| (b) | continued welfare benefits for two years (three years for Messrs. Gorder and Ciskowski); and (c) up to $25,000 of outplacement services.
| | (2) | We assumed each officer’s compensation at the time of each triggering event to be as stated below. The listed salary is the executive officer’s rate of pay as of December 31, 2016. The listed bonus amounts for Messrs. Gorder, Ciskowski, and Browning represent the highest bonus earned by the executive in any of fiscal years 2014, 2015, or 2016 (the three years prior to the assumed change of control). The listed bonus amounts for Messrs. Riggs and Simmons represent the target bonus in effect prior to the assumed change of control. |
| | | | | | | Name | | Salary | | Bonus | | Joseph W. Gorder | | $1,450,000 | | $3,900,000 | | Michael S. Ciskowski | | $890,000 | | $1,859,000 | | R. Lane Riggs | | $640,000 | | $512,000 | | Jay D. Browning | | $595,000 | | $920,000 | | Gary K. Simmons | | $565,000 | | $367,250 |
| | (3) | The executive is entitled to coverage under welfare benefit plans (e.g., health, dental, etc.) for two years (threeyearsfor Messrs. GorderMr. Gorder); and Ciskowski) following the date of termination.
|
| | (4)(c) | For Messrs. Gorder, Ciskowski, and Browning, upon a changeup to $25,000 of control of Valero, the vesting periods on outstanding stock options and shares of restricted stock are automatically accelerated to the date of the change of control. For Messrs. Riggs and Simmons, the vesting periods on outstanding stock options and shares of restricted stock are accelerated following a change of control upon the executive’s termination of employment other than (i) for cause, or (ii) voluntary termination by the executive other than for “good reason” or retirement. For stock options, the amounts stated in the table represent the assumed cash value of the accelerated options derived by multiplying (a) the difference between $68.32 (the closing price of Common Stock on the NYSE on December 30, 2016), and the options’ exercise prices, times (b) the number of option shares. For shares of restricted stock, the amounts stated in the table represent the product of (a) the number of shares whose restrictions lapsed, and (b) $68.32 (the closing price of Common Stock on the NYSE on December 30, 2016).outplacement services. |
| | (5) | Performance shares granted in 2014 and thereafter do not vest automatically upon the date of a change of control of Valero. Instead, for these performance shares, if an executive’s employment with Valero is terminated following a change of control, the unvested performance shares held by the executive will vest on a partial, pro rata basis on the date of his termination of employment. Automatic acceleration of the vesting of performance shares upon a change of control of Valero was possible only for the final tranche of the outstanding performance shares awarded in 2013. (This final tranche of the 2013 performance shares vested on January 26, 2017, and the performance shares are no longer outstanding.)
|
(footnote (5) continues on the following page)
Footnotes for Potential Payments Under Change of Control Severance Agreements table (cont.):
footnote (5) continued
The amounts disclosed in the table assume that a change of control occurred December 31, 2016. For the final tranche of performance shares awarded in 2013 (which was outstanding on December 31, 2016), the amounts included in the table represent the product of (a) the number of performance shares subject to accelerated vesting because of the assumed change of control, times 200%, times (b) $68.32 (the closing price of Common Stock on the NYSE on December 30, 2016).
For outstanding performance shares awarded in 2014, the amount included in the table represents a pro rata payout of common shares based upon the officer’s 24 months of service during the shortened performance periods ending December 31, 2016 (pro rata shares times $68.32).
For outstanding performance shares awarded in 2015, the amount included in the table represents a pro rata payout of common shares based upon the officer’s 12 months of service during the shortened performance periods ending December 31, 2016 (pro rata shares times $68.32).
For outstanding performance shares awarded in 2016, the amount included in the table is zero because the first measurable performance period for the shares would begin January 1, 2017, and the officer will have zero months of service during any measurable performance period; therefore zero shares of Common Stock would be earned.
| | (6) | If employment is terminated by reason of death or disability, the officer’s estate will be entitled to receive a lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a prorated bonus amount earned per the terms of the agreement. In the case of disability, the officer would be entitled to disability and related benefits at least as favorable as those provided by Valero under its programs during the 120 days prior to the officer’s termination of employment. |
| | (7) | If the officer voluntarily terminates employment other than for “good reason,” he or she will be entitled to a lump sum cash payment equal to any accrued and unpaid salary and vacation pay plus a prorated bonus amount earned per the terms of the agreement (proratedagreement. |
EXECUTIVE COMPENSATION Footnotes for Potential Payments Under Change of Control Severance Agreements tables (cont.): | (2) | We assumed each officer’s compensation at the time of the triggering event to be as stated below. The listed salary is the executive officer’s rate of pay as of Dec. 31, 2019. The listed bonus amounts for Mr. Gorder and Ms. Titzman represent the highest bonus earned by the executive in any of fiscal years 2017, 2018, or 2019 (the three years prior to the assumed change of control). The listed bonus amounts for Messrs. Riggs, Fraser, and Simmons represent the target bonus in effect prior to the assumed change of control. |
| | | | | | | | | | | | | Name | | Salary | | | Bonus | | | | | Joseph W. Gorder | | | 1,745,000 | | | | 4,625,000 | | | | | Donna M. Titzman | | | 725,000 | | | | 842,000 | | | | | R. Lane Riggs | | | 840,000 | | | | 840,000 | | | | | Jason W. Fraser | | | 600,000 | | | | 480,000 | | | | | Gary K. Simmons | | | 650,000 | | | | 422,500 | |
| (3) | The executive is entitled to coverage under health and welfare benefit plans (e.g., health, dental, etc.) for two years (three yearsfor Mr. Gorder) following the date of termination. |
| (4) | For Mr. Gorder and Ms. Titzman, upon a change of control of Valero, the vesting periods on outstanding stock options and shares of restricted stock are automatically accelerated to the date of termination; in this example, we assumed that the officers’ bonuses for the yearchange of termination were paid at year-end). In such an event for Mr.control. For Messrs. Riggs, Fraser, and Mr. Simmons, the restrictionvesting periods on their outstanding equity awards will not bestock options and shares of restricted stock are accelerated and they will not be entitled tofollowing a change of control upon the executive’s termination of employment (double trigger) so long as the termination is (i) other than for cause, in the case of involuntary termination, or (ii) for “good reason,” in the case of voluntary termination. |
| There are no values presented in the foregoing tables for accelerated vesting of stock options because all of the stock options held by our NEOs are fully vested. |
| For shares of restricted stock, the amounts stated in the table.table represent the product of (a) the number of shares for which vesting is accelerated, and (b) $93.65 (the closing price of Common Stock on the NYSE on Dec. 31, 2019). |
| (5) | Outstanding performance shares do not vest automatically upon a change of control of Valero. Instead, accelerated vesting of performance shares occurs when the executive’s employment with Valero is terminated following a change of control (double trigger). In that event, the unvested performance shares held by the officer will vest on a partial,pro rata basis on the date of the officer’s termination of employment. |
(8) | The amounts disclosed in the table assume that a change of control occurred Dec. 31, 2019. For outstanding performance shares awarded in 2017, the amount included in the table represents apro rata payout of common shares based upon the officer’s 24 months of service during the shortened performance period ending Dec. 31, 2019 (pro rata shares times $93.65, the closing price of Common Stock on the NYSE on Dec. 31, 2019), assuming a payout at 100%. |
| For outstanding performance shares awarded in 2018, the amount included in the table represents apro rata payout of common shares based upon the officer’s 12 months of service during the shortened performance periods ending Dec. 31, 2019 (pro rata shares times $93.65), assuming a payout at 100%. |
| For outstanding performance shares awarded in 2019, the amount included in the table is zero because the first measurable performance period for the shares would begin Jan. 1, 2020, and the officer will have zero months of service during any measurable performance period; therefore zero shares of Common Stock would be earned. |
| (6) | The agreements provide for a three-year term of employment following a change of control, and generally provide that the officer will continue to enjoy compensation and benefits per the terms in effect prior to the change of control. In addition, for Messrs.Mr. Gorder Ciskowski, and Browning,Ms. Titzman, all outstanding (i) stock options (ii)and shares of restricted stock and (iii) performance shares awarded before 2014 will vest on the date of the change of control (see footnotesfootnote (4) & (5) above). |
| | | | | | 64 | |  | | |
DIRECTOR COMPENSATION This table summarizes compensation earned by our directors for the year ended December 31, 2016. | | | | | | | | | | | | | | Fees Earned or Paid in Cash ($) | | Stock Awards ($)(1) | | Total ($) | Jerry D. Choate (retired May 12, 2016) | | 60,000 |
| | — |
| | 60,000 |
| | H. Paulett Eberhart | | 60,000 |
| | 141,680 |
| | 201,680 |
| | Joseph W. Gorder | | — |
| | — |
| | (2 | ) | | Kimberly S. Greene | | 60,000 |
| | 141,680 |
| | 201,680 |
| | Deborah P. Majoras | | 140,000 |
| | 170,038 |
| | 310,038 |
| | Donald L. Nickles | | 120,000 |
| | 170,038 |
| | 290,038 |
| | Philip J. Pfeiffer | | 120,000 |
| | 170,038 |
| | 290,038 |
| | Robert A. Profusek | | 145,000 |
| | 170,038 |
| | 315,038 |
| | Susan Kaufman Purcell | | 120,000 |
| | 170,038 |
| | 290,038 |
| | Stephen M. Waters | | 120,000 |
| | 170,038 |
| | 290,038 |
| | Randall J. Weisenburger | | 140,000 |
| | 170,038 |
| | 310,038 |
| | Rayford Wilkins, Jr. | | 140,000 |
| | 170,038 |
| | 310,038 |
|
in 2019. | | | | | | | | | | | | | | | | | | | Fees Earned or Paid in Cash ($) | | Stock Awards ($) (1) | | Total ($) | H. Paulett Eberhart | | | | 130,000 | | | | | 175,000 | | | | | 305,000 | | Joseph W. Gorder | | | | — | | | | | — | | | | | (2 | ) | Kimberly S. Greene | | | | 130,000 | | | | | 175,000 | | | | | 305,000 | | Deborah P. Majoras | | | | 150,000 | | | | | 175,000 | | | | | 325,000 | | Eric D. Mullins | | | | — | | | | | — | | | | | (3 | ) | Donald L. Nickles | | | | 130,000 | | | | | 175,000 | | | | | 305,000 | | Philip J. Pfeiffer | | | | 130,000 | | | | | 175,000 | | | | | 305,000 | | Robert A. Profusek | | | | 160,000 | | | | | 175,000 | | | | | 335,000 | | Stephen M. Waters | | | | 130,000 | | | | | 175,000 | | | | | 305,000 | | Randall J. Weisenburger | | | | 150,000 | | | | | 175,000 | | | | | 325,000 | | Rayford Wilkins, Jr. | | | | 150,000 | | | | | 175,000 | | | | | 325,000 | |
Footnotes to Director Compensation table : | | | (1) | The amounts shown represent the grant date fair value of stock unit awards granted in 2016,2019, computed in compliance with FASB ASC Topic 718. In 2016, each of our non-employee directors who was re-elected to the Board on May 12, 2016 (the date of our 2016 annual stockholders meeting), received a grant of 3,069 shares of restricted Common Stock. Ms. Eberhart and Ms. Greene received a pro rata grant of 2,404 restricted shares in connection with their appointment to the Board as new directors in 2016. Valero did not grant stock options to any director in 2016.2019. The following table presents for each non-employee director nominee the number of unvested restricted shares of Common Stock and stock units held as of DecemberDec. 31, 2016.2019. There are no outstanding stock options (vested or unvested) held by any of our non-employee directors. |
| | | | | | | | | | | | Name | | Unvested Restricted Stock | | Unvested Stock
Units | H. Paulett Eberhart | | | | 903 | | | | | 2,164 | | Kimberly S. Greene | | | | 903 | | | | | 2,164 | | Deborah P. Majoras | | | | 903 | | | | | 2,164 | | Eric D. Mullins | | | | — | | | | | — | | Donald L. Nickles | | | | 903 | | | | | 2,164 | | Philip J. Pfeiffer | | | | 903 | | | | | 2,164 | | Robert A. Profusek | | | | 903 | | | | | 2,164 | | Stephen M. Waters | | | | 903 | | | | | 1,933 | | Randall J. Weisenburger | | | | 903 | | | | | 2,164 | | Rayford Wilkins, Jr. | | | | 903 | | | | | 2,164 | |
| | | | | Name | | Unvested Restricted Stock | H. Paulett Eberhart | | 2,404 |
| Kimberly S. Greene | | 2,404 |
| Deborah P. Majoras | | 5,979 |
| Donald L. Nickles | | 5,979 |
| Philip J. Pfeiffer | | 5,979 |
| Robert A. Profusek | | 5,979 |
| Susan Kaufman Purcell | | 5,979 |
| Stephen M. Waters | | 5,979 |
| Randall J. Weisenburger | | 5,979 |
| Rayford Wilkins, Jr. | | 5,979 |
|
| | | (2) | Mr. Gorder did not receive any compensation as director of Valero in 2016.2019. His compensation for service as an executive officer in 20162019 is presented earlier in this proxy statement in the compensation tables for our named executive officers. |
In 2016 our| (3) | Mr. Mullins joined the Board on Jan. 23, 2020. |
Our non-employee directors earnedearn an annual cash retainer of $120,000.$130,000. Valero pays an annual retainer in lieu of separate meeting or committee fees. In addition to the retainer, in 2019, directors who chairchaired the Audit, Compensation, and Nominating/Governance and Public Policy Committees earned an additional
$20,000 $20,000 cash payment for their service as chair,Chair, and the director who served as the designated Lead DirectorMr. Profusek earned an additional $25,000$30,000 cash payment for his service in this role.as Lead Director. Directors are reimbursed for expenses of meeting attendance. Directors who are employees of Valero do not receive compensation for serving as directors.
