EXHIBIT 10.13
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CONTRIBUTION AGREEMENT
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By and Among
VALERO REFINING COMPANY - CALIFORNIA,
UDS LOGISTICS, LLC, ▇▇▇▇▇▇ ▇.▇.,
▇▇▇▇▇▇ ▇▇, INC.
and
VALERO LOGISTICS OPERATIONS, L.P.
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March 6, 2003
EXHIBITS AND SCHEDULES
Exhibit A: Description of Tank Assets
Exhibit A-1: Description of Land
Exhibit B: Form of Throughput Agreement
Exhibit C: Form of Services Agreement
Exhibit D: Form of Lease Agreement
Exhibit E: Form of Assignment
Exhibit F: Form of Closing Tax Certificate
Schedule 1(b) Permitted Encumbrances
Schedule 3(a)(ii) Consents (VRC)
Schedule 3(b)(ii) Consents (The MLP Parties)
Schedule 4(a) Noncontravention (the Tank Assets)
Schedule 4(b)(ii) Condition of Tank Assets
Schedule 4(c) Material Changes
Schedule 4(e)(ii) Rights of Way
Schedule 4(g) Environmental Matters
Schedule 4(g)(ii) Environmental Permits
Schedule 5(c) Operation of Tank Assets
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") dated as of March 6,
2003 (the "Effective Date") is by and among Valero Refining Company -
California, a Delaware corporation ("VRC"), UDS Logistics, LLC, a Delaware
limited liability company ("UDS Logistics"), ▇▇▇▇▇▇ ▇.▇., a Delaware limited
partnership (the "MLP"), Valero Logistics Operations, L.P., a Delaware limited
partnership (the "OLP") and ▇▇▇▇▇▇ ▇▇, Inc., a Delaware corporation and the
general partner of the OLP ("OLP-GP"). VRC, UDS Logistics, the MLP, the OLP and
the OLP-GP are sometimes referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS
WHEREAS, VRC owns all of the tank shells, foundations, tank valves,
tank gauges, pressure equipment, temperature equipment, cathodic protection,
leak detection, and tank lighting associated with the crude and intermediate
feedstock tanks listed on Exhibit A, along with the other assets described on
Exhibit A hereto (collectively, the "Tank Assets");
WHEREAS, VRC desires to contribute the Tank Assets to the OLP in
exchange for a limited partner interest in the OLP representing $95.8 million
(the "OLP Limited Partner Interest"), and the OLP desires to accept the
contribution of the Tank Assets, subject to the terms and conditions set forth
below;
WHEREAS, immediately upon receipt of the OLP Limited Partner Interest,
VRC desires to contribute the OLP Limited Partner Interest to UDS Logistics in
exchange for a membership interest in UDS Logistics representing $95.8 million
(the "UDS Membership Interest"), and UDS Logistics desires to accept the
contribution of the OLP Limited Partner Interest, subject to the terms and
conditions set forth below; and
WHEREAS, at the Closing, among other things, (i) the OLP and Valero
Marketing and Supply Company, a Delaware corporation ("VMSC"), will enter into a
Handling and Throughput Agreement in the form of Exhibit B (the "Throughput
Agreement") setting forth the rights and obligations of such parties with
respect to the handling and delivery of Specified Feedstocks (as such term is
defined in the Throughput Agreement) for the Benicia, Corpus ▇▇▇▇▇▇▇ ▇▇▇▇ and
Texas City refineries (the "Refineries") that are owned by affiliates of VMSC,
(ii) the OLP and VRC will enter into a Services and Secondment Agreement in the
form of Exhibit C (the "Services Agreement") whereby VRC agrees to second VRC
personnel to OLP to provide certain operational and maintenance services to the
OLP in connection with the Tank Assets, and (iii) VRC, as lessor, and the OLP,
as lessee, will enter into a lease of the land in the form of Exhibit D (the
"Lease Agreement") located in ▇▇▇▇▇▇ County, California, upon which the Tank
Assets are situated (the "Land") and as more particularly described on Exhibit
A-1 hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
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1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, but excluding
punitive (except as provided in SECTION 8), exemplary, special or consequential
damages.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended from time to
time; provided, however, that (i) with respect to any of the MLP Parties, the
term "Affiliate" shall exclude each member of the Valero Group and (ii) with
respect to VRC, the term "Affiliate" shall exclude each member of the MLP Group.
"Agreement" has the meaning set forth in the preface.
"Assignment" means the assignment and assumption agreement in the form
of Exhibit E pursuant to which all of the Tank Assets will be assigned.
"Basis" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
"Best Efforts" means the efforts, time, and costs that a prudent Person
desirous of achieving a result would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence shall
be required if it could reasonably be expected to have a material adverse effect
on such Person or to require an expense of such Person in excess of $1,000,000.
"Cash Amount" means $98,500,000.
"Casualty" has the meaning set forth in SECTION 11(b).
"CERCLA" has the meaning set forth in SECTION 4(g)(i).
"Closing" has the meaning set forth in SECTION 2(b).
"Closing Date" has the meaning set forth in SECTION 2(b).
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Law.
"Commitment" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange rights
or other contracts that could require a Person to issue any of its Equity
Interests or to sell any Equity Interest it owns in another Person; (b) any
other securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any Equity Interest of a Person or owned
by a Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person's Organizational
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Documents; and (d) stock appreciation rights, phantom stock, profit
participation, or other similar rights with respect to a Person.
"Common Units" has the meaning set forth in the Amended and Restated
Agreement of Limited Partnership of ▇▇▇▇▇▇ ▇.▇.
"Conflicts Committee" means the conflicts committee of the board of
directors of ▇▇▇▇▇▇ ▇▇.
"Contributed OLP Interest" has the meaning set forth in SECTION
2(a)(VIII).
"Crude Oil" means crude petroleum oil and all other hydrocarbons,
regardless of gravity, produced at the well in liquid form by ordinary
production methods and which are not the result of condensation of gas.
"Effective Date" has the meaning set forth in the preface.
"Encumbrance" means any mortgage, pledge, lien, encumbrance, charge,
security interest, Preferential Right or other defect in title.
"Environmental Law" and "Environmental Laws" have the meanings set
forth in SECTION 4(g)(i).
"Equity Interest" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership, limited liability company,
trust or similar interests, and any Commitments with respect thereto, and (c)
any other direct equity ownership or participation in a Person.
"GAAP" means accounting principles generally accepted in the United
States consistently applied.
"Governmental Authority" means the United States or any agency thereof
and any state, county, city or other political subdivision, agency, court or
instrumentality.
"Hazardous Substances" means all materials, substances, chemicals, gas
and wastes which are regulated under any Environmental Law or which may form the
basis for liability under any Environmental Law.
"Indemnified Party" has the meaning set forth in SECTION 8(d).
"Indemnifying Party" has the meaning set forth in SECTION 8(d)
"Knowledge": an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if such individual is consciously aware of such
fact or other matter at the time of determination. A Person other than a natural
person shall be deemed to have "Knowledge" of a particular fact or other matter
if (i) any natural person who is serving as a director, senior executive
officer, partner, member, executor, or trustee of such Person (or in any similar
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capacity) or (ii) any employee (or any natural person serving in a similar
capacity) who is charged with the ultimate responsibility for a particular area
of such Person's operations (e.g., the manager of the environmental section with
respect to knowledge of environmental matters), at the time of determination
had, Knowledge of such fact or other matter.
"Land" has the meaning set forth in the recitals.
"Law" or "Laws" means any statute, code, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any applicable
Governmental Authority.
"Lease Agreement" has the meaning set forth in the recitals.
"Material Adverse Effect" means any change or effect relating to the
operations relating to the Tank Assets, taken as a whole, that, individually or
in the aggregate with other changes or effects, materially and adversely affects
the value of the Tank Assets taken as a whole, provided that in determining
whether a Material Adverse Effect has occurred, changes or effects relating to
(i) the Crude Oil transportation and refining industry generally (including the
price of Crude Oil and the costs associated with the storage and/or
transportation of Crude Oil), (ii) United States or global economic conditions
or hostilities or financial markets in general, or (iii) the transactions
contemplated by this Agreement, shall not be considered.
"MLP" has the meaning set forth in the preface.
"MLP-GP" means Riverwalk Logistics, L.P., a Delaware limited
partnership and the general partner of the MLP.
"MLP Group" means (i) each of the MLP Parties, (ii) MLP-GP, (iii)
▇▇▇▇▇▇ ▇▇, (iv) each Affiliate of each of the MLP Parties in which such MLP
Party owns (directly or indirectly) an Equity Interest and (v) each natural
person that is an Affiliate of any MLP Party solely because of such natural
person's position as an officer (or person performing similar functions),
director (or person performing similar functions) or other representative of any
Person described in (i) - (iv) above, but only to the extent that such natural
person is in its capacity as an officer, director or representative of such
Person.
"MLP Parties" means each of (i) the MLP, (ii) OLP-GP, (iii) the OLP and
(iv) each Affiliate of the entities in (i) - (iii) which is a party to any
Transaction Agreement.
"MLP Party Indemnitees" means, collectively, the MLP Parties and their
Affiliates and each of their respective officers (or Persons performing similar
functions), directors (or Persons performing similar functions), employees,
agents and representatives to the extent acting in such capacity.
