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Registration No. 333-27015
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT ON FORM S-8
TO FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PG&E CORPORATION
(Exact name of issuer as specified in its charter)
California 94-3234914
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
77 Beale Street, P.O. Box 770000, San Francisco, California 94177
(Address of principal executive offices) (Zip Code)
VALERO ENERGY CORPORATION STOCK OPTION PLAN NO. 4
VALERO ENERGY CORPORATION STOCK OPTION PLAN NO. 5
VALERO ENERGY CORPORATION EXECUTIVE STOCK INCENTIVE PLAN
(Full title of the plan)
Bruce R. Worthington, Esq.
General Counsel
PG&E Corporation
77 Beale Street, P.O. Box 770000, San Francisco, California 94177
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (415) 973-2078
Copy to:
Leslie P. Jay, Esq.
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, California 94111
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INTRODUCTORY STATEMENT
PG&E Corporation hereby amends its Registration Statement on Form S-4 (Reg. File
No. 333-27015) (the "S-4"), effective August 1, 1997, by filing this Post-
Effective Amendment on Form S-8 (the "Post-Effective Amendment") relating to
shares of common stock, no par value, of PG&E Corporation ("PG&E Common Stock"),
issuable under the Valero Energy Corporation Stock Option Plan No. 4, Valero
Energy Corporation Stock Option Plan No. 5, and Valero Energy Corporation
Executive Stock Incentive Plan, as amended (collectively, the "Valero Plans").
On July 31, 1997, a wholly-owned subsidiary of PG&E Corporation merged into
Valero Energy Corporation ("Valero"), with Valero constituting the surviving
corporation (the "Merger"). Valero was then renamed "PG&E Gas Transmission,
Texas Corporation" ("PG&E Texas").
As a result of the Merger, the awards previously granted under the Valero Plans
to those individuals employed by PG&E Corporation or any affiliate thereof on
the Effective Date, were converted, as of July 31, 1997, solely into non-
qualified stock options to purchase an adjusted number of shares of PG&E Common
Stock at an adjusted exercise price, as set forth in conversion agreements
between such participants and PG&E Texas.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this registration
statement: (i) the latest annual report of PG&E Corporation (the "Registrant")
filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); (ii) all reports filed by the Registrant
pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the
fiscal year covered by the annual report referred to in clause (i) above; and
(iii) the description of the Registrant's common stock (the "Common Stock")
filed pursuant to the Exchange Act, including any amendment or report filed for
the purpose of updating such description. All documents filed by the Registrant
after the date of this registration statement pursuant to Sections 13(a), 13(c),
14, and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment (that indicates all securities offered have been sold or deregisters
all securities then remaining unsold), shall be deemed to be incorporated by
reference in this registration statement and to be a part hereof from the date
of filing of such documents.
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ITEM 4. DESCRIPTION OF SECURITIES
Inapplicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The legality of the Common Stock and all legal matters in connection therewith
will be passed upon by Gary P. Encinas, Chief Counsel, Corporate for Pacific Gas
and Electric Company, a wholly-owned subsidiary of the Registrant ("PG&E"). Mr.
Encinas and other members of PG&E's Law Department who will participate in
consideration of legal matters relating to the Common Stock, together with
members of their respective families, own in the aggregate approximately 2,100
shares of Common Stock, and have received options to purchase approximately
68,100 shares of Common Stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California Corporations Code and Article SIXTH of the
Registrant's Articles of Incorporation provide for indemnification of the
Registrant's directors and officers under certain circumstances. The
Registrant's Board of Directors has adopted a resolution regarding the
Registrant's policy of indemnification and the Registrant maintains insurance
which insures directors and officers of the Registrant against certain
liabilities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Inapplicable.
ITEM 8. EXHIBITS
4.1 Valero Energy Corporation Stock Option Plan No. 4, as amended.
4.2 Valero Energy Corporation Stock Option Plan No. 5, as amended.
4.3 Valero Energy Corporation Executive Stock Incentive Plan, as amended.
3
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5.1 Opinion of Gary P. Encinas, Esq.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Gary P. Encinas, Esq. is included in Exhibit 5.1 to this
Registration Statement.
24.1 Powers of Attorney (and incorporated by reference to Exhibit 24.1 to the
Registrant's Registration Statement on Form S-4, File No. 333-27015).
24.2 Resolution of the Board of Directors of the Registrant authorizing the
execution of this Registration Statement (incorporated by reference to
Exhibit 24.2 to the Registrant's Registration Statement on Form S-4, File
No. 333-27015).
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
4
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offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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Signatures
THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California on the 31st of
July, 1997.
PG&E CORPORATION
(Registrant)
By GARY P. ENCINAS
---------------------------------------
(Gary P. Encinas, Attorney-in-Fact)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
Signature Title Date
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A. Principal Executive Officer
*ROBERT D. GLYNN, JR. President and July 31, 1997
Chief Executive
Officer
B. Principal Financial Officer
*KENT M. HARVEY Treasurer and July 31, 1997
Acting Chief
Financial Officer
C. Controller or Principal
Accounting Officer
*CHRISTOPHER P. JOHNS Controller July 31, 1997
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<TABLE>
<CAPTION>
D. Directors
<S> <C> <C>
* STANLEY T. SKINNER Director July 31, 1997
* ROBERT D. GLYNN, JR. Director July 31, 1997
* RICHARD A. CLARKE Director July 31, 1997
* H. M. CONGER Director July 31, 1997
* MARY S. METZ Director July 31, 1997
* REBECCA Q. MORGAN Director July 31, 1997
* C. LEE COX Director July 31, 1997
* BARRY LAWSON WILLIAMS Director July 31, 1997
* RICHARD B. MADDEN Director July 31, 1997
* JOHN C. SAWHILL Director July 31, 1997
* DAVID M. LAWRENCE Director July 31, 1997
* ALAN SEELENFREUND Director July 31, 1997
* SAMUEL T. REEVES Director July 31, 1997
* CARL E. REICHARDT Director July 31, 1997
</TABLE>
*By: GARY P. ENCINAS
-------------------------------------------
(Gary P. Encinas, Attorney-in-Fact)
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EXHIBIT INDEX
4.1 Valero Energy Corporation Stock Option Plan No. 4, as amended.
4.2 Valero Energy Corporation Stock Option Plan No. 5, as amended.
4.3 Valero Energy Corporation Executive Stock Incentive Plan, as amended.
5.1 Opinion of Gary P. Encinas, Esq.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Gary P. Encinas, Esq. is included in Exhibit 5.1 to this
Registration Statement.
24.1 Powers of Attorney (and incorporated by reference to Exhibit 24.1 to the
Registrant's Registration Statement on Form S-4, File No. 333-27015).
24.2 Resolution of the Board of Directors of the Registrant authorizing the
execution of this Registration Statement (incorporated by reference to
Exhibit 24.2 to the Registrant's Registration Statement on Form S-4, File
No. 333-27015).
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EXHIBIT 4.1
VALERO ENERGY CORPORATION
STOCK OPTION PLAN NO. 4
1. Introduction and Statement of Purpose.
This Valero Energy Corporation Stock Option Plan No. 4 (the "Plan") is
established for the purpose of giving additional incentive to Key Employees of
the Company by creating an opportunity for capital accumulation by such Key
Employees. It is intended that the benefits available under this Plan, when
added to other benefits payable to these Key Employees, will furnish total
compensation to such Key Employees which is competitive in the industries in
which the Company conducts its business and in which the Company competes for
employees. This Plan sets forth the basis for the eligibility of Employees to
participate in the Plan and the terms and conditions regulating such
participation. The Plan provides for the grant of Options to purchase Common
Stock of Valero, Limited Rights which may be exercised in lieu of Options and
stock appreciation rights which are automatically exercised upon the exercise of
an Option. The Options granted under the Plan are and are intended to be "non-
qualified" options under the Internal Revenue Code of 1986, as amended. The
Plan amendments first included in this amended and restated Stock Option Plan
No. 4 shall be effective as of August 22, 1996.
2. Definitions.
For the purposes of this Plan, the following terms shall have the meanings
stated below unless a different meaning is plainly required by the context or
such term is otherwise defined herein.
(a) "Board of Directors" shall mean the Board of Directors of Valero.
(b) "Change of Control" shall have the meaning specified in Paragraph
4.15.
(c) "Change of Control Period" shall mean a period beginning on any
date that a Change of Control shall occur and ending at the close
of business on the 90th day thereafter, provided however, that if
a tender offer or exchange offer constituting a Change of Control
pursuant to clause (ii) of Paragraph 4.15 shall be canceled,
expire or otherwise terminate without Voting Securities having
been acquired pursuant thereto, the Change of Control Period
shall terminate at the close of business on (a) the seventh day
following the date of cancellation, expiration or other
termination of such tender offer or exchange offer, or (b) the
90th day after the commencement of such offer, whichever shall
first occur.
(d) "Committee" shall mean the persons administering this Plan from
time to time pursuant to Paragraph 6.1.
(e) "Common Stock" shall mean the common stock, par value $1.00 per
share, of Valero.
(f) "Company" shall mean Valero and any Parent or Subsidiary of
Valero which now exists or hereafter is organized or acquired by
or acquires Valero, and any successor or successors to such
entities. The terms "Parent" and "Subsidiary" shall have the
same meaning as the terms "parent corporation" and "subsidiary
corporation," respectively, as specified in Section 425 of the
Internal Revenue Code of 1986, as amended.
(g) "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors, as constituted from time to time.
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(h) "Controlled Subsidiary" shall mean a corporation of which a
majority of the outstanding common stock is directly or
indirectly beneficially owned by Valero.
(i) "Employee" shall mean any person employed by the Company,
including officers and directors of the Company within the
meaning of Section 16(a) of the Exchange Act, but shall include a
director only if also employed by the Company on a full-time
basis.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and in effect from time to time.
(k) "Exercise Date" -- see Paragraph 4.6.
(l) "Expiration Date" -- see Paragraph 3.5.
(m) "Exercise Notice" -- see Paragraph 4.6.
(n) "Group" -- see Paragraph 4.15.
(o) "Installment Option" -- see Paragraph 4.1.
(p) "Key Employee" shall mean any key executive, managerial or
professional Employee or prospective Employee of the Company
having responsibility for planning the Company's operations,
controlling or managing its business activities, or advising the
management of the Company with respect to its operations and
business activities. The determination of "Key Employees" for
purposes of determining eligibility for participation in this
Plan, and the determination of "key employees" for purposes of
applying any New York Stock Exchange Rule or determining
eligibility for participation in any other stock option plan of
the Company, need not be consistent.
(q) "Limited Right" shall mean the right, following a Change of
Control of Valero and in lieu of purchasing an Option Share
pursuant to the exercise of an Option, to receive a cash payment
equal to the difference between the Strike Price of such Limited
Right and the price of one share of Common Stock at the time
specified in Paragraph 4.2.
(r) "Nonaccelerated Person" -- see Paragraph 4.15.
(s) "Nonacceleration Notice" -- see Paragraph 4.15.
(t) "Option" or "Options" shall mean an option or options granted
pursuant to this Plan to purchase shares of Common Stock.
(u) "Option Agreement" shall mean a written agreement entered into
between Valero and a Participant pursuant to Paragraph 3.9.
(v) "Option Price" -- see Paragraph 3.5.
(w) "Option Share" shall mean one share of Common Stock purchased or
which may be purchased pursuant to an Option.
(x) "Parent" -- see subparagraph (f) of this Paragraph 2.
(y) "Participant" shall mean a Key Employee who has entered into an
Option Agreement which is in force and effect.
(z) "Person" -- see Paragraph 4.15.
(aa) "Plan" -- see Paragraph 1.
(bb) "Preference Share Purchase Right" shall mean one of the rights
distributed to holders of record of Valero on November 25, 1985,
to purchase 1/100 share of the Junior Participating Serial
Preference Stock, Series II, of Valero.
(cc) "Rights Agreement" shall mean that certain Rights Agreement,
dated as of October 26, 1995, between Valero and Harris Trust and
Savings Bank, as Rights Agent, as amended and in effect from time
to time.
(dd) "Restricted Optionee" shall mean any person who is a "director"
or "officer" of Valero within the meaning of Section 16(a) of the
Exchange Act, together with any person who is the beneficial
owner of more than 10 percent of any
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class of equity security of Valero registered under Section 12 of
the Exchange Act.
(ee) "SAR" or "stock appreciation right" shall mean the right, subject
to the provisions of this Plan, to receive a payment in cash
equal to the difference between the specified Strike Price of the
SAR and the price of one share of the Common Stock at the time
specified in Paragraph 4.3.
(ff) "SEC" shall mean the Securities and Exchange Commission.
(gg) "Settlement Date" -- see Paragraph 4.6.
(hh) "Strike Price" shall mean the price per share of the Common
Stock, determined pursuant to Paragraph 3.7, from which the
appreciation (if any) with respect to a SAR or Limited Right
shall be calculated.
(ii) "Subsidiary" -- see subparagraph (f) of this Paragraph 2.
(jj) "Tax Payment" -- see Paragraph 4.6.
(kk) "Valero" shall mean Valero Energy Corporation, a Delaware
corporation.
(ll) "Valero Pension Plan" -- see Paragraph 4.13.
(mm) "Voting Securities" -- see Paragraph 4.15.
3. Granting of Options, Limited Rights and SARs to Employees.
3.1. Selection of Participants. The Committee shall, from time to time,
-------------------------
grant Options to purchase a specified number of Option Shares to such Key
Employees of the Company as the Committee, in its sole and absolute discretion,
shall select to become Participants. At or subsequent to the time that an
Option is granted to a Key Employee by the Committee, the Committee may grant
such Key Employee a number of SARs not exceeding the number of Option Shares
which may be purchased (whether in installments or otherwise) pursuant to such
Option, provided, that no SARs shall be granted with respect to Option Shares
which have theretofore been purchased by a Participant or to any Participant
who, subsequent to the date of grant of such Option, is no longer an Employee as
such term is defined herein. Subject to the full and final authority of the
Committee to administer the Plan and select Participants, the granting of
Options, Limited Rights and SARs hereunder and the selection of Participants may
be based on recommendations made by the Chief Executive Officer of Valero.
3.2. Exclusion of Committee Members. No member of the Committee, while so
------------------------------
serving, may be granted any Option, Limited Rights or SARs. However, a
Participant who has been granted an Option, Limited Rights or SARs under this
Plan prior to serving on the Committee may, during such term of service,
continue to hold any Options, Limited Rights and SARs previously granted and may
exercise any such Options, Limited Rights and SARs and hold Option Shares
acquired upon the exercise of any such Options, subject to the provisions of
this Plan.
3.3. No Right to Participate. No Employee or prospective Employee of the
-----------------------
Company shall have the right to require the Company or the Committee to make him
a Participant under this Plan.
3.4. Automatic Grant of Limited Rights. Each Option granted pursuant to
---------------------------------
this Plan (whether or not the Option Agreement shall so specify) shall be
automatically accompanied by that number of Limited Rights which equals the
number of Option Shares which may be purchased (whether in installments or
otherwise) pursuant to such Option. Limited Rights may not be granted separate
or apart from the grant of an Option to purchase Option Shares.
3.5. Determination of Option Provisions. In determining that a Key
----------------------------------
Employee shall be granted an Option, the Committee shall designate the number of
Option Shares the Employee may
<PAGE>
purchase under the Option, a date upon which the Option (unless an earlier
termination date is established pursuant to Paragraph 8.4) will automatically
expire (the earlier of such dates being referred to herein as the "Expiration
Date"), the price per share at which such Option Shares may be purchased (the
"Option Price") and the remaining terms and conditions of such Option. If the
Committee shall determine to grant SARs to the grantee or holder of an Option,
the Committee shall designate the number of SARs granted and any terms and
conditions pertaining thereto.
3.6. Option Shares, Limited Rights and SARs Available for Grant. (A)
----------------------------------------------------------
Subject to the provisions of Paragraphs 4.10 and 5, the maximum number of shares
of Common Stock which may be optioned and sold under this Plan shall be 600,000
shares. Shares of Common Stock optioned and sold under this Plan (and any
rights or other securities sold or delivered in accordance with Paragraph 5.1)
may be either authorized but unissued securities or reacquired (treasury)
securities.
(B) The maximum number of SARs which may be granted under this Plan shall
(subject to the provisions of Paragraphs 4.10 and 5) be equal to the maximum
number of shares of Common Stock which may be optioned and sold under this Plan.
The number of Limited Rights which shall be granted under this Plan shall be
equal to the number of shares of Common Stock optioned under this Plan.
(C) During the term of this Plan, Valero will at all times reserve and keep
available, or have authorized but unissued, shares of Common Stock sufficient to
satisfy the requirements of this Plan. The inability of Valero to obtain, from
any regulatory body having jurisdiction, any authority deemed by Valero's
counsel to be necessary to the lawful issuance and sale of Common Stock
hereunder, shall relieve the Company of any liability in respect of the
nonissuance or sale of such Common Stock as to which such requisite authority
shall not have been obtained.
3.7. Limitations Regarding Option Price and Strike Price. The Option Price
---------------------------------------------------
for any Option Share shall be as specified by the Committee in its sole
discretion, but shall not be less than 75% of (a) the closing sales price per
share of Common Stock as reported in the New York Stock Exchange - Composite
Transactions listing in The Wall Street Journal or such other listing or
quotation medium as the Committee may later designate (the "Transactions
Listing") for the New York Stock Exchange (the "NYSE") trading day immediately
preceding such date, or if there are no sales on such date, on the next
preceding day on which there were sales, or (b) in the event that the Common
Stock is not listed for trading on the NYSE, an amount determined in accordance
with standards adopted by the Committee; provided however, that, at its
election, the Committee may specify an option price which is not less than 75%
of the average closing sales price per share of the Common Stock as reported in
the Transactions Listing for a period of not less than 10 nor greater than 60
consecutive trading days as determined by the Committee in its sole discretion,
provided that such period as determined by the Committee shall not commence on a
date more than 60 trading days prior to the date of grant nor end on a date more
than 60 trading days after the date of grant. The Strike Price at which a SAR
or Limited Right is granted shall be equal to the Option Price of the Option
Shares to which such SAR or Limited Right is related.
3.8. Limitation Regarding Option Period. The Plan shall continue
----------------------------------
indefinitely. However, no Option granted under this Plan shall have a stated
Expiration Date which is more than 10 years and 30 days following the date of
grant of such Option. Subject to the provisions of Paragraph 4.14, an Option,
the associated Limited Rights and any associated SARs shall lapse and shall be
automatically forfeited upon the earlier of the Expiration Date (i) as set forth
in the Option Agreement pursuant to which such Option, the associated Limited
Rights and any associated SARs are granted, or (ii) as established pursuant to
Paragraph 8.4, unless an Exercise Notice is delivered to Valero on or before the
Expiration Date.
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3.9. Option Agreements. Options, Limited Rights and SARs shall be
-----------------
evidenced by Option Agreements having such terms and provisions, not
inconsistent with this Plan, as the Committee deems advisable. Option
Agreements need not be uniform. Promptly following each determination by the
Committee to grant an Option or SARs to a Key Employee, the Committee shall
cause Valero to enter into an appropriate Option Agreement (or, in the case of a
grant only of SARs, an amendment to an existing Option Agreement) with such Key
Employee. No Key Employee or other person claiming by, through or under a Key
Employee shall be entitled to exercise any Option, Limited Right or SAR until an
appropriate Option Agreement (or amendment thereto) shall have been executed by
Valero and such Key Employee. In the event a Key Employee of the Company is
granted an Option or SARs by the Committee but for any reason, including, but
not limited to, death or total and permanent disability, does not actually enter
into a fully executed Option Agreement (or appropriate amendment thereto) with
Valero, such Key Employee shall not be deemed a Participant with respect to such
Option or SARs and neither such Key Employee nor any person claiming by, through
or under such Key Employee shall be entitled under any circumstances to exercise
such Option, Limited Rights or SARs.
3.10 Provisions Regarding Prospective Employees. In the event that a
------------------------------------------
prospective Key Employee of the Company is granted an Option, Limited Rights or
SARs pursuant to this Plan prior to actually commencing employment with the
Company but for any reason, including, but not limited to, death or total and
permanent disability, does not actually commence employment with the Company,
such person shall not be deemed a Participant for any purpose of this Plan and
neither such person nor any person claiming by, through or under such person
shall be entitled under any circumstances to exercise such Option, Limited
Rights or SARs. Upon actually commencing employment with the Company, such a
prospective Key Employee will then be deemed a Participant for all purposes of
this Plan, and will then, but only then, be deemed for purposes of this Plan
(but not for purposes of the Valero Pension Plan or other employee benefit plans
of the Company unless expressly so provided therein) to have been continually
employed by the Company from the date of grant of the Option to the date of
commencement of employment.