In addition to the annual cash payments, in 2019, each non-employee director who iswas re-elected on the date of our annual stockholders meeting receives areceived an equity grant in the form of restricted shares of Common Stockstock units (described below) valued at $170,000, with vesting scheduled$175,000 (calculated pursuant to occur over three years.FASB ASC Topic 718). Grants of equity awards supplement the cash compensation paid to our non-employee directors and serve to increase our
DIRECTOR COMPENSATION directors’ identification with the interests of our stockholders through ownership of Common Stock.
Non-employee directors are expected to hold shares of Common Stock having a value equal to five times the annual cash retainer and have five years from the date of their initial election to the Board to meet that guideline.Each stock unit represents the right to receive one share of Valero Common Stock, and is scheduled to vest (become nonforfeitable) in full on the date of Valero’s next annual meeting of stockholders for the election of directors. Directors may elect to defer receipt of the common shares for an additional one-year following the vesting date of the stock units. The stock unit award includes a dividend equivalent award, representing the right to receive, on the vesting date of the stock unit award, a payment in cash in an amount equal to the cumulative amount of dividends paid to holders of Common Stock during the period when the stock unit remained outstanding prior to vesting — calculated as if each stock unit held by the director was an outstanding share of Common Stock. The Compensation Committee reviews our director compensation program at least annually with assistance and input from our compensation consultant. The annual review includes an assessment of the director compensation programs of our peers and of industry trends and developments. On September 20, 2016,Sept. 5, 2019, following our Compensation Committee’s review of our non-employee directorsdirector compensation program and the programs of our peers, the Board approvedadopted certain changes to our director compensation program. These changes, effective Jan. 1, 2020, are (i) an increase in the compensationvalue of annual equity awards to be paid$200,000, (ii) an increase in Lead Director pay to our non-employee directors.$35,000 per year, and (iii) an increase in committee chair pay to $25,000 per year. The increaseannual cash retainer of $130,000 for each director remained unchanged. The changes were approved to more closely alignsalign our program with that of our peers. peers and with general industry practice. The Board approved an increase in the directors’ annual cash retainer from $120,000 to $130,000, an increase in the value of the annual equity grant from $170,000 to $175,000, and an increase in the Lead Director’s annual cash retainer from $25,000 to $30,000. The increases were effective January 1, 2017.
On February 25, 2016, the Boardpreviously approved a limitation on the amount of equity compensation that may be paid to our non-employee directors in any year. The limitation was implemented via an amendment to our 2011 Omnibus Stock Incentive Plan.Plan (the same limitation is contained in the proposed 2020 Omnibus Stock Incentive Plan). The limitation provides that a non-employee director may not receive in any calendar year awards payable in shares of Common Stock that have a fair market value greater than $500,000 in the aggregate. We selected $500,000 as the amount of the limitation because we believe that it places a meaningful limit on awards to our non-employee directors. While the amount of equity compensation awarded to our non-employee directors in recent years has been considerably lower than this limit, we believe that setting a limitation at this level provides us with a reasonable degree of flexibility to make adjustments that we may in the future deem appropriate or necessary for our compensation program to remain competitive in the market. | | | | | | 66 | | | | |
The following disclosure are made pursuant to Item 402(u) of SEC Regulation S-K. The median of the annual total compensation of all employees of Valero for 2019, except our CEO, was $272,417, and the annual total compensation of our CEO, Mr. Gorder, for 2019 was $28,175,952 (as disclosed in the Summary Compensation Table). As a result, our CEO’s 2019 annual total compensation was 103 times that of the median annual total compensation of all employees of Valero. To determine the median of the annual total compensation of all employees, we first identified the median employee using the sum of base pay, annual bonus, and the grant date fair value of long-term incentive awards. Once the median employee was identified, we then determined the median employee’s annual total compensation as of Dec. 31, 2019 using the Summary Compensation Table methodology set out in Item 402(c)(2)(x) of SEC Regulation S-K. In determining our pay ratio for 2019, we referred to the same employee who was identified as our median employee as of Dec. 31, 2018. We determined that there have been no changes to our employee population or employee compensation arrangements in 2019 that we believe would significantly impact our pay ratio disclosure and thus require identification of a new median employee. Our total employee population (U.S. and non-U.S.) as of Dec. 31, 2019, was approximately 10,225 employees. To determine the median employee for purposes of this disclosure, following thede minimis exemption under Item 402(u)(4)(ii) of Regulation S-K, we excluded all of our employees in Peru (118 employees) and all of our employees in Mexico (16 employees); the excluded employees represent less than five percent of our total employees. We did not exclude any employees under the data privacy exemption of Item 402(u)(4)(i). | | | | | | | | | | | | Median Employee to CEO Pay Ratio | | | | | Median Employee ($) | | | CEO ($) | | Salary | | | 113,770 | | | | 1,745,000 | | Stock Awards | | | — | | | | 14,485,699 | | Non-Equity Incentive Plan Compensation | | | 14,030 | | | | 4,100,000 | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | | 109,770 | | | | 7,484,813 | | All Other Compensation | | | 34,847 | | | | 360,440 | | Total Compensation | | | 272,417 | | | | 28,175,952 | | | | Median Employee to CEO Pay Ratio | | | 1:103 | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS REVIEW
Review Our Board has adopted a Related Party Transaction Policy to establish procedures for the notification, review, approval, ratification, and disclosure of related party transactions. Under the policy, a related party transaction is a transaction, arrangement, or relationship in which (i) Valero (including any of its subsidiaries) was, is or will be a participant, (ii) the amount involved exceeds $120,000, and (iii) any “related person” had, has or will have a direct or indirect material interest. Under the policy, a related person means, generally, any person who would be deemed to be a “related person” as defined in Item 404 of SEC’s Regulation S-K. Under the policy, a related party transaction must be submitted to the Board’s Nominating/Governance and Public Policy Committee for review and approval. The policy is available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. We also have a conflictConflict of interest policyInterest Policy to address instances in which an employee or director’s private interests may conflict with the interests of Valero. The policy is published on our intranet website. We have a Conflicts of Interest Committee (composed of Valero employees) to help administer our conflicts policy and to determine whether any employee or director’s private interests may interfere with the interests of Valero. Conflicts of interest are also addressed in our Code of Business Conduct and Ethics. Any waiver of any provision of this code for executive officers or directors may be made only by the Board, and will be promptly disclosed as required by law or NYSE rule. | | | | | | 68 | | | | |
TRANSACTIONS WITH VALERO ENERGY PARTNERS LP
Relationship with VLP
Valero, through its subsidiaries, owns more than five percent of the common units Valero Energy Partners LP (VLP). Valero also owns, through its wholly owned subsidiary, the 2.0 percent general partner interest in VLP (the “General Partner”). The common units representing limited partner interests of VLP are listed for trading on the NYSE under the symbol “VLP.” References in this section of our proxy statement to “VLP” means Valero Energy Partners LP, one or more of its subsidiaries, or all of them taken as a whole. Our transactions with VLP are deemed to be related party transactions for purposes of these disclosures.
Mr. Gorder is Chairman of the Board and Chief Executive Officer of the General Partner. Mr. Riggs is a member of the board of directors of the General Partner. Mr. Browning is as an executive officer of the General Partner.
Distributions to Us and Other Payments from VLP
In 2016, we received $79.0 million in distributions from VLP with respect to our ownership of limited partner and general partner interests of VLP. On February 10, 2017, we received $26.0 million of distributions from VLP with respect to our limited partner and general partner interests.
Under VLP’s partnership agreement, VLP reimburses the General Partner and its affiliates, including Valero, for costs and expenses they incur and payments they make on behalf of VLP.
Agreements with VLP
2016 Contribution Agreements
Effective April 1, 2016, we entered into a contribution agreement with VLP under which we contributed to VLP a subsidiary that owns and operates a crude oil, intermediates, and refined petroleum products terminal supporting our McKee Refinery for total consideration of $240.0 million, which consisted of (i) a cash distribution to us of $204.0 million and (ii) the issuance to us of 728,775 common units of VLP and 14,873 general partner units of VLP; the common units and the general partner units had an aggregate value of $36.0 million.
Effective September 1, 2016, we entered into a contribution agreement with VLP under which we contributed to VLP our Meraux Terminal and Three Rivers Terminal for total consideration of $325.0 million, which consisted of (i) a cash distribution to us of $276.0 million and (ii) the issuance to us of 1,149,905 common units of VLP and 23,467 general partner units of VLP; the common units and the general partner units had an aggregate value of $49.0 million.
Omnibus Agreement
We have an amended and restated omnibus agreement with VLP, which addresses the following key matters:
the payment to us by VLP of an annual administrative fee of $12.5 million for our provision of certain services to VLP;
VLP’s obligation to reimburse us for certain direct or allocated costs and expenses that we may incur on behalf of VLP;
VLP’s right of first offer through December 16, 2018, to acquire certain of our transportation and logistics assets;
our right of first refusal to acquire certain of VLP’s assets; and
the parties’ indemnification obligations to one another.
So long as we control the General Partner, the omnibus agreement will remain in effect. If we cease to control the General Partner, either party may terminate the omnibus agreement, provided that the indemnification obligations will remain in effect in accordance with their terms.
Services and Secondment Agreement
Under our services and secondment agreement with the General Partner, as amended, certain of our employees are seconded to the General Partner to provide operational and maintenance services for certain pipelines and terminals of VLP, including routine operational and maintenance activities. During their period of secondment to the General Partner, the seconded employees are under the management and supervision of the General Partner.
The General Partner is required to reimburse us for the cost of the seconded employees, including their wages and benefits. If a seconded employee does not devote 100 percent of his or her time to providing services to the General Partner, the General Partner is required to reimburse us for only a prorated portion of such employee’s overall wages and benefits, based on the percentage of the employee’s time spent working for the General Partner. The services and secondment agreement will continue for an initial term of 10 years from the Service Date (as described in the agreement) with respect to each asset, and will extend automatically for successive renewal terms of one year each, unless terminated by either party per the terms of the agreement.
Tax Sharing Agreement
Under our tax sharing agreement with VLP, VLP is required to reimburse us for VLP’s share of state and local income and other taxes that we incur as a result of VLP’s tax items and attributes being included in a combined or consolidated state tax return filed by Valero. The amount of any such reimbursement is limited to any entity-level tax that VLP would have paid directly had VLP not been included in a combined group with Valero.
Lease Agreements
We have lease agreements with VLP with respect to the land on which certain VLP terminals are located. Generally, each lease agreement has an initial term of ten years with four automatic successive renewal periods of five years each. Either party may terminate each lease agreement after the initial term by providing written notice. We also have a ground lease agreement with VLP with an initial term of 20 years and no renewal periods. Initial base rents under these lease agreements are subject to annual inflation escalators, and VLP is required to pay us a customary expense reimbursement for taxes, utilities, and similar costs we incur related to the leased premises.
Commercial Agreements
We have entered into commercial agreements with VLP with respect to certain assets owned by VLP. Under these commercial agreements, VLP provides transportation and terminaling services to us. We have committed to pay VLP for minimum quarterly throughput volumes of crude oil and refined petroleum products, regardless of whether we physically deliver such volumes in any given quarter. These agreements have initial five-year terms, and under most of the agreements, we will have the option to renew the agreement with respect to each asset for one additional five-year term.
For the year ended December 31, 2016, we accounted for all of VLP’s revenues. VLP’s gross operating revenues for the year ended December 31, 2016, were $362.6 million.
PROPOSAL NO. 2— RATIFY APPOINTMENT OF KPMG LLP (Item (ITEM 2 on the proxy card) ON THE PROXY CARD)The Audit Committee of the Board determined on February 23, 2017,Feb. 26, 2020, to engage KPMG LLP (“KPMG”) as Valero’s independent registered public accounting firm for the fiscal year ending DecemberDec. 31, 2017.2020. KPMG has served as Valero’s independent registered public accounting firm for fiscal years ended December 31, 2004 and following. since 2004.The Audit Committee is directly responsible for the appointment, compensation determination, retention, and oversight of the independent auditors retained to audit Valero’s financial statements. The Audit Committee is responsible for the audit fee negotiations and fee approval associated with Valero’s retention of the independent auditing firm. The Audit Committee annually reviews and evaluates the qualifications, performance, and independence of Valero’s independent auditing firm, and reviews and evaluates the lead partner of the independent auditor team. In conjunction with the mandated rotation of the audit firm’s lead engagement partner, the Audit Committee is involved in the selection of the audit firm’s new lead engagement partner. To monitor auditor independence, the Audit Committee periodically considers whether there should be a rotation of the independent auditing firm. The members of the Audit Committee and the Board believe that the continued retention of KPMG to serve as Valero’s independent registered public accounting firm for the fiscal year ending DecemberDec. 31, 20172020, is in the best interests of Valero and its investors. Accordingly, the Board requests stockholder approval of the following resolution. “RESOLVED, that the appointment of the firm of KPMG LLP as Valero’s independent registered public accounting firm for the purpose of conducting an audit of the consolidated financial statements and the effectiveness of internal control over financial reporting of Valero and its subsidiaries for the fiscal year ending DecemberDec. 31, 20172020, is hereby approved and ratified.”
