Exhibit 10.04

 

 

 

 

 

 

ADMINISTRATION AGREEMENT

BETWEEN

VALERO GP HOLDINGS, LLC

AND

VALERO GP, LLC

DATED AS OF July 19, 2006

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ADMINISTRATION AGREEMENT

This ADMINISTRATION AGREEMENT (this “Agreement”) is entered into as of July 19,
2006 and effective as of Effective Date, as defined below, between VALERO GP
HOLDINGS, LLC, a Delaware limited liability company (“Holdings”), and VALERO GP,
LLC, a Delaware limited liability company (“Valero GP”).

RECITALS

WHEREAS, management of Holdings has determined that certain executive
management, accounting, legal, cash management, corporate finance and other
administrative services required by Holdings should be performed by Valero GP in
exchange for an administrative services fee;

WHEREAS, on March 10, 2006, upon recommendation by management of Valero GP and
the Conflicts Committee of the Board of Directors of Valero GP (the “Conflicts
Committee”), the Board of Directors of Valero GP approved the terms of this
Agreement;

WHEREAS, Valero GP has agreed to provide certain administrative services under
this Agreement to Holdings; and

NOW, THEREFORE, for and in consideration of the mutual covenants contained in
this Agreement, the parties hereto hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1            Definitions.   The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.

(A)           “AFFILIATES” MEANS ENTITIES THAT DIRECTLY OR INDIRECTLY THROUGH
ONE OR MORE INTERMEDIARIES CONTROL, OR ARE CONTROLLED BY, OR ARE UNDER COMMON
CONTROL WITH, SUCH PARTY, AND THE TERM “CONTROL” SHALL MEAN THE POSSESSION,
DIRECTLY OR INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF
MANAGEMENT AND POLICIES OF AN ENTITY, WHETHER THROUGH THE OWNERSHIP OF VOTING
SECURITIES, BY CONTRACT OR OTHERWISE; PROVIDED, HOWEVER, THAT WITH RESPECT TO
VALERO GP, THE TERM “AFFILIATE” SHALL EXCLUDE HOLDINGS.

(B)           “ASSOCIATE” MEANS, WHEN USED TO INDICATE A RELATIONSHIP WITH ANY
PERSON, (A) ANY CORPORATION OR ORGANIZATION WHICH SUCH PERSON IS A DIRECTOR,
OFFICER OR PARTNER OR IS, DIRECTLY OR INDIRECTLY, THE OWNER OF 20% OR MORE OF
ANY CLASS OF VOTING STOCK OR OTHER VOTING INTEREST; (B) ANY TRUST OR OTHER
ESTATE IN WHICH SUCH PERSON HAS AT LEAST A 20% BENEFICIAL INTEREST OR AS TO
WHICH SUCH PERSON SERVES AS TRUSTEE OR IN A SIMILAR FIDUCIARY CAPACITY; AND (C)
ANY RELATIVE OR SPOUSE OF SUCH PERSON, OR ANY RELATIVE OF SUCH SPOUSE, WHO HAS
THE SAME PRINCIPAL RESIDENCE AS SUCH PERSON.

(C)           “EFFECTIVE DATE” MEANS THE CLOSING DATE OF THE INITIAL PUBLIC
OFFERING OF HOLDINGS.

 

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(D)           “FORCE MAJEURE” MEANS ANY ONE OR MORE OF: (A) AN ACT OF GOD, (B) A
STRIKE, LOCKOUT, LABOR DIFFICULTY OR OTHER INDUSTRIAL DISTURBANCE, (C) AN ACT OF
A PUBLIC ENEMY, WAR, BLOCKADE, INSURRECTION OR PUBLIC RIOT, (D) LIGHTNING, FIRE,
STORM, FLOOD OR EXPLOSION, (E) GOVERNMENTAL ACTION, DELAY, RESTRAINT OR
INACTION, (F) JUDICIAL ORDER OR INJUNCTION, (G) MATERIAL SHORTAGE OR
UNAVAILABILITY OF EQUIPMENT, OR (H) ANY OTHER CAUSE OR EVENT, WHETHER OF THE
KIND SPECIFICALLY ENUMERATED ABOVE OR OTHERWISE, WHICH IS NOT REASONABLY WITHIN
THE CONTROL OF THE PARTY CLAIMING SUSPENSION..

