AGREEMENT AND PLAN OF DISTRIBUTION
dated as of ___________ __, 1997
between
VALERO ENERGY CORPORATION
and
VALERO REFINING AND MARKETING COMPANY
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . .2
1.1. Definitions . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II TRANSACTIONS RELATING TO THE DISTRIBUTION . . . . . .8
2.1. Intercorporate Reorganization . . . . . . . . . . . .8
2.2. Assumption of Liabilities . . . . . . . . . . . . . 12
2.3. Repayment of Intercompany Indebtedness and
Cash Dividend . . . . . . . . . . . . . . . . . . 13
2.4. Resignations. . . . . . . . . . . . . . . . . . . . 13
2.5. VRM Certificate of Incorporation and By-Laws;
Rights Plan; Name Change. . . . . . . . . . . . . 14
2.6. Insurance . . . . . . . . . . . . . . . . . . . . . 14
2.7. Nonassignable Contracts . . . . . . . . . . . . . . 14
2.8. Interim Services Agreement. . . . . . . . . . . . . 15
2.9. Company Guarantees. . . . . . . . . . . . . . . . . 15
2.10. Conduct of Businesses. . . . . . . . . . . . . . . 16
ARTICLE III MECHANICS OF DISTRIBUTION. . . . . . . . . . . . . 16
3.1. Mechanics of Distribution . . . . . . . . . . . . . 16
3.2. Timing of Distribution. . . . . . . . . . . . . . . 16
ARTICLE IV OTHER AGREEMENTS. . . . . . . . . . . . . . . . . . 16
4.1. Use of Names, Trademarks, etc.. . . . . . . . . . . 16
4.2. Intercompany Accounts as of the Time of
Distribution. . . . . . . . . . . . . . . . . . .17
4.3. Hunting Lease . . . . . . . . . . . . . . . . . . . 17
4.4. Airplanes . . . . . . . . . . . . . . . . . . . . . 17
4.5. Intercompany Arrangements . . . . . . . . . . . . . 17
4.6. Further Assurances. . . . . . . . . . . . . . . . . 18
ARTICLE V TAX AND EMPLOYEE MATTERS . . . . . . . . . . . . . . 18
5.1. Tax Sharing; Exclusivity of Tax Sharing Agreement . 18
5.2. Employee Benefits . . . . . . . . . . . . . . . . . 18
5.3. Employees . . . . . . . . . . . . . . . . . . . . . 18
5.4. Non-Competition Covenants . . . . . . . . . . . . . 19
ARTICLE VI ACCESS TO INFORMATION . . . . . . . . . . . . . . . 20
6.1. Provision of Records and Information. . . . . . . . 20
6.2. Access to Information . . . . . . . . . . . . . . . 20
6.3. Production of Witnesses . . . . . . . . . . . . . . 21
6.4. Retention of Records. . . . . . . . . . . . . . . . 21
6.5. Confidentiality . . . . . . . . . . . . . . . . . . 21
ARTICLE VII CONDITIONS . . . . . . . . . . . . . . . . . . . . 22
7.1. Conditions to Obligations of the Company. . . . . . 22
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . 23
8.1. Indemnification by VRM. . . . . . . . . . . . . . . 23
8.2. Indemnification by Retained Company . . . . . . . . 24
8.3. Procedures Relating to Indemnification. . . . . . . 24
8.4. Certain Limitations . . . . . . . . . . . . . . . . 26
8.5. Express Negligence. . . . . . . . . . . . . . . . . 26
ARTICLE IX MISCELLANEOUS AND GENERAL . . . . . . . . . . . . . 27
9.1. Modification or Amendment . . . . . . . . . . . . . 27
9.2. Waiver; Remedies. . . . . . . . . . . . . . . . . . 27
9.3. Counterparts. . . . . . . . . . . . . . . . . . . . 27
9.4. Governing Law . . . . . . . . . . . . . . . . . . . 27
9.5. Notices . . . . . . . . . . . . . . . . . . . . . . 27
9.6. Entire Agreement. . . . . . . . . . . . . . . . . . 28
9.7. Certain Obligations . . . . . . . . . . . . . . . . 28
9.8. Assignment. . . . . . . . . . . . . . . . . . . . . 29
9.9. Captions. . . . . . . . . . . . . . . . . . . . . . 29
9.10. Specific Performance . . . . . . . . . . . . . . . 29
9.11. Severability . . . . . . . . . . . . . . . . . . . 29
9.12. Third Party Beneficiaries. . . . . . . . . . . . . 29
9.13. Schedules. . . . . . . . . . . . . . . . . . . . . 29
9.14. Tax Sharing Agreement. . . . . . . . . . . . . . . 30
Annex A Interim Services Agreement
AGREEMENT AND PLAN OF DISTRIBUTION, dated as of __________ __, 1997
(this "Agreement"), between VALERO ENERGY CORPORATION, a Delaware corporation
(the "Company") and VALERO REFINING AND MARKETING COMPANY, a Delaware
corporation and as of the date hereof a wholly-owned subsidiary of the Company
("VRM").
W I T N E S S E T H:
WHEREAS, the Company, PG&E Corporation, a California corporation
("Acquiror"), and PG&E Acquisition Corporation, a Delaware corporation
("Sub"), have entered into an Agreement and Plan of Merger dated as of January
31, 1997 (the "Merger Agreement"), providing for the Merger (as defined in the
Merger Agreement) of Sub with and into the Company;
WHEREAS, immediately prior to the Effective Time (as defined in the
Merger Agreement), the Company's Board of Directors, subject to the approval
of the Company's stockholders, expects to distribute to the holders of common
stock, par value $1.00 per share, of the Company ("Company Common Stock"),
other than shares held in the treasury of the Company, on a pro rata basis all
of the issued and outstanding shares of common stock, par value $0.01 per
share, of VRM ("VRM Common Stock"), along with the associated VRM Rights (as
defined in the Merger Agreement) (the "Distribution");
WHEREAS, the purpose of the Distribution is to make possible the
Merger by divesting the Company of the businesses and operations to be
conducted by VRM, which Acquiror is unwilling to acquire;
WHEREAS, it is the intention of the parties to this Agreement that
for federal income tax purposes the Distribution shall qualify as a
transaction described in Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code") and a "reorganization" within the meaning of Section
368(a)(1)(D) of the Code; and
WHEREAS, this Agreement sets forth or provides for certain
agreements by and between the Company and VRM in consideration of the
separation of the ownership of the Company and VRM;
NOW, THEREFORE, in consideration of the premises, and of the
respective covenants and agreements set forth herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to such terms in the
Merger Agreement. As used in this Agreement, the following terms shall have
the following respective meanings:
"Acts or Omissions" shall mean negligence, gross negligence,
breaches of express or implied warranties, premises liability, violations of
the Texas Deceptive Trade Practices Act, breaches of duties under the law of
strict liability in tort (including defects in design, manufacturing,
marketing, warnings, and distribution), defamation, false imprisonment or
arrest, malicious prosecution, or any other misfeasance, malfeasance,
non-feasance, breaches of legal duties, tortious conduct, intentional torts,
malicious conduct, false or misleading or deceptive or unconscionable conduct,
or any combination thereof.
"Airplanes" shall mean the airplanes to be co-owned by Valero
Corporate Services and Valero Management Company described on Schedule
2.1(b)(ii)(J).
"By-Laws" shall mean VRM's by-laws substantially in the form filed
as an Exhibit to the VRM Registration Statement.
"Cash Dividend" shall have the meaning set forth in Section 2.3(a).
"Certificate of Incorporation" shall mean VRM's amended and restated
certificate of incorporation substantially in the form filed as an Exhibit to
the VRM Registration Statement.
"Company Group" shall mean the Retained Company and the Retained
Subsidiaries, whether now or hereafter existing.
"Company Guarantees" shall mean, collectively, the guarantees of
obligations of the VRM Group by the Company or the Retained Subsidiaries, a
complete and accurate list of which is set forth on Schedule 1.1(a).
"Contract Rights" shall mean, as of any given date, any and all
right, title and interest of the Company and any of its Subsidiaries (other
than VRM and its Subsidiaries) in and to any and all of the Project Contracts
and other rights under, in and to contracts and agreements, written or oral,
express or implied, legal and equitable, of every kind or description,
pertaining or related in any way to the MTBE Project; and all estates, rights,
privileges, claims and causes of action, immunities, and other appurtenances
and rights, and all assets subject to liabilities connected to the above and
which, in any such case, is either (i) in force and effective at the date
hereof, or (ii) arises under or with respect to any document, paper,
instrument or other intangible interest of any of the types specified above,
in force and effect at the date hereof and pursuant to which any reversion,
remainder, contingent or other residual right, title, interest or liability
remains in the Company, and which in each case pertains or relates in any way
to the MTBE Project; together with all tolls, rents, revenues, issues,
earnings, income, products and profits thereof accruing on or after the date
hereof.
"Distribution Date" shall mean the date determined by the Board of
Directors of the Company on which the Distribution is to be effected.
"Environmental Law" shall mean any and all applicable laws,
statutes, ordinances, rules, regulations, orders, or permits of any
Governmental Entity or agency regulating, relating to or pertaining to the
protection of health, or the environment, or the use, storage, treatment,
generation, transportation, handling, Release or disposal of Hazardous
Substances, in effect in any and all jurisdictions in which the Company is
conducting or at any time has conducted the business, including without
limitation, the Oil Pollution Act of 1990, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1976, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Emergency Planning and Community
Right-to-Know Act, the Hazardous Liquid Pipeline Safety Act, as amended, and
the Natural Gas Pipeline Safety Act of 1979, as amended, and regulations
adopted thereunder.
"Environmental Liabilities" shall mean all Liabilities relating to
or arising out of any Environmental Law or Environmental Permit or relating to
Hazardous Substances or environmental, health or safety matters (including
without limitation removal, remediation or cleanup costs, investigatory costs,
governmental response costs and administrative oversight costs, environmental
monitoring costs, natural resources damages, property damages, personal injury
damages, costs of compliance with any contractual obligation or settlement,
judgment or other determination of Liability and indemnity, contribution or
similar obligations).
"Filings" shall mean the Registration Statements, the Proxy
Statement-Prospectus, and any other document filed or required to be filed
with the SEC in connection with the transactions contemplated by the
Reorganization Agreements, or any preliminary or final form thereof or any
amendment or supplement thereto.
"Group" shall mean the Company Group or the VRM Group, as
applicable.
"Hazardous Substance" shall mean any waste, substance, material,
pollutant or contaminant presently listed, defined, designated or classified
as hazardous or regulated, under any Environmental Law.
"Hunting Lease" shall mean the hunting lease described on Schedule
2.1(b)(ii)(K) to be assigned to Valero Corporate Services.
"Indemnifiable Losses" shall mean, subject to Section 8.4, all
losses, Liabilities, damages, deficiencies, obligations, fines, expenses,
claims, demands, actions, suits, proceedings, judgments or settlements,
whether or not resulting from Third Party Claims, including interest and
penalties recovered by a third party with respect thereto and out-of-pocket
expenses and reasonable attorneys' experts' and accountants', fees and
expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of the Indemnitee's rights hereunder,
suffered by an Indemnitee.
"Indemnitee" shall mean any of the Retained Company Indemnitees or
the VRM Indemnitees, as applicable, who or which may seek indemnification
under this Agreement.
"Information" shall mean all records, books, subscriptions,
contracts, instruments, computer data and other data and information.
"Intercompany Arrangement" shall have the meaning set forth in
Section 4.5.
"Intercompany Note" shall have the meaning set forth in Section
2.3(b).
"Intercompany Reorganization" shall mean the actions taken prior to
the Distribution to separate the VRM Business and the Retained Business,
including without limitation, the actions set forth in Article II.
"IRBs" shall mean the 10.25% Refunding Revenue Bonds Series 1987A
and the 10.625% Revenue Bonds Series 1987B, issued by the Industrial
Development Corporation of Port Corpus Christi, with VRM as the borrower and
the Company as guarantor.
"Liabilities" shall mean with respect to any Person, any and all
debts, liabilities, commitments and obligations, whether fixed, contingent or
absolute, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever or however arising, including, without
limitation, all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under law, rule,
regulation, permits, action or proceeding before any court or regulatory
agency or administrative agency, order or consent decree or any award of any
arbitrator of any kind, and those arising under contract, commitment or
undertaking.