The Board recommends that the stockholders vote “FOR” this proposal. Representatives of KPMG are expected to be present at the Annual Meeting to respond to appropriate questions raised at the Annual Meeting or make appropriate statements at the Annual Meeting.
| | | Representatives of KPMG are expected to be present at the Annual Meeting to respond to appropriate questions raised at the Annual Meeting or make appropriate statements at the Annual Meeting. | | 
The Board recommends that the stockholders vote “FOR” this proposal. |
The affirmative vote of a majority of the voting power of the shares present in person or by proxy and entitled to vote is required for adoption of this proposal. If the appointment is not approved, the adverse vote will be considered as an indication to the Audit Committee that it should select another independent registered public accounting firm for the following year. Because of the difficulty and expense of making any substitution of public accountants so long after the beginning of the current year, it is contemplated that the appointment for 20172020 will be permitted to stand unless the Audit Committee finds other good reason for making a change.
KPMG LLP FEES The following table presents fees for services provided to us by KPMG for the years shown (in($ in millions). | | | | | | | | | | | | | 2016 | | 2015 | Audit Fees (1) | | $ | 7.5 |
| | $ | 7.2 |
| Audit-Related Fees (2) | | 0.3 |
| | 0.3 |
| | Tax Fees (3) | | — |
| | 0.2 |
| All Other Fees (4) | | 0.3 |
| | 0.1 |
| | total | | $ | 8.1 |
| | $ | 7.8 |
|
| | | | | | | | | | | | 2019 | | | 2018 | | Audit Fees (1) | | | 8.7 | | | | 9.0 | | Audit-Related Fees (2) | | | 0.4 | | | | 0.4 | | Tax Fees (3) | | | 0.2 | | | | 0.5 | | All Other Fees (4) | | | — | | | | — | | total | | | 9.3 | | | | 9.9 | |
Notes: | | | (1) | Represents fees for professional services rendered for the audit of the annual financial statements included in Valero’s annual reports on Form 10-K, review of Valero’s interim financial statements included in Valero’s Forms 10-Q, the audit of the effectiveness of Valero’s internal control over financial reporting, and services that are normally provided by the principal auditor ( e.g.(e.g., comfort letters, statutory audits, attest services, consents, and assistance with and review of documents filed with the SEC). In addition to the services listed above, KPMG served as the independent auditor of the financial statements included in the annual reports on Form 10-K of Valero Energy Partners LP (VLP) for the years ended December 31, 2016 and 2015, and the audit of the effectiveness of VLP’s internal control over financial reporting as of December 31, 2016 and December 31, 2015. KPMG’s fees relating to VLP audits for 2016 and 2015 were $2.075 million and $1.325 million, respectively. |
| | | (2) | Represents fees for assurance and related services that are reasonably related to the performance of the audit or review of Valero’s financial statements and not reported under the caption for Audit Fees. The fees listed above are related primarily to the audit of Valero’s benefit plans. |
| | | (3) | Represents fees for professional services rendered by KPMG for tax compliance tax advice, and tax planningconsulting services. For 2019 and 2018, the fees relate primarily to property tax consulting and compliance services. |
| | | (4) | RepresentsCategory represents fees for for professional services, if any, other than the services reported under the preceding captions. The fees shown were for advisory services. |
AUDIT COMMITTEE PRE-APPROVAL POLICY
Audit Committee Pre-Approval Policy The Audit Committee adopted a pre-approval policy to address the pre-approval of certain services rendered to Valero by its independent auditor. The text of that policy appears in Exhibit 99.01 to Valero’s Annual Report on Form 10-K for the year ended DecemberDec. 31, 2014. 2017.All of the services rendered by KPMG to Valero for 20162019 were pre-approved specifically by the Audit Committee or pursuant to our pre-approval policy. None of the services provided by KPMG were approved by the Audit Committee under the pre-approval waiver provisions of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. | | | | | | 70 | | | | |
REPORT OF THE AUDIT COMMITTEE FOR FISCAL YEAR 20162019 Management is responsible for Valero’s internal controls and financial reporting process. KPMG LLP (KPMG), Valero’s independent registered public accounting firm for the fiscal year ended DecemberDec. 31, 2016,2019, is responsible for performing an independent audit of Valero’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”)(PCAOB), and an audit of the effectiveness of Valero’s internal control over financial reporting in accordance with the standards of the PCAOB, and to issue KPMG’s reports thereon. The Audit Committee monitors and oversees these processes. The Audit Committee approves the selection and appointment of Valero’s independent registered public accounting firm and recommends the ratification of its selection and appointment to our Board.
The Audit Committee has reviewed and discussed Valero’s audited financial statements with management and KPMG. The committee has discussed with KPMG the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380 “Communication with Audit Committees”), as adopted byapplicable requirements of the PCAOB in Rule 3200T.and the SEC. The committee has received the written disclosures and the letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with KPMG that firm’s independence.
Based on the foregoing review, discussions, and other matters the Audit Committee deemed relevant and appropriate, the committee recommended to the Board that the audited financial statements of Valero be included in its Annual Report on Form 10-K for the year ended DecemberDec. 31, 2016,2019, for filing with the SEC.
Members of the Audit Committee: Randall J. Weisenburger, Chairman Susan Kaufman Purcell
The material in this Report of the Audit Committee is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference in any of Valero’s filings under the Securities Act or the Exchange Act, respectively, whether made before or after the date of this proxy statement and irrespective of any general incorporation language therein.
PROPOSAL NO. 3— ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS (Item (ITEM 3 on the proxy card) ON THE PROXY CARD)Our Board and our stockholders have determined to hold an advisory vote on executive compensation (“say-on-pay”) every year. Accordingly, we are asking stockholders to vote to approve the 20162019 compensation of our named executive officers as such compensation is disclosed pursuant to Item 402 of the SEC’s Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables, and other narrative compensation disclosures required by Item 402. This proxy statement contains all of these required disclosures.
We request the stockholders to approve the following resolution: “RESOLVED, that the compensation paid to Valero’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.” Because the vote on this proposal is advisory, it will not affect compensation already paid or awarded to any named executive officer and will not be binding on Valero, the Board, or the Compensation Committee. The Board and Compensation Committee, however, will review the voting results and take into account the outcome in determining future annual compensation for the named executive officers. | | | Proxies will be voted for approval of the proposal unless otherwise specified. Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. | |
The Board recommends that the stockholders vote “FOR” this proposal. |
| | | | | | 72 | | | | |
The Board recommends that the stockholders vote “FOR” this proposal. Proxies will be voted for approval of the proposal unless otherwise specified. Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal.
ADVISORY VOTE TO RECOMMENDAPPROVE THE FREQUENCY2020 OMNIBUSSTOCK INCENTIVE PLAN OF STOCKHOLDER VOTES (ITEM 4 ON EXECUTIVE COMPENSATION (Item 4 on the proxy card)
The SEC requires issuers, not less frequently than once every six calendar years, to provide a separate stockholder advisory vote to determine whether the advisory stockholder vote on compensation (as described in Proposal 3 above) will occur every one, two, or three years. We presented our first proposal for this recommendation at the annual meeting of stockholders held in 2011. THE PROXY CARD)We are therefore re-presenting this proposal at this year’s Annual Meetingasking stockholders to give stockholdersapprove the opportunityValero Energy Corporation 2020 Omnibus Stock Incentive Plan (the “2020 OSIP”). The Compensation Committee and the Board of Directors have approved the 2020 OSIP, subject to express their preferred frequency for an advisory vote on compensation.
When voting on this proposal, you may make your choice among one year, two years, three years, or abstain,approval by marking the box on your proxy card that corresponds to your choice.
Valero’s stockholders.The Board recommends that stockholders have an annual vote (“every year”) on executive compensation and requests that the stockholdersyou approve the following resolution.
“RESOLVED,that the stockholders recommendhereby approve the Valero Energy Corporation 2020 Omnibus Stock Incentive Plan. | | | The affirmative vote of a majority of the voting power of the shares present in person or by proxy and entitled to vote is required for adoption of this proposal. Pursuant to rules of the NYSE, brokers will not have discretion to vote on this proposal. | |
The Board recommends that
stockholders vote “FOR” this proposal. |
The purpose of the 2020 OSIP is to attract and retain the services of eligible individuals, to provide them with a proprietary interest in Valero, and to motivate them using stock-based incentives linked to long-range performance goals and the interests of Valero’s stockholders. Our employees, non-employee directors, and third-party services providers will be eligible to participate in the 2020 OSIP. As of Jan. 31, 2020, we had 10,222 employees and 10 non-employee directors. On March 4, 2020, the closing price of our Common Stock on the NYSE was $64.15 per share. With the 2020 OSIP, we are seeking approval for a total number of shares equal to the sum of: | (2) | any shares of Common Stock available for grant under the 2011 OSIP (defined below) as of the date when the 2020 OSIP is approved by Valero’s stockholders, plus |
| (3) | shares of Common Stock previously subject to awards under the 2011 OSIP or 2020 OSIP that are forfeited, terminated, canceled or rescinded, settled in cash in lieu of Common Stock, or exchanged for awards that do not involve Common Stock, or expire unexercised on or after the effective date of the 2020 OSIP. |
No awards or grants have been made under the 2020 OSIP, and no awards or grants will be made under the 2020 OSIP unless it is approved by the stockholders. We will register the shares to be issued from the 2020 OSIP on a registration statement on Form S-8 as soon as practicable after stockholder approval of the plan. If the 2020 OSIP is not approved by the stockholders, it will not become effective. We presently use our 2011 Omnibus Stock Incentive Plan (2011 OSIP) for stock-based awards. If stockholders approve the 2020 OSIP, no further awards will be made under the 2011 OSIP and it will be terminated. Additional information about our stock-based compensation plans is provided in this proxy statement under the caption, “Equity Compensation Plan Information.” As of Dec. 31, 2019, we had 7,740,665 shares available for issuance under the 2011 OSIP. As of Feb. 28, 2020, we had 7,202,491 shares available for issuance under the 2011 OSIP. The decrease is due primarily to the 2020 grants of annual long-term incentive awards made to our executive officers on Feb. 26, 2020. As shown in the following table, the total number of shares subject to outstanding stock options, restricted shares, performance shares and stock units under the 2011 OSIP as of Feb. 28, 2020 was 2,167,923.
