in compliance with all terms and
conditions of any such permit and (iv) do not have any liability in connection
with the release into the environment of any Hazardous Material, except where
such noncompliance with Environmental Laws, failure to receive required permits,
or failure to comply with the terms and conditions of such permits or
liabilities in connection with such release would not, individually or in the
aggregate, have a Material Adverse Effect. The term "Hazardous Material" means
(A) any "hazardous substance" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, (B) any "hazardous
waste" as defined in the Resource Conservation and Recovery Act, as amended, (C)
any petroleum or petroleum product, (D) any polychlorinated biphenyl and (E) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material,
waste or substance regulated under or within the meaning of any other
Environmental Law.
(mm) Insurance. The Partnership Entities maintain, or are entitled to the
benefits of, insurance covering their properties, operations, personnel and
businesses against such losses and risks as are reasonably adequate to protect
them and their businesses in a manner consistent with other businesses similarly
situated. None of the Partnership Entities has received notice from any insurer
or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance, and all
such insurance is outstanding and duly in force on the date hereof and will be
outstanding and duly in force on each Delivery Date.
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(nn) Material Change. None of the Partnership Entities has sustained since
the date of the latest audited financial statements included in the Prospectus
any material loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capitalization or long-term debt of any of the
Partnership Entities or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, management, consolidated financial position, partners' capital,
members' equity, or results of operations of any of the Partnership Entities,
taken as a whole, otherwise than as set forth or contemplated in the Prospectus;
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, none of the Partnership Entities has
entered into any transaction or agreement (whether or not in the ordinary course
of business) material to the Partnership Entities, taken as a whole, otherwise
than as set forth or contemplated in the Prospectus.
(oo) Investment Company/Public Utility Holding Company. None of the
Partnership Entities is, nor, after giving effect to the offering and sale of
the Units and the application of the proceeds thereof, will be (i) an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended (the "Investment Company Act"), or (ii) a "public utility
company," "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" thereof, under the Public Utility Holding Company Act of 1935, as
amended.
(pp) Other Sales. The Partnership has not sold or issued any Common Units
during the six-month period preceding the date of the Prospectus other than
5,750,000 Common Units sold in a public offering pursuant to the Registration
Statement on March 18, 2003, an additional 581,000 Common Units sold pursuant to
the exercise of the underwriters' overallotment option in such public offering
and any Common Units issued pursuant to employee benefit plans, qualified
options plans or other employee compensation plans or pursuant to outstanding
options, rights or warrants described in the Prospectus.
(qq) Form S-3. The conditions for the use of Form S-3, as set forth in the
General Instructions thereto, have been satisfied.
2. Purchase of the Units. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Partnership agrees to sell 1,075,000 Firm Units to the
Underwriter, and the Underwriter agrees to purchase 1,075,000 Firm Units from
the Partnership.
In addition, the Partnership grants to the Underwriter an option to
purchase up to 161,250 Option Units. Such option is granted for the purpose of
covering over-allotments in the sale of Firm Units and is exercisable as
provided in Section 4 hereof.
The price of both the Firm Units and any Option Units shall be $39.30 per
Unit.
The Partnership shall not be obligated to deliver any of the Units to be
delivered on any Delivery Date (as hereinafter defined), as the case may be,
except upon payment for all the Units to be purchased on such Delivery Date as
provided herein.
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3. Offering of Units by the Underwriter. The Underwriter proposes to offer
the Firm Units for sale upon the terms and conditions set forth in the
Prospectus.
4. Delivery of and Payment for the Units. Delivery of and payment for the
Firm Units shall be made at the offices of Andrews & Kurth L.L.P. at 9:00 A.M.,
Houston, Texas time, on August 11, 2003 or at such other date or place as shall
be determined by agreement between the Underwriter and the Partnership. This
date and time are sometimes referred to as the "First Delivery Date." On the
First Delivery Date, the Partnership shall deliver or cause to be delivered the
Firm Units to the Underwriter in book entry form through the facilities of The
Depository Trust Company ("DTC") against payment to or upon the order of the
Partnership of the purchase price by wire transfer of immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
the Underwriter hereunder.
The option granted in Section 2 will expire 30 days after the date of this
Agreement and may be exercised in whole or in part from time to time by written
notice being given to the Partnership by the Underwriter. Such notice shall set
forth the aggregate number of Option Units as to which the option is being
exercised, the names in which the Option Units are to be registered, the
denominations in which the Option Units are to be issued and the date and time,
as determined by the Underwriter, when the Option Units are to be delivered;
provided, however, that this date and time shall not be earlier than the First
Delivery Date nor earlier than the second business day after the date on which
the option shall have been exercised nor later than the fifth business day after
the date on which the option shall have been exercised.
The date and time the Option Units are delivered are sometimes referred to
as the "Second Delivery Date," and the First Delivery Date and the Second
Delivery Date are sometimes each referred to as a "Delivery Date."
Delivery of and payment for the Option Units shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Underwriter and
the Partnership) at 9:00 A.M., Houston, Texas time, on the Second Delivery Date.
On the Second Delivery Date, the Partnership shall deliver or cause to be
delivered the Option Units to the Underwriter in book entry form through the
facilities of the DTC against payment to or upon the order of the Partnership of
the purchase price by wire transfer of immediately available funds. Time shall
be of the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of the Underwriter.
5. Further Agreements of the Partnership Parties. Each of the Partnership
Parties covenants and agrees with the Underwriter:
(a) Preparation of Prospectus and Registration Statement. (i) To prepare
the Prospectus in a form approved by the Underwriter and to file such Prospectus
pursuant to Rule 424(b) under the Securities Act not later than Commission's
close of business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Securities Act; (ii) to make no further
amendment or any supplement to the Registration Statement or to the Prospectus
except as permitted herein; (iii) to advise the Underwriter, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish the
Underwriter with copies thereof; (iv) to advise the Underwriter promptly after
it receives notice thereof of the issuance by the Commission of any stop order
or of any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus, of the suspension of the qualification of the Units for
offering or sale in any jurisdiction, of the initiation or threatening of any
proceeding for any such purpose or of any request by the Commission for the
amending or supplementing of the Registration Statement or the Prospectus or for
additional information; and (v) in the event of the issuance of any stop order
or of any order preventing or suspending the use of any Preliminary Prospectus
or the Prospectus or suspending any such qualification, to use promptly its best
efforts to obtain its withdrawal.
