VALERO ENERGY CORPORATION
AMENDED AND RESTATED
as of
January 1, 2009
VALERO ENERGY CORPORATION
AMENDED AND RESTATED STOCK OPTION PLAN
The original
Stock Option Plan (the “Original Plan”) was adopted
April 23, 1997 and amended as of July 30, 1997;
October 29, 1997; May 19, 1999; December 3, 2002;
December 31, 2004; October 1, 2005; and January 1,
2009. The plan is hereby amended and restated as of January 1,
2009 to fully incorporate all of the amendments to the Original
Plan to date.
1.
Introduction and Statement of Purpose.
This Stock Option
Plan (the “Plan”) of Valero Energy Corporation is
established for the purpose of giving additional incentive to Key
Employees of the Company by creating an opportunity for capital
accumulation. It is intended that the benefits available under this
Plan, when added to other benefits payable to these Key Employees,
will furnish total compensation that is competitive in the
industries in which the Company conducts its business and in which
the Company competes for employees. This Plan sets forth the basis
for the eligibility of Employees to participate in the Plan and the
terms and conditions regulating participation. The Plan provides
for the grant of Options to purchase Common Stock of Valero and
stock appreciation rights (“SARs”) which are
automatically exercised upon the exercise of an Option. The Options
granted under the Plan are and are intended to be
“non-qualified” options under the Internal Revenue Code
of 1986, as amended.
For the purposes
of this Plan, the following terms shall have the meanings stated
below unless a different meaning is plainly required by the context
or such term is otherwise defined herein.
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(a)
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“ Affiliate ”
shall mean (i) any entity that, directly or through one or
more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as
determined by the Committee.
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(b)
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“ Board of Directors
” shall mean the Board of Directors of Valero.
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(c)
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“ Cause ” shall
mean the (i) conviction of the Participant by a state or
federal court of a felony involving moral turpitude,
(ii) conviction of the Participant by a state or federal court
of embezzlement or misappropriation of funds of the Company,
(iii) the Company’s (or applicable Affiliate’s)
reasonable determination that the Participant has committed an act
of fraud, embezzlement, theft, or misappropriation of funds in
connection with such Participant’s duties in the course of
his or her employment with the Company (or applicable Affiliate),
(iv) the Company’s (or its applicable Affiliate’s)
reasonable determination that the Participant has engaged in gross
mismanagement, negligence or misconduct which causes or could
potentially cause material loss, damage or injury to the Company,
any of its Affiliates or their respective employees, or
(v) the Company’s (or applicable Affiliate’s)
reasonable determination that (a) the Participant has violated
any policy of the Company (or applicable Affiliate), including but
not limited to, policies regarding sexual harassment, insider
trading, confidentiality, substance abuse and/or conflicts of
interest, which violation could result in the termination of the
Participant’s employment, or (b) the Participant has
failed to satisfactorily perform the material duties of
Participant’s position with the Company or any of its
Affiliates.
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(d)
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“ Change of Control
” shall have the meaning specified in
Paragraph 4.12.
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(e)
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“ Committee ”
shall mean the persons administering this Plan from time to time
pursuant to Paragraph 6.1.
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(f)
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“ Common Stock ”
shall mean the common stock, par value $0.01 per share, of
Valero.
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(g)
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“ Company ” shall
mean Valero and its subsidiaries, and any successor or successors
to such entities.
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(h)
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“ Distribution
Agreement ” shall mean the Agreement and Plan of
Distribution, entered into between VEC and Valero, in connection
with the transactions contemplated by the Merger Agreement. “
Distribution ” and “ Time of Distribution
” shall have the meanings specified in the Distribution
Agreement.
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(i)
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“ EBA ” shall
mean the Employee Benefits Agreement, entered into between Valero
and VEC, in connection with the transactions contemplated by the
Merger Agreement.
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(j)
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“ Employee” shall
mean any person employed by the Company, including officers and
directors of the Company within the meaning of Section 16(a) of the
Exchange Act, but shall include a director only if also employed by
the Company on a full-time basis.
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(k)
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“ Exchange Act ”
shall mean the Securities Exchange Act of 1934, as amended and in
effect from time to time.
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(l)
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“ Exercise Date ”
— see Paragraph 4.3.
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(m)
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“ Expiration Date
” — see Paragraph 3.5.
