þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware
(State or other jurisdiction of
incorporation or organization) |
74-1828067
(I.R.S. Employer
Identification No.) |
|
One Valero Way
San Antonio, Texas
(Address of principal executive
offices)
|
78249
(Zip Code)
|
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Form 10-K Item No. and Caption | Heading in 2009 Proxy Statement | |
|
||
10. Directors, Executive Officers and
Corporate
Governance
|
Information Regarding the Board of Directors, Independent Directors, Audit Committee, Governance Documents and Codes of Ethics, Proposal No. 1 Election of Directors , Information Concerning Nominees and Other Directors, and Section 16(a) Beneficial Ownership Reporting Compliance | |
|
||
11. Executive Compensation
|
Compensation Committee, Compensation Discussion and Analysis, Director Compensation, Executive Compensation, and Certain Relationships and Related Transactions | |
|
||
12. Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
|
Beneficial Ownership of Valero Securities and Equity Compensation Plan Information | |
|
||
13. Certain Relationships and Related
Transactions, and Director
Independence
|
Certain Relationships and
Related Transactions
and
Independent Directors
|
|
|
||
14. Principal Accountant Fees and Services
|
KPMG Fees for Fiscal Year 2008, KPMG Fees for Fiscal Year 2007, and Audit Committee Pre-Approval Policy |
ii
PAGE | ||||||
1 | ||||||
2 | ||||||
3 | ||||||
12 | ||||||
16 | ||||||
16 | ||||||
17 | ||||||
17 | ||||||
18 | ||||||
19 | ||||||
|
||||||
20 | ||||||
23 | ||||||
24 | ||||||
51 | ||||||
57 | ||||||
132 | ||||||
132 | ||||||
132 | ||||||
|
||||||
133 | ||||||
Item 11.
|
Executive Compensation
|
133 | ||||
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
|
133 | ||||
Item 13.
|
Certain Relationships and Related Transactions, and Director
Independence
|
133 | ||||
Item 14.
|
Principal Accountant Fees and Services
|
133 | ||||
|
||||||
133 | ||||||
|
||||||
138 | ||||||
|
iii
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
1
Table of Contents
Table of Contents
Throughput Capacity
(a)
Refinery
Location
(barrels
per day)
Texas
315,000
Texas
310,000
Louisiana
250,000
Texas
245,000
Aruba
235,000
Texas
145,000
Texas
100,000
1,600,000
California
170,000
California
135,000
305,000
Tennessee
195,000
Texas
170,000
Oklahoma
90,000
455,000
Quebec, Canada
235,000
Delaware
210,000
New Jersey
185,000
630,000
2,990,000
(a)
(b)
Table of Contents
Percentage
Charges:
48
%
3
%
23
%
9
%
5
%
12
%
Yields:
45
%
35
%
3
%
17
%
Percentage
Charges:
57
%
9
%
13
%
7
%
14
%
Yields:
41
%
34
%
4
%
21
%
Table of Contents
Table of Contents
Percentage
Charges:
68
%
4
%
1
%
11
%
16
%
Yields:
60
%
25
%
15
%
Table of Contents
Percentage
Charges:
13
%
79
%
1
%
7
%
Yields:
49
%
40
%
3
%
8
%
Table of Contents
Percentage
Charges:
40
%
11
%
29
%
7
%
4
%
9
%
Yields:
43
%
38
%
1
%
18
%
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Name
Age*
Positions Held with Valero
Officer Since
62
Chief Executive Officer, President, and
Chairman of the Board
2001
44
Executive Vice President and General
Counsel
2003
51
Executive Vice President and Chief Financial
Officer
1998
52
Executive Vice President-Corporate Development
and Strategic Planning
1998
51
Executive Vice President-Marketing
and Supply
2003
56
Executive Vice President and Chief
Operating Officer
2001
Table of Contents
Table of Contents
Table of Contents
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
Sales Prices of the
Dividends
Common Stock
Per
Quarter Ended
High
Low
Common Share
$
30.36
$
13.94
$
0.15
40.74
28.20
0.15
55.00
39.20
0.15
71.12
44.94
0.12
$
75.75
$
60.80
$
0.12
78.68
60.00
0.12
77.89
63.53
0.12
66.02
47.66
0.12
Table of Contents
Period
Total
Average
Total Number of
Total Number of
Approximate Dollar
Number of
Price
Shares Not
Shares Purchased
Value of Shares that
Shares
Paid per
Purchased as Part
as Part of
May Yet Be Purchased
Purchased
Share
of Publicly
Publicly
Under the Plans or
Announced Plans
Announced Plans
Programs (2)
or Programs (1)
or Programs
8,366,493
$
21.62
446,928
7,919,565
$ 3.46 billion
20,526
$
19.61
20,526
$ 3.46 billion
507
$
17.52
507
$ 3.46 billion
8,387,526
$
21.61
467,961
7,919,565
$ 3.46 billion
(1)
(2)
Table of Contents
A New Peer Group and an Old Peer Group
12/2003
12/2004
12/2005
12/2006
12/2007
12/2008
$
100
$
197.64
$
451.53
$
450.06
$
620.65
$
195.21
100
110.88
116.33
134.70
142.10
89.53
100
128.93
152.64
205.69
263.27
202.99
100
129.30
153.99
206.52
268.02
207.99
*
Table of Contents
Year Ended December 31,
2008 (a)
2007 (a) (b)
2006 (a) (b)
2005 (a) (b) (c)
2004 (a) (d)
$
119,114
$
95,327
$
87,640
$
80,616
$
54,589
563
6,918
7,722
5,268
2,979
(1,131
)
4,565
5,287
3,473
1,804
assuming dilution
(2.16
)
7.72
8.36
5.90
3.27
0.57
0.48
0.30
0.19
0.145
23,213
21,560
20,032
17,266
10,234
4,019
4,061
4,792
2,388
34,417
42,722
37,753
32,798
19,392
6,264
6,470
4,619
5,156
3,901
15,620
18,507
18,605
15,050
7,798
(a)
(b)
(c)
(d)
(e)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
(millions of dollars, except per share amounts)
Year Ended December 31,
2008
2007 (a)
Change
$
119,114
$
95,327
$
23,787
107,429
81,645
25,784
4,555
4,016
539
768
750
18
559
638
(79
)
1,327
1,222
105
105
90
15
44
48
(4
)
(305
)
(305
)
4,069
4,069
118,551
88,409
30,142
563
6,918
(6,355
)
113
167
(54
)
(451
)
(466
)
15
111
107
4
336
6,726
(6,390
)
1,467
2,161
(694
)
(1,131
)
4,565
(5,696
)
669
(669
)
$
(1,131
)
$
5,234
$
(6,365
)
$
(2.16
)
$
7.72
$
(9.88
)
1.16
(1.16
)
$
(2.16
)
$
8.88
$
(11.04
)
See the footnote references
on page 31.
Table of Contents
(millions of dollars, except per barrel and per gallon amounts)
Year Ended December 31,
2008
2007
Change
$
797
$
7,355
$
(6,558
)
$
10.79
$
12.33
$
(1.54
)
$
4.71
$
3.93
$
0.78
1.37
1.20
0.17
$
6.08
$
5.13
$
0.95
592
638
(46
)
673
635
38
79
80
(1
)
606
724
(118
)
228
247
(19
)
149
173
(24
)
2,327
2,497
(170
)
316
301
15
2,643
2,798
(155
)
1,187
1,285
(98
)
915
919
(4
)
71
82
(11
)
463
507
(44
)
2,636
2,793
(157
)
$
260
$
154
$
106
973
957
16
5,000
4,979
21
$
0.229
$
0.174
$
0.055
$
1,097
$
1,024
$
73
29.9
%
29.7
%
0.2
%
$
99
$
101
$
(2
)
$
505
$
494
$
11
$
70
$
59
$
11
$
109
$
95
$
14
3,193
3,234
(41
)
$
0.268
$
0.248
$
0.020
$
200
$
187
$
13
28.5
%
27.8
%
0.7
%
$
36
$
37
$
(1
)
$
263
$
256
$
7
$
35
$
31
$
4
See the footnote references
on page 31.
Table of Contents
(millions of dollars, except per barrel amounts)
Year Ended December 31,
2008
2007
Change
$
3,191
$
4,505
$
(1,314
)
1,404
1,537
(133
)
$
11.57
$
12.81
$
(1.24
)
$
4.65
$
3.70
$
0.95
1.30
1.08
0.22
$
5.95
$
4.78
$
1.17
$
577
$
910
$
(333
)
423
402
21
$
9.27
$
11.66
$
(2.39
)
$
4.26
$
4.13
$
0.13
1.29
1.33
(0.04
)
$
5.55
$
5.46
$
0.09
$
724
$
1,084
$
(360
)
540
570
(30
)
$
9.95
$
10.46
$
(0.51
)
$
4.88
$
3.98
$
0.90
1.40
1.27
0.13
$
6.28
$
5.25
$
1.03
$
374
$
856
$
(482
)
276
289
(13
)
$
10.84
$
14.41
$
(3.57
)
$
5.37
$
4.82
$
0.55
1.77
1.49
0.28
$
7.14
$
6.31
$
0.83
$
4,866
$
7,355
$
(2,489
)
(4,069
)
(4,069
)
$
797
$
7,355
$
(6,558
)
See the footnote references
on page 31.
