VALERO ENERGY
CORPORATION
DEFERRED COMPENSATION
PLAN
WHEREAS ,
Valero Energy Corporation (the “Company” or
“Valero”) established the Valero Energy Corporation
Deferred Compensation Plan effective as of March 1, 1998, and
as thereafter amended (“Plan”); and
WHEREAS ,
the Company now desires to further amend and to restate the Plan,
effective as of January 1, 2008, in order to effect and
evidence certain changes to comply with the requirements of Code
§ 409A, and the regulations and other guidance promulgated
thereunder; and
WHEREAS ,
the portion of Participants’ Accounts which had been deferred
hereunder and had vested prior to December 31, 2004 (together
with earnings on such deferred and vested amounts), shall be
considered “grandfathered” and shall be governed by the
terms of the Plan in effect on October 3, 2004 (the provisions
of which continue in effect for purposes of such
“grandfathered” benefits, and are incorporated herein
by reference), and for the convenience of the Plan Administrator,
certain of such “grandfathered” provisions are set
forth on Exhibit “A” attached hereto; and
NOW,
THEREFORE , the Company hereby amends and restates the Plan
effective as of January 1, 2008 as follows:
1.1
Account. “Account” means a Participant’s
Account maintained under this Plan which reflects the benefits a
Participant is entitled to under this Plan as a result of his/her
deferral of Salary and/or Bonuses under the Plan, as well as any
Discretionary Awards and all earnings on all deferrals
hereunder.
1.2
Affiliate. “Affiliate” means any subsidiary
business entity of the Company. The term “subsidiary business
entity” means any entity in an unbroken chain of entities
beginning with the Company if, at the time of the action or
transaction, each of the entities other than the last entity in the
unbroken chain owns equity securities possessing 50 percent or
more of the total combined voting power of all classes of equity
securities in one of the other entities in such chain.
1.3
Beneficiary. “Beneficiary” means a person or
entity designated by the Participant under the terms of this Plan
to receive any amounts distributed under the Plan upon the death of
the Participant.
1.4 Board of
Directors. “Board of Directors” means the Board of
Directors of the Company.
1.5 Bonus.
“Bonus” or “Bonuses” shall include all
bonuses paid to a Participant, regardless of whether or not said
bonuses are discretionary, mandatory or determined by formula or
specified performance criteria.
1.6 Change in
Control. “Change in Control” means each occurrence
of one or more of the following events:
(a) Change in
Ownership of the Company . The acquisition by any one person,
or more than one person acting as a group (within the meaning of
Code § 409A), of ownership of stock of the Company that,
together with stock held by such person or group, constitutes more
than fifty percent (50%) of the total fair market value or total
voting power of the stock of the Company.
(b) Change in
Effective Control of Valero . Either of the
following:
(1) The
acquisition, during any 12-month period, by any one person, or more
than one person acting as a group (within the meaning of Code
§ 409A), of stock of the Company comprising thirty percent
(30%) or more of the total voting power of the stock of the
Company; or
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(2) The
replacement, during any 12-month period, of a majority of the
members of the Board of Directors with directors whose appointment
or election is not endorsed by the majority of the members of the
Board of Directors before the date of such appointment or
election.
(c) Change in
Ownership of a Substantial Portion of the Company’s
Assets . The acquisition by any one person, or more than one
person acting as a group (within the meaning of Code § 409A),
during the 12-month period ending on the date of the most recent
acquisition by such person or persons, of assets of the Company
that have a total gross fair market value equal to or more than
forty percent (40%) of the total gross fair market value of all of
the assets of the Company immediately before such acquisition or
acquisitions. For purposes of this provision, “gross fair
market value” means the value of the assets of the Company,
or the value of the assets being disposed of, determined without
regard to any liabilities associated with such assets.
The provisions of
this Plan relating to a Change in Control shall be interpreted and
administered in a manner consistent with Code § 409A and the
regulations and additional guidance thereunder.
1.7 Code.
“Code” means the Internal Revenue Code of 1986, as
amended from time to time.
1.8
Committee. “Committee” means the committee
administering this Plan, comprised of those directors of the
Company serving as the Company’s Compensation
Committee.
1.9
Company. “Company” means Valero Energy
Corporation, sponsor of the Plan, and any successor
thereof.
1.10
Discretionary Credit. “Discretionary Credit”
means a discretionary credit to a Participant’s Account under
the Plan granted by the Company pursuant to
Section 4.3.
