Document:

EX-10.21:AMENDMENT TO AMENDED REV CREDIT AGREEMENT

 

EXECUTION VERSION

NINTH AMENDMENT AGREEMENT

Dated as of May 8, 2003

among

LILLIAN VERNON CORPORATION,

as Borrower,

LVC RETAIL CORPORATION and

LILLIAN VERNON INTERNATIONAL, LTD.

as Guarantors,

JPMORGAN CHASE BANK

(formerly known as The Chase Manhattan Bank),

as Agent,

and

THE BANKS NAMED HEREIN

To The Credit Agreement Dated as of August 19, 1996

 

 

     THIS NINTH AMENDMENT AGREEMENT, dated as of May 8, 2003 (this
“Amendment”), among LILLIAN VERNON CORPORATION, a Delaware corporation (the
“Borrower”), LVC RETAIL CORPORATION, a Delaware corporation (“LVC”), and
LILLIAN VERNON INTERNATIONAL, LTD., a New York corporation (“LVI Inc.”, and
together with LVC, the “Guarantors”), the several banks from time to time
parties to the Agreement (as defined below) (the “Banks”) and JPMORGAN CHASE
BANK (formerly known as The Chase Manhattan Bank), a New York banking
corporation, as agent for the Banks hereunder (in such capacity, the “Agent”);

W I T N E S S E T H :

          WHEREAS, the parties hereto have entered into a Revolving Credit Agreement
dated as of August 19, 1996 (as amended, restated, supplemented or otherwise
modified from time to time, the “Agreement”);

          WHEREAS, the Borrower has requested the Banks reduce the amount of the
credit facility and amend certain of the other provisions of the Agreement as
hereinafter set forth, in each case effective as of the date hereof (the
“Amendment Effective Date”); and

          WHEREAS, the Borrower and Guarantors desire, and each Bank and the Agent
are willing, on the terms and conditions set forth below, to modify certain
terms of the Agreement as set forth below;

          NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

     SECTION 1.     Defined Terms. Capitalized terms used herein and not defined
herein shall have the meanings specified in the Agreement.

     SECTION 2.     Amendment to the Agreement.

     (a)     Section 1.01 of the Agreement is hereby amended by deleting the
definitions of “Guarantors” and “Maturity Date” contained therein and inserting
in lieu thereof the following:

		
	 	     “‘Guarantors’ shall mean LVC Retail Corporation, a Delaware
corporation, and Lillian Vernon International, Ltd., a New York
corporation, and any person that shall become a Guarantor in
accordance with Section 5.11.”

		
	 	     “‘Maturity Date’ shall mean the earlier to occur of (x) August
31, 2003 and (y) the date on which the merger contemplated by that
certain Agreement and Plan of Merger dated as of April 15, 2003
between the Borrower and Ripplewood Holdings L.L.C. is
consummated.”

     (b)     Schedule 2.01 to the Agreement is hereby amended by deleting such
schedule in its entirety and inserting in lieu thereof the Schedule 2.01
attached to this Amendment.

     (c)     Section 4.01 of the Agreement is hereby amended by adding a new
paragraph (e)

 

 

at the end thereof to read as follows:

		
	 	     (e) Notwithstanding any other provision contained in this
agreement or in any other Loan Document to the contrary, as of May
8, 2003, the Banks shall have no obligation to lend under Section
2.01 hereof (with respect to their Tranche 1 Commitments) until the
Borrower shall have executed and delivered to each Bank an executed
copy of a security agreement, which security agreement shall (i)
grant to the Agent, on behalf of the Banks, a lien in all of the
Borrower’s personal property located at its National Distribution
Center, 2600 International Parkway, Virginia Beach, VA 23452,
together with a lien on all accounts receivables arising out of its
operations at such location, and (ii) be in form and substance
reasonably satisfactory to the Banks.

     (d)     Section 6.01(f) of the Agreement is hereby amended by adding the
following proviso to the end thereof:

		
	 	     provided, further, however, that the Borrower shall not mortgage,
lien or encumber, nor suffer to exist any mortgage, lien or
encumbrance on, its property located at 2600 International
Parkway, Virginia Beach, VA 23452, except for such mortgages, liens
and encumbrances as are described in paragraphs (a), (b), (c), (d)
and (e) of this Section 6.01.

     (e)     Section 6.11 of the Agreement is hereby amended by deleting such
Section in its entirety and inserting in lieu thereof the following:

		
	 	     SECTION 6.11. Consolidated Net Income. Permit Consolidated
Net Income to be less than zero for any fiscal year, calculated in
accordance with GAAP; provided that for the fiscal periods set
forth below the Borrower may have a net loss of up to but not
exceeding the Permitted Net Loss set forth opposite such period as
follows:

	 	 	 	 	 
	Fiscal Period	 	Permitted Net Loss
	
	 	

	Fiscal
Year 2003,
    
four quarters, year to date
	 	$	19,000,000	 
	Fiscal
Year 2004,

   first quarter
	 	$	7,000,000	 

     (f)      Section 6.12 of the Agreement is hereby amended by deleting such
Section in its entirety and inserting in lieu thereof the following:

		
	 	     SECTION 6.12. Consolidated Working Capital. With respect to
each fiscal period set forth below, permit the Consolidated Working
Capital to be less than the amount set forth opposite such period
as follows:

2

 

	 	 	 	 	 
	Fiscal Period	 	
Consolidated Working Capital
	
	 	

	4th Quarter 2003
	 	$	39,000,000	 
	1st Quarter 2004
	 	$	26,000,000	 
	2nd Quarter 2004
	 	$	24,000,000	 
	3rd Quarter 2004
	 	$	15,000,000	 

     (g)     Section 6.14 of the Agreement is hereby amended by deleting such
Section in its entirety and inserting in lieu thereof the following:

		
	 	     SECTION 6.14. Consolidated Tangible Net worth Plus
Subordinated Debt. With respect to each fiscal period set forth
below, at any time permit the sum of Consolidated Tangible Net
Worth plus Subordinated Debt to be less than the amount set forth
opposite such period as follows:

	 	 	 	 	 
	Fiscal Period	 	
Consolidated Tangible Net Worth plus Subordinated Debt
	
	 	

	4th Quarter 2003
	 	$	71,000,000	 
	1st Quarter 2004
	 	$	64,000,000	 
	2nd Quarter 2004
	 	$	75,000,000	 
	3rd Quarter 2004
	 	$	80,000,000	 

     (h)     Article VI of the Agreement is hereby amended by adding a new Section
6.18 at the end thereof to read as follows:

		
	 	     SECTION 6.18. Negative Pledge. Enter into any agreement
(other than the Agreement and Plan of Merger referred to in
paragraph (j) of Article VII hereof) containing any provision
prohibiting the creation or assumption of any mortgage, pledge,
lien, charge or other encumbrance upon its properties, revenues or
assets, whether now owned or hereafter acquired, or restricting the
ability of the Borrower or any Guarantor to amend or modify this
agreement or any other Loan Document.

     (i)     Article VII of the Agreement is hereby amended by adding a new
paragraph (j) immediately following paragraph (i) thereof to read as follows:

		
	 	     (j) the merger contemplated by that certain Agreement and Plan
of Merger dated as of April 15, 2003 between the Borrower and
Ripplewood Holdings L.L.C. shall not have been consummated by
August 31, 2003, or such agreement shall have been terminated by
any party thereto or no longer be in full force and effect.

     SECTION 3.     Conditions to Effectiveness. This Amendment shall become
effective only upon the satisfaction or waiver of all of the following
conditions precedent:

     (A)     The parties hereto shall have duly executed and delivered this
Amendment.

3

 

     (B)     The Agent shall have received certificates of the Secretary or
Assistant Secretary of the Borrower and each of the Guarantors dated as of the
Amendment Effective Date, certifying: (i) that its respective By-laws either
are attached to such certificate, or to the extent not attached have not been
amended since the Closing Date, (ii) that its respective charter or
certificate, as the case may be, either is attached to such certificate or to
the extent not attached has not been amended since the Closing Date, and (iii)
as to the incumbency and signatures of each of its respective officers
executing this Amendment and any other documents to which it is a party.

     (C)     The Agent shall have received from the Borrower the fees and expense
reimbursements referred to under Section 8 hereof.

     SECTION 4.     Representations and Warranties. In order to induce the Banks
and Agent to enter into this Amendment, the Borrower and the Guarantors hereby
jointly and severally represent and warrant to the Agent: (i) that the
representations and warranties contained in the Agreement are true and correct
on and as of the Amendment Effective Date as though made on and as of such
date, except for changes which have occurred and which were not prohibited by
the terms of the Agreement; (ii) that no Default or Event of Default has
occurred and is continuing, or would result from the execution, delivery and
performance by the Borrower and the Guarantors, of this Amendment or the
Agreement (as amended by this Amendment); (iii) that the Borrower and the
Guarantors have full power, right and legal authority to execute, deliver and
perform its obligations under this Amendment; (iv) that the Borrower and
Guarantors have taken all action necessary to authorize the execution and
delivery of, and the performance of its obligations under this Amendment; (v)
that this Amendment constitutes a legal, valid and binding obligation of the
Borrower and the Guarantors enforceable against each of them in accordance with
its terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws affecting the rights of creditors
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law); and (vi) the Borrower owns the real property
located at 2600 International Parkway, Virginia Beach, VA 23452, and has good
and lawful right to convey the same and that such property is free and clear
from any and all liens whatsoever, except such liens as are described in
paragraphs (a), (b), (c), (d) and (e) of Section 6.01 of the Agreement.

     SECTION 5.     Consent to Merger. The Borrower hereby represents and warrants
that Lillian Vernon Fulfillment Services, Inc. (heretofore a Guarantor under
the Agreement) has been acquired by, merged into or consolidated with the
Borrower as of the date hereof (the “Merger”), and that the Borrower has
assumed all obligations and liabilities of Lillian Vernon Fulfillment Services,
Inc. from and after the date hereof, including without limitation all such
obligations and liabilities arising under the Loan Documents. The Banks and
the other parties hereto hereby consent to the Merger.

     SECTION 6.     Guaranty. The Guarantors each acknowledge receipt of a copy of
this Amendment Agreement and hereby ratify and affirm their guaranty of the
Obligations of the Borrower under the Agreement as amended hereby.