Table of Contents
(dollars per barrel)
Year Ended December 31,
2008
2007
Change
$
99.56
$
72.27
$
27.29
5.20
4.95
0.25
6.13
5.61
0.52
1.22
0.58
0.64
15.71
12.41
3.30
4.85
13.78
(8.93
)
18.35
11.94
6.41
22.96
17.76
5.20
(3.69
)
11.05
(14.74
)
4.46
18.02
(13.56
)
24.12
21.30
2.82
3.22
13.98
(10.76
)
20.23
12.96
7.27
68.79
48.29
20.50
11.15
23.80
(12.65
)
23.81
22.66
1.15
The following notes relate to
references on pages 28 through 31.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Table of Contents
Table of Contents
Table of Contents
Table of Contents
(millions of dollars, except per share amounts)
Year Ended December 31,
2007 (a)
2006 (a)
Change
$
95,327
$
87,640
$
7,687
81,645
73,863
7,782
4,016
3,622
394
750
719
31
638
598
40
1,222
985
237
90
87
3
48
44
4
88,409
79,918
8,491
6,918
7,722
(804
)
45
(45
)
167
350
(183
)
(466
)
(377
)
(89
)
107
165
(58
)
(7
)
7
6,726
7,898
(1,172
)
2,161
2,611
(450
)
4,565
5,287
(722
)
669
176
493
5,234
5,463
(229
)
2
(2
)
$
5,234
$
5,461
$
(227
)
$
7.72
$
8.36
$
(0.64
)
1.16
0.28
0.88
$
8.88
$
8.64
$
0.24
See the footnote references
on page 38.
Table of Contents
(millions of dollars, except per barrel and per gallon amounts)
Year Ended December 31,
2007
2006
Change
$
7,355
$
8,182
$
(827
)
$
12.33
$
12.47
$
(0.14
)
$
3.93
$
3.53
$
0.40
1.20
0.96
0.24
$
5.13
$
4.49
$
0.64
638
697
(59
)
635
618
17
80
65
15
724
752
(28
)
247
234
13
173
147
26
2,497
2,513
(16
)
301
298
3
2,798
2,811
(13
)
1,285
1,348
(63
)
919
891
28
82
80
2
507
491
16
2,793
2,810
(17
)
$
154
$
113
$
41
957
982
(25
)
4,979
4,985
(6
)
$
0.174
$
0.162
$
0.012
$
1,024
$
960
$
64
29.7
%
29.6
%
0.1
%
$
101
$
85
$
16
$
494
$
485
$
9
$
59
$
60
$
(1
)
$
95
$
69
$
26
3,234
3,176
58
$
0.248
$
0.217
$
0.031
$
187
$
167
$
20
27.8
%
27.4
%
0.4
%
$
37
$
32
$
5
$
256
$
234
$
22
$
31
$
27
$
4
See the footnote references
on page 38.
Table of Contents
(millions of dollars, except per barrel amounts)
Year Ended December 31,
2007
2006
Change
$
4,505
$
5,109
$
(604
)
1,537
1,532
5
$
12.81
$
13.23
$
(0.42
)
$
3.70
$
3.26
$
0.44
1.08
0.84
0.24
$
4.78
$
4.10
$
0.68
$
910
$
1,041
$
(131
)
402
410
(8
)
$
11.66
$
11.32
$
0.34
$
4.13
$
3.36
$
0.77
1.33
1.00
0.33
$
5.46
$
4.36
$
1.10
$
1,084
$
944
$
140
570
563
7
$
10.46
$
9.80
$
0.66
$
3.98
$
4.10
$
(0.12
)
1.27
1.11
0.16
$
5.25
$
5.21
$
0.04
$
856
$
1,088
$
(232
)
289
306
(17
)
$
14.41
$
15.07
$
(0.66
)
$
4.82
$
4.04
$
0.78
1.49
1.27
0.22
$
6.31
$
5.31
$
1.00
See the footnote references
on page 38.
Table of Contents
(dollars per barrel)
Year Ended December 31,
2007
2006
Change
$
72.27
$
66.00
$
6.27
4.95
7.01
(2.06
)
5.61
7.12
(1.51
)
0.58
2.47
(1.89
)
12.41
14.80
(2.39
)
13.78
11.34
2.44
11.94
9.80
2.14
17.76
N.A.
N.A.
11.05
8.78
2.27
18.02
12.16
5.86
21.30
18.59
2.71
13.98
10.62
3.36
12.96
9.60
3.36
48.29
55.56
(7.27
)
23.80
21.52
2.28
22.66
23.96
(1.30
)
The following notes relate to
references on pages 35 through 38.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Table of Contents
Table of Contents
Table of Contents
Net cash provided by operating activities for the year ended December 31, 2008 was $3.0 billion
compared to $5.3 billion for the year ended December 31, 2007. The decrease in cash generated from
operating activities was due primarily to the decrease in operating income discussed above under
Results of Operations
, after excluding the effect of the goodwill impairment loss included in the
2008 operating income that had no effect on cash. Changes in cash provided by or used for working
capital during the years ended December 31, 2008 and 2007 are shown in Note 16 of Notes to
Consolidated Financial Statements. Both receivables and accounts payable decreased in 2008 due to
a significant decrease in crude oil and refined product prices at December 31, 2008 compared to
such prices at the end of 2007. Receivables for 2008 also decreased due to the termination in the
first quarter of 2008 of certain agreements related to the sale of the Lima Refinery to Husky and
the timing of receivable collections at year-end 2007. The change in working capital for 2007
includes a $900 million decrease in the eligible trade receivables sold under our accounts
receivable sales facility as discussed below in the discussion of 2007 versus 2006 cash flows.
pay common stock dividends of $299 million.
Table of Contents
Net cash provided by operating activities for the year ended December 31, 2007 was $5.3 billion
compared to $6.3 billion for the year ended December 31, 2006. The decrease in cash generated from
operating activities was due primarily to the decrease in operating income discussed above under
Results of Operations
and a $900 million decrease in the eligible trade receivables sold under
our accounts receivable sales facility, as discussed in Note 4 of Notes to Consolidated Financial
Statements. Other changes in cash provided by or used for working capital during the years ended
December 31, 2007 and 2006 are shown in Note 16 of Notes to Consolidated Financial Statements.
Both receivables and accounts payable increased in 2007 due to a significant increase in gasoline,
distillate, and crude oil prices at December 31, 2007 compared to such prices at the end of 2006.
pay common stock dividends of $271 million; and
increase available cash on hand by $874 million.
During the year ended December 31, 2008, we expended $2.8 billion for capital expenditures and
$408 million for deferred turnaround and catalyst costs. Capital expenditures for the year ended
December 31, 2008 included $479 million of costs related to environmental projects.
Table of Contents
Effective July 1, 2008, we consummated the sale of our Krotz Springs Refinery to Alon Refining
Krotz Springs, Inc. (Alon), a subsidiary of Alon USA Energy, Inc. The sale resulted in a pre-tax
gain of $305 million, or $170 million after tax. Cash proceeds, net of certain costs related to
the sale, were $463 million, including approximately $135 million from the sale of working capital
to Alon primarily related to the sale of inventory by our marketing and supply subsidiary. In
addition to the cash consideration received, we also received contingent consideration in the form
of a three-year earn-out agreement based on certain product margins, which had a fair value of
$171 million as of July 1, 2008. We have hedged the risk of a decline in the referenced product
margins by entering into certain commodity derivative contracts. In addition, we entered into
various agreements with Alon as further described in Note 2 of Notes to Consolidated Financial
Statements.
Our contractual obligations as of December 31, 2008 are summarized below (in millions).
Payments Due by Period
2009
2010
2011
2012
2013
Thereafter
Total
$
315
$
39
$
424
$
765
$
495
$
4,619
$
6,657
397
272
174
84
51
257
1,235
12,812
2,507
1,589
1,208
623
1,752
20,491
163
150
150
149
1,549
2,161
$
13,524
$
2,981
$
2,337
$
2,207
$
1,318
$
8,177
$
30,544
Payments for debt and capital lease obligations in the table above reflect stated values and
minimum rental payments, respectively.
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BBB (stable outlook)
Baa2 (stable outlook)
BBB (stable outlook)
Our operating lease obligations include leases for land, office facilities and equipment, retail
facilities and equipment, dock facilities, transportation equipment, and various facilities and
equipment used in the storage, transportation, production, and sale of refinery feedstocks and
refined products. Operating lease obligations include all operating leases that have initial or
remaining noncancelable terms in excess of one year, and are not reduced by minimum rentals to be
received by us under subleases. The operating lease obligations reflected in the table above have
been reduced by related obligations that are included in other long-term liabilities.