PROPOSAL NO. 4—APPROVE THE 2020 OMNIBUS STOCK INCENTIVE PLAN The following provides information about outstanding equity awards under the 2011 OSIP as of Dec. 31, 2019, and Feb. 28, 2020. | | | | | | | | | | | | | | 2011 OSIP | | | Outstanding Stock Options | | | as of | | total # outstanding | | | weighted average exercise price | | | weighted average remaining term | | Dec. 31, 2019 | | | 349,462 | | | $ | 34.94 | | | | 3.33 yrs | | Feb. 28, 2020 | | | 349,462 | | | $ | 34.94 | | | | 3.17 yrs | | | | Total # of other outstanding equity awards | | | | | Restricted Stock | | | Performance Shares (target) | | | Stock Units | | Dec. 31, 2019 | | | 1,091,854 | | | | 499,857 | | | | 19,245 | | Feb. 28, 2020 | | | 1,267,275 | | | | 531,186 | | | | 20,000 | |
Dilution and Run Rate The 7,202,491 shares available under the 2011 OSIP as of Feb. 28, 2020, and the 8,580,000 new shares being requested for the 2020 OSIP, represent 1.76% and 2.10%, respectively, and 3.86% in the aggregate of our 408,932,677 common shares outstanding as of Feb. 28, 2020. No additional awards will be made under the 2011 OSIP upon approval of the 2020 OSIP by the stockholders. The following table describes the run rate with respect to equity awards issued under the 2011 OSIP. The run rate is determined by dividing the sum of (i) restricted shares granted, (ii) stock units granted, (iii) common shares earned upon the settlement of performance shares, and (iv) stock options granted, by the basic weighted-average total shares of our outstanding Common Stock for the pertinent year. A calculation of our run rate for the last three fiscal years appears below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fiscal Year | | Restricted Shares Granted | | | Stock Units Granted | | | Common Shares
Earned from
Settlement of
Performance Shares | | | Stock Options Granted | | | Total | | | Basic Weighted Average Common Shares Outstanding | | | Run Rate | | 2019 | | | 677,482 | | | | 19,245 | | | | 29,714 | | | | — | | | | 726,441 | | | | 413,225,530 | | | | 0.18 | % | 2018 | | | 628,908 | | | | 14,013 | | | | 217,485 | | | | — | | | | 860,406 | | | | 426,437,617 | | | | 0.20 | % | 2017 | | | 739,393 | | | | — | | | | 318,400 | | | | — | | | | 1,057,793 | | | | 441,619,203 | | | | 0.24 | % | | | | | | Three-Year Average Run Rate | | | | | | | | | | | | | | | | 0.21 | % |
Anticipated Awards to Participants Because awards under the 2020 OSIP would be granted at the discretion of the Compensation Committee, it is not possible for us to determine the amount of awards that Valero include, pursuantmay be granted from the 2020 OSIP to Section 14Athe named executive officers listed in the Summary Compensation Table or to any other potential participants. Summary The following summary of the material terms of the 2020 OSIP does not purport to be complete and is subject to and qualified in its entirety by reference to the complete text of the 2020 OSIP, which is attached to this proxy statement asAppendix A. If this summary conflicts with the terms of the Plan, the terms of the Plan will govern. In this summary: “shares” means Valero’s $0.01 par value common stock; “stock unit” means a unit or right whose value is based on the value of a share; “Plan” means the 2020 Omnibus Stock Incentive Plan; and “Committee” means the Compensation Committee of the Board. | | | | | | 74 | | | | |
PROPOSAL NO. 4—APPROVE THE 2020 OMNIBUS STOCK INCENTIVE PLAN Administration.The Plan is administered by the Committee. The Committee is composed of directors appointed by the Board who are non-employee directors, as defined by Rule 16b-3 of the Securities Exchange Act of 1934,1934. The Committee is authorized, subject to the terms of the Plan, to determine which participants will receive awards, the times when such awards will be made, the times when such awards will vest, the types of awards, the number of shares to be issued under the awards, and other terms and conditions of awards. Share Counting. All awards granted under the Plan will be counted against the aggregate number of shares that may be awarded under the Plan on a one-for-one basis. If an advisoryaward granted under the Plan is subsequently forfeited or cancelled without the payment of consideration, then, subject to the terms of the Plan, the shares allocable to the forfeited or cancelled portion of the award will be added back to the aggregate number available for grant under the Plan, and may again be subject to an award granted under the Plan. If, however, shares are delivered or tendered to Valero for repurchase to satisfy the exercise price of an option award, those shares may not be added back to the aggregate number of shares available for grants under the Plan. In addition, if any shares are withheld from issuance to satisfy tax obligations associated with an award, those shares will count against the aggregate number of shares available for future grants under the Plan. Limitations on Awards. The following limitations apply: The exercise price of stock options cannot be less than 100 percent of the fair market value of a share at the time the option is granted. The grant price of a stock appreciation right (“SAR”) cannot be less than 100 percent of the fair market value of a share at the time the SAR is granted. Repricing or the cashing out of stock options and SARs is not permitted, subject to limited exceptions in connection with certain extraordinary transactions affecting Valero as further specified in the Plan. No participant may receive during any calendar year awards that are to be settled in shares covering an aggregate of more than 1,000,000 shares. A non-employee director may not receive in any calendar year awards that are to be settled in shares having an aggregate fair market value that is greater than $500,000. No participant may receive during any calendar year awards that are to be settled in cash covering an aggregate of more than $20,000,000. The terms of awards may not exceed 10 years. The Plan does not contain an evergreen provision. Vesting. No award granted under the Plan shall become exercisable or vested prior to the one-year anniversary of the award’s date of grant; provided, however, that, such restriction shall not apply to awards granted under the Plan with respect to the number of shares which, in the aggregate, does not exceed five percent of the total number of shares that were authorized to be issued as awards under the Plan. Types of Awards. The Plan permits grants of: (i) restricted stock and restricted stock units; (ii) stock options (including incentive and non-qualified stock options); (iii) SARs; (iv) performance awards of cash, stock, or other securities; and (v) other stock-based awards (e.g., stock unit awards). Awards may be granted alone, in addition to, or in combination with, any other awards under the Plan or any other compensation plan. Awards can be granted for cash or other consideration as determined by the Committee or as required by applicable law (or for no cash consideration). Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares or other securities, or any combination of these. Restricted Stock and Restricted Stock Units. Restricted stock is an award of shares subject to a restriction period specified in the award. During the restriction period, the shares may not be transferred or pledged and are subject to forfeiture. Potential events of forfeiture include early termination of employment. The holder is otherwise usually treated as a registered stockholder with the right to receive dividends and vote the shares during the restriction period. Restricted stock units are similar to restricted stock except that the award takes the form of stock units instead of shares. During the restriction period, a holder of restricted stock units may be paid cash (dividend equivalents) that are equal in timing and amount to share dividends, but does not have voting or other stockholder rights. The units may be settled in cash or shares. Stock Options and Stock Appreciation Rights. Stock options give the holder the right to purchase shares at the exercise price specified in the award. SARs give the holder the right to receive an amount in cash or shares equal to the spread between the exercise price specified in the award and the market price of a share at the time of exercise. SARs may be granted alone or with stock options. Stock options and SARs granted under the Plan are subject to the terms and conditions determined by the Committee, except that the exercise price cannot be less than 100 percent of the fair market value of a share at the time of the grant and the maximum term is
PROPOSAL NO. 4—APPROVE THE 2020 OMNIBUS STOCK INCENTIVE PLAN 10 years. The Committee determines the form in which payment of the exercise price may be made. Incentive Stock Options may be granted, provided that they meet the requirements of the Internal Revenue Code. Stock options and SARs generally are subject to forfeiture upon a participant’s termination of employment or service. Performance Awards. Performance awards that may be granted under the Plan may consist of a right payable in cash, shares, other securities or other property upon the achievement of certain performance goals. The Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award, and the amount of any payment or transfer to be made pursuant to any performance award. Performance awards may be paid in a lump sum, installments, on a deferred basis or otherwise as prescribed by the Committee. Performance awards generally are subject to forfeiture upon a participant’s termination of employment or service. Performance goals may be particular to a Plan participant, may relate to the performance of Valero or one of its subsidiaries or divisions, or a combination thereof. Stock Compensation and Other Stock-Based Awards. The Committee may grant other forms of awards based on, payable in, or otherwise related in whole or in part to shares under the Plan. Subject to the terms of the Plan, the Committee shall determine the terms and conditions of any such other stock-based awards. The number and type of shares to be distributed in lieu of the cash compensation applicable to any award as well as the terms and conditions of any bonus awards shall be determined by the Committee. Adjustments.The Committee may make appropriate adjustments in the number of shares available under the Plan to reflect any stock split, stock dividend, recapitalization, reorganization, consolidation, merger, combination or exchange of shares, distribution to stockholders, liquidation, dissolution, or other similar event. Change of Control. Upon a change of control as defined in the Plan, the Committee generally is authorized to cause outstanding awards to be assumed, or new rights substituted therefor, by the surviving entity in the change of control. In addition, subject to applicable laws, any change of control agreement or any policy previously adopted by the Board, for participants whose employment has been terminated in connection with the change of control, the Committee may accelerate vesting periods, provide for extended exercise periods (for options), or waive other conditions applicable to the outstanding awards so that the terminated participant’s outstanding awards may be vested, exercised, paid, or distributed in full on or before a date fixed by the Committee. Also in connection with a participant’s termination of employment as a result of the change of control, the Committee may provide for the purchase of outstanding awards from the participant for cash. Amendment/Limitations on Amendments. The Committee, or as applicable, the Board, may terminate or amend the Plan without participant or stockholder approval, except that stockholder approval is required for any amendment that would require stockholder approval under the rules of the NYSE, or as otherwise may be required by applicable rule or regulation. No option or SAR may be canceled and replaced with an option or SAR having a lower exercise price, except in connection with a stock dividend, stock split or similar event as specified in the Plan in order to prevent dilution or enlargement of benefits intended under the Plan. Effective Date and Termination. The Plan will become effective on the compensationdate of its approval by Valero’s named executive officers every:stockholders. If the Plan is approved at the 2020 annual meeting, it will continue in force for a period of ten years, after which no additional awards may be made under the Plan. Federal Income Tax Consequences The following discussion summarizes certain federal income tax consequences of the issuance and receipt of 2020 OSIP awards. The rules governing the tax treatment of such awards are complex, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax or other federal tax consequences associated with the 2020 OSIP, nor does it address state, local, or non-U.S. taxes. The 2020 OSIP is not qualified under the provisions of Section 401(a) of the Internal Revenue Code (Code), and is not subject to the provisions of the Employee Retirement Income Security Act of 1974. Options, SARs, Performance Unit Awards, Restricted Stock Unit Awards and Other Stock-Based Awards. A participant generally is not required to recognize income on the grant of an option, SAR, restricted stock unit award, performance unit award or other stock-based award. Instead, ordinary income generally is required to be recognized on the date the option or SAR is exercised (but see the discussion on Incentive Stock Options), or in the case of restricted stock unit awards, performance unit awards or other stock-based awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award when the award vests. In general, the amount of ordinary income required to be recognized is: (a) in the case of an option, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price; (b) in the case of a SAR, the fair market value of any shares or cash received upon exercise; and (c) in the case of restricted stock unit awards, performance unit awards or other stock-based awards, the amount of cash and/or the fair market value of any shares received in respect thereof. | | | | | | 76 | | | | |
ýPROPOSAL NO. 4—APPROVE THE 2020 OMNIBUS STOCK INCENTIVE PLANyear
¨Incentive Stock Options. When a participant is granted an incentive stock option, or when the participant exercises the incentive stock option, the participant will generally not recognize taxable income (except for purposes of alternative minimum tax). If the participant holds the shares for at least two years ¨three years
¨abstain
The Board recommends that from the stockholders vote fordate of grant, and one year from the stockholder advisory vote on executive compensation to occur every year. Any uninstructed proxy cardsdate of exercise, then any gain or loss will be voted for approvaltreated as long-term capital gain or loss. If, however, the shares are disposed of during this period, the option will be treated as a non-qualified stock option, and the participant will recognize ordinary income equal to the lesser of the proposalfair market value of the shares on the exercise date minus the exercise price or the amount realized on disposition minus the exercise price. Any gain in excess of the ordinary income portion will be taxable as marked above (i.e.long-term or short-term capital gain.Cash-Based Awards. Upon payment of a cash-based award, a participant is required to recognize ordinary income in the amount of the award. Restricted Stock and Performance Share Awards. Unless a participant who receives an award of restricted stock or performance shares makes an election under Section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the award of restricted stock or performance shares. Instead, on the date the shares vest (i.e., forbecome transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an “every-year” frequency) unless otherwise specified.
You are not voting to approve or disapprove the Board’s recommendation, but you are being asked to recommendamount equal to the Board your preference from amongexcess, if any, of the choices stated abovefair market value of the shares on such date over the amount, if any, paid for such shares. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock or performance shares that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a Section 83(b) election within 30 days of the date of transfer of the restricted stock or performance shares, the participant will recognize ordinary income on the frequencydate the shares are awarded. The amount of stockholder votesordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on executive compensation.
Because the vote on this proposal is advisory in nature, itdate of award over the amount, if any, paid for such shares. In such case, the participant will not be bindingrequired to recognize additional ordinary income when the shares vest.Gain or Loss on Sale or Exchange of Shares. In general, gain or loss from the sale or exchange of shares granted or awarded under the 2020 OSIP will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. Deductibility by Valero. To the extent that a participant recognizes ordinary income in the circumstances described above, Valero will be entitled to a corresponding deduction, provided that, among other things, the Board orincome meets the Compensation Committee.test of reasonableness, is an ordinary and necessary business expense, is not disallowed by Section 162(m) of the Code and is not an “excess parachute payment” within the meaning of Section 280G of the Code (see the discussions on Section 162(m) and Parachute Payments below). Section 162(m). Section 162(m) of the Code generally limits the deductibility of compensation paid to certain top executives to $1 million. In previous years, there was an exemption from this $1 million deduction limit for compensation payments that qualified as “performance-based” under applicable regulations. However, the Boardenactment of the Tax Cuts and CompensationJobs Act of 2017 eliminated the performance-based compensation exemption, except with respect to certain grandfathered arrangements. Prospectively, for pay vehicles granted and earned in 2019 and beyond, the Tax Cuts and Jobs Acts of 2017 eliminated the deductibility of most components of pay to certain top executives to the extent that such pay exceeds $1 million in a year. Consistent with Valero’s historic approach to deductibility under former Section 162(m), the Committee will reviewcontinue to exercise flexibility and discretion in determining whether any given form of pay should be designed and administered to qualify for full deductibility. Parachute Payments. Under the voting resultsprovisions of Section 280G of the Code, the accelerated vesting of options and takebenefits paid under other awards in connection with a change in control of a corporation may be required to be valued and taken into account the outcome in determining whether participants have received compensatory payments, contingent upon a change in control, in excess of certain limits. If these limits are exceeded, a portion of the frequencyamounts payable to the participant may be subject to an additional 20 percent federal tax and may be nondeductible to the corporation. Withholding. Awards under the 2020 OSIP may be subject to tax withholding. When an award results in income subject to withholding, we may require the participant to remit the withholding amount to Valero or cause our shares to be withheld from issuance or sold in order to satisfy the tax withholding obligations. Section 409A. Section 409A of future advisory votes on executive compensation.the Code (Section 409A) applies to compensation plans providing deferred compensation to employees, directors and consultants, and potentially could apply to the different awards available under the 2020 OSIP. Generally, to the extent that deferrals of these awards fail to meet certain requirements under Section 409A, such awards will be subject to immediate taxation and tax penalties in the year they vest unless the requirements of Section 409A are satisfied. Valero’s intent is that awards under the 2020 OSIP will be structured and administered in a manner that either complies with or is exempt from the requirements of Section 409A. If any provision or award under the 2020 OSIP would result in the imposition of an applicable tax under Section 409A and related regulations and Treasury pronouncements, then that provision or award may be reformed to avoid imposition of the applicable tax and no action taken to comply with Section 409A shall be deemed to adversely affect the participant’s rights to an award.
MISCELLANEOUS
GOVERNANCE DOCUMENTS AND CODES OF ETHICS
Governance Documentsand Codes of EthicsOurCode of Ethics for Senior Financial Officers applies to our principal executive officer, principal financial officer, and controller. The code charges these officers with responsibilities regarding honest and ethical conduct, the preparation and quality of the disclosures in documents and reports we file with the SEC, and compliance with applicable laws, rules, and regulations. We have also adopted aCode of Business Conduct and Ethics which applies to all of our employees and directors.