4

 

     SECTION 7.     Reference to and Effect on the Documents. Each reference in
the Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of
like import, and each reference to the Agreement in documents related to the
Agreement, shall mean and be a reference to the Agreement as amended hereby.
Except as specifically amended hereby, the Agreement and all such related
documents, and all other documents, agreements, instruments or writings entered
into in connection therewith, shall remain in full force and effect and are
hereby ratified, confirmed and acknowledged by the Borrower.

     SECTION 8.     Fees and Expenses. The Borrower agrees to pay or reimburse the
Agent, as stated in Section 10.05 of the Agreement (as amended hereby), for its
reasonable out-of-pocket costs and expenses, including, without limitation, the
reasonable fees and disbursements of counsel to the Agent incurred by the Agent
in connection with the preparation, reproduction, execution and delivery of
this Amendment and any other instruments and documents to be delivered
hereunder. For the avoidance of doubt, the Lenders acknowledge that there
shall be no fee due and owing to them solely by virtue of the occurrence of the
Maturity Date (as such term is amended by this Amendment).

     SECTION 9.     Governing Law. This Amendment and the rights and obligations
of the parties hereunder shall be governed by and construed and interpreted in
accordance with the substantive laws of the State of New York, without regard
to its conflict of laws principles.

     SECTION 10.   Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing any such
counterpart.

5

 

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

	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK,

As Bank and as Agent,
	 	 	 	 	 
	 	 	
By:
	 	/s/ MARGARET J. NOLAN

Name: Margaret J. Nolan

Title: Vice President

	 	 	 	 	 
	 	 	SUNTRUST BANK
	 	 	 	 	 
	 	 	
By:
	 	/s/ BRUCE W. NAVE

Name: Bruce W. Nave
	 	 	 	 	Title: Senior Vice President

6

 

SIGNATURE PAGE TO NINTH AMENDMENT

TO LILLIAN VERNON CREDIT AGREEMENT

	 	 	 	 	 
	 	 	LILLIAN VERNON CORPORATION
	 	 	 	 	 
	 	 	
By:
	 	/s/ RICHARD P. RANDALL

	 	 	 	 	Name: Richard P. Randall
	 	 	 	 	Title: Executive Vice President,
	 	 	 	 	          Chief Operating Officer,
	 	 	 	 	          Chief Financial Officer

	 	 	 	 	 
	 	 	LVC RETAIL CORPORATION
	 	 	 	 	 
	 	 	
By:
	 	/s/ HARRIET KRAYNIK

	 	 	 	 	Name: Harriet Kraynik
	 	 	 	 	Title: Secretary/Treasurer

	 	 	 	 	 
	 	 	LILLIAN VERNON INTERNATIONAL, INC.
	 	 	 	 	 
	 	 	
By:
	 	/s/ SUSAN C. HANDLER

Name: Susan C. Handler
	 	 	 	 	Title: Secretary

7

 

SCHEDULE 2.01

COMMITMENTS

TRANCHE 1

	 	 	 	 	 
	TRANCHE 1	 	TRANCHE 1
	BANK	 	COMMITMENT AMOUNT
	
	 	

	JPMORGAN CHASE BANK
	 	$	2,500,000	 
	SUNTRUST BANK
	 	$	2,500,000	 
	 
	 	 	
	 
	TOTAL
	 	$	5,000,000	 

TRANCHE 2

	 	 	 	 	 
	TRANCHE 2	 	TRANCHE 2
	BANK	 	COMMITMENT AMOUNT
	
	 	

	JPMORGAN CHASE BANK
	 	$	10,000,000	 
	 
	 	 	
	 
	TOTAL
	 	$	10,000,000	 

8<PAGE>
                                                                     EXHIBIT 4.1

                            VALERO ENERGY CORPORATION

                              4.75% Notes due 2013

         A series of Securities is hereby established pursuant to Section 301 of
the Indenture dated as of December 12, 1997 (the "Indenture"), between Valero
Energy Corporation, a Delaware corporation (the "Company"), and The Bank of New
York, as Trustee (in such capacity, the "Trustee"), as follows (capitalized
terms used and not defined herein shall have the meanings assigned to them in
the Indenture, and all references herein to a Section shall refer to the
corresponding Section in the Indenture):

1. The title of the 4.75% Notes due 2013 shall be "4.75% Notes due 2013" (the
"Notes").

2. The initial limit upon the aggregate principal amount of the Notes that may
be authenticated and delivered under the Indenture (except for Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 304, 305, 306, 906 or 1207)
is $300,000,000.

3. The Notes shall be initially issued as Registered Securities in the form of
one or more global securities under the Indenture. The Depository Trust Company
is hereby designated as the Depository for these global Securities under the
Indenture.

