UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 1-11154
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3663331
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification
No.)
9830 Colonnade Boulevard 78230
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 641-6800
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
Common Stock, $.01 Par Value -- 74,861,171 shares outstanding as of
July
31, 1997
ULTRAMAR DIAMOND SHAMROCK CORPORATION
FORM 10-Q
June 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996
Consolidated Statements of Income for the Three and Six
Month
Periods Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Six Month
Periods Ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December
31,
1997 1996
(Unaudited)
(in millions)
Assets
Current assets:
Cash and cash equivalents $ 93.0 $ 197.9
Accounts and notes receivable, net 446.0 503.1
Inventories 562.7 633.3
Prepaid expenses and other current
assets 38.8 35.0
Deferred income taxes 32.0 30.0
Total current assets 1,172.5 1,399.3
Property, plant and equipment 3,730.2 3,685.2
Less accumulated depreciation and
amortization (1,011.2) (954.4)
2,719.0 2,730.8
Other assets 304.3 289.9
Total assets $4,195.8 $4,420.0
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of
long-term debt $ 7.1 $ 3.2
Accounts payable 258.7 540.7
Accrued liabilities 282.5 328.9
Taxes other than income taxes 205.3 191.3
Income taxes payable 24.7 32.1
Total current liabilities 778.3 1,096.2
Long-term debt, less current portion 1,527.6 1,646.3
Other long-term liabilities 306.4 349.6
Deferred income taxes 109.0 87.0
Commitments and contingencies (Note 4)
Company obligated Preferred Stock
of subsidiary 200.0 -
Stockholders' equity:
Convertible Preferred Stock, par value
$.01 per share:
25,000,000 shares authorized,
1,725,000 shares issued and out-
standing at June 30, 1997 and
December 31, 1996 0.0 0.0
Common Stock, par value $.01 per share:
250,000,000 shares authorized,
74,830,095 and 74,710,000 shares
issued and outstanding at June 30,
1997 and December 31, 1996,
respectively 0.7 0.7
Additional paid-in capital 1,140.2 1,137.0
ESOP, treasury stock and other (30.0) (32.2)
Retained earnings 224.5 193.7
Foreign currency translation adjustment (60.9) (58.3)
Total stockholders' equity 1,274.5 1240.9
Total liabilities and stockholders'
equity $4,195.8 $4,420.0
The accompanying notes are an integral part of these consolidated
financial
statements.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
(in millions, except per share data)
Sales and other revenues
(including excise taxes) $2,414.4 $2,565.8 $4,964.6
$4,935.4
Operating costs and expenses
Cost of products sold 1,485.8 1,666.8 3,135.5
3,154.3
Operating expenses 192.2 213.0 402.4
432.2
Selling, general and
administrative expenses 69.7 71.6 141.7
142.5
Taxes other than income
taxes 520.6 462.2 1,029.8
950.9
Depreciation and amorti-
zation 45.5 44.6 89.7
86.3
Total operating costs
and expenses 2,313.8 2,458.2 4,799.1
4,766.2
Operating income 100.6 107.6 165.5
169.2
Interest income 2.6 4.3 7.9
8.1
Interest expense (26.7) (32.6) (62.1)
(61.2)
Gain on sale of office
building - - 11.0
-
Income before income taxes 76.5 79.3 122.3
116.1
Provision for income taxes 30.2 32.2 48.4
47.0
Net income 46.3 47.1 73.9
69.1
Dividend requirements on
preferred stock 1.1 1.1 2.2
2.2
Net income applicable to
common shares $ 45.2 $ 46.0 $ 71.7 $
66.9
Net income per common share:
Primary $ 0.60 $ 0.61 $ 0.95 $
0.89
Fully diluted $ 0.58 $ 0.60 $ 0.93 $
0.88
Weighted average number
of common shares used
in computation (in
thousands):
Primary 75,793 75,352 75,677
75,107
Fully diluted 79,253 78,674 79,151
78,511
Dividends per share:
Common shares $ .275 $ .275 $ .550 $
.550
Cumulative convertible
preferred stock $ .625 $ .625 $ 1.250 $
1.250
The accompanying notes are an integral part of these consolidated
financial
statements.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997
1996
(in
millions)
Cash Flows from Operating Activities
Net income $ 73.9 $
69.1
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 89.7
86.3
(Gain) loss on sale of fixed assets (14.5)
1.0
Provision for deferred income taxes 42.8
26.7
Other, net 1.8
2.0
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes
receivable 53.3
(40.9)
Decrease in inventories 69.5
110.9
(Increase) decrease in prepaid expenses and
other current assets (6.6)
10.4
(Increase) decrease in other assets 5.7
(2.4)
Decrease in accounts payable and other
current liabilities (334.4)
(52.4)
(Decrease) increase in other long-term
liabilities (42.9)
0.1
Other, net (10.1)
2.5
Net cash provided by (used in) operating
activities (71.8)
213.3
Cash Flows from Investing Activities
Capital expenditures (115.7)
(140.1)
Acquisition of marketing operations (9.9)
(14.0)
Deferred turnaround costs (10.4)
(9.0)
Expenditures for investments (7.8)
(2.9)
Proceeds from sales of property, plant
and equipment 72.7
10.5
Net cash used in investing activities (71.1)
(155.5)
Cash Flows from Financing Activities
Increase in long-term debt 10.6
229.4
Repayment of long-term debt (126.6)
(107.6)
Issuance of company obligated Preferred
Stock of subsidiary 200.0
-
Payment of dividends (43.6)
(34.8)
Other, net (1.7)
7.9
Net cash provided by financing activities 38.7
94.9
Effect of exchange rate changes on cash (0.7)
0.3
Net Increase (Decrease) in Cash and Cash
Equivalents (104.9)
153.0
Cash and Cash Equivalents at Beginning
of Period 197.9
175.5
Cash and Cash Equivalents at End of Period $ 93.0 $
328.5
The accompanying notes are an integral part of these consolidated
financial
statements.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: Basis of Presentation
The accompanying unaudited consolidated financial statements have
been
prepared by Ultramar Diamond Shamrock Corporation (the "Company"),
in
accordance with generally accepted accounting principles for
interim
financial information and with the instructions to Form 10-Q and
Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting
principles
for complete financial statements. In the opinion of management,
all
adjustments (consisting of normal recurring accruals) considered
necessary
for a fair presentation have been included. Operating results for
the
three and six month periods ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending
December
31, 1997. The results of operations may be affected by seasonal
factors,
such as the demand for petroleum products and working capital
requirements
in the Northeast, which vary significantly during the year; or
industry
factors that may be specific to a particular period, such as
movements in
and the general level of crude oil prices, the demand for and
prices of
refined products, industry supply capacity and maintenance
turnarounds.
For further information, see the consolidated financial statements
and
footnotes thereto included in the Company's annual report on Form
10-K for
the year ended December 31, 1996. Prior period amounts have been
reclassified to reflect the merger of Diamond Shamrock, Inc., with
and into
the Company effective December 3, 1996, in a transaction accounted
for as
a pooling of interests. Certain reclassifications of historical
financial
data have been made to conform the accounting policies of the two
companies
as further described in the Company's annual report on Form 10-K
for the
year ended December 31, 1996.
NOTE 2: Inventories
Inventories consisted of the following:
June 30, December
31,
1997 1996
(in millions)
Crude oil and other feedstocks $ 323.9 $ 309.2
Refined and other finished products 168.0 264.7
Materials and supplies and convenience
store items 70.8 59.4
$ 562.7 $ 633.3
NOTE 3: Gain on Sale of Assets
Earnings for the first six months of 1997 include a pre-tax gain of
$11.0
million, resulting from the sale of an office building in San
Antonio,
Texas which was originally purchased to serve as the Company's
corporate
headquarters.
NOTE 4: Commitments and Contingencies
The Company's operations are subject to environmental laws and
regulations
adopted by various governmental authorities. Site restoration and
environmental remediation and clean-up obligations are accrued
either when
known or when considered probable and reasonably estimable. Total
future
environmental costs cannot be reasonably estimated due to unknown
factors
such as the magnitude of possible contamination, the timing and
extent of
remediation, the determination of the Company's liability in
proportion to
other parties and the extent to which environmental laws and
regulations
may change in the future. Although environmental costs may have a
significant impact on results of operations for any single year,
the
Company believes that such costs will not have a material adverse
effect
on the Company's financial position.
There are various legal proceedings and claims pending against the
Company
that arise in the ordinary course of business. It is management's
opinion,
based upon advice of legal counsel, that these matters,
individually or in
the aggregate, will not have a material adverse effect on the
Company's
financial position or results of operations.
NOTE 5: Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for
Transfers
and Servicing of Financial Assets and Extinguishments of
Liabilities," in
June 1996. This statement provides accounting and reporting
standards for,
among other things, the transfer and servicing of financial assets,
such
as factoring receivables. This statement is effective for
transactions
occurring after December 31, 1996, and is to be applied
prospectively.
Earlier or retroactive application is not permitted. In December
1996, the
FASB issued SFAS No. 127, "Deferral of the Effective Date of
Certain
Provisions of SFAS No. 125." SFAS No. 127 postpones the effective
date for
some, but not all, of the provisions of SFAS No. 125 to January 1,
1998.
The Company believes the adoption of these statements will not have
a
material impact on the financial position or results of operations
of the
Company.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per
Share", which
establishes standards for computing and presenting earnings per
share
("EPS") for entities with publicly held common stock. SFAS No. 128
simplifies the standards for computing EPS previously found in
Accounting
Principles Board Opinion No. 15, "Earnings Per Share", and makes
them
comparable to international EPS standards. It replaces the
presentation
of primary EPS with a presentation of basic EPS, and requires dual
presentation of basic and diluted EPS on the face of the income
statement.
SFAS No. 128 is effective for financial statements for periods
ending after
December 15, 1997, and early adoption is not permitted. The
Company has
not completed its calculations of EPS data under SFAS No. 128;
however,
management of the Company does not anticipate that the adoption of
this
pronouncement will have a material impact on the Company's earnings
per
share.
NOTE 6: Company Obligated Preferred Stock of Subsidiary
On June 25, 1997, UDS Capital I (the "Trust") issued $200.0 million
of
8.32% Trust Originated Preferred Securities in an underwritten
public
offering and issued $6.2 million of Trust Common Securities to the
Company.
Proceeds from the issuance of the Trust Originated Preferred
Securities and
of the Trust Common Securities were used to purchase $206.2 million
of
8.32% Partnership Preferred Securities of UDS Funding I, L.P. (the
"Partnership"), representing limited partner interests in the
Partnership.
The Partnership also received $36.4 million from the Company,
representing
the general partner interest in the Partnership. The Trust and the
Partnership are wholly-owned subsidiaries of the Company. The
Partnership's assets include $240.2 million in debentures issued by
the
Company and two of its subsidiaries as well as $2.4 million in debt
securities of third parties, which were acquired with the proceeds
from the
issuance of the limited and general partnership interests. The
debentures
have a term of 20 years and bear interest at 8.32% per annum. The
Company
has guaranteed, on a subordinated basis, the payments due on the
Trust
Originated Preferred Securities if and when declared by the
Partnership.
The proceeds from the issuance of the Trust Originated Preferred
Securities
were used to reduce long-term debt.
NOTE 7: Subsequent Events
On April 15, 1997, the Company entered into a definitive agreement
to
acquire Total Petroleum (North America) Ltd. ("Total"), a Denver,
Colorado
based petroleum refining and marketing company. The agreement
provides for
the issuance of .322 shares of Common Stock for each outstanding
share of
Total Common Stock. The Company expects to issue approximately
13.0
million shares of Common Stock and will assume Total debt
outstanding at
closing (approximately $428.0 million at December 31, 1996). The
transaction was approved by the Total shareholders on June 24,
1997. All
other regulatory approvals have been obtained, except for Federal
Trade
Commission approval which the Company anticipates receiving to
accommodate
a closing by the end of the third quarter of 1997.
On August 6, 1997, the Board of Directors declared a quarterly
dividend of
$.275 per common share payable on September 5, 1997 to holders of
record
on August 20, 1997. In addition, the Board of Directors declared
a
quarterly dividend of $.625 per share on the Company's 5%
Cumulative
Convertible Preferred Stock payable on September 15, 1997, to
holders of
record on August 20, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The Company's operating results are affected by Company-specific
factors,
primarily its refinery utilization rates and refinery maintenance
turnarounds; seasonal factors, such as the demand for petroleum
products
and working capital requirements in the Northeast, both of which
vary
significantly during the year; and industry factors, such as
movements in
and the level of crude oil prices, the demand for and prices of
refined
products and industry supply capacity. The effect of crude oil
price
changes on the Company's operating results is determined, in part,
by the
rate at which refined product prices adjust to reflect such
changes. As
a result, the Company's earnings have been volatile in the past and
may be
volatile in the future.
Three Months Ended June 30, 1997 Compared to Three Months Ended
June 30,
1996
Financial and operating data by geographic area for the three month
periods
ended June 30, 1997 and 1996 are as follows:
Financial Data:
Three Months Ended June 30,
1997 1996
Southwest Northeast Total Southwest Northeast
Total
(in
mil-
lions)
Sales and
other
revenues $1,716.3 $ 698.1 $2,414.4 $1,850.0 $ 715.8
$2,565.8
Cost of
products
sold 1,081.1 404.7 1,485.8 1,242.2 424.7
1,666.9
Operating
expenses 163.7 28.5 192.2 184.0 29.0
213.0
Selling,
general
and ad-
ministra-
tive ex-
penses 30.9 38.8 69.7 35.3 36.3
71.6
Taxes other
than
income
taxes 321.9 198.7 520.6 282.5 179.6
462.1
Depreci-
ation and
amortiza-
tion 37.6 7.9 45.5 38.0 6.6
44.6
Operating
income $ 81.1 $ 19.5 100.6 $ 68.0 $ 39.6
107.6
Interest
expense,
net 24.1
28.3
Income
before
income
taxes 76.5
79.3
Provision
for in-
come
taxes 30.2
32.2
Net income $ 46.3 $
47.1
Operating
Data:
Three Months
Ended
June 30
1997
1996
Southwest
McKee and Three Rivers Refineries
Throughput (BPD) 236,382
240,230
Margin (dollars per barrel) 5.62
4.10
Wilmington Refinery
Throughput (BPD) 122,776
112,198
Margin (dollars per barrel) 3.60
6.29
Retail Marketing
Fuel volume (BPD) 108,664
105,919
Fuel margin (cents per gallon) 13.5
14.1
Merchandise sales ($1,000/day) 2,438
2,525
Merchandise margin (%) 29.9
30.8
Northeast
Quebec Refinery
Throughput (BPD) 106,400
147,400
Margin (dollars per barrel) 1.92
3.65
Retail Marketing
Fuel volume (BPD) 60,200
54,000
Overall margins (cents per gallon)(1) 27.8
25.2
(1) Retail marketing overall margins reported for the Northeast
represent
a blend of gross margin from company and dealer operated
service
stations, heating oil sales and the cardlock business segment.
General
Net income for the quarter ended June 30, 1997 totaled $46.3
million as
compared to $47.1 million for the quarter ended June 30, 1996. In
the
Southwest, the Company had operating income of $81.2 million for
the second
quarter of 1997, as compared to $68.0 million for the second
quarter of
1996. The increase in operating profit was primarily due to
increased
refining margins at the McKee and Three Rivers refineries and
increased
throughput at the Wilmington refinery. These increases were
somewhat
offset by a decrease in refining margins at the Wilmington
refinery. In
the Northeast, operating income of $19.5 million was $20.1 million
lower
than that of the second quarter of 1996, as a result of higher
crude oil
costs, lower import parity prices and a scheduled refinery
turnaround.
Northeast retail marketing volumes increased by 6,200 barrels per
day in
the second quarter of 1997, and the overall retail marketing margin
improved by 2.6 cents per gallon compared to the second quarter of
1996.
Southwest Operations
Sales and other revenues in the Southwest in the second quarter of
1997
totaled $1.7 billion and were 7.2% lower than for the second
quarter of
1996, primarily due to a 9.2% decrease in refined product sales
volumes and
a 3.4% decrease in merchandise sales, partially offset by a 2.6%
increase
in retail fuel volumes as compared to the second quarter of 1996.
The refining margin for the McKee and Three Rivers refineries of
$5.62 per
barrel in the second quarter of 1997 increased by 37.1% as compared
to
$4.10 per barrel in the second quarter of 1996, reflecting
declining crude
oil costs during the second quarter of 1997. The refining margin
for the
Wilmington refinery decreased by 42.8% to $3.60 per barrel in the
second
quarter of 1997 due to 15.8% decrease in refined product sales
prices
compared to the second quarter of 1996. Throughput at the
Wilmington
refinery during the second quarter of 1997 increased by 9.4% over
the same
period in 1996 to 122,776 barrels per day, principally due to the
processing of additional feedstocks through the refinery's gas oil
hydrotreater which came on stream in the second quarter of 1996.
Retail
marketing fuel volume increased by 2.6% to 108,664 barrels per day,
principally as a result of the successful rebranding of the
National
Convenience Stores, which were acquired in December 1995. Retail
fuel
margins decreased by 4.3% to 13.5 cents per gallon at the end of
the first
half of 1997, primarily in the mid-continent area due to intense
competitive pressures. This decrease was partially offset by
increased
retail margins in California.
Merchandise sales at the Company's convenience stores averaged $2.4
million
per day during the second quarter of 1997 as compared to $2.5
million per
day during the corresponding quarter of 1996. This decrease was
primarily
result of disposing of a number of stations during recent months.
Merchandise margins for the second quarter of 1997 were down
slightly to
29.9% compared to 30.8% for the second quarter of 1996, reflecting
competitive pressures on the pricing of beer, soda and tobacco
products.
The petrochemicals and natural gas liquids businesses also
contributed to
operating income in the second quarter of 1997 with continued
strong demand
for Nitromite fertilizer and propylene.
Selling, general and administrative expenses of $30.9 million were
$4.4
million lower than in the second quarter of 1996, reflecting cost
reductions and synergies resulting from the acquisition of National
Convenience Stores in December 1995 and the Ultramar-Diamond
Shamrock
merger in December 1996.
Northeast Operations
Sales and other revenues in the Northeast in the second quarter of
1997
totaled $698.1 million and were $17.7 million, or 2.5%, lower than
in the
corresponding quarter of 1996, reflecting a 39 day scheduled
turnaround
late in the second quarter of 1997 at the Quebec refinery. This
decrease
was partially offset by higher retail volumes, mainly associated
with home
heating oil expansion into New England which commenced in mid-1996.
Refining margins decreased by 47.4% to $1.92 per barrel in the
second
quarter of 1997 as compared to $3.65 per barrel in the second
quarter of
1996, due to high crude oil costs, low import parity prices and a
scheduled
refinery turnaround late in the second quarter of 1997. Throughput
at the
Quebec Refinery averaged 106,400 BPD or 27.8% lower than in the
second
quarter of 1996, reflecting the refinery turnaround. Overall
retail
margins increased 2.6 cents per gallon, or 10.3%, to 27.8 cents per
gallon
in the second quarter of 1997 as compared to the corresponding
quarter of
1996, reflecting more stable market conditions as a result of the
Company's
"value plus" pricing program initiated in the second half of 1996
and the
Home Heat and Cardlock segments' ability to maintain prices as
costs
declined. Retail marketing volumes increased 11.5% as compared
with the
second quarter of 1996, to 60,200 barrels per day, as a result of
the
Company's expanding home heating oil operations and the
implementation of
the "value plus" pricing program.