A purchase obligation is an enforceable and legally binding agreement to purchase goods or services
that specifies significant terms, including (i) fixed or minimum quantities to be purchased, (ii)
fixed, minimum, or variable price provisions, and (iii) the approximate timing of the transaction.
We have various purchase obligations including industrial gas and chemical supply arrangements
(such as hydrogen supply arrangements), crude oil and other feedstock supply arrangements, and
various throughput and terminalling agreements. We enter into these contracts to ensure an
adequate supply of utilities and feedstock and adequate storage capacity to operate our refineries.
Substantially all of our purchase obligations are based on market prices or adjustments based on
market indices. Certain of these purchase obligations include fixed or minimum volume
requirements, while others are based on our usage requirements. The purchase obligation amounts
included in the table above include both short-term and long-term obligations and are based on (a)
fixed or minimum quantities to be purchased and (b) fixed or estimated prices to be paid based on
current market conditions. As of December 31, 2008, our short-term and long-term purchase
obligations decreased by $18.2 billion from the amount reported as of December 31, 2007. The
decrease is primarily attributable to lower crude oil and other feedstock prices at December 31,
2008 compared to December 31, 2007.
Our other long-term liabilities are described in Note 13 of Notes to Consolidated Financial
Statements. For purposes of reflecting amounts for other long-term liabilities in the table above,
we have made our best estimate of expected payments for each type of liability based on information
available as of December 31, 2008.
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As of December 31, 2008, our committed lines of credit were as follows:
Borrowing
$300 million
June 2009
$275 million
July 2009
$2.5 billion
November 2012
Cdn. $115 million
December 2012
On February 28, 2008, our board of directors approved a new $3 billion common stock purchase
program. This program is in addition to the remaining amount under the $6 billion program
previously authorized. This new $3 billion program has no expiration date. As of December 31,
2008, we had made no purchases of our common stock under the new $3 billion program. As of
December 31, 2008, we have approvals under these stock purchase programs to purchase approximately
$3.5 billion of our common stock.
During 2008, we contributed $110 million to our qualified pension plans. Based on a 5.40% discount
rate and fair values of plan assets as of December 31, 2008, the fair value of the assets in our
qualified pension plans was equal to approximately 76% of the projected benefit obligation under
those plans as of the end of 2008. The fair value of the assets in our qualified pension plans was
in excess of the projected benefit obligation under those plans as of December 31, 2007. However,
due primarily to a significant decline in the fair value of the plan assets during 2008 resulting
from unfavorable economic and market conditions, the qualified pension plans were underfunded as of
December 31, 2008.
As discussed in Note 24 of Notes to Consolidated Financial Statements, we are subject to extensive
federal, state, and local environmental laws and regulations, including those relating to the
discharge of materials into the environment, waste management, pollution prevention measures,
greenhouse gas
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As discussed in Note 23 of Notes to Consolidated Financial Statements, we are subject to extensive
tax liabilities. New tax laws and regulations and changes in existing tax laws and regulations are
continuously being enacted or proposed that could result in increased expenditures for tax
liabilities in the future. Many of these liabilities are subject to periodic audits by the
respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits
may subject us to interest and penalties.
In July 2008, we entered into an agreement to participate as a prospective shipper on the 500,000
barrel-per-day expansion of the Keystone crude oil pipeline system, which is expected to be
completed by 2012. Once completed, the pipeline will enable crude oil to be transported from
Western Canada to the U.S. Gulf Coast at Port Arthur, Texas. In addition to our commitment to ship
crude oil through the pipeline, we have an option to acquire an equity interest in the Keystone
partnerships. We have also secured commitments from several Canadian oil producers to sell to us
heavy sour crude oil for shipment through the pipeline.
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Long-lived assets (excluding goodwill, intangible assets with indefinite lives, equity method
investments, and deferred tax assets) are required to be tested for recoverability whenever events
or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.
An impairment loss should be recognized only if the carrying amount of the asset is not recoverable
and exceeds its fair value.
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Our operations are subject to extensive environmental regulation by federal, state, and local
authorities relating primarily to discharge of materials into the environment, waste management,
and pollution prevention measures. Future legislative action and regulatory initiatives could
result in changes to required operating permits, additional remedial actions, or increased capital
expenditures and operating costs that cannot be assessed with certainty at this time.
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We have significant pension and other postretirement benefit liabilities and costs that are
developed from actuarial valuations. Inherent in these valuations are key assumptions including
discount rates, expected return on plan assets, future compensation increases, and health care cost
trend rates. Changes in these assumptions are primarily influenced by factors outside our control.
For example, the discount rate assumption represents a yield curve comprised of various long-term
bonds that each receive one of the two highest ratings given by the recognized rating agencies as
of the end of each year, while the expected return on plan assets is based on a compounded return
calculated for us by an outside consultant using historical market index data with an asset
allocation of 65% equities and 35% bonds, which is representative of the asset mix in our qualified
pension plans. These assumptions can have a significant effect on the amounts reported in our
consolidated financial statements. For example, a 0.25% decrease in the assumptions related to the
discount rate or expected return on plan assets or a 0.25% increase in the assumptions related to
the health care cost trend rate or rate of compensation increase would have the following effects
on the projected benefit obligation as of December 31, 2008 and net periodic benefit cost for the
year ending December 31, 2009 (in millions):
Other
Pension
Postretirement
$
66
$
15
28
9
10
1
4
6
1
Our operations are subject to extensive tax liabilities, including federal, state, and foreign
income taxes. We are also subject to various transactional taxes such as excise, sales/use,
payroll, franchise, withholding, and ad valorem taxes. New tax laws and regulations and changes in
existing tax laws and regulations are continuously being enacted or proposed, and the
implementation of future legislative and regulatory tax initiatives could result in increased tax
liabilities that cannot be predicted at this time. In addition, we have received claims from
various jurisdictions related to certain tax matters. Tax liabilities include potential
assessments of penalty and interest amounts.
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A variety of claims have been made against us in various lawsuits. Although we have been
successful in defending litigation in the past, we cannot be assured of similar success in future
litigation due to the inherent uncertainty of litigation and the individual fact circumstances in
each case. We record a liability related to a loss contingency attributable to such legal matters
if we determine the loss to be both probable and estimable. The recording of such liabilities
requires judgments and estimates, the results of which can vary significantly from actual
litigation results due to differing interpretations of relevant law and differing opinions
regarding the degree of potential liability and the assessment of reasonable damages. However, an
estimate of the sensitivity to earnings if other assumptions were used in recording our legal
liabilities is not practicable due to the number of contingencies that must be assessed and the
wide range of reasonably possible outcomes, both in terms of the probability of loss and the
estimates of such loss.
