SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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by Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
VALERO ENERGY CORPORATION
(Name of Registrant as Specified In Its Charter)
_____________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
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Act Rule 14a-6(i)(3).
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state how it was determined):
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<PAGE>
THE PROMPT RETURN OF PROXY CARDS WILL SAVE THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ASSURE A QUORUM.
VALERO ENERGY CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors has determined that the 1995 Annual
Meeting of Stockholders (the "Annual Meeting") of Valero Energy
Corporation (referred to as "Energy," or when referred to
collectively with its subsidiaries, the "Company") will be held
on Tuesday, May 9, 1995, at 10:00 a.m., Central Time, at its
principal executive offices at 530 McCullough Avenue, San
Antonio, Texas 78215, for the following purposes:
(1) To elect three Class III directors and one Class I
director as members of the Board of Directors to serve until the
1998 and 1996 Annual Meetings respectively, or until their
successors are elected and have qualified;
(2) To approve the Executive Stock Incentive Plan for
executive officers and employees of the Company; and
(3) To ratify the appointment of Arthur Andersen LLP as
independent public accountants to examine the Company's accounts
for the year 1995;
(4) To transact such other business as may properly come
before the Annual Meeting or any adjournment thereof.
By order of the Board of Directors,
Rand C. Schmidt
Corporate Secretary
San Antonio, Texas
March 21, 1995
<PAGE>
530 McCullough Avenue
San Antonio, Texas 78215
March 21, 1995
ANNUAL MEETING OF STOCKHOLDERS -- May 9, 1995
PROXY STATEMENT
General Information
This Proxy Statement and the accompanying Notice of Annual
Meeting of Stockholders (the "Notice") and proxy card are being
mailed to stockholders beginning on or about March 21, 1995 and
are furnished in connection with the solicitation of proxies by
Energy to be voted at the 1995 Annual Meeting of Stockholders of
Energy (the "Annual Meeting") to be held at the time and place
and for the purposes set forth in the accompanying Notice.
Holders of Energy's Preferred Stock, $8.50 Cumulative Series A
(the "Series A Preferred Stock"), and Energy's Common Stock,
$1.00 par value per share (the "Common Stock"), are entitled to
one vote for each share held of record at the close of business
on March 13, 1995 and are entitled to vote together as a single
class with respect to all matters described in this Proxy
Statement. On March 13, 1995, there were issued and outstanding
43,593,987 shares of Common Stock and 126,500 shares of Series A
Preferred Stock entitled to vote, making an aggregate of
43,720,487 shares entitled to vote. Action may be taken on any
of the proposals at the Annual Meeting on the date specified
herein, or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Information with
respect to the vote required to approve each matter described
herein is set forth under the heading "Quorum, Voting Procedures
and Tabulation of Votes."
For a period of at least ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual
Meeting will be open to the examination of any stockholder of
record during ordinary business hours in the office of Energy's
Corporate Secretary, at 530 McCullough Avenue, San Antonio,
Texas.
The enclosed proxy may be revoked by the stockholder at any time
before it is voted by any of the following actions: the
submission of a written revocation to Energy, the return of a
subsequently dated proxy to Energy, or by the stockholder's
personal vote at the Annual Meeting. Dissenting stockholders do
not have rights of appraisal with respect to any matters to be
considered at the Annual Meeting.
Board of Directors
The business of Energy is managed by or under the direction of
the Board of Directors (the "Board"). The Board establishes
corporate policies, approves major business decisions and
monitors the performance of Energy's management. The day-to-day
management functions and operating activities of Energy are
performed by the Company's executive officers and employees. The
Board is routinely informed about the Company's business
activities through monthly financial and operating reports,
regular Board and Committee meetings and other reports and
documents furnished or presented by the Chairman of the Board and
Chief Executive Officer ("CEO") and other officers and employees
of the Company.
The Restated Certificate of Incorporation of Energy ("Certificate
of Incorporation") requires that Energy's Board be divided into
three classes as nearly equal in number as possible, consisting
of Class I, Class II and Class III directors, with each class
serving a staggered three-year term. The Certificate of
Incorporation provides that the Board shall consist of not less
than seven members, and the By-Laws of Energy (the "By-Laws"),
which may be amended by the Board, provide that the Board shall
have not more than thirteen members. The size of the Board is
currently set at eight members.
The Board conducts its business through meetings of the Board and
its committees. Eight regular and two special meetings of the
Board were held in 1994. No board member attended less than 88%
of the meetings of the Board and committees of which he or she
was a member.
Audit Committee
The Audit Committee reviews and reports to the Board on the
quality and performance of Energy's internal and external
accountants and auditors, the adequacy of its financial controls,
and the reliability of financial information reported to the
public. In addition, the Audit Committee monitors the Company's
efforts to comply with environmental laws and regulations.
During 1994, the Audit Committee received a detailed report
regarding the Company's environmental monitoring and compliance
efforts and, based upon such report, determined that the Company
was in substantial compliance with applicable requirements.
Current members of the Audit Committee are James L. Johnson
(Chairman), Robert G. Dettmer, Ruben M. Escobedo and Susan
Kaufman Purcell. None are employees of the Company. Messrs.
Dettmer and Escobedo and Dr. Purcell, subject to their election
as directors at the Annual Meeting, and Mr. Johnson have been
appointed as members of the Audit Committee to be effective May
9, 1995. Mr. Johnson has been designated to serve as chairman.
Three meetings of the Audit Committee were held in 1994.
Compensation Committee
The Compensation Committee reviews and reports to the Board on
Energy's compensation strategies, policies and programs; certain
personnel policies and policy controls; management development;
management succession; and benefit programs. The Committee also
approves and administers the Company's stock option, restricted
stock bonus, incentive bonus and other stock plans. See "Report
of the Compensation Committee of the Board of Directors on
Executive Compensation."
Current members of the Compensation Committee are Lowell H.
Lebermann (Chairman), Robert G. Dettmer, A. Ray Dudley and James
L. Johnson. None are current or former employees or officers of
the Company. Messrs. Dettmer and Lebermann, subject to their
election as directors at the Annual Meeting, and Messrs. Dudley
and Johnson have been appointed to serve as members of the
Compensation Committee to be effective May 9, 1995. Mr.
Lebermann, subject to his election as a director, has been
designated to serve as Chairman. Four meetings of the
Compensation Committee were held in 1994.
There are no compensation committee interlocks. For the previous
three fiscal years, except for director compensation arrangements
disclosed in this Proxy Statement, the Company has not
participated in any contracts, loans, fees, awards or financial
interests, direct or indirect, with any Compensation Committee
member, nor is the Company aware of any means, directly or
indirectly, by which a committee member could receive a material
benefit from the Company.
Executive Committee
The Executive Committee exercises the power and authority of the
Board during intervals between meetings of the Board, providing
flexibility and the ability to respond to time-sensitive business
and legal matters without calling a special Board meeting.
Actions taken by the Executive Committee do not require
ratification by the Board to be legally effective. If a
Nominating Committee is not appointed, the Executive Committee
may also review possible director candidates and recommend
individuals for election as a director.
Current members of the Executive Committee are A. Ray Dudley
(Chairman), William E. Greehey and Lowell H. Lebermann. Mr.
Lebermann, subject to his election as director at the Annual
Meeting, and Messrs. Dudley and Greehey have been appointed to
serve as members of the Executive Committee to be effective May
9, 1995. Mr. Dudley has been designated to serve as Chairman.
Four meetings of the Executive Committee were held in 1994.
Nominating Committee
The Nominating Committee, if appointed by the Board, evaluates
policy on the size and composition of the Board and criteria and
procedures for director nomination. The Nominating Committee
reviews possible director candidates, including director
recommendations properly presented by stockholders, and
recommends to the full Board individuals suited for election as
directors and the slate of Board nominees for election by the
stockholders. The Nominating Committee also reviews and
recommends to the full Board director assignments for the various
committees of the Board. The Nominating Committee, if appointed
by the Board, typically meets during the fourth quarter of each
year, but may meet more often as required to fill vacancies on
the Board.
The Nominating Committee is comprised of directors who will not
be standing for election at the Annual Meeting. A. Ray Dudley
(Chairman), William E. Greehey and James L. Johnson were
appointed by the full Board to serve as the Nominating Committee
with regard to nominations for the 1995 Annual Meeting. The
recommendations of the Nominating Committee were approved by the
full Board and are reflected in this Proxy Statement. Two
meetings of the Nominating Committee were held in 1994.
ITEM No. 1. Election of Directors
Three Class III directors and one Class I director will be
elected at the Annual Meeting. The Class III directors will
serve until the 1998 Annual Meeting of Stockholders or until
their respective successors are elected and have qualified. The
Class I director will serve until the 1996 Annual Meeting of
Stockholders or until a successor is elected and has qualified.
Robert G. Dettmer, Ruben M. Escobedo and Lowell H. Lebermann have
been nominated for election as Class III directors. Susan
Kaufman Purcell has been nominated for election as a Class I
director.
It is intended that shares represented by proxies will be voted,
except where authority to vote is withheld for any nominee, FOR
the election of the four director nominees in equal proportions
unless the persons named therein as proxies shall, in accordance
with their best judgment, otherwise direct. If, as the result of
some unexpected occurrence, any nominee should be unavailable as
a candidate at the time of the Annual Meeting, either the number
of directors constituting the full Board will be appropriately
reduced to eliminate the vacancy, or the proxies will be voted by
the persons named as proxies, in accordance with their best
judgment, for any available nominee. The Board has no reason to
believe that any current nominee will be unable to serve.
Information with respect to the right to cumulate votes for the
election of directors is set forth under the heading "Quorum,
Voting Procedures and Tabulation of Votes."
The following table sets forth information as of December 31,
1994, concerning each nominee for election as a director. Such
information, and the information regarding directors of Energy
contained herein, is based partly on data furnished to the
Company by such director and partly on the Company's records.
<TABLE>
___________________________________________________________________________________________________________________________________
<CAPTION>
Year First
Elected or Age
Appointed as as of
Energy Executive December Present Proposed
Position(s) and Officer 31, Director Director
Name Office(s) Held or Director 1994 Class Class
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Robert G. Dettmer Director 1991 63 III III
Ruben M. Escobedo Director 1994 57 (1) III
Lowell H. Lebermann Director 1986 55 III III
Susan Kaufman Purcell Director 1994 52 (1) I
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) Not currently assigned to a director class.
Mr. Dettmer was elected as a director of Energy in 1991. He has
served as Executive Vice President and Chief Financial Officer of
PepsiCo, Inc. ("PepsiCo") since 1986. Mr. Dettmer also serves as
a director of Caldor Corporation ("Caldor"). PepsiCo and Caldor
are not affiliated with the Company.