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(b) Exchange Act Reports. To file promptly all reports and any definitive
proxy or information statements required to be filed by the Partnership with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
("Exchange Act Reports") subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the offering
or sale of the Units.
(c) Copies of Documents to Underwriter. Prior to 9:00 A.M., Houston, Texas
time, on the business day next succeeding the date of this Agreement and from
time to time, to deliver to the Underwriter such number of the following
documents as the Underwriter shall reasonably request: (i) conformed copies of
the Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits) and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus; and, if
the delivery of a prospectus is required at any time after the Effective Time in
connection with the offering or sale of the Units or any other securities
relating thereto and if at such time any events shall have occurred as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary to amend or supplement the Prospectus
or to file under the Exchange Act any document incorporated by reference in the
Prospectus in order to comply with the Securities Act or the Exchange Act or
with a request from the Commission, to notify the Underwriter immediately
thereof and to promptly prepare and, subject to Section 5(d) hereof, file with
the Commission an amended Prospectus or supplement to the Prospectus which will
correct such statement or omission or effect such compliance.
(d) Filing of Amendment or Supplement. To file promptly with the Commission
any amendment to the Registration Statement or the Prospectus or any supplement
to the Prospectus that may, in the judgment of the Partnership or the
Underwriter, be required by the Securities Act or the Exchange Act or requested
by the Commission. Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, any document
incorporated by reference in the Prospectus or any Prospectus pursuant to Rule
424 of the Rules and Regulations, to furnish a copy thereof to the Underwriter
and counsel for the Underwriter and not to file any such document to which the
Underwriter shall reasonably object promptly after having been given reasonable
notice of the proposed filing thereof unless, in the judgment of counsel to the
Partnership Parties, such filing is required by law.
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(e) Copies of Reports. To furnish to the Underwriter, upon request, for a
period of three years from the date of this Agreement, copies of all reports or
other communications (financial or other) furnished to holders of the Units,
provided such documents are not otherwise publicly available via the
Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR")
and to deliver to the Underwriter, provided such documents are not otherwise
publicly available via EDGAR (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Partnership is listed; and (ii) such additional information concerning the
business and financial condition of the Partnership as the Underwriter may from
time to time reasonably request (such financial statements to be on a
consolidated basis to the extent they are consolidated in reports furnished to
the holders of the Units or to the Commission).
(f) Blue Sky Laws. Promptly to take from time to time such actions as the
Underwriter may reasonably request to qualify the Units for offering and sale
under the securities or Blue Sky laws of such jurisdictions as the Underwriter
may designate and to continue such qualifications in effect for so long as
required for the resale of the Units; and to arrange for the determination of
the eligibility for investment of the Units under the laws of such jurisdictions
as the Underwriter may reasonably request; provided that no Partnership Entity
shall be obligated to qualify as a foreign limited partnership, limited
liability company or corporation in any jurisdiction in which it is not so
qualified or to file a general consent to service of process in any
jurisdiction.
(g) Earnings Statement. To make generally available to the Partnership's
securityholders and to the Underwriter as soon as practicable an earnings
statement of the Partnership and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Partnership, Rule 158).
(h) Lock-up Period; Lock-up Letters. For a period of 90 days from the date
of the Prospectus, not to, directly or indirectly, (i) offer for sale, sell,
pledge or otherwise dispose of (or enter into any transaction or device that is
designed to, or could be expected to, result in the disposition by any person at
any time in the future of) any Common Units or securities convertible into, or
exchangeable for Common Units, or sell or grant options, rights or warrants with
respect to any Common Units or securities convertible into or exchangeable for
Common Units (other than the grant of options pursuant to option plans existing
on the date hereof), or (ii) enter into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such Common Units, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Units or other securities, in cash or otherwise, in each case without
the prior written consent of the Underwriter; provided, however, that the
foregoing restrictions do not apply to: (A) the sale of Common Units by the
Partnership to the Underwriter in connection with the public offering
contemplated hereby; (B) Common Units to be issued by the Partnership to
non-employee directors as described in the Prospectus or restricted units,
phantom units and options issued under the employee benefit plan of the
Partnership on the date hereof or (C) Common Units issued pursuant to currently
outstanding options, warrants or rights. Each person listed on Annex I shall
furnish to the Underwriter, prior to the First Delivery Date, a letter or
letters, substantially in the form of Exhibit C hereto, pursuant to which each
such person shall agree not to, directly or indirectly, (1) offer for sale,
sell, pledge or otherwise dispose of (or enter into any transaction or device
that is designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any Common Units or securities convertible
into or exchangeable for Common Units or (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of such Common Units, whether any
such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Units or other securities, in cash or otherwise, in each case
for a period of 90 days from the date of the Prospectus, without the prior
written consent of the Underwriter.
15
(i) NYSE Listing. To apply for the supplemental listing of the Units on the
New York Stock Exchange, and to use its best efforts to complete that listing,
subject only to official notice of issuance, prior to the First Delivery Date.
(j) Application of Proceeds. To apply the net proceeds from the sale of the
Units as set forth in the Prospectus.
(k) Investment Company. To take such steps as shall be necessary to ensure
that no Partnership Entity shall become an "investment company" as defined in
the Investment Company Act.
6. Expenses. The Partnership agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Units and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of printing and distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), each Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of producing and distributing
this Agreement, any underwriting and selling group documents and any other
related documents in connection with the offering, purchase, sale and delivery
of the Units; (e) the filing fees incident to securing the review, if
applicable, by the National Association of Securities Dealers, Inc. of the terms
of sale of the Units; (f) any applicable listing or other similar fees; (g) the
fees and expenses of preparing, printing and distributing a Blue Sky Memorandum
(including related fees and expenses of counsel to the Underwriter); (h) the
cost of printing certificates representing the Units; (i) the costs and charges
of any transfer agent or registrar; (j) the costs and expenses of the
Partnership relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Units, 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 Partnership, travel and
lodging expenses of the representatives and officers of the Partnership and any
such consultants; and (k) all other costs and expenses incident to the
performance of the obligations of the Partnership under this Agreement; provided
that, except as provided in this Section 6 and in Section 10 hereof, the
Underwriter shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Units which they may sell
and the expenses of advertising any offering of the Units made by the
Underwriter.
16
7. Conditions of Underwriter's Obligations. The obligations of the
Underwriter hereunder are subject to the accuracy, when made and on each
Delivery Date, of the representations and warranties of the Partnership Parties
contained herein, to the accuracy of the statements of the Partnership Parties
and the officers of Valero GP made in any certificates delivered pursuant
hereto, to the performance by each of the Partnership Parties of its obligations
hereunder and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission in
accordance with Section 5(a); no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise shall
have been complied with to the reasonable satisfaction of the Underwriter.