         As long as any Note is in global form, then, notwithstanding clause
(11) of Section 301 and the provisions of Section 302, any such global Note
shall represent such of the outstanding Notes as shall be specified therein and
may provide that it shall represent the aggregate amount of outstanding Notes
from time to time endorsed thereon and that the aggregate amount of outstanding
Notes represented thereby may from time to time be reduced to reflect exchanges
or redemptions. Any endorsement of a global Note to reflect the amount, or any
increase or decrease in the amount, of outstanding Notes represented thereby
shall be made by the Trustee in such manner and upon instructions given by such
Person or Persons as shall be specified in such Note or in a Company Order to be
delivered to the Trustee pursuant to Section 303. Subject to the provisions of
Section 303 and, if applicable Section 304, the Trustee shall deliver and
redeliver any Note in permanent global form in the manner and upon instructions
given by the Person or Persons specified in such Note or in the applicable
Company Order. With respect to the Notes of any series that are represented by a
global Note, the Company authorizes the execution and delivery by the Trustee of
a letter of representations or other similar agreement or instrument in the form
customarily provided for by the Depository appointed with respect to such global
Note. Any global Note may be deposited with the Depository or its nominee, or
may remain in the custody of the Trustee pursuant to a FAST Balance Certificate
Agreement or similar agreement between the Trustee and the Depository. If a
Company Order has been, or simultaneously is, delivered, any instructions by the
Company with respect to endorsement or delivery or redelivery of a Note in
global form shall be in writing but need not comply with Section 102 and need
not be accompanied by an Opinion of Counsel.

         Members of, or participants in, the Depository ("Agent Members") shall
have no rights under the Indenture with respect to any global Note held on their
behalf by the Depository, or the Trustee as its custodian, or under such global
Note and the Depository may be treated by the Company, the Trustee and any agent
of the Company or the Trustee as the absolute owner of such global Note for all
purposes whatsoever. Notwithstanding the foregoing, (i) the registered holder of
a global Note may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through an Agent Member, to
take any action that a Holder is entitled to take under the Indenture or the
Notes and (ii) nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee, from giving effect to any written
certification, proxy or other authorization furnished by the Depository or shall
impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a beneficial owner
of any Note.

         Notwithstanding Section 305, and except as otherwise provided pursuant
to Section 301, transfers of a global Note shall be limited to transfers of such
global Note in whole but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in a global Note may be
transferred in accordance with the rules and procedures of the Depository. In
all other respects, Notes shall be transferred to all

                                       A-1

<PAGE>

beneficial owners in exchange for their beneficial interest in a Global Security
solely as expressly provided in Section 305.

         In connection with any transfer of a portion of the beneficial interest
in a global Note to beneficial owners pursuant hereto and Section 305, the
Security Registrar shall reflect on its books and records the date and a
decrease in the principal amount of the global Note of the applicable series in
an amount equal to the principal amount of the beneficial interest in the global
Note to be transferred, and the Company shall execute, and the Trustee upon
receipt of a Company Order for the authentication and delivery of Notes shall
authenticate and deliver, one or more Notes of like tenor and amount.

         In connection with the transfer of an entire global Note to beneficial
owners pursuant hereto and Section 305, the global Security shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
global Note, an equal aggregate principal amount of Notes of the applicable
series of authorized denominations.

         Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, Notes by the Depository, or for maintaining, supervising or reviewing any
records of the Depository relating to such Notes. Neither the Company nor the
Trustee shall be liable for any delay by the related global Note Holder or the
Depository in identifying the beneficial owners, and each such Person may
conclusively rely on, and shall be protected in relying on, instructions from
such global Note Holder or the Depository for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).

         Notwithstanding the provisions of Sections 201 and 307, unless
otherwise specified as contemplated by Section 301, payment of principal of,
premium (if any) or interest on any global Note shall be made to the Person or
Persons specified in such global Note.

4. The date on which the principal of the Notes is payable shall be June 15,
2013.

5. The rate at which the Notes shall bear interest shall be 4.75% per annum.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The date from which interest shall accrue for the Notes shall be June 4,
2003. The Interest Payment Dates on which interest on the Notes shall be payable
are June 15 and December 15, commencing December 15, 2003. Interest on the Notes
shall be payable to the persons in whose name the Notes are registered at the
close of business on the Regular Record Date for such interest payment, except
in the case of default interest, which will be payable as provided in the
Indenture. The Regular Record Date for the interest payable on the Notes on any
Interest Payment Date shall be the May 31 and November 30, as the case may be,
immediately preceding such Interest Payment Date. No Additional Amounts shall be
payable with respect to the Notes.

6. The place or places where the principal of, premium (if any) on and interest
on the Notes shall be payable is at the office or agency of the Trustee in New
York, New York or such other offices or agencies maintained for such purpose as
the Company may from time to time and in accordance with the Indenture
designate. If appropriate wire transfer instructions have been received by the
Trustee at its Corporate Trust Office or at its corporate trust facility in the
Borough of Manhattan, The City of New York, not later than 5 Business Days prior
to the record date for an applicable Interest Payment Date, then payments in
respect of the Notes evidenced by a global Security (including principal,
premium, if any, and interest) shall be made by wire transfer of immediately
available funds to the accounts specified by the Holder of such global Note. In
all other cases, payment of interest on the Notes may be made at the option of
the Company by check mailed to the address of the person entitled thereto as
such address shall appear in the Security Register.

