Valero GP Holdings, LLC $20,000,000 3-Year SENIOR UNSECURED REVOLVING CREDIT FACILITY June 2006

 

Exhibit 10.01
SUMMARY OF TERMS AND CONDITIONS
Valero GP Holdings, LLC
$20,000,000 3-YEAR SENIOR UNSECURED REVOLVING CREDIT FACILITY
June 2006
I. AMOUNT AND TERMS OF SENIOR UNSECURED REVOLVING CREDIT FACILITY.
         
Revolving Credit Facility:  
 
  A revolving credit facility (the “3-Year Facility”).
   
 
   
Aggregate Amount:  
 
  Up to $20,000,000.
   
 
   
Borrower:  
 
  Valero GP Holdings, LLC, a Delaware limited liability company (the“Borrower”).
   
 
   
Co-Lead Arrangersand Joint Bookrunners:  
 
  J.P. Morgan Securities Inc. (“JPMSI”) and SunTrust Robinson Humphrey, adivision of SunTrust Capital Markets, Inc. (“SunTrust Capital” and, togetherwith JPMSI, the “Co-Arrangers”).
   
 
   
Administrative Agent:  
 
  JPMorgan Chase Bank, N.A. (“JPMorgan”).
   
 
   
Syndication Agent:  
 
  SunTrust Bank.
   
 
   
Lenders:  
 
  JPMorgan and SunTrust Bank.
   
 
   
Effective Date:  
 
  The date on which the conditions precedent to the initial extension of creditunder the 3-Year Facility are satisfied.
   
 
   
Termination Date:  
 
  The third anniversary of the Effective Date.
   
 
   
Maturity:  
 
  All Loans outstanding under the 3-Year Facility will mature on theTermination Date.
   
 
   
Type of Loans:  
 
  The full amount of the 3-Year Facility will be made available to the Borrowerin the form of revolving credit loans (“Loans”) for working capital andgeneral partnership purposes.
   
 
   
Letters of Credit:  
 
  A portion of the 3-Year Facility not in excess of $10,000,000 shall beavailable for the issuance of letters of credit (the “Letters of Credit”) byJPMorgan (in such capacity, the “Issuing Lender”). No Letter of Credit shallhave an expiration date after the earlier of (a) one year after the date ofissuance and (b) the date that is five Business Days prior to the Termination Date.

 


 

         
   
 
  Each Lender shall purchase a ratable undivided participating interest in anyLetter of Credit and shall fund its portion of each drawing under such Letterof Credit on the date of such drawing. The payment of a drawing under anyLetter of Credit shall be deemed to be the making of Loans by the Lenders tothe Borrower.
   
 
   
   
 
  The Borrower shall pay a letter of creditcommission to JPMorgan for the account of theLenders (including JPMorgan), on the drawableamount of each Letter of Credit at a rate perannum equal to the Applicable Margin forEurodollar Loans under the 3-Year Facility. TheBorrower shall pay a separate letter of creditcommission to the Issuing Lender, for its ownaccount, on the drawable amount of each Letter ofCredit in an amount equal to 1/8 of 1% per annum.Such letter of credit commissions shall bepayable quarterly in arrears and on theTermination Date.
   
 
   
II. GENERAL PROVISIONS  
 
   
   
 
   
Interest Rate Options:  
 
  The Borrower may elect that all or a portion ofthe Loans bear interest at a rate per annumequal to either:
   
 
   
   
(a)  
  The higherof (i) the rate from time to time publicly announcedby JPMorgan in New York City as its prime rate and(ii) the federal funds effective rate from time totime plus 1/2 of 1% (such higher rate, the“Alternate Base Rate”) (this rate is notintended to be the lowest rate charged by JPMorgan toits borrowers) plus the Applicable Margin (as definedbelow); or
   
 
   
   
(b)
  The rate(grossed-up for reserve requirements) equal to theaverage of the offered quotations appearing on Page3750 of the Dow Jones Market Service as ofapproximately 11:00 a.m., London time, on the day twobusiness days prior to the first day of such interestperiod for dollar deposits having a term comparableto such interest period and in an amount comparableto the principal amount of the eurodollar loan towhich such interest period relates (“EurodollarRate”) plus the Applicable Margin (as definedbelow). Interest periods of 1, 2, 3, and 6 monthsshall be available.
   