Selling, general and administrative expenses of $38.8 million were
$2.5
million higher than in the second quarter of 1996, principally due
to the
previously mentioned acquisition of home heating oil and
distribution
operations in the northeast United States.
Combined Interest and Income Taxes
Net interest expense of $24.1 million in the second quarter of 1997
was
$4.2 million lower than in the corresponding quarter of 1996.
The consolidated income tax provisions for the second quarter of
1997 and
1996 were based upon the Company's estimated effective income tax
rates for
the years ending December 31, 1997 and 1996 of 39.4% and 40.6%,
respectively. The consolidated effective income tax rates exceed
the U.S.
Federal statutory income tax rate primarily due to state income
taxes and
the effects of foreign operations.
Six Months Ended June 30, 1997 Compared to Six Months Ended June
30, 1996
Financial and operating data by geographic area for the six month
periods
ended June 30, 1997 and 1996 are as follows:
Financial Data:
Six Months Ended June 30,
1997 1996
Southwest Northeast Total Southwest Northeast
Total
(in
mil-
lions)
Sales and
other
revenues $3,448.4 $1,516.2 $4,964.6 $3,481.5 $1,453.9
$4,935.4
Cost of
products
sold 2,226.5 909.0 3,135.5 2,273.4 880.9
3,154.3
Operating
expenses 341.1 61.3 402.4 371.3 60.9
432.2
Selling,
general
and ad-
ministra-
tive ex-
penses 60.6 81.1 141.7 67.5 75.0
142.5
Taxes
other
than
income
taxes 641.7 388.1 1,029.8 603.7 347.2
950.9
Depreci-
ation
and amor-
tization 74.5 15.2 89.7 73.4 12.9
86.3
Operating
income $ 104.0 $ 61.5 165.5 $ 92.2 $ 77.0
169.2
Interest
expense,
net 54.2
53.1
Gain on
sale of
office
building 11.0
-
Income be-
fore in-
come
taxes 122.4
116.1
Provision
for in-
come
taxes 48.4
47.0
Net income $ 73.9 $
69.1
<PAGE>
Operating Data:
Six Months Ended
June 30,
1997 1996
Southwest
McKee and Three Rivers Refineries
Throughput (BPD) 229,600
232,600
Margin (dollars per barrel) 5.23 4.22
Wilmington Refinery
Throughput (BPD) 113,908
97,889
Margin (dollars per barrel) 4.25 5.11
Retail Marketing
Fuel volume (BPD) 104,969
103,846
Fuel margin (cents per gallon) 11.4 12.7
Merchandise sales ($1,000/day) 2,904
2,745
Merchandise margin (%) 30.0 30.5
Northeast
Quebec Refinery
Throughput (BPD) 127,400
145,900
Margin (dollars per barrel) 2.24 3.76
Retail Marketing
Fuel volume (BPD) 65,400
58,800
Overall margins (cents per gallon)(1) 28.5 24.6
(1) Retail marketing overall margins reported for the Northeast
represent
a blend of gross margin from company and dealer operated
service
stations, heating oil sales and the cardlock business segment.
General
Net income for the six months ended June 30, 1997 totaled $73.9
million as
compared to $69.1 million for the six months ended June 30, 1996.
In the
Southwest, the Company had operating income of $104.1 million for
the first
six months of 1997, as compared to $92.2 million for the first six
months
of 1996. The historically low refining margins on the West Coast
were
offset by increased throughput at the Wilmington refinery and
increased
refining margins at the McKee and Three Rivers refineries. In the
Northeast, operating income of $61.5 million was $15.5 million
lower than
that of the first six months of 1996, resulting from higher crude
oil
costs, lower import parity prices and a scheduled refinery
turnaround late
in the second quarter of 1997. Northeast retail marketing volumes
increased by 6,600 barrels per day in the first six months of 1997,
and the
overall retail marketing margin improved by 3.9 cents per gallon
compared
to the first six months of 1996.
Southwest Operations
Sales and other revenues in the Southwest in the first six months
of 1997
totaled $3.4 billion and were 1.0% lower than for the first six
months of
1996, primarily due to a 6.3% decrease in merchandise sales,
partially
offset by a 3.9% increase in refinery throughput.
The combined refining margin for the McKee and Three Rivers
refineries of
$5.23 per barrel in the first six months of 1997 increased by 23.9%
as
compared to $4.22 per barrel in the first six months of 1996,
reflecting
strong margin improvement late in the second quarter of 1997, as a
result
of declining crude oil costs. The refining margin for the
Wilmington
refinery decreased by 16.8% to $4.25 per barrel in the first six
months of
1997. Throughput at the Wilmington refinery during the first six
months
of 1997 increased by 16.4% over the same period in 1996 to 113,908
barrels
per day, principally due to the processing of additional feedstocks
through
the refinery's gas oil hydrotreater which came on stream in the
second
quarter of 1996. Retail marketing fuel volume increased by 1.1%,
to
104,969 barrels per day, principally as a result of a slight
increase in
demand. Retail fuel margins decreased by 10.2% to 11.4 cents per
gallon
in the first six months of 1997, primarily in the mid-continent
area due
to intense competitive pressures. This decrease was partially
offset by
improved retail margins in the West Coast in the second quarter of
1997.
Merchandise sales at the Company's convenience stores averaged $2.3
million
per day during the first six months of 1997 as compared to $2.4
million per
day during the corresponding six months of 1996, as a result of
disposing
of a number of stations during recent months. Merchandise margins
for the
first six months of 1997 decreased slightly to 30.0% compared to
30.5% in
the first six months of 1996.
Selling, general and administrative expenses of $60.6 million were
$6.9
million lower than in the first six months of 1996, reflecting cost
reductions and synergies resulting from the acquisition of National
Convenience Stores in December 1995 and the Ultramar-Diamond
Shamrock
merger in December 1996.
The petrochemical and natural gas liquids businesses also
contributed to
operating income in the first six months of 1997 with continued
strong
demand for Nitromite fertilizer and propylene.
Northeast Operations
Sales and other revenues in the Northeast in the first six months
of 1997
totaled $1.5 billion and were $62.3 million, or 4.3%, higher than
in the
corresponding six months of 1996 as average product prices
increased by
17.4%. Higher volume in retail activities, mainly associated with
expansion into New England which occurred in mid-1996, was
principally
responsible for the improvement in revenue. This increase was
partially
offset by reduced throughput at the Quebec refinery, reflecting a
39 day
scheduled turnaround late in the second quarter of 1997.
Refining margins decreased 40.4% to $2.24 barrel in the first six
months
of 1997 as compared to $3.76 per barrel in the first six months of
1996,
due to high crude oil costs, low import parity prices and a
scheduled
turnaround late in the second quarter of 1997. Throughput at the
Quebec
Refinery averaged 127,400 BPD or 12.7% lower than in the first six
months
of 1996, as throughput was adversely affected in the first six
months of
1997 due to the previously mentioned refinery turnaround. Overall
retail
margins increased 3.9 cents per gallon, or 15.9%, to 28.5 cents per
gallon
in the first six months of 1997 as compared to the corresponding
six months
of 1996, reflecting more stable market conditions as a result of
the
Company's "value plus" pricing program initiated in the second half
of 1996
and the Home Heat and Cardlock segments' ability to maintain prices
as
costs declined. Retail marketing volumes increased 11.2% as
compared with
the first six months of 1996, to 65,400 barrels per day, as a
result of the
Company's expanding home heating oil operations and the
implementation of
the "value plus" pricing program.
Selling, general and administrative expenses of $81.1 million were
$6.1
million higher than in the first six months of 1996 principally due
to the
previously mentioned acquisition of home heating oil and
distribution
operations in the northeast United States.
Combined Interest and Income Taxes
Net interest expense of $54.2 million in the first six months of
1997 was
$1.1 million higher than in the corresponding six months of 1996.
The consolidated income tax provisions for the first six months of
1997 and
1996 were based upon the Company's estimated effective income tax
rates for
the years ending December 31, 1997 and 1996 of 39.5% and 40.5%,
respectively. The consolidated effective income tax rates exceeded
the
U.S. Federal statutory income tax rate primarily due to state
income taxes
and the effects of foreign operations.
Outlook
The Company's earnings depend largely on refining and retail
marketing
margins. The petroleum refining and marketing industry has been
and
continues to be volatile and highly competitive. The cost of crude
oil
purchased by the Company as well as the price of refined products
sold by
the Company have fluctuated widely in the past. As a result of the
historic volatility of refining and marketing margins and the fact
that
they are affected by numerous diverse factors, it is impossible to
predict
future margin levels.
In general, industry gasoline inventories are lower than they were
a year
ago. This should bode well for better margins, as the industry
completes
the summer driving season. In addition, backwardation has
moderated in the
crude oil market, and crude oil prices have been declining and are
relatively stable at present.
California refining margins have been improving early in third
quarter;
however, retail margins have declined significantly. Texas
refining
margins have also improved early in the third quarter and southwest
retail
margins which includes California, have improved slightly early in
the
third quarter of 1997 from a very weak first half but are still
lower than
recent historical levels.
In eastern Canada, refining spreads have improved early in the
second
quarter while retail margins have weakened slightly in recent
weeks.
Certain Forward Looking Statements
This quarterly report on Form 10-Q contains certain
"forward-looking"
statements as such term is defined in the Private Securities
Litigation
Reform Act of 1995 and information relating to the Company and its
subsidiaries that are based on the beliefs of the Company's
management as
well as assumptions made by and information currently available to
the
Company's management. When used in this report, the words
"anticipate,"
"believe," "estimate," "expect," and "intend" and words or phrases
of
similar import, as they relate to the Company or its subsidiaries
or
Company management, are intended to identify forward-looking
statements.
Such statements reflect the current general economic conditions,
customer
relations, relationships with vendors, the interest rate
environment,
governmental regulation and supervision, seasonality, distribution
networks, product introductions and acceptance, technological
change,
changes in industry practices, one-time events and other factors
described
herein and in other filings made by the Company with the Securities
and
Exchange Commission. Based upon changing conditions, should any
one or
more of these risks or uncertainties materialize, or should any
underlying
assumptions prove incorrect, actual results may vary materially
from those
described herein as anticipated, believed, estimated, expected or
intended.
The Company does not intend to update these forward-looking
statements.
Capital Expenditures
The refining and marketing of petroleum products is a capital intensive
business. Significant capital requirements include expenditures to upgrade
or enhance operating facilities to meet environmental regulations and
maintain the Company's competitive position as well as to acquire, build
and maintain broad-based retail networks. The capital requirements of the
Company's operations consist primarily of (i) reliability, environmental
and regulatory expenditures, such as those required to maintain equipment
reliability and safety and to address environmental regulations (including
reformulated fuel specifications, stationary source emission standards and
underground storage tank regulations); and (ii) growth opportunity
expenditures, such as those planned to expand and upgrade its retail
marketing business, to increase the capacity of certain refinery processing
units and pipelines and to construct additional petrochemical processing
units.
During the first six months of 1997, capital expenditures and acquisition
of marketing operations totaled $156.2 million, of which $92.0 million
related to growth opportunity expenditures. Growth opportunity spending
included $20.1 million for the benzene, toluene and xylene ("BTX")
extraction unit at the Three Rivers refinery, which started up in May 1997.
Other growth opportunity spending, during the first six months of 1997
included $16.0 million to increase conversion capability at the Quebec
refinery and $4.5 million to increase pipeline and terminal capacity in
Denver, El Paso and Albuquerque.
In conjunction with its plans to expand and upgrade its retail marketing
operations, the Company also spent $31.9 million related to retail
marketing growth projects, including the acquisition of two retail home
heating operations in the northeast United States and the completion of
sixteen new stores in Arizona, California and Colorado.
The Company is continually investigating strategic acquisitions and other
business opportunities, some of which may be material, that will complement
its current business activities.
The Company expects to fund its capital expenditures over the next several
years from cash provided by operations and, to the extent necessary, from
the proceeds of borrowings under its bank credit facilities and its
commercial paper and medium-term note programs discussed below. In
addition, depending upon its future needs and the cost and availability of
various financing alternatives, the Company may, from time to time, seek
additional debt or equity financing in the public or private markets.
Liquidity and Capital Resources
At June 30, 1997, the Company had cash and cash equivalents of $93.0
million. The Company currently has committed, unsecured bank facilities
which provide a maximum of $700.0 million and Cdn. $200.0 million of
available credit, and a $700.0 million commercial paper program supported
by the unsecured, committed U.S. dollar bank facility. The Company's bank
facilities require the maintenance of certain financial ratios and contain
covenants with which the Company must comply. The Company believes these
covenants will not have a significant impact on the Company's liquidity or
its ability to pay dividends. At June 30, 1997, the Company had
approximately $376.4 million remaining borrowing capacity under its
committed bank facilities and commercial paper program. In addition to its
committed bank facilities, on June 30, 1997, the Company had approximately
$435.9 million of borrowing capacity under uncommitted, unsecured
short-term lines of credit with various financial institutions.
In addition to its bank credit facilities, the Company has $700.0 million
available under shelf registrations previously filed with the Securities
and Exchange Commission. The net proceeds from any debt or equity offering
under the existing shelf registration would add to the Company's working
capital and could be available for general corporate purposes.
The Company also has $75.1 million available pursuant to lease agreements
aggregating $290.0 million, under which the lessors will construct or
acquire and lease to the Company primarily retail marketing sites.
The Company believes its current sources of funds will be sufficient to
satisfy its capital expenditure, working capital, debt service and dividend
requirements for at least the next twelve months.
On August 6, 1997, the Board of Directors declared a quarterly dividend of
$.275 per common share payable on September 5, 1997, to holders of record
on August 20, 1997. In addition, the Board of Directors declared a
quarterly dividend of $.625 per share on the Company's 5% Cumulative
Convertible Preferred Stock payable on September 15, 1997, to holders of
record on August 20, 1997.
Cash Flows for the Six Months Ended June 30, 1997
During the six months ended June 30, 1997, the Company's cash position
decreased $104.9 million to $93.0 million. Net cash provided by operating
activities, before changes in non-cash operating assets and liabilities,
was $208.2 million. Net cash used in operating activities (after changes
in non-cash operating assets and liabilities) totaled $71.8 million.
Net cash used in investing activities during the six month period ended
June 30, 1997 totaled $71.1 million, representing scheduled capital
expenditures, the acquisition of a marketing operation in the Northeast and
expenditures for investments, net of the proceeds from asset disposals.
Net cash provided by financing activities during the six-month period ended
June 30, 1997, totaled $38.7 million, primarily due to the issuance of
preferred securities of a subsidiary of $200.0 million. This was partially
offset by the repayment of borrowings under the Company's commercial paper
program of $126.6 million, and the payment of dividends of $43.6 million.
Recent Developments
On April 15, 1997, the Company entered into a definitive agreement to
acquire Total Petroleum (North America) Ltd. ("Total"), a Denver, Colorado
based petroleum refining and marketing company. The agreement provides for
the issuance of .322 shares of Common Stock for each outstanding share of
Total Common Stock. The Company expects to issue approximately 13.0
million shares of Common Stock and will assume Total debt outstanding at
closing (approximately $428.0 million at December 31, 1996). The
transaction was approved by the Total shareholders on June 24, 1997.All
other regulatory approvals have been obtained, except for Federal Trade
Commission approval which the Company anticipates receiving to accommodate
a closing by the end of the third quarter of 1997. Total has approximately
6,000 employees and operates refineries in Ardmore, Oklahoma; Alma,
Michigan and Denver, Colorado. The three refineries have a combined
capacity of approximately 150,000 barrels of crude oil per day. Total
distributes gasoline and merchandise through approximately 2,100 branded
outlets, of which approximately 560 are company-operated.
Seasonality
In the Northeast, demand for petroleum products varies significantly during
the year. Distillate demand during the first and fourth quarters can range
from 30% to 40% above the average demand during the second and third
quarters. The substantial increase in demand for heating oils during the
winter months results in the Company's Northeast operations having
significantly higher accounts receivable and inventory levels during the
first and last quarters of each year. The Company's Southwest operations
are less affected by seasonal fluctuations in demand than its operations
in the Northeast. The working capital requirements of the Southwest
operations though substantial show little fluctuation throughout the year.
Exchange Rates
The value of the Canadian dollar relative to the U.S. dollar has weakened
substantially since the acquisition of the Canadian operations in 1992.
As the Company's Canadian operations are in a net asset position, the
weaker Canadian dollar has reduced, in U.S. dollars, the Company's net
equity at June 30, 1997, by $60.9 million. Although the Company expects
the exchange rate to fluctuate during 1997, it cannot reasonably predict
its future movement.
With the exception of its crude oil costs, which are U.S. dollar
denominated, fluctuations in the Canadian dollar exchange rate will affect
the U.S. dollar amount of revenues and related costs and expenses reported
by the Canadian operation. The potential impact on refining margin of
fluctuating exchange rates together with U.S. dollar denominated crude oil
costs is mitigated by the Company's pricing policies in the Northeast,
which generally pass on any change in the cost of crude oil. Marketing
margins, on the other hand, have been adversely affected by exchange rate
fluctuations as competitive pressures have, from time to time, limited the
Company's ability to promptly pass on the increased costs to the ultimate
consumer.
The Company has considered various strategies to manage currency risk, and
it hedges the Canadian currency risk when such hedging is considered
economically appropriate.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company's 1997 Annual Meeting of Stockholders was held on May 6,
1997, in Irving, Texas. At that meeting, the Company's stockholders
elected four directors to serve three year terms expiring in 2000, approved
the Company's Non-Employee Director Equity Plan, and ratified the
appointment of Arthur Andersen LLP to serve as independent accountants for
the Company and its subsidiaries for 1997.
The number of votes cast for, against, or withheld, and the number of
abstentions as to each matter, is set forth below:
Election of Directors
Name Total Votes For Total Votes Withheld
Byron Allumbaugh 63,811,146 239,827
E. Glenn Biggs 63,815,990 234,803
Katherine D. Ortega 63,802,129 248,844
Madeleine Saint-Jacques 63,809,618 241,355
Messrs. Bradford, Christie, Clark, Gaulin, Hemminghaus, Herman, Marbut, and
Schaefer continued to serve as directors of the Company after the 1997
Annual Meeting.
Approval of the Company's Non-Employee Director Equity Plan
For Against Abstain
59,713,360 4,055,771 281,842
Ratification of Arthur Andersen LLP as independent accountants
For Against Abstain
63,715,756 195,381 139,836
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 $700,000,000 Credit Agreement dated July 28, 1997
10.2 Trust Indenture for Subordinated Debt Securities dated
June 25, 1997 (filed as Exhibit 4.3 to the Company's
Report on Form 8-K dated June 20, 1997, and incor-
porated herein by reference)
11.0 Computation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated June 20, 1997 (File No. 11154) relating
to the issuance of Trust Preferred Securities by UDS Capital I
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.
