STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of May 1, 1997 (the
"Agreement"), between Valero Energy Corporation, a Delaware
corporation (the "Company"), and Salomon Inc, a Delaware
corporation ("Stockholder").
WHEREAS, pursuant to that certain Stock Purchase
Agreement, dated as of April 22, 1997 (the "Purchase Agreement"),
the Company has acquired (the "Acquisition") from Stockholder all
of the shares of common stock, par value $0.01 per share, of
Basis Petroleum, Inc., a Texas corporation;
WHEREAS, in consideration for the Acquisition, the
Company has, among other things, issued to Stockholder 3,429,796
shares of common stock, par value $1.00 per share (the "Common
Stock"), of the Company;
WHEREAS, the Company has entered into an agreement
(the "Merger Agreement") providing for the merger (the "Merger")
of the Company into PG&E Corporation;
WHEREAS, immediately prior to the Merger, the Company
will distribute the common stock of its wholly-owned subsidiary,
Valero Refining and Marketing Company, a Delaware corporation
("Refining"), to the stockholders of the Company, resulting in
Refining becoming a separate publicly held company; and
WHEREAS, the Company and Stockholder have determined
that it is in their best interests that certain aspects of their
relationship be regulated according to the terms and provisions
of this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agrees as follows:
ARTICLE I.
CERTAIN DEFINITIONS
Section 1.01 Definitions.
As used in this Agreement, the following terms shall
have the following meanings:
The term "Acquisition" shall have the meaning ascribed
to it in the second paragraph to the preamble.
The term "Advance Notice" shall have the meaning
ascribed to it in Section 3.04.
The term "Acquisition Shares" shall mean the shares of
Common Stock issued to Stockholder in connection with the
Acquisition, together with the securities identified in Section
4.02; provided, however, that upon their sale by Stockholder in
accordance with the terms of this Agreement, such shares of
Common Stock or other securities shall no longer be Acquisition
Shares for purposes of this Agreement.
The term "Affiliate" shall have the meaning ascribed
to it in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
The term "Agreement" shall have the meaning ascribed
to it in the first paragraph of the preamble.
The term "Block Execution" shall mean one or more
sales during not more than a two Trading Day period of a number
of Acquisition Shares having an aggregate fair market value of
not less than $10 million to one or more purchasers.
The term "Common Stock" shall have the meaning
ascribed to it in the third paragraph of the preamble.
The term "Company" shall have the meaning ascribed to
it in the first paragraph of the preamble.
The term "Company Offering" shall mean the offering of
equity securities of the Company, or securities convertible into
or exchangeable or exercisable for equity securities of the
Company, pursuant to a registration statement filed by the
Company, under the Securities Act (other than (i) a registration
statement filed on Form S-4 or any successor form or (ii) a
registration statement filed on Form S-8 or any successor form)
with respect to an underwritten offering, whether primary or
secondary, that is declared effective by the SEC.
The term "Company Subsidiary" shall mean any Person
the majority of the outstanding voting securities or interests of
which are owned by the Company, and shall include Refining.
The term "Effective Date" shall have the meaning
ascribed to it in Section 2.02.
The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended, and the rules and regulations
of the SEC promulgated thereunder.
The term "Group" shall have the meaning afforded the
term "group" under Section 13(d)(3) of the Exchange Act.
The term "NYSE" shall mean the New York Stock
Exchange.
The term "Lock-up Period" shall have the meaning
ascribed to it in Section 3.02(a).
-2-
The term "Losses" shall have the meaning ascribed to
it in Section 2.06(a).
The term "Merger" shall have the meaning ascribed to
it in the fourth paragraph of the preamble.
The term "Merger Agreement" shall have the meaning
ascribed to it in the fourth paragraph of the preamble.
The term "Notice" shall have the meaning ascribed to
it in Section 3.04.
The term "Person" shall mean an individual, trustee,
corporation, partnership, business trust, limited liability
company, limited liability partnership, joint stock company,
trust, unincorporated association, union, business association,
firm or other entity.
The term "Prospectus" shall have the meaning ascribed
to it in Section 2.01.
The term "Purchase Agreement" shall have the meaning
ascribed to it in the second paragraph of the preamble.
The term "Registration Expenses" shall have the
meaning ascribed to it in Section 2.05.
The term "Rule 144" shall mean Rule 144 promulgated
under the Securities Act (or any successor rule).
The term "Rule 415 Offering" shall have the meaning
ascribed to it in Section 2.01(a).
The term "SEC" shall mean the Securities and Exchange
Commission.
The term "Securities Act" shall mean the Securities
Act of 1933, as amended, and the rules and regulations of the SEC
promulgated thereunder.
The term "Shelf Registration Statement" shall have the
meaning ascribed to it in Section 2.01(a).
The term "Stockholder" shall have the meaning ascribed
to it in the first paragraph of the preamble.
The term "Trading Day(s)" shall mean any day on which
stock is traded on the NYSE.
The term "Transfer" shall mean any sale, assignment
transfer, grant of a participation in, pledge or other
disposition of any of the Acquisition Shares.
-3-
The term "Valero" shall have the meaning ascribed to
it in the first paragraph of the preamble.
ARTICLE II.