 
   
Applicable Margin:  
 
  The Applicable Margin with respect to Loans made pursuant to the 3-Year Facilityand

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  bearing interest at a rate based on the AlternateBase Rate or the Eurodollar Rate at any timeduring any quarter shall be the rate per annum asdetermined by reference to the pricing gridattached hereto as Annex I.
   
 
   
Interest
Payment Dates:
 
 
  In the case of Loans bearing interest based upon theAlternate Base Rate, quarterly in arrears.
   
 
   
   
 
  In the case of Loans bearing interest based uponthe Eurodollar Rate, on the last day of eachrelevant interest period and, in the case of anyinterest period longer than three months, also oneach successive date three months after the firstday of such interest period.
   
 
   
Overdue Rate:  
 
  Overdue principal, interest, fees and other amountsowing will bear interest at 2% over the rateotherwise applicable thereto.
   
 
   
Reserve Requirements
Yield Protection:
 
 
  The rate quoted as the Eurodollar Rate will begrossed-up for the maximum reserve requirementsprescribed for eurocurrency liabilities. Inaddition, the financing agreements will containcustomary provisions relating to (a) increased costs,capital adequacy protection, withholding and othertaxes and illegality and (b) indemnification of theLenders for “breakage costs” incurred in connectionwith, among other things, any prepayment of aEurodollar Loan on a day other than the last day ofan interest period with respect thereto.
   
 
   
Facility Fees:  
 
  The Borrower shall pay a facility fee based on eachLender’s allocated commitment irrespective of usageat the applicable rate per annum for the 3-YearFacility as determined by reference to the pricinggrid attached hereto as Annex I. The facility feesshall be payable quarterly in arrears commencing withthe Effective Date.
   
 
   
Utilization Fees:  
 
  The Borrower shall pay a utilization fee payable oneach Lender’s credit exposure whenever usage underthe 3-Year Facility exceeds 50%, at the applicablerate per annum for the 3-Year Facility as determinedby reference to the pricing grid attached hereto asAnnex I. The utilization fees shall be payablequarterly in arrears.
   
 
   
Rate and Fee Basis:  
 
  Interest on Alternate Base Rate Loans (to the extentbased on the prime rate) shall be calculated on thebasis of a year of 365 or 366

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  days, as the case may be, for actual dayselapsed. All other interest and fees shall becalculated on the basis of a year of 360 days foractual days elapsed.
   
 
   
Optional Reduction
Of Revolving Credit
Commitments:

 
 
  Upon not less than 3 Business Days’ notice,without premium or penalty, in minimum amounts of$1,000,000 and to be accompanied by prepayment ofLoans (together with break funding costs, if any)in excess of the 3-Year Facility commitments asreduced. Any such optional reductions shallpermanently reduce the 3-Year Facilitycommitments.
   
 
   
Optional
Prepayments:
 
 
  Without premium or penalty, in minimum amounts tobe determined and together with break fundingcosts if other than on the last day of an interestperiod in the case of Loans bearing interest basedupon the Eurodollar Rate.
   
 
   
Documentation:  
 
  The definitive documentation (the “Documentation”)will be subject to (a) negotiation between theAdministrative Agent, the Co-Arrangers and theBorrower and (b) the approval of the Lenders.
   
 
   
Commitment Termination:  
 
  The commitments of the Lenders shall terminate ifthe Documentation, satisfactory to theCo-Arrangers, the Administrative Agent and itscounsel, shall not have been negotiated, executedand delivered on or prior to July 31, 2006.
   
