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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ______)*
Valero Energy Corporation
(formerly Valero Refining and Marketing Company)
- -----------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.01 per share
- -----------------------------------------------------------------
(Title of Class of Securities)
91913Y100
-----------------------------------------
(CUSIP Number)
c/o Arnold S. Olshin, Salomon Inc
Seven World Trade Center, New York,
New York 10048
(212) 783-7000
- -----------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 31, 1997
-----------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box. |_|
Note: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in
a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
- ---------------------- ------------------------
CUSIP No. 91913Y100 Page 2 of 17 Pages
- ---------------------- ------------------------
- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Salomon Inc
22-1660266
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
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3 SEC USE ONLY
- -----------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF, 00
- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [X]
- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
3,429,796 shares
BENEFICIALLY -----------------------------------------------------
8 SHARED VOTING POWER
OWNED BY
EACH REPORTING -----------------------------------------------------
9 SOLE DISPOSITIVE POWER
PERSON 3,429,796 shares
-----------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,429,796 shares
- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.2%
- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO, HC
- -----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
Item 1. Security and Issuer.
The title of the class of equity securities to which
this statement relates is the common stock, par value $.01 per
share (the "Common Stock"), of Valero Energy Corporation
(formerly Valero Refining and Marketing Company), a corporation
organized under the laws of the State of Delaware (the "Issuer").
The principal executive offices of the Issuer are located at 530
McCullough Avenue, San Antonio, Texas 78215.
Item 2. Identity and Background.
(a-c, f) This statement on Schedule 13D is being filed
by Salomon Inc, a corporation organized under the laws of the
State of Delaware. All of the Common Stock reported herein is
directly beneficially owned by Salomon Inc. The principal
executive offices of Salomon Inc are located, and its principal
business activities are conducted, at Seven World Trade Center,
New York, New York 10048.
The principal business of Salomon Inc is the ownership
of all the outstanding shares of common stock of Salomon Brothers
Holding Company Inc ("SBHC") and Phibro Inc ("Phibro"). The
principal business of SBHC is the ownership of all the
outstanding shares of common stock of Salomon Brothers Inc
("SBI"), a registered broker-dealer, the principal business of
which is the general brokerage, dealer and investment banking
business. Phibro is a corporation engaged in commodities trading,
concentrating on crude oil and other energy related commodities.
The names, citizenship, business addresses and
principal occupations or employments of each of the executive
officers and directors of Salomon Inc are set forth in Annex A
hereto, which is incorporated herein by reference.
(d-e) On May 20, 1992, SBI and Salomon Inc (together
"Salomon") consented, without admitting or denying any of the
allegations of the concurrently filed complaint, to the entry of
a Final Judgment of Permanent Injunction and Other Relief (the
"Final Judgment") in settlement of an action arising out of
alleged misconduct in auctions of U.S. Treasury securities and
government securities trading, brought by the Securities and
Exchange Commission (the "SEC") in the United States District
Court for the Southern District of New York, entitled Securities
and Exchange Commission v. Salomon Inc and Salomon Brothers Inc
(92 Civ. 3691 and Securities and Exchange Act Release No. 30721
(May 20, 1992)) (the "Treasury Matter"). Among other things, the
Final Judgment enjoins Salomon from violations of Section 17(a)
of the Securities Act of 1933 (the "1933 Act"), Sections 10(b),
15(c)(1) and 17(a) of the Securities Exchange Act of 1934 (the
"1934 Act") and Rules 10b-5, 15c1-2, 17a-3 and 17a-4 promulgated
thereunder. Pursuant to the settlement, Salomon was required to
pay a total amount of $290,000,000, with $100,000,000 going to a
fund for the payment of private claims for compensatory damages
arising out of the U.S. Treasury auction and related matters and
$190,000,000 to the United States in payment of civil penalties
under the Securities Enforcement Remedies and Penny Stock Reform
Act of 1990 and a forfeiture of assets to and settlement of
claims with the Department of Justice against SBI. On the same
day, in other related actions solely involving SBI, the SEC
instituted and settled an administrative proceeding relating to a
Page 3 of 13 Pages
<PAGE>
failure to supervise the persons responsible for the alleged
misconduct, the Federal Reserve Bank of New York announced the
continuation of SBI's primary dealer designation but a cessation
of its trading activity with the Federal Reserve Bank until
August 3, 1992, and the Department of Treasury announced that SBI
would be permitted to resume bidding for customers on August 3,
1992, having restricted SBI to purchasing securities for its own
account in U.S. Treasury auctions since August 18, 1991.
In January and February 1993, SBI, without admitting
or denying any allegations, entered into consent agreements and,
in some states, consent orders with 41 state securities
regulators in settlement of certain claims in respect of SBI's
state broker-dealer registrations arising out of SBI's activities
described in the Treasury Matter. Pursuant to the settlement with
the states, SBI agreed, among other things, to (i) comply with
those provisions of the order issued by the SEC in the Treasury
Matter that imposed remedial sanctions with respect to alleged
violations of securities laws by former personnel of SBI in
auctions for United States Treasury Securities during 1990 and
1991; (ii) pay $50,000 to each state participant in the
settlement as reimbursement for costs of investigation related to
the Treasury Matter; and (iii) with respect to some states,
contribute $2,000,000 to a multi-state investor protection trust
fund to be created for the purpose of providing funds for
projects promoting the cause of investor protection.
On August 26, 1996, the SEC simultaneously instituted
a cease-and-desist proceeding pursuant to Section 21C of the 1934
Act against Salomon Inc and accepted Salomon Inc's Offer of
Settlement. Salomon Inc, by its Offer of Settlement, consented to
the imposition of a cease-and-desist order and the entry of the
findings therein without admitting or denying such findings. The
SEC found that Salomon Inc had violated Section 13(b)(2) of the
1934 Act. Specifically, the SEC determined that Salomon Inc had
failed to perform thorough and timely reconciliations of its
balance sheet accounts to supporting documentation, and thus
failed to identify on a timely basis erroneous entries made by
its staff. Moreover, Salomon Inc had failed to ensure that
correction procedures were properly implemented in London, in
part by failing to train adequately its staff to use a new
automated system. These failures resulted in the overstatement of
assets and income on the books, records, and accounts of Salomon
Inc and its subsidiaries. In determining to accept Salomon Inc's
Offer of Settlement, the SEC considered remedial acts promptly
undertaken by Salomon Inc and cooperation afforded the SEC staff.
Other than as aforesaid, during the last five years
neither Salomon Inc nor, to the best knowledge of Salomon Inc,
any of the persons listed in Annex A hereto, has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of
which Salomon Inc or any of such persons was or is subject to a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Beneficial ownership of the shares of Common Stock of
the Issuer described in Item 5 was acquired in connection with
the distribution, as a dividend, of shares of Common
Page 4 of 13 Pages
<PAGE>
Stock to the holders of record as of July 31, 1997 of common
stock, $1.00 par value per share ("Old Valero Common Stock"), of
Valero Energy Corporation ("Old Valero") on a one-to-one basis
(the "Spin-Off"). Such distribution occurred as part of a
transaction in which the Issuer, which had been a wholly owned
subsidiary of Old Valero, became a publicly held corporation and
Old Valero was merged with a wholly owned subsidiary of PG&E
Corporation (the "Merger"). In addition to receiving shares of
Common Stock, former holders of shares of Old Valero Common Stock
(with the exception of PG&E Corporation and Old Valero and their
respective wholly owned subsidiaries) received, in connection
with the Merger, a fraction of a share of common stock of PG&E
Corporation. The Spin-Off took place immediately prior to the
Merger and the Merger closed on July 31, 1997. The Issuer
thereafter changed its name from Valero Refining and Marketing
Company to Valero Energy Corporation. As a result of the
Spin-Off, Salomon Inc received 3,429,796 shares of Common Stock
in respect of its shares of Old Valero Common Stock. Reference is
made to the statement on Schedule 13D dated May 9, 1997 filed by
Salomon Inc for a description of the transactions in which
Salomon Inc acquired such shares of Old Valero Common Stock.