REQUIRED REGISTRATION
Section 2.01 Required Registration.
(a) Form S-3. If the Merger is not consummated, the
Company shall file with the SEC and use its reasonable efforts to
cause to be declared effective on or before December 31, 1997, a
registration statement (the "Shelf Registration Statement") so as
to permit promptly the resale of the Acquisition Shares by
Stockholder pursuant to an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule) under the
Securities Act (a "Rule 415 Offering").
(b) Effectiveness. Subject to Section 2.03 below, the
Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective under the Securities Act until
the date that is the earliest to occur of (i) the date that all
Acquisition Shares covered by the Shelf Registration Statement
have been sold thereunder (ii) the second anniversary of the date
hereof and (iii) the date when all outstanding Acquisition Shares
are held by Persons which are not Affiliates of the Company and
may be resold without registration under the Securities Act
pursuant to Rule 144(k) under the Act or any successor provision
thereto.
(c) Amendments/Supplement. The Company shall amend and
supplement the Shelf Registration Statement, the prospectus
contained therein including each preliminary prospectus, form of
prospectus and prospectus supplement (collectively, the
"Prospectus"), and all documents incorporated therein by
reference, in each case as may be required to keep the Shelf
Registration Statement continuously effective, as may be required
under Rule 424 under the Securities Act (or any successor
provision thereto) or as may be otherwise required by the rules,
regulations or instructions applicable to the registration form
used by the Company for such Shelf Registration Statement or if
required by the Securities Act.
Section 2.02 Holdback Agreements.
(a) Subject to Section 2.03(b) below, from and after
150 days after the later of the date the Shelf Registration
Statement is declared effective by the SEC (the "Effective Date")
and the expiration of the Lock-Up Period, upon no less than 10
days' prior written notice from the Company, Stockholder shall
not effect any public sale or distribution (including sales
pursuant to Rule 144) of Acquisition Shares, from the date
specified in such notice through the one hundred twenty (120)-day
period immediately following the closing date of such Company
Offering; provided, however, that if the Company is prohibited
from selling Common Stock following the closing date of such
Company Offering for a period of less than 120 days then
Stockholder's 120-day period in which it is prohibited from any
public sale or distribution of Acquisition Shares shall be
reduced accordingly; and, provided further, that the Company may
not restrict sales by Stockholder pursuant to this Section
2.02(a) for more than 150 days. In addition, Stockholder shall
-4-
not be obligated to comply with this Section 2.02 on more than
one (1) occasion in any twelve (12)-month period.
(b) The Company shall not effect any Company Offering,
whether on its own behalf or at the request of any holder or
holders of securities of the Company (other than Stockholder),
during the first 150 days immediately following the later of the
Effective Date and the expiration of the Lock-up Period.
Section 2.03 Blackout Provisions.
(a) The Company shall have the right to delay the
effectiveness of such Shelf Registration Statement, or suspend
the use of the Prospectus if the Board of Directors of the
Company determines that the Company is in possession of material
non-public information the disclosure of which would have a
material adverse effect on a pending acquisition, divestiture or
financing transaction that is material to the Company and its
subsidiaries taken as a whole or would require premature
disclosure of information not otherwise required to be disclosed
which would have a material adverse effect on the Company and its
subsidiaries taken as a whole. In addition, if the Company shall
make an acquisition that requires the filing of financial
statements with respect to one or more businesses acquired by the
Company pursuant to Article 3-05 of Regulation S-X promulgated
under the Securities Act or any successor rule, in order for the Shelf
Registration Statement to continue to meet the requirements under
the Securities Act, the Company shall advise the Stockholders in
writing of the consummation of such acquisition and sales of
Acquisition Shares under the Shelf Registration Statement shall
be suspended until such time that such financial statements are
filed by the Company with the SEC with respect to such business
or businesses. The Company shall use reasonable efforts to obtain
or cause to be prepared and to file such financial statements as
promptly as reasonably practicable after such acquisition. The
Company may not restrict any sales pursuant to this Section
2.03(a) unless prior written notice is provided to Stockholder,
and the Company shall promptly advise Stockholder in writing when
such restrictions are no longer applicable. In addition, the
Company may not restrict sales by Stockholder pursuant to this
Section 2.03(a) for a period in excess of 95 consecutive days and
may not further restrict sales pursuant to this Section 2.03 for
a period of 30 days following the termination of any prior
restriction under this Section 2.03(a).
(b) Notwithstanding anything in this Agreement to the
contrary, the Company may not restrict sales by Stockholder
pursuant to Section 2.02(a) or 2.03(a) for at total of more than
180 days during any one-year period.
Section 2.04 Registration Procedures.