 
   
Certain Conditions:  
 
  The obligations of the Lenders to make the initialextensions of credit under the 3-Year Facilitywill be conditioned upon satisfaction ofconditions precedent customary for financings ofthis type, including, without limitation, thefollowing:
   
 
   
   
 
  (a) The Borrower shall have executed anddelivered the Documentation to which it isintended to be a party, each satisfactory in formand substance to the Lenders.
   
 
   
   
 
  (b) The Lenders shall have received the auditedconsolidated financial statements of Valero L.P.,a Delaware limited partnership (the“MLP”), for the year ending 2005 and theBorrower’s registration statement on Form S-1, asamended. Such financial statements shall beprepared in accordance with GAAP and fairlypresent the financial condition of the MLP andits

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  consolidated subsidiaries or the Borrower and itsconsolidated subsidiaries, as applicable.
   
 
   
   
 
  (c) The Lenders shall have received the unauditedconsolidated financial statements of the MLP forthe fiscal quarter ended March 31, 2006. Suchfinancial statements shall be prepared inaccordance with GAAP and fairly present thefinancial condition of the MLP and itsconsolidated subsidiaries or the Borrower and itsconsolidated subsidiaries, as applicable.
   
 
   
   
 
  (d) The Lenders shall have received satisfactorylegal opinions from counsel to the Borrower.
   
 
   
   
 
  (e) The Administrative Agent and the Lendersshall have received all fees and expensesrequired to be paid or delivered on or before theEffective Date.
   
 
   
   
 
  (f) The Lenders shall have received satisfactoryevidence of any necessary shareholder, corporate,limited liability company, and partnershipapprovals and as to authority, enforceability andcompliance with law.
   
 
   
   
 
  (g) The Lenders shall have received a certificateof the Borrower certifying as to the mattersdescribed in (a) and (b) of “Conditions to allLoans” below.
   
 
   
   
 
  (h) The Lenders shall have received a copy of theBorrower’s limited liability company agreementand the MLP’s partnership agreement (in eachcase, together with any and all amendmentsthereto) certified by an officer of the Borroweror the MLP, respectively, to be complete and infull force and effect.
   
 
   
   
 
  (i) The Lenders shall have received such othercorporate documents and other instruments as arecustomary for transactions of this type or asthey may reasonably request.
   
 
   
   
 
  (j) The Borrower’s initial public offering shallhave been closed.
   
 
   
Conditions to all Loans:  
 
  The making of each extension of credit will be conditioned upon (a) all representationsand warranties in the credit documentation (including without limitation, the nomaterial adverse change and litigation representations) being true and correct and (b)there being no default or event of default in existence at the

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  time of, or after giving effect to the making of, such extension of credit.
   
 
   
Representations and Warranties:  
 
  Customary for financings of this type (including customary materiality qualifications)and substantially similar to the representations and warranties contained in the 5-YearRevolving Credit Agreement dated as of December 20, 2004 among Valero LogisticsOperations, L.P., the MLP, JPMorgan, as administrative agent, and the other agents andlenders party thereto (as heretofore amended, the “Valero Logistics Credit Facility”),including, without limitation, financial condition, material adverse changes, existence,compliance with law, partnership power and authorization, enforceable obligations, nolegal bar, no material litigation, no defaults, ownership of property, liens,intellectual property, no burdensome restrictions, taxes, ERISA, Investment Company Actand other regulations, subsidiaries, environmental matters, accuracy and completeness ofinformation and partnership and related agreements.
   
 
   
Affirmative Covenants:  
 
  Customary for financings of this type (including customary materiality qualifications)and substantially similar to the Valero Logistics Credit Facility, including, withoutlimitation, delivery of annual and quarterly financial statements of the MLP, theBorrower and its subsidiaries, reports, accountants’ letters, officers’ certificates,compliance certificates and other information requested by the Lenders; notices ofdefaults, litigation and material events; payment of taxes and other obligations;continuation of business and maintenance of existence, rights and privileges; compliancewith contractual obligations and laws; maintenance of property and insurance;maintenance of books and records; right of the Lenders to inspect property and books andrecords; use of proceeds; and environmental compliance and environmental indemnity.
   
