Exhibit 10.02

 

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5-YEAR REVOLVING CREDIT AGREEMENT

 

dated as of December 20, 2004

 

among

 

VALERO LOGISTICS OPERATIONS, L.P.

 

VALERO L.P.

 

The Lenders Party Hereto

 

and

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

SUNTRUST BANK,

as Syndication Agent

 

and

 

BARCLAYS BANK PLC,

MIZUHO CORPORATE BANK LTD.,

 

and

 

ROYAL BANK OF CANADA,

as Co-Documentation Agents

 

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J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner

 

and

 

J.P. MORGAN SECURITIES INC. and SUNTRUST ROBINSON HUMPHREY, A DIVISION OF

SUNTRUST CAPITAL MARKETS, INC.,

as Co-Lead Arrangers

 

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TABLE OF CONTENTS

 

          Page

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     ARTICLE I           Definitions      Section 1.01.   

Defined Terms

   1 Section 1.02.   

Classification of Loans and Borrowings

   18 Section 1.03.   

Terms Generally

   19 Section 1.04.   

Accounting Terms; GAAP

   19      ARTICLE II           The Credits      Section 2.01.   

Commitments

   19 Section 2.02.   

Loans and Borrowings

   19 Section 2.03.   

Requests for Revolving Borrowings

   20 Section 2.04.   

Competitive Bid Procedure

   21 Section 2.05.   

Letters of Credit

   23 Section 2.06.   

Funding of Borrowings

   27 Section 2.07.   

Interest Elections

   27 Section 2.08.   

Termination and Reduction of Commitments

   29 Section 2.09.   

Repayment of Loans; Evidence of Debt

   29 Section 2.10.   

Prepayment of Loans

   30 Section 2.11.   

Fees

   30 Section 2.12.   

Interest

   32 Section 2.13.   

Alternate Rate of Interest

   32 Section 2.14.   

Increased Costs

   33 Section 2.15.   

Break Funding Payments

   34 Section 2.16.   

Taxes

   35 Section 2.17.   

Payments Generally; Pro Rata Treatment; Sharing of Set-offs

   36 Section 2.18.   

Mitigation Obligations; Replacement of Lenders

   37 Section 2.19.   

Procedures Regarding Increases to the Commitments

   38      ARTICLE III           Representations and Warranties      Section
3.01.   

Organization; Powers

   40 Section 3.02.   

Authorization; Enforceability

   40 Section 3.03.   

Governmental Approvals; No Conflicts

   40 Section 3.04.   

Financial Condition; No Material Adverse Change

   41 Section 3.05.   

Properties

   41 Section 3.06.   

Litigation and Environmental Matters

   41 Section 3.07.   

Compliance with Laws and Agreements

   42 Section 3.08.   

Investment and Holding Company Status

   42 Section 3.09.   

Taxes

   42 Section 3.10.   

ERISA

   42

 

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Section 3.11.   

Disclosure

   42 Section 3.12.   

Investments and Guarantees

   43 Section 3.13.   

Casualties; Taking of Property

   43      ARTICLE IV           Conditions      Section 4.01.   

Effective Date

   43 Section 4.02.   

Each Credit Event

   45      ARTICLE V           Affirmative Covenants      Section 5.01.   

Financial Statements and Other Information

   46 Section 5.02.   

Notices of Material Events

   47 Section 5.03.   

Existence; Conduct of Business

   48 Section 5.04.   

Payment of Obligations

   49 Section 5.05.   

Maintenance of Properties; Insurance

   49 Section 5.06.   

Books and Records; Inspection Rights

   49 Section 5.07.   

Compliance with Laws

   49 Section 5.08.   

Use of Proceeds and Letters of Credit

   49 Section 5.09.   

Environmental Laws

   49 Section 5.10.   

Subsidiaries

   50      ARTICLE VI           Negative Covenants      Section 6.01.   

Indebtedness

   50 Section 6.02.   

Liens

   51 Section 6.03.   

Fundamental Changes

   52 Section 6.04.   

Investments, Loans, Advances, Guarantees and Acquisitions

   52 Section 6.05.   

Swap Agreements

   53 Section 6.06.   

Restricted Payments

   53 Section 6.07.   

Transactions with Affiliates

   53 Section 6.08.   

Restrictive Agreements

   54 Section 6.09.   

Limitation on Modifications of Other Agreements

   54 Section 6.10.   

Creation of Subsidiaries

   54 Section 6.11.   

Financial Condition Covenants

   54      ARTICLE VII           Events of Default           ARTICLE VIII       
   MLP Guarantee      Section 8.01.   

MLP Guarantee

   57 Section 8.02.   

Subrogation

   58 Section 8.03.   

Amendments, etc. with respect to the Borrower Obligations

   58 Section 8.04.   

Guarantee Absolute and Unconditional

   59 Section 8.05.   

Reinstatement

   60 Section 8.06.   

Payments

   60

 

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     ARTICLE IX           The Administrative Agent           ARTICLE X          
Miscellaneous      Section 10.01.   

Notices

   62 Section 10.02.   

Waivers; Amendments

   63 Section 10.03.   

Expenses; Indemnity; Damage Waiver

   64 Section 10.04.   

Successors and Assigns

   65 Section 10.05.   

Survival

   68 Section 10.06.   

Counterparts; Integration; Effectiveness

   68 Section 10.07.   

Severability

   69 Section 10.08.   

Right of Setoff

   69 Section 10.09.   

Governing Law; Jurisdiction; Consent to Service of Process

   69 Section 10.10.   

WAIVER OF JURY TRIAL

   70 Section 10.11.   

Headings

   70 Section 10.12.   

Confidentiality

   70 Section 10.13.   

Interest Rate Limitation

   71 Section 10.14.   

Limitation of Liability

   71 Section 10.15.   

USA PATRIOT Act

   71

 

SCHEDULES:

 

Schedule 2.01 –   Commitments Schedule 3.06 –   Disclosed Matters
Schedule 6.01 –   Existing Indebtedness Schedule 6.04 –   Existing Investments
Schedule 6.07 –   Affiliate Agreements Schedule 6.08 –   Existing Restrictions

 

EXHIBITS:

 

Exhibit A —    Form of Assignment and Assumption Exhibit B —    Form of Opinion
of the Borrower’s and the MLP’s Counsel Exhibit C –    Form of Subsidiary
Guaranty Agreement Exhibit D-1 –    Form of Initial Notice of Commitment
Increase Exhibit D-2 –    Form of Notice of Confirmation of Commitment Increase

 

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5-YEAR REVOLVING CREDIT AGREEMENT dated as of December 20, 2004 among VALERO
LOGISTICS OPERATIONS, L.P., a Delaware limited partnership, VALERO L.P., a
Delaware limited partnership, the LENDERS party hereto, JP MORGAN CHASE BANK,
N.A., as Administrative Agent, SUNTRUST BANK, as Syndication Agent, and BARCLAYS
BANK PLC, MIZUHO CORPORATE BANK LTD., and ROYAL BANK OF CANADA, as
Co-Documentation Agents.

 

The parties hereto agree as follows:

 

ARTICLE I

Definitions

 

Section 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

 

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

 

“Acquired Companies” means, collectively, KSL and KPP, and their respective
subsidiaries.

 

“Acquisition” means the mergers of KPP and KSL into Wholly-Owned Subsidiaries of
the MLP pursuant to the terms and conditions of the Acquisition Documents.

 

“Acquisition Documents” means (a) Agreement and Plan of Merger dated as of
October 31, 2004 by and among Valero L.P., Riverwalk Logistics, L.P., Valero GP,
LLC, VLI Sub A LLC and KSL and (b) Agreement and Plan of Merger dated as of
October 31, 2004 by and among Valero L.P., Riverwalk Logistics, L.P., Valero GP,
LLC, VLI Sub B LLC, KPP, and Kaneb Pipe Line Company LLC, in each case, as
amended, modified or supplemented.

 

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

 

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

 

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

“Agreement” means this 5-Year Revolving Credit Agreement, as the same may be
amended, modified. supplemented or restated from time to time in accordance
herewith.

 

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“Alternate Base Rate” means, for any day, a rate per annum equal to the higher
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender’s Commitment. If the Commitments
have terminated or expired, the Applicable Percentages shall be determined based
upon the Commitments most recently in effect, giving effect to any assignments.

 

“Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Revolving Loan, or with respect to the facility fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“ABR Spread”, “Eurodollar Spread” or “Facility Fee Rate”, as the case may be,
based upon the ratings by Moody’s and/or S&P, respectively, applicable on such
date to the Index Debt:

 

Index Debt Ratings:

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   ABR
Spread

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   Eurodollar
Spread

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   Facility Fee
Rate

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Tier 1

Greater than BBB or Baa2

   0.00%    0.525%    0.100%

Tier 2

BBB or Baa2

   0.00%    0.625%    0.125%

Tier 3

BBB - or Baa3

   0.000%    0.725%    0.150%

Tier 4

BB+ or Ba1

   0.250%    1.050%    0.200%

Tier 5

Less than BB+ or Ba1

   0.500%    1.200%    0.300%

 

For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in
effect a rating for the Index Debt (after having established such a rating and
other than by reason of the circumstances referred to in the last sentence of
this definition), then such rating agency shall be deemed to have established a
rating in Tier 5; (ii) if both Moody’s and S&P have established a rating for the
Index Debt and such ratings established or deemed to have been established by
Moody’s and S&P shall fall within different Tiers, then (a) so long as either or
both such ratings are Investment Grade or better, the Applicable Rate shall be
based on the higher of the two ratings, unless one of the two ratings is two or
more Tiers lower than the other, in which case the Applicable Rate shall be
determined by reference to the Tier next below that of the higher of the

 

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two ratings; and (b) so long as both such ratings are below Investment Grade,
the Applicable Rate shall be based on the lower of the two ratings, unless one
of the two ratings is two or more Tiers lower than the other, in which case the
Applicable Rate shall be determined by reference to the Tier next above that of
the lower of the two ratings and (iii) if the ratings established or deemed to
have been established by Moody’s and S&P for the Index Debt shall be changed
(other than as a result of a change in the rating system of Moody’s or S&P),
such change shall be effective as of the date on which it is first announced by
the applicable rating agency, irrespective of when notice of such change shall
have been furnished by the Borrower to the Administrative Agent and the Lenders
pursuant to Section 5.01 or otherwise. Each change in the Applicable Rate shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of Moody’s or S&P shall change, or if either such
rating agency shall cease to be in the business of rating corporate debt
obligations, the Borrower and the Lenders shall negotiate in good faith to amend
this definition to reflect such changed rating system or the unavailability of
ratings from such rating agency and, pending the effectiveness of any such
amendment, the Applicable Rate shall be determined by reference to the rating
most recently in effect prior to such change or cessation.

 

“Approved Fund” has the meaning assigned to such term in Section 10.04.

 

“Assessment Rate” means, for any day, the annual assessment rate in effect on
such day that is payable by a member of the Bank Insurance Fund classified as
“well-capitalized” and within supervisory subgroup “B” (or a comparable
successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance Corporation for insurance
by such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change in any
law, rule or regulation, it is no longer possible to determine the Assessment
Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall
be determined by the Administrative Agent to be representative of the cost of
such insurance to the Lenders.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 10.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

 

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Maturity Date and the date of termination of
the Commitments.

 

“Benefit Arrangement” means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any ERISA Affiliate.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

 

“Borrower” means Valero Logistics Operations, L.P., a Delaware limited
partnership.

 

3

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“Borrower Obligations” means the collective reference to all amounts owing by
the Borrower and its Subsidiaries pursuant to this Agreement and the other
Guaranteed Documents, including, without limitation, the unpaid principal of and
interest on the Loans and LC Disbursements and all other obligations and
liabilities of the Borrower (including, without limitation, interest accruing at
the then applicable rate provided in this Agreement after the maturity of the
Loans and LC Disbursements and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to the Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) to the Guaranteed Creditors, whether
direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with the Guaranteed Documents, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Guaranteed Creditors that are required to be paid by the Borrower pursuant to
the terms of any of the foregoing agreements).

 

“Borrowing” means (a) Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Competitive Loan or group of
Competitive Loans of the same Type made on the same date and as to which a
single Interest Period is in effect.

 

“Borrowing Request” means a request by the Borrower for a Revolving Borrowing in
accordance with Section 2.03.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

 

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Change in Control” means any of the following events:

 

(a) (i) Valero Energy shall cease, indirectly or directly, to own at least a
majority of the issued and outstanding Equity Interests of, or shall cease to
Control, the general partner(s) of the MLP, or (ii) 100% (and not less than
100%) of the issued and outstanding Equity Interest of the general partner(s) of
the Borrower shall cease to be owned, directly or indirectly, or the Borrower
shall cease to be Controlled, by Valero Energy and/or the MLP; or

 

4

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(b) 100% (and not less than 100%) of the limited partnership interests of the
Borrower shall cease to be owned in the aggregate, directly or indirectly, by
the MLP and/or Valero Energy.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or any Issuing Bank (or,
for purposes of Section 2.14(b), by any lending office of such Lender or by such
Lender’s or such Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

 

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolving Loans or Competitive
Loans.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Revolving Loans and to acquire participations in Letters of Credit
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.08 and (b) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to
Section 2.19 or Section 10.04. The initial amount of each Lender’s Commitment is
set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to
which such Lender shall have assumed its Commitment, as applicable. The initial
aggregate amount of the Lenders’ Commitments is $400,000,000.

 

“Commitment Increase Effective Date” has the meaning assigned such term in
Section 2.19.

 

“Common Units” means the common units of limited partner interests in the MLP.

 

“Competitive Bid” means an offer by a Lender to make a Competitive Loan in
accordance with Section 2.04.

 

“Competitive Bid Rate” means, with respect to any Competitive Bid, the Margin or
the Fixed Rate, as applicable, offered by the Lender making such Competitive
Bid.

 

“Competitive Bid Request” means a request by the Borrower for Competitive Bids
in accordance with Section 2.04.

 

“Competitive Loan” means a Loan made pursuant to Section 2.04.

 

“Consolidated Debt Coverage Ratio” means, for any day, the ratio of (a) all
Indebtedness of the MLP and its Subsidiaries, on a consolidated basis, as of the
last day of the then most recent Rolling Period over (b) Consolidated EBITDA for
such Rolling Period.

 

5

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“Consolidated EBITDA” means, without duplication, as to the MLP and its
Subsidiaries, on a consolidated basis for each Rolling Period, the amount equal
to Consolidated Operating Income for such period plus (a) depreciation and
amortization for such period, and (b) cash distributions received by the
Borrower from Skelly-Belvieu Pipeline Company, and similar joint ventures,
during such period; provided that (i) Consolidated EBITDA shall be adjusted from
time to time as necessary to give pro forma effect to permitted acquisitions or
Investments (other than Joint Venture Interests) or sales of property by the MLP
and its Subsidiaries and (ii) Consolidated EBITDA shall be adjusted to take into
account pro forma synergies as a result of the Acquisition in an amount equal to
(A) $25,000,000 for the Rolling Period ending on June 30, 2005, (B) $20,000,000
for the Rolling Period ending on September 30, 2005, (C) $15,000,000 for the
Rolling Period ending on December 31, 2005 and (D) $5,000,000 for the Rolling
Period ending on March 31, 2006.

 

“Consolidated Interest Coverage Ratio” means, for any day, the ratio of (i)
Consolidated EBITDA for the then most recent Rolling Period to (ii) Consolidated
Interest Expense for such Rolling Period.

 

“Consolidated Interest Expense” means, for any Rolling Period, total interest
expense (including that attributable to Capital Lease Obligations) of the MLP
and its Subsidiaries for such period with respect to all outstanding
Indebtedness of the MLP and its Subsidiaries (including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers’ acceptance financing and net costs under any Swap
Agreements to the extent such net costs are allocable to such period in
accordance with GAAP).

 

“Consolidated Operating Income” means, as to the MLP and its Subsidiaries on a
consolidated basis for each Rolling Period, the amount equal to gross income
minus operating expenses, general and administrative expenses, depreciation and
amortization, and taxes other than income taxes, in each case for such period.

 

“Consolidated Net Worth” means, at any time, an amount equal to the consolidated
partners’ equity of the MLP and its Subsidiaries.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.

 

“dollars” or “$” refers to lawful money of the United States of America.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
the United States of America or any state thereof or the District of Columbia.

 

6

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“Effective Date” means the date on which the conditions specified in Section
4.01 are satisfied (or waived in accordance with Section 10.02).

 

“Environmental Approvals” means any Governmental Approvals required under
applicable Environmental Laws.

 

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the MLP or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Equity Interest” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any member
interests in a limited liability company, and general or limited partnership
interests in a partnership, any and all equivalent ownership interests in a
Person and any and all warrants, options or other rights to purchase any of the
foregoing. In addition, “Equity Interest” shall include, without limitation,
with respect to the Borrower, the limited partner interests of the Borrower and
the General Partner Interests and, with respect to the MLP, the Units and the
general partner interest of the MLP.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the MLP, is treated as a single employer under Section
414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414 of
the Code.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the MLP or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the MLP or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
MLP or any

 

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of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the MLP or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the MLP or any ERISA Affiliate of any notice, concerning
the imposition of Withdrawal Liability or a determination that a Multiemployer
Plan is, or is expected to be, insolvent or in reorganization, within the
meaning of Title IV of ERISA.

 

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate (or, in the case of a
Competitive Loan, the LIBO Rate).

 

“Event of Default” has the meaning assigned to such term in Article VII.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
any Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender’s failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.16(a).

 

“Existing Credit Agreement” means the Amended and Restated Credit Agreement,
dated as of December 15, 2000, as amended and restated through March 6, 2003, by
and among the Borrower, the Lenders (as defined therein) party thereto, JPMorgan
Chase Bank, as Administrative Agent, Royal Bank of Canada, as syndication agent,
and SunTrust Bank and Mizuho Corporate Bank Ltd., as co-documentation agents, as
amended.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

“Financial Officer” means with respect to any Person, the chief accounting
officer, chief financial officer, treasurer or controller of such Person.

 

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“Fixed Rate” means, with respect to any Competitive Loan (other than a
Eurodollar Competitive Loan), the fixed rate of interest per annum specified by
the Lender making such Competitive Loan in its related Competitive Bid.

 

“Fixed Rate Loan” means a Competitive Loan bearing interest at a Fixed Rate.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

“GAAP” means generally accepted accounting principles in the United States of
America.

 

“General Partner” means Valero GP, Inc., a Delaware corporation.

 

“General Partner Interest” means all general partner interests in the Borrower.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

 

“Guaranteed Creditors” means the collective reference to the Administrative
Agent and the Lenders.

 

“Guaranteed Documents” means the collective reference to this Agreement and the
other Loan Documents.

 

“Guarantor” means each of the MLP and each Subsidiary and other Person that from
time to time executes and delivers a Subsidiary Guaranty (or becomes a party
thereto by executing and delivering a supplement thereto or otherwise).