"NonAffiliate Purchaser" has the meaning set forth in SECTION 2(d).
"Obligations" means duties, liabilities and obligations, whether
vested, absolute or contingent, known or unknown, asserted or unasserted,
accrued or unaccrued, liquidated or unliquidated, due or to become due, and
whether contractual, statutory or otherwise.
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"Offer" has the meaning set forth in SECTION 2(d)(i).
"Offered Assets" has the meaning set forth in SECTION 2(d).
"OLP" has the meaning set forth in the preface.
"OLP-GP" has the meaning set forth in the preface.
"OLP Limited Partner Interest" has the meaning set forth in the
recitals.
"Ordinary Course" means the ordinary course of business consistent with
the applicable Person's past custom and practice (including with respect to
quantity and frequency).
"Organizational Documents" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles or certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"Party" and "Parties" have the meanings set forth in the preface.
"Permitted Encumbrances" means any of the following: (i) any liens for
Taxes and assessments not yet delinquent or, if delinquent, that are being
contested in good faith in the Ordinary Course and the Party contesting such
assessments indemnifies the Party taking the property subject to such lien from
such lien and such contest; (ii) any inchoate liens or other encumbrances (other
than mechanic's, materialmen's and similar liens) and any other defect in title
created pursuant to any operating, farmout, construction, operation and
maintenance, co-owners, cotenancy, lease or similar agreements listed on
SCHEDULE 1(b) for which amounts are not due; and (iii) easements, rights-of-way,
restrictions and other similar Encumbrances incurred in the Ordinary Course
which, in the aggregate, are not substantial in amount and which do not in any
case materially detract from the value of the property subject thereto as it is
currently being used or materially interfere with the Ordinary Course conducted
thereon.
"Person" means an individual or entity, including any partnership,
corporation, association, joint stock company, trust, joint venture, limited
liability company, unincorporated organization, or Governmental Authority (or
any department, agency or political subdivision thereof).
"Post-Closing Tax Period" means any Tax period beginning after the
Closing Date.
"Post-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Tank Assets with respect to a Post-Closing Tax Period.
"Pre-Closing Tax Period" means any Tax periods or portions thereof
ending on or before the Closing Date.
"Pre-Closing Tax Return" means any Tax Return that is required to be
filed for any of the Tank Assets with respect to a Pre-Closing Tax Period.
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"Preferential Rights" has the meaning set forth in SECTION 4(h).
"Prime Rate" means the prime rate reported in the Wall Street Journal
at the time such rate must be determined under the terms of this Agreement.
"Private Placement" has the meaning set forth in SECTION 2(a)(i).
"Records" has the meaning set forth in SECTION 6(c).
"Redemption" has the meaning set forth in SECTION 2(a)(III).
"Refineries" has the meaning set forth in the recitals.
"Required Permits" has the meaning set forth in SECTION 4(g)(II).
"Rights of Way" has the meaning set forth in SECTION 4(e).
"Services Agreement" has the meaning set forth in the recitals.
"Specified Feedstocks" has the meaning set forth in the recitals.
"Straddle Period" means a Tax period or year commencing before and
ending after the Closing Date.
"Straddle Return" means a Tax Return for a Straddle Period.
"Subject Insurance Policies" means those material policies of insurance
that VRC or any of its Affiliates maintain covering any Tank Assets.
"Taking" has the meaning set forth in SECTION 11(b)(C).
"Tank Assets" has the meaning set forth in the recitals.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), custom duties, capital stock, franchise, profits, withholding,
social security (or similar excises), unemployment, disability, ad valorem, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
"Tax Records" means all Tax Returns and Tax-related work papers
relating to the Tank Assets and the Land.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in SECTION 8(d)(i).
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"Third Party Offer" has the meaning set forth in SECTION 2(d).
"Throughput Agreement" has the meaning set forth in the recitals.
"Transaction" has the meaning set forth in SECTION 5(b).
"Transaction Agreements" means this Agreement, the Assignment, the
Lease and Access Agreement(s), the Throughput Agreement, the Services Agreement
and all other agreements, documents, certificates or instruments executed and
delivered in connection with the transactions contemplated herein and therein.
"Transfer Taxes" has the meaning set forth in SECTION 9(e).
"UDS Logistics" has the meaning set forth in the preface.
"UDS Membership Interests" has the meaning set forth in the recitals.
"Underwriting Agreement" has the meaning set forth in SECTION 7(a)(vi).
"Unit Offering" has the meaning set forth in SECTION 2(a)(ii).
"▇▇▇▇▇▇ ▇▇" means ▇▇▇▇▇▇ ▇▇, LLC, a Delaware limited liability company
and the general partner of MLP-GP.
"Valero Group" means, excluding members of the MLP Group, (i) each
Affiliate of Valero Energy Corporation in which Valero Energy Corporation owns
(directly or indirectly) an Equity Interest and (ii) each natural person that is
an Affiliate of any Person described in (i) above solely because of such natural
person's position as an officer (or person performing similar functions),
director (or person performing similar functions) or other representative of any
Person described in (i) above, but only to the extent that such natural person
is acting in its capacity as an officer, director or representative of such
Person.
"VRC" has the meaning set forth in the preface.
"VRC Indemnitees" means, collectively, VRC and its Affiliates and each
of their respective officers (or Persons performing similar functions),
directors (or Persons performing similar functions), employees, agents, and
representatives.
"VRC Parties" means each of (i) VRC, (ii) UDS Logistics, (iii) Valero
Energy Corporation and (iv) each Affiliate of VRC in which Valero Energy
Corporation owns (directly or indirectly) an Equity Interest and which is a
party to any Transaction Agreement (but excluding any MLP Parties).
"VMSC" has the meaning set forth in the recitals.
2. Concurrent Transactions.
(a) Contribution of Tank Assets. Subject to the terms and conditions
of this Agreement, the Parties agree that the following transactions will occur
in the following order:
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(i) the MLP will cause the OLP to borrow from its credit
facility and the MLP proposes to cause the OLP to issue long-term debt
(the "Private Placement") to institutional investors pursuant to Rule
144A promulgated under the Securities Act of 1933 (which indebtedness
shall be guaranteed by the MLP);
(ii) the MLP proposes to issue additional Common Units,
representing limited partner interests in the MLP, to the public in
exchange for cash (the "Unit Offering");
(iii) using a portion of the net proceeds from the Private
Placement, the MLP will redeem (the "Redemption") a sufficient number
of Common Units owned by UDS Logistics to reduce, in conjunction with
the Unit Offering, the aggregate, combined ownership interest of UDS
Logistics and ▇▇▇▇▇▇ ▇▇ in the MLP to 49.5% or less;
(iv) except as provided in SECTION 11(d), VRC will contribute
to the OLP, in exchange for the OLP Limited Partner Interest, the Tank
Assets free and clear of any Encumbrances other than Permitted
Encumbrances;
(v) VRC will contribute to UDS Logistics, in exchange for the
UDS Membership Interest (or in the alternative, as provided in SECTION
11(d), for cash) the OLP Limited Partner Interest, free and clear of
any Encumbrances;
(vi) the OLP, on behalf of the MLP, will pay the Cash Amount
to UDS Logistics in exchange for the right to be assigned the OLP
Limited Partner Interest from UDS Logistics;
(vii) UDS Logistics will contribute to the MLP, in exchange
for the payment of the Cash Amount from the OLP, on behalf of the MLP,
the OLP Limited Partner Interest, free and clear of any Encumbrances;
(viii) the MLP will contribute to OLP-GP such portion of the
OLP Limited Partner Interest (the "Contributed OLP Interest") as is
necessary for OLP-GP to maintain its 0.01% general partner interest in
the OLP; and
(ix) the Contributed OLP Interest will be immediately
converted into a general partner interest in the OLP.
(b) The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇, commencing at 10:00 a.m., local time, on the fifth
business day following the date as of which the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby has occurred (other than conditions with respect to actions
each Party shall take at the Closing itself) or such other date as the Parties
may mutually determine (the "Closing Date").
(c) Deliveries at the Closing. At the Closing, (i) VRC shall deliver
to the MLP Parties the various certificates, instruments, and documents referred
to in SECTIONS 7(a) AND 9(g); (ii) the MLP Parties shall deliver to VRC the
various certificates, instruments, and documents referred to in SECTION 7(b);
(c) the applicable Parties shall execute and deliver each of (A) the
8
Assignment; (B) the Throughput Agreement; (C) the Services Agreement; and (D)
the Lease Agreement; (iii) UDS Logistics shall issue to VRC the UDS Membership
Interest; (iv) the OLP, on behalf of the MLP, shall pay to UDS Logistics the
Cash Amount; (v) the applicable Parties shall execute and/or deliver, or cause
to be executed and/or delivered, such other consideration, documents, assets and
interests as set forth in SECTION 2(a) above; and (vi) the applicable Parties
shall execute and/or deliver, or cause to be executed and/or delivered, each
other Transaction Agreement not listed above.