"MTBE Project" shall mean the installation of a plant in Mexico to
produce methyl tertiary butyl ether and transactions related thereto described
on Schedule 1.1(b).
"No-Action Letter" shall mean a letter from the staff of the SEC
indicating, among other things, that the Division of Corporation Finance will
not recommend enforcement action to the SEC if the VRM Common Stock is
distributed pursuant to the Distribution without registration under the
Securities Act.
"Personal Property" shall mean, collectively, as of any given date,
the personal property owned by Valero Management Company including without
limitation computer hardware, communications equipment, auto, trucks, personal
computers, lamps, chairs, desks, artwork, office furniture, books and office
supplies.
"Project Contracts" shall mean, as of any given date, and include
any contract or agreement heretofore entered into for the provision of any
money, guarantee, debt, service, labor, materials or improvements, or any
other good, service, duty, obligation or thing of value pertaining or related
to the MTBE Project, including, without limitation, any and all contracts,
agreements, guarantees, letters, letters of intent, undertakings or
understandings, written or unwritten, in respect thereto, including, without
limitation the Letter of Intent, the Memorandum of Understanding, the
PROESA-BANAMEX Letter, the VEC-PEMEX Letter, the PIBSA Offer Letter, the
▇▇▇▇▇▇▇ Letter, the Association Agreement, the MTBE Sales Agreement, the
Butane Supply Agreement, the Construction Agreement, the Surety Agreement, the
License Agreement, the Technical Support Agreement, the PEMEX Option, the UOP
Agreements and the Negotiation Services Agreement (in each case, as defined on
Schedule 1.1(b)).
"Record Date" shall have the meaning set forth in Section 3.1.
"Release" shall have the meaning given such term in the
Comprehensive Environmental Response, Compensation and Liability Act 42 U.S.C.
s 9601(22).
"Retained Assets" shall mean, collectively, as of any given date,
any and all of the assets, properties and rights, whether tangible or
intangible, whether real, personal or mixed, whether fixed, contingent or
otherwise, and wherever located, of the Company and its Subsidiaries (other
than the VRM Assets).
"Retained Business" shall mean the business heretofore and currently
engaged in by the Company and its Subsidiaries and their respective
predecessors of purchasing, gathering, processing, storing, transporting,
selling, trading and marketing natural gas, the business of extracting,
processing, fractionating, transporting, selling, trading and marketing
natural gas liquids, and related risk management, and the business of
purchasing, wheeling, selling, marketing and trading electric power and
related risk management, each as currently engaged in by the Company through
VNG and its Subsidiaries.
"Retained Company Assumed Liabilities" shall mean, collectively, all
Liabilities relating to or arising in connection with the Retained Assets or
the Retained Business (other than such Liabilities expressly assumed or
retained by the VRM Group pursuant to this Agreement), whether arising before,
at or after the Time of Distribution, which are to be assumed by the Retained
Company or any Retained Subsidiary pursuant to the transactions contemplated
by this Agreement, including without limitation the Liabilities relating to or
arising out of the items set forth on Schedule 1.1(c), but in the any event,
excluding VRM Assumed Liabilities.
"Retained Company Indemnitees" shall mean the Retained Company
(including after the Effective Time the Acquiror), each Affiliate of the
Retained Company, including any of its direct or indirect Subsidiaries, and
each of their respective Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing.
"Retained Liabilities" shall mean, collectively, all of (i) the
Environmental Liabilities relating to or arising in connection with the
Retained Business, (ii) the Liabilities of any member of the Company Group
under this Agreement, any other Reorganization Agreement or the Interim
Services Agreement, in each case, to which the Company is a party or will be a
party, (iii) the Liabilities relating to or arising in connection with the
businesses, assets or operations of the Company Group (other than the VRM
Assumed Liabilities), as heretofore, currently or hereafter conducted, (iv)
the Retained Company Assumed Liabilities and (v) the Liabilities retained or
assumed by the Company or any member of the Company Group pursuant to the
Employee Benefits Agreement.
"Tax" or "Taxes" shall have the meaning set forth in the Tax Sharing
Agreement.
"Teco Litigation" shall mean Teco Pipeline Company ▇. ▇▇▇▇▇▇ Energy
Corporation, Valero Transmission, L.P., Valero Management Company, Valero
Hydrocarbons, L.P., VMGA Company, Valero Marketing, L.P., VNGC Holding
Company, Valero Industrial Gas, L.P., Valero Natural Gas Company, Valero Gas
Marketing, L.P., Valero Eastex Pipeline Company, VLDC, L.P., Valero
Transmission Company, Reata Industrial Gas, L.P., Valero Gas Marketing
Company, Valero Nortex, L.P., Valero Gas Storage Company, Valero Northern
Texas Company, Valero Hydrocarbons Company, West Texas Transmission Co., VT
Company, Valero Natural Gas Partners, L.P., Valero Management Partnership,
L.P., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; In the 215th Judicial District
Court of ▇▇▇▇▇▇ County, Texas (Cause No. 96- 020628) and any other action,
claim, lawsuit, arbitration or appeal to obtain or recover damages or any
other economic benefit as a result of any action or omission by any member of
the Company Group or any of its Representatives in connection with the
performance or exercise of duties or obligations, including statutory and
common law fiduciary duties, arising out of or related to the ownership,
operation, management or maintenance of the Valero-Teco West Texas System at
any time from February 28, 1985 to January 27, 1997.
"Third Party Claim" shall have the meaning set forth in Section
8.3(a).
"Time of Distribution" shall mean the time as of which the
Distribution is effective.
"Transfer Agent" shall mean ▇▇▇▇▇▇ Trust and Savings Bank, the
transfer agent for the Company Common Stock.
"UOP Agreements" shall mean, collectively, (a) the Engineering
Agreement, dated as of July 1, 1993, between UOP and PROESA, (b) the Oleflex
Process License Agreement, dated November 21, 1994, between UOP and PROESA,
(c) the Merox Process Licenses Agreement, dated November 21, 1994, between UOP
and PROESA, (d) the UOP Oxygenate Removal Process License Agreement, dated
November 21, 1994, between UOP and PROESA, (e) the ▇▇▇▇▇ Complete Saturation
Process License Agreement, dated November 21, 1994, between UOP and PROESA,
(f) the Ethermax Process License Agreement, dated November 21, 1994, between
UOP and PROESA, (g) the Butamer Process License Agreement, dated November 21,
1994, between UOP and PROESA, (h) the Guarantee Agreement, dated November 21,
1994, between UOP and PROESA, and (i) the Supply Agreement, dated November 21,
1994, between UOP Equitec Services, Inc. and PROESA, as each of the same may
be from time to time amended, restated, supplemented, superseded or replaced.
"Valero Coal Company" shall mean Valero Coal Company, a Delaware
corporation and, as of the date of this Agreement, a wholly-owned Subsidiary
of the Company.
"Valero Corporate Services" shall mean Valero Corporate Services
Company, a Delaware corporation and, as of the date of this Agreement, a
wholly-owned Subsidiary of the Company.
"Valero Management Company" shall mean Valero Management Company, a
Delaware corporation and, as of the date of this Agreement, a wholly-owned
Subsidiary of the Company.
"Valero Producing Company" shall mean Valero Producing Company, a
Delaware corporation and, as of the date of this Agreement, a wholly-owned
Subsidiary of the Company.
"VMGA Company" shall mean the VMGA Company, a Texas corporation and,
as of the date of this Agreement, a wholly-owned Subsidiary of Valero
Management Company.
"VRM Assets" shall mean, collectively, (i) all assets currently
owned by VRM and any of its Subsidiaries (other than any such assets which
pursuant to, or as a consequence of, this Agreement are to be transferred to,
or retitled in the name of the Company or one of the Retained Subsidiaries)
and which, as of and after the Time of Distribution are to be owned by the VRM
Group and (ii) all assets which are currently owned by the Company or one or
more of the Retained Subsidiaries and which pursuant to, or as a consequence
of, this Agreement are to be transferred to VRM or any of its Subsidiaries and
which as of and after the Time of Distribution are to be owned by a member of
the VRM Group.
"VRM Assumed Liabilities" shall mean, collectively, the Liabilities
set forth in Section 2.2(a).
"VRM Business" shall mean (i) the business of purchasing,
transporting, storing, processing, selling, trading, marketing and refining
crude oils, residual fuel oils and other refinery feedstocks, and of
manufacturing, transporting, storing, selling, trading and marketing
gasolines, gasoline blendstocks, butanes, liquefied petroleum gases, other
refined products and petrochemicals, as currently conducted by the Company
through VRM and its Subsidiaries, and related risk management (ii) certain
insurance-related operations as currently conducted through VMGA Company,
(iii) certain coal-seam gas and other coal-related operations as currently
conducted through Valero Coal Company, (iv) certain oil and gas exploration
and production operations as currently conducted through Valero Producing
Company, (v) certain real estate leasing operations as currently conducted
through Valero Management Company, and (vi) the business conducted with the
Butane Splitter and Debutanizer (but excluding any business conducted with the
assets of the VRM Business transferred or to be transferred to the Company
Group pursuant to this Agreement).
"VRM Common Stock" shall have the meaning set forth in the third
paragraph of this Agreement.
"VRM Group" shall mean VRM, its Subsidiaries, and that portion of
any Person, whether now or hereafter existing, which conduct the VRM Business
(after giving effect to the transfers set forth in Article II).
"VRM Indemnitees" shall mean VRM, each Affiliate of VRM from and
after the Time of Distribution and each of their respective Representatives
and each of the heirs, executors, successors and assigns of any of the
foregoing.
"VRM Liabilities" shall mean, collectively, all of (i) the
Environmental Liabilities relating to or arising in connection with the VRM
Business, (ii) the Liabilities of any member of the VRM Group under this
Agreement, any other Reorganization Agreement, or the Interim Services
Agreement and of VRM under Section 7.10 of the Merger Agreement, in each case,
to which VRM is a party or will be a party, (iii) the Liabilities relating to
or arising in connection with the businesses, assets or operations of the VRM
Group (other than the Retained Company Assumed Liabilities), as heretofore,
currently or hereafter conducted, (iv) the VRM Assumed Liabilities, and (v)
the Liabilities retained or assumed by VRM or any member of the VRM Group
pursuant to the Employee Benefits Agreement.
ARTICLE II
TRANSACTIONS RELATING TO THE DISTRIBUTION
2.1. Intercorporate Reorganization.
(a) Prior to or at the Time of Distribution, the Company and VRM
hereby undertake to complete the actions specified in this Section 2.1, to (i)
transfer, or cause to be transferred, to VRM or one of its Subsidiaries, as
appropriate, effective as of or prior to the Time of Distribution, all of the
right, title and interest of the Company or any Retained Subsidiary (a list of
which is set forth on Schedule 2.1(a)), as appropriate, in any VRM Assets and
have VRM or one of its Subsidiaries, as appropriate, assume and agree to pay,
perform and discharge in due course each of the VRM Assumed Liabilities, and
(ii) transfer, or cause to be transferred, to the Company or a Retained
Subsidiary, as appropriate, effective as of or prior to the Time of
Distribution, all the right, title and interest of VRM or any VRM Subsidiary,
as appropriate, in any Retained Assets and have the Company or a Retained
Subsidiary, as appropriate, assume and agree to pay, perform and discharge in
due course each of the Retained Company Assumed Liabilities.