 

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“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Increasing Lender” has the meaning assigned to such term in Section 2.19.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures, notes
or similar instruments or by any other securities providing for the mandatory
payment of money (including, without limitation, preferred stock subject to
mandatory redemption or sinking fund provisions), (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all non-contingent obligations of such Person as an account party in respect of
letters of credit and letters of guaranty, (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances, (k) all
obligations of such Person with respect to any arrangement, directly or
indirectly, whereby such Person or its Subsidiaries shall sell or transfer any
material asset, and whereby such Person or any of its Subsidiaries shall then or
immediately thereafter rent or lease as lessee such asset or any part thereof,
and (l) all recourse and support obligations of such Person or any of its
Subsidiaries with respect to the sale or discount of any of its accounts
receivable. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person’s ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indenture” means the Indenture, dated as of July 15, 2002, between the
Borrower, as Issuer, the MLP, as Guarantor, and The Bank of New York, as
Trustee, relating to the issuance of senior debt securities, as amended,
modified and supplemented from time to time in accordance herewith.

 

“Index Debt” means senior, unsecured, long-term indebtedness for borrowed money
of the Borrower that is not guaranteed by any other Person other than the
Guarantors or subject to any other credit enhancement.

 

“Information Memorandum” means the Confidential Information Memorandum dated
November 8, 2004 relating to the Borrower and the Transactions.

 

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“Initial Notice of Commitment Increase” has the meaning assigned to such term in
Section 2.19.

 

“Interest Election Request” means a request by the Borrower to convert or
continue a Revolving Borrowing in accordance with Section 2.07.

 

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each March, June, September and December, (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months’ duration after
the first day of such Interest Period and (c) with respect to any Fixed Rate
Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest
Period of more than 90 days’ duration (unless otherwise specified in the
applicable Competitive Bid Request), each day prior to the last day of such
Interest Period that occurs at intervals of 90 days’ duration after the first
day of such Interest Period, and any other dates that are specified in the
applicable Competitive Bid Request as Interest Payment Dates with respect to
such Borrowing.

 

“Interest Period” means (a) with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six-months
thereafter, as the Borrower may elect, and (b) with respect to any Fixed Rate
Borrowing, the period (which shall not be less than 1 day or more than 270 days)
commencing on the date of such Borrowing and ending on the date specified in the
applicable Competitive Bid Request; provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and, in
the case of a Revolving Borrowing, thereafter shall be the effective date of the
most recent conversion or continuation of such Borrowing.

 

“Investment” means, as applied to any Person, any direct or indirect purchase or
other acquisition by such Person of any Equity Interests in any other Person, or
any direct or indirect loan, advance or capital contribution by such Person to
any other Person, including all Indebtedness and receivables from such other
Person which are not current assets or did not arise from sales to such other
Person in the ordinary course of business, and any direct or indirect purchase
or other acquisition by such Person of any assets (other than any acquisition of
assets in the ordinary course of business).

 

“Investment Grade” means a rating for Index Debt of BBB- or higher by S&P and
Baa3 or higher by Moody’s.

 

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“Issuing Bank” means each of JPMorgan Chase Bank, N.A. and SunTrust Bank, in
each case, in its capacity as an issuer of Letters of Credit hereunder, and its
successors in such capacity as provided in Section 2.05(i). Any Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued
by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate.

 

“Joint Venture Interest” means an acquisition of or Investment in Equity
Interests in another Person, held directly or indirectly by the MLP, that will
not be a Subsidiary after giving effect to such acquisition or Investment.

 

“KPP” means Kaneb Pipe Line Partners, L.P., a Delaware limited partnership.

 

“KSL” means Kaneb Services LLC, a Delaware limited liability company.

 

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter
of Credit issued by such Issuing Bank.

 

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time. The LC Exposure of
any Issuing Bank at any time shall be the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit issued by such Issuing Bank at such
time plus (b) the aggregate amount of all LC Disbursements made by such Issuing
Bank that have not yet been reimbursed by or on behalf of the Borrower at such
time.

 

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption.

 

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

 

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“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Loan Documents” means this Agreement, the Subsidiary Guaranty, any notes issued
pursuant to Section 2.09(e), and any Letter of Credit, as each such agreement
may be amended, supplemented or otherwise modified from time to time as
permitted hereby, and any and all instruments, certificates, or other agreements
delivered in connection with the foregoing.

 

“Loans” means the loans made by the Lenders to the Borrower pursuant to this
Agreement.

 

“Margin” means, with respect to any Competitive Loan bearing interest at a rate
based on the LIBO Rate, the marginal rate of interest, if any, to be added to or
subtracted from the LIBO Rate to determine the rate of interest applicable to
such Loan, as specified by the Lender making such Loan in its related
Competitive Bid.

 

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations or condition (financial or otherwise) of the MLP and its
Subsidiaries (including the Borrower) taken as a whole, (b) the ability of the
MLP, the Borrower or any Guarantor to perform any of their obligations under
this Agreement or any other Loan Document or (c) the rights of or benefits
available to the Lenders under this Agreement or any other Loan Document.

 

“Material Agreements” means the Partnership Agreement (Borrower) and the
Indenture as each such agreement may be amended, supplemented or otherwise
modified from time to time as permitted hereby.

 

“Material Domestic Subsidiary” means any Material Subsidiary that is a Domestic
Subsidiary.

 

“Material Subsidiary” means, with respect to the MLP, any Subsidiary (other than
the Borrower) that meets any of the following conditions: (i) the MLP’s and its
other Subsidiaries’ equity in the income from continuing operations before
interest expense and all income taxes of such Subsidiary exceeds 10% of such
income of the MLP and its Subsidiaries consolidated for the most recently
completed fiscal year or (ii) the MLP’s and its other Subsidiaries’
proportionate share of the total assets (after intercompany eliminations) of
such Subsidiary exceeds 10% of the total assets of the MLP and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year.

 

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the MLP and its Subsidiaries in an aggregate principal amount exceeding
$35,000,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the MLP or any Subsidiary in respect of any Swap
Agreement at any time shall be the maximum aggregate

 

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amount (giving effect to any netting agreements) that such Person would be
required to pay if such Swap Agreement were terminated at such time.

 

“Maturity Date” means the fifth anniversary of the Effective Date.

 

“MLP” means Valero L.P., a Delaware limited partnership.

 

“MLP Obligations” means the collective reference to (i) the Borrower Obligations
and (ii) all obligations and liabilities of the MLP which may arise under or in
connection with any Guaranteed Document to which the MLP is a party, in each
case whether on account of guarantee obligations, reimbursement obligations,
loan obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to any Guaranteed
Creditor under any Guaranteed Document).

 

“Moody’s” means Moody’s Investors Service, Inc. (or any successor rating
organization).

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA, to which the MLP or any ERISA Affiliate makes or is obligated to make
contributions.

 

“New Funds Amount” means the amount by which a New Lender’s or an Increasing
Lender’s outstanding Loans increase as of a Commitment Increase Effective Date
(without regard to any such increase as a result of Borrowings made on such
Commitment Increase Effective Date).

 

“New Lender” has the meaning assigned to such term in Section 2.19.

 

“Notice of Confirmation of Commitment Increase” has the meaning assigned to such
term in Section 2.19.

 

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement.

 

“Partially Increasing Lender” has the meaning assigned to such term in Section
2.19.

 

“Partnership Agreement (Borrower)” means the Agreement of Limited Partnership of
the Borrower among the General Partner and the MLP in the form previously
provided to the Lenders, as amended, modified and supplemented from time to time
in accordance herewith.

 

“Partnership Agreement (MLP)” means the Third Amended and Restated Agreement of
Limited Partnership of the MLP dated as of March 18, 2003, as amended, modified
and supplemented from time to time in accordance herewith.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

 

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“Permitted Encumbrances” means:

 

(a) Liens imposed by law for Taxes that are not yet due or are being contested
in compliance with Section 5.04;

 

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.04;

 

(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

 

(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

 

(e) judgment liens in respect of judgments that do not constitute an Event of
Default under clause (j) of Article VII;

 

(f) easements, zoning restrictions, rights-of-way, minor irregularities in
title, boundaries, or other survey defects, servitudes, permits, reservations,
exceptions, zoning regulations, conditions, covenants, mineral or royalty rights
or reservations or oil, gas and mineral leases and rights of others in any
property of the MLP or any Subsidiary for streets, roads, bridges, pipes, pipe
lines, railroads, electric transmission and distribution lines, telegraph and
telephone lines, the removal of oil, gas or other minerals or other similar
purposes, flood control, water rights, rights of others with respect to
navigable waters, sewage and drainage rights and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do
not secure any monetary obligations and do not materially detract from the value
of the affected property or interfere with the ordinary conduct of business of
the MLP or any Subsidiary; provided that the term “Permitted Encumbrances” shall
not include any Lien securing Indebtedness; and

 

(g) Liens securing an obligation of a third party neither created, assumed nor
Guaranteed by the MLP or any Subsidiary upon lands over which easements or
similar rights are acquired by the MLP or any Subsidiary in the ordinary course
of business of the MLP or any Subsidiary.

 

“Permitted Investments” means:

 

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;

 

(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, a short term
deposit rating of no lower than A2 or P2, as such rating is set forth by S&P or
Moody’s, respectively;

 

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(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000; and

 

(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the MLP or any ERISA Affiliate
contributes or has an obligation to contribute and is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as
defined in Section 3(5) of ERISA.

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

 

“Reducing Lender” has the meaning assigned to such term in Section 2.19.

 

“Reduction Amount” means the amount by which a Reducing Lender’s or a Partially
Increasing Lender’s outstanding Loans decrease as of a Commitment Increase
Effective Date (without regard to any such increase as a result of Borrowings
made on such Commitment Increase Effective Date).

 

“Register” has the meaning set forth in Section 10.04.

 

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

“Required Lenders” means, at any time, Lenders having Revolving Credit Exposures
and unused Commitments representing greater than 50% of the sum of the total
Revolving Credit Exposures and unused Commitments at such time; provided that,
for purposes of declaring the Loans to be due and payable pursuant to Article
VII, and for all purposes after the Loans become due and payable pursuant to
Article VII or the Commitments expire or terminate, the outstanding Competitive
Loans of the Lenders shall be included in their respective Revolving Credit
Exposures in determining the Required Lenders.

 

“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property, with the exception of a Unit split, combination,
or dividend, in each

 

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case so long as the only consideration paid in connection therewith is an
in-kind payment of additional Units) with respect to any Equity Interest of the
MLP or any Subsidiary, or any payment (whether in cash, securities or other
property, with the exception of a Unit split, combination, or dividend, in each
case so long as the only consideration paid in connection therewith is an
in-kind payment of additional Units), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interest of the MLP or any
option, warrant or other right to acquire any such Equity Interest of the MLP.

 

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Revolving Loans and its
LC Exposure at such time.

 

“Revolving Loan” means a Loan made pursuant to Section 2.03.

 

“Rolling Period” means any period of four consecutive fiscal quarters.

 

“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

 

“S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill
Companies, Inc. (or any successor rating organization).

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.

 

“Subordinated Units” means the subordinated units of limited partner interests
in the MLP.

 

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or

 

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(b) that is, as of such date, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.

 

“Subsidiary” means any subsidiary of the MLP (including the Borrower).

 

“Subsidiary Guaranty” means any guaranty executed and delivered pursuant to
Section 5.10, as from time to time amended, modified, or supplemented.

 

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the MLP or the
Subsidiaries shall be a Swap Agreement.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

 

“Transactions” means the execution, delivery and performance by the Borrower and
the MLP of this Agreement, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder, and the execution,
delivery and performance of the Subsidiary Guaranty.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate or,
in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate.

 

“Units” means the collective reference to the Common Units and the Subordinated
Units.

 

“Valero Energy” means Valero Energy Corporation, a Delaware corporation.

 

“Wholly-Owned Subsidiary” means, in respect of any Person, any subsidiary of
such Person, all of the Equity Interests of which (other than director’s
qualifying shares, as may be required by law) is owned by such Person, either
directly or indirectly through one or more Wholly-Owned Subsidiaries of such
Person. Unless otherwise indicated herein, each reference to the term
“Wholly-Owned Subsidiary” shall mean a Wholly-Owned Subsidiary of the MLP.

 

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

Section 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings

 

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also may be classified and referred to by Class (e.g., a “Revolving Borrowing”)
or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a
“Eurodollar Revolving Borrowing”).

 

Section 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

Section 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

 

ARTICLE II

The Credits

 

Section 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Revolving Loans to the Borrower from time to time
during the Availability Period in an aggregate principal amount that will not
result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s
Commitment or (b) the sum of the total Revolving Credit Exposures plus the
aggregate principal amount of outstanding Competitive Loans exceeding the total
Commitments. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.

 

Section 2.02. Loans and Borrowings. (a) Each Revolving Loan shall be made as
part of a Borrowing consisting of Revolving Loans made by the Lenders ratably in
accordance with

 

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their respective Commitments. Each Competitive Loan shall be made in accordance
with the procedures set forth in Section 2.04. The failure of any Lender to make
any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments and Competitive Bids of the
Lenders are several and no Lender shall be responsible for any other Lender’s
failure to make Loans as required.

 

(b) Subject to Section 2.13, (i) each Revolving Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith and (ii) each Competitive Borrowing shall be comprised
entirely of Eurodollar Loans or Fixed Rate Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.

 

(c) At the commencement of each Interest Period for any Eurodollar Revolving
Borrowing, such Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR
Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $500,000 and not less than $1,000,000; provided that
an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each
Competitive Borrowing shall be in an aggregate amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one
Type and Class may be outstanding at the same time; provided that there shall
not at any time be more than a total of five Eurodollar Revolving Borrowings
outstanding.

 

(d) Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Maturity
Date.

 

Section 2.03. Requests for Revolving Borrowings. To request a Revolving
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon,
New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New
York City time, on date of the proposed Borrowing; provided that any such notice
of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement
as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New
York City time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower. Each
such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:

 

(i) the aggregate amount of the requested Borrowing;

 

(ii) the date of such Borrowing, which shall be a Business Day;

 

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(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

 

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and

 

(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.06.

 

If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Promptly following receipt of a Borrowing Request in accordance with
this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

Section 2.04. Competitive Bid Procedure.

 

(a) Subject to the terms and conditions set forth herein, from time to time
during the Availability Period the Borrower may request Competitive Bids and may
(but shall not have any obligation to) accept Competitive Bids and borrow
Competitive Loans; provided that the sum of the total Revolving Credit Exposures
plus the aggregate principal amount of outstanding Competitive Loans at any time
shall not exceed the total Commitments. To request Competitive Bids, the
Borrower shall notify the Administrative Agent of such request by telephone, in
the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, four Business Days before the date of the proposed Borrowing and, in the
case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time,
one Business Day before the date of the proposed Borrowing; provided that the
Borrower may submit no more than one Competitive Bid Request on the same day,
but a Competitive Bid Request shall not be made within five Business Days after
the date of any previous Competitive Bid Request, unless such previous
Competitive Bid Request shall have been withdrawn or all Competitive Bids
received in response thereto rejected. Each such telephonic Competitive Bid
Request shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Competitive Bid Request in a form approved by
the Administrative Agent and signed by the Borrower. Each such telephonic and
written Competitive Bid Request shall specify the following information in
compliance with Section 2.02:

 

(i) the aggregate amount of the requested Borrowing;

 

(ii) the date of such Borrowing, which shall be a Business Day;

 

(iii) whether such Borrowing is to be a Eurodollar Borrowing or a Fixed Rate
Borrowing;

 

(iv) the Interest Period to be applicable to such Borrowing, which shall be a
period contemplated by the definition of the term “Interest Period”; and

 

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(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07.

 

Promptly following receipt of a Competitive Bid Request in accordance with this
Section, the Administrative Agent shall notify the Lenders of the details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.

 

(b) Each Lender may (but shall not have any obligation to) make one or more
Competitive Bids to the Borrower in response to a Competitive Bid Request. Each
Competitive Bid by a Lender must be in a form approved by the Administrative
Agent and must be received by the Administrative Agent by telecopy, in the case
of a Eurodollar Competitive Borrowing, not later than 9:30 a.m., New York City
time, three Business Days before the proposed date of such Competitive
Borrowing, and in the case of a Fixed Rate Borrowing, not later than 9:30 a.m.,
New York City time, on the proposed date of such Competitive Borrowing.
Competitive Bids that do not conform substantially to the form approved by the
Administrative Agent may be rejected by the Administrative Agent, and the
Administrative Agent shall notify the applicable Lender as promptly as
practicable. Each Competitive Bid shall specify (i) the principal amount (which
shall be a minimum of $5,000,000 and an integral multiple of $1,000,000 and
which may equal the entire principal amount of the Competitive Borrowing
requested by the Borrower) of the Competitive Loan or Loans that the Lender is
willing to make, (ii) the Competitive Bid Rate or Rates at which the Lender is
prepared to make such Loan or Loans (expressed as a percentage rate per annum in
the form of a decimal to no more than four decimal places) and (iii) the
Interest Period applicable to each such Loan and the last day thereof.

 

(c) The Administrative Agent shall promptly notify the Borrower by telecopy of
the Competitive Bid Rate and the principal amount specified in each Competitive
Bid and the identity of the Lender that shall have made such Competitive Bid.

 

(d) Subject only to the provisions of this paragraph, the Borrower may accept or
reject any Competitive Bid. The Borrower shall notify the Administrative Agent
by telephone, confirmed by telecopy in a form approved by the Administrative
Agent, whether and to what extent it has decided to accept or reject each
Competitive Bid, in the case of a Eurodollar Competitive Borrowing, not later
than 10:30 a.m., New York City time, three Business Days before the date of the
proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not
later than 10:30 a.m., New York City time, on the proposed date of the
Competitive Borrowing; provided that (i) the failure of the Borrower to give
such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the
Borrower shall not accept a Competitive Bid made at a particular Competitive Bid
Rate if the Borrower rejects a Competitive Bid made at a lower Competitive Bid
Rate, (iii) the aggregate amount of the Competitive Bids accepted by the
Borrower shall not exceed the aggregate amount of the requested Competitive
Borrowing specified in the related Competitive Bid Request, (iv) to the extent
necessary to comply with clause (iii) above, the Borrower may accept Competitive
Bids at the same Competitive Bid Rate in part, which acceptance, in the case of
multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata
in accordance with the amount of each such Competitive Bid, and (v) except
pursuant to clause (iv) above, no Competitive Bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in a minimum principal amount
of $5,000,000 and an integral multiple of $1,000,000; provided further that if a

 

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Competitive Loan must be in an amount less than $5,000,000 because of the
provisions of clause (iv) above, such Competitive Loan may be for a minimum of
$1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
Borrower. A notice given by the Borrower pursuant to this paragraph shall be
irrevocable.

 

(e) The Administrative Agent shall promptly notify each bidding Lender by
telecopy whether or not its Competitive Bid has been accepted (and, if so, the
amount and Competitive Bid Rate so accepted), and each successful bidder will
thereupon become bound, subject to the terms and conditions hereof, to make the
Competitive Loan in respect of which its Competitive Bid has been accepted.

 

(f) If the Administrative Agent shall elect to submit a Competitive Bid in its
capacity as a Lender, it shall submit such Competitive Bid directly to the
Borrower at least one quarter of an hour earlier than the time by which the
other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.

 

Section 2.05. Letters of Credit.

 

(a) General. Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of Letters of Credit for its own account from any
Issuing Bank, in a form reasonably acceptable to the Administrative Agent and
such Issuing Bank, at any time and from time to time during the Availability
Period. In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, an Issuing Bank relating to any Letter of Credit, the terms
and conditions of this Agreement shall control.