(d) Right of First Offer. Should the board of directors of ▇▇▇▇▇▇ ▇▇
determine at any time after the Closing Date (either through an unsolicited bona
fide offer from a Person that is not an Affiliate of the Valero Group (a "Third
Party Offer") or through an offer solicited by any of the MLP Parties) that it
is in the best interests of the MLP Parties to divest any or all of the Tank
Assets (the "Offered Assets"), ▇▇▇▇▇▇ ▇▇ shall promptly notify VRC of such
determination and deliver to VRC all information prepared by or on behalf of
▇▇▇▇▇▇ ▇▇ relating to the potential divestiture. As soon as practicable but in
any event within 30 days after receipt of such notification and information, VRC
shall notify ▇▇▇▇▇▇ ▇▇ that either (a) VRC has elected not to pursue the
opportunity to acquire the Offered Assets, in which case the MLP shall be free
to offer and divest the Offered Assets to (1) the Person that initiated the
Third Party Offer (the "Third Party Offeror") or (2) a Person that is not an
Affiliate of the Valero Group (a "NonAffiliate Purchaser"), or (b) VRC has
elected to pursue the opportunity to acquire the Offered Assets, in which event
the following procedures shall be followed:
(i) VRC shall submit a good faith offer to ▇▇▇▇▇▇ ▇▇ to
acquire the Offered Assets (the "Offer") on the terms and for the
consideration stated in the Offer;
(ii) VRC and ▇▇▇▇▇▇ ▇▇ shall negotiate in good faith for 90
days after receipt of such Offer by ▇▇▇▇▇▇ ▇▇, the terms on which the
Offered Assets will be acquired by VRC. ▇▇▇▇▇▇ ▇▇ shall provide all
information concerning the operations and finances of the Offered
Assets as may be reasonably requested by VRC.
(A) If VRC and ▇▇▇▇▇▇ ▇▇ agree on such terms within
90 days after the receipt by ▇▇▇▇▇▇ ▇▇ of the Offer, VRC shall
acquire the Offered Assets on such terms after such agreement
has been reached; provided, however, that the acquisition
consideration to be paid by VRC may not be less than the
acquisition consideration offered in the Third Party Offer.
(B) If VRC and ▇▇▇▇▇▇ ▇▇ are unable to agree on the
terms of an acquisition during such 90-day period, the MLP is
free to divest the Offered Assets to (1) the Third Party
Offeror within 180 days of the termination of such 90-day
period; provided that such Third Party Offer is not less than
95% of the acquisition consideration last offered by VRC or
(2) a NonAffiliate Purchaser; provided that any such
divestiture to a NonAffiliate Purchaser must be for an
acquisition consideration of not less than 95% of the
acquisition consideration last offered by VRC and on the same
material terms and conditions as last offered by VRC;
provided, further, that if such NonAffiliate Purchaser shall
offer less than 95% of the acquisition consideration last
offered by VRC or offer to purchase the
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Tank Assets on terms and conditions materially less favorable
to the MLP than those last offered by VRC, the MLP must first
give VRC notice and a right to match the offer from the
NonAffiliate Purchaser during a 15-day period after
notification of same from MLP to VRC.
(C) During such 90-day period ▇▇▇▇▇▇ ▇▇ shall be free
to make capital expenditures to maintain the Offered Assets.
(iii) If, after the expiration of the 180-day period referred
to in clause (ii)(B) above, no NonAffiliate Purchaser or Third Party
Offeror has acquired the Offered Assets and ▇▇▇▇▇▇ ▇▇ confirms its
determination that it is in the best interests of the MLP Parties to
divest the Offered Assets, ▇▇▇▇▇▇ ▇▇ shall comply with the provisions
of this SECTION 2(d) once again; provided that if ▇▇▇▇▇▇ ▇▇ and VRC are
unable to reach agreement during the 90-day period referenced in clause
(ii)(B) above, the parties will engage an independent investment
banking firm of national reputation to determine the value of the
Offered Assets and shall furnish VRC and ▇▇▇▇▇▇ ▇▇ with its opinion of
such value within 30 days of its engagement. VRC and ▇▇▇▇▇▇ ▇▇ shall
share equally the fees and expenses of such investment banking firm.
Upon receipt of such opinion, ▇▇▇▇▇▇ ▇▇ will have the option to
(A) cause the MLP to divest the Offered Assets for an
amount equal to the value as determined by such investment
banking firm on terms substantially similar to the relevant
terms of this Agreement or
(B) decline to divest the Offered Assets.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of VRC. VRC hereby represents and
warrants to the MLP Parties as follows as of the Effective Date:
(i) Organization and Good Standing. VRC is a corporation duly
incorporated, validly existing, and in good standing under the Laws of
the state of Delaware. VRC is in good standing under the Laws of the
state of California and each other jurisdiction which requires such
qualification, except where the lack of such qualification would not
have a Material Adverse Effect.
(ii) Authorization of Transaction. Each VRC Party has full
power and authority (including full entity power and authority) to
execute and deliver each Transaction Agreement to which such VRC Party
is a party and to perform its obligations thereunder. Each Transaction
Agreement to which any VRC Party is a party constitutes the valid and
legally binding obligation of such VRC Party, enforceable against such
VRC Party in accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency, reorganization,
moratorium or similar Laws affecting creditors' rights generally, and
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Except as set forth on SCHEDULE 3(A)(II), no VRC Party need give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Authority or any other
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Person in order to consummate the transactions contemplated by this
Agreement or any other Transaction Agreement to which such VRC Party is
a party.
(iii) Noncontravention. Except for filings specified in
SCHEDULE 3(a)(ii) and filings and notifications required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 (as amended, the
"HSR Act"), neither the execution and delivery of any Transaction
Agreement, nor the consummation of any of the transactions contemplated
thereby, shall (A) violate any Laws to which any VRC Party is subject
or any provision of the Organizational Documents of any VRC Party or
(B) result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement
to which any VRC Party is a party or by which it is bound or to which
any of its assets or any of the Tank Assets are subject, except for
such violations, defaults, breaches, or other occurrences that do not,
individually or in the aggregate, have a material adverse effect on the
ability of VRC or any other VRC Party to consummate the transactions
contemplated by such Transaction Agreement.
(iv) Brokers' Fees. No VRC Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which any of the MLP Parties could become liable or obligated.
(b) Representations and Warranties of the MLP Parties. Each of the
MLP Parties hereby represents and warrants to VRC as follows as of the Effective
Date:
(i) Organization of the MLP Parties. Each of the MLP Parties
is a limited liability company, limited partnership or corporation duly
organized, validly existing, and in good standing under the Laws of the
state of Delaware. Each of the MLP Parties is in good standing under
the Laws of the state of California, or will be qualified to do
business in California prior to the Closing, and each other
jurisdiction which requires such qualification, except where the lack
of such qualification in each instance would not have a Material
Adverse Effect.
(ii) Authorization of Transaction. Each of the MLP Parties has
full power and authority (including full entity power and authority) to
execute and deliver each Transaction Agreement to which it is a party
and to perform its obligations thereunder. Each Transaction Agreement
to which such MLP Party is a party constitutes the valid and legally
binding obligation of such MLP Party, enforceable against such MLP
Party in accordance with its terms and conditions, subject, however, to
the effects of bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Except for approval by
the Conflicts Committee and as set forth on SCHEDULE 3(b)(ii) and any
filings under the HSR Act, no MLP Party needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval
of any Governmental Authority or any other Person in
11
order to consummate the transactions contemplated by this Agreement or
any other Transaction Agreement.
(iii) Noncontravention. Except for the filings specified in
SCHEDULE 3(b)(ii), neither the execution and delivery of any
Transaction Agreement to which any MLP Party is a party, nor the
consummation of any of the transactions contemplated thereby, shall (A)
violate any Laws to which such MLP Party is subject or any provision of
its Organizational Documents or (B) result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the
right to accelerate, terminate, modify, or cancel, or require any
notice, approval or consent under any agreement, contract, lease,
license, instrument, or other arrangement to which any MLP Party is a
party or by which it is bound or to which any of its assets is subject,
except for such violations, defaults, breaches, or other occurrences
that do not, individually or in the aggregate, have a material adverse
effect on the ability of any MLP Party to consummate the transactions
contemplated by such Transaction Agreement.
(iv) Brokers' Fees. Other than a customary fee paid to ▇.▇.
▇▇▇▇▇▇▇ & Sons in connection with its assessment of the fairness of the
Transaction to the MLP and to the holders of the Common Units (other
than any of the Valero Group), no MLP Party has any liability or
obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which VRC could become liable or obligated.
(v) Investment. Each of the MLP Parties is familiar with
investments of the nature of the Tank Assets, understands that this
investment involves substantial risks, has investigated the Tank
Assets, and has substantial knowledge and experience in financial and
business matters such that it is capable of evaluating, and has
evaluated, the merits and risks inherent in purchasing the Tank Assets,
and is able to bear the economic risks of such investment. Each of the
MLP Parties has had the opportunity to visit with VRC and its
applicable Affiliates and meet with their representative officers and
other representatives to discuss the operations, assets, liabilities
and financial condition of the Tank Assets, has received materials,
documents and other information that such MLP Party deems necessary or
advisable to evaluate the Tank Assets. Each of the MLP Parties has made
its own independent examination, investigation, analysis and evaluation
of the Tank Assets, including its own estimate of the value of the Tank
Assets. Each of the MLP Parties has undertaken such due diligence
(including a review of the assets, properties, liabilities, books,
records and contracts constituting part of the Tank Assets) as such MLP
Party deems adequate. Notwithstanding the other provisions of this
subsection (v), the MLP Parties have relied on the truth and accuracy
of the representations and warranties made by VRC in SECTION 4(l) in
making the representations and warranties in this subsection (v) and
the MLP Parties shall not be considered to have breached any
representation or warranty contained in this subsection (v) if any of
the representations and warranties made by VRC in SECTION 4(l) are not
true or are inaccurate.