(E)           “GROUP” MEANS A PERSON THAT WITH OR THROUGH ANY OF ITS AFFILIATES
OR ASSOCIATES HAS ANY AGREEMENT, ARRANGEMENT OR UNDERSTANDING FOR THE PURPOSE OF
ACQUIRING, HOLDING, VOTING (EXCEPT VOTING PURSUANT TO A REVOCABLE PROXY OR
CONSENT GIVEN TO SUCH PERSON IN RESPONSE TO A PROXY OR CONSENT SOLICITATION MADE
TO TEN OR MORE PERSONS), EXERCISING INVESTMENT POWER OR DISPOSING OF ANY
MEMBERSHIP INTERESTS IN HOLDINGS WITH ANY OTHER PERSON THAT BENEFICIALLY OWNS,
OR WHOSE AFFILIATES OR ASSOCIATES BENEFICIALLY OWN, DIRECTLY OR INDIRECTLY,
MEMBERSHIP INTERESTS IN HOLDINGS.

(F)            “PERSON”  MEANS AN INDIVIDUAL OR A CORPORATION, LIMITED LIABILITY
COMPANY, PARTNERSHIP, JOINT VENTURE, TRUST, UNINCORPORATED ORGANIZATION OR OTHER
ENTERPRISE (INCLUDING AN EMPLOYEE BENEFIT PLAN), ASSOCIATION, GOVERNMENT AGENCY
OR POLITICAL SUBDIVISION THEREOF OR OTHER ENTITY.

(G)           “VALERO ENERGY AFFILIATES” SHALL MEAN ANY AND ALL AFFILIATES OF
VALERO ENERGY CORPORATION.

ARTICLE II
PROVISION OF SERVICES

SECTION 2.1                PROVISION OF ADMINISTRATIVE SERVICES BY VALERO GP.

(A)           ADMINISTRATIVE SERVICES.  VALERO GP OR ANY AFFILIATE OR DESIGNEE
OF VALERO GP SHALL PROVIDE TO HOLDINGS NON-EXCLUSIVE EXECUTIVE MANAGEMENT,
ACCOUNTING, LEGAL, CASH MANAGEMENT, CORPORATE FINANCE AND OTHER ADMINISTRATIVE
SERVICES, AND SUCH OTHER SERVICES AS VALERO GP AND HOLDINGS MAY FROM TIME TO
TIME AGREE (THE “ADMINISTRATIVE SERVICES”).

(B)           ADDITIONAL SERVICES.  VALERO GP OR ANY AFFILIATE OR DESIGNEE OF
VALERO GP SHALL PROVIDE HOLDINGS WITH SUCH OTHER SERVICES AS HOLDINGS MAY
REQUEST FROM TIME TO TIME DURING THE TERM OF THIS AGREEMENT AND FOR SUCH
ADDITIONAL COMPENSATION AS THE PARTIES MAY AGREE.

(C)           DIRECT CHARGES.  NOTWITHSTANDING SECTION 1.1 (A) ABOVE, THE
FOLLOWING ITEMS WILL BE DIRECTLY CHARGED TO HOLDINGS (“DIRECT CHARGES”):

ALL THIRD PARTY EXPENSES DIRECTLY RELATED TO HOLDINGS, INCLUDING, BUT NOT
LIMITED TO, PUBLIC COMPANY COSTS, OUTSIDE LEGAL FEES, OUTSIDE ACCOUNTING FEES,
FEES AND EXPENSES OF DIRECTORS, EXTERNAL ADVISORS AND CONSULTANTS, AND INSURANCE
COSTS, INCLUDING BUT NOT LIMITED TO, DIRECTORS AND OFFICERS.

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(D)           NATURE AND QUALITY OF SERVICES.  THE QUALITY OF THE ADMINISTRATIVE
SERVICES SHALL BE SUBSTANTIALLY IDENTICAL TO THOSE PROVIDED TO SUBSIDIARIES AND
AFFILIATES OF VALERO GP.