Mr. Escobedo was elected by the Board as a director of Energy in
1994 in order to fill a vacancy. He previously served as a
director of Valero Natural Gas Company from 1989 to 1994. He has
been a Senior Partner of the accounting firm of Ruben Escobedo &
Company, CPAs, in San Antonio, Texas since its formation in 1977.
Mr. Escobedo also serves as a director of Frost National Bank of
San Antonio, N.A. ("Frost"). Frost is not affiliated with the
Company.
Mr. Lebermann was elected as a director of Energy in 1986, and
previously had served on Energy's Board from 1979 to 1983. Mr.
Lebermann has served as President of Centex Beverage, Inc.
("Centex"), a beverage distributor, in Austin, Texas, since 1981.
Mr. Lebermann also serves as a director of Station Casinos, Inc.
("Station"). Centex and Station are not affiliated with the
Company.
Dr. Purcell was elected by the Board as a director of Energy in
1994 in order to fill a vacancy. She has served as Vice
President of the Americas Society in New York, New York since
1989 and as Managing Director, Counsel of the Americas, since
1994. She is a consultant for several international and national
firms and serves on the boards of several mutual funds, including
The Argentina Fund, The Latin America Dollar Income Fund and
Scudder World Income Opportunities Fund. Such organizations and
mutual funds are not affiliated with the Company.
For detailed information regarding the nominees' holdings of
Common Stock, compensation and other arrangements, see
"Beneficial Ownership of Voting Securities," "Information
Concerning Executive Compensation," "Arrangements with Certain
Officers and Directors," "Transactions with Management and
Others" and "Compensation of Directors."
Information Concerning Directors (Classes I and II)
The following table sets forth certain information as of December
31, 1994, respecting those directors whose present terms will
continue after the Annual Meeting. There is no family
relationship among any of the executive officers, directors or
nominees for director of Energy. The term of each Class I
director expires in 1996. The term of each Class II director
expires in 1997.
<TABLE>
___________________________________________________________________________________________________________________________________
<CAPTION>
Year First
Elected or Age
Appointed as as of
Energy Executive December Present
Position(s) and Officer 31, Director
Name Office(s) Held or Director 1994 Class
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
William E. Greehey Director, Chairman 1979 58 I
of the Board and
Chief Executive
Officer
Edward C. Benninger Director, Executive 1979 52 II
Vice President
A. Ray Dudley Director 1988 70 II
James L. Johnson Director 1991 67 II
___________________________________________________________________________________________________________________________________
</TABLE>
Mr. Greehey has served as Chief Executive Officer and as a
director of Energy since 1979 and as Chairman of the Board since
1983. He is also a director of Weatherford International
Incorporated and Santa Fe Energy Resources, Inc., neither of
which is affiliated with the Company.
Mr. Benninger has served as a director of Energy since 1990. He
was elected Executive Vice President in 1989 and served as Chief
Financial Officer from 1986 to 1992 and in various other
capacities with the Company since 1975.
Mr. Dudley has served as a director of Energy since 1988 and
currently serves as an independent consultant in the petroleum
industry. He served in various capacities with Tenneco Oil
Company ("Tenneco") from 1959 until his retirement in 1987.
Tenneco is not affiliated with the Company.
Mr. Johnson has served as a director of Energy since 1991. He
previously served in various capacities with GTE Corporation
("GTE"), was Chairman and Chief Executive Officer of GTE from
1988 to 1992, and since 1992 has served as Chairman Emeritus of
GTE. Mr. Johnson also serves as a director of CellStar
Corporation ("CellStar"), FINOVA Group, Inc. (formerly GFC
Financial Corp.) ("FINOVA"), Harte-Hanks Communications, Inc.
("Harte-Hanks"), and The Mutual Life Insurance Company of New
York ("MONY"). GTE, CellStar, FINOVA, Harte-Hanks and MONY are
not affiliated with the Company.
ITEM No. 2. Approval of Executive Stock Incentive Plan
The Board desires to obtain stockholder approval of the following
resolution adopted at the Board meeting held on February 28,
1995.
RESOLVED, that the Valero Energy Corporation Executive Stock
Incentive Plan for executive officers and employees of the
Company is hereby approved and ratified.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE EXECUTIVE STOCK INCENTIVE PLAN
Description of the Plan
The Executive Stock Incentive Plan (the "Plan") authorizes the
grant of various stock and stock-related awards. The Plan was
adopted by the Board on July 21, 1994, contingent upon approval
by the stockholders. The Board believes the Company's success
and long-term progress are dependent upon attracting and
retaining executive personnel and other key employees of the
Company. The Plan is intended to allow the Compensation
Committee continued flexibility to use stock and stock-related
awards in the Company's overall compensation program. In the
following description of the Plan, "Shares" shall mean Energy's
Common Stock and such other securities or property as may become
the subject of awards under the Plan.
The full text of the Plan is set forth in Appendix A to this
Proxy Statement. The essential features of the Plan are
summarized below, but such summary is qualified in its entirety
by reference to the full text of the Plan.
Types of Awards
The Plan permits the granting of any or all of the following
types of awards: (1) stock options, including both incentive
("ISOs") and non-qualified options; (2) stock appreciation rights
("SARs"), in tandem with stock options or freestanding; (3)
restricted stock; (4) performance awards; and (5) other
stock-based awards (collectively, "Awards").
Eligibility for Participation
Executive officers and other key employees of the Company will be
eligible for participation under the Plan. The Company estimates
that, at the date of this Proxy Statement, approximately six
executive officers of Energy and approximately 40 other key
employees of the Company would be eligible for Awards under the
Plan. Non-employee directors of Energy are not eligible to
participate in the Plan.
Administration
The Plan will be administered by the Compensation Committee,
composed of disinterested, outside directors appointed by the
Board. The Compensation Committee will select the participants
who will receive Awards, determine the type and terms of Awards
to be granted, and interpret and administer the Plan. Unless
otherwise expressly provided in the Plan, all decisions under or
with respect to the Plan shall be within the sole discretion of
the Compensation Committee and are final.
Amendment and Termination
The Board may terminate or amend the Plan without stockholder
approval, except that stockholder approval is required for any
amendment which would materially increase the number of Shares
available for grant, materially increase the benefits accruing to
Participants under the Plan, decrease the minimum exercise price
for Awards or otherwise cause the Plan to cease to qualify for
any tax or regulatory exemption, status or requirement.
Termination of the Plan
The Plan will terminate on July 21, 2004, after which time no
additional Awards may be made under the Plan.
If the Plan is not approved by the stockholders, the Plan shall
automatically terminate and all grants of stock options and
restricted stock (described below) which were made, subject to
approval by the stockholders, shall be deemed null and void.
Shares Available Under the Plan
Subject to adjustment as described more fully below, 2,100,000
Shares may be issued under the Plan. Not more than 750,000
Shares may be issued as restricted stock. No more than 500,000
Shares may be awarded as options or SARs to any single person
during any twelve-month period.
Stock Options
Stock options granted under the Plan are subject to the terms and
conditions determined by the Compensation Committee, except that
the option exercise price cannot be less than 100 percent of fair
market value of a Share at the time the option is granted. ISOs
may be granted provided they meet the requirements of the
Internal Revenue Code of 1986, as amended (the "Code).
The Compensation Committee shall determine the form in which
payment of the exercise price may be made, including cash,
Shares, other securities or other property, or any combination
thereof, having a fair market value on the exercise date equal to
the relevant exercise price.
When an optionee exercises a non-qualified option, the difference
between the option price and any higher fair market value of the
underlying Shares, generally on the date of exercise, will be
ordinary income to the optionee. The Company believes that stock
option awards under the Plan will meet the requirements for
"performance-based" compensation under Section 162(m) ("Section
162(m)") of the Code and that the amount of ordinary income to
the optionee generally will be allowed as a deduction for federal
income tax purposes to the Company. Any gain or loss realized by
an optionee on disposition of the stock so acquired generally
will be capital gain or loss to such optionee, long-term or
short-term depending on the holding period, and will not result
in any additional tax consequences to the Company. The
optionee's basis in the Shares for determining gain or loss on
the disposition generally will be the fair market value of such
stock on the date of exercise of the option.
In the case of ISOs, although no compensation income is realized
upon exercise, the excess of the fair market value on the date of
exercise over the option price generally is included in
alternative minimum taxable income for alternative minimum tax
purposes.
Stock Appreciation Rights
An SAR may be granted in tandem with another Award, in addition
to another Award, or freestanding and unrelated to another Award.
The grant price of an SAR shall not be less than 100 percent of
the fair market value of a Share at the time the SAR is granted.
The Compensation Committee may impose such conditions or
restrictions on the exercise of any SAR as it shall deem
appropriate.
In the case of SARs granted either freestanding or in tandem with
an option, the participant will not realize any compensation
income at the time of grant. However, the fair market value of
stock or cash delivered to the participant pursuant to the
exercise of such SAR will be treated as ordinary income to the
participant at the time of exercise. The Company believes that
SAR awards under the Plan will meet the requirements for
"performance-based" compensation under 162(m) of the Code and
that the amount of ordinary income to the participant generally
will be allowed as a deduction for federal income tax purposes to
the Company.
Restricted Stock
The Compensation Committee shall determine the employees to whom
restricted stock shall be granted, the number of Shares to be
granted to each participant, the duration of the restriction
period, the conditions under which the restricted stock may be
forfeited to the Company and other terms and conditions of Awards
of restricted stock. Restricted stock may not be disposed of by
the participant until the restrictions specified in the Award
expire. The participant will have the right to vote the Shares
and receive any cash dividends during the restriction period.
Except as otherwise determined by the Compensation Committee,
upon termination of a participant's employment for any reason
during the restriction period, all restricted stock shall be
forfeited by the participant.
The participant will generally realize ordinary income in an
amount equal to the fair market value of the Shares less any
amount paid for such Shares at the time when the participant's
rights with respect to such Shares are no longer subject to a
substantial risk of forfeiture. The participant may otherwise
elect, pursuant to a special election provided in the Code, to be
taxed on such amount calculated at the time of grant rather than
on the date of expiration of the restrictions. Dividends paid to
the participant during the restriction period will be taxable as
ordinary income unless such election has been made. The Company
generally will be allowed a deduction, subject to certain
limitations, for federal income tax purposes equal to the amount
of ordinary income that is realized by the participant. However,
to the extent compensation paid to the Company's CEO, or to any
of the other four executive officers named in the Summary
Compensation Table, exceeds $1 million in any year and includes
such restricted stock awards, the Company may be unable to claim
a deduction for such excess amounts.
Performance Awards
Performance Awards may be granted which shall consist of a right
payable in cash, Shares, other securities or other property upon
the achievement of performance goals. The Compensation Committee
shall determine the performance goals to be achieved during any
performance period, the length of any performance period, the
amount of any Performance Award and the amount of any payment or
transfer to be made pursuant to any Performance Award.