7. Each series of Notes will be redeemable, in whole or in part, at the option
of the Company at any time, at a redemption price equal to the greater of (i)
100% of the principal amount of the applicable series of Notes, and (ii) the sum
of the present values of the remaining scheduled payments of principal and
interest thereon (not including any portion of such payments of interest accrued
as of the date of redemption) discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate

                                       A-2

<PAGE>

(as defined below) plus 25 basis points, as calculated by an Independent
Investment Banker plus, in each case, accrued and unpaid interest thereon to the
date of redemption.

         "Adjusted Treasury Rate" means, with respect to any date of redemption,
         (i) the yield, under the heading which represents the average for the
         immediately preceding week, appearing in the most recently published
         statistical release designated "H.15(519)"or any successor publication
         which is published weekly by the Board of Governors of the Federal
         Reserve System and which establishes yields on actively traded United
         States Treasury securities adjusted to constant maturity under the
         caption "Treasury Constant Maturities," for the maturity corresponding
         to the Comparable Treasury Issue (if no maturity is within three months
         before or after the remaining life, yields for the two published
         maturities most closely corresponding to the Comparable Treasury Issue
         shall be determined and the Adjusted Treasury Rate shall be
         interpolated or extrapolated from such yields on a straight line basis,
         rounding to the nearest month); or (ii) if such release (or any
         successor release) is not published during the week preceding the
         calculation date or does not contain such yields, the rate per annum
         equal to the semi-annual equivalent yield to maturity of the Comparable
         Treasury Issue, calculated using a price for the Comparable Treasury
         Issue (expressed as a percentage of its principal amount) equal to the
         Comparable Treasury Price for such date of redemption. The Adjusted
         Treasury Rate shall be calculated on the third Business Day preceding
         the date of redemption.

         "Comparable Treasury Issue" means the United States Treasury security
         selected by an Independent Investment Banker as having a maturity
         comparable to the remaining term of the series of Notes to be redeemed
         that would be utilized, at the time of selection and in accordance with
         customary financial practice, in pricing new issues of corporate debt
         securities of comparable maturity to the remaining term of such Notes.

         "Comparable Treasury Price" means, with respect to any date of
         redemption, (i) the average of five Reference Treasury Dealer
         Quotations for such date of redemption, after excluding the highest and
         lowest such Reference Treasury Dealer Quotations, or (ii) if the
         Independent Investment Banker obtains fewer than five such Reference
         Treasury Dealer Quotations, the average of all such Reference Treasury
         Dealer Quotations.

         "Independent Investment Banker" means one of the Reference Treasury
         Dealers appointed by the Company to act as the independent investment
         banker from time to time.

         "Reference Treasury Dealers" means (i) J.P. Morgan Securities Inc.,
         Barclays Capital Inc. and Morgan Stanley & Co. Incorporated and their
         respective successors; provided that, if any of the foregoing shall
         cease to be a primary U.S. Government securities dealer (a "Primary
         Treasury Dealer"), the Company shall substitute therefor another
         Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer
         selected by the Company.

         "Reference Treasury Dealer Quotations" means, with respect to each
         Reference Treasury Dealer and any date of redemption, the average, as
         determined by the Independent Investment Banker, of the bid and asked
         prices for the Comparable Treasury Issue (expressed in each case as a
         percentage of its principal amount) quoted in writing to the
         Independent Investment Banker by such Reference Treasury Dealer at 5:00
         p.m., New York City time, on the third Business Day preceding such date
         of redemption.

Notice of any redemption will be mailed at least 30 days but not more than 60
days before the date of redemption to each Holder of the applicable series of
Notes to be redeemed. Unless the Company defaults in payment of the redemption
price, on and after the date of redemption, interest will cease to accrue on the
Notes or portions thereof called for redemption.

8. The Notes shall not be entitled to the benefit of any sinking fund, any
optional repurchase or redemption right in favor of any holder thereof or other
mandatory repurchase or redemption provisions.

                                       A-3

<PAGE>

9. The Notes shall be in substantially the form of Attachment A hereto (the
"Form of Note").

10. Each Note that is a global Security shall bear the legend set forth on the
face of the Form of Note.

                                       A-4

<PAGE>

                           ATTACHMENT A - FORM OF NOTE

                           [FORM OF FACE OF SECURITY]

         [THIS SECURITY IS A GLOBAL SECURITY AS PROVIDED FOR IN THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO
A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.]*

         [UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*

                            VALERO ENERGY CORPORATION

                              4.75% NOTES DUE 2013

No. [     ]                                                  $[               ]
REGISTERED                                              CUSIP No. [           ]

               VALERO ENERGY CORPORATION, a Delaware corporation (the "Company,"
which term includes any successor Person under the Indenture hereinafter
referred to), for value received promises to pay to Cede & Co. or registered
assigns, the principal sum of            Dollars [or such lesser amount as
indicated on the schedule of exchanges of Securities,]* on June 15, 2013.

               Interest Payment Dates: June 15 and December 15

               Regular Record Dates: May 31 and November 30

               Reference is hereby made to the further provisions of this
Security set forth in the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

--------
* To be included only if the Security is a Global Security.

                                      AA-1

<PAGE>

               IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers.