Item 4. Purpose of Transaction.
The shares of Common Stock to which this statement
relates were acquired pursuant to the Spin-Off, as more fully
described in Item 3.
Salomon Inc has entered into a stockholder agreement
with the Issuer (the "Stockholder Agreement") relating to the
disposition of the Common Stock issued to Salomon Inc in
connection with the Spin-Off. The Stockholder Agreement requires
the Issuer to file and maintain a shelf registration statement to
allow the continuous or delayed offering of such shares of Common
Stock and prohibits the disposition of any such shares until 90
days after the Spin-Off or such earlier time as the market price
of such shares has increased to 115% of the market price
immediately following the Spin-Off (the "Lock-up Period"). In
addition, the Stockholder Agreement, among other things, (i)
prohibits Salomon Inc, upon notice from the Issuer at any time
beginning 150 days after the later to occur of the effectiveness
of a shelf registration statement and the expiration of the
Lock-up Period, from effecting any public sale or distribution of
the relevant shares until 120 days after the closing of an
offering of securities by the Issuer, and (ii) provides the
Issuer a right of first offer with respect to certain shares of
Common Stock of the Issuer proposed to be sold by Salomon Inc.
Salomon Inc has also agreed pursuant to the Stockholder Agreement
to be present or represented by proxy at all stockholder meetings
of the Issuer and to vote the shares then beneficially owned by
Salomon Inc for persons nominated for election to the board of
directors of the Issuer by such board of directors. A copy of the
Stockholder Agreement is attached hereto as Exhibit 1, which is
incorporated herein by reference.
Upon the expiration of the lock-up provisions of the
Stockholder Agreement, Salomon Inc currently intends to dispose
of the shares of Common Stock received in connection with the
Spin-Off, subject to then existing market conditions. Notwithstanding
the foregoing, Salomon Inc or SBI at any time or from time to time may,
subject to the provisions of the Stockholder Agreement, (i) acquire,
or agree to acquire, or acquire put or call options relating to,
Page 5 of 13 Pages
<PAGE>
additional shares of Common Stock, any other securities of the
Issuer or the shares of Common Stock acquired in the Spin-Off
(collectively, "Securities"), (ii) sell, or agree to sell, or
sell put or call options relating to, some or all of the
Securities owned by Salomon Inc or SBI , in each such case in the
open market, in negotiated transactions or otherwise, (iii) make
or receive proposals to enter into negotiations with respect to
such transactions and/or (iv) surrender the Securities owned by
Salomon Inc or SBI in connection with any merger, tender offer or
other acquisition transaction involving the Issuer. Salomon Inc's
or SBI's decisions in such regard will be based on their views of
the value of the relevant Securities and the prevailing price of
such Securities in the open market and/or in any negotiated
transactions, the value of the consideration being offered in any
merger, tender offer or other acquisition transaction involving
the securities of the Issuer, tax considerations and any other
relevant factors. Other than as described above, Salomon Inc has
no plans or proposals that relate to or would result in any
transactions involving the Issuer or any of its subsidiaries or
securities of the type or kind listed in Item 4 of Schedule 13D
adopted by the SEC under the 1934 Act.
Item 5. Interest in Securities of the Issuer.
(a-b) Pursuant to the distribution of shares of Common
Stock to the holders of shares of Old Valero Common Stock in
connection with the Spin-Off, Salomon Inc became the direct
beneficial owner of 3,429,796 shares of Common Stock, and Salomon
Inc held 3,429,796 such shares as of the close of business on
August 8, 1997. The Issuer's Quarterly Report on Form 10-Q for
the period ended March 31, 1997 indicates that 55,308,596 shares
of Old Valero Common Stock were outstanding as of June 25, 1997.
As described above, the Spin-Off of shares of Common Stock was
effected on a share-for-share basis with the shares of Old Valero
Common Stock. As a result, 3,429,796 shares of Common Stock
represent approximately 6.2% of the outstanding shares of Common
Stock.
Except as described above, neither Salomon Inc nor, to
the best knowledge of Salomon Inc, any of the persons listed in
Annex A hereto beneficially owned any Common Stock at the close
of business on August 8, 1997.
(c) Except as described above, neither Salomon Inc
nor, to the best knowledge of Salomon Inc, any of the persons
listed in Annex A hereto made any purchases or sales of Common
Stock from July 31, 1997, the date of the Spin-Off, through the
close of business on August 8, 1997.
(d-e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
Other than the provisions of the Stockholder Agreement
described in Item 4, neither Salomon Inc nor, to the best
knowledge of Salomon Inc, any of the persons listed in Annex A
hereto has any contracts, arrangements, understandings or
relationships (legal or otherwise) with any person with respect
to securities of the Issuer.
Page 6 of 13 Pages
<PAGE>
Item 7. Material to Be Filed as Exhibits.
Exhibit 1. Stockholder Agreement, dated as of May 1, 1997,
between the Issuer and Salomon Inc
Page 7 of 13 Pages
<PAGE>
ANNEXES
A. Executive Officers and Directors of Salomon Inc
Page 8 of 13 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
Dated: August 11, 1997
SALOMON INC
By /s/ Arnold S. Olshin
-------------------------------
Name: Arnold S. Olshin
Title: Secretary
Page 9 of 13 Pages
<PAGE>
August 1997
ANNEX A
EXECUTIVE OFFICERS AND DIRECTORS
OF SALOMON INC
Principal Occupation
Name and Title and Business Address
Jerome H. Bailey Chief Financial Officer
Chief Financial Officer Salomon Inc
Seven World Trade Center
New York, New York 10048
Chief Financial Officer and
Managing Director
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Warren E. Buffett(1) Chairman and Chief Executive
Director Officer
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Robert E. Denham(1) Director, Chairman and Chief
Director, Chairman and Chief Executive Officer
Executive Officer Salomon Inc
Seven World Trade Center
New York, New York 10048
Page 10 of 13 Pages
<PAGE>
Dr. Claire M. Fagin Leadership Professor
Director School of Nursing
University of Pennsylvania
Philadelphia, Pennsylvania 19104
Gedale B. Horowitz Senior Executive Director
Director and Executive Salomon Brothers Holding
Vice President Company Inc
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Thomas W. Jasper Treasurer
Treasurer Salomon Inc
Seven World Trade Center
New York, New York 10048
Treasurer and Managing Director
Salomon Brothers Holding
Company Inc
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Deryck C. Maughan(2) Chairman and Chief Executive
Director and Executive Officer
Vice President Salomon Brothers Holding
Company Inc
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
David O. Maxwell(1) Retired
Director c/o Salomon Inc
Seven World Trade Center
New York, New York 10048
Page 11 of 13 Pages
<PAGE>
Robert H. Mundheim Executive Vice President and
Executive Vice President and General Counsel
General Counsel Salomon Inc
Seven World Trade Center
New York, New York 10048
Charles T. Munger Vice Chairman
Director Berkshire Hathaway Inc.