(b) Prior to the Time of Distribution, the Company and VRM each
agree to take, or cause to be taken, the following actions in connection with
the Distribution:
(i) Transfers of Capital Stock and Partnership Interests
(A) the Company shall transfer all of its right, title and
interest in the outstanding shares of capital stock of Valero Corporate
Services to VRM or one of its Subsidiaries;
(B) the Company shall cause Valero Management Company to
transfer all of its right, title and interest in the outstanding shares of
capital stock of VMGA Company to VRM or one of its Subsidiaries;
(C) the Company shall transfer all of its right, title and
interest in the outstanding shares of capital stock of Valero Coal Company to
VRM or one of its Subsidiaries;
(D) the Company shall transfer all of its right, title and
interest in the outstanding shares of capital stock of Valero Producing
Company to VRM or one of its Subsidiaries;
(ii) Other Transfers
(A) the Company shall transfer all of its right, title and
interest in the name "Valero" and the "Walking Flame" trademark each as
described on Schedule 4.1 to VRM;
(B) Valero Management Company shall transfer all of its right,
title and interest in the real estate set forth on Schedule 2.1(b)(ii)(B) to
Valero Corporate Services;
(C) Valero Management Company shall transfer all of its right,
title and interest in the promissory notes set forth on Schedule 2.1(b)(ii)(C)
to Valero Corporate Services;
(D) Valero Management Company shall transfer all of its right,
title and interest in the leases set forth on Schedule 2.1(b)(ii)(D) to Valero
Corporate Services;
(E) the Company shall transfer all of its right, title and
interest in its limited partnership interest in the San Antonio Spurs
professional basketball team to Valero Corporate Services;
(F) the Company shall transfer all of its right, title and
interest in season tickets to San Antonio Spurs and Houston Rockets
professional basketball games to Valero
Corporate Services;
(G) Valero Management Company and the Company shall transfer
all of their right, title and interest in the computer software set forth in
items A through E on Schedule 2.1(b)(ii)(G) to Valero Corporate Services, and
Valero Corporate Services will also grant to Valero Management a nonexclusive,
freely transferable, fully paid, perpetual license to the software set forth
in item E on Schedule 2.1(b)(ii)(G) which includes, or at the Time of
Distribution such schedule shall be amended to include, all material software
developed by the Company and its Subsidiaries which is used in the Retained
Business;
(H) VNG shall transfer all of its right, title and interest in
the Butane Splitter and Debutanizer set forth on Schedule 2.1(b)(ii)(H) to
Valero Refining Company;
(I) Valero Management Company shall transfer all of its right,
title and interest in the Personal Property as reflected on Schedule
2.1(b)(ii)(I), to Valero Corporate Services;
(J) Valero Management Company shall transfer a 50% interest in
the Airplanes to Valero Corporate Services so that each will be co-owners of
the Airplanes on the terms as set forth on Schedule 2.1(b)(ii)(J);
(K) Valero Management Company shall assign all of its right,
title and interest in the Hunting Lease to Valero Corporate Services;
(L) VNG shall transfer all of its right, title and interest in
the methanol pipeline segments set forth on Schedule 2.1(b)(ii)(L) to Valero
Refining Company;
(M) The Company shall assign all of its right, title and
interest in the Contract Rights to VRM;
(N) The Company will cause Valero Marketing and Supply to
assign all commodity swap contracts and similar contracts entered into by
Valero Marketing and Supply on behalf of the Retained Companies to the
appropriate members of the Company Group;
(O) The Company will cause Valero Marketing and Supply to
transfer to accounts designated by the Retained Company all commodities,
commodity futures, commodity options and other similar commodity contracts
held by Valero Marketing and Supply on behalf of any of the Retained
Companies;
(P) The Company will transfer each of the Valero Charitable
Trust, the Valero Scholarship Trust, the Rulaine ▇▇▇▇▇▇▇ Memorial Scholarship
Trust, and the Valero Political Action Committee (VALPAC) to VRM;
(Q) The Company will take all actions necessary (including,
without limitation, executing such documents as may be necessary to change the
beneficiary thereof) to transfer, and will cause Valero Management Company to
transfer, to VRM or its designated subsidiary, their respective rights in and
to all policies of life insurance covering participants in the Company's
Executive Deferred Compensation Plan and Key Employee Deferred Compensation
Plan; and
(R) The Company shall assign to VRM or its designated
Subsidiary all of its right, title and interest in and to that certain lease
Agreement, dated March 17, 1991, between The Manufacturers Life Insurance
Company, as landlord, and Valero Industrial Gas Company, as lessee, as amended
by that certain Lease Modification and Amendment Agreement, dated January 28,
1994, as the same may heretofore have or hereafter be amended, restated,
modified or supplemented, relating to the lease of office space in Washington,
D.C.
(c) In connection with the transfers of assets other than capital
stock and the assumptions of Liabilities contemplated by subsection (a) and
subsection (b) of this Section, the Company and VRM shall execute or cause to
be executed by the appropriate entities the conveyance and assumption
instruments in such forms as the Company, VRM and the Acquiror shall
reasonably agree; provided that, the transfer of the real property shall be by
warranty deed. The transfer of capital stock shall be effected by means of
delivery of stock certificates duly endorsed or accompanied by duly executed
stock powers and notation on the stock records books of the corporation or
other legal entities involved and, to the extent required by applicable law,
by notation on appropriate registries.
(d) Each of the parties hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document
contemplated by this Agreement or otherwise, representing and warranting in
any way as to the title, value or freedom from encumbrance of, or any other
matter concerning, any assets of such party, it being agreed and understood
that all assets are being transferred "as is, where is", and that the real
estate on Schedule 2.1(b)(ii)(B) shall be transferred by warranty deed.
(e) Prior to the Time of Distribution, the Company and VRM shall
take all steps necessary to increase the outstanding shares of VRM Common
Stock so that immediately prior to the Distribution, the Company will hold a
number of shares of VRM Common Stock equal to the total number of shares of
the Company Common Stock outstanding on the Record Date.
(f) If any assets that are used primarily in the Retained Business
including, without limitation, information systems, intellectual property
(including software licenses), microwave and other communications systems and
trading and risk management operations, would otherwise be held in a
Subsidiary that would not be owned directly or indirectly by the Company after
the Time of Distribution, then, notwithstanding the foregoing allocation, VRM
shall cause each such Subsidiary to contribute such assets to the appropriate
Subsidiary of the Company or as the Company otherwise directs as part of the
Intercompany Reorganization; provided, however, that the Company shall be
responsible for establishing new commodity accounts to accommodate the
Retained Business, risk management activities and/or transferring the assets
described in sections 2.1(b)(ii)(N) and (O) to Acquiror accounts. Neither any
existing commodities account, nor any New York Mercantile Exchange seat held
by Valero Marketing and Supply, shall be transferred so as to be a part of the
Retained Business.
(g) The Retained Companies will, at the Effective Time, include all
the Company's right, title and interest in and to (a) all assets of the
Company or any of its Subsidiaries, including the information systems, that
are used primarily in or that are being held primarily for use in or that are
otherwise sufficient (including for this purpose the services to be provided
pursuant to the Interim Services Agreement) for the operation, as currently
conducted, of the Retained Business.
2.2. Assumption of Liabilities. (a) Subject to Section 2.2(b),
and effective as of the time of the Intercompany Reorganization, VRM and the
VRM Group, in partial consideration for the transfers set forth in Section
2.1, hereby unconditionally assume and undertake to pay, satisfy and discharge
when due in accordance with their terms the VRM Assumed Liabilities, including
without limitation:
(i) all Liabilities relating to or arising from the VRM Assets or
the VRM Business (other than such Liabilities expressly assumed or retained by
the Company Group pursuant to this Agreement), whether arising before, at or
after the Time of Distribution;
(ii) all Liabilities (including, without limitation, indemnification
obligations) relating primarily to or arising primarily from (A) the reports,
registration statements and other documents filed by the Company with the SEC
prior to the Time of Distribution (including the Company's consolidated
financial statements for periods prior to the Time of Distribution included or
incorporated by reference therein) and (B) any breach or alleged breach by any
director or officerof the Company of his fiduciary duties to the Company and
its stockholders occurring at or prior to the Effective Time; and
(iii) any Liabilities to be assumed by VRM or any of its
Subsidiaries pursuant to the transactions contemplated by this Agreement,
including without limitation the Liabilities relating to or arising out of (A)
the MTBE Project, (B) the warranty deeds described in Sections 2.1(c) and
2.1(d) and (C) the VRM Assumed Liabilities set forth on Schedule 2.2(a).
(iv) the obligations of VRM pursuant to Section 2.2(c).
(b) Notwithstanding Section 2.2(a), the Company hereby retains, and
the VRM Group does not assume and will have no liability with respect to, the
Retained Liabilities.
(c) The provisions of Section 2.2(b) notwithstanding, within 45
days following the entry of a final, nonappealable judgment in the TECO
Litigation, or execution of a settlement agreement with respect to the TECO
Litigation approved by VRM (such approval not to be unreasonably withheld or
delayed), VRM shall pay to Acquiror in immediately available funds an amount
equal to (i) 50% of the amount of such judgment or settlement with respect to
that part of any judgment or settlement amount not in excess of $30,000,000,
and (ii) 100% of that part of such judgment or settlement amount which is in
excess of $30,000,000, plus in each case interest thereon at the applicable
statutory rate from the date of such judgment until paid in full.
2.3. Repayment of Intercompany Indebtedness and Cash Dividend.
(a) Dividend Payment. Prior to the Time of Distribution, VRM shall
pay a cash dividend of $210,000,000 (the "Cash Dividend") to the Company.
(b) Intercompany Note. The Company and VRM shall (a) eliminate
without payment the $212,450,000 net amount of the intercompany note (the
"Intercompany Note") owing from the Company to VRM as of December 31, 1996
(which amount reflects payment to VNG for the assets described in Section
2.1(b)(ii)(H); (b) refrain from creating any obligations under the
Intercompany Note after December 31, 1996, except in the ordinary course of
business consistent with past practice or as contemplated by the
Reorganization Agreements and (c) satisfy by cash payment at the Time of
Distribution the full net amount of such note for the period from January 1,
1997 to the Time of Distribution. Prior to the Time of Distribution, the
Company and VRM shall agree on the estimate of the net amount so payable. The
Company and VRM shall use their reasonable efforts within 60 days after the
Time of Distribution to agree on the actual amount so payable. If the actual
amount so payable is different from such estimated amount, the Company or VRM
will promptly pay the difference to the other, plus interest thereon at a
floating rate equal to the prime rate (as in effect from time to time) as
reported in the Wall Street Journal from the Time of Distribution to the date
of payment. If the parties are unable to so agree on the actual amount, any
disputes will be resolved by an independent accounting firm selected by the
Company and VRM, the fees and expenses of which will be borne equally by the
Company and VRM. Once the actual amount is so agreed or resolved, such amount
shall be final and non-appealable.
(c) Cash Management. Prior to the Time of Distribution, the
Company and VRM shall establish and maintain a separate cash management system
with respect to the VRM Businesses in accordance with the terms set forth on
Schedule 2.2(c) so that bank accounts are accurately allocated and distributed
to VRM and the Company at the Time of Distribution.
2.4. Resignations. The Company shall cause all of its, and all the
Company Group entities', employees and directors to resign, not later than the
Time of Distribution, from all boards of directors or similar governing bodies
of VRM or any member of the VRM Group on which they serve, and from all
positions as officers of VRM or any member of the VRM Group in which they
serve. VRM shall cause all of its, and all VRM Group entities', employees and
directors to resign, not later than the Time of Distribution, from all boards
of directors or similar governing bodies of the Company or any member of the
Company Group on which they serve, and from all positions as officers of the
Company or any member of the Company Group in which they serve.
2.5. VRM Certificate of Incorporation and By-Laws; Rights Plan;
Name Change. Prior to the Distribution Date, (a) the VRM Board of Directors
shall (i) approve the Certificate of Incorporation and shall file the same
with the Secretary of State of the State of Delaware and (ii) adopt the
By-Laws, and (b) the Company, as sole stockholder of VRM, shall approve such
Certificate of Incorporation. Prior to the Distribution Date, VRM shall adopt
the VRM Rights Agreement. Prior to the Distribution Date, the Company shall
approve as sole stockholder VRM changing its name to "Valero Energy
Corporation" following the Effective Time and thereafter shall take any and
all other action necessary to be taken by the Company to effect such change.
2.6. Insurance. The Company maintains various forms of insurance
coverages (the "Policies") applicable to both the Retained Business and the
VRM Business and in which VRM and/or other members of the VRM Group are
included as insureds or named insureds. Effective as of the Time of
Distribution, all such Policies (including all prepaid premiums, deposits,
refunds, dividends, accrued claims (excluding claims related solely to the
Retained Business) and other rights therein) shall be assigned or transferred
to VRM and the coverage of the Company and the Retained Subsidiaries under the
Policies shall cease under the Policies as of the Time of Distribution;
provided however the Retained Companies shall receive a cash payment from VRM
equivalent to the prepaid premiums, deposits, refunds and dividends with
respect to such Policies at the Time of Distribution to the extent
attributable to expenses which have been charged to the Retained Business.