 
   
Financial Covenants:  
 
  Financial covenants shall include:
   
 
   
   
 
  (a) Total Debt to EBITDA Ratio of the MLP and itssubsidiaries as of the last day of each fiscalquarter (each, a “Calculation Date”),calculated using Total Debt as of suchCalculation Date and EBITDA for the four mostrecent fiscal quarters (each, a “RollingPeriod”), shall not exceed 4.75 to 1.0;provided that if the MLP or its subsidiaries haveconsummated an acquisition for aggregate netconsideration of at

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  least $100,000,000, then for the two RollingPeriods the last day of which immediately followthe date on which such acquisition isconsummated, the numerator of such ratio shall beincreased by 0.5; thereafter, compliance shall bedetermined by reverting back to a ratio of 4.75to 1.0.
   
 
   
   
 
  The definition of EBITDA for purposes ofcalculating the financial covenant shall be thesame definition used in the Valero LogisticsCredit Facility.
   
 
   
   
 
  (b) As of the last day of each fiscal quarter,the Borrower shall have received an aggregatecash distribution in respect of its indirectinterests in the MLP of not less than $25,000,000during the Rolling Period ending on such day.
   
 
   
Negative Covenants:  
 
  Customary for financings of this type (includingcustomary materiality qualifications), including, butnot limited to, limitations on: (a) debt; (b) liens(other than permitted liens); (c) fundamental changes(including sales of subsidiaries and substantialassets); (d) mergers and acquisitions; (e)liquidations; (f) transactions with affiliates; (g)changes in business conducted; (h) creation ofsubsidiaries; (i) restrictions affectingsubsidiaries’ ability to make transfers, dividendsand loans; (j) hedging transactions; (k) investmentsand loans; and (l) distributions on, or purchases orredemptions of, the capital stock of the Borrower(other than distributions, so long as no defaultexists, to allow the Borrower to make cashdistributions in accordance with its limitedliability company agreement).
   
 
   
Events of Default:  
 
  Customary for financings of this type andsubstantially similar to (including with respect tocure periods) the Valero Logistics Credit Facility,including, without limitation, nonpayment ofprincipal, interest, fees or other amounts (subjectto a five Business Day cure period for failure to payamounts other than principal and reimbursementobligations), violation of covenants (with cureperiods as to certain covenants), inaccuracy ofrepresentations and warranties, cross-default toindebtedness of the Borrower and its subsidiaries(including the MLP) and joint ventures subject to anaggregate minimum threshold to be agreed upon,bankruptcy, insolvency, judgments resulting in aliability not covered by insurance of a minimumthreshold to be agreed upon, ERISA event,

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  environmental liability not covered by insurance or discharged in excess of aminimum threshold to be agreed upon, and Change of Control (as “Change ofControl” is defined below).
   
 
   
Change of Control:  
 
  (a) 100% (and not less than100%) of the issued andoutstanding equity interestof the general partner(s)of the MLP shall cease tobe owned, directly orindirectly, or the MLPshall cease to beControlled, by theBorrower; or
   
 
   
   
 
  (b) the occurrence of any transaction thatresults in any “person” or “group” (as such termsare used in Sections 13(d) and 14(d) of theExchange Act) other than Valero EnergyCorporation, a Delaware corporation, or an entitythat has issued unsecured senior debt that has aninvestment grade rating by at least S&P andMoody’s, becoming the beneficial owner, directlyor indirectly, of more than 50% of the equityinterests in the Borrower.
   
 
   
   
 
  “Control” means the possession, directlyor indirectly, of the power to direct or causethe direction of the management or policies of aperson, whether through the ability to exercisevoting power, by contract or otherwise.“Controlling” and “Controlled”have meanings correlative thereto.
   