 

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to any Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by an Issuing Bank, the Borrower also shall submit a
letter of credit application on such Issuing Bank’s standard form in connection
with any request for a Letter of Credit. Following receipt of a notice
requesting the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit) in accordance with this Section,
the Administrative Agent shall advise each Lender of the details thereof. A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and

 

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warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the total LC Exposure shall not exceed $200,000,000, (ii) the LC
Exposure of JPMorgan Chase Bank, N.A. shall not exceed $100,000,000, (iii) the
LC Exposure of SunTrust Bank shall not exceed $100,000,000 and (iv) the sum of
the total Revolving Credit Exposures plus the aggregate principal amount of
outstanding Competitive Loans shall not exceed the total Commitments.

 

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Maturity Date.

 

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank that issues such Letter of Credit or the
Lenders, each Issuing Bank that issues a Letter of Credit hereunder hereby
grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of each Issuing Bank that issues a Letter of Credit hereunder, such
Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.

 

(e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit issued by such Issuing Bank, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if the Borrower shall have received notice of
such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or,
if such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 that such payment be financed with an
ABR Revolving Borrowing in an equivalent amount and, to the extent so financed,
the Borrower’s obligation to make such payment shall be discharged and replaced
by the resulting ABR Revolving Borrowing. If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender’s Applicable Percentage thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its

 

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Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.06 with respect to Loans made by such Lender
(and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank that issued such Letter of Credit the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any payment
from the Borrower pursuant to this paragraph, the Administrative Agent shall
distribute such payment to the Issuing Bank that issued such Letter of Credit
or, to the extent that Lenders have made payments pursuant to this paragraph to
reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their
interests may appear. Any payment made by a Lender pursuant to this paragraph to
reimburse an Issuing Bank for any LC Disbursement (other than the funding of ABR
Revolving Loans as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.

 

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by any Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations hereunder. Neither
the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of any
Issuing Bank; provided that the foregoing shall not be construed to excuse any
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by such Issuing Bank’s failure to exercise care
when determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of an
Issuing Bank (as finally determined by a court of competent jurisdiction), each
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank that issued such Letter of Credit may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.

 

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(g) Disbursement Procedures. Each Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. Such Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether such Issuing Bank has made or will make an
LC Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse such
Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

(h) Interim Interest. If any Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrower reimburses such LC Disbursement, at the
rate per annum then applicable to ABR Revolving Loans; provided that, if the
Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph
(e) of this Section, then Section 2.12(d) shall apply. Interest accrued pursuant
to this paragraph shall be for the account of such Issuing Bank, except that
interest accrued on and after the date of payment by any Lender pursuant to
paragraph (e) of this Section to reimburse such Issuing Bank shall be for the
account of such Lender to the extent of such payment.

 

(i) Replacement of an Issuing Bank. Any Issuing Bank may be replaced at any time
by written agreement among the Borrower, the Administrative Agent, the replaced
Issuing Bank and the successor Issuing Bank. The Administrative Agent shall
notify the Lenders of any such replacement of an Issuing Bank. At the time any
such replacement shall become effective, the Borrower shall pay all unpaid fees
accrued for the account of the replaced Issuing Bank pursuant to Section
2.11(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the replaced
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

 

(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the Borrower
described in clause (g) or (h) of Article VII. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
obligations of the

 

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Borrower under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits,
which investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower’s risk and expense, such deposits shall
not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the
Administrative Agent to reimburse each Issuing Bank for LC Disbursements for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Lenders with LC Exposure representing
greater than 50% of the total LC Exposure), be applied to satisfy other
obligations of the Borrower under this Agreement. If the Borrower is required to
provide an amount of cash collateral hereunder as a result of the occurrence of
an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

 

Section 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 1:00 p.m., New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
an account of the Borrower maintained with the Administrative Agent in New York
City and designated by the Borrower in the applicable Borrowing Request or
Competitive Bid Request; provided that ABR Revolving Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be
remitted by the Administrative Agent to the Issuing Bank that made such LC
Disbursement.

 

(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed time of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.

 

Section 2.07. Interest Elections. (a) Each Revolving Borrowing initially shall
be of the Type specified in the applicable Borrowing Request and, in the case of
a Eurodollar Revolving Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue

 

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such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing. This Section shall
not apply to Competitive Borrowings, which may not be converted or continued.

 

(b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Borrower were requesting a
Revolving Borrowing of the Type resulting from such election to be made on the
effective date of such election. Each such telephonic Interest Election Request
shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.

 

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

 

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

 

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

 

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

 

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

 

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

 

(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

 

(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Revolving Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Revolving Borrowing may be
converted to or

 

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continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Revolving Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

 

Section 2.08. Termination and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Maturity Date.

 

(b) The Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $5,000,000
and (ii) the Borrower shall not terminate or reduce the Commitments if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.10, the sum of the Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans would exceed the total
Commitments.

 

(c) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked by the Borrower (by notice to the Administrative
Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments shall be permanent.
Each reduction of the Commitments shall be made ratably among the Lenders in
accordance with their respective Commitments.

 

Section 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account
of each Lender the then unpaid principal amount of each Revolving Loan on the
Maturity Date and (ii) to the Administrative Agent for the account of each
Lender the then unpaid principal amount of each Competitive Loan on the last day
of the Interest Period applicable to such Loan.

 

(b) Each Lender shall maintain in accordance with its usual practice an account
or accounts evidencing the indebtedness of the Borrower to such Lender resulting
from each Loan made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time hereunder.

 

(c) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

 

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(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c)
of this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

 

(e) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in a form
approved by the Administrative Agent. Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after an
increase in such Lender’s Commitment pursuant to Section 2.19 or an increase or
reduction in such Lender’s Commitment pursuant to an assignment pursuant to
Section 10.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).

 

Section 2.10. Prepayment of Loans. (a) The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (b) of this Section; provided that
the Borrower shall not have the right to prepay any Competitive Loan without the
prior consent of the Lender thereof.

 

(b) The Borrower shall notify the Administrative Agent by telephone (confirmed
by telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Revolving Borrowing, not later than 11:00 a.m., New York City time,
three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment or (iii) in the case
of prepayment of a Competitive Loan, not later than 11:00 a.m., New York City
time, one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.08, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with
Section 2.08. Promptly following receipt of any such notice relating to a
Revolving Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Revolving Borrowing shall be in
an amount that would be permitted in the case of an advance of a Revolving
Borrowing of the same Type as provided in Section 2.02. Each prepayment of a
Revolving Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.12 and any break funding payments required by
Section 2.15.

 

Section 2.11. Fees. (a) The Borrower agrees to pay to the Administrative Agent
for the account of each Lender a facility fee, which shall accrue at the
Applicable Rate on the daily amount of the Commitment of such Lender (whether
used or unused) during the period from and including the Effective Date to but
excluding the date on which such Commitment terminates; provided that, if such
Lender continues to have any Revolving Credit Exposure after its Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of

 

30

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such Lender’s Revolving Credit Exposure from and including the date on which its
Commitment terminates to but excluding the date on which such Lender ceases to
have any Revolving Credit Exposure. Accrued facility fees shall be payable in
arrears on the last day of March, June, September and December of each year and
on the date on which the Commitments terminate, commencing on the first such
date to occur after the Effective Date; provided that any facility fees accruing
after the date on which the Commitments terminate shall be payable on demand.
All facility fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last).

 

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account
of each Lender a participation fee with respect to its participations in Letters
of Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Revolving Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to each Issuing Bank a fronting fee, which shall accrue at
the rate of 0.125% per annum on the average daily amount of that portion of the
LC Exposure attributable to such Issuing Bank (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date of
termination of the Commitments and the date on which there ceases to be any LC
Exposure attributable to such Issuing Bank, as well as such Issuing Bank’s
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Participation fees
and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on such last day,
commencing on the first such date to occur after the Effective Date; provided
that all such fees shall be payable on the date on which the Commitments
terminate and any such fees accruing after the date on which the Commitments
terminate shall be payable on demand. Any other fees payable to an Issuing Bank
pursuant to this paragraph shall be payable within 10 days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last).

 

(c) If the Effective Date has not occurred on or prior to March 31, 2005, then
the Borrower agrees to pay to the Administrative Agent for the account of each
Lender a ticking fee, which shall accrue commencing on April 1, 2005, at a rate
equal to 0.075% per annum on such Lender’s Commitment. Accrued ticking fees
shall be payable in arrears on the Effective Date or, if the Effective Date does
not occur on or prior to June 30, 2005, then on June 30, 2005. All ticking fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last).

 

(d) The Borrower agrees to pay to the Administrative Agent, for its own account,
fees payable in the amounts and at the times separately agreed upon between the
Borrower and the Administrative Agent.

 

(e) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to an Issuing Bank, in the case
of fees payable to

 

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it) for distribution, in the case of facility fees and participation fees, to
the Lenders. Fees paid shall not be refundable under any circumstances.

 

Section 2.12. Interest. (a) The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Rate.

 

(b) The Loans comprising each Eurodollar Borrowing shall bear interest in the
case of a Eurodollar Revolving Loan, at the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate, or (ii) in the
case of a Eurodollar Competitive Loan, at the LIBO Rate for the Interest Period
in effect for such Borrowing plus (or minus, as applicable) the Margin
applicable to such Loan.

 

(c) Each Fixed Rate Loan shall bear interest at the Fixed Rate applicable to
such Loan.

 

(d) Notwithstanding the foregoing, if any principal of or interest on any Loan
or any fee or other amount payable by the Borrower hereunder is not paid when
due, whether at stated maturity, upon acceleration or otherwise, such overdue
amount shall bear interest, after as well as before judgment, at a rate per
annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

 

(e) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and, in the case of Revolving Loans, upon termination
of the Commitments; provided that (i) interest accrued pursuant to paragraph (d)
of this Section shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan
prior to the end of the Availability Period), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Revolving
Loan prior to the end of the current Interest Period therefor, accrued interest
on such Loan shall be payable on the effective date of such conversion.

 

(f) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

 

Section 2.13. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

 

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or

 

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(b) the Administrative Agent is advised by the Required Lenders (or, in the case
of a Eurodollar Competitive Loan, the Lender that is required to make such Loan)
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any
request by the Borrower for a Eurodollar Competitive Borrowing shall be
ineffective; provided that (A) if the circumstances giving rise to such notice
do not affect all the Lenders, then requests by the Borrower for Eurodollar
Competitive Borrowings may be made to Lenders that are not affected thereby and
(B) if the circumstances giving rise to such notice affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted.

 

Section 2.14. Increased Costs. (a) If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate) or any Issuing Bank; or

 

(ii) impose on any Lender or any Issuing Bank or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans or Fixed Rate Loans
made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or Fixed Rate Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to
such Lender or such Issuing Bank of participating in, issuing or maintaining any
Letter of Credit or to reduce the amount of any sum received or receivable by
such Lender or such Issuing Bank hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender or such Issuing Bank, as
the case may be, such additional amount or amounts as will compensate such
Lender or such Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.

 

(b) If any Lender or any Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s or such Issuing Bank’s capital or on the capital of
such Lender’s or such Issuing Bank’s holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a
level below that which such Lender or such Issuing Bank or such Lender’s or such
Issuing Bank’s holding company could have achieved but for such Change in Law
(taking into consideration such Lender’s or such Issuing Bank’s policies and the
policies of such

 

33

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Lender’s or such Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or such
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank or such Lender’s or such Issuing
Bank’s holding company for any such reduction suffered.

 

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or such Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.

 

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or such Issuing Bank’s right to demand such compensation; provided that
the Borrower shall not be required to compensate a Lender or an Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 270 days prior to the date that such Lender or such Issuing Bank, as the
case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or such Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.

 

(e) Notwithstanding the foregoing provisions of this Section, a Lender shall not
be entitled to compensation pursuant to this Section in respect of any
Competitive Loan if the Change in Law that would otherwise entitle it to such
compensation shall have been publicly announced prior to submission of the
Competitive Bid pursuant to which such Loan was made.

 

Section 2.15. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan or Fixed Rate Loan other than on the last day
of an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan or Fixed Rate Loan on the date specified
in any notice delivered pursuant hereto (regardless of whether such notice may
be revoked under Section 2.10(b) and is revoked in accordance therewith), (d)
the failure to borrow any Competitive Loan after accepting the Competitive Bid
to make such Loan, or (e) the assignment of any Eurodollar Loan or Fixed Rate
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 2.18, then, in any such
event, the Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over (ii) the
amount of interest which would accrue on such principal amount for such period
at the interest rate which such Lender would bid were it to

 

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bid, at the commencement of such period, for dollar deposits of a comparable
amount and period from other banks in the Eurodollar market. A certificate of
any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.

 

Section 2.16. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrower hereunder shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

 

(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

 

(c) The Borrower shall indemnify the Administrative Agent, each Lender and each
Issuing Bank, within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such
Lender or such Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or an Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or an
Issuing Bank, shall be conclusive absent manifest error.

 

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

 

(e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.

 

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Section 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a)
The Borrower shall make each payment required to be made by it hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.14, 2.15 or 2.16, or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Administrative Agent, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
its offices at 270 Park Avenue, New York, New York, except payments to be made
directly to an Issuing Bank as expressly provided herein and except that
payments pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be made directly
to the Persons entitled thereto. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.

 

(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

 

(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Revolving Loans or participations in LC Disbursements resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Revolving Loans and participations in LC Disbursements and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the

 

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Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.

 

(d) Unless the Administrative Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders or any Issuing Bank hereunder that the Borrower will
not make such payment, the Administrative Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders or such Issuing Bank, as the case may
be, the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders or such Issuing Bank, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender or such Issuing Bank with interest thereon,
for each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.

 

(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Sections 2.05(d) or (e), 2.06(b) or 2.17(d), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender’s obligations under such Sections
until all such unsatisfied obligations are fully paid.

 

Section 2.18. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.14, or if the Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.16, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.

 

(b) If any Lender requests compensation under Section 2.14, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.16, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04), all its interests, rights and obligations under this Agreement
(other than outstanding Competitive Loans held by it) to an assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower shall have received the
prior written consent of the Administrative Agent (and, if a Commitment is being
assigned, each Issuing Bank), which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans (other than

 

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Competitive Loans) and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.14 or payments required to be made pursuant to Section 2.16, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.

 

Section 2.19. Procedures Regarding Increases to the Commitments. (a) So long as
no Default or Event of Default has occurred and is continuing, the Borrower may
request from time to time, subject to the terms and conditions hereinafter set
forth, that the aggregate amount of the Lenders’ Commitments be increased. Any
such request shall be made by written notice to the Administrative Agent;
provided, however, that any such notice must be given no later than 60 days
prior to the Maturity Date. Each such notice (a “Initial Notice of Commitment
Increase”) shall be in the form of Exhibit D-1 and specify therein:

 

(i) the proposed effective date of such increase, which date (the requested
“Commitment Increase Effective Date”) shall be no earlier than forty-five days
after receipt by the Administrative Agent of such notice; and

 

(ii) the amount of the requested increase; provided, however, that (A) such
increase must be at least $10,000,000 and (B) after giving effect to such
requested increase, the aggregate amount of the Lenders’ Commitments shall not
exceed $600,000,000.

 

The Administrative Agent shall deliver a copy of such Initial Notice of
Commitment Increase to each Lender via facsimile transmission on or before the
third Business Day next succeeding the date the Administrative Agent receives
such Initial Notice of Commitment Increase. After receipt of the Initial Notice
of Commitment Increase, each Lender shall determine, in its sole discretion,
whether to participate, and to what extent, if any, in such Commitment increase
and shall communicate such decision in writing to the Administrative Agent and
the Borrower on or before the eleventh day prior to the proposed Commitment
Increase Effective Date.

 

(b) On the tenth day prior to the proposed Commitment Increase Effective Date,
so long as no Default or Event of Default has occurred and is continuing, the
Borrower shall deliver to the Administrative Agent a written notice confirming
the requested increase in the aggregate amount of the Lenders’ Commitments. Each
such notice (a “Notice of Confirmation of Commitment Increase”) shall be in the
form of Exhibit D-2 and specify therein:

 

(i) the proposed Commitment Increase Effective Date, which date shall be no
earlier than five Business Days after receipt by the Administrative Agent of
such Notice of Confirmation of Commitment Increase;

 

(ii) the amount of the requested increase; provided, however, that (A) such
increase must be at least $10,000,000 and (B) after giving effect to such
requested increase, the aggregate amount of the Lenders’ Commitments shall not
exceed $600,000,000;

 

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(iii) the identity of each of the then Lenders, if any, which has agreed with
the Borrower to increase its Commitment in an amount such that its Applicable
Percentage after giving effect to such requested increase will be the same or
greater than its Applicable Percentage prior to giving effect to such requested
increase (each such Lender being an “Increasing Lender”), each of the other then
Lenders, if any, which has agreed to increase its Commitment in an amount such
that its Applicable Percentage after giving effect to such a requested increase
will be less than its Applicable Percentage prior to giving effect to such
requested increase (each such Lender being a “Partially Increasing Lender”) and
the identity of each financial institution not already a Lender, if any, which
has agreed with the Borrower to become a Lender to effect such requested
increase in the aggregate amount of the Lenders’ Commitments (each such
financial institution shall be reasonably acceptable to the Administrative Agent
and each such financial institution being a “New Lender” and each of the other
then Lenders, if any, which has not agreed to increase its Commitment being a
“Reducing Lender”); and

 

(iv) the amount of the respective Commitments of the then existing Lenders, such
Increasing Lenders, such Partially Increasing Lenders, such Reducing Lenders and
such New Lenders from and after the effective date of such increase.

 

(c) On or before each Commitment Increase Effective Date:

 

(i) the Borrower, each Increasing Lender, each Partially Increasing Lender and
each then New Lender shall execute and deliver to the Administrative Agent for
its acceptance, as to form, documentation embodying the provisions of the Notice
of Commitment Increase relating to the increase in the aggregate amount of the
Lenders’ Commitments to be effected on such Commitment Increase Effective Date;
and

 

(ii) upon acceptance of such documentation by the Administrative Agent, which
acceptance shall not be unreasonably withheld, and so long as no Default or
Event of Default has occurred and is continuing, (A) the Administrative Agent
shall give prompt notice of such acceptance to each Lender, (B) it shall become
effective, and each Increasing Lender’s and Partially Increasing Lender’s
Commitment shall be increased to the amount specified therein, on such
Commitment Increase Effective Date and (C) the Administrative Agent shall record
each New Lender’s information in the Register.

 

(d) On each Commitment Increase Effective Date:

 

(i) each then New Lender and each then Increasing Lender shall, by wire transfer
of immediately available funds, deliver to the Administrative Agent such
Lenders’ New Funds Amount for such Commitment Increase Effective Date, which
amount, for each such Lender, shall constitute Loans made by such Lender to the
Borrower pursuant to Section 2.01 on such Commitment Increase Effective Date;
and

 

(ii) the Administrative Agent shall, by wire transfer of immediately available
funds, pay to each then Reducing Lender and to each Partially Increasing Lender
its Reduction Amount for such Commitment Increase Effective Date, which amount,
for each such Lender, shall constitute a prepayment by the Borrower pursuant to
Section 2.10, ratably in

 

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accordance with the respective principal amounts thereof, of the principal
amounts of all then outstanding Loans of such Lender.