From and after the Time of Distribution, the Company and the Retained
Subsidiaries shall be responsible for obtaining and maintaining insurance
coverages for their own account. Insofar as any existing Policies may provide
"claims made" or equivalent coverage, the VRM Group shall, if requested, use
reasonable best efforts to assist or cooperate with the Company in purchasing
(to the extent obtainable, and at the Retained Companies' sole cost and
expense) continuing coverages for claims which are unknown, undiscovered
and/or unreported at the Time of Distribution (i.e. "long tail coverage").
Insofar as any claims made (in the case of "claims made" or equivalent
coverages) or accrued (in the case of "occurrence" or equivalent coverages)
under the Policies prior to the Time of Distribution relate solely to the
Retained Business, VRM shall use its reasonable best efforts to assure that
the Retained Company and the Retained Subsidiaries can continue to make and/or
pursue such claims under the Policies, or that VRM can continue to make and/or
pursue such claims on behalf of the Retained Companies, notwithstanding
assignment or transfer of the Policies to VRM.
2.7. Nonassignable Contracts. Anything contained herein to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or asset if an assignment or
attempted assignment of the same without the consent or waiver of the other
party or parties thereto would constitute a breach thereof or in any way
impair the rights of the VRM Group or the Company Group thereunder. If any
such consent or waiver is not obtained or if an attempted assignment would be
ineffective or would impair either Group's rights under any such lease,
license agreement, contract, agreement, sales order, purchase order, open bid
or other commitment or asset so that the Company or VRM or a Subsidiary of
either, as applicable, would not receive all such rights, then (x) the Company
or VRM, as applicable, shall use reasonable best efforts to provide or cause
to be provided to the other or its Subsidiary, to the extent permitted by law,
the benefits of any such lease, license agreement, contract, agreement, sales
order, purchase order, open bid or other commitment or asset and the Company
or VRM, as applicable, shall promptly pay or cause to be paid to the other or
its Subsidiary when received all moneys received by the Company Group or VRM
Group, as applicable, with respect to any such lease, license agreement,
contract, agreement, sales order, purchase order, open bid or other commitment
or asset and (y) in consideration thereof the other party or its Subsidiary
shall pay, perform and discharge on behalf of such Group all of such Group's
debts, liabilities, obligations and commitments with respect thereto in a
timely manner and in accordance with the terms thereof. In addition, the
Company or VRM, as applicable, shall take such other actions (at the expense
of the other) as may reasonably be requested by the other in order to place
the other, insofar as reasonably possible, in the same position as if such
lease, license agreement, contract, agreement, sales order, purchase order,
open bid or other commitment or asset had been transferred as contemplated
hereby and so all the benefits and burdens relating thereto, including
possession, use, risk of loss, potential for gain and dominion, control and
command, shall inure to the applicable Group. If and when such consents and
approvals are obtained, the transfer of the applicable lease, license
agreement, contract, agreement, sales order, purchase order, open end or other
commitment or asset shall be effected in accordance with the terms of this
Agreement.
2.8. Interim Services Agreement. In connection with the
Intercompany Reorganiza- tion the Company and VRM shall enter into an Interim
Services Agreement in form and substance substantially the same as the Interim
Services Agreement attached hereto as Annex A.
2.9. Company Guarantees. (a) Neither VRM nor any member of the
VRM Group shall increase its outstanding obligations in excess of the
aggregate amounts of all obligations under the Company Guarantees as of
January 31, 1997, set forth on Schedule 1.1(a), nor shall VRM or any of the
VRM Group renew or enter into any additional obligations for which the Company
would act as guarantor unless such guarantee by its terms expires as to the
Company and its Subsidiaries without further liability at or prior to the Time
of Distribution. VRM agrees to use its reasonable best efforts to obtain any
amendments to, or consents with respect to, the Company Guarantees that are
necessary in order that the Company be released no later than the Time of
Distribution from any liability or obligation under the Company Guarantees;
provided that if any such release has not been obtained by the Time of
Distribution, VRM shall; (i) pursuant to Section 8.1 provide the Company with
a full indemnity with respect thereto; and (ii) continue to use its best
efforts to obtain such release as soon as practicable thereafter.
(b) VRM shall use its reasonable best efforts to refund the IRBs
with replacement industrial revenue bonds prior to the Time of Distribution,
which refunding shall eliminate the guarantee by the Company of the IRBs. In
the event VRM is unable to so refund the IRBs prior to the Time of
Distribution, for a period of up to 120 days following the Time of
Distribution VRM shall use its reasonable best efforts to so refund the IRBs
and shall pursuant to Section 8.1 provide the Company with a full indemnity
with respect to the Company's guarantee of the IRBs. In the event VRM is
unable to so refund the IRBs by the 120th day following the Time of
Distribution, VRM shall prepay the IRBs in full no later than such 120th day.
2.10. Conduct of Businesses. Except as otherwise provided in this
Agreement from and after December 31, 1996, the VRM Group and the Company
Group have carried on and shall carry on their respective businesses and
activities diligently and in substantially the same manner as they previously
have been carried out and neither the VRM Group nor the Company Group shall
make or institute any methods of operation or accounting that vary materially
from the methods used by the VRM Group and the Company Group prior to the date
hereof. Since December 31, 1996 all intercompany transactions, including
without limitation asset transfers and intercompany loans have, and after the
date hereof will until the Time of Distribution be accounted for through the
Intercompany Note.
ARTICLE III
MECHANICS OF DISTRIBUTION
3.1. Mechanics of Distribution. The Distribution shall be effected
by the distribution to each holder of record of Company Common Stock, as of
the record date designated for the Distribution by or pursuant to the
authorization of the Board of Directors of the Company (the "Record Date"), of
certificates representing one share of VRM Common Stock and associated VRM
Right for each share of Company Common Stock held by such holder.
3.2. Timing of Distribution. The Board of Directors of the Company
shall formally declare the Distribution and shall authorize the Company to pay
it immediately prior to the Effective Time, subject to the satisfaction or
waiver of the conditions set forth in Article VII, by delivery of certificates
for VRM Common Stock to the Transfer Agent for delivery to the holders
entitled thereto. The Distribution shall be deemed to be effective upon
notification by the Company to the Transfer Agent that the Distribution has
been declared and that the Transfer Agent is authorized to proceed with the
distribution of VRM Common Stock.
ARTICLE IV
OTHER AGREEMENTS
4.1. Use of Names, Trademarks, etc. (a) From and after the Time
of Distribution, VRM shall have all rights, including all intellectual
property rights in and exclusive use of the trademarks, trade names and
service marks, the U.S. federal and Mexican registrations and applications,
the Internet domain registration and exclusive use of the name "Valero", and
any and all other designs, logos and slogans, related to the names "Valero"
and "Valero Energy Corporation" and the "Walking Flame" service ▇▇▇▇, all as
more particularly set forth on Schedule 4.1, attached hereto, and all other
rights (whether tangible or intangible, statutory, at common law or otherwise)
in connection therewith, whether alone or in combination with one or more
other words or marks in connection therewith. During the period from five
business days after January 31, 1997 to the Time of Distribution the VRM group
shall not affix the name "Valero" or any other design, logo, slogan, name
related to the names "Valero", or "Valero Energy Corporation" or the "Walking
Flame" service ▇▇▇▇ to any new or existing equipment (including without
limitation vehicles), or facilities which are Retained Assets. As promptly as
practicable after the Effective Time, but in any event no later than four
months after the Effective Time, the Company shall cease using the "Valero"
name and ▇▇▇▇ or service ▇▇▇▇ and the "Walking Flame" service ▇▇▇▇, including
without limitation, on any signs, badges, parking stickers, letterhead,
business cards, invoices and other business forms, telephone directory
listings, and advertising and promotional materials; provided, however, that
nothing herein shall be construed to prohibit, and neither party shall
hereafter take any action which could have the effect of prohibiting, either
the Company Group or the VRM Group from continuing to use, after the Effective
Time of the blue-green color (PMS 315) now utilized by both the Company Group
and the VRM Group on their respective facilities.
4.2. Intercompany Accounts as of the Time of Distribution. From
and after the Time of Distribution all receivables and payables between VRM
and any of its Subsidiaries, on the one hand, and the Company and any Retained
Subsidiaries, on the other hand, which were intercompany receivables or
payables prior to the Time of Distribution and not subject to the intercompany
note shall be handled pursuant to the terms of the applicable Intercompany
Arrangement.
4.3. Hunting Lease. Subject to any necessary consents, Valero
Corporate Services and Valero Management Company shall assign to VRM its
leasehold interest in the Hunting Leases set forth on Schedule 2.1(b)(ii)(K).
4.4. Airplanes. The terms of ownership of the Airplanes shall be
in accordance with the terms and provisions substantially similar to those set
forth on Schedule 2.1(b)(ii)(J).
4.5. Intercompany Arrangements. All agreements, contracts,
arrangements and commitments, between a member of the VRM Group on the one
hand, and a member of the Company Group on the other hand, entered into prior
to the Closing Date for the purchase or sale of goods or services
("Intercompany Arrangements") set forth on Schedule 4.5, shall remain in
effect as of and after the Time of Distribution. To the knowledge of the
Company, the Intercompany Arrangements set forth on Schedule 4.5, the
Reorganization Agreements and the Interim Services Agreement collectively
comprise all agreements, contracts, arrangements and commitments between a
member of the VRM Group on the one hand, and a member of the Company Group on
the other hand entered into prior to the date hereof for the purchase or sale
of goods or services, except for such agreements, contracts, arrangements or
commitments entered into in the ordinary course in accordance with past
practice which agreements, contracts, arrangements or commitments will
terminate at or before the Time of Distribution. If following the Time of
Distribution any other such agreements, contracts, arrangements or commitments
are identified by either Group, then (i) if any such agreement, contract,
arrangement or commitment is oral, it shall terminate as of the Time of
Distribution and be of no further force and effect, and (ii) if any such
agreement, contract, arrangement or commitment is in writing, either party
thereto may terminate such agreement, contract, arrangement or commitment upon
45 days written notice to the other party thereto. Each of the Intercompany
Arrangements was based on market terms at the date of its inception, other
than any interest rates provided for therein. Complete and correct copies of
each of the Intercompany Arrangements have been delivered to the Acquiror.
4.6. Further Assurances. Each of the parties hereto, at its own
cost and expense, promptly shall execute such documents and other instruments
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and to consummate the transactions
contemplated hereby.
ARTICLE V
TAX AND EMPLOYEE MATTERS
5.1. Tax Sharing; Exclusivity of Tax Sharing Agreement. Prior to
the Time of Distribution, VRM and the Company shall enter into a Tax Sharing
Agreement in substantially the form attached as Annex C to the Merger
Agreement which agreement shall, notwithstanding anything in this Agreement to
the contrary, be the exclusive agreement among the parties hereto with respect
to all Tax matters, including without limitation indemnification of Tax
matters.
5.2. Employee Benefits. Prior to the Time of Distribution, VRM and
the Company shall enter into an Employee Benefits Agreement in substantially
the form attached as Annex B to the Merger Agreement.
5.3. Employees. (a) The Company has made available to Acquiror a
list of the employees currently employed exclusively or primarily in the
Retained Business indicating the positions which they now hold, their current
rates of compensation and which employees, if any, are on short or long term
disability, family and medical, military, workers' compensation, or any other
type of leave of absence; and copies of all employee handbooks, and policy and
procedure manuals. The VRM Group shall use its reasonable efforts to see that
the employees on such list shall be transferred to or retained in the Company
Group at the Time of Distribution and such employees as shall be transferred
to or retained in the Company Group at the Time of Distribution shall include
all of the employees necessary to conduct the Retained Business as conducted
in the past. The Company and the Acquiror shall cooperate in good faith to
reach a mutually satisfactory agreement with respect to the employment of
employees whose employment involves both the VRM Group and the Company Group.