355 So. Grand Avenue
Los Angeles, California 90071
Shigeru Myojin(3) Vice Chairman
Director Salomon Brothers Inc
Victoria Plaza
111 Buckingham Palace Rd.
London, SW1W OSB, England
Louis A. Simpson(1) Director, President and
Director Chief Executive Officer,
Capital Operations
GEICO Corporation
One Geico Plaza
5260 Western Avenue
Washington, D.C. 20076-0001
Wesley S. Williams, Jr. Partner,
Director Covington & Burling, Esqs.
1201 Pennsylvania Avenue, N.W.,
Suite 1155A
Washington, D.C. 20004
A. Thomas Young Retired
Director c/o Salomon Inc
Seven World Trade Center
New York, New York 10048
Page 12 of 13 Pages
<PAGE>
Citizenship
Except as footnoted below, each of the individuals listed above
is a citizen of the United States.
- ----------------------
(1) Member of the Executive Committee
(2) Citizen of Great Britain
(3) Citizen of Japan
Page 13 of 13 Pages
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 1, 1997 (the
"Agreement"), between Valero Refining and Marketing Company, a
Delaware corporation (the "Company"), a wholly-owned subsidiary
of Valero Energy Corporation, a Delaware corporation ("Valero"),
and Salomon Inc, a Delaware corporation ("Stockholder").
WHEREAS, pursuant to that certain Stock Purchase
Agreement, dated as of April 22, 1997 (the "Purchase Agreement"),
Valero has acquired (the "Acquisition") from Stockholder all of
the shares of common stock, par value $0.01 per share, of Basis
Petroleum, Inc., a Texas corporation;
WHEREAS, in consideration for the Acquisition, Valero
has, among other things, issued to Stockholder 3,429,796 shares
of its common stock, par value $1.00 per share;
WHEREAS, Valero has entered into an agreement (the
"Merger Agreement") providing for the merger (the "Merger") of
Valero into PG&E Corporation ("PG&E") and as a result of the
merger, Valero stockholders shall acquire shares of common stock
of PG&E in exchange for their shares of Valero common stock;
WHEREAS, immediately prior to the Merger, Valero will
distribute the common stock of the Company, par value $.01 per
share (the "Common Stock"), to its stockholders (the "Spin-Off"),
resulting in the Company becoming a separate publicly held
company;
WHEREAS, Valero will issue to Stockholder, as a result
of the Spin-Off, shares of Common Stock; and
WHEREAS, the Company and Stockholder have determined
that it is in their best interests that certain aspects of their
relationship be regulated according to the terms and provisions
of this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agrees as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
Section 1.01 Definitions.
As used in this Agreement, the following terms shall
have the following meanings:
<PAGE>
The term "Acquisition" shall have the meaning ascribed
to it in the second paragraph to the preamble.
The term "Advance Notice" shall have the meaning
ascribed to it in Section 3.04.
The term "Affiliate" shall have the meaning ascribed
to it in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
The term "Agreement" shall have the meaning ascribed
to it in the first paragraph of the preamble.
The term "Block Execution" shall mean one or more
sales during not more than a two Trading Day period of a number
of Spin-Off Shares having an aggregate fair market value of not
less than $10 million to one or more purchasers.
The term "Common Stock" shall have the meaning
ascribed to it in the fifth paragraph of the preamble.
The term "Company" shall have the meaning ascribed to
it in the first paragraph of the preamble.
The term "Company Offering" shall mean the offering of
equity securities of the Company, or securities convertible into
or exchangeable or exercisable for equity securities of the
Company, pursuant to a registration statement filed by the
Company under the Securities Act (other than (i) a registration
statement filed on Form S-4 or any successor form or (ii) a
registration statement filed on Form S-8 or any successor form)
with respect to an underwritten offering, whether primary or
secondary, that is declared effective by the SEC.
The term "Company Subsidiary" shall mean any Person
the majority of the outstanding voting securities or interests of
which are owned by the Company.
The term "Effective Date" shall have the meaning
ascribed to it in Section 2.02.
The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
of the SEC promulgated thereunder.
The term "Group" shall have the meaning afforded the
term "group" under Section 13(d)(3) of the Exchange Act.
The term "NYSE" shall mean the New York Stock
Exchange.
The term "Lock-up Period" shall have the meaning
ascribed to it in Section 3.02(a).
The term "Losses" shall have the meaning ascribed to
it in Section 2.06(a).
-2-
<PAGE>
The term "Merger" shall have the meaning ascribed to
it in the fourth paragraph of the preamble.
The term "Merger Agreement" shall have the meaning
ascribed to it in the fourth paragraph of the preamble.
The term "Notice" shall have the meaning ascribed to
it in Section 3.04.
The term "Person" shall mean an individual, trustee,
corporation, partnership, business trust, limited liability
company, limited liability partnership, joint stock company,
trust, unincorporated association, union, business association,
firm or other entity.
The term "Prospectus" shall have the meaning ascribed
to it in Section 2.01.
The term "Purchase Agreement" shall have the meaning
ascribed to it in the second paragraph of the preamble.
The term "Registration Expenses" shall have the
meaning ascribed to it in Section 2.05.
The term "Rule 144" shall mean Rule 144 promulgated
under the Securities Act (or any successor rule).
The term "Rule 415 Offering" shall have the meaning
ascribed to it in Section 2.01(a).
The term "SEC" shall mean the Securities and Exchange
Commission.
The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations of the SEC
promulgated thereunder.
The term "Shelf Registration Statement" shall have the
meaning ascribed to it in Section 2.01(a).
The term "Spin-Off" shall have the meaning ascribed to
it in the fifth paragraph of the preamble.
The term "Spin-Off Shares" shall mean the shares of
Common Stock issued to Stockholder in connection with the
Spin-Off, together with the securities identified in Section
4.02; provided, however, that upon their sale by Stockholder in
accordance with the terms of this Agreement, such shares of
Common Stock or other securities shall no longer be Spin-Off
Shares for purposes of this Agreement.
The term "Stockholder" shall have the meaning ascribed
to it in the first paragraph of the preamble.
-3-
<PAGE>
The term "Trading Day(s)" shall mean any day on which
stock is traded on the NYSE.
The term "Transfer" shall mean any sale, assignment,
transfer, grant of a participation in, pledge or other
disposition of any of the Spin-Off Shares.
The term "Valero" shall have the meaning ascribed to
it in the first paragraph of the preamble.
ARTICLE 2.
REQUIRED REGISTRATION
Section 2.01 Required Registration.
(a) Form S-3. As soon as the Company is eligible to
file a Form S-3 with the SEC, the Company shall file with the SEC
and use its reasonable efforts to cause to be declared effective
as soon as practicable thereafter a Form S-3 registration
statement (the "Shelf Registration Statement") with respect to
the Spin-Off Shares so as to permit promptly the resale of the
Spin-Off Shares by Stockholder pursuant to an offering on a
delayed or continuous basis pursuant to Rule 415 (or any
successor rule) under the Securities Act (a "Rule 415 Offering").
(b) Effectiveness. Subject to Section 2.03 below, the
Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective under the Securities Act until
the date that is the earliest to occur of (i) the date that all
Spin-Off Shares covered by the Shelf Registration Statement have
been sold thereunder (ii) the second anniversary of the date
hereof and (iii) the date when all outstanding Spin-Off Shares
are held by Persons which are not Affiliates of the Company and
may be resold without registration under the Securities Act
pursuant to Rule 144(k) under the Act or any successor provision
thereto.