We post the following documents on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. A printed copy of any of these documents is available to any stockholder upon request. Requests for documents must be in writing and directed to Valero’s Secretary at the address indicated on the cover page of this proxy statement. Restated Certificate of Incorporation Code of Business Conduct and Ethics Code of Ethics for Senior Financial Officers Corporate Governance Guidelines Compensation Committee Charter Nominating/Governance and Public Policy Committee Charter Related Party Transactions Policy Compensation Consultant Disclosures Policy Policy on Executive Compensation in Restatement Situations Policy on Political Contributions, Lobbying, and Trade Associations Policy on Vesting of Performance Shares Health, Safety and Environmental Policy
STOCKHOLDER COMMUNICATIONS, NOMINATIONS, AND PROPOSALS
Stockholder Communications,Nominations, and ProposalsStockholders and other interested parties may communicate with the Board, its non-management directors, or the Lead Director by sending a written communication addressed to “Board of Directors,” “Non-Management Directors,” or “Lead Director” in care of Valero’s Secretary at the address indicated on the cover page of this proxy statement.
If you wishIn order to submit a stockholder proposal to be includedfor inclusion in our proxy statement for the 20182021 annual meeting of stockholders pursuant to Rule 14a-8 of the Exchange Act, we must receive your written proposal on or before November 22, 2017.Nov. 20, 2020. The proposal must comply with Rule 14a-8, which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials.
If you wish toTo present a stockholder proposal at the 20182021 annual meeting of stockholders that is not the subject of a proposal pursuant to Rule 14a-8 of the Exchange Act, or if you wish to recommend to the Board’s Nominating/Governance and Public Policy Committee the nomination of a person for election to the Board, you must follow the procedures stated in Article I, Section 9 of our bylaws. These procedures include the requirement that your proposal must be delivered to Valero’s Secretary not later than the close of business on the 90th day or earlier than the close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. If the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, your notice must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the day we publicly announce the date of the 20182021 annual meeting of stockholders.
An eligible stockholder, or eligible group of stockholders, that wisheswants to nominate a candidate for election to the Board pursuant to the proxy access provisions of our bylaws must follow the procedures stated in Article I, Section 9A of our bylaws. These procedures include the requirement that your nomination must be delivered to Valero’s Secretary not later than the close of business on the 120th day or earlier than the close of business on the 150th day prior to the first anniversary of the preceding year’s annual meeting. If the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, your notice must be delivered not later than the 120th day prior to such annual meeting or, if later, the 10th day following the day we publicly announce the date of the 20182021 annual meeting of stockholders.
Our bylaws are available on our website at www.valero.com > Investors > Corporate Governance > Governance Documents. Stockholders are urged to review all applicable rules and consult legal counsel before submitting a nomination or proposal to Valero. | | | | | | 78 | | | | |
OTHER BUSINESS
MISCELLANEOUS Other Business If any matters not referred to in this proxy statement properly come before the Annual Meeting or any adjournments or postponements thereof, the enclosed proxies will be deemed to confer discretionary authority on the individuals named as proxies to vote the shares represented by proxy in accordance with their best judgments. The Board is not currently aware of any other matters that may be presented for action at the Annual Meeting.
FINANCIAL STATEMENTS
Financial StatementsConsolidated financial statements and related information for Valero, including audited financial statements for the fiscal year ended DecemberDec. 31, 2016,2019, are contained in Valero’s Annual Report on Form 10-K. We have filed our Annual Report on Form 10-K with the SEC. You may review this report on the internet as indicated in the Notice and through our website (www.valero.com > Investors > Financial Information > SEC Filings).
HOUSEHOLDING
HouseholdingThe SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses, and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These “householding” rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If your shares are held by an intermediary broker, dealer, or bank in “street name,” your consent to householding may be sought, or may already have been sought, by or on behalf of the intermediary. If you prefer to receive your own set of proxy materials now or in future years, you may request a duplicate set by phone at 800-579-1639, or you may contact your broker.
TRANSFER AGENT
Transfer AgentComputershare Investor Services serves as our transfer agent, registrar, and dividend paying agent with respect to our Common Stock. Correspondence relating to any stock accounts, dividends, or transfers of stock certificates should be addressed to: Computershare Investor Services Shareholder Communications 250 Royallby regular mail: P.O. Box 505000 Louisville, KY 40233-5000 by overnight delivery: 462 South 4th Street Canton, Massachusetts 02021
Suite 1600 Louisville, KY 40202 (888) 470-2938 (312) 360-5261 www.computershare.com
www.computershare.com
Appendix AVALERO ENERGY CORPORATION ONE VALERO WAY
SAN ANTONIO, TX 78249
VOTE BY INTERNET - www.proxyvote.com
Use2020 OMNIBUS STOCK INCENTIVE PLAN This Valero Energy Corporation2020 Omnibus Stock Incentive Plan (hereinafter called the Internet“Plan”) was approved by the Company’s Board on February 26, 2020, and subject to transmit your voting instructionsapproval by the Company’s stockholders, the Plan will become effective as of the Effective Date. Upon the Effective Date, no further awards will be granted under the Prior Plan and it will be terminated. ARTICLE 1. PURPOSE The purpose of the Plan is to attract and retain the services of eligible individuals, to provide them with a proprietary interest in the Company, and to motivate them using stock-based incentives linked to long-range performance goals and the interests of the Company’s stockholders. ARTICLE 2. DEFINITIONS For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: 2.1 “Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee. 2.2 “Award” means the grant of any Incentive Stock Option, Non-qualified Stock Option, SAR, Restricted Stock, Restricted Stock Unit, Stock Unit Award, Performance Share, Performance Unit, Performance Cash, Other Stock Based Awards, or Dividend Equivalent whether granted singly, in combination or in tandem (each individually referred to herein as an “Incentive”). 2.3 “Award Agreement” means a written or electronic agreement between a Participant and the Company, which contains the terms of the grant of an Award. 2.4 “Award Period” means the period during which one or more Incentives granted under an Award may be exercised or earned. 2.5 “Board” means the board of directors of the Company. 2.6 “Cause” means the: | (a) conviction of the Participant by a state or federal court of (i) a felony involving moral turpitude or (ii) embezzlement or misappropriation of funds of the Company, (b) the Company’s reasonable determination that the Participant has (i) 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 Subsidiary), or (ii) engaged in gross mismanagement, negligence or misconduct that causes or could potentially cause material loss, damage or injury to the Company, any of its Subsidiaries, or their respective employees, or (c) the Company’s reasonable determination that (i) the Participant has violated any company policy, 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 service as a Non-employee Director, or (ii) the Participant has failed to satisfactorily perform the material duties of the Participant’s position with the Company or any of its Subsidiaries. |
2.7 “Change of Control.” A Change of Control shall be deemed to occur when: | (a) following approval by the stockholders of the Company, an agreement or transaction is consummated pursuant to which: (i) the Company merges or consolidates with any other Person (other than a wholly owned subsidiary of the Company) and is not the surviving entity (or in which the Company survives only as the subsidiary of another entity); (ii) the Company sells all or substantially all of its assets to any other Person (other than a wholly owned subsidiary of the Company); or (iii) the Company is liquidated or dissolved; or |
| (b) consummation by any “person” or “group” of a tender offer or exchange offer for 20 percent or more of the Shares then outstanding, or for any number or amount of Shares which, if the tender or exchange offer were to be fully subscribed and all Shares for which the tender or exchange offer is made were to be purchased or exchanged pursuant to the offer, would result in the acquiring person or group directly or indirectly beneficially owning 50 percent or more of the Shares then outstanding; or (c) individuals who, as of any date, constitute the Board (the “Incumbent Board”) thereafter cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or group other than the Board. |
2.8 “Code” means the Internal Revenue Code of 1986, as amended, together with the published rulings, regulations, and interpretations promulgated thereunder. 2.9 “Committee” means the Compensation Committee of the Board or such other Committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan. 2.10 “Common Stock” means the Company’s $0.01 par value common stock, which the Company is currently authorized to issue or may in the future be authorized to issue. 2.11 “Company” means Valero Energy Corporation, a Delaware corporation, and any successor entity. 2.12 “Date of Grant” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement. 2.13 “Dividend Equivalent” means an Award, designated as a Dividend Equivalent, granted to Participants pursuant to Section 6.8 hereof, or in conjunction with other Awards, the value of which is determined, in whole or in part, by the value of payments tied to or based on the payment of dividends to holders of Common Stock and may be conditioned on the attainment of Performance Goals in a manner deemed appropriate by the Committee and described in the Award Agreement. 2.14 “Effective Date” means the date this Plan is duly approved by the Company’s stockholders. 2.15 “Employee” means common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary, or an individual who has agreed to become an employee of the Company or any Subsidiary and actually becomes such an employee within six months of such agreement. 2.16 “Fair Market Value” of a share of Common Stock is the mean of the highest and lowest prices per share on the New York Stock Exchange on the pertinent date, or in the absence of reported sales on such day, then on the next following day for which sales were reported. 2.17 “Good Reason” means that the Participant’s employment may be terminated by the Employee for Good Reason following a Change of Control, or anytime within two years following the date of Change of Control, when Good Reason means: | (a) The assignment to the Employee of any duties inconsistent in any respect with the Employee’s position (including status, offices, titles and reporting requirements), authority, duties, or responsibilities or any other action by the Company that results in a diminution in such position’s, authority, duties, or responsibilities, excluding for this purpose an isolated, insubstantial , and inadvertent action not taken in bad faith and that is remedied by the Company promptly after receipt of notice thereof given by the Employee; | (b) Any reduction in the Employee’s base salary, annual incentive target opportunity, and/or long-term incentive target opportunity below the level at which the Employee was awarded compensation immediately prior to the Change of Control; (c) The Company’s requiring that the Employee to be based at any office or location other than the location at which the Employee was based immediately preceding the Change of Control or a location other than the principal executive offices of the Company, without the Employee’s written consent; or (d) Any requirement for the Employee to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control. |
| | | | | | A-2 | | | | |
2.18 “Incentive” means an Award under the Plan as defined by Section 2.2 of Article 2. 2.19 “Incentive Stock Option” or “ISO” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan. 2.20 “Limited SAR” or “Limited Stock Appreciation Right” means an Award designated as an SAR as defined in this Article 2, which is granted with certain limiting features as determined by the Committee and as set forth in the Award Agreement at the time of grant. 2.21 “Limited SAR Price” means the Fair Market Value of each share of Common Stock covered by a Limited SAR on the Date of Grant of the Limited SAR. 2.22 “Non-Employee Director” means a member of the Board who is not an Employee or, for purposes of eligibility to receive an Award under the Plan and become a Participant, also includes a member of the board of directors or board of managers at any Affiliate or Subsidiary. 2.23 “Non-qualified Stock Option” or “NQSO” means a stock option, granted pursuant to this Plan that is not intended to comply with the requirements set forth in Section 422 of the Code. 2.24 “NYSE” means the New York Stock Exchange. 2.25 “Option Price” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock. 2.26 “Other Stock Based Awards” means an Award granted pursuant to Section 6.8. 2.27 “Participant” shall mean an Employee, Non-Employee Director, or Third Party Service Provider to whom an Award is granted under this Plan. 2.28 “Performance Award” means an Award made pursuant to this Plan to a Participant that is subject to the attainment of one or more Performance Goals. Performance Awards may be in the form of Performance Shares, Performance Units, Performance Cash, or Dividend Equivalents. 2.29 “Performance Cash” means an Award, designated as Performance Cash and denominated in cash, granted to a Participant pursuant to Section 6.7 hereof, the value of which is conditioned, in whole or in part, by the attainment of Performance Goals in a manner deemed appropriate by the Committee and described in the Award Agreement. 2.30 “Performance Criteria” or “Performance Goals” or “Performance Measures” mean the objectives established by the Committee for a Performance Period, for the purpose of determining when an Award subject to such objectives is earned. 2.31 “Performance Period” means the time period designated by the Committee during which Performance Goals must be met. 2.32 “Performance Share” means an Award, designated as a Performance Share in the form of shares of Common Stock or other securities of the Company, granted to a Participant pursuant to Section 6.7 hereof, the value of which is determined, in whole or in part, by the value of Common Stock and/or conditioned on the attainment of Performance Goals in a manner deemed appropriate by the Committee and described in the Award Agreement. 2.33 “Performance Unit” means an Award, designated as a Performance Unit, granted to a Participant pursuant to Section 6.7 hereof, the value of which is determined, in whole or in part, by the attainment of Performance Goals in a manner deemed appropriate by the Committee and described in the Award Agreement. 2.34 “Person” shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity. 2.35 “Plan” means this Valero Energy Corporation 2020 Omnibus Stock Incentive Plan, as amended from time to time. 2.36 “Prior Plan” means the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan, as amended from time to time. 2.37 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.4 of this Plan that are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement. 2.38 “Restricted Stock Unit” means a fixed or variable dollar-denominated right to acquire Common Stock, which may or may not be subject to restrictions, contingently awarded under Section 6.4 of the Plan.