ULTRAMAR DIAMOND SHAMROCK CORPORATION
(REGISTRANT)
By:
H. PETE SMITH
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
August 14, 1997
CONFORMED COPY
$700,000,000
CREDIT AGREEMENT
dated as of
July 28, 1997
among
Ultramar Diamond Shamrock Corporation
The Banks Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Agent
J.P. Morgan Securities Inc.,
and
Chase Securities Inc.
Arrangers
The Chase Manhattan Bank,
Syndication Agent
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions
SECTION 1.02. Accounting Terms and Determinations
SECTION 1.03. Types of Borrowings
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend
SECTION 2.02. Notice of Committed Borrowing
SECTION 2.03. Money Market Borrowings
SECTION 2.04. Notice to Banks; Funding of Loans
SECTION 2.05. Notes
SECTION 2.06. Maturity of Loans
SECTION 2.07. Interest Rates
SECTION 2.08. Fees
SECTION 2.09. Termination or Reduction of Commitment
SECTION 2.10. Method of Electing Interest Rates
SECTION 2.11. Optional Prepayments
SECTION 2.12. General Provisions as to Payments
SECTION 2.13. Funding Losses
SECTION 2.14. Computation of Interest and Fees
SECTION 2.15. Letters of Credit
SECTION 2.16. Regulation D Compensation
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing
SECTION 3.02. Borrowings and Issuances of Letters of
Credit
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Existence and Business; Power and
Authorization; Enforceable Obligations
SECTION 4.02. No Violation
SECTION 4.03. Litigation
SECTION 4.04. Financial Information
SECTION 4.05. Material Adverse Change
SECTION 4.06. Use of Proceeds; Margin Regulations
SECTION 4.07. Governmental Approvals
SECTION 4.08. Investment Company Act; Public Utility
Holding Company Act
SECTION 4.09. No Defaults
SECTION 4.10. U.S. Taxes
SECTION 4.11. Foreign Taxes
SECTION 4.12. ERISA
SECTION 4.13. Ownership of Property; Liens
SECTION 4.14. Accuracy and Completeness of Information
SECTION 4.15. Environmental Matters
SECTION 4.16. Significant Subsidiaries
ARTICLE 5
AFFIRMATIVE COVENANTS
SECTION 5.01. Information Covenants
SECTION 5.02. Books, Records and Inspections
SECTION 5.03. Payment of Taxes
SECTION 5.04. Compliance with Law
SECTION 5.05. Existence, Etc.
SECTION 5.06. Insurance
SECTION 5.07. Maintenance of Property
SECTION 5.08. Ownership of Subsidiaries
ARTICLE 6
NEGATIVE COVENANTS
SECTION 6.01. Restriction on Fundamental Changes
SECTION 6.02. Transactions with Affiliates
SECTION 6.03. Liens
SECTION 6.04. Use of Proceeds; Margin Regulations
SECTION 6.05. Environmental Matters
SECTION 6.06. Leverage Ratio
SECTION 6.07. Interest Coverage Ratio
ARTICLE 7
CASH COLLATERAL
SECTION 7.01. Cash Collateral
ARTICLE 8
EVENTS OF DEFAULT; REMEDIES
SECTION 8.01. Events of Default
SECTION 8.02. Rights and Remedies
ARTICLE 9
THE AGENT
SECTION 9.01. Appointment and Authorization
SECTION 9.02. Agent and Affiliates
SECTION 9.03. Action by Agent
SECTION 9.04. Consultation with Experts
SECTION 9.05. Liability of Agent
SECTION 9.06. Indemnification
SECTION 9.07. Credit Decision
SECTION 9.08. Successor Agent
SECTION 9.09. Agent's Fee
ARTICLE 10
CHANGE IN CIRCUMSTANCES
SECTION 10.01. Basis for Determining Interest Rate
Inadequate or Unfair
SECTION 10.02. Illegality
SECTION 10.03. Increased Cost and Reduced Return
SECTION 10.04. Taxes
SECTION 10.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices
SECTION 11.02. No Waivers
SECTION 11.03. Expenses; Indemnification
SECTION 11.04. Sharing of Set-Offs
SECTION 11.05. Amendments and Waivers
SECTION 11.06. Successors and Assigns
SECTION 11.07. Collateral
SECTION 11.08. Governing Law; Submission to Jurisdiction
SECTION 11.09. Counterparts; Integration; Effectiveness
SECTION 11.10. Consequences of Effectiveness; Transitional
Provisions
SECTION 11.11. WAIVER OF JURY TRIAL
COMMITMENT SCHEDULE
PRICING SCHEDULE
SCHEDULE 1.1 - Significant Subsidiaries
SCHEDULE 4.12 - Plans
EXHIBIT A - Note
EXHIBIT B - Money Market Quote Request
EXHIBIT C - Invitation for Money Market Quotes
EXHIBIT D - Money Market Quote
EXHIBIT E - Opinion of Counsel for the Borrower
EXHIBIT F - Opinion of Special Counsel for the Agent
EXHIBIT G - Assignment and Assumption Agreement
CREDIT AGREEMENT dated as of July 18, 1997 among ULTRAMAR DIAMOND
SHAMROCK CORPORATION, the BANKS party hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
WHEREAS, the Borrower, certain of the Banks, and the Agent are
parties to a Credit Agreement dated as of December 19, 1996 (as amended
to the date hereof, the "Existing Agreement");
WHEREAS, the parties hereto wish to replace the credit facility
under the Existing Agreement with a new credit facility hereunder;
WHEREAS, when all the conditions specified in Section 11.09 have
been satisfied, the Existing Agreement will be automatically terminated,
any letters of credit outstanding thereunder shall be renewed hereunder
and the loans outstanding thereunder (if any) will be repaid or
refinanced hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein,
have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted Consolidated Debt" means, without duplication, (i)
Indebtedness which is or should be reflected on a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries, minus (ii) to the
extent reflected as assets on a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries, the sum of all (a) direct obligations
of the United States of America, or of any agency thereof, or obligations
guaranteed as to principal and interest by the United States of America,
or of any agency thereof, in either case maturing not more than 180 days
from the date of acquisition thereof by such Person; (b) cash; (c) time
deposits, bankers acceptances or certificates of deposit issued by a
Restricted Bank maturing not more than 180 days from the date of
acquisition thereof; (d) commercial paper rated A-2 or better or P-2 or
better by S&P or Moody's, respectively, maturing not more than 180 days
from the date of acquisition thereof; and (e) other debt obligations rated
at least A- by S&P or A3 by Moody's, maturing not more than 180 days from
the date of acquisition thereof.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent, completed
by such Bank and returned to the Agent (with a copy to the Borrower).
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with such Person. For purposes of this definition,
a Person will be deemed to control another Person if such Person possesses,
directly or indirectly, the power to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such other
Person or (b) direct or cause the direction of the management and policies
of such other Person, whether through the ownership of voting securities,
by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such
capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in
the case of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 11.06(c).
"Authorized Officer" means (i) with respect to any Person that is a
corporation, the chief executive officer, the president, any executive vice
president, any senior vice president, any vice president, the treasurer,
or the chief financial officer of such Person, (ii) with respect to any
Person that is a partnership, the president, any executive vice president,
any senior vice president, any vice president, the treasurer or the chief
financial officer of a general partner of such Person, (iii) with respect
to any Person that is a limited liability company, the president, any
executive vice president, any senior vice president, any vice president,
the treasurer or the chief financial officer of a member of such Person,
or (iv) with respect to any other Person, such representative of such
Person that is approved by the Agent in writing. No Person will be deemed
to be an Authorized Officer until named on a certificate of incumbency of
such Person delivered to the Agent on or after the Effective Date.
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 11.06(c), and their
respective successors and will include as the context may require any Bank
in its capacity as Issuing Bank.
"Bankruptcy Code" means Title 11, Section 101 et seq. of the United
States Code titled "Bankruptcy," as amended from time to time, and any
successor statute thereto.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan which bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or the provisions of Article 10.
"Borrower" means Ultramar Diamond Shamrock Corporation, a Delaware
corporation, and its successors.
"Borrower's 1996 Form 10-K" means the Borrower's annual report on Form
10-K for 1996, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Borrower's Latest Form 10-Q" means the Borrower's quarterly report
on Form 10-Q for the quarter ended March 31, 1997, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"Canadian Revolver" means the Credit Agreement dated as of December
19, 1996 among the Borrower, Canadian Ultramar Company, the banks listed
therein and Canadian Imperial Bank of Commerce, as agent, as amended from
time to time.
"Capital Lease" means any lease which in accordance with GAAP is
required to be capitalized on a consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries, and for purposes of this Agreement, the
amount of these obligations will be the amount so capitalized.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD Rate" means a rate of interest determined pursuant to Section
2.07(b) on the basis of an Adjusted CD Rate.
"CD Reference Banks" means The Chase Manhattan Bank and Morgan
Guaranty Trust Company of New York.
"Change of Control" will be deemed to have occurred at such time as
any Person or any Persons acting together which would constitute a "group"
(a "Group") for purposes of Section 13(d) of the Securities Exchange Act
becomes the beneficial owner of 35% or more of the total voting power of
all classes of voting stock of the Borrower or such Person or Group
succeeds in having sufficient of its nominees elected to the board of
directors of the Borrower such that such nominees, when added to any
existing director remaining on the board of directors of the Borrower after
such election who is an Affiliate of such Group, will constitute a majority
of the board of directors of the Borrower.
"Closing Date" means the date on or after the Effective Date on which
the Agent shall have received all the documents specified in or pursuant
to Section 3.02.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute.
"Commitment" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank
on the Commitment Schedule and (ii) with respect to each Assignee which
becomes a Bank pursuant to Section 11.06(c), the amount of the Commitment
thereby assumed by it, in each case as such amount may be changed from time
to time pursuant to Section 2.09, or 11.06(b), or in any such case the
obligation to make Committed Loans hereunder at any time outstanding not
to exceed such amount, as the context may require.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined
or subdivided pursuant to a Notice of Interest Rate Election, the term
Committed Loan refers to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense excluding, however, interest expense not
payable in cash (including amortization of discount).
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period plus (ii) to the extent deducted
in the determination of such Consolidated Net Income, (A) provisions for
taxes based on income, (B) Consolidated Interest Expense, (C) depreciation,
(D) amortization and (E) distributions made to the holders of TOPrS, all
as determined on a consolidated basis for the Borrower and its Consolidated
Subsidiaries.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest that is payable in cash) net
of interest income of the Borrower and its Consolidated Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of the
Borrower and its Consolidated Subsidiaries, including without limitation,
all commissions, discounts, other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and distributions made
to the holders of TOPrS.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Borrower and its Consolidated Subsidiaries for such period;
provided that there shall be excluded (i) any after-tax gains or losses
attributable to asset sales (other than sales in the ordinary course of
business) or returned surplus assets of any Plan and (ii) to the extent not
included in clause (i), any net extraordinary gains or net extraordinary
losses.
"Consolidated Net Tangible Assets" means at any date the total
consolidated assets of the Borrower and its Consolidated Subsidiaries less
all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangible items.
"Consolidated Net Worth" shall mean, at any date, the sum of (i) the
consolidated shareholders' equity of the Borrower and its Consolidated
Subsidiaries plus (ii) 50% of the liquidation of value of outstanding
TOPrS, each determined as of such date, all computed in conformity with
GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date.
"Contest" means, with respect to any Tax, Lien, or claim, a contest
pursued in good faith and by appropriate proceedings diligently conducted
or pursued by other reasonable methods, so long as the failure to pay or
discharge any such Tax, Lien or claim during the pendency of such contest
would not otherwise have a Material Adverse Effect on the Person subject
to any such Tax, Lien or claim.
"Contingent Obligation" means, with respect to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a)
to purchase any such primary obligation or any property constituting direct
or indirect security therefor from the primary obligee, (b) to advance or
supply funds (1) for the payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c)
to purchase property, securities or services primarily for the purpose of
assuring the primary obligee of the ability of the primary obligor to make
payment of such primary obligation but excluding agreements on the part of
such Person to supply crude oil or petroleum products or feedstock, or (d)
otherwise to assure or hold harmless the primary obligee against loss in
respect of such primary obligation; provided, however, that the term
Contingent Obligation does not include endorsements of instruments for
deposit or collection in the ordinary course of business.
"Default" means any event, act or condition which constitutes an Event
of Default or which with notice or lapse of time, or both, would constitute
an Event of Default.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Domestic Lending Office) or such
other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to the Borrower and the Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its Base Rate Loans, on
the one hand, and its CD Loans, on the other hand, in which case all
references herein to the Domestic Lending Office of such Bank refers to
either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 11.09.
"Environmental Approvals" means any Governmental Approvals required
under applicable Environmental Laws.
"Environmental Claim" means any written notice, claim, demand or
similar communication by any Person alleging potential liability
(including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries, fines or penalties) arising
out of, based on or resulting from (i) the presence, or release into the
environment, of any Material of Environmental Concern at any location,
whether or not owned by such Person or (ii) circumstances forming the basis
of any violation, or alleged violation, of any Environmental Law or
Environmental Approval.
"Environmental Laws" means all Laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions of
ERISA amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group" means the group consisting of the Borrower
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with the
Borrower that, together with the Borrower, are treated as a single employer
under regulations of the PBGC.
"ERISA Plan" means (i) any Plan that (a) is not a Multiemployer Plan
and (b) has Unfunded Benefit Liabilities and (ii) any Plan that is a
Multiemployer Plan.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar Lending Office
by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing
or Notice of Interest Rate Election.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.07(c) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
The Chase Manhattan Bank and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of
any other category of liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents).
"Event of Bankruptcy" means, with respect to any Person, the
occurrence of any of the following events:
(i) the commencement by such Person of a voluntary case concerning
itself under the Bankruptcy Code or similar Law;
(ii) an involuntary case is commenced against such Person and the
petition is not controverted within 30 days, or is not dismissed within 60
days, after commencement of the case;
(iii) a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the property of such
Person or such Person commences any other proceedings 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 such Person or there is
commenced against such Person any such proceeding which remains undismissed
for a period of 60 days;
(iv) the entrance of any order for relief or other order approving
any such case or proceeding involving such Person;
(v) such Person is adjudicated insolvent or bankrupt;
(vi) such Person 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;
(vii) such Person makes a general assignment for the benefit of
creditors;
(viii) such Person shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due;
(ix) such Person shall by any act or failure to act consent to,
approve of or acquiesce in any of the foregoing for a period of 60 days;
or
(x) any partnership or corporate action, as the case may be, is taken
by such Person for the purpose of effecting any of the foregoing.
"Event of Default" means the occurrence of any of the events described
in Section 8.01.
"Existing Credit Agreement" has the meaning set forth in the recitals
hereto.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not
a Domestic Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Domestic Business Day as
so published on the next succeeding Domestic Business Day, and (ii) if no
such rate is so published on such next succeeding Domestic Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to
Morgan Guaranty Trust Company of New York on such day on overnight Federal
funds transactions as determined by the Agent.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 10.01) or any combination of the foregoing.
"GAAP" means generally accepted accounting principles as in effect
from time to time, applied on a basis consistent (except for changes with
respect to which the Borrower's independent public accountants concur) with
the most recent audited consolidated financial statements of the Borrower
and its Consolidated Subsidiaries delivered to the Banks.
"Governmental Approval" means any authorization, consent, approval,
license, lease, ruling, permit, certification, exemption or filing for
registration by or with any Governmental Authority.
"Governmental Authority" means any nation, state, sovereign, or
government, any federal, regional, state, local or political subdivision
and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all Euro-
Dollar Loans having the same Interest Period at such time or (iii) all CD
Loans having the same Interest Period at such time, provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base
Rate Loan pursuant to Article 10, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it
had not been so converted or made.
"Indebtedness" means, of any Person, without duplication, (i) all
obligations of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade payables within
credit terms normally prevailing in the industry and accrued liabilities
incurred in the ordinary course of business of such Person), (ii) all
obligations of such Person in respect of principal evidenced by a note,
bond, debenture or similar instrument, (iii) the obligations of such Person
which are capitalized under Capital Leases, (iv) all non-contingent
obligations (and, for purposes of Sections 6.03 and 8.01(d), all contingent
obligations) of such Person to reimburse any bank or other Person in
respect of amounts paid under a letter of credit or similar instrument, (v)
all Indebtedness of any other Person secured by any Lien on any property
owned by such Person, whether or not such Indebtedness has been assumed by
such Person, (vi) all obligations of such Person in respect of surety
bonds, appeal bonds or other similar instruments, (vii) in the case of UDS
Capital I, 50% of the liquidation value of outstanding TOPrS and (viii) all
Contingent Obligations of such Person.
"Indemnitee" has the meaning set forth in Section 11.03(a).
"Interest Period" means: (a) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in an applicable Notice of
Interest Rate Election and ending one, two, three or six months (or, if all
Banks at the time agree, nine or twelve months) thereafter, as the Borrower
may elect in such notice; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day will be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period will end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) will, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(iii) any Interest Period which would otherwise end after the
Termination Date will end on the Termination Date.
(b) with respect to each CD Loan, the period commencing on the date
of borrowing specified in the applicable Notice of Borrowing or on the date
specified in an applicable Notice of Interest Rate Election and ending 30,
60, 90 or 180 days (or, if all Banks at the time agree, 270 or 360 days)
thereafter, as the Borrower may elect in such notice; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day will be extended to the next succeeding
Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise end after the
Termination Date will end on the Termination Date.
(c) with respect to each Money Market LIBOR Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such whole number of months thereafter as the Borrower
may elect in accordance with Section 2.03; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day will be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period will end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) will, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(iii) any Interest Period which would otherwise end after the
Termination Date will end on the Termination Date.
(d) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 7
days) as the Borrower may elect in accordance with Section 2.03; provided
that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day will be extended to the next succeeding
Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise end after the
Termination Date will end on the Termination Date.
"Interest Rate Protection Agreements" means any interest rate
exchange, collar, cap or similar agreements providing interest rate
protection entered into by the Borrower or any of its Subsidiaries.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or
otherwise (but not including any demand deposit).
"Issuing Bank" means The Industrial Bank of Japan, Ltd. and any other
Bank that may agree to issue letters of credit hereunder, in each case as
issuer of a Letter of Credit hereunder.
"Law" means, with respect to any Governmental Authority, any
constitutional provision, law, statute, rule, regulation, ordinance,
treaty, order, decree, judgment, decision, certificate, holding,
injunction, Governmental Approval or requirement of such Government
Authority along with the interpretation and administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof. Unless the context clearly indicates otherwise, the term "Law"
includes each of the foregoing (and each provision thereof) as in effect
at the time in question, including any amendments, supplements,
replacements, or other modifications thereto or thereof, and whether or not
in effect at the date of this Agreement.
"Letter of Credit" means a letter of credit to be issued hereunder by
an Issuing Bank in accordance with Section 2.15.