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(n)
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“ Exercise Notice
” — see Paragraph 4.3.
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(o)
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“ Key Employee ”
shall mean any key Employee or prospective Employee of the Company
having responsibility for planning the Company’s operations,
controlling or managing its business activities, or advising the
management of the Company with respect to its operations and
business activities. The determination of “Key
Employees” for purposes of determining eligibility for
participation in this Plan, and the determination of “key
employees” for purposes of applying any New York Stock
Exchange Rule or determining eligibility for participation in any
other stock option plan of the Company, need not be
consistent.
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(p)
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“ Merger Agreement
” shall mean the Agreement and Plan of Merger, dated as of
January 31, 1997, between VEC, PG&E Corporation and
PG&E Acquisition Corporation.
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(q)
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“ Option ” or
“ Options ” shall mean an option or options
granted pursuant to this Plan to purchase shares of Common
Stock.
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(r)
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“ Option Agreement
” shall mean a written agreement entered into between Valero
and a Participant pursuant to Paragraph 3.9.
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(s)
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“ Option Price ”
— see Paragraph 3.5.
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(t)
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“ Option Share ”
shall mean one share of Common Stock purchased or which may be
purchased pursuant to an Option.
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(u)
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“ Participant ”
shall mean a Key Employee who is eligible to be granted an Option
under this Plan.
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(v)
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“ Plan ” —
see Paragraph 1.
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(w)
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“ Preference Share Purchase
Right ” shall mean one of the rights distributed pursuant
to the Rights Agreement to purchase 1/100 share of the Junior
Participating Preferred Stock, Series I, of Valero.
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(x)
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“ Ratio ” shall
mean the amount obtained by dividing the average of the daily high
and low trading prices per share of VEC Common Stock as reported on
the NYSE Composite Tape (the “NYSE Tape”) on each of
the last 15 consecutive full NYSE trading days (the
“Averaging Period”) ending on and including the trading
day preceding the Distribution Date (as defined in the Distribution
Agreement) (the “Company Price”) by the difference
between (a) the Company Price and (b) the product of
(1) the Per Share Merger Consideration (as defined in the
Merger Agreement) and (2) the average of the daily high and
low prices per share of Acquiror Common Stock (as defined in the
Merger Agreement) as reported on the NYSE Tape during the Averaging
Period.
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(y)
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“ Rights Agreement
” shall mean that certain Rights Agreement, dated as of
June 18, 1997, between Valero and Harris Trust and Savings
Bank, as Rights Agent, as amended and in effect from time to
time.
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(z)
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“ Restricted Optionee
” shall mean any person who is a “director” or
“officer” of Valero within the meaning of
Section 16(a) of the Exchange Act, together with any person
who is the beneficial owner of more than 10 percent of any
class of equity security of Valero registered under Section 12
of the Exchange Act.
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(aa)
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“ SAR ” or
“ stock appreciation right ” shall mean the
right, subject to the provisions of this Plan, to receive a payment
in cash equal to the difference between the specified Strike Price
of the SAR and the price of one share of the Common Stock at the
time specified in Paragraph 4.2.
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(bb)
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“ SEC ” shall
mean the Securities and Exchange Commission.
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(cc)
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“ Settlement Date
” — see Paragraph 4.3.
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(dd)
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“ Strike Price ”
shall mean the price per share of the Common Stock, determined
pursuant to Paragraph 3.7, from which the appreciation (if
any) with respect to an SAR shall be calculated.
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(ee)
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“ Tax Payment ”
— see Paragraph 4.3.
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(ff)
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“ Time of Distribution
” — see “ Distribution Agreement
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(gg)
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“Valero”
shall mean Valero Energy
Corporation, a Delaware corporation formerly known as Valero
Refining and Marketing Company , incorporated in 1981 under the
name Saber Energy, Inc .
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(hh)
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“ VEC ” shall
mean PG&E Gas Transmission, Texas Corporation, a Delaware
corporation formerly known as Valero Energy Corporation ,
incorporated in 1955 under the name Coastal States Oil and Gas
Company.
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(ii)
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“ VEC Common Stock
” shall mean the Common Stock, $1.00 par value, of
VEC.
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(jj)
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“ VEC Option Plans
” shall mean the following stock option plans previously
adopted by VEC: the VEC Stock Option Plan No. 3, the VEC Stock
Option Plan No. 4, and the VEC Stock Option Plan
No. 5.