Dated:          ,

                                            VALERO ENERGY CORPORATION

                                            By:
                                               --------------------------------
                                                William E. Greehey,
                                                Chief Executive Officer
ATTEST:

By:
   ---------------------------------------------
   Jay D. Browning, Vice President and Secretary

                    TRUSTEE'S CERTIFICATE OF AUTHENTICATION:

This is one of the Securities of the series designated therein referred to in
the within-mentioned Indenture.

                                        THE BANK OF NEW YORK, as Trustee

                                            By:
                                               --------------------------------
Dated:            ,                               Authorized Signatory

                                      AA-2
<PAGE>

                          [FORM OF REVERSE OF SECURITY]

                            VALERO ENERGY CORPORATION

                              4.75% NOTES DUE 2013

               This Security is one of a duly authorized issue of debentures,
notes or other evidences of indebtedness of VALERO ENERGY CORPORATION, a
Delaware corporation (the "Company"), issued under the Indenture hereinafter
referred to and is one of a series of such debentures, notes or other evidences
of indebtedness designated pursuant thereto as 4.75% Notes due 2013 (the
"Securities") of the Company.

         1. Interest. The Company promises to pay interest on the principal
amount of this Security at 4.75% per annum from June 4, 2003 until Maturity of
the Securities. The Company will pay interest semiannually on June 15 and
December 15 of each year (each an "Interest Payment Date") and on the Maturity
of the Securities, or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Securities will accrue from the most
recent Interest Payment Date on which interest has been paid or, if no interest
has been paid, from June 4, 2003; provided that if there is no existing Default
in the payment of, or provisions for, interest, and if this Security is
authenticated between a Regular Record Date referred to on the face hereof
(whether or not a Business Day) and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be December 15, 2003. The
interest so payable, and punctually paid or provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest as set forth on
the face hereof, provided, however, that interest payable at Maturity of this
Security will be payable to the Person to whom the principal hereof shall be
payable. Any such interest which is so payable, but is not punctually paid or
duly provided for on any Interest Payment Date, shall forthwith cease to be
payable to the registered Holder on such Regular Record Date, and may be paid as
more fully provided in the Indenture. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.

         2. Method of Payment. Payment of the principal of (and premium, if any)
and interest on this Security will be made at the office or agency of the
Company maintained for that purpose at the Corporate Trust Office of the Trustee
in the Borough of Manhattan, The City of New York, or at such other offices or
agencies maintained for such purpose as the Company may from time to time and in
accordance with the Indenture designate, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that (i) payment of interest may,
at the option of the Company, be made (subject to collection) by check mailed to
the address of the Person entitled thereto as such address shall appear on the
Security Register or, with respect to Securities evidenced by a global Security,
if appropriate wire transfer instructions have been received in writing by the
Trustee at its Corporate Trust Office or at its corporate trust facility in the
Borough of Manhattan, The City of New York, not later than five Business Days
prior to the record date for an applicable Interest Payment Date, be made by
wire transfer of immediately available funds in accordance with such wire
transfer instructions; and (ii) payment of available funds upon surrender of
this Security will be made at the Corporate Trust Office of the Trustee or at
the corporate trust facility of the Trustee located in the Borough of Manhattan,
The City of New York, or at such additional offices or agencies maintained for
such purpose as the Company may from time to time and in accordance with the
Indenture designate.

         3. Certain Office. Initially, The Bank of New York, the Trustee under
the Indenture (in such capacity, the "Trustee"), will, at its Corporate Trust
Office in the Borough of Manhattan, The City of New York, act as the Company's
office or agency where the Securities may be presented or surrendered for
payment, where the Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and the Indenture may be served.

         4. Indenture. The Company issued the Securities under an Indenture
dated as of December 12, 1997 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture
(including terms defined therein, which terms when used herein, unless the
context requires otherwise, shall have the meanings assigned to such terms in
the Indenture) and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "TIA"), as in effect on the date of
execution of the Indenture. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the TIA for a statement of

                                      AA-3
<PAGE>

such terms. The Securities are unsecured general obligations of the Company
initially limited to $300,000,000 in aggregate principal amount and will rank on
a parity with all other unsecured and unsubordinated indebtedness of the
Company. The Indenture provides for the issuance of other series of debentures,
notes and other evidences of Indebtedness (including the Securities, the "Debt
Securities") thereunder.

         5. Denominations, Transfer, Exchange. The Securities are in registered
form without coupons and, if not in global form, in denominations of $1,000 and
integral multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Security Registrar
and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Security Registrar need not exchange or
register the transfer of any Securities during the period beginning on the
opening of business 15 days before the day of mailing of a notice of redemption
of the Securities and ending at the close of business on the day of such mailing
or of any Securities selected for redemption, except the unredeemed portion of
any Securities being redeemed in part.

         6. Persons Deemed Owners. The registered Holder of a Security shall be
treated as its owner for all purposes.

         7. Redemption. The Securities will be redeemable, in whole or in part,
at the option of the Company at any time, at a redemption price equal to the
greater of (i) 100% of the principal amount of such Securities, and (ii) the sum
of the present values of the remaining scheduled payments of principal and
interest thereon (not including any portion of such payments of interest accrued
as of the date of redemption) discounted to the date of redemption on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months)
at the Adjusted Treasury Rate (as defined below) plus 25 basis points, as
calculated by the Independent Investment Banker (as defined below) plus, in each
case, accrued and unpaid interest thereon to the date of redemption.