(b) With respect to the Retained Business, neither the Company nor
any of its Subsidiaries is a party to, or is bound by, any collective
bargaining agreement, contract, or other agreement or understanding with a
labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of any proceeding or organizing activity asserting
that it or any such Subsidiary has committed an unfair labor practice or
seeking to compel it or such Subsidiary to bargain with any labor organization
as to wages and conditions of employment, nor is there any strike, labor
dispute, slow down or stoppage involving the Company or any of its
Subsidiaries pending or, to the knowledge of the Company, threatened that,
individually or in the aggregate, are reasonably likely to have a material
adverse effect on the Retained Business taken as a whole.
5.4. Non-Competition Covenants. (a) From and after Distribution
until the second anniversary of the Closing Date, VRM shall not, and shall
cause its Affiliates and Subsidiaries not to, directly or indirectly, within
the geographic area in which such businesses are currently conducted by the
Company Group (i) engage in marketing natural gas, or marketing and trading
electric power (a "Competitive Business") (provided, that nothing herein shall
be construed to preclude VRM from marketing surplus electric power generated
at its refineries), (iii) sell, assign or otherwise transfer the trademarks,
trade names, service marks, the use of the name "Valero" or any and all other
designs, logos and slogans, related to the names "Valero" and "Valero Energy
Corporation" and the "Walking Flame" service ▇▇▇▇ or any other right set forth
on Schedule 4.1 to a Competitive Business, or (iv) invest in, as principal,
partner or stockholder (otherwise than through the ownership of less than 4%
of the outstanding voting securities of any corporation which are listed on a
national securities exchange or accepted for quotation of The Nasdaq Stock
Market), any person, partnership, firm, corporation or other business entity
which is engaged in a Competitive Business; provided, that nothing herein
shall be construed to preclude VRM from acquiring (or, thereafter, from
operating) a Competitive Business if the operations constituting a Competitive
Business are incidental to a larger acquisition of a business or entity whose
principal operations do not constitute a Competitive Business. From and after
the Distribution, until the second anniversary of the Time of Distribution,
VRM shall not, and shall cause its Affiliates and Subsidiaries not to,
directly or indirectly, solicit (other than through a general solicitation not
directed at a particular individual or group of individuals employed by the
Retained Business) for hire any employee, officer, director, executive or
consultant currently employed primarily in activities related to the Retained
Business or encourage any such employee, officer, director, executive or
consultant to leave such employment. Following the Closing, VRM shall not,
and shall cause its Affiliates and Subsidiaries not to, directly or
indirectly, disclose, divulge, communicate, use to the detriment of Acquiror
or the Retained Business or for the benefit of any other person or persons,
any confidential, proprietary or sensitive information or trade secrets of the
Retained Business, including, without limitation, any and all personnel
information, know-how, customer lists, price lists or other financial and
operating data relating to the Retained Assets and the Retained Business,
unless required to do so by law or legal process. In the event that such
disclosure is required by law or legal process, VRM shall immediately notify
the Company of the existence, terms and circumstances surrounding such
disclosure so that the Company may seek an appropriate protective order prior
to the disclosure of such information.
(b) VRM expressly agrees and understands that the remedy at law for
any breach by it or its Affiliates or Subsidiaries of this Section 5.4 will be
inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, VRM
acknowledges that upon a violation of any provision of this Section 5.4, the
Company shall be entitled to immediate injunctive relief and may obtain a
temporary restraining order restraining any threatened or further breach and
the Company shall be further entitled to require VRM to account for and pay
over to the Company all compensation, profits, monies, accruals, or other
benefits derived or received by VRM during the period of, and resulting from,
the breach of any of the provisions of this Section 5.4. Nothing contained in
this Section 5.4 shall be deemed to limit the Company's remedies at law or in
equity for any breach of the provisions of this Section 5.4 by VRM or its
Affiliates or Subsidiaries. Any covenant on VRM's part contained in this
Section 5.4 which may not be specifically enforceable shall nevertheless, if
breached, give rise to a cause of action for monetary damages.
(c) The parties hereto acknowledge that the covenants contained in
this Section 5.4 are independent covenants and shall not be affected by
performance or nonperformance of any other provision of this Agreement. VRM
has carefully considered the nature and extent of the restrictions upon them
and their Affiliates and Subsidiaries and the rights and remedies conferred
upon the Company under this Section 5.4, and VRM has independently consulted
with their counsel and after such consultation acknowledges and agrees that
the covenants set forth in this Section 5.4 are reasonable in time and
territory, are designed to eliminate competition that would otherwise be
inequitable to the Company and the Retained Business, are fully required to
protect the legitimate interests of the Company and do not confer a benefit
upon the Company disproportionate to the detriment to VRM and its Affiliates
and Subsidiaries. It is the desire and intent of the parties that the
provisions of this Section 5.4 shall be enforced to the fullest extent
permissible under applicable law.
ARTICLE VI
ACCESS TO INFORMATION
6.1. Provision of Records and Information. Prior to the Time of
Distribution: (i) the Company shall transfer to VRM all minute books and
other Information relating to the VRM Business, and (ii) the Company shall
transfer to VRM all Tax Records (as defined in the Tax Sharing Agreement)
exclusively related to the assets and activities of the VRM Group's
Pre-Distribution Periods (as defined in the Tax Sharing Agreement); provided
that the transferor of such documents may retain copies of such documents for
its use. The original minute books, Tax Records and Information shall be the
property of the transferee.
6.2. Access to Information. From and after the Time of
Distribution, each of the Company and VRM shall afford to the other and to the
other's Representatives reasonable access and duplicating rights (at the
requesting party's expense) during normal business hours and upon reasonable
advance notice to each such member all Information within the possession or
control of any member of the Company Group or the VRM Group, as the case may
be, relating to the business, assets or Liabilities as they existed prior to
the Time of Distribution or relating to or arising in connection with the
relationship between the constituent elements of the Groups on or prior to the
Time of Distribution, insofar as such access is reasonably required for a
reasonable business purpose. Without limiting the foregoing, Information may
be requested under this Section 6.2 for audit, accounting, claims, litigation
and tax purposes, as well as for purposes of fulfilling disclosure and
reporting obligations and for performing this Agreement and the other
Reorganization Agreements.
6.3. Production of Witnesses. After the Time of Distribution, each
of the Company and VRM shall, and shall cause each member of the Company Group
and the VRM Group, respectively, to, make available to VRM or any member of
the VRM Group or to the Company or any member of the Company Group, as the
case may be, upon written request and without charge (other than the
reimbursement by the requesting party of reasonable direct expenses incurred
in performance of the obligations described in this Section), such Group's
directors, officers, employees and agents as witnesses to the extent that any
such Person may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from
time to time be involved and relating to the business of the VRM Group or the
Company Group as it existed prior to the Time of Distribution or relating to
or in connection with the relationship between the constituent elements of the
Groups on or prior to the Time of Distribution, provided that the same shall
not unreasonably interfere with the conduct of business by the Group of which
the request is made.
6.4. Retention of Records. Except as otherwise required by law or
agreed to in writing (including without limitation, in the Tax Sharing
Agreement), if any Information relating to the business, assets or Liabilities
of a member of a Group as they existed prior to the Time of Distribution is
retained by a member of the other Group, each of the Retained Company and VRM
shall, and shall cause the members of the Group of which it is a member to,
retain all such Information in such Group's possession or under its control
until such Information is at least six years old except that if, prior to the
expiration of such period, any member of either Group wishes to destroy or
dispose of any such Information that is at least three years old, prior to
destroying or disposing of any of such Information, (1) VRM or the Retained
Company, on behalf of the member of its Group that is proposing to dispose of
or destroy any such Information, shall provide no less than 30 days' prior
written notice to the other party, specifying the Information proposed to be
destroyed or disposed of, and (2) if, prior to the scheduled date for such
destruction or disposal, the other party requests in writing that any of the
Information proposed to be destroyed or disposed of be delivered to such other
party, the party whose Group is proposing to dispose of or destroy such
Information promptly shall arrange for the delivery of the requested
Information to a location specified by, and at the expense of, the requesting
party.
6.5. Confidentiality. From and after the Time of Distribution,
each of the Company Group and the VRM Group shall hold, and shall cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party's Group obtained by it prior to the Time of
Distribution or furnished to it by such other party's Group pursuant to the
Reorganization Agreements and shall not release or disclose such Information
to any other Person, except its Affiliates and Representatives, who shall be
bound by the provisions of this Section 6.5, and each party shall be
responsible for a breach of this Section 6.5 by any of its Affiliates or
Representatives; provided, however, that any member of the Company Group or
the VRM Group may disclose such Information to the extent that (a) disclosure
is compelled by judicial or administrative process or, in the opinion of such
Person's counsel, by other requirements of law, or (b) such Person can show
that such Information was (i) available to such Person on a nonconfidential
basis (other than from a member of the other party's Group) prior to its
disclosure by such Person, (ii) in the public domain through no fault of such
Person, (iii) lawfully acquired by such Person from another source after the
time that it was furnished to such Person by the other party's Group, and not
acquired from such source subject to any confidentiality obligation on the
part of such source, or on the part of the acquiror, known to the acquiror, or
(iv) treated by such Person with the same care as such Person takes to
preserve confidentiality for its own similar Information; provided further
that if either Group is requested or required (by oral questions,
interrogatories, requests for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) to disclose any
such Information, such Group shall provide the other Group with prompt written
notice of any such request or requirement so that such other Group may seek a
protective order or other appropriate remedy or waive compliance with the
provisions of this Agreement; if, in the absence of a protective order or
other remedy or the receipt of a waiver the Group which received such request
is, in the written opinion of its counsel, legally compelled to disclose
Information to any tribunal or else stand liable for contempt or suffer other
censure or penalty, such Group may, without liability hereunder, disclose to
such tribunal only that portion of the Information which such counsel advises
is legally required to be disclosed, provided that such Group exercises its
best efforts to preserve the confidentiality of the Information, including,
without limitation, by cooperating with the other Group to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Information by such tribunal.
ARTICLE VII
CONDITIONS
7.1. Conditions to Obligations of the Company. The obligations of
the Company to consummate the Distribution hereunder shall be subject to the
fulfillment of each of the following conditions:
(a) Each of the covenants and provisions in this Agreement required
to be performed or complied with on or before the Time of Distribution shall
have been performed and complied with.
(b) Each condition to the Closing of the Merger Agreement set forth
in Article VIII thereof, other than the condition set forth in Sections 8.1(g)
thereof as to the consummation of the Distribution, shall have been fulfilled
or waived by the party for whose benefit such condition exists.
(c) The Board of Directors of the Company and the Acquiror shall be
satisfied that the Company's surplus would be sufficient to permit, without
violation of Section 170 of the DGCL, the Distribution and shall have given
final approval of the Distribution.
(d) The VRM Common Stock shall have been approved for listing, upon
notice of issuance, on the NYSE.
(e) The Distribution shall have been duly approved by the requisite
vote of the holders of Company Common Stock.
[(f) The No-action Letter shall have been issued and shall be in
full force and effect.]
(g) The Intercompany Reorganization shall have been completed as
contemplated by the terms of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnification by VRM. From and after the Effective Time,
subject to the provisions of this Article VIII, VRM, its successors and
assigns, shall indemnify, defend and hold harmless the Retained Company
Indemnitees from and against, and pay or reimburse the Retained Company
Indemnitees for, all Indemnifiable Losses, as incurred:
(i) relating to or arising from the VRM Assets or the VRM
Liabilities (including the failure by VRM or any VRM Company, as
applicable, to pay, perform or otherwise discharge such Liabilities in
accordance with their terms), whether such Indemnifiable Losses relate to
or arise from events, occurrences, actions, omissions, facts or
circumstances occurring, existing or asserted before, at or after the Time of
Distribution;
(ii) arising from or based upon any untrue statement of a
material fact contained in any of the Filings, or any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; but only in each case with respect to information provided by
the Company relating to the VRM Group contained in or omitted from the
Filings;
(iii) relating to the Company Guarantees and the Company's
guarantee of the IRBs
(iv) relating to the warranty deeds described in Sections
2.1(c) and 2.1(d);
(v) relating to any breach or violation of this Agreement by
VRM or, prior to the Time of Distribution, by the Company; any breach by VRM
or, prior to the Time of Distribution; by the Company of any of the
representations, warranties or covenants made in this Agreement, or any
inaccuracy or misrepresentation in the Schedules hereto or in any certificate
or document delivered in accordance with the terms of this Agreement;
(vi) incurred in connection with the enforcement by any
Retained Company Indemnitees of their rights to be indemnified, defended and
held harmless under this Agreement.