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December 31, 2008
Wtd Avg
Wtd Avg
Pre-tax
Contract
Pay
Receive
Contract
Market
Fair
Volumes
Price
Price
Value
Value
Value
6,904
N/A
$
48.28
$
333
$
320
$
13
60,162
$
121.69
58.44
N/A
(3,805
)
(3,805
)
4,680
63.72
64.03
N/A
1
1
60,162
62.38
129.80
N/A
4,056
4,056
4,680
76.32
78.69
N/A
11
11
780
38.62
N/A
30
27
(3
)
25,987
96.88
55.25
N/A
(1,082
)
(1,082
)
19,734
105.96
63.94
N/A
(829
)
(829
)
3,900
124.78
67.99
N/A
(221
)
(221
)
25,931
59.65
106.81
N/A
1,223
1,223
19,734
72.18
121.96
N/A
982
982
3,900
74.08
136.66
N/A
244
244
135,882
59.17
N/A
8,040
7,319
(721
)
3,466
78.33
N/A
271
240
(31
)
4,310
8.46
N/A
36
24
(12
)
135,091
N/A
62.74
8,475
7,510
965
3,692
N/A
84.66
313
276
37
4,310
N/A
5.68
24
24
57
60.64
N/A
1
(1
)
19,887
77.56
45.09
N/A
(646
)
(646
)
10,050
40.66
35.35
N/A
(53
)
(53
)
1,950
78.36
65.80
N/A
(24
)
(24
)
16,084
56.44
97.17
N/A
655
655
5,850
64.19
73.12
N/A
52
52
1,950
68.06
80.59
N/A
24
24
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December 31, 2008
Wtd Avg
Wtd Avg
Pre-tax
Contract
Pay
Receive
Contract
Market
Fair
Volumes
Price
Price
Value
Value
Value
24,039
$
71.70
N/A
$
1,724
$
1,300
$
(424
)
956
84.12
N/A
80
70
(10
)
200
5.79
N/A
1
1
21,999
N/A
73.38
1,614
1,209
405
956
N/A
83.63
80
70
10
200
N/A
5.82
1
1
100
30.00
N/A
$
816
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December 31, 2007
Wtd Avg
Wtd Avg
Pre-tax
Contract
Pay
Receive
Contract
Market
Fair
Volumes
Price
Price
Value
Value
Value
68,873
$
97.69
N/A
$
6,728
$
6,961
$
233
79,188
N/A
$
96.89
7,673
8,005
(332
)
18,175
81.44
98.50
N/A
310
310
18,175
102.55
86.25
N/A
(296
)
(296
)
80,960
103.50
N/A
8,379
8,596
217
73,735
N/A
103.62
7,640
7,826
(186
)
12,012
33.16
39.48
N/A
76
76
7,397
63.91
54.25
N/A
(71
)
(71
)
77,902
96.20
N/A
7,494
7,802
308
76,426
N/A
96.18
7,351
7,663
(312
)
89
47.72
N/A
1
1
14,677
11.77
12.98
N/A
18
18
15,952
12.47
11.56
N/A
(15
)
(15
)
28,801
98.01
N/A
2,823
2,923
100
28,766
N/A
98.20
2,824
2,920
(96
)
66
N/A
49.00
1
1
$
(45
)
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December 31, 2008
Expected Maturity Dates
There-
Fair
2009
2010
2011
2012
2013
after
Total
Value
$
209
$
33
$
418
$
759
$
489
$
4,597
$
6,505
$
6,362
3.6
%
6.8
%
6.4
%
6.9
%
5.5
%
6.8
%
6.6
%
$
100
$
$
$
$
$
$
100
$
100
3.9
%
%
%
%
%
%
3.9
%
December 31, 2007
Expected Maturity Dates
There-
Fair
2008
2009
2010
2011
2012
after
Total
Value
$
356
$
209
$
33
$
418
$
759
$
5,086
$
6,861
$
7,109
9.4
%
3.6
%
6.8
%
6.4
%
6.9
%
6.7
%
6.8
%
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Table of Contents
of Valero Energy Corporation and subsidiaries:
February 26, 2009
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of Valero Energy Corporation and subsidiaries:
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February 26, 2009
Table of Contents
(Millions of Dollars, Except Par Value)
Table of Contents
(Millions of Dollars, Except per Share Amounts)
Year Ended December 31,
2008
2007
2006
$
119,114
$
95,327
$
87,640
107,429
81,645
73,863
4,555
4,016
3,622
768
750
719
559
638
598
1,476
1,360
1,116
(305
)
4,069
118,551
88,409
79,918
563
6,918
7,722
45
113
167
350
(451
)
(466
)
(377
)
111
107
165
(7
)
336
6,726
7,898
1,467
2,161
2,611
(1,131
)
4,565
5,287
669
176
(1,131
)
5,234
5,463
2
$
(1,131
)
$
5,234
$
5,461
$
(2.16
)
$
8.08
$
8.65
1.19
0.29
$
(2.16
)
$
9.27
$
8.94
524
565
611
$
(2.16
)
$
7.72
$
8.36
1.16
0.28
$
(2.16
)
$
8.88
$
8.64
assuming dilution (in millions)
524
579
632
$
0.57
$
0.48
$
0.30
$
816
$
801
$
782
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(Millions of Dollars)
Accumulated
Additional
Other
Preferred
Common
Paid-in
Treasury
Retained
Comprehensive
Stock
Stock
Capital
Stock
Earnings
Income (Loss)
$
68
$
6
$
8,164
$
(196
)
$
6,673
$
335
5,463
(183
)
1
(2
)
(69
)
69
101
81
(636
)
(1,200
)
29
(99
)
6
7,779
(1,396
)
11,951
265
5,234
(271
)
89
(4,873
)
(757
)
172
308
6
7,111
(6,097
)
16,914
573
(1,131
)
(299
)
62
(667
)
17
(120
)
(749
)
$
$
6
$
7,190
$
(6,884
)
$
15,484
$
(176
)
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(Millions of Dollars)
Year Ended December 31,
2008
2007
2006
$
(1,131
)
$
5,234
$
5,463
1,476
1,376
1,155
4,069
(305
)
(827
)
(328
)
(76
)
(10
)
31
59
100
108
675
(131
)
290
(1,630
)
(469
)
(144
)
(145
)
(15
)
(263
)
2,992
5,258
6,312
(2,790
)
(2,260
)
(3,187
)
(408
)
(518
)
(569
)
463
2,428
880
(25
)
(75
)
(101
)
24
(209
)
(26
)
25
63
64
(144
)
(7
)
(11
)
(32
)
(2,862
)
(582
)
(2,971
)
2,245
(374
)
(463
)
(249
)
296
3,000
830
(296
)
(3,000
)
(830
)
(54
)
(955
)
(5,788
)
(2,020
)
16
159
122
9
311
206
(299
)
(271
)
(184
)
(4
)
(24
)
(9
)
(1,607
)
(3,831
)
(2,188
)
(47
)
29
1
(1,524
)
874
1,154
2,464
1,590
436
$
940
$
2,464
$
1,590
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(Millions of Dollars)
Year Ended December 31,
2008
2007
2006
$
(1,131
)
$
5,234
$
5,463
(490
)
250
(11
)
(410
)
80
(1
)
(1
)
6
(411
)
86
(1
)
85
(11
)
70
67
(17
)
(29
)
152
(28
)
41
(749
)
308
29
$
(1,880
)
$
5,542
$
5,492
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As used in this report, the terms Valero, we, us, or our may refer to Valero Energy
Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole. We are
an independent refining and marketing company and own and operate 16 refineries with a combined
total throughput capacity as of December 31, 2008 of approximately 3.0 million barrels per day. We
market our refined products through an extensive bulk and rack marketing network and approximately
5,800 retail and wholesale branded outlets in the United States and eastern Canada under various
brand names including Valero
®
, Diamond Shamrock
®
, Shamrock
®
,
Ultramar
®
, and Beacon
®
. Our operations are affected by:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In May 2008, the Financial Accounting Standards Board (FASB) issued Statement No. 162, The
Hierarchy of Generally Accepted Accounting Principles. Statement No. 162 identifies the sources
of accounting principles and the framework for selecting the principles used in the preparation of
financial statements that are presented in conformity with United States generally accepted
accounting principles (GAAP). Statement No. 162 was effective November 15, 2008. The adoption of
Statement No. 162 has not affected our financial position or results of operations.
The preparation of financial statements in conformity with GAAP requires our management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. Actual results could differ from those estimates. On an ongoing basis,
management reviews its estimates based on currently available information. Changes in facts and
circumstances may result in revised estimates.
Our temporary cash investments are highly liquid, low-risk debt instruments that have a maturity of
three months or less when acquired. Cash and temporary cash investments exclude cash that is not
available to us due to restrictions related to its use. Such amounts are segregated in the
consolidated balance sheets in restricted cash as described in Note 3.
Inventories are carried at the lower of cost or market. The cost of refinery feedstocks purchased
for processing and refined products are determined under the last-in, first-out (LIFO) method using
the dollar-value LIFO method, with any increments valued based on average purchase prices during
the year. The cost of feedstocks and products purchased for resale and the cost of materials,
supplies, and convenience store merchandise are determined principally under the weighted-average
cost method.
Additions to property, plant and equipment, including capitalized interest and certain costs
allocable to construction and property purchases, are recorded at cost.
Goodwill represents the excess of the cost of an acquired entity over the fair value of the assets
acquired less liabilities assumed. Intangible assets are assets that lack physical substance
(excluding financial
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deferred charges and other assets, net include the following:
Long-lived assets (excluding goodwill, intangible assets with indefinite lives, equity method
investments, and deferred tax assets) are tested for recoverability whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. A long-lived asset is not
recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to
result from its use and eventual disposition. If a long-lived asset is not recoverable, an
impairment loss is recognized in an amount by which its carrying amount exceeds its fair value,
with fair value determined based on discounted estimated net cash flows. We believe that the
carrying amounts of our long-lived assets as of December 31, 2008 are recoverable.
Taxes other than income taxes includes primarily liabilities for ad valorem, excise, sales and
use, and payroll taxes.
Income taxes are accounted for under the asset and liability method. Under this method, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred amounts are measured using enacted tax rates expected to
apply to taxable income in the year those temporary differences are expected to be recovered or
settled.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We record a liability, which is referred to as an asset retirement obligation, at fair value for
the estimated cost to retire a tangible long-lived asset at the time we incur that liability, which
is generally when the asset is purchased, constructed, or leased. We record the liability when we
have a legal obligation to incur costs to retire the asset and when a reasonable estimate of the
fair value of the liability can be made. If a reasonable estimate cannot be made at the time the
liability is incurred, we record the liability when sufficient information is available to estimate
the liabilitys fair value.
The functional currencies of our Canadian and Aruban operations are the Canadian dollar and the
Aruban florin, respectively. The translation of the Canadian operations into U.S. dollars is
computed for balance
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenues for products sold by both the refining and retail segments are recorded upon delivery of
the products to our customers, which is the point at which title to the products is transferred,
and when payment has either been received or collection is reasonably assured. Revenues for
services are recorded when the services have been provided.
Costs incurred for shipping and handling of products are included in cost of sales in the
consolidated statements of income.