4. Exercise of Options, Limited Rights and SARs.
4.1. Exercise of Options. Any Option and any associated SARs shall be
-------------------
exercisable at such time and in such amounts, either as to all of the Option
Shares covered thereby or in installments ("Installment Options"), as is
provided in the Participant's Option Agreement or as may otherwise be provided
in this Plan. An Installment Option may allow the purchase of all or any part
of the Option Shares on a specified installment date or dates, and the
subsequent purchase of any unpurchased Option Shares after such installment
date(s) and through the Expiration Date. However, no Option may be exercised
with respect to a fractional share.
4.2. Exercise of Limited Rights. Any Limited Right may be exercised only
--------------------------
following a Change of Control of Valero, and may be exercised only in lieu of
the purchase of the related Option Shares. However, a Participant may, at his
election, either exercise a Limited Right or purchase the related Option Share
upon exercise of the Option. Upon the exercise of a Limited Right, the Partici
pant's Option to purchase the related Option Share shall automatically terminate
and be forfeited. Upon the exercise of a Limited Right, the Participant shall
be entitled to receive a cash payment in an amount equal to the difference
between the Strike Price of the Limited Right and (a) if the Limited Right is
exercised during a Change of Control Period, the highest of the daily average
sales prices for the Common Stock during such Change of Control Period or (b) if
the Limited Right is not exercised during a Change of Control Period, the
highest of the daily average sales prices for the Common Stock within the 30 day
period prior to the Exercise Date. The daily average sales price of the Common
Stock on a given date shall be the mean of the reported "high" and "low" prices
for the
<PAGE>
Common Stock on such date, as reported in the Transactions Listing (as defined
in Paragraph 3.7) for such date, corrected, if necessary, to exclude the effect
of typographical errors.
4.3. Automatic Exercise of SARs; Settlement Price for SARs. (A) No SARs
-----------------------------------------------------
may be exercised except simultaneously with the exercise of an Option or Limited
Right. A Participant or other person exercising an Option or Limited Right
shall be deemed to have automatically exercised on the Exercise Date that number
of related SARs which equals the number of Option Shares purchased or Limited
Rights exercised, not exceeding the lesser of (a) the number of related SARs
held by such Participant, or (b) the number of SARs then permitted to be
exercised under the Participant's Option Agreement. When a Participant holds
fewer related SARs than the number of Option Shares to which his or her Option
pertains, the Committee may adopt policies, or include terms in the
Participant's Option Agreement, which permit or require the Participant to
exercise such SARs during or after specified periods, or in conjunction with the
exercise of a certain portion of an Option, or which permit the Participant to
determine, with such restrictions as the Committee may prescribe, the timing of
exercise of such SARs.
(B) Any SAR that is exercised at the same time as a related Limited Right
shall be settled on the basis of the same daily average sales price for the
Common Stock as is such Limited Right. Except as provided in the foregoing
sentence, any SAR which is exercised during a Change of Control Period shall be
settled on the basis of the highest daily average sales prices of the Common
Stock during such Change of Control Period. Except as provided in the two
foregoing sentences, SARs shall be settled on the basis of the daily average
sales price of the Common Stock on the Exercise Date.
4.4. [reserved].
4.5. [reserved].
4.6. Exercise Procedure. Options, Limited Rights and SARs may be exercised
------------------
only by written notice of such exercise (the "Exercise Notice"), in such form as
the Committee may prescribe, delivered to Valero's Stock Benefit Plan
Administration department at Valero's principal business office and signed by
the Participant or other person specified herein as being entitled to exercise
the same. The date on which such Exercise Notice is delivered to Valero shall
be the "Exercise Date." The Exercise Notice for Options Shares shall specify a
date (the "Settlement Date"), not less than five business days nor more than ten
business days following the Exercise Date, upon which the Option Shares shall be
issued to the Participant (or other person entitled to exercise the Option) and
the Option Price shall be paid to Valero. Upon the exercise of an Option, the
Participant's right to exercise the related Limited Rights shall automatically
terminate and be forfeited. Subject to the provisions of Paragraph 3.6(A), on
the Settlement Date the person exercising an Option shall tender to Valero full
payment (in cash, certified check, cashier's check or bank draft approved by
Valero, unless shares of Common Stock are tendered, as provided in Paragraph
4.8) for the Option Shares with respect to which the Option is exercised,
together with an additional amount, in cash, certified check, cashier's check or
bank draft approved by Valero, equal to the amount of any and all taxes required
to be collected or withheld by the Company in connection with such exercise of
such Option (the "Tax Payment"); provided, however, that when related SARs are
exercised at the same time an Option is exercised, such Tax Payment shall be
reduced by withholding the amount thereof, to the extent possible, from the cash
payment otherwise payable by the Company to the Participant as the result of the
exercise of such SARs. Subject to the prior approval or disapproval of the
Committee, and to such rules and limitations as it may adopt, if no related SARs
are exercised such Tax Payment may also be made in whole or in part by (a)
withholding from the number of shares otherwise deliverable to the person
exercising the Option a number of shares whose fair market value equals the
<PAGE>
Tax Payment or (b) delivering certificates for other shares of Common Stock
owned by the person exercising the Option, endorsed in blank with appropriate
signature guarantee, having a fair market value equal to the amount otherwise to
be collected or withheld. When Limited Rights are exercised, the Tax Payment
shall be withheld, to the extent possible, from any cash amount otherwise
payable by the Company as the result of the exercise of such Limited Rights (and
any related SARs). Any and all calculations 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 Option shall be made using the average sales
price of the Common Stock on the Exercise Date, whether or not the Exercise
Notice is delivered to Valero before or after the close of trading on such date,
unless otherwise specified by the Committee. Any and all calculations made with
respect to a Participant's income, required tax withholding or other matters
made upon exercise of a SAR or Limited Right shall be made using the price at
which such SAR or Limited Right is settled, unless otherwise specified by the
Committee.
4.7. Payment for SARs and Limited Rights. SARs and Limited Rights shall be
-----------------------------------
paid or settled only in cash. Payment for Limited Rights and SARs exercised
hereunder shall be made on the Settlement Date. In the event the final amount
of such payment cannot be immediately determined (e.g., if exercise occurs near
the beginning of a Change of Control Period), an interim payment shall be made
as soon as practicable following the Exercise Date, and the final payment shall
be made as soon as practicable after the applicable daily average sales price
can be determined.
4.8. Payment with Common Stock. Subject to approval of the Committee, a
-------------------------
person exercising an Option may pay for Option Shares by tendering to Valero
other shares of Common Stock legally and beneficially owned by such person at
the time of the exercise of an Option. Subject to approval of the Committee, a
person exercising an Option may also pay for Option Shares by delivering a
notarized affidavit, in such form as the Committee may prescribe, certifying as
to such person's legal and beneficial ownership of shares of Common Stock held
either in such person's name or in "street name" and, in the case of shares held
in such person's name, providing the certificate number(s) for such shares; if
such method of payment is approved and utilized, the number of shares issued
upon exercise of the Option shall be reduced by the number of shares represented
by such affidavit. If approved by the Committee, either such method of exercise
may include use of a procedure whereby a person exercising an Option may request
that shares received upon exercise of a portion of an Option be automatically
applied to satisfy the exercise price for additional and increasingly larger
portions of the Option. The certificate(s) representing any shares of Common
Stock tendered in payment of the Option Price must be accompanied by a stock
power duly executed with appropriate signature guarantees. Shares of Common
Stock tendered in payment of the Option Price (including shares represented by
an affidavit) shall be valued at the daily average sales price of the Common
Stock on the Exercise Date, determined as specified in Paragraph 4.2 above. The
Committee may, in its sole and absolute discretion, refuse any tender of shares
of Common Stock, in which case it shall promptly deliver the shares of Common
Stock back to the person exercising the Option and notify such person of such
refusal as soon as practicable. In such event, such person may either (a)
tender to Valero on the Settlement Date the cash amount required to pay for such
Option Shares, or (b) rescind his Exercise Notice. If such person elects to
rescind his Exercise Notice, such person may again (subject to the provisions of
this Plan relating to the termination, forfeiture, lapse or expiration of
Options granted hereunder) deliver an Exercise Notice with respect to such
Option Shares or the associated Limited Rights (and any related SARs) at any
time prior to the Expiration Date of such Options.
4.9. Rights as Stockholder. Until the issuance of the stock certificate(s)
---------------------
for Option Shares purchased hereunder (as evidenced by the appropriate entry on
the books of Valero or of a duly authorized transfer agent of Valero), no right
to vote or receive dividends or any other rights as a stockholder of Valero
shall exist with respect to such Option Shares, notwithstanding the exercise of
<PAGE>
any Option. No adjustment will be made for a dividend or other rights for which
the record date is prior to the date the stock certificates evidencing such
shares of Common Stock are issued, except as otherwise provided under Paragraph
5 of this Plan.
4.10 Effect of Termination and Forfeiture. Except as provided in
------------------------------------
Paragraphs 4.14 and 4.15, an Option (and any associated Limited Rights and SARs)
may be exercised by a Participant only while he is and has continually been,
since the date of the grant of the Option, an Employee of the Company. In the
event a Participant's employment with the Company is voluntarily terminated by
the Participant (other than through retirement) or is terminated by the Company
under circumstances involving willful misconduct or criminal activity by the
Participant, then, except as provided in Paragraph 4.14(D), all Options (and any
associated Limited Rights and SARs) previously awarded to such Participant
hereunder and not theretofore exercised in accordance with Paragraph 4.6 shall
automatically lapse and be forfeited as of the date of the Participant's
termination. Should a Participant's employment be terminated by retirement,
death or total and permanent disability, or by the Company (except under
circumstances involving willful misconduct or criminal activity by the
Participant), the provisions of Paragraph 4.14 shall apply. Except as set forth
in the following sentence, if a Participant shall forfeit, voluntarily surrender
or otherwise permanently lose his right to exercise an Option or SARs or any
associated Limited Rights under any provision of this Plan or otherwise, or any
Option shall terminate or expire pursuant to its terms, the Option Shares
subject to such Option shall once more be available to be optioned and sold
under this Plan pursuant to a new Option granted hereunder, and any associated
Limited Rights and SARs shall again be available for grant hereunder. However,
if a Limited Right has terminated and been forfeited because an Option has been
exercised with respect to the related Option Shares, or an Option to purchase
Option Shares has terminated and been forfeited because the related Limited
Rights have been exercised, the Limited Rights or Option Shares so forfeited
shall not become available for additional grants hereunder.
4.11 Effect of Leave of Absence. A Participant who commences a leave of
--------------------------
absence (such as a disability leave of absence) shall thereupon be suspended
from participation in this Plan during such leave of absence. During a period
of suspension from this Plan, a Participant cannot exercise any Option
(including any Installment Option) or any associated SARs that, but for this
provision, would otherwise become exercisable during such period of suspension,
provided however, that such Participant shall be entitled to exercise any
Options, Limited Rights or SARs which become exercisable during such period of
suspension pursuant to Paragraph 4.15. A Participant, while suspended, may
exercise an Option (and any related SARs) with respect to any unpurchased Option
Shares which such Participant was eligible to purchase on the day preceding the
first day of such suspension; however, such Option Shares must be purchased
prior to the Expiration Date of the Option. Notwithstanding the foregoing
provisions of this Paragraph 4.11, the Committee, in its sole and absolute
discretion, may determine at any time before or after the commencement of such
leave of absence that the commencement of such leave of absence will be treated
as a termination of employment for purposes of the Plan. If the Committee so
determines, the Committee shall so notify the Participant and specify a date,
not less than 10 days following such notification, by which the Participant must
deliver an Exercise Notice with respect to any Option Shares which the
Participant is then entitled to purchase and exercise any related Limited Rights
and SARs which may then be exercised. Options, Limited Rights and SARs not
exercised by the Participant by such date shall be forfeited. The Committee
may, in its sole and absolute discretion, change or modify the exercise dates or
other terms of any Option or SARs held by a Participant who goes on a leave of
absence and which were not exercisable by such Participant at the commencement
of such leave of absence.
4.12 Effect of Disability. The total and permanent disability of a
--------------------
Participant shall terminate, effective on the first day of such disability, as
determined by the Committee, the participation of such Participant in this Plan
subject to the conditions set forth in Paragraph 4.14.
<PAGE>
The Committee shall determine, in its sole and absolute discretion, whether or
not a Participant is totally and permanently disabled for purposes of this Plan
and when such disability (if any) commenced, and such determinations by the
Committee shall be conclusive and binding on the Participant and all persons
claiming by, through or under such Participant. Such determinations shall be
made on the basis of medical reports and other evidence satisfactory to the
Committee and in accordance with a uniform, nondiscriminatory policy applied by
the Committee, but such determinations shall not be binding on the Company or
any Participant with respect to any other employee benefit or other plan or
insurance policy wherein such determinations may be relevant, and need not be
consistent with any determinations made under any such plan or insurance policy.
4.13 Effect of Retirement or Death. The retirement or death of a
-----------------------------
Participant shall terminate, effective on the date of such retirement or death,
the participation of such Participant in this Plan subject to the conditions set
forth in Paragraph 4.14. For purposes of this Plan, a Participant shall be
deemed to have retired when the Participant retires under the provisions of the
Pension Plan for Employees of Valero Energy Corporation or any other, similar
pension plan of the Company providing benefits to such Participant ("Valero
Pension Plan"). In the case of a Participant who is not a participant in a
Valero Pension Plan, retirement shall be deemed to occur when the Participant
retires from the service of the Company.
4.14 Exercise Following Termination, Retirement, Disability or Death. (A)
---------------------------------------------------------------
Should the Committee determine that a Participant has become totally and
permanently disabled, or should the Participant's employment with the Company be
terminated as the result of death or retirement, the first day of such
disability (as determined by the Committee) or the date of retirement or death,
as the case may be, shall be treated as the date of the Participant's
termination from the Plan, and the Participant (or the Participant's heir,
beneficiary, guardian, legal representative, administrator or executor, as the
case may be) shall be entitled for the period specified in subparagraph (C)
below to (a) purchase any Option Shares (or, if a Change of Control has
occurred, exercise any Limited Rights) that the Participant was eligible to
purchase or exercise on the day prior to such date of retirement, death or
disability and which such Participant (had he not died, retired or become
disabled) would have become eligible to purchase or exercise within the six
month period following such date of retirement, death or disability and (b)
exercise any SARs associated with such Option Shares so purchased or Limited
Rights so exercised.
(B) A Participant who retires, dies or becomes totally and permanently
disabled while suspended from this Plan will be deemed to have been reinstated
into the Plan on the day prior to the date of retirement, death or disability,
and such Participant (or the Participant's heir, beneficiary, guardian, legal
representative, administrator or executor, as the case may be), shall be
entitled for the period specified in subparagraph (C) below to (i) purchase any
Option Shares (or, if a Change of Control has occurred, exercise any Limited
Rights) which the Participant, had he not retired, died or become disabled,
would have been entitled to purchase or exercise on the day prior to the date of
retirement, death or disability, and would have become entitled to purchase or
exercise within the six month period following the date of retirement, death or
disability, and (ii) exercise any SARs related to the Option Shares so purchased
or Limited Rights so exercised.
(C) A Participant or other person entitled to exercise any Options, Limited
Rights or SARs pursuant to subparagraph (A) or (B) above--other than a
Restricted Optionee or other person exercising an Option, Limited Right or SAR
on behalf of a Restricted Optionee--shall have until the earlier of (i) the
Option Expiration Date, or (ii) three years from the date of such Participant's
retirement, death or disability, to deliver in accordance with Paragraph 4.6 an
Exercise Notice with respect to such Options, Limited Rights and SARs. A
Restricted Optionee or other person entitled to exercise an Option, Limited
Right or SAR on behalf of a Restricted Optionee pursuant to
<PAGE>
subparagraph (A) or (B) above shall have until the earlier of (i) the Option
Expiration Date, or (ii) three years from the date of such Restricted Optionee's
retirement, death or disability, to deliver in accordance with Paragraph 4.6 an
Exercise Notice with respect to such Options, Limited Rights and SARs granted on
--
or after November 28, 1993. For Options, Limited Rights and SARs granted to
- --------------------------
Restricted Optionees under this Plan before November 28, 1993, a Restricted
------------------------
Optionee or other person entitled to exercise an Option, Limited Right or SAR on
behalf of a Restricted Optionee pursuant to subparagraph (A) or (B) above shall
have until the earlier of (i) the Option Expiration Date, or (ii) 90 days from
the date of such Restricted Optionee's retirement, death or disability to
deliver the Exercise Notice prescribed by Paragraph 4.6 herein. Any Options,
Limited Rights or SARs not exercised within such periods shall be automatically
forfeited; provided, however, that the Committee or the Chief Executive Officer
of Valero upon application of any proper party may in its sole and absolute
discretion grant extensions of such three year or 90 day period upon such terms
and subject to such conditions as it may specify; provided further, however,
that in the case of a Restricted Optionee, any such extension shall be subject
to the prior approval of the Committee, which shall either approve or disapprove
the same in its sole discretion. Neither the Company, its officers, directors,
employees, or agents, nor any member of the Committee shall bear any liability
to the estate of, or to any spouse, beneficiary, legatee or heir of a
Participant, or to the Participant himself, or to any other person, for
authorizing an heir, beneficiary, executor, legatee, administrator, guardian or
legal representative of a Participant, or an individual or entity who is
represented as such, to exercise an Option, Limited Right or SAR granted
hereunder or for issuing the Option Shares purchased pursuant to the exercise of
any Option, or for making any cash payment (or for withholding any Tax Payment
from any cash payment) relating to any Limited Right or SAR, granted under this
Plan.
(D) In the case of any retirement and/or termination of employment (whether
voluntary or involuntary termination or otherwise), the Committee or, except
with respect to a Restricted Optionee, the Chief Executive Officer of Valero
shall be entitled (but shall not be required) to permit the Participant to
exercise, for a period not to exceed 90 days, all or part of the Participant's
Options (and any associated Limited Rights and SARs) which, at the date of
termination of employment, were exercisable pursuant to the Participant's Option
Agreement(s) and the provisions of the Plan and remained unexercised. In
addition, the Committee or, except with respect to a Participant who is a
Restricted Optionee at the date of such Option Agreement amendment, the Chief
Executive Officer of Valero may, in connection with any Participant's retirement
and/or termination of employment with the Company, (i) authorize any existing
Option Agreement of such Participant to remain in full force and effect under
its existing terms and conditions (including its existing vesting schedule) or
such amended terms and conditions as the Committee or the Chief Executive
Officer shall approve, and/or (ii) authorize amendments to any existing Option
Agreement (or a new Option Agreement superseding any prior Option Agreement)
between Valero and such Participant removing and/or modifying any or all of the
then present or future restrictions, conditions and/or limitations (whether
arising under such Option Agreement or this Plan) on the exercise of the Options
(and any associated Limited Rights and SARs) previously granted to such
Participant; no such authorization or amendment (or new Option Agreement) shall
increase the aggregate number of Options granted to any Participant. Any action
referred to in the preceding two sentences shall be taken by the Committee or
Chief Executive Officer of Valero, if at all, not later than six months
following the Participant's effective date of termination.