"Letter of Credit Liabilities" means, for any Bank and at any time,
such Bank's ratable participation in the sum of (x) the amounts then owing
by the Borrower in respect of amounts drawn under Letters of Credit and (y)
the aggregate amount then available for drawing under all Letters of
Credit.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect
as a security interest, in respect of such asset. For the purposes of this
Agreement, the Borrower or any Subsidiary will be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, Capital Lease or
other title retention agreement relating to such asset.
"Loan" means a Committed Loan or a Money Market Loan and "Loans" means
Committed Loans or Money Market Loans or any combination of the foregoing.
"Loan Documents" means this Agreement and the Notes.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Margin Stock" has the meaning provided such term in Regulation U.
"Material Adverse Effect" means a material adverse effect upon (i) the
business, results of operations, financial condition or prospects of the
Borrower and its Consolidated Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform under any Loan Document or (iii) the
ability of any of the Banks to enforce any of the Obligations or any of
their rights and remedies against the Borrower under the Loan Documents;
provided that the failure of the Borrower to consummate the transactions
contemplated by the Arrangement Agreement dated April 15, 1997 among the
Borrower, 3007152 Nova Scotia Company and Total Petroleum (North American)
Ltd. shall not constitute a Material Adverse Effect.
"Material Financial Obligation" means a principal or face amount of
Indebtedness and/or payment or collateralization obligations in respect of
Interest Rate Protection Agreements of the Borrower and/or one or more of
its Subsidiaries, arising in one or more related or unrelated transactions,
exceeding in the aggregate $25,000,000.
"Materials of Environmental Concern" means all materials, substances
and wastes regulated as hazardous under Environmental Laws.
"Merger" means the merger of Diamond Shamrock, Inc. with and into
Ultramar Corporation pursuant to the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
September 22, 1996 between Ultramar Corporation and Diamond Shamrock, Inc.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as
it may hereafter designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may from time to time
by notice to the Borrower and the Agent designate separate Money Market
Lending Offices for its Money Market LIBOR Loans, on the one hand, and its
Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank will be
deemed to refer to either or both of such offices, as the context may
require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 10.01).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d)(ii)(C).
"Moody's" means Moody's Investors Service, Inc.
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"Multiemployer Plan" means a Plan which is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the Borrower's obligation to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined
in Section 2.10).
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.10.
"Notice of Issuance" has the meaning set forth in Section 2.15(b).
"Obligations" means all obligations, liabilities and indebtedness of
every nature of the Borrower from time to time owing to the Agent or any
Bank under any Loan Document including, without limitation, (i) all
principal, interest, and fees, (ii) any amounts the Agent or any Bank
expends on behalf of the Borrower because the Borrower under the Loan
Documents fails to make any such payment when required under the terms of
any Loan Document, (iii) all amounts required to be paid under any
indemnification or similar provision, (iv) all fees and expenses required
to be paid pursuant to Section 11.03 of this Agreement and (v) all
obligations in respect of any Letter of Credit.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 11.06(a)
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permitted Transaction" has the meaning set forth in Section 6.01(a).
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Plan" means any employee benefit plan covered by Title IV of ERISA,
the funding requirements of which: (i) were the responsibility of the
Borrower or a member of the ERISA Controlled Group at any time within the
five years immediately preceding the Effective Date, (ii) are currently the
responsibility of the Borrower or a member of the ERISA Controlled Group,
or (iii) hereafter become the responsibility of the Borrower or a member
of the ERISA Controlled Group, including any such plans as may have been,
or may hereafter be, terminated for whatever reason; provided, however,
that solely for purposes of Section 4.12 and Section 5.01(e) hereof, (A)
the term "ERISA Controlled Group" in clauses (i) and (ii) will not include
a Person that was a member of the ERISA Controlled Group solely as a result
of the acquisition of a member of such ERISA Controlled Group by Lasmo plc
and (B) the Ultramar U.S. Employees Retirement Plan with respect to any
period on or after January 1, 1993 should not be considered a Plan under
clause (i).
"Pricing Schedule" means the Pricing Schedule attached hereto.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Quarterly Payment Dates" means each March 31, June 30, September 30
and December 31.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any
one of such Reference Banks.
"Regulations D, G, T, U and X" means such Regulations of the Federal
Reserve Board as may be from time to time in effect and any successor to
all or any portion thereof.
"Regulation S-X" means Regulation S-X of the SEC and any successor to
all or any portion thereof.
"Reimbursement Obligation" has the meaning provided in Section
2.15(c).
"Reportable Event" has the meaning set forth in Section 4043(c) of
ERISA (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations or with respect
to which the PBGC has by public notice announced that it will not impose
penalties for failure to comply), or is the occurrence of any of the events
described in Section 4063(a) or 4068(a) of ERISA.
"Required Banks" means at any time Banks having at least 66-2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have
terminated, holding Notes evidencing at least 66-2/3% of the aggregate
unpaid principal amount of the Loans.
"Restricted Bank" means (i) any Bank, (ii) any Lender under the
Canadian Revolver and (iii) any other commercial bank whose unsecured long-term
debt is rated BBB+ or better by S&P and Baa1 or better by Moody's.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Ratings Services.
"SEC" means the Securities and Exchange Commission.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
"Significant Subsidiary" means (i) each of the Subsidiaries set forth
in Schedule 1.1 and their respective successors and (ii) any other
Subsidiary of the Borrower which is or would hereafter be classified as a
"significant subsidiary" of the Borrower under Regulation S-X of the
Securities and Exchange Commission as in effect on the date hereof.
"Stated Amount" has the meaning set forth in the applicable Letter of
Credit.
"Subsidiary" means, with respect to any Person, (i) any corporation
50% or more 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 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 Subsidiaries and (ii) any partnership,
limited liability company, association, joint venture, trust or other
entity in which such Person, directly or indirectly through Subsidiaries,
is either a general partner, has a 50% or greater equity interest at the
time or otherwise owns a controlling interest.
"Termination Date" means July 28, 2002, or, if such day is not a Euro-
Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which
case the Termination Date will be the next preceding Euro-Dollar Business
Day.
"Termination Event" means (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan
(other than pursuant to Section 4041(b) of ERISA) or the treatment of an
amendment to an ERISA Plan as a termination under ERISA, or (iii) the
institution of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any ERISA
Plan.
"TOPrS" means the 8.32% Trust Originated Preferred Securities of UDS
Capital I described in the Prospectus Supplement dated as of June 20, 1997.
"UCP" shall mean the Uniform Customs and Practice for Documentary
Credits (1993 revision) published by the International Chamber of Commerce
as its Publication No. 500.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the actuarial present value of accumulated
benefits under such Plan exceeds (ii) the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan (on the basis of the assumptions used
in the most recent actuarial valuation report for such Plans).
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP; provided that, if the Borrower notifies the Agent
that the Borrower wishes to amend any covenant in Article 5 or Article 6
or the definition of any term used therein to eliminate the effect of any
change in GAAP on the operation of such covenant (or if the Agent notifies
the Borrower that the Required Banks wish to amend Article 5 or Article 6
or any such definition for such purpose), then the Borrower's compliance
with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until
either such notice is withdrawn or such covenant or definition is amended
in a manner satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans to be made by one or more Banks to the Borrower
pursuant to Article 2 on the same day, all of which Loans are of the same
type (subject to Article 10) and, except in the case of Base Rate Loans,
have the same initial Interest Period. Borrowings are classified for
purposes of this Agreement either (i) by reference to the pricing of Loans
comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans) or (ii) by reference to the provisions of
Article 2 under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants
are determined on the basis of their bids).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on
the terms and conditions set forth in this Agreement, to make loans to the
Borrower pursuant to this Section from time to time during the Revolving
Credit Period; provided that, immediately after each such loan is made, the
aggregate outstanding principal amount of all Committed Loans by such Bank
shall not exceed the amount of its Commitment. Each Borrowing under this
Section shall be in an aggregate principal amount of $5,000,000 or any
larger multiple of $1,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.02) and shall be
made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under
this Section, prepay Loans to the extent permitted by Section 2.11 and
reborrow at any time during the Revolving Credit Period under this Section.
SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 10:30
A.M. (New York City time) on (a) the date of each Base Rate Borrowing, (b)
the second Domestic Business Day before each CD Borrowing and (c) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and
(iv) in the case of a CD Borrowing or a Euro-Dollar Borrowing, the
duration of the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
SECTION 2.03. Money Market Borrowings. (a) The Money Market Option.
In addition to Committed Borrowings pursuant to Section 2.01, the Borrower
may, as set forth in this Section, request the Banks to make offers to make
Money Market Loans to the Borrower from time to time during the Revolving
Credit Period. The Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to
the Agent by telex or facsimile a Money Market Quote Request substantially
in the form of Exhibit B hereto so as to be received not later than 10:30
A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day before
the date of Borrowing proposed therein, in the case of a LIBOR Auction or
(y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed
and shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth
a Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than
one Interest Period in a single Money Market Quote Request. No Money
Market Quote Request shall be given within five Euro-Dollar Business Days
(or such other number of days as the Borrower and the Agent may agree) of
any other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly after receiving a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile an Invitation for Money Market Quotes substantially in the form
of Exhibit C hereto, which shall constitute an invitation by the Borrower
to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance
with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this subsection (d)
and must be submitted to the Agent by telex or facsimile at its address
referred to in Section 11.01 not later than (x) 2:00 P.M. (New York City
time) on the fourth Euro-Dollar Business Day before the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York City
time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Borrower and
the Agent shall have mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first
LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Agent (or
any affiliate of the Agent) in the capacity of a Bank may be submitted, and
may only be submitted, if the Agent or such affiliate notifies the Borrower
of the terms of the offer or offers contained therein not later than (x)
one hour before the deadline for the other Banks, in the case of a LIBOR
Auction or (y) 15 minutes before the deadline for the other Banks, in the
case of an Absolute Rate Auction. Subject to Articles 3 and 8, any Money
Market Quote so made shall not be revocable except with the written consent
of the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be substantially in the form
of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which
each such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were requested and
(z) may be subject to an aggregate limitation as to the principal amount
of Money Market Loans for which offers being made by such quoting Bank may
be accepted,
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "Money Market
Margin") offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by
subsection (d)(ii) above;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms of (i) any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (ii) any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request.
Any such subsequent Money Market Quote shall be disregarded by the Agent
unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to
the Borrower shall specify (A) the aggregate principal amount of Money
Market Loans for which offers have been received for each Interest Period
specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates,
as the case may be, so offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for which offers in any
single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day before the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the Agent shall
have mutually agreed and shall have notified to the Banks not later than
the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the
Borrower shall notify the Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of
acceptance, such notice (a "Notice of Money Market Borrowing") shall
specify the aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money Market Quote in whole
or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing must
be $5,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the case
may be; and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period,
the principal amount of Money Market Loans in respect of which such offers
are accepted shall be allocated by the Agent among such Banks as nearly as
possible (in multiples of $1,000,000, as the Agent may deem appropriate)
in proportion to the aggregate principal amounts of such offers.
Determinations by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Promptly after
receiving a Notice of Borrowing, the Agent shall notify each Bank of the
contents thereof and of such Bank's share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 1:00 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share
of such Borrowing, in Federal or other funds immediately available in New
York City, to the Agent at its address referred to in Section 11.01.
Unless the Agent determines that any applicable condition specified in
Article 3 has not been satisfied, the Agent will make the funds so received
from the Banks available to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank before
the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such
Bank has made such share available to the Agent on the date of such
Borrowing in accordance with subsection (b) of this Section and the Agent
may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Bank
shall not have so made such share available to the Agent, such Bank and,
if such Bank shall have failed to do so within three Domestic Business Days
of demand therefor by the Agent, the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Agent, at the
Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Borrower's obligation to repay the
Loans of each Bank shall be evidenced by a single Note payable to the order
of such Bank for the account of its Applicable Lending Office in an amount
equal to the aggregate unpaid principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that the Borrower's obligation to repay such Bank's Loans of a particular
type be evidenced by a separate Note in an amount equal to the aggregate
unpaid principal amount of such Loans. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate modifications
to reflect the fact that it relates solely to Loans of the relevant type.
Each reference in this Agreement 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.
(c) Promptly after receiving each Bank's Note pursuant to Section
3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount and type of each Loan made by it and the date and
amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer
or enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding; provided that a Bank's failure to make
any such recordation or endorsement shall not affect the Borrower's
obligations hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make
a part of its Note a continuation of any such schedule as and when
required.
SECTION 2.06. Maturity of Loans. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable (together
with interest accrued thereon), on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable
(together with interest accrued thereon), on the last day of the Interest
Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) The unpaid principal amount of
each Base Rate Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made until it becomes due,
at a rate per annum equal to the Base Rate for such day. Such interest
shall be payable quarterly in arrears on each Quarterly Payment Date and,
with respect to the principal amount of any Base Rate Loan converted to a
CD Loan or a Euro- Dollar Loan, on the date such amount is so converted.
Any overdue principal of or interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum
equal to the sum of 1% plus the Base Rate for such day.
(b) The unpaid principal amount of each CD Loan shall bear interest
on the outstanding principal amount thereof, for each day during each
Interest Period applicable thereto, at a rate per annum equal to the sum
of the CD Margin for such day plus the Adjusted CD Rate applicable to such
Interest Period; provided that if any CD Loan shall, as a result of clause
(2)(b) of the definition of Interest Period, have an Interest Period of
less than 30 days, such CD Loan shall bear interest for each day during
such Interest Period at the Base Rate for such day. Such interest shall
be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, at intervals of 90 days after the
first day thereof. Any overdue principal of or interest on any CD Loan
shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the higher of (i) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to such Loan at
the date such payment was due and (ii) the rate applicable to Base Rate
Loans for such day.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
* The amount in brackets being rounded upward, if necessary, to the next
higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per
annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as
practicable) on the first day of such Interest Period by two or more New
York certificate of deposit dealers of recognized standing for the purchase
at face value from each CD Reference Bank of its certificates of deposit
in an amount comparable to the principal amount of the CD Loan of such CD
Reference Bank to which such Interest Period applies and having a maturity
comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation
any basic, supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of new non-personal time deposits in dollars in
New York City having a maturity comparable to the related Interest Period
and in an amount of $100,000 or more. The Adjusted CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A"
(or a comparable successor assessment risk classification) within the
meaning of 12 C.F.R. Section 327.4(a) (or any successor provision) to the
Federal Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring time deposits at offices of
such institution in the United States. The Adjusted CD Rate shall be
adjusted automatically on and as of the effective date of any change in the
Assessment Rate.
(c) The unpaid principal amount of each Euro-Dollar Loan shall bear
interest on the outstanding principal amount thereof, for each day during
each Interest Period applicable thereto, at a rate per annum equal to the
sum of the Euro-Dollar Margin for such day plus the London Interbank
Offered Rate applicable to such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months
after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London interbank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business
Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the Euro-Dollar Margin for such day
plus the higher of (i) the London Interbank Offered Rate applicable to such
Loan at the date such payment was due and (ii) the quotient obtained
(rounded upwards, if necessary, to the next higher 1/100 of 1%) by dividing
(x) the average (rounded upwards, if necessary, to the next higher 1/16 of
1%) of the respective rates per annum at which one day (or, if such amount
due remains unpaid more than three Euro-Dollar Business Days, then for such
other period of time not longer than six months as the Agent may select)
deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the Euro-
Dollar Reserve Percentage (or, if the circumstances described in clause (a)
or (b) of Section 10.01 shall exist, at a rate per annum equal to the sum
of 1% plus the rate applicable to Base Rate Loans for such day).
(e) Subject to Section 10.01, the unpaid principal amount of each
Money Market LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per
annum equal to the sum of the London Interbank Offered Rate for such
Interest Period (determined in accordance with Section 2.07(c) as if the
related Money Market LIBOR Borrowing were a Committed Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Bank
making such Loan. The unpaid principal amount of each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the Money Market Absolute Rate quoted by the Bank making such
Loan. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the
sum of 1% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall promptly notify the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if none of such
quotations is available on a timely basis, the provisions of Section 10.01
shall apply.
SECTION 2.08. Fees. (a) The Borrower shall pay to the Agent, for
the account of the Banks, a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility
fee shall accrue (i) from and including the Effective Date to but excluding
the date on which the Commitments terminate in their entirety, on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from
and including such date of termination to but excluding the date on which
the Loans shall be repaid in their entirety, on the daily aggregate
outstanding principal amount of the Loans. Such facility fee shall be
allocated among the Banks ratably in proportion to their Commitments;
provided that any facility fee accruing after the Commitments terminate in
their entirety shall be allocated among the Banks ratably in proportion to
the unpaid principal amounts of their respective Loans.
(b) The Borrower shall pay to the Agent (i) for the account of the
Banks ratably a Letter of Credit fee accruing daily on the aggregate amount
then available for drawing under all Letters of Credit at a rate per annum
determined in accordance with the Pricing Schedule and (ii) for the account
of each Issuing Bank a Letter of Credit fronting fee accruing daily on the
aggregate amount then available for drawing under all Letters of Credit
issued by such Issuing Bank at a rate per annum as determined from time to
time by the Borrower and such Issuing Bank.
(c) Fees accrued under this Section shall be payable quarterly in
arrears on each Quarterly Payment Date and on the date on which the
Commitments terminate in their entirety (and, if later, the date on which
the Loans shall be repaid in their entirety).
SECTION 2.09. Termination or Reduction of Commitments. (a) The
Borrower may, upon at least three Domestic Business Days' notice to the
Agent, (i) terminate the Commitments at any time, if no Loans or Letters
of Credit are outstanding at such time, or (ii) ratably reduce the
Commitments from time to time by an amount of $5,000,000 or any larger
multiple of $1,000,000 to the extent that the aggregate amount of the
Commitments exceeds the sum of the aggregate outstanding principal amount
of the Loans and the aggregate amount of the Letter of Credit Liabilities
at such time. Promptly after receiving a notice pursuant to this
subsection, the Agent shall notify each Bank of the contents thereof.
(b) Unless previously terminated, the Commitments shall terminate in
their entirety on the Termination Date.
SECTION 2.10. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the
type of rate specified by the Borrower in the applicable Notice of
Committed Borrowing. Thereafter, the Borrower may from time to time elect
to change or continue the type of interest rate borne by each Group of
Loans (subject to subsection (d) of this Section and the provisions of
Article 10), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to Euro-
Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue
such Loans as CD Loans for an additional Interest Period, subject to
Section 2.13 if any such conversion is effective on any day other than the
last day of the then current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, subject to
Section 2.13 if any such conversion is effective on any day other than the
last day of the then current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Agent not later than 10:30 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective (unless the
relevant Loans are to be converted from Domestic Loans of one type to
Domestic Loans of the other type or are CD Loans to be continued as CD
Loans for an additional Interest Period, in which case such notice shall
be delivered to the Agent not later than 10:30 A.M. (New York City time)
on the second Domestic Business Day before such conversion or continuation
is to be effective). A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Group of Loans; provided that (i) such portion is allocated
ratably among the Loans comprising such Group and (ii) the portion to which
such Notice applies, and the remaining portion to which it does not apply,
are each $5,000,000 or any larger multiple of $1,000,000. If no such
notice is timely received before the end of an Interest Period for any
Group of CD Loans or Euro-Dollar Loans, the Borrower shall be deemed to
have elected that such Group of Loans be converted to Base Rate Loans at
the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if the Loans resulting from such conversion are to
be CD Loans or Euro-Dollar Loans, the duration of the next succeeding
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or Euro-Dollar
Loans for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Agent shall notify each
Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any
Committed Loans to, or continue any Committed Loans for an additional
Interest Period as, CD Loans or Euro-Dollar Loans if a Default shall have
occurred and be continuing when the Borrower delivers notice of such
election to the Agent.