Performance Awards may be paid in a lump sum, installments, on a
deferred basis or otherwise in accordance with procedures
established by the Compensation Committee.
When a participant receives a Performance Award, the participant
will realize ordinary income in an amount equal to the fair
market value of such Award less any amount paid for such Award at
the time when the participant's rights with respect to such Award
are no longer subject to a substantial risk of forfeiture. The
participant may otherwise elect, pursuant to a special election
provided in the Code, to be taxed on such amount calculated at
the time of grant. The Company generally will be allowed a
deduction, subject to certain limitations, for federal income tax
purposes equal to the amount of ordinary income that is realized
by the participant. However, to the extent compensation paid to
the Company's CEO, or to any of the other four executive officers
named in the Summary Compensation Table, exceeds $1 million in
any year and includes restricted stock awards, the Company may be
unable to claim a deduction for such excess amounts.
Other Stock-Based Awards
The Compensation Committee may grant other forms of Awards based
on, payable in, or otherwise related in whole or in part to
Shares under the Plan. Subject to the terms of the Plan, the
Compensation Committee shall determine the terms and conditions
of any such other stock-based Awards.
Stock Compensation
The Compensation Committee shall have the authority to pay all or
a portion of any amounts payable under any compensation program
of the Company in Shares. The number and type of Shares to be
distributed in lieu of the cash compensation, as well as the
terms and conditions of any such stock compensation, shall be
determined by the Compensation Committee.
When a participant receives Shares in lieu of cash compensation,
the fair market value of the Shares will be ordinary income to
the participant and generally will be allowed as a deduction for
federal income tax purposes to the Company, if the cash
compensation meets the requirements of 162(m) of the Code. Any
gain or loss realized by a participant on disposition of the
stock so acquired generally will be capital gain or loss to such
participant, long-term or short-term depending on the holding
period, and will not result in any additional tax consequences to
the Company. The participant's basis in the Shares for
determining gain or loss on the disposition will generally be the
fair market value of such Shares on the date the Shares are
issued.
Change of Control
In the event of a "Change of Control" as defined in the Plan, all
Awards previously granted under the Plan shall immediately become
vested or exercisable upon the date of the Change of Control,
except as otherwise provided in the Plan. Additionally, the
Compensation Committee may take any one or more of the following
actions in connection with any Awards made under the Plan: (i)
accelerate the exercise or vesting date; (ii) provide for the
purchase, in cash, of such Award; (iii) make adjustments to such
Award; or (iv) cause any outstanding Award to be assumed, or a
new right substituted therefor, by the acquiring or surviving
corporation.
Adjustments
In the event the Compensation Committee determines that any
dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of
Shares or other similar corporate transaction or event affects
the Shares so that an adjustment is determined by the
Compensation Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended under the Plan, then the Compensation Committee shall
adjust any or all of the Awards.
Certain Awards
Subject to approval of the Plan by the stockholders, Awards of
stock options and restricted stock have conditionally been made
in the following amounts to the executive officers named in the
Summary Compensation Table, all current executive officers of
Energy, as a group, and all employees of the Company, as a group:
<TABLE>
<CAPTION>
New Plan Benefits
___________________________________________________________________________________________________________________________________
Number of Restricted
Name and Position Options (Shares)(1) Stock (Shares)(1) Dollar Value ($)(1)
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
William E. Greehey, Chairman 290,300 25,000 $ 420,313
and CEO of Energy
Edward C. Benninger, Executive 100,500 11,000 184,938
Vice President of Energy
Stan L. McLelland, Executive 65,600 8,000 134,500
Vice President of Energy
Martin P. Zanotti (2) 0 0 0
E. Baines Manning, Senior 50,500 3,000 50,438
Vice President, Valero
Refining and Marketing
Company
All current executive officers of 575,600 54,000 907,875
Energy, as a group
All employees of the Company, 575,600 99,700 1,676,206
as a group (3)
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) The number of shares of Common Stock subject to stock
options heretofore granted, and the number of shares of Common
Stock heretofore awarded as restricted stock, under the Plan are
set forth herein. Except as set forth herein, it is not possible
to determine the benefits or amounts that will be received by or
allocated to any person or class of persons under the Plan.
Directors who are not also employees of the Company are not
eligible to participate in the Plan. The "dollar value" reported
is the market value at the date of grant (January 19, 1995) of
the restricted stock Awards included herein. Options granted
under the Plan were granted at the market price of the Common
Stock ($19) on the date of grant (July 21, 1994). The dollar
value of the options reported for the executive officers named in
the Summary Compensation Table, determined in accordance with a
variation of the Black-Scholes option pricing model, is included
and more fully explained in the table entitled "Option/SAR Grants
in the Last Fiscal Year". For all current executive officers of
Energy, as a group, and all employees of the Company as a group,
the dollar value of such options, determined in accordance with
such Black-Scholes model, was $3,528,428. All such Awards are
subject to stockholder approval of the Plan.
<FN2>
(2) Mr. Zanotti served as Executive Vice President of Valero
Refining and Marketing Company until his retirement at December
31, 1994.
<FN3>
(3) Includes amounts granted to all current executive officers
of Energy, as a group.
ITEM No. 3. Ratification of Independent Public Accountants
The Board desires to obtain stockholder approval of the following
resolution adopted at the Board meeting held on February 28,
1995, appointing Arthur Andersen LLP, 70 N.E. Loop 410, San
Antonio, Texas 78216, as independent public accountants for the
Company for the year 1995. Arthur Andersen LLP has served
continuously in such capacity for the Company since 1979.
RESOLVED, that the appointment of the firm of Arthur
Andersen LLP, Certified Public Accountants, as the independent
auditors for the Company for the purpose of conducting an
examination and audit of the financial statements of the Company
and its subsidiaries for the fiscal year ending December 31,
1995, is hereby approved and ratified.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS.
If the appointment is not approved, the adverse vote will be
considered as an indication to the Board that it should select
other independent public accountants for the following year.
Because of the difficulty and expense of making any substitution
of accountants so long after the beginning of the current year,
it is contemplated that the appointment for the year 1995 will be
permitted to stand unless the Board finds other good reason for
making a change.
A representative of Arthur Andersen LLP is expected to be present
at the Annual Meeting to respond to appropriate questions raised
at the Annual Meeting or submitted to such firm in writing prior
to the Annual Meeting, and to make a statement if he desires to
do so.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth information as of December 31,
1994, with respect to each person, including any group as that
term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), known to Energy to be the
beneficial owner of more than five percent of any class of its
voting securities:
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________________________________
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Common Stock Wellington Management Company(1) 4,429,985 10.19%
75 State Street
Boston, MA 02109
Common Stock Franklin Resources, Inc.(2) 4,364,850 10.04%
777 Mariners Island Blvd.
San Mateo, CA 94404
Common Stock Frost National Bank of 4,247,732 9.77%
San Antonio, N.A.(3)
100 West Houston Street
San Antonio, TX 78205
Common Stock Merrill Lynch & Co.(4) 4,174,785 9.61%
World Financial Center, North Tower
250 Vessey Street
New York, NY
Series A Preferred American General Corporation 126,500 100%
Stock(5) P.O. Box 3855
Houston, TX 77253
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) Wellington Management Company ("Wellington") and
Vanguard/Windsor Fund, Inc. ("Vanguard") have filed with the
Securities and Exchange Commission ("SEC") separate Schedule
13Gs, reporting their beneficial ownership with respect to
4,429,985 shares of Common Stock. As disclosed in the Schedule
13Gs, Wellington has shared dispositive power with respect to the
4,429,985 reported shares and shared voting power with respect to
54,248 of the reported shares, while Vanguard has shared
dispositive power and sole voting power with respect to 4,255,500
of the reported shares.
<FN2>
(2) Franklin Resources, Inc. ("Franklin") has filed with the SEC
a Schedule 13G reporting its beneficial ownership of 4,364,850
shares of Common Stock. As disclosed in the Schedule 13G,
Franklin has sole voting power with respect to 3,930,000 shares,
shared voting power with respect to 434,850 shares and shared
dispositive power with respect to all the reported shares.
<FN3>
(3) Frost National Bank of San Antonio, N.A. ("Frost") has filed
with the SEC a Schedule 13G reporting its beneficial ownership of
4,247,732 shares of Common Stock in its capacity as Trustee for
the Valero Energy Corporation Thrift Plan, Valero Energy
Corporation Employees' Stock Ownership Plan, the Valero
Employees' Stock Ownership Plan and Valero Energy Corporation
Benefits Trust. As disclosed in the Schedule 13G, Frost has
shared voting and dispositive power with respect to all the
reported shares.
<FN4>
(4) Merrill Lynch & Co., Inc. ("ML&Co.") and certain
wholly-owned subsidiaries have filed with the SEC a Schedule 13G
reporting beneficial ownership of 4,174,785 shares of Common
Stock. As disclosed in the Schedule 13G, ML&Co. has shared
voting power with respect to all the reported shares, while
certain ML&Co. subsidiaries have reported shared voting power and
shared dispositive power with respect to up to 4,150,000 of such
shares.
<FN5>
(5) The Series A Preferred Stock is not registered pursuant to
Section 12 of the Exchange Act and, accordingly, no filing of
Schedules 13G or 13D is required with respect thereto. A
subsidiary of Energy holds 506,000 shares of Series A Preferred
Stock, which shares are not deemed to be "outstanding" for
purposes of the Annual Meeting.
Except as otherwise indicated, the following table sets forth
information as of February 1, 1995, regarding Common Stock and
$3.125 Convertible Preferred Stock beneficially owned (or deemed
to be owned) by each nominee for director, each current director,
each executive officer named in the Summary Compensation Table,
and all current directors and executive officers of Energy as a
group. Such information has been furnished to Energy by such
persons and cannot be independently verified by Energy. The
$3.125 Convertible Preferred Stock is not entitled to vote at the
Annual Meeting.
<TABLE>
___________________________________________________________________________________________________________________________________
<CAPTION>
Shares Beneficially Owned
$3.125 Percent Percent
Name of Common Convertible of Class of Class
Beneficial Owner Stock Preferred (Common (Preferred
(1) (2)(3)(4) Stock(2) Stock) Stock)
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Edward C. Benninger(5) 146,972 1,000 * *
Robert G. Dettmer(6) 5,877 - 0 - * *
A. Ray Dudley 10,051 - 0 - * *
Ruben M. Escobedo(6) 3,289 - 0 - * *
William E. Greehey(5) 442,543 4,000 1.02% *
James L. Johnson 3,852 - 0 - * *
Lowell H. Lebermann 5,774 - 0 - * *
E. Baines Manning(5) 69,074 1,000 * *
Stan L. McLelland(5) 131,306 - 0 - * *
Susan Kaufman Purcell 2,289 - 0 - * *
Martin P. Zanotti(5) 83,483 1,000 * *
All current executive officers 991,297 7,000 2.28% *
and directors as a group,
including the persons named
above(5)(7)
___________________________________________________________________________________________________________________________________
* Indicates that the percentage of beneficial ownership does not exceed 1% of the class.