 

The Administrative Agent shall record each then New Lender’s, each then
Increasing Lender’s and each then Partially Increasing Lender’s information in
the Register. Also effective as of each Commitment Increase Effective Date, each
then New Lender and each then Increasing Lender shall be deemed to have
purchased and had transferred to it, and each then Reducing Lender and each
Partially Increasing Lender shall be deemed to have sold and transferred as
provided in Section 2.05(d) to such New Lenders and Increasing Lenders, such
undivided interest and participation in such Reducing Lender’s and such
Partially Increasing Lender’s interest and participation in all then outstanding
Letters of Credit, to the extent necessary so that such undivided interests and
participations of all Lenders (including each New Lender) shall accord with
their respective Applicable Percentages after giving effect to the increase in
the aggregate amount of the Lenders’ Commitments on such Commitment Increase
Effective Date.

 

ARTICLE III

Representations and Warranties

 

The MLP and the Borrower, in each case with respect to itself and its
subsidiaries, each represents and warrants to the Lenders that:

 

Section 3.01. Organization; Powers. It and its subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

 

Section 3.02. Authorization; Enforceability. The Transactions are within its and
its subsidiaries corporate, limited liability company or partnership powers and
have been duly authorized by all necessary corporate, limited liability company
or partnership and, if required, stockholder, member or limited partner action.
This Agreement has been duly executed and delivered by it and constitutes a
legal, valid and binding obligation of it, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

 

Section 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any material consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as have been obtained
or made and are in full force and effect, (b) will not violate any applicable
material law or regulation or the charter, by-laws or other organizational
documents of it or any of its subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument relating to Material Indebtedness binding upon it
or any of its subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by it or any of its subsidiaries, and (d) will
not result in the creation or imposition of any Lien on any asset of it or any
of its subsidiaries.

 

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Section 3.04. Financial Condition; No Material Adverse Change. (a) It has
heretofore furnished to the Lenders (i) the consolidated balance sheet and
statements of income, partners equity and cash flows of the MLP (A) as of and
for the fiscal year ended December 31, 2003, reported on by Ernst & Young LLP,
and (B) as of and for the fiscal quarter and the portion of the fiscal year
ended September 30, 2004, certified by its chief financial officer; (ii) the
consolidated balance sheet and statements of income, partners equity and cash
flows of the Borrower (A) as of and for the fiscal year ended December 31, 2003,
certified by its chief financial officer, and (B) as of and for the fiscal
quarter and the portion of the fiscal year ended September 30, 2004, certified
by its chief financial officer; (iii) the consolidated balance sheet and
statements of income, partners equity and cash flows of KPP (A) as of and for
the fiscal year ended December 31, 2003, reported on by KPMG LLP, and (B) as of
and for the fiscal quarter and the portion of the fiscal year ended September
30, 2004, certified by its chief financial officer; and (iv) the summary
unaudited combined pro forma financial data set forth in the joint proxy
statement/prospectus included in the Registration Statement on Form S-4 filed
with the SEC in connection with the Acquisition. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of (x) the MLP and its consolidated subsidiaries, the
Borrower and its consolidated Subsidiaries, and KPP and its consolidated
subsidiaries and (y) the pro forma consolidated financial condition of the MLP,
as of such dates and for such periods in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes in the case of the
statements referred to in clauses (B) above.

 

(b) Since December 31, 2003, there has been no material adverse change in the
business, assets, operations or condition (financial or otherwise) of it and its
subsidiaries, taken as a whole.

 

Section 3.05. Properties. (a) It and its subsidiaries has good title to, or
valid leasehold interests in, all its real and personal property material to its
business, free and clear of all Liens except Permitted Encumbrances and Liens
otherwise permitted or contemplated by this Agreement, except where the failure
to have such title or leasehold interest could not reasonably be expected to
result in a Material Adverse Effect.

 

(b) It and its subsidiaries owns, or is licensed to use, or has made all
required federal filings (and has not been notified of any contest) with respect
to, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by it and its
subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

 

Section 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of it, threatened against or affecting it
or any of its subsidiaries (i) as to which there is a reasonable possibility of
an adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect (other than the Disclosed Matters) or (ii) that involve this Agreement or
the Transactions.

 

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(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither it nor any of its subsidiaries
(i) has failed to comply with any Environmental Law or to obtain, maintain or
comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.

 

(c) Since the Effective Date, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or
materially increased the likelihood of, a Material Adverse Effect.

 

Section 3.07. Compliance with Laws and Agreements. It and its subsidiaries is in
compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other
instruments binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No Default has occurred and is continuing.

 

Section 3.08. Investment and Holding Company Status. Neither it nor any of its
subsidiaries is (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a “holding company”
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935. The Borrower is not subject to regulation under any Federal
or State statute or regulation which limits its ability to incur Indebtedness.

 

Section 3.09. Taxes. It and its subsidiaries has each timely filed or caused to
be filed all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes
that are being contested in good faith by appropriate proceedings and for which
it or such subsidiary, as applicable, has set aside on its books adequate
reserves or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.

 

Section 3.10. ERISA. Except as could not reasonably be expected to result in a
Material Adverse Effect, each ERISA Affiliate has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. Except as could not
reasonably be expected to result in a Material Adverse Effect, no ERISA
Affiliate has (i) sought a waiver of the minimum funding standard under Section
412 of the Code in respect of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or made any amendment to any Plan or Benefit Arrangement, which has
resulted or could reasonably be expected to result in the imposition of a Lien
or the posting of a bond or other security under ERISA or the Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.

 

Section 3.11. Disclosure. It has disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its
subsidiaries is subject, and all other

 

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matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. Neither the Information
Memorandum nor any of the other reports, financial statements, certificates or
other information furnished by or on behalf of it to the Administrative Agent or
any Lender in connection with the negotiation of this Agreement or delivered
hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, it represents only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.

 

Section 3.12. Investments and Guarantees. Neither it nor any of its subsidiaries
has any Investments or has outstanding any Guarantees, except as permitted by
this Agreement or reflected in the financial statements described in Section
3.04(a).

 

Section 3.13. Casualties; Taking of Property. Neither the business nor the
assets taken as a whole of it or any of its subsidiaries (after giving effect to
the payment or anticipated payment of any proceeds of insurance) have been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of any assets or cancellation of
contracts, permits or concessions by any domestic or foreign government or any
agency thereof, riot, activities of armed forces or acts of God or of any public
enemy.

 

ARTICLE IV

Conditions

 

Section 4.01. Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Banks to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 10.02):

 

(a) The Administrative Agent (or its counsel) shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of the Borrower
and the MLP, and by the Lenders and the Administrative Agent and (ii) the
Subsidiary Guaranty, executed and delivered by a duly authorized officer of each
Guarantor (other than the MLP) and satisfactory in form and substance to the
Administrative Agent.

 

(b) The Administrative Agent shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the Effective
Date) of (i) Andrews Kurth LLP, counsel for the Borrower and the MLP and (ii)
Bradley C. Barron, in-house counsel of Valero Energy, collectively providing the
opinions set forth in Exhibit B, and each such opinion covering such other
matters relating to the Borrower, the General Partner, the MLP, the Guarantors,
this Agreement or the Transactions as the Lenders shall reasonably request. The
Borrower hereby requests each such counsel to deliver its applicable opinion to
the Administrative Agent and the Lenders.

 

(c) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the

 

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organization, existence and good standing of the Borrower, the General Partner,
the MLP, the Guarantors, the authorization of the Transactions, and any other
legal matters relating to the Borrower, the General Partner, the MLP, the
Guarantors, the Agreement, the Transactions or the Acquisition, all in form and
substance satisfactory to the Administrative Agent and its counsel.

 

(d) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, Vice President or a Financial
Officer of each of the Borrower and the MLP, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.

 

(e) The Administrative Agent shall have received (i) counterpart originals of
the Partnership Agreement (MLP) substantially in the form listed as Exhibit 3.4
to the MLP’s annual report on Form 10-K for the fiscal year ended December 31,
2003, the Indenture and the Partnership Agreement (Borrower) in form and
substance acceptable to the Lenders, in each case duly executed by each of the
parties thereto and (ii) evidence satisfactory to the Lenders that the
Partnership Agreement (Borrower), the Indenture and the Partnership Agreement
(MLP) are in full force and effect and have not been amended or modified except
to the extent such amendments or modifications have been delivered to the
Administrative Agent, which evidence may be in the form of a certificate of the
President or a Vice President (or equivalent officer) of each of the Borrower
and the MLP.

 

(f) The Administrative Agent shall have received the financial statements
referred to in Section 3.04(a).

 

(g) The Administrative Agent shall have received evidence satisfactory to it
that the Acquisition has been or is being concurrently consummated substantially
in accordance with the Acquisition Documents (with all of the material
conditions precedent thereto having been satisfied in all material respects by
the parties thereto other than as consented to by the Lenders).

 

(h) The Administrative Agent shall have received (i) a certificate of the
President or a Vice President (or equivalent officer) of each of the Borrower
and the MLP certifying: (A) that the Acquisition has been or is concurrently
being consummated substantially in accordance with the terms of the Acquisition
Documents (with all of the material conditions precedent thereto having been
satisfied in all material respects by the parties thereto other than as
consented to by the Lenders); (B) that attached thereto is a true and complete
executed copy of each of the Acquisition Documents (including all exhibits,
schedules and supplements) and that no Acquisition Document has been amended
since October 31, 2004 in any material respect except as otherwise consented to
by the Administrative Agent and the Lenders (which consent will not be
unreasonably withheld); (C) that attached thereto is a true and complete copy of
each Certificate of Merger issued by the Delaware Secretary of State in
connection with the consummation of the Acquisition; and (ii) such other related
documents and information as the Administrative Agent shall have reasonably
requested.

 

(i) The Administrative Agent shall have received, and shall be satisfied with
(in each case after giving effect to the Acquisition), (i) the projections of
the MLP and its Subsidiaries, (ii) an opening pro forma balance sheet for the
year ending December 31, 2003 and

 

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related pro forma income statements and cash flow statements of the MLP and its
Subsidiaries for the periods ending September 30, 2004.

 

(j) The Administrative Agent shall have received evidence satisfactory to it of
any necessary shareholder, corporate, limited liability company, and partnership
approvals as to authority, enforceability and compliance with law in connection
with the Transactions and the consummation of the Acquisition.

 

(k) The Administrative Agent shall have received evidence satisfactory to it
that all loans, letters of credit and other obligations owing pursuant to each
of (i) the Existing Agreement and (ii) the $400,000,000 Revolving Credit
Agreement dated as of April 24, 2003 among Kaneb Pipe Line Operating
Partnership, L.P., as borrower, KPP, SunTrust Bank, as administrative agent, and
the lenders party thereto, as amended, shall have been paid in full and all
commitments thereunder shall have been terminated.

 

(l) The Administrative Agent shall have received all fees and other amounts due
and payable on or prior to the Effective Date (including amounts payable in
respect of the ticking fee, if any), including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder.

 

(m) The Administrative Agent shall have received satisfactory evidence regarding
the scope and materiality of any environmental risks affecting the properties of
the MLP and its Subsidiaries (including the Acquired Companies).

 

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Banks to issue Letters of Credit under this Agreement shall not become effective
unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 10.02) at or prior to 3:00 p.m., New York City time, on June 30, 2005
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).

 

Section 4.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Banks to issue, amend, renew
or extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

 

(a) The representations and warranties of the Borrower and the MLP set forth in
this Agreement shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable (unless such representations and warranties are stated to
relate to a specific earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date).

 

(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

 

(c) The Administrative Agent shall have received each additional document,
instrument, legal opinion or item of information reasonably requested by the
Administrative

 

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Agent, including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which the MLP or any Subsidiary may be a
party.

 

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower and the MLP on the date thereof as to the matters specified in
paragraphs (a) and (b) of this Section 4.02.

 

ARTICLE V

Affirmative Covenants

 

Commencing on the Effective Date, until the Commitments have expired or been
terminated and the principal of and interest on each Loan and all fees payable
hereunder shall have been paid in full and all Letters of Credit shall have
expired or terminated and all LC Disbursements shall have been reimbursed, the
MLP and the Borrower each covenants and agrees with the Lenders that:

 

Section 5.01. Financial Statements and Other Information. It will furnish to the
Administrative Agent and each Lender:

 

(a) no later than 15 days following the date required by applicable SEC rules
(without giving effect to any extensions available thereunder) for the filing of
such financial statements after the end of each fiscal year of the MLP:

 

(i) the audited consolidated balance sheet and related statements of income,
partners equity and cash flows of the MLP as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Ernst & Young LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition, results of
operations and cash flows of the MLP and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied; and

 

(ii) the consolidated balance sheet and related statements of income, partners
equity and cash flows of the Borrower as of the end of and for such year,
setting forth in each case in comparative form the figures from the previous
fiscal year, all certified by one of its Financial Officers as presenting fairly
in all material respects the financial condition and results of operations of
the Borrower and its consolidated subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to the absence of footnotes.

 

(b) no later than 15 days following the date required by applicable SEC rules
(without giving effect to any extensions available thereunder) for the filing of
such financial statements after the end of each of the first three fiscal
quarters of each fiscal year of the MLP:

 

(i) the consolidated balance sheet and related statements of income, partners
equity and cash flows of the MLP as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of)

 

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the previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of the MLP and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes; and

 

(ii) the consolidated balance sheet and related statements of income, partners
equity and cash flows of the Borrower as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in each
case in comparative form the figures for the corresponding period or periods of
(or, in the case of the balance sheet, as of the end of) the previous fiscal
year, all certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated subsidiaries on a consolidated basis in accordance
with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes.

 

(c) concurrently with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of each of the Borrower and the
MLP (i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 6.11 and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 3.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate;

 

(d) promptly after Moody’s or S&P shall have announced a change in the rating
established or deemed to have been established for the Index Debt, written
notice of such rating change; and

 

(e) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Borrower, the
MLP or any of their subsidiaries, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably request.

 

Section 5.02. Notices of Material Events. The MLP and the Borrower will furnish
to the Administrative Agent and each Lender prompt written notice of the
following:

 

(a) the occurrence of any Default;

 

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting the MLP, the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

 

(c) if and when any ERISA Affiliate (i) gives or is required to give notice to
the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with
respect to any Plan which could reasonably be expected to constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal

 

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liability under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multi-Employer Plan or in
respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could reasonably be expected to result in the
imposition of a Lien or the posting of a bond or other security, a certificate
of a Financial Officer of each of the Borrower and the MLP setting forth details
as to such occurrence and action, if any, which the Borrower, the MLP or
applicable ERISA Affiliate is required or proposes to take, but only to the
extent that any occurrence described in the preceding clauses (i) through (vii)
could reasonably be expected to result in a Material Adverse Effect;

 

(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect;

 

(e) any material amendment to the Partnership Agreement (MLP), the Partnership
Agreement (Borrower) or any Material Agreement, together with a certified copy
of such amendment; and

 

(f) any of the following events, in each case if the occurrence of such event
could reasonably be expected to have a Material Adverse Effect:

 

(i) the receipt by the MLP (or its general partner(s)), the Borrower or the
General Partner of any notice of any claim with respect to any Environmental
Liability;

 

(ii) if the President or a Vice President (or equivalent officer) of the MLP or
the Borrower, or the officer of the MLP or the Borrower primarily responsible
for monitoring compliance by the MLP or the Borrower and its subsidiaries with
Environmental Laws, shall obtain actual knowledge that there exists any
Environmental Liability pending or threatened against the MLP, the Borrower or
any of their subsidiaries; or

 

(iii) any release, emission, discharge or disposal of any Hazardous Materials
that could reasonably be expected to form the basis of any Environmental
Liability with respect to the MLP, the Borrower or any of their subsidiaries.

 

Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or President or any Vice President (or equivalent officer)
of each of the Borrower and the MLP setting forth a description of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

 

Section 5.03. Existence; Conduct of Business. It will, and will cause each of
its subsidiaries to, do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises

 

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material to the conduct of its business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.

 

Section 5.04. Payment of Obligations. It will, and will cause each of its
subsidiaries to, pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) it or such
subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.

 

Section 5.05. Maintenance of Properties; Insurance. It will, and will cause each
of its subsidiaries to, (a) keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and (b) maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.

 

Section 5.06. Books and Records; Inspection Rights. It will, and will cause each
of its subsidiaries to, keep proper books of record and account in which full,
true and correct entries are made of all dealings and transactions in relation
to its business and activities. It will, and will cause each of its subsidiaries
to, permit any representatives designated by the Administrative Agent or any
Lender, upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.

 

Section 5.07. Compliance with Laws. It will, and will cause each of its
subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property and the terms and
provisions of the Material Agreements, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

Section 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans
will be used for working capital and general partnership purposes of the
Borrower and its subsidiaries (including, without limitation, for distributions
to the MLP to allow the MLP to make distributions to unitholders as contemplated
in the Partnership Agreement (MLP)). The Letters of Credit shall be used for
general business purposes in the ordinary course of business or for such other
purposes as may be approved by the Administrative Agent. No part of the proceeds
of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including
Regulations T, U and X.

 

Section 5.09. Environmental Laws. It will, and will cause each of its
subsidiaries to:

 

(a) comply with all applicable Environmental Laws and obtain and comply with and
maintain any and all licenses, approvals, notifications, registrations or
permits required

 

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by applicable Environmental Laws except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and

 

(b) conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws and
promptly comply with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the extent that the same are
being contested in good faith by appropriate proceedings and the pendency of
such proceedings could not reasonably be expected to have a Material Adverse
Effect.

 

Section 5.10. Subsidiaries. It will, substantially contemporaneously with its
formation or acquisition (or event or circumstance that qualifies it as a
Material Domestic Subsidiary), cause each subsidiary of it that is a Material
Domestic Subsidiary to become a Guarantor with respect to, and jointly and
severally liable with all other Guarantors for, all obligations of the Borrower
under this Agreement by executing and delivering to the Administrative Agent,
for the benefit of the Lenders, a Subsidiary Guaranty, substantially in the form
of Exhibit C (or a supplement thereto as may be requested by the Administrative
Agent). In addition, the MLP and the Borrower shall at all times cause (i) the
MLP’s and its Subsidiaries’ equity in the income from continuing operations
before interest expense and all income taxes of the Borrower and all Domestic
Subsidiaries that are then parties to a Subsidiary Guaranty to be at least 80%
of such income of the MLP’s Domestic Subsidiaries consolidated for the most
recently completed fiscal year and (ii) the MLP’s and its Subsidiaries’
proportionate share of the total assets (after intercompany eliminations) of the
Borrower and all Domestic Subsidiaries that are then parties to a Subsidiary
Guaranty to be at least 80% of the total assets of the MLP’s Domestic
Subsidiaries consolidated as of the end of the most recently completed fiscal
year. The MLP and the Borrower shall, promptly, but in any event no later than
10 days after becoming aware of their non-compliance with the requirements of
the immediately preceding sentence, cause one or more of their Domestic
Subsidiaries that are not then parties to a Subsidiary Guaranty to become
parties to a Subsidiary Guaranty (even if such subsidiary does not constitute a
Material Domestic Subsidiary) so as to comply with the requirements of the
immediately preceding sentence. The MLP and the Borrower shall, or shall cause
its subsidiaries to, further deliver any and all instruments, documents,
approvals, consents or opinions of counsel reasonably requested by the
Administrative Agent or the Required Lenders in connection with any Subsidiary
Guaranty.