(c) Amendments/Supplement. The Company shall amend and
supplement the Shelf Registration Statement, the prospectus
contained therein, including each preliminary prospectus, form of
prospectus and prospectus supplement (collectively, the
"Prospectus"), and all documents incorporated therein by
reference, in each case as may be required to keep the Shelf
Registration Statement continuously effective, as may be required
under Rule 424 under the Securities Act (or any successor
provision thereto) or as may be otherwise required by the rules,
regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration Statement or if
required by the Securities Act.
(d) Eligibility to Use Form S-3.
(1) The Company shall use its reasonable efforts
to be eligible to use Form S-3 as soon as possible
following the Spin-Off, including by requesting, prior
to the Spin-Off, a no-action letter from the SEC to
the effect that the Company will be eligible to use
-4-
<PAGE>
Form S-3 immediately following the Spin-Off, unless
the Company's outside legal counsel advises the
Company (i) that the SEC is not likely to grant such a
no-action letter to the Company and (ii) that seeking
such a no-action letter is likely to adversely affect
the likelihood of the Company receiving other relief
from the SEC or obtaining from the SEC a declaration
of effectiveness of any registration statement filed
with the SEC.
(2) If the Company is not eligible to use Form
S-3, it shall, on one occasion on or after the
consummation of the Spin-Off, within 45 days upon
demand by Stockholder, register on Form S-1 the
Spin-Off Shares for sale, subject to the requirements,
qualifications and limitations set forth in this
Section 2.01 with respect to registration on Form S-3;
provided, however, that such registration statement
shall remain effective for no less than 120 days
following the expiration of the Lockup Period to
permit delayed offerings by Stockholder (excluding, in
calculating such 120 days, any periods in which such
effectiveness lapses, the Company suspends the use of
the Prospectus, a stop order is in effect with
respect to such registration statement or the
registration or qualification of the Shares is
suspended in any jurisdiction or, pursuant to the
second paragraph of Section 2.04(b), Stockholder
discontinues its disposition of Spin-Off Shares). If
such registration statement is not declared and/or
does not remain effective for such 120-day period,
Stockholder shall be entitled to demand another
registration of the Spin-Off Shares on the same terms
as provided in this Section 2.01(d)(2) if at least 25%
of the Spin-Off Shares registered pursuant to such
registration statement shall not have been sold. Any
registration statement filed pursuant to this Section
2.01(d)(2) shall be subject to Sections 2.04, 2.05 and
2.06 of this Agreement.
Section 2.02 Holdback Agreements.
(a) Subject to Section 2.03(b) below, from and after
150 days after the later of the date the Shelf Registration
Statement is declared effective by the SEC (the "Effective Date")
and the expiration of the Lock-up Period, upon no less than ten
days' prior written notice from the Company, Stockholder shall
not effect any public sale or distribution (including sales
pursuant to Rule 144) of Spin-Off Shares, from the date specified
in such notice through the one hundred twenty (120)-day period
immediately following the closing date of such Company Offering;
provided, however, that if the Company is prohibited from selling
Common Stock following the closing date of such Company Offering
for a period of less than 120 days then Stockholder's 120-day
period in which it is prohibited from any public sale or
distribution of Spin-Off Shares shall be reduced accordingly;
and, provided further, that the Company may not restrict sales by
Stockholder pursuant to this Section 2.02(a) for more than 150
days. In addition, Stockholder shall not be obligated to comply
with this Section 2.02 on more than one occasion in any twelve
(12)-month period.
(b) The Company shall not effect any Company Offering,
whether on its own behalf or at the request of any holder or
holders of securities of the Company (other than Stockholder),
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during the first 150 days immediately following the later of the
Effective Date and the expiration of the Lock-up Period.
Section 2.03 Blackout Provisions.
(a) The Company shall have the right to delay the
effectiveness of such Shelf Registration Statement, or suspend
the use of the Prospectus if the Board of Directors of the
Company determines that the Company is in possession of material
non-public information the disclosure of which would have a
material adverse effect on a pending acquisition, divestiture or
financing transaction that is material to the Company and its
subsidiaries taken as a whole or would require premature
disclosure of information not otherwise required to be disclosed
which would have a material adverse effect on the Company and its
subsidiaries taken as a whole. In addition, if the Company shall
make an acquisition that requires the filing of financial
statements with respect to one or more businesses acquired by the
Company pursuant to Article 3-05 of Regulation S-X promulgated
under the Securities Act or any successor rule, in order for the
Shelf Registration Statement to continue to meet the requirements
under the Securities Act, the Company shall advise the
Stockholders in writing of the consummation of such acquisition
and sales of Spin-Off Shares under the Shelf Registration
Statement shall be suspended until such time that such financial
statements are filed by the Company with the SEC with respect to
such business or businesses. The Company shall use reasonable
efforts to obtain or cause to be prepared and to file such
financial statements as promptly as reasonably practicable after
such acquisition. The Company may not restrict any sales pursuant
to this Section 2.03(a) unless prior written notice is provided
to Stockholder, and the Company shall promptly advise Stockholder
in writing when such restrictions are no longer applicable. In
addition, the Company may not restrict sales by Stockholder
pursuant to this Section 2.03(a) for a period in excess of 95
consecutive days and may not further restrict sales pursuant to
this Section 2.03(a) for a period of 30 days following the
termination of any prior restriction under this Section 2.03(a).
(b) Notwithstanding anything in this Agreement to the
contrary, the Company may not restrict sales by Stockholder
pursuant to Section 2.02(a) or 2.03(a) for a total of more than
180 days during any one-year period.
Section 2.04 Registration Procedures.
