UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4718
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1244795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 McCullough Avenue
San Antonio, Texas
(Address of principal executive offices)
78215
(Zip Code)
(210) 246-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicated below is the number of shares outstanding of the
registrant's only class of common stock, as of April 22, 1994.
Number of
Shares
Title of Class Outstanding
Common Stock, $1 Par Value 43,336,954
<PAGE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - March 31, 1994 and
December 31, 1993. . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income - For the Three
Months Ended March 31, 1994 and 1993 . . . . . . . . .
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 1994 and 1993 . . . . . .
Notes to Consolidated Financial Statements . . . . . . .
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . .
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . .
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
PART I - FINANCIAL INFORMATION
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31,
1994 December 31,
(Unaudited) 1993
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments. . . . . . . . . $ 126,394 $ 7,252
Receivables, less allowance for doubtful accounts of
$434 (1994) and $359 (1993). . . . . . . . . . . . 77,139 64,521
Inventories. . . . . . . . . . . . . . . . . . . . . 101,211 113,384
Current deferred income tax assets . . . . . . . . . 14,642 12,304
Prepaid expenses and other . . . . . . . . . . . . . 27,150 38,025
346,536 235,486
PROPERTY, PLANT AND EQUIPMENT - including
construction in progress of $17,581 (1994)
and $10,158 (1993), at cost. . . . . . . . . . . . . 1,656,260 1,640,136
Less: Accumulated depreciation. . . . . . . . . . 361,884 346,570
1,294,376 1,293,566
INVESTMENT IN AND LEASES RECEIVABLE FROM
VALERO NATURAL GAS PARTNERS, L.P.. . . . . . . . . . 123,055 130,557
INVESTMENT IN AND ADVANCES TO JOINT
VENTURES . . . . . . . . . . . . . . . . . . . . . . 29,674 28,343
DEFERRED CHARGES AND OTHER ASSETS. . . . . . . . . . . 74,548 76,485
$1,868,189 $1,764,437
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
PART I - FINANCIAL INFORMATION
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31,
1994 December 31,
(Unaudited) 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . $ 28,804 $ 28,737
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 73,149 90,994
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 37,664 33,296
Income taxes payable . . . . . . . . . . . . . . . . . . . . . 1,658 -
141,275 153,027
LONG-TERM DEBT, less current maturities. . . . . . . . . . . . . 424,844 485,621
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . 235,640 232,564
DEFERRED CREDITS AND OTHER LIABILITIES . . . . . . . . . . . . . 40,021 37,128
REDEEMABLE PREFERRED STOCK, SERIES A . . . . . . . . . . . . . . 13,800 13,800
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - 20,000,000 shares authorized:
Redeemable Preferred Stock, Series A, issued 1,150,000
shares, outstanding 138,000 (1994 and 1993) shares . . . - -
$3.125 Convertible Preferred Stock, issued and outstanding
3,450,000 (1994) and -0- (1993) shares ($172,500
aggregate involuntary liquidation value) . . . . . . . . 3,450 -
Common stock, $1 par value - 75,000,000 shares authorized;
issued 43,393,685 (1994) and 43,391,685 (1993) shares . . . 43,394 43,392
Additional paid-in capital . . . . . . . . . . . . . . . . . . 534,841 371,303
Unearned Valero Employees' Stock Ownership Plan
Compensation. . . . . . . . . . . . . . . . . . . . . . . . (15,048) (15,958)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . 447,287 446,931
Treasury stock, 56,884 (1994) and 145,119 (1993)
common shares, at cost. . . . . . . . . . . . . . . . . . . (1,315) (3,371)
1,012,609 842,297
$1,868,189 $1,764,437
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . $281,277 $295,762
COSTS AND EXPENSES:
Cost of sales. . . . . . . . . . . . . . . . . . 210,107 228,713
Operating expenses . . . . . . . . . . . . . . . 30,024 29,756
Depreciation expense . . . . . . . . . . . . . . 15,568 12,640
Total. . . . . . . . . . . . . . . . . . . . . 255,699 271,109
OPERATING INCOME . . . . . . . . . . . . . . . . . 25,578 24,653
EQUITY IN EARNINGS (LOSSES) OF AND INCOME
FROM VALERO NATURAL GAS PARTNERS, L.P. . . . . . (2,908) 6,649
OTHER INCOME (EXPENSE), NET. . . . . . . . . . . . (918) 467
INTEREST AND DEBT EXPENSE:
Incurred . . . . . . . . . . . . . . . . . . . . (12,048) (12,698)
Capitalized. . . . . . . . . . . . . . . . . . . 279 5,240
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . 9,983 24,311
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . 3,700 8,700
NET INCOME . . . . . . . . . . . . . . . . . . . . 6,283 15,611
Less: Preferred stock dividend requirements . . 532 318
NET INCOME APPLICABLE
TO COMMON STOCK. . . . . . . . . . . . . . . . . $ 5,751 $ 15,293
EARNINGS PER SHARE OF COMMON STOCK . . . . . . . . $ .13 $ .36
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (in thousands) . . . . . . . . . . . 43,320 43,038
DIVIDENDS PER SHARE OF
COMMON STOCK. . . . . . . . . . . . . . . . . . $ .13 $ .11
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,283 $ 15,611
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense . . . . . . . . . . . . . . . . . . . 15,568 12,640
Amortization of deferred charges and other, net. . . . . . 7,234 4,428
Changes in current assets and current liabilities. . . . . (3,727) 6,675
Deferred income tax expense. . . . . . . . . . . . . . . . 1,400 4,600
Equity in (earnings) losses of Valero Natural Gas
Partners, L.P. in excess of distributions. . . . . . . . 6,195 (2,014)
Changes in deferred items and other, net . . . . . . . . . (1,576) (5,940)
Net cash provided by operating activities. . . . . . . . 31,377 36,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions. . . . . . . . . . . . . . . . . . . . . . . (14,332) (43,223)
Deferred turnaround and catalyst costs . . . . . . . . . . . . (388) (6,833)
Investment in and advances to joint ventures, net. . . . . . . (2,808) (1,742)
Distributions from Valero Natural Gas Partners, L.P. . . . . . 1,383 -
Dispositions of property, plant and equipment. . . . . . . . . 216 220
Principal payments received under capital lease obligations. . 177 23
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . 649 11
Net cash used in investing activities. . . . . . . . . . . . (15,103) (51,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings, net. . . . . . . . . . . . . . . . . . . - 22,000
Long-term debt reduction, net. . . . . . . . . . . . . . . . . (60,000) -
Decrease in notes payable. . . . . . . . . . . . . . . . . . . - (2,600)
Common stock dividends . . . . . . . . . . . . . . . . . . . . (5,634) (4,734)
Preferred stock dividends. . . . . . . . . . . . . . . . . . . (293) (318)
Issuance of Convertible Preferred Stock, net . . . . . . . . . 167,878 -
Issuance of common stock, net. . . . . . . . . . . . . . . . . 917 1,140
Net cash provided by financing activities. . . . . . . . . . 102,868 15,488
NET INCREASE (DECREASE) IN CASH AND
TEMPORARY CASH INVESTMENTS . . . . . . . . . . . . . . . . . . 119,142 (56)
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . . . . 7,252 8,174
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . $126,394 $ 8,118
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Basis of Presentation
The consolidated financial statements included herein
have been prepared by Valero Energy Corporation ("Energy") and
subsidiaries (collectively referred to as the "Company"), without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. However, all adjustments have been made
to the accompanying financial statements which are, in the
opinion of the Company's management, necessary for a fair
presentation of the Company's results of operations for the
periods covered. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented herein not misleading. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included
in the Company's latest Annual Report on Form 10-K. Certain
prior period amounts have been reclassified for comparative
purposes.
Note 2
Statements of Cash Flows
In order to determine net cash provided by operating
activities, net income has been adjusted by, among other things,
changes in current assets and current liabilities, excluding
changes in cash and temporary cash investments, current
maturities of long-term debt and notes payable. Those changes
are shown in the following table as an (increase) decrease in
current assets and an increase (decrease) in current liabilities.
The Company's temporary cash investments are highly liquid, low-
risk debt instruments which have a maturity of three months or
less when acquired and whose carrying amounts approximate fair
value. (Dollars in thousands.)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Receivables, net. . . . . . . . . . . . . . . . $(12,618) $(12,203)
Inventories . . . . . . . . . . . . . . . . . . 12,173 25,274
Current deferred income tax assets. . . . . . . (2,338) 2,890
Prepaid expenses and other. . . . . . . . . . . 10,875 9,812
Accounts payable. . . . . . . . . . . . . . . . (17,845) (21,393)
Accrued expenses. . . . . . . . . . . . . . . . 4,368 (346)
Income taxes payable. . . . . . . . . . . . . . 1,658 2,641
Total . . . . . . . . . . . . . . . . . . . $ (3,727) $ 6,675
</TABLE>
The following provides information related to cash
interest and income taxes paid by the Company for the periods
indicated (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Interest (net of amount capitalized of $279 (1994)
and $5,240 (1993)) . . . . . . . . . . . . . . . . $7,274 $2,466
Income taxes. . . . . . . . . . . . . . . . . . . . . - 1,284
</TABLE>
Note 3
Inventories
Valero Refining and Marketing Company, a wholly owned
subsidiary of Energy, and its principal subsidiary, Valero
Refining Company, are collectively referred to herein as
"Refining." Refining's inventories are carried at the lower of
cost or market with cost determined primarily under the last-in,
first-out ("LIFO") method of inventory pricing. Inventories as
of March 31, 1994 and December 31, 1993 were as follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
<S> <C> <C>
Refinery feedstocks and blendstocks . . . . . $ 62,240 $ 70,807
Refined products. . . . . . . . . . . . . . . 38,971 42,577
$101,211 $113,384
</TABLE>
Inventory volumes totalled 6,927 thousand barrels ("Mbbls")
and 8,082 Mbbls at March 31, 1994 and December 31, 1993, respectively.
The excess of the replacement cost of Refining's inventories over
their LIFO values was insignificant at March 31, 1994.
Note 4
Price Risk Management Activities
The Company periodically enters into exchange-traded
futures and options contracts, forward contracts and swap
contracts to hedge the purchase costs and sales prices of
portions of inventories. Changes in the market value of such
contracts are accounted for as additions to or reductions in
inventory and recognized when the related inventory is sold. The
Company also enters into a very limited amount of contracts that
are not specific hedges, and gains or losses resulting from
changes in the market value of these contracts are recognized in
income currently. As of March 31, 1994, the Company had
outstanding contracts for notional or contract volumes totalling
2,725 Mbbls for which the Company is the fixed price payor
and 6,101 Mbbls for which the Company is the fixed price
receiver. As of December 31, 1993, such amounts were 2,700 Mbbls
and 2,615 Mbbls, respectively. These contracts run for a period
of approximately one to seven months. The Company's activities
in both hedging and nonhedging contracts were not material to the
Company's results of operations for the three months ended
March 31, 1994 and 1993.
Note 5
Valero Natural Gas Partners, L.P.
The Company holds an effective equity interest of
approximately 49% at March 31, 1994 in Valero Natural Gas
Partners, L.P. ("VNGP, L.P.") and its consolidated subsidiaries,
collectively referred to herein as the "Partnership." This
effective equity interest consists of general partner interests
and common units of limited partner interests (the "Common
Units"). The remaining equity interest in the Partnership
consisting of publicly traded common units of limited partner
interests are referred to herein as "Public Units" and holders of
such units are referred to as "Public Unitholders." Components
of the line items Investment in and Leases Receivable from Valero
Natural Gas Partners, L.P. in the accompanying Consolidated
Balance Sheets and Equity in Earnings (Losses) of and Income from
Valero Natural Gas Partners, L.P. in the accompanying
Consolidated Statements of Income, are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
<S> <C> <C>
Investment in Valero Natural Gas Partners, L.P. . . . . . . . . . $ 17,469 $ 25,047
Leases receivable from Valero Natural
Gas Partners, L.P. . . . . . . . . . . . . . . . . . . . . . . 105,586 105,510
$123,055 $130,557
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
<S> <C> <C>
Equity in earnings (losses) of Valero Natural
Gas Partners, L.P. . . . . . . . . . . . . . . . . . . . . . $(6,195) $ 3,368
Interest income from capital lease transactions
with Valero Natural Gas Partners, L.P. . . . . . . . . . . . 3,287 3,281
$(2,908) $ 6,649
</TABLE>
Summarized income statement and cash flow information
for the Partnership for the three months ended March 31, 1994 and
1993 and summarized balance sheet information for the Partnership
as of March 31, 1994 and December 31, 1993 is as follows (in
thousands, except per Unit amounts):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
<S> <C> <C>
Income statement data:
Operating revenues. . . . . . . . . . . . . . . . . . . $ 379,664 $ 367,310
Depreciation expense. . . . . . . . . . . . . . . . . . 9,234 9,019
Operating income. . . . . . . . . . . . . . . . . . . . 1,752 21,747
Net income (loss) . . . . . . . . . . . . . . . . . . . (14,447) 5,133
General Partners' interest. . . . . . . . . . . . . . . (243) 359
Net income (loss) allocable to Limited Partners . . . . (14,204) 4,774
Net income (loss) per Limited Partner Unit. . . . . . . (.77) .26
Statement of cash flows data:
Net cash provided by (used in) operating activities . . $ (2,280) $ 18,013
Capital expenditures. . . . . . . . . . . . . . . . . . 4,641 10,787
Partnership distributions . . . . . . . . . . . . . . . 2,602 2,573
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
<S> <C> <C>
Balance sheet data:
Total assets. . . . . . . . . . . . . . . . . . . . . . $1,018,529 $1,045,082
First Mortgage Notes. . . . . . . . . . . . . . . . . . 506,429 534,286
Capital lease obligations . . . . . . . . . . . . . . . 104,822 104,838
Weighted average Units outstanding. . . . . . . . . . . . 18,487 18,487
</TABLE>
The Company enters into transactions with the
Partnership commensurate with its status as the General Partner.
As of March 31, 1994 and December 31, 1993, the Company had
recorded approximately $24.2 million and $31.8 million,
respectively, of accounts receivable, net of accounts payable,
due from the Partnership. The following table summarizes
transactions between the Company and the Partnership for the
three months ended March 31, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
<S> <C> <C>
Natural gas liquid ("NGL") purchases and services
from the Partnership . . . . . . . . . . . . . . . $21,513 $19,790
Natural gas purchases from the Partnership. . . . . . 6,069 14,216
Sales of NGLs and natural gas, and transportation
and other charges to the Partnership . . . . . . . 6,524 10,298
Management fees billed to the Partnership for
direct and indirect costs. . . . . . . . . . . . . 20,702 20,072
</TABLE>
In October 1993, Energy publicly announced its
proposal to acquire the 9.7 million issued and outstanding Public
Units in VNGP, L.P. and effective December 20, 1993, Energy,
Valero Natural Gas Company ("VNGC", a wholly owned subsidiary of
Energy and general partner of VNGP, L.P.,) and VNGP, L.P. entered
into an agreement of merger. In the merger, the Public Units
will be converted into a right to receive cash consideration of
$12.10 per Common Unit, and VNGP, L.P. will become a wholly owned
subsidiary of Energy. Consummation of the merger is subject to,
among other things, approval of the merger by the holders of a
majority of the issued and outstanding Common Units and by a
majority of the Common Units held by the Public Unitholders voted
at a special meeting called to consider the merger. In order to
provide for the proposed merger, the Company has completed an
underwritten public offering of convertible preferred stock (see
Note 6), has entered into a new revolving credit and letter of
credit facility and has obtained amendments to other financial
agreements. It is a condition precedent to the effectiveness of
Energy's new credit facility that the litigation filed in
response to the announcement by Energy of its proposal to acquire
the Public Units is settled (see Note 7). A proposal to approve
the merger will be submitted to the holders of Common Units at a
special meeting of unitholders scheduled to be held on May 31,
1994. There can be no assurance, however, that the merger will
be completed.
The following unaudited pro forma information of
Valero Energy Corporation and subsidiaries gives effect to the
sale of the convertible preferred stock and the utilization of
approximately $117.5 million of the net proceeds therefrom to
fund the acquisition by the Company of the Public Units. The
remaining net proceeds of approximately $50.4 million are used to
pay expenses of the proposed acquisition and reduce outstanding
indebtedness under bank credit lines. The acquisition is
accounted for as a purchase. The pro forma information assumes
that the above described transactions occurred at the beginning
of each period presented. Such pro forma information is not
necessarily indicative of the results of future operations.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1994 1993
(Thousands of dollars, except
per share amounts)
<S> <C> <C>
Operating revenues. . . . . . . . . . . . . $607,173 $563,996
Operating income. . . . . . . . . . . . . . 28,901 48,179
Net income. . . . . . . . . . . . . . . . . 3,078 19,014
Net income applicable to common stock . . . 90 16,001
Earnings per share of common stock. . . . . .00 .37
</TABLE>
Note 6
Convertible Preferred Stock
In March 1994, Energy issued 3,450,000 shares of its
$3.125 convertible preferred stock ("Convertible Preferred
Stock") with a stated value of $50 per share and received cash
proceeds, net of underwriting discounts, of approximately $168
million. The proceeds from the offering will be utilized to fund
the proposed merger (see Note 5). In the event that the proposed
merger of VNGP, L.P. with the Company is not ultimately
consummated, the proceeds from the offering will be used for
general corporate purposes, including the repayment of existing
indebtedness, financing of capital projects and additions to
working capital.
Note 7
Litigation and Contingencies
Partnership Related Claims
Seven lawsuits were filed in Chancery Court in
Delaware against VNGP, L.P., VNGC and Energy and certain officers
and directors of VNGC and/or Energy in response to the
announcement by Energy on October 14, 1993 of its proposal to
acquire the publicly traded Common Units of VNGP, L.P. pursuant
to a proposed merger of VNGP, L.P. with a wholly owned subsidiary
of Energy. See Note 5. The suits were consolidated into a
single proceeding by the Chancery Court on November 23, 1993.
The plaintiffs sought to enjoin or rescind the proposed merger,
alleging that the corporate defendants and the individual
defendants, as officers or directors of the corporate defendants,
engaged in actions in breach of the defendants' fiduciary duties
to the Public Unitholders by proposing the merger. The
plaintiffs alternatively sought an increase in the proposed
merger consideration, unspecified compensatory damages and
attorneys' fees. In December 1993, the attorneys representing
the plaintiffs entered into a memorandum of understanding with
Energy and VNGP, L.P. pursuant to which the attorneys have agreed
to recommend that the Chancery Court approve a settlement of the
litigation. The proposed settlement will not require a material
payment by the Company or the Partnership. On April 29, 1994,
notice of the proposed settlement, including a description of the
terms of the settlement, was mailed to the Public Unitholders by
order of the Chancery Court. A hearing to consider approval of
the settlement has been scheduled in the Chancery Court for
May 31, 1994. There can be no assurance that the settlement will
be approved by the Chancery Court.
Energy, VNGP, L.P. and certain of their respective
subsidiaries are defendants in a lawsuit originally filed in
January 1993. The lawsuit is based upon construction work
performed by the plaintiff at certain of the Partnership's gas
processing plants in 1991 and 1992. The plaintiff alleges that
it performed work for the defendants for which it was not
compensated. The plaintiff's second amended petition, filed
April 30, 1994, asserts claims for breach of contract, quantum
meruit, wrongful failure to pay retainage, fraudulent
misrepresentation, conspiracy, breach of the implied covenant of
good faith and fair dealing, and other commercial tort claims.
The plaintiff alleges actual damages of approximately
$9.7 million and punitive damages of $45.5 million. The
defendants have filed a motion for summary judgment and a motion
to transfer venue to Bexar County.
In a letter dated September 1, 1993 from the City of
Houston (the "City") to Valero Transmission Company ("VTC"), an
indirect wholly owned subsidiary of Energy, the City stated its
intent to bring suit against VTC for certain claims asserted by
the City under the franchise agreement between the City and VTC.
VTC is the general partner of Valero Transmission, L.P. ("VT,
L.P."), an indirect subsidiary partnership of VNGP, L.P. The
franchise agreement was assigned to and assumed by VT, L.P. upon
formation of the Partnership in 1987. In the letter, the City
also declared a conditional forfeiture of the franchise rights
based on the City's claims. In a letter dated October 27, 1993,
the City claimed that VTC owes to the City franchise fees and
accrued interest thereon aggregating approximately $13.5 million.
In a letter dated November 9, 1993, the City claimed an
additional $18 million in damages related to the City's
allegations that VTC engaged in unauthorized activities under the
franchise agreement by transmitting gas for resale and by
transporting gas for third parties on the franchised premises.
The City has not filed a lawsuit. The Company and the City have
engaged in formal discussions regarding the possible settlement
of the City's claims, but no agreement has been concluded. While
any liability of VTC with respect to the City's claims has been
assumed by the Partnership, if the proposed merger with VNGP,
L.P. is consummated, the Company's financial position would
necessarily reflect the full amount of any Partnership liability.
Additionally, in the event that the Partnership failed to pay any
such liability, the Company could remain ultimately responsible.
The Company believes that the City's claims are overstated, and
that VTC has a number of defenses to the claims.
The Company was a party to a lawsuit originally filed
in 1988 in which Energy, VTC, VNGP, L.P. and subsidiaries of
VNGP, L.P. (the "Valero Defendants") and a subsidiary of The
Coastal Corporation ("Coastal") were alleged to be liable for
failure to take minimum quantities of gas, failure to make take-
or-pay payments and other breach of contract and breach of
fiduciary duty claims. The plaintiffs sought declaratory relief,
actual damages in excess of $37 million and unspecified punitive
damages. During the third quarter of 1992, the plaintiffs,
Coastal and the Valero Defendants settled this lawsuit on terms
which were not material to the Valero Defendants and on July 19,
1993, this lawsuit was dismissed. On November 16, 1992, prior to
entry of the order of dismissal, NationsBank of Texas, N.A., as
trustee for certain trusts (the "Intervenors"), filed a plea in
intervention to intervene in the lawsuit. The Intervenors
asserted that they held a non-participating mineral interest in
the lands subject to the litigation and that their rights were
not protected by the plaintiffs in the settlement. On
February 4, 1993, the Court struck the Intervenors' plea in
intervention. However, on February 2, 1993, the Intervenors had
filed a separate suit in the 160th State District Court, Dallas
County, Texas, against all prior defendants and an additional
defendant, substantially adopting in form and substance the
allegations and claims in the original litigation. In February
1994, the parties reached a tentative settlement of the lawsuit
on terms immaterial to the Company or the Partnership.
In 1987, VT, L.P. and a producer from whom VT, L.P.
has purchased natural gas entered into an agreement resolving
certain take-or-pay issues between the parties in which VT, L.P.
agreed to pay one-half of certain excess royalty claims arising
after the date of the agreement. The royalty owners of the
producer recently completed an audit of the producer and have
presented to the producer a claim for additional royalty payments
in the amount of approximately $17.3 million, and accrued
interest thereon of approximately $19.8 million. Approximately
$8 million of the royalty owners' claim accrued after the
effective date of the agreement between the producer and VT, L.P.
The producer and VT, L.P. are reviewing the royalty owners'
claims. No lawsuit has been filed by the royalty owners. The
Company believes that various defenses may reduce or eliminate
any liability of VT, L.P. to the producer in this matter.
VTC and one of its gas suppliers are parties to
various gas purchase contracts assigned to and assumed by VT,
L.P. upon formation of the Partnership in 1987. The supplier is
also a party to a series of gas purchase contracts between the
supplier, as buyer, and certain trusts, as seller. In 1989, the
trusts brought suit against the supplier, alleging breach of
various minimum take, take-or-pay and other contractual
provisions, and asserting a statutory nonratability claim. In
the trusts' claims against the supplier, the trusts seek alleged
actual damages, including interest, of approximately $30 million.
Neither VTC nor VT, L.P. was originally a party to the lawsuit.
However, because of the relationship between VTC's contracts with
the supplier and the supplier's contracts with the trusts, and in
order to resolve existing and potential disputes, the supplier,
VTC and VT, L.P. agreed in March 1991 to cooperate in the conduct
of the litigation, and agreed that VTC and VT, L.P. will bear a
substantial portion of the costs of any appeal and any
nonappealable final judgment rendered against the supplier. In
January 1993, the District Court ruled on the trusts' motion for
summary judgment, finding that as a matter of law the three gas
purchase contracts at issue were fully binding and enforceable,
the supplier breached the minimum take obligations under one of
the contracts, the supplier is not entitled to claimed offsets
for gas purchased by third parties and the "availability" of gas
for take-or-pay purposes is established solely by the delivery
capacity testing procedures in the contracts. Damages, if any,
were not determined. On April 15, 1994, the trusts named VTC and
VT, L.P. as additional defendants (the "Valero Defendants") to
the lawsuit, alleging that the Valero Defendants maliciously
interfered with the trusts' contracts with the supplier. In the
trusts' claim against the Valero Defendants, the trusts seek
unspecified actual and punitive damages. The Company believes
that the claims brought by the trusts have been significantly
overstated, and that the supplier and the Valero Defendants have
a number of meritorious defenses to the claims. This litigation
is not currently set for trial.
The Partnership has settled substantially all of the
significant take-or-pay claims, pricing differences and
contractual disputes related to gas purchases heretofore brought
against it. Although additional take-or-pay claims may continue
to be brought against the Partnership, the Company believes that
the Partnership has resolved substantially all of the significant
take-or-pay claims that are likely to be made. Any liability of
the Company with respect to these claims has been assumed by the
Partnership. However, if the Partnership were unable or
otherwise failed to discharge any such liability of the Company
which it assumed, the Company could remain ultimately liable for
such liability. Also, if the proposed merger with VNGP, L.P. is
consummated, the Company's financial position would necessarily
reflect the full amount of any Partnership liability.
The Company and the Partnership believe it is unlikely
that the final outcome of any of the claims or proceedings
described above would have a material adverse effect on either
the Company's or the Partnership's financial position or results
of operations; however, due to the inherent uncertainty of
litigation, the range of possible loss, if any, cannot be
estimated with a reasonable degree of precision and there can be
no assurance that the resolution of any of these claims or
proceedings would not have an adverse effect on either the
Company's or the Partnership's results of operations for the
fiscal period in which the resolution occurred.
Other Litigation
On August 31, 1993, suit was brought by certain
residents of the Oak Park Triangle area of Corpus Christi, Texas,
against several defendants including Valero Refining Company.
All named defendants are either refiners or gas processors having
facilities located at or near Up River Road in Corpus Christi.
Plaintiffs allege in general terms damages resulting from ground
water contamination and air pollution allegedly caused by the
operations of the defendants. Plaintiffs seek unspecified actual
and punitive damages.
Valero Javelina Company, a wholly owned subsidiary of
Energy, owns a 20% general partner interest in Javelina Company,
a general partnership. Javelina Company has been named as a
defendant in seven lawsuits filed since 1992 in state district
courts in Nueces County, Texas. Four of the suits include as
defendants other companies that own refineries or other
industrial facilities in Nueces County. These suits were brought
by a number of plaintiffs who reside in neighborhoods near the
facilities. The plaintiffs claim injuries relating to an alleged
exposure to toxic chemicals, and generally claim that the
defendants were negligent, grossly negligent and committed
trespass. The plaintiffs claim personal injury and property
damages resulting from soil and ground water contamination and
air pollution allegedly caused by the operations of the
defendants. One of the suits seeks certification of the
litigation as a class action. The plaintiffs seek unspecified
actual and punitive damages. The other three suits were brought
by plaintiffs who either live or have businesses near the
Javelina Plant. The suits allege claims similar to those
described above. These plaintiffs also fail to specify an amount
of damages claimed.
The Company is also a party to additional claims and
legal proceedings arising in the ordinary course of business.
The Company believes it is unlikely that the final outcome of any
of the claims or proceedings to which the Company is a party,
including those described above, would have a material adverse
effect on the Company's financial position or results of
operations; however, due to the inherent uncertainty of
litigation, the range of possible loss, if any, cannot be
estimated with a reasonable degree of precision and there can be
no assurance that the resolution of any particular claim or
proceeding would not have an adverse effect on the Company's
results of operations for the fiscal period in which such
resolution occurred.
<PAGE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following are the Company's financial and
operating highlights for the three months ended March 31, 1994
and 1993. The Partnership operating income (loss) amounts
presented below represent 100% of the Partnership's operating
income (loss) by segment. The amounts in the following table are
in thousands of dollars, unless otherwise noted:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
OPERATING REVENUES:
Refining and marketing . . . . . . . . . . . . . . . . . . . . $247,526 $249,308
Other operations . . . . . . . . . . . . . . . . . . . . . . . 33,751 46,454
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $281,277 $295,762
OPERATING INCOME (LOSS):
Refining and marketing . . . . . . . . . . . . . . . . . . . . $ 28,440 $ 22,344
Other operations and corporate general and
administrative expenses. . . . . . . . . . . . . . . . . . . (2,862) 2,309
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,578 $ 24,653
Equity in earnings (losses) of Valero Natural Gas Partners, L.P. $ (6,195) $ 3,368
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,283 $ 15,611
Net income applicable to common stock. . . . . . . . . . . . . . $ 5,751 $ 15,293
Earnings per share of common stock . . . . . . . . . . . . . . . $ .13 $ .36
REFINING AND MARKETING OPERATING STATISTICS:
Throughput volumes (Mbbls per day) . . . . . . . . . . . . . . 145 120
Average throughput margin per barrel . . . . . . . . . . . . . $ 6.08 $ 5.94
Sales volumes (Mbbls per day). . . . . . . . . . . . . . . . . 144 125
PARTNERSHIP OPERATING INCOME (LOSS):
Natural gas. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,989 $ 7,951
Natural gas liquids. . . . . . . . . . . . . . . . . . . . . . (1,237) 13,796
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,752 $ 21,747
</TABLE>
General
The Company reported net income of $6.3 million or
$.13 per share for the three months ended March 31, 1994,
compared to $15.6 million or $.36 per share, respectively, for
the same period in 1993. Operating income was $25.6 million for
the first quarter of 1994 compared to $24.7 million for the same
period in 1993, due to increased refining and marketing operating
income partially offset by decreased operating income from other
operations. The decrease in net income and earnings per share
was primarily a result of a decrease in the Company's equity in
earnings of the Partnership and decreased capitalized interest
resulting from the completion in 1993 of the Company's major
capital program.
Refining Operations
Refining's operating revenues were $247.5 million for
the first quarter of 1994 compared to $249.3 million for the same
period in 1993. Operating revenues remained level as a 13%
decrease in the average sales price per barrel was offset by a
15% increase in sales volumes. Increased production resulting
from the butane upgrade facility which began operation during the
second quarter of 1993 and other new Refinery units contributed
to the increase in sales and throughput volumes. Refining's cost
of sales decreased $11.6 million to $202.6 million for the first
quarter of 1994 compared to the same period in 1993 due to a
decrease in the average feedstock cost per barrel, partially
offset by the increase in throughput volumes. The Refinery's
HDS/HOC complex processes high-sulfur atmospheric tower bottoms,
a type of residual fuel oil ("resid") and the remainder of the
Refinery units process crude oil, butanes, methanol and other
feedstocks. Crude oil prices decreased more than gasoline prices
for the first quarter of 1994 compared to the same period in
1993. This benefit was partially offset by a decrease in the
discount per barrel at which resid sells to crude oil, resulting
from strong fuel oil demand in Europe and the Far East. This
average discount per barrel was $3.33 and $4.66 for the three
months ended March 31, 1994 and 1993, respectively. The average
throughput margin per barrel, before operating costs and
depreciation expense, for the first quarter of 1994 was $6.08
compared to $5.94 for the same period in 1993. Operating costs
and depreciation expense per barrel have remained relatively
level at approximately $4.00 per barrel, but have increased in
total for the first quarter of 1994 compared to the same period
in 1993 due primarily to operation of the butane upgrade facility
and other new Refinery units. As a result of the above factors,
Refining's operating income increased 27% to $28.4 million.
Refining margins for the first quarter of 1994 have
improved from late December levels as gasoline prices increased
somewhat faster than feedstock costs. However, MTBE prices have
not increased correspondingly with gasoline prices due to an
industrywide excess supply of MTBE. Unless refining margins
increase from current levels, refining margins for the second
quarter of 1994 are expected to be lower than second quarter 1993
levels.
Other Operations
The Company's other operations consist principally of
certain natural gas liquids assets. Prior to its sale on
September 30, 1993, the Company's other operations included the
results of Rio Grande Valley Gas Company ("RGV"), a natural gas
distribution subsidiary. Also included in other operations are
the Company's activities as the General Partner of the
Partnership and other miscellaneous revenues. The Company
receives a management fee, which is included in operating
revenues, equal to the direct and indirect costs incurred by it
on behalf of the Partnership.
Operating loss from other operations was $2.9 million
for the first quarter of 1994 compared to operating income of
$2.3 million for the same period in 1993. Operating income
decreased by $5.2 million due to a decrease in both NGL average
market prices and plant production volumes and the inclusion of
RGV's operating income in 1993 results.
The Company's equity in losses of the Partnership was
$6.2 million for the first quarter of 1994 compared to equity in
earnings of $3.4 million in the first quarter of 1993. The
Partnership's NGL operations incurred an operating loss of $1.2
million during the first quarter of 1994 compared to operating
income of $13.8 million during the same period in 1993 primarily
due to a 21% decrease in the average NGL market price and an
increase in fuel and shrinkage costs resulting from a 16%
increase in the cost of natural gas. The average NGL market
price decreased due to continued weak crude oil and refined
product prices. Operating income from natural gas operations
decreased by $5 million or 62% during the first quarter of 1994
compared to the same period in 1993. Operating expenses
increased due to a one-time charge related to the final
resolution of certain contractual disputes and an increase in
pipeline transportation and other expenses. Other reductions in
natural gas operating income resulting from a decrease in income
generated by the Partnership's Market Center Services Program, a
decrease in the recovery of VT, L.P.'s fixed costs resulting from
the settlement of a customer audit of VT, L.P.'s weighted average
cost of gas effective in the third quarter of 1993, and an
increase in fuel costs were offset by increases in gas sales
volumes and transportation revenues. Such increases were due to
continued strong demand for natural gas resulting from prolonged
cold weather in the U.S. during the 1994 first quarter, new term
sales business generated during the latter part of 1993 as a
result of the implementation of FERC Order 636, new
transportation business, and the continued shutdown of both units
of the South Texas Project nuclear plant ("STP") during the 1994
first quarter. However, the return to commercial service of Unit
No. 1 of the STP on April 8, 1994 and the expected return to
service of Unit No. 2 later in 1994 are expected to displace a
portion of the Partnership's gas sales and transportation volumes
for the customers served by the STP. As a result primarily of
increased stability in natural gas prices, income generated by
the Market Center Services Program is expected to be
significantly lower in 1994 than in 1993. The conditions which
resulted in the decreases in Partnership operating income in the
first quarter of 1994 compared to the first quarter of 1993 have
generally continued to date in the second quarter of 1994.
Interest and debt expense, net increased primarily due
to decreased capitalized interest resulting from the completion
in 1993 of various of the Company's new Refinery units. Income
tax expense decreased primarily due to lower pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1994, net cash provided by
the Company's operating activities totalled $31.4 million
compared to $36 million during the first quarter of 1993. As
described in Note 6 of Notes to Consolidated Financial
Statements, Energy issued 3,450,000 shares of $3.125 Convertible
Preferred Stock during March 1994 and received net cash proceeds
of approximately $168 million. The Company utilized the cash
provided by its operating activities and a portion of the net
cash proceeds from the Convertible Preferred Stock issuance to
reduce bank borrowings, to fund capital expenditures and
investments in joint ventures and to pay dividends. The Company
intends to use the remaining net cash proceeds from the issuance
of Convertible Preferred Stock to fund the proposed acquisition
of the limited partner interests in VNGP, L.P. not currently held
by the Company (see Note 5 of Notes to Consolidated Financial
Statements).
Refining currently maintains a $160 million revolving
credit and letter of credit facility that is available for
working capital purposes and matures September 30, 1996. Energy
has an unsecured $30 million revolving credit and letter of
credit facility which matures February 29, 1996. As of March 31,
1994, Refining and Energy had approximately $121 million and $29
million, respectively, available under their committed bank
credit facilities for additional borrowings and letters of
credit. Energy also currently has $50 million of unsecured
short-term credit lines which are unrestricted as to use, of
which no amounts were outstanding at March 31, 1994. Total
borrowings under Energy's bank credit facility and short-term
lines are limited to $50 million.
Certain of the Company's financing agreements contain
various financial ratio requirements, including debt-to-
capitalization tests. Under the most restrictive of the debt-to-
capitalization tests, the Company's indebtedness for borrowed
money may not exceed 40% of its capitalization as defined in the
agreements. At March 31, 1994, the debt-to-capitalization ratio
computed in accordance with such agreements was 31.2%.
The Company's financing agreements contain additional
covenants limiting Energy's ability to make certain "restricted
disbursements." At March 31, 1994, the Company had the ability
to pay approximately $229 million in Energy common stock ("Common
Stock") dividends and other restricted disbursements. However,
the Company's ability to pay additional Common Stock dividends
and other restricted disbursements in the future may also be
limited by the more restrictive fixed charge coverage ratio test
described in Part II, Item 5.
On March 31, 1994, Energy entered into a new $250
million revolving credit and letter of credit facility. This
facility is unsecured and provides for sublimits of $200 million
for direct advances and $150 million for letters of credit.
Availability under this facility reduces $16.7 million quarterly
beginning June 30, 1995 and expires on March 29, 1996. This
facility contains covenants limiting Energy's ability to make
certain "restricted payments," including dividend payments on and
redemptions, repurchases or exchanges of its capital stock and
advances and capital contributions to the Partnership, requires
Energy to maintain a minimum consolidated working capital and net
worth and also contains various financial requirements including
debt-to-capitalization and fixed charges. Effectiveness of the
facility and borrowing availability will occur simultaneously
with the proposed merger of Energy and the Partnership and will
replace all of the Company's and the Partnership's currently
existing committed bank credit facilities. It is also a
condition precedent to the effectiveness of Energy's new credit
facility that the litigation filed in response to the
announcement by Energy of its proposal to acquire the publicly
traded Common Units of VNGP, L.P. is settled. For a discussion
of the status of such litigation, see Note 7 of Notes to
Consolidated Financial Statements.