 

ARTICLE VI

Negative Covenants

 

Commencing on the Effective Date, until the Commitments have expired or
terminated and the principal of and interest on each Loan and all fees payable
hereunder have been paid in full and all Letters of Credit have expired or
terminated and all LC Disbursements shall have been reimbursed, each of the MLP
and the Borrower covenants and agrees with the Lenders that:

 

Section 6.01. Indebtedness. It will not, and will not permit any of its
subsidiaries to, create, incur, assume or permit to exist any Indebtedness,
except:

 

(a) Indebtedness created under this Agreement;

 

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(b) Indebtedness of the MLP to any Subsidiary and of any Subsidiary to the MLP
or any other Subsidiary to the extent permitted by Section 6.04, so long as the
MLP and the Borrower are in compliance with Section 5.10;

 

(c) Guarantees by the MLP of Indebtedness of any Subsidiary and by any Guarantor
of Indebtedness of the MLP or any other Subsidiary and by any Subsidiary that is
not a Guarantor of Indebtedness of any other Subsidiary that is not a Guarantor;

 

(d) other Indebtedness of the MLP and any Subsidiary; provided that, both before
and after such Indebtedness is created, incurred or assumed, no Event of Default
shall have occurred and be continuing under this Agreement, including, without
limitation, an Event of Default with respect to (i) the Consolidated Interest
Coverage Ratio set forth in Section 6.11(a) and (ii) the Consolidated Debt
Coverage Ratio set forth in Section 6.11(b).

 

Notwithstanding the foregoing or anything to the contrary contained herein, the
MLP and the Borrower will not permit the aggregate principal amount of
Indebtedness of Subsidiaries that are not Guarantors (other than Indebtedness
described on Schedule 6.01) at any time to exceed 5% of Consolidated Net Worth.

 

Section 6.02. Liens. It will not, and will not permit any of its subsidiaries
to, create, incur, assume or permit to exist any Lien on any property or asset
now owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:

 

(a) Permitted Encumbrances;

 

(b) any Lien existing on any property or asset prior to the acquisition thereof
by the MLP or any Subsidiary or existing on any property or asset of any Person
that becomes a Subsidiary after the date hereof prior to the time such Person
becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other
property or assets of the MLP or any Subsidiary and (iii) such Lien shall secure
only those obligations which it secures on the date of such acquisition or the
date such Person becomes a Subsidiary, as the case may be;

 

(c) Liens on fixed or capital assets acquired, constructed or improved by the
MLP or any Subsidiary; provided that (i) such security interest secures
Indebtedness permitted by clause (d) of Section 6.01, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the MLP or
any Subsidiary;

 

(d) other Liens securing Indebtedness in an amount that does not at any time
exceed 10% of Consolidated Net Worth; and

 

(e) extensions, renewals, modifications or replacements of any of the Liens and
other matters referred to in clauses (a) through (d) of this Section, provided
that such Lien is

 

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otherwise permitted by the terms hereof and, with respect to Liens securing
Indebtedness, no extension or renewal Lien shall (i) secure more than the amount
of the Indebtedness or other obligations secured by the Lien being so extended
or renewed or (ii) extend to any property or assets not subject to the Lien
being so extended or renewed.

 

Section 6.03. Fundamental Changes. (a) Other than in connection with the
Acquisition, it will not, and will not permit any of its subsidiaries to, merge
into or consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or sell, transfer, lease or otherwise dispose of
(in one transaction or in a series of transactions) all or substantially all of
its assets (it being understood that “substantially all of its assets” shall
mean more than 50% of the aggregate total assets of the MLP and its
Subsidiaries, taken as a whole), or all or substantially all of the stock (it
being understood that “substantially all of the stock” shall mean stock
representing ownership interests in more than 50% of the aggregate total assets
of the MLP and its Subsidiaries, taken as a whole) of any of its subsidiaries
(in each case whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any
Subsidiary may merge into the Borrower in a transaction in which the Borrower is
the surviving entity or the Borrower may merge with another Person so long as
(A) the surviving entity or purchaser, if other than the Borrower, assumes,
pursuant to the terms of such transaction, each of the obligations of the
Borrower hereunder and under any other documents entered into in connection with
the Loans and (B) each such assumption is expressly evidenced by an agreement
executed and delivered to the Lenders in a form reasonably satisfactory to the
Administrative Agent, (ii) any Subsidiary (other than the Borrower) may merge
into any Subsidiary (other than the Borrower) in a transaction in which the
surviving entity is a Subsidiary (other than the Borrower), and (iii) any
Subsidiary (other than the Borrower) may liquidate or dissolve if the MLP
determines in good faith that such liquidation or dissolution is in the best
interests of the MLP and is not materially disadvantageous to the Lenders;
provided that any such merger involving a Person that is not a Wholly-Owned
Subsidiary immediately prior to such merger shall not be permitted unless also
permitted by Section 6.04.

 

(b) It will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than businesses of the type conducted by
it, its Subsidiaries or KPP, KSL and their subsidiaries on the date of this
Agreement and businesses reasonably related thereto.

 

Section 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. It will
not, and will not permit any of its subsidiaries to, purchase, hold or acquire
(including pursuant to any merger with any Person that was not a Wholly-Owned
Subsidiary prior to such merger) any Investment in or Guarantee any obligations
of, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit, except:

 

(a) Permitted Investments;

 

(b) Investments by it in the Equity Interest of Wholly-Owned Subsidiaries of the
MLP, so long as the MLP and the Borrower are in compliance with Section 5.10;

 

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(c) loans or advances made by the MLP to any Wholly-Owned Subsidiary of the MLP
and made by any Subsidiary to the MLP or any other Wholly-Owned Subsidiary of
the MLP, so long as the MLP and the Borrower are in compliance with Section
5.10;

 

(d) Guarantees constituting Indebtedness permitted by Section 6.01;

 

(e) the Borrower’s interest in the Skelly-Belvieu Pipeline Company, L.L.C.;

 

(f) the purchase or other acquisition by a Wholly-Owned Subsidiary of the MLP of
the assets of another Person constituting a business unit; provided, that, both
before and after giving effect to any such Investment, no Default shall exist,
including, without limitation, a Default with respect to (i) use of proceeds set
forth in Section 5.08, (ii) the Consolidated Interest Coverage Ratio set forth
in Section 6.11(a), or (iii) the Consolidated Debt Coverage Ratio set forth in
Section 6.11(b);

 

(g) Investments in Joint Venture Interests and the purchase or other acquisition
by a Subsidiary that is not a Wholly-Owned Subsidiary of the MLP of the assets
of another Person constituting a business unit; provided, that, both before and
after giving effect to any such Investment, no Default shall exist, including,
without limitation, a Default with respect to (i) use of proceeds set forth in
Section 5.08, (ii) the Consolidated Interest Coverage Ratio set forth in Section
6.11(a), or (iii) the Consolidated Debt Coverage Ratio set forth in Section
6.11(b); provided that the aggregate amount of Investments and other
acquisitions made pursuant to this clause (g) (other than Investments described
in Schedule 6.04) shall not exceed $100,000,000 in the aggregate at any time;
and

 

(h) Guarantees of obligations not constituting Indebtedness of Wholly-Owned
Subsidiaries of the MLP incurred in the ordinary course of business.

 

Section 6.05. Swap Agreements. It will not, and will not permit any of its
subsidiaries to, enter into any Swap Agreement, other than Swap Agreements
entered into in the ordinary course of business to hedge or mitigate risks to
which it or any of its subsidiaries is exposed in the conduct of its business or
the management of its liabilities.

 

Section 6.06. Restricted Payments. It will not, and will not permit any of its
subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except (a) any Subsidiary may declare and
pay Restricted Payments to its parent and (b) as long as no Default has occurred
and is continuing or would result therefrom, the MLP may make Restricted
Payments in accordance with the terms of the Partnership Agreement (MLP).

 

Section 6.07. Transactions with Affiliates. It will not, and will not permit any
of its subsidiaries to, sell, lease or otherwise transfer any property or assets
to, or purchase, lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
(a) at prices and on terms and conditions not less favorable to it or such
subsidiary than could be obtained on an arm’s-length basis from unrelated third
parties, (b) transactions between or among it and its Wholly-Owned Subsidiaries
not involving any other Affiliate, (c) any Restricted Payment permitted by
Section 6.06, and (d) pursuant to the agreements listed on Schedule 6.07, which
agreements are at prices and on terms and conditions

 

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not less favorable to it than could be obtained on an arm’s-length basis from
unrelated third parties.

 

Section 6.08. Restrictive Agreements. It will not, and will not permit any of
its subsidiaries to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of it or any of its subsidiaries to create,
incur or permit to exist any Lien upon any of its property or assets, or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
MLP or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any
other Subsidiary; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions and conditions (x) existing on the
date of this Agreement identified on Schedule 6.08 (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition so as to cause such restriction or
condition to be more restrictive than the restriction or condition in existence
on the date of this Agreement) or (y) arising or agreed to after the date of
this Agreement; provided that such restrictions or conditions are not more
restrictive than the restrictions and conditions existing on the date of this
Agreement, (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by
any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a) of the foregoing shall not apply to
customary provisions in leases and other contracts restricting the assignment
thereof.

 

Section 6.09. Limitation on Modifications of Other Agreements. It will not, and
will not permit any of its subsidiaries to, amend, modify or change, or consent
to any amendment, modification or change to, any of the terms of, the Material
Agreements, except to the extent the same could not reasonably be expected to
have a Material Adverse Effect.

 

Section 6.10. Creation of Subsidiaries. It will not at any time create or
acquire any subsidiary unless it has caused such subsidiary to comply with the
requirements of Section 5.10.

 

Section 6.11. Financial Condition Covenants. The MLP will not permit at any time
(a) its Consolidated Interest Coverage Ratio to be less than 3.00 to 1.00 or (b)
its Consolidated Debt Coverage Ratio to be in excess of (i) 5.00 to 1.00 for any
Rolling Period ending on or before March 31, 2006 and (ii) 4.75 to 1.00 for any
Rolling Period ending on or subsequent to June 30, 2006; provided that if at any
time the MLP or any of its Subsidiaries consummates an acquisition (including
the Acquisition) for which the MLP or any of its Subsidiaries has paid aggregate
net consideration of at least $100,000,000, then, for the two Rolling Periods
the last day of which immediately follow the date on which such acquisition is
consummated, the numerator of the maximum Consolidated Debt Coverage Ratio
otherwise permitted above shall be increased by 0.5; thereafter, compliance
shall be determined by reverting back to clause (i) or (ii) above, as
applicable.

 

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ARTICLE VII

Events of Default

 

From (and including) the Effective Date, if any of the following events (“Events
of Default”) shall occur:

 

(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

 

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of five Business Days;

 

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower, the MLP or any of their subsidiaries in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any report, certificate, financial statement or other document furnished
pursuant to or in connection with the Loan Documents or any amendment or
modification hereof or waiver hereunder, shall prove to have been incorrect in
any material respect when made or deemed made;

 

(d) the MLP or the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02(a), (c) or (e), Section 5.03
(with respect to the MLP’s or the Borrower’s existence), Section 5.08 or in
Article VI;

 

(e) the Borrower or any Guarantor shall fail to observe or perform any covenant,
condition or agreement contained in the Loan Documents (other than those
specified in clause (a), (b) or (d) of this Article), and such failure shall
continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender);

 

(f) the MLP or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable (subject to any
applicable grace period), whether by acceleration or otherwise, of any Material
Indebtedness; or a default shall occur in the performance or observance of any
obligation or condition with respect to any Material Indebtedness if the effect
of such default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time sufficient
to permit the holder or holders of such Indebtedness, or any trustee or agent
for such holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity;

 

(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the General Partner, the MLP (or its general partner(s)), the
Borrower, any Guarantor or any Material Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the

 

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appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the General Partner, the MLP (or its general partner(s)),
the Borrower, any Guarantor or any Material Subsidiary or for a substantial part
of its assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;

 

(h) the General Partner, the MLP (or its general partner(s)), the Borrower, any
Guarantor or any Material Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (g) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the General Partner, the MLP (or its general partner(s)),
the Borrower, any Guarantor or any Material Subsidiary or for a substantial part
of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;

 

(i) the General Partner, the MLP (or its general partner(s)), the Borrower, any
Guarantor or any Material Subsidiary shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;

 

(j) one or more judgments for the payment of money in an aggregate amount in
excess of $35,000,000 and that are not covered by insurance shall be rendered
against the MLP, any Subsidiary, or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the MLP or any Subsidiary
to enforce any such judgment;

 

(k) an ERISA Event shall have occurred that, in the opinion of the Required
Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in liability of the MLP and its
Subsidiaries in an aggregate amount exceeding $35,000,000;

 

(l) the MLP or any Subsidiary shall incur an Environmental Liability requiring
payment in any Rolling Period in excess of $35,000,000 that is not covered by
insurance or that remains undischarged for a period of 30 days;

 

(m) the MLP shall (i) conduct, transact or otherwise engage in, or commit to
conduct, transact or otherwise engage in, any business or operations other than
(X) those incidental to its ownership of the limited partner interests in the
Borrower or of Equity Interests in other Wholly-Owned Subsidiaries and (Y) the
incurrence and maintenance of Indebtedness or (ii) own, lease, manage or
otherwise operate any properties or assets (including cash and cash
equivalents), other than (A) the limited partner interests in the Borrower, (B)
ownership interests of a Subsidiary, (C) ownership interests in other
subsidiaries not Subsidiaries of the Borrower, (D) cash received in connection
with dividends made by the Borrower in accordance with Section 6.06(b) pending
application to the holders of the Units and the General Partner Interest,

 

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(E) cash received in connection with the incurrence of Indebtedness and (F) cash
received in connection with dividends made by other subsidiaries;

 

(n) this Agreement or the Subsidiary Guaranty after delivery thereof shall for
any reason, except to the extent permitted by the terms hereof or thereof (or as
waived by the Lenders in accordance with Section 10.02), ceases to be valid,
binding and enforceable in accordance with its terms against the Borrower, the
MLP or a Guarantor party thereto or shall be repudiated by any of them, or the
Borrower, the MLP or any Guarantor shall so state in writing;

 

(o) a Change in Control shall occur; or

 

(p) Section 11.2 of the Partnership Agreement (MLP) (or the definition of the
term “Outstanding” as defined therein) shall be amended, modified or changed in
any respect.

 

then, and in every such event (other than an event with respect to the Borrower
described in clause (g) or (h) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower; and in case of any
event with respect to the Borrower described in clause (g) or (h) of this
Article, the Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

 

ARTICLE VIII

MLP Guarantee

 

Section 8.01. MLP Guarantee.

 

(a) The MLP, to the maximum extent permitted by applicable law, (i) absolutely,
unconditionally and irrevocably, guarantees to the Administrative Agent for the
ratable benefit of the Guaranteed Creditors and their respective successors,
endorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations and (ii) indemnifies and
holds harmless each Guaranteed Creditor from, and agrees to pay to such
Guaranteed Creditor, all reasonable costs and expenses (including reasonable
counsel fees and expenses) incurred by such Guaranteed Creditor in enforcing any
of its rights under the guarantee contained in this Section 8.01. The MLP agrees
that notwithstanding any stay, injunction or other prohibition preventing the
payment by the Borrower of all or any portion of the Borrower Obligations and
notwithstanding that all or any portion of the Borrower

 

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Obligations may be unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Borrower, to the
maximum extent permitted by applicable law, such Borrower Obligations shall
nevertheless be due and payable by the MLP for the purposes of this guarantee at
the time such Borrower Obligations would by payable by the Borrower under the
provisions of this Agreement. Notwithstanding the foregoing, any enforcement of
this guarantee with respect to the rights of any Guaranteed Creditor shall be
accomplished by the Administrative Agent acting on behalf of such Guaranteed
Creditor. The guarantee contained in this Section 8.01 is a guarantee of payment
and not collection, and the liability of the MLP is primary and not secondary.

 

(b) The MLP agrees that if the maturity of the Borrower Obligations is
accelerated by bankruptcy or otherwise, such maturity shall also be deemed
accelerated for the purpose of this guarantee without demand or notice to the
MLP. The guarantee contained in this Section 8.01 is a continuing guarantee and
shall remain in full force and effect until all the Borrower Obligations and the
obligations of the MLP under the guarantee contained in this Section 8.01 shall
have been satisfied by payment in full in cash, no Letter of Credit shall be
outstanding and the Commitments shall be terminated, notwithstanding that from
time to time during the term of this Agreement the Borrower may be free from any
Borrower Obligations.

 

(c) No payment made by the Borrower, the MLP, any other guarantor or any other
Person or received or collected by any Guaranteed Creditor from the Borrower,
the MLP, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Borrower Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of the MLP
hereunder which shall, notwithstanding any such payment (other than any payment
made by the Borrower or MLP in respect of the Borrower Obligations or any
payment received or collected from the Borrower or MLP in respect of the
Borrower Obligations), remain liable for the Borrower Obligations until, subject
to Section 8.05, the Borrower Obligations are paid in full in cash, no Letter of
Credit shall be outstanding and the Commitments are terminated.

 

Section 8.02. Subrogation. The MLP shall be subrogated to all the rights of any
Guaranteed Creditor against the Borrower in respect of any amounts paid by the
MLP pursuant to the provisions of the guarantee contained in Section 8.01;
provided, however, that the MLP shall not be entitled to enforce or to receive
any payments arising out of, or based upon, such right of subrogation with
respect to any of the Borrower Obligations until all of the Borrower Obligations
and the Guarantees thereof shall have been indefeasibly paid in full in cash or
discharged. A director, officer, employee or stockholder, as such, of the MLP
shall not have any liability for any obligations of the Guarantor under the
guarantee contained in Section 8.01 or any claim based on, in respect of or by
reason of such obligations or their creation.

 

Section 8.03. Amendments, etc. with respect to the Borrower Obligations. The MLP
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against the MLP and without notice to or further assent by the MLP,
any demand for payment of any of the Borrower Obligations made by any Guaranteed
Creditor may be rescinded by such Guaranteed Creditor and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in

 

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whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by any Guaranteed Creditor, and any
Guaranteed Document and any other document executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent (or the Required Lenders or all Lenders, as
the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by any Guaranteed
Creditor for the payment of the Borrower Obligations may be sold, exchanged,
waived, surrendered or released. Except as required by applicable law, no
Guaranteed Creditor shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Borrower Obligations
or for the guarantee contained in Section 8.01 or any property subject thereto.