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(kk)
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“ VRM Participant
” shall have the same meaning as given in the EBA.
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3.
Granting of Options and SARs to Employees.
3.1.
Selection of Participants . The Committee may
grant Options to purchase a specified number of Option Shares to
Key Employees of the Company selected by the Committee in its sole
and absolute discretion to become Participants. At or subsequent to
the time that an Option is granted to a Key Employee by the
Committee, the Committee may grant to that Key Employee a number of
SARs not exceeding the number of Option Shares that may be
purchased pursuant to such Option, provided, that no SARs shall be
granted with respect to Option Shares that have theretofore been
purchased by a Participant or to any Participant who, subsequent to
the date of grant of such Option, is no longer an Employee. Subject
to the full and final authority of the Committee to administer the
Plan and select Participants, the granting of Options and SARs and
the selection of Participants may be based on recommendations made
by the Chief Executive Officer of Valero.
3.2.
Exclusion of Committee Members . No member of
the Committee, while so serving, may be granted Options or SARs.
However, a Participant who has been granted an Option or SARs under
this Plan prior to serving on the Committee may, during such term
of service, continue to hold any Options and SARs and may exercise
any such Options and SARs and hold the Option Shares acquired upon
the exercise of any such Options, subject to the provisions of this
Plan.
3.3.
No Right to Participate . No Employee or
prospective Employee of the Company shall have the right to require
the Company or the Committee to make him or her a Participant under
this Plan.
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3.4. Certain
Options Granted Under Prior VEC Stock Option Plans . Pursuant
to the terms of the Merger Agreement, the EBA and the VEC Option
Plans, certain stock options previously awarded by VEC under the
VEC Option Plans will be automatically converted at the Time of
Distribution into Options to purchase Options Shares under this
Plan. Each such VEC option that is outstanding and unexercised
immediately prior to the Time of Distribution and is held by a
person who, immediately before the Time of Distribution, is a VRM
Participant, or their respective beneficiaries and dependents,
shall be converted in accordance with the EBA into Options to
purchase Option Shares under this Plan. Each such VEC option
eligible to be replaced by an Option under this Plan shall be
replaced with an Option with respect to a number of Option Shares
equal to the number of shares of VEC Common Stock subject to such
VEC option immediately before such replacement, multiplied by the
Ratio, rounded up to the nearest whole share as necessary, and
having a per-share exercise price equal to the per-share exercise
price of such VEC option immediately before such replacement,
divided by the Ratio (rounded down to the nearest whole cent as
necessary). The other terms and conditions of any such VEC option,
including the vesting and termination dates thereof, shall remain
unchanged, except as may be necessary to conform to the provisions
of the Plan or as otherwise may be determined by the
Committee.
3.5.
Determination of Option Provisions . When
granting Options, the Committee shall designate the number of
Option Shares the Employee may purchase under the Option, a date
upon which the Option will automatically expire (unless an earlier
termination date is established pursuant to Paragraph 8.3; the
earlier of such dates being referred to herein as the
“Expiration Date”), the price per share at which the
Option Shares may be purchased (the “Option Price”),
and the remaining terms and conditions of the Option. If the
Committee determines to grant SARs to the grantee or holder of an
Option, the Committee shall designate the number of SARs granted
and any terms and conditions pertaining thereto.
3.6.
Option Shares
and SARs Available for Grant .
(A) Subject to the provisions of Paragraphs 4.7 and 5,
the maximum number of shares of Common Stock that may be optioned
under this Plan shall be 2,000,000 shares. In addition, the number
of shares available to be optioned under this Plan may from time to
time be increased by such number of additional shares as the
Committee may deem necessary. However, in no event shall the total
number of shares optioned and sold under this Plan equal or exceed
20 percent of the “voting power outstanding,” as
defined in the NYSE’s Company Manual, Paragraph 312.
Shares of Common Stock optioned and sold under this Plan (and any
rights or other securities sold or delivered in accordance with
Paragraph 5.1) may be either authorized but unissued
securities or reacquired (treasury) securities.
(B) Subject
to the provisions of Paragraphs 4.7 and 5, the maximum number
of SARs that may be granted under this Plan shall be equal to the
maximum number of shares of Common Stock that may be optioned and
sold under this Plan.