For 1994, the Company currently expects to expend
approximately $90 million for capital expenditures, deferred
turnaround and catalyst costs and investments in joint ventures,
$17.5 million of which was expended during the first quarter of
1994. In addition, the Company expects to pay approximately
$117.5 million for the publicly held equity interest of
approximately 51% in VNGP, L.P., as mentioned above and expects
to incur after the merger date the majority of an estimated $35
million in Partnership capital expenditures. The Company
believes it has sufficient funds from operations, the Convertible
Preferred Stock offering, and to the extent necessary, from the
public markets and private capital markets, to fund its current
and ongoing operating requirements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Coastal Oil and Gas Corporation v. TransAmerican
Natural Gas Corporation ("TANG"), 49th State District Court, Webb
County, Texas (filed October 30, 1991) (reported in the Company's
Form 10-K for the year ended December 31, 1992 as Transamerican
Natural Gas Corporation v. The Coastal Corporation et al). In
March 1993, VTC and Valero Industrial Gas Company were served as
third party defendants in this lawsuit. In August 1993, Energy,
VNGP, L.P. and certain of their respective subsidiaries were
named as additional third-party defendants (collectively,
including the original defendant subsidiaries, the "Valero
Defendants"). In TANG's counterclaims against Coastal and
third-party claims against the Valero Defendants, TANG alleged
that it contracted to sell natural gas to Coastal at the posted
field price of Valero Industrial Gas Company and that the Valero
Defendants and Coastal conspired to set such price at an
artificially low level. TANG also alleged that the Valero
Defendants and Coastal conspired to cause TANG to deliver
unprocessed or "wet" gas thus precluding TANG from extracting
NGLs from its gas prior to delivery. TANG sought actual and
punitive damages and attorneys' fees. On March 14, 1994, the
Valero Defendants and TANG executed a settlement agreement with
respect to this lawsuit on terms immaterial to the Partnership or
the Company.
J.M. Davidson, Inc. v. Valero Energy Corporation,
Valero Hydrocarbons, L.P., et al., 229th State District Court,
Duval County, Texas (filed January 21, 1993). Energy and Valero
Hydrocarbons, L.P. were named as original defendants in the
lawsuit filed in January 1993. Through the plaintiff's amended
petitions, the lawsuit now includes as additional defendants
VNGC; VNGP, L.P.; Valero Management Partnership, L.P.; VTC; VT,
L.P.; Valero Hydrocarbons Company; and Valero Management Company.
The lawsuit is based upon construction work performed by the
plaintiff at certain of the Partnership's gas processing plants
in 1991 and 1992. The plaintiff alleges that it performed work
for the defendants for which it was not compensated. The
plaintiff's second amended petition, filed April 30, 1994,
asserts claims for breach of contract, quantum meruit, wrongful
failure to pay retainage, fraudulent misrepresentation,
conspiracy, breach of the implied covenant of good faith and fair
dealing, and other commercial tort claims. The plaintiff alleges
actual damages of approximately $9.7 million and punitive damages
of $45.5 million. The defendants have filed a motion for summary
judgment and a motion to transfer venue to Bexar County.
In re Valero Natural Gas Partners, L.P. Litigation,
Consolidated Civil Action No. 13194, Court of Chancery, New
Castle County, Delaware (first suit filed October 15, 1993; all
suits consolidated November 23, 1993). Seven lawsuits were filed
in the Delaware Court of Chancery for New Castle County (the
"Chancery Court") in response to the announcement of Energy's
proposal to acquire the publicly traded Common Units of
VNGP, L.P. pursuant to a proposed merger of VNGP, L.P. with a
wholly owned subsidiary of Energy. The plaintiffs sought to
enjoin or rescind the proposed merger, alleging that the
corporate defendants and the individual defendants, as officers
or directors of the corporate defendants, engaged in actions in
breach of the defendants' fiduciary duties to the holders of the
Common Units by proposing the merger. The plaintiffs
alternatively sought an increase in the proposed merger
consideration, compensatory damages and attorneys' fees. In
December 1993, attorneys representing the plaintiffs entered into
a Memorandum of Understanding with Energy and VNGP, L.P. pursuant
to which the attorneys have agreed to recommend that the Chancery
Court approve a settlement of the litigation. The proposed
settlement will not require a material payment by the Company or
the Partnership. On April 29, 1994, notice of the proposed
settlement, including a description of the terms of the
settlement, was mailed to the Public Unitholders by order of the
Chancery Court. A hearing to consider approval of the settlement
has been scheduled in the Chancery Court for May 31, 1994.
The Long Trusts v. Tejas Gas Corporation, Valero
Transmission Company, and Valero Transmission, L.P., 123rd
Judicial District Court, Panola County, Texas (filed March 1,
1989). VTC, as buyer, and Tejas Gas Corporation ("Tejas"), as
seller, are parties to various gas purchase contracts assigned to
and assumed by VT, L.P. upon formation of the Partnership in 1987
(the "Valero Contracts"). In turn, Tejas has entered into a
series of gas purchase contracts between Tejas, as buyer, and
certain trusts (the "Long Trusts"), as seller (the "Long Trusts
Contracts"). The litigation originated in 1989 as a lawsuit by
the Long Trusts against Tejas. In the Long Trusts' claims
against Tejas, the Long Trusts claim that Tejas breached various
minimum take, take-or-pay and other contractual provisions in
connection with the Long Trusts Contracts, and seek alleged
actual damages, including interest, of approximately $30 million.
Neither VTC nor VT, L.P. was originally a party to the lawsuit.
However, because of the relationship between the Valero Contracts
and the Long Trusts Contracts, and in order to resolve existing
and potential disputes, Tejas, VTC and VT, L.P. agreed in
March 1991 to cooperate in the conduct of the litigation, and
agreed that VTC and VT, L.P. will bear a substantial portion of
the costs of any appeal and any nonappealable final judgment
rendered against Tejas. In January 1993, the District Court
ruled on the Long Trusts' motion for summary judgment, finding
that as a matter of law the Long Trusts Contracts were fully
binding and enforceable, that Tejas breached the minimum take
obligations under one of the contracts, that Tejas is not
entitled to claimed offsets for gas purchased by third parties
and that the "availability" of gas for take-or-pay purposes is
established solely by the delivery capacity testing procedures in
the contracts. Damages, if any, were not determined. On
April 15, 1994, the Long Trusts named VTC and VT, L.P. as
additional defendants (the "Valero Defendants") to the lawsuit,
alleging that the Valero Defendants maliciously interfered with
the Long Trusts Contracts. In the Long Trusts' claim against the
Valero Defendants, the Long Trusts seek unspecified actual and
punitive damages. The Company believes that the claims brought
by the Long Trusts have been significantly overstated, and that
Tejas and the Valero Defendants have a number of meritorious
defenses to the claims. This litigation is not currently set for
trial.
Valero Energy Corporation, et al. v. M.W. Kellogg
Company, et al., 117th Judicial District Court, Nueces County,
Texas (filed July 11, 1986). In the Company's suit against the
defendants, the Company asserted claims of breach of warranty,
breach of contract, negligence, gross negligence, strict
liability in tort and other claims in connection with services
performed by the defendants at the Refinery. The Company claimed
actual damages in excess of $165 million plus exemplary damages,
statutory penalties, attorney's fees and costs of court. In
September 1991, the court considered motions for summary judgment
filed by the Company, Kellogg and Ingersoll-Rand, another primary
defendant. On October 25, 1991, the court entered judgment which
granted the motions for summary judgment of Kellogg and
Ingersoll-Rand in their entirety, denied the motion for summary
judgment filed by the Company and entered a take-nothing judgment
against the Company dismissing all of the Company's claims with
prejudice. The Company appealed the trial court's decision to
the Thirteenth Court of Appeals, Corpus Christi, Texas. On June
30, 1993, the Court of Appeals affirmed the trial court's
decision. On April 20, 1994, the Texas Supreme Court denied the
Company's application for writ of error. On May 5, 1994, the
Company filed a motion for rehearing with the Texas Supreme Court.
Item 5. Other Information
PROPOSED MERGER WITH ENERGY
In connection with the proposed merger of VNGP, L.P.
with a wholly owned subsidiary of Energy, a special meeting of
the holders of Common Units has been scheduled for May 31, 1994.
A definitive proxy statement fully describing the proposed merger
and explaining the manner in which holders of Common Units may
cast their votes was filed with the Securities and Exchange
Commission and mailed to all unitholders on May 2, 1994.
Unitholders of record as of the close of business on April 28,
1994, will be entitled to vote at the special meeting. Also
scheduled for May 31, 1994, is a hearing in the Delaware Chancery
Court to consider the approval of a proposed settlement of
litigation filed in response to Energy's proposal to acquire the
outstanding Common Units held by the Public Unitholders pursuant
to the proposed merger. Notice of the proposed settlement was
mailed to the Public Unitholders on April 29, 1994. Subject to
approval of the settlement by the Chancery Court and to the
satisfaction of all other preconditions to the proposed merger
(see Note 5 of Notes to Consolidated Financial Statements), the
merger is expected to become effective on or about May 31, 1994.
$250 MILLION UNSECURED CREDIT FACILITY
On March 31, 1994, Energy entered into a new credit
agreement (the "New Credit Agreement") providing for a new
unsecured $250 million revolving bank credit and letter of credit
facility. The New Credit Agreement is conditioned upon, and will
not take effect until, the consummation of the merger of the
Partnership with a subsidiary of Energy (the "Merger").
Effectiveness of the New Credit Agreement is also conditioned
upon the settlement of the litigation styled In re Valero Natural
Gas Partners, L.P. Litigation, as described above under the
caption "Item 1-Legal Proceedings."
Upon consummation of the Merger, the New Credit
Agreement will replace Refining's $160 million secured revolving
credit facility, Energy's $30 million unsecured revolving credit
facility, and all of the Partnership's committed unsecured
revolving credit facilities. The New Credit Agreement, which
will expire March 29, 1996, permits direct advances to Energy of
up to $200 million and up to $150 million for letters of credit,
subject to the overall $250 million commitment limit. The
commitment amount will be reduced $16.7 million per quarter
beginning June 30, 1995, with 80% of each reduction applied to
direct advances and 20% to letters of credit. Borrowings under
the facility will bear interest, at the Company's option, at
LIBOR plus 1.25% or at the agent bank's prime rate. The Company
will be charged various fees, including commitment fees on the
unutilized portion, and various letter of credit and facility
fees. Indebtedness under the New Credit Agreement will rank
equally with Energy's other long-term debt.
The New Credit Agreement contains financial and other
covenants similar to the existing $160 million secured credit
facility of Refining and the existing $30 million unsecured
credit facility of Energy. The New Credit Agreement, however,
contains additional covenants and modifications to existing
covenants, primarily because borrowings under the new facility
shall be unsecured borrowings exclusively by Energy.
The New Credit Agreement restricts the payment of
dividends, the purchase, redemption or exchange of shares of
Energy's capital stock and the making of sinking fund payments
for the capital stock of Energy (collectively referred to as
"restricted payments") to the sum of: (i) the sum of 50% of the
Company's consolidated net income after September 30, 1993, plus
the amount of the noncash charge to income for the fourth quarter
of 1993 resulting from the write-down of the Company's refining
inventories valued on the LIFO method (the "LIFO Adjustment") on
an after-tax basis; (ii) 25% of the amount by which the proceeds
from the sale of capital stock after September 30, 1993, exceeds
Energy's Cost of the Merger (as defined in the New Credit
Agreement); and (iii) $40 million.
The New Credit Agreement also restricts disbursements
consisting of the aggregate of the foregoing restricted payments,
plus optional sinking fund payments or prepayments of
indebtedness, capital expenditures and certain capital
investments, including the Cost of the Merger (collectively,
"restricted disbursements"). Such restricted disbursements are
limited to the sum of: (i) $39.8 million; (ii) the sum of
aggregate earnings after September 30, 1993 (before taxes,
depreciation and amortization), plus the LIFO Adjustment;
(iii) proceeds from the sale of capital stock and issuance of
permitted debt after September 30, 1993; (iv) $50 million; and
(v) the net cash proceeds from permitted sales of assets after
September 30, 1993; less principal repayments of long-term
indebtedness after September 30, 1993.
Assuming that the New Credit Agreement were in effect
at March 31, 1994, the amount calculated to be available for
restricted payments under the restricted payments test was
approximately $73 million, and the amount calculated to be
available for restricted disbursements under the restricted
disbursements test was approximately $219 million. These amounts
include net proceeds of approximately $168 million from the
recently completed sale of Convertible Preferred Stock of Energy,
but do not include any amounts for the Cost of the Merger or
other payments, and are based solely on the financial information
of the Company as of March 31, 1994. When and if the Merger is
consummated and the New Credit Agreement becomes effective, these
tests will be based upon the consolidated financial information
of the Company, including the Partnership as a wholly owned
subsidiary partnership of Energy. Energy anticipates that
immediately prior to consummation of the Merger, Energy will make
a substantial capital contribution to the Partnership. The
Company also anticipates spending an estimated $124 million in
Costs of the Merger by the end of the second quarter of 1994. As
a result of these expenditures, the amount available for
restricted payments under the New Credit Agreement would be
reduced by approximately $31 million (25% of the estimated Cost
of the Merger). The amount available for restricted
disbursements would be reduced dollar-for-dollar by the
anticipated expenditures.
The New Credit Agreement requires Energy to maintain
$100 million of consolidated working capital. For purposes of
this requirement, "current assets" is defined to include the
unused portion of the New Credit Agreement, and "current
liabilities" is defined to include current maturities of long-
term debt (except for current maturities, if any, under the New
Credit Agreement). The consolidated net worth of Energy must be
at least $800 million, plus 50% of net income earned after
September 30, 1993, plus 75% of the proceeds from sales of
capital stock after September 30, 1993. The ratio of debt-to-
capitalization (which includes the LIFO Adjustment) of the
Company must be at least .575 to 1.0 until June 29, 1995, and
.55 to 1.0 thereafter. Refining's ratio of debt- (excluding debt
payable to its parent) to-capitalization (including the LIFO
Adjustment) may not exceed 12.5%.
Additionally, the fixed charge coverage ratio of
Energy may not be less than 1.6 to 1.0 for any period of four
consecutive "non-turnaround quarters" (i.e., any quarter in which
none of the major units at the Company's refinery is shut down
for scheduled or periodic maintenance for more than 14 days), or
1.1 to 1.0 for any single non-turnaround quarter during the
period from the initial borrowing under the New Credit Agreement
through June 29, 1995; and thereafter, 2.0 to 1.0 for any period
of four consecutive non-turnaround quarters, or 1.5 to 1.0 for
any single non-turnaround quarter. The fixed charge coverage
ratio is calculated by adding net income, interest expense,
deferred taxes, the LIFO Adjustment, depreciation, amortization
and other noncash charges, and dividing such sum by the sum of
interest incurred, dividends paid on all classes of capital stock
of Energy and mandatory redemptions of preferred stock.
The New Credit Agreement also requires the Company and
Refining to maintain a certain earnings coverage ratio, defined
as net income plus income taxes, interest and operating lease
expense and the LIFO Adjustment, divided by interest and
operating lease expense. For each of the Company and Refining
the earnings coverage ratio may not be less than 1.0 to 1.0 for
any four consecutive non-turnaround quarters during the period
from the initial borrowing date through June 29, 1995, and
1.25 to 1.0 for any four consecutive non-turnaround quarters
thereafter.
The New Credit Agreement also provides certain
limitations upon advances and capital contributions to the
Partnership after the Merger. Intercompany advances to the
Partnership are generally limited to $50 million. In addition,
75% of the amount (not to exceed $37.5 million) of the proceeds
from the issuance of certain permitted term indebtedness by
Energy after September 30, 1993, plus 75% of the amount (not to
exceed $37.5 million) of the proceeds from the issuance of equity
by Energy after September 30, 1993 in excess of the Cost of the
Merger may be advanced to the Partnership in the form of
intercompany advances or capital contributions. Additionally,
subsidiaries of Energy may lease assets valued at up to
$50 million to the Partnership and to subsidiaries of Energy that
hold common units of VNGP, L.P. Other provisions of the New
Credit Agreement include limitations upon additional debt and new
liens, restrictions upon mergers and actions that would reduce
Energy's capital position in certain subsidiaries, restrictions
upon entering into leases, unconditional purchase obligations,
transfers of assets and other agreements that would restrict the
receipt of Partnership distributions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
*10.1 $250,000,000 Credit Agreement, dated March 31,
1994, among Valero Energy Corporation, Bankers
Trust Company and Bank of Montreal as Managing
Agents, and the banks and co-agents party
thereto.
*11 Computation of Earnings Per Share.
Pursuant to paragraph 601(b)(4)(iii)(A) of Regulation
S-K, the registrant has omitted from the foregoing listing of
exhibits, and hereby agrees to furnish to the Commission upon its
request, copies of certain instruments, each relating to
long-term debt not exceeding 10 percent of the total assets of
the registrant and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
three-month period ended March 31, 1994.
*Filed herewith.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
VALERO ENERGY CORPORATION
(Registrant)
By: /s/ Don M. Heep
Don M. Heep
Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
Date: May 12, 1994
CREDIT AGREEMENT
among
VALERO ENERGY CORPORATION,
as Borrower,
The Banks and Co-Agents Named Herein,
BANKERS TRUST COMPANY
and
BANK OF MONTREAL,
as Managing Agents,
and
BANKERS TRUST COMPANY,
as Administrative Agent,
Dated as of
March 31, 1994
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENT. . . . . . . . . . . . . . . . . . .
ARTICLE I AMOUNT AND TERMS OF CREDIT . . . . . . . . . . .
SECTION 1.01 Loan Commitments.. . . . . . . . . . .
SECTION 1.02 Letter of Credit Commitment. . . . . .
SECTION 1.03 Notice of Borrowing. . . . . . . . . .
SECTION 1.04 Letter of Credit Requests. . . . . . .
SECTION 1.05 Disbursement of Funds. . . . . . . . .
SECTION 1.06 Notes. . . . . . . . . . . . . . . . .
SECTION 1.07 Existing Letters of Credit . . . . . .
ARTICLE II FEES AND INTEREST . . . . . . . . . . . . . . .
SECTION 2.01 Fees . . . . . . . . . . . . . . . . .
SECTION 2.02 Interest . . . . . . . . . . . . . . .
SECTION 2.03 Interest Periods .. . . . . . . . . .
SECTION 2.04 Computations . . . . . . . . . . . . .
ARTICLE III COMMITMENT REDUCTIONS
AND REPAYMENTS. . . . . . . . . . . . . . . . . . . . .
SECTION 3.01 Reduction of Commitments . . . . . . .
SECTION 3.02 Voluntary Prepayments. . . . . . . . .
SECTION 3.03 Mandatory Repayments . . . . . . . . .
SECTION 3.04 Agreement to Repay Letter of Credit
Drawings . . . . . . . . . . . . . .
SECTION 3.05 Method and Place of Payment. . . . . .
ARTICLE IV INCREASED COSTS, ETC. . . . . . . . . . . . . .
SECTION 4.01 Eurodollar Rate Not Ascertainable,
Etc. . . . . . . . . . . . . . . . .
SECTION 4.02 Illegality . . . . . . . . . . . . . .
SECTION 4.03 Increased Costs; Capital Adequacy. . .
SECTION 4.04 Change of Lending Office . . . . . . .
SECTION 4.05 Funding Losses . . . . . . . . . . . .
SECTION 4.06 Net Payments . . . . . . . . . . . . .
SECTION 4.07 Adjustment of Non-Pro Rata Payments. .
ARTICLE V CONDITIONS PRECEDENT . . . . . . . . . . . . . .
SECTION 5.01 Conditions Precedent to the Initial
Credit Event . . . . . . . . . . . .
SECTION 5.02. Conditions Precedent to All Credit
Events . . . . . . . . . . . . . . .
SECTION 5.03. Conditions Precedent to Certain
Credit Events. . . . . . . . . . . .
SECTION 5.04 Delivery of Documents. . . . . . . . .
ARTICLE VI REPRESENTATIONS AND WARRANTIES. . . . . . . . .
SECTION 6.01 Existence. . . . . . . . . . . . . . .
SECTION 6.02 Authorization of Agreement;
No Violation . . . . . . . . . . . .
SECTION 6.03 Approvals. . . . . . . . . . . . . . .
SECTION 6.04 Binding Effect . . . . . . . . . . . .
SECTION 6.05 Financial Information. . . . . . . . .
SECTION 6.06 Litigation . . . . . . . . . . . . . .
SECTION 6.07 Use of Proceeds. . . . . . . . . . . .
SECTION 6.08 Compliance with ERISA. . . . . . . . .
SECTION 6.09 Environmental Matters. . . . . . . . .
SECTION 6.10 Title to Assets. . . . . . . . . . . .
SECTION 6.11 Payment of Taxes . . . . . . . . . . .
SECTION 6.12 Governmental Regulation. . . . . . . .
SECTION 6.13 Partnership Merger . . . . . . . . . .
ARTICLE VII AFFIRMATIVE COVENANTS. . . . . . . . . . . . .
SECTION 7.01 Reporting Covenants. . . . . . . . . .
SECTION 7.02 Existence, Etc.. . . . . . . . . . . .
SECTION 7.03 Compliance with Laws, Etc. . . . . . .
SECTION 7.04 Payment of Taxes and Claims, Etc.. . .
SECTION 7.05 Keeping of Books . . . . . . . . . . .
SECTION 7.06 Visitation, Inspection, Etc. . . . . .
SECTION 7.07 Insurance. . . . . . . . . . . . . . .
SECTION 7.08 Further Assurances . . . . . . . . . .
SECTION 7.09 Repair and Maintenance of Properties .
SECTION 7.10 Covenant to Secure Notes Equally . . .
SECTION 7.11 Subordination Agreements . . . . . . .
SECTION 7.12 Termination of Certain Existing Debt .
ARTICLE VIII NEGATIVE COVENANTS. . . . . . . . . . . . . .
SECTION 8.01 Indebtedness . . . . . . . . . . . . .
SECTION 8.02 Liens. . . . . . . . . . . . . . . . .
SECTION 8.03 Restriction on Other Agreements. . . .
SECTION 8.04 Mergers, Etc.. . . . . . . . . . . . .
SECTION 8.05 Capital Stock. . . . . . . . . . . . .
SECTION 8.06 Leases . . . . . . . . . . . . . . . .
SECTION 8.07 Unconditional Purchase Obligations . .
SECTION 8.08 Transfer of Assets . . . . . . . . . .
SECTION 8.10 Transactions with Affiliates . . . . .
SECTION 8.11 Financial Covenants. . . . . . . . . .
SECTION 8.12 Restricted Payments and Disbursements.
SECTION 8.13 Business . . . . . . . . . . . . . . .
ARTICLE IX EVENTS OF DEFAULT . . . . . . . . . . . . . . .
SECTION 9.01 Events of Default. . . . . . . . . . .
SECTION 9.02 Other Remedies . . . . . . . . . . . .
ARTICLE X THE AGENTS . . . . . . . . . . . . . . . . . . .
SECTION 10.01 Appointment . . . . . . . . . . . . .
SECTION 10.02 Nature of Duties. . . . . . . . . . .
SECTION 10.03 Lack of Reliance on the Agents. . . .
SECTION 10.04 Certain Rights of the Agents. . . . .
SECTION 10.05 Reliance. . . . . . . . . . . . . . .
SECTION 10.06 Indemnification . . . . . . . . . . .
SECTION 10.07 Rights of Agents as Banks . . . . . .
SECTION 10.08 Holders . . . . . . . . . . . . . . .
SECTION 10.09 Resignation by the Administrative
Agent . . . . . . . . . . . . . . .
SECTION 10.10 Resignation by any Managing Agent
or Co-Agent . . . . . . . . . . . .
SECTION 10.11 Co-Agents . . . . . . . . . . . . . .
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . .
SECTION 11.01 Payment of Expenses, Etc. . . . . . .
SECTION 11.02 Right of Setoff . . . . . . . . . . .
SECTION 11.03 Notices . . . . . . . . . . . . . . .
SECTION 11.04 Benefit of Agreement; Participations
and Assignments . . . . . . . . . .
SECTION 11.05 No Waiver; Remedies Cumulative. . . .
SECTION 11.06 Indemnification . . . . . . . . . . .
SECTION 11.07 Governing Law; Submission to
Jurisdiction; Waiver of Immunities.
SECTION 11.08 Counterparts. . . . . . . . . . . . .
SECTION 11.09 Headings Descriptive. . . . . . . . .
SECTION 11.10 Amendment and Waiver. . . . . . . . .
SECTION 11.11 Survival. . . . . . . . . . . . . . .
SECTION 11.12 Interest. . . . . . . . . . . . . . .
SECTION 11.13 Withholding Taxes . . . . . . . . . .
SECTION 11.14 Independence of Covenants . . . . . .
SECTION 11.15 Senior Indebtedness . . . . . . . . .
SECTION 11.16 Separability. . . . . . . . . . . . .
SECTION 11.17 Final Agreement . . . . . . . . . . .
ARTICLE XII DEFINITIONS; CONSTRUCTION. . . . . . . . . . .
SECTION 12.01 Definitions . . . . . . . . . . . . .
SECTION 12.02 Other Definitional Terms. . . . . . .
SECTION 12.03 Types of Loans. . . . . . . . . . . .
SECTION 12.04 Accounting Matters. . . . . . . . . .
Exhibits and Schedules
Schedule 1.01-A Banks and Commitments
Schedule 8.01 Existing Indebtedness
Schedule 8.02 Existing Liens
Schedule 8.07 Natural Gas Storage Contracts
Exhibit 1.03 Form of Notice of Borrowing
Exhibit 1.04-A Form of Instructions to Issue Standby Letter
of Credit
Exhibit 1.04-B Form of Instructions to Issue Trade Letter of
Credit
Exhibit 1.06 Form of Note
Exhibit 8.01(c) Form of Subordination Agreement
Exhibit 11.04 Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of March 31, 1994 is
among VALERO ENERGY CORPORATION, a Delaware corporation (the
"Borrower"), the banks and co agents referred to herein, BANKERS
TRUST COMPANY and BANK OF MONTREAL, as Managing Agents, and
BANKERS TRUST COMPANY, as Administrative Agent. Unless otherwise
defined herein, all capitalized terms used herein and defined in
Article XII are used herein as so defined.
PRELIMINARY STATEMENT
The Borrower has requested that the Banks provide the
Borrower with a $250,000,000 credit facility, pursuant to which
the Banks will commit to make loans to the Borrower from time to
time and the Administrative Agent will commit to issue letters of
credit for the account of the Borrower from time to time. The
Banks and the Administrative Agent have agreed to provide such
credit facility and the Managing Agents have agreed to serve in
such capacities, all upon the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, the parties hereto agree as
follows:
ARTICLE I
AMOUNT AND TERMS OF CREDIT
SECTION 1.01 Loan Commitments. (a) Subject to and
upon the terms and conditions herein set forth, (i) each Bank
severally agrees, at any time and from time to time on and after
the Effective Date and prior to the Termination Date, to make
loans ("Loans") to the Borrower in an aggregate amount requested
by the Borrower not to exceed such Bank's Loan Commitment, and
(ii) the Total Loan Commitment in effect from time to time
(unless otherwise reduced or terminated pursuant to this
Agreement) shall equal the following amounts during the following
periods:
<TABLE>
<S> <C>
Period Total Loan Commitment
March 31, 1994 through June 29, 1995 $200,000,000
June 30, 1995 through September 29, 1995 186,666,667
September 30, 1995 through December 30, 1995 173,333,333
December 31, 1995 to (but excluding) Termination Date 160,000,000
On Termination Date -0-
</TABLE>
(b) Any Loans made pursuant to the provisions hereof
may be repaid and reborrowed in accordance with the provisions
hereof.
(c) Notwithstanding any provision hereof to the
contrary, no Loan shall be made hereunder if, after giving effect
thereto, (i) the aggregate outstanding principal amount of the
Loans made by all Banks would exceed the sum of (A) the Total
Loan Commitment minus (B) any outstanding Short Term Credit; or
(ii) the sum of (A) the aggregate outstanding principal amount of
the Loans made by all Banks plus (B) the Letter of Credit
Outstandings would exceed the sum of (1) the Total Commitment,
minus (2) any outstanding Short Term Credit.
(d) The aggregate principal amount of each Borrowing
shall be not less than (i) in the case of a Borrowing comprised
of Prime Rate Loans, $1,000,000 and shall be in integral
multiples of $100,000 in excess thereof, and (ii) in the case of
a Borrowing comprised of Eurodollar Rate Loans, $5,000,000 and
shall be in integral multiples of $1,000,000 in excess thereof.
(e) The Loans shall, at the option of the Borrower, be
made pursuant to one or more Borrowings, with each Borrowing
being comprised of a Loan from each Bank equal to such Bank's
Percentage Participation in such Borrowing. It is understood
that no Bank shall be responsible for any default by any other
Bank in its obligation to make Loans hereunder and that each Bank
shall be obligated to make the Loans to be made by it hereunder,
regardless of the failure of any other Bank to fulfill its
commitments hereunder.
SECTION 1.02 Letter of Credit Commitment. (a) Subject
to and upon the terms and conditions herein set forth, the
Borrower in its sole and absolute discretion may request the
Administrative Agent to issue, and the Administrative Agent
agrees to issue, at any time and from time to time on or after
the Effective Date and prior to the Termination Date, one or more
irrevocable letters of credit ("Letters of Credit") for the
account of the Borrower, and for the benefit of any obligee of
payment obligations of the Borrower or any of its Subsidiaries,
in an aggregate amount not to exceed the Letter of Credit
Sublimit in effect from time to time, which (unless otherwise
reduced or terminated pursuant to this Agreement) shall equal the
following amounts during the following periods:
<TABLE>
<S> <C>
Period Letter of Credit Sublimit
March 31, 1994 through June 29, 1995 $150,000,000
June 30, 1995 through September 29, 1995 146,666,666
September 30, 1995 through December 30, 1995 143,333,333
December 31, 1995 to (but excluding) Termination Date 140,000,000
On Termination Date -0-
</TABLE>
(b) Each Letter of Credit shall be in a form
customarily used by the Administrative Agent on the Effective
Date or otherwise in such form as may be approved by the
Administrative Agent and the Managing Agents, and shall be issued
as (i) a standby Letter of Credit (the "Standby Letters of
Credit") or (ii) a commercial Letter of Credit (the "Trade
Letters of Credit"). Each Letter of Credit shall be subject to
the Uniform Customs and Practice for Documentary Credits (1994
Revision), International Chamber of Commerce Publication No. 500,
(and any subsequent revisions thereof approved by a Congress of
the International Chamber of Commerce and adhered to by the
Administrative Agent), and shall also be subject to Section 5-114
of the New York Uniform Commercial Code.
(c) Notwithstanding any provision hereof to the
contrary, no Letter of Credit shall be issued hereunder if, after
giving effect thereto, the sum of (A) the Letter of Credit
Outstandings plus (B) the aggregate outstanding principal amount
of the Loans would exceed the sum of (1) the Total Commitment,
minus (2) any outstanding Short Term Credit.
(d) Notwithstanding the foregoing, unless all of the
Banks otherwise agree in writing, each Letter of Credit issued
hereunder shall (i) be denominated in Dollars and provide for the
payment of sight drafts and or documents when presented for honor
thereunder in accordance with the terms thereof and accompanied
by the documents described therein, and (ii) have an expiry date
occurring not later than the earliest of (1) one year after the
date of issuance in the case of a Standby Letter of Credit, (2)
180 days after the date of issuance in the case of a Trade Letter
of Credit, or (3) the Termination Date. Notwithstanding anything
to the contrary contained in clause (ii) of the preceding
sentence, if requested prior to the Termination Date, but not
earlier than 45 days prior to the expiry date of any Standby
Letter of Credit, the expiry date of such Standby Letter of
Credit may be extended for a period of up to one year from the
expiry date in effect before giving effect to such extension (but
in no event later than the Termination Date) so long as such
Standby Letter of Credit could otherwise be issued pursuant to
this Section 1.02 and Article V at such time.
(e) Upon the issuance of any Letter of Credit (or upon
the Effective Date with respect to any Existing Letter of
Credit), the Administrative Agent shall be deemed to have sold
and each Bank shall be deemed to have acquired, an undivided
participation in each Letter of Credit issued by the
Administrative Agent in accordance with the terms hereof and in
each Drawing made thereunder in a percentage equal to the
Percentage Participation of such Bank.
SECTION 1.03 Notice of Borrowing. (a) Whenever the
Borrower desires to make a Borrowing hereunder, the Borrower
shall give written or facsimile notice (or telephonic notice
promptly confirmed in writing or by facsimile) to the
Administrative Agent at the New York Office (i) in the case of a
Borrowing to be comprised of Prime Rate Loans not later than
12:00 noon (New York time) on the Business Day upon which the
proceeds of such Borrowing are to be made available to the
Borrower and (ii) in the case of a Borrowing to be comprised of
Eurodollar Rate Loans, not later than 12:00 noon (New York time)
on the third Business Day prior to the date upon which the
proceeds of such Borrowing are to be made available to the
Borrower. At the time each such notice (each such notice being a
"Notice of Borrowing") is given to the Administrative Agent at
the New York Office, a copy shall be given to B.T. Southwest,
Inc., 3000 Two Houston Center, Houston, Texas 77010, Attention:
Loan Administration Section. Each Notice of Borrowing shall be
irrevocable and shall be in the form of Exhibit 1.03 specifying
(i) the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, (ii) the date of the Borrowing (which
shall be a Business Day), (iii) whether the Type of Loans to be
made pursuant to such Borrowing are to be Prime Rate Loans or
Eurodollar Rate Loans and (iv) if the proposed Borrowing is to be
comprised of Eurodollar Rate Loans, the Interest Period
applicable thereto. The Borrower may submit one or more Notices
of Borrowing, requesting one or more Types of Loans, on any
Business Day. Except as otherwise specifically provided herein,
all Loans comprising all or a portion of the same Borrowing shall
at all times be of the same Type and, in the case of a Borrowing
comprised of Eurodollar Rate Loans, shall have the same Interest
Period.
(b) Without in any way limiting the Borrower's
obligation to confirm in writing or by facsimile any telephonic
notice, the Administrative Agent may act without liability upon
the basis of telephonic notice believed by the Administrative
Agent in good faith to be from the Borrower prior to receipt of
written confirmation. In each such case, the Borrower hereby
waives the right to dispute the Administrative Agent's record of
the terms of such telephonic Notice of Borrowing.
(c) The Administrative Agent shall promptly give the
Banks written or facsimile notice or telephonic notice (promptly
confirmed in writing or by facsimile) of each proposed Borrowing,
of each Bank's proportionate share thereof and of the other
matters covered by the Notice of Borrowing.
SECTION 1.04 Letter of Credit Requests. Whenever the
Borrower desires that a Letter of Credit be issued for its
account, the Borrower shall give the Administrative Agent (a) in
the case of a Letter of Credit to be issued in a form customarily
used by the Administrative Agent on the Effective Date or a form
previously approved by the Administrative Agent and the Managing
Agent, at least one Business Day's written, facsimile or
telephonic notice (if telephonic, promptly confirmed in writing
or by facsimile) thereof, (b) in the case of a Letter of Credit
to be issued in a form other than as set forth in clause (a)
above, at least two Business Days written, facsimile or
telephonic notice (if telephonic, promptly confirmed in writing
or by facsimile) thereof (it being understood and agreed that the
Administrative Agent shall have no obligation to issue a Letter
of Credit in such non customary form unless such form is approved
by the Administrative Agent and the Managing Agents), including
instructions in the form of Exhibit 1.04 A in the case of Standby
Letters of Credit or Exhibit 1.04 B in the case of Trade Letters
of Credit, and any letter of credit applications or other
documents that the Administrative Agent customarily requires in
connection therewith. In the event any provision of any letter
of credit application is inconsistent with, or in conflict of,
any provision of this Agreement, the provisions of this Agreement
shall control.
SECTION 1.05 Disbursement of Funds. (a) No later
than (i) 12:00 noon (New York time) on the date of each Borrowing
of Eurodollar Rate Loans or (ii) 3:00 p.m. (New York time) on the
date of each Borrowing of Prime Rate Loans, each Bank will make
available its pro rata portion of the amount of such Borrowing in
U.S. dollars and in immediately available funds at the Payment
Office. The Administrative Agent will make available to the
Borrower at the Payment Office the aggregate of the amounts (if
any) so made available by the Banks.
(b) Unless the Administrative Agent shall have been
notified by a Bank prior to the date of a Borrowing that such
Bank does not intend to make available to the Administrative
Agent such Bank's portion of the Borrowing to be made on such
date, the Administrative Agent may assume that such Bank has made
such amount available to the Administrative Agent on such date of
Borrowing and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding
amount. If such corresponding amount is not made available to
the Administrative Agent by such Bank and the Administrative
Agent has made such amount available to the Borrower, the
Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Bank. If such Bank does
not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent
shall promptly notify the Borrower, and the Borrower shall pay
such corresponding amount to the Administrative Agent within two
Business Days after demand therefor. The Administrative Agent
shall also be entitled to recover from such Bank or the Borrower,
as the case may be, interest on such corresponding amount from
the date such corresponding amount was made available by the
Administrative Agent to the Borrower to the date such
corresponding amount is recovered by the Administrative Agent, at
a rate per annum equal to (i) if paid by such Bank, the overnight
Federal funds rate or (ii) if paid by the Borrower (1) on or
before the date that is two days after demand therefor, the
lesser of (A) the Highest Lawful Rate or (B) the rate per annum
then in effect pursuant to Section 2.02 with respect to the Loans
made by the other Banks comprising the remainder of such
Borrowing and (2) thereafter, the lesser of (A) the Highest
Lawful Rate or (B) 2 1/2% in excess of the Prime Lending Rate in
effect from time to time, plus the applicable Prime Rate Margin
in effect from time to time; provided, however, that no such Loan
shall bear interest pursuant to this clause (2) at a rate per
annum less than the rate of interest applicable thereto pursuant
to clause (1) above. Nothing herein shall be deemed to relieve
any Bank from its obligation to fulfill its commitments hereunder
or to prejudice any rights which the Borrower may have against
any Bank as a result of any default by such Bank hereunder.