(a) Procedures. Subject to Section 2.03 above, in
connection with the registration of the Acquisition Shares
pursuant to this Agreement, the Company shall use reasonable
efforts to effect the registration and sale of the Acquisition
Shares in accordance with Stockholder's intended method of
disposition thereof and, in connection therewith, the Company
shall:
-5-
(1) prepare and file with the SEC the Shelf
Registration Statement, use reasonable efforts to
cause the Shelf Registration Statement to be declared
effective, and use best efforts to keep such Shelf
Registration Statement effective in accordance with
Sections 2.01(a) and (b) above;
(2) prepare and file with the SEC amendments and
supplements to the Shelf Registration Statement, the
Prospectus and any documents incorporated therein by
reference in accordance with Section 2.01(c) above;
(3) before filing with the SEC the Shelf
Registration Statement, the Prospectus or any
amendments or supplements thereto (including any
post-effective amendments), the Company shall furnish
to Stockholder, the managing underwriter or
underwriters, if any, in connection therewith and one
counsel selected by Stockholder and one counsel for
such underwriter or underwriters, if any, drafts of
all such documents proposed to be filed and provide
such counsel with a reasonable opportunity for review
thereof and comment thereon, such review to be
conducted and such comments to be delivered with
reasonable promptness, and the Company will consider
in good faith such comments in such documents;
(4) give its full cooperation to Stockholder in
connection with its sales of the Acquisition Shares,
including, without limitation, making the Company's
management available on one occasion for up to two
weeks to assist in the marketing of such shares
through a "road show"; provided however, that
Stockholder will provide no less than two weeks' prior
notice to the Company of the commencement of such road
show, and in any event the Company will have the right
to have at least one representative at such road show;
(5) promptly (i) notify Stockholder of each of
(w) the filing and effectiveness of the Shelf
Registration Statement, the Prospectus and any
amendments or supplements thereto, (x) the receipt of
any comments from the SEC and, if applicable, any
state securities law authorities or any other
governmental authorities with respect to any such
Shelf Registration Statement, the Prospectus or any
amendments or supplement thereto, (y) any request from
the SEC or any such other governmental authority that
an amendment, supplement or additional information be
filed or made available with respect to the Shelf
Registration Statement, the Prospectus or any document
incorporated by reference therein and (z) any oral or
-6-
written stop order with respect to such registration,
or use of the Prospectus, any suspension of the
registration or qualification of the sale of the
Acquisition Shares in any jurisdiction or any
initiation or threatening of any proceedings with
respect to any of the foregoing, (ii) provide
Stockholder, the managing underwriter or underwriters,
if any, and one counsel for each of them with copies
of any such comments and requests (if made in writing)
and use reasonable efforts to promptly resolve any
such comments and requests, including by preparing and
filing with the SEC an amendment or supplement to the
Shelf Registration Statement, the Prospectus or any
document incorporated by reference therein and (iii)
use reasonable efforts to prevent the issuance of and,
it issued, to obtain the withdrawal of any such order
or suspension referred to in clause (2);
(6) furnish to Stockholder, the managing
underwriter or underwriters, if any, and one counsel
for each of the foregoing, a conformed copy of the
Shelf Registration Statement and each amendment and
supplement thereto (in each case, including all
exhibits thereto, documents incorporated by reference
and post-effective amendments thereto) and such
additional number of copies of such Shelf Registration
Statement, each amendment and supplement thereto (in
such case, without such exhibits or documents
incorporated by reference), the Prospectus and all
exhibits thereto and such other documents as
Stockholder, underwriter, agent or such counsel may
reasonably request in order to facilitate the
disposition of the Acquisition Shares by Stockholder,
and the Company hereby consents to the use of the
Prospectus and such exhibits and other documents in
connection with the offer and sale of the Acquisition
Shares;
(7) if requested by Stockholder or the managing
underwriter or underwriters of a Rule 415 Offering,
subject to approval of counsel to the Company in its
reasonable judgment, promptly incorporate in the
Prospectus or a post-effective amendment to the Shelf
Registration Statement such information concerning
underwriters and the plan of distribution of the
Acquisition Shares as such managing underwriter or
underwriters or Stockholder reasonably shall furnish
to the Company in writing and request be included
therein, including, without limitation, information
with respect to the number of Acquisition Shares being
sold by Stockholder to such underwriter or
underwriters, and with respect to any other terms of
the underwritten offering of the Acquisition Shares to
be sold in such offering; and make all required
-7-
filings of Prospectus or such post-effective amendment
as soon as reasonably practicable after being notified
of the matters to be incorporated in the Prospectus or
such post-effective amendment;
(8) to the extent, if any, necessary to permit
the Stockholder or any underwriter to make offers and
sales pursuant to the Shelf Registration Statement,
use reasonable efforts to register or qualify the
Acquisition Shares under such securities or "blue sky"
laws of such jurisdictions as Stockholder or such
underwriter reasonably requests and do any and all
other acts and things which may be reasonably
necessary or advisable to enable Stockholder to
consummate the disposition in such jurisdictions in
which the Acquisition Shares are to be sold and keep
such registration or qualification in effect for so
long as the Shelf Registration Statement remains
effective under the Securities Act (provided that the
Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not
otherwise be required to qualify but for this
paragraph, (ii) subject itself to taxation in any such
jurisdiction where it would not otherwise be subject
to taxation but for this paragraph or (iii) consent to
the general service of process in any jurisdiction
where it would not otherwise be subject to general
service of process but for this paragraph);
(9) promptly notify Stockholder, at any time upon