SECTION 2.11. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Loans to Section 2.13, the Borrower may, upon at least one
Domestic Business Day's notice to the Agent, without penalty or premium
except as specified herein, prepay any Group of Base Rate Loans (or any
Money Market Borrowing bearing interest at the Base Rate pursuant to
Section 10.01) or upon at least three Euro-Dollar Business Days' notice to
the Agent, prepay any Group of Fixed Rates Loans, in each case in whole at
any time, or from time to time in part in amounts aggregating $5,000,000
or any larger multiple of $1,000,000, by paying the principal amount to be
prepaid together with interest accrued thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the Loans
of the several Banks included in such Group of Loans (or such Money Market
Borrowing).
(b) Except as provided in subsection (a) above, the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan
before the maturity thereof.
(c) Promptly upon receiving a notice of prepayment pursuant to this
Section, the Agent shall notify each Bank of the contents thereof and of
such Bank's ratable share (if any) of such prepayment, and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and
Letters of Credit Liabilities and of fees hereunder, not later than 1:00
P.M. (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Agent at its address
referred to in Section 11.01. The Agent will promptly distribute to each
Bank its ratable share of each such payment received by the Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Domestic Loans or Letter of Credit Liabilities or of fees shall be due
on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall
be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal of,
or interest on, the Money Market Loans shall be due on a day which is not
a Euro-Dollar Business Day, the date for payment thereof shall be extended
to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Agent before the date on which
any payment is due to the Banks hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in reliance
on such assumption, cause to be distributed to each Bank on such due date
an amount equal to the amount then due such Bank. If and to the extent
that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2 or 8 or Section 10.02) on any day other
than the last day of an Interest Period applicable thereto, or the last day
of an applicable period fixed pursuant to Section 2.07(d), or if the
Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans
after notice has been given to any Bank in accordance with Section 2.04(a),
2.10(c) or 2.11(c), by reason of a failure to satisfy a condition thereto
or otherwise, the Borrower shall reimburse each Bank within 15 days after
demand for any resulting loss or expense incurred by it (or by an existing
or prospective Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period
after such payment or conversion or failure to borrow, prepay, convert or
continue; provided that such Bank shall have delivered to the Borrower a
certificate as to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day but
excluding the last day).
SECTION 2.15. Letters of Credit. (a) Subject to the terms and
conditions hereof, each Issuing Bank agrees to issue Letters of Credit
hereunder from time to time before the tenth day before the Termination
Date upon the request of the Borrower; provided that, immediately after
each Letter of Credit is issued (i) the aggregate amount of the Letter of
Credit Liabilities plus the aggregate outstanding amount of all Loans shall
not exceed the aggregate amount of the Commitments and (ii) the aggregate
Letter of Credit Liabilities in respect of Letters of Credit issued by such
Issuing Bank shall not exceed any applicable limitation mutually agreed
upon by the Borrower and such Issuing Bank. Upon the date of issuance by
an Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed,
without further action by any party hereto, to have sold to each Bank, and
each Bank shall be deemed, without further action by any party hereto, to
have purchased from the Issuing Bank, a participation in such Letter of
Credit and the related Letter of Credit Liabilities in the proportion their
respective Commitments bear to the aggregate Commitments.
(b) The Borrower shall give the Issuing Bank notice at least five
Domestic Business Days prior to the requested issuance of a Letter of
Credit specifying the date such Letter of Credit is to be issued, and
describing the terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such
notice given in connection with the extension of a Letter of Credit, a
"Notice of Issuance"). Upon receipt of a Notice of Issuance, the Issuing
Bank shall promptly notify the Agent, and the Agent shall promptly notify
each Bank of the contents thereof and of the amount of such Bank's
participation in such Letter of Credit. The issuance by the Issuing Bank
of each Letter of Credit shall, in addition to the conditions precedent set
forth in Article 3, be subject to the conditions precedent that such Letter
of Credit shall be in such form and contain such terms as shall be
satisfactory to the Issuing Bank and that the Borrower shall have executed
and delivered such other instruments and agreements relating to such Letter
of Credit as the Issuing Bank shall have reasonably requested. The
Borrower shall also pay to the Issuing Bank for its own account issuance,
drawing, amendment and extension charges in the amounts and at the times
as agreed between the Borrower and the Issuing Bank. The extension or
renewal of any Letter of Credit shall be deemed to be an issuance of such
Letter of Credit, and if any Letter of Credit contains a provision pursuant
to which it is deemed to be extended unless notice of termination is given
by the Issuing Bank, the Issuing Bank shall timely give such notice of
termination unless it has theretofore timely received a Notice of Issuance
and the other conditions to issuance of a Letter of Credit have also
theretofore been met with respect to such extension. No Letter of Credit
shall have a term extending or be so extendible beyond the fifth Domestic
Business Day preceding the Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such letter of Credit, the Issuing Bank shall
notify the Agent and the Agent shall promptly notify the Borrower and each
other Bank as to the amount to be paid as a result of such demand or
drawing and the payment date. The Borrower shall be irrevocably and
unconditionally obligated forthwith to reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter of
Credit, without presentment, demand, protest or other formalities of any
kind. All such amounts paid by the Issuing Bank and remaining unpaid by
the Borrower shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 1% plus the Base Rate for such
day. In addition, each Bank will pay to the Agent, for the account of the
Issuing Bank, immediately upon the Issuing Bank's demand at any time during
the period commencing after such drawing until reimbursement therefor in
full by the Borrower, an amount equal to such Bank's ratable share of such
drawing (in proportion to its participation therein), together with
interest on such amount for each day from the date of the Issuing Bank's
demand for such payment (or, if such demand is made after 12:00 Noon (New
York City time) on such date, from the next succeeding Domestic Business
Day) to the date of payment by such Bank of such amount at a rate of
interest per annum equal to the Federal Funds Rate. The Issuing Bank will
pay to each Bank ratably all amounts received from the Borrower for
application in payment of its reimbursement obligations in respect of any
Letter of Credit ("Reimbursement Obligations"), but only to the extent such
Bank has made payment to the Issuing Bank in respect of such Letter of
Credit pursuant hereto.
(d) The obligations of the Borrower and each Bank under subsection
(c) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under
all circumstances whatsoever, including without limitation the following
circumstances:
(i) the use which may be made of the Letter of Credit by, or
any acts or omission of, a beneficiary of a Letter of Credit (or any Person
for whom the beneficiary may be acting);
(ii) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary of a
Letter of Credit (or any Person for whom the beneficiary may be acting),
the Banks (including the Issuing Bank) or any other Person, whether in
connection with this Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
(iii) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue or inaccurate in any respect
whatsoever;
(iv) payment under a Letter of Credit to the beneficiary of
such Letter of Credit against presentation to the Issuing Bank of a draft
or certificate that does not comply with the terms of the Letter of Credit;
or
(v) any other act or omission to act or delay of any kind by
any Bank (including the Issuing Bank), the Agent or any other Person or any
other event or circumstance whatsoever that might, but for the provisions
of this subsection (v), constitute a legal or equitable discharge of the
Borrower's or the Bank's obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each Bank
(including each Issuing Bank) and the Agent from and against any and all
claims, damages, losses, liabilities, costs or expenses which such Bank or
the Agent may incur (including, without limitation, any claims, damages,
losses, liabilities, costs or expenses which the Issuing Bank may incur by
reason of or in connection with the failure of any other Bank to fulfill
or comply with its obligations to such Issuing Bank hereunder (but nothing
herein contained shall affect any rights the Borrower may have against such
defaulting Bank)), and none of the Banks (including an Issuing Bank) nor
the Agent nor any of their officers or directors or employees or agents
shall be liable or responsible, by reason of or in connection with the
execution and delivery or transfer of or payment or failure to pay under
any Letter of Credit, including without limitation any of the circumstances
enumerated in subsection (d) above, as well as (i) any error, omission,
interruption or delay in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, (ii) any loss or delay in the
transmission of any document required in order to make a drawing under a
Letter of Credit, and (iii) any consequences arising from causes beyond the
control of the Issuing Bank, including without limitation any government
acts, or any other circumstances whatsoever in making or failing to make
payment under such Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Bank for any claims, damages, losses,
liabilities, costs or expenses, and the Borrower shall have a claim for
direct (but not consequential) damage suffered by it, to the extent found
by a court of competent jurisdiction to have been caused by (x) the failure
of the Issuing Bank to comply in any material respect with the UCP in
determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) the Issuing Bank's failure
to pay under any Letter of Credit after the presentation to it of a request
strictly complying with the terms and conditions of the Letter of Credit.
Nothing in this subsection (e) is intended to limit the obligations of the
Borrower under any other provision of this Agreement. To the extent the
Borrower does not indemnify an Issuing Bank as required by this subsection,
the Banks agree to do so ratably in accordance with their Commitments.
SECTION 2.16. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Bank at a rate per annum determined by such Bank up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered
Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii)
the applicable London Interbank Offered Rate. Any Bank wishing to require
payment of such additional interest (x) shall so notify the Borrower and
the Agent, in which case such additional interest on the Euro-Dollar Loans
of such Bank shall be payable to such Bank at the place indicated in such
notice with respect to each Interest Period commencing at least three Euro-
Dollar Business Days after such Bank gives such notice and (y) shall notify
the Borrower at least five Euro-Dollar Business Days before each date on
which interest is payable on the Euro-Dollar Loans of the amount then due
it under this Section.
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing. The closing hereunder shall occur when the
Agent has received all the following documents, each dated the Closing Date
unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date and complying with the provisions of Section 2.05;
(b) an opinion of the General Counsel of the Borrower, substantially
in the form of Exhibit E hereto and covering such additional matters
relating to the transactions contemplated hereby as the Required Banks may
reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request; and
(d) all documents the Agent may reasonably request relating to the
existence of the Borrower, the corporate authority for and the validity of
this Agreement and the Notes, and any other matters relevant hereto, all
in form and substance satisfactory to the Agent;
Promptly after the Closing Date occurs, the Agent shall notify the Borrower
and the Banks thereof, and such notice shall be conclusive and binding on
all parties hereto.
SECTION 3.02. Borrowings and Issuances of Letters of Credit. The
obligation of any Bank to make a Loan on the occasion of any Borrowing and
the obligation of an Issuing Bank to issue (or renew or extend the term of)
any Letter of Credit is subject to the satisfaction of the following
conditions:
(a) the fact that a Closing Date shall have occurred on or before
September 1, 1997;
(b) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, or receipt by the Issuing Bank of a Notice of
Issuance as required by Section 2.15(b), as the case may be;
(c) the fact that, immediately after such Borrowing or issuance of
a Letter of Credit, the sum of the aggregate outstanding principal amount
of the Loans and the aggregate amount of Letter of Credit Liabilities will
not exceed the aggregate amount of the Commitments;
(d) the fact that, immediately before and after such Borrowing or
issuance of a Letter of Credit, no Default shall have occurred and be
continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing or issuance of a Letter of Credit.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed
to be a representation and warranty by the Borrower on the date of such
Borrowing or issuance as to the facts specified in clauses (c), (d) and (e)
of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this
Agreement and to make the Loans, and to induce the Issuing Bank and the
Banks to issue the Letters of Credit, the Borrower makes the following
representations and warranties:
SECTION 4.01. Existence and Business; Power and Authorization;
Enforceable Obligations. (a) The Borrower is a corporation duly organized
in accordance with the Laws of the State of Delaware. The Borrower (i) has
the corporate power and authority to own its property and assets and to
transact the business in which it is engaged or presently proposes to
engage and (ii) is authorized to do business as a corporation and is in
good standing in each jurisdiction in which it is required to be authorized
to do business, except where the failure to be so authorized or in good
standing could not reasonably be expected to have a Material Adverse
Effect. No Governmental Approval (other than those already obtained) is
necessary in connection with the formation and continued existence of the
Borrower, except where the failure to obtain such Governmental Approval
could not reasonably be expected to have a Material Adverse Effect.
(b) The Borrower has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the other
Loan Documents. The Borrower has corporate power and authority to borrow
hereunder.
(c) The Borrower has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents.
No consent or authorization of, filing with or other act by or in respect
of any Governmental Authority or other Person is required in connection
with the execution, delivery and performance by the Borrower of the Loan
Documents or the validity and enforceability of the Loan Documents.
(d) This Agreement and each other Loan Document has been duly
executed and delivered on behalf of the Borrower and is a legal, valid and
binding obligation of the Borrower enforceable in accordance with its terms
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency or similar Laws affecting the enforcement of rights of creditors
generally and except to the extent that enforcement of rights and remedies
set forth therein may be limited by equitable principles (regardless of
whether enforcement is considered in a court of law or a proceeding in
equity).
SECTION 4.02. No Violation. Neither the execution, delivery and
performance by the Borrower of the Loan Documents, nor compliance by it
with the terms and provisions thereof nor the consummation of the
transactions contemplated thereby, (i) will contravene in any material
respect any applicable provision of Law, (ii) will conflict with or result
in any breach of any of the terms and conditions of, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
upon any of the property or assets of the Borrower pursuant to the terms
of, any material agreement or instrument to which the Borrower is a party
or by which it or any of its property or assets is bound, or (iii) will
violate any provision of the certificate of incorporation or by-laws or
other organizational documents of the Borrower.
SECTION 4.03. Litigation. There are no actions, suits,
investigations or proceedings by or before any Governmental Authority or
arbitrator pending or, to the best knowledge of the Borrower, threatened
which could reasonably be expected to have a Material Adverse Effect.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of Ultramar Corporation and its Consolidated Subsidiaries as of
December 31, 1996 and the related consolidated statements of income and
cash flows for the fiscal year then ended, reported on by Ernst & Young LLP
and set forth in the Borrower's 1996 Form 10-K, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with GAAP the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations
and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of March 31, 1997 and the related
unaudited consolidated statements of income and cash flows for the three
months then ended, set forth in the Borrower's Latest Form 10-Q, a copy of
which has been delivered to each of the Banks, fairly present, in
conformity with GAAP or SEC regulation, the consolidated financial position
of the Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such three month
period (subject to year-end adjustments);
SECTION 4.05. Material Adverse Change. Since December 31, 1996,
there has occurred no event, act or condition which has had, or could
reasonably be expected to have, a Material Adverse Effect.
SECTION 4.06. Use of Proceeds; Margin Regulations. All proceeds of
each Loan will be used by the Borrower only in accordance with the
provisions of Section 6.04.
SECTION 4.07. Governmental Approvals. All Governmental Approvals
which under applicable Law are required to have been obtained prior to the
date this representation is made or deemed made in connection with the due
execution, delivery and performance by the Borrower of the Loan Documents
to which it is a party have been obtained.
SECTION 4.08. Investment Company Act; Public Utility Holding Company
Act. The Borrower is not (i) an "investment company" or a company
"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding company" or
a company controlled by a "holding company" within the meaning of PUHCA.
SECTION 4.09. No Defaults. No Default has occurred and is
continuing.
SECTION 4.10. U.S. Taxes. The Borrower and each of its Subsidiaries
have filed all United States Federal income tax returns and all other
material United States tax returns which to their knowledge are required
to be filed by them and have paid all taxes due pursuant to such returns
or pursuant to any assessment received by them, except as are being
contested in good faith or which could not reasonably be expected to have
a Material Adverse Effect.
SECTION 4.11. Foreign Taxes. The Borrower and each of its
Subsidiaries have filed or caused to be filed all income tax returns in all
relevant foreign jurisdictions and all other material foreign tax returns
which are to their knowledge required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received
by the Borrower or any of its Subsidiaries, except as are being contested
in good faith or which could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.12. ERISA. As of the Closing Date, the Borrower is
responsible for funding no Plans other than those listed on the Schedule
having the same number as this Section. No accumulated funding deficiency
(as defined in Section 412 of the Code or Section 302 of ERISA) or
Reportable Event has occurred with respect to any Plan which could
reasonably be expected to have a Material Adverse Effect. There are no
Unfunded Liabilities under any Plan which when added to the aggregate
amount of Unfunded Liabilities with respect to all other Plans at such time
could reasonably be expected to have a Material Adverse Effect. The
Borrower and each member of the ERISA Controlled Group have not failed to
comply with the requirements of Section 515 of ERISA with respect to any
Multiemployer Plan and are not in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan to
an extent which could reasonably be expected to have a Material Adverse
Effect. The aggregate potential total withdrawal liability payments of the
Borrower and the members of the ERISA Controlled Group as determined in
accordance with Title IV of ERISA as if the Borrower and the members of the
ERISA Controlled Group had completely withdrawn from all Multiemployer
Plans is not equal to or greater than an amount which could reasonably be
expected to have a Material Adverse Effect. To the knowledge of the
Borrower and each member of the ERISA Controlled Group, no Multiemployer
Plan is or is likely to be in reorganization (as defined in Section 4241
or ERISA or Section 418 of the Code) or is insolvent (as defined in Section
4245 of ERISA). No liability to the PBGC (other than required premium
payments), the Internal Revenue Service, any Plan or any trust established
under Title IV of ERISA has been, or is expected by the Borrower or any
member of the ERISA Controlled Group to be, incurred by the Borrower or any
member of the ERISA Controlled Group which could reasonably be expected to
have a Material Adverse Effect. No Lien under Section 412(n) of the Code
or 302(f) of ERISA or requirement to provide security under Section
401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably
expected by the Borrower or any member of the ERISA Controlled Group to be
imposed on the assets of the Borrower or any member of the ERISA Controlled
Group. With respect to any employee benefit plan covered under Title IV
of ERISA that is excluded from the definition of Plan by the proviso at the
end of such definition, no liability, penalty, Lien or security interest
has been incurred or is expected to be incurred which could reasonably be
expected to have a Material Adverse Effect, and to the Borrower's knowledge
no other event or condition has occurred or exists which could reasonably
be expected to have a Material Adverse Effect.
SECTION 4.13. Ownership of Property; Liens. The Borrower and each
of its Consolidated Subsidiaries has good and marketable title to all of
its property except for any defects which could not reasonably be expected
to have a Material Adverse Effect, subject to no Lien of any kind except
Liens permitted pursuant to Section 6.03 hereof.
SECTION 4.14. Accuracy and Completeness of Information. All
historical information heretofore or contemporaneously furnished by the
Borrower in writing to the Agent or any Bank for purposes of or in
connection with this Agreement is, to the knowledge of the Borrower, true
and accurate in all material respects on the date as of which such
information is dated and not incomplete by omitting to state any material
fact necessary to make such information (taken as a whole) not misleading
at such time.
SECTION 4.15. Environmental Matters.