4.15 Effect of Change of Control. (A) As used herein, the term "Change of
---------------------------
Control" shall mean each occurrence of any one or more of the following events:
(i) any person (excluding any employee benefit plan of Valero, any
trustee, administrator or other entity administering any such plan,
and Valero or any Controlled Subsidiary) or any partnership, limited
partnership, syndicate or other group formed for the
<PAGE>
purpose of acquiring, holding or disposing of Voting Securities within
the meaning of Rule 13(d) under the Exchange Act (a "Group") which
theretofore beneficially owns less than 20% of the Voting Securities
of Valero then issued and outstanding shall publicly announce, or
shall file with the SEC a Schedule 13D pursuant to Section 13(d) of
the Exchange Act (or successor form pursuant to such or any successor
provision) indicating, that it has acquired (whether in one or more
transactions) Voting Securities of Valero that result in such person
or Group directly or indirectly beneficially owning 20% or more of the
Voting Securities of Valero; or
(ii) any person (other than Valero, any Controlled Subsidiary, any employee
benefit plan of Valero and any trustee, administrator or other entity
administering any such plan) or Group shall commence a tender offer or
exchange offer for 30% or more of the Voting Securities of Valero, or
for any number or amount of Voting Securities of Valero which, if such
offer were to be fully subscribed and all Voting Securities for which
such tender or exchange offer is made were to be purchased or
exchanged pursuant to such offer, would result in such person or Group
directly or indirectly beneficially owning 50% or more of the Voting
Securities of Valero; or
(iii)during any period of 24 consecutive calendar months, there shall be
a change in the composition of the Board of Directors of Valero such
that the persons who at the beginning of any such period constituted a
majority of the directors of Valero shall cease to constitute a
majority of the Board of Directors of Valero, unless the election, or
the nomination for election, by the shareholders of Valero, or the
appointment by the Board of Directors, of each new director during
such 24 month period was approved by the vote at a meeting or the
written consent of at least two-thirds of the directors then still in
office who were directors at the beginning of such period; or
(iv) the shareholders of Valero shall approve an agreement providing either
for any merger, consolidation, combination or other transaction in
which Valero will cease to be an independent publicly owned
corporation, or for the liquidation or the sale of all or
substantially all of the assets of Valero.
(v) the occurrence of the Distribution Date, as such term is defined in
the Rights Agreement.
(vi) any other event determined by the Board of Directors or the Committee
to constitute a Change of Control.
(B) As used herein, the term "Voting Securities" shall mean the Common
Stock, any other equity security of Valero ordinarily entitled to vote for
directors at meetings of the stockholders of Valero and any debt or equity
security of Valero convertible into Common Stock or another security so entitled
to vote for the election of directors of Valero. In calculating the percentage
of Voting Securities owned by a person or Group, securities that are immediately
convertible, or by their terms, upon the occurrence of any event or the lapse of
time, or both, will become convertible into or exchangeable or exercisable for
shares of Common Stock (or other Voting Securities) shall be deemed to represent
the number of whole shares of Common Stock (or other Voting Securities) into
which such securities are then or will become ultimately convertible or for
which they are then or will become ultimately exchangeable or exercisable, and
the total number of issued and outstanding shares of Common Stock (or other
Voting Securities) of Valero shall be determined on a pro forma basis after
giving effect to such conversion. The percentage of Voting Securities held by a
person or Group shall be deemed to be equal to the percentage of the number of
the votes that could be cast for
<PAGE>
the election of directors of Valero at a meeting of stockholders that such
person or Group would be entitled to so cast after giving effect to the
provisions of the preceding sentence. As used in this Paragraph 4.15, the term
"person" shall include any individual, corporation, partnership, firm or other
entity.
(C) In the event that a Change of Control shall occur, the Chief Executive
Officer of Valero may, on or before the date of such event constituting a Change
of Control, file with the Corporate Secretary of Valero a written notice (the
"Nonacceleration Notice") signed by such officer stating that such Change of
Control shall not result in the acceleration of Options (or any related Limited
Rights and SARs) granted under the Plan to the Participants identified in such
notice (or held by persons claiming by, through or under such Participants).
Such Nonacceleration Notice may be filed with respect to all Options granted
under the Plan or with respect to Options granted to specified Participants
(each such Participant referred to by name or generically in a Nonacceleration
Notice timely filed with the Corporate Secretary of Valero, together with each
person claiming by, through or under such a Participant, is hereinafter referred
to as a "Nonaccelerated Person"). Any other provision of this Plan
notwithstanding, each Option (and, subject to the provisions of Paragraph 4.2,
all Limited Rights and SARs) granted under this Plan, not theretofore forfeited
or terminated and held at the date of a Change of Control by a person who at
such date is neither a Nonaccelerated Person nor a Restricted Optionee shall
upon occurrence of such Change of Control immediately become exercisable with
respect to all of the Shares of Common Stock specified therein (less any such
shares previously purchased under the Option) and any related Limited Rights and
SARs. The inclusion of a Participant or other person as a Nonaccelerated Person
in a Nonacceleration Notice shall not be construed to alter or amend any rights
such Participant or other person may have under this Plan under the provisions
of any executive severance agreement or other contractual relationship with
Valero.
(D) Notwithstanding the provisions of Paragraph 4.10, in the event that a
Change of Control shall occur, each Option (and any Limited Rights and SARs)
held by a Participant pursuant to the Plan shall remain exercisable until the
earlier of (i) the Expiration Date of the Option, or (ii) 90 days following the
Participant's date of termination of employment.
5. Adjustments Upon Changes In Capitalization.
5.1. Securities Received Upon Exercise. If all or any portion of an
---------------------------------
Option, Limited Right or SAR is exercised subsequent to any stock dividend,
rights distribution, split-up, recapitalization, combination or exchange of
shares, merger, consolidation, acquisition of property or stock, spin-off or
separation, reorganization, or liquidation, as a result of which shares or other
Securities of any class or rights shall be issued in respect of outstanding
shares of Common Stock or shares of Common Stock shall be changed into the same
or a different number of shares of the same or another class or classes or other
securities, the person or persons so exercising such Option, Limited Right or
SAR shall receive, (a) for the aggregate price payable upon such exercise of
such Option, (i) the aggregate number and class of shares, rights or other
securities for which a recognized market exists, and (ii) a cash amount equal to
the fair market value on such date, as reasonably determined by the Committee,
of any other property (other than regular cash dividend payments) and of any
shares, rights or other securities for which no recognized market exists, which,
if shares of Common Stock (as authorized at the date of the granting of such
Option) had been purchased at the date of granting of the Option for the same
aggregate price (on the basis of the price per share provided in the Option) and
had not been disposed of, such person or persons would be holding at the time of
such exercise as a result of such purchase and any such stock dividend, rights
distribution, split-up, recapitalization, combination or exchange of shares,
merger, consolidation, acquisition of property or stock, spin-off or separation,
reorganization, or liquidation and (b) a cash amount upon the exercise of the
Limited
<PAGE>
Rights or SARs equal to the difference between the aggregate Strike Price of
such Limited Right or SAR and the aggregate of (i) the average sales price, on
the date provided in Paragraph 4.2 or 4.3 hereof, as the case may be, of any
whole shares or units of Common Stock, rights or other securities for which a
recognized market exists, and (ii) the fair market value on such date, as
reasonably determined by the Committee, of any other property (other than
regular cash dividend payments) which the holder of a number of shares of Common
Stock equal to the number of such Limited Rights or SARs, if such shares had
been purchased at the date of granting of such Limited Rights or SARs and not
otherwise disposed of, would be holding at the time of exercise of such Limited
Rights or SARs as a result of such purchase and any such stock dividend, rights
distribution, split-up, recapitalization, combination or exchange of shares,
merger, consolidation, acquisition of property or stock, spin-off or separation,
reorganization or liquidation; provided, however, that no fractional share of
Common Stock, fractional right or other fractional security shall be issued upon
any such exercise, and the aggregate price paid shall be appropriately reduced
to reflect any fractional share of Common Stock, fractional right or other
fractional security not issued; and provided further, however, that if the
exercise of any Option subsequent to any stock dividend, rights distribution,
split-up, recapitalization, combination or exchange of shares, merger,
consolidation, acquisition of property, or stock, spin-off or separation,
reorganization or liquidation would, pursuant to clause (a) of this Paragraph
5.1, require the delivery of shares, rights or other securities which Valero is
not then authorized to issue or which in the sole judgment of the Committee
cannot be issued without undue effort or expense, the person exercising such
Option shall receive, in lieu of such shares, rights or other securities, a cash
payment equal to the fair market value on the Exercise Date, as reasonably
determined by the Committee, of such shares, rights or other securities. For
purposes of applying the provisions of this Plan, the Preference Share Purchase
Rights distributed to stockholders of record of Valero on November 25, 1985,
shall be deemed not to have been distributed until the Distribution Date (as
defined in the Rights Agreement).
5.2. Adjustment of Option Shares Available. In the event of any change in
-------------------------------------
the number of shares of Common Stock outstanding resulting from a stock
dividend, rights distribution, split-up, recapitalization, combination or
exchange of shares, merger, consolidation, acquisition of property or stock,
spin-off or separation, reorganization or liquidation, (a) the aggregate number
and class of shares of Common Stock remaining available to be optioned under
this Plan shall be that number and class which a person, to whom an Option had
been granted for all of the available shares of Common Stock under this Plan on
the date preceding such change, would be entitled to receive as provided in
Paragraph 5, and (b) the aggregate number of Limited Rights and SARs remaining
available under this Plan shall be determined pursuant to the formula b/a (c)
wherein:
a = the number of Option Shares available to be optioned under this Plan
immediately prior to such change,
b = the number of Option Shares available to be optioned under this Plan
immediately following such change, and
c = the number of Limited Rights or SARs available for grant under this
Plan immediately prior to such change.
Upon the occurrence of any stock dividend, rights distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, spin-off or separation, reorganization or
liquidation, the Committee shall be entitled (but shall not be required) to
determine that new Option Agreements shall be entered into with Participants
reflecting such stock dividend or other event.
<PAGE>
6. Administration.
6.1. Plan Administered by Committee. This Plan shall be administered by a
------------------------------
committee composed solely of two or more "Non-Employee Directors" (as defined in
Rule 16b-3 under the Exchange Act) of Valero, which committee shall, except as
hereinafter set forth, be the Compensation Committee, as appointed and
constituted from time to time by the Board of Directors. In the event that the
membership of the Compensation Committee shall fail to meet the foregoing
criteria, then additional or different members of the Board of Directors shall
be appointed by the Board of Directors to act for purposes of administering this
Plan so that the Committee administering this Plan shall consist solely of two
or more "Non-Employee Directors."
6.2. Powers of the Committee. In connection with its administration of
-----------------------
this Plan, the Committee is empowered to:
(a) Make all determinations and computations concerning the selection of
Participants, the granting of Options, Limited Rights and SARs, the
pricing thereof and the number of Option Shares to be optioned, and
SARs to be granted, to each Participant;
(b) Cause Valero to enter into Option Agreements with Participants;
(c) With the consent of the Participant, enter into agreements amending
any Option Agreement so as to grant SARs thereunder, change the Option
Price or Expiration Date of any Option, the Strike Price of any
Limited Right or SAR or any other term or condition thereof, or to
terminate any such Option Agreement;
(d) Make rules and regulations for the administration of the Plan which
are not inconsistent with the terms and provisions of this Plan,
including rules providing for the accelerated exercise of Options and
SARs in such circumstances as the Committee may deem appropriate;
(e) Construe all terms, provisions, conditions and limitations of the Plan
in good faith, and adopt amendments to the Plan;
(f) Make equitable adjustments for any mistakes or errors in the
administration of this Plan or deemed by the Committee to be necessary
as the result of any unusual situation or any ambiguity in the Plan;
(g) Select, employ and compensate, from time to time, consultants,
accountants, attorneys and other agents and employees as the
Compensation Committee may deem necessary or advisable for the proper
and efficient administration of this Plan.
6.3. Express Powers not Exclusive. The foregoing list of express powers
----------------------------
granted to the Committee upon the adoption of this Plan is not intended to be
either complete or exclusive, but the Committee shall, in addition to the
specific powers granted by this Plan, have such powers, whether or not expressly
authorized herein, which it may deem necessary, desirable, advisable, proper,
convenient or appropriate for the supervision and administration of this Plan.
Except as otherwise specifically provided herein, the decisions or judgment of
the Committee on any question or claim arising hereunder shall be final, binding
and conclusive upon the Participants and all persons claiming by, through or
under a Participant.
7. Miscellaneous Provisions.
7.1. Nonassignability. Without prior written approval from the Committee,
----------------
no Options, SARs, Limited Rights or any other security, right or interest
heretofore or hereafter granted under this Plan shall be transferable by the
Participant other than pursuant to a will of the Participant or the laws of
descent and distribution, and no Participant or other person claiming by,
through or under a Participant shall have any right to sell, assign, transfer,
pledge, anticipate, mortgage or otherwise
<PAGE>
encumber, transfer, hypothecate or convey in advance of actual receipt any
Option Shares, SARs, Limited Rights or any cash amounts or other shares, rights
or securities (if any) payable hereunder, or any part thereof, all of which are,
and all rights in and to which are, hereby expressly declared to be
nonassignable and nontransferable; any such purported sale, assignment,
transfer, pledge, anticipation, mortgage, encumbrance, transfer, hypothecation
or conveyance without the Committee's prior approval shall be void and of no
force or effect. No Option Shares, SARs, Limited Rights and no part of any cash
amounts or other shares, rights or securities payable hereunder (if any) shall,
prior to actual payment or delivery, be subject to seizure or sequestration for
the payment of any debts, judgments, alimony or separate maintenance owed by a
Participant, or other person claiming by, through or under a Participant, nor be
transferable by operation of law in the event of bankruptcy or insolvency,
except as required by law. The designation of a beneficiary shall not
constitute a transfer hereunder.
7.2. Investment Letter. As a condition to the exercise of any portion of
-----------------
an Option, the Committee, the General Counsel or the Corporate Secretary may
require the person exercising such Option to represent and warrant to Valero at
the time of any such exercise that the Option Shares are being purchased only
for investment and without any present intention to sell or distribute such
Option Shares, if, in the opinion of counsel for Valero, such representation is
required or desirable under the Securities Act of 1933 or any other applicable
state, federal or local law, regulation or rule of any governmental agency. The
Committee, the General Counsel or the Corporate Secretary may require such
person to execute and deliver to Valero an appropriate investment letter
containing representations and warranties of the type generally described above.
7.3. [Reserved]
7.4. Responsibility for Taxes. Any and all taxes payable with respect to
------------------------
income to a Participant resulting from the exercise of an Option, Limited Rights
or SARs granted hereunder shall be the sole responsibility of the Participant,
not of the Company or Valero, whether or not Valero or the Company shall have
withheld or collected from the Participant any sums required to be so withheld
or collected in respect of such income, and whether or not any sums so withheld
or collected shall be sufficient to provide for any such taxes.
7.5. Employment Not Guaranteed. Nothing contained in this Plan nor any
-------------------------
action taken hereunder shall be construed to create a contract of employment or
to give any Participant any right to be retained in the employ of the Company or
to serve or continue to serve as an officer or director of Valero or any
Subsidiary.
7.6. Gender, Singular and Plural. All pronouns and any variations thereof
---------------------------
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
7.7. Captions. The captions of the Paragraphs of this Plan are for
--------
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
7.8. Validity. In the event any provision of this Plan is held invalid,
--------
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.
7.9. Notice. Any notice, statement, decision or communication required or
------
permitted to be given under this Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, if to the Company, to the
principal office of Valero, directed to the attention of the
<PAGE>
Corporate Secretary of Valero, and if to a Participant or other person, to the
address of the Participant or other person as it shall appear on the books of
the Company. Any such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the third day following the date shown on
the postmark on receipt for registration or certification.
7.10 Applicable Law. This Plan shall be governed and construed in
--------------
accordance with the laws of the State of Texas.
7.11 Inconsistency. In the event of any conflict or inconsistency between
-------------
the provisions of this Plan and the provisions of any Option Agreement, the
provisions of this Plan shall control.
8. Amendment and Termination of Plan and Option Agreements.
8.1. Amendments. The Board of Directors or the Committee, without approval
----------
of the Participants but subject to Paragraph 8.3, may amend this Plan from time
to time in such respect as it deems advisable.
8.2. Termination. The Board of Directors or the Committee, without
-----------
approval of the Participants but subject to Paragraph 8.3, may at any time
terminate this Plan.
8.3. Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of this Plan shall not materially adversely affect Options, Limited Rights or
SARs already granted. In the event of any termination of this Plan or amendment
which materially adversely affects Options, Limited Rights or SARs, Options,
Limited Rights and SARs already granted shall, subject to Paragraph 8.4, remain
in full force and effect as if this Plan had not been so amended or terminated.
In any case where the Board of Directors or the Committee feels it appropriate
or is advised by counsel that such approval is required, the amendment or
termination of this Plan shall be submitted to the stockholders of Valero for
approval.
8.4 Cancellation of Options. Any other provision of this Plan to the
-----------------------
contrary notwithstanding, in the event that either (a) the Option Price of any
Option shall on any NYSE trading day equal or exceed 125% of the closing sales
price per share of the Common Stock (determined as provided in Paragraph 3.7),
or (b) out of any period of 120 consecutive NYSE trading days the Option Price
of any Option shall exceed the closing sales price per share of the Common Stock
(determined as provided in Paragraph 3.7) on any 80 or more of such days, then
the Committee, in its sole discretion, may unilaterally determine to cancel and
terminate such Option, the related Option Agreement and associated Limited
Rights and any associated SARs. Upon such Committee determination, the
Expiration Date of such Option, Option Agreement, Limited Rights and SARs shall
be at the close of business on the date of such determination. The Committee
shall cause notification of such cancellation to be sent to the Participant (or
other person entitled to exercise such Option), but failure to send or any delay
in sending such notice shall not nullify, delay, or otherwise affect such
cancellation. No compensation shall be paid or payable to any Participant (or
other person entitled to exercise such Option), or other person claiming by,
through or under a Participant, in respect of any such cancellation. If an
Option, the related Option Agreement and associated Limited Rights, and any
associated SARs, shall be terminated and cancelled pursuant to the provisions of
this Paragraph 8.4, the Option Shares and associated Limited Rights, and any
associated SARs, subject to such Option (to the extent not theretofore
exercised) shall once more be available to be optioned and sold under this Plan
pursuant to a new Option granted hereunder. No Participant with respect to whom
an Option and associated Limited Rights, and any associated SARs, has been
cancelled pursuant to this Paragraph 8.4 shall have any right, whether by virtue
of such cancellation or otherwise, to require the Company
<PAGE>
or the Committee to grant a new Option to him under this Plan or any other stock
option plan of the Company.
9. Claims.
9.1. Filing of Claims. A Participant or other person claiming to have been
----------------
denied any benefit or right provided under this Plan shall have the right to
file a written claim with the Committee. All such claims shall be submitted on
a form provided by the Committee, which shall be signed by the claimant and
shall be considered filed on the date the claim is received by the Committee.
The claim will be reviewed and a decision rendered by a member of the Committee
designated by the Committee for such purpose.
9.2. Denial of Claims. In the event the claim is denied, in whole or in
----------------
part, the Committee member reviewing the claim shall, within 90 days following
receipt of the claim, provide the claimant with either (i) a written statement
containing the following:
(1) the specific reason or reasons for the denial of benefits;
(2) a specific reference to the pertinent provisions of the Plan upon
which the denial is based;
(3) a description of any additional material or information which is
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(4) an explanation of the review procedure provided below;
or (ii) a written notice that special circumstances (which shall be specified in
the notice) require an additional specified period (not to exceed 90 days) for
processing of the claim. If a claimant is provided with the notice specified in
clause (ii), the claimant shall thereafter be provided with the statement
required by clause (i) within the period specified in such notice.
9.3. Review of Claims. Within 90 days after receipt of a notice of a
----------------
denial of benefits as provided above, the claimant or his authorized
representative may request, in writing, to appear before the full Committee for
a review of his claim. In conducting its review, the Committee shall consider
any oral or written statement or other evidence presented by the claimant or his
authorized representative in support of his claim. The Committee shall give the
claimant and his authorized representative reasonable access to all pertinent
documents necessary for the preparation and presentation of his claim.
9.4. Decision by Committee. Within 60 days after receipt by the Committee
---------------------
of the written request for review of his claim (or in the event of special
circumstances which require additional time for review, not later than 120 days
after receipt of such request) the Committee shall notify the claimant of its
decision. If an extension of time for review is required because of special
circumstances, written notice of the extension shall be furnished to the
claimant prior to the commencement of the extension. In the event the Committee
shall hold regularly scheduled meetings at least quarterly, then in lieu of the
60-day period specified above, the decision on review shall be made by no later
than the date of the meeting of the Committee which immediately follows receipt
of the claimant's request for review, provided, that if the request for review
is received within 30 days preceding the date of such meeting, the decision
shall be made by no later than the date of the second meeting following receipt
of such request for review, provided further, that if special circumstances
require a further extension of time for processing of the report, such decision
shall be rendered not later than the date of the third meeting of the Committee
following receipt of the written request for review. The decision of the
Committee shall be in writing and shall include the specific reasons for
<PAGE>
the decision and references to relevant Plan provisions on which the decision is
based. The decision of the Committee shall be final, conclusive and binding
upon the Participant or other claimant and all persons claiming by, through or
under such claimant.