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4. Representations and Warranties Concerning the Tank Assets. VRC
hereby represents and warrants to the MLP Parties as follows as of the Effective
Date:
(a) Noncontravention. Except as set forth in SCHEDULE 4(a), neither
the execution and delivery of any Transaction Agreement to which any VRC Party
is a party, nor the consummation of any of the transactions contemplated
thereby, shall (i) violate any Laws to which any of the Tank Assets is subject
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, require any notice or trigger any rights to payment or other
compensation, or result in the imposition of any Encumbrance on any of the Tank
Assets under, any agreement, contract, lease, license, instrument, or other
arrangement to which any of the Tank Assets is subject, except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, right to payment or other compensation, or
Encumbrance would not have a Material Adverse Effect, or would not materially
adversely affect the ability of any VRC Party to consummate the transactions
contemplated by such Transaction Agreement.
(b) Title to and Condition of Tank Assets and Land.
(i) VRC has good and marketable title to all of the Tank
Assets in each case free and clear of all Encumbrances, except for
Permitted Encumbrances. VRC has good and indefeasible title (fee and
leasehold, as applicable) to all of the Land.
(ii) To VRC's Knowledge, except as disclosed in SCHEDULE
4(b)(ii), the Tank Assets are in good operating condition and repair
(normal wear and tear excepted), are free from patent and latent
defects, are suitable for the purposes for which they are currently
used and are not in need of maintenance or repairs except for ordinary
routine maintenance and repairs that, in the aggregate, do not exceed
$250,000.
(iii) There are no borrowings, loan agreements, promissory
notes, pledges, mortgages, guaranties, liens and similar liabilities
(direct and indirect), or Encumbrances which are secured by or
constitute an Encumbrance on the Tank Assets and/or the Land.
(iv) VRC has not caused any work or improvements to be
performed upon or made to any of the Tank Assets for which there
remains outstanding any payment obligation that would or might serve as
the basis for any claim, lien, charge or Encumbrance in favor of the
Person which performed the work.
(v) VRC has not leased or subleased any parcel or any portion
of the Land to any other Person.
(c) Material Change. Except as set forth in SCHEDULE 4(c), since
December 31, 2001:
(i) there has not been any Material Adverse Effect;
13
(ii) the Tank Assets have been operated and maintained in the
Ordinary Course;
(iii) to VRC's Knowledge, there has not been any material
damage, destruction or loss to any material portion of the Tank Assets,
whether or not covered by insurance;
(iv) there has been no purchase, sale or lease of any material
asset included in the Tank Assets;
(v) there is no contract, commitment or agreement to do any of
the foregoing, except as expressly permitted hereby.
(d) Legal Compliance. Each VRC Party, with respect to the Tank
Assets, has complied with all applicable Laws, except where the failure to
comply would not have a Material Adverse Effect. VRC makes no representations or
warranties in this SECTION 4(d) with respect to Environmental Laws, for which
the sole representations and warranties of VRC are set forth in SECTION 4(g).
(e) Rights of Way. SCHEDULE 4(e) contains a list of all
rights-of-way constituting part of or affecting the Tank Assets (the "Rights of
Way"). The Rights of Way (together with the Required Permits and the Transaction
Documents) constitute all of the agreements, rights of way, licenses, permits,
and other documents and instruments necessary for the operation of the Tank
Assets consistent with applicable Laws and prior operation. The VRC Parties have
performed and are in compliance with all obligations required to be performed by
them to date under the Rights of Way, and are not in default under any
obligation of any such Right of Way, except when such default would not have a
Material Adverse Effect. VRC has not received any notice of cancellation or
termination of any Right of Way. VRC has not assigned its interest under any
Right of Way to any third party.
(f) Litigation.
(i) VRC is not, with respect to the Tank Assets, (i) subject
to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) the subject of any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction, or is the subject of any pending or, to VRC's Knowledge,
threatened claim, demand, or notice of violation or liability from any
Person, except where any of the foregoing would not have a Material
Adverse Effect.
(ii) No VRC Party has Knowledge of any Basis for any present
or future injunction, judgment, order, decree, ruling, or charge or
action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction, against any of them giving rise
to any Obligation to which any of the Tank Assets and/or the Land would
be subject.
(g) Environmental Matters. Except as set forth in SCHEDULE 4(g):
14
(i) VRC, with respect to the Tank Assets and the Land, has
been in compliance with all applicable local, state, and federal laws,
rules, regulations, and orders regulating or otherwise pertaining to
(a) the use, generation, migration, storage, removal, treatment,
remedy, discharge, release, transportation, disposal, or cleanup of
pollutants, contamination, hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, (b) surface
waters, ground waters, ambient air and any other environmental medium
on or off any lease or (c) the environment or health and safety-related
matters; including the following as from time to time amended and all
others whether similar or dissimilar: the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (as amended by the
Superfund Amendments and Reauthorization Act of 1986 "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by the Used
Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of
1980, and the Hazardous and Solid Waste Amendments of 1984, the
Hazardous Materials Transportation Act, as amended, the Toxic Substance
Control Act, as amended, the Clean Air Act, as amended, the Clean Water
Act, as amended, and all regulations promulgated pursuant thereto, and
common law principles, including nuisance, trespass and negligence as
applicable to environmental matters described above (collectively, the
"Environmental Laws," and, individually, an "Environmental Law"),
except for such instances of noncompliance that individually or in the
aggregate do not have a Material Adverse Effect.
(ii) VRC has obtained all permits, licenses, franchises,
authorities, consents, registrations, orders, certificates, waivers,
exceptions, variances and approvals, and have made all filings, paid
all fees, and maintained all material information, documentation, and
records, as necessary under applicable Environmental Laws for operating
the Tank Assets and/or the Land as they are presently operated, and all
such permits, licenses, franchises, authorities, consents, approvals,
and filings remain in full force and effect, except for such matters
that individually or in the aggregate do not have a Material Adverse
Effect. SCHEDULE 4(g)(II) sets forth a complete list of all permits,
licenses, franchises, authorities, consents, and approvals, as
necessary under applicable Environmental Laws for operating the Tank
Assets and/or the Land as they are presently operated (the "Required
Permits"), each of which is held in the name of the appropriate VRC
Party as indicated on such schedule.
(iii) Except as would not have a Material Adverse Effect, (x)
there are no pending or, to the knowledge of any VRC Party, threatened
claims, demands, actions, administrative proceedings or lawsuits
against VRC with respect to the Tank Assets and/or the Land and VRC has
not received notice of any of the foregoing and (y) none of the Tank
Assets, and none of the Land is, subject to any outstanding injunction,
judgment, order, decree or ruling under any Environmental Laws.
(iv) VRC has not received any written notice that VRC, with
respect to the Tank Assets and/or the Land, is or may be a potentially
responsible party under CERCLA or any analogous state law in connection
with any site actually or allegedly containing or used for the
treatment, storage or disposal of Hazardous Substances.
15
(v) All Hazardous Substances or solid wastes generated,
transported, handled, stored, treated or disposed by, in connection
with or as a result of the operation or possession of VRC or the
conduct of VRC, have been transported only by carriers maintaining
valid authorizations under applicable Environmental Laws and treated,
stored, disposed of or otherwise handled only at facilities maintaining
valid authorizations under applicable Environmental Laws and such
carriers and facilities have been and are operating in compliance with
such authorizations and are not the subject of any existing, pending or
threatened action, investigation or inquiry by any Governmental
Authority or other Person in connection with any of the Environmental
Laws, except for such matters that individually or in the aggregate do
not have a Material Adverse Effect.
VRC makes no representation or warranty regarding any compliance or failure to
comply with, or any actual or contingent liability under, any Environmental Law,
except as expressly set forth in this SECTION 4(g). For purposes of this SECTION
4(g), each reference to VRC or VRC Parties shall be deemed to include VRC
Parties and their Affiliates.
(h) Preferential Purchase Rights. Except for the Right of First
Offer and the Right of First Refusal set forth in SECTION 2(d), there are no
preferential purchase rights, rights of refusal to purchase, purchase options or
other rights held by any Person not a party to this Agreement to purchase or
acquire any or all of the Tank Assets, in whole or in part, or any or all of the
Land, in whole or in part, that would be triggered or otherwise affected as a
result of the transactions contemplated by this Agreement ("Preferential
Rights").
(i) Prohibited Events. None of the matters described in SECTION 5(c)
have occurred since December 31, 2002.
(j) Regulatory Matters No VRC Party is (i) a "holding company," a
"subsidiary company" of a "holding company," an "affiliate" of a "holding
company," or a "public utility," as each such term is defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder. None of the Tank Assets are subject to regulation by the
Federal Energy Regulatory Commission or rate regulation or comprehensive
nondiscriminatory access regulation under any federal laws or the laws of any
state or other local jurisdiction.