Section 2.2            Fees for Administrative Services.

(A)           COMMENCING ON THE EFFECTIVE DATE OF THIS AGREEMENT, AND FOR EACH
CONTRACT YEAR THEREAFTER, HOLDINGS SHALL PAY TO VALERO GP AN ANNUAL FEE (THE
“ADMINISTRATIVE SERVICES FEE”).  THE ADMINISTRATIVE SERVICES FEE SHALL BE
$500,000 PER YEAR, SUBJECT TO ADJUSTMENT AS PROVIDED IN SECTION 2.2(B).

(B)           ON THE LAST DAY OF EACH CONTRACT YEAR STARTING WITH THE CONTRACT
YEAR ENDING DECEMBER 31, 2006, AND PRIOR TO THE BEGINNING OF THE NEXT CONTRACT
YEAR, THE ADMINISTRATIVE SERVICES FEE SHALL BE INCREASED BY AN AMOUNT EQUAL TO
VALERO GP’S GENERAL ANNUAL MERIT INCREASE PERCENTAGE FOR THE JUST COMPLETED
CONTRACT YEAR.

(C)           VALERO GP, WITH THE APPROVAL AND CONSENT OF THE CONFLICTS
COMMITTEE, MAY AGREE TO FURTHER MODIFICATIONS IN THE ADMINISTRATIVE SERVICES FEE
IN CONNECTION WITH CHANGED LEVELS OF ADMINISTRATIVE SERVICES PROVIDED TO
HOLDINGS DUE TO MODIFICATIONS OF HOLDINGS’ OPERATIONS THROUGH ACQUISITIONS OR
OTHERWISE.

(D)           THE PARTIES HERETO ACKNOWLEDGE THAT THE ADMINISTRATIVE SERVICES
FEE IS INTENDED TO REFLECT VALERO GP’S ACTUAL COSTS TO PROVIDE THE
ADMINISTRATIVE SERVICES.  AT THE END OF EACH CONTRACT YEAR, THE SCOPE OF THE
ADMINISTRATIVE SERVICES AND THE RELATED ADMINISTRATIVE SERVICES FEE ARE SUBJECT
TO REVIEW EITHER AT THE REQUEST OF VALERO GP OR HOLDINGS, IN EITHER CASE BY
PROVIDING 10 DAYS WRITTEN NOTICE TO THE OTHER PARTY BUT IN NO EVENT LATER THAN
60 DAYS BEFORE THE END OF THE APPLICABLE CONTRACT YEAR, WITH SUCH REVIEW TO BE
COMPLETED NO LATER THAN MARCH 31 OF THE IMMEDIATELY FOLLOWING CONTRACT YEAR,
WITH ANY MODIFICATION OF THE ADMINISTRATIVE SERVICES FEE, OTHER THAN AS PROVIDED
IN SECTIONS 2.2 (B) AND 2.4, SUBJECT TO THE CONSENT AND APPROVAL OF THE
CONFLICTS COMMITTEE.

(E)           ANY FEES PAYABLE HEREUNDER FOR PERIODS LESS THAN A FULL CONTRACT
YEAR SHALL BE PRORATED FOR THE PERIOD FOR WHICH SERVICES WERE PROVIDED BASED ON
THE ACTUAL NUMBER OF DAYS ELAPSED AND A YEAR OF 365 DAYS.

SECTION 2.3                PAYMENT OF FEES.

(A)           THE FEES TO BE PAID PURSUANT TO THIS AGREEMENT SHALL BE PAID BY
HOLDINGS IN EQUAL MONTHLY INSTALLMENTS IN ARREARS WITHIN 30 DAYS OF THE END OF
THE MONTH.