(b) The Underwriter shall not have discovered and disclosed to the
Partnership on or prior to such Delivery Date that the Prospectus or any
amendment or supplement thereto contains an untrue statement of a fact which, in
the opinion of counsel for the Underwriter, is material or omits to state any
fact which, in the opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not misleading.
(c) All corporate, partnership and limited liability company proceedings
and other legal matters incident to the authorization, form and validity of this
Agreement, the Registration Statement and the Prospectus, and all other legal
matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel for the
Underwriter, and the Partnership shall have furnished to such counsel all
documents and information that they or their counsel may reasonably request to
enable them to pass upon such matters.
(d) Andrews & Kurth L.L.P. shall have furnished to the Underwriter their
written opinion, as counsel for the Partnership Parties, addressed to the
Underwriter and dated such Delivery Date, in form and substance reasonably
satisfactory to the Underwriter, substantially to the effect set forth in
Exhibit A to this Agreement.
(e) Bradley Barron shall have furnished to the Underwriter his written
opinion, as Corporate Secretary and Managing Counsel of Valero GP, addressed to
the Underwriter and dated such Delivery Date, in form and substance reasonably
satisfactory to the Underwriter, substantially to the effect set forth in
Exhibit B hereto.
(f) The Underwriter shall have received from Baker Botts L.L.P., counsel
for the Underwriter, such opinion or opinions, dated such Delivery Date, with
respect to such matters as the Underwriter may reasonably require, and the
Partnership shall have furnished to such counsel such documents and information
as they may reasonably request for the purpose of enabling them to pass upon
such matters.
17
(g) At the time of execution of this Agreement, the Underwriter shall have
received from Ernst & Young LLP a letter, in form and substance satisfactory to
the Underwriter, addressed to the Underwriter and dated the date hereof (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, and (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in connection with
registered public offerings.
(h) With respect to the letter of Ernst & Young LLP referred to in the
preceding paragraph and delivered to the Underwriter concurrently with the
execution of this Agreement (the "initial letter"), the Partnership shall have
furnished to the Underwriter a letter (the "bring-down letter") of such
accountants, addressed to the Underwriter and dated such Delivery Date (i)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii) confirming
in all material respects the conclusions and findings set forth in the initial
letter.
(i) The Partnership shall have furnished to the Underwriter a certificate,
dated such Delivery Date, of the chief executive officer and the chief financial
officer of Valero GP stating that (A) such officers have carefully examined the
Registration Statement and the Prospectus, (B) in their opinion, the
Registration Statement, including the documents incorporated therein by
reference, as of the Effective Time, did not include any untrue statement of a
material fact and did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading, and
the Prospectus, including the Incorporated Documents, as of the date of the
Prospectus and as of such Delivery Date, did not and does not include any untrue
statement of a material fact and did not and does not omit 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, and (C) as of such
Delivery Date, the representations and warranties of the Partnership Parties in
this Agreement are true and correct, the Partnership Parties have complied with
all their agreements contained herein and satisfied all conditions on their part
to be performed or satisfied hereunder on or prior to such Delivery Date, no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or, to the best
of such officer's knowledge, are contemplated by the Commission, and subsequent
to the date of the most recent financial statements contained in the Prospectus,
there has been no material adverse change in the financial position or results
of operations of the Partnership Entities, taken as a whole, or any change, or
any development involving a prospective material adverse change, in or affecting
the condition (financial or otherwise), results of operations or business of the
Partnership Entities, taken as a whole, except as set forth in the Prospectus.
18
(j) If any event shall have occurred on or prior to such Delivery Date that
requires the Partnership under Section 5(d) to prepare an amendment or
supplement to the Prospectus, such amendment or supplement shall have been
prepared, the Underwriter shall have been given a reasonable opportunity to
comment thereon as provided in Section 5(d) hereof, and copies thereof shall
have been delivered to the Underwriter reasonably in advance of such Delivery
Date.
(k) None of the Partnership Entities shall have sustained since the date of
the latest audited financial statements included or incorporated by reference in
the Prospectus any loss or interference with its business from fire, flood,
explosion or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, investigation, order or decree,
otherwise than as set forth or contemplated in the Prospectus; nor shall there
have been a change in the partners' capital, members' interests or long-term
debt of any of the Partnership Entities or any change, or any development
involving a prospective change, in or affecting the general affairs, management,
financial position, net worth or results of operations of the Partnership
Entities, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any case under this Section 7(k), is, in the judgment of the
Underwriter, so material and adverse as to make it impracticable or inadvisable
to proceed with the public offering or the delivery of the Units being delivered
on such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(l) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency or
body which would, as of such Delivery Date, prevent the issuance or sale of the
Units; and no injunction, restraining order or order of any other nature by any
federal or state court of competent jurisdiction shall have been issued as of
such Delivery Date which would prevent the issuance or sale of the Units.
(m) Subsequent to the execution and delivery of this Agreement there shall
not have occurred any of the following: (i) trading in securities generally on
the New York Stock Exchange or the American Stock Exchange or in the
over-the-counter market or trading in any securities of the Partnership on any
exchange or in the over-the-counter market shall have been suspended, the
settlement of such trading generally shall have been materially disrupted or
minimum prices shall have been established on any such exchange or such market
by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by federal or state authorities, (iii) the United States shall
have become engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have been a declaration
of a national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions including, without limitation, as a result of terrorist
activities after the date hereof (or the effect of international conditions on
the financial markets in the United States shall be such), as to make it, in the
judgment of the Underwriter, impracticable or inadvisable to proceed with the
public offering or sale of the Units being delivered on such Delivery Date on
the terms and in the manner contemplated by the Prospectus.
(n) The New York Stock Exchange shall have approved the Units for listing,
subject only to official notice of issuance.
All such opinions, certificates, letters and documents mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the Underwriter and to counsel for the Underwriter.
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8. Indemnification and Contribution.