(C) During
the term of this Plan, Valero will at all times reserve and keep
available, or have authorized but unissued, shares of Common Stock
sufficient to satisfy the requirements of this Plan. The inability
of Valero to obtain, from any regulatory body having jurisdiction,
any authority deemed by Valero’s counsel to be necessary to
the lawful issuance and sale of Common Stock hereunder, shall
relieve the Company of any liability in respect of the nonissuance
or sale of such Common Stock as to which such requisite authority
shall not have been obtained.
3.7.
Limitations Regarding Option Price and Strike Price
. The Option Price for any Option Share shall be as specified by
the Committee in its sole discretion, but shall not be less than
(a) the average of the “high” and
“low” reported sales price per share of Common Stock on
the date of grant as reported in the New York Stock Exchange
— Composite Transactions listing or such other listing or
quotation medium as the Committee may later designate, or if there
are no sales on such date, on the next following day on which there
are sales, or (b) in the event that the Common Stock is not
listed for trading on the NYSE, an amount determined in accordance
with standards adopted by the Committee. The Strike Price at which
an SAR is granted shall be equal to the Option Price of the Option
Shares to which such SAR is related.
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3.8.
Limitation Regarding Option Period . The Plan
shall continue indefinitely. However, no Option granted under this
Plan shall have a stated Expiration Date that is more than
10 years and 30 days following its date of grant. Subject
to the provisions of Paragraph 4.11, an Option and any
associated SARs shall lapse and be automatically forfeited upon the
earlier of the Expiration Date (i) as set forth in the Option
Agreement pursuant to which such Option and any associated SARs are
granted, or (ii) as established pursuant to
Paragraph 8.3, unless an Exercise Notice is delivered to
Valero on or before the Expiration Date.
3.9.
Option Agreements . Options and SARs shall be evidenced
by Option Agreements having such terms and provisions, not
inconsistent with this Plan, as the Committee deems advisable.
Option Agreements need not be uniform. Promptly following each
determination by the Committee to grant an Option or SARs to a Key
Employee, the Committee shall cause Valero to enter into an
appropriate Option Agreement (or, in the case of a grant only of
SARs, an amendment to an existing Option Agreement) with such Key
Employee. No Key Employee or other person claiming by, through or
under a Key Employee shall be entitled to exercise any Option or
SAR until an appropriate Option Agreement (or amendment thereto)
shall have been executed by Valero and the Key Employee. In the
event that a Key Employee of the Company is granted an Option or
SARs by the Committee but for any reason, including but not limited
to death or disability, does not actually enter into a fully
executed Option Agreement (or appropriate amendment thereto) with
Valero, such Key Employee shall not be deemed a Participant with
respect to such Option or SARs and neither such Key Employee nor
any person claiming by, through or under such Key Employee shall be
entitled under any circumstances to exercise such Option or
SARs.
3.10
Provisions Regarding Prospective Employees .
If a prospective Employee of the Company is granted an Option or
SARs pursuant to this Plan prior to actually commencing employment
with the Company but for any reason, including, but not limited to,
death or total and permanent disability, does not actually commence
employment with the Company, such person shall not be deemed a
Participant for any purpose of this Plan and neither such person
nor any person claiming by, through or under such person shall be
entitled under any circumstances to exercise such Option or SARs.
Upon actually commencing employment with the Company, such a
prospective Key Employee will then be deemed a Participant for all
purposes of this Plan, and will then, but only then, be deemed
solely for purposes of this Plan to have been continually employed
by the Company from the date of grant of the Option to the date of
commencement of employment.
4.
Exercise of Options and SARs.
4.1.
Exercise of Options . Any Option and any
associated SARs shall be exercisable at such time and in such
amounts, either as to all of the Option Shares covered thereby or
in installments, as is provided in the Participant’s Option
Agreement or as may otherwise be provided in this Plan. An
installment option may allow the purchase of all or any part of the
Option Shares on a specified installment date or dates, and the
subsequent purchase of any unpurchased Option Shares after such
installment date(s) and through the Expiration Date. However, no
Option may be exercised with respect to a fractional
share.
4.2.
Automatic Exercise of SARs, Settlement Price for SARs
. SARs may not be exercised except simultaneously with the exercise
of an Option. A Participant or other person exercising an Option
shall be deemed to have automatically exercised on the Exercise
Date that number of related SARs equal to the number of Option
Shares purchased, not exceeding the lesser of (a) the
number
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