SECTION 1.06 Notes. (a) The Borrower's obligation
to pay the principal of, and interest on, all the Loans made by
each Bank shall be evidenced by a promissory note duly executed
and delivered by the Borrower substantially in the form of
Exhibit 1.06 hereto with blanks appropriately completed in
conformity herewith (each a "Note" and collectively, the
"Notes"), which Note shall (i) be payable to the order of such
Bank, (ii) be in the stated principal amount equal to the Loan
Commitment of such Bank, (iii) mature, with respect to each
Eurodollar Rate Loan evidenced thereby, on the last day of the
Interest Period applicable thereto, and with respect to each
Prime Rate Loan evidenced thereby, on the Termination Date, (iv)
bear interest as provided herein and (v) be entitled to the
benefits of this Agreement and the other Credit Documents.
(b) Each Bank will note on its internal records, to
the extent applicable, the date, amount and Type and, to the
extent applicable, the Interest Period for each Loan made by such
Bank to the Borrower hereunder, and the amount of each payment in
respect thereof and will prior to any transfer of any of its
Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in
respect of such Loans. Absent manifest error, any Bank's records
or notations on any Note as to the outstanding principal amount
of its Loans shall be conclusive.
(c) Any Bank may, by notice to the Borrower and the
Administrative Agent, request that its Loans of a particular Type
be evidenced by a separate Note of the Borrower payable to such
Bank (or such Lending Office or branch of such Bank as such Bank
may specify in such request). Any Bank that receives multiple
Notes pursuant to this Section 1.06(c) agrees that: (1) the
aggregate principal amount payable by the Borrower under such
Notes shall never exceed the aggregate principal amount of the
Loans made by such Bank (including, if applicable, the separate
Lending Offices or branches of such Bank) and (2) the payees of
the Notes issued at the request of such Bank shall enjoy no
greater rights (voting or otherwise) than such Bank would enjoy
in the absence of such request and such payees (including, if
applicable, the separate Lending Offices and branches of such
Bank) shall be considered a single Bank for purposes of this
Agreement. Each Note issued pursuant to this Section 1.06(c)
shall be in a form consistent with the provisions of Section
1.06(a), with appropriate modifications to reflect the fact that
such Note evidences only Loans of a certain Type. Each reference
in the Credit Documents to the "Note" of such Bank shall be
deemed to refer to and include any or all of such Notes, as the
context may require.
SECTION 1.07 Existing Letters of Credit. Any letter
of credit issued by the Administrative Agent for the account of
the Borrower and Refining prior to the date hereof pursuant to
the Existing VEC Bank Agreement and the Refining Bank Agreement,
respectively, and outstanding on the Effective Date (each an
"Existing Letter of Credit") shall, on and after the Effective
Date, constitute a Letter of Credit for all purposes of this
Agreement. With respect to any Existing Letter of Credit issued
for the account of Refining, Refining, VRMC and the Borrower
shall continue to be jointly and severally liable for all
obligations of Refining in respect thereof. If requested by the
Managing Agents, the Borrower shall, and shall cause VRMC and
Refining to, execute and deliver such guaranties and other
agreements as the Managing Agents may reasonably request to
further evidence such joint and several liability.
ARTICLE II
FEES AND INTEREST
SECTION 2.01 Fees. (a) Commitment Fee. The
Borrower agrees to pay the Administrative Agent for the account
of each Bank a commitment fee for the period from and including
the earlier of the Effective Date or May 20, 1994 to but
excluding the date upon which the Total Commitment shall have
been terminated, determined by multiplying the daily average
Unutilized Commitment of such Bank by the lowest rate per annum
determined as follows:
<TABLE>
<S> <C>
Borrower's Long Term
Senior Unsecured Debt Rating Rate Per Annum
A3 or better by Moody's and A - or better by S&P 25/100 of 1%
Baa3 or better by Moody's and BBB - or better by S&P 40/100 of 1%
Lower than Baa3 (or not rated) by Moody's or lower 50/100 of 1%
than BBB - (or not rated) by S&P
</TABLE>
Any commitment fee payable pursuant to this Section 2.01(a) (i)
shall be calculated to the end of each calendar quarter and to
the date upon which the Total Commitment is terminated and (ii)
shall be due and payable in arrears on the third Business Day
following the end of each calendar quarter during the term hereof
and on the date upon which the Total Commitment is terminated.
(b) Usage Fee. For each day that the sum of (i) the
aggregate outstanding principal amount of the Loans, plus (ii)
the Letter of Credit Outstandings exceeds sixty five percent
(65%) of the Total Commitment, the Borrower agrees to pay the
Administrative Agent for the account of each Bank, a fee equal to
such Bank's Commitment multiplied by a rate equal to 1/8 of 1%
per annum. Any fee payable pursuant to this Section 2.01(b) (A)
shall be calculated, to the extent applicable, to the end of each
calendar quarter and to the date upon which the Total Commitment
is terminated and (B) shall be due and payable in arrears on the
third Business Day following the end of each calendar quarter
during the term hereof and on the date upon which the Total
Commitment is terminated.
(c) Administrative Agency Fee. The Borrower agrees to
pay the Administrative Agent, for its own account, an
administrative fee for acting as Administrative Agent hereunder
in the amount of $18,750 per calendar quarter for each calendar
quarter, or portion thereof, during which the Administrative
Agent is acting as Administrative Agent hereunder, which
administrative fee shall be payable quarterly in arrears on the
third Business Day following the end of each calendar quarter
during the term hereof (commencing with the calendar quarter
ending on June 30, 1994) and on the date upon which the Total
Commitment is terminated and all amounts owing hereunder have
been paid in full. The administrative fee payable to the
Administrative Agent for the calendar quarter ending on June 30,
1994 shall include (without duplication) the administrative fees
payable to BTCo, as agent under the Existing VEC Bank Agreement
and the Refining Bank Agreement for the period commencing on
April 1, 1994 and ending on the Effective Date and no additional
administrative fees shall be payable under the Existing VEC Bank
Agreement and the Refining Bank Agreement for such period.
(d) Upfront Fees. On March 31, 1994 the Borrower
agrees to pay to BT Securities Corporation, BMO and each of the
Banks, for their own accounts, such fees as have been agreed to
in writing from time to time by the Borrower.
(e) Trade Letter of Credit Fees. (i) The Borrower
agrees to pay the Administrative Agent, for the account of the
Banks, a fee in respect of each Trade Letter of Credit issued
hereunder in an amount determined by multiplying the Stated
Amount of such Trade Letter of Credit by the lowest rate
determined as follows:
<TABLE>
<CAPTION>
Term of Trade Letter Borrower's Long Term
of Credit Senior Unsecured Debt Rating
Baa3 or better by Lower than Baa3 (or
Moody's and BBB - or not rated) by Moody s
Better by S&P or lower than BBB -
(or not rated) by S&P
<S> <C> <C>
60 days or less 25/100 of 1% 40/100 of 1%
61 days or more but 35/100 of 1% 55/100 of 1%
less than 91 days
91 days or more but 45/100 of 1% 70/100 of 1%
less than 121 days
121 days or more but 60/100 of 1% 90/100 of 1%
less than 151 days
151 days or longer 65/100 of 1% 1%
</TABLE>
Any fee payable pursuant to this Section 2.01(e)(i) shall be
distributed by the Administrative Agent to the Banks in
accordance with the respective Percentage Participations of the
Banks and shall be due and payable on the earlier of (A) the
third Business Day following the end of the calendar quarter in
which such Trade Letter of Credit was issued and (B) the date
upon which the Total Commitment is terminated.
(ii) The Borrower agrees to pay the Administrative
Agent, for its own account, a fee in respect of each Trade Letter
of Credit issued hereunder, computed at the rate of (i) 1/32 of
1% of the Stated Amount of any Trade Letters of Credit having a
term of 90 days or less and (ii) 1/16 of 1% of the Stated Amount
of any Trade Letter of Credit having a term of more than 90 days.
Any fee payable pursuant to this Section 2.01(e)(ii) shall be due
and payable on the earlier of (A) the third Business Day
following the end of the calendar quarter in which such Trade
Letter of Credit was issued and (B) the date upon which the Total
Commitment is terminated. The Borrower agrees to pay the
Administrative Agent such administrative fees as the
Administrative Agent customarily charges in respect of issuing,
amending and or making payments under its Trade Letters of
Credit.
(f) Standby Letter of Credit Fees. (i) The Borrower
agrees to pay to the Administrative Agent, for the account of the
Banks, a fee in respect of each Standby Letter of Credit issued
hereunder computed at the rate of 1/8 of 1% per annum, plus the
applicable Eurodollar Rate Margin on the average daily Stated
Amount of such Standby Letter of Credit. Any fee payable
pursuant to this subsection shall be distributed by the
Administrative Agent to the Banks in accordance with the
respective Percentage Participations of the Banks, shall be
calculated to the end of each calendar quarter and to the date
upon which the Total Commitment is terminated, and shall be due
and payable in arrears on the third Business Day following the
end of each calendar quarter during the term hereof and the date
upon which the Total Commitment is terminated.
(ii) The Borrower agrees to pay the Administrative
Agent, for its own account, a fee in respect of each Standby
Letter of Credit issued hereunder computed at the rate of 1/8 of
1% per annum on the average daily Stated Amount of such Standby
Letter of Credit. Such fees shall be calculated to the end of
each calendar quarter and to the date upon which the Total
Commitment is terminated, and shall be due and payable on the
third Business Day following the end of each calendar quarter
during the term hereof and on the date upon which the Total
Commitment is terminated.
(iii) Without duplication of any administrative
fees paid by the Borrower in respect of the issuance of any
Existing Letter of Credit, the Borrower agrees to pay to the
Administrative Agent, with respect to the issuance of, amendment
of, or payment made under any Letter of Credit, processing
charges in accordance with the Administrative Agent's standard
schedule for such charges in effect at the time of such issuance,
amendment or payment, as the case may be.
SECTION 2.02 Interest. (a) The Borrower agrees to
pay interest on the unpaid principal amount of each Prime Rate
Loan at a rate per annum equal to the lesser of (i) the Highest
Lawful Rate or (ii) the Prime Lending Rate in effect from time to
time plus the applicable Prime Rate Margin in effect from time to
time. As used herein "Prime Rate Margin" shall mean the lowest
rate of interest per annum determined as follows:
<TABLE>
<S> <C>
Borrower's Long Term Prime
Senior Unsecured Debt Rating Rate Margin
Baa3 or better by Moody's and BBB- or better by S&P 0%
Baa3 or better by Moody's and BB+ or better by S&P 1/8 of 1%
Ba1 or better by Moody's and BBB- or better by S&P 1/8 of 1%
Ba1 by Moody's and BB+ by S&P 3/8 of 1%
Lower than Ba1 (or not rated) by Moody's or 3/4 of 1%
lower than BB+(or not rated) by S&P
</TABLE>
(b) The Borrower agrees to pay interest on the unpaid
principal amount of each Eurodollar Rate Loan at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate or (ii) the
Eurodollar Rate for the Interest Period applicable thereto, plus
the applicable Eurodollar Rate Margin in effect from time to time
during such Interest Period. As used herein "Eurodollar Rate
Margin" shall mean the lowest rate of interest per annum
determined as follows:
<TABLE>
<S> <C>
Borrower's Long Term Eurodollar
Senior Unsecured Debt Rating Rate Margin
A3 or better by Moody's and A- or better by S&P 4/5 of 1%
Baa3 or better by Moody's and BBB- or better by S&P 1 1/4%
Baa3 or better by Moody's and BB+ or better by S&P 1 5/8%
Ba1 or better by Moody's and BBB- or better by S&P 1 5/8%
Ba1 by Moody's and BB+ by S&P 1 7/8%
Lower than Ba1 (or not rated) by Moody's or 2 1/4%
lower than BB+(or not rated) by S&P
</TABLE>
(c) The Borrower agrees to pay interest in respect of
overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and all other overdue amounts
owing hereunder for each day that such amounts are overdue at a
rate per annum equal to the lesser of (i) the Highest Lawful Rate
or (ii) 2 1/2% in excess of the Prime Lending Rate in effect from
time to time, plus the applicable Prime Rate Margin in effect
from time to time; provided, however, that no Loan shall bear
interest after maturity (whether by acceleration or otherwise) at
a rate per annum less than the rate of interest applicable
thereto at maturity.
(d) Interest on each Loan shall accrue from, and
including, the date of such Loan to, but excluding, the date of
any repayment thereof and shall be payable (i) in respect of
Eurodollar Rate Loans (A) on the last day of the Interest Period
applicable thereto and in the case of any Interest Period in
excess of three months, on such day which occurs every three
months after the initial date of such Interest Period, and (B) on
the date of any voluntary repayment (on the amount repaid), (ii)
in respect of each Prime Rate Loan, on the third Business Day
following the end of each calendar quarter during the term hereof
(calculated to the end of such calendar quarter) and (iii) in
respect of each Loan, on the date of any involuntary repayment
(on the amount repaid), at maturity (whether by acceleration or
otherwise) and, after maturity, on demand.
(e) The Administrative Agent, upon determining the
Eurodollar Rate for any Interest Period, shall promptly notify,
by telephone (confirmed in writing or by facsimile) or in writing
or by facsimile, the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and
conclusive and binding on all parties hereto.
(f) The Borrower shall pay to each Bank additional
interest on the unpaid principal amount of each Eurodollar Rate
Loan of such Bank, from the date of such Loan until such
principal amount is paid in full, at an interest rate per annum
equal at all times to the remainder obtained by subtracting (i)
the Eurodollar Rate for the Interest Period for such Loan from
(ii) the rate obtained by dividing such Eurodollar Rate by a
percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage, if any, for such Interest Period. Such additional
interest shall be (i) calculated by the Administrative Agent, who
shall notify the Borrower of the amount of such interest and (ii)
payable on the next interest payment date applicable to such
Eurodollar Rate Loan. As used herein, "Eurodollar Rate Reserve
Percentage""shall mean the stated maximum rate (stated as a
percentage) of all reserves (including, without limitation, any
marginal, emergency, supplemental, special or other reserves), if
any, required to be maintained by any Reference Bank against
"eurocurrency liabilities" as specified in Regulation D (or
against any other category of liabilities which includes deposits
by reference to which the interest rate on Eurodollar Rate Loans
is determined).
SECTION 2.03 Interest Periods. At the time the
Borrower gives any Notice of Borrowing for a Eurodollar
Borrowing, the Borrower shall have the right to elect, by giving
the Administrative Agent notice thereof, the interest period
(each an "Interest Period") applicable to such Eurodollar
Borrowing, which Interest Period shall be either a one, two,
three or six month period, subject to the following:
(a) all Loans comprising a Eurodollar Borrowing shall
at all times have the same Interest Period;
(b) the Interest Period for any Eurodollar Borrowing
shall commence on the date of such Borrowing;
(c) if any Interest Period relating to a Eurodollar
Borrowing begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(d) if any Interest Period would otherwise expire on a
day which is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; provided, that if any
Interest Period would otherwise expire on a day which is not a
Business Day, but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(e) no Interest Period shall extend beyond the
Termination Date; and
(f) at no time shall more than ten Interest Periods be
in effect.
SECTION 2.04 Computations. All computations of
interest on Prime Rate Loans and of Fees shall be made on the
basis of a year of 365 or 366 days, as the case may be, and all
computations of interest on Eurodollar Rate Loans shall be made
on the basis of a year of 360 days (unless such computation would
cause the interest on the Loans to exceed the Highest Lawful Rate
in which event such interest shall be computed on the basis of a
year of 365 or 366 days, as the case may be), in each case, for
the actual number of days elapsed.
ARTICLE III
COMMITMENT REDUCTIONS
AND REPAYMENTS
SECTION 3.01 Reduction of Commitments. (a) Upon at
least five Business Days prior telephonic notice confirmed in
writing or facsimile to the Administrative Agent (which notice
the Administrative Agent shall promptly transmit to each of the
Banks), the Borrower shall have the right, without premium or
penalty, to terminate the Total Unutilized Commitment in part or
in whole; provided, that (i) any such reduction shall
proportionately reduce the respective Commitments and Loan
Commitments of the Banks and (ii) any such partial reduction
shall be in the amount of $5,000,000 or, if greater, an integral
multiple of $1,000,000 and shall be applied to the scheduled
reductions of the Total Commitment otherwise required by Section
3.01(b) in direct order of the occurrence of such scheduled
reductions.
(b) Unless otherwise reduced or terminated pursuant to
this Agreement, the Total Commitment shall equal the following
amounts during the following periods:
<TABLE>
<S> <C>
Period Total Commitment
March 31, 1994 through June 29, 1995 $250,000,000
June 30, 1995 through September 29, 1995 233,333,333
September 30, 1995 through December 30, 1995 216,666,666
December 31, 1995 to (but excluding) Termination Date 200,000,000
On Termination Date -0-
</TABLE>
Each such scheduled reduction of the Total Commitment shall
proportionately reduce the respective Commitments and Loan
Commitments of the Banks.
SECTION 3.02 Voluntary Prepayments. The Borrower
shall have the right to voluntarily prepay the Loans in whole or
in part from time to time on the following terms and conditions:
(i) the Borrower shall give the Administrative Agent at its New
York Office written, facsimile or telephonic notice (promptly
confirmed in writing or by facsimile), not later than 12:00 noon
(New York time) on the Business Day on which it desires to
prepay, of its intent to prepay the Loans, the principal amount
of such prepayment, the Type of Loans to be prepaid and the
specific Borrowing or Borrowings relating to such Loans, which
notice the Administrative Agent shall promptly transmit to each
of the Banks; (ii) subject to payment of any amounts specified in
Section 4.05, the Borrower shall have the right to voluntarily
prepay any Eurodollar Rate Loan prior to the last day of its
Interest Period; (iii) each prepayment of Prime Rate Loans shall
be in an aggregate principal amount of $1,000,000 or an integral
multiple of $100,000 in excess thereof, and each prepayment of
Eurodollar Rate Loans shall be in an aggregate principal amount
of $1,000,000 or an integral multiple of $1,000,000 in excess
thereof, provided that no partial prepayment of Eurodollar Rate
Loans made pursuant to any Borrowing shall reduce the outstanding
Loans made pursuant to such Borrowing to an amount less than
$5,000,000 and (iv) each prepayment pursuant to this Section 3.02
shall be applied pro rata among the designated outstanding Loans
of each of the Banks, in the case of Eurodollar Rate Loans,
first, to the payment of accrued and unpaid interest, then, in
the case of all Loans, to the outstanding principal of such
Loans.
SECTION 3.03 Mandatory Repayments. (a) Subject to
the provisions of Section 4.05, on any day on which:
(i) the sum of (A) the aggregate outstanding principal
amount of the Loans made by all of the Banks, plus (B) the Letter
of Credit Outstandings at such time, exceeds the sum of (1) the
Total Commitment, minus (2) any outstanding Short Term Credit,
the Borrower shall prepay the Loans in an amount equal to such
excess; if after giving effect to the repayment of all
outstanding Loans, the Letter of Credit Outstandings exceed the
Total Commitment minus any outstanding Short Term Credit, the
Borrower shall pay an amount of cash equal to such excess Letter
of Credit Outstandings to the Administrative Agent at this
payment office, such cash to be held as security for all
obligations of the Borrower;
(ii) the aggregate outstanding principal amount of the
Loans made by all of the Banks exceeds the sum of (A) the Total
Loan Commitment minus (B) any outstanding Short Term Credit, the
Borrower shall repay the Loans in an amount equal to such excess;
or
(iii) the Letter of Credit Outstandings exceed the
Letter of Credit Sublimit, the Borrower shall pay an amount of
cash equal to such excess Letter of Credit Outstandings to the
Administrative Agent at the Payment Office, such cash to be held
as security for all Obligations of the Borrower.
(b) With respect to each repayment of Loans required
by Section 3.03(a), the Borrower may, consistent with the
requirements of Section 3.03(a), designate the Types of Loans and
the specific Borrowing or Borrowings which are to be repaid;
provided, that: (i) repayments of Eurodollar Rate Loans made
pursuant to Section 3.03(a) may only be made on the last day of
an Interest Period applicable thereto unless all Eurodollar Rate
Loans with Interest Periods ending on such date of required
repayment and all Prime Rate Loans have been paid in full; or
(ii) if any repayment of Eurodollar Rate Loans made pursuant to a
single Borrowing shall reduce the outstanding Loans made pursuant
to such Borrowing to an amount less than $5,000,000, such
Borrowing shall immediately and automatically be converted into
Prime Rate Loans. In the absence of a designation by the
Borrower as described in the preceding sentence or in the event
such designation conflicts with the requirements of Section
3.03(a), the Administrative Agent shall, subject to the above and
in accordance with Section 3.03(a), make such designation in its
sole discretion.
(c) On the Termination Date all outstanding
Obligations shall be fully due and payable.
SECTION 3.04 Agreement to Repay Letter of Credit
Drawings. (a) The Borrower hereby agrees to reimburse the
Administrative Agent at the Administrative Agent's Payment
Office, for any payment or disbursement made by the
Administrative Agent under any Letter of Credit (each such amount
so paid or disbursed until reimbursed, an "Unpaid Drawing")
within one Business Day after the date of such payment or
disbursement with interest on the amount so paid or disbursed by
the Administrative Agent, to the extent not reimbursed prior to
12:00 noon, New York time, on the date of such payment or
disbursement, from and including the date paid or disbursed to,
but excluding, the date the Administrative Agent was reimbursed
therefor at a rate per annum which shall be (i) to, but
excluding, the first Business Day following the date of such
Unpaid Drawing, the lesser of (A) the Highest Lawful Rate or (B)
the rate of interest that would be applicable to Prime Rate Loans
during such period pursuant to Section 2.02, and (ii) from and
including such first Business Day, the lesser of (A) the Highest
Lawful Rate or (B) the Prime Lending Rate in effect from time to
time, plus the applicable Prime Rate Margin in effect from time
to time, plus 2 1/2%, such interest to be payable on demand.
(b) The Borrower's obligations under this Section 3.04
to reimburse the Administrative Agent with respect to Unpaid
Drawings in respect of Letters of Credit (including, in each
case, interest thereon) shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower may have or
have had against any Bank (including the Administrative Agent in
its capacity as issuer of the Letter of Credit or as a Bank),
including, without limitation, any defense based upon the failure
of any drawing under a Letter of Credit (each a "Drawing") to
conform to the terms of the Letter of Credit or any
nonapplication or misapplication by the beneficiary of the
proceeds of such Drawing. The Borrower assumes all risks as a
result of the acts or omissions of the user of any Letter of
Credit and all risks of the misuse of any Letter of Credit. The
Administrative Agent in its capacity as issuer of any Letter of
Credit shall not be liable (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document reasonably believed to be genuine by the Person
examining such document in connection with any Letter of Credit,
even if it should prove to be in any respect invalid,
insufficient, inaccurate, fraudulent or forged, (ii) for the
validity or insufficiency of any instrument transferring or
assigning or purporting to assign any Letter of Credit or the
rights and benefits thereunder or the proceeds thereof, (iii) for
clerical, administrative or other ministerial errors, such as
failure of any draft to bear any reference or adequate reference
to any applicable Letter of Credit, or failure of any Person to
note the amount of any draft on any applicable Letter of Credit
or to surrender or take up any applicable Letter of Credit or to
send forward any such document apart from drafts as required by
the terms of any Letter of Credit, each of which provisions, if
contained in any Letter of Credit, may be waived by the
Administrative Agent in its capacity as issuing bank, (iv) for
errors, omissions, interruptions or delays in transmissions or
delivery of any message, by mail, telegraph, telex or otherwise,
(v) for any error, neglect, default, suspension or insolvency of
any correspondent, (vi) for errors in translation or for errors
in interpretation of technical terms, (vii) for any loss or delay
in the transmission or otherwise of any Letter of Credit or any
document or draft in connection therewith or the proceeds
thereof, or (viii) for any consequence arising from causes beyond
the control of the Administrative Agent in its capacity as
issuing bank. Notwithstanding the foregoing, the Borrower shall
not be obligated to reimburse the Administrative Agent for any
wrongful payment made by the Administrative Agent under a Letter
of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Administrative
Agent, IT BEING THE INTENTION THAT THE BORROWER SHALL BE
OBLIGATED TO REIMBURSE THE ADMINISTRATIVE AGENT FOR ANY WRONGFUL
PAYMENT RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OF THE ADMINISTRATIVE AGENT.
(c) Promptly upon the occurrence of any Unpaid
Drawing, the Administrative Agent shall notify the Borrower and
the Banks thereof. Failure to give such notice, however, shall
not affect the obligations of the Borrower or the Banks in
respect of such Unpaid Drawing.
(d) Promptly after receiving notice of any Unpaid
Drawing, each Bank shall pay to the Administrative Agent the
amount of such Bank's Percentage Participation in such Unpaid
Drawing by transferring the same to the Administrative Agent in
immediately available funds at the Payment Office. To the extent
any Bank does not effect such payment on the date of any Unpaid
Drawing, such Bank agrees to pay interest to the Administrative
Agent on such amount until such payment is made at the overnight
Federal funds rate. If a Bank shall have made all payments to
the Administrative Agent required by this Section 3.04(d), the
Administrative Agent shall pay such Bank its proportionate share
of all payments received by the Administrative Agent from the
Borrower in respect of Unpaid Drawings, all as, and, to the
extent possible, when received by the Administrative Agent.
SECTION 3.05 Method and Place of Payment. Except as
otherwise specifically provided herein, (i) all payments under
this Agreement shall be made to the Administrative Agent for the
account of the Bank or Banks entitled thereto not later than
12:00 noon (New York time) on the date when due and shall be made
in lawful money of the United States of America in immediately
available funds at the Administrative Agent's Payment Office,
(ii) whenever any payment to be made under this Agreement or any
other Credit Document shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and, with respect to payments of
principal, interest shall be payable at the applicable rate
during such extension, and (iii) upon receipt of each payment
from or on behalf of the Borrower hereunder, the Administrative
Agent shall distribute such payment to each Bank at the Lending
Office of such Bank (or otherwise in accordance with instructions
received from such Bank), pro rata based upon such Bank's
proportionate share of the Obligations with respect to which such
payment was received.
ARTICLE IV
INCREASED COSTS, ETC.
SECTION 4.01 Eurodollar Rate Not Ascertainable, Etc.
In the event that the Administrative Agent shall have determined
(which determination shall, absent manifest error, be final,
conclusive and binding upon all parties) that on any date for
determining the Eurodollar Rate for any Interest Period, by
reason of any changes arising after the date of this Agreement
affecting the applicable interbank eurodollar market or any
Bank's position in such markets, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Eurodollar Rate, then, and in
any such event, the Administrative Agent shall forthwith give
notice (by telephone, confirmed in writing or by facsimile) to
the Borrower and to the Banks of such determination. Until the
Administrative Agent notifies the Borrower that the circumstances
giving rise to the suspension described herein no longer exist,
the obligations of the Banks to make Eurodollar Rate Loans shall
be suspended.
SECTION 4.02 Illegality. (a) In the event that any
Bank shall have determined (which determination shall, absent
manifest error, be final, conclusive and binding upon all
parties) at any time that the making or continuance of any
Eurodollar Rate Loan has become unlawful by compliance by such
Bank in good faith with any applicable law, governmental rule,
regulation, guideline or order (whether or not having the force
of law and whether or not failure to comply therewith would be
unlawful), then, in any such event, the Bank shall give prompt
notice (by telephone, confirmed in writing or by facsimile) to
the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall
promptly transmit to the other Banks).
(b) Upon the giving of the notice to the Borrower
referred to in subsection (a) above, (i) the Borrower's right to
request and such Bank's obligation to make Eurodollar Rate Loans
shall be immediately suspended, and such Bank shall make a Loan
as part of the requested Borrowing of Eurodollar Rate Loans as a
Prime Rate Loan for a period identical to the Interest Period for
such requested Eurodollar Rate Loans, which Prime Rate Loan
shall, for all other purposes, be considered part of such
Borrowing and (ii) if the affected Eurodollar Rate Loans are then
outstanding, the Borrower shall immediately, or if permitted by
applicable law, no later than the date permitted thereby, upon at
least one Business Day s written notice to the Administrative
Agent and the affected Bank, convert each such Loan into a Prime
Rate Loan for the remainder of the Interest Period applicable to
the affected Eurodollar Rate Loans; provided, that if more than
one Bank is affected at any time, then all affected Banks must be
treated the same pursuant to this Section 4.02(b).
SECTION 4.03 Increased Costs; Capital Adequacy.
(a) If, at any time after the date hereof, due to (i) the
introduction of or any change (excluding any change by way of
imposition or increase of reserve requirements covered by Section
2.02(f)) in any applicable law, rule or regulation or in the
interpretation or administration thereof by any governmental
authority charged with the interpretation or administration
thereof, or (ii) compliance with any guideline or request from
any central bank or other governmental or quasi governmental
authority exercising control over banks or financial institutions
generally (whether or not having the force of law), there is (A)
an increase in the cost to the Administrative Agent or any Bank
of issuing, maintaining or participating in any Letter of Credit,
or agreeing to make, making or maintaining any Eurodollar Rate
Loan, or (B) a reduction in the amount of any sum received or
receivable by the Administrative Agent or any Bank hereunder,
then, upon demand (with a copy of any such demand made by a Bank
to the Administrative Agent), the Borrower shall pay to the
Administrative Agent or such Bank, as the case may be, such
additional amount or amounts as will compensate the
Administrative Agent or such Bank, as the case may be, for such
increased cost or reduction of receipts. In determining such
additional amounts, the Administrative Agent and the Banks agree
to act reasonably and in good faith.
(b) Without duplication of any amounts payable under
clause (a), if any Bank determines that compliance with any law
or regulation or any guideline or request from any central bank
or other governmental authority (whether or not having the force
of law) affects or would affect the amount of capital required or
expected to be maintained by such Bank or any corporation
controlling such Bank and that the amount of such capital is
increased by or based upon the existence of such Bank's
Commitment and other commitments of this type, then, upon demand
by such Bank to the Borrower (with a copy of such demand to the
Administrative Agent), the Borrower shall, pursuant to Section
4.03(d), pay to such Bank, from time to time as specified by such
Bank, additional amounts sufficient to compensate such Bank or
such corporation in the light of such circumstances, to the
extent that such Bank reasonably determines such increase in
capital to be allocable to the existence of such Bank's
Commitment hereunder. In determining such additional amounts,
each Bank agrees to act reasonably and in good faith and shall
use its best efforts to allocate all increases resulting from any
such capital adequacy requirement on a fair and reasonable basis.
(c) If any Bank shall advise the Administrative Agent
that at any time, because of the circumstances described in
Section 4.03(a) or Section 4.03(b) or any other circumstances
arising after the date hereof affecting such Bank or the
applicable interbank eurodollar market or such Bank's position in
such market, the Eurodollar Rate, as determined by the
Administrative Agent, will not adequately and fairly reflect the
cost to such Bank of funding its Eurodollar Rate Loans, then, and
in any such event: (i) the Administrative Agent shall forthwith
give notice (by telephone confirmed in writing or by facsimile)
to the Borrower and to the Banks of such advice; (ii) the
Borrower's right to request, and such Bank's obligation to make,
Eurodollar Rate Loans shall be immediately suspended; and (iii)
such Bank shall make a Loan as part of the requested Borrowing of
Eurodollar Rate Loans as a Prime Rate Loan for a period identical
to the Interest Period for such requested Eurodollar Rate Loans,
which Prime Rate Loan shall, for all other purposes, be
considered part of such Borrowing.
(d) The Administrative Agent and each Bank will notify
the Borrower and the Administrative Agent of any event occurring
after the date hereof which will entitle the Administrative Agent
or such Bank to compensation pursuant to this Section 4.03, as
promptly as practical, and in any event within 90 days after it
becomes aware thereof and determines to request compensation
pursuant to this Section 4.03. A certificate submitted by the
Administrative Agent or such Bank, as the case may be, to the
Borrower and the Administrative Agent setting forth the amount
necessary to compensate the Administrative Agent or such Bank, as
the case may be, as specified in Section 4.03(a) or Section
4.03(b) and, in the case of any such certificate seeking
compensation pursuant to Section 4.03(a), setting forth the basis
for the determination of such additional amount, shall be
conclusive and binding on the Borrower for all purposes, absent
manifest error. No such certificate shall claim compensation
pursuant to this Section 4.03 for any period other than the
period commencing 90 days prior to the date of the postal mark
shown on the envelope in which such certificate is mailed through
the U.S. mails or, if such certificate is delivered by hand, the
date shown on the receipt for such delivery. The Borrower shall
pay to the Administrative Agent or such Bank the amount shown as
due on any such certificate within ten days after its receipt of
same.
(e) Except as expressly provided in the third sentence
of Section 4.03(d), failure on the part of any Bank to demand
compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital with
respect to any Interest Period shall not constitute a waiver of
the Administrative Agent's or such Bank's rights to demand
compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital with
respect to such Interest Period, any other Interest Period or,
any other period. The protection of this Section 4.03 shall be
available to the Administrative Agent and each Bank regardless of
any possible contention of invalidity or inapplicability of law,
regulation or condition which shall have been imposed.
(f) In the event any Bank shall seek compensation
pursuant to this Section 4.03, the Borrower may give notice to
such Bank (with copy to the Administrative Agent) that it wishes
to seek one or more financial institutions (which may be one or
more of the Banks) to assume the Commitment of such Bank and to
purchase its outstanding Loans and Notes and its interest in the
Letter of Credit Outstandings. Each Bank requesting compensation
pursuant to this Section 4.03 agrees to sell its Commitment,
Loans, Note and interest in this Agreement and the other Credit
Documents to any such financial institution pursuant to, and
subject to the conditions contained in, Section 11.04(c).
SECTION 4.04 Change of Lending Office. Each Bank
agrees that it will use reasonable efforts to designate an
alternate Lending Office with respect to any of its Eurodollar
Rate Loans affected by the matters or circumstances described in
Sections 4.01, Section 4.02 or Section 4.03 to reduce the
liability of the Borrower or avoid the results provided
thereunder, so long as such designation is not disadvantageous to
such Bank as determined by such Bank in its sole discretion.
SECTION 4.05 Funding Losses. The Borrower shall
compensate each Bank, upon its written request (which request
shall set forth the basis for requesting such amounts and which
request shall, absent manifest error, be final, conclusive and
binding upon all of the parties hereto), for all losses, expenses
and liabilities (including, without limitation, any interest paid
by such Bank to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans to the extent not recovered by such
Bank in connection with the re employment of such funds and
including loss of anticipated profits), which such Bank may
sustain: (i) if for any reason (other than a default by such
Bank) a Borrowing of Eurodollar Rate Loans does not occur on the
date specified therefor in a Notice of Borrowing, (ii) if any
repayment of any of its Eurodollar Rate Loans occurs on a date
which is not the last day of an Interest Period applicable
thereto or (iii) if, for any reason, the Borrower defaults in its
obligation to repay its Eurodollar Rate Loans when required by
the terms of this Agreement.
SECTION 4.06 Net Payments. (a) Any and all payments
by the Borrower under this Agreement, the Notes or any other
Credit Document shall be made without setoff, counterclaim or
other defense and shall be made free and clear of and without
deducting for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding taxes on or measured by the net
income of a Bank pursuant to the tax laws of the jurisdiction in
which such Bank is organized (or any political subdivision
thereof) or the jurisdiction in which such Bank's principal
office or offices or lending office or offices are located (or
any political subdivision thereof) and the taxes the Borrower is
required to deduct pursuant to Section 4.06(e) (all such non
excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable to any Bank or any
Agent under this Agreement, any Note or any other Credit
Document, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 4.06) such Bank, or such Agent, as the case may be,
receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies which arise from any
payment made under this Agreement, the Notes or any other Credit
Document or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Notes or any other
Credit Document (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Bank and each
Agent for the full amount of Taxes or Other Taxes (including,
without limitation any Taxes or Other Taxes imposed by any
jurisdiction on payments payable under this Section 4.06) paid by
such Bank or Agent (on its own behalf or on behalf of any Bank),
as the case may be, in respect of payments made or to be made
hereunder and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date
such Bank or Agent, as the case may be, makes written demand
therefor. The Borrower's obligation under this Section 4.06
shall survive the payment in full of the Loans.