(a) Except in each case as could not reasonably be expected to
have a Material Adverse Effect (i) the Borrower and its Significant
Subsidiaries are in compliance with all applicable Environmental Laws, (ii)
the Borrower and its Significant Subsidiaries have all Environmental
Approvals required to operate its business as presently conducted and is
in compliance with the terms and conditions thereof, (iii) the Borrower and
its Significant Subsidiaries have not received any communication (written
or oral) from a Governmental Authority that alleges that the Borrower is
not in compliance with all Environmental Laws and Environmental Approvals
and (iv) to the Borrower's knowledge there are no circumstances that may
prevent or interfere with such compliance in the future.
(b) There is no Environmental Claim pending or, to the Borrower's
knowledge, threatened against the Borrower or any Significant Subsidiary
which could reasonably be expected to have a Material Adverse Effect.
(c) Without in any way limiting the generality of the foregoing,
except in each case as could not reasonably be expected to have a Material
Adverse Effect (i) there are no on-site or off-site locations in which the
Borrower or any Significant Subsidiary have stored, disposed or arranged
for the disposal of Materials of Environmental Concern in violation of any
Environmental Law (ii) there are no underground storage tanks located on
property owned or leased by the Borrower or any Significant Subsidiary in
violation of any Environmental Law, (iii) there is no asbestos contained
in or forming part of any building, building component, structure or office
space owned or leased by the Borrower or any Significant Subsidiary and
(iv) no polychlorinated - biphenyles (PCB's) are used or stored at any
property or leased by the Borrower or any Significant Subsidiary in
violation of any Environmental Law.
SECTION 4.16. Significant Subsidiaries. Each of the Borrower's
Significant Subsidiaries is a corporation, partnership, limited liability
company, association or other entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, and
has all powers and all material government licenses, authorizations,
consents and approvals required to carry on its business as now conducted
except for such powers, licenses, authorizations, consents or approvals the
absence of which could not reasonably be expected to have a Material
Adverse Effect.
ARTICLE 5
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid
or any Letter of Credit Liabilities remain outstanding unless otherwise
agreed by the Required Banks:
SECTION 5.01. Information Covenants. The Borrower will furnish to
each Bank:
(a) Quarterly Financial Statements. Within 60 days after the
close of each fiscal quarter (other than the fourth fiscal quarter) in each
fiscal year of the Borrower, the unaudited consolidated balance sheet of
the Borrower as at the end of such quarterly period and the related
consolidated statements of income and cash flows for such quarterly period
and for the elapsed portion of the fiscal year ended with the last day of
such quarterly period, and in each case setting forth comparative figures
for the related periods in the prior fiscal year;
(b) Annual Financial Statements. Within 120 days after the close
of each fiscal year of the Borrower, the audited consolidated balance sheet
of the Borrower as at the end of such fiscal year and the related
consolidated statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on in a manner acceptable to the SEC by
independent public accountants of nationally recognized standing;
(c) Officer's Certificate. At the time of the delivery of the
financial statements referred to in clauses (a) and (b) above, a
certificate of an Authorized Officer of the Borrower which certifies (x)
that such financial statements fairly present the financial condition and
the results of operations of the Borrower on the dates and for the period
indicated, except as disclosed in the notes thereto, in accordance with
GAAP, subject, in the case of interim financial statements, to normally
recurring year-end adjustments, (y) the detailed calculations made pursuant
to Sections 6.06 and 6.07 as of the last day of such period and (z) that
such Authorized Officer has reviewed the terms of the Loan Documents and
has made, or caused to be made under his or her supervision, a review in
reasonable detail of the business and financial condition of the Borrower
during the accounting period covered by such financial statements, and that
as a result of such review such Authorized officer has concluded that no
Default has occurred and is continuing as of the date of such certificate
or, if any Default has occurred and is continuing, specifying the nature
and extent thereof and the action the Borrower proposes to take in respect
thereof;
(d) Notice of Default, Litigation or Other Event. Promptly and in
any event within three Domestic Business Days after the Borrower obtains
knowledge thereof, notice of (i) the occurrence of any Event of Default and
(ii) any litigation or governmental proceeding pending or threatened
against the Borrower or any Significant Subsidiary which could reasonably
be expected to have a Material Adverse Effect;
(e) ERISA.
(i) Except as could not reasonably be expected to have a
Material Adverse Effect, as soon as possible and in any event within twenty
days after the Borrower or any member of its ERISA Controlled Group knows,
or has reason to know, that:
(A) any Termination Event with respect to a Plan has
occurred or will occur, or
(B) any condition exists with respect to a Plan which
presents a material risk of termination of the Plan (if such Plan has
Unfunded Liabilities) or imposition of an excise tax or other material
liability on the Borrower or any member of the ERISA Controlled Group, or
(C) the Borrower or any member of the ERISA Controlled
Group has applied for a waiver of the minimum funding standard under
Section 412 of the Code or Section 302 of ERISA or an accumulated funding
deficiency has been incurred, or
(D) the Borrower or any member of the ERISA Controlled
Group has engaged in a "prohibited transaction," as defined in Section 4975
of the Code or as described in Section 406 of ERISA, that is not exempt
under Section 4975 of the Code and Section 408 of ERISA, or
(E) there exists any Unfunded Liabilities under any Plan
giving rise to a Lien under ERISA or the Code, or
(F) any condition exists with respect to a Multiemployer
Plan which presents a material risk of a partial or complete withdrawal (as
described in Section 4203 or 4205 of ERISA) by the Borrower or any member
of the ERISA Controlled Group from a Multiemployer Plan, or
(G) the Borrower or any member of the ERISA Controlled
Group is in "default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan, or
(H) a Multiemployer Plan is in "reorganization" (as
defined in Section 418 of the Code or Section 4241 of ERISA) or is
"insolvent" (as defined in Section 4245 of ERISA), or
(I) the Borrower and/or any member of the ERISA
Controlled Group have incurred any withdrawal liability (as determined in
accordance with Title IV of ERISA), or
(J) there is an action brought against the Borrower or
any member of the ERISA Controlled Group under Section 502 of ERISA with
respect to its failure to comply with Section 515 of ERISA,
a certificate of an Authorized Officer of the Borrower setting forth the
details of each of the events described in clauses (A) through (J) above,
as applicable, and the action which the Borrower or the applicable member
of the ERISA Controlled Group proposes to take with respect thereto,
together with a copy of any notice or filing from the PBGC or which may be
required by the PBGC or other agency of the United States government with
respect to each of the events described in clauses (A) through (J) above,
as applicable.
(ii) As soon as possible and in any event within ten days
after the receipt by the Borrower or any member of its ERISA Controlled
Group of a demand letter from the PBGC notifying the Borrower or such
member of the ERISA Controlled Group of its final decision finding
liability which, if remaining unpaid, could reasonably be expected to have
a Material Adverse Effect and the date by which such liability must be
paid, a copy of such letter, together with a certificate an Authorized
Officer of the Borrower setting forth the action which the Borrower or such
member of the ERISA Controlled Group proposes to take with respect thereto.
(iii) With respect to any employee benefit plan covered by Title
IV of ERISA that is excluded from the definition of Plan by the proviso at
the end of such definition, as soon as possible and in any event within ten
days after the receipt by the Borrower or any member of the ERISA
Controlled Group of any notice, whether or not in writing, that any
material liability, penalty or Lien has been or could reasonably be
expected to be asserted against it with respect to such plan, a certificate
of an Authorized Officer of the Borrower setting forth the relevant details
and the action which the Borrower or the applicable member of its ERISA
Controlled Group proposes to take with respect thereto, together with a
copy of such notice, if any.
(f) Environmental Matters. Promptly and in any event within ten
Domestic Business Days after the existence of any of the following
conditions, a certificate of an Authorized Officer of the Borrower
specifying in detail the nature of such condition and the Borrower's
proposed response thereto, in each case if the occurrence of such event
could reasonably be expected to have a Material Adverse Effect: (i) the
receipt by the Borrower of any communication (written or oral), whether
from a Governmental Authority or other Person that alleges that the
Borrower or any Significant Subsidiary is not in compliance with applicable
Environmental Laws or Environmental Approvals, (ii) any Authorized Officer
of the Borrower shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against the Borrower or any
Significant Subsidiary, or (iii) any release, emission, discharge or
disposal of any Material of Environmental Concern that could reasonably be
expected to form the basis of any Environmental Claim against the Borrower
or any Significant Subsidiary. The Borrower will also maintain and make
available for inspection by the Agent and the Banks and their agents and
employees accurate and complete records of all investigations, studies,
sampling and testing conducted, and any and all remedial actions taken, by
the Borrower or, to its knowledge and to the extent obtained by the
Borrower, by any Governmental Authority or other Person in respect of
Materials of Environmental Concern on or affecting the properties of the
Borrower and its Subsidiaries.
(g) Other Information. From time to time, such other information
or documents (financial or otherwise) as the Agent or any Bank may
reasonably request.
SECTION 5.02. Books, Records and Inspections. The Borrower will keep
proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of Law shall be made of all
dealings and transactions in relation to its business and activities. The
Borrower will permit officers and designated representatives of the Agent
or any Bank to visit and inspect any of the properties of the Borrower, and
to examine the books of record and account of the Borrower, and discuss the
affairs, finances and accounts of the Borrower with, and be advised as to
the same by, its and their officers and independent accountants, all upon
reasonable notice and at such reasonable times and intervals as the Agent
or such Bank may desire.
SECTION 5.03. Payment of Taxes. The Borrower will, and will cause
its Subsidiaries to, pay and discharge all material taxes, assessments and
governmental charges or levies imposed on it or on its income or profits
or on any of its property prior to the date on which penalties attach
hereto, except that neither the Borrower nor any such Subsidiary will be
required hereby to pay any such tax, assessment, charge or levy the payment
of which is the subject of a Contest.
SECTION 5.04. Compliance with Law. (a) The Borrower will own,
operate and maintain its business in compliance with all Laws, except such
noncompliance as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) The Borrower will keep each of its property and assets free
of any Lien imposed pursuant to Environmental Laws which could reasonably
be expected to have a Material Adverse Effect and is not the subject of a
Contest, and will pay or cause to be paid when due any and all costs
necessary to accomplish the foregoing, including, without limitation, the
cost of identifying the nature and extent of the presence of any such
Materials of Environmental Concern on any real property owned or leased by
the Borrower, and the cost of delineation, removal, treatment and disposal
of any such Materials of Environmental Concern.
SECTION 5.05. Existence, Etc. The Borrower will preserve and
maintain its corporate existence, and all material rights and material
franchises, and cause each of its Subsidiaries to preserve and maintain its
material rights and material franchises except as permitted under Section
6.01; provided that neither the Borrower not any of its Subsidiaries shall
be required to maintain any such rights or franchises, the maintenance of
which is determined by it in good faith not to be in its best interest in
the conduct of business.
SECTION 5.06. Insurance. The Borrower will 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 damages of the kinds customarily insured
against by reputable companies in the same or similar businesses, such
insurance to be of such types and in such amounts (with such deductible
amounts or other forms of self-insurance) as is customary for such
companies under similar circumstances.
SECTION 5.07. Maintenance of Property. The Borrower will keep, and
cause each of its Subsidiaries to keep, all property necessary to their
respective businesses in good working order and condition (ordinary wear
and tear excepted); provided that neither the Borrower nor any of its
Subsidiaries shall be required to maintain any property, the maintenance
of which is determined by it in good faith not to be in its best interest
in the conduct of business.
SECTION 5.08. Ownership of Subsidiaries. The Borrower will own,
directly or indirectly, 100% of the outstanding voting securities of each
of its Significant Subsidiaries.
ARTICLE 6
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains unpaid
or any Letter of Credit Liabilities remain outstanding, unless otherwise
agreed by the Required Banks:
SECTION 6.01. Restriction on Fundamental Changes. (a) The Borrower
will not enter into any merger or consolidation, liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), discontinue
substantially all of its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of transactions, all or
substantially all of its business or property, provided that the Borrower
may effect such a merger, consolidation or sale (a "Permitted Transaction")
so long as after giving effect to such transaction, (x) no Default shall
exist, (y) the surviving entity or purchaser, if other than the Borrower,
assumes, pursuant to the terms of such transaction, each of the obligations
of the Borrower under the Loan Documents and (z) such assumption is
expressly evidenced by an agreement executed and delivered to the Banks
within 30 days of such transaction in a form reasonably satisfactory to the
Agent. Without limiting the generality of the foregoing, the transfer of
more than 50% of the Borrower's Consolidated Net Tangible Assets shall be
deemed, for the purposes of this Section 6.01(a), a transfer of all or
substantially all of the assets of the Borrower.
(b) No transaction permitted by this Section 6.01 shall result in
a discharge or novation of the Borrower under the Loan Documents. The
Agent may require as a condition to any transaction permitted by this
Section 6.01 evidence (including legal opinions) reasonably satisfactory
to the Agent establishing satisfaction of the conditions set forth in this
Section 6.01.
SECTION 6.02. Transactions with Affiliates. Neither the Borrower nor
any Subsidiary will enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with any
Affiliate (other than in any such Affiliate's capacity as a director or
executive officer of the Borrower) on terms that are less favorable to the
Borrower than those terms that might be obtained in a comparable arms-length
transaction at the time from a Person who is not an Affiliate, in
each case excluding transactions among the Borrower and its Subsidiaries.
SECTION 6.03. Liens. Neither the Borrower nor any Subsidiary will
create, incur, assume or suffer to exist, directly or indirectly, any Lien
on any of its assets now owned or hereinafter acquired, other than the
following:
(i) Liens existing on the date hereof which are not otherwise
permitted under paragraphs (ii) through (xi) below and which Liens secure
Indebtedness outstanding on the date hereof in an aggregate principal
amount not exceeding $10,000,000;
(ii) Liens for taxes not yet due or which are subject to a Contest;
(iii) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen, and other similar Liens and any other
Liens imposed by Law (other than any Lien imposed by ERISA or pursuant to
any Environmental Law) created in the ordinary course of business for
amounts not yet due or which are subject to a Contest;
(iv) Liens (other than any Lien imposed by ERISA or pursuant to any
Environmental Law) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds, and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(v) Easements, rights-of-way, zoning, and similar restrictions and
other similar charges or encumbrances that do not materially interfere with
the conduct of the business of the Borrower or any of its Subsidiaries and
which do not detract materially from the value of the property to which
they attach or impair materially the use thereof by the Borrower or any of
its Subsidiaries or have a Material Adverse Effect;
(vi) purchase money Liens not to exceed 100% of the applicable
purchase price; provided that such Lien shall attach within 180 days of the
acquisition of the related asset and in no event shall such Lien attach to
current assets of the Borrower or any of its Significant Subsidiaries;
(vii) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or any of its Subsidiaries, whether by purchase,
consolidation, merger, exchange or otherwise and not created in
contemplation of such acquisition; provided that in no event shall such
Lien attach to current assets of the Borrower or any of its Significant
Subsidiaries;
(viii) Liens securing Environmental Claims (which, for the purposes
of this paragraph (viii) shall be limited to undetermined or inchoate Liens
arising pursuant to applicable Environmental Laws, arising in the ordinary
course of business of the Borrower, and in respect of which no steps or
proceedings have been taken to enforce such Lien);
(ix) Liens imposed by ERISA which could not reasonably be expected
to have a Material Adverse Effect;
(x) Liens on time deposit, demand, custodial or other banking
accounts of the Borrower or any Subsidiary, if such accounts exist for the
purpose of funding or securing insurance obligations of any Subsidiary
engaged in the business of providing commercial insurance or reinsurance
and which are in accordance with prudent business practices and industry
standards;
(xi) Liens on commingled stored crude oil and product inventory
existing to secure obligations of parties with which the Borrower or its
Subsidiaries have entered into crude oil processing and crude oil and
product storage agreements:
(xii) extensions, renewals and replacements of Liens referred to in
paragraphs (i) through (x); provided, that any such extension, renewal or
replacement Lien shall be limited to the property or assets covered by the
Lien extended, renewed or replaced and that the obligations secured by any
such extension, renewal or replacement Lien shall be in an amount not
greater than the amount of the obligations secured by the Lien extended,
renewed or replaced; and
(xiii) Liens other than those described in paragraphs (i) through
(xii) above; provided that the aggregate outstanding principal amount of
Indebtedness secured by such Liens shall at no time exceed 10% of
Consolidated Net Worth.
SECTION 6.04. Use of Proceeds; Margin Regulations. No part of the
proceeds of any Loan will be used by the Borrower to purchase or carry any
Margin Stock or to extend credit to others for the purpose of purchasing
or carrying any Margin Stock. The Borrower shall not use the proceeds of
any Loan in a manner that will violate or be inconsistent with the
provisions of Regulations G, T, U or X.
SECTION 6.05. Environmental Matters. Except in each case where such
activity could not reasonably be expected to have a Material Adverse
Effect, the Borrower shall not permit (a) any underground storage tanks to
be located on any property owned or leased by the Borrower in violation of
any Environmental Law, (b) any asbestos to be contained in or form part of
any building, building component, structure or office space owned or leased
by the Borrower, and (c) any polychlorinated biphenyls (PCB's) to be used
or stored at any property owned or leased by the Borrower.
SECTION 6.06. Leverage Ratio. Adjusted Consolidated Debt will at no
time exceed 60% of the sum of Adjusted Consolidated Debt and Consolidated
Net Worth.
SECTION 6.07. Interest Coverage Ratio. The ratio (the "Interest
Coverage Ratio") of (x) Consolidated EBITDA to (y) Consolidated Cash
Interest Expense will not, for any period of four consecutive Fiscal
Quarters, be less than 2.5:1.0.
ARTICLE 7
CASH COLLATERAL
SECTION 7.01. Cash Collateral. (a) Upon the occurrence of the
circumstances and the continuance of any Event of Default, the Borrower
shall deposit with the Agent an amount in cash equal to the aggregate
Stated Amount of all outstanding Letters of Credit. The Agent shall hold
and apply such cash to each drawing made in respect of each Letter of
Credit.
(b) Amounts on deposit pursuant to Section 7.01(a) shall be held
by the Agent for the benefit of the Issuing Bank and the other Banks and
shall be used and held as security for each Reimbursement Obligation or
other Obligations of the Borrower until the Obligations have been paid in
full.
ARTICLE 8
EVENTS OF DEFAULT; REMEDIES
SECTION 8.01. Events of Default. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition
is voluntary or involuntary or results from the operation of Law or
pursuant to or as a result of compliance by any Person with any judgment,
decree, order, rule or regulation of any Governmental Authority:
(a) Failure to Make Payments. The Borrower shall (i) default in
the payment when due of any principal on the Loans or on any Reimbursement
Obligation or (ii) default in the payment when due of any interest or fees
hereunder for a period of five Domestic Business Days after such interest
or fees are due and payable.
(b) Breach of Representation or Warranty. Any representation or
warranty made in any Loan Document or in any certificate or statement
delivered pursuant thereto shall prove to be false or misleading in any
material respect on the date as of which made or deemed made.