8.2. Indemnification by Retained Company. From and after the
Effective Time, subject to the provisions of this Article VIII, the Retained
Company, its successors and assigns, shall indemnify, defend and hold harmless
the VRM Indemnitees from and against, and pay or reimburse the VRM Indemnitees
for, all Indemnifiable Losses, as incurred:
(i) relating to or arising from the Retained Assets or the
Retained Liabilities (including the failure by the Retained Companies to pay,
perform or otherwise discharge such Liabilities in accordance with their
terms), whether such Indemnifiable Losses relate to or arise from events,
occurrences, actions, omissions, facts or circumstances occurring, existing or
asserted before, at or after the Time of Distribution;
(ii) arising from or based upon any untrue statement of a
material fact contained in any Filings, or any omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; but only in each case with respect to information provided by
Acquiror relating to Acquiror or any of its Subsidiaries contained in or
omitted from the Filings;
(iii) incurred in connection with the enforcement by any
VRM Indemnitees of their rights to be indemnified, defended and held harmless
under this Agreement.
8.3. Procedures Relating to Indemnification. (a) In order for an
Indemnitee to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim made by any
Person who is not an Indemnitee against the Indemnitee (a "Third Party
Claim"), such Indemnitee must notify the party who may become obligated to
provide indemnification hereunder (the "indemnifying party") in writing, and
in reasonable detail, of the Third Party Claim reasonably promptly, and in any
event within 20 days after receipt by such Indemnitee of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent
the indemnifying party shall have been actually prejudiced as a result of such
failure (except that the indemnifying party shall not be liable for any
expenses incurred during the period in which the Indemnitee failed to give
such notice). After any required notification (if applicable), the Indemnitee
shall deliver to the indemnifying party, promptly after the Indemnitee's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnitee relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof (at the expense of the
indemnifying party) with counsel selected by the indemnifying party and
reasonably satisfactory to the Indemnitee. Should the indemnifying party so
elect to assume the defense of a Third Party Claim, the indemnifying party
will not be liable to the Indemnitee for any legal expenses subsequently
incurred by the Indemnitee in connection with the defense thereof; provided,
however, that if the indemnifying party fails to take reasonable steps
necessary to defend diligently such Third Party Claim within 30 calendar days
after receiving written notice from the Indemnitee that the Indemnitee
believes the indemnifying party has failed to take such steps or if the
indemnifying party has not undertaken fully to indemnify the Indemnitee in
respect of all Indemnifiable Losses relating to the matter, the Indemnitee may
assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. If the
indemnifying party assumes such defense, the Indemnitee shall have the right
to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it
being understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel
employed by the Indemnitee for any period during which the indemnifying party
has not assumed the defense thereof (other than during any period in which the
Indemnitee shall have failed to give notice of the Third Party Claim as
provided above). If the indemnifying party chooses to defend or prosecute a
Third Party Claim, all the parties hereto shall cooperate in the defense or
prosecution thereof, which cooperation shall include the retention in
accordance with this Agreement and (upon the indemnifying party's request) the
provision to the indemnifying party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the indemnifying party
chooses to defend or prosecute any Third Party Claim, the Indemnitee will
agree to any settlement, compromise or discharge of such Third Party Claim
which the indemnifying party may recommend and which by its terms obligates
the indemnifying party to pay the full amount of liability in connection with
such Third Party Claim; provided, however, that, without the Indemnitee's
consent, the indemnifying party shall not consent to entry of any judgment or
enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnitee, that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such Indemnitee of a
release from all liability with respect to such claim. Whether or not the
indemnifying party shall have assumed the defense of a Third Party Claim, the
Indemnitee shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying
party's prior written consent (which consent shall not be unreasonably
withheld).
(c) In order for an Indemnitee to be entitled to any
indemnification provided for under this Agreement in respect of a claim that
does not involve a Third Party Claim, the Indemnitee shall deliver notice of
such claim with reasonable promptness to the indemnifying party. The failure
by any Indemnitee so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which it may have to such Indemnitee
under this Agreement, except to the extent that the indemnifying party shall
have been actually prejudiced by such failure. If the indemnifying party has
within 30 business days from the receipt of such notice disputed its liability
with respect to such claim, as provided above, the indemnifying party and the
Indemnitee shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, such dispute shall be
resolved by litigation in an appropriate court of competent jurisdiction.
8.4. Certain Limitations. (a) The amount of any Indemnifiable
Losses or other liability for which indemnification is provided under this
Agreement shall be net of any amounts actually recovered by the Indemnitee
from third parties (including, without limitation, amounts actually recovered
under insurance policies) with respect to such Indemnifiable Losses or other
liability. Any indemnifying party hereunder shall be subrogated to the rights
of the Indemnitee upon payment in full of the amount of the relevant
Indemnifiable Loss. An insurer who would otherwise be obligated to pay any
claim shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any
subrogation rights with respect thereto. If any Indemnitee recovers an amount
from a third party in respect of an Indemnifiable Loss for which
indemnification is provided in this Agreement after the full amount of such
Indemnifiable Loss has been paid by an indemnifying party or after an
indemnifying party has made a partial payment of such Indemnifiable Loss and
the amount received from the third party exceeds the remaining unpaid balance
of such Indemnifiable Loss, then the Indemnitee shall promptly remit to the
indemnifying party the excess (if any) of (A) the sum of the amount
theretofore paid by the indemnifying party in respect of such Indemnifiable
Loss plus the amount received from the third party in respect thereof, less
(B) the full amount of such Indemnifiable Loss or other liability.
(b) The amount of any Indemnifiable Losses or other Liability for
which indemnification is provided under this Agreement or any other amounts
payable or reimbursable by one party to another under this Agreement shall be
increased or decreased to take account of any net Tax cost or any net Tax
benefit in a manner analogous to that described in the Tax Sharing Agreement.
8.5. Express Negligence. INSOFAR AS TEXAS LAW MAY APPLY, THE
PARTIES EXPRESSLY INTEND AND AGREE THAT THE INDEMNIFICATION OBLIGATIONS OF
EACH SET FORTH IN SECTIONS 8.1 AND 8.2 SHALL EXTEND TO AND INCLUDE, WITHOUT
LIMITATION, ACTIONS FOR INJURIES OR DAMAGES TO ANY PERSON, PARTY OR PROPERTY
THAT WERE CAUSED IN WHOLE OR IN PART BY THE INDEMNITEE'S OWN ACTS OR OMISSIONS
(SPECIFICALLY INCLUDING, BUT NOT LIMITED TO, NEGLIGENCE AND ACTS OR OMISSIONS
GIVING RISE TO STRICT LIABILITY).
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of the respective parties, and the written consent of the
Acquiror thereto.
9.2. Waiver; Remedies. The conditions to the Company's obligation
to consummate the Distribution are for the benefit of the Company and the
Acquiror and may be waived in whole or in part as may be agreed by the Company
and the Acquiror in writing and to the extent permitted by applicable law. No
delay on the part of any party hereto in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any waiver on
the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor will
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. Unless otherwise provided, the rights
and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties may otherwise have at law or in equity.
9.3. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
9.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
9.5. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to any other party shall be
in writing and shall be deemed to have been duly given (i) on the date of
delivery if delivered personally, or by telecopy or telefacsimile, upon
confirmation of receipt, (ii) on the first business day following the date of
dispatch if delivered by Federal Express or other nationally reputable
next-day courier service, or (iii) on the third business day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) If to VRM:
Valero Refining and Marketing Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company:
Valero Energy Corporation
c/o PG&E Corporation
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
9.6. Entire Agreement. The Reorganization Agreements (including
the Annexes and Schedules thereto) and the Interim Services Agreement
(including the Annexes and Schedules thereto) constitute the entire agreement,
and supersede all other prior agreements, understandings, representations and
warranties, both written and oral, among the parties, with respect to the
subject matter hereof and thereof.
9.7. Certain Obligations. Whenever this Agreement requires any of
the Subsidiaries of any party to take any action, this Agreement will be
deemed to include an undertaking on the part of such party to cause such
Subsidiary to take such action.
9.8. Assignment. No party to this Agreement shall convey, assign
or otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other party hereto, which shall not
be unreasonably withheld or delayed, except that the Company may assign its
rights hereunder to an Affiliate or to a successor to all or substantially all
of the business of the Company as conducted at the time of the Intercompany
Reorganization.
9.9. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
9.10. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, the party or parties who are or are to be
thereby aggrieved shall have the right of specific performance and injunctive
relief giving effect to its or their rights under this Agreement, in addition
to any and all other rights and remedies at law or in equity, and all such
rights and remedies shall be cumulative. The parties agree that the remedies
at law for any breach or threatened breach, including monetary damages, are
inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
9.11. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon any such determination, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
9.12. Third Party Beneficiaries. Acquiror shall be a third party
beneficiary of this Agreement. Nothing contained in this Agreement is
intended to confer upon any Person or entity other than the parties hereto and
their respective successors and permitted assigns (other than Acquiror), any
benefit, right or remedies under or by reason of this Agreement, except that
the provisions of Article VIII hereof shall inure to the benefit of
Indemnitees.
9.13. Schedules. All Schedules attached hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Matters reflected on the Schedules are not necessarily
limited to matters required by this Agreement to be reflected on such
Schedules. Such additional matters are set forth for informational purposes
only and do not necessarily include other matters of a similar nature.
Capitalized terms used in any Schedule but not otherwise defined therein shall
have the respective meanings assigned to such terms in this Agreement.
9.14. Tax Sharing Agreement. With respect to Tax matters, if there
is a conflict between this Agreement and the Tax Sharing Agreement the Tax
Sharing Agreement shall control.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first hereinabove written.
VALERO ENERGY CORPORATION
By:
Name:
Title:
VALERO REFINING AND MARKETING COMPANY
By:
Name:
Title:
ANNEX A
INTERIM SERVICES AGREEMENT
This Interim Services Agreement is entered into by and among Valero
Refining and Marketing Company, a Delaware corporation, and Valero Energy
Corporation, a Delaware corporation, as of [________, 1997,] and is made
effective as of the Effective Time.
Whereas, VEC, PG&E Corporation and PG&E Acquisition Corporation have
executed the Merger Agreement, pursuant to which PG&E Acquisition Corporation
will merge with and into VEC, and
Whereas, in connection with the Merger, VEC and Valero Refining have
executed the Distribution Agreement, pursuant to which VEC will cause, prior
to the Merger, all of the common stock of Valero Refining to be distributed to
the stockholders of VEC, and Valero Refining will cease to be a subsidiary of
VEC, and
Whereas, for a period of time following the Merger, Valero Refining
desires to continue to procure certain services from VEC that were formerly
performed by or through VEC, and VEC desires to procure certain services from
Valero Refining, and each of VEC and Valero Refining has agreed to provide (or
cause to be provided) the services described in this Agreement according to
the terms and conditions of this Agreement,
Now, Therefore, Valero Refining and VEC, in consideration of the mutual
promises and obligations described in this Agreement, hereby agree as follows:
I. Definitions.
"Aircraft Ownership Agreement" means that certain Ownership Agreement dated
_________, 1997 by and between VMC and VCSC providing the terms and
conditions under which VMC and VCSC will jointly own certain aircraft
formerly owned by or leased to VMC.
"Distribution Agreement" means that certain Agreement and Plan of Distribution
dated as of ________, 1997 between VEC and Valero Refining providing for,
among other things, the distribution prior to the Effective Time of all
of the issued and outstanding shares of common stock of Valero Refining
to the stockholders of VEC.
"Effective Date" and "Effective Time" mean the date and the time,
respectively, upon which the Merger is consummated as prescribed by the
Merger Agreement.
"Houston Sublease" means that certain Sublease dated ________ 1997, between
Valero Refining (as sublessor) and Valero Natural Gas Company (as
sublessee) providing for the rental of office space and common areas at
Two ▇▇▇▇▇ Center for the business needs of Valero Natural Gas Company in
Houston after the Effective Time.