<PAGE>
Amendment to Stock
Option Plan No. 4
AMENDMENT, dated as of June 30, 1997, to the Valero Energy Corporation
Stock Option Plan No. 4 (the "Plan").
RECITALS:
1. The By-laws of Valero Energy Corporation (the "Company") delegate to
the Compensation Committee (the "Committee") of the Board of Directors authority
to adopt amendments to and interpret benefit plans for employees, officers and
directors, and specify that such authority may be delegated by the Committee to
the Chief Executive Officer of the Company, subject to such limitations as are
specified in the By-laws.
2. By resolution dated August 22, 1996, the Committee delegated to the
Chief Executive Officer of the Company the full authority of the Committee to
approve and cause to be placed into effect amendments to, among other plans, the
Valero Energy Corporation Stock Option Plan No. 3.
WITNESSETH:
The undersigned Chief Executive Officer of the Company, acting pursuant to
the authority set forth above, and having determined that the following
amendments are desirable and in the best interests of the Company, hereby amends
the Plan as follows:
1. The existing sub-paragraph 2(f) is hereby amended to read in its
entirety as follows:
"Company" shall mean, prior to the Effective Time, Valero and any Parent or
Subsidiary of Valero which now exists or hereafter is organized or acquired
by or acquires Valero, and any successor or successors to such entities.
After the Effective Time such term shall mean PG&E Corporation, a
California Corporation, and any Parent or Subsidiary of PG&E Corporation
which now exists or hereafter is organized or acquired by or acquires PG&E
Corporation and any successor or successors to such entities. The terms
"Parent" and "Subsidiary" shall have the same meaning as the terms "parent
corporation" and "subsidiary corporation," respectively, as specified in
Section 424 of the Internal Revenue Code of 1986, as amended.
2. A new sub-paragraph 2(i) is hereby added to read as follows and the
remaining sub-paragraphs of Paragraph 2 shall be relettered accordingly:
"Effective Time" shall have the meaning specified in that certain Agreement
and Plan of Merger, dated as of January 31, 1997, among Valero, PG&E
Corporation, and PG&E Acquisition Corporation (Merger Agreement).
3. The existing sub-paragraph 2(kk) is hereby amended to read in its
entirety as follows:
"Valero" shall mean Valero Energy Corporation, a Delaware Corporation, as
renamed PG&E Gas Transmission, Texas Corporation, on or after the Effective
Time.
4. The following sentence shall be added to the end of Paragraph 3.1:
No Options shall be granted hereunder after the Effective Time.
<PAGE>
5. The existing Paragraph 5.2 of the Plan is hereby redesignated as
"Paragraph 5.3" and a new Paragraph 5.2 is hereby added to read in its entirety
as follows:
5.2 Treatment of Options and SARs upon Consummation of Spin-off and
---------------------------------------------------------------
Merger. (A) Capitalized terms used in this Paragraph 5.2 and not
------
otherwise defined in this Plan shall have the meanings given to them in
that certain Employee Benefits Agreement between Valero and Valero Refining
and Marketing Company (the "Employee Benefits Agreement"), and in that
certain Agreement and Plan of Merger, dated as of January 31, 1997, among
Valero, PG&E Corporation, and PG&E Acquisition Corporation (the "Merger
Agreement"). The provisions of this Paragraph 5.2 shall apply for all
purposes under the Plan, the provisions of Paragraph 5.1 to the contrary
notwithstanding.
(B) Upon the consummation of the Distribution, any Option held by a
VRM Participant or by a non-employee director of the Company that is
outstanding at the Time of Distribution shall cease to represent a right to
acquire Common Stock and shall be replaced as of the Time of Distribution
with a VRM Stock Option with respect to a number of shares of VRM Common
Stock and with a per-share exercise price as determined pursuant to Section
3.01(a) of the Employee Benefits Agreement. Valero shall take such actions
as may be necessary to cause such VRM Stock Options otherwise to have the
same terms and conditions as the corresponding Options issued hereunder,
except that references to Valero shall be changed to refer to VRM.
(C) Upon the consummation of the Distribution, any SAR held by a VRM
Participant or by a non-employee director of the Company that is
outstanding at the Time of Distribution shall cease to represent a right to
receive a cash payment from the Company and shall be replaced as of the
Time of Distribution with a VRM SAR with respect to a number of shares of
VRM Common Stock and with a per-SAR exercise price as determined pursuant
to Section 3.01(a) of the Employee Benefits Agreement. Valero shall take
such actions as may be necessary to cause such VRM SARs otherwise to have
the same terms and conditions as the corresponding SARs issued hereunder,
except that references to Valero shall be changed to refer to VRM.
(D) Upon the consummation of the Distribution and Merger, any Option
held by a Company Participant that is outstanding at the Effective Time
shall cease to represent a right to acquire Common Stock and shall be
replaced as of the Effective Time with an option to purchase shares of
Acquirer Common Stock ("Converted Option"), not intended to qualify under
Section 422 of the Code, so that, after giving effect to Section
3.1(a)(iii) of the Merger Agreement, the number of shares of Acquirer
Common Stock subject to such Converted Option shall be equal to the product
of (x) the number of shares of Common Stock subject to the original Option
immediately before the Distribution, multiplied by (y) the Ratio (rounded
up to the nearest whole share if necessary), and the per-share exercise
price of the Converted Option shall be equal to the quotient of (A) the
per-share exercise price of the original Option immediately before the
Distribution divided by (B) the Ratio (rounded down to nearest cent.) As
used herein "Ratio" shall mean the amount obtained by dividing the average
of the daily high and low trading price on the NYSE for the Common Stock on
each of the 15 trading days prior to the ex-dividend date for the
Distribution by the average of the daily high and low trading prices on the
NYSE of the Acquirer Common Stock on each of the same 15 trading days.
<PAGE>
(E) A Converted Option shall be subject to the provisions of this Plan
and the terms and conditions of the Option Agreement relating to the
original option as if it remained an Option hereunder, provided that as of
the Effective Time (i) the Converted Option shall constitute solely a right
to purchase shares of Acquirer Common Stock in a number and with an
exercise price determined pursuant to Paragraph 5.2(D), (ii) any Limited
Rights accompanying the original Option shall terminate, and (iii) to the
extent practicable all outstanding Option Agreements pertaining to Options
which have been converted pursuant to Paragraph 5.2(D) shall be amended to
reflect the provisions of this Paragraph 5.2.
(F) Each SAR held by a Company Participant that is outstanding and
unexercised at the Time of Distribution (i) shall cease to represent a
right to receive a cash payment from the Company, (ii) shall be
automatically converted into an Option having an Option Price equal to the
SAR's Strike Price, and (iii) such Option shall be automatically treated in
all respects in the manner provided in Paragraphs 5.2(D) and 5.2(E) above,
as if such Option were outstanding prior to the Distribution.
6. The existing Paragraph 6.1 is hereby amended to read in its entirety
as follows:
6.1 Plan Administered by Committee. From and after Effective Time, this
------------------------------
Plan shall be administered by a committee composed solely of two or more "Non-
Employee Directors" (as defined in Rule 16b-3 under the Exchange Act) of PG&E
Corporation, which committee shall, except as hereinafter set forth, be the
Nomination and Compensation Committee, as appointed and constituted from time to
time by the PG&E Corporation Board of Directors. In the event that the
membership of the Compensation Committee shall fail to meet the foregoing
criteria, then additional or different members of such board shall be appointed
by the PG&E Corporation Board of Directors to act for purposes of administering
this Plan so that the Committee administering this Plan shall consist solely of
two or more "Non-Employee Directors."
As amended hereby, the Plan shall continue in full force and effect, and
the Corporate Secretary of the Company shall in his discretion incorporate the
foregoing amendments and all prior amendments, together with such conforming
changes and corrections as he may determine to be necessary or appropriate into
amended and restated Plan documents, which shall thereupon constitute the
official Plan documents for all purposes.
IN WITNESS WHEREOF, the undersigned Chief Executive Officer of the Company
has executed this Amendment effective the 30th day of June, 1997.
____________________________________________
William E. Greehey
Chief Executive Officer
<PAGE>
EXHIBIT 4.2
VALERO ENERGY CORPORATION
STOCK OPTION PLAN NO. 5
1. Introduction and Statement of Purpose.
The Valero Energy Corporation Stock Option Plan No. 5 (the "Plan") is
established for the purpose of giving additional incentive to Eligible Employees
of the Company by creating an opportunity for capital accumulation by such
Eligible Employees. This Plan sets forth the basis for the eligibility of
Employees to participate in the Plan and the terms and conditions regulating
such participation. The Plan provides for the grant of Options to purchase
Common Stock of Valero. The Options granted under the Plan are and are intended
to be "non-qualified" options under the Internal Revenue Code of 1986, as
amended. The amendments first included in this amended and restated Plan shall
be effective as of August 22, 1996.
2. Definitions.
For the purposes of this Plan, the following terms shall have the meanings
stated below unless a different meaning is plainly required by the context or
such term is otherwise defined herein.
(a) "Board of Directors" shall mean the Board of Directors of Valero.
(b) "Change of Control" shall have the meaning specified in Paragraph
4.10.
(c) "Change of Control Period" shall mean a period beginning on any date
that a Change of Control shall occur and ending at the close of
business on the 90th day thereafter, provided however, that if a
tender offer or exchange offer constituting a Change of Control
pursuant to clause (ii) of Paragraph 4.10 shall be canceled, expire or
otherwise terminate without Voting Securities having been acquired
pursuant thereto, the Change of Control Period shall terminate at the
close of business on (a) the seventh day following the date of
cancellation, expiration or other termination of such tender offer or
exchange offer, or (b) the 90th day after the commencement of such
offer, whichever shall first occur.
(d) "Committee" shall mean the persons administering this Plan from time
to time pursuant to Paragraph 6.1.
(e) "Common Stock" shall mean the common stock, par value $1.00 per share,
of Valero.
(f) "Company" shall mean Valero and any Parent or Subsidiary of Valero
which now exists or hereafter is organized or acquired by or acquires
Valero, and any successor or successors to such entities. The terms
"Parent" and "Subsidiary" shall have the same meaning as the terms
"parent corporation" and "subsidiary corporation," respectively, as
specified in Section 425 of the Internal Revenue Code of 1986, as
amended.
(g) "Compensation Committee" shall mean the Compensation Committee of the
Board of Directors, as constituted from time to time.
(h) "Controlled Subsidiary" shall mean a corporation of which a majority
of the outstanding common stock is directly or indirectly beneficially
owned by Valero.
(i) "Eligible Employee" shall mean any Employee, or prospective Employee,
of the Company selected by the Committee for participation in the
Plan.
(j) "Employee" shall mean any person employed by the Company, but
excluding however (i) executive officers and directors of Valero, (ii)
persons who are "key employees" of Valero within the meaning of NYSE
Company Manual Paragraph 703.09(A), as determined by the Compensation
Committee, and other persons who are subject to the provisions of
Section 16 under the Securities Exchange Act of 1934. The
determination
<PAGE>
of persons who are "key employees" for purposes of such Rule, and
persons who are "Key Employees" for purposes of determining
eligibility for participation in any other stock option plan of the
Company, need not be consistent.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and in effect from time to time.
(l) "Exercise Date" -- see Paragraph 4.2.
(m) "Expiration Date" -- see Paragraph 3.4.
(n) "Exercise Notice" -- see Paragraph 4.2.
(o) "Group" -- see Paragraph 4.10.
(p) "Installment Option" -- see Paragraph 4.1.
(q) "Nonaccelerated Person" -- see Paragraph 4.10.
(r) "Nonacceleration Notice" -- see Paragraph 4.10.
(s) "NYSE" shall mean the New York Stock Exchange, Inc.
(t) "Option" or "Options" shall mean an option or options granted pursuant
to this Plan to purchase shares of Common Stock.
(u) "Option Agreement" shall mean a written agreement entered into between
Valero and a Participant pursuant to Paragraph 3.8.
(v) "Option Price" -- see Paragraph 3.4.
(w) "Option Share" shall mean one share of Common Stock purchased or which
may be purchased pursuant to an Option.
(x) "Parent" -- see subparagraph (f) of this Paragraph 2.
(y) "Participant" shall mean an Eligible Employee who has entered into an
Option Agreement which is in force and effect.
(z) "Person" -- see Paragraph 4.10.
(aa) "Plan" -- see Paragraph 1.
(bb) "Preference Share Purchase Right" shall mean one of the rights
distributed to holders of record of Valero on November 25, 1985, to
purchase 1/100 share of the Junior Participating Serial Preference
Stock, Series II, of Valero.
(cc) "Rights Agreement" shall mean that certain Rights Agreement, dated as
of October 26, 1995, between Valero and Harris Trust and Savings Bank,
as Rights Agent, as amended and in effect from time to time.
(dd) "SEC" shall mean the Securities and Exchange Commission.
(ee) "Settlement Date" -- see Paragraph 4.2.
(ff) "Subsidiary" -- see subparagraph (f) of this Paragraph 2.
(gg) "Tax Payment" -- see Paragraph 4.2.
(hh) "Valero" shall mean Valero Energy Corporation, a Delaware corporation.
(ii) "Valero Pension Plan" -- see Paragraph 4.8.
(jj) "Voting Securities" -- see Paragraph 4.10.
3. Granting of Options to Employees.
3.1. Selection of Participants. The Committee shall, from time to time,
-------------------------
grant Options to purchase a specified number of Option Shares to such Eligible
Employees of the Company as the Committee, in its sole and absolute discretion,
shall select to become Participants.
3.2. Exclusion of Committee Members. No member of the Committee, while so
------------------------------
serving, may be granted any Option under the Plan.
3.3. No Right to Participate. No Employee or prospective Employee of the
-----------------------
Company shall have the right to require the Company or the Committee to make him
or her a Participant under this Plan.
<PAGE>
3.4. Determination of Option Provisions. In determining that an Eligible
----------------------------------
Employee shall be granted an Option, the Committee shall designate the number of
Option Shares the Employee may purchase under the Option, a date upon which the
Option (unless an earlier termination date is established pursuant to Paragraph
8.4) will automatically expire (the earlier of such dates being referred to
herein as the "Expiration Date"), the price per share at which such Option
Shares may be purchased (the "Option Price") and the remaining terms and
conditions of such Option.
3.5. Option Shares Available for Grant. (A) Subject to the provisions of
---------------------------------
Paragraphs 4.5 and 5, the maximum number of shares of Common Stock which may be
optioned under this Plan prior to January 1, 1993, shall be 300,000 shares.
Shares of Common Stock sold to Participants under this Plan (and any rights or
other securities sold or delivered in accordance with Paragraph 5.1) may be
either authorized but unissued securities or reacquired (treasury) securities;
provided, however, that prior to the time that a listing application has been
- -------- -------
filed with the NYSE with respect to the shares issuable under the Plan and
becomes effective, the securities issued under this Plan shall be reacquired
(treasury) securities.
(B) In addition to the number of available shares specified in Paragraph
3.5(A), the number of shares available to be optioned under this Plan may from
time to time be increased by such number of additional shares as the
Compensation Committee may deem necessary. However, in no event shall the total
number of shares optioned and sold under this Plan equal 20% of the "voting
power outstanding," as defined in the NYSE's Company Manual, Paragraph 312.
(C) During the term of this Plan, Valero will at all times reserve and keep
available, or have authorized but unissued, or treasury, shares of Common Stock
sufficient to satisfy the requirements of this Plan. The inability of Valero to
obtain, from any regulatory body having jurisdiction, any authority deemed by
Valero's counsel to be necessary to the lawful issuance and sale of Common Stock
hereunder, shall relieve the Company of any liability in respect of the
nonissuance or sale of such Common Stock as to which such requisite authority
shall not have been obtained.
(D) For purposes of determining at any time the number of shares that
remain available for grant under this Plan, the total number of shares then
authorized pursuant to Paragraphs 3.5(A) and (B) shall be (i) decreased by the
---------
"gross" number of shares issued pursuant to exercised options, (ii) decreased by
---------
the "gross" number of shares issuable pursuant to outstanding unexercised
Options, and (iii) increased by the difference between the "gross" number of
---------
shares and the "net" number of shares issued pursuant to exercised Options. As
used herein, the "gross" number of shares refers to the maximum nominal number
of shares which may be issued upon the exercise of an Option; the "net" number
of shares refers to the net number of shares actually issued to an Option holder
upon exercise of an Option, after reducing such "gross" number of shares by the
number of shares tendered back to the Company in payment of the Option Exercise
Price pursuant to Paragraph 4.3 or for any Tax Payment pursuant to Paragraph
4.2.
3.6. Limitations Regarding Option Price. The Option Price for any Option
----------------------------------
Share shall be as specified by the Committee in its sole discretion, but shall
not be less than 75% of (a) the closing sales price per share of Common Stock as
reported in the New York Stock Exchange - Composite Transactions listing in The
Wall Street Journal or such other listing or quotation medium as the Committee
may later designate (the "Transactions Listing") for the NYSE trading day
immediately preceding such date, or if there are no sales on such date, on the
next preceding day on which there were sales, or (b) in the event that the
Common Stock is not listed for trading on the NYSE, an amount determined in
accordance with standards adopted by the Committee; provided however, that, at
its election, the Committee may specify an option price which is not less than
75% of the average closing sales price per share of the Common Stock as reported
in the New York Stock Exchange--Composite Transactions listing for a period of
not less than 10 nor greater than 60 consecutive NYSE trading days as determined
by the Committee in its sole discretion, provided that such period as determined
by the Committee shall not commence on a date
<PAGE>
more than 60 NYSE trading days prior to the date of grant nor end on a date more
than 60 NYSE trading days after the date of grant.
3.7. Limitation Regarding Option Period. The Plan shall continue
----------------------------------
indefinitely. However, no Option granted under this Plan shall have a stated
Expiration Date which is more than 10 years and 30 days following the date of
grant of such Option. Subject to the provisions of Paragraph 4.9, an Option
shall lapse and shall be automatically forfeited upon the earlier of the
Expiration Date (i) as set forth in the Option Agreement pursuant to which such
Option is granted or (ii) as established pursuant to Paragraph 8.4, unless an
Exercise Notice is delivered to Valero on or before the Expiration Date.
3.8. Option Agreements. Options shall be evidenced by Option Agreements
-----------------
having such terms and provisions, not inconsistent with this Plan, as the
Committee deems advisable. Option Agreements need not be uniform. Promptly
following each determination by the Committee to grant an Option to an Eligible
Employee, the Committee shall cause Valero to enter into an appropriate Option
Agreement with such Eligible Employee. No Eligible Employee or other person
claiming by, through or under an Eligible Employee shall be entitled to exercise
any Option until an appropriate Option Agreement shall have been executed by
Valero and such Eligible Employee. In the event an Eligible Employee of the
Company is granted an Option by the Committee but for any reason, including, but
not limited to, death or total and permanent disability, does not actually enter
into a fully executed Option Agreement with Valero, such Eligible Employee shall
not be deemed a Participant with respect to such Option and neither such
Eligible Employee nor any person claiming by, through or under such Eligible
Employee shall be entitled under any circumstances to exercise such Option.
3.9. Provisions Regarding Prospective Employees. In the event that a
------------------------------------------
prospective Eligible Employee of the Company is granted an Option or Limited
Rights pursuant to this Plan prior to actually commencing employment with the
Company but for any reason, including, but not limited to, death or total and
permanent disability, does not actually commence employment with the Company,
such person shall not be deemed a Participant for any purpose of this Plan and
neither such person nor any person claiming by, through or under such person
shall be entitled under any circumstances to exercise such Option. Upon
actually commencing employment with the Company, such a prospective Eligible
Employee will then be deemed a Participant for all purposes of this Plan, and
will then, but only then, be deemed for purposes of this Plan (but not for
purposes of the Valero Pension Plan or other employee benefit plans of the
Company unless expressly so provided therein) to have been continually employed
by the Company from the date of grant of the Option to the date of commencement
of employment.
4. Exercise of Options.
4.1. Exercise of Options. Any Option shall be exercisable at such time and
-------------------
in such amounts, either as to all of the Option Shares covered thereby or in
installments ("Installment Options"), as is provided in the Participant's Option
Agreement or as may otherwise be provided in this Plan. An Installment Option
may allow the purchase of all or any part of the Option Shares on a specified
installment date or dates, and the subsequent purchase of any unpurchased Option
Shares after such installment date(s) and through the Expiration Date. However,
no Option may be exercised with respect to a fractional share.