the discovery that, or of the happening of any event
as a result of which, the Shelf Registration
Statement, the Prospectus or any document incorporated
therein by reference as then in effect, contains an
untrue statement of a material fact or omits to state
any material fact required to be stated therein or any
fact necessary to make the statements therein not
misleading, or at any time whenever any representation
or warranty made by the Company pursuant to Section
2.04(b) shall cease to be true in any
material respect, and, subject to Section 2.03 above,
promptly prepare and furnish to Stockholder a
supplement or amendment to the Shelf Registration
Statement so that the Shelf Registration Statement,
the Prospectus or such document shall not, and any
Prospectus as thereafter delivered to the purchasers
of such Acquisition Shares shall not, contain an
untrue statement of a material fact or omit to state
any material fact required to be stated therein or any
fact necessary to make the statements therein not
misleading;
(10) cause all of the Acquisition Shares to be listed
on the NYSE;
-8-
(11) make available for inspection by
Stockholder, any underwriter participating in any
disposition pursuant to the Shelf Registration
Statement, and any attorney, accountant or other agent
retained by Stockholder or underwriter, all reasonably
requested financing and other records, pertinent
corporate documents and properties of the Company, and
cause the Company's officers, directors, employees,
attorneys and independent accountants to supply all
information reasonably requested by Stockholder,
underwriters, attorneys, accountants or agents in
connection with the Shelf Registration Statement;
information which the Company determines, in good
faith, to be confidential shall not be disclosed by
such persons unless, subject to Section 2.03 above,
(i) the disclosure of such information is required by
applicable federal securities laws or is necessary to
avoid or correct a misstatement or omission in such
Shelf Registration Statement, the Prospectus or any
document incorporated by reference therein or (ii) the
release of such information is ordered pursuant to a
subpoena or other order from a court of competent
jurisdiction or other governmental authority.
Stockholder further agrees, on its own behalf and on
behalf of all its underwriters, accountants, attorneys
and agents, that it will, upon learning that
disclosure of such information determined by the
Company to be confidential is sought in a court or by
any other governmental authority, give notice to the
Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of
the information deemed confidential;
(12) use reasonable efforts to comply with all
applicable laws related to the Shelf Registration
Statement and offering and sale of securities and all
applicable rules and regulations of governmental
authorities in connection therewith (including,
without limitation, the Securities Act and the
Exchange Act, and the rules and regulations
promulgated by the SEC) and make generally available
to its security holders as soon as practicable an
earnings statement of the Company and the Company
Subsidiaries complying with Section 11(a) of the
Securities Act;
(13) use reasonable efforts to furnish to
Stockholder and the managing underwriter or
underwriters, if any, a signed counterpart of (i) an
opinion of counsel for the Company; (ii) certificates
of officers and the secretary of the Company; and
(iii) a "cold comfort" letter (and a bring-down
version thereof) signed by the independent public
accountants who have certified any financial
statements included or incorporated by reference in
the Shelf Registration Statement, covering such
matters with respect to the Shelf Registration
-9-
Statement and, in the case of the accountants' comfort
letter, with respect to such matters as are
customarily covered in opinions of issuer's counsel,
certificates of the Company and in accountants'
comfort letters delivered to the underwriters in
underwritten public offerings of securities for the
account of, or on behalf of, a holder of common stock,
such opinion, certificates and comfort letters to be
dated the date or dates that such opinion,
certificates and comfort letters are customarily dated
in such transactions and, in the case of a Rule 415
Offering, an additional comfort letter on the date of
the filing of any document containing financial
statements to be incorporated by reference in the
Shelf Registration Statement; and
(14) take other actions as Stockholder or the
underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of the
Acquisition Shares.
(b) Further Agreements. Without limiting any of the
foregoing, in the event that the sale of Acquisition Shares is to
be made by or through underwriters, the Company shall enter into
an underwriting agreement with a managing underwriter or
underwriters selected by Stockholder containing representations,
warranties, indemnities, conditions precedent and agreements
customarily included (but not inconsistent with the agreements
contained herein) by an issuer of common stock in underwriting
agreements with respect to offerings of common stock for the
account of, or on behalf of, holders of common stock; provided,
however, that the Stockholder shall not utilize the Shelf
Registration Statement for more than one underwritten offering
during the term of this Agreement. In connection with the sale of
Acquisition Shares hereunder, Stockholder may, at its option,
require that any and all representations and warranties by, and
the other agreements of, the Company to or for the benefit of
such an underwriter or underwriters (or which would be made to or
for the benefit of such an underwriter or underwriters if such
sale of Acquisition Shares were pursuant to a customary
underwritten offering) be made to and for the benefit of
Stockholder and that any or all of the conditions precedent to
the obligations of such underwriter or underwriters (or which
would be so for the benefit of such underwriter or underwriters
under a customary underwriting agreement) be conditions precedent
to the obligations of Stockholder in connection with the
disposition of its securities pursuant to the terms hereof. In
connection with any offering of Acquisition Shares registered
pursuant to this Agreement, the Company shall, upon receipt of
duly endorsed certificates representing the Acquisition Shares,
(x) furnish to the underwriter, if any (or, if no underwriter,
Stockholder), unlegended certificates representing ownership of
Acquisition Shares being sold, in such denominations and
registered in such names as requested, and (y) instruct any
transfer agent and registrar of the Acquisition Shares to release
any stop transfer order with respect thereto.