 

Section 8.04. Guarantee Absolute and Unconditional. To the fullest extent
permitted by applicable law, the MLP hereby (i) waives diligence, presentment,
demand of payment, notice of intent to accelerate, notice of acceleration,
notice of acceptance, filing of claims with a court in the event of the merger,
insolvency or bankruptcy of the Borrower or the MLP, and all demands and notices
whatsoever, (ii) acknowledges that any agreement, instrument or document
evidencing the MLP Obligations may be transferred and that the benefit of its
obligations hereunder shall extend to each holder of any agreement, instrument
or document evidencing the MLP Obligations without notice to them and (iii)
covenants that the MLP Obligations will not be discharged except by complete
performance thereof. The MLP further agrees that to the fullest extent permitted
by applicable law, if at any time all or any part of any payment theretofore
applied by any Person to any of the MLP Obligations is, or must be, rescinded or
returned for any reason whatsoever, including without limitation, the
insolvency, bankruptcy or reorganization of the MLP, such MLP Obligations shall,
to the extent that such payment is or must be rescinded or returned, be deemed
to have continued in existence notwithstanding such application, and the MLP
Obligations shall continue to be effective or be reinstated, as the case may be,
as though such application had not been made.

 

To the fullest extent permitted by applicable law, the obligations of the MLP
under this guarantee shall be as aforesaid full, irrevocable, unconditional and
absolute and shall not be impaired, modified, discharged, released or limited by
any occurrence or condition whatsoever, including, without limitation, (i) any
compromise, settlement, release, waiver, renewal, extension, indulgence or
modification of, or any change in, any of the obligations and liabilities of the
Borrower or the MLP contained in any of the Borrower Obligations or this
Agreement, (ii) any impairment, modification, release or limitation of the
liability of the Borrower, the MLP or any of their estates in bankruptcy, or any
remedy for the enforcement thereof, resulting from the operation of any present
or future provision of any applicable bankruptcy law, as amended, or other
statute or from the decision of any court, (iii) the assertion or exercise by
the Borrower or the MLP of any rights or remedies under any of the Borrower
Obligations or this Agreement or their delay in or failure to assert or exercise
any such rights or remedies, (iv) the assignment or the purported assignment of
any property as security for any of the Borrower Obligations, including all or
any part of the rights of the Borrower or the MLP under this Agreement, (v) the
extension of the time for payment by the Borrower or the MLP of any payments or
other sums or any part thereof owing or payable under any of the terms and
provisions of any of the Borrower Obligations or this Agreement or of the time
for performance by the Borrower or the MLP of any other obligations under or
arising out of any such terms and provisions or the extension or the renewal of
any thereof, (vi) the modification or amendment (whether material or otherwise)
of

 

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any duty, agreement or obligation of the Borrower or the MLP set forth in this
Agreement, (vii) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshaling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of, or other similar proceeding affecting, the Borrower or any of the MLP or any
of their respective assets, or the disaffirmance of any of the Borrower
Obligations, or this Agreement in any such proceeding, (viii) the release or
discharge of the Borrower or the MLP from the performance or observance of any
agreement, covenant, term or condition contained in any of such instruments by
operation of law, (ix) the unenforceability of any of the Borrower Obligations
or this Agreement, (x) any change in the name, business, capital structure,
corporate existence, or ownership of the Borrower or the MLP, or (xi) any other
circumstance which might otherwise constitute a defense available to, or a legal
or equitable discharge of, a surety or the MLP.

 

Section 8.05. Reinstatement. To the maximum extent permitted by applicable law,
the guarantee contained in Section 8.01 shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Borrower Obligations is rescinded or must otherwise be restored or
returned by any Guaranteed Creditor upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or the MLP, or upon
or as a result of the appointment of a receiver, intervenor or conservator of,
or trustee or similar officer for, the Borrower or the MLP or any substantial
part of its property, or otherwise, all as though such payments had not been
made.

 

Section 8.06. Payments. The MLP hereby guarantees that payments hereunder will
be paid to the Administrative Agent without set-off or counterclaim and without
deduction for any taxes and in immediately available funds and in dollars at the
Administrative Agent’s payment office at the address provided in Section 10.01
of this Agreement.

 

ARTICLE IX

The Administrative Agent

 

Each of the Lenders and the Issuing Banks hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.

 

The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

 

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers

 

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expressly contemplated hereby that the Administrative Agent is required to
exercise in writing as directed by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 10.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

 

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

 

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

 

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Banks and the Borrower. Upon any such
resignation, the Required Lenders shall have the right, in consultation with the
Borrower, to appoint a successor. If no successor shall have been so appointed
by the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Banks, appoint a

 

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successor Administrative Agent which shall be a Lender and a commercial bank
with an office in New York, New York and having a combined capital and surplus
of at least $500,000,000, or an Affiliate of any such bank. Upon the acceptance
of its appointment as Administrative Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent’s
resignation hereunder, the provisions of this Article and Section 10.03 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while it was acting as Administrative
Agent.

 

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.

 

None of the Syndication Agent, the Co-Documentation Agents or the Co-Managing
Agents shall have any duties, responsibilities or liabilities under this
Agreement or the other Loan Documents other than their duties, responsibilities
and liabilities in their capacity as Lenders hereunder.

 

ARTICLE X

Miscellaneous

 

Section 10.01. Notices.

 

(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

 

(i) if to the Borrower or the MLP, to it at One Valero Way, San Antonio, Texas
78249-1112, Attention of Senior Vice President and Chief Financial Officer
(Telecopy No. (210) 345-3629);

 

(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Loan and
Agency Services Group, 1111 Fannin, 8th Floor, Houston, Texas 77002, Attention
of Maria Arreola (Telecopy No. (713) 750-2228);

 

(iii) if to JPMorgan Chase Bank, N.A., in its capacity as Issuing Bank, to it at
JPMorgan Chase Bank, N.A., Letter of Credit Group, Global Trade Services, 10420

 

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Highland Manor Dr., Tampa, Florida 33610, Attention of James Alonzo (Telecopy
No. (813) 432-5161);

 

(iv) if to SunTrust Bank, in its capacity as Issuing Bank, to it at SunTrust
Bank, 25 Park Place, 16th Floor, Standby Letter of Credit Dept., MC-3706,
Atlanta, Georgia 30303, Attention of Nivetta Freeman (Telecopy No. (404)
588-8129)), with a copy to it at the same address and telecopy number, Attention
of Aimee Maier;

 

(v) if to any other Lender, to it at its address (or telecopy number) set forth
in its Administrative Questionnaire.

 

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

 

(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

 

Section 10.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent, any Issuing Bank or any Lender in exercising any right or
power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Administrative Agent, the Issuing Banks and the Lenders
hereunder are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or any Issuing Bank may have had notice or knowledge of such
Default at the time.

 

(b) Neither this Agreement nor the Subsidiary Guaranty nor any provision hereof
or thereof may be waived, amended or modified (except as expressly set forth
herein or therein) except pursuant to an agreement or agreements in writing
entered into by the Borrower, the MLP and the Required Lenders or by the
Borrower, the MLP and the Administrative Agent with the consent of the Required
Lenders; provided that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any

 

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fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of
any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) waive or amend Section 4.01 or
release any Guarantor (except as set forth in the Subsidiary Guaranty), without
the written consent of each Lender or (vi) change any of the provisions of this
Section or the definition of “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or any Issuing Bank hereunder without the prior written
consent of the Administrative Agent or such Issuing Bank, as the case may be.

 

Section 10.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the syndication of the
credit facilities provided for herein, the preparation and administration of
this Agreement or any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by any Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement,
including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.

 

(b) The Borrower shall indemnify the Administrative Agent, each Issuing Bank and
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including the fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (i) the execution or delivery of this Agreement, any
other Loan Document or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto of their respective obligations
hereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by any Issuing Bank to honor a demand
for payment under a Letter of Credit issued by it if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or

 

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prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.

 

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to the Administrative Agent or any Issuing Bank under paragraph (a) or (b)
of this Section, each Lender severally agrees to pay to the Administrative Agent
or such Issuing Bank, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent or such
Issuing Bank in its capacity as such.

 

(d) To the extent permitted by applicable law, the Borrower shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.

 

(e) All amounts due under this Section shall be payable not later than 5
Business Days after written demand therefor.

 

Section 10.04. Successors and Assigns.

 

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of any Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
any Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.

 

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(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

 

(A) the Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default has occurred and is continuing, any other assignee;

 

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment of any Commitment to an assignee that
is a Lender with a Commitment immediately prior to giving effect to such
assignment; and

 

(C) each Issuing Bank.

 

(ii) Assignments shall be subject to the following additional conditions:

 

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any Class, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

 

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement,
provided that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;

 

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

 

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

For the purposes of this Section 10.04(b), the term “Approved Fund” has the
following meaning:

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under

 

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this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.14, 2.15, 2.16 and 10.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 10.04 shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (c) of this Section.

 

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and
the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Banks and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

 

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.05(d) or (e), 2.06(b),
2.17(d) or 10.03(c), the Administrative Agent shall have no obligation to accept
such Assignment and Assumption and record the information therein in the
Register unless and until such payment shall have been made in full, together
with all accrued interest thereon. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this paragraph.

 

(c) (i) Any Lender may, without the consent of the Borrower, the Administrative
Agent or any Issuing Bank, sell participations to one or more banks or other
entities (a “Participant”) in all or a portion of such Lender’s rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided that (A) such Lender’s obligations under
this Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing Banks and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or

 

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waiver described in the first proviso to Section 10.02(b) that affects such
Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees
that each Participant shall be entitled to the benefits of Sections 2.14, 2.15
and 2.16 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to paragraph (b) of this Section. To the extent permitted
by law, each Participant also shall be entitled to the benefits of Section 10.08
as though it were a Lender, provided such Participant agrees to be subject to
Section 2.17(c) as though it were a Lender.

 

(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.14 or Section 2.16 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.16(e) as
though it were a Lender.

 

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

Section 10.05. Survival. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 10.03 and Article
IX shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

 

Section 10.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written,

 

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relating to the subject matter hereof. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other required parties hereto, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

Section 10.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

Section 10.08. Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
or the MLP against any of and all the obligations of the Borrower or the MLP now
or hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.

 

Section 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a)
This Agreement shall be construed in accordance with and governed by the law of
the State of New York.

 

(b) The Borrower and the MLP each hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
any Issuing Bank or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against the Borrower or its properties in
the courts of any jurisdiction.

 

(c) The Borrower and the MLP each hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties

 

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hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 10.01. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

 

Section 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (a) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 10.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

Section 10.12. Confidentiality. Each of the Administrative Agent, the Issuing
Banks and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis
from a source other than the Borrower. For the purposes of this Section,
“Information” means all information received from the Borrower relating to the
Borrower or its business, other than any such information that is available to
the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential
basis prior to disclosure by the Borrower; provided that, in the case of
information received from the Borrower after the date hereof, such information
is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided

 

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in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Section 10.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

 

Section 10.14. Limitation of Liability. Neither the General Partner nor the
general partner(s) of the MLP shall be liable for (a) the obligations of the
Borrower under this Agreement or (b) the obligations of the MLP under this
Agreement, including in each case, without limitation, by reason of any payment
obligation imposed by governing state partnership statutes and any provision of
the applicable limited partnership agreement of the Borrower or the MLP that
requires such General Partner or general partner(s), as the case may be, to
restore a capital account deficit.

 

Section 10.15. USA PATRIOT Act. Each Lender that is subject to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies the Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

 

VALERO LOGISTICS OPERATIONS, L.P.

By:   Valero GP, Inc., its General Partner     By:   /s/ Steven A. Blank        
Steven A. Blank         Vice President

VALERO L.P.

By:   Riverwalk Logistics, L.P., its General Partner By:   Valero GP, LLC, its
General Partner     By:   /s/ Steven A. Blank    

Name:

  Steven A. Blank    

Title:

  Senior Vice President and Chief Financial Officer

 

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JPMORGAN CHASE BANK, N.A., individually
and as Administrative Agent By       /s/ Robert C. Mertensotto    

Name:

  Robert C. Mertensotto    

Title:

  Managing Director

 

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5-Year Revolving Credit Agreement

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SUNTRUST BANK, individually and as Syndication Agent By       /s/ David Edge    

Name:

  David Edge    

Title:

  Managing Director

 

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BARCLAYS BANK PLC, individually and as Co-Documentation Agent By       /s/
Nicholas Bell    

Name:

  Nicholas Bell    

Title:

  Director

 

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MIZUHO CORPORATE BANK (USA), individually and as Co-Documentation Agent By      
/s/ Greg Botshon    

Name:

  Greg Botshon    

Title:

  Senior Vice President

 

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5-Year Revolving Credit Agreement

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ROYAL BANK OF CANADA, individually and as Co-Documentation Agent By       /s/
Linda M. Stephens    

Name:

  Linda M. Stephens    

Title:

  Authorized Signatory

 

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THE BANK OF TOKYO-MITSUBISHI, LTD., individually and as Co-Managing Agent By    
  /s/ Kelton Glasscock    

Name:

  Kelton Glasscock    

Title:

  Vice-President & Manager

 

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BANK OF AMERICA, N.A., individually and as Co-Managing Agent By       /s/ Claire
Liu    

Name:

  Claire Liu    

Title:

  Senior Vice President

 

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THE BANK OF NOVA SCOTIA, individually and as Co-Managing Agent By       /s/ N.
Bell    

Name:

  N. Bell    

Title:

  Senior Manager

 

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BNP PARIBAS, individually and as Co-Managing Agent By       /s/ Mark A. Cox    

Name:

  Mark A. Cox    

Title:

  Director By       /s/ Greg Smothers    

Name:

  Greg Smothers    

Title:

  Vice President

 

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5-Year Revolving Credit Agreement

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CITIBANK, N.A., individually and as Co-Managing Agent By       /s/ Joronne Jeter
   

Name:

  Joronne Jeter    

Title:

  Attorney-In-Fact

 

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THE ROYAL BANK OF SCOTLAND plc individually and as Co-Managing Agent By      
/s/ Paul McDonagh    

Name:

  Paul McDonagh    

Title:

  Sr. Vice President

 

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5-Year Revolving Credit Agreement

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BAYERISCHE HYPO-UND VEREINSBANK
AG, NEW YORK BRANCH, individually and as
Co-Managing Agent By       /s/ Yoram Dankner    

Name:

  Yoram Dankner    

Title:

  Managing Director By       /s/ Richard Cordover    

Name:

  Richard Cordover    

Title:

  Director

 

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5-Year Revolving Credit Agreement

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KEYBANK NATIONAL ASSOCIATION, individually and as Co-Managing Agent By   /s/
Keven D. Smith     Kevin D. Smith     Vice President

 

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5-Year Revolving Credit Agreement

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SUMITOMO MITSUI BANKING CORPORATION, individually and as Co-Managing Agent By  
    /s/ Leo Pagarigan    

Name:

  Leo E. Pagarigan    

Title:

  Senior Vice President

 

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5-Year Revolving Credit Agreement

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CALYON NEW YORK BRANCH, individually
and as Co-Managing Agent By       /s/ Oliver Audemard    

Name:

  Oliver Audemard    

Title:

  Managing Director By       /s/ Phillipe Soustra    

Name:

  Phillipe Soustra    

Title:

  Executive Vice President

 

Signature Page to

5-Year Revolving Credit Agreement

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WELLS FARGO BANK, NATIONAL ASSOCIATION, individually and as
Co-Managing Agent By       /s/ Richard A. Gould    

Name:

  Richard A. Gould    

Title:

  VP

 

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5-Year Revolving Credit Agreement

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LEHMAN BROTHERS BANK, FSB By       /s/ Gary T. Taylor    

Name:

  Gary T. Taylor    

Title:

  Vice President

 

Signature Page to

5-Year Revolving Credit Agreement

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UBS LOAN FINANCE LLC By       /s/ Barbara Ezell-McMichael    

Name:

  Barbara Ezell-McMichael    

Title:

  Director By       /s/ Winslowe Ogbourne    

Name:

  Winslowe Ogbourne    

Title:

  Associate Director

 

Signature Page to

5-Year Revolving Credit Agreement

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COMPASS BANK By       /s/ David Mills    

Name:

  David Mills    

Title:

  Senior Vice President

 

Signature Page to

5-Year Revolving Credit Agreement

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BANK HAPOALIM B.M. By       /s/ Marc Bosc    

Name:

  Marc Bosc    

Title:

  Vice President By       /s/ Laura Anne Raffe    

Name:

  Laura Anne Raffe    

Title:

  Executive Vice President & Corporate Manager

 

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5-Year Revolving Credit Agreement

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EXHIBIT A

 

Form of Assignment and Assumption

 

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1.

  Assignor:   _______________________________

2.

  Assignee:   _______________________________         [and is an
Affiliate/Approved Fund of [identify Lender]1]

3.

  Borrower(s):   _______________________________

4.

  Administrative Agent:   JPMorgan Chase Bank, N.A., as the administrative agent
under the Credit Agreement

--------------------------------------------------------------------------------

1 Select as applicable.

 

Exhibit A - 1

--------------------------------------------------------------------------------

5. Credit Agreement: The 5-Year Revolving Credit Agreement dated as of December
20, 2004 among Valero Logistics Operations, L.P., the Lenders parties thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties
thereto

 

6. Assigned Interest:

 

Facility Assigned2

--------------------------------------------------------------------------------

   Aggregate Amount
of Commitment/
Loans for all Lenders

--------------------------------------------------------------------------------

   Amount of
Commitment/Loans
Assigned

--------------------------------------------------------------------------------

   Percentage
Assigned of
Commitment/Loans3

--------------------------------------------------------------------------------

     $      $      %      $      $      %      $      $      %

 

Effective Date:                              , 20     [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:

       

Title:

   

 

ASSIGNEE

[NAME OF ASSIGNEE]

By:

       

Title:

   

--------------------------------------------------------------------------------

2 Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g. “Revolving
Commitment,” “Tranche A Commitment,” “Tranche B Commitment,” etc.)

 

3 Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

Exhibit A - 2

--------------------------------------------------------------------------------

[Consented to and]4 Accepted:

[NAME OF ADMINISTRATIVE AGENT], as
Administrative Agent

By

       

Title:

   

 

[Consented to:]5

[NAME OF RELEVANT PARTY]

By

       

Title:

   

--------------------------------------------------------------------------------

4 To be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement.

 

5 To be added only if the consent of the Borrower and/or other parties (e.g.
Swingline Lender, Issuing Bank) is required by the terms of the Credit
Agreement.

 

Exhibit A - 3

--------------------------------------------------------------------------------

 

ANNEX 1

 

[                                    ]6

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1. Representations and Warranties.

 

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document7, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

 

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section              thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender8, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with

--------------------------------------------------------------------------------

6 Describe Credit Agreement at option of Administrative Agent.

 

7 The term “Loan Document” should be conformed to that used in the Credit
Agreement.

 

8 The concept of “Foreign Lender” should be conformed to the section in the
Credit Agreement governing withholding taxes and gross-up.

 

Exhibit A - 4

--------------------------------------------------------------------------------

their terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

 

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

 

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

 

Exhibit A - 5

--------------------------------------------------------------------------------

 

EXHIBIT B

 

OPINION OF COUNSEL FOR THE BORROWER AND THE MLP

 

[        ], 2005

 

To the Lenders and the Administrative

    Agent Referred to Below

c/o JPMorgan Chase Bank, N.A., as

    Administrative Agent

270 Park Avenue

New York, New York 10017

 

Dear Sirs:

 

[I/We] have acted as counsel for Valero Logistics Operations, L.P. (the
“Borrower”), Valero L.P. (the “MLP”), and each of the Subsidiaries of the MLP
listed on Annex I hereto (the “Subsidiary Guarantors”, and together with the
Borrower and the MLP, the “Loan Parties”), in connection with the Credit
Agreement dated as of December 20, 2004 (the “Credit Agreement”), among the
Borrower, the MLP, the banks and other financial institutions identified therein
as Lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, and others as
agents, and the other Loan Documents identified below. This opinion is being
furnished to you pursuant to Section 4.01(b) of the Credit Agreement. Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.