(a) Each of the Partnership Parties, jointly and severally, shall indemnify
and hold harmless the Underwriter, its directors, officers and employees and
each person, if any, who controls the Underwriter within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Units), to which the Underwriter, director, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in (A) any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto or (B) any written or
electronically produced materials or information electronically provided to
investors by, or with the approval of, the Partnership in connection with the
marketing of the offering of the Common Units ("Marketing Materials") including
any road show or investor presentations made to investors by the Partnership
(whether in person or electronically), (ii) the omission or alleged omission to
state in the Registration Statement, or in any amendment or supplement thereto,
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) the omission or alleged omission to
state in any Preliminary Prospectus, the Prospectus or in any amendment or
supplement thereto any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, or
(iv) any act or failure to act or any alleged act or failure to act by the
Underwriter in connection with, or relating in any manner to, the Units or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i), (ii) or (iii) above (provided that no Partnership
Party shall be liable under this clause (iv) to the extent that it is determined
in a final judgment by a court of competent jurisdiction that such loss, claim,
damage, liability or action resulted directly from any such acts or failures to
act undertaken or omitted to be taken by the Underwriter through its gross
negligence or willful misconduct), and shall reimburse the Underwriter and each
such director, officer, employee or controlling person promptly upon demand for
any legal or other expenses reasonably incurred by the Underwriter, director,
officer, employee or controlling person in connection with investigating or
defending or preparing to defend against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that no Partnership Party shall be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement in or omission or alleged omission from any such
documents in reliance upon and in conformity with written information concerning
the Underwriter furnished to the Partnership through the Underwriter by or on
behalf of the Underwriter specifically for inclusion therein which information
consists solely of the information specified in Section 8(e); provided, however,
that the Partnership Parties shall not be liable to the Underwriter under the
indemnity agreement in this Section 8(a) to the extent, but only to the extent,
that (x) such loss, claim, damage, or liability of the Underwriter results from
an untrue statement of a material fact or an omission of a material fact
contained in the Preliminary Prospectus, which untrue statement or omission was
completely corrected in the Prospectus and (y) the Partnership had previously
furnished sufficient quantities (as requested by the Underwriter) of the
Prospectus to the Underwriter within a reasonable amount of time prior to such
sale or such confirmation and (z) the Underwriter failed to deliver the
Prospectus, if required by law to have so delivered it, and such delivery would
have cured the defect giving rise to such loss, claim, liability, expense or
damage.
20
(b) The Underwriter shall indemnify and hold harmless each Partnership
Party, their officers and employees, each of their directors, and each person,
if any, who controls the Partnership Parties within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 8(b) and Section 8(d) as the Partnership), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which such person may become subject, whether commenced or
threatened, under the Securities Act, the Exchange Act, any other federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus or in
any amendment or supplement thereto, (ii) the omission or alleged omission to
state in the Registration Statement, or any amendment or supplement thereto, any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, or (iii) the omission or alleged omission to
state in any Preliminary Prospectus, the Prospectus or in any amendment or
supplement thereto any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning the Underwriter furnished to the
Partnership through the Underwriter by or on behalf of the Underwriter
specifically for inclusion therein which information consists solely of the
information specified in Section 8(e), and shall reimburse the Partnership for
any legal or other expenses reasonably incurred by the Partnership in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure and, provided further, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have to an indemnified
party otherwise than under this Section 8. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that an indemnified party
shall have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel for the indemnified party will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based upon advice of counsel
to the indemnified party) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, (3) a conflict or potential conflict exists
(based upon advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not
have the right to direct the defense of such action on behalf of the indemnified
party) or (4) the indemnifying party has not in fact employed counsel reasonably
satisfactory to the indemnified party to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties.
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm of attorneys (in addition to any local counsel) at any one time
for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 8(a) and 8(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any indemnified
party from and against any loss or liability by reason of such settlement or
judgment. No indemnifying party shall, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld), effect any
settlement, compromise or consent to the entry of any judgment with respect to
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, compromise or consent includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
21
The obligations of the Partnership Parties and the Underwriter in this
Section 8 are in addition to any other liability that the Partnership Parties or
the Underwriter, as the case may be, may otherwise have, including in respect of
any breaches of representations, warranties and agreements made herein by any
such party.
(d) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the
Partnership, on the one hand, and the Underwriter, on the other hand, from the
offering of the Units or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Partnership on the one hand and the Underwriter on the
other with respect to the statements or omissions that resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by the
Partnership on the one hand and the Underwriter on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Units purchased under this Agreement (before
deducting expenses) received by the Partnership, on the one hand, and the total
underwriting discounts and commissions received by the Underwriter with respect
to the Units purchased under this Agreement, on the other hand, bear to the
total gross proceeds from the offering of the Units under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Partnership or the
Underwriter, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Partnership and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section 8 were to be determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage,
liability, or action in respect thereof, referred to above in this Section 8
shall be deemed to include, for purposes of this Section 8(d), 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(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Units
underwritten by it and distributed to the public was offered to the public
exceeds the amount of any damages which the Underwriter has otherwise paid or
become liable to pay by reason of any 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 Underwriter's obligations to contribute as provided in
this Section 8(d) are several in proportion to their respective underwriting
obligations and not joint.
22
(e) The Underwriter confirms and the Partnership Parties acknowledge that
the statements with respect to the public offering of the Units by the
Underwriter set forth on the cover page of the Prospectus Supplement and the
concession and reallowance figures in the fourth paragraph and the statements in
the seventh, eighth, ninth, tenth, eleventh, fourteenth, fifteenth, sixteenth,
seventeenth, eighteenth and nineteenth paragraphs under the "Underwriting"
section of the Prospectus Supplement are correct and constitute the only
information concerning the Underwriter furnished in writing to the Partnership
by or on behalf of the Underwriter specifically for inclusion in the
Registration Statement and the Prospectus.
9. Termination. The obligations of the Underwriter hereunder may be
terminated by the Underwriter by notice given to and received by the Partnership
prior to delivery of and payment for the Firm Units if, prior to that time, any
of the events described in Section 7(k) or (m) shall have occurred and be
continuing or if the Underwriter shall decline to purchase the Units for any
reason permitted under this Agreement.
10. Reimbursement of Underwriter's Expenses. If the Partnership shall fail
to tender the Units for delivery to the Underwriter by reason of any failure,
refusal or inability on the part of any Partnership Party to perform any
agreement on its part to be performed, or because any other condition of the
Underwriter's obligations hereunder required to be fulfilled by the Partnership
Parties is not fulfilled, the Partnership will reimburse the Underwriter for all
reasonable out-of-pocket expenses (including fees and disbursements of counsel)
incurred by the Underwriter in connection with this Agreement and the proposed
purchase of the Units, and upon demand the Partnership shall pay the full amount
thereof to the Underwriter.