Liabilities for future remediation costs are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. Other than for
assessments, the timing and magnitude of these accruals generally are based on the completion of
investigations or other studies or a commitment to a formal plan of action. Environmental
liabilities are based on best estimates of probable
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All derivative instruments are recorded in the balance sheet as either assets or liabilities
measured at their fair values. When we enter into a derivative instrument, it is designated as a
fair value hedge, a cash flow hedge, an economic hedge, or a trading activity. The gain or loss on
a derivative instrument designated and qualifying as a fair value hedge, as well as the offsetting
loss or gain on the hedged item attributable to the hedged risk, are recognized currently in income
in the same period. The effective portion of the gain or loss on a derivative instrument
designated and qualifying as a cash flow hedge is initially reported
as a component of other comprehensive income and is then recorded in income in the period or
periods during which the hedged forecasted transaction affects income. The ineffective portion of
the gain or loss on the cash flow derivative instrument, if any, is recognized in income as
incurred. For our economic hedging relationships (hedges not designated as fair value or cash flow
hedges) and for derivative instruments entered into by us for trading purposes, the derivative
instrument is recorded at fair value and changes in the fair value of the derivative instrument are
recognized currently in income. Income effects of commodity derivative instruments, other than
certain contracts related to an earn-out agreement discussed in Notes 2 and 17, are recorded in cost of sales while income effects of interest rate swaps (if
applicable) are recorded in interest and debt expense.
Our financial instruments include cash and temporary cash investments, restricted cash,
receivables, payables, debt, capital lease obligations, commodity derivative contracts, and foreign
currency derivative contracts. The estimated fair values of these financial instruments
approximate their carrying amounts as reflected in the consolidated balance sheets, except for
certain debt as discussed in Note 12. The fair values of our debt,
commodity derivative contracts, and foreign currency derivative contracts were estimated primarily
based on year-end quoted market prices.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. Statement No. 157
defines fair value, establishes a framework for measuring fair value under GAAP, and expands
disclosures about fair value measures, but does not require any new fair value measurements. We
adopted Statement No. 157 effective January 1, 2008, with the exceptions allowed under FASB Staff
Position No. FAS 157-2 (FSP No. FAS 157-2) (further described under
New Accounting
Pronouncements"
)
,
the adoption of which did not affect our financial position or results of
operations but did result in additional required disclosures, which are provided in Note 17.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Earnings per common share is computed by dividing net income applicable to common stock by the
weighted-average number of common shares outstanding for the year. Earnings per common share
assuming dilution reflects the potential dilution of our outstanding stock options and nonvested
shares granted to employees in connection with our stock compensation plans, as well as the 2%
mandatory convertible preferred stock prior to its conversion as discussed in Note 14. In addition, see Notes 14 and 15 for a discussion of an accelerated share repurchase program during 2007 and its
effect on earnings per common share assuming dilution for the year ended December 31, 2007. Common
equivalent shares were excluded from the computation of diluted earnings per share for the year
ended December 31, 2008 because the effect of including such shares would be anti-dilutive.
Comprehensive income consists of net income (loss) and other gains and losses affecting
stockholders equity that, under GAAP, are excluded from net income (loss), including foreign
currency translation adjustments, gains and losses related to certain derivative contracts, and
gains or losses, prior service
costs or credits, and transition assets or obligations associated with pension or other
postretirement benefits that have not been recognized as components of net periodic benefit cost.
In September 2006, the FASB issued Statement No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans, which amends Statement No. 87, Employers Accounting for
Pensions, Statement No. 88, Employers Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits, Statement No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions, Statement No. 132 (revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits, and other related accounting
literature.
Effective January 1, 2006, we adopted Statement No. 123 (revised 2004), Share-Based Payment
(Statement No. 123(R)), which requires the expensing of the fair value of stock options. We
adopted the fair value recognition provisions of Statement
No. 123(R)
using the modified
prospective application. Accordingly, we recognize compensation expense for all newly granted
stock options and stock options modified, repurchased, or cancelled on or after January 1, 2006.
Compensation expense for stock options granted on or after January 1, 2006 is being recognized on a
straight-line basis. In addition, compensation cost for the unvested portion of stock options and
other awards that were outstanding as of January 1, 2006 is being recognized over the remaining
vesting period based on the fair value at date of grant and applying the attribution approach
utilized in determining the pro forma effect of expensing stock options that was required for
periods prior to the effective date of Statement No. 123(R). Our total stock-based compensation
expense recognized for the years ended December 31, 2008, 2007, and 2006 was
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 51, Accounting for Sales of
Stock by a Subsidiary (SAB 51), provides guidance on accounting for the effect of issuances of a
subsidiarys stock on the parents investment in that subsidiary. SAB 51 allows registrants to
elect an accounting policy of recording such increases or decreases in a parents investment
(SAB 51 credits or charges, respectively) either in income or in stockholders equity. In
accordance with the election provided in SAB 51, we adopted a policy of recording such SAB 51
credits or charges directly to additional paid-in capital in stockholders equity. As further
discussed in Note 9, we recognized in 2006 certain SAB 51 credits
related to our investment in NuStar Energy L.P. under this policy.
FSP No. FAS 157-2
In February 2008, the FASB issued Staff Position No. FAS 157-2, which delayed the effective date of
Statement No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at least
annually), until fiscal years beginning after November 15, 2008. The exceptions apply to the
following: nonfinancial assets and nonfinancial liabilities measured at fair value in a business
combination; impaired property, plant and equipment; goodwill; and the initial recognition of the
fair value of asset retirement obligations and restructuring costs. The implementation of
Statement No. 157 for these assets and liabilities effective January 1, 2009 has not had a material
effect on our financial position or results of operations.
In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations
(Statement No. 141(R)). This statement improves the financial reporting of business combinations
and
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51. Statement No. 160 is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15, 2008.
This statement provides guidance for the accounting and reporting of noncontrolling interests,
changes in controlling interests, and the deconsolidation of subsidiaries. In addition, Statement
No. 160 amends FASB Statement No. 128, Earnings per Share, to specify the computation,
presentation, and disclosure requirements for earnings per share if an entity has one or more
noncontrolling interests. The adoption of Statement No. 160 effective January 1, 2009 is not
expected to materially affect our financial position or results of operations.
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activities. Statement No. 161 establishes, among other things, the disclosure
requirements for derivative instruments and for hedging activities. This statement requires
qualitative disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative instruments, and
disclosures about contingent features related to credit risk in derivative agreements. Statement
No. 161 is effective for fiscal years, and interim periods within those fiscal years, beginning
after November 15, 2008. Since Statement No. 161 only affects disclosure requirements, the
adoption of Statement No. 161 effective January 1, 2009 has not affected our financial position or
results of operations.
In June 2008, the FASB issued Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities (FSP No. EITF 03-6-1).
FSP No. EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in the earnings
allocation in computing earnings per share under the two-class method described in Statement No.
128. FSP No. EITF 03-6-1 is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2008; early adoption is not permitted. The adoption of
FSP No. EITF 03-6-1 effective January 1, 2009 is not expected to materially affect our calculation
of earnings per common share.
In November 2008, the FASB ratified its consensus on EITF Issue No. 08-6, Equity Method Investment
Accounting Considerations (EITF No. 08-6). EITF No. 08-6 applies to all investments accounted for
under the equity method and provides guidance regarding (i) initial measurement of an equity
investment, (ii) recognition of other-than-temporary impairment of an equity method investment,
including any impairment charge taken by the investee, and (iii) accounting for a change in
ownership level or degree of influence on an investee. The consensus is effective for fiscal years
beginning on or after December 15, 2008, and interim periods within those fiscal years. EITF
No. 08-6 is to be applied prospectively and earlier application is not permitted. Due to its
application to future equity method investments, the
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In December 2008, the FASB issued Staff Position No. FAS 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (FSP No. FAS 132(R)-1). FSP No. FAS 132(R)-1 amends FASB
Statement No. 132 (revised 2003), Employers Disclosures about Pensions and Other Postretirement
Benefits, to provide guidance on an employers disclosures about plan assets of a defined benefit
pension or other postretirement plan. The additional requirements of FSP No. FAS 132(R)-1 are
designed to enhance disclosures regarding (i) investment policies and strategies, (ii) categories
of plan assets, (iii) fair value measurements of plan assets, and (iv) significant concentrations
of risk. FSP No. FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009, with
earlier application permitted. Since FSP No. FAS 132(R)-1 only affects disclosure requirements,
the adoption of FSP No. FAS 132(R)-1 will not affect our financial position or results of
operations.
Our consolidated balance sheet as of December 31, 2007 has been reclassified to present the assets
and liabilities of the Krotz Springs Refinery as assets held for sale and liabilities related to
assets held for sale, respectively. In addition, certain other minor amounts previously reported
in our annual report on Form 10-K for the year ended December 31, 2007 have been reclassified to
conform to the 2008 presentation.