Stockholder agrees that upon receipt of any notice
from the Company of the happening of any event of the kind
described in paragraph (9) of Section 2.04(a), Stockholder shall
forthwith discontinue its disposition of Acquisition Shares
pursuant to the Shelf Registration Statement and the Prospectus
-10-
until its receipt of the copies of the supplement or amendment
thereto contemplated by paragraph (9) of Section 2.04(a) and, if
so directed by the Company, deliver to the Company all copies,
other than permanent file copies, then in Stockholder's
possession of the Prospectus current at the time of receipt of
such notice relating to the Acquisition Shares.
If Stockholder is an Affiliate of the Company,
Stockholder's broker-dealer subsidiaries shall be permitted to
use the Shelf Registration Statement and the Prospectus in
market-making transactions at any time during the effectiveness
of the Shelf Registration Statement. The Shelf Registration
Statement, the Prospectus and all amendments thereof and
supplements thereto shall include such information concerning
such market-making transactions as Stockholder shall furnish the
Company from time to time. If the Shelf Registration Statement
and the Prospectus are used by Stockholder's broker-dealer
subsidiaries in market-making transactions, the provisions of
Sections 2.04, 2.05 and 2.06 shall be deemed to apply to such
transactions and the shares of Common Stock sold thereby.
The Company shall not grant to any of its security
holders (other than Stockholder) the right to include any of its
securities in the Shelf Registration Statement.
Section 2.05 Registration Expenses.
All expenses incidental to the Company's performance
of, or compliance with, its obligations under this Agreement
including, without limitation, all registration and filing fees,
all fees and expenses of compliance with securities and "blue
sky" laws (including, without limitation, the fees and expenses
of counsel for underwriters or placement or sales agents in
connection with "blue sky" law compliance), all printing and
copying expenses, all messenger and delivery expenses, all fees
and expenses of the transfer agent and registrar, all listing
fees for the NYSE, all fees for any filings with the National
Association of Securities Dealers, Inc., all reasonable
out-of-pocket expenses of underwriters and sales and placement
agents in connection therewith (excluding underwriting discounts
and commissions and the fees and expenses of counsel,
accountants, agents or experts therefor), all fees and expenses
of the Company's independent certified public accountants and
counsel (including, without limitation, with respect to "comfort"
letters and opinions) and other Persons retained by the Company
in connection therewith (collectively, the "Registration
Expenses"), shall be borne by the Company. The Company shall not
be responsible for and shall not pay the fees and expenses of
legal counsel, accountants, agents or experts retained by
Stockholder in connection with the sale of the Acquisition
Shares.
Section 2.06 Indemnification.
(a) By the Company. The Company agrees to indemnify
Stockholder, its officers, directors, employees and agents and
each Person who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) Stockholder or
such other indemnified Person and the officers, directors,
employees and agents of such control Persons or other indemnified
Persons against all losses, claims, damages, liabilities and
expenses including, without limitation, reasonable attorneys'
fees and expenses, (collectively, the "Losses"), as incurred,
-11-
caused by, resulting from or relating to (i) any untrue or
alleged untrue statement of material fact contained in the Shelf
Registration Statement, the Prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as the same
are caused by or contained in, or alleged to be omitted from, any
information furnished in writing to the Company by Stockholder or
its underwriter expressly for use therein or are caused by
Stockholder's failure to deliver, or its underwriter's failure to
deliver, a copy of the Prospectus or any supplements thereto
after the Company has furnished Stockholder with the requested
number of copies of the same and the Prospectus or such
supplement would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission or (ii) any
violation by the Company of any federal or state law, rule or
regulation applicable to the Company and relating to action
required of, or inaction required by, the Company with respect to
the Shelf Registration Statement, the Prospectus or any amendment
thereto or supplement thereof. In connection with an underwritten
offering and without limiting any of the Company's other
obligations under this Agreement, the Company shall indemnify
such underwriters, their officers, directors, employees and
agents and each Person who controls (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) such underwriters or such other indemnified Person and the
officers, directors, employees and agents of such control Persons
or other indemnified Persons to the same extent as provided above
with respect to the indemnification of Stockholder.
(b) By Stockholder. In connection with the Shelf
Registration Statement, Stockholder shall furnish to the Company
in writing information regarding Stockholder's ownership of
Acquisition Shares and its intended method of distribution
thereof and shall indemnify the Company, its directors, officers,
employees and agents and each Person who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company or such other indemnified Person and
the officers, directors, employees and agents of such control
Persons or other indemnified Persons against all Losses, as
incurred, caused by, resulting from or relating to any untrue or
alleged untrue statement of material fact contained in the Shelf
Registration Statement, the Prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent
that such untrue statement or omission or alleged untrue
statement or omission (i) is caused by, results from or relates
to, or is alleged to be omitted from, such information so
furnished in writing by Stockholder or (ii) arises out of or
results from Stockholder's failure to deliver, or its
underwriter's failure to deliver, a copy of the Prospectus or any
supplements thereto after the Company has furnished Stockholder
with the requested number of copies of the same and the
Prospectus or such supplement would have corrected such untrue
statement or alleged untrue statement or such omission or alleged
omission; provided, however, that Stockholder shall not be liable
for any claims hereunder in excess of the amount of net proceeds
received by Stockholder from the sale of Acquisition Shares
pursuant to the Shelf Registration Statement; provided further,
however, that Stockholder shall not be liable in any such case to
the extent Stockholder has furnished in writing to the Company
within a reasonable period of time prior to the filing of the
Shelf Registration Statement, such Prospectus or such amendment
or supplement thereto information expressly for use therein which
-12-
corrected or made not misleading information previously furnished
to the Company and the Company failed to include such information
therein.