(a) Procedures. Subject to Section 2.03 above, in
connection with the registration of the Spin-Off Shares pursuant
to this Agreement, the Company shall use reasonable efforts to
effect the registration and sale of the Spin-Off Shares in
accordance with Stockholder's intended method of disposition
thereof and, in connection therewith, the Company shall:
(1) prepare and file with the SEC the Shelf
Registration Statement, use reasonable efforts to
cause the Shelf Registration Statement to be declared
effective, and use best efforts to keep such Shelf
Registration Statement effective in accordance with
Sections 2.01(a) and (b) above;
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<PAGE>
(2) prepare and file with the SEC amendments and
supplements to the Shelf Registration Statement, the
Prospectus and any documents incorporated therein by
reference in accordance with Section 2.01(c) above;
(3) before filing with the SEC the Shelf
Registration Statement, the Prospectus or any
amendments or supplements thereto (including any
post-effective amendments), the Company shall furnish
to Stockholder, the managing underwriter or
underwriters, if any, in connection therewith and one
counsel selected by Stockholder and one counsel for
such underwriter or underwriters, if any, drafts of
all such documents proposed to be filed and provide
such counsel with a reasonable opportunity for review
thereof and comment thereon, such review to be
conducted and such comments to be delivered with
reasonable promptness, and the Company will consider
in good faith such comments in such documents;
(4) give its full cooperation to Stockholder in
connection with its sales of the Spin-Off Shares,
including, without limitation, making the Company's
management available on one occasion for up to two
weeks to assist in the marketing of such shares
through a "road show"; provided, however, that
Stockholder will provide no less than two weeks' prior
notice to the Company of the commencement of such road
show, and in any event the Company will have the right
to have at least one representative at such road
show;
(5) promptly (i) notify Stockholder of each of
(w) the filing and effectiveness of the Shelf
Registration Statement, the Prospectus and any
amendments or supplements thereto, (x) the receipt of
any comments from the SEC and, if applicable, any
state securities law authorities or any other
governmental authorities with respect to any such
Shelf Registration Statement, the Prospectus or any
amendments or supplement thereto, (y) any request from
the SEC or any such other governmental authority that
an amendment, supplement or additional information be
filed or made available with respect to the Shelf
Registration Statement, the Prospectus or any document
incorporated by reference therein and (z) any oral or
written stop order with respect to such registration
or use of the Prospectus, any suspension of the
registration or qualification of the sale of the
Spin-Off Shares in any jurisdiction or any initiation
or threatening of any proceedings with respect to any
of the foregoing, (ii) provide Stockholder, the
managing underwriter or underwriters, if any, and one
counsel for each of them with copies of any such
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<PAGE>
comments and requests (if made in writing) and use
reasonable efforts to promptly resolve any such
comments and requests, including by preparing and
filing with the SEC an amendment or supplement to the
Shelf Registration Statement, the Prospectus or any
document incorporated by reference therein and (iii)
use reasonable efforts to prevent the issuance of and,
if issued, to obtain the withdrawal of any such order
or suspension referred to in clause (2);
(6) furnish to Stockholder, the managing
underwriter or underwriters, if any, and one counsel
for each of the foregoing, a conformed copy of the
Shelf Registration Statement and each amendment and
supplement thereto (in each case, including all
exhibits thereto, documents incorporated by reference
and post-effective amendments thereto) and such
additional number of copies of such Shelf Registration
Statement, each amendment and supplement thereto (in
such case, without such exhibits or documents
incorporated by reference), the Prospectus and all
exhibits thereto and such other documents as
Stockholder, underwriter, agent or such counsel may
reasonably request in order to facilitate the
disposition of the Spin-Off Shares by Stockholder, and
the Company hereby consents to the use of the
Prospectus and such exhibits and other documents in
connection with the offer and sale of the Spin-Off
Shares;
(7) if requested by Stockholder or the managing
underwriter or underwriters of a Rule 415 Offering,
subject to approval of counsel to the Company in its
reasonable judgment, promptly incorporate in the
Prospectus or a post-effective amendment to the Shelf
Registration Statement such information
concerning underwriters and the plan of distribution
of the Spin-Off Shares as such managing underwriter or
underwriters or Stockholder reasonably shall furnish
to the Company in writing and request be included
therein, including, without limitation, information
with respect to the number of Spin-Off Shares being
sold by Stockholder to such underwriter or
underwriters, and with respect to any other terms of
the underwritten offering of the Spin-Off Shares to be
sold in such offering; and make all required filings
of the Prospectus or such post-effective amendment as
soon as reasonably practicable after being notified of
the matters to be incorporated in the Prospectus or
such post-effective amendment;
(8) to the extent, if any, necessary to permit
the Stockholder or any underwriter to make offers and
sales pursuant to the Shelf Registration Statement,
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<PAGE>
use reasonable efforts to register or qualify the
Spin-Off Shares under such securities or "blue sky"
laws of such jurisdictions as Stockholder or such
underwriter reasonably requests and do any and all
other acts and things which may be reasonably
necessary or advisable to enable Stockholder to
consummate the disposition in such jurisdictions in
which the Spin-Off Shares are to be sold and keep such
registration or qualification in effect for so long as
the Shelf Registration Statement remains effective
under the Securities Act (provided that the Company
shall not be required to (i) qualify generally to do
business in any jurisdiction where it would not
otherwise be required to qualify but for this
paragraph, (ii) subject itself to taxation in any such
jurisdiction where it would not otherwise be subject
to taxation but for this paragraph or (iii) consent to
the general service of process in any jurisdiction
where it would not otherwise be subject to general
service of process but for this paragraph);
(9) promptly notify Stockholder, at any time upon
the discovery that, or of the happening of any event
as a result of which, the Shelf Registration
Statement, the Prospectus or any document incorporated
therein by reference as then in effect, contains an
untrue statement of a material fact or omits to state
any material fact required to be stated therein or any
fact necessary to make the statements therein not
misleading, or at any time whenever any representation
or warranty made by the Company pursuant to Section
2.04(b) shall cease to be true in any material
respect, and, subject to Section 2.03 above, promptly
prepare and furnish to Stockholder a supplement or
amendment to the Shelf Registration Statement, the
Prospectus or such document so that the Shelf
Registration Statement shall not, and any Prospectus
as thereafter delivered to the purchasers of such
Spin-Off Shares shall not, contain an untrue statement
of a material fact or omit to state any material fact
required to be stated therein or any fact necessary to
make the statements therein not misleading;
(10) use reasonable efforts to promptly cause all
of the Spin-Off Shares to be listed on the NYSE and to
remain so listed;
(11) make available for inspection by
Stockholder, any underwriter participating in any
disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or other agent
retained by Stockholder or underwriter, all reasonably
requested financing and other records, pertinent
corporate documents and properties of the Company, and
cause the Company's officers, directors, employees,
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<PAGE>
attorneys and independent accountants to supply all
information reasonably requested by Stockholder,
underwriters, attorneys, accountants or agents in
connection with the Shelf Registration Statement;
information which the Company determines, in good
faith, to be confidential shall not be disclosed by
such persons unless, subject to Section 2.03 above,
(i) the disclosure of such information is required by
applicable federal securities laws or is necessary to
avoid or correct a misstatement or omission in the
Shelf Registration Statement, the Prospectus or any
document incorporated by reference therein or (ii) the
release of such information is ordered pursuant to a
subpoena or other order from a court of competent
jurisdiction or other governmental authority.
Stockholder further agrees, on its own behalf and on
behalf of all its underwriters, accountants, attorneys
and agents, that it will, upon learning that
disclosure of such information determined by the
Company to be confidential is sought in a court or by
any other governmental authority, give notice to the
Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of
the information deemed confidential;
(12) use reasonable efforts to comply with all
applicable laws related to the Shelf Registration
Statement and offering and sale of securities and all
applicable rules and regulations of governmental
authorities in connection therewith (including,
without limitation, the Securities Act and the
Exchange Act, and the rules and regulations
promulgated by the SEC) and make generally available
to its security holders as soon as practicable an
earnings statement of the Company and the Company
Subsidiaries complying with Section 11(a) of the
Securities Act;
(13) use reasonable efforts to furnish to
Stockholder and the managing underwriter or
underwriters, if any, a signed counterpart of (i) an
opinion of counsel for the Company; (ii) certificates
of officers and the secretary of the Company; and
(iii) a "cold comfort" letter (and a bring-down
version thereof) signed by the independent public
accountants who have certified any financial
statements included or incorporated by reference in
the Shelf Registration Statement, covering such
matters with respect to the Shelf Registration
Statement and, in the case of the accountants' comfort
letter, with respect to such matters as are
customarily covered in opinions of issuer's counsel,
certificates of the Company and in accountants'
comfort letters delivered to the underwriters in
underwritten public offerings of securities for the
account of, or on behalf of, a holder of common stock,
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<PAGE>
such opinion, certificates and comfort letters to be
dated the date or dates that such opinion and comfort
letters are customarily dated in such transactions
and, in the case of a Rule 415 Offering, an additional
comfort letter on the date of the filing of any
document containing financial statements to be
incorporated by reference in the Shelf Registration
Statement; and
(14) take other actions as Stockholder or the
underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of the Spin-Off
Shares.