 

In that connection, we have examined executed copies of the Credit Agreement,
the Subsidiary Guaranty Agreement dated as of even date herewith made by each of
the Guarantors (as defined therein) in favor of the Administrative Agent (the
“Subsidiary Guaranty”), and the notes executed and delivered on the date hereof
pursuant to Section 2.09(e) of the Credit Agreement (the “Loan Documents”).

 

In addition, [I, or individuals under my direction,/We] have examined originals
or copies, certified or otherwise identified to [my/our] satisfaction, of such
documents, corporate records, certificates of public officials and other
instruments and have conducted such other investigations of fact and law as
[I/we] have deemed necessary or advisable for purposes of this opinion.

 

Upon the basis of the foregoing, [I am/we are] of the opinion that:

 

1. The Loan Documents constitute the legal, valid and binding obligations of the
Loan Parties party thereto, enforceable against such Loan Parties under the law
of the State of New York in accordance with their respective terms.

 

2. In a case properly argued and presented, a Texas court or a Federal court
sitting in Texas and applying Texas conflict of law principles, as set out in
Section 35.51 of the Texas Business and Commerce Code, would give effect to the
provisions of the Credit Agreement and

 

Exhibit B - 1

--------------------------------------------------------------------------------

the Subsidiary Guaranty selecting New York law as governing, and would apply the
substantive laws of the State of New York in construing the Credit Agreement and
the Subsidiary Guaranty.

 

3. Under the circumstances contemplated by the Credit Agreement, the making of
the Loans will not violate Section 7 of the Securities Exchange Act of 1934, as
amended, or any regulation issued pursuant thereto, including without
limitation, the provisions of Regulation T, U or X of the Board of Governors of
the Federal Reserve System.

 

4. The Borrower is not an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

 

5. The Borrower is not subject to, or is exempt from, regulation as a “holding
company” under the Public Utility Holding Company Act of 1935, as amended.

 

6. The Borrower (a) is a limited partnership duly formed and validly existing
under the laws of the State of Delaware and (b) has the limited partnership
power and authority to (i) own property and conduct the business in which it is
currently engaged and in which it proposes, as of the date hereof, to be engaged
after the date hereof, (ii) make, deliver and perform the Loan Documents to
which it is a party in accordance with the terms and provisions thereof and
(iii) borrow under the Credit Agreement.

 

7. The MLP (a) is a limited partnership duly formed and validly existing under
the laws of the State of Delaware and (b) has the limited partnership power and
authority to (i) own property and conduct the business in which it is currently
engaged and in which it proposes, as of the date hereof, to be engaged after the
date hereof, and (ii) make, deliver and perform the Credit Agreement in
accordance with the terms and provisions thereof.

 

8. Each Subsidiary Guarantor (a) is a limited partnership, corporation or
limited liability company validly existing under the laws of the jurisdiction of
its formation as described on Annex I hereto and (b) has the limited
partnership, corporate or limited liability company power and authority to make,
deliver and perform the Subsidiary Guaranty in accordance with the terms and
provisions thereof.

 

9. The execution, delivery and performance of the Credit Agreement by the
Borrower and the MLP, and of the Subsidiary Guaranty by each Subsidiary
Guarantor, and the borrowings by the Borrower under the Credit Agreement, have
been duly authorized by all necessary actions on behalf of the Loan Parties and
each other Person whose authorization is relevant to, or constitutes,
authorization on behalf of either Loan Party.

 

10. The Loan Documents have been duly executed and delivered on behalf of the
Loan Parties, as applicable.

 

11. No approvals or consents of any governmental authority of the State of Texas
or the United States of America or other consents or approvals by any other
Person which have not been obtained on or prior to the date hereof are required
(a) in connection with the participation by the Loan Parties in connection with
the transactions under the Loan Documents or the execution, delivery and
performance by any Loan Party of the Loan Documents to which it is a

 

Exhibit B - 2

--------------------------------------------------------------------------------

party, or (b) for the validity and enforceability of the Loan Documents and the
exercise by the Lenders of their rights and remedies thereunder.

 

12. The execution, delivery and performance by the Loan Parties of the Loan
Documents will not (a) violate any provision of the Partnership Agreement
(Borrower), the Partnership Agreement (MLP), or the certificate of
incorporation, bylaws, partnership agreement or limited liability company
agreement, as applicable, of any Subsidiary Guarantor, (b) result in the breach
of, or constitute a default under, any indenture or loan or credit agreement or
any other material agreement, lease or instrument, known to me after due
inquiry, to which any of the Loan Parties is a party or by which its properties
may be bound, (c) result in, or require, the creation or imposition of any Lien
on any of its properties or revenues pursuant to any requirement of law, rule
regulation or order of any governmental authority of the State of Texas or the
United States of America or material contractual obligation binding upon any
Loan Party, or (d) result in any violation by any Loan Party of any applicable
law of the State of Texas or the United States of America.

 

13. The partnership interests in the Borrower listed on Schedule A hereto
constitute all the partnership interests of record in the Borrower and are owned
of record by the Persons designated on Schedule A.

 

14. The Borrower is not subject to regulation under any statute or regulation of
the State of Texas or the United States of America that limits its ability to
incur indebtedness.

 

15. To my knowledge (having made due inquiry with respect thereto), except as
disclosed in the Credit Agreement, no litigation, investigation or proceeding of
or before any arbitrator or governmental authority is pending or threatened by
or against any Loan Party or against any of the properties or revenues of either
(a) with respect to the Loan Documents or any of the transactions contemplated
thereby or (b) which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.

 

Exhibit B - 3

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

EXHIBIT C

 

[FORM OF]

SUBSIDIARY GUARANTY AGREEMENT

 

made by

 

EACH OF THE GUARANTORS (as defined herein)

 

in favor of

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

Dated as of [                    ], 200[        ]

 

--------------------------------------------------------------------------------

 

Exhibit C - 1

--------------------------------------------------------------------------------

SUBSIDIARY GUARANTY AGREEMENT, dated as of [            ], 200[            ],
made by the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the “Guarantors” and each a “Guarantor”), in
favor of JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity,
the “Administrative Agent”), for the benefit of the banks and other financial
institutions or entities (the “Lenders”) parties to the 5-Year Revolving Credit
Agreement, dated as of December 20, 2004 (the “Credit Agreement”), among Valero
Logistics Operations, L.P., a Delaware limited partnership (the “Borrower”),
Valero L.P., a Delaware limited partnership (the “MLP”), the Lenders, the
Administrative Agent, SunTrust Bank, as Syndication Agent, and Barclays Bank
Plc, Mizuho Corporate Bank Ltd., and Royal Bank of Canada, as Co-Documentation
Agents.

 

WITNESSETH:

 

WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to
make extensions of credit to the Borrower upon the terms and subject to the
conditions set forth therein;

 

WHEREAS, the Borrower is a member of an affiliated group of companies that
includes each Guarantor;

 

WHEREAS, the proceeds of the extensions of credit under the Credit Agreement may
be or have been used in part to enable the Borrower to make valuable transfers
to one or more of the Guarantors in connection with the operation of their
respective businesses;

 

WHEREAS, the Borrower and the Guarantors are engaged in related businesses, and
each Guarantor will derive substantial direct and indirect benefit from the
making of the extensions of credit under the Credit Agreement;

 

WHEREAS, it is a condition precedent to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Credit Agreement
that the Guarantors shall have executed and delivered this Agreement to the
Administrative Agent for the ratable benefit of the Lenders; and

 

WHEREAS, it is a condition subsequent to the obligation of the Lenders to make
their respective extensions of credit to the Borrower under the Credit Agreement
that certain subsidiaries of the MLP shall from time to time become parties to
this Agreement as Guarantors by executing and delivering an Assumption
Agreement, in the form attached hereto as Annex I, to the Administrative Agent
for the ratable benefit of the Lenders;

 

Exhibit C - 2

--------------------------------------------------------------------------------

NOW, THEREFORE, in consideration of the premises and to induce the Lenders to
continue their respective extensions of credit to the Borrower under the Credit
Agreement, each Guarantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:

 

SECTION 1. DEFINED TERMS

 

1.1 Definitions.

 

(a) Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.

 

(b) The following terms shall have the following meanings:

 

“Agreement”: means this Subsidiary Guaranty Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.

 

“Borrower Obligations”: means the collective reference to all obligations,
liabilities and indebtedness (including all Indebtedness) owing by the Borrower
pursuant to the Credit Agreement, including, without limitation, the unpaid
principal of and interest on the Loans and LC Disbursements and all other
obligations and liabilities of the Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit Agreement
after the maturity of the Loans and LC Disbursements and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to the Administrative Agent or any Lender, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, any Letter of Credit or the other Loan Documents or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).

 

“Guarantor Obligations”: means with respect to any Guarantor, the collective
reference to (i) the Borrower Obligations and (ii) all obligations and
liabilities of such Guarantor which may arise under or in connection with this
Agreement, in each case whether on account of guarantee obligations,
reimbursement obligations, loan obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to be
paid by such Guarantor pursuant to the terms of this Agreement or any other Loan
Document).

 

“Guarantors”: means the collective reference to each Guarantor party to this
Agreement.

 

“Obligations”: means in the case of each Guarantor, its Guarantor Obligations.

 

“Solvent”: means with respect to each Guarantor as of any date, that (a) the
value of the assets of such Guarantor (both at fair value and present fair
saleable value) is, on the date of determination, greater than the total amount
of liabilities (including contingent and unliquidated liabilities) of such
Guarantor as of such date, (b) as of such date, such Guarantor is able to pay
all of its liabilities as such liabilities mature and (c) as of such date, such
Guarantor does not have unreasonably small capital given the nature of its
business. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.

 

Exhibit C - 3

--------------------------------------------------------------------------------

1.2 Other Definitional Provisions.

 

(a) The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section and Schedule
references are to this Agreement unless otherwise specified.

 

(b) The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms.

 

(c) A reference to any Person hereunder shall be deemed to include a reference
to such Person’s successor’s, endorsees, transferees and assigns.

 

SECTION 2. GUARANTEE

 

2.1 Guarantee.

 

(a) Each of the Guarantors hereby, jointly and severally, (i) absolutely,
unconditionally and irrevocably, guarantees to the Administrative Agent for the
ratable benefit of the Lenders and their respective successors, endorsees,
transferees and assigns, the prompt and complete payment and performance by the
Borrower when due (whether at the stated maturity, by acceleration or otherwise)
of the Borrower Obligations and (ii) indemnifies and holds harmless the
Administrative Agent and each Lender from, and agrees to pay to the
Administrative Agent and each Lender, all reasonable costs and expenses
(including reasonable counsel fees and expenses) incurred by the Administrative
Agent or such Lender in enforcing any of its rights under this Agreement. The
guarantee in this Section 2.1 is a continuing guarantee, and shall apply to all
Obligations owing at any time whenever arising or incurred and shall remain in
full force and effect until the Obligations have been indefeasibly paid in full
in cash. Each Guarantor agrees that notwithstanding any stay, injunction or
other prohibition preventing the payment by the Borrower of all or any portion
of the Borrower Obligations and notwithstanding that all or any portion of the
Borrower Obligations may be unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving the Borrower,
such Borrower Obligations shall nevertheless be due and payable by such
Guarantor for the purposes of this Agreement at the time such Borrower
Obligations would by payable by the Borrower under the provisions of the Credit
Agreement. Notwithstanding the foregoing, any enforcement of this Agreement with
respect to the rights of any Lender may be accomplished by the Administrative
Agent acting on behalf of such Lender.

 

(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder shall in no
event exceed the amount which can be guaranteed by such Guarantor under
applicable federal and state laws relating to the insolvency of debtors (after
giving effect to the right of contribution established in Section 2.2).

 

(c) Each Guarantor agrees that the Borrower Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any Lender hereunder.

 

Exhibit C - 4

--------------------------------------------------------------------------------

(d) The guarantee contained in this Section 2.1 shall remain in full force and
effect until all the Borrower Obligations and the obligations of each Guarantor
under the guarantee contained in this Section 2.1 shall have been satisfied by
indefeasible payment in full in cash, no Letter of Credit shall be outstanding
and the Commitments shall be terminated, notwithstanding that from time to time
during the term of the Credit Agreement the Borrower may be free from any
Borrower Obligations.

 

(e) No payment made by the Borrower, any of the Guarantors, any other guarantor
or any other Person or received or collected by the Administrative Agent or any
Lender from the Borrower, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until, subject to Section 2.6, the Borrower Obligations are
indefeasibly paid in full in cash, no Letter of Credit shall be outstanding and
the Commitments are terminated.

 

2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that
a Guarantor shall have paid more than its proportionate share of any payment
made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor’s right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.

 

2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder
or any set-off or application of funds of any Guarantor by the Administrative
Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Borrower or any
other Guarantor (or any other guarantor) or any collateral security or guarantee
or right of offset held by the Administrative Agent or any Lender for the
payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled
to seek any contribution or reimbursement from the Borrower or any other
Guarantor (or any other guarantor) in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Administrative Agent and the Lenders
by the Borrower on account of the Borrower Obligations are indefeasibly paid in
full in cash, no Letter of Credit shall be outstanding and the Commitments are
terminated. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Borrower Obligations shall not
have been paid in full in cash, such amount shall be held by such Guarantor in
trust for the Administrative Agent and the Lenders, segregated from other funds
of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be
turned over to the Administrative Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Administrative

 

Exhibit C - 5

--------------------------------------------------------------------------------

Agent, if required), to be applied against the Borrower Obligations, whether
matured or unmatured, in such order as the Administrative Agent may determine.

 

2.4 Amendments, etc. with respect to the Borrower Obligations. Each Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of the Borrower Obligations made by the
Administrative Agent or any Lender may be rescinded by the Administrative Agent
or such Lender and any of the Borrower Obligations continued, and the Borrower
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Administrative Agent or any Lender, and the Credit Agreement and the other
Loan Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent (or the Required Lenders or all Lenders, as
the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. Neither the Administrative Agent nor
any Lender shall have any obligation to protect, secure, perfect or insure any
Lien at any time held by it as security for the Borrower Obligations or for the
guarantee contained in this Section 2 or any property subject thereto.

 

2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings between the Borrower and any of
the Guarantors, on the one hand, and the Administrative Agent and the Lenders,
on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives diligence, presentment, protest, demand for payment, notice of
intent to accelerate, notice of acceleration and notice of default or nonpayment
to or upon the Borrower or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that the guarantee contained
in this Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Credit Agreement or any other Loan Document, any of the Borrower Obligations or
any other collateral security therefor or guarantee or right of offset with
respect thereto at any time or from time to time held by the Administrative
Agent or any Lender, (b) any defense, set-off or counterclaim (other than a
defense of payment or performance) which may at any time be available to or be
asserted by the Borrower or any other Person against the Administrative Agent or
any Lender, (c) any extension, other indulgence, renewal, settlement, discharge,
compromise, waiver, subordination or release in respect of any Borrower
Obligation, security, Person or otherwise, (d) any modification or amendment of
or supplement to the Borrower Obligations, including any increase or decrease in
the principal, the rates of interest or other amounts payable thereunder, (e)
any release, non-perfection or invalidity of any direct or indirect security for
any Borrower Obligation, (f) any change in the existence,

 

Exhibit C - 6

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structure, constitution, name, objects, powers, business, control or ownership
of the Borrower or any other Person, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower or any other
Person or its assets, (g) any limitation, postponement, prohibition,
subordination or other restriction on the rights of the Administrative Agent or
the Lenders to payment of the Borrower Obligations, (h) any release,
substitution or addition of any cosigner, endorser or other guarantor of the
Borrower Obligations, (i) any defense arising by reason of any failure of the
Borrower to make any presentment, demand for performance, notice of
non-performance, protest, notice of intent to accelerate, notice of acceleration
and any other notice, including notice of all of the following: acceptance of
this Agreement, partial payment or non-payment of all or any part of the
Borrower Obligations and the existence, creation, or incurring of new or
additional Borrower Obligations, (j) any defense arising by reason of any
failure of the Administrative Agent to proceed against the Borrower or any other
Person, to proceed against, apply or exhaust any security held from the Borrower
or any other Person for the Borrower Obligations, to proceed against, apply or
exhaust any security held from any Guarantor or any other Person for this
Agreement or to pursue any other remedy in the power of the Administrative Agent
or the Lenders whatsoever, (k) any law which provides that the obligation of a
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal obligation or which reduces a guarantor’s obligation
in proportion to the principal obligation, (l) any defense arising by reason of
any incapacity, lack of authority, or other defense of the Borrower or any other
Person, or by reason of any limitation, postponement, prohibition on the
Administrative Agent’s or the Lenders’ right to payment of the Borrower
Obligations or any part thereof, or by reason of the cessation from any cause
whatsoever of the liability of the Borrower or any other Person with respect to
all or any part of the Borrower Obligations, or by reason of any act or omission
of the Administrative Agent or the Lenders which directly or indirectly results
in the discharge or release of the Borrower or any other Person of all or any
part of the Borrower Obligations or any security or guarantee therefore, whether
by contract, operation of law or otherwise, (m) any defense arising by failure
by the Administrative Agent or the Lenders to obtain, perfect or maintain a
perfected or prior (or any) security interest in or lien or encumbrance upon any
property of the Borrower or any other Person, or by reason of any interest of
the Borrower in any property, whether as owner thereof or the holder of a
security interest therein or lien or encumbrance thereon, being invalidated,
voided, declared fraudulent or preferential or otherwise set aside, or by reason
of any impairment by the Borrower of any right to recourse or collateral, (n)
any defense arising by reason of the failure of the Borrower to marshal any
assets, (o) any defense based upon any failure of the Administrative Agent or
any Lender to give to the Borrower or any Guarantor notice of any sale or other
disposition of any property securing any or all of the Obligations, or any
defect in any notice that may be given in connection with any sale or other
disposition of any such property, or any failure of the Administrative Agent or
any Lender to comply with any provision of applicable law in enforcing any
security interest in or lien upon any such property, including any failure of
the Administrative Agent or any Lender to dispose of any such property in a
commercially reasonable manner, (p) any dealing whatsoever with the Borrower or
other Person or any security, whether negligently or not, or any failure to do
so, (q) any defense based upon or arising out any bankruptcy, insolvency,
reorganization, moratorium, arrangement, readjustment of debt, liquidation or
dissolution proceeding commenced by or against the Borrower or any other Person,
including any discharge of, or bar against collecting, any of the Borrower
Obligations, in or as a result of any such proceeding, (r) or any other act or
omission to act or

 

Exhibit C - 7

--------------------------------------------------------------------------------

delay of any kind by the Borrower, the Administrative Agent, any Lender, any
Guarantor or any other Person or any other circumstance whatsoever, whether
similar or dissimilar to the foregoing, which might, but for the provisions of
this Section 2.5, constitute a legal or equitable discharge, limitation or
reduction of such Guarantor’s obligations hereunder (other than the indefeasible
payment in full in cash of all of the Borrower Obligations). The foregoing
provisions apply (and the foregoing waivers will be effective) even if the
effect of any action (or failure to take any action) by the Administrative Agent
or any Lender is to destroy or diminish a Guarantor’s subrogation rights, such
Guarantor’s right to proceed against the Borrower for reimbursement, such
Guarantor’s right to recover contribution from any other Guarantor or any other
right or remedy. When making any demand hereunder or otherwise pursuing its
rights and remedies hereunder against any Guarantor, the Administrative Agent or
any Lender may, but shall be under no obligation to, make a similar demand on or
otherwise pursue such rights and remedies as it may have against the Borrower,
any other Guarantor or any other Person or against any collateral security or
guarantee for the Borrower Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to make any
such demand, to pursue such other rights or remedies or to collect any payments
from the Borrower, any other Guarantor or any other Person or to realize upon
any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower, any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any Guarantor.
For the purposes hereof “demand” shall include the commencement and continuance
of any legal proceedings.