</TABLE>
<FN1>
(1) The business address for all beneficial owners listed above
is 530 McCullough Avenue, San Antonio, Texas 78215.
<FN2>
(2) No executive officer, director or nominee for director of
Energy owns any class of equity securities of Energy other than
Common Stock and $3.125 Convertible Preferred Stock.
<FN3>
(3) Includes Common Stock owned by minor children and excludes
Common Stock owned by adult children. Beneficial ownership is
disclaimed as to all such shares.
<FN4>
(4) Amounts include shares of Common Stock allocated pursuant to
various employee stock plans established by Energy and available
to its employees generally (collectively, the "Employee Stock
Plans"), as well as shares granted under Energy's Restricted
Stock Bonus and Incentive Stock Plan (the "Restricted Stock
Plan") and Energy's 1990 Restricted Stock Plan for Non-Employee
Directors (the "Director Plan"). Shares granted, subject to
stockholder approval, under the Executive Stock Incentive Plan
are excluded (see "Item No. 2. Approval of Executive Stock
Incentive Plan"). Except as otherwise noted, each person named
in the table, and each other executive officer, has sole power to
vote or direct the vote of all such shares beneficially owned by
him. Except as otherwise noted, each person named in the table,
and each other executive officer, has sole power to dispose or
direct the disposition of shares beneficially owned by him, and
except that shares held under certain Employee Stock Plans are
subject to transfer restrictions. Common Stock granted under the
Restricted Stock Plan ("Restricted Stock") and the Director Plan
may not be disposed of until vested.
<FN5>
(5) Amounts include 124,791, 42,371, 31,683, 34,700, 25,334 and
292,395 shares which could be acquired by Messrs. Greehey,
Benninger, McLelland, Zanotti, Manning and all current executive
officers and directors of Energy as a group, respectively, under
options which are exercisable at or within 60 days after February
1, 1995. Such shares may not be voted unless the options are
exercised. Options which may become exercisable within such 60
day period only in the event of a change of control of Energy are
excluded. None of the current executive officers, directors or
nominees for director of Energy holds any rights to acquire
Common Stock except through exercise of stock options.
<FN6>
(6) Includes shares held by spouse for which beneficial
ownership is disclaimed.
<FN7>
(7) Certain officers of Energy not designated as executive
officers by the Board of Directors do not perform the duties of
executive officers and are not classified as "executive officers"
for purposes of this Proxy Statement.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires Energy's executive
officers and directors, and persons who own more than ten percent
of a registered class of Energy's equity securities, to file
reports of ownership and changes in ownership with the SEC and
the New York Stock Exchange, Inc. (the "Exchange"). Officers,
directors and greater than ten-percent stockholders are required
by SEC regulation to furnish Energy with copies of all forms
filed pursuant to Section 16(a).
Based on a review of the copies of such forms received by it and
written representations from certain reporting persons that no
Forms 5 were required for those persons, Energy believes that,
during the year ended December 31, 1994, its executive officers,
directors and greater than ten-percent beneficial owners were in
compliance with applicable requirements of Section 16(a).
Notwithstanding anything to the contrary set forth in any of
Energy's previous filings under the Securities Act of 1933, as
amended, or the Exchange Act that might incorporate future
filings by reference, including this Proxy Statement, in whole or
in part, the following Performance Graph and Report of the
Compensation Committee of the Board of Directors on Executive
Compensation shall not be incorporated by reference into any such
filings.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage
change in the cumulative total stockholder return on Energy's
Common Stock against the cumulative total return of the S&P 500
Composite Index and the S&P Oil (Domestic Integrated) Index for
the period of five fiscal years commencing December 31, 1989 and
ended December 31, 1994.
<TABLE>
12/1989 12/1990 12/1991 12/1992 12/1993 12/1994
<S> <C> <C> <C> <C> <C> <C>
Energy
Common Stock $100 $103 $203 $159 $149 $122
S&P 500 100 97 126 136 150 152
S&P Oil
(Domestic Integrated) 100 95 89 91 96 100
</TABLE>
*Assumes that the value of the investment in Energy Common Stock
and each index was $100 on December 31, 1989, and that all
dividends were reinvested.
The foregoing Performance Graph and related textual information
are based on historical data and are not necessarily indicative
of future performance. The S&P Oil (Domestic Integrated) Index
includes Amerada Hess Corp., Ashland Oil, Inc, Atlantic Richfield
Co., Kerr-McGee Corp., Louisiana Land & Exploration Co.,
Occidental Petroleum Corp., Pennzoil Co., Philips Petroleum Co.,
Sun Company, Inc., USX-Marathon Group and Unocal Corp.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Company's executive compensation programs are administered by
the Compensation Committee (the "Committee") of Energy's Board of
Directors. The Committee is composed of four independent outside
directors not eligible to participate in the Company's executive
compensation programs. The Committee's policies are implemented
by the Company's compensation and benefits staff under the
direction of the Vice President Administration. The Company's
executive compensation programs are intended to provide strong
incentives for high performance, enabling the Company to recruit,
retain and motivate the executive talent necessary to be
successful.
Overview. The Company's executive compensation program includes
base salary, an annual incentive bonus opportunity and long-term
stock-based incentives. The CEO and other executive officers
also participate in benefit plans generally available to
employees of the Company. Because of its ongoing business
activities, the Company competes for executive talent in both the
oil refining industry and in the natural gas industry.
Accordingly, for purposes of determining executive compensation
levels, the Company utilizes a subgroup of companies from a
nationally recognized compensation database compiled by Hewitt
Associates, L.L.C. ("Hewitt"), an independent compensation
consultant retained by the Company. The subgroup consists of
fifteen companies with significant participation in the oil
refining industry or natural gas industry and which are similar
to the Company in size and scope of operations (the "Comparator
Group"). The Comparator Group has been approved by the Committee
and the companies in the Comparator Group are identified in
Appendix B. Base salary, bonuses and other compensation
recommendations are developed by the Company's compensation and
benefits staff, reviewed by Hewitt and submitted to the Committee
for consideration. Other nationally recognized compensation
surveys are utilized to validate the information provided by
Hewitt. In establishing and implementing executive compensation
arrangements, the Committee reviews and discusses the staff
recommendations directly with representatives of Hewitt.
Annual incentive bonuses, when awarded, are related both to
measures of Company financial performance and to individual
performance. Long-term incentives, consisting of restricted
stock and stock option grants, as well as the noncash portion of
annual incentive bonus awards, are intended to balance executive
management focus between short and long-term goals and provide
capital accumulation linked directly to the performance of
Energy's Common Stock. Base salary levels are targeted at
approximately the 50th percentile of the Comparator Group, while
annual incentive compensation, restricted stock and stock option
grants, when awarded, are targeted at the 65th percentile. While
no specific percentile target is set for overall compensation,
the Committee intends that each executive's total compensation
package favor longer-term and variable compensation over fixed
compensation. For the five executives named in the Summary
Compensation Table, the base salary component of total annual and
long-term compensation for 1994, as reported in the Summary
Compensation Table, ranged from a low of approximately 21.9% (for
the CEO) to approximately 87.1% (for Mr. Zanotti, who received
fewer options due to his pending retirement), while the annual
incentive and longer-term compensation component ranged from a
high of approximately 78.1% (for the CEO) to approximately 12.9%
(for Mr. Zanotti). For purposes of the preceding sentence, stock
options granted in 1994 have been valued using the "grant date
present value" set forth in the table below titled "Option/SAR
Grants in the Last Fiscal Year." For the CEO and other named
executives, excluding Mr. Zanotti, the base salary component
comprised a lower percentage of total annual and long-term
compensation in 1994, compared with 1993.
Base Salaries. Base salaries are set against established grades,
salary ranges and midpoints reflecting the position, duties and
level of responsibility for each executive and the Hewitt
compensation survey data for the Comparator Group. Base salaries
are reviewed annually and may be adjusted within the established
salary ranges for each salary grade to reflect promotions, the
assignment of additional responsibilities, individual performance
or the performance of the Company. Salary grades, compensation
ranges and midpoints are also periodically adjusted to remain
competitive with the Comparator Group. Base salaries for the CEO
and other executive officers were not increased in 1994.
Annual Incentive Bonus. Executive officers have customarily had
the opportunity to earn an annual incentive bonus based on three
factors: (i) the position of the executive officer, which is used
to determine a targeted percentage of annual base salary which
may be awarded as incentive bonus, with the targets ranging from
a low of approximately 40% of base salary to approximately 65% of
base salary (for the CEO); (ii) realization by the Company of
quantitative financial performance targets approved by the
Committee; and (iii) a qualitative evaluation of the individual's
performance. For each executive, the targeted percentage of base
salary is adjusted, upward or downward, based upon Company
achievement of the financial performance goals. The Committee
retains ultimate discretion to adjust the bonus amount, upwards
or downward, by up to approximately 25%, based upon its
subjective determination of individual performance and such other
factors as it deems to be appropriate. In the past, four
approximately equally weighted quantitative measures of Company
financial performance have been utilized, consisting of (i)
return on equity ("ROE") compared with the average ROE for a
group of similarly-sized companies in the oil refining business,
(ii) return on investment ("ROI") compared with such group, (iii)
earnings per share of Common Stock compared with the prior year,
and (iv) the average closing price of a share of Common Stock
during a recent period, compared with the average closing price
during the corresponding prior year period. For the ROE and ROI
financial performance measures, the targeted salary percentage
was then adjusted, upward or downward, depending upon the extent
to which the Company's ROE and ROI exceeded, or fell short of,
the average ROE and ROI for such group. For the earnings per
share and stock price performance measures, such adjustments were
made if the Company's performance fell outside of preestablished
ranges. However, the Committee determined early in 1994 that the
Company's financial results for the fourth quarter of 1993 and
its projected results for 1994 would not justify the payment of
annual incentive bonuses. As a result, bonuses were suspended
for 1994.
Long-Term Incentive Awards. To provide stock-based longer-term
compensation for executives, the Company maintains the Restricted
Stock Plan, which was approved by Energy's stockholders in 1990.