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1.11 Elective
Deferral. “Elective Deferral” means the amount of
Salary and/or Bonuses the Participant elects to defer under the
terms of this Plan.
1.12 Elective
Deferral Agreement. “Elective Deferral Agreement”
means the agreement entered into by the Participant from time to
time setting forth his/her Elective Deferrals under this Plan.
Elective Deferral Agreements shall be in a form prescribed by the
Committee from time to time.
1.13
Employee. “Employee” means an individual who is
employed by the Employer.
1.14
Employer. “Employer” means the Company or any
Affiliate which adopts this Plan.
1.15 Fund.
“Fund” means the investment fund or funds, or portfolio
or portfolios selected by the Committee, which shall be used to
measure the earnings (losses) on deferrals under this
Plan.
1.16
Grandfathered Amounts. “Grandfathered Amounts”
means all amounts which had been deferred under this Plan and were
vested as of December 31, 2004, together with all earnings on
such deferred and vested amounts.
1.17
Insider. “Insider” means an officer or director
of the Company subject to Section 16(b) of the Securities Exchange
Act of 1934.
1.18 Other
Termination. “Other Termination” means a
“separation from service” (within the meaning of Code
§ 409A) of a Participant from the Employer, other than a
separation from service upon death or Retirement.
1.19
Participant. “Participant” means a member of a
select group of management or highly compensated Employees,
determined by the Committee to be eligible to participant in this
Plan in accordance with Article II.
1.20 Plan.
“Plan” means the Valero Energy Corporation Deferred
Compensation Plan set forth in this document, as amended from time
to time.
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1.21 Plan
Administrator. “Plan Administrator” means, as
appropriate for the particular context, the Committee, its
designees and/or the individuals responsible for the day-to-day
administration of the Plan.
1.22 Plan
Year. “Plan Year” means the calendar
year.
1.23 Prior
Plan. “Prior Plan” means the Plan as in effect on
October 3, 2004. The Prior Plan shall remain in effect only
with respect to, and shall govern, the Grandfathered
Amounts.
1.24
Retirement. “Retirement” means the separation
from service (within the meaning of Code § 409A) of a
Participant from the Employer after attaining age 55 and at least
5 years of service with the Company and its
Affiliates.
1.25
Salary. “Salary” means the regular rate of pay
of a Participant during a Plan Year; provided, however, in the
event a Participant has Elective Deferrals under Article III,
or elective deferrals under a plan maintained by the Employer
pursuant to Code § 401(k), or salary reductions under Code
§ 125, then the Participant’s Salary shall be deemed to
include the amounts so deferred by the Participant.
1.26 Stock
Fund. “Stock Fund” means a Fund deemed to be
invested in the common stock of the Company.
1.27 Trust.
“Trust” means the Valero Energy Corporation Deferred
Compensation Trust, a grantor trust established by the Company and
the Trustee, pursuant to Revenue Procedure 92-64, which is intended
to constitute a model “rabbi trust” for the purpose of
establishing a funding vehicle for the payment of benefits under
this Plan.
1.28
Trustee. “Trustee” means Frost National Bank, or
any successor Trustee that may be appointed by the Company from
time to time.
1.29
Unforeseeable Emergency. “Unforeseeable
Emergency” means: (a) a severe financial hardship to the
Participant resulting from an illness or accident of the
Participant, the Participant’s spouse, the
Participant’s beneficiary, or the Participant’s
dependent (as defined in
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Code §
152, without regard to Code §§ 152(b)(1), (b)(2) and
(d)(1)(B)); (b) a loss of the Participant’s property due
to casualty (including the need to rebuild a home following damage
to a home not otherwise covered by insurance); or (c) another
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, as
contemplated in Code § 409A and the regulations and other
guidance promulgated thereunder.
2.1 Initial
Eligibility. The individuals who shall be eligible to
participate in the Plan shall be such Employees as the Committee
shall determine from time to time. Such Employees shall in all
events constitute a select group of management or highly
compensated individuals within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) or ERISA.