11. Notices. All statements, requests, notices and agreements hereunder
shall be in writing, and:
(a) if to the Underwriter, shall be delivered or sent by mail, telex or
facsimile transmission to Lehman Brothers Inc., 399 Park Avenue, 11th Floor, New
York, N.Y. 10022, Attention: Syndicate Registration Department, Fax (212)
526-0943, with a copy, in the case of any notice pursuant to Section 8(c), to
the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc.,
399 Park Avenue, 15th Floor, New York, NY 10022; and
(b) if to the Partnership Parties, shall be delivered or sent by mail or
telecopy to Valero L.P., One Valero Place, San Antonio, Texas 78212, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) shall be delivered or sent by mail, telex or facsimile transmission
to the Underwriter at its address set forth in its acceptance telex to the
Underwriter, which address will be supplied to any other party hereto by the
Underwriter upon request. Any such statements, requests, notices or agreements
shall take effect at the time of receipt thereof.
12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the Underwriter, the Partnership Parties and
their respective successors. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Partnership
Parties contained in this Agreement shall also be deemed to be for the benefit
of the person or persons, if any, who control the Underwriter within the meaning
of Section 15 of the Securities Act and (B) the indemnity agreement of the
Underwriter contained in Section 8(b) of this Agreement shall be deemed to be
for the benefit of directors, officers, employees and any controlling persons of
the Partnership Parties within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to in this Section 13, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
23
13. Survival. The respective indemnities, representations, warranties and
agreements of the Partnership Parties and the Underwriter contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement or any certificate delivered pursuant hereto, shall survive the
delivery of and payment for the Units and shall remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any person controlling any
of them.
14. Definition of the Terms "Business Day" and "Subsidiary". For purposes
of this Agreement, (a) "business day" means any day on which the New York Stock
Exchange, Inc. is open for trading, and (b) "affiliate" and "subsidiary" have
their respective meanings set forth in Rule 405 of the Rules and Regulations.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Amendments. No amendment or waiver of any provision of this Agreement,
nor any consent or approval to any departure therefrom, shall in any event be
effective unless the same shall be in writing and signed by the parties hereto.
18. Headings. The headings herein are inserted for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
24
If the foregoing correctly sets forth the agreement among the Partnership
Parties, and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
VALERO L.P.
By: Riverwalk Logistics, L.P., its
general partner
By: Valero, GP, LLC, its
general partner
By: /s/Curtis V. Anastasio
-------------------------------
Curtis V. Anastasio
President and Chief Executive
Officer
RIVERWALK LOGISTICS, L.P.
By: Valero GP, LLC,
its general partner
By: /s/Curtis V. Anastasio
-------------------------------
Curtis V. Anastasio
President and Chief Executive
Officer
25
VALERO GP, LLC
By: /s/Curtis V. Anastasio
----------------------------------------
Curtis V. Anastasio
President and Chief Executive Officer
VALERO LOGISTICS OPERATIONS, L.P.
By: Valero GP, Inc., its
general partner
By: /s/Curtis V. Anastasio
---------------------------------
Curtis V. Anastasio
President and Chief Executive
Officer
VALERO GP, INC.
By: /s/Curtis V. Anastasio
----------------------------------------
Curtis V. Anastasio
President and Chief Executive Officer
26
Accepted:
LEHMAN BROTHERS INC.
By: /s/Michael J. Cannon
-------------------------
Authorized Representative
27
EXHIBIT A
FORM OF OPINION OF ANDREWS & KURTH L.L.P.
1. Each of the Partnership, the Operating Partnership and the General
Partner has been duly formed and is validly existing in good standing as a
limited partnership under the Revised Uniform Limited Partnership Act of the
State of Delaware.
2. Valero GP has been duly formed and is validly existing in good standing
as a limited liability company under the Limited Liability Company Act of the
State of Delaware.
3. The OLP General Partner has been duly incorporated and is validly
existing in good standing as a corporation under the General Corporation Law of
the State of Delaware.
4. Each of the Partnership and the Operating Partnership has all necessary
limited partnership power and authority under the Revised Uniform Limited
Partnership Act of the State of Delaware (i) to own or lease its properties and
to conduct its business, in each case in all material respects as described in
the Registration Statement and the Prospectus and (ii) to execute and deliver
the Underwriting Agreement and to perform all of its obligations thereunder.
5. Valero GP has all necessary limited liability company power and
authority under the Delaware Limited Liability Company Act (i) to own or lease
its properties, to conduct its business and to act as general partner of the
General Partner, in each case in all material respects as described in the
Registration Statement and the Prospectus and (ii) to execute and deliver the
Underwriting Agreement and to perform all of its obligations thereunder.
6. The General Partner has all necessary limited partnership power and
authority under the Revised Uniform Limited Partnership Act of the State of
Delaware (i) to own or lease its properties, to conduct its business and to act
as the general partner of the Partnership, in each case in all material respects
as described in the Registration Statement and the Prospectus and (ii) to
execute and deliver the Underwriting Agreement and to perform all of its
obligations thereunder.
7. The OLP General Partner has all necessary corporate power and authority
under the General Corporation Law of the State of Delaware (i) to own or lease
its properties, to conduct its business and to act as general partner of the
Operating Partnership, in each case in all material respects as described in the
Registration Statement and the Prospectus and (ii) to execute and deliver the
Underwriting Agreement and to perform all of its obligations thereunder.
8. The General Partner is the sole general partner of the Partnership with
a 2.0% general partner interest in the Partnership, and such general partner
interest has been duly authorized and validly issued in accordance with the
Partnership Agreement.
9. As of the date hereof, the issued and outstanding limited partner
interest of the Partnership consists of 13,280,822 Common Units, 9,599,322
Subordinated Units and the Incentive Distribution Rights; such Common Units,
Subordinated Units and Incentive Distribution Rights and the limited partner
interests represented thereby have been duly authorized and validly issued in
accordance with the Partnership Agreement and are fully paid (to the extent
required under the Partnership Agreement) and nonassessable (except as such
nonassessability may be affected by matters of the nature described in the
Partnership's registration statement on Form S-1 (File No. 333-43668) under the
caption "The Partnership Agreement--Limited Liability," which is incorporated by
reference into the Partnership's registration statement on Form 8-A (File No.
1-16417)).
A-1
10. The OLP General Partner is the sole general partner of the Operating
Partnership with a 0.01% general partner interest in the Operating Partnership,
and such general partner interest has been duly authorized and validly issued in
accordance with the Operating Partnership Agreement.