(B)           TO THE EXTENT REASONABLY PRACTICABLE, ALL THIRD PARTY INVOICES FOR
DIRECT CHARGES SHALL BE SUBMITTED TO HOLDINGS FOR PAYMENT.  FOR DIRECT CHARGES
NOT PAID DIRECTLY BY HOLDINGS, IF ANY, VALERO GP SHALL PRESENT HOLDINGS WITH AN
INVOICE WITHIN 10 DAYS AFTER THE END OF EACH CALENDAR MONTH THAT REFLECTS AN
AMOUNT EQUAL TO ALL DIRECT CHARGES REIMBURSABLE TO VALERO GP.  HOLDINGS SHALL
PAY SUCH SUM WITHIN 30 DAYS OF THE END OF THE APPLICABLE CALENDAR MONTH.

Section 2.4            Cancellation or Reduction of Services.   Holdings may
terminate or reduce the level of any Administrative Service on 60 days’ prior
written notice to Valero GP.  Upon such termination or reduction, the
Administrative Services Fee shall be reduced

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accordingly, whether on a temporary or a permanent basis, for such time as such
service is reduced or terminated.

Section 2.5            Term.   The provisions of this Article II will apply
until this Agreement is terminated or amended in accordance with Section 3.1 or
Section 3.12, respectively.

ARTICLE III
MISCELLANEOUS

Section 3.1            Termination/Change of Control.

(A)           THIS AGREEMENT SHALL TERMINATE ON DECEMBER 31, 2011 (THE “INITIAL
TERM”); PROVIDED THAT THIS AGREEMENT SHALL AUTOMATICALLY CONTINUE FOR SUCCESSIVE
TWO-YEAR TERMS AFTER THE INITIAL TERM UNLESS OR UNTIL SIX MONTHS’ ADVANCE NOTICE
IS GIVEN BY VALERO GP TO TERMINATE THIS AGREEMENT, IN WHICH CASE THIS AGREEMENT
SHALL TERMINATE SIX MONTHS AFTER SUCH NOTICE IS DELIVERED.  NOTWITHSTANDING THE
FOREGOING, HOLDINGS (I) MAY TERMINATE THE PROVISION OF ONE OR MORE
ADMINISTRATIVE SERVICES OR REDUCE THE LEVEL OF ONE OR MORE ADMINISTRATIVE
SERVICES, IN EACH CASE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2.4 HEREOF
AND (II) SHALL HAVE THE RIGHT AT ANY TIME TO TERMINATE THIS AGREEMENT BY GIVING
WRITTEN NOTICE TO VALERO GP, AND IN SUCH EVENT THIS AGREEMENT SHALL TERMINATE
SIX MONTHS FROM THE DATE ON WHICH SUCH NOTICE IS GIVEN.

(B)           NOTWITHSTANDING SECTION 3.1(A), IF A CHANGE OF CONTROL OF HOLDINGS
OR VALERO GP OCCURS, THIS AGREEMENT SHALL TERMINATE.  THE FOLLOWING SHALL
CONSTITUTE A CHANGE OF CONTROL:

(I)            HOLDINGS SHALL CEASE TO OWN, DIRECTLY OR INDIRECTLY, 100% OF EACH
OF VALERO GP AND RIVERWALK LOGISTICS, L.P., A DELAWARE LIMITED PARTNERSHIP
(“RIVERWALK”);

(II)           BOTH (A) THE VALERO ENERGY AFFILIATES SHALL BE IN THE AGGREGATE
THE LEGAL OR BENEFICIAL OWNERS (WITHIN THE MEANING OF RULE 13D-3 UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) OF LESS THAN A MAJORITY OF THE
COMBINED VOTING POWER OF THE THEN TOTAL MEMBERSHIP INTERESTS (INCLUDING ALL
SECURITIES WHICH ARE CONVERTIBLE INTO MEMBERSHIP INTERESTS) OF HOLDINGS, AND (B)
ANY PERSON OR GROUP OF PERSONS ACTING IN CONCERT AS A PARTNERSHIP OR OTHER GROUP
(A “GROUP OF PERSONS”), OTHER THAN ONE OR MORE OF THE VALERO ENERGY AFFILIATES,
SHALL BE THE LEGAL OR BENEFICIAL OWNER (WITHIN THE MEANING OF RULE 13D-3 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED) OF MORE THAN 20% OF THE
COMBINED VOTING POWER OF THE THEN TOTAL MEMBERSHIP INTERESTS (INCLUDING ALL
SECURITIES WHICH ARE CONVERTIBLE INTO MEMBERSHIP INTERESTS) OF HOLDINGS,
PROVIDED, THAT A “GROUP OF PERSONS” SHALL NOT INCLUDE THE UNDERWRITER IN ANY
FIRM UNDERWRITING UNDERTAKEN IN CONNECTION WITH THE INITIAL PUBLIC OFFERING OR
ANY SUBSEQUENT PUBLIC OFFERING OF HOLDINGS; OR