(b) Further Agreements. Without limiting any of the
foregoing, in the event that the sale of Spin-Off Shares is to be
made by or through underwriters, the Company shall enter into an
underwriting agreement with a managing underwriter or
underwriters selected by Stockholder containing representations,
warranties, indemnities, conditions precedent and agreements
customarily included (but not inconsistent with the agreements
contained herein) by an issuer of common stock in underwriting
agreements with respect to offerings of common stock for the
account of, or on behalf of, holders of common stock; provided,
however, that the Stockholder shall not utilize the Shelf
Registration Statement for more than one underwritten offering
during the term of this Agreement. In connection with the sale of
Spin-Off Shares hereunder, Stockholder may, at its option,
require that any and all representations and warranties by, and
the other agreements of, the Company to or for the benefit of
such an underwriter or underwriters (or which would be made to or
for the benefit of such an underwriter or underwriters if such
sale of Spin-Off Shares were pursuant to a customary underwritten
offering) be made to and for the benefit of Stockholder and that
any or all of the conditions precedent to the obligations of such
underwriter or underwriters (or which would be so for the benefit
of such underwriter or underwriters under a customary
underwriting agreement) be conditions precedent to the
obligations of Stockholder in connection with the disposition of
its securities pursuant to the terms hereof. In connection with
any offering of Spin-Off Shares registered pursuant to this
Agreement, the Company shall, upon receipt of duly endorsed
certificates representing the Spin-Off Shares, (x) furnish to the
underwriter, if any (or, if no underwriter, Stockholder),
unlegended certificates representing ownership of Spin-Off Shares
being sold, in such denominations and registered in such names as
requested, and (y) instruct any transfer agent and registrar of
the Spin-Off Shares to release any stop transfer order with
respect thereto.
Stockholder agrees that upon receipt of any notice
from the Company of the happening of any event of the kind
described in paragraph (9) of Section 2.04(a), Stockholder shall
forthwith discontinue its disposition of Spin-Off Shares pursuant
to the Shelf Registration Statement and the Prospectus until its
receipt of the copies of the supplement or amendment thereto
contemplated by paragraph (9) of Section 2.04(a) and, if so
directed by the Company, deliver to the Company all copies, other
than permanent file copies, then in Stockholder's possession of
the Prospectus current at the time of receipt of such notice
relating to the Spin-Off Shares.
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<PAGE>
If Stockholder is an Affiliate of the Company,
Stockholder's broker-dealer subsidiaries shall be permitted to
use the Shelf Registration Statement and the Prospectus in
market-making transactions at any time during the effectiveness
of the Shelf Registration Statement. The Shelf Registration
Statement, the Prospectus and all amendments thereof and
supplements thereto shall include such information concerning
such market-making transactions as Stockholder shall furnish the
Company from time to time. If the Shelf Registration Statement
and the Prospectus are used by Stockholder's broker-dealer
subsidiaries in market-making transactions, the provisions of
Sections 2.04, 2.05 and 2.06 shall be deemed to apply to such
transactions and the shares of Common Stock sold thereby.
The Company shall not grant to any of its security
holders (other than Stockholder) the right to include any of its
securities in the Shelf Registration Statement.
Section 2.05 Registration Expenses.
All expenses incidental to the Company's performance
of, or compliance with, its obligations under this Agreement
including, without limitation, all registration and filing fees,
all fees and expenses of compliance with securities and "blue
sky" laws (including, without limitation, the fees and expenses
of counsel for underwriters or placement or sales agents in
connection with "blue sky" law compliance), all printing and
copying expenses, all messenger and delivery expenses, all fees
and expenses of the transfer agent and registrar, all listing
fees for the NYSE, all fees for any filings with the National
Association of Securities Dealers, Inc., all reasonable
out-of-pocket expenses of underwriters and sales and placement
agents in connection therewith (excluding underwriting discounts
and commissions and the fees and expenses of counsel,
accountants, agents or experts therefor), all fees and expenses
of the Company's independent certified public accountants and
counsel (including, without limitation, with respect to "comfort"
letters and opinions) and other Persons retained by the Company
in connection therewith (collectively, the "Registration
Expenses"), shall be borne by the Company. The Company shall not
be responsible for and shall not pay the fees and expenses of
legal counsel, accountants, agents or experts retained by
Stockholder in connection with the sale of the Spin-Off Shares.
Section 2.06 Indemnification.
(a) By the Company. The Company agrees to indemnify
Stockholder, its officers, directors, employees and agents and
each Person who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) Stockholder or
such other indemnified Person and the officers, directors,
employees and agents of such control Persons or other indemnified
Persons against all losses, claims, damages, liabilities and
expenses, including, without limitation, reasonable attorneys'
fees and expenses, (collectively, the "Losses"), as incurred,
caused by, resulting from or relating to (i) any untrue or
alleged untrue statement of material fact contained in the Shelf
Registration Statement, the Prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same
are caused by or contained in, or alleged to be omitted from, any
information furnished in writing to the Company by Stockholder or
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<PAGE>
its underwriter expressly for use therein or are caused by
Stockholder's failure to deliver, or its underwriter's failure to
deliver, a copy of the Prospectus or any supplements thereto
after the Company has furnished Stockholder with the requested
number of copies of the same and the Prospectus or such
supplement would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission or (ii) any
violation by the Company of any federal or state law, rule or
regulation applicable to the Company and relating to action
required of, or inaction required by, the Company with respect to
the Shelf Registration Statement, the Prospectus or any amendment
thereto or supplement thereof. In connection with an underwritten
offering and without limiting any of the Company's other
obligations under this Agreement, the Company shall indemnify
such underwriters, their officers, directors, employees and
agents and each Person who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) such underwriters or such other indemnified Person and the
officers, directors, employees and agents of such control Persons
or other indemnified Persons to the same extent as provided above
with respect to the indemnification of Stockholder.
(b) By Stockholder. In connection with the Shelf
Registration Statement, Stockholder shall furnish to the Company
in writing information regarding Stockholder's ownership of
Spin-Off Shares and its intended method of distribution thereof
and shall indemnify the Company, its directors, officers,
employees and agents and each Person who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company or such other indemnified Person and
the officers, directors, employees and agents of such control
Persons or other indemnified Persons against all Losses, as
incurred, caused by, resulting from or relating to any untrue or
alleged untrue statement of material fact contained in the Shelf
Registration Statement, the Prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent
that such untrue statement or omission or alleged untrue
statement or omission (i) is caused by, results from or relates
to, or is alleged to be omitted from, such information so
furnished in writing by Stockholder or (ii) arises out of or
results from Stockholder's failure to deliver, or its
underwriter's failure to deliver, a copy of the Prospectus or any
supplements thereto after the Company has furnished Stockholder
with the requested number of copies of the same and the
Prospectus or such supplement would have corrected such untrue
statement or alleged untrue statement or such omission or alleged
omission; provided, however, that Stockholder shall not be liable
for any claims hereunder in excess of the amount of net proceeds
received by Stockholder from the sale of Spin-Off Shares pursuant
to the Shelf Registration Statement; provided further, however,
that Stockholder shall not be liable in any such case to the
extent Stockholder has furnished in writing to the Company within
a reasonable period of time prior to the filing of the Shelf
Registration Statement, such Prospectus or such amendment or
supplement thereto information expressly for use therein which
corrected or made not misleading information previously furnished
to the Company and the Company failed to include such information
therein.