(k) Intercompany Transactions. There are no outstanding receivables,
payables and other intercompany agreements between VRC and any of its Affiliates
that relate to the Tank Assets. -
(l) Material Information. VRC has provided to the MLP Parties all
material information concerning the operations and finances of the Tank Assets
as has been requested by any of the MLP Parties to date and such information is
complete and correct in all material respects and does not omit to state a
material fact necessary to make the statements and information contained therein
not misleading in light of the circumstances in which they are made. To VRC's
knowledge, there is not any fact that has not been disclosed to the MLP Parties
pertaining particularly to any of the Tank Assets (as opposed to public
information concerning general industry or economic conditions or governmental
policies) which materially and
16
adversely affect any of the Tank Assets or the use, ownership, financing,
operation, maintenance or repair of any of the Tank Assets at any time after the
Closing.
(m) Disclaimer of Representations and Warranties Concerning Personal
Property, Equipment and Fixtures. Each of the MLP Parties acknowledges that (i)
it has had and pursuant to this Agreement shall have before Closing access to
the Tank Assets and the Land and the officers and employees of VRC and (ii) in
making the decision to enter into this Agreement and consummate the transactions
contemplated hereby, each of the MLP Parties has relied solely on the basis of
its own independent investigation and upon the express representations,
warranties, covenants, and agreements set forth in this Agreement and the other
Transaction Agreements. Accordingly, each of the MLP Parties acknowledges that,
except as expressly set forth in this Agreement, VRC has not made, and VRC MAKES
NO AND DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED,
AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING (i) THE QUALITY,
CONDITION, OR OPERABILITY OF ANY PERSONAL PROPERTY, EQUIPMENT, OR FIXTURES, (ii)
THEIR MERCHANTABILITY, (iii) THEIR FITNESS FOR ANY PARTICULAR PURPOSE, OR (iv)
THEIR CONFORMITY TO MODELS, SAMPLES OF MATERIALS OR MANUFACTURER DESIGN, AND ALL
PERSONAL PROPERTY AND EQUIPMENT IS DELIVERED "AS IS, WHERE IS" IN THE CONDITION
IN WHICH THE SAME EXISTS.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the date of this Agreement and the Closing:
(a) General. Each of the MLP Parties shall use its Best Efforts to
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including causing the occurrence of VRC's conditions to Closing in SECTION 7(b).
VRC shall use its Best Efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement, including causing the occurrence of
the MLP Parties' conditions to Closing in SECTION 7(a).
(b) Notices and Consents. Each of the Parties shall give any notices
to, make any filings with, and use its Best Efforts to obtain any
authorizations, consents, and approvals of Governmental Authorities and third
parties it is required to obtain in connection with the transaction contemplated
by this Agreement (the "Transaction"), so as to permit the Closing to occur not
later than 9:00 a.m. (San Antonio time) on March 31, 2003.
(c) Operation of Tank Assets. VRC shall not, without the written
consent of the OLP (which consent shall not be unreasonably withheld or
delayed), except as expressly contemplated by this Agreement or as contemplated
by SCHEDULE 5(c), engage in any practice, take any action, omit to take any
action or enter into any transaction outside the Ordinary Course that could
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, without the written consent of the MLP (which
consent shall not be unreasonably withheld or delayed), except as expressly
contemplated by this Agreement or SCHEDULE 5(c), prior to the Closing VRC shall
not do any of the following:
17
(i) sell, lease or otherwise dispose of any Tank Assets and/or
any portion of the Land or cause or allow any part of the Tank Assets
and/or the Land to become subject to an Encumbrance, except for
Permitted Encumbrances;
(ii) initiate or settle any litigation, complaint, rate filing
or administration proceeding relating to the Tank Assets and/or the
Land.
(d) Full Access. VRC shall permit, and shall cause its Affiliates to
permit, representatives of the MLP Parties to have full access at all reasonable
times, and in a manner so as not to unreasonably interfere with the normal
business operations of VRC and its Affiliates, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents
pertaining to any of the Tank Assets and/or the Land.
(e) Required Permits. Each of the VRC Parties and the MLP Parties
shall use its Best Efforts to take all action and to do all things necessary,
proper, or advisable in order to transfer the Required Permits to the OLP or
otherwise to assist the OLP in obtaining such Required Permits in its own right.
6. Post-Closing Covenants. The Parties agree as follows:
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties shall take such further action (including the execution and delivery of
such further instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under SECTION 8).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or before
the Closing Date involving the Tank Assets, the other Party shall cooperate with
the contesting or defending Party and its counsel in the defense or contest,
make available its personnel, and provide such testimony and access to its books
and records (other than books and records which are subject to privilege or to
confidentiality restrictions) as shall be necessary in connection with the
defense or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under SECTION 8).
(c) Intentionally Omitted.
(d) Delivery and Retention of Records. On the Closing Date, VRC
shall deliver or cause to be delivered to the MLP Parties, copies of Tax Records
and all other files, books, records, information and data relating to the Tank
Assets (other than Tax Records) that are in the possession or control of VRC
(the "Records"). The MLP Parties agree to (i) hold the Records and not to
destroy or dispose of any thereof for a period of seven years from the Closing
Date or such longer time as may be required by Law, provided that, if it desires
to destroy or dispose of such Records during such period, it shall first offer
in writing at least 60 days before such destruction or disposition to surrender
them to VRC and if VRC does not accept such offer
18
within 20 days after receipt of such offer, such MLP Party may take such action
and (ii) afford VRC, its accountants, and counsel, during normal business hours,
upon reasonable request, at any time, full access to the Records to the extent
that such access may be requested for any legitimate purpose at no cost to VRC
(other than for reasonable out-of-pocket expenses); provided that such access
shall not be construed to require the disclosure of Records that would cause the
waiver of any attorney-client, work product, or like privilege; provided,
further that in the event of any litigation nothing herein shall limit any
Party's rights of discovery under applicable Law.
(e) Required Permits. Each of the VRC Parties and the MLP Parties
shall use its Best Efforts to take all action and to do all things necessary,
proper, or advisable in order to transfer the Required Permits to the OLP or
otherwise to assist the OLP in obtaining such Required Permits in its own right.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the MLP Parties. The obligation of
each of the MLP Parties to consummate the transactions to be performed by such
MLP Party in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the representations and warranties of VRC contained in
SECTIONS 3(a) and 4 must be true and correct in all material respects
(without, for purposes of determining whether or not this condition is
satisfied as of the Closing, giving effect to any supplement to the
Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, awareness or concepts of similar import, or any
qualification or limitation as to monetary amount or value, except with
respect to (A) the representations and warranties in SECTION 4(b)(II)
and (B) the representations and warranties in SECTION 4(c)(III), for
which in each such case qualifications as to Knowledge shall be given
effect) as of the date of this Agreement and at Closing (except for
those which refer to a specific date, which must be true and correct as
of such date);
(ii) VRC must have performed and complied in all material
respects with its covenants hereunder through the Closing (without, for
purposes of determining whether or not this condition is satisfied as
of the Closing, giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value);
(iii) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental Authority to enjoin the consummation of any
of the transactions contemplated by this Agreement;
(iv) the MLP Parties must have obtained all material
Governmental Authority and third party consents, including any material
consents specified in SECTION 3(b)(ii) and including the consents
required by the corresponding Schedule and the 30-day waiting period
under the HSR Act shall have expired or been terminated prior to the
19
expiration thereof and all other approvals required under the HSR Act
shall have been issued;
(v) VRC must have delivered to the MLP Parties a certificate
to the effect that each of the conditions specified in SECTIONS 7(a)(i)
- (iv) is satisfied in all respects;
(vi) the MLP and a group of underwriters must have executed
and delivered an Underwriting Agreement (the "Underwriting Agreement")
with respect to a public offering of common units representing limited
partner interests in the MLP with an aggregate offering amount of up to
$200 million (not including the underwriters' over-allotment option)
and the closing of the transactions contemplated therein must have
occurred;
(vii) one or more of the MLP Parties and a group of note
purchasers must have executed and delivered a Note Purchase Agreement
with respect to the Private Placement with an aggregate principal
amount of up to $250 million (the "Note Purchase Agreement") and the
closing of the transactions contemplated thereby must have occurred;
(viii) one or more of the MLP Parties shall have entered into
arrangements under the OLP's revolving credit facility to borrow such
additional amount as is necessary for the MLP and OLP to fund the
aggregate amount of the Cash Amount, the cash amount required under the
Contribution Agreements entered into as the date hereof by the MLP
Parties with Valero Refining-Texas, L.P. for the contribution of
specified feedstock storage tanks as identified therein and with Valero
Pipeline Company for the contribution of the pipeline and terminal
assets as identified therein, the Redemption as well as the aggregate
transaction costs (expected to be approximately $2 million), and the
closing of the borrowing transaction must have occurred;
(ix) the MLP Parties must have duly and validly authorized the
terms of the Underwriting Agreement, the Note Purchase Agreement and
the borrowing by the OLP as contemplated in clauses (vi), (vii) and
(viii) above;
(x) the proceeds of the equity and debt financing for the
transactions contemplated hereby as outlined in clauses (vi), (vii) and
(viii) above must have been received by the MLP Parties on terms
substantially the same as authorized by the MLP Parties; and
(xi) the MLP's public offering of its common units and the
Redemption, on an aggregate basis, must have caused the aggregate
ownership interest of Valero Energy in the MLP to be 49.5% or less.