The Restricted Stock Plan authorizes grants of restricted shares
of Common Stock which vest (become nonforfeitable) over a period
determined by the Committee. For each executive, a targeted
number of shares is set with a market value at the date of grant
equivalent to approximately the 65th percentile of the Comparator
Group. Such targeted award is then adjusted, upwards or
downwards, based upon an individual subjective performance
evaluation, which (for executives other than the CEO) is based
upon the recommendation of the CEO. The total number of shares
awarded is a function of the Common Stock price at the time of
grant and the number of shares required to achieve the percentile
compensation target. The Committee generally makes restricted
stock awards every year. However, no such awards were made in
1994. In 1994, the Committee approved the Executive Stock
Incentive Plan, and in January 1995 made awards of restricted
stock under such plan. Such plan and awards are subject to
stockholder approval. See "Item No. 2. Approval of Executive
Stock Incentive Plan."
Stock Options. Under the Company's Stock Option Plan No. 3 and
Stock Option Plan No. 4, previously approved by Energy's
stockholders, as well as under the Executive Stock Incentive Plan
presented for consideration as Item No. 2 herein, the Committee
may grant stock options to executives. Procedures for
determining option grants are in all material respects the same
as for restricted stock awards. Option awards generally vest
over a period of three years in equal installments and, in the
case of the awards made in 1994, are exercisable for
approximately ten years. However, the stock option awards that
were made during 1994 to the CEO and other executive officers
named in the Summary Compensation Table and granted under the
new Executive Stock Incentive Plan were intended by the
Committee to provide a significant incentive for long-term
performance. Accordingly, these grants were larger than previous
awards and will vest in their entirety on the third anniversary
of the grant. These options are subject to stockholder approval
of the Executive Stock Incentive Plan, and are also subject to
forfeiture upon termination of employment. The award and vesting
of stock options are not contingent on achievement of any
performance targets, but the options will provide a benefit to
the executive only to the extent that there is appreciation in
the market price of the Common Stock during the option period.
Determination of the CEO's Compensation. The CEO's compensation
is recommended by the Committee and established by the Board of
Directors. The 1994 compensation of Mr. William E. Greehey, as
CEO, consisted of base salary and stock option awards. As noted
above, base salary comprised approximately 21.9% of the CEO's
1994 total annual and long-term compensation reported in the
Summary Compensation Table, versus approximately 78.1% for
long-term compensation. The CEO's base salary and bonus, when
paid, are determined using the procedures described above. As
described above, the Compensation Committee determined that
annual bonuses would not be paid in 1994. The Company and Mr.
Greehey have entered into an employment agreement which expires
in 1995. See "Arrangements with Certain Officers and Directors."
However, such agreement did not have an effect on the Committee's
determination of Mr. Greehey's 1994 compensation.
In July 1994, Mr. Greehey was awarded options to purchase 290,300
shares of Common Stock under the Executive Stock Incentive Plan
in accordance with the guidelines discussed above. Subject to
stockholder approval of such plan, these options will vest in
their entirety at the end of three years.
Omnibus Budget Reconciliation Act of 1994. The Omnibus Budget
Reconciliation Act of 1994 added Section 162(m) to the Code.
With certain exceptions, beginning with the taxable year
commencing January 1, 1994, Section 162(m) prevents publicly held
corporations, including the Company, from taking a tax deduction
for compensation in excess of $1 million paid to the CEO or the
four other persons named in the Summary Compensation Table in the
proxy statement. Section 162(m) will not apply to limit the
deductibility of performance-based compensation exceeding $1
million if paid (i) solely upon attainment of one or more
performance goals, (ii) pursuant to a performance-based
compensation plan adopted by the Committee, and (iii) the terms
of such plan are approved by the stockholders before payment of
the compensation. The Company believes that its stock option
plans (including stock option awards under the new Executive
Stock Incentive Plan) will qualify for the tax deduction.
Neither the CEO nor any of the other executive officers named in
the Summary Compensation Table received taxable compensation
exceeding $1 million in 1994.
The Executive Stock Incentive Plan does not require quantifiable
performance goals for restricted stock and other awards.
Accordingly, restricted stock grants and other awards (other than
stock option or SAR awards) made under the Executive Stock
Incentive Plan may be ineligible for the performance-based
exception to the $1 million deduction limitation for compensation
paid to the CEO and other executive officers named in the Summary
Compensation Table. The Committee and the Board believe that it
is in the best interests of the stockholders that the Committee
have the flexibility to make awards to encourage employee
retention or which are based upon nonquantifiable goals, such as
achieving progress with specific projects. The Committee and the
Board will continue to evaluate their position as regulations
implementing Section 162(m) are further developed.
Members of the Compensation Committee:
Lowell H. Lebermann, Chairman
Robert G. Dettmer
A. Ray Dudley
James L. Johnson
The foregoing Performance Graph and Report of the Compensation
Committee shall not be deemed to be "soliciting material" or to
be "filed" with the SEC or subject to regulations 14A or 14C
under the Exchange Act, or to the liabilities of Section 18 of
the Exchange Act.
INFORMATION CONCERNING EXECUTIVE COMPENSATION
The following table sets forth information as to items of
compensation paid to Energy's CEO and its four other most highly
compensated executive officers for services rendered in all
capacities to the Company in 1992, 1993 and 1994. Benefits made
available under comprehensive health care, long-term and
short-term disability, relocation, term life insurance, vacation
and other plans which are available on the same basis to all
full-time salaried employees are not included herein.
<TABLE>
<CAPTION>
Summary Compensation Table
___________________________________________________________________________________________________________________________________
Long-Term Compensation
Securities
Restricted Underlying
Annual Compensation Stock Options/ All Other
Name and Bonus Awards SARs Compensation
Principal Position Year Salary($) ($)(1) ($)(2) (#)(3) ($)(4)
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey
Director, Chairman of 1994 $622,020 $ 0 $ 0 355,300 $71,664
the Board and Chief 1993 $622,020 $375,000 $457,500 50,000 $77,861
Executive Officer 1992 $610,050 $365,000 $367,413 32,884 $78,327
of Energy
Edward C. Benninger
Director and Executive 1994 $335,040 $ 0 $ 0 125,500 $27,598
Vice President of 1993 $335,040 $170,000 $228,750 18,000 $32,923
Energy 1992 $303,778 $155,000 $165,538 18,805 $33,507
Stan L. McLelland
Executive Vice 1994 $262,380 $ 0 $ 0 82,600 $23,836
President and 1993 $262,380 $ 87,000 $102,938 12,000 $28,777
General Counsel of 1992 $257,310 $ 91,000 $ 88,825 12,524 $31,885
Energy
Martin P. Zanotti(5)
Executive Vice 1994 $227,160 $ 0 $ 0 5,000 $23,160
President of Valero 1993 $227,160 $ 75,000 $ 22,875 10,000 $24,977
Refining and Marketing 1992 $222,780 $ 80,000 $ 72,675 11,700 $25,214
Company
E. Baines Manning(5)
Senior Vice President 1994 $216,420 $ 0 $ 0 63,500 $15,524
of Valero Refining and 1993 $216,420 $ 60,000 $ 68,625 9,000 $17,682
Marketing Company 1992 $212,250 $ 64,000 $ 40,375 9,750 $14,417
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) In 1992 and 1993, executives received bonuses payable 60% in
cash and 40% in Common Stock. No bonus was paid in 1994.
<FN2>
(2) No shares of Restricted Stock were granted to the named
executive officers in 1994. For each named executive officer,
the number of shares of Restricted Stock held at December 31,
1994, and the value thereof, based on the closing market price of
the Common Stock at December 31, 1994, was as follows: Mr.
Greehey: 35,133 shares -- $592,869; Mr. Benninger: 16,532 shares
- -- $279,978; Mr. McLelland: 8,066 shares -- $136,114; Mr.
Zanotti: 3,400 shares -- $57,375; and Mr. Manning: 4,333 shares
- -- $73,119. Dividends are paid on the Restricted Stock at the
same rate as on Energy's unrestricted Common Stock. All grants
of Restricted Stock vest in annual increments of 33 1/3%
beginning on the first anniversary of the grant date. All shares
of Restricted Stock held by Mr. Zanotti have subsequently vested.
<FN3>
(3) Includes options granted subject to stockholder approval of
the Executive Stock Incentive Plan. See "Item No. 2. Approval
of Executive Stock Incentive Plan."
<FN4>
(4) Amounts include Company contributions pursuant to the
Employee Stock Plans, and that portion of interest accrued under
the Executive Deferred Compensation Plan which is deemed to be at
"above-market" rates under applicable SEC rules. Messrs.
Greehey, Benninger, McLelland, Zanotti and Manning were allocated
$47,090, $23,803, $17,990, $18,397 and $15,524, respectively, as
a result of Company contributions to Employee Stock Plans for
1994, and $11,574, $3,795, $5,846, $4,763 and $0, respectively,
as a result of "above-market" allocations to the Executive
Deferred Compensation Plan for 1994. Mr. Manning does not
participate in the Executive Deferred Compensation Plan. Amounts
also include executive insurance policy premiums with respect to
standard cash value life insurance (and not split-dollar life
insurance) for Mr. Greehey in the amount of $13,000 per year.
<FN5>
(5) The Board of Directors of Energy determined to include
Messrs. Zanotti and Manning in the Summary Compensation Table in
accordance with Rule 3b-7 under the Exchange Act.
Shown below is further information regarding the grants of stock
options to the named executive officers reflected in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Option/SAR Grants in the Last Fiscal Year
___________________________________________________________________________________________________________________________________
Number of Percent of
Securities Total
Underlying Options/
Options/ SARs Granted Market
SARs to Employees Exercise or Price at Grant Date
Granted in Fiscal Base Price Grant Date Expiration Present Value $
Name (#)(1) Year (/$/Sh) ($/Sh) Date (2)
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey 65,000 3.39% $21.06 $21.06 1/20/04 $ 435,500
*290,300 15.12% 19.00 19.00 7/21/04 1,779,539
Edward C. Benninger 25,000 1.30% 21.06 21.06 1/20/04 167,500
*100,500 5.24% 19.00 19.00 7/21/04 616,065
Stan L. McLelland 17,000 0.89% 21.06 21.06 1/20/04 113,900
*65,600 3.42% 19.00 19.00 7/21/04 402,128
Martin P. Zanotti 5,000 0.26% 21.06 21.06 1/20/04 33,500
E. Baines Manning 13,000 0.68% 21.06 21.06 1/20/04 87,100
*50,500 2.63% 19.00 19.00 7/21/04 309,565
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) Options granted in 1994 under the Executive Stock Incentive
Plan and identified with a (*) become exercisable three years
from the date of grant, subject to stockholder approval of the
plan. The remaining options granted in 1994 were granted under
another stock option plan previously approved by the stockholders
and, except as described below, are exercisable in cumulative 33
1/3% annual installments commencing one year from date of grant.
In the event of a change of control of Energy, such options would
also become immediately exercisable pursuant to provisions of the
respective stock option plans or of executive severance
agreements between Energy and certain of such executive officers.