 

2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to
be effective, or be reinstated, as the case may be, if at any time payment, or
any part thereof, of any of the Borrower Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Lender upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

 

2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be
paid to the Administrative Agent without set-off or counterclaim and without
deduction for any taxes and in immediately available funds and in dollars at the
Administrative Agent ‘s payment office at the address provided in Section 2.17
of the Credit Agreement.

 

SECTION 3. REPRESENTATIONS AND WARRANTIES

 

To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Guarantor hereby represents and warrants
to the Administrative Agent and each Lender that:

 

3.1 Representations in Credit Agreement. In the case of each Guarantor, the
representations and warranties relating to subsidiaries of the Borrower and the
MLP set forth in

 

Exhibit C - 8

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Article 3 of the Credit Agreement, each of which is hereby incorporated herein
by reference and shall apply mutatis mutandis, are true and correct, and the
Administrative Agent and each Lender shall be entitled to rely on each of them
as if they were fully set forth herein. Each Guarantor also represents and
warrants that it is Solvent and that it is a Subsidiary of the MLP.

 

SECTION 4. COVENANTS

 

Each Guarantor covenants and agrees with the Administrative Agent and the
Lenders that, from and after the date of this Agreement until the Obligations
shall have been indefeasibly paid in full in cash, no Letter of Credit shall be
outstanding and the Commitments shall have terminated, in the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.

 

SECTION 5. THE ADMINISTRATIVE AGENT

 

5.1 Authority of Administrative Agent. Each Guarantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Guarantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Guarantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

 

SECTION 6. MISCELLANEOUS

 

6.1 Amendments in Writing. None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except in accordance with
Section 10.02 of the Credit Agreement.

 

6.2 Notices. All notices, requests and demands to or upon the Administrative
Agent or any Guarantor hereunder shall be effected in the manner provided for in
Section 10.01 of the Credit Agreement; provided that any such notice, request or
demand to or upon any Guarantor shall be addressed to such Guarantor at its
notice address set forth on Schedule 1.

 

6.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 6.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative

 

Exhibit C - 9

--------------------------------------------------------------------------------

Agent or such Lender would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.

 

6.4 Enforcement Expenses; Indemnification.

 

(a) Each Guarantor agrees to pay or reimburse each Lender and the Administrative
Agent for all its costs and expenses incurred in collecting against such
Guarantor under the guarantee contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement and which such Guarantor is a party,
including, without limitation, the reasonable fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent.

 

(b) Each Guarantor agrees to pay, and to save the Administrative Agent and the
Lenders harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the same extent the Borrower
would be required to do so pursuant to Section 10.03 of the Credit Agreement.

 

(c) The agreements in this Section 6.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.

 

6.5 Successors and Assigns. This Agreement shall be binding upon the successors
and assigns of each Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Guarantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.

 

6.6 Counterparts. This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Administrative Agent. Delivery of an executed counterpart of a signature page of
this Agreement by telecopy or facsimile shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

6.7 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

6.8 Integration. This Agreement and the other Loan Documents represent the
entire agreement of the Guarantors, the Administrative Agent and the Lenders
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or

 

Exhibit C - 10

--------------------------------------------------------------------------------

warranties by the Administrative Agent or any Lender relative to subject matter
hereof and thereof not expressly set forth or referred to herein.

 

6.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND TO THE EXTENT
CONTROLLING, LAWS OF THE UNITED STATES OF AMERICA.

 

6.10 Submission to Jurisdiction; Waivers. Each Guarantor hereby irrevocably and
unconditionally:

 

(a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the Courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

 

(b) consents that any such action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same;

 

(c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Guarantor at its
address referred to in Section 6.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;

 

(d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

 

(e) waives, to the maximum extent not prohibited by law, any right it may have
to claim or recover in any legal action or proceeding referred to in this
Section 6.10 any special, exemplary, punitive or consequential damages.

 

6.11 Acknowledgments. Each Guarantor hereby acknowledges that:

 

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents to which it is a party;

 

(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Guarantor arising out of or in connection with
this Agreement or the relationship between the Administrative Agent and Lenders,
on one hand, and the Guarantors, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and

 

(c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Guarantors and the Lenders.

 

Exhibit C - 11

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6.12 WAIVERS OF JURY TRIAL. EACH GUARANTOR, AND THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN.

 

6.13 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

 

6.14 Additional Guarantors. Each Subsidiary of the MLP that is required to
become a party to this Agreement pursuant to Section 5.10 of the Credit
Agreement shall become a party hereto and a Guarantor hereunder for all purposes
of this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex I hereto.

 

6.15 Release of Guarantors. At the request and sole expense of the Borrower and
the MLP: (a) any Material Domestic Subsidiary of the MLP that is a Guarantor
shall be released from its obligations hereunder in the event that all of the
Equity Interests of such Guarantor shall be sold, transferred or otherwise
disposed of in a transaction permitted by the Credit Agreement, provided that
the Borrower and the MLP shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request of a Responsible Officer of each of the Borrower and the MLP for release
identifying the relevant Guarantor and the terms of the sale or other
disposition in reasonable detail, together with a certification by the Borrower
and the MLP that such transaction is in compliance with the Credit Agreement and
the other Loan Documents and that at the time of such release, after giving
effect to any other Subsidiary of the MLP becoming a party hereto, the Borrower
and the MLP are in compliance with Section 5.10 of the Credit Agreement and no
Event of Default exists or would exist as a result of such release; and (b) any
Guarantor that is not a Material Domestic Subsidiary of the MLP shall be
released from its obligations hereunder, provided that the Borrower and the MLP
shall have delivered to the Administrative Agent, at least ten Business Days
prior to the date of the proposed release, a written request of a Responsible
Officer of each of the Borrower and the MLP for release identifying the relevant
Guarantor, together with a certification by the Borrower and the MLP that at the
time of such release, after giving effect to any other Subsidiary of the MLP
becoming a party hereto, the Borrower and the MLP are in compliance with Section
5.10 of the Credit Agreement and no Event of Default exists or would exist as a
result of such release.

 

6.16 Limitation of Liability. Neither the General Partner nor the general
partner(s) of the MLP shall be liable for (c) the obligations of the Borrower
under this Agreement or (d) the obligations of the MLP under this Agreement,
including in each case, without limitation, by reason of any payment obligation
imposed by governing state partnership statutes and any provision of the
applicable limited partnership agreement of the Borrower or the MLP that
requires such General Partner or general partner(s), as the case may be, to
restore a capital account deficit.

 

Exhibit C - 12

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IN WITNESS WHEREOF, each of the undersigned has caused this Subsidiary Guaranty
Agreement to be duly executed and delivered as of the date first above written.

 

Guarantor By:   [                                      
                                         ] Title:     [Guarantor] By:  
[                                                                              
 ] Title:    

 

Exhibit C - 13

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Schedule 1

 

NOTICE ADDRESSES OF GUARANTORS

 

Guarantors

--------------------------------------------------------------------------------

 

Address

--------------------------------------------------------------------------------

           

 

Exhibit C - 14

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ACKNOWLEDGMENT AND CONSENT

 

The undersigned hereby acknowledges receipt of a copy of the Subsidiary Guaranty
Agreement dated as of [                    ], 2004, (the “Subsidiary Guaranty
Agreement”), made by the Guarantors parties thereto in favor of JPMorgan Chase
Bank, N.A., as Administrative Agent, for the benefit of the Lenders. The
undersigned agrees for the benefit of the Administrative Agent and the Lenders
the undersigned will be bound by the terms of the Subsidiary Guaranty Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.

 

[                                                                              
 ] By:   [                                                                     ]
Title:     Address for Notices:

 

Exhibit C - 15

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Annex 1 to

Subsidiary Guaranty Agreement

 

ASSUMPTION AGREEMENT, dated as of [                    ], [200_], by
[                    ], a [            ] corporation (the “Additional
Guarantor”), in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (in
such capacity, the “Administrative Agent”) for the banks and other financial
institutions (the “Lenders”) parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.

 

WITNESSETH:

 

WHEREAS, Valero Logistics Operations, L.P., a Delaware limited partnership (the
“Borrower”), Valero L.P., a Delaware limited partnership (the “MLP”), the
Lenders and the Administrative Agent have entered into a Credit Agreement, dated
as of December 20, 2004 (as amended, supplemented or otherwise modified from
time to time, the “Credit Agreement”);

 

WHEREAS, in connection with the Credit Agreement, certain subsidiaries of the
MLP (other than the Additional Guarantor) have entered into the Subsidiary
Guaranty Agreement, dated as of [                    ], 2004 (as amended,
supplemented or otherwise modified from time to time, the “Subsidiary Guaranty
Agreement”) in favor of the Administrative Agent for the benefit of the Lenders:

 

WHEREAS, the Credit Agreement requires the Additional Guarantor to become a
party to the Subsidiary Guaranty Agreement; and

 

WHEREAS, the Additional Guarantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Subsidiary Guaranty
Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1. Subsidiary Guaranty Agreement. By executing and delivering this Assumption
Agreement, the Additional Guarantor, as provided in Section 6.14 of the
Subsidiary Guaranty Agreement, hereby becomes a party to the Subsidiary Guaranty
Agreement as a Guarantor thereunder with the same force and effect as if
originally named therein as a Guarantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Guarantor thereunder. The information set forth in Annex l-A hereto is hereby
added to the information set forth in Schedule 1 to the Subsidiary Guaranty
Agreement. The Additional Guarantor hereby represents and warrants that each of
the representations and warranties contained in Section 3 of the Subsidiary
Guaranty Agreement is true and correct on and as the date hereof (after giving
effect to this Assumption Agreement) as if made on and as of such date.

 

2. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK AND TO THE EXTENT
CONTROLLING, LAWS OF THE UNITED STATES OF AMERICA.

 

Exhibit C - 16

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

 

[ADDITIONAL GUARANTOR]

By:   [                                      
                                         ]    

Name:

   

Title:

 

Exhibit C - 17

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EXHIBIT D-1

 

FORM OF INITIAL NOTICE OF COMMITMENT INCREASE

 

[Date]

 

JPMorgan Chase Bank, N.A.

    as Administrative Agent

1111 Fannin, 8th Floor

Houston, TX 77002

 

Attention:                     

 

Ladies and Gentlemen:

 

The undersigned, Valero Logistics Operations, L.P., refers to the 5-Year
Revolving Credit Agreement dated as of December 20, 2004 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”,
with terms defined in the Credit Agreement and not otherwise defined herein
being used herein as therein defined) among Valero Logistics Operations, L.P., a
Delaware limited partnership (the “Borrower”), Valero L.P., a Delaware limited
partnership, the Lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, SunTrust Bank, as Syndication Agent, and Barclays Bank
Plc, Mizuho Corporate Bank Ltd. and Royal Bank of Canada, as Co-Documentation
Agents and hereby gives you notice, pursuant to Section 2.19 of the Credit
Agreement that the undersigned hereby requests that (x) the Lenders agree to
increase their respective Commitments and/or (y) the New Lenders agree to
provide Commitments under the Credit Agreement, and in that connection sets
forth below the information relating to such proposed Commitment increase as
required by Section 2.19 of the Credit Agreement:

 

(i) the effective date of such increase of aggregate amount of the Lenders’
Commitments is                     ; and

 

(ii) the amount of the requested increase (and/or provision, as applicable) of
the aggregate Lenders’ Commitments is $                     [$10,000,000
minimum];

 

Exhibit D-1 - 1

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Delivery of an executed counterpart of this Initial Notice of Commitment
Increase by telecopier shall be effective as delivery of an original executed
counterpart of this Initial Notice of Commitment Increase.

 

Very truly yours,

VALERO LOGISTICS OPERATIONS, L.P.

   

By:

 

Valero GP, Inc., its General Partner

       

By:

                Steven A. Blank             Vice President

 

Exhibit D-1 - 2

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EXHIBIT D-2

 

FORM OF NOTICE OF CONFIRMATION OF COMMITMENT INCREASE

 

[Date]

 

JPMorgan Chase Bank, N.A.

    as Administrative Agent

1111 Fannin, 8th Floor

Houston, TX 77002

 

Attention:                     

 

Ladies and Gentlemen:

 

The undersigned, Valero Logistics Operations, L.P., refers to the 5-Year
Revolving Credit Agreement dated as of December 20, 2004 (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”,
with terms defined in the Credit Agreement and not otherwise defined herein
being used herein as therein defined) among Valero Logistics Operations, L.P., a
Delaware limited partnership (the “Borrower”), Valero L.P., a Delaware limited
partnership, the Lenders party thereto, JPMorgan Chase Bank, N.A., as
Administrative Agent, SunTrust Bank, as Syndication Agent, and Barclays Bank
Plc, Mizuho Corporate Bank Ltd. and Royal Bank of Canada, as Co-Documentation
Agents and hereby gives you notice, irrevocably, pursuant to Section 2.19 of the
Credit Agreement that the undersigned hereby requests that (x) the Lenders agree
to increase their respective Commitments and/or (y) the New Lenders agree to
provide Commitments under the Credit Agreement, and in that connection sets
forth below the information relating to such proposed Commitment increase as
required by Section 2.19 of the Credit Agreement:

 

(i) the effective date of such increase of aggregate amount of the Lenders’
Commitments is             ;

 

(ii) the amount of the requested increase (and/or provision, as applicable) of
the aggregate Lenders’ Commitments is                     [$10,000,000 minimum];

 

(iii) the Increasing Lenders, the Partially Increasing Lenders or the New
Lenders, if any, which have agreed with the Borrower to increase (and/or
provide, as applicable) their respective Commitments or to provide Commitments,
as the case may be, are: [INSERT NAMES OF THE INCREASING LENDERS, THE PARTIALLY
INCREASING LENDERS AND/OR NEW LENDERS];

 

(iv) the Reducing Lenders, if any, which have not agreed to increase their
respective Commitments are: [INSERT THE NAMES OF THE REDUCING LENDERS]; and

 

(v) set forth on Schedule I hereto is the amount of the respective Commitments
of all Increasing Lenders, Partially Increasing Lenders, Reducing Lenders and
New Lenders after the effective date of such increase.

 

Exhibit D-2 - 1

--------------------------------------------------------------------------------

Delivery of an executed counterpart of this Notice of Confirmation of Commitment
Increase by telecopier shall be effective as delivery of an original executed
counterpart of this Notice of Confirmation of Commitment Increase.

 

Very truly yours,

VALERO LOGISTICS OPERATIONS, L.P.

   

By:

 

Valero GP, Inc., its General Partner

       

By:

                Steven A. Blank             Vice President

 

Exhibit D-2 - 2

--------------------------------------------------------------------------------

 

SCHEDULE 2.01

 

LENDER

--------------------------------------------------------------------------------

   COMMITMENT

--------------------------------------------------------------------------------

JPMorgan Chase Bank, N.A.

   $ 22,500,000

SunTrust Bank

   $ 22,500,000

Barclays Bank PLC

   $ 22,500,000

Mizuho Corporate Bank (USA)

   $ 22,500,000

Royal Bank of Canada

   $ 22,500,000

The Bank of Tokyo – Mitsubishi, Ltd.

   $ 20,000,000

Bank of America, N.A.

   $ 20,000,000

The Bank of Nova Scotia

   $ 20,000,000

BNP Paribas

   $ 20,000,000

Citibank, N.A.

   $ 20,000,000

The Royal Bank of Scotland plc

   $ 20,000,000

Bayerische Hypo-Und Vereinsbank AG, New York Branch

   $ 20,000,000

KeyBank National Association

   $ 20,000,000

Sumitomo Mitsui Banking Corporation

   $ 20,000,000

Calyon New York Branch

   $ 20,000,000

Wells Fargo Bank, National Association

   $ 20,000,000

Lehman Brothers Bank, FSB

   $ 17,500,000

UBS Loan Finance LLC

   $ 17,500,000

Compass Bank

   $ 17,500,000

Bank Hapoalim B.M.

   $ 15,000,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total

   $ 400,000,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

Schedule 2.01

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SCHEDULE 3.06

 

Disclosed Matters

 

Grace Litigation. All actions, suits, proceedings, claims and Environmental
Liabilities arising out of or related to the Otis pipeline as described in
Kaneb’s Form 10K for the year ended December 31, 2003.

 

PEPCO Litigation. All actions, suits, proceedings, claims and Environmental
Liabilities arising out of or related to the Potomac Electric Power Company
pipeline as described in Kaneb’s Form 10K for the year ended December 31, 2003.

 

Schedule 3.06

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SCHEDULE 6.01

 

Existing Indebtedness

 

Indebtedness not to exceed A$56,200,000 under the Facility Agreement between ST
Australia Pty Ltd, Terminals Pty Ltd, Kaneb Pipe Line Operating Partnership,
L.P. and National Australia Bank Limited dated April 16, 2003 as amended or
restated from time to time (or replaced but no increases thereof).

 

Indebtedness not to exceed £21,000,000 under Credit Agreement between Kaneb Pipe
Line Operating Partnership, L.P. and ST Services, LTD., as borrowers, and
SunTrust Bank, Atlanta, as Lender dated January 29, 1999 as amended or restated
from time to time (or replaced but no increases thereof).

 

Schedule 6.01

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SCHEDULE 6.04

 

Existing Investments

 

Investment in ST Linden Terminal, LLC existing on the date hereof

 

Investment in Steuart-Aectra Terminals Partnership No. 1 existing on the date
hereof

 

Investment in ST/Center Chillicothe Terminal LLC existing on the date hereof

 

Investment in BST (Auckland) Ltd. existing on the date hereof

 

Schedule 6.04

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SCHEDULE 6.07

 

Affiliate Agreements

 

Services and Secondment Agreement dated as of March 18, 2003 between Valero
Refining-California and Valero Logistics Operations, L.P.

 

Services and Secondment Agreement dated as of March 18, 2003 between Valero
Refining-Texas, L.P. and Valero Logistics Operations, L.P.

 

Amended and Restated Services Agreement dated as of April 1, 2004 among Diamond
Shamrock Refining and Marketing Company, Valero L.P., Valero Logistics
Operations, L.P., Riverwalk Logistics, L.P. and Valero GP, L.L.C.

 

Schedule 6.07

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SCHEDULE 6.08

 

Existing Restrictions

 

Indenture dated as of July 15, 2002.

 

First Supplemental Indenture dated as of July 15, 2002.

 

Second Supplemental Indenture dated as of March 19, 2003.

 

Schedule 6.08