4.2. Exercise Procedure. Options may be exercised only by written notice
------------------
of such exercise (the "Exercise Notice"), in such form as the Committee may
prescribe, delivered to Valero's Stock Benefit Plan Administration department at
Valero's principal business office and signed by the Participant or other person
specified herein as being entitled to exercise the same. The date on which such
Exercise Notice is delivered to Valero shall be the "Exercise Date." The
Exercise Notice shall specify a date (the "Settlement Date"), not less than five
business days nor more than ten business days following the
<PAGE>
Exercise Date, upon which the Option Shares shall be issued to the Participant
(or other person entitled to exercise the Option) and the Option Price shall be
paid to Valero. On the Settlement Date, the person exercising an Option shall
tender to Valero full payment (in cash, certified check, cashier's check or bank
draft approved by Valero, unless shares of Common Stock are tendered, as
provided in Paragraph 4.3) for the Option Shares with respect to which the
Option is exercised, together with an additional amount, in cash, certified
check, cashier's check or bank draft approved by Valero, equal to the amount of
any and all taxes required to be collected or withheld by the Company in
connection with such exercise of such Option (the "Tax Payment"). Subject to
the approval or disapproval of the Committee, and to such rules and limitations
as it may adopt, a person exercising an Option may make such Tax Payment in
whole or in part by electing, at or before the time of exercise of the Option,
to either (a) have Valero withhold from the number of shares otherwise
deliverable to the person exercising the Option a number of shares whose fair
market value equals the Tax Payment or (b) deliver certificates for other shares
of Common Stock owned by the person exercising the Option, endorsed in blank
with appropriate signature guarantee, having a fair market value equal to the
amount otherwise to be collected or withheld. Following any such election to
withhold shares or deliver other shares to make a Tax Payment, the Committee
shall have sole discretion to approve or disapprove such election at any time
prior to the Settlement Date; if such election is disapproved, such Tax Payment
shall be made in cash, or in such combination of cash and shares as the
Committee may direct. In the event the Committee shall fail to disapprove such
election prior to the Settlement Date, such election shall be deemed approved.
Any and all calculations 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 Option shall be made using the average of the "high" and "low"
reported sales prices of the Common Stock (as reported in the New York Stock
Exchange - Composite Transactions listing referred to in Paragraph 3.6) on the
Exercise Date, whether or not the Exercise Notice is delivered to Valero before
or after the close of trading on such date, unless otherwise specified by the
Committee.
4.3. Payment with Common Stock. Subject to approval of the Committee, a
-------------------------
person exercising an Option may pay for Option Shares by tendering to Valero
other shares of Common Stock legally and beneficially owned by such person at
the time of the exercise of an Option. If approved by the Committee, such
method of exercise may include use of a procedure whereby a person exercising an
Option may request that shares received upon exercise of a portion of an Option
be automatically applied to satisfy the exercise price for additional and
increasingly larger portions of the Option. The certificate(s) representing any
shares of Common Stock tendered in payment of the Option Price must be
accompanied by a stock power duly executed with appropriate signature
guarantees. Shares of Common Stock tendered in payment of the Option Price
shall be valued at the average sales price of the Common Stock on the Exercise
Date, determined as specified in Paragraph 4.2 above. The Committee may, in its
sole and absolute discretion, refuse any tender of shares of Common Stock, in
which case it shall promptly deliver the shares of Common Stock back to the
person exercising the Option and notify such person of such refusal as soon as
practicable. In such event, such person may either (a) tender to Valero on the
Settlement Date the cash amount required to pay for such Option Shares, or (b)
rescind his Exercise Notice. If such person elects to rescind his Exercise
Notice, such person may again (subject to the provisions of this Plan relating
to the termination, forfeiture, lapse or expiration of Options granted
hereunder) deliver an Exercise Notice with respect to such Option Shares at any
time prior to the Expiration Date of such Options.
4.4. Rights as Stockholder. Until the issuance of the stock certificate(s)
---------------------
for Option Shares purchased hereunder (as evidenced by the appropriate entry on
the books of Valero or of a duly authorized transfer agent of Valero), no right
to vote or receive dividends or any other rights as a stockholder of Valero
shall exist with respect to such Option Shares, notwithstanding the exercise of
any Option. No adjustment will be made for a dividend or other rights for which
the record date is prior to
<PAGE>
the date the stock certificates evidencing such shares of Common Stock are
issued, except as otherwise provided under Paragraph 5 of this Plan.
4.5. Effect of Termination and Forfeiture. Except as provided in
------------------------------------
Paragraphs 4.9 and 4.10, an Option may be exercised by a Participant only while
he or she is and has continually been, since the date of the grant of the
Option, an Employee of the Company. In the event a Participant's employment
with the Company is voluntarily terminated by the Participant (other than
through retirement or termination by the Company under circumstances involving
willful misconduct or criminal activity by the Participant), then, except as
provided in Paragraph 4.9(D), all Options previously awarded to such Participant
hereunder and not theretofore exercised in accordance with Paragraph 4.2 shall
automatically lapse and be forfeited as of the date of the Participant's
termination. Should a Participant's employment be terminated by retirement,
death or total and permanent disability, or by the Company (except under
circumstances involving willful misconduct or criminal activity by the
Participant), the provisions of Paragraph 4.9 shall apply. If a Participant
shall forfeit, voluntarily surrender or otherwise permanently lose his right to
exercise an Option under any provision of this Plan or otherwise, or any Option
shall terminate or expire pursuant to its terms, the Option Shares subject to
such Option shall once more be available to be optioned and sold under this Plan
pursuant to a new Option granted hereunder.
4.6. Effect of Leave of Absence. A Participant who commences a leave of
--------------------------
absence (such as a disability leave of absence) shall thereupon be suspended
from participation in this Plan during such leave of absence. During a period
of suspension from this Plan, a Participant cannot exercise any Option
(including any Installment Option) that, but for this provision, would otherwise
become exercisable during such period of suspension; provided, however, that
such Participant shall be entitled to exercise any Options which become
exercisable during such period of suspension pursuant to Paragraph 4.10. A
Participant, while suspended, may exercise an Option with respect to any
unpurchased Option Shares which such Participant was eligible to purchase on the
day preceding the first day of such suspension; however, such Option Shares must
be purchased prior to the Expiration Date of the Option. Notwithstanding the
foregoing provisions of this Paragraph 4.6, the Committee, in its sole and
absolute discretion, may determine at any time before or after the commencement
of such leave of absence that the commencement of such leave of absence will be
treated as a termination of employment for purposes of the Plan. If the
Committee so determines, the Committee shall so notify the Participant and
specify a date, not less then 10 days following such notification, by which the
Participant must deliver an Exercise Notice with respect to any Option Shares
which the Participant is then entitled to purchase Options not exercised by the
Participant by such date shall be forfeited. The Committee may, in its sole and
absolute discretion, change or modify the exercise dates or other terms of any
Option held by a Participant who goes on a leave of absence and which were not
exercisable by such Participant at the commencement of such leave of absence.
4.7 Effect of Disability. The total and permanent disability of a
--------------------
Participant shall terminate, effective on the first day of such disability, as
determined by the Committee, the participation of such Participant in this Plan
subject to the conditions set forth in Paragraph 4.9. The Committee shall
determine, in its sole and absolute discretion, whether or not a Participant is
totally and permanently disabled for purposes of this Plan and when such
disability (if any) commenced, and such determinations by the Committee shall be
conclusive and binding on the Participant and all persons claiming by, through
or under such Participant. Such determinations shall be made on the basis of
medical reports and other evidence satisfactory to the Committee and in
accordance with a uniform, nondiscriminatory policy applied by the Committee,
but such determinations shall not be binding on the Company or any Participant
with respect to any other employee benefit or other plan or insurance policy
wherein such determinations may be relevant, and need not be consistent with any
determinations made under any such plan or insurance policy.
<PAGE>
4.8. Effect of Retirement or Death. The retirement or death of a
-----------------------------
Participant shall terminate, effective on the date of such retirement or death,
the participation of such Participant in this Plan subject to the conditions set
forth in Paragraph 4.9. For purposes of this Plan, a Participant shall be
deemed to have retired when the Participant retires under the provisions of the
Pension Plan for Employees of Valero Energy Corporation or any other, similar
pension plan of the Company providing benefits to such Participant ("Valero
Pension Plan"). In the case of a Participant who is not a participant in a
Valero Pension Plan, retirement shall be deemed to occur when the Participant
retires from the service of the Company.
4.9. Exercise Following Termination, Retirement, Disability or Death. (A)
---------------------------------------------------------------
Should the Committee determine that a Participant has become totally and
permanently disabled, or should the Participant's employment with the Company be
terminated as the result of death or retirement, the first day of such
disability (as determined by the Committee) or the date of retirement or death,
as the case may be, shall be treated as the date of the Participant's
termination from the Plan, and the Participant (or the Participant's heir,
beneficiary, guardian, legal representative, administrator or executor, as the
case may be) shall be entitled for the period specified in subparagraph (C)
below to purchase any Option Shares that the Participant was eligible to
purchase on the day prior to such date of retirement, death or disability and
which such Participant (had he not died, retired or become disabled) would have
become eligible to purchase within the six-month period following such date of
retirement, death or disability.
(B) A Participant who retires, dies, or becomes totally and permanently
disabled while suspended from this Plan will be deemed to have been reinstated
into the Plan on the day prior to the date of retirement, death or disability,
and such Participant (or the Participant's heir, beneficiary, guardian, legal
representative, administrator or executor, as the case may be), shall be
entitled for the period specified in subparagraph (C) below to purchase any
Option Shares which the Participant, had he not retired, died or become
disabled, would have been entitled to purchase on the day prior to the date of
retirement, death or disability, and would have become entitled to purchase
within the six-month period following the date of retirement, death or
disability.
(C) A Participant or other person entitled to exercise an Option pursuant
to subparagraph (A) or (B) above shall have until the earlier of (i) the Option
Expiration Date, or (ii) three years from the date of such Participant's
retirement, death or disability, to deliver in accordance with Paragraph 4.2 an
Exercise Notice with respect to such Option. Any Option not exercised within
such period shall be automatically forfeited; provided, however, that the
Committee or the Chief Executive Officer of Valero upon application of any
proper party may in its sole and absolute discretion grant extensions of such
three-year period upon such terms and subject to such conditions as it may
specify. Neither the Company, its officers, directors, employees, or agents,
nor any member of the Committee shall bear any liability to the estate of, or to
any beneficiary, legatee or heir of a Participant, or to the Participant
himself, or to any other person, for authorizing a beneficiary, legatee, heir,
executor, administrator, guardian or legal representative of a Participant, or
an individual or entity who is represented as such, to exercise an Option
granted hereunder or for issuing the Option Shares purchased pursuant to the
exercise of any Option.
(D) In the case of any termination of employment (whether voluntary or
involuntary termination or otherwise) the Committee or the Chief Executive
Officer of Valero shall be entitled (but shall not be required) to permit the
Participant to exercise all or part of the Participant's Options which, at the
date of termination of employment, were exercisable pursuant to the
Participant's Option Agreement(s) and the provisions of the Plan and remained
unexercised. In addition, the Committee or the Chief Executive Officer of
Valero may, in connection with any such termination of any Participant's
employment with the Company, authorize any existing Option Agreement of such
Participant to remain in full force and effect under its existing terms and
conditions (including its existing vesting schedule),
<PAGE>
or authorize amendments to any existing Option Agreement (or a new Option
Agreement superseding any prior Option Agreement) between Valero and such
Participant removing any or all of the restrictions on the exercise of the
Options previously granted to such Participant. No such authorization or
amendment (or new Option Agreement) shall increase the aggregate number of
Options granted to any Participant.
4.10 Effect of Change of Control. (A) As used herein, the term "Change of
---------------------------
Control" shall mean each occurrence of any one or more of the following events:
(i) any person (excluding any employee benefit plan of Valero, any
trustee, administrator or other entity administering any such plan, and
Valero or any Controlled Subsidiary) or any partnership, limited
partnership, syndicate or other group formed for the purpose of acquiring,
holding or disposing of Voting Securities within the meaning of Rule 13(d)
under the Exchange Act (a "Group") which theretofore beneficially owns less
than 20% of the Voting Securities of Valero then issued and outstanding
shall publicly announce, or shall file with the SEC a Schedule 13D pursuant
to Section 13(d) of the Exchange Act (or successor form pursuant to such or
any successor provision) indicating, that it has acquired (whether in one
or more transactions) Voting Securities of Valero that result in such
person or Group directly or indirectly beneficially owning 20% or more of
the Voting Securities of Valero; or
(ii) any person (other than Valero, any Controlled Subsidiary, any
employee benefit plan of Valero and any trustee, administrator or other
entity administering any such plan) or Group shall commence a tender offer
or exchange offer for 30% or more of the Voting Securities of Valero, or
for any number or amount of Voting Securities of Valero which, if such
offer were to be fully subscribed and all Voting Securities for which such
tender or exchange offer is made were to be purchased or exchanged pursuant
to such offer, would result in such person or Group directly or indirectly
beneficially owning 50% or more of the Voting Securities of Valero; or
(iii) during any period of 24 consecutive calendar months, there
shall be a change in the composition of the Board of Directors of Valero
such that the persons who at the beginning of any such period constituted a
majority of the directors of Valero shall cease to constitute a majority of
the Board of Directors of Valero, unless the election, or the nomination
for election, by the shareholders of Valero, or the appointment by the
Board of Directors, of each new director during such 24-month period was
approved by the vote at a meeting or the written consent of at least two-
thirds of the directors then still in office who were directors at the
beginning of such period; or
(iv) the shareholders of Valero shall approve an agreement providing
either for any merger, consolidation, combination or other transaction in
which Valero will cease to be an independent publicly owned corporation, or
for the liquidation or the sale of all or substantially all of the assets
of Valero; or
(v) the occurrence of the Distribution Date, as such term is defined
in the Rights Agreement.
(B) As used herein, the term "Voting Securities" shall mean the Common
Stock, any other equity security of Valero ordinarily entitled to vote for
directors at meetings of the stockholders of Valero and any debt or equity
security of Valero convertible into Common Stock or another security so entitled
to vote for the election of directors of Valero. In calculating the percentage
of Voting Securities owned by a person or Group, securities that are immediately
convertible, or by their terms, upon the occurrence of any event or the lapse of
time, or both, will become convertible into or exchangeable or exercisable for
shares of Common Stock (or other Voting Securities) shall be deemed to represent
the number of
<PAGE>
whole shares of Common Stock (or other Voting Securities) into which such
securities are then or will become ultimately convertible or for which they are
then or will become ultimately exchangeable or exercisable, and the total number
of issued and outstanding shares of Common Stock (or other Voting Securities) of
Valero shall be determined on a pro forma basis after giving effect to such
conversion. The percentage of Voting Securities held by a person or Group shall
be deemed to be equal to the percentage of the number of the votes that could be
cast for the election of directors of Valero at a meeting of stockholders that
such person or Group would be entitled to so cast after giving effect to the
provisions of the preceding sentence. As used in this Paragraph 4.10, the term
"person" shall include any individual, corporation, partnership, firm or other
entity.
(C) In the event that a Change of Control shall occur, the Chief Executive
Officer of Valero may, on or before the date of such event constituting a Change
of Control, file with the Corporate Secretary of Valero a written notice (the
"Nonacceleration Notice") signed by such officer stating that such Change of
Control shall not result in the acceleration of Options granted under the Plan
to the Participants identified in such notice (or held by persons claiming by,
through or under such Participants); such Nonacceleration Notice may be filed
with respect to all Options granted under the Plan or with respect to Options
granted to specified Participants (each such Participant referred to by name or
generically in a Nonacceleration Notice timely filed with the Corporate
Secretary of Valero, together with each person claiming by, through or under
such a Participant, is hereinafter referred to as a "Nonaccelerated Person").
Any other provision of this Plan notwithstanding, each Option granted under this
Plan, not theretofore forfeited or terminated and held at the date of a Change
of Control by a person who at such date is not a Nonaccelerated Person shall
upon occurrence of such Change of Control immediately become exercisable with
respect to all of the Shares of Common Stock specified therein (less any such
shares previously purchased under the Option). The inclusion of a Participant
or other person as a Nonaccelerated Person in a Nonacceleration Notice shall not
be construed to alter or amend any rights such Participant or other person may
have under this Plan under the provisions of any executive severance agreement
or other contractual relationship with Valero.
(D) Notwithstanding the provisions of Paragraph 4.5, in the event that a
Change of Control shall occur, each Option held by a Participant pursuant to the
Plan shall remain exercisable until the earlier of (i) the Expiration Date of
the Option, or (ii) 90 days following the Participant's date of termination of
employment.
5. Adjustments Upon Changes In Capitalization.
5.1. Securities Received Upon Exercise. If all or any portion of an Option
---------------------------------
is exercised subsequent to any stock dividend, rights distribution, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, spin-off or separation, reorganization or
liquidation, as a result of which shares or other securities of any class or
rights shall be issued in respect of outstanding shares of Common Stock or
shares of Common Stock shall be changed into the same or a different number of
shares of the same or another class or classes or other securities, the person
or persons so exercising such Option shall receive, for the aggregate price
payable upon such exercise of such Option, (i) the aggregate number and class of
shares, rights or other securities for which a recognized market exists, and
(ii) a cash amount equal to the fair market value on such date, as reasonably
determined by the Committee, of any other property (other than regular cash
dividend payments) and of any shares, rights or other securities for which no
recognized market exists, which, if shares of Common Stock (as authorized at the
date of the granting of such Option) had been purchased at the date of granting
of the Option for the same aggregate price (on the basis of the price per share
provided in the Option) and had not been disposed of, such person or persons
would be holding at the time of such exercise as a result of such purchase and
any such stock dividend, rights distribution, split-up, recapitalization,
combination or exchange of shares, merger, consolidation, acquisition of
<PAGE>
property or stock, spin-off or separation, reorganization, or liquidation;
provided, however, that no fractional share of Common Stock, fractional right or
other fractional security shall be issued upon any such exercise, and the
aggregate price paid shall be appropriately reduced to reflect any fractional
share of Common Stock, fractional right or other fractional security not issued;
and provided further, however, that if the exercise of any Option subsequent to
any stock dividend, rights distribution, split-up, recapitalization, combination
or exchange of shares, merger, consolidation, acquisition of property or stock,
spin-off or separation, reorganization or liquidation would, pursuant to this
Paragraph 5.1, require the delivery of shares, rights or other securities which
Valero is not then authorized to issue or which in the sole judgment of the
Committee cannot be issued without undue effort or expense, the person
exercising such Option shall receive, in lieu of such shares, rights or other
securities, a cash payment equal to the fair market value on the Exercise Date,
as reasonably determined by the Committee, of such shares, rights or other
securities. For purposes of applying the provisions of this Plan, the
Preference Share Purchase Rights previously distributed to stockholders of
Valero shall be deemed not to have been distributed until the Distribution Date
(as defined in the Rights Agreement).
5.2. Adjustment of Option Shares Available. In the event of any change in
-------------------------------------
the number of shares of Common Stock outstanding resulting from a stock
dividend, rights distribution, split-up, recapitalization, combination or
exchange of shares, merger, consolidation, acquisition of property or stock,
spin-off or separation, reorganization or liquidation, then (i) the aggregate
number and class of shares of Common Stock remaining available to be optioned
under this Plan shall be that number and class which a person, to whom an Option
had been granted for all of the available shares of Common Stock under this Plan
on the date preceding such change, would be entitled to receive as provided in
Paragraph 5 and (ii) the number of additional shares made available on any
succeeding January 1 pursuant to Paragraph 3.5(B) shall be appropriately
adjusted so that the aggregate number and class of additional shares of Common
Stock to be made available under this Plan shall be the number and class which a
person, to whom an Option had been granted for all additional shares which
absent such change would otherwise have become available on such January 1,
would be entitled to receive pursuant to Paragraph 5. Upon the occurrence of
any stock dividend, rights distribution, split-up, recapitalization, combination
or exchange of shares, merger, consolidation, acquisition of property or stock,
spin-off or separation, reorganization or liquidation, the Committee shall be
entitled (but shall not be required) to determine that new Option Agreements (or
amendments to the existing Option Agreements) shall be entered into with
Participants reflecting such stock dividend or other event.