         "Adjusted Treasury Rate" means, with respect to any date of redemption,
         (i) the yield, under the heading which represents the average for the
         immediately preceding week, appearing in the most recently published
         statistical release designated "H.15(519)" or any successor publication
         which is published weekly by the Board of Governors of the Federal
         Reserve System and which establishes yields on actively traded United
         States Treasury securities adjusted to constant maturity under the
         caption "Treasury Constant Maturities," for the maturity corresponding
         to the Comparable Treasury Issue (if no maturity is within three months
         before or after the remaining life, yields for the two published
         maturities most closely corresponding to the Comparable Treasury Issue
         shall be determined and the Adjusted Treasury Rate shall be
         interpolated or extrapolated from such yields on a straight line basis,
         rounding to the nearest month); or (ii) if such release (or any
         successor release) is not published during the week preceding the
         calculation date or does not contain such yields, the rate per annum
         equal to the semi-annual equivalent yield to maturity of the Comparable
         Treasury Issue, calculated using a price for the Comparable Treasury
         Issue (expressed as a percentage of its principal amount) equal to the
         Comparable Treasury Price for such date of redemption. The Adjusted
         Treasury Rate shall be calculated on the third Business Day preceding
         the date of redemption.

         "Comparable Treasury Issue" means the United States Treasury security
         selected by an Independent Investment Banker as having a maturity
         comparable to the remaining term of the Notes to be redeemed that would
         be utilized, at the time of selection and in accordance with customary
         financial practice, in pricing new issues of corporate debt securities
         of comparable maturity to the remaining term of such Notes.

         "Comparable Treasury Price" means, with respect to any date of
         redemption, (i) the average of five Reference Treasury Dealer
         Quotations for such date of redemption, after excluding the highest and
         lowest such Reference Treasury Dealer Quotations, or (ii) if the
         Independent Investment Banker obtains fewer than five such Reference
         Treasury Dealer Quotations, the average of all such Reference Treasury
         Dealer Quotations.

         "Independent Investment Banker" means one of the Reference Treasury
         Dealers appointed by the Company to act as the independent investment
         banker from time to time.

                                      AA-4
<PAGE>

         "Reference Treasury Dealers" means (i) J.P. Morgan Securities Inc.,
         Barclays Capital Inc. and Morgan Stanley & Co. Incorporated and their
         respective successors; provided that, if any of the foregoing shall
         cease to be a primary U.S. Government securities dealer (a "Primary
         Treasury Dealer"), the Company shall substitute therefor another
         Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer
         selected by the Company.

         "Reference Treasury Dealer Quotations" means, with respect to each
         Reference Treasury Dealer and any date of redemption, the average, as
         determined by the Independent Investment Banker, of the bid and asked
         prices for the Comparable Treasury Issue (expressed in each case as a
         percentage of its principal amount) quoted in writing to the
         Independent Investment Banker by such Reference Treasury Dealer at 5:00
         p.m., New York City time, on the third Business Day preceding such date
         of redemption.

Notice of any redemption will be mailed at least 30 days but not more than 60
days before the date of redemption to each Holder of the Securities to be
redeemed. Unless the Company defaults in payment of the redemption price, on and
after the date of redemption, interest will cease to accrue on the Securities or
portions thereof called for redemption.

         8. Amendments and Waivers. Subject to certain exceptions and
limitations, the Indenture or the Securities may be supplemented with the
consent of the Holders of not less than a majority in aggregate principal amount
of the outstanding Securities, and any past default under the Indenture with
respect to the Securities, and its consequences, may be waived (other than a
default in the payment of the principal of (or premium, if any) or interest on
the Securities or in respect of a covenant or provision of the Indenture which
under Article 9 thereof cannot be modified or amended without the consent of the
Holder of each outstanding Security) by the Holders of not less than a majority
in principal amount of the outstanding Securities in accordance with the terms
of the Indenture. Without the consent of any Holder, the Company and the Trustee
may supplement the Indenture or the Securities (i) to cure any ambiguity,
omission, defect or inconsistency, in each case which shall not be inconsistent
with the provisions of the Indenture and which shall not adversely affect the
interest of the Holders of the Securities in any material respect; (ii) to
evidence the assumption by a successor Person of the obligations of the Company
under the Indenture and this Security; (iii) to change or eliminate any
restrictions on the payment of principal (or premium, if any) on Registered
Securities, to permit Registered Securities to be exchanged for Bearer
Securities or to permit the issuance of Securities in uncertificated form,
provided any such action shall not adversely affect the interest of the Holders
of the Securities in any material respect; (iv) to add to the covenants of the
Company for the benefit of the Holders of the Securities or Holders of other
series of Debt Securities, or to surrender any right or power conferred by the
Indenture upon the Company; (v) to add to, delete from or revise the conditions,
limitations and restrictions on the authorized amount, terms or purpose of
issue, authentication and delivery of the Securities as set forth in the
Indenture; or (vi) to evidence and provide for the acceptance of appointment
under the Indenture by a successor Trustee with respect to the Securities and to
add to or change any of the provisions of the Indenture as shall be necessary to
provide for or facilitate the administration of the trusts thereunder by more
than one Trustee, pursuant to the requirements of the Indenture.