11. The Partnership is the sole limited partner of the Operating
Partnership with a 99.99% limited partner interest in the Operating Partnership;
and such limited partner interest has been duly authorized and validly issued in
accordance with the Operating Partnership Agreement and is fully paid (to the
extent required under the Operating Partnership Agreement) and nonassessable,
except as such nonassessability may be affected by matters of the nature
described in the Partnership's registration statement on Form S-1 (File No.
333-43668) under the caption "The Partnership Agreement--Limited Liability,"
which is incorporated by reference into the Partnership's registration statement
on Form 8-A (File No. 1-16417).
12. Valero GP is the sole general partner of the General Partner with a
0.1% general partner interest in the General Partner, and such general partner
interest has been duly authorized and validly issued in accordance with the
General Partner Partnership Agreement.
13. The Underwriting Agreement has been duly authorized and validly
executed and delivered by or on behalf of each of the Partnership Parties.
14. The Partnership Agreement has been duly authorized and validly executed
and delivered by or on behalf of the General Partner and is a valid and legally
binding obligation of the General Partner, enforceable against the General
Partner in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law) and (B) public policy,
applicable law relating to fiduciary duties and indemnification and an implied
covenant of good faith and fair dealing.
15. The Operating Partnership Agreement has been duly authorized and
validly executed and delivered by or on behalf of each of the Partnership and
the OLP General Partner and is a valid and legally binding obligation of the
Partnership and the OLP General Partner, enforceable against the Partnership and
the OLP General Partner in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and (B) public policy, applicable law relating to fiduciary duties and
indemnification and an implied covenant of good faith and fair dealing.
A-2
16. The Units to be issued and sold to the Underwriter by the Partnership
pursuant to the Underwriting Agreement and the limited partner interests
represented thereby have been duly authorized by the Partnership under the
Partnership Agreement, and, when issued and delivered to the Underwriter against
payment therefor in accordance with the terms of the Underwriting Agreement,
such Units will be validly issued, fully paid (to the extent required under the
Partnership Agreement) and nonassessable, except as such nonassessability may be
affected by matters of the nature described in (i) the Partnership's
registration statement on Form S-1 (File No. 333-43668) under the caption "The
Partnership Agreement--Limited Liability," which is incorporated by reference
into the Partnership's registration statement on Form 8-A (File No. 1-16417) or
(ii) the Base Prospectus under the caption "Risk Factors--A unitholder may not
have limited liability if a state or court finds that we are not in compliance
with the applicable statutes or that unitholder action constitutes control of
our business." The issuance by the Partnership of the Units will not be subject
to any preemptive or similar rights arising under the Partnership Agreement or
the Certificate of Limited Partnership of the Partnership.
17. Neither the execution and delivery on behalf of the Partnership Parties
of the Underwriting Agreement nor the consummation by the Partnership of the
issuance and sale of the Units (A) constituted, constitutes or will constitute a
violation of the Formation Documents (as defined in such counsel's opinion), (B)
constituted, constitutes or will constitute a breach or violation of, or a
default (or an event which, with notice or lapse of time or both, would
constitute such a default), under any Operative Agreement (as defined in such
counsel's opinion), (C) resulted, results or will result in any violation of (i)
the Applicable Laws (as defined in such counsel's opinion) of the State of
Texas, (ii) the Applicable Laws of the United States of America, (iii) the
Revised Uniform Limited Partnership Act of the State of Delaware, (iv) the
Limited Liability Company Act of the State of Delaware or (v) the General
Corporation Law of the State of Delaware or (D) resulted, results or will result
in the creation of any security interest in, or lien upon, any of the property
or assets of the Partnership Entities, which, in the case of clause (B), (C) or
(D), would reasonably be expected to have a material adverse effect on the
financial condition, business or results of operations of the Partnership, the
Operating Partnership and Skelly-Belvieu LLC, taken as a whole.
18. No Governmental Approval (as defined in such counsel's opinion), which
has not been obtained or taken and is not in full force and effect, is required
to authorize, or is required for, the execution and delivery by each of the
Partnership Parties of the Underwriting Agreement or the consummation by the
Partnership of the issuance and sale of the Units contemplated thereby.
19. The statements in the Prospectus under the captions "Tax
Considerations," "Description of Common Units," and "Cash Distributions" insofar
as they constitute descriptions of agreements or refer to statements of law or
legal conclusions, fairly summarize the matters referred to therein in all
material respects, subject to the qualifications and assumptions stated therein.
20. The Units conform in all material respects to the descriptions thereof
contained in the Prospectus under the caption "Description of Common Units."
A-3
21. Each of the Registration Statement, as of its effective date, the Base
Prospectus, as of its date, and the Prospectus Supplement as of its date,
appeared on its face to be appropriately responsive in all material respects to
the requirements of the Securities Act and the Rules and Regulations, except,
that in each case, we express no opinion as to the financial statements,
schedules and other financial or statistical data included therein or excluded
therefrom, or the exhibits to the Registration Statement. Each of the
Incorporated Documents filed prior to the date hereof appeared on its face to be
appropriately responsive in all material respects to the requirements of the
Exchange Act of 1934, as amended (the "Exchange Act"), or the rules and
regulations promulgated under the Exchange Act, except, that in each case, we
express no opinion as to the financial statements, schedules and other financial
or statistical data included therein or excluded therefrom, or the exhibits to
any of the Incorporated Documents.
22. None of the Partnership Parties is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
23. None of the Partnership Parties is a "public utility company," or a
"holding company," as defined in the Public Utility Holding Company Act of 1935,
as amended.
24. The Operating Partnership is entitled to exercise the power of eminent
domain in the State of Texas to secure rights-of-way necessary to operate and
maintain each of its common carrier pipelines situated in such State.
In addition, such counsel shall state that they have participated in
conferences with officers and other representatives of the Partnership Entities
and the independent public accountants for the Partnership and the Operating
Partnership, your representatives and your counsel at which the contents of the
Registration Statement and the Prospectus and related matters were discussed
and, although such counsel have not independently verified and are not passing
upon, and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus (except and to the extent set forth in paragraph 19 above), on the
basis of the foregoing, no facts have come to such counsel's attention that have
led them to believe that the Registration Statement, including the Incorporated
Documents, as of its effective date, contained an 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 that the Prospectus,
including the Incorporated Documents, as of its issue date and as of the date
hereof, contained an 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, in light of the circumstances under which they were made, not
misleading, it being understood that such counsel expresses no statement or
belief with respect to (a) the financial statements and related schedules
included therein, including the notes and the auditor's report thereon, (b) the
other information of a financial or statistical nature included in the
Registration Statement or the Prospectus and (c) the exhibits to the
Registration Statement.