2.39 “Retirement” means any termination of service due to retirement upon attainment of certain age and/or service requirements as specified by the Company’s qualified retirement program(s) or successor programs or as determined by the Committee in the event of early retirement. 2.40 “SAR” or “Stock Appreciation Right” means the right to receive a payment, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the SAR is exercised over the SAR Price for such shares, and may be granted as a Limited SAR. 2.41 “SAR Price” means the Fair Market Value of each share of Common Stock covered by an SAR on the Date of Grant of the SAR. 2.42 “SEC” shall mean the Securities and Exchange Commission. 2.43 “Share” means a share of Common Stock. 2.44 “Stock Option” means a Non-qualified Stock Option or an Incentive Stock Option. 2.45 “Stock Unit Award” means awards of Common Stock or other awards pursuant to Section 6.8 hereof that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other securities of the Company. 2.46 “Subsidiary” means any entity for which Valero Energy Corporation is the ultimate parent company and in which all of the equity, partnership, member or other interests are owned by Valero Energy Corporation or another one of its Subsidiaries. “Subsidiaries” means more than one of any such entities. 2.47 “Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of the Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s securities. ARTICLE 3. ADMINISTRATION 3.1 The Committee shall administer the Plan unless otherwise determined by the Board. The administering Committee shall consist of not fewer than three persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board; and any vacancy occurring in the membership of the Committee may be filled by appointment by the Board on the recommendation of the Nominating/Governance and Public Policy Committee of the Board. 3.2 The Board shall select one of the members of the Committee to act as the Committee’s Chair. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. 3.3 The Committee shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement the Award Period, the Date of Grant, and such other terms and conditions as may be approved by the Committee not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive, two or more Incentives granted in combination, or two or more Incentives granted in tandem. 3.4 The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and (iii) make such other determinations and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. 3.5 With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, Section 422 of the Code, the rules of the NYSE or any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other applicable law, rule or restriction (collectively, “applicable law”), to the extent that any such restrictions are no longer required by applicable law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards. 3.6 Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or managers of the Company or any Affiliate, or to a committee of such officers or managers, the authority, subject to the terms and limitations the Committee shall determine, to grant Awards or to cancel, modify or waive rights with respect to, or to amend, suspend, or terminate Awards. | | | | | | A-4 | | | | |
ARTICLE 4. ELIGIBILITY Employees (including Employees who are also a director or an officer), Non-Employee Directors, and Third Party Service Providers are eligible to participate in the Plan. The Committee, in its discretion, may grant, but shall not be required to grant, an Award to any Employee, Non-Employee Director, or Third Party Service Provider. Awards may be granted by the Committee at any time and from time to time selectively to one or more new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, all as the Committee shall determine. Except as may be required by the Plan, Awards need not be uniform. ARTICLE 5. SHARES SUBJECT TO PLAN 5.1 Total Shares Available. Subject to adjustment as provided in Articles 12 and 13, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is the sum of (a) 8,580,000, plus (b) any shares of Common Stock available for grants of Awards under the Prior Plan as of the Effective Date, plus (c) shares of Common Stock previously subject to Awards under the Plan or the Prior Plan that are forfeited, terminated, cancelled or rescinded, settled in cash in lieu of Common Stock, or exchanged for Awards that do not involve Common Stock, or expire unexercised on or after the Effective Date. 5.2 Source of Shares. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available a number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan. 5.3 Restoration and Retention of Shares (“Share Counting”). If any shares of Common Stock subject to an Award shall not be issued or transferred to a Participant and shall cease to be issuable or transferable to a Participant because of the forfeiture, termination, expiration or cancellation, in whole or in part, of such Award or for any other reason, or if any such shares shall, after issuance or transfer, be reacquired by the Company because of the Participant’s failure to comply with the terms and conditions of an Award or for any other reason, the shares not so issued or transferred, or the shares so reacquired by the Company, as the case may be, shall no longer be charged against the limitation provided for in Section 5.1 and may be used thereafter for additional Awards under the Plan. The following additional parameters shall apply: | (a) To the extent an Award under the Plan is settled or paid in cash, Shares subject to such Award will not be considered to have been issued and will not be applied against the maximum number of shares of Common Stock provided for in Section 5.1. | (b) If an Award may be settled in shares of Common Stock or cash, such shares shall be deemed issued only when and to the extent that settlement or payment is actually made in shares of Common Stock. To the extent an Award is settled or paid in cash, and not shares of Common Stock, any Shares previously reserved for issuance or transfer pursuant to such Award will again be deemed available for issuance or transfer under the Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Plan shall be reduced only by the number of Shares actually issued and transferred to the Participant. (c) Notwithstanding the foregoing: (i) Shares withheld or tendered to pay withholding taxes or the exercise price of an Award shall not again be available for the grant of Awards under the Plan, and (ii) the full number of Shares subject to a Stock Option or SAR granted that are settled by the issuance of Shares shall be counted against the Shares authorized for issuance under this Plan, regardless of the number of Shares actually issued upon the settlement of such Stock Option or SAR. (d) Any Shares repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of Shares available for the future grant of Awards. |
5.4 Uncertificated Shares. Shares issued under the Plan will be registered in uncertificated book-entry form (unless a holder of Common Stock requests a certificate representing such holder’s shares of Common Stock). As a result, instead of receiving Common Stock certificates, holders of Common Stock will receive account statements reflecting their ownership interest in shares of Common Stock. The book-entry Shares will be held with the Company’s transfer agent, which will serve as the record keeper for all shares of Common Stock being issued in connection with the Plan. Computershare Investor Services, Chicago, Illinois, currently serves as transfer agent, registrar and dividend paying agent for the Common Stock. Correspondence relating to any stock accounts, dividends or transfers of Common Stock should be addressed to: Computershare Investor Services Shareholder Communications, P.O. Box 505000, Louisville, KY 40233-5000, (888) 470-2938 or (312) 360-5261, www.computershare.com.
ARTICLE 6. GRANTS OF AWARDS 6.1 In General. | (a) | The grant of an Award shall be authorized by the Committee and may be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s) or the value of the Performance Award (if applicable), the Option Price (if applicable), the Award Period, the Date of Grant, and such other terms as are approved by the Committee not inconsistent with the Plan. The Company may execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within 10 years of the Effective Date of this Plan. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan. |
| (b) | If the Committee establishes a Date of Grant purchase price for an Award, the Participant must pay such purchase price within 30 days (or such shorter period as the Committee may specify) after the Date of Grant. |
6.2 Limitations on Awards | (a) | The Plan is subject to the following additional limitations: |
| (i) | The Option Price of Stock Options cannot be less than 100 percent of the Fair Market Value of a share of Common Stock on the Date of Grant of the Stock Option. |
| (ii) | The SAR Price of an SAR cannot be less than 100 percent of the Fair Market Value of a share of Common Stock on the Date of Grant of the SAR. |
| (iii) | Repricing of Stock Options and SARs or other downward adjustments in the Option Price or SAR Price of previously granted Stock Options or SARs, respectively, are prohibited, except in connection with a corporate transaction involving the Company such as any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares, provided that the terms of outstanding Awards may not be amended without stockholder approval to reduce the exercise price of outstanding Stock Options or SARs or cancel outstanding Stock Options or SARs in exchange for cash, other awards or Stock Options or SARs having an exercise price that is less than the exercise price of the original Stock Option or SAR. |
| (iv) | No Participant may receive during any calendar year Awards that are to be settled in Shares of Common Stock covering an aggregate of more than 1,000,000 Shares. In addition, a Participant who is a Non-Employee Director may not receive in any calendar year Awards that are to be settled in Shares having a Fair Market Value (measured on the Date(s) of Grant) that is greater than $500,000 in the aggregate. |
| (v) | No Participant may receive during any calendar year Awards that are to be settled in cash covering an aggregate of more than $20,000,000. |
| (vi) | The term of Awards may not exceed 10 years. |
| (b) | Limited SARs granted in tandem with Stock Options or other Awards shall not be counted towards the maximum individual grant limitation set forth in this Section, as the Limited SAR will expire based on conditions described in Section 6.5(b), below. |
6.3 Rights as Stockholder. Except as provided in Section 6.4 of this Plan, until the issuance of the Shares of Common Stock (as evidenced by the appropriate entry on the books of the Company or its transfer agent), no right to vote or receive dividends or any other rights as a stockholder of the Company shall exist with respect to such Shares, notwithstanding the exercise of any Incentive or Award. No adjustment will be made for a dividend or other rights for which the record date is prior to the date Shares are issued, except as otherwise provided in this Plan. 6.4 Restricted Stock/Restricted Stock Units. If Restricted Stock and/or Restricted Stock Units are granted to a Participant under an Award, the Committee shall establish: (i) the number of shares of Restricted Stock and/or the number of Restricted Stock Units awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and/or Restricted Stock Units, (iii) the time(s) within which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, if any, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms of the Restricted Stock and/or Restricted Stock Units, which shall be consistent with this Plan. The provisions of Restricted Stock and/or Restricted Stock Units need not be the same with respect to each Participant. | | | | | | A-6 | | | | |
| (a) Record of Shares. Each Participant who is awarded Restricted Stock shall be issued the number of shares of Common Stock specified in the Award Agreement for such Restricted Stock, and such shares shall be recorded in the share transfer records of the Company and ownership of such shares shall be evidenced by a book entry notation in the share transfer records of the Company’s transfer agent. Such shares shall be registered in the name of the Participant, subject to any restrictions in effect for the Award. (b) Restrictions and Conditions. Shares of Restricted Stock and Restricted Stock Units shall be subject to the following restrictions and conditions: (i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant (the “Restriction Period”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock and/or Restricted Stock Units. (ii) Except as provided in subparagraph (i) above and subject to the terms of a Participant’s Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the Shares, and the right to receive any dividends thereon. Certificates or other evidence of ownership of shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock. Each Participant, by his or her acceptance of Restricted Stock, shall irrevocably grant to the Company a power of attorney to transfer any forfeited Shares to the Company and agrees to execute any documents requested by the Company in connection with such forfeiture and transfer. | (iii) The Restriction Period of Restricted Stock and/or Restricted Stock Units shall commence on the Date of Grant and, subject to Article 13 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock and/or Restricted Stock Units, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on (i) length of continuous service, (ii) achievement of specific business objectives, (iii) increases in specified indices, (iv) attainment of specified growth rates, or (v) other comparable Performance Measurements, as may be determined by the Committee in its sole discretion. (c) Forfeiture. Except as otherwise determined by the Committee or the Chief Executive Officer, the provisions of Article 8 shall apply with respect to Restricted Stock granted hereunder. |
6.5 SARs and Limited SARs. | (a) An SAR shall entitle the Participant at his or her election to surrender to the Company the SAR, or portion thereof, as the Participant shall choose, and to receive from the Company in exchange therefore cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the SAR) per share over the SAR Price per share specified in the Award Agreement with respect to such SAR, multiplied by the total number of shares of the SAR being surrendered. In the discretion of the Committee, the Company may satisfy its obligation upon exercise of an SAR by the distribution of that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the exercise of the SAR) equal to the amount of cash otherwise payable to the Participant (with a cash settlement to be made for any fractional share interests), or the Company may settle such obligation in part with shares of Common Stock and in part with cash. (b) A Limited SAR shall allow the Participant to receive from the Company cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the Limited SAR) per share over the Limited SAR Price per share specified in such Limited SAR, multiplied by the total number of shares of the Limited SAR being surrendered. In the discretion of the Committee, the Company may satisfy its obligation upon exercise of a Limited SAR by the distribution of that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the exercise of the Limited SAR) equal to the amount of cash otherwise payable to the Participant (with a cash settlement to be made for any fractional share interests), or the Company may settle such obligation in part with shares of Common Stock and in part with cash. Limited SARs will expire without consideration upon the vesting, exercise, or settlement, in shares and/or in cash, of Awards for which the Limited SAR was granted in tandem. |
6.6 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and an SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to 100 shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of 100 shares of Common Stock.