6. Administration.
6.1. Plan Administered by Committee. This Plan shall be administered by a
------------------------------
committee composed solely of two or more "Non-Employee Directors" (as defined in
Rule 16b-3 under the Exchange Act) of Valero, which committee shall, except as
hereinafter set forth, be the Compensation Committee, as appointed and
constituted from time to time by the Board of Directors. In the event that the
membership of the Compensation Committee shall fail to meet the foregoing
criteria, then additional or different members of the Board of Directors shall
be appointed by the Board of Directors to act for purposes of administering this
Plan so that the Committee administering this Plan shall consist solely of two
or more "Non-Employee Directors."
6.2. Powers of the Committee. In connection with its administration of
-----------------------
this Plan, the Committee is empowered to:
(a) Make all determinations and computations concerning the selection of
Participants, the granting of Options, the pricing thereof and the
number of Option Shares to be optioned to each Participant;
<PAGE>
(b) Cause Valero to enter into Option Agreements with Participants;
(c) With the consent of the Participant except as otherwise provided in
Para-graphs 5.2 and 8.4, enter into agreements amending any Option
Agreement so as to grant, change the Option Price or Expiration Date
of any Option, or any other term or condition thereof, or to terminate
any such Option Agreement;
(d) Make rules and regulations for the administration of the Plan which
are not inconsistent with the terms and provisions of this Plan,
including rules providing for the accelerated exercise of Options in
such circumstances as the Committee may deem appropriate;
(e) Construe all terms, provisions, conditions and limitations of the Plan
in good faith, and adopt amendments to the Plan;
(f) Make equitable adjustments for any mistakes or errors in the
administration of this Plan or deemed by the Committee to be necessary
as the result of any unusual situation or any ambiguity in the Plan;
(g) Select, employ and compensate, from time to time, consultants,
accountants, attorneys and other agents and employees as the
Compensation Committee may deem necessary or advisable for the proper
and efficient administration of this Plan.
6.3. Express Powers not Exclusive. The foregoing list of express powers
----------------------------
granted to the Committee upon the adoption of this Plan is not intended to be
either complete or exclusive, but the Committee shall, in addition to the
specific powers granted by this Plan, have such powers, whether or not expressly
authorized herein, which it may deem necessary, desirable, advisable, proper,
convenient or appropriate for the supervision and administration of this Plan.
Except as otherwise specifically provided herein, the decisions or judgment of
the Committee on any question or claim arising hereunder shall be final, binding
and conclusive upon the Participants and all persons claiming by, through or
under a Participant.
7. Miscellaneous Provisions.
7.1. Nonassignability. Without prior written approval from the Committee,
----------------
no Option or any other security, right or interest heretofore or hereafter
granted under this Plan shall be transferable by the Participant other than
pursuant to a will of the Participant or the laws of descent and distribution,
and no Participant or other person claiming by, through or under a Participant
shall have any right to sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
any Option Shares or any cash amounts or other shares, rights or securities (if
any) payable hereunder, or any part thereof, all of which are, and all rights in
and to which are, hereby expressly declared to be nonassignable and
nontransferable; any such purported sale, assignment, transfer, pledge,
anticipation, mortgage, encumbrance, transfer, hypothecation or conveyance
without the Committee's prior approval shall be void and of no force or effect.
No Option Shares and no part of any cash amounts or other shares, rights or
securities payable hereunder (if any) shall, prior to actual payment or
delivery, be subject to seizure or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant, or other
person claiming by, through or under a Participant, nor be transferable by
operation of law in the event of bankruptcy or insolvency, except as required by
law. The designation of a beneficiary shall not constitute a transfer
hereunder.
7.2. Investment Letter. As a condition to the exercise of any portion of
-----------------
an Option, the Committee, the General Counsel, or the Corporate Secretary may
require the person exercising such
<PAGE>
Option to represent and warrant to Valero at the time of any such exercise that
the Option Shares are being purchased only for investment and without any
present intention to sell or distribute such Option Shares, if, in the opinion
of counsel for Valero, such representation is required or desirable under the
Securities Act of 1933 or any other applicable state, federal or local law,
regulation or rule of any governmental agency. The Committee, General Counsel
or Corporate Secretary may require such person to execute and deliver to Valero
an appropriate investment letter containing representations and warranties of
the type generally described above.
7.3. Responsibility for Taxes. Any and all taxes payable with respect to
------------------------
income to a Participant resulting from the exercise of an Option granted
hereunder shall be the sole responsibility of the Participant, not of the
Company or Valero, whether or not Valero or the Company shall have withheld or
collected from the Participant any sums required to be so withheld or collected
in respect of such income, and whether or not any sums so withheld or collected
shall be sufficient to provide for any such taxes.
7.4. Employment Not Guaranteed. Nothing contained in this Plan nor any
-------------------------
action taken hereunder shall be construed to create a contract of employment or
to give any Participant any right to be retained in the employ of the Company or
to serve or continue to serve as an officer or director of Valero or any
Subsidiary.
7.5. Gender, Singular and Plural. All pronouns and any variations thereof
---------------------------
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
7.6. Captions. The captions of the Paragraphs of this Plan are for
--------
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
7.7. Validity. In the event any provision of this Plan is held invalid,
--------
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.
7.8. Notice. Any notice, statement, decision or communication required or
------
permitted to be given under this Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, if to the Company, to the
principal office of Valero, directed to the attention of the Corporate Secretary
of Valero, and if to a Participant or other person, to the address of the
Participant or other person as it shall appear on the books of the Company. Any
such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the third day following the date shown on the postmark on
receipt for registration or certification.
7.9. Applicable Law. This Plan shall be governed and construed in
--------------
accordance with the laws of the State of Texas.
7.10.Inconsistency. In the event of any conflict or inconsistency
-------------
between the provisions of this Plan and the provisions of any Option Agreement,
the provisions of this Plan shall control.
8. Amendment and Termination of Plan and Option Agreements.
8.1. Amendments. The Board of Directors or the Committee, without approval
----------
of the Participants but subject to Paragraph 8.3, may amend this Plan from time
to time in such respect as it deems advisable.
<PAGE>
8.2. Termination. The Board of Directors or the Committee, without
-----------
approval of the Participants but subject to Paragraph 8.3, may at any time
terminate this Plan.
8.3. Effect of Amendment or Termination. Any such amendment or termination
----------------------------------
of this Plan shall not materially adversely affect Options already granted. In
the event of any termination of this Plan or amendment which materially
adversely affects Options, Options already granted shall, subject to Paragraph
8.4, remain in full force and effect as if this Plan had not been so amended or
terminated. In any case in which the Board of Directors or the Committee feels
it appropriate or is advised by counsel that such approval is required, the
amendment or termination of this Plan shall be submitted to the stockholders of
Valero for approval.
8.4 Cancellation of Options. Any other provision of this Plan to the
-----------------------
contrary notwithstanding, in the event that either (a) the Option Price of any
Option shall on any NYSE trading day equal or exceed 125% of the closing sales
price per share of the Common Stock (determined as provided in Paragraph 3.6),
or (b) out of any period of 120 consecutive NYSE trading days the Option Price
of any Option shall exceed the closing sales price per share of the Common Stock
(determined as provided in Paragraph 3.6) on any 80 or more of such days, then
the Committee, in its sole discretion, may unilaterally determine to cancel and
terminate such Option and the related Option Agreement. Upon such Committee
determination, the Expiration Date of such Option and related Option Agreement
shall be at the close of business on the date of such determination. The
Committee shall cause notification of such cancellation to be sent to the
Participant (or other person entitled to exercise such Option), but failure to
send or any delay in sending such notice shall not nullify, delay or otherwise
affect such cancellation. No compensation shall be paid or payable to any
Participant (or other person entitled to exercise such Option), or other person
claiming by, through or under a Participant, in respect of any such
cancellation. If an Option and the related Option Agreement shall be terminated
and canceled pursuant to the provisions of this Paragraph 8.4, the Option Shares
subject to such Option (to the extent not theretofore exercised) shall once more
be available to be optioned and sold under this Plan pursuant to a new Option
granted hereunder. No Participant with respect to whom an Option has been
canceled pursuant to this Paragraph 8.4 shall have any right, whether by virtue
of such cancellation or otherwise, to require the Company or the Committee to
grant a new Option to him under this Plan or any other stock option plan of the
Company.
9. Claims.
9.1. Filing of Claims. A Participant or other person claiming to have been
----------------
denied any benefit or right provided under this Plan shall have the right to
file a written claim with the Committee. All such claims shall be submitted on
a form provided by the Committee, which shall be signed by the claimant and
shall be considered filed on the date the claim is received by the Committee.
The claim will be reviewed and a decision rendered by a member of the Committee
designated by the Committee for such purpose.
9.2. Denial of Claims. In the event the claim is denied, in whole or in
----------------
part, the Committee member reviewing the claim shall, within 90 days following
receipt of the claim, provide the claimant with either (i) a written statement
containing the following:
(1) the specific reason or reasons for the denial of benefits;
(2) a specific reference to the pertinent provisions of the Plan upon
which the denial is based;
(3) a description of any additional material or information which is
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(4) an explanation of the review procedure provided below;
<PAGE>
or (ii) a written notice that special circumstances (which shall be specified in
the notice) require an additional specified period (not to exceed 90 days) for
processing of the claim. If a claimant is provided with the notice specified in
clause (ii), the claimant shall thereafter be provided with the statement
required by clause (i) within the period specified in such notice.
9.3. Review of Claims. Within 90 days after receipt of a notice of a
----------------
denial of benefits as provided above, the claimant or his authorized
representative may request, in writing, to appear before the full Committee for
a review of the claim. In conducting its review, the Committee shall consider
any oral or written statement or other evidence presented by the claimant or his
authorized representative in support of the claim. The Committee shall give the
claimant and his authorized representative reasonable access to all pertinent
documents necessary for the preparation and presentation of the claim.
9.4. Decision by Committee. Within 60 days after receipt by the Committee
---------------------
of the written request for review of the claim (or in the event of special
circumstances which require additional time for review, not later than 120 days
after receipt of such request) the Committee shall notify the claimant of its
decision. If an extension of time for review is required because of special
circumstances, written notice of the extension shall be furnished to the
claimant prior to the commencement of the extension. In the event the Committee
shall hold regularly scheduled meetings at least quarterly, then in lieu of the
60 day period specified above, the decision on review shall be made by no later
than the date of the meeting of the Committee which immediately follows receipt
of the claimant's request for review, provided, that if the request for review
is received within 30 days preceding the date of such meeting, the decision
shall be made by no later than the date of the second meeting following receipt
of such request for review, provided further, that if special circumstances
require a further extension of time for processing of the report, such decision
shall be rendered not later than the date of the third meeting of the Committee
following receipt of the written request for review. The decision of the
Committee shall be in writing and shall include the specific reasons for the
decision and references to relevant Plan provisions on which the decision is
based. The decision of the Committee shall be final, conclusive and binding
upon the Participant or other claimant and all persons claiming by, through or
under such claimant.
<PAGE>
Amendment to Stock
Option Plan No. 5
AMENDMENT, dated as of June 30, 1997, to the Valero Energy Corporation
Stock Option Plan No. 5 (the "Plan").
RECITALS:
1. The By-laws of Valero Energy Corporation (the "Company") delegate to
the Compensation Committee (the "Committee") of the Board of Directors authority
to adopt amendments to and interpret benefit plans for employees, officers and
directors, and specify that such authority may be delegated by the Committee to
the Chief Executive Officer of the Company, subject to such limitations as are
specified in the By-laws.
2. By resolution dated August 22, 1996, the Committee delegated to the
Chief Executive Officer of the Company the full authority of the Committee to
approve and cause to be placed into effect amendments to, among other plans, the
Valero Energy Corporation Stock Option Plan No. 3.
WITNESSETH:
The undersigned Chief Executive Officer of the Company, acting pursuant to
the authority set forth above, and having determined that the following
amendments are desirable and in the best interests of the Company, hereby amends
the Plan as follows:
1. The existing sub-paragraph 2(f) is hereby amended to read in its
entirety as follows:
"Company" shall mean, prior to the Effective Time, Valero and any Parent or
Subsidiary of Valero which now exists or hereafter is organized or acquired
by or acquires Valero, and any successor or successors to such entities.
After the Effective Time such term shall mean PG&E Corporation, a
California Corporation, and any Parent or Subsidiary of PG&E Corporation
which now exists or hereafter is organized or acquired by or acquires PG&E
Corporation and any successor or successors to such entities. The terms
"Parent" and "Subsidiary" shall have the same meaning as the terms "parent
corporation" and "subsidiary corporation," respectively, as specified in
Section 424 of the Internal Revenue Code of 1986, as amended.
2. A new sub-paragraph 2(i) is hereby added to read as follows and the
remaining sub-paragraphs of Paragraph 2 shall be relettered accordingly:
"Effective Time" shall have the meaning specified in that certain Agreement
and Plan of Merger, dated as of January 31, 1997, among Valero, PG&E
Corporation, and PG&E Acquisition Corporation (Merger Agreement).
3. The existing sub-paragraph 2(ff) is hereby amended to read in its
entirety as follows:
"Valero" shall mean Valero Energy Corporation, a Delaware Corporation, as
renamed PG&E Gas Transmission, Texas Corporation, on or after the Effective
Time.
4. The following sentence shall be added to the end of Paragraph 3.1:
No Options shall be granted hereunder after the Effective Time.
<PAGE>
5. The existing Paragraph 5.2 of the Plan is hereby redesignated as
"Paragraph 5.3" and a new Paragraph 5.2 is hereby added to read in its entirety
as follows:
5.2 Treatment of Options upon Consummation of Spin-off and Merger.
-------------------------------------------------------------
(A) Capitalized terms used in this Paragraph 5.2 and not otherwise defined
in this Plan shall have the meanings given to them in that certain Employee
Benefits Agreement between Valero and Valero Refining and Marketing Company
(the "Employee Benefits Agreement"), and in that certain Agreement and Plan
of Merger, dated as of January 31, 1997, among Valero, PG&E Corporation,
and PG&E Acquisition Corporation (the "Merger Agreement"). The provisions
of this Paragraph 5.2 shall apply for all purposes under the Plan, the
provisions of Paragraph 5.1 to the contrary notwithstanding.
(B) Upon the consummation of the Distribution, any Option held by a
VRM Participant or by a non-employee director of the Company that is
outstanding at the Time of Distribution shall cease to represent a right to
acquire Common Stock and shall be replaced as of the Time of Distribution
with a VRM Stock Option with respect to a number of shares of VRM Common
Stock and with a per-share exercise price as determined pursuant to Section
3.01(a) of the Employee Benefits Agreement. Valero shall take such actions
as may be necessary to cause such VRM Stock Options otherwise to have the
same terms and conditions as the corresponding Options issued hereunder,
except that references to Valero shall be changed to refer to VRM.
(C) Upon the consummation of the Distribution and Merger, any Option
held by a Company Participant that is outstanding at the Effective Time
shall cease to represent a right to acquire Common Stock and shall be
replaced as of the Effective Time with an option to purchase shares of
Acquirer Common Stock ("Converted Option"), not intended to qualify under
Section 422 of the Code, so that, after giving effect to Section
3.1(a)(iii) of the Merger Agreement, the number of shares of Acquirer
Common Stock subject to such Converted Option shall be equal to the product
of (x) the number of shares of Common Stock subject to the original Option
immediately before the Distribution, multiplied by (y) the Ratio (rounded
up to the nearest whole share if necessary), and the per-share exercise
price of the Converted Option shall be equal to the quotient of (A) the
per-share exercise price of the original Option immediately before the
Distribution divided by (B) the Ratio (rounded down to nearest cent.) As
used herein "Ratio" shall mean the amount obtained by dividing the average
of the daily high and low trading price on the NYSE for the Common Stock on
each of the 15 trading days prior to the ex-dividend date for the
Distribution by the average of the daily high and low trading prices on the
NYSE of the Acquirer Common Stock on each of the same 15 trading days.
(D) A Converted Option shall be subject to the provisions of this Plan
and the terms and conditions of the Option Agreement relating to the
original option as if it remained an Option hereunder, provided that as of
the Effective Time (i) the Converted Option shall constitute solely a right
to purchase shares of Acquirer Common Stock in a number and with an
exercise price determined pursuant to Paragraph 5.2(C), and (ii) to the
extent practicable all outstanding Option Agreements pertaining to Options
which have been converted pursuant to Paragraph 5.2(C) shall be amended to
reflect the provisions of this Paragraph 5.2.
6. The existing Paragraph 6.1 is hereby amended to read in its entirety
as follows:
<PAGE>
6.1 Plan Administered by Committee. From and after Effective Time, this
------------------------------
Plan shall be administered by a committee composed solely of two or more "Non-
Employee Directors" (as defined in Rule 16b-3 under the Exchange Act) of PG&E
Corporation, which committee shall, except as hereinafter set forth, be the
Nomination and Compensation Committee, as appointed and constituted from time to
time by the PG&E Corporation Board of Directors. In the event that the
membership of the Compensation Committee shall fail to meet the foregoing
criteria, then additional or different members of such board shall be appointed
by the PG&E Corporation Board of Directors to act for purposes of administering
this Plan so that the Committee administering this Plan shall consist solely of
two or more "Non-Employee Directors."
As amended hereby, the Plan shall continue in full force and effect, and
the Corporate Secretary of the Company shall in his discretion incorporate the
foregoing amendments and all prior amendments, together with such conforming
changes and corrections as he may determine to be necessary or appropriate into
amended and restated Plan documents, which shall thereupon constitute the
official Plan documents for all purposes.
IN WITNESS WHEREOF, the undersigned Chief Executive Officer of the Company
has executed this Amendment effective the 30th day of June, 1997.
____________________________________________
William E. Greehey
Chief Executive Officer
<PAGE>
EXHIBIT 4.3
EXECUTIVE STOCK INCENTIVE PLAN
SECTION 1. Purpose.
The purposes of the Valero Energy Corporation Executive Stock Incentive Plan
(the "Plan") are to promote the interests of Valero Energy Corporation (together
with any successor thereto, the "Company") and its stockholders by (i)
attracting and retaining executive personnel and other key employees of the
Company and its affiliates; (ii) motivating these employees by using
performance-related incentives to achieve longer range performance goals; and
(iii) enabling these employees to participate in the long-term growth and
financial success of the Company.
SECTION 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or through one or more
---------
intermediaries, is controlled by the Company and (ii) any entity in which
the Company has a significant equity interest, as determined by the
Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock,
-----
Performance Award, Stock Compensation Award or Other Stock-Based Award.
(c) "Award Agreement" shall mean any written agreement, contract, or other
---------------
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
(d) "Board" shall mean the Board of Directors of the Company.
-----
(e) "Change of Control" is defined in Section 8(b) of the Plan.
-----------------
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
(g) "Committee" or "Compensation Committee" shall mean the Compensation
--------- ----------------------
Committee of the Board as further described in Section 3 of the Plan.
(h) "Employee" shall mean any employee of the Company or of any Affiliate.
--------
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
------------
(j) "Exercise Notice" is defined in Section 6(h) of the Plan.
---------------
(k) "Fair Market Value" shall mean the average of the "high" and "low" reported
-----------------
sales price per Share (as reported in the New York Stock Exchange -
Composite Transactions listing) as of the relevant measuring date, or if
there are no sales on the New York Stock Exchange on that measuring date,
then as of the next following day on which there were sales.
(l) "Incentive Stock Option" shall mean an option granted under Section 6(a) of
----------------------
the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.
<PAGE>
(m) "Non-Qualified Stock Option" shall mean an option granted under Section
--------------------------
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(n) "Notice Date" is defined in Section 6(h) of the Plan.
-----------
(o) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
------
Option.
(p) "Other Stock-Based Award" shall mean any right granted under Section 6(f)
-----------------------
of the Plan.
(q) "Participant" shall mean any Employee granted an Award under the Plan.
-----------
(r) "Performance Award" shall mean any right granted under Section 6(d) of the
-----------------
Plan.
(s) "Person" shall mean any individual, corporation, partnership, association,
------
joint-stock company, trust, unincorporated organization, government or
political subdivision thereof or other entity.
(t) "Restricted Stock" shall mean any Share, prior to the lapse of restrictions
----------------
thereon, granted under Section 6(c) of the Plan.
(u) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
----------
Exchange Act, or any successor rule or regulation thereto as in effect from
time to time.