In addition, such counsel shall state that based solely on its review of a
copy of the Effectiveness Order, the Registration Statement was declared
effective under the Securities Act at 11:00 a.m. (Washington D.C. time) on June
17, 2002. Such counsel have also been orally advised by the SEC that no stop
order suspending the effectiveness of the Registration Statement has been
issued, and based solely on such counsel's communications with the SEC, to such
counsel's knowledge no proceedings for that purpose have been instituted or are
pending or threatened by the SEC. The Prospectus has been filed pursuant to Rule
424(b) in the manner and within the time period required by such Rule.
A-4
In rendering such opinion, such counsel may (A) rely in respect of maters
of fact upon certificates of officers and employees of the Partnership Entities
and upon information obtained from public officials, (B) base its opinion
regarding the enforceability of the Partnership Agreement and the Operating
Partnership Agreement rendered in paragraphs 14 and 15, respectively, on an
opinion of Delaware local counsel reasonably satisfactory to the Underwriter,
(C) assume the legal capacity of all natural persons, that all documents
submitted to them as originals are authentic, that all copies submitted to them
conform to the authentic originals thereof, and that the signatures on all
documents examined by them are genuine, (D) state that their opinion is limited
to applicable federal laws, the Delaware LP Act, the Delaware LLC Act, the DGCL
and the applicable laws of the State of Texas, and (E) state that they express
no opinion with respect to state or local taxes or tax statutes to which any of
the limited partners of the Partnership Entities may be subject.
A-5
EXHIBIT B
FORM OF OPINION OF BRADLEY C. BARRON
1. Skelly-Belvieu LLC has been duly formed and is validly existing in good
standing as a limited liability company under the Delaware LLC Act with all
necessary limited liability company power and authority under the Delaware LLC
Act to own or lease its properties and to conduct its business, in each case in
all material respects as described in the Registration Statement and the
Prospectus.
2. Each of the Partnership Parties has been duly registered or qualified as
a foreign limited partnership, foreign limited liability company or foreign
corporation, as the case may be, for the transaction of business under the laws
of each jurisdiction as set forth in Annex I to this opinion.
3. Valero Energy indirectly, through one or more direct or indirect wholly
owned subsidiaries, owns a 100% member interest in Valero GP LLC; such member
interest has been duly authorized and validly issued in accordance with the
Valero GP LLC Agreement, and is fully paid (to the extent required under the
Valero GP LLC Agreement and nonassessable (except as such nonassessability may
be affected by Section 18-607 of the Delaware LLC Act).
4. The Operating Partnership owns a 50% profits interest and a 49% capital
interest in Skelly-Belvieu LLC; such interests have been duly authorized and
validly issued in accordance with the Skelly-Belvieu Agreement and are fully
paid (to the extent required under the Skelly-Belvieu Agreement) and
nonassessable (except as such nonassessability may be affected by Section 18-607
of the Delaware LLC Act); and, to the knowledge of such counsel without
independent investigation, the Operating Partnership owns such member interest
free and clear of all liens, encumbrances, security interests, charges or
claims.
5. To the knowledge of such counsel without independent investigation, the
General Partner owns its general partner interest in the Partnership free and
clear of all liens, encumbrances, security interests, charges or claims.
6. To the knowledge of such counsel without independent investigation, UDS
Logistics owns the Sponsor Units free and clear of all liens, encumbrances,
security interests, charges or claims.
7. To the knowledge of such counsel without independent investigation, the
OLP General Partner owns its general partner interest in the Operating
Partnership free and clear of all liens, encumbrances, security interests,
charges or claims.
8. To the knowledge of such counsel without independent investigation, the
Partnership owns its limited partner interest in the Operating Partnership free
and clear of all liens, encumbrances, security interests, charges or claims.
9. To the knowledge of such counsel without independent investigation,
Valero GP owns its general partner interest in the General Partner free and
clear of all liens, encumbrances, security interests, charges or claims.
B-1
10. To the knowledge of such counsel without independent investigation, the
member interest in Valero GP owned indirectly by Valero Energy through one or
more direct or indirect wholly owned subsidiaries is owned free and clear of all
liens, encumbrances, security interests, charges or claims.
11. To such counsel's knowledge without independent investigation, neither
the filing of the Registration Statement nor the offering or sale of the Units
as contemplated by this Agreement gives rise to any rights for or relating to
the registration of any Units or other securities of the Partnership or any of
its subsidiaries, other than as provided in the Prospectus and the Partnership
Agreement or as have been waived.
12. Neither the execution and delivery on behalf of the Partnership Parties
of the Underwriting Agreement nor the consummation by the Partnership Parties of
the transactions contemplated hereby (A) constituted, constitutes or will
constitute a breach or violation of, or a default under (or an event which, with
notice or lapse of time or both, would constitute such a default), any
agreement, lease or instrument known to such counsel (excluding any Operative
Agreement) to which any of the Partnership Entities is a party or by which any
of them or any of their respective properties may be bound or (B) to such
counsel's knowledge, resulted, results or will result in any violation of the
applicable laws of the State of Texas, the Delaware LP Act, the Delaware LLC Act
or the DGCL, which, in the case of clauses (A) or (B), would reasonably be
expected to have a material adverse effect on the financial condition, business
or results of operations of the Partnership, the Operating Partnership and
Skelly-Belvieu, taken as a whole.
13. To the knowledge of such counsel after due inquiry, none of the
Partnership Parties is in (i) violation of its certificate or agreement of
limited partnership, certificate of formation, limited liability company
agreement, certificate or articles of incorporation or bylaws or other
organizational documents, or (ii) violation of any law, statute, ordinance,
administrative or governmental rule or regulation applicable to it or (iii)
violation of any decree of any court or governmental agency or body having
jurisdiction over it, or (iv) breach, default (or an event which, with notice or
lapse of time or both, would constitute such a default) or violation in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any agreement,
indenture, lease or other instrument to which it is a party or by which it or
any of its properties may be bound, except (with respect to the immediately
preceding clauses (ii), (iii) and (iv)), any violation, breach or default that
would not, if continued, have a material adverse effect on the financial
condition, business or results of operations of the Partnership, the Operating
Partnership and Skelly-Belvieu LLC, taken as a whole.