"including," "includes," or "include" when used in this Agreement means
"including but not limited to."
"Merger" means the merger and related transactions contemplated by the Merger
Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger dated
January [31], 1997 by and between VEC, PG&E Corporation and PG&E Acquisition
Corporation providing for the merger of PG&E Acquisition Corporation with and
into VEC.
"PG&E Acquisition Corporation" means PG&E Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of PG&E Corporation formed for the
purpose of participating in the Merger.
"PG&E Corporation" means Pacific Gas & Electric Corporation, a California
corporation.
"Performing Party" means that party to this Agreement that is rendering
Services to the Receiving Party.
"Receiving Party" means that party to this Agreement that is receiving, or is
the beneficiary of, Services rendered by the Performing Party.
"Records Agreement" means that certain Records Access and Storage Agreement
dated _________, 1997 between VEC and Valero Refining.
"San Antonio Sublease" means that certain Amended and Restated Sublease
Agreement dated ________ 1997, between VMC (as sublessor) and Valero Marketing
and Supply Company (as sublessee) providing for the rental of office space,
common areas, and parking at 530 ▇▇▇▇▇▇▇▇▇▇ for the business needs of Valero
Refining in San Antonio after the Time of Distribution.
"Services" means, generally and collectively, the set of services to be
provided in accordance with the terms of this Agreement.
"Tax Agreement" means that certain Tax Sharing Agreement dated _______, 1997,
among VEC, Valero Refining and PG&E Corporation.
"Time of Distribution" means the time at which the distribution of the common
stock of Valero Refining to the stockholders of VEC is consummated in
accordance with the Distribution Agreement.
"Valero Refining" means Valero Refining and Marketing Company, a Delaware
corporation, and its subsidiaries.
"VCSC" means Valero Corporate Services Company, a Delaware corporation.
"VEC" means Valero Energy Corporation, a Delaware corporation, and its
subsidiaries.
"VEC System" means the computer data processing systems operated by VEC prior
to the Effective Date whether located in San Antonio, Houston, Corpus Christi,
or any office of VEC as may be modified by VEC after the Effective Date.
"VMC" means Valero Management Company, a Delaware corporation.
II. Terms of General Application
2.1 Performance of Services. Each Performing Party will perform (or
cause to be performed) its Services in a professional manner, with due
diligence and due care. Each Performing Party agrees to perform (or cause to
be performed) its Services as economically as possible with the minimum number
of employees, time, and materials necessary to perform properly the Services.
Each Performing Party agrees to use its best efforts to meet any completion
dates established in this Agreement for the performance of the Services.
Except as otherwise expressly provided in this Agreement, the Services shall
be of the type and extent provided by each Performing Party prior to the
Effective Date. The Performing Party's obligation to provide any particular
Service is limited to its performance of Services using its resources existing
as of the Effective Date. In no event shall the Performing Party be required
to add to its staff, equipment, facilities or other resources in order to
provide any Service.
2.2 Cooperation. Each party to this Agreement will cooperate with each
other and assist each other to facilitate the performance of the Services. To
this end, each party agrees to furnish timely any information in its
possession that is reasonably necessary for the performance of the Services
but which the other party does not possess.
2.3 Severability and Cancellation of Services. The Services described
in the various sections of this Agreement are severable. (The San Antonio
Sublease and the Houston Sublease are not considered "Services" to which the
provisions of this Section 2.3 apply.) A Receiving Party may elect to cancel
any one or more of the Services at any time by providing written notice to the
Performing Party. Unless expressly provided elsewhere in this Agreement, any
election of cancellation received by the Performing Party on or before the
first business day of a given month will be effective as of the last calendar
day of that month (e.g., notice received on July 19, 1997 will be effective as
of August 31, 1997; notice received on August 1, 1997 will be effective as of
August 31, 1997). Each of the Services provided to each Receiving Party
hereunder is to be provided on an interim basis for the period of time
reasonably necessary for such Receiving Party to arrange for the delivery of
such Service by third parties or to develop the ability itself to provide such
Service. Each Receiving Party will use its best efforts to arrange for the
delivery of such Service by third parties or to develop the ability itself to
provide such Service, and will cancel each such Service pursuant to this
Section 2.3 as soon as practicable after the date of this Agreement.
2.4 Term and Termination. The term of this Agreement will commence at
the Effective Time and will end at 5:00 p.m. on December 31, 1998, except for
any particular Service that is earlier canceled pursuant to Section 2.3 or for
which this Agreement specifically provides for an earlier or later termination
of a Performing Party's obligation to provide that Service.
2.5 Payment. The parties agree to the amounts listed in Exhibit A
(attached to this Agreement and incorporated herein for all purposes), as
increased from time to time in accordance with Section 2.5.4, as full and
adequate compensation for the Services rendered under this Agreement.
2.5.1 Billing and Payment for Services Rendered. Each party
will ▇▇▇▇ the other party monthly (in accordance with the rates listed in
Exhibit A) as of the first day of the month, for Services rendered during the
prior month. VEC will send invoices to Valero Refining to the attention of
the Treasurer. Valero Refining will send invoices to VEC to the attention of
the Treasurer. Invoices may be delivered to either party by facsimile. The
parties agree to pay the stated fees and charges within 30 days from the date
of invoice. The parties may offset amounts owing to one another so that only
one payment is required. In satisfaction of amounts owing under this
Agreement, the parties will remit funds either by wire transfer or ACH
(Automated Clearing House) in accordance with the payment instructions stated
in Exhibit B.
2.5.2 Reimbursements. If either party incurs a reasonable and
necessary out-of-pocket expense directly in connection with the rendering of
Services (e.g., payroll, payables), then the party for whom the payment was
made will reimburse that amount to the payor-party either on the day that the
payment was made or the next business day, in accordance with the payment
instructions stated in Exhibit B, without regard to the billing and payment
schedule described in Section 2.5.1.
2.5.3 Misapplied Cash Receipts. If a cash receipt belonging to
one party is erroneously deposited into the other party's account, then the
party who received the misapplied funds will promptly transfer the funds to
the other party's bank account in accordance with the payment instructions
listed in Exhibit B. The transfer will be made either on the same day that
available funds are received, or on the business day when available funds have
been collected.
2.5.4 Fee Increases. Each Performing Party may increase the fee
for any Service provided by that Performing Party upon 60 days' prior written
notice to the Receiving Party in order to reflect any increase in the cost of
providing that Service.
2.6 Confidentiality. Each party will use due care to protect the
confidentiality of all proprietary information regarding the other party
received or generated pursuant to this Agreement, and will use and copy such
information only as required to perform the Services in accordance with the
terms of this Agreement. Each party will limit disclosure of proprietary
information of the other party to those individuals who have a need to know
such information in order to provide the Services, except for any disclosures
that are required by law or other governmental authority.
2.7 Conflict of Terms. If the terms of this Agreement conflict with the
terms of the Aircraft Ownership Agreement, Distribution Agreement, Houston
Sublease, Merger Agreement, Records Agreement, San Antonio Sublease, or Tax
Agreement (collectively the "Other Agreement(s)") with respect to any matter,
then the terms of the Other Agreement(s) will control.
III. Information Services
3.1 Information Services. In consideration for the fees described on
Exhibit A, VEC will provide the following Information Services to Valero
Refining (the "Information Services").
3.1.1 Processing Services. VEC will provide data processing
services on the VEC System to Valero Refining for all applications supporting
the VRM Business (as defined in the Distribution Agreement) as of the
Effective Date. In all cases, Valero Refining will be responsible for
furnishing to VEC all data necessary to run the applications and achieve the
desired results.
3.1.2 Maintenance and Support. VEC will provide the following
maintenance and support services to Valero Refining.
(a) Maintenance. VEC will provide maintenance required for
the VEC System computer equipment, data communications facilities and
operating system software used in performance of the Information Services.
For the VEC System software used in performing the Information Services, VEC
will provide all maintenance necessary to keep such software performing in
accordance with the specifications in effect as of the Effective Date.
(b) Exclusion of PCs and Servers. VEC will not provide
maintenance for the desktop personal computers, printers, and servers owned by
Valero Refining. Valero Refining will be responsible for procuring any
maintenance required by Valero Refining for these assets.
3.2 Procedures. The following procedures will apply to the rendering of
Information Services.
3.2.1 Access to the VEC System. VEC will provide to Valero
Refining all reasonable access to the VEC System during the same access hours
for which Valero Refining had access immediately prior to the Effective Date.
3.2.2 Delivery. Valero Refining, at its own risk and expense,
will be responsible for transporting or transmitting to and from the VEC
System (i) all data and information necessary for VEC to perform the
Information Services, and (ii) all reports provided by VEC hereunder. VEC
will have no obligation to determine the authenticity, genuineness or accuracy
of items delivered by Valero Refining or the accuracy or correctness of the
reports based thereon.
3.2.3 Computer System Instructions. VEC may from time to time
provide Valero Refining with instructions governing the operation of the VEC
System. Valero Refining will comply with all reasonable policies, procedures
and standards published and provided by VEC relating to the operation of the
VEC System and to the performance of Information Services.
3.2.4 Communications. All costs associated with the
installation and removal of remote terminals, printers, modems, servers,
controllers and related equipment of Valero Refining are the responsibility of
Valero Refining. All interconnected communications configurations are subject
to the approval of VEC before installation, whose approval shall not be
unreasonably withheld or delayed.
3.3 Fees. In addition to the fees described on Exhibit A, the following
terms will apply to Information Services.
3.3.1 Service Fees. For all mainframe-based use of the VEC
System by Valero Refining, Valero Refining agrees to pay to VEC a fee
determined on a "percentage of use" basis. Each month VEC will determine the
percentage of Valero Refining's mainframe-based use of the VEC System, and
will ▇▇▇▇ ▇▇▇▇▇▇ Refining an amount equal to the total VEC System
mainframe-based operating, maintenance and data storage costs multiplied by
Valero Refining's percentage of such use.
3.3.2 Programming. VEC will provide all labor required for the
initial setup prior to the Effective Date of programs in connection with the
Information Services. After the Effective Date, Valero Refining agrees to pay
for all subsequent programming performed by VEC on behalf of Valero Refining
at a rate which includes all direct and indirect labor costs of VEC for such
programming. Valero Refining will reimburse all reasonable and direct
out-of-pocket expenses incurred by VEC in connection with such programming
services.
3.4 Data Storage. VEC will apply the same backup, storage, and recovery
procedures to data relating to the Information Services that VEC applies to
its own data. Upon receipt of a written request from Valero Refining, VEC
will tender to Valero Refining all stored data, provided that Valero Refining
shall not be in default with respect to any amounts due for the Information
Services provided hereunder.
IV. Financial and Regulatory Services
4.1 Financial and Regulatory Services. In consideration for the fees
described on Exhibit A of this Agreement, VEC and Valero Refining will provide
the following financial and regulatory services (the "Financial and Regulatory
Services"):
4.1.1 Tax Services. VEC and Valero Refining (or their
affiliates) will perform any tax services in accordance with terms of the
Tax Agreement.
4.1.2 Governmental Compliance. VEC will furnish all accounting,
finance, and legal support requested by Valero Refining to assist Valero
Refining in the preparation, review, and timely filing in 1997 and years
thereafter of all documents (including financial statements) covering periods
prior to the Effective Date, as such filings may be required by the Securities
Exchange Act of 1934, the Securities Act of 1933, or the rules and regulations
promulgated by the Securities and Exchange Commission pursuant to those Acts.
These documents may include registration statements, annual reports, and
quarterly reports of Valero Refining. VEC and Valero Refining each will
assist the other in the preparation and filing of any other documents required
by regulatory authorities, whether federal or state, that are related to the
operations of VEC or Valero Refining prior to the Effective Time. A
Performing Party's obligation to offer the Services described in this
paragraph shall continue until the passage of all regulatory deadlines and
statutes of limitation for the applicable document or filing.
4.1.3 Check Printing. For a period not to exceed four months
after the Effective Date, Valero Refining will make available to VEC check
printing services through the Treasury department of Valero Refining, provided
that VEC will be responsible for the mailing of all checks printed by Valero
Refining on behalf of VEC.