(c) Breach of Covenants. (i) The Borrower shall fail to perform
or observe any covenant or obligation arising under Section 6.01, 6.04,
6.06 or 6.07, or (ii) the Borrower shall fail to perform or observe any
other covenant or obligation arising under this Agreement or under any
other Loan Document and, in the case of this clause (ii), such failure
shall continue for a period of 30 days.
(d) Default Under Other Agreements. The Borrower or any
Significant Subsidiary shall default in the payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise)
of any amount owing in respect of principal or interest (subject, in the
case of interest, to any applicable grace period) in respect of any
Material Financial Obligation; or the Borrower or any Significant
Subsidiary shall default in the performance or observance of any other
obligation or condition with respect to any Material Financial Obligation
or any other event shall occur or condition exist, if, as a result, such
Material Financial Obligation has become or can then be declared to be due
and payable prior to its stated maturity other than as a result of a
regularly scheduled payment.
(e) Bankruptcy, Etc. Any Event of Bankruptcy shall occur with
respect to the Borrower or any Significant Subsidiary.
(f) Dissolution. Any order, judgment, or decree shall be entered
against the Borrower or any Significant Subsidiary decreeing its
involuntary dissolution or split up and such order shall remain
undischarged and unstayed for a period in excess of 30 days; or the
Borrower shall otherwise dissolve or cease to exist (except as permitted
by Section 6.01).
(g) ERISA. (i) Any Termination Event shall occur, or (ii) any
Plan shall incur an "accumulated funding deficiency" (as defined in Section
412 of the Code or Section 302 of ERISA), whether or not waived or (iii)
the Borrower or a member of its ERISA Controlled Group shall have engaged
in a transaction which is prohibited under Section 4975 of the Code or
Section 406 of ERISA which could result in the imposition of liability on
the Borrower or any member of its ERISA Controlled Group, or (iv) the
Borrower or any member of its ERISA Controlled Group shall fail to pay when
due an amount which it shall have become liable to pay to the PBGC, any
Plan or a trust established under Title IV of ERISA, or (v) a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that an ERISA Plan must be terminated or have a trustee
appointed to administer any ERISA Plan, or (vi) the Borrower or a member
of its ERISA Controlled Group suffers a partial or complete withdrawal from
a Multiemployer plan or is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan, or (vii) a
proceeding shall be instituted against the Borrower or any member of its
ERISA Controlled Group to enforce Section 515 of ERISA, or (viii) any other
event or condition shall occur or exist with respect to any Plan which
could subject the Borrower or any member of its ERISA Controlled Group to
any tax, penalty or other liability, and in each case in clauses (i)
through (viii) of this Section 8.01(h), such event or condition, together
with all other such events or conditions, if any, could reasonably be
expected to result in a lien, security interest, liability or penalty which
in the aggregate could reasonably be expected to have a Material Adverse
Effect.
(h) Judgments. Any judgment or decree shall be entered by a court
or courts of competent jurisdiction against the Borrower or any Significant
Subsidiary and such judgment or decree (i) shall be in an amount greater
than or equal to $25,000,000 and (ii) has not been discharged, bonded, or
vacated within thirty days from entry.
(i) Change of Control. A Change of Control shall occur.
SECTION 8.02. Rights and Remedies. (a) Upon the occurrence of any
Event of Default described in Section 8.01(e), the Commitments shall
automatically and immediately terminate and the unpaid principal amount of
any and all accrued interest on the Loans and any and all accrued fees and
other Obligations shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, diligence, presentment, notice of intent
to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by the Borrower, and the obligation of each Bank
to make any Loan hereunder shall thereupon terminate.
(b) Upon the occurrence and during the continuance of any Event
of Default (other than an Event of Default described in Section 8.01(e)),
the Agent shall at the request of the Required Banks, by notice to the
Borrower (i) declare that the Commitments are terminated, whereupon the
Commitments and the obligation of each Bank to make any Loan hereunder
shall immediately terminate, and (ii) declare the unpaid principal amount
of and any and all accrued and unpaid Fees and other Obligations to be, and
the same shall thereupon be, immediately due and payable with all
additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind
(including, without limitation, diligence, presentment, notice of intent
to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by the Borrower.
ARTICLE 9
THE AGENT
SECTION 9.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Agent by the terms hereof or thereof, together with
all such powers as are reasonably incidental thereto.
SECTION 9.02. Agent and Affiliates. Morgan Guaranty Trust Company
of New York shall have the same rights and powers under this Agreement as
any other Bank and may exercise or refrain from exercising the same as
though it were not the Agent, and Morgan Guaranty Trust Company of New York
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent.
SECTION 9.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any
action with respect to any Default, except as expressly provided in Article
8.
SECTION 9.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance
with the advice of such counsel, accountants or experts.
SECTION 9.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Banks (or such different number of Banks as any provision hereof expressly
requires for such consent or request) or (ii) in the absence of its own
gross negligence or willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire
into or verify (A) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (B) the
performance or observance of any of the covenants or agreements of the
Borrower; (C) the satisfaction of any condition specified in Article 3,
except receipt of items required to be delivered to the Agent; or (D) the
validity, effectiveness or genuineness of this Agreement, the Notes or any
other instrument or writing furnished in connection herewith. The Agent
shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement or other writing (which may be a bank wire,
telex, facsimile or similar writing) believed by it to be genuine or to be
signed by the proper party or parties. Without limiting the generality of
the foregoing, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom and is
intended to create or reflect only an administrative relationship between
independent contracting parties.
SECTION 9.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and
their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 9.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance
upon the Agent 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 any action under this
Agreement.
SECTION 9.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may,
on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized or licensed under the Laws of the United States
or of any State thereof and having a combined capital and surplus of at
least $100,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent resigns as Agent
hereunder, the provisions of this Article shall inure to its benefit as to
actions taken or omitted to be taken by it while it was Agent.
SECTION 9.09. Agent's Fee. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
by the Borrower and the Agent.
ARTICLE 10
CHANGE IN CIRCUMSTANCES
SECTION 10.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or before the first day of any Interest Period for any CD
Loan, Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 66
2/3% or more of the aggregate principal amount of the affected Loans advise
the Agent that the Adjusted CD Rate or the London Interbank Offered Rate,
as the case may be, as determined by the Agent will not adequately and
fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period, the Agent shall
forthwith give notice thereof to the Borrower and the Banks, whereupon
until the Agent notifies the Borrower that the circumstances giving rise
to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the
case may be, shall be suspended and (ii) each outstanding CD Loan or Euro-
Dollar Loan, as the case may be, shall be converted into a Base Rate Loan
on the last day of the then current Interest Period applicable thereto.
Unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any affected Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, (A)
if such affected Borrowing is a CD Borrowing or Euro-Dollar Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (B) if such
affected Borrowing is a Money Market LIBOR Borrowing, the Money Market
LIBOR Loans comprising such Borrowing shall bear interest for each day from
and including the first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such day.
SECTION 10.02. Illegality. If, on or after the date hereof, the
adoption of any applicable Law, rule or regulation, or any change in any
applicable Law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with
any request or directive (whether or not having the force of Law) of any
such authority, central bank or comparable agency shall make it unlawful
or impossible for any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Bank shall so notify the
Agent, the Agent shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or to continue or
convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended.
Before giving any notice to the Agent pursuant to this Section, such Bank
shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank. If such notice
is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then
current Interest Period applicable to such Euro-Dollar Loan if such Bank
may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan
to such day or (b) immediately if such Bank shall determine that it may not
lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to
such day.
SECTION 10.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or Letter of Credit
or any obligation to make Committed Loans or issue or participate in any
Letter of Credit or (y) the date of the related Money Market Quote, in the
case of any Money Market Loan, the adoption of any applicable Law, rule or
regulation, or any change in any applicable Law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not
having the force of Law) of any such authority, central bank or comparable
agency shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (i) with respect to any CD
Loan any such requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any such
requirement with respect to which such Bank is entitled to compensation
during the relevant Interest Period under Section 2.16), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the account of, or
credit extended by, any Bank (or its Applicable Lending Office) or shall
impose on any Bank (or its Applicable Lending Office) or on the United
States market for certificates of deposit or the London interbank market
any other condition affecting its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans or its obligations hereunder in respect
to Letters of Credit and the result of any of the foregoing is to increase
the cost to such Bank (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan or of issuing or participating in any
Letter of Credit, or to reduce the amount of any sum received or receivable
by such Bank (or its Applicable Lending Office) under this Agreement or
under its Note with respect thereto, by an amount deemed by such Bank to
be material, then, within 15 days after demand by such Bank (with a copy
to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable Law, rule or regulation regarding capital
adequacy, or any change in any such Law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of Law) of any
such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Bank (or its
Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank
to be material, then from time to time, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent)
for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
SECTION 10.04. Taxes. (a) For the purposes of this Section, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment
by the Borrower pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, excluding (i) in the case of each Bank
and the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the Laws of which such Bank or the
Agent (as the case may be) is organized or in which its principal executive
office is located or, in the case of each Bank, in which its Applicable
Lending Office is located and (ii) in the case of each Bank, any United
States withholding tax imposed on such payment at a rate up to (but not
exceeding) the rate at which United States withholding tax would have been
imposed on such a payment to such Bank under the Laws and treaties in
effect when such Bank first became a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note.
(b) All payments by the Borrower to or for the account of any Bank
or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if the Borrower shall be
required by Law to deduct any Taxes or Other Taxes from any such payment,
(i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) such Bank or the 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, (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Law and (iv) the
Borrower shall furnish to the Agent, at its address referred to in Section
11.01, the original or a certified copy of a receipt evidencing payment
thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section) paid by such Bank or the Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be paid
within 15 days after such Bank or the Agent (as the case may be) makes
demand therefor.
(d) Each Bank organized under the Laws of a jurisdiction outside
the United States, before it signs and delivers this Agreement in the case
of each Bank listed on the signature pages hereof and before it becomes a
Bank in the case of each other Bank, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Bank remains
lawfully able to do so), shall provide the Borrower and the Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that
such Bank is entitled to benefits under an income tax treaty to which the
United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of
interest for the account of such Bank or certifying that the income
receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to
provide the Borrower or the Agent with the appropriate form pursuant to
Section 10.04(d) (unless such failure is due to a change in treaty, Law or
regulation occurring after the date on which such form originally was
required to be provided), such Bank shall not be entitled to
indemnification under Section 11.03(b) or (c) with respect to Taxes imposed
by the United States; provided that if a Bank, which is otherwise exempt
from or subject to a reduced rate of withholding tax, becomes subject to
Taxes because of its failure to deliver a form required hereunder, the
Borrower shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will
change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank.
SECTION 10.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or to continue or
convert outstanding Loans as or to, Euro-Dollar Loans has been suspended
pursuant to Section 10.02 or (ii) any Bank has demanded compensation under
Section 10.03 with respect to its CD Loans or Euro- Dollar Loans, and in
either case the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist, all Loans which
would otherwise be made by such Bank as (or continued as or converted into)
CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other Banks).
If such Bank notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist, the principal
amount of each such Base Rate Loan shall be converted into a CD Loan or
Euro-Dollar Loan, as the case may be, on the first day of the next
succeeding Interest Period applicable to the related CD Loans or Euro-Dollar
Loans of the other Banks.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile or similar writing) and shall be given to such
party: (a) in the case of the Borrower or the Agent, at its address,
facsimile number or telex number set forth on the signature pages hereof,
(b) in the case of any Bank, at its address, facsimile number or telex
number set forth in its Administrative Questionnaire or (c) in the case of
any party, at such other address, facsimile number or telex number as such
party may hereafter specify for the purpose by notice to the Agent and the
Borrower. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the
telex number referred to in this Section and the appropriate answerback is
received, (ii) if given by facsimile, when transmitted to the facsimile
number referred to in this Section and confirmation of receipt is received,
(iii) if given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as aforesaid or (iv)
if given by any other means, when delivered at the address referred to in
this Section; provided that notices to the Agent and the Issuing Bank under
Article 2 or Article 10 shall not be effective until received.
SECTION 11.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.
SECTION 11.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses of the Agent, including
reasonable fees and disbursements of special counsel for the Agent, in
connection with the preparation and administration of this Agreement, any
waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Agent and each Bank,
including the reasonable fees and disbursements of counsel, in connection
with such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs
and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee
in connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto)
brought or threatened relating to or arising out of this Agreement or any
actual or proposed use of proceeds of Loans hereunder; provided that no
Indemnitee shall have the right to be indemnified hereunder for such
Indemnitee's own gross negligence or willful misconduct as determined by
a court of competent jurisdiction.
SECTION 11.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest then due with respect to any Note held by it which is greater than
the proportion received by any other Bank in respect of the aggregate
amount of principal and interest then due with respect to any Note held by
such other Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Notes held by the other Banks,
and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Notes held by
the Banks shall be shared by the Banks pro rata; provided that nothing in
this Section shall impair the right of any Bank to exercise any right of
set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other than its
indebtedness hereunder. The Borrower agrees, to the fullest extent it may
effectively do so under applicable Law, that any holder of a participation
in a Note, whether or not acquired pursuant to the foregoing arrangements,
may exercise rights of set-off or counterclaim and other rights with
respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
SECTION 11.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the Agent or any Issuing
Bank are affected thereby, by the Agent or such Issuing Bank); provided
that no such amendment or waiver shall, unless signed by all the Banks, (i)
except as contemplated in Section 2.17, increase or decrease the Commitment
of any Bank (except for a ratable decrease in the Commitments of all Banks)
or subject any Bank to any additional obligation, (ii) reduce the principal
of or rate of interest on any Loan or the amount to be reimbursed in
respect of any Letter of Credit or any interest thereon or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of
or interest on any Loan or for reimbursement in respect of any Letter of
Credit or interest thereon or any fees hereunder or for the termination of
any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes and Letter of Credit
Liabilities, or the number of Banks, which shall be required for the Banks
or any of them to take any action under this Section or any other provision
of this Agreement.
SECTION 11.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer (other than pursuant to a
Permitted Transaction) any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans and Letter of Credit Liabilities.
If a Bank grants any such participating interest to a Participant, whether
or not upon notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the
Borrower and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the Borrower's obligations hereunder
including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii) or (iii) of Section 11.05 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in
its participation agreement, be entitled to the benefits of Section 2.16
and Article 10 with respect to its participating interest. An assignment
or other transfer which is not permitted by subsection (c) or (d) below
shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection.
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent
to an initial Commitment of not less than $10,000,000) of all, of its
rights and obligations under this Agreement and the Notes, and such
Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit
G hereto signed by such Assignee and such transferor Bank, with (and
subject to) the subscribed consent of the Borrower, which shall not be
unreasonably withheld, and each Issuing Bank and the Agent; provided that
if an Assignee is an affiliate of such transferor Bank or was a Bank
immediately before such assignment, no such consent of the Borrower or the
Agent shall be required; and provided further that such assignment may, but
need not, include rights of the transferor Bank in respect of outstanding
Money Market Loans. When such instrument has been signed and delivered by
the parties thereto and such Assignee has paid to such transferor Bank the
purchase price agreed between such transferor Bank and such Assignee, such
Assignee shall be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from
its obligations hereunder to a corresponding extent, and no further consent
or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection, the transferor Bank, the Agent and
the Borrower shall make appropriate arrangements so that, if required, a
new Note is issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative
fee for processing such assignment in the amount of $2,500. If the
Assignee is not incorporated under the Laws of the United States or a state
thereof, it shall deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of any United States federal
income taxes in accordance with Section 10.03.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No
such assignment shall release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 10.03
or 10.04 than such Bank would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with the Borrower's
prior written consent or by reason of the provisions of Section 10.02,
10.03 or 10.04 requiring such Bank to designate a different Applicable
Lending Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
SECTION 11.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension
or maintenance of the credit provided for in this Agreement.
SECTION 11.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the Laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by Law, any
objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 11.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement constitutes the
entire agreement and understanding among the parties hereto and supersedes
any and all prior agreements and understandings, oral or written, relating
to the subject matter hereof. This Agreement shall become effective when
the Agent has received from each of the parties hereto a counterpart hereof
signed by such party or facsimile or other written confirmation
satisfactory to the Agent confirming that such party has signed a
counterpart hereof.
SECTION 11.10. Consequences of Effectiveness; Transitional
Provisions. (a) On the Effective Date, the commitments under the Existing
Agreement shall terminate without further action by any party thereto. The
Agent will promptly notify each of the other parties hereto and to the
Existing Agreement of the effectiveness of this Agreement.
(b) Concurrently with the effectiveness of this Agreement, the
Borrower shall prepay in full (including accrued and unpaid interest
thereon to, but excluding, the Effective Date (i) all "Money Market Loans"
outstanding under the Existing Agreement made by "Banks" under the Existing
Agreement which are not Banks hereunder and (ii) all Committed Loans
outstanding under the Existing Agreement. Any "Money Market Loans"
outstanding under the Existing Agreement on the Effective Date made by
Banks parties to this Agreement shall remain outstanding as Money Market
Loans hereunder on the terms previously established with respect thereto
under the Existing Agreement. Any "Letters of Credit" issued by the
Issuing Bank under the Existing Agreement and outstanding on the Effective
Date shall remain outstanding as Letters of Credit hereunder. Concurrently
with the effectiveness of this Agreement, the Borrower shall pay all
accrued and unpaid commitment and facility fees under the Existing
Agreement to, but excluding, the Effective Date.
(c) The Banks which are parties to the Existing Agreement, comprising
the "Required Banks" as defined therein, hereby waive any requirement of
notice of termination of the Commitments pursuant to Section 2.09 and any
restriction on prepayment of Money Market Loans to the extent necessary to
give effect to the subsections (a) and (b) above, provided that any such
prepayment of Money Market Loans shall be subject to Section 2.13 of the
Existing Agreement.
SECTION 11.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
ULTRAMAR DIAMOND SHAMROCK
CORPORATION
By /s/ H. Pete Smith
Title: Executive Vice
President and Chief
Financial Officer
Address: 9830 Colonnade Blvd.
San Antonio, TX 78230
Facsimile: 210-641-8484
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent and as Bank
By: /s/ James S. Finch
Title: Vice President
Address: 60 Wall Street
New York, NY 10260
Facsimile: 212-648-5014
THE CHASE MANHATTAN BANK
as Syndication Agent and as Bank
By: /s/ Laurie B. Perper
Title: Vice President
CO-AGENTS:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ David E. Sisler
Title: Vice President
BARCLAYS BANK PLC
By: /s/ Illegible
Title: Associate Director
CIBC, INC
By: /s/ Aleksandra K. Dymanus
Title: Authorized Signatory
THE INDUSTRIAL BANK OF JAPAN,
LIMITED NEW YORK BRANCH
By: /s/ Kensaku Iwata
Title: Senior Vice President &
Deputy General Manager,
Houston Office
ROYAL BANK OF CANADA
By: /s/ J. D. Frost
Title: Senior Manager
PARTICIPANTS:
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
Title: Senior Manager
Loan Operations
THE BANK OF TOKYO-MITSUBISHI, LTD.,
HOUSTON AGENCY
By: /s/ Michael Meins
Title: Vice President
THE FUJI BANK, LIMITED
By: /s/ Jacques M. Azagury
Title: Vice President & Manager
NATIONSBANK OF TEXAS, N.A.