The MLP Parties may waive any condition specified in this SECTION 7(a) if ▇▇▇▇▇▇
▇▇, on behalf of all of the MLP Parties, executes a writing so stating at or
before the Closing.
20
(b) Conditions to Obligation of VRC. The obligation of VRC to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties of the MLP Parties
contained in SECTION 3(b) must be true and correct in all material
respects (without, for purposes of determining whether or not this
condition is satisfied as of the Closing, giving effect to any
supplement to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary amount or
value) as of the date of this Agreement and at Closing (except for
those which refer to a specific date, which must be true and correct as
of such date);
(ii) each of the MLP Parties must have performed and complied
in all material respects with each of its covenants hereunder through
the Closing (without, for purposes of determining whether or not this
condition is satisfied as of the Closing, giving effect to any
supplement to the Schedules, any qualification as to materiality,
Material Adverse Effect, Knowledge, awareness or concepts of similar
import, or any qualification or limitation as to monetary amount or
value);
(iii) there must not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement or any suit or action
pending by a Governmental Authority to enjoin the consummation of any
of the transactions contemplated by this Agreement;
(iv) VRC must have obtained all material Governmental
Authority and third party consents, including material consents
specified in SECTIONS 3(a)(ii) and 4(a) and including the consents
required by the corresponding Schedules and the 30-day waiting period
under the HSR Act shall have expired or been terminated prior to the
expiration thereof and all other approvals required under the HSR Act
shall have been issued; and
(v) ▇▇▇▇▇▇ ▇▇, on behalf of the MLP Parties, must have
delivered to VRC a certificate to the effect that each of the
conditions specified in SECTIONS 7(b)(i) - (iv) is satisfied in all
respects.
VRC may waive any condition specified in this SECTION 7(b) if it executes a
writing so stating at or before the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival. (i) All of the representations and warranties of VRC
contained in SECTIONS 3(a) and 4 (other than SECTIONS 3(a)(i), 3(a)(ii),
4(b)(i), and 4(f)(ii)) shall survive the Closing hereunder for a period of three
years after the Closing Date; (ii) the representations and warranties of VRC
contained in SECTIONS 3(a)(i), 3(a)(i), and 4(b)(i) shall survive the Closing
forever, and (iii) the representations and warranties of VRC contained in
SECTION 4(f)(ii) shall survive the Closing for a period of one year after the
Closing Date. The representations and warranties of the MLP Parties contained in
SECTION 3(b) (other than in SECTIONS 3(b)(i) and
21
3(b)(ii)) shall survive the Closing for a period of three years after the
Closing Date. The representations and warranties of the MLP Parties contained in
SECTIONS 3(b)(i) and 3(b)(ii) shall survive the Closing forever. The covenants
and obligations contained in SECTIONS 2 and 6 and all other covenants and
obligations contained in this Agreement (including, but not limited to, those
contained in SECTIONS 8(b)(iii), 8(b)(iv) and 8(b)(v)) shall survive the Closing
forever, unless a shorter period is expressly identified in this Agreement with
respect thereto.
(b) Indemnification Provisions for Benefit of the MLP Parties.
(i) VRC agrees to release and indemnify the MLP Party
Indemnitees from and against any Adverse Consequences suffered by the
MLP Party Indemnitees arising out of, in connection with or relating to
any breach of the representations and warranties made by VRC in this
Agreement to the extent that (x) such representations and warranties
survive the Closing pursuant to SECTION 8(a) and (y) any MLP Party
makes a written claim for indemnification against VRC pursuant to
SECTION 11(g) within such period of survival. However, VRC shall not
have any obligation to release and indemnify the MLP Party Indemnitees
from and against any such Adverse Consequences (A) until the MLP Party
Indemnitees, in the aggregate, have suffered Adverse Consequences by
reason of all such breaches in excess of an aggregate amount equal to
1% of the Cash Amount (the "1% Threshold") (after which point VRC shall
be obligated to release and indemnify the MLP Party Indemnitees from
and against all Adverse Consequences by reason of all such breaches,
including those Adverse Consequences included in the calculation of
whether or not the 1% Threshold had been met), (B) to the extent the
Adverse Consequences the MLP Party Indemnitees, in the aggregate,
exceeds an aggregate ceiling amount equal to 50% of the Cash Amount
(after which point VRC shall have no obligation to release and
indemnify the MLP Party Indemnitees from and against further such
Adverse Consequences); provided, however, that the threshold amount
with respect to breaches of SECTION 4(b)(ii) shall be $250,000 and not
the 1% Threshold. For purposes of calculating any Adverse Consequences
in connection with this SECTION 8(b)(i), any supplement to the
Schedules, any qualification as to materiality, Material Adverse
Effect, Knowledge, or any qualification or limitation as to monetary
amount or value set forth in SECTIONS 3(a) OR 4 shall be disregarded.
(ii) In the event: (x) VRC breaches any of its covenants or
obligations in SECTIONS 2 or 6 or any other covenants or obligations in
this Agreement (other than SECTIONS 3, 4 AND 8(b)(i)) (in each case
above without giving effect to any supplement to the Schedules, any
qualification as to materiality, Material Adverse Effect, Knowledge,
awareness or concepts of similar import, or any qualification or
limitation as to monetary amount or value); (y) there is an applicable
survival period pursuant to SECTION 8(a); and (z) any MLP Party makes a
written claim for indemnification against VRC pursuant to SECTION 11(g)
within such survival period, then VRC agrees to release and indemnify
the MLP Party Indemnitees from and against any Adverse Consequences
suffered by the MLP Party Indemnitees.
(iii) VRC shall release, defend, indemnify and hold harmless
the MLP Party Indemnitees against any Adverse Consequences resulting by
reason of joint and several liability with VRC arising by reason of
having been required to be aggregated
22
with VRC under section 414(o) of the Code, or having been under "common
control" with VRC, within the meaning of Section 4001(a)(14) of ERISA.
(iv) VRC shall release, defend and indemnify the MLP Party
Indemnitees from and against any Adverse Consequences suffered by the
MLP Party Indemnitees with respect to any environmental condition,
claim or loss with respect to (a) any of the Tank Assets arising as a
result of events occurring or conditions existing on or prior to the
Closing Date, including the matters disclosed in SCHEDULE 4(g) and (b)
any real or personal property on which the Tank Assets are or, prior to
the Effective Date, have been located, arising prior to or as of the
date of this Agreement.
(v) VRC shall release, defend, indemnify and hold harmless the
MLP Party Indemnitees against any Adverse Consequences suffered by the
MLP Party Indemnitees with respect to, any outstanding injunction,
judgment, order, decree, ruling, or charge, or any pending or
threatened action, suit, proceeding, hearing, or investigation of, in,
or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction, or any other Adverse
Consequences suffered by the MLP Party Indemnitees as a result of
third-party claims relating to the Tank Assets on or before the Closing
Date.
(vi) Notwithstanding anything to the contrary contained in
SECTIONS 8(b)(i) and (ii), VRC shall not have any obligation to
indemnify any MLP Party Indemnitee to the extent that the payment
thereof would cause VRC's aggregate indemnity payments under SECTION
8(b) (but excluding SECTIONS 8(b)(iii), 8(b)(iv) and 8(b)(v)) to exceed
100% of the Cash Amount.
(vii) To the extent any MLP Party Indemnitee becomes liable
to, and is ordered to and does pay to any third party, punitive,
exemplary, special or consequential damages caused by a breach by VRC
of any representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or consequential
damages shall be deemed actual damages to such MLP Party Indemnitee and
included within the definition of Adverse Consequences for purposes of
this SECTION 8.
(viii) Except for the rights of indemnification provided in
this SECTION 8 and SECTION 9, each of the MLP Parties hereby waives any
claim or cause of action pursuant to common or statutory law or
otherwise against VRC arising from any breach by VRC of any of its
representations, warranties or covenants under this Agreement or the
transactions contemplated hereby.
(c) Indemnification Provisions for Benefit of VRC.
(i) In the event: (x) any of the MLP Parties breaches any of
its representations, warranties or covenants contained herein; (y)
there is an applicable survival period pursuant to SECTION 8(a); and
(z) VRC makes a written claim for indemnification against such MLP
Party pursuant to SECTION 11(g) within such survival period, then each
of the MLP Parties agrees to release and indemnify the VRC
23
Indemnitees from and against the entirety of any Adverse Consequences
suffered by such VRC Indemnitees.
(ii) To the extent any VRC Indemnitee becomes liable to, and
is ordered to and does pay to any third party, punitive, exemplary,
special or consequential damages caused by a breach by any of the MLP
Parties of any representation, warranty or covenant contained in this
Agreement, then such punitive, exemplary, special or consequential
damages shall be deemed actual damages to such VRC Indemnitee and
included within the definition of Adverse Consequences for purposes of
this SECTION 8.
(iii) Except for the rights of indemnification provided in
this SECTION 8, VRC hereby waives any claim or cause of action pursuant
to common or statutory law or otherwise against the MLP Parties arising
from any breach by any of the MLP Parties of any of its
representations, warranties or covenants under this Agreement or the
transactions contemplated hereby.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this SECTION 8, then the
Indemnified Party shall promptly (and in any event within fifteen
business days after receiving notice of the Third Party Claim) notify
the Indemnifying Party thereof in writing.