(v) "SAR" or "stock appreciation right" shall mean the right, subject to the
--- ------------------------
provisions of this Plan, to receive a payment in cash equal to the
difference between the specified exercise price of the SAR and the Fair
Market Value of one share of the Common Stock.
(w) "SEC" shall mean the Securities and Exchange Commission, or any successor
---
thereto.
(x) "Settlement Date" is defined in Section 6(h) of the Plan.
---------------
(y) "Share" or "Shares" shall mean the common stock of the Company, $1.00 par
----- ------
value, and other securities or property that may become the subject of
Awards or become subject to Awards pursuant to an adjustment made under
Section 4(b) of the Plan.
(z) "Stock Compensation" shall mean any right granted under Section 6(e) of the
------------------
Plan.
(aa) "Tax Payment" is defined in Section 6(h) of the Plan.
-----------
SECTION 3. Administration.
The Plan shall be administered by a committee composed solely of two or more
"Non-Employee Directors" (as defined in Rule 16b-3 under the Exchange Act) of
the Company, which Committee shall be, except as hereinafter set forth, the
Compensation Committee. In the event that the membership of the Compensation
Committee shall fail to meet the foregoing criteria, then additional or
different members of the Board of Directors shall be appointed by the Board to
act for purposes of administering this Plan so that the committee administering
this Plan shall consist solely of two or more "Non-Employee Directors." Subject
to the terms of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the Committee
shall have authority to:
(a) designate Participants;
<PAGE>
(b) determine the type or types of Awards to be granted to an eligible
Employee;
(c) determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with,
Awards;
(d) determine the terms and conditions of any Award and any subsequent
amendments thereto;
(e) determine to what extent and under what circumstances Awards may be settled
or exercised in cash, Shares, other securities, other Awards or other
property, or cancelled, forfeited, or suspended, and the method or methods
by which Awards may be settled, exercised, cancelled, forfeited, or
suspended;
(f) determine to what extent and under what circumstances any amount payable
(in whatever form) with respect to an Award may be deferred either
automatically or at the election of the holder thereof or the Committee;
(g) provide for the acceleration of any time period relating to the vesting,
exercise or realization of any Award so that the Award may be exercised or
realized in full on or before a date fixed by the Committee; the Committee
may, in its discretion, include other provisions and limitations in any
Award Agreement as the Committee may deem equitable and in the best
interests of the Company;
(h) interpret and administer the Plan and any instrument or agreement relating
to the Plan, including Award Agreements.
(i) establish, amend, suspend, or waive any rules or regulations regarding the
Plan, and appoint any agent the Committee shall deem appropriate for the
proper administration of the Plan; and
(j) make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan. Unless
otherwise expressly provided in the Plan, all designations, determinations,
interpretations, and other decisions with respect to the Plan or any Award
shall be within the sole discretion of the Committee, may be made at any
time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or
beneficiary of any Award, any stockholder of the Company and any Employee.
SECTION 4. Shares and Other Property Available For Awards.
(a) Shares Available. Subject to adjustment as provided in Section 4(c), the
----------------
number of Shares with respect to which Awards may be granted under the Plan
shall be 2,100,000. No more than 750,000 of the Shares available for
Awards shall be issued as Restricted Stock. The maximum aggregate number
of Shares available for Options and SARs to any one Participant during any
12-month period is equal to 500,000 or any lesser amount that will enable
the Company to comply with the deductibility requirements of Section 162(m)
of the Code and the rules promulgated thereunder as determined by the
Committee.
(b) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant
------------------------------------------
to an Award may consist, in whole or in part, of authorized and unissued
Shares or treasury Shares.
(c) Adjustments. (i) If all or any portion of an Award vests or is exercised
-----------
subsequent to any stock dividend, rights distribution, split-up,
recapitalization, combination or exchange of shares,
<PAGE>
merger, consolidation, acquisition of property or stock, spin-off or
separation, reorganization, or liquidation (any one of which being
hereafter referred to as a "Reorganization Event"), as a result of which
shares or other securities of any class or rights shall be issued in
respect of outstanding Shares, or Shares shall be changed into the same or
a different number of shares of the same or another class or classes or
other securities, the person exercising or otherwise entitled to such Award
shall receive,
(A) for the aggregate price payable upon such exercise of an Option, or
upon vesting of an Award (other than an Option) denominated in Shares
(i) the aggregate number and class of shares, rights or other
securities for which a recognized market exists, and (ii) a cash
amount equal to the fair market value (as reasonably determined by the
Committee) on such exercise or vesting date of any other property
(other than regular cash dividend payments) and of any shares, rights
or other securities for which no recognized market exists, which, if
Shares (as authorized at the date of the granting of such Award) had
been acquired at the date of granting of the Award for the same
aggregate price (on the basis of the price per share, if any, provided
in the Award) and had not been disposed of, such person or persons
would be holding at the time of such exercise or vesting as a result
of such acquisition and any such Reorganization Event, and
(B) a cash amount upon the exercise of any SARs equal to the difference
between the aggregate Grant Price of such SARs and the aggregate of
(i) the fair market value, on the exercise date of any whole shares,
rights or other securities for which a recognized market exists, and
(ii) the fair market value (as reasonably determined by the Committee)
on such date of any other property (other than regular cash dividend
payments) which the holder of a number of Shares equal to the number
of such SARs, if such Shares had been purchased at the date of
granting of such SARs and not otherwise disposed of, would be holding
at the time of exercise of such SARs as a result of such purchase and
any such Reorganization Event;
provided, however, that no fractional Share, fractional right or other
fractional security shall be issued upon any such exercise or vesting, and
the aggregate price paid shall be appropriately reduced to reflect any
fractional Share, fractional right or other fractional security not issued;
and provided further, however, that if the exercise or vesting of any Award
subsequent to any Reorganization Event would, pursuant to clause (a) of
this Section 4(c)(i), require the delivery of shares, rights or other
securities which the Company is not then authorized to issue or which in
the sole judgment of the Committee cannot be issued without undue effort or
expense, the person exercising or vesting in such Award shall receive, in
lieu of such shares, rights or other securities, a cash payment equal to
the Fair Market Value on the exercise or vesting date, as the case may be,
as reasonably determined by the Committee, of such shares, rights or other
securities. For purposes of applying the provisions of this Plan, the
Preference Share Purchase Rights distributed to stockholders of the Company
pursuant to the Rights Agreement (dated as of October 25, 1995, between the
Company and Harris Trust and Savings Bank, the "Rights Agreement"), shall
be deemed not to have been distributed until the Distribution Date (as
defined in the Rights Agreement).
(ii) In the event of any change in the number of Shares outstanding
resulting from a Reorganization Event, the aggregate number and class of
Shares remaining available to be awarded under this Plan shall be that
number and class which a person, to whom an Award had been granted for all
of the available Shares under this Plan on the date preceding such change,
would be entitled to receive as provided in Section 4(c)(i).
<PAGE>
(iii) Upon the occurrence of any Reorganization Event, the Committee shall
be entitled (but shall not be required) to determine that new Award
Agreements shall be entered into with Participants reflecting such event.
(d) Share Counting. For purposes of determining at any time the number of
--------------
Shares that remain available for grant under this Plan, the number of
Shares then authorized pursuant to Section 4 of the Plan shall be (i)
decreased by the "gross" number of Shares issued pursuant to exercised
Awards, (ii) decreased by the "gross" number of Shares issuable pursuant to
outstanding unexercised Awards, and (iii) increased by the difference
between the "gross" number of Shares and the "net" number of Shares issued
pursuant to exercised Awards. As used herein, the "gross" number of Shares
refers to the maximum number of Shares that may be issued upon the exercise
of an Award. The "net" number of Shares refers to the net number of Shares
actually issued to an Award holder upon exercise of an Award, after
reducing the "gross" number of Shares by the number of Shares tendered back
to the Company in payment of the Award's exercise price or for the
satisfaction of any Tax Payment obligation. If a Participant shall
forfeit, voluntarily surrender or otherwise permanently lose his or her
right to exercise an Award under any provision of this Plan or otherwise,
or if any Award shall terminate or expire pursuant to its terms, the Shares
subject to the Award shall once again be available to be awarded and sold
under this Plan pursuant to a new Award granted hereunder.
SECTION 5. Eligibility.
Any Employee who is not a member of the Committee, including any officer or
employee-director of the Company or any affiliate, shall be eligible to be
designated a Participant.
SECTION 6. Awards.
(a) Options. In determining that an eligible Employee shall be granted an
-------
Option, the Committee shall determine, subject to the provisions of the
Plan, the number of Shares to be covered by each Option, the purchase price
therefor and the conditions and limitations applicable to the exercise of
the Option, including the following terms and conditions and any additional
terms and conditions not inconsistent with the provisions of the Plan as
the Committee shall determine.
(i) Exercise Price. The purchase price per Share purchasable under an
--------------
Option shall be determined by the Committee at the time each Option is
granted; provided, that the purchase price per Share shall not be less
than 100% of Fair Market Value on the date of grant.
(ii) Incentive Stock Options. The terms of any Incentive Stock Option
-----------------------
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision, and
any regulations promulgated thereunder.
(b) Stock Appreciation Rights. Subject to the provisions of the Plan, in
-------------------------
determining the Employees to whom SARs shall be granted, the Committee
shall determine the number of Shares to be covered by each SAR Award, the
grant price thereof and the conditions and limitations applicable to the
exercise thereof. SAR Awards shall be payable in cash only and may be
granted in tandem with another Award, in addition to another Award, or
freestanding and unrelated to another Award. SARs granted in tandem with
or in addition to another Award may be granted either at the same time as
the other Award or at a later time.
(i) Grant Price. The grant price of an SAR shall be determined by the
-----------
Committee.
<PAGE>
(ii) Other Terms and Conditions. Subject to the terms of the Plan and any
--------------------------
applicable Award Agreement, the Committee shall determine, at or after
the grant of an SAR, the term, methods of exercise, and any other
terms and conditions of any SAR.
(c) Restricted Stock. Subject to the provisions of the Plan, in determining
----------------
the Employees to whom Restricted Stock shall be granted, the Committee
shall determine the number of Shares of Restricted Stock to be granted to
each Participant, the duration of the restriction period during which, and
the conditions under which, the Restricted Stock may be forfeited to the
Company, and the other terms and conditions of the Awards.
(i) Dividends. Unless otherwise determined by the Committee, a Restricted
---------
Stock Award shall provide for the payment of dividends during its
restriction period. Dividends paid on Restricted Stock may be paid
directly to the Participant, may be subject to risk of forfeiture, and
may be subject to transfer restrictions during any period established
by the Committee, all as determined by the Committee in its
discretion.
(ii) Registration. Any Restricted Stock may be evidenced in any manner
------------
deemed appropriate by the Committee, including book-entry registration
or the issuance of stock certificates. If any stock certificate is
issued with respect to Restricted Stock, the certificate shall be
registered in the name of the Participant and may bear an appropriate
legend referring to the terms, conditions, and restrictions applicable
to the Restricted Stock.
(iii)Forfeiture. Except as otherwise determined by the Committee, upon
----------
termination of a Participant's employment (as determined under
criteria established by the Committee) for any reason during the
applicable restriction period, all Restricted Stock shall be forfeited
by the Participant to the Company without compensation therefor.
However, when the Committee finds that a waiver would be in the best
interests of the Company, the Committee may waive in whole or in part
any or all remaining restrictions with respect to the Restricted Stock
held by the Participant whose employment is terminating. Unrestricted
Shares, evidenced in any manner as the Committee shall deem
appropriate, shall be issued to the holder of Restricted Stock
promptly after the applicable restrictions have lapsed or otherwise
have been satisfied.
(d) Performance Awards. The Committee shall have authority to determine the
------------------
Employees who may receive a Performance Award, which shall consist of a
right, (A) denominated or payable in cash, Shares, other securities or
other property (including Restricted Stock), and (B) that shall confer on
the holder thereof, rights valued at an amount determined by the Committee
and payable to or exercisable by the holder thereof, in whole or in part,
upon the achievement of prescribed performance goals during prescribed
performance periods as the Committee shall establish.
(i) Terms and Conditions. Subject to the terms of the Plan and any
--------------------
applicable Award Agreement, 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.
(ii) Payment of Performance Awards. Performance Awards may be paid in a
-----------------------------
lump sum or in installments following the close of the performance
period or, in accordance with procedures established by the Committee,
on a deferred basis.
<PAGE>
(e) Stock Compensation. The Committee shall have authority to pay in Shares
------------------
all or any portion of the amounts payable under any compensation program of
the Company. 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.
(f) Other Stock-Based Awards. The Committee is hereby authorized to grant to
------------------------
eligible Employees an "Other Stock-Based Award", which shall consist of a
right
(i) that is not an Award or right described in Section 6(a), (b), (c),
(d), or (e) above and
(ii) that is denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including
securities convertible into Shares), as are deemed by the Committee to
be consistent with the purposes of the Plan; provided, that any such
rights must comply, to the extent deemed desirable by the Committee,
with Rule 16b-3 and applicable law. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine the
terms and conditions of any Other Stock-Based Award.
(g) General.
-------
(i) Grants. Awards may be granted, in the discretion of the Committee,
------
either alone or in addition to, in tandem with, or in substitution for
any other Award granted under the Plan or any award granted under any
other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards or awards granted under any
other plan of the Company or any Affiliate may be granted either at
the same time as or at a different time from the grant of other Awards
or awards. The Committee may authorize the grant of Awards prior to
stockholder approval of the Plan, but any Award granted by the
Committee shall be contingent upon stockholder approval of the Plan.
(ii) Forms of Payment by Company. Subject to the terms of the Plan and of
---------------------------
any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise or payment of an
Award may be made in any form as the Committee shall determine,
including cash, Shares, other securities, other Awards or other
property, or any combination thereof, and may be made in a single
payment or transfer, in installments, or on a deferred basis, in each
case in accordance with rules and procedures established by the
Committee. These rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments.
(iii)Limits on Transfer.
------------------
(A) Each Award, and each right under any Award, shall be exercisable
only by the Participant during the Participant's lifetime, or if
permissible under applicable law, (i) by the Participant's
beneficiary, (ii) by an immediate family member as a transferee
receiving the Award pursuant to a gift, or (iii) by any
transferee authorized by the Committee below.
(B) Without prior written approval from the Committee, no Award and
no right under any Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a
Participant otherwise than as provided in Paragraph (A) above or
by will or by the laws of descent and distribution and
<PAGE>
any purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against
the Company or any Affiliate.
(iv) Term of Awards. The term of each Award shall be for the period
--------------
determined by the Committee; provided, that in no event shall the term
of any Incentive Stock Option exceed a period of 10 years from the
date of its grant.
(v) Share Certificates. All certificates for Shares or other securities
------------------
of the Company or any Affiliate delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to (i) all stop
transfer orders and other restrictions as the Committee may deem
advisable under the Plan, (ii) the rules, regulations, and other
requirements of the SEC and any stock exchange upon which the Shares
or other securities are then listed, (iii) and any applicable federal
or state laws. The Committee may cause a legend or legends to be put
on any stock certificates to make appropriate reference to applicable
restrictions.
(vi) Delivery of Shares or other Securities and Payment by Participant of
--------------------------------------------------------------------
Consideration. No Shares or other securities shall be delivered
-------------
pursuant to any Award until payment in full of any amount required to
be paid pursuant to the Plan or the applicable Award Agreement is
received by the Company. Payment may be made in any form or method
prescribed by the Committee, including cash, Shares, other securities,
other Awards or other property, or any combination thereof, provided
that the combined value, as determined by the Committee, of all cash
and cash equivalents and the Fair Market Value of any Shares or other
property tendered to the Company as of the date of such tender, is at
least equal to the full amount required to be paid.
(vii)Termination of Employment.
-------------------------
(A) Except as otherwise provided in the Plan, or otherwise determined
by the Committee on the date of grant and included in the Award
Agreement, an Award vests to and/or may be exercised by a
Participant only while the Participant is and has continually
been since the date of the grant of the Award an Employee. If a
Participant's employment with the Company is voluntarily
terminated by the Participant (other than through retirement,
death or disability), then all unexercised Awards previously
granted to that Participant under the Plan shall lapse
automatically and be forfeited 30 days following the date of the
Participant's termination of employment. If a Participant's
employment is terminated by the Company other than for "cause"
(as determined by the Company), then all unexercised Awards
previously granted to the Participant shall lapse and be
forfeited by the Participant 90 days after termination of
employment.
(B) If a Participant's employment is terminated because of
retirement, death or total and permanent disability (with the
determination of disability to be made within the sole discretion
of the Committee), any unexercised Award held by the Participant
shall remain outstanding according to the Award's original terms;
alternatively, the Committee or, except with respect to a
Participant subject to Section 16 under the Exchange Act, the
Chief Executive Officer of the Company, may prescribe new or
additional terms for the vesting, exercise or realization of the
Award. Absent any determination by the Committee or
<PAGE>
the Chief Executive Officer to the contrary, any unexercised
Award held by a Participant whose employment is terminated
because of retirement, death or disability shall vest or become
exercisable according to the Award's original terms.
(C) In connection with the termination of any Participant from
employment with the Company, the Chief Executive Officer of the
Company is authorized to determine which, if any, of the
foregoing provisions of this clause (vii) shall apply, such
determination to be binding upon the Company.
(viii)Award Agreements. Awards shall be evidenced by Award Agreements
----------------
having terms and conditions, not inconsistent with the Plan, as
prescribed by the Committee. Award Agreements need not be uniform.
(ix) Deferral of Receipt. By filing a written request with the Committee
-------------------
not later than December 31st of any calendar year, a Participant may
elect to defer receipt of all or any portion of any stock to be
awarded pursuant to a Restricted Stock award, Performance Award or
Other Stock-Based Award which, absent such election, the Participant
would be entitled to receive during the calendar year following the
Participant's request (hereafter referred to as the "Deferred Award").
The Deferred Award will be delivered to the Participant on January 2nd
of the second calendar year following the calendar year in which the
deferral election is made. Successive elections may be made with
respect to the same Deferred Award to defer from year to year the
receipt of such Deferred Award. Each Participant shall be solely
responsible for determining the personal income tax effect of making
any deferral election; the Company makes no representation that such
election shall have the effect of deferring receipt of any income
attributable to the Deferred Award for federal income tax purposes.
(h) Exercise of Option or SAR Awards.
--------------------------------
(i) Notice. Unless otherwise prescribed by the Committee, Awards may be
------
exercised only by written notice of exercise (the "Exercise Notice"),
in the form prescribed by the Committee, delivered to the Company to
the Financial Benefit Plan Administration Manager, and signed by the
Participant, other person acting on behalf of the Participant or
transferee being entitled to exercise the same. The date on which the
Exercise Notice is delivered to the Company shall be the "Notice
Date." The Exercise Notice shall specify a date (the "Settlement
Date"), not less than five business days nor more than ten business
days following the Notice Date, upon which the Shares or other rights
shall be issued or transferred to the Participant (or other person
entitled to exercise the Award) and the Award's exercise price shall
be paid to the Company.
(ii) Payment. Unless otherwise prescribed by the Committee, on the
-------
Settlement Date, the person exercising an Award shall tender to the
Company full payment for the Shares or other rights with respect to
which the Award is exercised, together with an additional amount, in
cash, certified check, cashier's check or bank draft approved by
Valero, equal to the amount of any taxes required to be collected or
withheld by the Company in connection with the exercise of the Award
(the "Tax Payment").
<PAGE>
(iii)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 Award may make the Tax Payment in whole or in part by
electing, at or before the time of exercise of the Award, either (a)
to have the Company withhold from the number of Shares otherwise
deliverable a number of Shares whose Fair Market Value equals the Tax
Payment, or (b) 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. Following any election to
withhold Shares or deliver other Shares to make a Tax Payment, the
Committee shall have sole discretion to approve or disapprove the
election at any time prior to the Settlement Date. If the election is
disapproved, the Tax Payment shall be made in cash, or in any
combination of cash and Shares as the Committee may direct. If the
Committee shall fail to disapprove the election prior to the
Settlement Date, the election will be deemed approved.