(c) Notice. Notice shall be in accordance with
Section 11(g) of the Purchase Agreement.
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<PAGE>
(d) Defense of Actions. Defense of Actions shall be
in accordance with Section 11(g) of the Purchase Agreement.
(e) Survival. The indemnification provided for under
this Agreement shall remain in full force and effect regardless
of any investigation made by or on behalf of the indemnified
Person and will survive the transfer of the Spin-Off Securities.
(f) Contribution. If the indemnification provided for
in this Section 2.06 is unavailable to an indemnified party or is
insufficient to hold such indemnified party harmless for any
losses in respect of which this Section 2.06 would otherwise
apply by its terms, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and the
indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact,
has been taken by, or relates to information supplied by, each
indemnifying party or indemnified party, and the parties relative
intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses incurred
by such party, to the extent such party would have been
indemnified for such expenses if the indemnification provided for
in Section 2.06(a) or 2.06(b) was available to such party. The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.06(f) were determined by
pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to
in this Section 2.06(f). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not found guilty of such fraudulent misrepresentation.
Section 2.07 Rule 144.
The Company shall file the reports required to be
filed by it under the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder, and will take such
further action as Stockholder may reasonably request, all to the
extent required from time to time to enable Stockholder to sell
Spin-Off Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
Upon the request of Stockholder, the Company shall deliver to
Stockholder a written statement as to whether it has complied
with such requirements.
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ARTICLE 3.
TRANSFER OF SHARES
Section 3.01 Compliance with Securities Laws.
Stockholder agrees not to sell any of the Spin-Off
Shares except pursuant to an effective registration statement
under the Securities Act covering such sales or pursuant to an
exemption from the registration requirements of the Securities
Act.
Section 3.02 Lock-up.
(a) Period. Stockholder shall not Transfer any of the
Spin-Off Shares for a period ("Lock-up Period") ending with the
earlier of (i) 90 days after the Spin-Off and (ii) the day that
the simple arithmetic mean of the high and low trading prices for
the five Trading Days immediately preceding such day is at least
115% of the average of the high and low trading prices for each
of the first five Trading Days for the Common Stock following the
Spin-Off.
(b) Restricted Transfers. From and after the
expiration of the Lock-up Period, Stockholder shall not Transfer
the Spin-Off Shares to any single purchaser or Group who
Stockholder has reason to believe will after such purchase, own
more than 5% of the outstanding Common Stock, except for (i)
sales pursuant to an underwriting of a bona fide public offering,
(ii) sales pursuant to a tender offer approved by the Board of
Directors of the Company, and (iii) sales to a purchaser or Group
that has filed or is eligible to file a Schedule 13G under the
Exchange Act with respect to the Company.
Section 3.03 Certain Prohibited Actions.
During the term of this Agreement, without the prior
written consent of the Board of Directors of the Company, neither
Stockholder nor any of its Affiliates shall, singly or as part of
a Group, directly or indirectly, through one or more
intermediaries or otherwise (i) enter into any arrangement or
understanding with respect to the Common Stock which would
facilitate or attempt to facilitate any change of control of the
Company unless such transaction is specifically approved by the
Board of Directors of the Company; (ii) acquire or agree to
acquire ownership (including beneficial ownership as defined in
Rule 13d-3 under the Exchange Act) of any assets or property or
more than one percent of any class of equity security of the
Company or any of its subsidiaries, or any rights or options to
acquire such ownership with, in the case of any such security,
the intention or purpose of influencing the management of, or
causing or formulating a transaction with respect to, the assets
or capital stock of the Company or any of its subsidiaries; (iii)
make any proposal to merge, consolidate or cause the sale of any
substantial part of the assets of the Company or any of its
subsidiaries; or (iv) make or participate in any solicitation of
persons to vote, or solicit consents with respect to, any voting
securities of the Company or any of its subsidiaries. The
provisions of this Section 3.03 shall terminate at such time as
Stockholder or its Affiliates no longer holds any Spin-Off
Shares, and shall in no way limit the asset management,
investment banking or trading operations of Stockholder's asset
management, investment banking or broker-dealer subsidiaries as
conducted in the ordinary course of their business.
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<PAGE>
Section 3.04 Right of First Offer.
Stockholder shall, prior to selling at any one time
Spin-Off Shares representing more than 1% of the outstanding
Common Stock in any three month period, first provide the Company
with telephonic notice confirmed promptly by a fax (the "Notice")
to the Company of the intent to make such sale as follows:
(a) Underwritten Transactions. If such proposed sale
would be pursuant to a firm commitment underwriting, Notice shall
be given to the Company no later than the date Stockholder
commences a "road show" or other marketing effort, giving the
Company the option (which option may only be exercised prior to
the close of trading on the third Trading Day immediately
following the date of actual receipt of such Notice by the
Company) to purchase all the Spin-Off Shares intended to be
included in such offering at a price per share equal to the
average of the bid and the ask prices at the time such Notice is
given to the Company, as reported on the consolidated quotation
system or the most recent closing bid and ask prices if such
consolidated quotation system is closed at the time of the
Notice. The Notice shall include such bid and ask prices. The
Company may exercise such option only by Notice, which Notice
shall be irrevocable. Any purchase pursuant to this Section
3.04(a) shall be closed three Trading Days from the exercise of
such option. If such option is not exercised, Stockholder may
sell all or any portion of such Spin-Off Shares without further
notice at any price in a firm commitment underwriting at any time
within 60 days of such Notice.
(b) Market Transactions. If such proposed sale
would be pursuant to a broker's transaction or other customary
equity securities market transaction, other than a Block
Execution, Notice shall be given to the Company prior to
submitting an order to sell, giving the Company the option (which
option may only be exercised prior to the close of trading on the
next Trading Day immediately following the date of actual receipt
of such Notice by the Company) to purchase all the Spin-Off
Shares intended to be sold at a price per share equal to the
average of the bid and the ask prices at the time such Notice is
given to the Company, as reported on the consolidated quotation
system or the most recent closing bid and ask prices if such
consolidated quotation system is closed at the time of the
Notice. The Notice shall include such bid and ask prices. The
Company may exercise such option only by giving Notice, which
Notice shall be irrevocable. Any purchase pursuant to this
Section 3.04(b) shall be closed three Trading Days from the
exercise of such option. If such option is not exercised,
Stockholder may sell all or any portion of such Spin-Off Shares
without further notice at any price in a broker's transaction or
other customary equity securities market transaction, other than
a Block Execution, at any time within ten Trading Days of such
Notice.