3.1 Deferral
Election. A Participant may elect, within 30 days after
first becoming eligible to participate in this Plan, and not later
than the 30-day period preceding the beginning of any future Plan
Year (or such other election period ending prior to the beginning
of a Plan Year as may be prescribed by the Committee), by properly
and timely completing an Elective Deferral Agreement, as to what,
if any, percentage of his/her Salary and/or Bonuses to be earned
during the ensuing Plan Year (or for the remainder of the Plan Year
in the case of a Participant’s initial eligibility deferral
election) are to be deferred under this Plan during such ensuing
Plan Year (or remainder of the Plan Year in the case of a
Participant’s initial eligibility deferral election). Once an
election has been made under an Elective Deferral Agreement, it
shall be irrevocable. The election to participate in the Plan for a
given Plan Year will be
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effective only
upon timely receipt by the Plan Administrator of the
Participant’s Elective Deferral Agreement. Notwithstanding
any other provision of this Plan, if the Plan Administrator fails
to receive a Participant’s Elective Deferral Agreement prior
to the beginning of a Plan Year, that Participant will be deemed to
have elected not to defer any part of his/her Salary and/or Bonuses
for that Plan Year.
3.2 Deferral
Amount. A Participant who makes an election to defer a
percentage of his/her Salary and/or Bonuses may defer a maximum of
30% of his/her Salary and/or 50% of the cash portion of any
Bonuses, or any lesser percentage (in minimum 1% increments) as
he/she may elect on the Elective Deferral Agreement.
4.1
Establishing a Participant’s Account. The Committee
will establish an Account for each Participant in a special
deferred compensation ledger which will be maintained by the
Company. The Account will reflect the amount of the Company’s
obligation to pay benefits to the Participant hereunder at any
given time.
4.2 Credit of
the Participant’s Deferral. The Committee will credit the
amount of a Participant’s deferral to the Participant’s
Account in the deferred compensation ledger as it would have been
paid during the Plan Year but for the deferral which was
elected.
4.3
Discretionary Credits. The Company may, from time to time,
credit to a Participant’s Account a Discretionary Credit on
behalf of such Participant in such amount, if any, as shall be
determined, or determinable under a formula, and announced to such
Participant. Subject to the terms of this Plan, the Bylaws of the
Company and applicable law, the making of Discretionary Credits, or
the cancellation, modification or waiver of rights with respect to,
or the amendment, suspension or termination of, Discretionary
Credits, to:
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(a) the Chief
Executive Officer or President of the Company, shall be upon
recommendation by the Committee and approval of the Board of
Directors.
(b) any
“executive officer” of the Company (i.e., one
designated by the Company’s Board of Directors as an
“officer” for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended (“Exchange
Act”), and as an “executive officer” for purposes
of Regulation 14A under the Exchange Act), other than the Chief
Executive Officer or the President, shall be upon recommendation of
the Chief Executive Officer and approval of the Committee;
and
(c) any other
Employee, shall be upon approval of the Chief Executive
Officer.
4.4 Gauge for
Determining Benefits. The Salary and/or Bonuses deferred
pursuant to the Elective Deferral Agreement, and any Discretionary
Credits, when allocated to the Account of the Participant, shall be
treated as if they were invested in the Fund as of the date of
allocation. The amounts entered in the Account shall then begin
accruing gains and losses at the rate set forth under the Fund as
if those amounts were actually invested in the Fund and shall be
entered as of the last day of each calendar month of each Plan
Year, and shall continue to accrue such gains and losses at the
rate set forth under the Fund until distributed as provided for
herein. If permitted by the Committee, each Participant shall have
the right to select the particular Fund or Funds for the deemed
investment of his/her Account in accordance with the procedures
established by the Committee, which may include the Stock Fund;
provided that any such selection shall be solely for the purpose of
determining gains and losses on the Participant’s Account,
and under no circumstances will any Participant have any ownership
interest in any Fund. No election of a conversion designation by an
Insider which has the effect of increasing the total amount
allocated to the Stock Fund may be made on a date which is less
than six months following (i) the date of any prior election
of a conversion designation by such Insider which had the effect of
decreasing the total amount allocated to the
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Stock Fund or
(ii) the date of any election by such Insider with respect to
any other plan of the Company or any subsidiary thereof which had
the effect (directly or indirectly) of making a disposition on
behalf of such Insider of the same class of equity security as that
which is the subject of the Stock Fund. No election of a conversion
designation by an Insider which has the effect of decreasing the
total amount allocated to the Stock Fund may be made on a date
which is less than six months following (i) the date of any
prior election of a conversion designation by such Insider which
had the effect of increasing the total amount allocated to the
Stock Fund or (ii) the date of any election by such Insider
with respect to any other plan of the Company or any Affiliate
which had the effect (directly or indirectly) of making an
acquisition on behalf of the Insider of the same class of equity
security as that which is the subject of the Stock Fund. The
restrictions contained herein regarding investment conversions by
Insiders respecting the Stock Fund are intended to comply with, and
enable Insiders to rely upon, the exemption provided by Rule 16b-3
under the Securities Exchange Act of 1934. Any future amendment to
Rule 16b-3 or any successor rule promulgated by the Securities
and Exchange Commission affecting the investment by Insiders in the
Stock Fund shall be incorporated by reference herein and be deemed
to be an amendment to the Plan in order that Insiders shall
continue to be entitled to rely upon the exemption provided by such
rule without any interruption. Notwithstanding the foregoing, the
Committee may alter the conversion restrictions applicable to an
Insider, as set forth herein, as a result of changes in
Rule 16b-3 under the Securities Exchange Act of
1934.