(ii) The Indemnifying Party shall have the right to assume and
thereafter conduct the defense of the Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party; provided,
however, that the Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld or delayed unreasonably) unless the judgment or
proposed settlement involves only the payment of money damages and does
not impose an injunction or other equitable relief upon the Indemnified
Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in SECTION 8(d)(ii), the
Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) The Indemnified Party may not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party which
consent shall not be withheld unreasonably; provided that no such
consent will be required if the Indemnifying Party has denied in
writing its obligations to indemnify the Indemnified Party hereunder or
if the Indemnifying Party has not responded to the Indemnified Party's
written request for consent within 10 business days of the Indemnifying
Party's receipt thereof.
(e) Determination of Amount of Adverse Consequences. The Adverse
Consequences giving rise to any indemnification obligation hereunder shall be
limited to the
24
actual loss suffered by the Indemnified Party (i.e. reduced by any insurance
proceeds or other payment or recoupment received, realized or retained by the
Indemnified Party as a result of the events giving rise to the claim for
indemnification net of any expenses related to the receipt of such proceeds,
payment or recoupment, including retrospective premium adjustments, if any), as
such actual loss is reduced by any reduction in Taxes of the Indemnified Party
(or the affiliated group of which it is a member) occasioned by such loss or
damage. The amount of the actual loss and the amount of the indemnity payment
shall be computed by taking into account the timing of the loss or payment, as
applicable, using a Prime Rate plus 2% interest or discount rate, as
appropriate. Upon the request of the Indemnifying Party, the Indemnified Party
shall provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this SECTION 8(e). An Indemnified Party shall take all
reasonable steps to mitigate damages in respect of any claim for which it is
seeking indemnification and shall use reasonable efforts to avoid any costs or
expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof.
(f) Tax Treatment of Indemnity Payments. All indemnification
payments made under this Agreement, including any payment made under SECTION 9,
shall be treated as increases or decreases to the Cash Amount for Tax purposes.
9. Tax Matters.
(a) Tax Returns. VRC shall prepare or cause to be prepared and file
or cause to be filed when due all Pre-Closing Tax Returns with respect to the
Tank Assets. VRC shall timely pay or cause to be timely paid any Taxes due with
respect to such Pre-Closing Tax Returns. The MLP Parties shall prepare or cause
to be prepared and file or cause to be filed when due any Post-Closing Tax
Returns with respect to the Tank Assets. The MLP Parties shall timely pay (or
cause to be timely paid) any Taxes due with respect to such Post-Closing Tax
Returns.
(b) Straddle Periods. The MLP Parties shall be responsible for Taxes
with respect to the Tank Assets related to the portion of any Straddle Period
occurring after the Closing Date. VRC shall be responsible for such Taxes
relating to the portion of any Straddle Period occurring before and on the
Closing Date. If applicable Law shall not permit the Closing Date to be the last
day of a period, then (i) real or personal property Taxes with respect to the
Tank Assets shall be allocated based on the number of days in the partial period
before and after the Closing Date and (ii) all other Taxes shall be allocated on
the basis of the actual activities or attributes of the Tank Assets for each
partial period as determined from the books and records of VRC and its
Affiliates.
(c) Straddle Returns. The MLP Parties shall prepare any Straddle
Returns and deliver same to VRC for review and comment at least 45 days prior to
the due date (including any extension) for filing each such Straddle Return,
together with a statement setting forth the allocation of taxable income and
Taxes under SECTION 9(b) and the amount of Tax that VRC owes. VRC and the MLP
Parties agree to consult with each other to attempt to resolve in good faith any
issue arising as a result of VRC's review of such Straddle Return and mutually
to consent to the filing thereof as promptly as possible. Not later than five
days before the due date
25
for the payment of Taxes with respect to any such Straddle Return, VRC shall pay
or cause to be paid to the MLP Parties either (i) if the MLP Parties and VRC are
in agreement as to the amount of Taxes owed by VRC, that amount, or (ii) if the
MLP Parties and VRC cannot agree on the amount of Taxes owed by VRC, the maximum
amount of Taxes reasonably determined by VRC to be owed by it, in which case (A)
VRC and the MLP Parties shall refer the dispute to an independent "Big-Four"
accounting firm agreed to by the MLP Parties and VRC to arbitrate the dispute
within ten days following the payment of the undisputed amount, (B) the
determination of such accounting firm as to the amount of Taxes owing by VRC
with respect to a Straddle Return shall be binding on both VRC and the MLP
Parties, (C) VRC and the MLP Parties shall equally share the fees and expenses
of the accounting firm, and (D) within five days after the determination by such
accounting firm, if necessary, the appropriate Party shall pay the other Party
any amount which is determined by such accounting firm to be owed. VRC shall be
entitled to reduce its obligation to pay Taxes with respect to a Straddle Return
by the amount of any estimated Taxes paid with respect to such Taxes on or
before the Closing Date.
(d) Tax Indemnification. VRC agrees to indemnify the MLP Party
Indemnitees from and against any Adverse Consequences with respect to (i) Taxes
with respect to the Tank Assets for any Pre-Closing Tax Period and the portion
of any Straddle Period occurring on or before the Closing Date and (ii) Transfer
Taxes. The MLP Parties agree to indemnify VRC from and against any Adverse
Consequences with respect to Taxes with respect to the Tank Assets for any
Post-Closing Tax Period and the portion of any Straddle Period occurring after
the Closing Date. Notwithstanding anything to the contrary in this Agreement,
the covenants and obligations of the Parties sets forth in this SECTION 9 shall
be unconditional and absolute and shall remain in effect until thirty days after
the expiration of all statutes of limitation applicable to such covenants and
obligations. The limitation on the indemnity obligations of VRC pursuant to
SECTION 8(b) shall not apply to the indemnity obligations of VRC for Adverse
Consequences related to Taxes under this SECTION 9(d).
(e) Transfer Taxes. VRC shall file all necessary Tax Returns and
other documentation with respect to all transfer, documentary, sales, use,
stamp, registration and other similar Taxes and fees arising out of or in
connection with the transactions effected pursuant to this Agreement (the
"Transfer Taxes") and shall be liable for and shall timely pay such Transfer
Taxes. If required by applicable Law, the MLP Parties shall, and shall cause
their Affiliates to, join in the execution of any such Tax Returns and other
documentation.
(f) Tax Refunds. If any of the MLP Parties or any Affiliate of the
MLP Parties receives a refund of any Taxes that VRC is responsible for
hereunder, or if VRC or any Affiliate of VRC receives a refund of any Taxes that
any of the MLP Parties is responsible for hereunder, the party receiving such
refund shall, within 30 days after receipt of such refund, remit it to the party
who has responsibility for such Taxes hereunder. For the purpose of this SECTION
9(f), the term "refund" shall include a reduction in Tax and the use of an
overpayment as a credit or other tax offset, and receipt of a refund in respect
thereof shall be deemed to occur upon the filing of a return or an adjustment
thereto claiming the benefit of such reduction, overpayment or offset.
(g) Closing Tax Certificate. On the Closing Date, VRC shall deliver
to the MLP Parties a certificate (in the form attached hereto as Exhibit F)
signed under penalties of perjury (i) stating it is not a foreign corporation,
foreign partnership, foreign trust or foreign estate, (ii)
26
providing its U.S. Employer Identification Number, and (iii) providing its
address, all pursuant to Section 1445 of the Code.
10. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement, as provided below:
(i) the MLP Parties and VRC may terminate this Agreement by
mutual written consent at any time before the Closing;
(ii) the MLP Parties may terminate this Agreement by giving
written notice to VRC at any time before Closing (A) in the event VRC
has breached any representation, warranty or covenant contained in this
Agreement in any material respect, the MLP Parties have notified VRC of
the breach, the breach has continued without cure for a period of 10
days after the notice of breach and such breach would result in a
failure to satisfy a condition to the MLP Parties' obligation to
consummate the transactions contemplated hereby; or (B) if the Closing
shall not have occurred on or before 9:00 a.m. (San Antonio time) on
April 30, 2003 (unless the failure results primarily from the MLP
Parties itself breaching any representation, warranty or covenant
contained in this Agreement);
(iii) VRC may terminate this Agreement by giving written
notice to the MLP Parties at any time before the Closing (A) in the
event any of the MLP Parties has breached any representation, warranty
or covenant contained in this Agreement in any material respect, VRC
has notified such MLP Party of the breach, the breach has continued
without cure for a period of 10 days after the notice of breach and
such breach would result in a failure to satisfy a condition to VRC's
obligation to consummate the transactions contemplated hereby; or (B)
if the Closing shall not have occurred on or before 9:00 a.m. (San
Antonio time) on April 30, 2003 (unless the failure results primarily
from VRC breaching any representation, warranty or covenant contained
in this Agreement);
(iv) the MLP Parties or VRC may terminate this Agreement if
any court of competent jurisdiction or any governmental, administrative
or regulatory authority, agency or body shall have issued an order,
decree or ruling or shall have taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action
shall have become final and nonappealable; and
(v) the MLP Parties or VRC may terminate this Agreement if the
Underwriting Agreement is terminated for any reason.
(b) Effect of Termination. Except as provided in SECTION 8 and
except for the obligations under SECTION 10 and SECTION 11, if any Party
terminates this Agreement pursuant to SECTION 10(a), all rights and obligations
of the Parties hereunder shall terminate without any liability of any Party to
any other Party (except for any liability of any Party then in breach).