(III)          OCCUPATION OF A MAJORITY OF THE SEATS (OTHER THAN VACANT SEATS)
ON THE BOARD OF DIRECTORS (OR BOARD OF MANAGERS) OF HOLDINGS BY PERSONS WHO WERE
NEITHER (A) NOMINATED BY THE BOARD OF DIRECTORS OF HOLDINGS NOR (B) APPOINTED BY
DIRECTORS, A MAJORITY OF WHOM WERE SO NOMINATED.

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SECTION 3.2                NO THIRD PARTY BENEFICIARY.  THE PROVISIONS OF THIS
AGREEMENT ARE ENFORCEABLE SOLELY BY THE PARTIES TO THE AGREEMENT AND NO LIMITED
PARTNER, ASSIGNEE, MEMBER OR OTHER PERSON SHALL HAVE THE RIGHT, SEPARATE AND
APART FROM THE PARTIES HERETO, TO ENFORCE ANY PROVISIONS OF THIS AGREEMENT OR TO
COMPEL AN PARTY TO THIS AGREEMENT TO COMPLY WITH THE TERMS OF THIS AGREEMENT.

SECTION 3.3                NO FIDUCIARY DUTIES.  NEITHER PARTY HERETO SHALL HAVE
ANY FIDUCIARY OBLIGATIONS OR DUTIES TO THE OTHER PARTY BY REASON OF THIS
AGREEMENT.  SUBJECT TO THE (I) OMNIBUS AGREEMENT AMONG VALERO ENERGY CORPORATION
(AS SUCCESSOR TO ULTRAMAR DIAMOND SHAMROCK CORPORATION), VALERO GP, RIVERWALK,
VALERO L.P. AND VALERO LOGISTICS OPERATIONS, L.P., DATED AS OF APRIL 16, 2001,
AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, AND (II) NON-COMPETE
AGREEMENT AMONG HOLDINGS, VALERO GP, RIVERWALK AND VALERO L.P., DATED AS OF
[                   ], 2006, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME,
ANY PARTY HERETO MAY CONDUCT ANY ACTIVITY OR BUSINESS FOR ITS OWN PROFIT WHETHER
OR NOT SUCH ACTIVITY OR BUSINESS IS IN COMPETITION WITH ANY ACTIVITY OR BUSINESS
OF THE OTHER PARTY.

SECTION 3.4                LIMITED WARRANTY; LIMITATION OF LIABILITY

Valero GP represents that it will provide or cause the services to be provided
to Holdings with reasonable care and in accordance with all applicable laws,
rules, and regulations, including without limitation those of the Federal Energy
Regulatory Commission.  EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING
SENTENCE AND IN SECTION 2.1 (d), ALL PRODUCTS OBTAINED FOR HOLDINGS ARE AS IS,
WHERE IS, WITH ALL FAULTS AND VALERO GP MAKES NO (AND HEREBY DISCLAIMS AND
NEGATES ANY AND ALL) REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR HOLDINGS. 
FURTHERMORE, HOLDINGS MAY NOT RELY UPON ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE MADE TO VALERO GP BY ANY PARTY (INCLUDING, AN AFFILIATE OR
DESIGNEE OF VALERO GP) PERFORMING SERVICES ON BEHALF OF VALERO GP HEREUNDER,
UNLESS SUCH PARTY MAKES AN EXPRESS WARRANTY TO HOLDINGS.  HOWEVER, IN THE CASE
OF SERVICES PROVIDED BY A THIRD PARTY FOR HOLDINGS, IF THE THIRD PARTY PROVIDER
OF SUCH SERVICES MAKES AN EXPRESS WARRANTY TO HOLDINGS, HOLDINGS IS ENTITLED TO
CAUSE VALERO GP TO RELY ON AND TO ENFORCE SUCH WARRANTY.