6.7 Performance Based Awards. | (a) Grant of Performance Awards. The Committee may issue Performance Awards in the form of Performance Units, Performance Shares, Performance Cash, Other Stock Based Awards, or Dividend Equivalents to Participants subject to the Performance Goals and Performance Period as it shall determine. The terms and conditions of each Performance Award will be set forth in the Award Agreement. The Committee shall have complete discretion in determining the number and/or value of Performance Awards granted to each Participant. Participants receiving Performance Awards are not required to pay the Company therefor (except for applicable tax withholding) other than the rendering of services. (b) Value of Performance Awards. The Committee shall set Performance Goals in its discretion for each Participant who is granted a Performance Award. Such Performance Goals may be particular to a Participant, may relate to the performance of the Subsidiary or division which employs him or her, may be based on the performance of the Company generally, or a combination of the foregoing. The Performance Goals may be based on achievement of financial statement objectives, or any other objectives established by the Committee. The Performance Goals may be absolute in their terms or measured in relationship to other companies similarly or otherwise situated. The extent to which such Performance Goals are met will determine the number and/or value of the Performance Awards that will be paid out to the Participant and/or the portion of an Award that may be exercised by the Participant. | (c) Form of Payment. Payment of the amount to which a Participant shall be entitled upon the settlement of a Performance Award shall be made in a lump sum or installments in cash, shares of Common Stock, or a combination thereof as determined by the Committee. Dividend Equivalents may not be paid on unvested Performance Shares. |
6.8 Other Stock Based Awards. | (a) Grant of Other Stock Based Awards. The Committee may issue to Participants, either alone or in addition to other Awards made under the Plan, Stock Unit Awards which may be in the form of Common Stock or other securities. The value of each such Award shall be based, in whole or in part, on the value of the underlying Common Stock or other securities. The Committee, in its discretion, may determine that an Award, either in the form of a Stock Unit Award under this Section or as an Award granted pursuant to the other provisions of this Article, may provide to the Participant (i) dividends or Dividend Equivalents (payable on a current or deferred basis, except not for Stock Options and unvested SARs) and (ii) cash payments in lieu of or in addition to an Award. The Committee shall determine the terms, restrictions, conditions, vesting requirements, and payment rules (all of which are sometimes hereinafter collectively referred to as “rules”) of the Award and shall set forth those rules in the related Award Agreement. (b) Rules for Stock Unit Awards. The Committee, in its sole and complete discretion, may grant a Stock Unit Award subject to the following rules: (i) All rights with respect to such Stock Unit Awards granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant or his or her guardian or legal representative. (ii) Stock Unit Awards may require the payment of cash consideration by the Participant in receipt of the Award or provide that the Award, and any Common Stock or other securities issued in conjunction with the Award be delivered without the payment of cash consideration. (iii) The Committee, in its sole and complete discretion, may establish certain Performance Criteria that may relate in whole or in part to receipt of the Stock Unit Awards. (iv) Stock Unit Awards may be subject to a deferred payment schedule and/or vesting over a specified employment period. |
ARTICLE 7. AWARD PERIOD; VESTING 7.1 Award Period. Subject to the other provisions of this Plan, no Incentive granted under the Plan may be exercised at any time after the end of its Award Period. 7.2 Vesting. No Award granted under the Plan shall become exercisable or vested prior to the one-year anniversary of the Date of Grant; provided, however, that, such restriction shall not apply to Awards granted under this Plan with respect to a number of Shares which, in the aggregate, does not exceed five percent (5%) of the total number of Shares authorized under Section 5.1 of the Plan for delivery in connection with Awards under the Plan, as such number may be adjusted in accordance with Article 12 and Article 13. This Section 7.2 shall not restrict the right of the Committee to provide for the acceleration or continued vesting or exercisability of an Award upon or after a Change of Control or termination of employment or otherwise pursuant to the terms of the Plan. | | | | | | A-8 | | | | |
ARTICLE 8. TERMINATION OF SERVICE 8.1 Termination of Service. | (a) Vesting and Exercise. Except as otherwise provided in the Plan, or otherwise determined by the Committee and included in the applicable Award Agreement, a Stock Option, SAR or other Award having an exercise provision (each, an “Exercisable Award”) vests in and may be exercised by a Participant only while the Participant is and has continually been since the Date of Grant of the Exercisable Award an Employee, Non-Employee Director or Third-Party Service Provider. | (b) Voluntary Termination by Participant (Exercisable Awards). If a Participant’s employment or service as a Non-Employee Director or Third-Party Service Provider is voluntarily terminated by the Participant (other than through retirement, death or disability as set forth in Section 8.3 below), then: (i) that portion of any Exercisable Award that has not vested on or prior to such date of termination shall automatically lapse and be forfeited, and (ii) all vested but unexercised Exercisable Awards previously granted to that Participant under the Plan shall automatically lapse and be forfeited at the close of business on the 30th day following the date of such Participant’s termination, unless an Exercisable Award expires earlier according to its original terms. (c) Involuntary Termination for Cause (Exercisable Awards). If a Participant’s employment or service as a Non-Employee Director or Third-Party Service Provider is involuntarily terminated by the Company for Cause: (i) that portion of any Exercisable Award that has not vested on or prior to such date of termination shall automatically lapse and be forfeited, and (ii) all vested but unexercised Exercisable Awards previously granted to that Participant under the Plan shall automatically lapse and be forfeited at the close of business on the 30th day following the date of such Participant’s termination, unless an Exercisable Award expires earlier according to its original terms. (d) Involuntary Termination Other Than for Cause (Exercisable Awards). If a Participant’s employment or service as a Non-Employee Director or Third-Party Service Provider is involuntarily terminated by the Company other than for Cause: (i) that portion of any Exercisable Award that has not vested on or prior to such date of termination shall automatically lapse and be forfeited, and (ii) all vested but unexercised Exercisable Awards previously granted to that Participant under the Plan shall automatically lapse and be forfeited at the close of business on the last business day of the twelfth month following the date of the Participant’s termination, unless an Exercisable Award expires earlier according to its original terms. |
8.2 AwardsOther Than Exercisable Awards. Except as otherwise provided in the Plan, or otherwise determined by the Committee and included in the applicable Award Agreement, if a Participant’s employment or service as a Non-Employee Director or Third-Party Service Provider is voluntarily terminated by the Participant (other than through retirement, death or disability as set forth in Section 8.3 below), or is terminated by the Company with or without Cause, then any Awardother than an Exercisable Award previously granted to that Participant under the Plan that remains unvested shall automatically lapse and be forfeited at the close of business on the date of such Participant’s termination of employment or service. 8.3 Retirement, Death, Disability. Except as otherwise provided in the Plan, or otherwise determined by the Committee and included in the applicable Award Agreement, if a Participant’s employment or service as a Non-Employee Director or Third-Party Service Provider is terminated because of retirement, death or disability (with the determination of disability to be made within the sole discretion of the Committee), any Award held by the Participant shall remain outstanding and vest or become exercisable according to the Award’s original terms, provided that any Restricted Stock or Restricted Stock Units held by the Participant that remain unvested as of the date of retirement, death or disability shall immediately vest and become non-forfeitable as of such date. 8.4 Amendment. Subject to the limitations set forth in Section 6.2 above, the Committee or the Chief Executive Officer may prescribe new or additional terms for the vesting, exercise or realization of any Award, provided that no such action shall deprive a Participant or beneficiary, without his or her consent, of the right to any benefit accrued to his or her credit at the time of such action. ARTICLE 9. EXERCISE OF INCENTIVE 9.1 In General. (a) A vested Incentive may be exercised during its Award Period, subject to limitations and restrictions set forth therein and in Article 8. A vested Incentive may be exercised at such times and in such amounts as provided in this Plan and the applicable Award Agreement, subject to the terms and conditions of the Plan. | (b) An Incentive may not be exercised and shares of Common Stock may not be issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished. No Incentive may be exercised for a fractional share of Common Stock. |
9.2 Stock Options. (a) Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of information up until 11:59 P.M. Eastern Timewritten notice to the dayCompany setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised (the “Exercise Notice”) and the date of exercise thereof (the “Exercise Date”) in accordance with procedures established by the Company. On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the Shares to be purchased, payable as follows: (i) cash, check, bank draft, or money order payable to the order of the Company, (ii) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, (iii) by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option and promptly deliver to the Company the amount of sale proceeds necessary to pay such purchase price, and/or (iv) in any other form of valid consideration that is acceptable to the Company in its sole discretion. If shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so submitted, as well as any additional restrictions that may be imposed by the Committee. | (b) Upon payment of all amounts due from the Participant, the Company shall cause shares of the Common Stock then being purchased to be delivered as directed by the Participant (or the person exercising the Participant’s Stock Option in the event of his death) promptly after the Exercise Date, provided that if the Participant has exercised an Incentive Stock Option, the Company may at its option retain possession of the Shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. The obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. (c) If the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, the Participant’s right to purchase such Common Stock may be terminated by the Company. |
9.3 SARs. Subject to the conditions of this Section 9.3 and such administrative regulations as the Committee may from time to time adopt, an SAR may be exercised by the delivery (including by fax) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of exercise thereof in accordance with procedures established by the Company. On the SAR exercise date, the Participant shall receive from the Company in exchange therefore cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered. In the discretion of the Committee, the Company may satisfy its obligation upon exercise of an SAR by the distribution of that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the exercise of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests, or the Company may settle such obligation in part with shares of Common Stock and in part with cash. 9.4 Tax Payment Election. Subject to the approval of the Committee, and to any rules and limitations as the Committee may adopt, a person exercising an Incentive may make the payment of the amount of any taxes required to be collected or withheld by the Company in connection with such exercise in whole or in part by electing, at or before the cut-offtime of exercise, either (i) to have the Company withhold from the number of Shares otherwise deliverable a number of Shares whose Fair Market Value equals the amount of the applicable supplemental wage withholding required plus any required state, local or employment tax withholdings, or (ii) to deliver certificates for other Shares owned by the person exercising the Award, endorsed in blank with appropriate signature guarantee, having a Fair Market Value equal to the amount otherwise to be collected or withheld. 9.5 Valuation. Any calculation with respect to a Participant’s income, required tax withholding or other matters required to be made by the Company upon the exercise of an Incentive shall be made using the Fair Market Value of the shares of Common Stock on the Exercise Date, whether or not the Exercise Notice is delivered to the Company before or after the close of trading on that date, unless otherwise specified by the Committee. Notwithstanding the foregoing, for Stock Option exercises using the Company’s “same-day-sale for cash method” or meeting date. Have your proxy card“broker sale for stock method,” a Participant’s taxable gain and related tax withholding on the exercise will be calculated using the actual market price at which Shares were sold in hand when you access the web sitetransaction. | | | | | | A-10 | | | | |
ARTICLE 10. AMENDMENT OR DISCONTINUANCE 10.1 In General. Subject to the limitations set forth in this Article 10, the Committee may at any time and followfrom time to time, without the instructionsconsent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part, provided that no amendment that requires stockholder approval under the rules of the national exchange on which the shares of Common Stock are listed, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to obtain your recordsvote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. 10.2 Amendments to Awards. Subject to the limitations set forth in the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter any Award theretofore granted, provided that, unless required by law, no action contemplated or permitted by this Article 10 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant. 10.3 Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms, conditions, and criteria of Awards in recognition of unusual or nonrecurring events (including the events described in Article 12 of the Plan) affecting the Company, any Subsidiary, or the financial statements of the Company, or in recognition of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. ARTICLE 11. EFFECTIVE DATE AND TERM The Plan shall become effective on the Effective Date, and shall continue in existence and force for a period of 10 years thereafter, subject to earlier termination as prescribed under Article 10 above. After termination of the Plan no future Awards may be granted hereunder, but any Awards or Incentives granted before the date of termination will continue to be in effect in accordance with their terms and conditions. ARTICLE 12. CAPITAL ADJUSTMENTS 12.1 In General. If at any time while the Plan is in effect, or Incentives are outstanding, there shall be any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from (i) the declaration or payment of a stock dividend, (ii) any recapitalization resulting in a stock split-up, combination, or exchange of shares of Common Stock, or (iii) other increase or decrease in such shares of Common Stock effected without receipt of consideration by the Company, then: | (a) An appropriate adjustment shall be made in the maximum number of shares of Common Stock then subject to being awarded under the Plan and in the maximum number of shares of Common Stock that may be awarded to a Participant to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock shall continue to be subject to being so awarded. (b) Appropriate adjustments shall be made in the number of shares of Common Stock and the Option Price thereof then subject to purchase pursuant to each such Stock Option previously granted and unexercised, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each such instance shall remain subject to purchase at the same aggregate Option Price. (c) Appropriate adjustments shall be made in the number of SARs and the SAR Price thereof then subject to exercise pursuant to each such SAR previously granted and unexercised, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price. (d) Appropriate adjustments shall be made in the number of outstanding shares of Restricted Stock with respect to which restrictions have not yet lapsed prior to any such change. (e) Appropriate adjustments shall be made with respect to shares of Common Stock applicable to any other Incentives previously awarded under the Plan as the Committee, in its sole discretion, deems appropriate, consistent with the event. |
12.2 Issuance of Stock or Other Convertible Securities. Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to (i) the number of or Option Price of shares of Common Stock then subject to outstanding Stock Options granted under the Plan, (ii) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs granted under the Plan, (iii) the number of outstanding shares of Restricted Stock, or (iv) the number of shares of Common Stock otherwise payable under any other Incentive. 12.3 Notification. Upon the occurrence of each event requiring an adjustment with respect to any Incentive, the Company shall notify each affected Participant of its computation of such adjustment, which shall be conclusive and shall be binding upon each such Participant. ARTICLE 13. RECAPITALIZATION, MERGER AND CONSOLIDATION; CHANGE OF CONTROL 13.1 Adjustments, Recapitalizations, Reorganizations, or Other Adjustments. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 13.2 Acquiring Entity. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a Participant would have been entitled. 13.3 Acquired Entity. In the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of such outstanding Incentives, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company that were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms. 13.4 Change of Control. Unless otherwise specified in a change of control severance agreement between a Participant and the Company, and unless otherwise specifically prohibited under applicable laws, or by the rules of any governing governmental agency or authority or national securities exchange, or any policy previously adopted by the Board, the Committee may, in its sole discretion, at the time an Award is made or granted hereunder or at any time prior to, coincident with, or after the time of a Change of Control, take one of the following actions which shall apply only upon the occurrence of a Change of Control or, if later, upon the action being taken: | (a) Provide for the acceleration of any time periods, or the waiver of any other conditions, relating to the vesting, exercise, payment, or distribution of an Award so that any Award to a Participant whose employment has been terminated as a result of a Change of Control may be vested, exercised, paid, or distributed in full on or before a date fixed by the Committee, and in connection therewith the Committee may (i) provide for an extended period to exercise Stock Options or SARs (not to exceed the original term) and (ii) determine the level of attainment of any applicable performance goals; (b) Provide for the purchase of any Awards from a participant whose employment has been terminated as a result of a Change of Control, upon the Participant’s request, for an amount of cash equal to the amount that could have been obtained upon the exercise, payment, or distribution of such rights had such Award been currently exercisable or payable; or (c) Cause the Awards then outstanding to be assumed, or new rights substituted therefore, by the surviving corporation in such Change of Control. |