27
11. Miscellaneous.
(a) Public Announcements. Any Party is permitted to issue a press
release or make a public announcement concerning this Agreement without the
other Parties' consents, in which case the disclosing Party shall provide an
advance copy of the proposed public disclosure to the non-disclosing Parties and
permit the non-disclosing Parties the opportunity to reasonably comment on such
proposed disclosure. The Parties agree to cooperate in good faith to issue
separate and simultaneous press releases promptly following the execution of
this Agreement by all Parties.
(b) Insurance; Casualty; Condemnation. (i) The MLP Parties
acknowledge and agree that, following the Closing, any Subject Insurance
Policies shall be terminated or modified to exclude coverage of all or any
portion of the Tank Assets by VRC or any of its Affiliates, and, as a result,
the MLP Parties shall be obligated at or before Closing to obtain at their sole
cost and expense replacement insurance, including insurance required by any
third party to be maintained for or by the Tank Assets. Notwithstanding the
foregoing, VRC acknowledges that initially such insurance described in the
preceding sentence may be maintained under an umbrella policy of Valero Energy
Corporation with OLP as a named insured (and for which OLP shall reimburse
Valero Energy Corporation for its proportionate cost), but the OLP agrees that
it will endeavor in good faith to obtain insurance in its own name if
commercially and economically practicable. Each of the MLP Parties further
acknowledges and agrees that the MLP Parties may need to provide to certain
Governmental Authorities and third parties evidence of such replacement or
substitute insurance coverage for the continued operations of the Tank Assets.
If any claims are made or losses occur prior to the Closing Date that relate
solely to the Tank Assets and such claims, or the claims associated with such
losses, properly may be made against the policies retained by VRC or its
Affiliates after the Closing, then VRC shall use its Best Efforts so that the
MLP Parties can file, notice, and otherwise continue to pursue these claims
pursuant to the terms of such policies; provided, however, nothing in this
Agreement shall require VRC to maintain or to refrain from asserting claims
against or exhausting any retained policies.
(ii) (A) VRC shall give the MLP Parties prompt notice of (i)
any fire or other casualty affecting the Tank Assets (a "Casualty")
between the Effective Date and the Closing Date and (ii) any actual,
pending or proposed Taking of all or any portion of the Tank Assets.
(B) In the event the Tank Assets (or any material portion
thereof) suffers a Casualty subsequent to the Effective Date, but prior
to the Closing Date, VRC shall elect either (i) to repair or make
adequate provision for the repair of such Tank Assets prior to Closing
or (ii) to provide the MLP Parties with a credit against the Cash
Amount in an amount agreed upon by VRC and the MLP Parties to represent
the reduction in the value of the Tank Assets by reason of the
Casualty, taking into account any repairs actually made by VRC to such
Tank Assets prior to the Closing Date. If the reduction in the value of
the Tank Assets by reason of the Casualty exceeds 25% of the Cash
Amount, the MLP Parties shall have the option to terminate this
Agreement without any further obligation of any of the Parties or their
Affiliates pursuant hereto.
(C) If after the Effective Date and prior to the Closing Date,
all or any portion of the Tank Assets is taken by condemnation or
eminent domain or by agreement in lieu thereof with any person or
entity authorized to exercise such rights (a "Taking"), and the
mutually-agreed value of the Tank Assets subject to such Taking, when
aggregated with all other Takings occurring during such time period,
equal:
28
i. less than 25% of the Cash Amount, the
Closing shall take place as provided herein
without abatement of the Cash Amount, and
there shall be assigned to the MLP Parties
at the Closing all interest of VRC in any
award which may be payable to VRC on account
of such Taking; or
ii. 25% or more of the Cash Amount, the MLP
Parties shall have the option to terminate
this Agreement without any further
obligation of any of the parties or their
affiliates pursuant hereto; provided that if
the MLP Parties elects to proceed with the
Closing, the Closing shall take place as
provided herein without abatement of the
Cash Amount, and there shall be assigned to
the MLP Parties at the Closing all interest
of VRC in any award which may be payable to
VRC on account of such Taking.
(D) In the event condemnation proceedings for a Taking of all or any
portion of the Tank Assets are commenced prior to the Closing Date, the MLP
Parties and VRC shall have joint control of such proceedings and shall cooperate
in their efforts in response to such proceedings.
(c) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, the VRC Parties,
the MLP Parties and their respective successors and permitted assigns.
(d) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. Prior to the Closing the MLP Parties may not
assign this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of VRC; provided, however, without the prior
written approval of VRC, the MLP Parties and its permitted successors and
assigns may assign any or all of its rights, interests or obligations under this
Agreement to an Affiliate of any of the MLP Parties, including designating one
or more Affiliates of any of the MLP Parties to be the assignee of some or any
portion of the Tank Assets. Notwithstanding the foregoing, VRC may assign its
right under SECTION 2(a)(iv) to receive the OLP Limited Partner Interest to a
person described in Treasury Regulation Section 1.1031(k)-1(g)(4) (a "Qualified
Intermediary"). The Qualified Intermediary will be obligated to, and will,
assign such right to receive the OLP Limited Partner Interest to UDS Logistics.
Such assignment shall be deemed to fulfill VRC's obligations under SECTION
2(a)(v) hereof. If VRC elects to assign its right to receive the OLP Limited
Partner Interest as provided in the preceding sentence, then the Qualified
Intermediary shall assign its right to receive the OLP Limited Partner Interest
to UDS Logistics and UDS Logistics, in lieu of issuing the UDS Membership
Interest to VRC, shall assign its right to received the Cash Amount as set forth
in SECTION 2(a)(vi) hereof to the Qualified Intermediary, in exchange for the
assignment by the Qualified Intermediary of the right to receive the OLP Limited
Partner Interest.
(e) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but which together shall constitute
one and the same instrument.
29
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to VRC: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy:▇▇▇-▇▇▇-▇▇▇▇
If to the MLP Parties: Valero Logistics Operations, L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the addresses set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
(h) Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. VENUE FOR ANY ACTION
ARISING UNDER THIS AGREEMENT SHALL LIE EXCLUSIVELY IN ANY STATE OR FEDERAL COURT
IN BEXAR COUNTY, TEXAS.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
MLP Parties and VRC. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
held to be invalid or unenforceable in any situation in any court of competent
jurisdiction shall not affect the validity or enforceability of the remaining
terms and provisions hereof or the validity or
30
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
(k) Transaction Expenses. Each of the MLP Parties and VRC shall bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. All personal pronouns
used in this Agreement, whether used in the masculine, feminine or neuter
gender, shall include all other genders; the singular shall include the plural,
and vice versa. All references herein to Exhibits, Schedules, Articles, Sections
or subdivisions thereof shall refer to the corresponding Exhibits, Schedules,
Article, Section or subdivision thereof of this Agreement unless specific
reference is made to such exhibits, articles, sections or subdivisions of
another document or instrument. The terms "herein," "hereby," "hereunder,"
"hereof," "hereinafter," and other equivalent words refer to this Agreement in
its entirety and not solely to the particular portion of the Agreement in which
such word is used. Each certificate delivered pursuant to this Agreement shall
be deemed a part hereof, and any representation, warranty or covenant herein
referenced or affirmed in such certificate shall be treated as a representation,
warranty or covenant given in the correlated Section hereof on the date of such
certificate. Additionally, any representation, warranty or covenant made in any
such certificate shall be deemed to be made herein.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Entire Agreement. THIS AGREEMENT (INCLUDING THE TRANSACTION
AGREEMENTS AND OTHER DOCUMENTS REFERRED TO HEREIN) CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES AND SUPERSEDES ANY PRIOR UNDERSTANDINGS, AGREEMENTS,
OR REPRESENTATIONS BY OR AMONG THE PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY
HAVE RELATED IN ANY WAY TO THE SUBJECT MATTER HEREOF. The rights and obligations
created by this Agreement are separate and independent from any rights and
obligations created by any Assignment. Accordingly, none of the representations,
warranties, covenants or indemnities included in any Assignment shall be merged
into this Agreement or otherwise restrict or limit the effect of this Agreement,
but each shall survive as provided in each such agreement. To the extent that
there is a conflict between the express terms of this Agreement and any
Assignment, this Agreement shall control.
(o) Further Assurances. The Parties agree to execute such additional
instruments, agreements and documents, and to take such other actions, as may be
reasonably necessary to effect the purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the preamble.
VALERO REFINING COMPANY--CALIFORNIA
Name: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Title: Senior Vice President
------------------------------------------
UDS LOGISTICS, LLC
Name: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Title: President
------------------------------------------
▇▇▇▇▇▇ ▇.▇.
By: Riverwalk Logistics, L.P.
its General Partner
By: ▇▇▇▇▇▇ ▇▇, LLC
its General Partner
Name: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Title: Chief Executive Officer and President
------------------------------------------
▇▇▇▇▇▇ ▇▇, INC.
Name: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Title: Chief Executive Officer and President
------------------------------------------
VALERO LOGISTICS OPERATIONS, L.P.
By: ▇▇▇▇▇▇ ▇▇, Inc.
its General Partner
Name: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Title: Chief Executive Officer and President
------------------------------------------
33