(iv) Payment with Stock. Subject to approval by the Committee, a person
------------------
exercising an Award for the receipt of Shares may pay for the Shares
by tendering to the Company other Shares legally and beneficially
owned by that person at the time of the exercise of the Award. If
approved by the Committee, this method of exercise may include use of
a procedure whereby a person exercising an Award may request that
Shares received upon exercise of a portion of an Award be
automatically applied to satisfy the exercise price for additional and
increasingly larger portions of the Award. The certificate(s)
representing any Shares tendered in payment of an Award's exercise
price must be accompanied by a stock power duly executed with
appropriate signature guarantees. The Committee may, in its sole
discretion, refuse any tender of Shares in which case the Company
shall promptly redeliver the Shares to the person exercising the Award
and notify the person of the refusal as soon as practicable. In this
event, the person may either (a) tender to the Company on the
Settlement Date the cash amount required to pay for the Award's
Shares, or (b) rescind the Exercise Notice. If the person elects to
rescind his or her Exercise Notice, the person may again (subject to
the other terms of this Plan) deliver an Exercise Notice with respect
to the Award at any time prior to its expiration date.
(v) 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 Award shall be made using the Fair
Market Value of the Shares on the Notice 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.
(vi) Rights as Stockholder. Except as provided in Section 6(c) of this
---------------------
Plan, until the issuance of the stock certificate(s) for Shares
purchased hereunder (as evidenced by the appropriate entry on the
books of the Company or any authorized transfer agent of the Company),
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 Award. No adjustment will be made
for a dividend or other rights for which the record date is prior to
the date the stock certificates evidencing such Shares are issued,
except as otherwise provided in this Plan.
<PAGE>
SECTION 7. Amendment and Termination.
Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter, suspend, discontinue,
----------------------
or terminate the Plan without the consent of any stockholder, Participant,
other holder or beneficiary of an Award, or other Person; provided that
notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company no amendment,
alteration, suspension, discontinuation, or termination may be made that
would:
(i) materially increase the total number of Shares available for Awards
under the Plan (except as provided in Section 4) or materially
increase the benefits accruing to Participants under the Plan;
(ii) permit Awards encompassing rights to purchase Shares to be granted
with a per Share grant, exercise or purchase price of less than the
Fair Market Value of a Share on the grant thereof; or
(iii)otherwise cause the Plan to cease to qualify for or cease to comply
with any tax or regulatory exemption, status or requirement, including
for these purposes any approval or other prerequisite for exemptive
relief from Section 16(b) of the Exchange Act.
(b) Amendments to Awards. The Committee may waive any conditions or rights
--------------------
under, amend any terms of, or alter any Award theretofore granted, provided
that no change in any Award shall reduce the benefit accruing to any
Participant without the consent of the Participant.
(c) 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
Section 4(c) of the Plan) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, 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. Notwithstanding the
foregoing, with respect to any Award intended to qualify as performance-
based compensation under Section 162(m) of the Code, no adjustment shall be
authorized to the extent the adjustment would cause the Award to fail to
qualify.
SECTION 8. Change Of Control.
(a) Nonacceleration. In the event of any Change of Control, the Chief
---------------
Executive Officer of the Company may on or before the date of the event
constituting a Change of Control, file with the Corporate Secretary of the
Company a written notice (the "Nonacceleration Notice") signed by the
officer stating that the Change of Control shall not result in the
acceleration of Awards granted under the Plan to the Participants
identified in the notice (or held by persons claiming by, through or under
such Participants). The Nonacceleration Notice may be filed with respect
to all Awards granted under the Plan or with respect to certain Awards
granted to Participants specified in the notice (each Participant referred
to by name or generically in a Nonacceleration Notice, together with each
person claiming by, through or under such
<PAGE>
Participant, is hereinafter referred to as a "Nonaccelerated Person").
Notwithstanding any other provision of this Plan, each Award granted under
this Plan, not theretofore forfeited or terminated and held as of the date
of a Change of Control by a person who as of such date is not a
Nonaccelerated Person shall upon occurrence of the Change of Control
immediately become vested or exercisable with respect to all of the rights
specified therein. The inclusion of a Participant or other person as a
Nonaccelerated Person in a Nonacceleration Notice shall not be construed to
alter or amend any rights the Participant or other person may have under
this Plan under the provisions of any executive severance agreement or
other contractual relationship with the Company.
(b) Effect. If a Change of Control shall occur, each Award held by a
------
Participant pursuant to the Plan shall remain in full force and effect
until the earlier of (i) the expiration date of the Award, or (ii) 90 days
following the Participant's date of termination of employment with the
Company.
In addition to the Committee's authority set forth in Section 7(c) of the
Plan, in order to maintain the Participants' rights in the event of any
Change of Control, the Committee, as constituted before the Change of
Control, is hereby authorized, and has sole discretion, as to any Award,
either at the time the Award is made hereunder or any time thereafter, to
take any one or more of the following actions:
(i) provide for the acceleration of any time periods relating to the
vesting, exercise or realization of the Award so that the Award may be
exercised or realized in full on or before a date fixed by the
Committee;
(ii) provide for the purchase of any Award, upon the Participant's request,
for an amount of cash equal to the amount that could have been
attained upon the exercise of the Award or realization of the
Participant's rights in the Award had the Award been currently
exercisable or payable;
(iii)adjust any outstanding Award as the Committee deems appropriate to
reflect the Change of Control; or
(iv) cause any outstanding Award to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after the Change
of Control. 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.
(c) Defined. A Change of Control shall be deemed to occur when:
-------
(i) the shareholders of the Company approve any agreement or transaction
pursuant to which: (A) the Company will merge or consolidate with any
other Person (other than a wholly owned subsidiary of the Company) and
will not be the surviving entity (or survives only as the subsidiary
of another entity); (B) the Company will sell all or substantially all
of its assets to any other Person (other than a wholly owned
subsidiary of the Company); or (C) the Company will be liquidated or
dissolved;
(ii) any "person" or "group" (as these terms are used in Section 13(d) and
14(d) of the Exchange Act) other than the Company, any subsidiary of
the Company, any
<PAGE>
employee benefit plan of the Company or its subsidiaries, or any
entity holding Shares for or pursuant to the terms of those employee
benefit plans, is or becomes an "Acquiring Person" as defined in that
certain Amended and Restated Rights Agreement dated October 26, 1995,
between the Company and Harris Trust and Savings Bank, as Rights Agent
(or any successor Rights Agreement).
(iii)any "person" or "group" (as these terms are used in subparagraph
(iv) above) shall commence a tender offer or exchange offer for 30% 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% or more of the Shares then outstanding; or
(iv) as a result of or in connection with a contested election of
directors, a number of directors equal to a majority of the Board
before the election cease to be members of the Board.
SECTION 9. General Provisions.
(a) No Rights to Awards. No Employee, Participant or other Person shall have
-------------------
any claim to be granted any Award. The Committee is not required to treat
uniformly the Employees, Participants, or holders or beneficiaries of
Awards when making grants of Awards under the Plan. The terms and
conditions of Awards are not required to be the same with respect to each
recipient.
(b) Delegation. 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 to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Employees who are not deemed "officers" or "directors" of the Company for
purposes of Section 16 of the Exchange Act, or any successor Section
thereto, or who are otherwise not subject to Section 16.
(c) 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.
(d) No Limit on Other Compensation Arrangements. Nothing contained in the Plan
-------------------------------------------
shall prevent the Company or any Affiliate from adopting or continuing in
effect any other compensation arrangements.
(e) No Right to Employment. The grant of an Award shall not be construed as
----------------------
giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free
<PAGE>
from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any Award Agreement.
(f) Governing Law. The validity, construction, and effect of the Plan and any
-------------
rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Texas and applicable federal law.
(g) Severability. If any 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 disqualify the Plan or any Award under any
law deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the 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.
(h) Other Laws. The Committee may refuse to issue or transfer any Shares or
----------
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of the Shares or other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded.
(i) 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 and a
Participant or any other Person. To the extent that any Person acquires a
right to receive payments from the Company 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.
(j) No Fractional Shares. No fractional Shares shall be issued or delivered
--------------------
pursuant to 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 cancelled, terminated, or otherwise
eliminated.
(k) Headings. Headings are given to the Sections and subsections of the Plan
--------
solely as a convenience to facilitate reference. The headings shall not be
deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(l) Construction. Use of the term "including" in this Plan shall be construed
------------
to mean "including but not limited to."
SECTION 10. Effective Date of the Plan.
The Plan shall be effective July 21, 1994, subject to approval by the
stockholders of the Company.
<PAGE>
SECTION 11. Term of the Plan.
No Award shall be granted under the Plan 10 years after approval of the Plan by
the Board. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under any such
Award shall, extend beyond that date.
<PAGE>
Amendment to Executive Stock
Incentive Plan
AMENDMENT, dated as of June 30, 1997, to the Valero Energy Corporation
Executive Stock Incentive Plan (the "Plan").
RECITALS:
1. The By-laws of Valero Energy Corporation (the "Company") delegate to
the Compensation Committee (the "Committee") of the Board of Directors authority
to adopt amendments to and interpret benefit plans for employees, officers and
directors, and specify that such authority may be delegated by the Committee to
the Chief Executive Officer of the Company, subject to such limitations as are
specified in the By-laws.
2. By resolution dated August 22, 1996, the Committee delegated to the
Chief Executive Officer of the Company the full authority of the Committee to
approve and cause to be placed into effect amendments to, among other plans, the
Valero Energy Corporation Stock Option Plan No. 3.
WITNESSETH:
The undersigned Chief Executive Officer of the Company, acting pursuant to
the authority set forth above, and having determined that the following
amendments are desirable and in the best interests of the Company, hereby amends
the Plan as follows:
1. New sub-paragraphs 2(h) and 2(i) are hereby added to read in their
entirety as follows, and the remaining sub-paragraphs of Paragraph 2 shall be
relettered accordingly:
"Company" shall mean, prior to the Effective Time, Valero and any Parent or
Subsidiary of Valero which now exists or hereafter is organized or acquired
by or acquires Valero, and any successor or successors to such entities.
After the Effective Time such term shall mean PG&E Corporation, a
California Corporation, and any Parent or Subsidiary of PG&E Corporation
which now exists or hereafter is organized or acquired by or acquires PG&E
Corporation and any successor or successors to such entities. The terms
"Parent" and "Subsidiary" shall have the same meaning as the terms "parent
corporation" and "subsidiary corporation," respectively, as specified in
Section 424 of the Internal Revenue Code of 1986, as amended.
"Effective Time" shall have the meaning specified in that certain Agreement
and Plan of Merger, dated as of January 31, 1997, among Valero, PG&E
Corporation, and PG&E Acquisition Corporation (Merger Agreement).
2. A new sub-paragraph 2(dd) is hereby added to read in its entirety as
follows:
"Valero" shall mean Valero Energy Corporation, a Delaware Corporation, as
renamed PG&E Gas Transmission, Texas Corporation, on or after the Effective
Time.
<PAGE>
3. The first two sentences of existing Section 3 are hereby amended to
read in their entirety as follows:
From and after Effective Time, this Plan shall be administered by a
committee composed solely of two or more "Non-Employee Directors" (as
defined in Rule 16b-3 under the Exchange Act) of PG&E Corporation, which
committee shall, except as hereinafter set forth, be the Nomination and
Compensation Committee, as appointed and constituted from time to time by
the PG&E Corporation Board of Directors. In the event that the membership
of the Compensation Committee shall fail to meet the foregoing criteria,
then additional or different members of such board shall be appointed by
the PG&E Corporation Board of Directors to act for purposes of
administering this Plan so that the Committee administering this Plan shall
consist solely of two or more "Non-Employee Directors."
4. The existing Section 4(d) of the Plan is hereby redesignated as
Section 4(e), and a new Section 4(d) is hereby added to read in its entirety
as follows:
(d) Treatment of Options and SARs upon Consummation of Spin-off and
---------------------------------------------------------------
Merger. (i) Capitalized terms used in this Section 4(d) and not otherwise
------
defined in this Plan shall have the meanings given to them in that certain
Employee Benefits Agreement between Valero and Valero Refining and
Marketing Company (the "Employee Benefits Agreement"), and in that certain
Agreement and Plan of Merger, dated as of January 31, 1997, among Valero,
PG&E Corporation, and PG&E Acquisition Corporation (the "Merger
Agreement"). The provisions of this Section 4(d) shall apply for all
purposes under the Plan, the provisions of Section 4(c) to the contrary
notwithstanding.
(ii) Upon the consummation of the Distribution, any Option held by a
VRM Participant or by a non-employee director of the Company that is
outstanding at the Time of Distribution shall cease to represent a right to
acquire Common Stock and shall be replaced as of the Time of Distribution
with a VRM Stock Option with respect to a number of shares of VRM Common
Stock and with a per-share exercise price as determined pursuant to Section
3.01(a) of the Employee Benefits Agreement. Valero shall take such actions
as may be necessary to cause such VRM Stock Options otherwise to have the
same terms and conditions as the corresponding Options issued hereunder,
except that references to Valero shall be changed to refer to VRM.
(iii) Upon the consummation of the Distribution, any SAR held by a
VRM Participant or by a non-employee director of the Company that is
outstanding at the Time of Distribution shall cease to represent a right to
receive a cash payment from the Company and shall be replaced as of the
Time of Distribution with a VRM SAR with respect to a number of shares of
VRM Common Stock and with a per-SAR exercise price as determined pursuant
to Section 3.01(a) of the Employee Benefits Agreement. Valero shall take
such actions as may be necessary to cause such VRM SARs otherwise to have
the same terms and conditions as the corresponding SARs issued hereunder,
except that references to Valero shall be changed to refer to VRM.
(iv) Upon the consummation of the Distribution and Merger, any Option
held by a Company Participant that is outstanding at the Effective Time
shall cease
<PAGE>
to represent a right to acquire Common Stock and shall be replaced as of
the Effective Time with an option to purchase shares of Acquirer Common
Stock ("Converted Option"), not intended to qualify under Section 422 of
the Code, so that, after giving effect to Section 3.1(a)(iii) of the Merger
Agreement, the number of shares of Acquirer Common Stock subject to such
Converted Option shall be equal to the product of (x) the number of shares
of Common Stock subject to the original Option immediately before the
Distribution, multiplied by (y) the Ratio (rounded up to the nearest whole
share if necessary), and the per-share exercise price of the Converted
Option shall be equal to the quotient of (A) the per-share exercise price
of the original Option immediately before the Distribution divided by (B)
the Ratio (rounded down to nearest cent.) As used herein "Ratio" shall
mean the amount obtained by dividing the average of the daily high and low
trading price on the NYSE for the Common Stock on each of the 15 trading
days prior to the ex-dividend date for the Distribution by the average of
the daily high and low trading prices on the NYSE of the Acquirer Common
Stock on each of the same 15 trading days.
(v) A Converted Option shall be subject to the provisions of this Plan
and the terms and conditions of the Option Agreement relating to the
original option as if it remained an Option hereunder, provided that as of
the Effective Time (A) the Converted Option shall constitute solely a right
to purchase shares of Acquirer Common Stock in a number and with an
exercise price determined pursuant to Section 4(d)(iv), and (B) to the
extent practicable all outstanding Option Agreements pertaining to Options
which have been converted pursuant to Section 4(d)(iv) shall be amended to
reflect the provisions of this Section 4(d).
(vi) Each SAR held by a Company Participant that is outstanding and
unexercised at the Time of Distribution (A) shall cease to represent a
right to receive a cash payment from the Company, (B) shall be
automatically converted into an Option having an Option Price equal to the
SAR's Strike Price, and (C) such Option shall be automatically treated in
all respects in the manner provided in Sections 4(d)(iv) and 4(d)(v) above,
as if such Option were outstanding prior to the Distribution.
5. The following sentence shall be added to the end of Section 6(g)(i):
No awards shall be granted hereunder after the Effective Time.
As amended hereby, the Plan shall continue in full force and effect, and
the Corporate Secretary of the Company shall in his discretion incorporate the
foregoing amendments and all prior amendments, together with such conforming
changes and corrections as he may determine to be necessary or appropriate into
amended and restated Plan documents, which shall thereupon constitute the
official Plan documents for all purposes.
IN WITNESS WHEREOF, the undersigned Chief Executive Officer of the Company
has executed this Amendment effective the 30th day of June, 1997.
____________________________________________
William E. Greehey
Chief Executive Officer
<PAGE>
EXHIBIT 5.1
July 31, 1997
PG&E Corporation
77 Beale Street
San Francisco, California 94177
Re: PG&E Corporation -- Post-Effective Amendment on Form S-8 to Form
S-4 (Reg. No. 333-27015)
Ladies and Gentlemen:
At your request, I, Chief Counsel, Corporate for Pacific Gas and Electric
Company ("PG&E"), a wholly-owned subsidiary of PG&E Corporation, a California
corporation (the "Company"), am rendering this opinion in connection with the
proposed issuance pursuant to the Valero Energy Corporation Stock Option Plan
No. 4, Valero Energy Corporation Stock Option Plan No. 5, and Valero Energy
Corporation Executive Stock Incentive Plan, as amended effective as of July 31,
1997 (the "Valero Plans"), of shares of common stock, no par value, of the
Company ("Common Stock").
I, or other members of PG&E's Law Department acting under my direction and
under my supervision, have examined instruments, documents, and records which I
deemed relevant and necessary for the basis of my opinion hereinafter expressed.
In such examination, I have assumed the following: (a) the authenticity of
original documents and the genuineness of all signatures; (b) the conformity to
the originals of all documents submitted to me as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates I have
reviewed.
Based on such examination, I am of the opinion that the shares of Common
Stock to be issued by the Company pursuant to the Valero Plans are validly
authorized shares of Common Stock and, when issued in accordance with the
provisions of the Valero Plans, will be legally issued, fully paid and
nonassessable.
I express no opinion as to matters of law in jurisdictions other than the
State of California and federal law of the United States.
I hereby consent to the filing of this opinion as an exhibit to this
Registration Statement and to the use of my name wherever it appears in said
Registration Statement. In giving such consent, I do not consider that I am an
"expert" within the meaning of such term as used in the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
GARY P. ENCINAS
GARY P. ENCINAS
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 10, 1997
included or incorporated by reference in PG&E Corporation's Form 10-K for the
year ended December 31, 1996 and to all references to our firm included in this
registration statement.
Arthur Andersen LLP
San Francisco, California
July 31, 1997
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
ROBERT D. GLYNN, JR., the undersigned, President and Chief Executive
Officer of PG&E Corporation, hereby constitutes and appoints BRUCE R.
WORTHINGTON, LESLIE H. EVERETT, LINDA Y.H. CHENG, ERIC MONTIZAMBERT, KATHLEEN
RUEGER, GARY P. ENCINAS, CRAIG M. BUCHSBAUM or KATHLEEN M. HAYES, his attorneys
with full power of substitution to sign and file with the Securities and
Exchange Commission in his capacity as President and Chief Executive Officer of
said corporation a Post-Effective Amendment on Form S-8 to said
corporation's Registration Statement on Form S-4 (Reg. No. 333-27015), relating
to shares of common stock of said corporation issuable under the Valero Energy
Corporation Stock Option Plan No. 3, Valero Energy Corporation Stock Option Plan
No. 4, Valero Energy Corporation Stock Option Plan No. 5, and Valero Energy
Corporation Executive Stock Incentive Plan, and any and all amendments or
supplements thereto, including post-effective amendments, and hereby ratifies
all that said attorneys or any of them may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have signed these presents this 31st day of July,
1997.
ROBERT D. GLYNN, JR.
--------------------
ROBERT D. GLYNN, JR.
<PAGE>
POWER OF ATTORNEY
KENT M. HARVEY, the undersigned, Treasurer and Acting Chief Financial
Officer of PG&E Corporation, hereby constitutes and appoints BRUCE R.
WORTHINGTON, LESLIE H. EVERETT, LINDA Y.H. CHENG, ERIC MONTIZAMBERT, KATHLEEN
RUEGER, GARY P. ENCINAS, CRAIG M. BUCHSBAUM or KATHLEEN M. HAYES, his attorneys
with full power of substitution to sign and file with the Securities and
Exchange Commission in his capacity as Treasurer and Acting Chief Financial
Officer of said corporation a Post-Effective Amendment on Form S-8 to said
corporation's Registration Statement on Form S-4 (Reg. No. 333-27015), relating
to shares of common stock of said corporation issuable under the Valero Energy
Corporation Stock Option Plan No. 3, Valero Energy Corporation Stock Option Plan
No. 4, Valero Energy Corporation Stock Option Plan No. 5, and Valero Energy
Corporation Executive Stock Incentive Plan, and any and all amendments or
supplements thereto, including post-effective amendments, and hereby ratifies
all that said attorneys or any of them may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have signed these presents this 31st day of July,
1997.
KENT M. HARVEY
--------------
KENT M. HARVEY