(d) Within 30 days after the date of any payment of
Taxes or Other Taxes, the Borrower will furnish to the
Administrative Agent, at the Administrative Agent's Payment
Office, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Each Bank represents that it is either (i) a
corporation organized under the laws of the United States or any
State thereof or (ii) entitled to complete exemption from United
States withholding tax imposed on or with respect to any
payments, including fees, to be made to it pursuant to this
Agreement and the other Credit Documents (y) under an applicable
provision of a tax convention to which the United States is a
party or (z) because it is acting through a branch, agency or
office in the United States and any payment to be received by it
under this Agreement and the other Credit Documents is
effectively connected with a trade or business in the United
States. Each Bank that is not a corporation organized under the
laws of the United States or any State thereof (a "Foreign Bank")
agrees to provide to the Borrower and the Administrative Agent on
or prior to the Effective Date in the case of each Foreign Bank
signatory hereto, and on the date of the Assignment and
Acceptance pursuant to which it became a Bank in the case of each
other Foreign Bank, and at such other times as required by United
States law or as the Borrower or the Administrative Agent shall
reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form 4224 (or any
successor form) certifying that all payments to be made to such
Foreign Bank under this Agreement and the other Credit Documents
will be effectively connected to a United States trade or
business (the "Form 4224 Certification") or (B) Internal Revenue
Service Form 1001 (or any successor form) certifying that such
Foreign Bank is entitled to the benefits of a provision of a tax
convention to which the United States is a party which completely
exempts from United States withholding tax all payments to be
made to such Foreign Bank under this Agreement and the other
Credit Documents (the "Form 1001 Certification"). In addition,
each Foreign Bank agrees that if such Foreign Bank previously
filed a Form 1001 Certification it will deliver to the Borrower
and the Administrative Agent a new Form 1001 Certification prior
to the first payment date falling in the third year following the
previous filing of such Form 1001 Certification; and if such
Foreign Bank previously filed a Form 4224 Certification it will
deliver to the Borrower and the Administrative Agent a new Form
4224 Certification prior to the first payment date occurring in
each of its subsequent taxable years. Each Foreign Bank also
agrees to deliver to the Borrower and the Administrative Agent
such other supplemental forms as may at any time be required as a
result of changes in applicable law, rule, regulation or treaty
or the circumstances of such Foreign Bank in order to confirm or
maintain in effect its entitlement to complete exemption from
U.S. withholding tax on any payments hereunder; provided that the
circumstances of such Foreign Bank at the relevant time and
applicable laws permit it to do so. If a Foreign Bank
determines, as a result of any change in either (1) applicable
law, rule, regulation or treaty, or in any official application
thereof, or (2) its circumstances, that it is unable to submit
any form or certificate that it is obligated to submit pursuant
to this Section 4.06(e), or that it is required to withdraw or
cancel any such form or certificate previously submitted, it
shall promptly notify the Borrower and the Administrative Agent
of such fact (a "Withholding Notice"). If the Borrower and the
Administrative Agent have not received from any Foreign Bank a
Form 1001 Certification or Form 4224 Certification satisfactory
to them indicating that all payments to be made to such Foreign
Bank under this Agreement and the other Credit Documents are not
subject to United States withholding tax, the Borrower shall
withhold taxes from all payments at the applicable statutory
rate; provided, that if the Borrower shall so deduct or withhold
any such taxes, it shall provide a statement to the
Administrative Agent and such Foreign Bank, setting forth the
amount of such taxes so deducted or withheld, the applicable rate
and any other information or documentation which such Foreign
Bank may reasonably request for purposes of assisting such
Foreign Bank in obtaining any allowable credits or deductions for
the taxes so deducted or withheld. Each Bank agrees to indemnify
and hold the Borrower and the Administrative Agent harmless from
any United States taxes, penalties, interest and other expenses,
costs and losses incurred or payable by them as a result of
either (y) such Bank's failure to submit any form that it is
required to provide pursuant to this Section 4.06(e) or (z) the
Administrative Agent's and the Borrower's reliance on any such
form which such Bank has provided to them, or on the
representation of such Bank made to them pursuant to this Section
4.06(e).
SECTION 4.07 Adjustment of Non Pro-Rata Payments.
Except as otherwise expressly provided in this Agreement, each of
the Banks agrees that if it should receive any amount hereunder
(whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right
under the Credit Documents, or otherwise) applicable to the
payment of the principal of, or interest on, the Loans or Unpaid
Drawings, which amount with respect to the related sum or sums
received by other Banks, is in a greater proportion than the
proportion of the total of such Obligations then owed and due to
such Bank relative to the total of such Obligations then owed and
due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in
the Obligations to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount;
provided, that if all or any portion of such excess amount is
thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such
recovery, together with its pro rata share of any interest on
such excess amount paid by such Bank as part of such recovery.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions Precedent to the Initial
Credit Event. The obligation of the Banks to make the initial
Loan hereunder or of the Administrative Agent to issue the
initial Letter of Credit hereunder is subject to the conditions
precedent that the Managing Agents and the Banks shall have
received the following:
(a) The following documents duly executed by the
Persons indicated:
(i) this Agreement executed by each party hereto,
(ii) a Note executed by the Borrower and payable to the
order of each Bank, and
(iii) any agreements to be executed by the Borrower
pursuant to Section 2.01(d).
(b) A certificate of the secretary or an assistant
secretary of the Borrower certifying, inter alia, (i) true and
correct copies of the certificate of incorporation and bylaws of
the Borrower, each as amended and in effect, as well as
resolutions adopted by the Board of Directors of the Borrower (or
a duly authorized committee thereof) (A) authorizing (1) the
execution, delivery and performance by the Borrower of this
Agreement and the other Credit Documents and the Borrowings to be
made or Letters of Credit to be issued hereunder, and (2) the
consummation of the transactions contemplated hereby (including,
without limitation, the Partnership Merger), (B) approving the
forms of the Credit Documents which will be delivered at or prior
to the date of the initial Borrowing and (C) authorizing officers
of the Borrower to execute and deliver the Credit Documents and
any related documents, including, without limitation, any
agreement contemplated by this Agreement, (ii) the incumbency and
specimen signatures of the officers of the Borrower executing any
documents on its behalf and (iii) to the best of his or her
knowledge after due inquiry, there are no proceedings for the
dissolution or liquidation of the Borrower.
(c) Certificates of appropriate public officials as to
the existence, good standing and qualification to do business as
a foreign corporation or partnership, as applicable, of each of
the Borrower, VRMC, Refining, the Partnership, VMP and VNGC in
each jurisdiction in which the ownership of its properties or the
conduct of its business requires such qualifications and where
the failure to so qualify would have a material adverse effect on
the business, financial position, results of operation or
prospects of such Person.
(d) A certificate signed by a Financial Officer of the
Borrower dated the Effective Date and stating that:
(i) as of the date of such certificate (A) the
representations and warranties made by the Borrower in this
Agreement are true and correct as of, and as if such
representations and warranties were made on, the date of the
proposed Loan or Letter of Credit, (B) no Default or Event of
Default has occurred and is continuing or would result from the
making of such Loan or the issuance of such Letter of Credit, and
(C) the other conditions set forth in Section 5.03 have been
satisfied;
(ii) as of the date of such certificate the Borrower's
long term, senior unsecured debt is then rated not less than Baa3
and BBB , respectively, by Moody's and S&P, and the Borrower has
not received notice that either Moody's or S&P plans to reduce
its rating of the Borrower's long term, senior unsecured debt;
(iii) all loans owing by the Borrower, VRMC and
Refining under the Existing VEC Bank Agreement and the Refining
Bank Agreement have been paid in full or will be paid on the
Effective Date with the proceeds of the initial Loans hereunder,
and the Borrower and Refining have given notice to terminate the
commitments of the lenders party to the Existing VEC Bank
Agreement and the Refining Bank Agreement, respectively;
(iv) all Indebtedness of the Partnership Group (other
than the First Mortgage Notes and intercompany Indebtedness
permitted by this Agreement) has been paid in full or will be
paid on the Effective Date with the proceeds of the initial Loans
hereunder, and notice to terminate the funding commitments (if
any) of the holders of such Indebtedness has been given;
(v) all agreements relating to any Indebtedness of the
Borrower and its Subsidiaries outstanding on the Effective Date
have, to the extent necessary, been amended to permit the
consummation of the Partnership Merger (which amendments shall be
in form and substance satisfactory to the Managing Agents); and
(vi) attached thereto are schedules showing as of the
date of such certificate (A) all the Borrower's existing
insurance coverage, (B) all Existing Letters of Credit and (C)
all Subsidiaries of the Borrower (including the Partnership
Group) and specifying the Material Subsidiaries.
(e) The Administrative Agent shall have received a
letter from the Process Agent accepting its appointment, and
agreeing to act, as such pursuant to Section 11.07.
(f) A favorable, signed opinion dated the Effective
Date and addressed to the Managing Agents and the Banks from
Andrews & Kurth L.L.P., counsel to the Administrative Agent and
the Managing Agents, in form and substance satisfactory to the
Managing Agents.
(g) A favorable, signed opinion dated the Effective
Date and addressed to the Managing Agents and the Banks from the
General Counsel of the Borrower, in form and substance
satisfactory to the Managing Agents.
(h) The payment of all Fees and expenses payable on or
prior to the Effective Date.
(i) Such other documents, agreements and opinions as
the Managing Agents and the Required Banks may reasonably
request, all in form and substance reasonably satisfactory to the
Managing Agents and the Required Banks.
The acceptance of the benefits of the initial Credit Event by the
Borrower shall constitute a representation and warranty by the
Borrower to the Agents and each of the Banks that all of the
conditions specified in this Article V above have been and remain
satisfied as of that time.
SECTION 5.02. Conditions Precedent to All Credit
Events. The obligation of the Banks to make any Loan or of the
Administrative Agent to issue any Letter of Credit is subject to
the further conditions precedent that on the date such Loan is
made or such Letter of Credit is issued:
(a) The conditions precedent set forth in Section 5.01
shall have been and remain satisfied.
(b) The representations and warranties set forth in
Article VI (other than Section 6.05(d)) shall be true and correct
as of, and as if such representations and warranties were made
on, the date of the proposed Loan or Letter of Credit, as the
case may be.
(c) No Event of Default shall have occurred and be
continuing or would result from the making of such Loan or the
issuance of such Letter of Credit.
(d) The Managing Agents and the Banks shall have
received such other approvals, opinions or documents as the
Managing Agents or the Banks may reasonably request.
The Borrower's acceptance of the benefits of a Credit Event shall
constitute a representation and warranty by the Borrower to the
Agents and each of the Banks that all of the conditions specified
in this Section 5.02 have been satisfied as of that time.
SECTION 5.03. Conditions Precedent to Certain Credit
Events. The obligation of (A) the Banks to make (1) any
Eurodollar Rate Loan or (2) any Loan that would increase the
aggregate outstanding principal amount of the Loans or (B) the
Administrative Agent to issue any Letter of Credit (including any
Loan made or Letter of Credit issued on the date of the initial
Credit Event), is subject to the further conditions precedent
that on the date such Loan is made or such Letter of Credit is
issued:
(a) The conditions precedent set forth in Section 5.02
shall have been and remain satisfied.
(b) The representation and warranty set forth in
Section 6.05(d) shall be true and correct as of, and as if such
representation and warranty was made on, the date of the proposed
Loan or Letter of Credit, as the case may be.
(c) No Default shall have occurred and be continuing
or would result from the making of such Loan or the issuance of
such Letter of Credit.
(d) The Managing Agents and the Banks shall have
received such other approvals, opinions or documents as the
Managing Agents or the Banks may reasonably request.
The Borrower's acceptance of the benefits of a Credit Event shall
constitute a representation and warranty by the Borrower to the
Agents and each of the Banks that all of the conditions specified
in this Section 5.03 have been satisfied as of that time.
SECTION 5.04 Delivery of Documents. All of the
Notes, certificates, legal opinions and other documents and
papers referred to in this Article V, unless otherwise specified,
shall be delivered to the Administrative Agent at the
Administrative Agent's New York Office for the account of each of
the Banks and, except for the Notes, in sufficient counterparts
for each of the Banks and shall be satisfactory in form and
substance to the Managing Agents.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
SECTION 6.01 Existence. Each of the Borrower and its
Subsidiaries is a corporation duly organized or a limited
partnership duly formed, as applicable, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation or formation, as applicable, and is duly qualified
or authorized to do business as a foreign corporation or foreign
limited partnership, as applicable, and is in good standing in
each jurisdiction in which the ownership of its properties or the
conduct of its business requires such qualification and where the
failure to so qualify could have a material adverse effect on the
business, financial position, results of operations or prospects
of (i) the Borrower and its Subsidiaries, taken as a whole, (ii)
Refining, (iii) VRMC, (iv) the Partnership or (v) VMP. Each of
the Borrower and its Subsidiaries has all corporate or
partnership, as applicable, power and all governmental licenses,
authorizations, consents and approvals required to own its assets
and to carry on its business as now conducted and to consummate
the transactions contemplated hereby (including, without
limitation, the Partnership Merger).
SECTION 6.02 Authorization of Agreement; No
Violation. The execution, delivery, and performance by the
Borrower of the Credit Documents and the consummation of the
transactions contemplated hereby (including, without limitation,
the Partnership Merger) (i) are within the corporate or
partnership, as applicable, powers of the Borrower and, with
respect to the Partnership Merger, VNGC, the Partnership and
Valero Merger Partnership, L.P., (ii) have been duly authorized
by all necessary corporate or partnership, as applicable, action,
(iii) do not violate or create a default under any provision of
applicable law, or, to the extent applicable, the certificate of
incorporation, bylaws, partnership agreement or other charter
document of the Borrower or any of its Subsidiaries, or any
contractual provision binding on or affecting any such Person or
its property, and (iv) do not contravene any judgment,
injunction, order or decree or other instrument binding upon the
Borrower or any of its Subsidiaries or result in the creation or
imposition of any Lien on any asset of any such Person.
SECTION 6.03 Approvals. No authorization or approval
or other action by, and no notice to or filing or registration
with, any governmental authority or regulatory body or any other
Person is required in connection with the execution, delivery and
performance by the Borrower of the Credit Documents or the
consummation of the transactions contemplated thereby (including,
without limitation, the Partnership Merger) other than those that
have been obtained, given or made and are in full force and
effect.
SECTION 6.04 Binding Effect. This Agreement
constitutes, and each of the Credit Documents when executed and
delivered will constitute, legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance
with their respective terms, except as enforcement thereof may be
subject to (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting
creditors rights generally and (ii) general principles of equity
(regardless of whether such enforcement is sought in a proceeding
in equity or at law).
SECTION 6.05 Financial Information. (a) Prior to the
date hereof, the Borrower delivered to each of the Banks (i) the
consolidated balance sheet of the Borrower and its Subsidiaries
as of December 31, 1993 and the related consolidated statements
of income, common stock and other stockholders equity and cash
flows for the year then ended, including the related schedules
and notes, reported on by Arthur Andersen & Co., and (ii) the
consolidated balance sheet of the Borrower and its Subsidiaries
as of September 30, 1993 and the related consolidated statement
of income and cash flows for the quarterly and year-to-date
periods, respectively, then ended, including the related notes,
certified by a Financial Officer of the Borrower.
(b) Prior to the date hereof, the Borrower delivered
to each of the Banks (i) the consolidated balance sheet of the
Partnership and its Subsidiaries as of December 31, 1993 and the
related consolidated statements of income, and partner s capital
and cash flows for the year then ended, including the related
schedules and notes, reported on by Arthur Andersen & Co., and
(ii) the consolidated balance sheet of the Partnership and its
Subsidiaries as of September 30, 1993 and the related
consolidated statement of income and cash flows for the quarterly
and year-to-date periods, respectively, then ended, including the
related notes, certified by a Financial Officer of the Borrower.
(c) The financial statements described in subsections
(a) and (b) above fairly present the consolidated financial
position of the Borrower and its Subsidiaries and the Partnership
and its Subsidiaries, respectively, as of the dates thereof and
their respective consolidated results of operations and cash
flows for such periods, in accordance with generally accepted
accounting principles applied on a consistent basis (except as
set forth in the notes thereto), subject, in the case of the
interim financial statements referred to in subsections (a) (ii)
and (b) (ii) above, to normal year-end adjustments.
(d) Since September 30, 1993, there has been no
material adverse change in the business, financial condition,
results of operations or prospects of the Borrower and its
Subsidiaries (including the Partnership Subsidiaries with the
same effect as if the Partnership Subsidiaries were consolidated
Subsidiaries of the Borrower on September 30, 1993), taken as a
whole; provided that the Banks stipulate that the financial and
other information disclosed in the Borrower's report on Form 10-K
for the year ended December 31, 1993 do not reflect a material
adverse change in the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries
(including the Partnership Subsidiaries with the same effect as
if the Partnership Subsidiaries were consolidated Subsidiaries of
the Borrower on September 30, 1993), taken as a whole.
(e) As of the date hereof, neither the Borrower nor
any of its Subsidiaries (including the Partnership Subsidiaries)
has any material contingent obligation, contingent liability or
liability for taxes, long-term leases or forward or long-term
commitment out of the ordinary course of business, which is not
reflected in the foregoing statements or in the notes thereto.
The Borrower has disclosed to the Banks in writing any and all
facts which materially and adversely affect or may be reasonably
expected so to affect (to the extent the Borrower can now
reasonably foresee), the business, assets, operations, prospects
or condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under the Credit Documents. All factual
information (taken as a whole) heretofore or contemporaneously
furnished by or on behalf of the Borrower in writing to any Bank,
for purposes of or in connection with this Agreement or any
transaction contemplated by this Agreement is, and all other such
factual information (taken as a whole) hereafter furnished by or
on behalf of the Borrower to any Bank will be, true and accurate
in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a
whole) not misleading at such time. Any projections and pro
forma financial information contained in the materials referenced
above are based upon good faith estimates and assumptions
believed by the Borrower to be reasonable.
SECTION 6.06 Litigation. There are no actions, suits
or proceedings, or any governmental investigations or any
arbitration, in each case pending or, to the knowledge of the
Borrower, threatened against the Borrower or any of its
Subsidiaries or any material property of any thereof before any
court or arbitrator or any governmental or administrative body,
agency or official (i) that in any manner draws into question the
validity of any Credit Document, (ii) that contest or seek to
prevent the consummation of the transactions contemplated hereby
(including, without limitation, the Partnership Merger) (except
for suits seeking to enjoin the Partnership Merger that are
disclosed in the Borrower's report on Form 10-K for the year
ended on December 31, 1993 and that are settled or dismissed with
prejudice on or before the Effective Date) or (iii) that are
reasonably likely to materially and adversely affect the
business, financial condition, results of operations or prospects
of the Borrower and its Subsidiaries, taken as a whole.
SECTION 6.07 Use of Proceeds. (a) The proceeds of
the Loans will be used only for general corporate purposes,
including working capital. No Letter of Credit will be used
directly or indirectly as a Guarantee of Indebtedness for
borrowed money of another Person.
(b) Neither the Borrower nor any of its Subsidiaries
is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of any Loan will be used,
directly or indirectly, (i) to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or
carrying any margin stock or (ii) for the purpose of purchasing,
carrying or trading in any securities, in either case under such
circumstances as to involve any Bank in a violation of Regulation
U or the Borrower or any of its Subsidiaries in a violation of
Regulation X. Following the application of the proceeds of each
Loan, not more than 25% of the value of the assets of the
Borrower, or of the Borrower and its Subsidiaries, which are
subject to any arrangement with any Bank (herein or otherwise)
whereby the right or ability of the Borrower or its Subsidiaries
to sell, pledge or otherwise dispose of such assets is in any way
restricted, will be such margin stock.
SECTION 6.08 Compliance with ERISA. Each member of
the ERISA Group has timely fulfilled all its obligations under
the minimum funding standards of ERISA and the Internal Revenue
Code with respect to each Plan and is (and has been) in
compliance in all material respects with the applicable
provisions of ERISA, the Internal Revenue Code and other law with
respect to each Plan and Benefit Arrangement. Each Plan and
Benefit Arrangement is (and has been) maintained and operated in
compliance in all material respects with the applicable
provisions of ERISA, the Internal Revenue Code and other law. No
member of the ERISA Group (i) has sought (or is seeking) a waiver
of the minimum funding standard under Section 412 of the Internal
Revenue Code in respect of any Plan, (ii) has failed to timely
make any contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan, which has resulted or could result in the
imposition of a lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) has incurred
(and no event exists which presents a material risk to the
Borrower or any member of the ERISA Group of incurring) any
liability under Title IV of ERISA (other than a liability to the
PBGC for premiums under Section 4007 of ERISA). No litigation,
investigation or claim (other than a routine audit or claim for
benefits) is pending or, to the knowledge of the Borrower,
threatened or anticipated concerning any Plan or Benefit
Arrangement and no unfunded liability (whether or not current)
exists under or with respect to any Plan or Benefit Arrangement.
SECTION 6.09 Environmental Matters. There are no
material obligations, undertakings or liabilities arising out of
or relating to Environmental Laws which the Borrower or any of
its Subsidiaries, taken as a whole, has agreed to or assumed or
retained, or by which the Borrower and its Subsidiaries is
adversely affected, by contract or otherwise. The Borrower and
each Subsidiary and Affiliate of the Borrower is in compliance
with all Requirements of Environmental Laws, including, without
limitation, those governing the generation, use, collection,
treatment, storage, transportation, recovery, removal, discharge
or disposal of Hazardous Materials, except to the extent that
noncompliance would not have a material adverse effect on the
business, financial condition, results of operations or prospects
of the Borrower and its Subsidiaries, taken as a whole. Without
limitation of the foregoing:
(a) the Borrower and each of its Subsidiaries possess
all environmental, health and safety licenses, permits,
authorizations, registrations, approvals and similar rights
necessary under law or otherwise for the Borrower or such
Subsidiary, as the case may be, to conduct its operations as now
being conducted; each of such licenses, permits, authorizations,
registrations, approvals and similar rights is valid and
subsisting, in full force and effect and enforceable by the
Borrower or such Subsidiary, as the case may be; and the Borrower
or such Subsidiary is in compliance with all terms, conditions or
other provisions of such permits, authorizations, registrations,
approvals and similar rights; except, in each case, to the extent
that noncompliance could not reasonably be expected to have a
material adverse effect on the business, financial condition,
results of operations or prospects of the Borrower and its
Subsidiaries, taken as a whole;
(b) neither the Borrower nor any of its Subsidiaries
has received any notices of any violation of, noncompliance with,
or remedial obligation under, Requirements of Environmental Laws,
and there are no writs, injunctions, decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings, investigations or
inquiries pending or, to the knowledge of the Borrower,
threatened by governmental or private parties, relating to the
ownership, use, condition, maintenance, or operation of, or
conduct of business related to, any property owned, leased or
operated by the Borrower or any of its Subsidiaries, or other
assets of the Borrower or any of its Subsidiaries, which, in any
such case, could reasonably be expected to have a material
adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries,
taken as a whole;
(c) neither the Borrower nor any of its Subsidiaries,
has received a written notice or claim to the effect that it is
or may be liable to any Person as the result of a Release or
threatened Release of a Hazardous Material (including, without
limitation, Releases related to any off site location where
Hazardous Materials from any of the assets of the Borrower or any
of its Subsidiaries have been stored, treated, recycled, disposed
of or Released), which liabilities, either individually or in the
aggregate, could reasonably be expected to have a material
adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries,
taken as a whole;
(d) neither the Borrower nor any of its Subsidiaries
has any known liability in connection with any Release or any
threatened Release of any Hazardous Materials into the
environment, which liabilities, either individually or in the
aggregate, could reasonably be expected to have a material
adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries,
taken as a whole;
(e) there is not now on or in any property of the
Borrower or any of its Subsidiaries, any generation, treatment,
recycling, storage or disposal of any hazardous waste, as that
term is defined under 40 CFR Part 261 or any state equivalent,
any underground storage tanks or surface impoundments, any
asbestos containing material, or any polychlorinated biphenyls
(PCBs) used in hydraulic oils, electrical transformers or other
equipment, the presence of which could reasonably be expected to
have a material adverse effect on the business, financial
condition, result of operations or prospects of the Borrower and
its Subsidiaries, taken as a whole;
(f) no property owned, leased or operated by the
Borrower or any of its Subsidiaries is subject to, or, to the
knowledge of the Borrower, threatened with, any Lien arising
under Environmental Laws, except for such Liens which, either
individually or in the aggregate could not reasonably be expected
to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Borrower and
its Subsidiaries, taken as a whole;
(g) the Borrower and each of its Subsidiaries has all
environmental and pollution control equipment necessary for
compliance with the Requirements of Environmental Laws and
operation of their respective businesses as is presently
conducted; and
(h) there are no facts or circumstances known to the
Borrower or any of its Subsidiaries that the Borrower or such
Subsidiary reasonably believes could form the basis for the
assertion of a claim against the Borrower or any of its
Subsidiaries involving any of their respective properties or
relating to environmental, health or safety matters (including,
without limitation, a claim arising from past or present
noncompliance with Requirements of Environmental Laws), except in
each case for matters that individually or in the aggregate do
not present a material risk of materially and adversely affecting
the business, financial condition, results of operations or
prospects of the Borrower and its Subsidiaries, taken as a whole.
SECTION 6.10 Title to Assets. The Borrower and its
Subsidiaries and the Partnership and its Subsidiaries have good,
sufficient and legal title to all the material properties and
assets reflected in the most recent balance sheets referred to in
Section 6.05(a) and Section 6.05(b), respectively, and all the
other material assets owned on the date hereof, except (i) for
assets disposed of in the ordinary course of business since the
date of such balance sheets, (ii) assets Transferred in a manner
not prohibited by Section 8.08, and (iii) any assets accounted
for as a capital lease on such balance sheets. All such
properties are free and clear of any Liens and known defects
except Liens permitted by Section 8.02.
SECTION 6.11 Payment of Taxes. All tax returns and
reports of the Borrower and its consolidated Subsidiaries
required to be filed by any of them have been timely filed, and
all taxes, assessments, fees and other governmental charges upon
each of the Borrower and its Subsidiaries and upon their
respective properties, assets, income and franchises which are
due and payable have been paid when due and payable, except (i)
to the extent they are being contested in good faith by
appropriate proceedings promptly instituted and diligently
conducted and such reserve or other appropriate provision, if
any, as shall be required in conformity with generally accepted
accounting principles shall have been made therefor and (ii) to
the extent that such taxes, assessments, fees and other
governmental charges or the failure to pay the same would not be
material to the condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole. The Borrower
does not know of any proposed tax assessment against it, or any
of its Subsidiaries, that would be material to the condition
(financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole.
SECTION 6.12 Governmental Regulation. Neither the
Borrower nor any of its Subsidiaries is subject to regulation
under the Federal Power Act, the Public Utility Holding Company
Act of 1935, the Interstate Commerce Act or the Investment
Company Act of 1940 or to any United States federal or state
statute or regulation limiting its ability to incur or discharge
Indebtedness for money borrowed or to become contingently liable
for the Indebtedness of another.
SECTION 6.13 Partnership Merger. On and after the
Effective Date, the Partnership Merger has become effective and,
as a result thereof, each of the Partnership Subsidiaries is a
wholly owned Subsidiary of the Borrower. On and after the
Effective Date, the Partnership Merger Cost does not exceed
$130,000,000 and the net proceeds of the Equity Offering exceed
the Partnership Merger Cost by at least $10,000,000.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that on and after the
date hereof and until the Total Commitment has terminated, each
Letter of Credit has expired, and the Loans and all Unpaid
Drawings, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
SECTION 7.01 Reporting Covenants. Commencing on the
Effective Date, the Borrower will furnish to each Bank:
(a) Annual Financial Statements. Within 105 days
after the end of each fiscal year of the Borrower:
(i) a consolidated balance sheet of each of the
Borrower and its Subsidiaries and VMP and its Subsidiaries as of
the end of such fiscal year and the related consolidated
statements of income, common stock and stockholders equity or
partners equity, as the case may be, and cash flows of each of
the Borrower and its Subsidiaries and VMP and its Subsidiaries
for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable
detail and accompanied by a report thereon of Arthur Andersen &
Co. or other independent public accountants of comparable
recognized national standing, which such report shall be
unqualified as to scope of audit and shall state that such
consolidated financial statements present fairly in all material
respects the consolidated financial position as of the end of
such fiscal year, and the consolidated results of operations and
cash flows for such fiscal year, of the Borrower and its
Subsidiaries and VMP and its Subsidiaries, as applicable, in
accordance with generally accepted accounting principles
consistently applied (except for changes in such accounting
principles which are set forth in the notes thereto, permitted by
generally accepted accounting principles and concurred in by such
independent certified public accountants), and
(ii) a consolidating balance sheet of each of the
Borrower, VMP and their respective Subsidiaries as of the end of
such fiscal year and the related consolidating statements of
income and cash flows of the Borrower, VMP and any of their
respective Subsidiaries whose total assets are in excess of
$10,000,000 as of the end of such fiscal year, in each case for
such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable
detail and accompanied by a certificate of a Financial Officer of
the Borrower to the effect that such consolidating financial
statements are complete and correct and that they present fairly
in all material respects the consolidating financial position as
of the end of such fiscal year, and the consolidating results of
operations and cash flows for such fiscal year, of the Borrower,
VMP and such Subsidiaries in accordance with generally accepted
accounting principles applied consistently with the audited
financial statements referred to in Section 7.01(a)(i).
(b) Quarterly Financial Statements. Within 60 days
after the end of each fiscal quarter (other than the fourth
quarter) of the Borrower:
(i) a consolidated balance sheet of each of the
Borrower and its Subsidiaries and VMP and its Subsidiaries as at
the end of such fiscal quarter and the related consolidated
statements of income and cash flows, of each of the Borrower and
its Subsidiaries and VMP and its Subsidiaries for such fiscal
quarter and for the portion of the fiscal year ended at the end
of such fiscal quarter, setting forth in the case of the
consolidated statements of income and cash flows, in comparative
form the figures for the corresponding fiscal quarter and the
corresponding portion of the previous fiscal year, all in
reasonable detail and accompanied by a certificate of a Financial
Officer of the Borrower to the effect that they are complete and
correct and that they fairly present the consolidated financial
position as of the end of such fiscal quarter, and the
consolidated results of operations and cash flows for such fiscal
quarter and such portion of such fiscal year, of the Borrower and
its Subsidiaries and of VMP and its Subsidiaries in accordance
with generally accepted accounting principles consistently
applied (subject to normal, year-end audit adjustments); and
(ii) a consolidating balance sheet of the Borrower, VMP
and their Subsidiaries as of the end of such fiscal quarter and
the related consolidating statements of income and cash flows of
the Borrower, VMP and any of their respective Subsidiaries whose
total assets are in excess of $10,000,000 as of the end of such
fiscal quarter, in each case for such fiscal quarter and for the
portion of the fiscal year ended at the end of such fiscal
quarter, setting forth in each case in comparative form the
figures for the corresponding quarter and the corresponding
portion of the previous fiscal year, all in reasonable detail and
accompanied by a certificate of a Financial Officer of the
Borrower to the effect that such consolidating financial
statements are complete and correct and that they present fairly
in all material respects the consolidating financial position as
of the end of such fiscal quarter, and the consolidating results
of operations and cash flows for such fiscal quarter and such
portion of such fiscal year, of the Borrower, VMP and such
Subsidiaries in accordance with generally accepted accounting
principles consistently applied (subject to normal, year end
audit adjustments).
(c) Monthly Operations Report. Within 90 days after
the last day of December of each year, 60 days after the last day
of January of each year, 45 days after the last day of March,
June and September of each year and 30 days after the last day of
each other calendar month of each year, a report, in form and
substance satisfactory to the Managing Agents, setting forth (i)
a consolidated balance sheet (which shall include two footnotes
that provide the amount of feedstock inventory in transit to the
United States and outstanding letters of credit, both as of the
balance sheet date) for VRMC and its consolidated Subsidiaries,
and related consolidated statements of operations and cash flows,
(ii) a consolidated balance sheet and related consolidated
statement of operations and cash flows for the Partnership
Subsidiaries, and (iii) such other information with respect to
the operations of VRMC and its consolidated Subsidiaries and of
the Partnership Subsidiaries during such month as either Managing
Agent may reasonably request.
(d) No Default Compliance Certificate. Together with
the financial statements required pursuant to subsections (a) and
(b) above, a certificate of a Financial Officer of the Borrower
(i) to the effect that, based upon a review of the Borrower's
activities and such financial statements during the period
covered thereby, there exists no Event of Default and no Default
under this Agreement, or if there exists an Event of Default or a
Default hereunder, specifying the nature thereof and the
Borrower's proposed response thereto, (ii) demonstrating in
reasonable detail compliance as at the end of such fiscal year or
such fiscal quarter with Section 8.01, Section 8.09, Section 8.11
and Section 8.12, (iii) attaching a schedule of all Guarantees
and other contingent liabilities of the Borrower or any of its
Subsidiaries in excess of $1,000,000, intercompany advances, and
Short Term Credit, in each case outstanding or existing at the
end of such period and (iv) a list of all direct and indirect
Subsidiaries of the Borrower as at the end of such period,
indicating in such list any changes in such list from the prior
period's certificate.
(e) Auditors' No Default Certificate. Together with
the financial statements required pursuant to subsection (a)(i)
above, a certificate of the accountants who prepared the annual
audit reports referred to therein, addressed to the Banks and to
the effect that, based upon the audit conducted by such
accountants and any additional review, there exists no Event of
Default and no Default under this Agreement, or if there exists
an Event of Default or a Default hereunder, specifying the nature
thereof.
(f) Notice of Default. Within three days after any
Financial Officer of the Borrower obtains knowledge of the
occurrence of an Event of Default or a Default, a certificate of
a Financial Officer of the Borrower specifying the nature thereof
and the Borrower's proposed response thereto.
(g) Shareholder Communications, Filings, Etc.
Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Borrower's shareholders, and copies of all registration
statements and periodic reports filed with the Securities and
Exchange Commission (or any successor thereto) or any national
securities exchange by the Borrower.
(h) Litigation. Promptly after and in any event
within 10 Business Days after an officer of the Borrower learns
of (i) the occurrence of the institution of or any material
adverse development in any action, suit or proceeding or any
governmental investigation or any arbitration, before any court
or arbitrator or any governmental or administrative body, agency
or official, against the Borrower, any Subsidiary thereof or any
material property of any thereof, (ii) the written threat of any
such action, suit, proceeding, investigation or arbitration or
(iii) the occurrence of any other event which in the case of
clause (i) or (ii) is reasonably determined to be material to the
Borrower and its Subsidiaries, taken as a whole, or to the
Borrower individually, written notice thereof describing the same
and the steps being taken by the Borrower or its affected
Subsidiaries, as the case may be, with respect thereto; provided,
however, that no notice shall be required as to any matter in
which the potential expenditures, loss, liabilities or damages by
the Borrower or its Subsidiaries do not exceed $10,000,000.
(i) ERISA. Promptly after the occurrence thereof, if
and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) (other than a "reportable event" not
subject to the provisions for 30 day notice to the PBGC under the
regulations issued under Section 4043 of ERISA) with respect to
any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice
of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is (or
may become) in reorganization or partitioned, is (or may become)
insolvent or has been (or may be) terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of
ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA (or an event is deemed under Section
4062(e) of ERISA to be a withdrawal under Section 4063), a copy
of such notice (or "notice" with respect to such deemed
withdrawal); (vii) fails to timely make any payment or
contribution to any Plan or Multiemployer Plan or in respect of
any Benefit Arrangement or makes any amendment to any Plan which
has resulted or could result in the imposition of a Lien or the
posting of a bond or other security, a statement of a Financial
Officer of the Borrower describing such event and the action
which the Borrower or applicable member of the ERISA Group has
taken, is taking or proposes to take with respect to such event;
(viii) incurs or may incur any contingent secondary liability
with respect to a Multiemployer Plan, a statement of a Financial
Officer of the Borrower describing such event and the action
which the Borrower or applicable member of the ERISA Group has
taken, is taking or proposes to take with respect to such event;
(ix) engages in a prohibited transaction (as defined in Section
406 of ERISA and 4975 of the Code) or receives notice of a claim
involving a violation of fiduciary duties under ERISA, a
statement of a Financial Officer of the Borrower describing such
event and the action which the Borrower or applicable member of
the ERISA Group has taken, is taking or proposes to take with
respect thereto; (x) receives any proposed unfavorable
determination letter (or notice proposing to revoke a favorable
letter) from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code or a
Benefit Arrangement under Section 501(c)(9) of the Code, a copy
of such notice and (xi) files an annual report (Form 5500) with
the Internal Revenue Service with respect to a Plan or Benefit
Arrangement, a copy of such report.
(j) Environmental Matters. Promptly upon obtaining
knowledge thereof, notice of (i) any violation of, noncompliance
with, or remedial obligations under, Requirements of
Environmental Laws by or affecting the Borrower or any of its
Subsidiaries, (ii) the institution of or any material adverse
development in any action, suit or proceeding or any governmental
investigation or any arbitration, before any court or arbitrator
or any governmental or administrative body, agency or official,
against the Borrower, any of its Subsidiaries or any property
thereof, or (after actual knowledge thereof), notice of the
threat of any such action, suit, proceeding, investigation or
arbitration involving, in each case, Environmental Laws, (iii)
any Release or threatened Release of a Hazardous Material
affecting any property owned, leased or operated by the Borrower
or any of its Subsidiaries, (iv) any property owned, leased or
operated by the Borrower or any of its Subsidiaries being subject
to a Lien arising under Environmental Laws, (v) any proposed
acquisition of stock, assets, real estate, or leasing of
property, or any other action by the Borrower or any of its
Subsidiaries that could reasonably be expected to subject the
Borrower or any of its Subsidiaries to liability under
Environmental Laws, the result of which could have a material
adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries,
taken as a whole, (vi) the pending or threatened amendment or
revocation of any permit, authorization, registration, approval
or similar right, which amendment or revocation presents a
reasonable possibility of having a material adverse effect on the
business, financial condition, results of operations or prospects
of the Borrower and its Subsidiaries, taken as a whole, (vii) new
or proposed changes to Requirements of Environmental Laws or
changes to Requirements of Environmental Laws formally proposed
by a governmental entity or agency that present a reasonable
possibility of having a material adverse effect on the business,
financial condition, results of operations or prospects of the
Borrower and its Subsidiaries taken as a whole or (viii) any
other facts or circumstances known to the Borrower or any of its
Subsidiaries that the Borrower reasonably believes could result
in the liability of the Borrower or any of its Subsidiaries to
governmental or private parties arising out of, or in connection
with, any Requirements of Environmental Laws; provided, however,
that no notice shall be required in the case of clauses (i),
(ii), (iii), (iv), (v) and (viii) as to any matter in which the
potential expenditures, loss, liabilities or damages by the
Borrower or its Subsidiaries do not exceed $10,000,000.
(k) Other Information. With reasonable promptness,
such other information about the Borrower or its Subsidiaries as
any Bank may reasonably request from time to time.
SECTION 7.02 Existence, Etc. The Borrower shall, and
shall cause each of its Subsidiaries to, preserve and maintain
its corporate or partnership, as applicable, existence, rights
and franchises; provided, however, that the corporate or
partnership, as applicable, existence of any Subsidiary (other
than VRMC, Refining, the Partnership, VMP and VNGC) may be
terminated if such termination is not disadvantageous to the
Banks.
