EXHIBIT 10.02
EMPLOYEE BENEFITS TRANSITION
AGREEMENT
This Employee Benefits Transition
Agreement (“Agreement”) is entered into by and between
Valero Energy Corporation (“VEC”), Valero GP Holdings,
LLC (“Holdings”) and Valero GP, LLC (“GP”)
to be effective as of July 1, 2006.
WHEREAS, GP is a wholly-owned
subsidiary of Holdings and, prior to the transactions referenced
herein, Holdings has been an indirect wholly-owned subsidiary of
VEC; and
WHEREAS, pursuant to a series of
public offerings, VEC intends to sell its ownership interest in
Holdings to public unitholders; and
WHEREAS, the first such public
offering (“Initial Tranche”) became effective on July
19, 2006, at which time Holdings and (as a result of
Holdings’ ownership, GP) ceased to be within the controlled
group of VEC, as contemplated under Internal Revenue Code section
414(b); and
WHEREAS, VEC, Holdings and GP have
made certain provisions for, and certain agreements with respect
to, the transition of employee benefit plans covering employees of
GP in connection with such transactions;
WHEREAS, VEC, Holdings and GP have
agreed that VEC and certain of its wholly owned subsidiaries (the
“VEC Subsidiaries”) will transfer to Holdings related
liabilities and assets, such transfer to relate to whichever entity
holds such liability; and
WHEREAS, VEC, Holdings and GP desire
to enter into this Agreement in order to confirm and memorialize
such agreements.
NOW, THEREFORE, the parties hereby
agree as follows:
1.
Definitions
. In
addition to the terms defined elsewhere in this Agreement, the
following terms, when used herein, shall have the following
meanings:
“COBRA” shall mean the
continuation coverage requirements for “group health
plans” under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as
codified in section 4980B of the Code and sections 601 through 608
of ERISA.
“Code” shall mean the
Internal Revenue Code of 1986, as amended from time to
time.
“DOL” shall mean the
Department of Labor.
“Eligible GP Employees”
shall mean individuals who, as of July 1, 2006, are employees of
GP, as well as any other individuals who are transferred from VEC
or any of its affiliates to GP on or before the effective date of
the Final Tranche.
“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended from
time to time.
“Final Tranche” shall
mean the effective date of the final sale by VEC of its equity
ownership interest in Holdings, whether by public offering, private
placement or otherwise, at which time it is contemplated that VEC
shall cease to have any equity ownership interest in
Holdings.
“GP Plans” shall mean
each of the employee benefit plans and programs to be adopted and
maintained by GP as contemplated herein.
“IRS” shall mean the
Internal Revenue Service.
“QDRO” shall mean a
domestic relations order which qualifies under section 414(p) of
the Code and section 206(d) of ERISA.
“QMCSO” shall mean a
domestic relations order which qualifies under section 609(a) of
ERISA.
“VEC Employees” shall
mean all employees of VEC or any of its affiliates other than
Eligible GP Employees.
2.
General Support and
Cooperation . The parties agree, as
a general matter, that they shall fully cooperate with each other
in all reasonable respects in the design, adoption, amendment,
implementation, and administration of the employee benefit plans
and programs, as well as the other matters, contemplated
herein. In furtherance but not in limitation of this general
provision, each party shall provide the other party with such
records, data and information as may be reasonably necessary in
order to carry out the intent of this Agreement.
Additionally, VEC shall, at its cost and expense, assist GP in the
design, preparation and initial implementation of each of the GP
Plans, such assistance to include reasonable access to appropriate
individuals within the human resources and legal functions of
VEC. Notwithstanding anything else provided herein, payment
of all costs associated with the design, preparation and initial
implementation of each of the GP Plans contemplated herein shall be
borne by VEC, including but not limited to related legal and
actuarial fees.
3.
No Limitation on Right to Amend
Plans . Notwithstanding any
provision of this Agreement, nothing herein shall be interpreted or
construed to limit the right of either VEC or GP to amend any of
their respective employee benefit plans in whole or in part, or to
terminate any such plan or program, at any time, and nothing herein
is intended to require VEC or GP to continue to maintain any of the
plans or programs described herein. This Agreement is not
intended, and shall not be construed, to constitute an amendment of
any plan or program of VEC or GP, nor shall this Agreement provide
any Eligible GP Employee, VEC Employee, or any other
individual any third party beneficiary rights of any
kind.
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4.
Term . Each of the
transition services and arrangements provided for herein shall
continue through the earlier of its completion or the Final
Tranche; provided that the parties may agree to extend any of the
services and arrangements beyond the effective date of the Final
Tranche by mutual agreement, and provided further that nothing in
this Agreement shall be deemed to alter or diminish any of the
services provided by affiliates of VEC to GP or any of its
affiliates pursuant to that certain Third Amended and Restated
Services Agreement dated as of January 1, 2006 among Diamond
Shamrock Refining and Marketing Company, Valero Corporate Services
Company, Valero L.P., Valero Logistics Operations, L.P., Riverwalk
Logistics, L.P. and GP, as may be amended and restated from time to
time.
5.
Pension Plan
.