Effective July 1, 2008, we sold our refinery in Krotz Springs, Louisiana to Alon Refining Krotz
Springs, Inc. (Alon), a subsidiary of Alon USA Energy, Inc. As a result, the assets and
liabilities related to the Krotz Springs Refinery as of December 31, 2007 have been presented in
the consolidated balance sheet as assets held for sale and liabilities related to assets held
for sale, respectively. The nature and significance of our post-closing participation in the
offtake agreement described below represents a continuation of activities with the Krotz Springs
Refinery for accounting purposes, and as such the results of operations related to the Krotz
Springs Refinery have not been presented as discontinued operations in the consolidated statements
of income for any of the periods presented.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
July 1,
December 31,
2008
2007
$
138
$
111
153
149
42
42
4
4
$
337
$
306
$
10
$
11
$
10
$
11
Effective July 1, 2007, we sold our refinery in Lima, Ohio to Husky Refining Company (Husky), a
wholly owned subsidiary of Husky Energy Inc. In addition, our marketing and supply subsidiary
separately sold certain inventory amounts to Husky as part of this transaction. The consolidated
statements of income reflect the operations related to the Lima Refinery for the periods prior to
the effective date of the sale in income from discontinued operations, net of income tax expense.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
July 1,
December 31,
2007
2006
$
570
$
456
929
918
107
108
46
45
$
1,652
$
1,527
$
15
$
29
38
38
$
53
$
67
Year Ended December 31,
2007
2006
$
2,231
$
4,119
391
291
In February 2008, we purchased ConocoPhillips one-third undivided joint interest in a refined
product pipeline and terminal for $57 million. These assets provide transportation and storage
services for moving refined products from our McKee Refinery to markets in El Paso, Texas and
Phoenix and Tucson, Arizona.
December 31,
2008
2007
$
22
$
23
7
8
102
$
131
$
31
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,
2008
2007
$
2,939
$
7,702
16
32
2,955
7,734
(58
)
(43
)
$
2,897
$
7,691
Year Ended December 31,
2008
2007
2006
$
43
$
33
$
31
43
34
16
(27
)
(25
)
(14
)
(1
)
1
$
58
$
43
$
33
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,
2008
2007
$
2,140
$
1,701
2,224
2,117
90
85
183
170
$
4,637
$
4,073
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Estimated
December 31,
Useful Lives
2008
2007
$
602
$
574
10 - 33 years
21,194
20,509
30 years
246
246
24 - 42 years
549
511
5 - 22 years
787
735
13 - 47 years
872
775
1 - 44 years
1,102
1,006
2,751
1,243
28,103
25,599
(4,890
)
(4,039
)
$
23,213
$
21,560
December 31, 2008
December 31, 2007
Gross
Accumulated
Gross
Accumulated
Cost
Amortization
Cost
Amortization
$
97
$
(43
)
$
116
$
(45
)
127
(22
)
156
(23
)
95
(76
)
94
(66
)
62
(29
)
62
(23
)
25
(12
)
25
(11
)
27
(27
)
27
(23
)
4
(4
)
4
(3
)
$
437
$
(213
)
$
484
$
(194
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amortization
Expense
$
23
20
14
14
14
Year Ended December 31,
2008
2007
$
4,019
$
4,061
50
(42
)
(4,069
)
$
$
4,019
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On July 19, 2006, NuStar GP Holdings, LLC consummated an initial public offering (IPO) of
17,250,000 of its units representing limited liability company interests to the public at $22.00
per unit, before an underwriters discount of $1.265 per unit. On December 22, 2006, NuStar GP
Holdings, LLC completed a secondary public offering of 20,550,000 units representing limited
liability company interests at a price of $21.62 per unit, before an underwriters discount of
$0.8648 per unit. In addition, NuStar GP Holdings, LLC sold 4,700,000 unregistered units to its
chairman of the board of directors (who was at that time also chairman of Valeros board of
directors) at $21.62 per unit. All such units were sold by our subsidiaries that held various
ownership interests in NuStar GP Holdings, LLC. As a result, NuStar GP Holdings, LLC did not
receive any proceeds from these offerings, and our indirect ownership interest in NuStar GP
Holdings, LLC was reduced to zero.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial information reported by NuStar Energy L.P. for the year ended December 31, 2006 is
summarized below (in millions):
$
1,136
211
150
Under various throughput, handling, terminalling, and service agreements, we use NuStar Energy
L.P.s pipelines to transport crude oil shipped to and refined products shipped from certain of our
refineries and use NuStar Energy L.P.s refined product terminals for certain terminalling
services. In addition, through 2006, we provided personnel to NuStar Energy L.P. to perform
operating and maintenance services with respect to certain assets for which we received
reimbursement from NuStar Energy L.P. We recognized in cost of sales both our costs related to
the throughput, handling, terminalling, and service agreements with NuStar Energy L.P. and the
receipt from NuStar Energy L.P. of payment for operating and maintenance services we provided to
NuStar Energy L.P. We have indemnified NuStar Energy L.P. for certain environmental liabilities
related to assets we previously sold to NuStar Energy L.P. that were known on the date the assets
were sold or are discovered within a specified number of years after the assets were sold and
result from events occurring or conditions existing prior to the date of sale.
$
127
261
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We own a 50% interest in Cameron Highway Oil Pipeline Company, a general partnership formed to
construct and operate a crude oil pipeline. The 390-mile crude oil pipeline delivers up to 500,000
barrels per day from the Gulf of Mexico to the major refining areas of Port Arthur and Texas City,
Texas. Our investment in Cameron Highway Oil Pipeline Company is accounted for using the equity
method and is included in deferred charges and other assets, net in the consolidated balance
sheets. During May and June of 2007, we made cash capital contributions of $215 million
representing our 50% portion of the amount required to enable the joint venture to redeem its
fixed-rate notes and variable-rate debt. As of December 31, 2008 and 2007, our investment in
Cameron Highway Oil Pipeline Company totaled $289 million and $297 million, respectively.
December 31,
2008
2007
$
169
$
258
66
79
25
7
10
42
55
90
73
$
374
$
500
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,
Maturity
2008
2007
Various
$
$
2027
24
24
2018
33
33
2018
33
33
2009
9
9
2031
25
25
2032
25
25
2032
25
25
2032
19
19
2009
200
200
2013
300
300
2014
200
200
2017
750
750
2037
1,500
1,500
2012
750
750
2032
750
750
2030
200
200
2010
25
25
2026
100
100
2015
75
75
2011
200
200
2013
180
180
2011
210
210
2014
185
185
2037
100
100
2017
200
200
2097
100
100
2015
287
287
2013
350
Various
100
6
(68
)
(42
)
6,537
6,819
39
43
6,576
6,862
(312
)
(392
)
$
6,264
$
6,470
(a)
The maturity dates reflected for the Series 1997A, 1997B, and 1997C tax-exempt revenue
refunding bonds represent their final maturity dates; however, principal payments on these
bonds commence in 2010.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We have a $2.5 billion revolving credit facility (the Revolver) that has a maturity date of
November 2012. Borrowings under the Revolver bear interest at LIBOR plus a margin, or an alternate
base rate as defined under the agreement. We are also being charged various fees and expenses in
connection with the Revolver, including facility fees and letter of credit fees. The interest rate
and fees under the Revolver are subject to adjustment based upon the credit ratings assigned to our
non-bank debt. The Revolver also includes certain restrictive covenants including a
debt-to-capitalization ratio. During the years ended December 31, 2008 and 2006, we borrowed and
repaid $296 million and $830 million, respectively, under the Revolver. There were no borrowings
under the Revolver during the year ended December 31, 2007. As of December 31, 2008 and 2007,
there were no borrowings outstanding under the Revolver and outstanding letters of credit issued
under this facility totaled $199 million and $292 million, respectively.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On February 1, 2008, we redeemed our 9.50% senior notes for $367 million, or 104.75% of stated
value. These notes had a carrying amount of $381 million on the date of redemption, resulting in a
gain of $14 million that was included in other income, net in the consolidated statement of
income. In addition, in March 2008, we made a scheduled debt repayment of $7 million related to
certain of our other debt.
Our revolving bank credit facilities and other debt arrangements contain various customary
restrictive covenants, including cross-default and cross-acceleration clauses.
$
309
33
418
759
489
4,597
(68
)
$
6,537
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,
2008
2007
$
6,537
$
6,819
6,462
7,109
December 31,
2008
2007
$
1,047
$
701
255
230
226
160
189
163
92
114
90
86
72
70
38
51
152
235
$
2,161
$
1,810
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
2006
$
70
$
51
$
51
4
1
1
3
2
2
(4
)
(13
)
(5
)
28
2
(1
)
1
$
72
$
70
$
51
For the years ended December 31, 2008, 2007, and 2006, activity in the number of shares of
preferred stock, common stock, and treasury stock was as follows (in millions):
Preferred
Common
Treasury
Stock
Stock
Stock
3
621
(4
)
(3
)
6
(20
)
627
(24
)
(70
)
3
627
(91
)
(18
)
(2
)
627
(111
)
We have 20 million shares of preferred stock authorized with a par value of $.01 per share. As of
December 31, 2008 and 2007, no shares of preferred stock were outstanding.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We purchase shares of our common stock in open market transactions to meet our obligations under
employee benefit plans. We also purchase shares of our common stock from our employees and
non-employee directors in connection with the exercise of stock options, the vesting of restricted
stock, and other stock compensation transactions.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On January 20, 2009, our board of directors declared a quarterly cash dividend of $0.15 per common
share payable March 11, 2009 to holders of record at the close of business on February 11, 2009.