5.1 Vesting of
Elective Deferrals. All amounts deferred under this Plan
(including earnings on such deferrals), other than any
Discretionary Credits and earnings on such Discretionary Credits,
shall be deemed to be 100% vested at all times.
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5.2 Vesting of
Discretionary Credits. Any Discretionary Credits made pursuant
to Section 4.3 shall be subject to such vesting schedule as
determined by the Committee and announced to Participants prior to,
or contemporaneously with, the granting of said Discretionary
Credits.
6.1
Distribution Events and Elections Relating to Elective
Deferrals. Distribution of a Participant’s Elective
Deferrals (including earnings thereon) shall occur upon the earlier
of:
(a) A specified
date, as provided for in Section 6.4, if and to the extent
elected by the Participant on the Elective Deferral Agreement
relating to such Elective Deferrals pursuant to the distribution
election procedures hereunder; or
(b) An
Unforeseeable Emergency, as provided for, and subject to the
provisions of, Section 6.5; or
(c) The first to
occur of the Participant’s death, Retirement or Other
Termination, as provided for, and subject to the provisions of
Section 6.2 or 6.3, as the case may be.
Each
Participant, at the time of entering into an Elective Deferral
Agreement, shall elect:
(a) Whether all or
any portion of the applicable Elective Deferrals shall be
distributed in a lump sum cash payment on a specified date under
Section 6.4; and
(b) The manner of
payment of such Elective Deferrals in the event of a distribution
upon Retirement or an Other Termination among the distribution
options provided for in Section 6.3. In the event that a
Participant fails to make a timely distribution election with
respect to such Elective Deferrals, and the deferrals become
distributable upon Retirement or Other Termination, such deferrals
and all earnings thereon shall be distributed pursuant to the
default distribution provisions of Section 6.3.
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Distribution of
a Participant’s Discretionary Credits, if any, shall be made
in accordance with the provisions of Section 6.6
hereof.
6.2 Death;
Beneficiary Designation. Upon the death of a Participant, the
Participant’s Beneficiary or Beneficiaries will receive the
vested balance then credited to the Participant’s Account in
one lump sum cash payment. The payment will be made as soon as
reasonably practical following the Participant’s death and,
in any event, within 90 days thereafter.
Each Participant,
at the time of entering into his/her initial Elective Deferral
Agreement, must file with the Committee a designation of one or
more Beneficiaries to whom distributions otherwise due the
Participant will be made in the event of his/her death prior to the
complete distribution of the amount credited to his/her Account.
The designation will be effective upon receipt by the Committee of
a properly executed form which the Committee has approved for that
purpose. The Participant may from time to time revoke or change any
Beneficiary designation by filing another approved Beneficiary
designation form with the Committee. If there is no valid
designation of Beneficiary on file with the Committee at the time
of the Participant’s death, or if all of the Beneficiaries
designated in the last Beneficiary designation have predeceased the
Participant or otherwise ceased to exist at the time of the
Participant’s death, the Beneficiary will be the
Participant’s spouse, if the spouse survives the Participant,
or otherwise the Participant’s estate. If any Beneficiary
survives the Participant but dies or otherwise ceases to exist
before receiving all amounts due the Beneficiary from the
Participant’s Account, the balance of the amount which would
have been paid to that Beneficiary will, unless the
Participant’s designation provides otherwise, be distributed
to the individual deceased Beneficiary’s estate or to the
Participant’s estate in the case of a Beneficiary which is
not an individual.
6.3 Retirement
or Other Termination.
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(a) Upon a
Participant’s Retirement or Other Termination, the
Participant shall receive the value of the Elective Deferrals
credited to his/her Account as of the date of his/her Retirement or
Other Termination (including earnings on such deferrals and
earnings on Elective Deferrals previously distributed on a
specified date pursuant to Section 6.4 at the time and in the
manner elected by the Participant in his/her Deferral Election
Agreement, or as otherwise described in paragraph
(b) below.