IT IS EXPRESSLY UNDERSTOOD BY HOLDINGS THAT VALERO GP AND ITS AFFILIATES AND
DESIGNEES SHALL HAVE NO LIABILITY FOR THE FAILURE OF THIRD PARTY PROVIDERS TO
PERFORM ANY SERVICES HEREUNDER AND FURTHER THAT VALERO GP AND ITS AFFILIATES AND
DESIGNEES SHALL HAVE NO LIABILITY WHATSOEVER FOR THE SERVICES PROVIDED BY ANY
SUCH THIRD PARTY UNLESS IN EITHER EVENT SUCH SERVICES ARE PROVIDED IN A MANNER
WHICH WOULD EVIDENCE GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT ON THE PART OF
VALERO GP OR ITS AFFILIATES OR DESIGNEES BUT VALERO GP SHALL, ON BEHALF OF
HOLDINGS, PURSUE ALL RIGHTS AND REMEDIES UNDER

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ANY SUCH THIRD PARTY CONTRACT.  HOLDINGS AGREES THAT THE REMUNERATION PAID TO
ALERO GP HEREUNDER FOR THE SERVICES TO BE PERFORMED REFLECT THIS LIMITATION OF
LIABILITY AND DISCLAIMER OF WARRANTIES.  IN NO EVENT SHALL VALERO GP BE LIABLE
TO HOLDINGS OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, OR CONSEQUENTIAL
DAMAGES RESULTING FROM ANY ERROR IN THE PERFORMANCE OF SERVICES OR FROM THE
BREACH OF THIS AGREEMENT, REGARDLESS OF THE FAULT OF VALERO GP, ANY VALERO GP
AFFILIATE OR DESIGNEE, OR ANY THIRD PARTY PROVIDER OR WHETHER VALERO GP, ANY
VALERO GP AFFILIATE OR DESIGNEE, OR THE THIRD PARTY PROVIDER ARE WHOLLY,
CONCURRENTLY, PARTIALLY, OR SOLELY NEGLIGENT.  TO THE EXTENT ANY THIRD PARTY
PROVIDER HAS LIMITED ITS LIABILITY TO VALERO GP OR ITS AFFILIATE OR DESIGNEE FOR
SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT, HOLDINGS AGREES TO BE BOUND BY
SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE PROVIDED TO HOLDINGS BY
SUCH THIRD PARTY PROVIDER UNDER VALERO GP’S OR SUCH AFFILIATE’S OR DESIGNEE’S
AGREEMENT.

SECTION 3.5                FORCE MAJEURE.  IF EITHER PARTY TO THIS AGREEMENT IS
RENDERED UNABLE BY FORCE MAJEURE TO CARRY OUT ITS OBLIGATIONS UNDER THIS
AGREEMENT, OTHER THAN A PARTY’S OBLIGATION TO MAKE PAYMENTS AS PROVIDED FOR
HEREIN, THAT PARTY SHALL GIVE THE OTHER PARTY PROMPT WRITTEN NOTICE OF THE FORCE
MAJEURE WITH REASONABLY FULL PARTICULARS CONCERNING IT.  THEREUPON, THE
OBLIGATIONS OF THE PARTY GIVING THE NOTICE, INSOFAR AS THEY ARE AFFECTED BY THE
FORCE MAJEURE, SHALL BE SUSPENDED DURING, BUT NO LONGER THAN THE CONTINUANCE OF,
THE FORCE MAJEURE.  THE AFFECTED PARTY SHALL USE ALL REASONABLE DILIGENCE TO
REMOVE OR REMEDY THE FORCE MAJEURE SITUATION AS QUICKLY AS PRACTICABLE.

The requirement that any force majeure situation be removed or remedied with all
reasonable diligence shall not require the settlement of strikes, lockouts or
other labor difficulty by the party involved, contrary to its wishes. Rather,
all such difficulties may be handled entirely within the discretion of the party
concerned.