For purposes of sub-paragraphs (a) and (b) above, any Participant whose employment is either (i) terminated by the Company other than for “Cause,” or (ii) terminated by the Participant for “Good Reason” (each as defined in this Plan) in either case upon, or on or prior to the second anniversary of a Change of Control, shall be deemed to have been terminated as a result of the Change of Control. | | | | | | A-12 | | | | |
ARTICLE 14. LIQUIDATION OR DISSOLUTION In case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, sell all or substantially all of its property (other than in connection with a Change of Control Event), or dissolve, liquidate, or wind up its affairs (each, a “Dissolution Event”), then each Participant shall be thereafter entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) then in such event the Option Prices or SAR Prices then in effect with respect to each Stock Option or SAR shall be reduced, on the payment date of such distribution, in proportion to the percentage reduction in the tangible book value of the shares of the Company’s Common Stock (determined in accordance with generally accepted accounting principles) resulting by reason of such distribution. ARTICLE 15. ADDITIONAL AUTHORITY OF COMMITTEE In addition to the Committee’s authority set forth elsewhere in this Plan, in order to maintain a Participant’s rights in the event of any Change of Control or Dissolution Event described under Articles 13 and 14, the Committee, as constituted before the Change of Control or Dissolution Event, is hereby authorized, and has sole discretion, as to any Incentive, either at the time the Award is made hereunder or any time thereafter, to take any one or more of the following actions: | (a) provide for the purchase of any Incentive, upon the Participant’s request, for an amount of cash equal to the amount that could have been attained upon the exercise of the Incentive or realization of the Participant’s rights in the Incentive had the Incentive been currently exercisable or payable; (b) adjust any outstanding Incentive as the Committee deems appropriate to reflect the Change of Control or Dissolution Event; or (c) cause any outstanding Incentive to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after a Change of Control or successor following a Dissolution Event. (d) The Committee may in its discretion include other provisions and limitations in any Award Agreement as it may deem equitable and in the best interests of the Company. |
ARTICLE 16. INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER CORPORATIONS Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees of a corporation who become or are about to become Employees of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company or the acquisition by the Company of stock of the employing corporation. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Board at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the instruments in substitution for which they are granted. ARTICLE 17. MISCELLANEOUS PROVISIONS 17.1 Code Section 409A. Notwithstanding anything in this Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an applicable tax under Section 409A of the Internal Revenue Code of 1986, as amended and related regulations and Treasury pronouncements (“Code Section 409A”), that Plan provision or Award may be reformed to avoid imposition of the applicable tax and no action taken to comply with Code Section 409A shall be deemed to adversely affect the Participant’s rights to an Award. This Plan is intended to comply, and shall be administered consistently in all respects, with Code Section 409A, and the regulations and additional guidance promulgated thereunder to the extent applicable. Accordingly, the Company shall have the authority to take any action, or refrain from taking any action, with respect to this Plan or any Award hereunder that is reasonably necessary to ensure compliance with Code Section 409A (provided that the Company shall choose the action that best preserves the value of payments and benefits provided to Participant that is consistent with Code Section 409A); this Plan shall be interpreted in a manner that is consistent with Code Section 409A. In furtherance, but not in limitation of the foregoing: | (a) in no event may a Participant designate, directly or indirectly, the calendar year of any payment to be made hereunder; |
| (b) to the extent the Participant is a “specified employee” within the meaning of Code Section 409A, payments, if any, that constitute a “deferral of compensation” under Code Section 409A and that would otherwise become due during the first six months following Participant’s termination of employment shall be delayed and all such delayed payments shall be paid in full in the seventh month after such termination date, provided that the above delay shall not apply to any payment that is excepted from coverage by Code Section 409A, such as a payment covered by the short-term deferral exception described in Treasury Regulations Section 1.409A-1(b)(4). |
17.2 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution. 17.3 No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary. 17.4 Indemnification. No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the fullest extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation. 17.5 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein. 17.6 Employees Based Outside of the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have an Employee, Non-Employee Director, or Third Party Service Provider, the Committee, in its sole discretion, shall have the power and authority to: | (a) Determine which Affiliates and Subsidiaries shall be covered by this Plan; (b) Determine which Employees , Non-Employee Directors, and/or Third Part Service Providers outside the United States are eligible to participate in this Plan; (c) Modify the terms and conditions of any Award granted to Participants outside the United States to comply with applicable foreign laws; (d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; and (e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals. Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law. |
17.7 Compliance with Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (an “Exchange”) (including without limitation Section 16 of the Securities Exchange Act of 1934), and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock hereunder, shall be subject to all applicable federal and state laws, rules and regulations, and the rules and regulations of any Exchange, and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
such approvals by any government, regulatory agency or Exchange as may be required, and the grant or making of any Award shall be conditional and shall be granted or awarded subject to acceptance of the Shares deliverable pursuant to the Award for listing on the NYSE.17.8 Severability. If youany provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction as to any Person or Award, or would likedisqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to reduceconform to applicable laws, or if it cannot be construed or | | | | | | A-14 | | | | |
deemed amended without, in the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-maildetermination of the Committee, materially altering the intent of the Plan or the Internet.Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. 17.9 Tax Requirements, Withholding. The Company or any Affiliate is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes with respect to an Award, its exercise, the lapse of restrictions thereon, payment or transfer under an Award or under the Plan, and to take any other action necessary in the opinion of the Company to satisfy all obligations for the payment of the taxes. Notwithstanding the foregoing, in the event of an assignment of a Non-qualified Stock Option or SAR, the Participant who assigns the Non-qualified Stock Option or SAR shall remain subject to withholding taxes upon exercise of the Non-qualified Stock Option or SAR by the transferee to the extent required by the Code or the rules and regulations promulgated thereunder. Such payments shall be required to be made prior to the delivery of any shares of Common Stock. Such payment may be made in cash, by check, or through the delivery of shares of Common Stock owned by the Participant (which may be effected by the actual delivery of shares of Common Stock by the Participant or by the Company’s withholding a number of shares of Common Stock to be issued upon the exercise of a Stock Option or an SAR, if applicable), which shares of Common Stock have an aggregate Fair Market Value equal to the required minimum withholding payment, or any combination thereof. 17.10 No Representations or Warranties Regarding Tax Effect. Notwithstanding any provision of the Plan to the contrary, the Company, its Affiliates and Subsidiaries, the Board and the Committee make no representation or warranty with respect to the tax treatment under any federal, state, local or foreign laws and regulations thereunder (individually and collectively referred to as the “Tax Laws”) of any Award granted or any amounts paid to any Participant under the Plan including, but not limited to, when and to what extent such Awards or amounts may be subject to tax, penalties and interest under the Tax Laws. 17.11 Assignability. (a) Incentive Stock Options may not be transferred or assigned other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 17.11 that is not required for compliance with Section 422 of the Code. | (b) The Committee may, in its discretion, authorize all or a portion of a Non-qualified Stock Option or SAR to be granted to a Participant to be on terms which permit transfer by such Participant to (i) the spouse, children or grandchildren of the Participant (“Immediate Family Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision,provided that (a) there shall be no consideration for any such transfer, (b) the Award Agreement pursuant to which such Non-qualified Stock Option or SAR is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (c) subsequent transfers of transferred Non-qualified Stock Options or SARs shall be prohibited except those by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended. Following transfer, any such Non-qualified Stock Option or SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 9, 10, 12, 14 and 16 hereof the term “Participant” shall be deemed to include the transferee. The events for termination of service described in Section 8.1 shall continue to be applied with respect to the original Participant, following which the Non-qualified Stock Options and SARs shall be exercisable by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of a Non-qualified Stock Option or SAR of any expiration, termination, lapse or acceleration of such Non-qualified Stock Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Non-qualified Stock Option or SAR that has been transferred by a Participant under this Section 17.11. |
17.12 No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or any fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or any other Person, on the other hand. To sign up for electronic delivery, please follow the instructions aboveextent that any Person acquires a right to vote usingreceive payments from the InternetCompany or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. 17.13 Governing Law. The validity, construction and when prompted, indicate that youeffect of the Plan and any actions taken or relating to the Plan shall be determined in accordance with the laws of the State of Texas and applicable federal law.
17.14 Successors and Assigns. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, expressly to assume and agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Timeperform the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return itCompany’s obligations under this Plan in the postage-paid envelope we have provided same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. As used herein, the “Company” shall mean the Company as herein before defined and any aforesaid successor to its business and/or return itassets.17.15 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or whether fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated. | | | | | | A-16 | | | | |
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VALERO ENERGY CORPORATION ONE VALERO WAY SAN ANTONIO, TEXAS 78249 | | VOTE BY INTERNET - www.proxyvote.com | | Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 04/29/2020 for shares held directly and by 11:59 P.M. ET on 04/27/2020 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | VOTE BY PHONE - 1-800-690-6903 | | Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 04/29/2020 for shares held directly and by 11:59 P.M. ET on 04/27/2020 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. | | | VOTE BY MAIL | | | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | KEEP THIS PORTION FOR YOUR RECORDS |
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | | | | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | DETACH AND RETURN THIS PORTION ONLY |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote“FOR” the following action: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. | | Elect directors to serve until the 2021 Annual Meeting of Stockholders. | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees | | | | | | For | | Against | | Abstain | | | | | | | | For | | Against | | Abstain | | | | | 1A. | | H. Paulett Eberhart | | | | | | ☐ | | ☐ | | ☐ | | | | 1K. | | Rayford Wilkins, Jr. | | ☐ | | ☐ | | ☐ | | | | | 1B. | | Joseph W. Gorder | | | | | | ☐ | | ☐ | | ☐ | | | | The Board of Directors recommends you vote “FOR” proposals 2, 3 and 4. | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | 1C. | | Kimberly S. Greene | | | | | | ☐ | | ☐ | | ☐ | | | | 2. | | Ratify the appointment of KPMG LLP as Valero’s independent registered public accounting firm for 2020. | | ☐ | | ☐ | | ☐ | | | | | 1D. | | Deborah P. Majoras | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | 1E. | | Eric D. Mullins | | | | | | ☐ | | ☐ | | ☐ | | | | 3. | | Approve, by non-binding vote, the 2019 compensation of our named executive officers. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | 1F. | | Donald L. Nickles | | | | | | ☐ | | ☐ | | ☐ | | | | 4. | | Approve 2020 Omnibus Stock Incentive Plan. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | 
| | 1G. | | Philip J. Pfeiffer | | | | | | ☐ | | ☐ | | ☐ | | | | NOTE:Such other business as may properly comebefore the meeting or any adjournment thereof. | | | | | | | | | | 1H. | | Robert A. Profusek | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1I. | | Stephen M. Waters | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 1J. | | Randall J. Weisenburger | | | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] Date | | | | | | | | Signature (Joint Owners) Date |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
| | | | | | | | | | | | | | | | | Valero Energy Corporation | | | | | | | | | | | | | | | Vote on Directors | | | | | | | | | | | | | | | The Board of Directors recommends a vote “FOR” the following action: | | | | | | Vote on Proposals | | | | | | | | 1. | Elect directors to serve until the 2018 annual meeting of stockholders. | | For | Against | Abstain | | The Board of Directors recommends a vote FOR proposals 2 and 3. | | | | | | | | | Nominees: | | | | | | | | | | | | | | | 1a. H. Paulett Eberhart | | 0 | 0 | 0 | | | | For | Against | Abstain | | | | | 1b. Joseph W. Gorder | | 0 | 0 | 0 | | 2. | Ratify the appointment of KPMG LLP as Valero Energy’s independent registered public accounting firm for 2017. | | 0 | 0 | 0 | | | | | 1c. Kimberly S. Greene | | 0 | 0 | 0 | | | | | | | | | | | | 1d. Deborah P. Majoras | | 0 | 0 | 0 | | 3. | Approve, by nonbinding vote, the 2016 compensation of our named executive officers. | | 0 | 0 | 0 | | | | | 1e. Donald L. Nickles | | 0 | 0 | 0 | | | | | | | | | | | | 1f. Philip J. Pfeiffer | | 0 | 0 | 0 | | The Board of Directors recommends a vote for “1 YEAR” on the following proposal. | | | | | | | | | 1g. Robert A. Profusek | | 0 | 0 | 0 | | | | | 1 Year | 2 Years | 3 Years | Abstain | | | | 1h. Susan Kaufman Purcell | | 0 | 0 | 0 | | 4. | Advisory vote to recommend the frequency of stockholder votes on executive compesnation. | | 0 | 0 | 0 | 0 | | | | 1i. Stephen M. Waters
| | 0 | 0 | 0 | | | | | | | | | | | | 1j. Randall J. Weisenburger
| | | | | | | | | | | | | | | | 1k. Rayford Wilkins, Jr.
| | | | | | | | | | | | | | | | | | | | | | NOTE: Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | Signature (Joint Owners) | | Date | | |
ImportantNoticeRegardingthe AvailabilityofProxyMaterialsfor the AnnualMeeting: Combo Document (NoticeThe Notice and Proxy Statement and Annual Report on Form 10-K) is10-K are available at www.proxyvote.com.
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| | | | | | VALERO ENERGY CORPORATION | ANNUAL MEETING OF STOCKHOLDERS April 30, 2020 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS | ANNUAL MEETING OF STOCKHOLDERS | MAY 3, 2017 | | The stockholder(s) hereby revoke(s) all previous proxies and appoint(s) Joseph W. Gorder, Jay D. BrowningJason W. Fraser and J. Stephen Gilbert, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizesauthorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Valero Energy Corporation that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held on Wednesday, May 3, 2017Thursday, April 30, 2020 at 10:00 a.m., Central Time, at the Valero Energy Corporation offices located at One Valero Way, San Antonio, TX 78249, and any adjournment or postponement thereof. | | THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES FOR DIRECTOR, AND “FOR” PROPOSALS 2, AND 3 AND FOR “1 YEAR” ON PROPOSAL 4. IF ANY OTHER MATTERS ARE VOTED ON AT THE MEETING, THIS PROXY WILL BE VOTED BY THE NAMED PROXIES ON SUCH MATTERS IN THEIR SOLE DISCRETION. | | YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE THE SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD. | | | | | | | | Continued and to be signed on reverse side |
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