(b) A Participant
may elect, at the time of executing his/her Elective Deferral
Agreement for a particular Plan Year, to receive a distribution of
his/her Account applicable to Elective Deferrals for such Plan
Year: (a) in the case of a distribution upon Retirement, in a
single lump sum cash payment, or in five (5), ten (10) or
fifteen (15) annual installments (recalculated annually for each
installment); and (b) in the case of a distribution upon an
Other Termination, in a single lump sum cash payment, or in five
(5) annual installments (recalculated annually for each
installment). Additionally, in connection with, and at the time of,
such election, the Participant may elect to have such distribution
commence (or be made) upon his/her Retirement or Other Termination,
or on the January 1 following his/her Retirement or Other
Termination. In the absence of such an election, the Participant
shall receive a distribution of his/her Account in fifteen (15)
annual installments (recalculated annually for each installment) in
the case of Retirement, and in a single lump sum cash payment in
the case of an Other Termination, and in either case, commencing
upon Retirement or Other Termination, as the case may be. Any such
payment provided for under this Section 6.3 shall be made as
soon as reasonably practical following the designated or default
date provided for above, and in any event within 90 days
thereof.
6.4 Payment on
Specified Date. Upon election by the Participant in his/her
Elective Deferral Agreement for a particular Plan Year the
Participant may receive, in one lump-sum payment, that portion of
his/her Elective Deferrals for such Plan Year on the date specified
in
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his/her
Elective Deferral Agreement (provided such date is at least
5 years after the year of the Elective Deferral) or the
balance of his/her Account relating to such Elective Deferrals, if
less. Any amounts distributed under his/her Elective Deferral
Agreement pursuant to this Section shall:
(a) be made to the
Participant as soon as reasonably practical following the specified
date, and in any event within 90 days thereof; and
(b) immediately
reduce the Participant’s Account by the amount of such
distribution for purposes of any further income accrual and for
subsequent distributions.
6.5 Payment
Upon Unforeseeable Emergency. Notwithstanding any other
provision of this Plan, in the event of an Unforeseeable Emergency,
the Participant may, upon approval by the Committee, receive a
distribution from his/her Account, or receive acceleration of a
payment that had previously commenced, in an amount not to exceed
the lesser of (a) the amount in the Participant’s
Account at the time of the Unforeseeable Emergency; or (b) the
amount reasonably necessary to satisfy the Unforeseeable Emergency
(which may include amounts necessary to pay any Federal, state,
local or foreign income taxes or penalties reasonably anticipated
to result from the distribution).
6.6
Distribution of Discretionary Credits . The vested amount of
any Discretionary Credits granted hereunder (including earnings
thereon) shall be distributed to a Participant (or the
Participant’s Beneficiary in the event of the
Participant’s death) in the form elected by the Participant
under Section 6.3(b) during the annual election period
applicable to the year in which the Discretionary Credit is granted
(or in the form of a single lump sum payment if no such election
was made). Such payment will be made or commence as soon as
reasonably practical following the earlier of Participant’s
Retirement, Other Termination or death, and in any event within
90 days thereof.
6.7
Responsibility for Distributions and Withholding of Taxes.
The Committee will furnish information to the Company concerning
the amount and form of distribution to any
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Participant so
that the Company may make, or cause the Trust to make, the
distribution required. The Company shall have the right to deduct
from all payments made under the Plan any federal, state or local
taxes required by law to be withheld with respect to such payments.
However, any and all taxes payable with respect to any distribution
or benefit hereunder shall be the sole responsibility of the
Participant, not of the Company, whether or not the Company shall
have withheld or collected from the Participant any sums required
to be so withheld or collected in respect thereof and whether or
not any sums so withheld or collected shall be sufficient to
provide for any such taxes. Without limitation of the foregoing,
and except as may otherwise be provided in any separate employment,
severance or other agreement between the Participant and the
Company, the individual Participant or Surviving Spouse, as the
case may be, shall be solely responsible for payment of any excise,
income or other tax imposed for any reason, including (a) upon
any payment hereunder which may be deemed to constitute an
“excess parachute payment” pursuant to Code section
4999, (b) based upon a theory that any additional or excise
tax is required under Code section 409A, or (c) based upon any
theory of “constructive receipt” of any lump sum or
other amount hereunder.
6.8 Forfeiture
Upon Termination for Cause. In the event, and at the time of, a
distribution upon Re
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