SECTION 7.03 Compliance with Laws, Etc. The Borrower
shall, and shall cause each of its Subsidiaries to, (i) comply in
all material respects, with all applicable laws, rules,
regulations and orders, including, without limitation, the
Requirements of Environmental Laws, and (ii) take all reasonably
necessary precautions to prevent any Release or threatened
Release of any Hazardous Material from, into, or under its
properties that could reasonably be expected to violate in any
material respect the Requirements of Environmental Laws.
SECTION 7.04 Payment of Taxes and Claims, Etc. The
Borrower shall, and shall cause each of its Subsidiaries to, pay
(i) all taxes, assessments and governmental charges imposed upon
it or upon its property (including, without limitation, all
employee withholding taxes and similar liabilities) and (ii) all
claims (including, without limitation, claims for labor,
materials, supplies or services) which might, if unpaid, become a
Lien upon its property, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate
proceedings and the Borrower has maintained adequate reserves
with respect thereto.
SECTION 7.05 Keeping of Books. The Borrower shall,
and shall cause each of its Subsidiaries to, keep proper books of
record and account, containing complete and accurate entries of
all financial and business transactions of the Borrower and each
of its Subsidiaries.
SECTION 7.06 Visitation, Inspection, Etc. The
Borrower shall, and shall cause each of its Subsidiaries to,
permit any representative of any Managing Agent or any Bank to
visit and inspect, accompanied by one or more representatives of
the Borrower, any of its property, to examine its books and
records and to make copies and take extracts therefrom, and to
discuss its affairs, finances and accounts with its officers, all
at such reasonable times and as often as any Managing Agent or
any Bank may reasonably request.
SECTION 7.07 Insurance. The Borrower shall, and shall
cause each of its Subsidiaries to, maintain or cause to be
maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the
properties and business of its Subsidiaries against loss or
damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar
businesses and similarly situated, of such type and in such
amounts and with such levels of deductibles, as are customarily
carried under similar circumstances by such other corporations.
SECTION 7.08 Further Assurances. At any time and
from time to time, upon the request of any Managing Agent or the
Required Banks and at the expense of the Borrower, the Borrower
shall, and shall cause its Subsidiaries to, promptly and duly
execute and deliver or cause to be executed and delivered any and
all further instruments and documents and take such further
action as such Managing Agent or the Required Banks, as the case
may be, may deem reasonable to effect the purpose of this
Agreement and the other Credit Documents.
SECTION 7.09 Repair and Maintenance of Properties.
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain all of its assets and properties in good condition,
repair and working order as would a prudent owner and operator of
similar properties.
SECTION 7.10 Covenant to Secure Notes Equally. If
the Borrower or any of its Subsidiaries shall create or assume
any Lien upon any of its property or assets, whether now owned or
hereafter acquired, other than Liens permitted by the provisions
of Section 8.02 (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to Section
11.10), the Borrower and its Subsidiaries will make or cause to
be made effective provision whereby the Loans, Letters of Credit
and all other Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness thereby secured
so long as any such other Indebtedness shall be so secured.
SECTION 7.11 Subordination Agreements. Within 30
days from the Effective Date, the Borrower and each Subsidiary of
the Borrower shall execute and deliver a Subordination Agreement.
The Borrower shall cause any entity that becomes a Subsidiary
after the Effective Date to execute and deliver a Subordination
Agreement not later than 30 days after such entity becomes a
Subsidiary.
SECTION 7.12 Termination of Certain Existing Debt.
Within five (5) Business Days after the Effective Date, the
Borrower shall (a) cause all agreements relating to Indebtedness
of the Partnership Group (other than the First Mortgage Notes and
intercompany Indebtedness permitted by this Agreement) to be
terminated, (b) cause the commitments of the lenders party to the
Existing VEC Bank Agreement and the Refining Bank Agreement to be
terminated and (c) request that the Liens securing the Refining
Bank Agreement be released.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that on and after the
date hereof and until the Total Commitment has terminated, each
Letter of Credit has expired, the Loans and all Unpaid Drawings,
together with interest, Fees and all other Obligations incurred
hereunder are paid in full:
SECTION 8.01 Indebtedness. The Borrower will not,
and will not permit any of its Subsidiaries to, incur, assume,
guarantee or permit to exist any Indebtedness except:
(a) Indebtedness of the Borrower pursuant to the
Credit Documents;
(b) (i) Indebtedness of the Borrower and its
Subsidiaries (including the Partnership Subsidiaries) outstanding
on the date hereof and listed on Schedule 8.01 hereto, (ii) any
extensions or renewals of unsecured Indebtedness of the Borrower
permitted under clause (i) above, provided that the maximum
amount of Indebtedness resulting from any such extension or
renewal may not exceed the Indebtedness outstanding immediately
prior thereto, (iii) on and prior to the Effective Date,
Indebtedness of the Borrower, Refining and VRMC outstanding under
the Refining Bank Agreement and the Existing VEC Bank Agreement,
and (iv) on and prior to the fifth Business Day after the
Effective Date, Indebtedness of the Partnership Group not
exceeding $50,000,000;
(c) (i) unsecured Indebtedness owing by the Borrower
to any Subsidiary of the Borrower, so long as such Indebtedness
is for borrowed money and is subordinated to Indebtedness under
this Agreement pursuant to a subordination agreement in the form
of Exhibit 8.01(c) executed by the Borrower and the holder of
such Indebtedness (each, a "Subordination Agreement"), and (ii)
unsecured Indebtedness owing by any Subsidiary (other than the
Partnership Group) of the Borrower to either the Borrower or the
immediate parent company of such Subsidiary;
(d) subject to the limitations set forth in Section
8.09, Indebtedness owing by any member of the Partnership Group
to either the Borrower or any of its Subsidiaries (other than
Refining and VRMC);
(e) (i) purchase money Indebtedness incurred
contemporaneously with the acquisition of an asset (excluding
inventory or accounts or notes receivable) or within ninety days
after the acquisition of such asset to refinance the purchase
price thereof, which in either case is secured by Liens attaching
only to the asset so acquired, (ii) Indebtedness existing prior
to the acquisition of an asset and assumed as part of the
purchase price of such asset, which is secured by Liens existing
prior to such acquisition and attaching only to the asset so
acquired, and (iii) Indebtedness in respect of leases of the type
described in clause (ii) of the definition of Indebtedness, which
may be secured by Liens that are imputed and not expressly
created in connection with any such lease; provided, that such
Indebtedness under this clause (e) (A) does not exceed 100% of
the Fair Market Value of such asset at the time of the
acquisition or leasing thereof, and (B) does not in the aggregate
exceed five percent (5%) of the Consolidated Net Worth of the
Borrower on the date any such Indebtedness is incurred;
(f) Indebtedness owing by the Borrower or any
Subsidiary of the Borrower to any non Affiliate, not to exceed
$1,000,000 in aggregate principal amount at any one time
outstanding, which is secured by Liens on assets having a fair
market value equal to or less than $5,000,000 (other than any
inventory or accounts or notes receivable, any stock or other
equity interest in any Subsidiary of the Borrower);
(g) unsecured Indebtedness of the Borrower not
otherwise permitted by this Section 8.01, so long as (i) such
Indebtedness is not owing to any Subsidiary of the Borrower and
is not Guaranteed by, or secured by any Lien against the assets
of, the Borrower or any of its Subsidiaries, and (ii) either (A)
the terms of such Indebtedness do not require any principal
amortization or sinking fund payments on or prior to the
Termination Date and otherwise are no more restrictive than the
most restrictive terms set forth in any agreement relating to
Indebtedness of the Borrower listed on Schedule 8.01 or (B) such
Indebtedness is Short Term Credit and the aggregate principal
amount thereof does not exceed $50,000,000; and
(h) Guarantees by Subsidiaries of the Borrower (other
than VRMC or Refining) in respect of Indebtedness arising by
operation of law as a result of such Subsidiary being a general
partner of any Person;
provided that at each date on which any such Indebtedness
permitted under clauses (a) through (h) is incurred and after
giving pro forma effect thereto and the application of the
proceeds thereof, no Default or Event of Default shall have
occurred and be continuing hereunder. Upon any incurrence of
Funded Indebtedness permitted under clauses (b)(ii), (e), (f) or
(g) of this Section 8.01, the Borrower shall furnish the
Administrative Agent with a certificate of a Financial Officer
stating that after giving pro forma effect to such Indebtedness
and the application of the proceeds thereof, no Default or Event
of Default shall have occurred and be continuing. All
Indebtedness between the Borrower and its Subsidiaries shall be
evidenced by all documentation customarily used to evidence such
Indebtedness and the terms and conditions thereof and to
otherwise protect the rights of the holder of such Indebtedness,
and, if requested by a Managing Agent, such documentation shall
be subject to review and approval by such Managing Agent (such
approval not to be unreasonably withheld). The Borrower shall
not, and shall not permit any of its Subsidiaries (including the
Partnership Group) to, request that any extension of credit be
made on or after the Effective Date under the Existing VEC Bank
Agreement, the Refining Bank Agreement or the agreements relating
to Indebtedness of the Partnership Group required to be
terminated pursuant to Section 7.12(a).
SECTION 8.02 Liens. The Borrower will not, and will
not permit any of its Subsidiaries to, create, incur, assume or
permit or suffer to exist any Lien with respect to any asset now
owned or hereafter acquired, except:
(a) Liens in existence on the date hereof and set
forth on Schedule 8.02;
(b) Liens permitted by Section 8.01(e) or Section
8.01(f);
(c) Liens created for the sole purpose of extending,
renewing, or replacing (or successively extending, renewing or
replacing) any Indebtedness secured by any Lien permitted by
clause (b) of this Section 8.02; provided, that the principal
amount of such Indebtedness is not increased and is not secured
by additional assets and that such extended, renewed or
replacement Indebtedness is permitted by Section 8.01;
(d) Liens (i) against accounts receivable and
inventory of VMP and its Subsidiaries so long as such Liens are
permitted by the Partnership Indenture and secure the
Indebtedness described in Section 8.09(f) and (ii) Liens
described in the definition of Permitted Liens set forth in the
Partnership Indenture (other than those described in clauses (o)
and (q) of such definition);
(e) Liens for current taxes or assessments and similar
charges not delinquent or for taxes or assessments and similar
charges being contested in good faith by appropriate proceedings;
provided, that such reserves, if any, as are required by
generally accepted accounting principles with respect to such
taxes, assessments or similar charges are established;
(f) Liens arising in the ordinary course of business
for sums not due or sums being contested in good faith and by
appropriate proceedings and not involving any deposits or
advances or borrowed money or the deferred purchase price of an
asset or a service;
(g) Liens under leases permitted under Section 8.06 or
Section 8.09, and Liens reserved in permitted leases for rent and
for compliance with the terms of the leases in the case of
permitted leasehold estates;
(h) Liens arising in connection with Margin Accounts
and Liens granted in the ordinary course of business in
connection with existing lines of business of the Borrower or its
Subsidiaries in favor of an operator on assets subject to joint
operations by such operator to secure payments due such operator
solely with respect to the operation of such assets;
(i) Liens on joint venture and partnership interests
(other than interests in the Partnership) in favor of such
partnerships or joint ventures or the other partners therein on
the Borrower's or its Subsidiaries partnership or joint venture
interests to secure payments due from, or the performance
obligations of, the Borrower or any of its Subsidiaries to such
partnership or joint venture or the other partners therein solely
with respect to the business of such partnership or joint
venture;
(j) Liens in connection with workmen s compensation,
unemployment insurance or other social security or old age
pension obligations, including obligations under ERISA;
(k) (i) rights granted or reserved to, or vested in,
any municipality or governmental or other public authority (A) by
the terms of any franchise, grant, license, permit or lease or by
any statutory provision specifically relating thereto, to
terminate such franchise, grant, license, permit or lease or to
purchase, condemn, expropriate or recapture, or designate a
purchaser of, any property, and the right reserved to or vested
in any such authority to require such property to be altered at
the expense of the holder of such franchise, grant, license,
permit or lease, and (B) to control, regulate or use any property
of the Borrower or its Subsidiaries, and (ii) any obligations or
duties affecting the property of the Borrower or its Subsidiaries
to any municipality or governmental, statutory or public
authority with respect to any franchise, grant, license or
permit; and
(l) (i) Liens and encumbrances (other than those
securing Indebtedness) existing upon real estate or rights in or
relating to real estate acquired by the Borrower or its
Subsidiaries, (ii) any rights of a common owner of any interest
in property held by the Borrower or its Subsidiaries and such
common owner as tenants in common or through other common
ownership, (iii) zoning, planning, environmental laws and
ordinances and municipal regulations, (iv) interests of Persons
other than the Borrower or its Subsidiaries in pipelines,
appliances or other equipment located on, over or under private
property, minor defects or irregularities in or encumbrances on
the titles to properties which in the aggregate do not materially
impair the use of such property for the purposes for which it is
held, and (v) permits, rights of way, easements, licenses and
other rights and privileges granted or conveyed by the Borrower
or its Subsidiaries, which in the aggregate do not materially
impair the usefulness of the property subject to such rights,
easements or servitudes.
SECTION 8.03 Restriction on Other Agreements. The
Borrower will not, and will not permit any of its Subsidiaries
to, enter into any agreement prohibiting or having the effect of
restricting the ability of any Subsidiary of the Borrower to pay
dividends or make any distribution, loans or advances to the
Borrower or any Subsidiary of the Borrower owning any capital
stock of or other equity interest in such Subsidiary (other than
(i) the Partnership Indenture, as such prohibition or restriction
exists on the date hereof or (ii) this Agreement).
SECTION 8.04 Mergers, Etc. The Borrower will not,
and will not permit any of Refining, VRMC, the Partnership, VMP
or VNGC to, be a party to any merger or consolidation, unless
such Person is the entity surviving such merger or consolidation,
and after giving effect thereto, no Default or Event of Default
has occurred and is continuing.
SECTION 8.05 Capital Stock. The Borrower will not
(a) take any action, or permit any of its Subsidiaries to take
any action, which will result in (i) the Borrower owning less
than 100% of the issued and outstanding capital stock of VRMC,
(ii) VRMC owning less than 100% of the issued and outstanding
capital stock of Refining, (iii) the Borrower owning, either
directly or indirectly, less than 100% of the issued and
outstanding capital stock of or other equity interests in any
member of the Partnership Group or (iv) any Person other than
VNGC or a wholly owned Subsidiary of VNGC being a general partner
of any Partnership Subsidiary; (b) make any additional capital
contributions (whether as additional paid in capital, forgiveness
of intercompany obligations, in exchange for additional stock or
other equity interests or otherwise) to any Subsidiary of the
Borrower, except (i) in the case of the Partnership Group, any
capital contribution permitted by Section 8.09, or (ii) in the
case of any direct Subsidiary of the Borrower (other than the
Partnership Group), capital contributions not exceeding
$15,000,000 in the aggregate; or (c) permit any of its
Subsidiaries to issue preferred or preference stock.
SECTION 8.06 Leases. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into or renew or
extend any agreement to rent or lease (but excluding any rental
obligation which, under generally accepted accounting principles,
is required to be capitalized on the books of the Borrower or any
of its Subsidiaries), as lessee, any real or personal property
unless, after giving effect thereto, the aggregate amount of all
minimum or guaranteed net rental payments under all such
agreements then outstanding having remaining terms of more than
three years shall not exceed five percent (5%) of the
Consolidated Net Worth of the Borrower and its Subsidiaries;
provided, however, that there shall be excluded from any
computation under this Section 8.06, (a) agreements to rent or
lease motor vehicles, rolling stock, computers, office equipment
or office space, (b) Partnership Leases, (c) payments made to
acquire and maintain easements and rights of way not exceeding
$1,000,000 per annum, and (d) renewals or extensions of (i) that
certain Lease Agreement, dated July 1, 1981, as amended, between
Valero Gas Storage Company, as Lessee, and ML Caverns Inc. (now,
by change of name, ILI Caverns Inc.), as Lessor, and (ii) that
certain Lease Agreement, dated as of December 17, 1981, between
McCullough Avenue Associates, as Lessor, and Valero Realty
Company, as Lessee.
SECTION 8.07 Unconditional Purchase Obligations. The
Borrower will not, and will not permit any of its Subsidiaries
to, enter into, or be a party to, any contract for the purchase
of materials, supplies or other property or services, if such
contract requires that payment be made by it regardless of
whether or not delivery is made of such materials, supplies or
other property or services, except for (a) take or pay
arrangements entered into by VNGC or its Subsidiaries prior to
September 30, 1987 or by any Partnership Subsidiary prior to the
date hereof, relating to the purchase of hydrocarbons, including
oil, natural gas and natural gas liquids; (b) other arrangements
involving amounts with respect to the transportation or sale of
natural gas not to exceed $5,000,000 in the aggregate at any one
time outstanding; (c) natural gas storage fees pursuant to
contracts in existence on September 30, 1987 to the extent set
forth on Schedule 8.07, (d) vessel charters permitted by Section
8.06; and (e) any other contract entered into by the Borrower or
its Subsidiaries, provided that the aggregate amount of
obligations of the Borrower or its Subsidiaries under all such
other contracts shall be considered "Indebtedness" for purposes
of this Agreement and such other contracts shall be permitted
under this Section 8.07(e) only if the "Indebtedness" in respect
of such other contracts is permitted by Section 8.01 and does not
otherwise cause a Default or Event of Default hereunder.
SECTION 8.08 Transfer of Assets. The Borrower will
not, and will not permit any of its Subsidiaries to, sell,
transfer, convey, lease, assign or otherwise dispose of
(collectively, a "Transfer" any asset, (including, without
limitation, any sale or assignment with or without recourse of
any receivables), whether or not such asset constitutes all or
any substantial part of its assets, except:
(a) (i) the sale or exchange of inventory in the
ordinary course of business or (ii) the acceptance by the
Borrower or any of its Subsidiaries of a promissory note from a
customer in the ordinary course of business in exchange for a
past due account receivable owing by such customer to such
Person, so long as any such Transfer pursuant to this clause (ii)
is not made (A) between any member of the Partnership Group, on
the one hand, and the Borrower or any of its Subsidiaries (other
than the Partnership Group), on the other, or (B) between the
Partnership or VNGC, on the one hand, and VMP or any of its
Subsidiaries, on the other;
(b) Transfers of assets made after the date hereof so
long as (i) the aggregate Fair Market Value of the assets so
Transferred does not exceed (A) $50,000,000 as to any single
Transfer or series of related Transfers or (B) $100,000,000 as to
all such Transfers occurring after the date hereof, (ii) such
Transfer is not made (A) between any member of the Partnership
Group, on the one hand, and the Borrower or any of its
Subsidiaries (other than the Partnership Group), on the other, or
(B) between the Partnership or VNGC, on the one hand, and VMP or
any of its Subsidiaries, on the other, and (iii) the assets so
Transferred are not the capital stock of VRMC or an asset of the
Partnership Group, VRMC or Refining;
(c) Transfers by (i) the Borrower or any of its wholly
owned Subsidiaries (other than VRMC, Refining or any member of
the Partnership Group) to the Borrower or any of its wholly owned
Subsidiaries (other than any member of the Partnership Group),
(ii) VMP or any of its Subsidiaries to VMP or any of its
Subsidiaries, (iii) Bay Pipeline, Inc. to VMP or any of its
Subsidiaries, (iv) any member of the Partnership Group of any
asset (other than a general partner interest in a Partnership
Subsidiary) to the Borrower or any of its Subsidiaries (other
than the Partnership Group), (v) VNGC or any other general
partner of a Partnership Subsidiary of its general partner
interest in a Partnership Subsidiary to VNGC or a wholly owned
Subsidiary of VNGC (so long as such Transfer is permitted by the
Partnership Indenture), (vi) any lessor under the leases
described in clauses (a) through (d) of the definition of
Partnership Lease of such leases and the assets subject thereto
to the Borrower or a direct Subsidiary of the Borrower (other
than a member of the Partnership Group) or (vii) Valero
Interstate Transmission Company ("VITCO" (or its successor in
interest) to Valero Transmission, L.P. ("VTLP") of the assets
currently leased by VITCO to VTLP pursuant to the lease described
in clause (d) of the definition of Partnership Lease;
(d) Transfers of assets of VRMC or Refining so long as
(i) the consideration received by VRMC or Refining, as the case
may be, in respect of such Transfer is at least equal to the Fair
Market Value of the assets so Transferred, (ii) the aggregate
Fair Market Value of the assets so Transferred does not exceed
$5,000,000 during any calendar year, (iii) such Transfer is not
made to a member of the Partnership Group, and (iv) such assets
do not constitute the capital stock of Refining;
(e) Transfers of assets of the Partnership Group so
long as (i) the consideration received by such member of the
Partnership Group in respect of such Transfer is at least equal
to the Fair Market Value of the assets so Transferred, and (ii)
such Transfer is made to a Person other than the Borrower or any
of its Subsidiaries;
(f) Transfers of assets between the Borrower and its
Subsidiaries (including the Partnership Group), so long as (i)
the consideration received by such transferee in respect of such
Transfer is at least equal to the Fair Market Value of the assets
so Transferred, and (ii) such Transfer is otherwise on terms and
conditions substantially as those obtainable by such transferee
at the time in a comparable arm's-length transaction with a non-
Affiliate;
(g) Transfers in respect of Partnership Investments
permitted by Section 8.09;
(h) the Transfer by the Borrower or a Subsidiary of
the Borrower to (i) the Borrower, (ii) a Person that is not an
Affiliate of the Borrower or (iii) a wholly owned Subsidiary of
the Borrower, of an asset having a Fair Market Value not
exceeding $25,000 as of the date of such Transfer;
(i) the Transfer of cash or short-term investments in
the ordinary course of business, so long as the consideration
received by such transferee in respect of such Transfer is at
least equal to the Fair Market Value of the cash or short-term
investments so Transferred;
(j) Transfers relating to dividends, distributions,
loans and advances by the Borrower and its Subsidiaries, to the
extent otherwise permitted by this Agreement; and
(k) the Transfer by the Borrower or any of its
Subsidiaries of the common stock, rights and warrants to purchase
common stock, serial preference stock or preferred stock of the
Borrower, so long as such Transfer is not made (i) between any
member of the Partnership Group, on the one hand, and the
Borrower or any of its Subsidiaries (other than the Partnership
Group), on the other, or (ii) between the Partnership or VNGC, on
the one hand, and VMP or any of its Subsidiaries, on the other.
SECTION 8.09 Partnership Investments. The Borrower
will not, and will not permit any of its Subsidiaries to, make
any Partnership Investments other than:
(a) Partnership Investments made (i) on or prior to
December 31, 1993 and (ii) after December 31, 1993 and on or
before the Effective Date so long as the aggregate amount of
Partnership Investments made pursuant to this clause (ii), when
added to the Partnership Merger Cost, do not exceed the sum of
the (A) the net cash proceeds of the Equity Offering minus (B)
$10,000,000;
(b) Partnership Investments made to fund the
Partnership Merger Cost in an amount not exceeding the least of
(i) the amount of such Partnership Merger Cost, (ii) $130,000,000
or (iii) the excess of (A) the net cash proceeds of the Equity
Offering over (B) $10,000,000;
(c) (i) the Partnership Leases in existence on the
date hereof and described in clauses (a), (b), (c) and (d) of the
definition of "Partnership Leases" and (ii) other Partnership
Leases entered into after the date hereof with respect to which
(A) the Borrower or a direct Subsidiary of the Borrower (other
than a member of the Partnership Group) is the lessor and (B) the
aggregate costs incurred by such lessors to acquire or construct
the equipment or facilities subject to such Partnership Leases
does not exceed $50,000,000;
(d) capital contributions made or Indebtedness for
borrowed money funded on or after the Effective Date in an amount
equal to the lesser of (i) $37,500,000 or (ii) seventy five
percent (75%) of the net cash proceeds received after September
30, 1993 from any issuance of Funded Indebtedness of the Borrower
pursuant to a commitment (other than under this Agreement)
entered into after September 30, 1993;
(e) capital contributions made or Indebtedness for
borrowed money funded on or after the Effective Date in an amount
equal to the lesser of (i) $37,500,000 or (ii) seventy five
percent (75%) of the excess (if any) of (A) the sum of (1) the
net cash proceeds received from the sale by the Borrower of its
capital stock after September 30, 1993 plus (2) the net cash
proceeds received from the sale or conversion of rights, options
and warrants to purchase capital stock of the Borrower after
September 30, 1993, over (B) the Partnership Merger Cost; and
(f) Indebtedness for borrowed money owing by VMP or
its Subsidiaries to the Borrower (i) in an aggregate outstanding
principal amount that does not exceed $50,000,000 at any time,
and (ii) permitted by Section 4.12(b)(i) of the Partnership
Indenture.
SECTION 8.10 Transactions with Affiliates. The
Borrower will not, and will not permit any of its Subsidiaries
to, enter into any transaction or series of transactions, whether
or not in the ordinary course of business, with any Affiliate
other than (a) transactions on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be
obtainable by the Borrower or such Subsidiary at the time in a
comparable arm s length transaction with a Person other than an
Affiliate, (b) transactions between the Borrower or any of its
Subsidiaries otherwise permitted by this Agreement and (c)
transactions between the Borrower or any of its Subsidiaries and
any member of the Partnership Group otherwise permitted by this
Agreement.
SECTION 8.11 Financial Covenants.
(a) Consolidated Working Capital. The Borrower will
not permit the sum of:
(i) the Consolidated Current Assets of the Borrower
plus the the Total Unutilized Commitment, minus
(ii) the Consolidated Current Liabilities of the
Borrower (excluding any portion attributable to this Agreement),
to at any time be less than the sum of (1) $100,000,000, plus (2)
the amount of the Loans and the Letter of Credit Outstandings
that would not be permitted to be outstanding one year from the
date of determination, excluding amounts permitted to be
outstanding on the day immediately prior to the Termination Date.
(b) Consolidated Net Worth. The Borrower will at no
time permit the Consolidated Net Worth of the Borrower to be less
than the sum of (i) $800,000,000 plus (ii) fifty percent (50%),
if positive, zero percent (0%), if negative, of the cumulative
Consolidated Net Income Applicable to Common Stock of the
Borrower for the period commencing on October 1, 1993 and ending
on the date of determination, plus (iii) seventy five percent
(75%) of the excess, if any, of (A) the Fair Market Value of cash
and other consideration received from the sale of equity
securities of the Borrower after September 30, 1993 (but only to
the extent that receipt of such cash or other consideration
increases the amount of the Borrower's Consolidated Net Worth),
over (B) without duplication, the redemption or purchase price
paid by the Borrower after September 30, 1993 for any outstanding
securities of the Borrower (but only to the extent such
securities constituted a portion of the Borrower's Consolidated
Net Worth prior to such redemption or purchase) redeemed or
purchased within 6 months prior to or 6 months after the
consummation of a sale described in clause (A) above.
(c) Fixed Charge Coverage. The Borrower will not
permit the ratio of:
(i) the sum (without duplication) of (A) Consolidated
Net Income (excluding extraordinary items) of the Borrower for
the applicable period, plus (B) interest expense for the Borrower
and its Subsidiaries on a consolidated basis for such period,
plus (C) deferred federal and state income taxes deducted in
determining such Consolidated Net Income for such period, plus
(D) Depreciation and Amortization Expense for such period, plus
(E) other noncash charges deducted in determining such
Consolidated Net Income for such period (including, without
limitation, the LIFO Adjustment to the extent such period
includes the fourth quarter of 1993), minus (F) other noncash
credits added in determining such Consolidated Net Income for
such period, to
(ii) the sum (without duplication) of (A) interest
incurred for the Borrower and its Subsidiaries on a consolidated
basis for such period, plus (B) cash dividends paid by the
Borrower on its preferred and preference stock during such period
(other than dividends paid on preferred and preference stock held
by the Borrower or a Subsidiary of the Borrower) plus (C) cash
dividends paid by the Borrower on its common stock during such
period (other than dividends reinvested in newly issued or
treasury shares of common stock of the Borrower pursuant to any
dividend reinvestment plan maintained by the Borrower for holders
of its common stock), plus (D) the amount of mandatory
redemptions of preferred stock made by the Borrower during such
period (excluding redemptions of shares of such preferred stock
held by Subsidiaries of the Borrower),
to be less than (1) 1.6 to 1.0 for any period of four consecutive
non-Turnaround Quarter fiscal quarters (taken as one accounting
period) ending on or prior to June 29, 1995, (2) 1.1 to 1.0 for
any single non-Turnaround Quarter fiscal quarter ending on or
prior to June 29, 1995, (3) 2.0 to 1.0 for any period of four
consecutive non-Turnaround Quarter fiscal quarters (taken as one
accounting period) ending after June 29, 1995, or (4) 1.5 to 1.0
for any single non-Turnaround Quarter fiscal quarter ending after
June 29, 1995.
(d) Borrower's Earnings Coverage. The Borrower will
not permit the ratio of:
(i) the sum (without duplication) of (A) the
Consolidated Net Income of the Borrower for the applicable
period, plus (B) any federal and state income taxes deducted in
determining such Consolidated Net Income for such period, plus
(C) the Interest and Lease Expense of the Borrower for such
period, plus (D) the LIFO Adjustment to the extent such period
includes the fourth quarter of 1993, to
(ii) the Interest and Lease Expense of the Borrower for
such period,
to be less than (1) 1.0 to 1.0 for any period of four consecutive
non-Turnaround Quarter fiscal quarters (taken as one accounting
period) ending on or prior to June 29, 1995, or (2) 1.25 to 1.0
for any period of four consecutive non-Turnaround Quarter fiscal
quarters (taken as one accounting period) ending after June 29,
1995.
(e) VRMC's Earnings Coverage. The Borrower will not
permit the ratio of:
(i) the sum (without duplication) of (A) the
Consolidated Net Income of VRMC for the applicable period, plus
(B) any federal and state income taxes deducted in determining
such Consolidated Net Income for such period, plus (C) the
Interest and Lease Expense of VRMC for such period (other than
Interest and Lease Expense paid or payable to the Borrower), plus
(D) the LIFO Adjustment to the extent such period includes the
fourth quarter of 1993, to
(ii) the Interest and Lease Expense of VRMC (other than
Interest and Lease Expense paid or payable to the Borrower) for
such period,
to be less than (1) 1.0 to 1.0 for any period of four consecutive
non-Turnaround Quarter fiscal quarters (taken as one accounting
period) ending on or prior to June 29, 1995, or (2) 1.25 to 1.0
for any period of four consecutive non-Turnaround Quarter fiscal
quarters (taken as one accounting period) ending after June 29,
1995.
(f) Borrower's Debt to Total Capitalization Ratio. The
Borrower will not permit the ratio of:
(i) the sum (without duplication) of (A) the
Consolidated Total Indebtedness of the Borrower, plus (B) the
involuntary liquidation value of outstanding shares of any
preferred stock or preference stock issued or sold after December
31, 1993 and required to be shown as redeemable preferred stock
on the consolidated balance sheet of the Borrower, to
(ii) the sum (without duplication) of (A) the amount
determined pursuant to clause (i), plus (B) the Consolidated Net
Worth of the Borrower, plus (C) the involuntary liquidation value
of any outstanding shares of redeemable preferred stock of the
Borrower, plus (D) the LIFO Adjustment (net of any income tax
effect),
to be greater than (1) .575 to 1.0 at any time on or prior to
June 29, 1995, or (ii) .55 to 1.0 at any time after June 29,
1995.
(g) VRMC's Debt to Total Capitalization Ratio. The
Borrower will not permit the ratio of:
(i) the Consolidated Total Indebtedness of VRMC
(excluding any such Indebtedness owing to the Borrower), to
(ii) the sum (without duplication) of (A) the amount
determined pursuant to clause (i), plus (B) the Consolidated Net
Worth of VRMC, plus (C) the LIFO Adjustment (net of any income
tax effect),
to be greater than .125 to 1.0 at any time.
SECTION 8.12 Restricted Payments and Disbursements.
(a) Restricted Disbursements. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or
indirectly, make any Restricted Disbursement if, after giving
effect thereto, as of the last day of any fiscal quarter of the
Borrower (each such day being a "determination date") the
aggregate amount of all Restricted Disbursements made by the
Borrower and its Subsidiaries subsequent to September 30, 1993,
and on or prior to such determination date, exceeds the sum of
(i) $39,783,000, plus (ii) the sum, determined without
duplication, of (A) the sum of EBT, plus Depreciation and
Amortization Expense for the cumulative period commencing on
October 1, 1993 and ending on such determination date (which sum
may be positive or negative, and may from time to time increase
or decrease, all as a function of the cumulative operating income
or loss of the Borrower and its Subsidiaries included in the
computation of EBT for such cumulative period), plus (B) the
LIFO Adjustment, plus (iii) an amount equal to net cash proceeds
received from the sale by the Borrower of its capital stock after
September 30, 1993, but on or prior to such determination date,
plus (iv) an amount equal to net cash proceeds received from the
sale or conversion of rights, options and warrants to purchase
capital stock of the Borrower after September 30, 1993, but on or
prior to such determination date, plus (v) an amount equal to net
cash proceeds received after September 30, 1993, but on or prior
to such determination date, from any issuance of Funded
Indebtedness of the Borrower pursuant to a commitment (other than
under this Agreement) entered into after September 30, 1993, but
on or prior to such determination date, minus (vi) all payments
of principal of Funded Indebtedness (other than payments that
constitute Restricted Disbursements and payments under this
Agreement, the Existing VEC Bank Agreement or the Refining Bank
Agreement) of the Borrower or its Subsidiaries made after
September 30, 1993, but on or prior to such determination date,
plus (vii) $50,000,000, plus (viii) the aggregate amount of net
cash proceeds received by the Borrower or any of its Subsidiaries
subsequent to October 1, 1993 but on or prior to such
determination date from Transfers of assets permitted by Section
8.08(b), Section 8.08(d) or Section 8.08(e).
(b) Restricted Payments. The Borrower will not, and
will not permit any of its Subsidiaries to, directly or
indirectly, make any Restricted Payment if, after giving effect
thereto, as of the last day of any fiscal quarter of the Borrower
(each such day being a "determination date") the aggregate amount
of all Restricted Payments made by the Borrower and its
Subsidiaries subsequent to September 30, 1993, and on or prior to
such determination date, exceeds the sum of (i) fifty percent
(50%) of the sum, if positive, and zero percent (0%) of the sum,
if negative, in each case determined without duplication, of (A)
the sum of the Consolidated Net Income of the Borrower (excluding
any extraordinary items) for the cumulative period commencing on
October 1, 1993 and ending on such determination date (which sum
may be positive or negative, and may from time to time increase
or decrease, all as a function of the cumulative income or loss
of the Borrower and its Subsidiaries included in the computation
of Consolidated Net Income of the Borrower for such cumulative
period), plus (B) the LIFO Adjustment (net of any income tax
effect), plus (ii) twenty-five (25%) of the excess (if any) of
(A) the sum of (1) an amount equal to net cash proceeds received
from the sale by the Borrower of its capital stock after
September 30, 1993, but on or prior to such determination date,
plus (2) an amount equal to net cash proceeds received from the
sale or conversion of rights, options and warrants to purchase
capital stock of the Borrower after September 30, 1993, but on or
prior to such determination date, over (B) the Partnership Merger
Cost, plus (iii) $40,000,000.
(c) Definitions of Restricted Payments and Restricted
Disbursements.
(i) As used in this Agreement "Restricted Payment"
shall mean any (A) purchase, redemption or exchange of any shares
of any class of capital stock of the Borrower or any options,
rights or warrants to purchase any such stock or setting aside
funds for any such purpose, (B) declaration or payment of any
dividends on shares of any class of capital stock of the Borrower
(other than dividends payable in capital stock, or rights to
acquire capital stock, of the Borrower), and (C) sinking fund or
other payment or distribution made to or for the benefit of any
holders of the capital stock of the Borrower with respect to such
capital stock (other than distributions payable in capital stock,
or rights to acquire capital stock, of the Borrower) or setting
aside funds for any such purpose.
(ii) As used in this Agreement "Restricted
Disbursement" shall mean any (A) Restricted Payment, (B) Capital
Investment (including the Partnership Merger Cost), and (C)
optional, non scheduled redemption, payment or prepayment of, or
purchase (except for regularly scheduled redemption and sinking
fund payments), any Funded Indebtedness (other than under this
Agreement) or setting aside any funds for any such purpose, prior
to the date that payment is required under the terms of such
Funded Indebtedness.
(iii) Notwithstanding the foregoing, so long as no
Default or Event of Default exists or would result therefrom,
none of the following shall constitute either a Restricted
Payment or a Restricted Disbursement: (A) an exchange of any
shares of the capital stock of the Borrower or Subordinated Debt
of the Borrower solely for capital stock or warrants or other
rights to acquire capital stock of the Borrower, (B) Permitted
Cash Investments, (C) advances to a customer of the Borrower or
its Subsidiaries resulting from the acceptance by the Borrower or
such Subsidiary in the the ordinary course of business of a
promissory note in exchange for a past due account receivable
owing by such customer to the Borrower or such Subsidiary, so
long as such customer is not an Affiliate of the Borrower or such
Subsidiary, (D) prepayments to a Person in the ordinary course of
business to obtain trade credit or a discount from a trade
creditor, so long as such Person is not an Affiliate of the
Borrower or such Subsidiary or (E) any prepayment of the
Indebtedness outstanding under the Refining Bank Agreement and
the Existing VEC Bank Agreement.
(d) Exceptions to Restrictions. For purposes of
determining whether a Restricted Payment or Restricted
Disbursement is permitted by this Section 8.12, (i) to the extent
that the Borrower would be permitted to make a dividend payment
of the type described in clause (B) of the definition of
Restricted Payment at the time that such dividend payment is
declared, such dividend payment may be made within 60 days after
the date of declaration even if such dividend payment would
otherwise be prohibited at the time it is made, and (ii) to the
extent that the Borrower would be permitted to make a sinking
fund or other payment or distribution of the type described in
clause (C) of the definition of Restricted Payment at the time
that such payment or distribution is approved by the board of
directors of the Borrower, such payment or distribution may be
made within 60 days after the date of such approval even if such
payment or distribution would otherwise be prohibited at the time
it is made. For purposes of calculating Restricted Payments and
Restricted Disbursements there shall not be included Restricted
Payments with respect to shares of preferred stock or preference
stock of the Borrower owned by the Borrower or a Subsidiary of
the Borrower.