Accumulated balances for each component of accumulated other comprehensive income (loss) were as
follows (in millions):
Foreign
Net Gain
Accumulated
Currency
Pension/OPEB
(Loss) On
Other
Translation
Liability
Cash Flow
Comprehensive
Adjustment
Adjustment
Hedges
Income (Loss)
$
341
$
(10
)
$
4
$
335
(11
)
(100
)
41
(70
)
330
(110
)
45
265
250
86
(28
)
308
580
(24
)
17
573
(490
)
(411
)
152
(749
)
$
90
$
(435
)
$
169
$
(176
)
Prior to June 30, 2007, each outstanding share of our common stock was accompanied by one preferred
share purchase right (Right). With certain exceptions, each Right entitled the registered holder
to purchase from us .0025 of a share of our Junior Participating Preferred Stock, Series I at a
price of $100 per .0025 of a share, subject to adjustment for certain recapitalization events.
These Rights expired on June 30, 2007.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
2006
$
(1,131
)
$
4,565
$
5,287
2
$
(1,131
)
$
4,565
$
5,285
524
565
611
$
(2.16
)
$
8.08
$
8.65
$
(1,131
)
$
4,565
$
5,287
94
$
(1,131
)
$
4,471
$
5,287
524
565
611
13
18
1
1
2
524
579
632
$
(2.16
)
$
7.72
$
8.36
(1)
Common equivalent shares were excluded from the computation of diluted earnings
per share for the year ended December 31, 2008 because the effect of including such shares would be anti-dilutive.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
2006
7
7
2
Year Ended December 31,
2008
2007
2006
$
(100
)
$
$
(1
)
4,815
(3,227
)
(837
)
(705
)
(249
)
(405
)
(197
)
32
38
(190
)
(58
)
(81
)
(4,985
)
2,557
1,362
182
(20
)
(54
)
(4
)
15
(4
)
(446
)
481
(162
)
$
(1,630
)
$
(469
)
$
(144
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
changes in assets held for sale and liabilities related to assets held for sale
pertaining to the operations of the Krotz Springs Refinery and the Lima Refinery prior to
their sales are reflected in the line items to which the changes relate in the table above;
and
certain differences between consolidated balance sheet changes and consolidated
statement of cash flow changes reflected above result from translating foreign currency
denominated amounts at different exchange rates.
the recognition of $158 million (pre-tax) of SAB 51 credits related to our investment in
NuStar Energy L.P. (as discussed in Note 9);
adjustments to property, plant and equipment, goodwill, and certain current and
noncurrent assets and liabilities resulting from adjustments to the purchase price
allocations related to the Premcor and UDS Acquisitions;
the conversion of 3,164,151 shares of preferred stock into 6,271,327 shares of our
common stock as discussed in Note 14; and
the recording of a $39 million capital lease obligation and related capital lease asset
pertaining to certain facilities at the Lima Refinery.
Year Ended December 31,
2008
2007
2006
$
351
$
331
$
261
1,428
2,014
2,349
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Measurements Using
Quoted
Prices
Significant
Other
Significant
in Active
Observable
Unobservable
Total as of
Markets
Inputs
Inputs
December 31,
(Level 1)
(Level 2)
(Level 3)
2008
$
40
$
610
$
$
650
98
98
13
13
7
7
26
26
Commodity derivative contracts, consisting primarily of exchange-traded futures and
swaps, are measured at fair value using the market approach pursuant to the provisions of
Statement No. 157. Exchange-traded futures are valued based on quoted prices from the
exchange and are categorized in Level 1 of the fair value hierarchy. Swaps are priced
using third-party broker quotes, industry pricing services, and exchange-traded curves, but
since they have contractual terms that are not identical to exchange-traded futures
instruments with a comparable market price, these financial instruments are categorized in
Level 2 of the fair value hierarchy.
Nonqualified benefit plan assets and certain nonqualified benefit plan liabilities are
measured at fair value using a market approach based on quotations from national securities
exchanges and are categorized in Level 1 of the fair value hierarchy.
The Alon earn-out agreement, which we received as partial consideration for the sale of
our Krotz Springs Refinery as discussed in Note 2, is
measured at fair value using a discounted cash flow model and is categorized in Level 3 of
the fair value hierarchy. Significant inputs to the model include expected payments and
discount rates that consider the effects of both credit risk and the time value of money.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$
171
(158
)
$
13
We are exposed to market risks related to the volatility of crude oil and refined product prices,
as well as volatility in the price of natural gas used in our refining operations. To reduce the
impact of this price volatility, we use derivative commodity instruments (swaps, futures, and
options) to manage our exposure to:
changes in the fair value of a portion of our refinery feedstock and refined product
inventories and a portion of our unrecognized firm commitments to purchase these
inventories (fair value hedges);
changes in cash flows of certain forecasted transactions such as forecasted feedstock
and product purchases, natural gas purchases, and refined product sales (cash flow hedges);
and
price volatility on a portion of our refinery feedstock and refined product inventories
and on certain forecasted feedstock and product purchases, refined product sales, and
natural gas purchases that are not designated as either fair value or cash flow hedges
(economic hedges).
We are exposed to market risk for changes in interest rates related to certain of our debt
obligations. We sometimes use interest rate swap agreements to manage our fixed to floating
interest rate position by converting certain fixed-rate debt to floating-rate debt. As of
December 31, 2008 and 2007, we did not have any interest rate swap agreements.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We are exposed to exchange rate fluctuations on transactions related to our Canadian operations.
To manage our exposure to these exchange rate fluctuations, we use foreign currency exchange and
purchase contracts. These contracts are not designated as hedging instruments. As of December 31,
2008, we had commitments to purchase $280 million of U.S. dollars. These commitments matured on or
before January 30, 2009, resulting in a 2009 gain of $2 million.
The net gain (loss) recognized in income representing the amount of hedge ineffectiveness was as
follows (in millions):
Year Ended December 31,
2008
2007
2006
$
4
$
(17
)
$
(11
)
(11
)
(18
)
8
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our price risk management activities involve the receipt or payment of fixed price commitments into
the future. These transactions give rise to market risk, the risk that future changes in market
conditions may make an instrument less valuable. We closely monitor and manage our exposure to
market risk on a daily
basis in accordance with policies approved by our board of directors. Market risks are monitored
by a risk control group to ensure compliance with our stated risk management policy.
Concentrations of customers in the refining industry may impact our overall exposure to credit
risk, in that these customers may be similarly affected by changes in economic or other conditions.
In addition, financial services companies are the counterparties in certain of our price risk
management activities, and such financial services companies may be adversely affected by periods
of uncertainty and illiquidity in the credit and capital markets.