(c) Notice. Notice shall be in accordance with
Section 11(g) of the Purchase Agreement.
(d) Defense of Actions. Defense of Actions shall be
in accordance with Section 11(g) of the Purchase Agreement.
(e) Survival. The indemnification provided for under
this Agreement shall remain in full force and effect regardless
of any investigation made by or on behalf of the indemnified
Person and will survive the transfer of the Acquisition Shares.
(f) Contribution. If the indemnification provided for
in this Section 2.06 is unavailable to an indemnified party or is
insufficient to hold such indemnified party harmless for any
losses in respect of which this Section 2.06 would otherwise
apply by its terms, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and
such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and the
indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in
questions, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material
fact, has been taken by, or relates to information supplied by,
each indemnifying party or indemnified party, and the parties
relative intent, knowledge, access to information and opportunity
to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses incurred
by such party, to the extent such party would have been
indemnified for such expenses if the indemnification provided for
in Section 2.06(a) or 2.06(b) was available to such party. the
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.06(f) were determined by
pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to
in this Section 2.06(f). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not found guilty of such fraudulent misrepresentation.
Section 2.07 Rule 144.
The Company shall file the reports required to be
filed by it under the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder, and will take such
further action as Stockholder may reasonably request, all to the
extent required from time to time to enable Stockholder to sell
Acquisition Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
Upon the request of Stockholder, the Company shall deliver to
-13-
Stockholder a written statement as to whether it has complied
with such requirements.
ARTICLE III.
TRANSFER OF SHARES
Section 3.01 Compliance with Securities Laws.
Stockholder agrees not to sell any of the Acquisition
Shares except pursuant to an effective registration statement
under the Securities Act covering such sales or pursuant to an
exemption from the registration requirements of the Securities
Act.
Section 3.02 Lock-up.
(a) Period. Stockholder shall not Transfer any of the
Acquisition Shares for a period ("Lock-up Period") ending with
the earlier of (i) December 31, 1997, and (ii) the consummation
of the Merger.
(b) Restricted Transfers. From and after the
expiration of the Lock-up Period, Stockholder shall not Transfer
the Acquisition Shares to any single purchaser or Group who
Stockholder has reason to believe will after such purchase, own
more than 5% of the outstanding Common Stock, except for (i)
sales pursuant to an underwriting of a bona fide public offering,
(ii) sales pursuant to a tender offer approved by the Board of
Directors of the Company, and (iii) sales to a purchaser or Group
that has filed or is eligible to file a Schedule 13G under the
Exchange Act with respect to the Company.
Section 3.03 Certain Prohibited Actions.
During the term of this Agreement, without the prior
written consent of the Board of Directors of the Company, neither
Stockholder nor any of its Affiliates shall, singly or as part of
a Group, directly or indirectly, through one or more
intermediaries or otherwise (i) enter into any arrangement or
understanding with respect to the Common Stock which would
facilitate or attempt to facilitate any change of control of the
Company, unless such transaction is specifically approved by the
Board of Directors of the Company; (ii) acquire or agree to
acquire ownership (including beneficial ownership as defined in
Rule 13d-3 under the Exchange Act) of any assets or property or
more than one percent of any class of equity security of the
Company or its subsidiaries, or any rights or options to acquire
such ownership with, in the case of any such security, the
intention or purpose of influencing the management of, or causing
or formulating a transaction with respect to, the assets or
capital stock of the Company or any of its subsidiaries; (iii)
make any proposal to merge, consolidate or cause the sale of any
substantial part of the assets of the Company; or (iv) make or
participate in any solicitation of persons to vote, or solicit
consents with respect to, any voting securities of the Company.
The provisions of this Section 3.03 shall terminate at such time
as Stockholder or its Affiliates no longer holds any Acquisition
Shares, and shall in no way limit the asset management,
investment banking or trading operations of Stockholder's asset
-14-
management, investment banking or broker-dealer subsidiaries as
conducted in the ordinary course of their business.
Section 3.04 Right of First Offer.
Stockholder shall, prior to selling at any one time
Acquisition Shares representing more than 1% of the outstanding
Common Stock in any three month period, first provide the Company
with telephonic notice, confirmed promptly by a fax (the
"Notice") to the Company of the intent to make such sale as
follows:
(a) Underwritten Transactions. If such proposed sale
would be pursuant to a firm commitment underwriting, Notice shall
be given to the Company no later than the date Stockholder
commences a "road show" or other marketing effort, giving the
Company the option (which option may only be exercised prior to
the close of trading on the third Trading Day immediately
following the date of actual receipt of such Notice by the
Company.) to purchase all the Acquisition Shares intended to be
included in such offering at a price per share equal to the
average of the bid and the ask prices at the time such Notice is
given to the Company, as reported on the consolidated quotation
system or the most recent closing bid and ask prices if
such consolidated quotation system is closed at the time of the
Notice. The Notice shall include bid and ask prices. The Company
may exercise such option only by Notice, which Notice shall be
irrevocable. Any purchase pursuant to this Section 3.04(a) shall
be closed three Trading Days from the exercise of such option. If
such option is not exercised, Stockholder may sell all or any
portion of such Acquisition Shares without further notice at any
price in a firm commitment underwriting at any time within 60
days of such Notice.