Under the terms of the plans, the exercise price and tax
withholding obligations related to exercise may be paid by
delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions. In accordance with
applicable stock option plan provisions, upon Mr. Zanotti's
retirement the Compensation Committee approved the immediate
vesting of the options granted to Mr. Zanotti; under plan
provisions, such options will now expire three years from the
date of Mr. Zanotti's retirement.
<FN2>
(2) A variation of the Black-Scholes option pricing model
was used to determine grant date present value. This model is
designed to value publicly traded options. Options issued under
the Company's option plans are not freely traded, and the
exercise of such options is subject to substantial restrictions.
The Black-Scholes model does not give effect to either risk of
forfeiture or lack of transferability. The estimated values
under the Black-Scholes model are based on assumptions as to
variables such as interest rates, stock price volatility and
future dividend yield. The grant date present values presented
in this table were calculated using an expected average option
term of six years, risk-free rates of return of 5.30% (for the
options expiring 1/20/04) and 7.05% (for the options expiring
7/21/04), an average volatility rate for the three years
preceding such grant of 32.4% (for the options expiring 1/20/04)
and 29.5% (for the options expiring 7/21/04), and a dividend
yield of 2.47% (for the options expiring 1/20/04) and 2.72% (for
the options expiring 7/21/04), which are the annualized quarterly
dividend rates in effect at the dates of grant, expressed as a
percentage of the market values of the Common Stock at the dates
of grant. The actual value of stock options depends upon the
actual future performance of the Common Stock, the continued
employment of the option holder throughout the vesting period and
the timing of the exercise of the option. Accordingly, the
values set forth in this table may not be achieved.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
___________________________________________________________________________________________________________________________________
Value of Unexercised
Shares Number of Securities In-the-Money
Acquired Value Underlying Unexercised Options/SARs at
on Exercise Realized Options/SARs at FY-End(#) FY-End ($) (1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
William E. Greehey 0 0 110,591 399,593 $169,776 0
Edward C. Benninger 0 0 27,537 143,768 21,222 0
Stan L. McLelland 0 0 24,349 94,774 28,294 0
Martin P. Zanotti (2) 0 0 25,534 15,566 33,955 0
E. Baines Manning 0 0 20,300 72,750 25,466 0
___________________________________________________________________________________________________________________________________
</TABLE>
<FN1>
(1) Represents the dollar value obtained by multiplying the
number of unexercised options/SARs by the difference between the
strike price and the average market price of Energy's Common
Stock on December 31, 1994.
<FN2>
(2) All options held by Mr. Zanotti have subsequently vested.
RETIREMENT BENEFITS
The following table shows, for purposes of illustration, the
estimated annual gross benefits payable under Energy's Pension
Plan ("Pension Plan") and Supplemental Executive Retirement Plan
("SERP") upon retirement at age 65 on the assumed compensation
levels and years of service indicated, assuming an election to
have payments continue for the benefit of the life of the
participant only.
<TABLE>
<CAPTION>
Pension Table
___________________________________________________________________________________________________________________________________
Years of Service
____________________________________________________________________________________________________
Remuneration 15 20 25 30 35
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 55,000 $ 74,000 $ 92,000 $111,000 $129,000
250,000 70,000 93,000 117,000 140,000 163,000
300,000 85,000 113,000 141,000 169,000 197,000
400,000 114,000 152,000 190,000 228,000 266,000
500,000 143,000 191,000 238,000 286,000 334,000
600,000 172,000 230,000 287,000 345,000 402,000
700,000 202,000 269,000 336,000 403,000 470,000
800,000 231,000 308,000 385,000 462,000 539,000
900,000 260,000 347,000 433,000 520,000 607,000
1,000,000 289,000 386,000 482,000 579,000 675,000
1,200,000 348,000 464,000 580,000 696,000 812,000
___________________________________________________________________________________________________________________________________
</TABLE>
Energy maintains a noncontributory Pension Plan in which
virtually all Company employees are eligible to participate. The
Pension Plan is a defined benefit plan funded by a method which
determines contribution requirements in the aggregate for all
participants. Accordingly, contributions for individual
participants are not determinable. Accrued contributions to the
Pension Plan in 1994 for the 1994 Pension Plan year were
approximately 5.16% of total covered remuneration. The Pension
Plan provides a monthly pension at normal retirement equal to
1.6% of the participant's average monthly compensation (based
upon the participant's base earnings during the sixty consecutive
months of the participant's credited service affording the
highest such average) times the participant's years of credited
service, plus .35% times the product of the participant's years
of credited service (maximum thirty-five years) multiplied by the
excess of the participant's average monthly compensation over the
lesser of 1.25 times the monthly average (without indexing) of
the social security wage bases for the thirty-five-year period
ending with the year the participant attains social security
retirement age, or the monthly average of the social security
wage base in effect for the year that the participant retires
under the Pension Plan.
Energy also maintains the SERP, a non-qualified plan approved by
the Board in 1982, which provides additional pension benefits to
the executive officers and certain other employees of the
Company. In 1989, Energy funded its obligations through that
date under the SERP through the contribution of Common Stock to a
trust that was established as a vehicle to fund disbursements to
SERP participants. No contributions were made to the SERP trust
during 1994.
Compensation for purposes of the Pension Plan includes only
salary as reported in the Summary Compensation Table and excludes
cash bonuses. For purposes of calculating the amount payable
under the SERP, the participant's most highly compensated
consecutive thirty-six months of service in the prior five years
(rather than sixty months) are considered, and bonuses are
included in calculating covered compensation. Accordingly, the
amounts reported in the Summary Compensation Table under the
headings "Salary" and "Bonus" each constitute covered
compensation for purposes of the SERP. Benefits listed in the
Pension Table are not subject to any deduction for social
security or other offset amounts.
Credited years of service for the period ended December 31, 1994
for the executive officers named in the cash compensation table
are as follows: Mr. Greehey -- 31 years; Mr. Benninger -- 20
years; Mr. McLelland -- 16 years; Mr. Zanotti -- 11 years; and
Mr. Manning -- 8 years. The credited service for Mr. McLelland
includes two years service credited pursuant to the terms of Mr.
McLelland's employment by the Company and for which benefits are
payable only from the SERP.
ARRANGEMENTS WITH CERTAIN OFFICERS AND DIRECTORS
Energy entered into an employment agreement with Mr. Greehey in
1990. The employment agreement expires June 9, 1995, and
provides for a minimum annual salary of $540,000, which is
subject to increase adjustments by the Board. The agreement does
not limit the authority or discretion of the Board to grant
bonuses or other additional or direct or indirect benefits or
increased compensation to Mr. Greehey.
Mr. Greehey's employment agreement provides that he be entitled
to receive certain post-retirement benefits, including office
facilities and secretarial help until age 69, transfer of certain
club memberships, the vesting of certain stock option and
restricted stock grants, certain medical and life insurance
benefits and the right to certain supplemental amounts under the
SERP. Under the employment agreement, Mr. Greehey would be
entitled to receive such benefits only upon retirement, on or
before July 9, 1995, following not less than six months' prior
notice, but would not be entitled to such benefits if he were to
retire following the termination of the employment agreement or
upon less than six months' prior notice. In November 1994, in
consideration of Mr. Greehey's forbearance in not giving notice
of retirement prior to such six month deadline, Energy's Board of
Directors adopted resolutions approving the continued granting of
such post-retirement benefits to Mr. Greehey if he were to retire
following the scheduled termination of such employment agreement
on July 9, 1995, or upon less than six months' notice.
Mr. Zanotti retired from the Company on December 31, 1994.
Energy and Mr. Zanotti have entered into a Consulting Agreement
under which Mr. Zanotti has agreed to provide consulting services
for a period of two years ending December 31, 1996, at a rate of
$75,000 per annum, plus reimbursement for necessary and
reasonable travel and other expenses incurred in connection with
the agreement.
EXECUTIVE SEVERANCE PROGRAM
The Board approved an executive severance program in 1982 which
is administered by the Compensation Committee. Pursuant to this
program, Energy has entered into agreements (the "Executive
Severance Agreements") with Messrs. Greehey, Benninger, McLelland
and Manning. These Executive Severance Agreements provide such
executives with payments and other benefits in the event of the
termination of their employment with the Company under certain
circumstances. The Executive Severance Agreements each provide
that if the executive leaves the employ of the Company for any
reason other than death, disability or normal retirement within
two years after a change of control of Energy, such executives
will receive a lump sum cash payment equal to three times, in the
cases of Messrs. Greehey and McLelland, and two times, in the
cases of Messrs. Benninger and Manning, the highest compensation
paid to such executive during any consecutive twelve month period
prior to such termination. The executive will also be entitled
to accelerated exercise of any stock options or SARs previously
granted under Energy's stock option plans and held by the
executive for more than six months. If the executive has
received a grant of Restricted Stock under the Restricted Stock
Plan, any restrictions imposed by such plan on the vesting and
sale of such Restricted Stock will be removed. Each Executive
Severance Agreement also provides for special retirement benefits
if the executive would have qualified for benefits under the
Pension Plan had the executive remained in the employ of the
Company for the three-year period following such termination, for
continuance of life insurance, health coverages and other fringe
benefits previously provided to the executive for such three-year
period and for relocation assistance if the executive chooses to
relocate after termination.
COMPENSATION OF DIRECTORS
Each director is reimbursed for the usual and ordinary expenses
of meeting attendance. Directors who are employees of the
Company receive no compensation (other than reimbursement of
usual and ordinary expenses of meeting attendance) for serving as
directors.
The compensation of each non-employee director of Energy is a
retainer fee of $18,000 per year, plus $1,000 for each Board and
committee meeting attended ($500 for telephonic meetings).
Upon election or appointment to the Board, non-employee directors
receive grants of Common Stock, and are eligible to participate
in the Retirement Plan for Non-Employee Directors ("Retirement
Plan").
1990 Restricted Stock Plan for Non-Employee Directors
Energy maintains the Director Plan to supplement the compensation
paid to non-employee directors, increase their proprietary
interest in Energy and increase their identification with the
interests of Energy's stockholders through grants of Common Stock
("Director Stock").
The Director Plan, approved by Energy's stockholders in 1990,
provides for grants of Director Stock to non-employee directors;
such grants generally vest in equal annual installments over a
period of three years beginning in the year after the grant date.
No director who is also an employee of the Company may
participate in the Director Plan. Upon initial election to the
Board, each non-employee director automatically receives a grant
of shares of Director Stock, the value of which is determined
annually based on changes in the consumer price index. Directors
receiving a grant in 1995 will receive Director Stock having a
value of approximately $51,000. Typically, annual installments
are scheduled to vest on or about the date of the Annual Meeting.