(a)
GP Pension Plan
. GP has adopted a defined
benefit pension plan (“GP Pension Plan”) effective as
of July 1, 2006, to cover Eligible GP Employees, as well as other
individuals subsequently employed by GP and determined to be
eligible under the terms of the GP Pension Plan. The GP
Pension Plan provides all Eligible GP Employees with service credit
for purposes of vesting and eligibility for all service credited by
VEC under the Valero Energy Corporation Pension Plan (“VEC
Pension Plan”) for such purposes. Additionally, Final
Average Salary (as defined in the GP Pension Plan) includes
eligible compensation earned by Eligible GP Employees while covered
under the VEC Pension Plan, as well as eligible compensation earned
with GP after July 1, 2006.
(b)
VEC Pension Plan
. Effective as of July 1,
2006, GP shall cease to be a participating employer under the VEC
Pension Plan and all Eligible GP Employees shall no longer be
eligible to accrue additional credited service for purposes of
accruing additional benefits under the VEC Pension Plan. VEC shall
amend the VEC Pension Plan to provide that, for purposes of
calculating the benefits of each Eligible GP Employee, Final
Average Salary (as defined in the VEC Pension Plan) shall include
all eligible compensation earned by the Eligible GP Employee while
employed by GP (or an affiliate of GP provided, and for so long as,
such affiliate maintains a traditional formula-based defined
benefit pension plan) following the effective date of this
Agreement and prior to the earlier of the date that the Eligible GP
Employee commences his/her benefit under the VEC Pension Plan, or
separates from service from GP. GP or its affiliate, as
appropriate, shall provide to VEC an affidavit to be certified by
an appropriate representative setting forth the amount of earned
compensation and years of service with the respective entity to be
used in determining Final Average Salary as contemplated in the
preceding sentence. VEC shall amend the VEC Pension Plan further to
provide that vesting service under the VEC Pension Plan shall
include all service with GP following the effective date of this
Agreement prior to the date that the Eligible GP Employee commences
his/her benefits under the VEC Pension Plan.
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6.
Retiree Welfare
Benefits . GP
has adopted a retiree welfare benefit plan effective July 1, 2006
that will offer retiree coverage for medical, dental, prescription
drug, vision and life insurance benefits for eligible retirees of
GP, as determined by GP from time to time, beginning January 1,
2007. The parties agree that VEC will provide retiree welfare
benefits under the VEC retiree welfare benefit plan, as it
may be amended from time to time, for: (a) Eligible GP Employees
who: (i) as of July 1, 2006, are at least age fifty-five (55) and
have at least five (5) years of credited service recognized by VEC
under the VEC Pension Plan; or (ii) on or prior to December 31,
2006, are eligible for, and elect to begin receiving, a pension
benefit under the VEC Pension Plan and, coincident with such
pension benefit commencement, elect to commence retiree welfare
plan coverage.
7.
Active Employee Welfare
Benefits .
(a)
Welfare Plan Transition
Period . Health and
welfare benefit coverage for Eligible GP Employees, as well as
other individuals subsequently employed by GP and determined to be
eligible under the terms of the applicable welfare plan sponsored
by GP, and their eligible dependents, shall, during the period
beginning July 1, 2006 and ending December 31, 2006, or such other
date to which the parties may agree (“Welfare Plan Transition
Period”), continue to be provided under the VEC welfare
benefit plans, subject to the respective terms of such plans, as
they may be amended from time to time. VEC will also be
responsible for providing any required COBRA coverage for Eligible
GP Employees and dependents whose COBRA qualifying event occurs
during the Welfare Plan Transition Period, and for administering
any QMCSOs received during the Welfare Plan Transition
Period. With respect to the continuation of coverage during
the Welfare Plan Transition Period for the Eligible GP Employees
and their dependents, GP shall continue to be charged by VEC the
percentage of payroll attributable to the overall benefit costs as
determined on January 1, 2006 (such percentage being 50.6%, a
portion of which relates to the provision of welfare
benefits).
(b)
GP Welfare Plans
. As of the expiration of the
Welfare Plan Transition Period, GP will have established its
welfare benefit plans for Eligible GP Employees and their
dependents, as well as other individuals subsequently employed by
GP and determined to be eligible under the terms of the applicable
welfare plan sponsored by GP, and such individuals shall no longer
be eligible for coverage or benefits under the VEC welfare benefit
plans, except as may be required under COBRA for qualifying events
that occurred during the Welfare Plan Transition Period.
(c)
Special Provisions Regarding
Long-Term Disability/Health and Welfare Benefits
. Consistent with the
foregoing provisions of this Section 7, VEC shall continue to
provide long-term disability (“LTD”) pay continuance
coverage to Eligible GP Employees during the Welfare Plan
Transition Period under the VEC LTD plan, as it may be amended from
time to time. However, GP will be obligated for the cost of
LTD benefits (pay continuance and/or health and welfare benefits,
as applicable) to those individuals identified on Schedule A during
the Welfare Plan Transition Period and going forward shall provide
such benefits under GP LTD and health and welfare plans. The
transfer of liabilities relating to the individuals
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identified on Schedule A are more
particularly described in Exhibit A. At the expiration of the
Wel