V. Administrative Services
5.1 Administrative Services to be Provided by VEC. In consideration for
the fees described on Exhibit A of this Agreement, VEC will provide the
following administrative services to Valero Refining.
5.1.1 San Antonio Office Space and Parking. VEC will cause VMC
to provide to Valero Refining office space, use of common areas, and parking
for the business needs of Valero Refining in San Antonio in accordance with
terms of the San Antonio Sublease.
5.1.2 Security. VEC will provide security services for the
personnel and property of Valero Refining and the Valero Federal Credit Union
located at 530 ▇▇▇▇▇▇▇▇▇▇ in San Antonio in the same manner as security
services are provided by VEC for its own personnel and property in San
Antonio.
5.1.3 Telecommunications. VEC will provide local and
long-distance telephone, facsimile, teleconference, and other
telecommunications availability and support for the business needs of Valero
Refining in San Antonio.
5.1.4. Mail Room. VEC will provide mail (including U.S. postal
service and commercial expedited courier service) receiving, sorting, and
distribution services for Valero Refining in San Antonio.
5.1.5 Printing and Document Design. VEC will provide printing
and document design services to Valero Refining for a period not to exceed six
months following the Effective Date.
5.1.6 Purchasing. In coordination with the Vice
President-Administration of Valero Refining, VEC will provide purchasing
services to Valero Refining with respect to its San Antonio and Houston
operations. VEC will issue purchase orders on behalf of and in the name of
Valero Refining.
5.1.7 Records. VEC will provide records storage and access services
to Valero Refining in accordance with the Records Agreement.
5.1.8 Travel. VEC will provide travel-related services to Valero
Refining, including the booking and ticketing of airline flights and related
reservation services. Air-carriage services will be provided in accordance
with the Aircraft Ownership Agreement.
5.2 Administrative Services to be Provided by Valero Refining. In
consideration for the fees described on Exhibit A of this Agreement, Valero
Refining will provide the following administrative services to VEC.
5.2.1 Houston Office Space. Valero Refining will provide to VEC
office space and the use of common areas for the business needs of VEC in
Houston in accordance with terms of the Houston Sublease.
5.2.2 Health Care Administration. Valero Refining will provide
claims processing through April 15, 1998 for the medical, dental,
reimbursement, and other health care claims incurred prior to the Effective
Time by VEC employees.
5.2.3 Payroll. For a period not to exceed four months after the
Effective Date, Valero Refining will provide payroll services for VEC with
respect to the employees of VEC, such services to include the preparation and
distribution of semi-monthly payroll checks, administration of employee
federal payroll tax and other withholdings, administration (including
remittance) of employer payroll tax contributions, maintenance of
payroll-related tax returns, and preparation and mailing of Forms W-2 for the
year 1997.
5.2.4 Accounts Payable. For a period not to exceed four months
after the Effective Date, Valero Refining will provide accounts payable
processing for VEC accounts. Valero Refining will process invoices from VEC
creditors, provide data for appropriate bookkeeping, and print checks for the
processed accounts.
VI. Miscellaneous
6.1 Additional Services. Valero Refining and VEC may determine that
services not specifically described in this Agreement may be necessary or
desirable during the term of this Agreement. If the parties through their
appropriate representatives agree upon such other services, then these
services will be incorporated into this Agreement by a written amendment and
will be subject to all provisions of this Agreement unless expressly stated
otherwise in the written amendment. The persons authorized to request
additional services on behalf of Valero Refining are the President, any Vice
President, the Controller and the Treasurer. The persons authorized to
request additional services on behalf of VEC are the President, any Vice
President, the Controller and the Treasurer.
6.2 Independence of Parties.
6.2.1 Independent Contractors. The parties agree that each of VEC
(or its designee) and Valero Refining (or its designee), with respect to one
another, is an independent contractor in the performance of Services under
this Agreement. The parties agree that this Agreement is not intended to
create a joint venture or partnership relationship. The Performing Party's
employees will not be, or be deemed to be, the employees of the Receiving
Party, and these employees shall be subject to the Performing Party's
exclusive supervision, direction, and control. The Receiving Party will have
the right to inspect the performance of the Services to ensure satisfactory
completion of them, but the parties acknowledge that the Receiving Party is
not directly responsible for the actual performance of the Services. It is
further agreed that the Performing Party is solely and individually liable for
all labor and expenses in connection with the Services performed. The parties
agree that neither party will have the right or authority to assume or create
any obligation or responsibility, express or implied, on behalf of, or in the
name of the other party, or to bind the other party in any way.
6.2.2 No Obligation for Compensation or Benefits. Neither federal,
state nor local income or payroll tax will be withheld or paid by the
Receiving Party on behalf of the Performing Party or the Performing Party's
employees. No workers' compensation insurance will be obtained by the
Receiving Party concerning the Performing Party or the Performing Party's
employees. The employees of the Performing Party shall have no claim against
the Receiving Party for any compensation, reimbursement, injury or damages of
any kind.
6.3 Liability and Indemnification. Neither party makes any warranty,
express or implied, with respect to the Services to be provided by such party
under this Agreement. The liability of any Performing Party with respect to
the quality of performance of Services provided under this Agreement is
limited to the total compensation for the Services provided by that party
under this Agreement and shall not include any contingent liability. The sole
remedy (other than the amount of damages described in the foregoing sentence)
for the Performing Party's breach of this Agreement shall be the termination
of this Agreement. The Receiving Party's receipt of any Service performed
hereunder shall be deemed an unqualified acceptance of such Service and a
waiver by the Receiving Party of any and all claims with respect to such
Service, unless the Receiving Party gives notice of such claim within five
days after the date such item of Service was performed. Neither party will be
liable under this Agreement to the other party (or affiliate thereof) for
indirect, incidental, punitive, special or consequential damages, including
lost profits or revenue, even if the liable party has been advised of the
possibility of such damages or any claim against the other party by any third
party. A Performing Party will not be liable for any costs, expenses, losses,
liabilities, claims or damages, including attorneys' fees (hereafter
"Claims") directly or indirectly attributable to the actions of the Performing
Party, whether or not negligent, in performance of its obligations under this
Agreement, except that the same may be attributable to the [gross negligence]
or willful misconduct of the Performing Party.
6.3.1 Indemnification Covenant of Receiving Party. With respect to
any Service performed for the benefit of a Receiving Party, the Receiving
Party shall indemnify, defend and hold the Performing Party harmless from and
against any and all Claims (except for those Claims described in Section 6.3.2
or excluded by Section 6.3.3 of this Agreement) incurred by or assessed
against the Performing Party in connection with: (a) the performance of
Services by the Performing Party under this Agreement, (b) the injury to or
death of any person during the term of this Agreement who is an employee of
the Receiving Party at the time of the occurrence which causes such injury or
death, or (c) loss of or damage to any property of the Receiving Party during
the term of this Agreement.
6.3.2 Indemnification Covenant of Performing Party. With respect to
the Services performed by the Performing Party, the Performing Party shall
indemnify, defend and hold the Receiving Party harmless from and against any
and all Claims incurred by or assessed against the Receiving Party in
connection with the gross negligence, willful misconduct, or fraud of, or the
imposition of punitive or exemplary damages against, the Performing Party in
the performance of Services under the terms of this Agreement.
6.3.3 General Terms Regarding Indemnification. All indemnities set
forth in this Agreement extend to the officers, directors, employees and
affiliates of the party indemnified. Unless this agreement expressly provides
to the contrary, the indemnities set forth herein apply regardless of whether
the indemnified party (or its employees, agents, contractors, successors or
assigns) was a contributing cause of the indemnified Claim, expressly
including indemnified Claims arising out of or resulting, in whole or part,
from the indemnified party's (or its employees', agents', contractors',
successors' or assigns') sole or concurrent negligence. However, the
indemnities set forth in this agreement do not extend to any part of an
indemnified Claim that is the result of the gross negligence, willful
misconduct or fraud of the indemnified party or the result of the imposition
of punitive or exemplary damages on the indemnified party.
6.4 DTPA Waiver. Each Receiving Party hereby waives the provisions of the
Texas Deceptive Trade Practices-Consumer Protection Act, chapter 17,
subchapter E, sections 17.41 through 17.63, inclusive, Texas Business and
Commerce Code. To evidence its ability to grant such waiver, each Receiving
Party hereby represents and warrants to the Performing Party that the
Receiving Party (a) is in the business of seeking or acquiring, by purchase or
lease, goods or services for commercial or business use, (b) has assets of $5
million or more according to its most recent financial statement prepared in
accordance with generally accepted accounting principles, (c) has knowledge
and experience in financial and business matters that enable it to evaluate
the merits and risks of the transactions contemplated by this Agreement, and
(d) is not in a significantly disparate bargaining position.
6.5 Force Majeure. A Performing Party will not be considered in default
in performance of its obligations hereunder if performance is prevented or
delayed by acts of God or government, labor disputes, fires, power failures,
failure or delay of transportation, or by vendors or subcontractors, or any
other similar cause or causes beyond the reasonable control of that party,
whether similar to the causes specified herein or not, provided that the
Performing Party exercises all diligence in response to the force majeure and
uses its best efforts to perform its obligations hereunder as soon as possible
after termination of the force majeure. Neither party will be obligated to
settle a dispute or otherwise take any action that is not commercially
reasonable to terminate an event of force majeure.
6.6 Governing Law, Amendments, Successors and Assigns. This Agreement
will be governed by and construed in accordance with Texas law. This
Agreement may be amended, but only by a written instrument executed by a duly
authorized representative of each of VEC and Valero Refining. No party to
this Agreement may assign its rights or obligations under the Agreement
without the prior written consent of the other. This Agreement is binding
upon the successors and permitted assigns of VEC and Valero Refining.
6.7 Disputes. If a Receiving Party, within 10 days after receipt of an
invoice, disputes any charge set forth therein, the Receiving Party shall
notify the Performing Party in writing. The parties shall promptly attempt to
resolve any such dispute. If either party determines that the dispute cannot
be resolved in a mutually agreeable manner, the dispute shall be submitted,
within five days of notification to the other party, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
or if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP declines the referral, to another independent public
accountant mutually acceptable to the parties (the "Accountant"). The
Accountant shall make an investigation of the disputed charges as it deems
necessary and shall finally determine the amount of the charge. The cost of
the Accountant shall be borne by the Receiving Party if the invoiced amount is
determined to be correct, and shall be borne by the Performing Party if the
invoiced amount is determined to be incorrect. Pending such determination,
the Receiving Party shall pay the invoiced amount, with appropriate
adjustments to be made by the Performing Party following a final
determination.
The parties have executed this Interim Services Agreement to be effective
as of the Effective Date.
VALERO ENERGY CORPORATION
By:
[insert name and title]
VALERO REFINING AND MARKETING COMPANY
By:
[insert name and title]
[The following schedules or annexes have been omitted from this filing
pursuant to Regulation S-K section 229.601(b)(2). The Company undertakes to
furnish supplementally a copy of any omitted schedule or annex to the
Commission upon request.]
Schedule 1.1(a) -- Company Guarantees
Schedule 1.1(b) -- MTBE Project
Schedule 1.1(c) -- Retained Company Assumed Liabilities
Schedule 2.1(a) -- Retained Subsidiaries
Schedule 2.1(b)(ii)(B) -- Esco Real Estate
Schedule 2.1(b)(ii)(C) -- Promissory Notes
Schedule 2.1(b)(ii)(D) -- Esco Leases
Schedule 2.1(b)(ii)(G) -- Computer Software
Schedule 2.1(b)(ii)(H) -- Butane Splitter and Debutanizer
Schedule 2.1(b)(ii)(I) -- Valero Corporate Services Company, Listing of
Property, Plant and
Equipment as of January 1, 1997
Schedule 2.1(b)(ii)(J) -- Airplanes
Schedule 2.1(b)(ii)(K) -- Hunting Lease
Schedule 2.1(b)(ii)(L) -- Methanol Pipeline Segments
Schedule 2.2(a) -- VRM Assumed Liabilities
Schedule 2.2(c) -- Cash Management Overview
Schedule 4.1 -- Trademarks/Service Marks
Schedule 4.5 -- Intercompany Arrangements