When all of the Director Stock previously granted to a
non-employee director becomes fully vested and the director is
reelected for an additional term, or his term of office otherwise
continues beyond the date of the Annual Meeting at which his
Director Stock has become fully vested, another automatic grant
of Director Stock is made. However, if a director would not be
eligible for reelection as a director due to Energy's mandatory
retirement policy for directors or if a director advises Energy
that he does not intend to stand for reelection, the grant would
be reduced pro rata based on the number of years to the end of
that director's term.
Retirement Plan for Non-Employee Directors
Energy established the Retirement Plan in 1992. Under the
Retirement Plan, a non-employee director becomes entitled to a
retirement benefit upon completion of five years of service on
the Board. The annual benefit at retirement is equal to the
product of 10% of the highest annual cash retainer paid to the
director during his service on the Board, multiplied by the
number of full and partial years of service on the Board (not to
exceed 10 years). Retirement benefits are paid for a period
equal to the shorter of the director's number of whole and
partial years of service on the Board, or his lifetime, but in no
event for longer than 10 years. The Retirement Plan provides no
survivor benefits, and is an unfunded plan, the benefits of which
will be paid from the general assets of Energy.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company has invested approximately $9.7 million in a program
to drill coal seam gas wells in New Mexico. In order to share
the drilling and other risks inherent in this project, various
officers and employees of the Company were permitted to invest as
general partners in a partnership to which the subsidiary's
interest was assigned. As a result, during 1992 and 1993 Messrs.
Greehey, Benninger, McLelland, Zanotti and Manning invested
approximately $207,000, $52,000, $156,000, $104,000 and $104,000,
respectively, to acquire respective interests of 2.0%, .50%,
1.5%, 1.0% and 1.0% in the project. No additional investments
were made by these executive officers during 1994. The Board
determined in 1992 that this transaction was fair to the Company.
During 1994, Messrs. Greehey, Benninger, McLelland, Zanotti and
Manning received cash distributions of $19,618, $4,904, $14,713,
$9,809 and $9,809, respectively, with respect to such
investments.
Except as disclosed herein, no executive officer, director or
nominee for director of Energy has been indebted to the Company,
or has acquired a material interest in any transaction to which
the Company is a party, during the last fiscal year.
QUORUM, VOTING PROCEDURES AND TABULATION OF VOTE
A proxy enables a stockholder to be represented at a meeting at
which he or she would otherwise be unable to participate. The
proxy card accompanying this Proxy Statement is solicited because
each stockholder is entitled to vote on matters scheduled to come
before the Annual Meeting. For ease of reference, these matters
have corresponding numbers in the Proxy Statement and on the
enclosed proxy card.
The By-Laws provide that a majority of the shares of Common Stock
and Series A Preferred Stock issued and outstanding and entitled
to vote, present in person or by proxy, shall constitute a
quorum. Shares of Common Stock and Series A Preferred Stock
represented by a properly signed and returned proxy are
considered as present at the Annual Meeting for purposes of
determining a quorum.
The Certificate of Incorporation entitles stockholders eligible
to vote to cumulate votes for any election of directors. There
are no conditions to the exercise of this right. The maximum
number of votes which may be cast is equal to the number of
shares of Common Stock and Series A Preferred Stock to be voted,
multiplied by the number of directors (four) to be elected. Any
stockholder eligible to vote may cast all votes for a single
director or may distribute his votes among the number of director
nominees as the stockholder may see fit. The distribution of
votes among nominees in other than equal proportions may be
accomplished by writing explicit instructions on the proxy card
or an attachment thereto. The proxy solicits discretionary
authority to cumulate votes and, unless otherwise specified, a
vote for the nominees will be cumulated and distributed among the
nominees (except nominees for whom authority to vote is withheld)
in equal proportions unless the persons named as proxies shall,
in accordance with their best judgment, otherwise direct.
Shares eligible to be voted and for which a proxy card in the
accompanying form is properly signed, dated and returned in
sufficient time to permit the necessary examination and
tabulation of the proxy before a vote is taken will be voted by
the proxies named in the proxy card in accordance with any choice
specified. The proxy card permits a specification as to whether
shares represented by the proxy are to be voted for all nominees
for director or are not to be voted for certain of such nominees.
The proxy card also permits a specification of approval,
disapproval or abstention as to each proposal described in this
Proxy Statement. Stockholders are urged to specify their choices
on the proxy card, but where no choice is specified, eligible
shares will be voted as indicated on the proxy card. If any
nominee for director is unable to serve or if any business not
specified in the Notice of Annual Meeting and Proxy Statement,
including matters incidental to the conduct of the meeting, comes
before the Annual Meeting, eligible shares will be voted in
accordance with the best judgment of the persons named therein as
proxies. At the time this Proxy Statement was printed, the
management of Energy was not aware of any other matters to be
voted upon. All powers conferred by the proxy may be exercised
by a majority of the proxies or substitutes voting or acting or,
if only one votes or acts, then by that one.
Brokers holding shares for beneficial owners must vote those
shares according to the specific instructions they receive from
the owners. If specific instructions are not received, brokers
may generally vote these shares in their discretion, depending on
the type of proposal involved. However, the Exchange can
preclude brokers from exercising their voting discretion on
certain proposals. Absent specific instructions from the
beneficial owner in such a case, the broker may not vote on that
proposal. This results in what is known as a "broker non-vote"
on such a proposal. Under Delaware law, a broker non-vote is
treated as "present" for purposes of determining the existence of
a quorum. A broker non-vote has the effect of a negative vote
when a majority of the shares issued and outstanding is required
for approval of a particular proposal. A broker non-vote has no
effect when a majority of the shares present and entitled to vote
or a majority of the votes cast is required for approval of the
proposal.
Pursuant to the By-Laws, the election of directors (Item No. 1)
will be by a favorable vote of a plurality of the shares of
Common Stock and Series A Preferred Stock present or represented
at the Annual Meeting and entitled to vote thereat. Votes
"withheld" from a nominee will not count against the election of
such nominee. Brokers have discretionary authority to vote on
this proposal. Accordingly, the three nominees for Class III
director receiving the greatest number of votes, whether or not
such votes represent a majority of the shares present and voting
at the Annual Meeting, will be elected as Class III directors and
the nominee for Class I director receiving the greatest number of
votes, whether or not such votes represent a majority of the
shares present and voting at the Annual Meeting, will be elected
as Class I director.
Passage of the proposals to approve the Executive Stock Incentive
Plan (Item No. 2) and to approve the appointment of Arthur
Andersen LLP (Item No. 3) requires the approval of a majority of
the shares present or represented at the Annual Meeting and
entitled to vote thereat. Abstentions with respect to Item Nos.
2 and 3 will count as being present or represented at the Annual
Meeting and entitled to vote, and will be included in calculating
the number of votes necessary for approval of the proposals. The
Exchange has determined that brokers have discretionary authority
to vote on these proposals.
Solicitation of proxies from Energy's stockholders will be made
by Energy and will be undertaken principally by use of the United
States Postal Service. However, such solicitation may also be
undertaken, without additional remuneration, by the directors,
officers and employees of the Company, and Energy may also
utilize the services of the firm of Kissel-Blake Inc.
("Kissel-Blake"), New York, New York. Such solicitation could be
undertaken either by telephone, telegraph or personal interview.
The cost of any such solicitation, including the cost of
preparing and mailing proxy materials, returning the proxy cards
and reimbursing brokerage houses and nominees for forwarding
proxy materials to beneficial owners, will be borne by Energy and
its stockholders. Energy's arrangement with Kissel-Blake
provides for payment of a fee of approximately $11,500, plus
reimbursement of mailing and other expenses.
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR 1996 ANNUAL MEETING
Under the By-Laws, stockholders intending to bring any business
before an Annual Meeting of Stockholders of Energy, including
nominations of persons for election as directors, must give
written notice to the Corporate Secretary of Energy regarding
the business to be presented or persons to be nominated. The
notice must be received at the principal executive office of
Energy within the time periods and must be accompanied by the
information and documents specified in the By-Laws. A copy of
the By-Laws may be obtained by writing to the Corporate Secretary
of Energy.
The foregoing provisions of the By-Laws do not affect the right
of any stockholder to request inclusion of proposals in the Proxy
Statement pursuant to Rule 14a-8 under the Exchange Act.
However, the stockholder must also comply with all applicable
requirements of the Exchange Act and the rules and regulations of
the SEC thereunder. Any stockholder proposal intended to be
considered for inclusion in the 1996 proxy materials for the 1996
Annual Meeting must, in addition to the foregoing requirements,
be made in writing and received by the Corporate Secretary of
Energy at Energy's principal executive office by November 22,
1995. The SEC's rules require, among other things, that a person
making a stockholder proposal shall, at the time of submitting
such proposal, be the record or beneficial owner of at least
$1,000 in market value of Common Stock or Series A Preferred
Stock, that such shares have been held by such person for at
least one year prior to such date and that such shares continue
to be owned by such person through the date of the meeting.
Energy will also consider recommendations by stockholders for
directors to be nominated at the 1996 Annual Meeting. Such
recommendations must be made in writing and must include
sufficient biographical and other relevant information such that
an informed judgment as to the proposed nominee's qualifications
can be made. Such recommendation must be accompanied by a
notarized written statement executed by the proposed nominee
consenting to be named in the Proxy Statement, if nominated, and
to serve as a director, if elected. Recommendations received in
proper order by the Corporate Secretary of Energy at Energy's
principal executive office at least six months prior to the 1996
Annual Meeting will be referred to, and considered by, the
Executive Committee or, if appointed, a Nominating Committee.
Stockholders are urged to review all applicable rules and, if
questions arise, to consult their own legal counsel before
submitting a nomination or proposal to Energy. No stockholder
recommendations or proposals were received within the required
period before the 1995 Annual Meeting.
MISCELLANEOUS
Energy's Annual Report on Form 10-K, including the financial
statements and the financial statement schedules, required to be
filed with the SEC pursuant to Rule 13a-1 of the Exchange Act,
for the fiscal year ended December 31, 1994, will be furnished
without charge to any stockholder upon written request. A copy
may be requested by writing to Mr. Keith Booke, Investor
Relations Department, Valero Energy Corporation, P.O. Box 500,
San Antonio, Texas 78292-0500.
Energy's Annual Report to Stockholders (the "Annual Report"),
including audited financial statements of the Company for the
fiscal year ended December 31, 1994, has simultaneously been
mailed to stockholders entitled to vote at the Annual Meeting.
The Annual Report is not to be treated as a part of the proxy
materials.
During 1994, Energy appointed Harris Trust and Savings Bank,
Chicago, Illinois, to serve as transfer agent, registrar and
dividend paying agent for its Common Stock, $3.125 Convertible
Preferred Stock and Series A Preferred Stock. Correspondence
relating to any stock accounts or dividends should be addressed
to:
Harris Trust and Savings Bank
Shareholder Services Division
P.O. Box 755
Chicago, Illinois 60690-9971
(312) 461-3597
All transfers of certificates of the Common Stock or any series
of Preferred Stock should also be mailed for transfer to such
address.