(c) Block Execution. If such proposed sale would be
pursuant to a Block Execution, Stockholder shall, prior to giving
Notice, give during business hours, an advance notice ("Advance
Notice") to the Company that Stockholder is contemplating
pursuing a Block Execution, which Advance Notice shall (i) become
effective on the third Trading Day following the date on which
such Advance Notice is received by the Company at the same time
of day as such Advance Notice was received, (ii) remain effective
for the next 10 Trading Days following such third Trading Day and
(iii) state the estimated number of Spin-Off Shares to be sold in
such Block Execution. Such Advance Notice must be in effect at
the time Stockholder gives Notice. Stockholder shall, once it
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actually intends to consummate a proposed sale pursuant to such
Block Execution, give, during business hours, Notice giving the
Company the option (which option may only be exercised within 60
minutes of actual receipt of such Notice by the Company) to
purchase all the Spin-Off Shares intended to be sold at a price
per share equal to the average of the bid and the ask prices at
the time such Notice is given to the Company, as reported on the
consolidated quotation system. Any purchase pursuant to this
Section 3.04(c) shall be closed three Trading Days from such
Notice. If such option is not exercised, Stockholder may sell all
or any portion of such Spin-Off Shares without further notice at
any price in a Block Execution at any time prior to the close of
business on the second Trading Day following such Notice;
provided, however, the number of Spin-Off Shares sold pursuant to
this Section 3.04(c) shall be not more than the number specified
in the Advance Notice and shall have an aggregate fair market
value of not less than $10 million; and
(d) Other Transactions. If such proposed sale would be
pursuant to any type of transaction other than the transactions
identified in paragraphs (a), (b) and (c), the Notice shall
include the identity, to the extent known, of the proposed
purchaser(s) and give the Company the option (which option may
only be exercised prior to the close of trading on the third
Trading Day immediately following such Notice) to purchase all
the Spin-Off Shares intended to be sold at the price per share
specified in such Notice (which purchase shall be closed three
Trading Days from such Notice). If such option is not exercised,
Stockholder may sell all or any portion of such Spin-Off Shares
without further notice at any time within 30 days of such notice
at a price no lower than the price specified in such Notice to
the purchaser(s) identified in such Notice.
(e) Method of Payment. In the event the Company
exercises any of the foregoing options, it shall make payment on
the closing date of such purchase by wire transfer to the
Stockholder of immediately available funds in an amount equal to
the purchase price to an account of Stockholder in a bank in the
United States.
(f) Title. Stockholder shall warrant to the Company
good and marketable title to all Spin-Off Shares purchased
pursuant to the foregoing options and shall promptly take all
actions necessary within the control of Stockholder to cause
record and beneficial ownership to be transferred to the Company.
Section 3.05 Voting.
Stockholder (i) shall be present in person or
represented by proxy at all stockholder meetings of the Company
of which Stockholder is notified in accordance with applicable
law so that all Spin-Off Shares then beneficially owned by
Stockholder shall be counted for the purpose of determining the
presence of a quorum at such meetings, and (ii) shall vote, or
act by consent with respect to, at any such meetings, all
Spin-Off Shares then beneficially owned by Stockholder so as to
vote for persons nominated by the Company's Board of Directors by
such Board of Directors and no others.
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ARTICLE 4.
MISCELLANEOUS
Section 4.01 Restrictive Legends.
Stockholder hereby acknowledges and agrees that,
during the term of this Agreement (except as otherwise specified
in Sections 2.04(b) and 4.13), each of the certificates
representing Spin-Off Shares shall be subject to stop transfer
instructions and shall include the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED WHETHER BY SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE,
GIFT, BEQUEST, APPOINTMENT OR OTHERWISE, AND VALERO REFINING AND
MARKETING COMPANY (THE "COMPANY") WILL NOT REGISTER THE TRANSFER
OF SUCH SHARES, EXCEPT PURSUANT AND SUBJECT TO THAT CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF MAY 1, 1997, AS THE SAME MAY
BE AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND
STOCKHOLDER. A COPY OF SUCH AGREEMENT IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
Section 4.02 Recapitalization.
In the event that any capital stock or other
securities are issued as a dividend or distribution on, in
respect of, in exchange for, or in substitution of, any Spin-Off
Shares, such securities shall be deemed to be Spin-Off Shares for
all purposes under this Agreement.
Section 4.03 Notices.
All notices, requests, demands, waivers and other
communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally, by reputable overnight
courier (next day morning delivery) or by facsimile transmission
(receipt of which is confirmed):
(a) If to the Company, to:
Valero Refining and Marketing Company
530 McCullough Avenue
San Antonio, TX 78213
Attention: General Counsel
Facsimile: (210) 246-2646
with a copy to:
Fulbright & Jaworski L.L.P.
801 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Michael W. Conlon
Facsimile: (202) 662-4643
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(b) If to Stockholder, to:
Salomon Inc
Seven World Trade Center
New York, NY 10048
Attention: Thomas Jasper
Facsimile: (212) 783-3219
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall
Facsimile: (212) 474-3700
or to such other person or address as any party shall specify by
notice in writing, given in accordance with this Section 4.03, to
the other parties hereto. All such notices, requests, demands,
waivers and communication shall be deemed to have been given on
the date on which so hand-delivered, on the next business day
following the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confirmation,
except for a notice of change of person or address, which shall
be effective only upon receipt thereof.
Section 4.04 Entire Agreement.
This Agreement and the Purchase Agreement contain the
entire understanding of the parties hereto with respect to the
subject matter hereof. This Agreement and the Purchase Agreement
supersede all prior agreements and understandings, oral and
written, with respect to the subject matter hereof.
Section 4.05 Severability.
Should any provision of this Agreement, or any part
thereof, for any reason be declared invalid or unenforceable, such
declaration shall not affect the validity or enforceability of
any other provision of this Agreement, or any other part thereof,
all of which other provisions, and parts, shall remain in full
force and effect, and the application of such invalid or
unenforceable provision, or such part thereof, to Persons or
circumstances other than those as to which it is held invalid or
unenforceable shall be valid and be enforced to the fullest
extent permitted by law.
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Section 4.06 Binding Effect; Assignment.
This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, successors and permitted
assigns, but, except as expressly contemplated herein, neither
this Agreement not any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by the
Company or Stockholder without the prior written consent of the
other. Upon any such assignment, this Agreement shall be amended
to substitute the assignee as a party hereto in a writing
reasonably acceptable to the other party.
Section 4.07 Amendment, Modification and Waiver.
This Agreement may be amended, modified or
supplemented at any time by written agreement of the parties
hereto. Any failure by Stockholder, on the one hand, or the
Company, on the other hand, to comply with any term or provision
of this Agreement may be waived by the Company or Stockholder,
respectively, at any time by an instrument in writing signed by
or on behalf of the Company and Stockholder, but such waiver or
failure to insist upon strict compliance with such term or
provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply.
Section 4.08 Third-Party Beneficiaries.
This Agreement (other than Section 2.06) is not
intended, and shall not be deemed, to confer upon or give any
person except the parties hereto and their respective successors
and permitted assigns, any remedy, claim, liability,
reimbursement, cause of action or other right under or by reason
of this Agreement.
Section 4.10 Counterparts.
This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section 4.11 Interpretation.
The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part
of the agreement of the parties and shall not in any way affect
the meaning of interpretation of this Agreement.
Section 4.12 Governing Law.
This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts
of law thereof.
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Section 4.13 Termination; Restrictive Legend.
This Agreement shall terminate when Stockholder and
its Affiliates no longer own any Spin-Off Shares; provided,
however, that the provisions of Section 2.06 shall survive
termination of this Agreement and the provisions of Article II,
other than Section 2.06, shall terminate on the second
anniversary date on which the Spin-Off Shares were issued to
Stockholder. It is understood and agreed that any restrictive
legends set forth on any Spin-Off Shares shall be removed by
delivery of substitute certificates without such legends and such
Spin-Off Shares shall no longer be subject to the terms of this
Agreement, upon the resale of such Spin-Off Shares in accordance
with the terms of this Agreement or, if not theretofore removed,
on the second anniversary of the date hereof.
IN WITNESS WHEREOF, the undersigned hereby agree to be
bound by the terms and provisions of this Stockholder Agreement
as of the date first above written.
VALERO REFINING AND MARKETING COMPANY
By: __________________________________
Name:
Title:
SALOMON INC
By: __________________________________
Name:
Title:
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