 
   
Assignments & Participations:  
 
  The Lenders may at any time grantparticipations in, or, with the consent ofthe Borrower (so long as no default exists),the Administrative Agent and the IssuingLender (in each case not to be unreasonablywithheld), sell, assign or otherwisetransfer loans, commitments and other rightsand duties to one or more other financialinstitutions in a minimum amount of$1,000,000. Participations shall be withoutrestrictions, and participants will have thesame benefits as the Lenders with respect toyield protection and increased costprovisions.
   
 
   
Governing Law:  
 
  The 3-Year Facility will be subject to thelaws of the State of New York with theBorrower submitting to the non-exclusivejurisdiction of the courts of New York.Waiver of trial by jury.
   
 
   
Expense and Indemnification:  
 
  At closing of the 3-Year Facility, theBorrower will pay all reasonableout-of-pocket expense of the Co-Arrangersand the Administrative Agent incurred in thepreparation, documentation, and syndication,of the 3-Year Facility and all reasonableout-of-pocket expense of the Lenders inconnection with the administration

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  and enforcement of their rights under andpursuant to the 3-Year Facility. Should the3-Year Facility not close, the Borrower will payall reasonable legal fees incurred by theAdministrative Agent and the Co-Arrangers inconnection with the preparation, documentation,and syndication of the 3-Year Facility.
   
 
   
   
 
  The Borrower will indemnify, pay and holdharmless the Administrative Agent and the Lenders(and their respective directors, officers,employees and agents) against any loss,liability, cost or expense incurred in respectof, relating to or in connection with thefinancing contemplated hereby or the use or theproposed use of proceeds thereof, except any suchliability arising out the gross negligence orwillful misconduct of the indemnified party.
   
 
   
Required Lenders:  
 
  Lenders holding more than 50% of thecommitments under the 3-Year Facility.
   
 
   
AdministrativeAdministrative Agent’s Counsel:  
 
  Vinson & Elkins L.L.P.

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Annex I
Pricing Grid
The 3-Year Facility
Margins and Fees are expressed as basis points
                     
        Euro-Dollar Rate   All-in Draw   Utilization Fee   All-in Drawn
Rating   Facility Fee   Margin   <50% usage   ³ 50% usage   ³ 50% usage
>BBB/Baa2   8.00   27.00   35.00   10.00   45.00
BBB/Baa2   10.00   40.00   50.00   10.00   60.00
BBB-/Baa3   12.50   50.00   62.50   10.00   72.50
BB+/Ba1   17.50   57.50   75.00   10.00   85.00
<BB+/Ba1   20.00   70.00   90.00   10.00   100.00
The Margin applicable to the Alternate Base Rate will be zero.
The applicable ratings level will correspond to the ratings issued from time to time by Moody’s andS&P on the Borrower’s senior, unsecured, non-credit enhanced debt, or if the Borrower is unrated byeither of Moody’s or S&P, then the applicable ratings level will correspond to the ratings issuedfrom time to time by Moody’s and S&P on the on the senior, unsecured, non-credit enhanced debt ofValero Logistics Operations, L.P.
In the event such ratings are split, (a) so long as either or both such ratings are investmentgrade or better, the applicable ratings level will be the ratings level corresponding to the higherof the two ratings and to the extent that there is a rating differential of more than one level,the applicable ratings level shall be set at one level lower than the ratings level correspondingto the higher rating and (b) if and so long as both such ratings are below investment grade, theapplicable ratings level will be the ratings level corresponding to the lower of the two ratingsand to the extent that there is a rating differential of more than one level, the applicableratings level shall be set at one level higher than the ratings level corresponding to the lowerrating. To the extent that neither the Borrower nor Valero Logistics Operations, L.P. has senior,unsecured, non-credit enhanced debt, the pricing will be determined in accordance with the ratingslevel set forth above for <BB+/Ba1.

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