               The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which consent is required or sought as of a
date fixed in accordance with the terms of the Indenture.

               Subject to certain exceptions and limitations set forth in the
Indenture, without the consent of each Holder affected, the Company may not (i)
change the Stated Maturity of the principal of or any installment of interest on
any Security, (ii) reduce the principal amount of, or any premium or interest
on, any Security, (iii) change any Place of Payment where, or the currency in
which, any Security or any premium or interest thereon is payable, (iv) impair
the right to institute suit for the enforcement of any payment with respect to
any Security after the Stated Maturity thereof (or, in the case of redemption,
on or after the applicable Redemption Date), (v) reduce the percentage in
principal amount of the outstanding Securities whose Holders must consent to a
supplement or waiver, or reduce the requirements in Section 1504 of the
Indenture for quorum or voting, or make any change in the percentage of
principal amount of Securities necessary to waive compliance with certain
provisions of the Indenture or (vi) waive a continuing Default or Event of
Default in the payment of principal of or premium (if any) or interest on the
Securities.

                                      AA-5
<PAGE>

               A supplemental indenture that changes or eliminates any covenant
or other provision of the Indenture which has expressly been included solely for
the benefit of one or more particular series of Debt Securities under the
Indenture, or which modifies the rights of the Holders of Debt Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under the Indenture of the Holders of Debt Securities
of any other series.

         9. Defaults and Remedies. Events of Default are defined in the
Indenture and generally include: (i) failure to pay principal of or any premium
on any Security when due and payable; (ii) failure to pay any interest on any
Security when due and payable, and the continuation of the default for 30 days;
(iii) failure to perform any other covenant, or breach of any warranty, of the
Company in the Indenture, continued for 60 days after written notice is given or
received as provided in the Indenture; (iv) certain events of bankruptcy,
insolvency, or reorganization; and (v) failure to pay at final maturity (after
the expiration of any applicable grace periods) or upon the declaration of
acceleration of payment of indebtedness for borrowed money of the Company or any
Subsidiary in excess of $25 million, if such indebtedness is not discharged, or
such acceleration is not annulled, within 10 days after written notice. If any
Event of Default at any time outstanding occurs and is continuing, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities may declare the principal amount of all Securities to be
due and payable immediately. At any time after a declaration or occurrence of
acceleration with respect to the Securities has been made, but before a judgment
or decree based on acceleration has been obtained, the Holders of a majority in
aggregate principal amount of the then outstanding Securities may, under certain
circumstances, rescind and annul the acceleration.

               Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity reasonably
satisfactory to it before it enforces the Indenture or the Securities. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any trust or
power with respect to the Securities. The Trustee may withhold from Holders
notice of any continuing default (except a default in payment of principal,
premium (if any) or interest) if in good faith it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee.

         10. Discharge Prior to Maturity. The Indenture with respect to the
Securities shall be discharged and canceled upon the payment of all Securities
and, as provided in the Indenture, shall be discharged except for certain
obligations upon the irrevocable deposit with the Trustee of funds sufficient
for such payment.

         11. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.

         12. Authentication. This Security shall not be valid until
authenticated by the manual signature of an authorized signer of the Trustee.

         13. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities as a convenience to the Holders of
the Securities. No representation is made as to the correctness of such numbers
as printed on the Securities and reliance may be placed only on the other
identification numbers printed thereon.

         14. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform gifts
to Minors Act).

                                      AA-6
<PAGE>

         THE COMPANY WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND WITHOUT
CHARGE A COPY OF THE INDENTURE. REQUEST MAY BE MADE TO:

                   VALERO ENERGY CORPORATION
                   ONE VALERO PLACE
                   SAN ANTONIO, TEXAS 78212
                   TELEPHONE: (210) 370-2000
                   ATTENTION:  GENERAL COUNSEL

                                      AA-7
<PAGE>

                       SCHEDULE OF EXCHANGES OF SECURITY*

         The following exchanges of a part of this global Security for
definitive Securities have been made:

<Table>
<Caption>

                                                                                  Principal amount of        Signature of
                          Amount of decrease in      Amount of increase          this global Security     authorized officer of
                           principal amount of     in principal amount of          following such          Trustee or Security
     Date of exchange     this global Security      this global Security        decrease (or increase)         Registrar
     ----------------     ---------------------    ----------------------       ----------------------    ---------------------
<S>                       <C>                      <C>                         <C>                        <C>

</Table>

----------
* This schedule to be included only if the Security is a Global Security.

                                      AA-8

<PAGE>

                                 ASSIGNMENT FORM

               To assign this Security, fill in the form below: (I) or (we)
assign and transfer this Security to __________________________ (Insert
assignee's social security or tax I.D. number)

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

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

--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and irrevocably appoint _______________________________________________________
as agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.

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

Date:                       Your Signature:
     ----------------                      ------------------------------------
                                           (Sign exactly as your name appears
                                           on the face of this Security)

Signature Guarantee:
                    ------------------------------------------------------------
                        (Participant in a Recognized Signature Guaranty
                                      Medallion Program)

                                      AA-9

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