By: /s/ James V. Ducote
Title: Vice President
THE SANWA BANK LIMITED
By: /s/ Matthew G. Patrick
Title: Vice President
BANK ONE OF TEXAS, N.A.
By: /s/ Illegible
Title: Senior Vice President
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By: /s/ Henry F. Setina
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Pascal Poupelle
Title: Executive Vice President
DEN NORSKE BANK ASA
By: /s/ Byron L. Cooley
Title: Senior Vice President
By: /s/ Illegible
Title: Senior Vice President
THE FROST NATIONAL BANK
By: /s/ Illegible
Title: Senior Vice President
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By: /s/ W. Benson Vance
Title: Assistant Vice President
By: /s/ J. Finley Biggerstaff
Title: Assistant Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ Harumitsu Seki
Title: General Manager
CAISSE NATIONALE DE CREDIT
AGRICOLE
By: /s/ Dean Balice
Title: Senior Vice President
Branch Manager
BANK OF SCOTLAND
By: /s/ Joseph Fratus
Title: Asst. Vice President
COMMERCIA BANK
By: /s/ Reginald M. Goldsmith, III
Title: Vice President
COMMITMENT SCHEDULE
Bank
Name of Lender Commitment
Morgan Guaranty Trust
Company of New York $ 64,750,000
The Chase Manhattan Bank $ 64,750,000
Bank of America National Trust
and Savings Association $ 45,000,000
Barclays Bank PLC $ 45,000,000
CIBC, Inc. $ 45,000,000
The Industrial Bank
of Japan, Limited, New York
Branch $ 45,000,000
Royal Bank of Canada $ 45,000,000
The Bank of Nova Scotia $ 35,000,000
Bank of Tokyo-Mitsubishi,
Ltd., Houston Agency $ 35,000,000
The Fuji Bank, Limited $ 35,000,000
NationsBank of Texas, N.A. $ 35,000,000
The Sanwa Bank Limited $ 35,000,000
Bank One Texas, N.A. $ 20,000,000
Banque Nationale de Paris
Houston Agency $ 20,000,000
Credit Lyonnais New York
Branch $ 20,000,000
Den Norske Bank ASA $ 20,000,000
The Frost National Bank $ 20,000,000
Union Bank of Switzerland
Houston Agency $ 20,000,000
The Sumitomo Bank, Limited $ 18,000,000
Caisse Nationale de Credit
Agricole $ 15,000,000
Bank of Scotland $ 10,000,000
Comercia Bank $ 7,500,000
Total: $700,000,000
PRICING SCHEDULE
Each of "Facility Fee Rate", "Euro-Dollar Margin," "CD Margin" and "LC
Fee Rate" means, for any day, the rate set forth below in the row opposite
such term and in the column corresponding to the Pricing Level that applies
for such day:
Pricing Level Level I Level II Level III Level IV Level V Level VI
Facility Fee
Rate .07% .08% .09% .11% .15% .1875%
Euro-Dollar
Margin .155% .17% .185% .215% .3% .4375%
CD Margin .28% .295% .31% .34% .425% .5625%
LC Fee Rate .155% .17% .185% .215% .3% .4375%
For purposes of this Schedule, the following terms have the following
meanings, subject to the final paragraph of this Pricing Schedule:
"Level I Pricing" applies for any day if, on such day, the Borrower's
long-term debt is rated A or higher by S&P or A2 or higher by Moody's.
"Level II Pricing" applies for any day if, on such day, (i) the
Borrower's long-term debt is rated A- or higher by S&P or A3 or higher by
Moody's and (ii) Level I Pricing does not apply.
"Level III Pricing" applies for any day if, on such day, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher
by Moody's and (ii) neither Level I Pricing nor Level II Pricing applies
"Level IV Pricing" applies for any day if, on such day, (i) the
Borrower's long-term debt is rated BBB or higher by S&P or Baa2 or higher
by Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III
Pricing applies.
"Level V Pricing" applies for any day if, on such day, (i) the
Borrower's long-term debt is rated BBB- or higher by S&P or Baa3 or higher
by Moody's and (ii) none of Level I Pricing, Level II Pricing, Level III
Pricing and Level IV Pricing applies.
"Level VI Pricing" applies for any day if no other Pricing Level
applies for such day.
"Pricing Level" refers to the determination of which of Level I, Level
II, Level III, Level IV or Level V Pricing applies for any day.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating assigned
to any other debt security of the Borrower shall be disregarded. The
ratings in effect for any day are those in effect at the close of business
on such day. In the case of split ratings from S&P and Moody's, the rating
to be used to determine Pricing is the higher of the two (e.g. BBB+/Baa2
results in Level III Pricing), provided that in the event the split is more
than one full category, the average (or the higher of the two intermediate
ratings) shall be used (e.g. BBB+/Baa3 results in Level IV Pricing, as does
BBB+/Ba1).
SCHEDULE 1.1
SIGNIFICANT SUBSIDIARIES
Canadian Ultramar Company
Diamond Shamrock Refining and Marketing Company
D-S Venture Company, L.L.C.
Diamond Shamrock Refining Company, L.P.
Ultramar Credit Corporation
Ultramar Inc.
Ultramar Ltee
SCHEDULE 4.12
PLANS
Ultramar Diamond Shamrock Corporation Career Average Retirement Income Plan
Ultramar Diamond Shamrock Corporation Retirement Income Plan
Ultramar Diamond Shamrock Corporation Employees' Retirement Plan
Ultramar Diamond Shamrock Corporation Employee Stock Ownership Plan I
Ultramar Diamond Shamrock Corporation Employee Stock Ownership Plan II
Ultramar Diamond Shamrock Corporation 401(k) Retirement Savings Plan
Ultramar Diamond Shamrock Corporation U.S. Savings Incentive Plan
Ultramar Energy 401(k) Plan
Ultramar Diamond Shamrock Corporation U.S. Employee's Retirement Plan
MULTIEMPLOYER PLANS
New England Teamsters & Trucking Industry Pension Fund
Automotive Industries Welfare Fund
Western Conference of Teamsters Pension Trust Fund - Northern California
Area
Western Conference of Teamsters Pension Trust Fund - Southern Area
EXHIBIT A - Note
NOTE
New York, New York
_____________, 199_
For value received, Ultramar Diamond Shamrock Corporation, a Delaware
corporation (the "Borrower"), promises to pay to the order of
______________________ (the "Bank"), for the account of its Applicable
Lending Office, the unpaid principal amount of each Loan made by the Bank
to the Borrower pursuant to the Credit Agreement referred to below on the
maturity date provided for in the Credit Agreement. The Borrower promises
to pay interest on the unpaid principal amount of each such Loan on the
dates and at the rate or rates provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money of
the United States in Federal or other immediately available funds at the
office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached
to and made a part hereof; provided that the failure of the Bank to make
any such recordation or endorsement shall not affect the Borrower's
obligations hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of July 28, 1997 among Ultramar Diamond Shamrock Corporation, the
Banks party thereto and Morgan Guaranty Trust Company of New York, as Agent
(as the same may be amended from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
Ultramar Diamond Shamrock
Corporation
By:
Name:
Title:
LOANS AND PAYMENTS OF PRINCIPAL
Amount Type Amount of
of of Principal Notation
Date Loan Loan Repaid Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
EXHIBIT B - Money Market Quote Request
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Ultramar Diamond Shamrock Corporation
Re: Credit Agreement (the "Credit Agreement") dated as of
July 28, 1997 among Ultramar Diamond Shamrock Corporation,
the Banks party thereto and the Agent
We hereby give notice pursuant to Section ______ of the Credit
Agreement that we request Money Market Quotes for the following proposed
Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount (1) Interest Period (2)
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Ultramar Diamond Shamrock
Corporation
By:
Name:
Title:
(1) Amount must be $5,000,000 or a larger multiple of $1,000,000.
(2) Not less than one month (LIBOR Auction) or not less than 7 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
EXHIBIT C - Invitation for Money Market Quotes
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Ultramar Diamond
Shamrock Corporation (the "Borrower")
Pursuant to Section ______ of the Credit Agreement dated as of July
28, 1997 among Ultramar Diamond Shamrock Corporation, the Banks party
thereto and the undersigned, as Agent, we are pleased on behalf of the
Borrower to invite you to submit Money Market Quotes to the Borrower for
the following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Agent
By:
Authorized Officer
EXHIBIT D - Money Market Quote
FORM OF MONEY MARKET QUOTE
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to Ultramar Diamond Shamrock
Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the
following principal amounts, for the following
Interest Periods and at the following rates:
Principal Interest Money Market
Amount Period [Margin****] [Absolute Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not
exceed $____________.]**
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of July 28, 1997 among Ultramar Diamond Shamrock
Corporation, the Banks party thereto and yourselves, as Agent, irrevocably
obligates us to make the Money Market Loans(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
Authorized Officer
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not
exceed principal amount requested. Specify aggregate
limitation if the sum of the individual offers exceeds
the amount the Bank is willing to lend. Each bid must
be made for $5,000,000 or a larger multiple of
$1,000,000.
*** Not less than one month or not less than 30 days, as
specified in the related Invitation. No more than five
bids are permitted for each Interest Period.
**** Margin over or under the London Interbank Offered Rate
determined for the applicable Interest Period. Specify
percentage (to the nearest 1/10,000 of 1%) and specify
whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest
1/10,000th of 1%).
EXHIBIT E - Opinion of Counsel for the Borrower
OPINION OF
GENERAL COUNSEL OF THE BORROWER
July 28, 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I am Executive Vice President, General Counsel and Secretary of
Ultramar Diamond Shamrock Corporation (the "Borrower") and I am familiar
with the Credit Agreement dated as of July 28, 1997 (the "Credit
Agreement") among the Borrower, the Banks party thereto, and Morgan
Guaranty Trust Company of New York, as Agent. Terms defined in the Credit
Agreement are used herein as therein defined. The Credit Agreement and the
Notes are collectively referred to as the "Documents." This opinion is
being rendered to you pursuant to Section 3.01(b) of the Credit Agreement.
I have examined such corporate documents of the Borrower, certificates
of public officials, and other agreements, instruments, certificates and
documents as I have deemed necessary as a basis for the opinions expressed
herein.
In rendering the opinions expressed below, I have assumed, with your
permission and without independent verification, that:
(a) the signatures of all persons (other than the Borrower)
signing documents in connection with which this opinion is rendered are
genuine and authorized;
(b) all documents submitted to me as originals or duplicate
originals are authentic;
(c) all documents submitted to me as copies, whether
certified or not, conform to authentic original documents; and
(d) all parties to the Credit Agreement (other than the
Borrower) have full power and authority to execute, deliver and perform
their obligations under such documents, and all such documents have been
duly authorized by all necessary action on the part of parties thereto
(other than the Borrower), have been duly executed and delivered by such
other parties, and are valid, binding and enforceable obligations of such
other parties.
Subject to the foregoing and to further qualifications and limitations
set forth below, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes (a) are within the Borrower's corporate
powers, (b) have been duly authorized by all necessary corporate action,
(c) do not require any action by or in respect of, or filing with, any
governmental body, agency or official and (d) do not contravene, or
constitute a default under, any provision of applicable Law or regulation
or of the Borrower's certificate of incorporation or by-laws or, to the
best of my knowledge, of any agreement, judgment, injunction, order, 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 the
Borrower or any of its Significant Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note issued thereunder today constitutes a valid and
binding obligation of the Borrower, in each case enforceable in accordance
with its terms.
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental
body, agency or official which could reasonably be expected to have a
Material Adverse Effect or which in any manner draws into question the
validity of the Credit Agreement or the Notes.
5. Each of the Borrower's corporate Significant Subsidiaries is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation except where the failure to validly exist or
to be in good standing could not reasonably be expected to have a Material
Adverse Effect.
My opinions are subject to the following qualifications:
(i) my opinions are subject to the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting creditors' or secured creditors' rights generally;
(ii) the binding effect and enforceability of the Documents and
the availability of injunctive relief or other equitable remedies
thereunder are subject to the effect of general principles of equity
(regardless of whether enforcement is considered in proceedings at law or
in equity);
(iii) the binding effect and the enforceability of the Documents
are subject to the effect of laws and judicial decisions which have imposed
duties and standards of conduct (including, without limitation, obligations
of good faith, fair dealing and reasonableness) upon creditors or secured
creditors;
(iv) I express no opinion as to the enforceability of cumulative
remedies to the extent such cumulative remedies purport to or would have
the effect of compensating the party entitled to the benefits thereof in
amounts in excess of the actual loss suffered by such party;
(v) requirements in the Documents specifying that provisions
thereof may only be waived in writing may not be valid, binding or
enforceable to the extent that an oral agreement or an implied agreement
by trade practice or course of conduct has been created modifying any
provision of such documents;
(vi) waivers of equitable rights and defenses may not be valid,
binding or enforceable under state or federal law;
(vii) I express no opinion as to the enforceability of the
indemnification provisions of the Documents insofar as said provisions
contravene public policy; and
(viii) I am admitted to practice law in the State of New York
and as such, I express no opinion as to, or the effect or applicability of,
any laws other than the General Corporation Law of the State of Delaware,
the laws of the State of New York and the federal laws of the United States
of America.
My opinions are limited to the specific issues addressed and are
limited in all respects to laws and facts existing on the date hereof. By
rendering these opinions, I do not undertake to advise you of any changes
in such laws or facts which may occur after the date hereof.
This letter is furnished to you pursuant to the Credit Agreement and
is not to be relied upon by any other person or entity or used, circulated,
quoted or otherwise relied upon for any other purpose except that it may
be relied upon as of the date hereof by persons which become Banks after
the date hereof.
Sincerely,
EXHIBIT F - Opinion of Special Counsel for the Agent
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
July 28, 1997
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement dated
as of July 28, 1997 (the "Credit Agreement") among Ultramar Diamond
Shamrock Corporation, a Delaware corporation (the "Borrower"), the Banks
party thereto, and Morgan Guaranty Trust Company of New York, as Agent and
have acted as special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms
defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted
such other investigations of fact and Law as we have deemed necessary or
advisable for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers,
and have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note issued thereunder today constitutes a valid and
binding obligation of the Borrower, in each case enforceable in accordance
with its terms except as the same may be limited by bankruptcy, insolvency
or similar Laws affecting creditors' rights generally and by general
principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the Laws of the State of New York, the federal Laws
of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion
as to the effect (if any) of any Law of any jurisdiction (except the State
of New York) in which any Bank is located which limits the rate of interest
that such Bank may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT G - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among (NAME OF ASSIGNOR) (the
"Assignor"), (NAME OF ASSIGNEE) (the "Assignee"), Ultramar Diamond Shamrock
Corporation (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent (the "Agent").
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of July 28, 1997 among the
Borrower, the Assignor and the other Banks party thereto, as Banks, and the
Agent (as amended from time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of
Credit in an aggregate principal amount at any time outstanding not to
exceed $____________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the
"Assigned Amount"), together with a corresponding portion of its
outstanding Committed Loans and Letter of Credit Liabilities, and the
Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the Assigned Amount,
including the purchase from the Assignor of the corresponding portion of
the principal amount of each of the Committed Loans made by, and Letter of
Credit Liabilities of, the Assignor outstanding at the date hereof. Upon
the execution and delivery hereof by the Assignor, the Assignee, [the
Borrower, the Issuing Banks and the Agent] and the payment of the amounts
specified in Section 3 required to be paid on the date hereof (i) the
Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee.
The assignment provided for herein shall be without recourse to the
Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between
them.(1) It is understood that commitment and/or facility fees accrued
before the date hereof are for the account of the Assignor and such fees
accruing on and after the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee agrees that if it receives any amount
under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to
the extent of such other party's interest therein and promptly pay the same
to such other party.
SECTION 4. Consent of the [Borrower, the Agent and] the Issuing
Banks. This Agreement is conditioned upon the consent of [the Borrower,
the Agent and] the Issuing Banks pursuant to Section 11.06(c) of the Credit
Agreement. The execution of this Agreement by such Persons is evidence of
their consent. [Pursuant to Section 11.06(c), the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee to evidence
the assignment and assumption provided for herein.]
____________________
(1) Amount should combine principal together with accrued interest
and breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the Assignee. It
may be preferable in an appropriate case to specify these amounts
generically or by formula rather than as a fixed sum.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no
responsibility with respect to, the solvency, financial condition, or
statements of the Borrower, or the validity and enforceability of the
Borrower's obligations under the Credit Agreement or any Note. The
Assignee acknowledges that it has, independently and without reliance on
the Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of
the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date
first above written.
(NAME OF ASSIGNOR)
By:
Name:
Title:
(NAME OF ASSIGNEE)
By:
Name:
Title:
[ULTRAMAR DIAMOND SHAMROCK
CORPORATION
By:
Name:
Title:]
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By:
Name:
Title:]
[LETTER OF CREDIT ISSUING
BANK]
By:
Name:
Title:
Exhibit 11 - Statement re: Computation of Earnings Per Share
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(dollars in millions, except per share data
and shares in thousands)
Primary:
Average shares outstanding 74,799 74,402 74,762 74,269
Net effect of dilutive
stock options - based on
the treasury stock method
using average market price 994 950 915 838
Total 75,793 75,352 75,677 75,107
Net Income $ 46.3 $ 47.1 $ 73.9 $ 69.1
Dividend requirement on
preferred stock 1.1 1.1 2.2 2.2
Net income applicable to
common shares $ 45.2 $ 46.0 $ 71.7 $ 66.9
Net income per common
share: $ 0.60 $ 0.61 $ 0.95 $ 0.89
Fully Diluted:
Average common shares
outstanding 74,799 74,402 74,762 74,269
Net effect of dilutive
stock options - based
on the treasury stock
method using the
period-end market price,
if higher than average
market price 1,135 952 1,069 922
Assumed conversion of 5%
cumulative preferred
stock 3,319 3,320 3,320 3,320
Total 79,253 78,674 79,151 78,511
Net income $ 46.3 $ 47.1 $ 73.9 $ 69.1
Net income per common share $ 0.58 $ 0.60 $ 0.93 $ 0.88
<TABLE> <S> <C>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 93,000
<SECURITIES> 0
<RECEIVABLES> 596,000
<ALLOWANCES> 150,000
<INVENTORY> 562,700
<CURRENT-ASSETS> 1,172,500
<PP&E> 3,730,200
<DEPRECIATION> 1,011,200
<TOTAL-ASSETS> 4,195,800
<CURRENT-LIABILITIES> 778,300
<BONDS> 1,834,000
200,000
0
<COMMON> 700
<OTHER-SE> 1,273,800
<TOTAL-LIABILITY-AND-EQUITY> 4,195,800
<SALES> 4,975,600
<TOTAL-REVENUES> 4,975,600
<CGS> 3,537,900
<TOTAL-COSTS> 3,537,900
<OTHER-EXPENSES> 1,261,200
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<INTEREST-EXPENSE> 54,200
<INCOME-PRETAX> 122,300
<INCOME-TAX> 48,400
<INCOME-CONTINUING> 73,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,900
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.93
</TABLE>