(b) Market Transactions. If such proposed sale would
be pursuant to a broker's transaction or other customary equity
securities market transaction, other than a Block Execution,
Notice shall be given to the Company prior to submitting an order
to sell, giving the Company the option (which option may only be
exercised prior to the close of trading on the next Trading Day
immediately following the date of actual receipt of such Notice
by the Company) to purchase all the Acquisition Shares intended
to be sold at a price per share equal to the average of the bid
and the ask prices at the time such Notice is given to the
Company, as reported on the consolidated quotation system or the
most recent closing bid and ask prices if such consolidated
quotation system is closed at the time of the Notice. The Notice
shall include such bid and ask prices. The Company may exercise
such option only by giving Notice, which Notice shall be
irrevocable. Any purchase pursuant to this Section 3.04(b) shall
be closed three Trading Days from the exercise of such option. If
such option is not exercised, Stockholder may sell all or any
portion of such Acquisition Shares without further notice at any
price in a broker's transaction or other customary equity
securities market transaction, other than a Block Execution, at
any time within ten Trading Days of such Notice.
(c) Block Execution. If such proposed sale would be
pursuant to a Block Execution, Stockholder shall, prior to giving
Notice, give during business hours, an advance notice ("Advance
Notice") to the Company that Stockholder is contemplating
pursuing a Block Execution, which Advance Notice shall (i) become
-15-
effective on the third Trading Day following the date on which
such Advance Notice is received by the Company at the same time
of day as such Advance Notice was received, (ii) remain effective
for the next 10 Trading Days following such third Trading Day and
(iii) state the estimated number of Acquisition Shares to be sold
in such Block Execution. Such Advance Notice must be in effect at
the time Stockholder gives Notice. Stockholder shall, once it
actually intends to consummate a proposed sale pursuant to such
Block Execution, give, during business hours, Notice giving the
Company the option (which option may only be exercised within 60
minutes of actual receipt of such Notice by the Company) to
purchase all the Acquisition Shares intended to be sold at a
price per share equal to the average of the bid and the ask
prices at the time such Notice is given to the Company, as
reported on the consolidated quotation system. Any purchase
pursuant to this Section 3.04(c) shall be closed three Trading
Days from such Notice. If such option is not exercised,
Stockholder may sell all or any portion of such Acquisition
Shares without further notice at any price in a Block Execution
at any time prior to the close of business on the second Trading
Day following such Notice; provided, however, the number of
Acquisition Shares sold pursuant to this Section 3.04(c) shall be
not more than the number specified in the Advance Notice and
shall have an aggregate fair market value of not less than $10
million; and
(d) Other Transactions. If such proposed sale would be
pursuant to any type of transaction other than the transactions
identified in paragraphs (a), (b) and (c), the Notice shall
include the identity, to the extent known, of the proposed
purchaser(s) and give the Company the option (which option may
only be exercised prior to the close of trading on the third
Trading Day immediately following such Notice) to purchase all
the Acquisition Shares intended to be sold at the price per share
specified in such Notice (which purchase shall be closed three
Trading Days from such Notice). If such option is not exercised,
Stockholder may sell all or any portion of such Acquisition
Shares without further notice at any time within 30 days of such
notice at a price no lower than the price specified in such
Notice to the purchaser(s) identified in such Notice.
(e) Method of Payment. In the event the Company
exercises any of the foregoing options, it shall make payment on
the closing date of such purchase by wire transfer to the
Stockholder of immediately available funds in an amount equal to
the purchase price to an account of Stockholder in a bank in the
United States.
(f) Title. Stockholder shall warrant to the Company
good and marketable title to all Acquisition Shares purchased
pursuant to the foregoing options and shall promptly take all
actions necessary within the control of Stockholder to cause
record and beneficial ownership to be transferred to the Company.
Section 3.05 Voting.
Stockholder (i) shall be present in person or
represented by proxy at all stockholder meetings of the Company
of which Stockholder is notified in accordance with applicable
law so that all Acquisition Shares then beneficially owned by
Stockholder shall be counted for the purpose of determining the
presence of a quorum at such meetings, and (ii) shall vote, or
-16-
act by consent with respect to, at any such meetings, all
Acquisition Shares then beneficially owned by Stockholder so as
to vote for persons nominated for election to the Company's Board
of Directors by such Board of Directors and no others.
Section 3.06 Rule 145 Letter.
Upon written request, in connection with the Merger,
Stockholder will provide PG&E a letter pursuant to Rule 145 of
the Act as contemplated by the Merger Agreement.
Section 3.07 Refining stock.
In connection with the Merger, Valero will use its
reasonable efforts to cause the common stock of Refining to be
listed on the NYSE.
ARTICLE IV.
MISCELLANEOUS
Section 4.01 Restrictive Legends.