SECTION 3.6                FURTHER ASSURANCES.  IN CONNECTION WITH THIS
AGREEMENT AND ALL TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, EACH SIGNATORY
PARTY HERETO AGREES TO EXECUTE AND DELIVER SUCH ADDITIONAL DOCUMENTS AND
INSTRUMENTS AS MAY BE REQUIRED FOR A PARTY TO PROVIDE THE SERVICES HEREUNDER AND
TO PERFORM SUCH OTHER ADDITIONAL ACTS AS MAY BE NECESSARY OR APPROPRIATE TO
EFFECTUATE, CARRY OUT, AND PERFORM ALL OF THE TERMS AND PROVISIONS OF THIS
AGREEMENT.

SECTION 3.7                NOTICES.  ANY NOTICE, REQUEST, DEMAND, DIRECTION OR
OTHER COMMUNICATION REQUIRED OR PERMITTED TO BE GIVEN OR MADE UNDER THIS
AGREEMENT TO A PARTY SHALL BE IN WRITING AND MAY BE GIVEN BY HAND DELIVERY,
POSTAGE PREPAID FIRST-CLASS MAIL DELIVERY, DELIVERY BY A REPUTABLE INTERNATIONAL
COURIER SERVICE GUARANTEEING NEXT BUSINESS DAY DELIVERY OR BY FACSIMILE (IF
CONFIRMED BY ONE OF THE FOREGOING METHODS) TO SUCH PARTY AT ITS ADDRESS NOTED
BELOW:

(A)                                  IN THE CASE OF VALERO GP, TO:

Valero GP, LLC

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One Valero Way
San Antonio, Texas 78249
Attention:  Legal Department

Telecopy: (210) 345-4861

(B)                                 IN THE CASE OF HOLDINGS, TO:

Valero GP Holdings, LLC
One Valero Way
San Antonio, Texas 78249
Attention: Legal Department
Telecopy: (210) 345-xxxx

or at such other address of which notice may have been given by such party in
accordance with the provisions of this Section.

Section 3.8            Counterparts.  This Agreement may be executed in several
counterparts, no one of which needs to be executed by all of the parties.  Such
counterpart, including a facsimile transmission of this Agreement, shall be
deemed to be an original and shall have the same force and effect as an
original.  All counterparts together shall constitute but one and the same
instrument.

Section 3.9            Applicable Law.  he provisions of this Agreement shall be
construed in accordance with the laws of the State of Texas, excluding any
conflicts of law rule or principle that might refer the construction or
interpretation hereof to the laws of another jurisdiction.

Section 3.10         Binding Effect; Assignment.  Except for the ability of
Valero GP to cause one or more of the Administrative Services to be performed by
a third party provider or an Affiliate of Valero GP, no party shall have the
right to assign its rights or obligations under this Agreement (by operation of
law or otherwise) without the consent of the other parties.

Section 3.11         Invalidity of Provisions.  In the event that one or more of
the provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality or
enforceability of the remaining provisions hereof shall not be affected or
impaired thereby.

Section 3.12         Modification; Amendment.  This Agreement may be amended or
modified from time to time only by a written amendment signed by both parties
hereto; provided however, that Valero GP may not, without the prior approval of
the Conflicts Committee, agree to any amendment or modification to this
Agreement that, in the reasonable discretion of Valero GP, will adversely affect
the holders of common units of the Partnership.

Section 3.13         Entire Agreement.  This Agreement constitutes the whole and
entire agreement between the parties hereto and supersedes any prior agreement,
undertaking, declarations, commitments or representations, verbal or oral, in
respect of the subject matter hereof.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement with effect
as of the date first above written.

 

VALERO GP, LLC

 

 

 

 

 

 

 

By:

/s/ Curtis V. Anastasio

 

Name:

Curtis V. Anastasio

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

VALERO GP HOLDINGS, LLC

 

 

 

 

 

 

 

By:

/s/ Steven A. Blank

 

Name:

Steven A. Blank

 

Title:

Senior Vice President, Chief Financial Officer and Treasurer

 

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