14. To the knowledge of such counsel after due inquiry, each of the
Partnership Entities has such permits, consents, licenses, franchises,
certificates and authorizations of governmental or regulatory authorities
("permits") as are necessary to own its properties and to conduct its business
in the manner described in the Prospectus, subject to such qualifications as may
be set forth in the Prospectus and except for such permits which, if not
obtained, would not, individually or in the aggregate, have a material adverse
effect upon the ability of the Partnership, the Operating Partnership and
Skelly-Belvieu LLC, taken as a whole, to conduct their businesses in all
material respects as currently conducted or as contemplated by the Prospectus to
be conducted; and, to the knowledge of such counsel after due inquiry, none of
the Partnership Entities has received any notice of proceedings relating to the
revocation or modification of any such permits which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to have a material adverse effect upon the ability of the
Partnership, the Operating Partnership and Skelly-Belvieu LLC, taken as a whole,
to conduct their businesses in all material respects as currently conducted or
as contemplated by the Prospectus to be conducted.
B-2
15. Except as described in the Prospectus, there is no litigation,
proceeding or governmental investigation pending or, to the knowledge of such
counsel after due inquiry, threatened against any of the Partnership Entities or
to which any of the Partnership Entities is a party or to which any of their
respective properties is subject, which, if adversely determined to such
Partnership Entities, would reasonably be expected to have a material adverse
effect on the financial condition, business or results of operations of the
Partnership, the Operating Partnership and Skelly-Belvieu LLC, taken as a whole.
16. There are no legal or governmental proceedings pending or, to the
knowledge of such counsel without independent investigation, threatened against
any of the Partnership Entities or to which any of the Partnership Entities is a
party or to which any of their respective properties is subject that are
required to be described in the Prospectus but are not so described as required
and (B) there are no agreements, contracts, indentures, leases or other
instruments 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 by the Securities Act.
In addition, such counsel shall state that he has participated in
conferences with officers and other representatives of the Partnership Entities
and the independent public accountants of the Partnership and your
representatives and your counsel, at which the contents of the Registration
Statement and the Prospectus and related matters were discussed, and although
such counsel has not independently verified, is not passing on, and is not
assuming any responsibility for the accuracy, completeness or fairness of the
statements contained in, the Registration Statement and the Prospectus, on the
basis of the foregoing, no facts have come to such counsel's attention that lead
such counsel to believe that the Registration Statement, including the
Incorporated Documents (other than (i) the financial statements and related
schedules included therein, including the notes thereto and auditor's report
thereon, (ii) the other information of a financial or statistical nature
included in the Registration Statement, and (iii) the exhibits thereto, as to
which such counsel need not comment), as of its effective date, contained an
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 that the Prospectus, including the Incorporated Documents (other than (i) the
financial statements and related schedules included therein, including the notes
thereto and auditor's report thereon, (ii) the other information of a financial
or statistical nature included in the Prospectus, and (iii) the exhibits
thereto, as to which such counsel need not comment), as of its issue date and as
of each Delivery Date contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
B-3
In rendering such opinion, such counsel may (A) rely in respect of matters
of fact upon certificates of officers and employees of the Partnership Entities
and upon information obtained from public officials, (B) assume the legal
capacity of natural persons, that all documents submitted to him as originals
are authentic, that all copies submitted to her conform to the originals
thereof, and that the signatures on all documents examined by him are genuine,
(C) state that his opinion is limited to federal laws, the Delaware LP Act, the
Delaware LLC Act, the DGCL and the laws of the State of Texas and (D) state that
he expresses no opinion with respect to state or local taxes or tax statutes to
which any of the limited partners of the Partnership Entities may be subject.
B-4
EXHIBIT C
FORM OF LOCK-UP LETTER AGREEMENT
Lehman Brothers Inc. August 5, 2003
745 7th Avenue
New York, New York 10019
Dear Sirs:
The undersigned understands that you, as underwriter, propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") with the Partnership
Parties providing for the purchase by you of common units, each representing a
limited partner interest (the "Common Units") in the Partnership, and that you
propose to reoffer the Common Units to the public (the "Offering"). Capitalized
terms used but not defined herein have the meanings given to them in the
Underwriting Agreement.
In consideration of the execution of the Underwriting Agreement by you, and for
other good and valuable consideration, the undersigned hereby irrevocably agrees
that, without your prior written consent, the undersigned will not, directly or
indirectly, (1) offer for sale, sell, pledge or otherwise dispose of (or enter
into any transaction or device that is designed to, or could be expected to,
result in the disposition by any person at any time in the future of) any Common
Units (including, without limitation, Common Units that may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Commission and Common Units that may be issued upon exercise
of any option or warrant) or securities convertible into or exchangeable for
Common Units owned by the undersigned on the date of execution of this Lock-up
Letter Agreement or on the date of the completion of the Offering, or (2) enter
into any swap or other derivatives transaction that transfers to another, in
whole or in part, any of the economic benefits or risks of ownership of such
Common Units, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Units or other securities, in cash or
otherwise, for a period of 90 days from the date of the Prospectus.
In furtherance of the foregoing, the Partnership and its Transfer Agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this Lock-Up Letter Agreement.
It is understood that, if the Partnership notifies you that it does not intend
to proceed with the Offering, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
that survive termination) shall terminate or be terminated prior to payment for
and delivery of the Common Units, the undersigned will be released from
[his/her] obligations under this Lock-Up Letter Agreement.
The undersigned understands that the Partnership and you will proceed with the
Offering in reliance on this Lock-Up Letter Agreement.
C-1
Whether or not the Offering actually occurs depends on a number of factors,
including market conditions. Any Offering will only be made pursuant to an
Underwriting Agreement, the terms of which are subject to negotiation between
the Partnership and you.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this Lock-Up Letter Agreement and that, upon
request, the undersigned will execute any additional documents necessary in
connection with the enforcement hereof. Any obligations of the undersigned shall
be binding upon the [heirs and personal representatives] (for individuals)
[successors and assigns] (for nonnatural persons) of the undersigned.
Yours very truly,
C-2
Annex I-1
Annex I
Steven A. Blank
Curtis V. Anastasio
Rodney L. Reese
Robert A. Profusek
Rodman D. Patton
H. Frederick Christie
William R. Klesse
Gregory C. King
William E. Greehey
James R. Bluntzer
Clayton E. Killinger
Jerry D. McVicker