Stockholder hereby acknowledges and agrees that,
during the term of this Agreement (except as otherwise specified
in Sections 2.04 and 4.13), each of the certificates representing
Acquisition Shares shall be subject to stop transfer instructions
and shall include the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE TRANSFERRED WHETHER BY SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE,
GIFT, BEQUEST, APPOINTMENT OR OTHERWISE, AND VALERO ENERGY
CORPORATION (THE "COMPANY") WILL NOT REGISTER THE TRANSFER OF
SUCH SHARES, EXCEPT PURSUANT AND SUBJECT TO THAT CERTAIN
STOCKHOLDERS AGREEMENT DATED AS OF MAY 1, 1997, AS THE SAME MAY
BE AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND
STOCKHOLDER. A COPY OF SUCH AGREEMENT IS ON FILE WITH THE
SECRETARY OF THE COMPANY."
Section 4.02 Recapitalization.
In the event that any capital stock or other
securities are issued as a dividend or distribution on, in
respect of, in exchange for, or in substitution of, any
Acquisition Shares, such securities shall be deemed to be
Acquisition Shares for all purposes under this Agreement.
Section 4.03 Notices.
All notices, requests, demands, waivers and other
communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
-17-
duly given if delivered personally, by reputable overnight
courier (next day morning delivery) or by facsimile transmission
(receipt of which is confirmed):
(a) If to the Company, to:
Valero Energy Corporation
000 XxXxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
(b) If to Stockholder, to:
Salomon Inc
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxx
Facsimile: (000) 000-0000
or to such other person or address as any party shall specify by
notice in writing, given in accordance with this Section 4.03, to
the other parties hereto. All such notices, requests, demands,
waivers and communication shall be deemed to have been given on
the date on which so hand-delivered, on the next business day
following the date on which delivered to such overnight courier
and on the date of such facsimile transmission and confirmation,
except for a notice of change of person or address, which shall
be effective only upon receipt thereof.
-18-
Section 4.04 Entire Agreement.
This Agreement and the Purchase Agreement contain the
entire understanding of the parties hereto with respect to the
subject matter hereof. This Agreement supersede all prior
agreements and understandings, oral and written, with respect to
the subject matter hereof.
Section 4.05 Severability.
Should any provision of this Agreement, or any part
thereof, for any reason be declared invalid or unenforceable,
such declaration shall not affect the validity or enforceability
of any other provision of this Agreement, or any other part
thereof, all of which other provisions, and parts, shall remain
in full force and effect, and the application of such invalid or
unenforceable provision, or such part thereof, to Person or
circumstances other than those as to which it is held invalid or
unenforceable shall be valid and be enforced to the fullest
extent permitted by law.
Section 4.06 Binding Effect; Assignment.
This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, successors and permitted
assigns, but, except as expressly contemplated herein, neither
this Agreement not any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, by the
Company or Stockholder without the prior written consent of the
other. Upon any such assignment, this Agreement shall be amended
to substitute the assignee as a party hereto in a writing
reasonably acceptable to the other party.
Section 4.07 Amendment, Modification and Waiver.
This Agreement may be amended, modified or
supplemented at any time by written agreement of the parties
hereto. Any failure by Stockholder, on the one hand, or the
Company, on the other hand, to comply with any term or provision
of this Agreement may be waived by the Company or Stockholder,
respectively, at any time by an instrument in writing signed by
or on behalf of the Company and Stockholder, but such waiver or
failure to insist upon strict compliance with such term or
provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure to comply.
Section 4.08 Third-Party Beneficiaries.
This Agreement is not intended, and shall not be
deemed, to confer upon or give any person except the parties
hereto and their respective successors and permitted assigns, any
remedy, claim, liability, reimbursement, cause of action or other
right under or by reason of this Agreement.
-19-
Section 4.10 Counterparts.
This Agreement (other than Section 2.06) may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 4.11 Interpretation.
The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part
of the agreement of the parties and shall not in any way affect
the meaning of interpretation of this Agreement.
Section 4.12 Governing Law.
This Agreement shall be governed by the laws of the
State of New York, without regard to the principles of conflicts
of law thereof.
Section 4.13 Termination; Restrictive Legend.
This Agreement shall terminate on the effective date
of the Merger. If the Merger does not become effective, this
Agreement shall terminate when the Stockholder and its Affiliates
no longer own any Acquisition Shares, provided, however, that the
provisions of Section 2.06 shall survive termination of this
Agreement and the provisions of Article II, other than Section
2.06, shall terminate on the second anniversary date of the date
hereof. It is understood and agreed that any restrictive legends
set forth on any Acquisition Shares shall be removed by delivery
of substitute certificates without such legends and such
Acquisition Shares shall no longer be subject to the terms of
this Agreement, upon the resale of such Acquisition Shares in
accordance with the terms of this Agreement or, if not
theretofore removed, on the second anniversary of the date
hereof.
IN WITNESS WHEREOF, the undersigned hereby agree to be
bound by the terms and provisions of this Stockholder Agreement
as of the date first above written.
VALERO ENERGY CORPORATION
By: _________________________________________
Name:
Title:
SALOMON INC
By: _________________________________________
Name:
Title:
-20-