SECTION 8.13 Business. The Borrower will not engage
in any business (whether directly, or indirectly through
participation in a partnership, joint venture or other
Investment) that differs in any material respect from the lines
of business in which the Borrower is engaged on the date hereof.
The Borrower will not permit VRMC or Refining to engage in any
business (whether directly, or indirectly through participation
in a partnership, joint venture or other Investment) other than
the business engaged in by VRMC and Refining on the date hereof.
The Borrower will not permit the Partnership Group to engage in
any business (whether directly, or indirectly through
participation in a partnership, joint venture or other
Investment) other than the business engaged in by the Partnership
Group on the date hereof.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. Events of Default. If any of the
following events (each an "Event of Default") shall occur and be
continuing:
(a) the Borrower shall fail to pay when due any
installment of principal in respect of any Loan or Note; or
(b) the Borrower shall fail to pay any interest on any
Loan or Note, or any Unpaid Drawing, Fee, commission, expense,
compensation, reimbursement or any other amounts owing hereunder
or under any other Credit Document (other than amounts described
in subsection (a) of this Section 9.01) when due, or any other
Person party to any Credit Document shall fail to pay any amount
payable by such Person under any such Credit Document when due,
and, in either event, such failure shall continue for two or more
Business Days; or
(c) the Borrower or any Subsidiary thereof shall fail
to perform any term, covenant or agreement contained in Section
7.01(f) or Article VIII of this Agreement; or
(d) the Borrower shall fail to perform any term,
covenant or agreement contained in this Agreement (other than
those referenced in subsections (a), (b) and (c) of this Section
9.01) and such failure shall not have been remedied within 30
days after written notice thereof to the Borrower by any Managing
Agent or any Bank; or
(e) the Borrower or any other Person (other than an
Agent or a Bank) shall fail to perform any term, covenant or
agreement contained in any other Credit Document (other than
those referenced in subsections (a), (b), (c) and (d) of this
Section 9.01) and such failure shall not have been remedied
within 30 days after notice thereof to the Borrower or such
Person, as the case may be, by any Managing Agent or any Bank; or
(f) any representation or warranty made or deemed made
by, on behalf of, or concerning the Borrower or any Subsidiary of
the Borrower herein or in any other Credit Document or in any
certificate, agreement, instrument or statement delivered in
connection herewith or therewith, shall prove to have been untrue
in any material respect when made, deemed made or delivered; or
(g) the Borrower or any Material Subsidiary shall (i)
default in any payment of any Indebtedness having an outstanding
principal amount of $5,000,000 or more (other than the Notes)
beyond the period of grace if any, provided in the instruments or
agreements under which such Indebtedness was created, (ii)
default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any
instruments or agreements evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause
(determined without regard to whether any notice is required),
any such Indebtedness to become due prior to its stated maturity
or (iii) any such Indebtedness shall be declared to be due and
payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity
thereof; or
(h) the Borrower or any Material Subsidiary shall
commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy" as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an
involuntary case is commenced against the Borrower, or any such
Subsidiary of the Borrower and the petition is not controverted
within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower, or any such
Subsidiary, or the Borrower, or any such Subsidiary commences any
other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to the Borrower, or any such
Subsidiary of the Borrower, or there is commenced against the
Borrower, or any such Subsidiary of the Borrower any such
proceeding which remains undismissed for a period of 60 days or
the Borrower or any such Subsidiary of the Borrower is
adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered and
is not dismissed within 60 days from the entry thereof; or the
Borrower, or any such Subsidiary of the Borrower suffers any
appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or
unstayed for a period of 60 days; or the Borrower, or any such
Subsidiary makes a general assignment for the benefit of
creditors; or any corporate action is taken by the Borrower, or
any such Subsidiary for the purpose of effecting any of the
foregoing; or
(i) any Credit Document, any other agreement or
security document executed in connection with or pursuant to any
Credit Document, or any document executed in connection therewith
shall (other than with the consent of the Administrative Agent
and the Banks), at any time after its execution and delivery and
for any reason, cease to be in full force and effect or shall be
declared to be null and void, or the validity or enforceability
thereof shall be contested or the Borrower shall deny that it has
any or further liability or obligation thereunder; or
(j) a final judgment or final judgments for the
payment of money are entered by a court or courts of competent
jurisdiction against the Borrower or any Material Subsidiary and
such judgment or judgments remain unstayed or undischarged for a
period of 60 days, and the aggregate amount of all such judgments
against all such Persons exceeds $10,000,000; or
(k) except where the following would not have a
material adverse effect on the operations, businesses, properties
or condition (financial or otherwise) of any of VRMC, Refining,
the Partnership Group or the Borrower, any member of the ERISA
Group shall (i) engage in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which a
statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of
Labor; (ii) seek or permit to exist any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived with respect to any Plan; (iii)
fail to timely pay required contributions or payments due to or
with respect to any Plan (whether or not required under Section
412 of the Code) or Benefit Arrangement; (iv) terminate (or file
notice of intent to terminate) any Plan which would result in any
liability under Title IV of ERISA; (v) fail to timely make any
contribution or payment to any Multiemployer Plan; (vi) incur any
withdrawal liability under Title IV with respect to a
Multiemployer Plan; (vii) amend a Plan or Benefit Arrangement
resulting in either (A) an increase in current liability for the
plan year such that security to such Plan is required under
Section 401(a)(29) of the Code or (B) an increase in the unfunded
liabilities of such Plan or Benefit Arrangement or (viii)
maintain or contribute to any Benefit Arrangement which provides
health benefits to employees after termination of employment
other than as required by Section 601 of ERISA;
then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Administrative
Agent, upon the written request of the Required Banks, shall by
written notice to the Borrower take any or all of the following
actions, without prejudice to the rights of the Administrative
Agent, any Bank or the holder of any Note to enforce its claims
against the Borrower (provided, that, if an Event of Default
specified in Section 9.01(h) shall occur with respect to the
Borrower, the result which would occur upon the giving of written
notice by the Administrative Agent to the Borrower as specified
in clauses (i), (ii) and (iv) below, shall occur automatically
without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank
shall forthwith terminate immediately and any commitment fees
shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued
interest in respect of all Loans, and all Obligations owing
hereunder, to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice
of any kind (including, without limitation, notice of intent to
accelerate), all of which are hereby waived by the Borrower;
(iii) terminate any Letter of Credit which may be terminated in
accordance with its terms (whether by the giving of written
notice to the beneficiary or otherwise); and (iv) direct the
Borrower to pay, and the Borrower agrees that upon receipt of
such notice (or upon the occurrence of an Event of Default
specified in Section 9.01(h)) it will pay, to the Administrative
Agent at the Administrative Agent's Payment Office, such
additional amount of cash, as is equal to the aggregate Stated
Amount of all Letters of Credit then outstanding to be held as
security for the Obligations of the Borrower hereunder and under
the Notes and the other Credit Documents.
SECTION 9.02. Other Remedies. Upon the occurrence
and during the continuance of any Event of Default, the
Administrative Agent, acting at the request of the Required
Banks, may (subject to the provisions of the other Credit
Documents), proceed to protect and enforce its rights, either by
suit in equity or by action at law or both, whether for the
specific performance of any covenant or agreement contained in
this Agreement or in any other Credit Document or in aid of the
exercise of any power granted in this Agreement or in any other
Credit Document; or may proceed to enforce the payment of all
amounts owing to the Agents and the Banks under the Credit
Documents and interest thereon in the manner set forth herein or
therein; it being intended that no remedy conferred herein or in
any of the other Credit Documents is to be exclusive of any other
remedy, and each and every remedy contained herein or in any
other Credit Document shall be cumulative and shall be in
addition to every other remedy given hereunder and under the
other Credit Documents or now or hereafter existing at law or in
equity or by statute or otherwise.
ARTICLE X
THE AGENTS
SECTION 10.01 Appointment. The Banks hereby
designate BTCo, as Administrative Agent, BTCo and BMO, as
Managing Agents and the Persons identified as Co-Agents, as Co-
Agents, to act as specified herein and in the other Credit
Documents. Each Bank hereby irrevocably authorizes, and each
holder of any Note by the acceptance of such Note shall be deemed
irrevocably to authorize, the Agents to take such action on its
behalf under the provisions of this Agreement, the other Credit
Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to
or required of the Agents by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The
Agents may perform any of their respective duties hereunder by or
through its agents or employees.
SECTION 10.02 Nature of Duties. The Agents shall
have no duties or responsibilities except those expressly set
forth in this Agreement and the other Credit Documents. As to
any matters not expressly provided for by this Agreement
(including enforcement or collection of the Notes or of amounts
owing under the Credit Documents) no Agent shall be required to
exercise any discretion or take any action, but such Person shall
be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the
instructions of the Required Banks (or all Banks if such action
or inaction requires unanimity), and such instructions shall be
binding on all Banks; provided, that no Agent shall be required
to take any action which exposes such Person to personal
liability or which is contrary to the Credit Documents or
applicable law. Neither the Agents nor any of their respective
officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such hereunder or under any
other Credit Document or in connection herewith or therewith,
unless caused by its or their gross negligence or willful
misconduct. IT IS THE INTENT OF THE PARTIES HERETO THAT NO AGENT
SHALL BE LIABLE FOR ANY ACTION TAKEN OR OMITTED BY IT AS SUCH
HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT OR IN CONNECTION
THEREWITH CAUSED BY THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OF SUCH AGENT. The duties of each Agent shall be
mechanical and administrative in nature; no Agent shall have by
reason of this Agreement or any Credit Document a fiduciary
relationship in respect of any Bank; and nothing in this
Agreement or any Credit Document, expressed or implied, is
intended to, or shall be so construed as to, impose upon any
Agent any obligations in respect of this Agreement or any Credit
Document except as expressly set forth herein.
SECTION 10.03 Lack of Reliance on the Agents.
Independently and without reliance upon any Agent, each Bank, to
the extent it deems appropriate, has made and shall continue to
make (a) its own independent investigation of the financial
condition and affairs of the Borrower in connection with the
making and the maintaining of the Loans hereunder and the taking
or not taking of any action in connection herewith and (b) its
own appraisal of the creditworthiness of the Borrower, and,
except as expressly provided in this Agreement, no Agent shall
have a duty or responsibility, either initially or on a
continuing basis, to provide any Bank with any credit or other
information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times
thereafter. No Agent shall be responsible to any Bank for any
recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered
in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any
other Credit Document or the financial condition of the Borrower,
any Subsidiary of the Borrower or any other Person or be required
to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this
Agreement or any other Credit Document, or the financial
condition of the Borrower, or any Subsidiary of the Borrower or
any other Person, or the existence or possible existence of any
Default or Event of Default.
SECTION 10.04 Certain Rights of the Agents. If an
Agent shall request instructions from the Required Banks (or
where unanimity is required, all Banks) with respect to any act
or action (including failure to act) in connection with this
Agreement or any other Credit Document, such Agent shall be
entitled to refrain from such act or taking such action unless
and until such Agent shall have received instructions from the
Required Banks (or where unanimity is required, all Banks); and
such Agent shall not incur liability to any Person by reason of
so refraining. Without limiting the foregoing, no Bank shall
have any right of action whatsoever against any Agent as a result
of such Agent acting or refraining from acting here under or
under any other Credit Document in accordance with the
instructions of the Required Banks (or where unanimity is
required, all Banks).
SECTION 10.05 Reliance. Each Agent shall be entitled
to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, statement, certificate, facsimile,
teletype or telecopier message, cablegram, radiogram, order or
other document or telephone message signed, sent or made or
purported to be signed, sent or made by the proper Person or
entity and reasonably believed by such Agent to be genuine, and,
with respect to all legal matters pertaining to this Agreement
and its duties hereunder, upon advice of counsel selected by it.
SECTION 10.06 Indemnification. To the extent an
Administrative Agent or a Managing Agent is not reimbursed and
indemnified by the Borrower, the Banks will reimburse and
indemnify such Person and its directors, officers, shareholders,
employees, agents and successors, for and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or
asserted against such Person in performing its duties hereunder
or under any other Credit Document, in any way relating to or
arising out of this Agreement or any other Credit Document;
provided, that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from
such Person s gross negligence or willful misconduct. WITHOUT
LIMITING ANY PROVISION OF THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE BANKS THAT THE
ADMINISTRATIVE AGENT, THE MANAGING AGENTS AND THEIR RESPECTIVE
DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES, AGENTS AND
SUCCESSORS SHALL BE INDEMNIFIED HEREUNDER AGAINST ALL SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT
OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OF SUCH PERSON. Neither the Administrative Agent
nor any Managing Agent shall be required to do any act hereunder
or under any other document or instrument delivered hereunder or
in connection herewith or take any action toward the execution or
enforcement of the agencies hereby created, or to prosecute or
defend any suit in respect of this Agreement or the Credit
Documents, unless indemnified to its satisfaction by the holders
of the Notes against loss, cost, liability and expense. If any
indemnity furnished to any such Person is, in the opinion of such
Person insufficient or becomes impaired, such Person may call for
additional indemnity and not commence or cease to do the acts
indemnified against until such additional indemnity is furnished.
SECTION 10.07 Rights of Agents as Banks. With
respect to its obligation to make Loans under this Agreement,
BTCo, BMO and any other Person serving as an Agent who is also a
"Bank" shall have the rights and powers specified herein for a
"Bank" and may exercise the same rights and powers as though it
were not performing the duties specified herein; and the terms
"Banks", "Required Banks", "holders of Notes", or any similar
terms shall, unless the context clearly otherwise indicates,
include BTCo, BMO and such other Persons in their individual
capacities. BTCo, BMO, any other Person serving as an Agent and
their respective Affiliates may be engaged in, or may hereafter
engage in, one or more loan, letters of credit, leasing or other
financing activities, not the subject of the Credit Documents
(collectively, the "Other Financings") with the Borrower or any
of its Subsidiaries or Affiliates, or may act as trustee on
behalf of, or depositary for, or otherwise engage in other
business transactions with the Borrower or any of its
Subsidiaries or Affiliates (all Other Financings and such other
business transactions being collectively, the "Other Activities")
with no responsibility to account therefor to the Banks. Without
limiting the rights and remedies of the Banks specifically set
forth in the Credit Documents, no other Bank shall, in its
capacity as a "Bank" hereunder or otherwise as a result of being
a party to this Agreement, have any interest in (a) any Other
Activities, (b) any present or future guarantee by or for the
account of the Borrower not contemplated or included in the
Credit Documents, (c) any present or future offset exercised by
any Agent in respect of any such Other Activities, (d) any
present or future property taken as security for any Other
Activities, or (e) any property now or hereafter in the
possession or control of any Agent which may be or become
security for the obligations of the Borrower under the Credit
Documents by reason of the general description of indebtedness
secured, or of property contained in any other agreements,
documents or instruments related to such Other Activities.
SECTION 10.08 Holders. The Agents may deem and treat
the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment,
transfer or endorsement thereof, as the case may be, shall have
been filed with the Administrative Agent. Any request, authority
or consent of any Person who, at the time of making of such
request or giving such authority or consent, is the holder of any
Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or endorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
SECTION 10.09 Resignation by the Administrative
Agent. (a) The Administrative Agent may resign from the
performance of all its functions and duties hereunder and under
the other Credit Documents at any time by giving 30 Business Days
prior written notice to the Borrower and the Banks. Such
resignation shall take effect upon the appointment of a successor
Administrative Agent pursuant to clauses (b) or (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required
Banks shall appoint a successor Administrative Agent hereunder
who shall be a commercial bank or trust company with a combined
capital and surplus in excess of $100,000,000.
(c) If a successor Administrative Agent shall not have
been so appointed within said 30 Business Day period, the
Administrative Agent, with the consent of the Borrower, shall
then appoint a successor Administrative Agent who shall serve as
Administrative Agent hereunder until such time, if any, as the
Required Banks appoint a successor Administrative Agent as
provided above.
(d) If a successor Administrative Agent has not been
appointed pursuant to clause (b) or (c) by the 30th Business Day
after the date such notice of resignation was given by the
Administrative Agent or has not accepted such appointment, the
Administrative Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of the
Administrative Agent hereunder and under the other Credit
Documents until such time, if any, as the Required Banks appoint
a successor Administrative Agent as provided above.
(e) Upon the acceptance of any appointment as
Administrative Agent under this Agreement by a successor
Administrative Agent, each successor Administrative Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative
Agent and shall function as sole Administrative Agent under this
Agreement, and the retiring Administrative Agent shall be
discharged from its duties and obligations as Administrative
Agent under this Agreement.
(f) After the retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of
this Article X shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent
under this Agreement.
SECTION 10.10 Resignation by any Managing Agent or
Co-Agent. (a) Any Managing Agent or Co-Agent may resign at any
time as Managing Agent or Co-Agent, as the case may be, under
this Agreement by giving written notice thereof to the Banks and
the Borrower. Any such resignation by a Co-Agent shall be
effective immediately upon delivery of such written notice and no
successor shall be appointed. Any such resignation by a Managing
Agent shall take effect upon the appointment of a successor
Managing Agent pursuant to clauses (b) or (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the remaining
Managing Agent, or, if both Managing Agents have resigned or
tendered their resignations, the Required Banks, shall have the
right to appoint a successor Managing Agent which shall be a
commercial bank or trust company with a combined capital and
surplus in excess of $100,000,000.
(c) If a successor Managing Agent shall not have been
so appointed by the remaining Managing Agent or, if applicable,
the Required Banks, or shall not have accepted such appointment,
within 30 days after the retiring Managing Agent's giving of
notice of resignation, then such Managing Agent position shall
remain vacant unless and until a successor is appointed pursuant
to clause (b) above and the duties of such retiring Managing
Agent shall be discharged by the remaining Managing Agent, or if
both Managing Agents have resigned or tendered their
resignations, by the Required Banks.
(d) Upon the acceptance of any appointment as Managing
Agent under this Agreement by a successor Managing Agent, each
successor Managing Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
retiring Managing Agent and shall function as such under this
Agreement, and the retiring Managing Agent shall be discharged
from its duties and obligations as such under this Agreement.
(e) After the retiring Managing Agent's or Co-Agent's,
as the case may be, resignation hereunder as such, the provisions
of this Article X shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Managing Agent or
Co-Agent, as the case may be, under this Agreement.
SECTION 10.11 Co-Agents. No Co-Agent shall have any
duties, obligations or liabilities in its capacity as Co-Agent.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 Payment of Expenses, Etc. (a) The
Borrower agrees, whether or not the transactions hereby
contemplated are consummated, to pay all reasonable out of pocket
costs and expenses (which costs and expenses shall be itemized by
type of expenditure) of the Administrative Agent and the Managing
Agents in connection with the preparation, execution and delivery
of the Credit Documents and the documents and instruments
referred to therein (including, without limitation, the
reasonable fees and disbursements of Andrews & Kurth L.L.P.,
counsel to the Administrative Agent and the Managing Agents and
any local counsel who may be retained by such counsel), and of
the Administrative Agent and the Managing Agents in connection
with the administration of the Credit Documents and the other
documents and instruments referred to therein and any amendment,
waiver or consent relating thereto (including, without
limitation, the reasonable fees and disbursements of counsel for
the Administrative Agent and the Managing Agents) and of the
Administrative Agent and the Managing Agents and each Bank in
connection with the preservation of rights under, and enforcement
of, the Credit Documents and the documents and instruments
referred to therein (including, without limitation, the
reasonable fees and disbursements of counsel for the
Administrative Agent and the Managing Agents and for any of the
Banks). Any statement of counsel to the Administrative Agent and
the Managing Agents or any Bank for fees and disbursements
referred to in the immediately preceding sentence shall reference
the attorney who performed the legal services, a brief summary of
the services performed and the hours worked; all disbursements
shall be itemized by type of disbursement. In addition, the
Borrower shall indemnify each Agent, each Bank and their
respective Affiliates, officers, directors, employees,
representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of
any investigation, litigation or other proceeding related to the
Borrower's entering into and performance of any Credit Document,
including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any
such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). WITHOUT LIMITING
ANY PROVISION OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS,
IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE
AGENTS, EACH BANK AND THEIR RESPECTIVE AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES AND AGENTS SHALL BE
INDEMNIFIED AND HELD HARMLESS FOR ALL SUCH LOSSES, LIABILITIES,
CLAIMS, DAMAGES AND EXPENSES INCURRED BY ANY SUCH PERSON ARISING
FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF
SUCH PERSON.
(b) A statement or statements of the fees and
disbursements of counsel to the Administrative Agent and the
Managing Agents incurred in connection with the preparation of
this Agreement and delivered to the Borrower not less than five
Business Days prior to the Effective Date shall be paid on the
Effective Date, and statements or certificates as to all other
fees, disbursements and other amounts referred to in Section
11.01(a) (including, without limitation, statements of the fees
and disbursements of counsel) shall be paid within 30 days of the
date such statement or certificate is delivered to the Borrower.
SECTION 11.02 Right of Setoff. In addition to any
rights now or hereafter granted under applicable law or otherwise
and not by way of limitation of any such rights, upon the
occurrence and continuance of an Event of Default, each Bank is
hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at
any time held or owing by such Bank to or for the credit or the
account of the Borrower against and on account of the Obligations
and liabilities of the Borrower to such Bank under this Agreement
or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Bank
pursuant to Section 4.07, and all other claims of any nature or
description arising out of or connected with this Agreement or
any other Credit Document, irrespective of whether or not such
Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
SECTION 11.03 Notices. Except as otherwise specified
herein or in the other Credit Documents, all notices, requests,
demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when
delivered to the party to which such notice, request, demand or
other communication is required or permitted to be given or made
under this Agreement, the Notes or the other Credit Documents,
addressed to such party at its address set forth opposite its
signature below, or at such other address as any of the parties
hereto may hereafter notify the others in writing.
SECTION 11.04 Benefit of Agreement; Participations
and Assignments. (a) This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however,
the Borrower may not assign or transfer any of its interest
hereunder without the prior written consent of the Banks. Any
Bank may grant participations in its rights hereunder, subject to
the following: (i) such Bank shall remain a "Bank" for all
purposes hereunder and the participant shall not constitute a
"Bank" hereunder, (ii) no Bank shall grant any participation
under which the participant shall have rights to approve any
amendment to or waiver of this Agreement except to the extent
such amendment or waiver requires the consent of 100% of the
Banks, as provided in Section 11.10, and (iii) each Bank agrees
to notify the Borrower of the amount of each participation
granted and the identity of the respective participant.
(b) With the prior written consent of the Borrower
(which consent shall not be unreasonably withheld) and subject to
the approval of the Managing Agents, each Bank may assign all or
any portion of its rights and obligations (including its
Commitment) to one or more financial institutions ("Eligible
Transferees"), each of which Eligible Transferees shall have all
of the rights and benefits of a Bank hereunder to the extent of
its assigned rights and benefits; provided, however, that the
parties to each such assignment shall execute and deliver to the
Borrower and the Managing Agents for their acceptance, an
Assignment and Acceptance in substantially the form of Exhibit
11.04 (an "Assignment and Acceptance"); and further provided that
such assignment of a Bank's Commitment shall be in a minimum
amount equal to two percent (2%) of the Total Commitment as of
the effective date of such assignment. The Borrower agrees to
all assignments at the option of each Bank to any Affiliate of
such Bank. In the event of any assignment, (i) any reference in
this Agreement or the other Credit Documents to a Bank or a
Bank's Commitment or Notes shall include such new Bank to the
extent of its assigned interest, (ii) such new Bank shall become
a party to this Agreement as a Bank by execution of an Assignment
and Acceptance, which effective date shall be at least two
Business Days after the execution date, with the Managing Agents
and the assigning Bank, (iii) the Administrative Agent shall have
received a processing fee for such assignment equal to $2,500
from such assignor or such assignee, (iv) the Borrower will issue
new Notes to such new Bank and to the assigning Bank in
conformity with the requirements of Section 1.06 and (v) the
assigning Bank shall have no further obligation with respect to
that portion of its obligations and Commitments assigned to such
new Bank. All amounts remitted to any assigning Bank by any
Eligible Assignee must be delivered by such Eligible Assignee to
the Administrative Agent for payment to the assigning Bank. Each
Bank and the Borrower agree to execute such documents (including,
without limitation, amendments to this Agreement and the other
Credit Documents) as shall be necessary to effect the foregoing.
Nothing contained in this Section 11.04(b) shall alter or modify
the Borrower's obligation to pay any amount payable to or for the
account of the assignor Bank pursuant to Section 4.03 accruing
prior to such assignment.
(c) Notwithstanding anything to the contrary contained
in Section 11.04(a) or Section 11.10, if at any time any Bank
shall be in receivership or shall seek compensation pursuant to
the provisions of Section 4.03, the Borrower shall have the right
to replace such Bank with another financial institution;
provided, that such new financial institution shall be acceptable
to the Managing Agents (unless the Bank to be replaced is a
Managing Agent, in which case such new financial institution
shall be acceptable to the remaining Managing Agent). Each Bank
agrees to its replacement at the option of the Borrower pursuant
to this Section 11.04(c), provided, that the successor financial
institution shall purchase without recourse such Bank's interest
in the Commitment of such Bank and the Obligations of the
Borrower to such Bank for cash in an aggregate amount equal to
the aggregate unpaid principal thereof, all unpaid interest
accrued thereon, all unpaid commitment fees and letter of credit
fees accrued for the account of such Bank, and all other amounts
(if any) then owing to such Bank hereunder and otherwise in
accordance with Section 11.04(b). Nothing contained in this
Section 11.04(c) shall alter or modify the Borrower's obligation
to pay any amount payable to or for the account of the replaced
Bank pursuant to Section 4.03 accruing prior to the replacement
of such Bank. Notwithstanding anything to the contrary contained
in this Agreement, the Administrative Agent may not be replaced
hereunder at any time while it has Letters of Credit outstanding
hereunder unless arrangements satisfactory to the Administrative
Agent (including, the furnishing of a standby letter of credit in
form and substance, and issued by an issuer, satisfactory to the
Administrative Agent or the furnishing of cash collateral in
amounts and pursuant to arrangements satisfactory to the
Administrative Agent) have been made with respect to such
outstanding Letters of Credit.
(d) The Administrative Agent will give prompt notice
to the Borrower of the execution by it of any Assignment and
Acceptance or supplement to this Agreement pursuant to this
Section 11.04.
(e) Each Agent and each Bank may furnish any
information concerning the Borrower or its Subsidiaries in the
possession of such Agent or such Person from time to time to
Affiliates of the Agent or such Bank (including without
limitation, in the case of BTCo, BT Securities Corporation and
its employees, to the extent necessary for the purposes
contemplated by this Agreement, including, without limitation,
the syndication of the credit facilities contemplated hereby)
and, in the case of each Bank, to assignees and participants
(including prospective assignees and participants) of such Bank.
Each Bank will take reasonable steps to protect the
confidentiality of any information concerning the Borrower or its
Subsidiaries provided to a prospective participant or assignee
and known by such Bank to be confidential, and, if requested by
the Borrower, such Bank will identify the prospective assignees
and participants that have received such information.
(f) Anything in this Section 11.04 to the contrary
notwithstanding, any Bank may at any time, without the consent of
the Borrower or the Managing Agents, assign and pledge all or any
portion of its Commitment and the Loans owing to it to any
Federal Reserve Bank (and its transferees) as collateral security
pursuant to Regulation A of the Federal Reserve Board and any
Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Bank from its obligations
hereunder.
SECTION 11.05 No Waiver; Remedies Cumulative. No
failure or delay on the part of any Agent or any Bank or any
holder of a Note in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of
dealing between the Borrower and any Agent or any Bank or the
holder of any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which any Agent or any Bank
or the holder of any Note would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agents,
the Banks or the holder of any Note to any other or further
action in any circumstances without notice or demand.
SECTION 11.06 Indemnification. (a) The Borrower
agrees to indemnify, defend and hold harmless the Agents and the
Banks, and each of their respective Affiliates, directors,
officers, shareholders, employees, agents and successors
(collectively, the "Indemnified Persons") from and against, any
and all losses, costs, liabilities, expenses, judgments, claims
or damages arising out of the assertion against any of them as a
result of their being a party to this Agreement or any
transaction contemplated hereby or the exercise of any rights or
remedies under the Credit Documents, including, without
limitation, the amounts of any fines, penalties, attorneys fees,
response costs and natural resource damages arising out of, or in
connection with, or resulting from any (i) actual or proposed use
by the Borrower of the proceeds of any extension of credit
(including the Loans and Letters of Credit of any Bank
hereunder), (ii) breach by the Borrower of this Agreement or any
other Credit Document, (iii) violation by the Borrower or any of
its Subsidiaries or Affiliates of any law, rule, regulation or
order including, but not limited, to Environmental Laws, (iv)
transportation, treatment, recycling, storage, disposal, Release
or threatened Release of any Hazardous Material by, at, or onto
any facility owned or operated by another party, which Hazardous
Material has been used or generated by the Borrower or any of its
Subsidiaries or which is present at or on any of their
properties, (v) Release or threatened Release of any Hazardous
Material by the Borrower or any of its Subsidiaries, or the
presence on or under, or Release or threatened Release from, any
of their properties, into or upon the land, atmosphere,
watercourse, body of surface or subsurface water or wetland,
arising from the installation, use, generation, manufacture,
treatment, handling, production, processing, storage, removal,
remediation, cleanup, or disposal of any Hazardous Material,
including without limitation, any liability arising under or in
connection with CERCLA and similar Environmental Laws, (vi) claim
by any third party based upon any exposure of any person or
property to any Hazardous Material generated, used, or Released
by the Borrower or any of its Subsidiaries, (vii) circumstance in
which such Indemnified Person is deemed an owner or operator of
any real or personal property of the Borrower or any of its
Subsidiaries in circumstances in which such Indemnified Person is
not generally operating or generally exercising control over the
property of the Borrower or its Subsidiaries, to the extent such
losses, liabilities, claims or damages arise out of or result
from any Hazardous Materials located in, on or under such
property or (viii) investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating
to any of the foregoing, and the Borrower shall reimburse each
Indemnified Person upon demand for any losses, costs or expenses
(including reasonable legal fees) incurred in connection with any
investigation or proceeding; but excluding any such losses,
costs, liabilities, claims, damages or expenses incurred by an
Indemnified Person by reason of the gross negligence or willful
misconduct of such Indemnified Person. WITHOUT LIMITING ANY
PROVISION OF THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, IT IS
THE EXPRESS INTENTION OF THE PARTIES THAT EACH INDEMNIFIED PERSON
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ALL SUCH LOSSES,
LIABILITIES, CLAIMS AND DAMAGES ARISING OUT OF OR RESULTING FROM
THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF SUCH
PERSON.
(b) Within a reasonable period of time after an
Indemnified Person receives actual notice of any claim or the
commencement of any action covered by this Section 11.06, the
Indemnified Person shall, if a claim in respect thereof is to be
made against the Borrower under this Section 11.06, notify the
Borrower in writing of such claim or action; provided, however,
that the failure to so notify the Borrower shall not relieve the
Borrower from any liability which the Borrower may have to the
Indemnified Person under this Section 11.06 unless, and only to
the extent that, such Indemnified Person had actual notice of
such claim or action and the obligations of the Borrower under
this Section 11.06 have been significantly increased as a direct
result of such failure. With respect to any claim or action
brought against an Indemnified Person, and for which a claim in
respect thereof is to be made against the Borrower under this
Section 11.06, so long as no Default exists, the Borrower shall
be entitled to be consulted by such Indemnified Person to the
extent the Borrower reasonably requests, in respect of the
defense of such claim or action. The Borrower and such
Indemnified Person shall cooperate in the defense of any such
claim or action and shall take those actions reasonably within
their power to take which are reasonably necessary to preserve
any legal defenses to such matters. If any such claim or action
shall be brought against the Indemnified Person, so long as no
Default exists, the Borrower shall be entitled to participate in
the defense thereof, and, with the consent of such Indemnified
Person, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Person. If the Borrower shall
assume the defense of such claim or action, the Indemnified
Person (i) shall nonetheless have the right to employ counsel to
represent it, and the reasonable fees and expenses of such
counsel shall be paid by the Borrower and (ii) may at any time
revoke its consent with respect thereto and resume its own
defense of such claim or action. Notwithstanding any provision
hereof to the contrary, no consent order shall be entered into or
claim or action settled unless (A) the Indemnified Person has
given its prior written consent thereto and (B) the Borrower has
been advised of the terms of such consent order or settlement and
consulted with respect thereto. The Borrower agrees that it will
reimburse each Indemnified Person for all reasonable expenses
(including reasonable counsel fees) as they are incurred by such
Indemnified Person in connection with investigating, preparing or
defending, or providing evidence in, any pending or threatened
claim or proceeding in respect of which indemnification or
contribution is provided hereunder (whether or not such
Indemnified Person is a party to such claim or proceeding) or in
enforcing this Section 11.06.
SECTION 11.07 Governing Law; Submission to
Jurisdiction; Waiver of Immunities. (a) This Agreement and the
rights and obligations of the parties hereunder and under the
Notes shall be construed in accordance with and be governed by
the internal laws of the State of New York without giving effect
to the conflict of law principles thereof (other than Section
5-1401 of the General Obligations Law of the State of New York).
In no event shall Chapter 15, Subtitle 3, Title 79, of the
Revised Civil Statutes of Texas, 1925, as amended, apply to this
Agreement, the Notes and the Obligations.
(b) The Banks, the Agents and the Borrower hereby (i)
irrevocably submit to the non-exclusive personal jurisdiction of
any New York State or Federal court sitting in New York City, New
York over any action or proceeding arising out of or relating to
this Agreement or any of the other Credit Documents, and the
Banks, the Agents and the Borrower hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard
and determined in such New York State or Federal court, and (ii)
irrevocably waive, to the fullest extent permitted by applicable
law, any objection they may now or hereafter have to the laying
of venue in any proceeding brought in a New York State or Federal
Court sitting in New York City and any claim that any such
proceeding brought in a New York State or Federal Court sitting
in New York City has been brought in an inconvenient forum;
provided, however, nothing in this Section 11.07 is intended to
waive the right of any Agent, any Bank or the Borrower to remove
any such action or proceeding commenced in any such New York
State court to an appropriate New York Federal court to the
extent the basis for such removal exists under applicable law.
The Borrower hereby irrevocably appoints CT Corporation Systems,
Inc. (the "Process Agent"), with an office on the date hereof at
1633 Broadway, New York City, New York 10019, as its agent to
receive on behalf of it and its properties service of copies of
the summons and complaint and any other process which may be
served in any such action or proceeding. Such service may be
made by mailing by certified mail a copy of such process to the
Borrower in care of the Process Agent at the Process Agent's
above address, with a copy to the Borrower (Attention: General
Counsel) at its address specified on the signature pages hereof
and the Borrower hereby irrevocably authorizes and directs the
Process Agent to accept such service on its behalf. As an
alternative method of service, the Borrower also irrevocably
consents to the service of any and all process in any such action
or proceeding by the mailing by certified mail of copies of such
process to it at its address specified on the signature pages
hereof (Attention: General Counsel). The Borrower agrees that a
final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
(c) Nothing in this Section 11.07 shall affect the
right of any Agent or any Bank to serve legal process in any
other manner permitted by law or affect the right of any Agent or
any Bank to bring any action or proceeding against the Borrower
or any of its properties in the courts of any other
jurisdictions.
(d) To the extent that the Borrower has or hereafter
may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service of notice, attachment
prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, the Borrower
hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the other Credit Documents.
(e) To the maximum extent permitted by law, each of
the Borrower, the Agents and the Banks hereby knowingly,
voluntarily and intentionally waives any right it may have to
claim or recover in any litigation directly or indirectly arising
out of, under or in connection with this Agreement, the Credit
Documents or the transactions contemplated hereby or thereby, any
punitive or consequential damages or any damages other than, or
in addition to, actual damages. Further, each of the Borrower,
the Agents and the Banks hereby certifies that neither any
representative or agent of any Agent or the Banks nor counsel for
any Agent or the Banks has represented, expressly or otherwise,
that any Agent or the Banks would not, in the event of
litigation, seek to enforce this waiver. Each of the Borrower,
the Agents and the Banks acknowledges that it has been induced to
enter into this Agreement by, among other things, the mutual
waivers and certification herein.
SECTION 11.08 Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete
set of counterparts shall be lodged with the Borrower and the
Administrative Agent.
SECTION 11.09 Headings Descriptive. The headings of
the several Sections and subsections of this Agreement are
inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
SECTION 11.10 Amendment and Waiver. No amendment or
waiver of any provision of this Agreement, any Note or any other
Credit Document, or consent to any departure by the Borrower
herefrom or therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Banks and the
Borrower, and then, in any case, such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, that, no such waiver or
consent and no such amendment shall (i) extend the time of
payment of or reduce any principal amount due under any Note (or
of any Unpaid Drawing), or reduce the rate or amount or extend
the time of payment of interest thereof, or reduce the rate or
amount or extend the time of payment of any Fees, or reduce the
principal amount of any Note (or of any Unpaid Drawing), or
change the amount of or extend any Bank's Commitment or Loan
Commitment, or increase the Letter of Credit Sublimit or extend
the maturity of any Unpaid Drawings or the expiry date of any
Letter of Credit beyond the Termination Date, or amend, modify or
waive any provision of this subsection or reduce the percentage
specified in the definition of Required Banks or dispense with
the requirement for the approval or the assent of the Required
Banks whenever the same is required, without the written consent
of all the Banks or (ii) amend, modify or waive any provision of
Article X without the written consent of the then acting Agents.
SECTION 11.11 Survival. All indemnities set forth
herein including, without limitation, in Section 10.06, Section
11.01 and Section 11.06 shall survive the execution and delivery
of this Agreement, the Notes and the other Credit Documents, the
making of Loans hereunder and the repayment of the Obligations.