Participants in Employee Stock Plans Please Note:
In the case of participants in the Company's Thrift Plan,
Employees' Stock Ownership Plan and Valero Employees' Stock
Ownership Plan, the proxy card will represent (in addition to any
shares held individually of record) the number of shares
allocated to the participant's account under each plan. For
those shares held under the plan, the proxy card will constitute
an instruction to the trustee under the plan as to how such
shares are to be voted.
By order of the Board of Directors,
Rand C. Schmidt
Corporate Secretary
San Antonio, Texas
March 21, 1995
<PAGE>
Appendix A
VALERO ENERGY CORPORATION
EXECUTIVE STOCK INCENTIVE PLAN
Table of Contents
SECTION 1. Purpose. . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Definitions. . . . . . . . . . . . . . . . . . 1
SECTION 3. Administration . . . . . . . . . . . . . . . . 2
SECTION 4. Shares Available For Awards. . . . . . . . . . 3
Shares Available. . . . . . . . . . . . . . . . . . . 3
Sources of Shares Deliverable Under Awards. . . . . . 3
Adjustments . . . . . . . . . . . . . . . . . . . . . 3
Share Counting. . . . . . . . . . . . . . . . . . . . 4
SECTION 5. Eligibility. . . . . . . . . . . . . . . . . . 4
SECTION 6. Awards . . . . . . . . . . . . . . . . . . . . 4
Options . . . . . . . . . . . . . . . . . . . . . . . 4
Exercise Price . . . . . . . . . . . . . . . . . 4
Incentive Stock Options. . . . . . . . . . . . . 4
Stock Appreciation Rights . . . . . . . . . . . . . . 4
Grant Price. . . . . . . . . . . . . . . . . . . 4
Other Terms and Conditions . . . . . . . . . . . 5
Restricted Stock. . . . . . . . . . . . . . . . . . . 5
Dividends. . . . . . . . . . . . . . . . . . . . 5
Registration . . . . . . . . . . . . . . . . . . 5
Forfeiture . . . . . . . . . . . . . . . . . . . 5
Performance Awards. . . . . . . . . . . . . . . . . . 5
Terms and Conditions . . . . . . . . . . . . . . 5
Payment of Performance Awards. . . . . . . . . . 5
Stock Compensation. . . . . . . . . . . . . . . . . . 6
Other Stock-Based Awards. . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . . 6
Grants . . . . . . . . . . . . . . . . . . . . . 6
Forms of Payment by Company. . . . . . . . . . . 6
Limits on Transfer . . . . . . . . . . . . . . . 6
Term of Awards . . . . . . . . . . . . . . . . . 7
Share Certificates . . . . . . . . . . . . . . . 7
Delivery of Shares or other Securities and
Payment by Participant of Consideration . . . 7
Termination of Employment. . . . . . . . . . . . 7
Award Agreements . . . . . . . . . . . . . . . . 7
Exercise of Option or SAR Awards. . . . . . . . . . . 7
Notice . . . . . . . . . . . . . . . . . . . . . 7
Payment. . . . . . . . . . . . . . . . . . . . . 8
Tax Payment Election . . . . . . . . . . . . . . 8
Payment with Stock . . . . . . . . . . . . . . . 8
Valuation. . . . . . . . . . . . . . . . . . . . 8
Rights as Stockholder. . . . . . . . . . . . . . 8
SECTION 7. Amendment and Termination. . . . . . . . . . . 9
Amendments to the Plan. . . . . . . . . . . . . . . . 9
Amendments to Awards. . . . . . . . . . . . . . . . . 9
Unusual or Nonrecurring Events. . . . . . . . . . . . 9
SECTION 8. Change Of Control. . . . . . . . . . . . . . . 9
Nonacceleration . . . . . . . . . . . . . . . . . . . 9
Effect. . . . . . . . . . . . . . . . . . . . . . . . 10
Defined . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 9. General Provisions . . . . . . . . . . . . . . 11
No Rights to Awards . . . . . . . . . . . . . . . . . 11
Delegation. . . . . . . . . . . . . . . . . . . . . . 11
Withholding . . . . . . . . . . . . . . . . . . . . . 11
No Limit on Other Compensation Arrangements . . . . . 11
No Right to Employment. . . . . . . . . . . . . . . . 11
Governing Law . . . . . . . . . . . . . . . . . . . . 11
Severability. . . . . . . . . . . . . . . . . . . . . 11
Other Laws. . . . . . . . . . . . . . . . . . . . . . 11
No Trust or Fund Created. . . . . . . . . . . . . . . 11
No Fractional Shares. . . . . . . . . . . . . . . . . 12
Headings. . . . . . . . . . . . . . . . . . . . . . . 12
Construction. . . . . . . . . . . . . . . . . . . . . 12
SECTION 10. Effective Date of the Plan. . . . . . . . . . 12
SECTION 11. Term of the Plan. . . . . . . . . . . . . . . 12
<PAGE>
VALERO ENERGY CORPORATION
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.
(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 of not less than
three directors of the Company, which Committee shall be, except
as hereinafter set forth, the Compensation Committee. In the
event the Compensation Committee shall have fewer than three
members, or if fewer than three members of the Compensation
Committee shall be eligible to act with respect to this Plan,
then additional members of the Board of Directors shall be
appointed by the Board to act with and as a part of the
Compensation Committee for purposes of administering this Plan so
that the committee administering this Plan shall consist of at
least three members of the Board of Directors. No person shall
serve on or act as a member of the committee administering this
Plan who would be ineligible to serve on the Committee under Rule
16b-3. 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 full power
and authority to:
(a) designate Participants;
(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 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
twelve-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. In the event that the Committee determines
that any dividend or distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction
or event affects the Shares so that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution
or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee shall
adjust, in such manner as it may deem equitable (i) any or all of
the number and type of Shares (or other securities or property)
with respect to which Awards may be granted, (ii) any or all of
the number and type of Shares (or other securities or property)
subject to outstanding Awards, and/or (iii) the grant or exercise
price with respect to any Award or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding
Award; provided in each case that with respect to Awards of
Incentive Stock Options and Awards intended to qualify as
performance-based compensation under Section 162(m)(4)(C) of the
Code, no adjustment shall be authorized to the extent that the
adjustment would cause the Plan to violate Section 422(b)(1) of
the Code or would cause any part of the Award to fail to qualify
under Section 162(m) of the Code, as the case may be, or any
successor provisions thereto; and provided further, that the
number of Shares subject to any Award denominated in Shares shall
always be a whole number.
(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.
(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; provided
that the Committee may not grant an SAR to any Participant
subject to Section 16 of the Exchange Act that is exercisable
earlier than six months from the date of its grant.
(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.
(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, by the
Participant's beneficiary or by an immediate family member as a
transferee receiving the Award pursuant to a gift if the transfer
is permitted under the terms of the Award Agreement.
(B) 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 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 ten 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 all stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan; the rules,
regulations, and other requirements of the SEC, and any stock
exchange upon which the Shares or other securities are then
listed; 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. 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.
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
or the Committee may prescribe new or additional terms not
inconsistent with the terms of the Plan for the vesting, exercise
or realization of the Award. Absent any determination by the
Committee 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.
(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.
(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").
(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.
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
Chairman of the Board and Chief Executive Officer (or, if the
office is vacant, the President) 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 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 if:
(i) the Company merges or consolidates with any other
Person (other than a wholly owned subsidiary of the Company) and
is not the surviving entity (or survives only as the subsidiary
of another entity);
(ii) the Company sells all or substantially all of its
assets to any other Person (other than a wholly owned subsidiary
of the Company);
(iii) the Company is liquidated or dissolved;
(iv) any "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Exchange Act) other than the
Company, any subsidiary of the Company, any 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 17, 1991,
between the Company and Ameritrust Texas, N.A., successor to
MBank Alamo, N.A. (or any successor Rights Agreement).
(v) 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
(vi) 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 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.
SECTION 11. Term of the Plan.
No Award shall be granted under the Plan ten 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>
Appendix B
The Comparator Group, as identified in the Report of the
Compensation Committee of the Board of Directors on Executive
Compensation, included the following companies for 1994:
El Paso Natural Gas Co.
Citgo Petroleum Corp.
Consolidated Natural Gas Co.
Diamond Shamrock, Inc.
Enron Corp.
Freeport-McMoran Inc.
MAPCO, Inc.
NICOR, Inc.
Panhandle Eastern Corp.
Phillips Petroleum Co.
Sonat Inc.
Sun Company, Inc.
Tenneco, Inc.
Transco Energy Company
The Williams Companies, Inc.
<PAGE>
Appendix C
PROXY CARD PROXY CARD
VALERO ENERGY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 9, 1995
The undersigned hereby appoint(s) William E. Greehey, Stan
L. McLelland and Rand C. Schmidt, Proxies, with full power of
substitution, to represent and to vote all Common Stock and
Preferred Stock, $8.50 Cumulative Series A, of Valero Energy
Corporation ("Energy") owned by the undersigned at the Annual
Meeting of Stockholders to be held in San Antonio, Texas on
Tuesday, May 9, 1995, including any adjournment thereof, with
respect to the matters set forth in the Notice of Annual Meeting
and Proxy Statement. When properly executed, this proxy will be
voted in accordance with the directions indicated herein by the
undersigned, or if no direction is made, will be voted for Items
1, 2 and 3. For shares allocated to a participant's account
pursuant to any Employee Stock Plan of Energy, this proxy will
constitute an instruction to the plan trustee as to how such
shares are to be voted. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come
before the meeting and to vote for a substitute if a nominee
named in Item 1 is unable to serve. The undersigned authorize(s)
the Proxies to cumulate the undersigned's votes and distribute
them among the nominees (excepting any nominee for which
authority to vote is withheld) in equal proportions or in such
other proportions as the Proxies shall direct.
The Board of Directors recommends a vote FOR the election of
Directors and FOR Items 2 and 3.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON
THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
VALERO ENERGY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK
ONLY.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Election of Directors For All
1995 Nominees: Robert G. Dettmer, For Withheld Except Nominee(s) Written Below
Ruben M. Escobedo, Lowell H.
Lebermann, Susan Kaufman Purcell
2. Aproval of Executive Stock For Against Abstain Sign here exactly as name(s) appears
Incentive Plan. on reverse side of card
Dated ___________, 1995
3. Ratification of Arthur Andersen For Against Abstain (x)____________________________________________
& Co. as auditors for 1995.
(x)____________________________________________
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any
adjournments thereof and acknowledges receipt of the
Notice of Annual Meeting and Proxy Statement. If
signing for a corporation or partnership or as agent,
attorney or fiduciary, indicate full title or
capacity in which you are signing.
</TABLE>