SECTION 11.12 Interest. (a) It is the intention of
the parties hereto that each Bank shall conform strictly to usury
laws applicable to it. Accordingly, the parties hereto stipulate
and agree that none of the terms and provisions contained in the
Notes, this Agreement or any of the other Credit Documents shall
ever be construed to create a contract to pay to any Bank for the
use, forbearance or detention of money at a rate in excess of the
Highest Lawful Rate applicable to such Bank, if any, and that for
purposes hereof, "interest" shall include the aggregate of all
charges or other consideration which constitute interest under
applicable laws and are contracted for, taken, reserved, charged,
or received under any of this Agreement, the Notes or the other
Credit Documents or otherwise in connection with the transactions
contemplated by this Agreement. Further, if the transactions
contemplated hereby would be usurious as to any Bank under laws
applicable to it then, in that event, notwithstanding anything to
the contrary in the Notes, this Agreement or in any other Credit
Document or agreement entered into in connection with or as
security for the Notes, it is agreed as follows: the aggregate of
all consideration which constitutes interest under law applicable
to each such Bank that is contracted for, taken, reserved,
charged or received by such Bank under the Notes, this Agreement
or under any of the other aforesaid Credit Documents or
agreements or otherwise in connection with the Notes shall under
no circumstances exceed the maximum amount allowed by the law
applicable to such Bank, and any excess shall be credited by such
Bank on the principal amount of the Indebtedness of the Borrower
owed to such Bank (or, if the principal amount of such
Indebtedness shall have been paid in full, to the extent such
interest has been received by a Bank it shall be refunded by such
Bank to the Borrower). The provisions of this Section 11.12(a)
shall control over all other provisions of this Agreement, the
Notes, and the other Credit Documents which may be in apparent
conflict herewith. The parties further stipulate and agree that,
without limitation of the foregoing, all calculations of the rate
or amount of interest contracted for, taken, reserved, charged or
received under any of this Agreement, the Notes, and the other
Credit Documents which are made for the purpose of determining
whether such rate or amount exceeds the Highest Lawful Rate shall
be made, to the extent permitted by applicable law, by
amortizing, prorating, al locating and spreading during the
period of the full stated term of the Indebtedness, and if longer
and if permitted by applicable law, until payment in full, all
interest at any time so contracted for, taken, reserved, charged
or received.
(b) If at any time the effective rate of interest
which would otherwise apply to any Indebtedness evidenced hereby
or by any Bank's Note would exceed the Highest Lawful Rate
applicable to such Bank (taking into account the interest rate
applicable to such Indebtedness pursuant to the other provisions
of this Agreement, plus all additional charges and consideration
which have been contracted for, taken, reserved, charged or
received under this Agreement, such Bank's Note and the other
Credit Documents, or any of them, and which additional charges or
consideration (the "Additional Charges") constitute interest with
respect to such Indebtedness), the effective interest rate to
apply to such Indebtedness made by a Bank shall be limited to the
Highest Lawful Rate, but any subsequent reductions in the
interest rate applicable to such Indebtedness owed to such Bank
shall not reduce the effective interest rate to apply to such
Indebtedness owed to such Bank below the Highest Lawful Rate
applicable to such Bank until the total amount of interest
accrued on such Indebtedness equals the amount of interest which
would have accrued if the Interest Rate from time to time
applicable to such Indebtedness owed to such Bank had at all
times been in effect with respect to such Indebtedness pursuant
to the other provisions of this Agreement and if the Banks had
collected all Additional Charges called for under this Agreement,
the Notes, and the other Credit Documents. If at maturity or
final payment of such Bank's Note the total amount of interest
accrued on such Bank's Notes (including amounts designated as
"interest" plus any Additional Charges which constitute interest
with respect to such Bank's Note, and taking into account the
limitations of the first sentence of this Section 11.12(b)) is
less than the total amount of interest which would have accrued
if the interest rate or interest rates applicable to the
Indebtedness from time to time outstanding under such Bank's Note
had at all times been in effect pursuant to the other provisions
of this Agreement, then the Borrower agrees, to the fullest
extent permitted by the laws applicable to such Bank, to pay to
such Bank an amount equal to the difference between (i) the
lesser of (A) the amount of interest which would have accrued on
such Bank's Note and other Obligations if the Highest Lawful Rate
had at all times been in effect (but excluding, for purposes of
calculating such amount of interest, any Additional Charges which
constitute interest with respect to such Bank's Note) or (B) the
amount of interest which would have accrued on such Bank's Note
and other Obligations if the interest rate or interest rates
applicable to the Indebtedness from time to time outstanding
under such Bank's Note and other Obligations had at all times
been in effect pursuant to the other provisions of this Agreement
(including amounts designated as "interest" plus any Additional
Charges which constitute interest with respect to such Bank's
Note) less (ii) the amount of interest actually accrued on such
Bank's Note (including amounts designated as "interest" plus any
Additional Charges which constitute interest with respect to such
Bank's Note).
(c) The Agents, the Banks and the Borrower agree that
insofar as the provisions of Article 1.04, Subtitle 1, Title 79
of the Revised Civil Statutes of Texas, 1925, as amended, are
applicable to the determination of the Highest Lawful Rate with
respect to any of the Obligations, the indicated rate ceiling
computed from time to time pursuant to Section (a) of such
Article shall apply to the Notes; provided, however, that to the
extent permitted by such Article, the Administrative Agent may
from time to time by notice from the Administrative Agent to the
Borrower revise the election of such interest rate ceiling as
such ceiling affects the then current or future balances of the
Loans and other Obligations.
SECTION 11.13 Withholding Taxes. In the event that
(i) the Borrower fails to pay all employee withholding taxes or
similar liabilities (and fails to contest such liabilities and
set up reserves) in accordance with Section 7.04, (ii) the
Administrative Agent or any Bank shall have notified the Borrower
of its intention to pay any such amounts on behalf of the
Borrower, and (iii) the Borrower shall not have paid such amount
(or contested such amount and set up reserves in accordance with
Section 7.04) within 10 Business Days following receipt of the
notice referred to in clause (ii) above, then the Administrative
Agent or any Bank may, but shall have no obligation to, pay any
such employee withholding taxes or similar liabilities. The
Borrower hereby agrees to reimburse the Administrative Agent or
any Bank which pays any amount in accordance with the preceding
sentence for such amount and for all costs and expenses of paying
such amounts.
SECTION 11.14 Independence of Covenants. All
covenants contained in the Credit Documents shall be given
independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that such action
or condition would be permitted by an exception to, or otherwise
be within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action
is taken or condition exists.
SECTION 11.15 Senior Indebtedness. The Banks
acknowledge that the Obligations do not constitute "Senior Debt"
as such term is defined in Paragraph 7A of the Note Purchase
Agreement dated as of October 15, 1987, among the Borrower and
certain purchasers listed on the signature pages thereof.
SECTION 11.16 Separability. Should any clause,
sentence, paragraph, subsection, Section or Article of this
Agreement be judicially declared to be invalid, unenforceable or
void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be
invalid, unenforceable or void will be deemed to have been
stricken herefrom by the parties hereto, and the remainder will
have the same force and effectiveness as if such stricken part or
parts had never been included herein.
SECTION 11.17 FINAL AGREEMENT. THIS WRITTEN CREDIT
AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
ARTICLE XII
DEFINITIONS; CONSTRUCTION
SECTION 12.01 Definitions. As used herein, the terms
defined in Annex A hereto shall have the meanings therein
specified unless the context otherwise requires. All terms
defined in Annex A hereto or in any other provision of this
Agreement in the singular shall have the same meanings in the
plural and vice versa.
SECTION 12.02 Other Definitional Terms. The words
"hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All
references herein to Sections, Annexes, Exhibits and Schedules
shall, unless the context requires a different construction, be
deemed to be references to the Sections of this Agreement and the
Annexes, Exhibits and Schedules attached hereto and made a part
hereof. In this Agreement, unless a clear contrary intention
appears the word "including" (and with correlative meaning
"include") means including, without limiting the generality of
any description preceding such term. No provision of this
Agreement shall be interpreted or construed against any Person
solely because that Person or its legal representative drafted
such provision.
SECTION 12.03 Types of Loans. Loans hereunder are
distinguished by "Type". The "Type" of a Loan refers to the
determination whether such Loan is a Eurodollar Rate Loan or a
Prime Rate Loan.
SECTION 12.04 Accounting Matters. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be
made and prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved (except as set forth in the notes thereto or as
otherwise disclosed in writing by the Borrower to the Banks).
(b) All computations determining compliance with
Article VIII shall utilize accounting principles in conformity
with those utilized by the Borrower and in effect on December 31,
1993; except for changes that (i) are permitted by generally
accepted accounting principles and (ii) are concurred in by the
Borrower's independent certified public accountants; provided,
that, if any computation determining compliance with Article VIII
is affected by a change in accounting principles, the Borrower
and the Required Banks shall renegotiate any such affected
covenant so that it reflects the financial terms of the covenant
before such change in accounting principles, if requested by the
Managing Agents or the Required Banks because in the judgment of
the Managing Agents or the Required Banks, the impact on the
covenants contained in Article VIII is adverse to the Banks. If
the Borrower and the Required Banks are unable to renegotiate
such affected covenant, the Borrower shall make all computations
determining compliance with Article VIII in accordance with the
accounting principles utilized by the Borrower on December 31,
1993.
(c) In determining compliance with Article VIII with
respect to any periods prior to the effective date of the
Partnership Merger, (i) none of the Partnership Subsidiaries
shall be considered Subsidiaries of the Borrower during any such
period, and (ii) any such calculation of the Borrower's
Consolidated Net Income, or Consolidated Net Income Applicable to
Common Stock for such period (A) shall exclude the excess of (1)
the Borrower's and its Subsidiaries equity in the earnings of
the Partnership Subsidiaries for any such period over (2)
distributions received by the Borrower and its Subsidiaries
during any such period, and (B) shall include the excess of (1)
distributions received by the Borrower and its Subsidiaries
during any such period over (2) the Borrower's and its
Subsidiaries equity in the earnings of the Partnership
Subsidiaries for any such period.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date first stated herein by
their respective officers thereunto duly authorized.
<TABLE>
<S> <C>
Address:
530 McCullough Avenue VALERO ENERGY CORPORATION
San Antonio, Texas 78215
Attention: John D. Gibbons
Telecopy No.: (210) 246 2646
By:
Title:
Lending Office: BANKERS TRUST COMPANY,
Individually, as Administrative
Agent and as Managing Agent
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Joel M. Rosmarin By:
Telecopy No.: (212) 250 7351 Title:
with copy to:
B.T. Securities Corporation
3000 Two Houston Center
909 Fannin Street
Houston, Texas 77010
Attention: David B. Gorte
Telecopy No.: (713) 759 6736
Lending Office: BANK OF MONTREAL,
Individually and as Managing Agent
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Julia B. Buthman By:
Telecopy No.: (713) 223 4007 Title:
Lending Office: BANK ONE, TEXAS, N.A.,
Individually and as Co-Agent
105 South St. Mary's,
2nd Floor
San Antonio, Texas 78205
Attention: Robert S. Glenn By:
Telecopy No.: (210) 271 6588 Title:
Lending Office: BANQUE NATIONALE de PARIS,
HOUSTON AGENCY, Individually
and as Co-Agent
333 Clay, Suite 3400
Houston, Texas 77002
Attention: Donna Rose
Telecopy No.: (713) 659 1414 By:
Title:
Lending Office: CIBC INC., Individually and as
Co-Agent
Two Paces West
2727 Paces Ferry Road,
Suite 1200
Atlanta, Georgia 30339
Attention: Anita Williams By:
Telecopy No.: (404) 319 4950 Title:
with a copy to:
909 Fannin, Suite 1200
Houston, Texas 77010
Attention: Robert Baldwin
Telecopy No.: (713) 658 9922
Lending Office: THE FIRST NATIONAL BANK OF
BOSTON, Individually and as Co-Agent
Energy and Utilities Division
100 Federal Street, 01 08 02
Boston, Massachusetts 02110
Attention: Cindy Stableford By:
Telecopy No.: (617) 434 3652 Title:
Lending Office: THE FUJI BANK, LIMITED
HOUSTON AGENCY, Individually
and as Co-Agent
909 Fannin, Suite 2800
Houston, Texas 77010
Attention: Jacques Azaqury By:
Telecopy No.: (713) 759 0048 Title:
Lending Office: TORONTO DOMINION (TEXAS),
INC., Individually and as Co-Agent
909 Fannin, Suite 1700
Houston, Texas 77010 By:
Attention: Fred Hawley Title:
Telecopy No.: (713) 951 9921
Lending Office: THE BANK OF TOKYO, LTD.
909 Fannin, Suite 1104
Houston, Texas 77010 By:
Attention: Michael G. Meiss Title:
Telecopy No.: (713) 658 8341
Lending Office: BERLINER HANDELS UND
FRANKFURTER BANK
55 East 59th Street
New York, New York 10022
Attention: Paul Travers By:
Telecopy No.: (212) 546 5911 Title:
By:
Title:
Lending Office: CHRISTIANIA BANK
11 West 42nd Street,
7th Floor
New York, New York 10036 By:
Attention: Peter Dodge Title:
Telecopy No.: (212) 827 4888
Lending Office: CREDIT LYONNAIS NEW YORK
BRANCH
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Christine Smith
Byerly By:
Telecopy No.: (713) 751 0307 Title:
with a copy to: CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
Credit Lyonnais,
Legal Department
1301 Avenue of the Americas
New York, New York 10019
Attention: Ron Finn By:
Telecopy No.: (212) 458 3187 Title:
Lending Office: THE DAIWA BANK, LTD.
The Daiwa Bank, Ltd.,
Chicago Branch
U. S. Commercial Banking Div. By:
Sears Tower Title:
233 South Wacker Drive
Suite 5400
Chicago, Illinois 60606
Attention: Richard Bailey By:
Telecopy No.: (312) 876 1995 Title:
with a copy to:
1601 Elm Street, Suite 4250
Dallas, Texas 75201
Attention: Paul Patrick
Telecopy No.: (214) 979 0571
Lending Office: THE FROST NATIONAL BANK
100 West Houston Street
San Antonio, Texas 78205 By:
Attention: Phil Dudley Title:
Telecopy No.: (210) 220 4626
Lending Office: SOCIETE GENERALE, SOUTHWEST
AGENCY
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201 By:
Attention: Ms. Gina Lee Title:
Telecopy No.: (214) 979 1104
</TABLE>
<PAGE>
EXECUTION COPY
ANNEX A
DEFINITIONS
"Additional Charges" shall have the meaning provided in
Section 11.12.
"Administrative Agent" shall mean BTCo, acting in its
capacity as administrative agent for the Banks and as issuing
bank with respect to Letters of Credit issued hereunder, and its
successors appointed pursuant to Article X.
"Affiliate" shall mean, with respect to any Person, any
other Person directly or indirectly controlling (including but
not limited to all directors and officers of such Person),
controlled by, or under direct or indirect common control with
such Person, and any other Person in which such Person s direct
or indirect equity interest is 5% or more of the total
outstanding equity interests of such Person.
"Agents" shall mean collectively, the Administrative
Agent, the Managing Agents and the Co Agents.
"Agreement" shall mean this Credit Agreement, as
amended, supplemented or modified from time to time.
"Assignment and Acceptance" shall have the meaning
provided in Section 11.04.
"Bank" shall mean the banks listed on Schedule 1.01-A
hereto, and shall include all Persons who become Banks pursuant
to Section 11.04.
"Bankruptcy Code" shall have the meaning provided in
Section 9.01.
"Benefit Arrangement" shall mean at any time an
employee benefit plan within the meaning of Section 3(3) of ERISA
which is not a Plan or a Multiemployer Plan and which is
maintained or otherwise contributed to by any member of the ERISA
Group.
"BMO" shall mean Bank of Montreal.
"Borrower" has the meaning specified in the
introduction to this Agreement.
"Borrowing" shall mean a borrowing comprised of Loans
of one Type made by all of the Banks concurrently to the
Borrower.
"BTCo" shall mean Bankers Trust Company, a New York
banking corporation.
"Business Day" shall mean any day excluding Saturday,
Sunday and any other day on which banks are required or
authorized to close in New York City and, if the applicable
Business Day relates to Eurodollar Rate Loans, on which trading
is carried on by and between banks in Dollar deposits in the
applicable interbank eurodollar market.
"Capital Investments" shall mean, without duplication,
the sum of all capital expenditures (determined in accordance
with generally accepted accounting principles), Investments and
Deferred Turnaround Costs of the Borrower and its Subsidiaries.
"CERCLA" shall have the meaning provided in the
definition of "Environmental Laws."
"Co-Agents" shall mean, collectively, Bank One, Texas,
N.A., Banque Nationale de Paris, CIBC Inc., The First National
Bank of Boston, The Fuji Bank, Limited Houston Agency, and
Toronto Dominion (Texas), Inc., acting in their capacities as co
agents for the Banks hereunder until their resignation becomes
effective pursuant to Article X.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commitment" shall mean for any Bank the amount set
forth opposite such Bank's name in Schedule 1.01-A under the
heading "Commitment", as the same may be reduced from time to
time pursuant to Section 3.01, Article IX or both.
"Consolidated Current Assets" of any Person shall mean
the current assets of such Person and its Subsidiaries determined
on a consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Current Liabilities" of any Person shall
mean the current liabilities of such Person and its Subsidiaries
determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Net Income" of any Person shall mean, for
any period, the net income of such Person and its Subsidiaries
for such period determined on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Net Income Applicable to Common Stock" of
any Person shall mean, for any period, the net income to common
shareholders of such Person and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Net Worth" of any Person shall mean the
Net Worth of such Person and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted
accounting principles.
"Consolidated Total Indebtedness" of any Person shall
mean the sum (without duplication) of (i) the aggregate principal
amount of all Indebtedness of such Person and its Subsidiaries
outstanding from time to time and (ii) to the extent not included
in the Indebtedness described in clause (i), such Person s or its
Subsidiaries proportionate share of all Indebtedness of any
joint venture, partnership or other Person in which such Person
or any of its Subsidiaries has a direct or indirect ownership or
equity interest regardless of whether the interest of such Person
or its Subsidiaries is accounted for on the equity method, but
only to the extent such Person or its Subsidiaries has Guaranteed
or is otherwise obligated to pay such Indebtedness.
"Credit Documents" shall mean this Agreement, each
Note, each Notice of Borrowing, the Subordination Agreement(s),
each Letter of Credit and each request or application therefor
made pursuant to Section 1.04, and any other agreements referred
to in Section 5.01 hereof.
"Credit Event" shall mean the making of any Loan or the
issuance of any Letter of Credit.
"Default" shall mean any Event of Default or any
condition or event which, with notice or lapse of time or both,
would constitute an Event of Default.
"Deferred Turnaround Costs" shall mean the aggregate of
all expenditures incurred for scheduled or periodic maintenance
during a shutdown of Refinery operating units, including, but not
limited to, catalyst costs, labor, materials, supplies and other
related costs that are deferred and amortized over future periods
on the Borrower s books and records on a consolidated basis.
"Depreciation and Amortization Expense" shall mean
depreciation expense and amortization, as shown on the
consolidated statement of cash flow of the Borrower and its
Subsidiaries for the applicable period.
"Dollar" and the sign " " shall mean lawful money of
the United States of America.
"Drawing" shall have the meaning provided in Section
3.04.
"EBT" for any period shall mean (i) interest income,
operating income or loss and other income or loss of the Borrower
and its Subsidiaries for such period determined on a consolidated
basis in accordance with generally accepted accounting
principles, plus the sum of all cash distributions (including
distributions in excess of equity in earnings) received during
such period by the Borrower and its Subsidiaries from
partnerships in which the Borrower or its Subsidiaries has an
interest and which are not consolidated with the Borrower for
financial reporting purposes during such period, minus (ii) the
amount of all interest expense of the Borrower and its
Subsidiaries for such period determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Effective Date" shall mean the date on which the
conditions precedent specified in Section 5.01 are first
satisfied.
"Eligible Transferees" shall have the meaning provided
in Section 11.04.
"Environmental Laws" shall mean any and all federal,
state or local laws, statutes, ordinances, rules or regulations,
orders, and any judicial, arbitral or administrative
interpretations thereof, including, without limitation, any
judgment, permit, approval, decision or determination pertaining
to health, safety or the environment in effect now or hereafter,
including, without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), the Federal Water Pollution Control
Act, as amended, the Occupational Safety and Health Act, as
amended, the Resource Conservation and Recovery Act, as amended,
the Safe Drinking Water Act, as amended, the Toxic Substances
Control Act, as amended, the Superfund Amendment and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and comparable state and local
laws, and other environmental conservation and protection laws.
"Equity Offering" shall mean the issuance and sale in
an underwritten public offering of up to 3,450,000 shares of the
Borrower s $3.125 Convertible Preferred Stock.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Group" shall mean the Borrower and all members
of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single
employer under Section 414 of the Code or as members of the same
"controlled group" under Section 4001 of ERISA.
"Eurodollar Borrowing" means a Borrowing comprised of
Eurodollar Rate Loans having the same Interest Period.
"Eurodollar Rate" shall mean, with respect to each
Interest Period for a Borrowing comprised of Eurodollar Rate
Loans, the average (rounded upward to the next whole multiple of
1/16 of 1%) of the offered quotation by each of the Reference
Banks to first class banks in the applicable interbank eurodollar
market selected by such Reference Bank for dollar deposits of
amounts comparable to the outstanding principal amount of the
Eurodollar Rate Loan of such Reference Bank for which an interest
rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Rate Loan,
determined as of 10:00 a.m. (New York time) on the date which is
two Business Days prior to the commencement of such Interest
Period; provided, that if any Reference Bank fails to provide the
Administrative Agent with its quotation, the Eurodollar Rate
shall be based on the quotation or quotations provided to the
Administrative Agent by the other Reference Bank or Reference
Banks.
"Eurodollar Rate Loan" shall mean any Loan made as a
Eurodollar Rate Loan pursuant to a Notice of Borrowing or
otherwise pursuant to the terms of this Agreement.
"Eurodollar Rate Margin" shall have the meaning
provided in Section 2.02.
"Event of Default" shall have the meaning provided in
Article IX.
"Existing Letter of Credit" shall have the meaning
provided in Section 1.07.
"Existing VEC Bank Agreement" shall mean that certain
Credit Agreement dated as of December 4, 1992 among the Borrower,
BTCo, as agent, BMO, as co agent, and the banks named therein, as
in effect immediately prior to the Effective Date.
"Fair Market Value" shall mean (i) with respect to any
asset (other than cash) the price at which a willing buyer would
buy and a willing seller would sell such asset in an arms length
transaction and (ii) with respect to cash, the amount of such
cash.
"Fees" shall mean all amounts payable pursuant to
Section 2.01.
"Financial Officer" of a Person shall mean the chief
financial officer, vice president finance, treasurer or assistant
treasurer of such Person.
"First Mortgage Notes" shall mean the promissory notes
of VMP issued and outstanding pursuant to the Partnership
Indenture.
"Form 1001 Certification" shall have the meaning
provided in Section 4.06.
"Form 4224 Certification" shall have the meaning
provided in Section 4.06.
"Funded Indebtedness" shall mean the Indebtedness
evidenced by the Loans and all other Indebtedness of the Borrower
or any of its Subsidiaries which matures more than one year from
the date incurred.
"Guarantee" or "Guaranteed" shall mean, as to any
Person, all guaranties, agreements, undertakings and arrangements
by which such Person directly or indirectly guarantees, endorses
or otherwise becomes or is contingently liable upon the debt,
obligation, undertaking, guaranty or other liability of any other
Person or guarantees the payment of dividends or other
distributions upon the shares of or interests in any other
Person, regardless of whether such agreements, undertakings and
arrangements arise by operation of law, by contract or otherwise,
or are made directly with a creditor or holder of interests in a
Person, if the agreement, undertaking or arrangement assures a
creditor or other Person against loss. The amount of the
Borrower s obligation under any liability for which the Borrower
is not primarily obligated shall (subject to any limitation set
forth therein) be deemed to be the amount of such other Person s
debt, obligation or other liability.
"Hazardous Materials" shall mean any pollutant,
contaminant, solid waste, asbestos, petroleum product, crude oil
or a fraction thereof, any toxic or hazardous substance, material
or waste, any flammable, explosive or radioactive material, any
chemical which causes cancer or reproductive effects, or any
other material or substance not mentioned above which is
regulated under any Environmental Law.
"Highest Lawful Rate" shall mean, with respect to any
indebtedness owed to any Agent or any Bank hereunder or under any
other Credit Document, the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received by such Person with respect
to such indebtedness under law applicable to such Person.
"Indebtedness" shall mean, as to any Person, each of
the following, without duplication (i) all items of indebtedness
or liability, which, in accordance with generally accepted
accounting principles, would be included in determining total
liabilities as shown on the liability side of a balance sheet at
the date as of which indebtedness is to be determined, but
excluding Net Worth, preferred stock (including, in the case of
the Borrower, the Borrower s $8.50 Series A Redeemable Preferred
Stock, $1 par value, and the Borrower s $3.125 Convertible
Preferred Stock), deferred credits, deferred taxes, accounts
payable (not more than 120 days past due), accrued expenses and
taxes payable, (ii) obligations and guaranties thereof, under
leases which, in accordance with generally accepted accounting
principles, would at such time (and assuming that the Person was
not a regulated enterprise) be required to be capitalized on a
balance sheet of such Person, (iii) that portion of indebtedness,
obligations or liabilities which equals the fair market value of
assets secured by any Lien or encumbrance upon such properties or
assets owned by such Person, even if such Person is not liable
for the payment thereof or the rights or remedies of the holder
of such indebtedness or liabilities of the obligee, as the case
may be, in the event of a default are limited to repossession or
sale of such property, including, without limitation, the
undischarged balance of any production payments, (iv) any
obligations constituting Indebtedness pursuant to the provisions
of Section 8.07(e), and (v) all indebtedness of others of the
type described in clauses (i), (ii), (iii) or (iv) that is
Guaranteed by such Person.
"Interest and Lease Expense" of any Person shall mean,
for any period, the sum (without duplication) of (a) all interest
incurred by such Person and its Subsidiaries for such period,
plus (b) all lease and rental expense of such Person and its
Subsidiaries for such period in respect of leases that are not
required to be capitalized on the books of such Person in
accordance with generally accepted accounting principles, in each
case determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Interest Period" shall have the meaning set forth in
Section 2.03.
"Investments" shall mean, as to the Borrower and its
Subsidiaries, without duplication, the sum of:
(i) all outstanding loans and advances made by such
Person to Persons other than wholly owned Subsidiaries of the
Borrower;
(ii) all acquisitions by such Person of or investments
by such Person in the debt or equity of, and any capital
contribution (including capital contributions by Transfers of
assets or services) by such Person to, any Person other than a
wholly owned Subsidiary of the Borrower;
(iii) all Transfers to such Person of assets or
services from any other Person (other than Transfers of cash,
services, inventory, and accounts receivable in the ordinary
course of business on an arm s length basis and Transfers from
any Person that is a wholly owned Subsidiary of the Borrower);
(iv) any merger or consolidation by such Person with
any other Person other than, to the extent not prohibited by
Section 8.04, a merger or consolidation by such Person with a
wholly owned Subsidiary of the Borrower, and the amount of an
Investment in respect of a merger or consolidation shall be the
Fair Market Value of cash and other consideration (including,
without limitation, the Fair Market Value of any securities)
delivered by the Borrower or its Subsidiaries to or exchanged
with any other Person that is a party to such merger or
consolidation or the shareholders or other equity interest
holders of such Person;
(v) the Fair Market Value of leasehold interests,
grants of rights of way, easements, licenses, permits or other
similar rights created or transferred by such Person to any
Affiliate (other than a wholly owned Subsidiary of the Borrower),
less the sum of the present value of the cash consideration,
received or to be received, and the Fair Market Value of all
other consideration received, by such Person for such transfer;
and
(vi) where the Borrower or any of its Subsidiaries is
the lessee under a leasehold interest, grant of right of way,
license, permit or similar right from an Affiliate (other than a
wholly owned Subsidiary of the Borrower), the consideration paid
or to be paid by such Person, less the Fair Market Value of the
interest created or transferred to such Person.
With respect to (i) any Transfer of assets or services to an
Affiliate or (ii) any Transfer of assets or services to non
Affiliates in exchange for equity or debt or as a capital
contribution to, such Person, the amount of the Investment shall
be the Fair Market Value of the assets or services Transferred,
less any cash and the Fair Market Value of other consideration
consisting of tangible assets actually received by the Borrower
or a Subsidiary of the Borrower in consideration for such
Transfer. Any Investment in the Partnership Subsidiaries made at
a time when the Partnership Subsidiaries are not wholly owned
Subsidiaries of the Borrower (including the Partnership Merger
Cost) shall continue to constitute an Investment after the
Partnership Subsidiaries become wholly owned Subsidiaries of the
Borrower.
"Lending Office" shall mean for each Bank the office
specified opposite such Bank s name on the signature pages hereof
with respect to each Type of Loan, or such other office as such
Bank may designate in writing from time to time to the Borrower
and the Administrative Agent with respect to such Type of Loan.
"Letter of Credit Outstandings" shall mean, at any
time, the sum (without duplication) of the aggregate Stated
Amount of all outstanding Letters of Credit and the aggregate
amount of all Unpaid Drawings in respect of Letters of Credit.
"Letter of Credit Sublimit" shall mean, as of any date,
an amount equal to the lesser of (a) the Total Commitment as of
such date or (b) the sum of (i) the amount specified for such
date in Section 1.02(a) minus (ii) twenty percent (20%) of any
reduction of the Total Commitment made pursuant to Section
3.01(a) on or prior to such date.
"Letters of Credit" shall have the meaning provided in
Section 1.02.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other
security agreement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any financing lease having substantially the same
effect as any of the foregoing).
"LIFO Adjustment" shall mean an amount equal to
$27,600,000, which is the noncash charge to the income of the
Borrower and its consolidated Subsidiaries for the fourth
calendar quarter of 1993 resulting from the write down of the
value of refining inventories determined on the "last-in, first-
out" method of inventory valuation, as said charge is reflected
in the income statement for the Borrower and its consolidated
Subsidiaries for the fiscal year ending December 31, 1993.
"Loans" shall have the meaning provided in Section
1.01.
"Loan Commitment" shall mean for any Bank an amount
equal to eighty percent (80%) of such Bank s Commitment in effect
as of the date of determination.
"Managing Agents" shall mean collectively, BTCo and BMO
acting in their capacity as managing agents for the Banks
hereunder and their successors appointed pursuant to Article X.
"Margin Accounts" shall mean accounts or contractual
arrangements from time to time maintained by the Partnership
Group, the Borrower or any Subsidiary of the Borrower with
Persons qualified to do business on a national commodities
exchange and required as security for the payment of contractual
obligations with such Persons in connection with swaps, options,
futures or forward contracts, or other transactions related to
hedging or trading activity in natural gas, natural gas liquids,
petroleum or refined products and other energy related
commodities for the purpose of reducing its exposure to price
fluctuations of its inventory or its commitment to buy and sell
such commodities.
"Material Subsidiary" shall mean VRMC, Refining, the
Partnership, VMP and each other Subsidiary of the Borrower that
would be a "significant subsidiary" as such term is defined in
Regulation S-X promulgated pursuant to the Securities Exchange
Act of 1934, as amended to the date hereof; provided, however,
for purposes of determining whether any such Subsidiary is a
"Material Subsidiary", the reference to "10 percent" in clauses
(1), (2) and (3) of the definition of "significant subsidiary"
contained in said Regulation S-X shall be a reference to five
percent.
"Moody's" shall mean Moody's Investors Service.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3) of
ERISA to which any member of the ERISA Group is then making or
accruing an obligation to make contributions or has within the
preceding five plan years made or had an obligation to make
contributions, including for these purposes any Person which
ceased to be a member of the ERISA Group during such five year
period.
"Net Worth" of a Person shall mean the sum of its
capital stock, additional paid in capital, retained earnings, and
any other account which, in accordance with generally accepted
accounting principles, constitutes stockholders equity, less
treasury stock; provided, that in the case of the Borrower, "Net
Worth" shall not include the liquidation value of any preferred
stock classified as redeemable preferred stock in accordance with
generally accepted accounting principles.
"New York Office" shall mean the office of the
Administrative Agent located at 130 Liberty Street, New York, New
York 10006, or such other office as the Administrative Agent may
hereafter designate in writing as such to the other parties
hereto.
"Note" or "Notes" shall have the meaning provided in
Section 1.06.
"Notice of Borrowing" shall have the meaning provided
in Section 1.03.
"Obligations" shall mean all amounts owing to any Agent
or any Bank pursuant to the terms of this Agreement and the other
Credit Documents.
"Other Activities" shall have the meaning provided in
Section 10.07.
"Other Financings" shall have the meaning provided in
Section 10.07.
"Other Taxes" shall have the meaning provided in
Section 4.06.
"Partnership" shall mean Valero Natural Gas Partners,
L.P., a Delaware limited partnership and the entity surviving the
Partnership Merger.
"Partnership Agreement" shall mean the Second Amended
and Restated Agreement of Limited Partnership of Valero Natural
Gas Partners, L.P., as amended from time to time.
"Partnership Group" shall mean, collectively, (a) the
Partnership Subsidiaries and (b) each Subsidiary of the Borrower
that is a general partner of a Partnership Subsidiary and the
respective Subsidiaries of such general partners.
"Partnership Indenture" shall mean that certain
Indenture of Mortgage and Deed of Trust and Security Agreement
dated as of March 25, 1987, between VMP and State Street Bank &
Trust Company (as successor to The Bank of New England, N.A.),
and Brian J. Curtis, as Trustee, as amended, supplemented,
restated, modified and in effect from time to time.
"Partnership Investment" shall mean (a) any
Indebtedness owing by any member of the Partnership Group to the
Borrower or any of its Subsidiaries (other than the Partnership
Group), (b) any Partnership Lease, and (c) any Investment in any
member of the Partnership Group made by the Borrower or any of
its Subsidiaries (other than the Partnership Group). For
purposes of determining or calculating "Investments" pursuant to
clause (c) of this definition, the members of the Partnership
Group shall be deemed to be less than wholly owned Subsidiaries
of the Borrower.
"Partnership Leases" shall mean (a) that certain Lease
Agreement dated as of December 1, 1992, as amended and in effect
on the date hereof, between Valero NGL Investment Company, as
lessor, and Valero Texas Pipeline, L.P., as lessee, relating to
an approximately 200MMcf/d natural gas processing plant near
Thompsonville, Texas and related pipeline and fractionator
facilities, which Valero Texas Pipeline, L.P. has in turn
subleased to Valero Marketing, L.P. and Valero Hydrocarbons,
L.P., as sublessees, (b) that certain Lease Agreement dated as of
November 5, 1990, as amended and in effect on the date hereof,
between Valero Eastex Pipeline Company, as lessor, and Valero
Texas Pipeline, L.P., as lessee, relating to the approximately
105 mile extension of the Partnership s North Texas pipeline
system to Carthage, Texas, which Valero Texas Pipeline, L.P. has
in turn subleased to Valero Transmission, L.P., as sublessee, (c)
that certain Lease Agreement dated as of December 1, 1991, as
amended and in effect on the date hereof, between Valero NGL
Investment Company, as lessor, and Valero Texas Pipeline, L.P.,
as lessee, relating to the expansion of the Partnership s
fractionation and related pipeline facilities in the Corpus
Christi, Texas area, which Valero Texas Pipeline, L.P. has in
turn subleased to Valero Marketing, L.P., as sublessee, (d) that
certain Lease Agreement dated as of January 1, 1994, as amended
and in effect on the date hereof, between Valero Interstate
Transmission Company, as lessor, and Valero Transmission, L.P.,
as lessee, relating to approximately 252.5 miles of gathering and
transmission pipeline, and related easements and facilities,
including two field compressors and one transmission line
compressor, all located in Kleberg, Starr, Jim Wells, Brooks and
Hidalgo Counties, Texas, and (e) any supplement to the foregoing
or any other lease agreement which provides for additional
equipment or other facilities to be leased to VMP or any of its
Subsidiaries and is not required to be capitalized on the books
of such lessee under generally accepted accounting principles.
"Partnership Merger" shall mean the merger of Valero
Merger Partnership, L.P. with and into the Partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act and the
Agreement of Merger dated December 20, 1993 by and between the
Partnership, Valero Merger Partnership, L.P., VNGC and the
Borrower.
"Partnership Merger Cost" shall mean the aggregate Fair
Market Value paid or payable to the "Public Unitholders" pursuant
to the Agreement of Merger referred to in the definition of
Partnership Merger and all filing fees, legal fees and expenses,
accounting fees and expenses, printing costs, fees and expenses
of investment advisors and information agents, and other
miscellaneous transaction costs paid or payable in connection
with the Partnership Merger.
"Partnership Subsidiaries" shall mean the Partnership
and its Subsidiaries.
"Payment Office" shall mean the office of the
Administrative Agent located at 130 Liberty Street, New York, New
York 10006, or such other office as the Administrative Agent may
hereafter designate in writing as such to the other parties
hereto.
"PBGC" means the Pension Benefit Guaranty Corporation
or any entity succeeding to any or all of its functions under
ERISA.
"Percentage Participation" shall mean, for each Bank,
that percentage obtained by dividing the amount of such Bank s
Commitment by the Total Commitment.
"Permitted Cash Investments" shall mean investments in
(i) marketable direct obligations issued by, or the payment of
the principal of and interest on which is unconditionally
guaranteed by, the United States of America or an agency or
instrumentality thereof, (ii) certificates of deposit issued by
or money market deposits with the Administrative Agent or with
any Bank or with any other bank or trust company organized under
the laws of the United States of America or any state thereof or
Canada and having combined capital, surplus and undivided profits
of not less than $500,000,000 (as of the date of its most recent
financial statements), (iii) certificates of deposit issued by or
money market deposits with any other bank organized under the
laws of a nation located in Western Europe or of Japan or Canada
extending credit to the Borrower and having combined capital,
surplus and undivided profits of not less than $500,000,000 (as
of the date of its most recent statements) (collectively the
"Permitted Foreign Banks") (iv) commercial paper rated at least
P-2 or A-2 by Moody's or S&P, respectively, (v) repurchase
agreements with respect to the investments referred to in clauses
(i), (ii) and (iii) above with the Administrative Agent or with
any Bank or with any other bank or trust company organized under
the laws of the United States of America or any state thereof or
Canada and having combined capital, surplus and undivided profits
of not less than $500,000,000 (as of the date of its most recent
financial statements), or with a major national brokerage firm,
(vi) eurodollar time accounts or eurodollar certificates of
deposit each with any branch of any Bank or any Permitted Foreign
Bank located in Nassau or the Cayman Islands or Canada, or
bankers acceptances of any branch of any Bank or Permitted
Foreign Bank located in Nassau or the Cayman Islands or with any
other bank or trust company organized under the laws of the
United States of America or any state thereof or Canada and
having combined capital, surplus and undivided profits of not
less than $500,000,000 (as of the date of its most recent
financial statements), or (vii) shares of mutual funds (including
mutual funds managed by any Bank) that invest solely in
investments of the types referred to in clauses (i) through (vi)
above.
"Person" shall mean any individual, partnership, firm,
corporation, association, joint venture, trust or other entity or
enterprise, or any government or political subdivision or agency,
department or instrumentality thereof.
"Plan" means at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by Title
IV of ERISA or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of
the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Prime Lending Rate" shall mean the rate which the
Administrative Agent announces from time to time as its prime
lending rate, as in effect from time to time. The Prime Lending
Rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The
Administrative Agent may make commercial loans or other loans at
rates of interest at, above or below the Prime Lending Rate.
"Prime Rate Loans" shall mean any Loan made as a "Prime
Rate Loan" pursuant to a Notice of Borrowing or otherwise
pursuant to the terms of this Agreement.
"Prime Rate Margin" has the meaning provided in Section
2.02.
"Process Agent" shall have the meaning provided in
Section 11.07.
"Reference Banks" shall mean BTCo, BMO and The Fuji
Bank, Limited, Houston Agency.
"Refinery" shall mean the petroleum refinery and
related facilities owned by Refining and located in Nueces
County, Texas.
"Refining" shall mean Valero Refining Company, a
Delaware corporation.
"Refining Bank Agreement" shall mean that certain
Amended and Restated Credit Agreement dated as of December 4,
1992, among Refining, VRMC, the Borrower, BTCo, as agent, BMO, as
co agent, and the banks named therein, as in effect immediately
prior to the Effective Date.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof establishing
reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor thereto.
"Regulation X" shall mean Regulation X of the Board of
Governors of the Federal Reserve System as from time to time in
effect and any successor thereto.
"Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including,
the abandonment or discarding of barrels, containers, and other
closed receptacles).
"Required Banks" shall mean at any time Banks holding
at least 66 2/3% of the then aggregate unpaid principal amount of
the Notes, or, if no such principal amount is then outstanding,
Banks having Commitments in an aggregate amount equal to at least
66 2/3% of the Total Commitment.
"Requirements of Environmental Laws" shall mean the
requirements of any applicable Environmental Law relating to or
affecting the Borrower or the condition or operation of the
Borrower s business or its properties, both real and personal.
"Restricted Disbursements" shall have the meaning
provided in Section 8.12.
"Restricted Payments" shall have the meaning provided
in Section 8.12.
"S&P" shall mean Standard & Poor's Corporation.
"Short Term Credit" shall mean Indebtedness of the
Borrower for borrowed money (other than the Loans) that matures
one year or less from the date incurred.
"Standby Letters of Credit" shall have the meaning
provided in Section 1.02.
"Stated Amount" of each Letter of Credit, at any time,
shall mean the maximum amount then available to be drawn
thereunder (without regard to whether any conditions to drawing
could then be met).
"Subordinated Debt" shall mean any Indebtedness,
obligation or liability of the Borrower that is subordinate in
right of payment to the Obligations upon terms reasonably
satisfactory to the Required Banks.
"Subordination Agreement" shall have the meaning
provided in Section 8.01.
"Subsidiary" shall mean and include, with respect to
any Person, (i) any corporation more than 50% of whose stock of
any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time
owned by such Person directly or indirectly through one or more
other Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or
indirectly through one or more other Subsidiaries, has a greater
than 50% equity interest at the time.
"Taxes" shall have the meaning provided in Section
4.06.
"Termination Date" shall mean March 29, 1996.
"Total Commitment" shall mean, as of any date, the
amount specified for such date in Section 3.01(b) minus any
reduction of the Total Commitment made pursuant to Section
3.01(a) on or prior to such date.
"Total Loan Commitment" shall mean, as of any date, the
amount specified for such date in Section 1.01(a), minus eighty
percent (80%) of any reduction of the Total Commitment made
pursuant to Section 3.01(a) on or prior to such date .
"Total Unutilized Commitment" shall mean, at any time,
the sum of the Unutilized Commitments of all the Banks.
"Trade Letters of Credit" shall have the meaning
provided in Section 1.02.
"Transfer" shall have the meaning provided in Section
8.08.
"Turnaround Quarter" shall mean any fiscal quarter of
the Borrower in which either the heavy oil cracker unit or the
hydrogen desulfurization unit, hydrocracker, reformer or butane
upgrading unit at the Refinery is shut down for scheduled or
periodic maintenance for a period in excess of 14 days; provided,
that on the date of any determination pursuant to this Agreement,
only one of the most recently completed five fiscal quarters may
constitute a "Turnaround Quarter," and in the event that more
than one such quarter would otherwise qualify as a "Turnaround
Quarter" without regard to this proviso, the Borrower shall
select one such quarter as the "Turnaround Quarter" for such five
fiscal quarter period and shall properly notify the Bank of such
selection.
"Type" shall have the meaning provided in Section
12.03.
"Unpaid Drawing" shall have the meaning provided in
Section 3.04.
"Unutilized Commitment" for any Bank, at any time,
shall mean the remainder of (i) such Bank s Commitment at such
time less (ii) the sum of (a) the outstanding Loans made by such
Bank plus (b) the product of (A) the Letter of Credit
Outstandings at such time multiplied by (B) such Bank s
Percentage Participation.
"VMP" shall mean Valero Management Partnership, L.P., a
Delaware limited partnership.
"VNGC" shall mean Valero Natural Gas Company, a
Delaware corporation.
"VRMC" shall mean Valero Refining and Marketing
Company, a Delaware corporation.
<PAGE>
SCHEDULE 1.01-A
BANKS AND COMMITMENTS
Percentage
Bank Commitment Participation
1. Bankers Trust Company $ 30,000,000 12%
2. Bank of Montreal 30,000,000 12
3. Bank One, Texas, N.A. 20,000,000 8
4. Banque Nationale de 20,000,000 8
Paris, Houston Agency
5. CIBC Inc. 20,000,000 8
6. The First National 20,000,000 8
Bank of Boston
7. The Fuji Bank, Limited 20,000,000 8
Houston Agency
8. Toronto Dominion 20,000,000 8
(Texas), Inc.
9. The Bank of Tokyo, 10,000,000 4
Ltd.
10. Berliner Handels Und 10,000,000 4
Frankfurter Bank
11. Christiania Bank 10,000,000 4
12. Credit Lyonnais 10,000,000 4
13. The Daiwa Bank, Ltd. 10,000,000 4
14. Societe Generale, 10,000,000 4
Southwest Agency
15. The Frost National 10,000,000 4
Bank
Totals: $250,000,000 100%
<PAGE>
SCHEDULE 8.01
EXISTING INDEBTEDNESS
1. Industrial Development Corporation of Port of
Corpus Christi 10 1/4% Refunding Revenue Bonds, Series 1987 A due
2017 and 10 5/8% Revenue Bonds, Series 1987 B due 2003, issued
pursuant to the Loan Agreement dated June 1, 1987 between
Industrial Development Corporation of Port of Corpus Christi and
VRMC and guaranteed by the Borrower pursuant to the Guaranty
Agreement dated as of June 1, 1987.
2. Senior Subordinated Notes, Series B, due 1994,
issued by the Borrower pursuant to the Note Purchase Agreement
dated October 15, 1987.
3. Guaranty by the Borrower of ESOP Notes pursuant to
the Note Purchase Agreement, dated March 17, 1989.
4. Guarantee, dated as of January 31, 1994,
guaranteeing 33 1/3% of the obligations of Javelina Company under
that certain Amended and Restated Credit Agreement among Javelina
Company, The Royal Bank of Canada, as Agent and the other banks
named therein, dated as of January 31, 1994.
5. Senior Notes, Series A and Series B, due December
30, 2000, issued by the Borrower pursuant to the Note Purchase
Agreement dated December 19, 1990, between the Borrower and the
Noteholders named therein.
6. Various Notes issued by the Borrower as described
below, issued under an Indenture dated as of March 30, 1992,
between Valero Energy Corporation and Bankers Trust Company:
(a) 8.78% Medium Term Note issued on April 14, 1992,
maturing on April 15, 2002;
(b) 6.83% Medium Term Note issued on April 14, 1992,
maturing on April 14, 1995;
(c) 8.71% Medium Term Note issued on April 14, 1992,
maturing on April 16, 2001;
(d) 6.80% Medium Term Note issued on April 16, 1992,
maturing on April 16, 1995;
(e) 9.0% Medium Term Note issued on April 27, 1992,
maturing on May 30, 2012;
(f) 8.48% Medium Term Note issued on May 27, 1992,
maturing on May 30, 2001;
(g) 7.90% Medium Term Note issued on October 15, 1992,
maturing on October 17, 2005;
(h) 8.24% Medium Term Note issued on October 27, 1992,
maturing on October 28, 2002;
(i) 8.45% Medium Term Note issued on November 2, 1992,
maturing on November 4, 2002; and
(j) 8.35% Medium Term Note issued on November 4, 1992,
maturing on November 15, 2002.
7. The First Mortgage Notes issued by VMP.
<PAGE>
SCHEDULE 8.02
EXISTING LIENS
1. Liens and security interests created pursuant to
or in connection with the Participation Agreement, dated as of
July 1, 1981, among Valero Gas Storage Company, as lessee, Valero
Transmission Company, Valero Transmission, L.P., GATX Gas Storage
Services, Inc., ML Caverns, Inc., (now ILI Leasing, Inc.),
certain Loan Participants and Connecticut Bank and Trust Company,
as Indenture Trustee.
2. Liens and security interests created pursuant to
or in connection with the Lease and Agreement, dated as of
December 17, 1981, between Valero Realty Company and McCullough
Avenue Associates.
3. Liens arising under the Deed of Trust and Security
Agreement, dated as of June 1, 1987, between Refining and VRMC
and Ameritrust Texas, National Association (as successor to
MTrust, N.A.) ("Ameritrust"), as Trustee; the Deed of Trust and
Security Agreement, dated as of June 1, 1987, as amended between
Refining (as successor by merger to Valero Land Company) and
Ameritrust, as Trustee; the Guaranty Agreement, dated as of June
1, 1987, among the Borrower, the Industrial Development
Corporation of Port of Corpus Christi ("IDC") and Ameritrust, as
Trustee; or the Indenture of Trust and Security Agreement, dated
as of June 1, 1987, between IDC and Ameritrust, as Trustee.
4. Liens arising under the Partnership Indenture.
<PAGE>
SCHEDULE 8.07
NATURAL GAS STORAGE CONTRACTS
1. Natural Gas Storage Agreement dated as of July 1,
1981 between GATX Gas Storage Services, Inc. and Valero
Transmission Company.
2. Assignment and Assumption Agreement dated as of
March 25, 1987 by and between Valero Transmission Company and
Valero Transmission, L.P.
<PAGE>
EXHIBIT 1.03
LOAN/PAYDOWN NOTICE
Exhibit 1.03 provides a form whereby Valero Energy
Corporation may provide notice to the Administrative Agent
specifying the amount and effective date of borrowings requested
under the facility.
<PAGE>
EXHIBIT 1.04-A
FORM OF INSTRUCTIONS TO ISSUE
STANDBY LETTER OF CREDIT
Bankers Trust Company Date: ____________, 19_____
130 Liberty Street
New York, New York 10006
Attention: Commercial Loan Division
Standby Letter of Credit Unit
Reference is made to the Credit Agreement dated as of
March 31, 1994 (as amended or modified from time to time, the
"Credit Agreement") among Valero Energy Corporation, the banks
named therein, the Co Agents named therein, Bankers Trust
Company and Bank of Montreal, as Managing Agents for such banks,
and Bankers Trust Company, as Administrative Agent for such
banks. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the
Credit Agreement. The undersigned hereby gives you notice
pursuant to Section 1.04 of the Credit Agreement that it requests
that the Administrative Agent issue a Standby Letter of Credit
under the Credit Agreement, and in that connection sets forth
below the terms of such Standby Letter of Credit:
Form:
Standby Letter of Credit Model Form
( ) 1 ( ) 2 ( ) 3 ( ) 4 ( ) 5
Other: ________
With following details to be inserted:
(1) Advising bank, if any:_____________________________________
(2) Name of beneficiary:_______________________________________
(3) Name of account party:_____________________________________
(4) Amount of the Standby Letter of Credit to be issued:_______
(5) Description of the goods, if any:__________________________
(6) Options: partial drawings ___________ permitted
are/are not
With respect to variable No. 6 it is understood and agreed
that should the account party instruct us that partial
drawings "are not" permitted all references to "drafts"
and "payments" contained in the applicable Model Form will
be changed to read "draft" and "payment"
(7) Expiration date of the Standby Letter of Credit to be
issued:
(8) Transmit Standby Letters of Credit to: Advising Bank or
Beneficiary
( ) Telex Telex No. _____________
( ) Airmail
( ) Courier
( ) Other (Specify)
By the delivery of this request for the issuance of a
Standby Letter of Credit, the undersigned represents and warrants
that the conditions to the issuance thereof specified in Article
V of the Credit Agreement have been satisfied.
Very truly yours,
VALERO ENERGY CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
cc: B.T. Southwest, Inc.
3000 Two Houston Center
Houston, Texas 77010
Attention: Loan Administration Section
<PAGE>
EXHIBIT 1.04-B
FORM OF INSTRUCTIONS TO ISSUE
TRADE LETTER OF CREDIT
Bankers Trust Company Date: _________________, 19_____
130 Liberty Street
New York, New York 10006
Attention: Letter of Credit Division Import Sec. Team 1
Reference is made to the Credit Agreement dated as of
March 31, 1994 (as amended or modified from time to time, the
Credit Agreement ) among Valero Energy Corporation, the banks
named therein, the Co Agents named therein, Bankers Trust
Company and Bank of Montreal, as Managing Agents for such banks,
and Bankers Trust Company, as Administrative Agent for such
banks. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the
Credit Agreement. The undersigned hereby gives you notice
pursuant to Section 1.04 of the Credit Agreement that it requests
that the Administrative Agent:
Issue and transmit by:
( ) Telex
( ) Airmail
( ) Courier or other (specify)
Form:
Documentary Letter of Credit Model Form
( ) 1 ( ) 2 ( ) 3
Other:_____________________________
with following details to be inserted:
_______________________________________________________________
(1) Beneficiary complete name and (2) Advising bank name and
address: address:
_____________________________ _______________________
_____________________________ _______________________
_____________________________ _______________________
_____________________________ _______________________
Telex #
(if available)
_______________________________________________________________
(3) Account party name and (4) Amount in U.S. dollars:
address: _________________________
__________________________ _________________________
__________________________ (4a) Tenor
__________________________ _________________________
__________________________ _________________________
_______________________________________________________________
(5) Good description: (6) Shipment from:
__________________________ _________________________
__________________________ _________________________
__________________________ To:
__________________________ _________________________
(6a) Shipping terms:
_________________________
_________________________
_______________________________________________________________
(7) Shipping date: not earlier (8) Expiry date - at:
__________________________ negotiating bank counter
__________________________ _________________________
Not later than: _________________________
__________________________
__________________________
_______________________________________________________________
(9) ( ) 3/3 B L ( ) 2/3 B L ( ) Others-specify
_______________________________________________________________
(10) All banking charges are for opener ( ) Beneficiary ( )
Stale documents Acceptable ( ) Not acceptable ( )
Combined documents Acceptable ( ) Not acceptable ( )
Charter party b/l Acceptable ( ) Not acceptable ( )
Partial shipment Permitted ( ) Prohibited ( )
Trans shipment Permitted ( ) Prohibited ( )
_______________________________________________________________
(11) Other changes:
_______________________________________________________________
(12) Payment details reimbursement instructions must be
received prior to maturity date.
_______________________________________________________________
Send a carbon copy of L/C to - Name __________________________
Location ____________________ Attn __________________________
Telex #
_______________________________________________________________
By the delivery of this request for the issuance of a
Trade Letter of Credit, the undersigned represents and warrants
that the conditions to the issuance thereof specified in Article
V of the Credit Agreement have been satisfied.
Very truly yours,
VALERO ENERGY CORPORATION
By__________________________
Name:_______________________
Title:______________________
cc: B.T. Southwest, Inc.
3000 Two Houston Center
Houston, Texas 77010
Attention: Loan Administration Section
<PAGE>
EXHIBIT 1.06
NOTE
$____________ New York, New York __________, 1994
FOR VALUE RECEIVED, VALERO ENERGY CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay to
the order of _____________________ (the "Bank"), in lawful money
of the United States of America in immediately available funds,
at the office of Bankers Trust Company (the Administrative Agent
) located at 130 Liberty Street, New York, New York 10006, on the
Termination Date (as defined in the Credit Agreement referred to
below) (or such earlier date as may be specified in said Credit
Agreement) the principal sum of _______________ DOLLARS
($_________) or, if less, the unpaid principal amount of all
Loans (as defined in the Credit Agreement) made by the Bank
pursuant to the Credit Agreement and then outstanding.
The Borrower promises also to pay interest on the
unpaid principal amount hereof in like money at said office from
the date hereof until paid at the rates and at the times provided
in the Credit Agreement.
Each Loan made by the Bank to the Borrower, the
Interest Period, if any, applicable thereto, and all payments
made on account thereof, shall be recorded by the Bank and, prior
to any transfer hereof, endorsed on the grid attached hereto
which is part of this Note.
This Note is one of the Notes referred to in, and is
subject to and entitled to the benefits of, the Credit Agreement
dated as of March 31, 1994 among the Borrower, the banks named
therein (including the Bank), the Co Agents named therein,
Bankers Trust Company and Bank of Montreal, as Managing Agents
for such banks, and Bankers Trust Company, as Administrative
Agent for such banks (as amended or modified from time to time,
the Credit Agreement ). The Credit Agreement, among other
things, (i) provides for the making of Loans by the Bank to the
Borrower from time to time pursuant to Article I of the Credit
Agreement in an aggregate outstanding amount not to exceed at any
time the U.S. Dollar amount first above mentioned, and (ii)
contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events, provisions for
prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified, and
provisions to the effect that no provision of this Note or any
other Credit Document (as defined in the Credit Agreement) shall
permit collection of any amount constituting interest in excess
of the Highest Lawful Rate (as defined in the Credit Agreement).
Any Bank that receives multiple Notes pursuant to Section 1.06(c)
of the Credit Agreement agrees that: (1) the aggregate principal
amount payable by Borrower under such Notes shall never exceed
the aggregate principal amount of the Loans made by such Bank
(including, if applicable, the separate Lending Offices or
branches of such Bank) and (2) the payees of the Notes issued at
the request of such Bank shall enjoy no greater rights (voting or
otherwise) than such Bank would enjoy in the absence of such
request and such payees (including, if applicable, the separate
Lending Offices and branches of such Bank) shall be considered a
single Bank for purposes of the Credit Agreement.
In case an Event of Default (as defined in the Credit
Agreement) shall occur and be continuing, the principal of and
accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the Credit
Agreement.
The Borrower hereby waives presentment, demand,
protest, notice of intent to accelerate and any other notice of
any kind except as provided in the Credit Agreement. No failure
to exercise, and no delay in exercising, any rights hereunder on
the part of the holder hereof shall operate as a waiver of such
rights.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
VALERO ENERGY CORPORATION
By:
Name:
Title:
<PAGE>
<TABLE>
<CAPTION>
ADVANCES, MATURITIES, AND PAYMENTS OF PRINCIPAL
<S> <C> <C> <C> <C> <C> <C>
Amount of
Maturity Principal Unpaid
Type of Amount of of Paid or Principal Notation
Date Advance Advance Advance Prepaid Balance Made By
</TABLE>
<PAGE>
EXHIBIT 8.01(c)
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT (this "Subordination
Agreement") dated as of , 199 , by and between
VALERO ENERGY CORPORATION, a Delaware corporation (the "Company")
and each of the subsidiaries of the Company listed on the
signature pages hereto as a Lender (each of such subsidiaries
being a "Lender" and collectively the "Lenders"). Unless
otherwise defined herein, all capitalized terms used herein and
defined in the Credit Agreement referred to below are used herein
as so defined.
W I T N E S S E T H:
WHEREAS, the Company, the banks named therein, the Co
Agents named therein, Bankers Trust Company and Bank of
Montreal, as Managing Agents for such banks, and Bankers Trust
Company, as Administrative Agent for such banks, have entered
into a Credit Agreement dated as of March 31, 1994, (as amended
or modified from time to time, the "Credit Agreement") providing
for the making of loans and issuance of letters of credit as
contemplated therein; and
WHEREAS, Section 8.01(c) of the Credit Agreement
provides that the Company may create, incur, assume or suffer to
exist indebtedness for borrowed money from the Lenders only if
this Subordination Agreement has been executed and delivered by
the parties hereto; and
WHEREAS, each Lender may now or hereafter make loans or
advances to the Company (such loans or advances together with all
principal, interest, fees, indemnities and other amounts owing
with respect thereto, herein called the "Subordinated
Indebtedness") and, to enable it to extend such loans, desires to
enter into this Subordination Agreement;
NOW, THEREFORE, in consideration of the premises and
the mutual agreements herein contained, the parties hereto agree
as follows:
1. Anything in the documents relating to the
Subordinated Indebtedness to the contrary notwithstanding, the
Subordinated Indebtedness shall be subordinate and junior in
right of payment, to the extent and in the manner hereinafter set
forth, to all Superior Indebtedness. The term "Superior
Indebtedness" shall mean (a) all Obligations (as defined below)
of the Company under the Credit Documents, (b) all indebtedness
for borrowed money of the Company owed to any Person (other than
an Affiliate or Subsidiary of the Company) and (c) any renewal,
extension, restatement or refunding thereof. As used herein, the
term "Obligation" shall mean any principal, interest, premium,
penalties, fees and other liabilities and obligations payable by
the Company under the documentation governing any Superior
Indebtedness (including interest after the commencement of any
bankruptcy, insolvency, receivership or similar proceeding).
2. The holders of the Superior Indebtedness shall be
entitled to receive payment in full of all Superior Indebtedness
before any Lender is entitled to receive any payment on account
of Subordinated Indebtedness, except that payments of principal
of, and interest on, Subordinated Indebtedness may be made if, at
the time of such payment (both before and after giving effect
thereto), no payment default exists with respect to any Superior
Indebtedness and no Default or Event of Default is then in
existence. Each Lender agrees that it will not ask, demand, sue
for, take or receive, directly or indirectly, by set-off or in
any other manner whatsoever, and the Company agrees that it will
not make, any payment of any kind on account of the Subordinated
Indebtedness for so long as any Superior Indebtedness is
outstanding and a Default or Event of Default exists or would
exist after giving effect to such payment. In the event that any
payment on account of the Subordinated Indebtedness shall be
received by any Lender in violation of the foregoing, such
payment shall be held in trust for the benefit of, and shall be
paid over to, the holders of the Superior Indebtedness (or their
representatives).
3. In the event of proceedings for the voluntary
liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, or any
insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization, arrangement or other similar
proceeding in connection therewith, relative to the Company or to
its creditors, as such, or to its property, (i) the holders of
the Superior Indebtedness (until payment in full of all Superior
Indebtedness, including without limitation all interest thereon
accruing after the commencement of any such proceedings) shall be
entitled to receive for application in payment thereof any
payment or distribution of any kind or character, whether in cash
or property or securities, which may be payable or deliverable in
any such proceedings in respect of the Subordinated Indebtedness
(including any such payment or distribution which may be payable
or deliverable by virtue of the provisions of, or any security
for, any securities which are subordinate and junior in right of
payment of the Subordinated Indebtedness) and (ii) the holders of
the Superior Indebtedness may, and are hereby irrevocably
authorized and empowered (in their respective own names or in the
name of the Lender or otherwise), but shall have no obligation to
(A) demand, sue for, collect and receive every payment or
distribution in respect of the Subordinated Indebtedness and give
acquittance therefor and (B) file claims and proofs of claim in
respect of the Subordinated Indebtedness and take such other
action (including, without limitation, voting the Subordinated
Indebtedness or enforcing any security interest or other Lien, if
any, securing payment of any of the Subordinated Indebtedness) as
the holders of the Superior Indebtedness may deem necessary or
advisable for the exercise or enforcement of any of the rights or
interests thereof hereunder. In the event that, notwithstanding
the foregoing, any such payment or distribution of assets shall
be received by any Lender on account of, or with respect to, the
Subordinated Indebtedness before the Superior Indebtedness shall
have been paid in full in accordance with the respective terms
thereof, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over to, the holders of the
Superior Indebtedness in accordance with the provisions of the
preceding sentence.
4. Each Lender agrees that no payment or distribution
by it directly to the holders of the Superior Indebtedness
pursuant to the provisions of this Subordination Agreement shall
entitle such Lender to any rights of subrogation in respect
thereof.
5. The holders of the Superior Indebtedness may,
without in any way affecting the obligations of any Lender
hereunder with respect thereto, at any time or from time to time
and in their absolute discretion, change the manner, place or
terms of payment of, change or extend the time of payment of, or
renew or alter, any Superior Indebtedness, or amend, modify or
supplement any agreement creating, evidencing or otherwise
relating to any Superior Indebtedness, or exercise or refrain
from exercising any other of their rights under the Superior
Indebtedness, including, without limitation, the waiver of any
default thereunder, all without notice to or consent from any
Lender. No right of any holder of Superior Indebtedness to
enforce the subordination contained herein shall at any time or
in any way be prejudiced or impaired by any act or failure to act
on the part of the Company or by any act or failure to act, in
good faith, by any such holder.
6. Nothing shall impair, as between the Company and
each Lender, the obligation of the Company to pay to any Lender
the principal and interest thereon in accordance with its terms,
nor shall anything herein prevent any Lender from exercising all
remedies otherwise permitted by applicable law or under the
Subordinated Indebtedness upon default thereunder, subject to the
rights, if any, under this Subordination Agreement of holders of
the Superior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to such Lender and all amounts
which such Lender would be entitled to retain by reason of set-
off or counterclaim in respect of any obligations of such Lender
to the Company against the obligations of the Company under the
Subordinated Indebtedness.
7. Each Lender covenants and agrees that (i) upon the
request of the Administrative Agent, it shall execute and deliver
to the Administrative Agent such other documents and assurances
and do or cause to be done all such other acts and things as may
be reasonably required by the Administrative Agent in order to
give effect to this Subordination Agreement, and (ii) except as
permitted by the Credit Agreement, it will not sell, assign or
otherwise transfer the Subordinated Indebtedness or any interest
therein to any other person or entity.
8. The provisions of this Subordination Agreement are
continuing provisions, and all Superior Indebtedness to which
they apply shall conclusively be presumed to have been created in
reliance thereon.
9. THIS SUBORDINATION AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
10. This Subordination Agreement is entered into for
the benefit of the holders from time to time of the Superior
Indebtedness. This Subordination Agreement may be amended or
modified in any respect, or terminated, with consent of the
Managing Agents and the Lenders, but without the prior written
consent of any other holders of Superior Indebtedness at the time
of such amendment, modification or termination.
IN WITNESS WHEREOF, the Company and each Lender have
caused this Subordination Agreement to be duly executed and
delivered as of the date first above written.
COMPANY:
VALERO ENERGY CORPORATION
By:
Name:
Title:
LENDERS:
[TO BE SIGNED BY ALL
SUBSIDIARIES]
By:
John D. Gibbons, Treasurer of
each of the above named
corporations
<PAGE>
EXHIBIT 11.04
ASSIGNMENT AND ACCEPTANCE
Dated: _________, 19___
Reference is made to the Credit Agreement dated as of
March 31, 1994 (as amended or modified from time to time, the
"Credit Agreement") among Valero Energy Corporation, a Delaware
corporation (the "Borrower"), the banks named therein, the Co-
Agents named therein, Bankers Trust Company and Bank of
Montreal, as Managing Agents for such banks, and Bankers Trust
Company, as Administrative Agent for such banks. Terms defined
in the Credit Agreement are used herein with the same meaning.
__________________, acting as one of the Banks (the
"Assignor"), and _____________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to a portion of the Assignor s
rights and obligations as of the date hereof under the Credit
Agreement and the other Credit Documents sufficient to give the
Assignee the fractional interest specified in Section 1 of
Schedule 1 hereto of all outstanding rights and obligations under
the Credit Agreement and the other Credit Documents. Such sale
and assignment shall [include] [exclude] a proportionate share of
Fees (if any) paid by, or on behalf of, the Borrower to Assignor
pursuant to Section 2.01(a) of the Credit Agreement, [the amounts
of such proportionate shares being specified in Section 2 of
Schedule 1 hereto]. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Credit Agreement
for periods prior to the settlement date between themselves.
After giving effect to such sale and assignment, the respective
Commitments of, amounts of the Loans owing to, and participations
in the Letter of Credit Outstandings held by the Assignor and the
Assignee will be as set forth in Section 3 of Schedule 1 hereto.
2. The Assignor (i) represents and warrants that (x)
it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear
of any adverse claim; (y) it has full power and authority, and
has taken all action necessary, to execute and deliver this
Assignment and to fulfill its obligations under, and to
consummate the transactions contemplated by, this Assignment;
(z) this Assignment has been duly executed and delivered by it
and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms; (ii) makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with the Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement or any other instrument or document
furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility either initially or on a
continuing basis with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any
of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) will
deliver the Note issued to it pursuant to the Credit Agreement to
the Administrative Agent concurrently with the presentation
hereof to the Administrative Agent for acceptance and requests
that, upon receipt of such Note, the Administrative Agent
exchange such Note for [a] new Note[s] payable to the order of
the Assignee in an amount equal to the Loan Commitment assumed by
the Assignee pursuant hereto [and the Assignor in an amount equal
to the Loan Commitment retained by the Assignor under the Credit
Agreement, respectively], as specified in Section 4 of Schedule 1
hereto.
3. The Assignee (i) confirms that it has received a
copy of the Credit Agreement, together with copies of the
financial statements referred to in Section 6.05 of the Credit
Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision
to enter into this Assignment; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent,
the Managing Agents, any Co-Agent, the Assignor or any other Bank
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit
Agreement; (iii) confirms (y) that it has full power and
authority, and has taken all action necessary, to execute and
deliver this Assignment and to fulfill its obligations under, and
to consummate the transactions contemplated by, this Assignment
and (z) that this Assignment has been duly executed and delivered
by it and constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms; (iv) appoints and
authorizes the Administrative Agent and Managing Agents to take
such action as administrative agent and managing agent,
respectively, on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent and
the Managing Agents by the terms thereof, together with such
powers as are reasonably incidental thereto; (v) agrees that it
will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement and the
other Credit Documents are required to be performed by it as a
Bank; and (vi) specifies as its Lending Office (and address for
notices) the office set forth in Section 5 of Schedule 1 hereto;
and (vii) represents that it is either (y) a corporation
organized under the laws of the United States or a state thereof
or (z) entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to the Credit Agreement
and the other Credit Documents (A) under an applicable provision
of a tax convention to which the United States is a party or (B)
because it is acting through a branch, agency or office in the
United States and any payment to be received by it under the
Credit Agreement is effectively connected with a trade or
business in the United States.
4. Following the execution of this Assignment by the
Assignor and the Assignee, it will be delivered to the
Administrative Agent for the consent of the Borrower and approval
by the Managing Agents, and the effective date of this Assignment
(the "Effective Date") shall be at least two Business Days after
the date on which both such consent of the Borrower has been
obtained and such approval by the Managing Agents has occurred.
If the statement set forth in clause (vii)(z) of Section 3 hereof
is true with respect to the Assignee, the Assignee will execute
and deliver to the Administrative Agent the forms, certificates
and other documents required by Section 4.06(e) of the Credit
Agreement.
5. Upon such consent by the Borrower and approval by
the Managing Agents, as of the Effective Date, (i) the Assignee
shall be a party to the Credit Agreement and, to the extent
provided in this Assignment, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement.
6. Upon such consent by the Borrower and approval by
the Managing Agents, from and after the Effective Date, the
Administrative Agent shall make all payments under the Credit
Agreement and the other Credit Documents in respect of the
interest assigned hereby (including, without limitation, all
payments of principal, interest and fees with respect thereto) to
the Assignee. Notwithstanding anything to the contrary contained
in this Assignment, if and when Assignor receives or collects any
payment of interest on any Loan or Letter of Credit Outstandings
attributable to Assignee s share or any payment of Fees
attributable to Assignee s share which, in any such case, are
required to be paid to Assignee, Assignor shall distribute to
Assignee such payment. Notwithstanding anything to the contrary
contained in this Assignment Agreement, if and when Assignee
receives or collects any payment of interest on any Loan or
Letter of Credit Outstandings or any payment of Fees which in any
such case are required to be paid to Assignor, Assignee shall
distribute such payment to Assignor. To the extent payments of
funds payable to Assignee by Assignor, or to Assignor by
Assignee, as the case may be, pursuant to this Section 6 are not
made within two Business Days of receipt, each of the Assignee or
Assignor, as the case may be, shall be entitled to recover such
amount together with interest thereon at the Effective Federal
Funds Rate per annum accruing from the date of receipt of such
funds by the other party. For the purposes hereof, "Effective
Federal Funds Rate" shall mean, for any day, the weighted average
of the rate on overnight Federal funds transactions, with members
of the Federal Reserve System, only, arranged by Federal funds
brokers, as published as of such day by the Federal Reserve Bank
of New York.
7. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. This Assignment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed to be an original and all of which taken together shall
constitute but one and the same instrument. This Assignment
shall be binding upon and inure to the benefit of the Assignor
and the Assignee and their respective successors and assigns.
8. No term or provision of this Assignment may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the parties to this Assignment.
Assignor and Assignee agree that each party shall bear its own
expenses in connection with the preparation and execution of this
Assignment.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
Attachments: ASSIGNOR:
Schedule 1
By:
Name:
Title:
ASSIGNEE:
By:
Name:
Title:
Consented to this __ day VALERO ENERGY CORPORATION
of , 19_.
By:
Name:
Title:
Approved this __ day BANKERS TRUST COMPANY, as
of , 19_. Managing Agent
By:
Name:
Title:
Approved this __ day BANK OF MONTREAL, as
of , 19_. Managing Agent
By:
Name:
Title:
<PAGE>
Schedule 1
to
Assignment and Acceptance
Dated ________, 19___
Section 1.
Fractional interest acquired by Assignee
relative to all Banks __________
Section 2.
1. Assignee's proportionate share of the facility
fees previously paid to Assignor pursuant to
Section 4.01(a) of the Credit Agreement. $_________
Section 3.
1. Assignee's acquired interest.
Assignee's Commitment: $_________
Aggregate outstanding principal
amount of Loans owing to the Assignee: $_________
Amount of participations in Letter of
Credit Outstandings held by the Assignee: $_________
Assignee's Percentage Participation: ________%
2. Assignor's retained interest.
Assignor's Commitment: $_________
Aggregate outstanding principal
amount of Loans owing to the Assignor: $_________
Amount of participations in Letter of
Credit Outstandings held by the Assignor: $_________
Assignor's Percentage Participation: ________%
Section 4.
1. A Note payable to the order of the Assignee in the principal
amount of $________.
2. A Note payable to the order of the Assignor in the principal
amount of $________.
Section 5.
Lending Office:
_____________________________
_____________________________
_____________________________
_____________________________
EXHIBIT 11
VALERO ENERGY CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
COMPUTATION OF EARNINGS PER SHARE
ASSUMING NO DILUTION:
Net income. . . . . . . . . . . . . . . . . . . . . $ 6,283 $ 15,611
Less: Preferred stock dividend requirements. . . . (532) (318)
Net income applicable to common stock . . . . . . . $ 5,751 $ 15,293
Weighted average number of shares of common
stock outstanding. . . . . . . . . . . . . . . . 43,320,425 43,037,951
Earnings per share assuming no dilution . . . . . . $ .13 $ .36
COMPUTATION OF EARNINGS PER SHARE
ASSUMING FULL DILUTION:
Net income. . . . . . . . . . . . . . . . . . . . . $ 6,283 $ 15,611
Less: Preferred stock dividend requirements. . . . (532) (318)
Add: Reduction of preferred stock dividends
applicable to the assumed conversion of
Convertible Preferred Stock at date of issuance. 239 -
Net income applicable to common stock
assuming full dilution . . . . . . . . . . . . . $ 5,990 $ 15,293
Weighted average number of shares of common
stock outstanding. . . . . . . . . . . . . . . . 43,320,425 43,037,951
Weighted average common stock equivalents
applicable to stock options. . . . . . . . . . . 49,013 74,687
Weighted average shares issuable upon conversion
of Convertible Preferred Stock . . . . . . . . . 567,271 -
Weighted average shares used for computation. . . . 43,936,709 43,112,638
Earnings per share assuming full dilution . . . . . $ .14 <F1> $ .35 <F2>
<FN>
<F1>
This calculation is submitted in accordance with paragraph 601(b)(11) of Regulation S-K although it is contrary to APB
Opinion No. 15 because it produces an antidilutive result.
<F2>
This calculation is submitted in accordance with paragraph 601(b)(11) of Regulation S-K although it is not required by
APB Opinion No. 15 because it results in dilution of less than 3%.
</FN>
</TABLE>