Year Ended December 31,
2008
2007
2006
$
(255
)
$
5,846
$
7,290
605
458
289
(14
)
422
319
$
336
$
6,726
$
7,898
Year Ended December 31,
2008
2007
2006
$
118
$
2,354
$
2,764
4
83
46
(53
)
(88
)
(71
)
(27
)
(48
)
(45
)
7
(144
)
(108
)
1,367
26
16
9
25
(12
)
16
$
1,467
$
2,161
$
2,611
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
2006
$
732
$
1,764
$
2,198
13
96
76
45
202
51
2
3
3
792
2,065
2,328
543
155
285
(8
)
31
(5
)
140
(90
)
3
675
96
283
$
1,467
$
2,161
$
2,611
December 31,
2008
2007
$
91
$
95
78
36
394
175
93
86
72
224
298
360
1,026
976
(62
)
(54
)
964
922
(250
)
(264
)
(4,530
)
(4,297
)
(628
)
(302
)
(106
)
(126
)
(5,514
)
(4,989
)
$
(4,550
)
$
(4,067
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Amount
Expiration
$
57
2009 through 2029
36
Unlimited
30
2011
1,606
2009 through 2028
$
57
5
$
62
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
$
164
$
160
17
32
67
13
(5
)
(36
)
(5
)
(5
)
$
238
$
164
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Refining
Retail
Corporate
Total
(in millions)
$
108,586
$
10,528
$
$
119,114
7,703
7,703
1,327
105
44
1,476
797
369
(603
)
563
2,957
104
141
3,202
86,443
8,884
95,327
6,298
6,298
1,222
90
48
1,360
7,355
249
(686
)
6,918
2,483
107
193
2,783
79,406
8,234
87,640
5,729
5,729
985
87
44
1,116
8,182
182
(642
)
7,722
3,637
101
57
3,795
Year Ended December 31,
2008
2007
2006
$
48,052
$
43,014
$
40,458
45,672
31,552
28,524
4,221
3,797
3,254
2,770
1,837
1,863
7,871
6,243
5,307
108,586
86,443
79,406
8,750
7,235
6,709
1,446
1,356
1,272
332
293
253
10,528
8,884
8,234
$
119,114
$
95,327
$
87,640
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Year Ended December 31,
2008
2007
2006
$
101,141
$
82,168
$
76,604
9,961
8,142
7,275
8,012
5,017
3,761
$
119,114
$
95,327
$
87,640
December 31,
2008
2007
$
21,327
$
19,438
1,999
2,412
1,045
972
$
24,371
$
22,822
December 31,
2008
2007
$
30,801
$
37,703
1,818
2,098
1,798
2,921
$
34,417
$
42,722
We have several qualified non-contributory defined benefit pension plans (collectively, the
Qualified Plans), some of which are subject to collective bargaining agreements. The Qualified
Plans cover substantially all employees in the United States and generally provide eligible
employees with retirement income based on years of service and compensation during specific
periods.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2008
2007
$
1,292
$
1,252
$
477
$
477
92
95
13
13
76
71
28
27
7
7
(1
)
14
1
2
1
(75
)
(78
)
(27
)
(20
)
107
(61
)
26
(34
)
(6
)
5
$
1,492
$
1,292
$
520
$
477
$
1,358
$
1,156
$
$
(400
)
125
122
155
18
12
7
7
2
1
(75
)
(78
)
(27
)
(20
)
$
1,005
$
1,358
$
$
$
1,005
$
1,358
$
$
1,492
1,292
520
477
$
(487
)
$
66
$
(520
)
$
(477
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2008
2007
$
$
239
$
$
(13
)
(13
)
(22
)
(18
)
(474
)
(160
)
(498
)
(459
)
645
38
43
13
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2008
2007
$
19
$
22
$
(84
)
$
(93
)
626
16
127
106
$
645
$
38
$
43
$
13
Other
Pension
Postretirement
Plans
Benefit Plans
$
3
$
(9
)
10
6
$
13
$
(3
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31,
2008
2007
$
1,492
$
232
1,201
192
1,005
59
December 31,
2008
2007
48
%
50
%
11
22
16
9
17
8
2
1
6
10
100
%
100
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension
Other
Health Care
Benefits
Benefits
Subsidy Receipts
$
63
$
24
$
(2
)
72
27
(3
)
76
30
(3
)
85
32
(3
)
97
34
(4
)
647
204
(27
)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2006
2008
2007
2006
$
92
$
95
$
96
$
13
$
13
$
14
76
71
64
28
27
24
(105
)
(84
)
(57
)
3
3
3
(9
)
(9
)
(9
)
2
9
13
3
6
6
68
94
119
35
37
35
14
1
$
68
$
108
$
119
$
35
$
38
$
35
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2008
2007
$
612
$
(102
)
$
25
$
(33
)
(1
)
(2
)
(9
)
(3
)
(6
)
(3
)
(3
)
9
9
$
607
$
(115
)
$
31
$
(30
)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2008
2007
5.40
%
6.00
%
5.39
%
6.00
%
5.19
%
5.43
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Postretirement
Pension Plans
Benefit Plans
2008
2007
2006
2008
2007
2006
6.00
%
5.75
%
5.50
%
6.00
%
5.75
%
5.50
%
8.23
%
8.25
%
8.25
%
5.43
%
5.46
%
4.75
%
2008
2007
8.30
%
8.87
%
5.00
%
5.00
%
2015
2015
1% Increase
1% Decrease
$
3
$
(3
)
37
(32
)
Valero Energy Corporation Thrift Plan
We are the sponsor of the Valero Energy Corporation Thrift Plan, which is a defined contribution
plan. Participation in the Thrift Plan is voluntary. Through June 30, 2006, employees were
eligible to participate in the plan upon the completion of one month of continuous service.
Effective July 1, 2006, participants may participate in the plan as soon as practicable following
enrollment.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Valero Savings Plan is a defined contribution plan covering our retail store employees and
certain other employees supporting the retail organization. Under the Valero Savings Plan,
participants can contribute from 1% to 30% of their compensation. We contribute $0.60 for every
$1.00 of the participants contribution up to 6% of compensation.
The Premcor Retirement Savings Plan is a defined contribution plan covering former Premcor
employees who became employees of Valero effective September 1, 2005. Under this plan,
participants can contribute from 1% to 50% of their eligible compensation. We contribute 200% of
the first 3% of a participants pre-tax contribution. In addition, we contribute 100% of a
participants pre-tax contribution above 3% up to 6% for certain union participants who contribute
to the plan.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Under the terms of our various stock option plans, the exercise price of options granted is not
less than the fair market value of our common stock on the date of grant. Stock options become
exercisable pursuant to the individual written agreements between the participants and us, usually
in three or five equal annual installments beginning one year after the date of grant, with
unexercised options generally expiring seven or ten years from the date of grant.
Year Ended December 31,
2008
2007
2006
4.5
5.0
5.0
43.2
%
33.7
%
36.3
%
3.5
%
0.7
%
0.6
%
2.8
%
4.0
%
4.7
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Weighted-
Weighted-
Average
Average
Number
Exercise
Remaining
Aggregate
of Stock
Price
Contractual
Intrinsic
Options
Per Share
Term
Value
(in years)
(in millions)
23,178,212
$
25.41
3,752,075
17.17
(1,506,387
)
10.93
(354,347
)
46.00
25,069,553
24.76
4.6
$
153
16,565,130
18.81
4.0
136
Restricted stock is granted to employees and non-employee directors. Restricted stock granted to
employees vests in accordance with individual written agreements between the participants and us,
usually in equal annual installments over a period of five years beginning one year after the date
of grant. Restricted stock granted to our non-employee directors vests from one to three years
following the date of grant. A summary of the status of our restricted stock awards is presented
in the table below.
Weighted-
Average
Grant-Date
Number of
Fair Value
Shares
Per Share
1,394,075
$
49.63
989,491
18.14
(522,645
)
39.72
(31,626
)
51.09
1,829,295
35.41
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In 2007 and 2006, we issued to certain key employees performance awards, which represent rights to
receive shares of Valero common stock only upon Valeros achievement of an objective performance
measure. Performance awards are subject to vesting in three annual amounts beginning approximately
one year after the date of grant. The number of common shares earned each year is based on the
vested award adjusted by a factor determined by our total shareholder return over a rolling
three-year period compared to the total shareholder return of a defined peer group for the same
time period.
As of December 31, 2008, 98,688 unvested restricted stock units were outstanding. Restricted stock
units vest in equal annual amounts over a three-year or five-year period beginning one year after
the date of grant. These restricted stock units are payable in cash based on the price of our
common stock on the date of vesting, and therefore they are accounted for as liability-based awards. For the years ended December 31, 2008, 2007, and 2006, cash payments
of $1 million, $8 million, and $25 million, respectively, were made for vested restricted stock
units. During the year ended December 31, 2008, 29,530
restricted stock units were granted, 31,218 units vested, and 436
units were forfeited. Based on the price of our common stock on
December 31, 2008, there was $1 million of unrecognized
compensation cost related to outstanding unvested restricted stock
units, which is expected to be recognized over a weighted-average
period of approximately four years.
We have long-term operating lease commitments for land, office facilities, retail facilities and
related equipment, transportation equipment, time charters for ocean-going tankers and coastal
vessels, dock facilities, and various facilities and equipment used in the storage, transportation,
production, and sale of refinery feedstocks and refined products.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operating
Capital
Leases
Leases
$
397
$
6
282
6
179
6
90
6
55
6
270
22
1,273
52
(24
)
$
1,249
52
(13
)
$
39
Year Ended December 31,
2008
2007
2006
$
554
$
552
$
545
23
24
22
577
576
567
(4
)
(4
)
(4
)
$
573
$
572
$
563
We have various purchase obligations under certain industrial gas and chemical supply arrangements
(such as hydrogen supply arrangements), crude oil and other feedstock supply arrangements, and
various throughput and terminalling agreements. We enter into these contracts to ensure an
adequate supply of utilities and feedstock and adequate storage capacity to operate our refineries.
Substantially all of our purchase obligations are based on market prices or adjustments based on
market indices. Certain of these
purchase obligations include fixed or minimum volume requirements, while others are based on our
usage requirements. None of these obligations are associated with suppliers financing
arrangements. These purchase obligations are not reflected in the consolidated balance sheets.
In connection with our acquisitions of Basis Petroleum, Inc. in 1997 and the St. Charles Refinery
in 2003, the sellers were entitled to receive payments in any of the ten and seven years,
respectively, following these acquisitions if certain average refining margins during any of those
years exceeded a specified level. In connection with the Premcor Acquisition in 2005, we assumed
Premcors obligation under a contingent earn-out agreement related to Premcors acquisition of the
Delaware City Refinery from Motiva Enterprises LLC (Motiva). Under this agreement, Motiva was
entitled to receive two separate annual earn-out payments depending on (a) the amount of crude oil
processed at the refinery and the level of
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Basis
Delaware
Petroleum,
St. Charles
City
Inc.
Refinery
Refinery
$
26
$
50
$
25
50
25
25
200
175
50
35
50
25
200
175
50
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the third quarter of 2005, certain of our refineries experienced property damage and
business interruption losses associated with Hurricanes Katrina and Rita. As a result of these
losses, we submitted claims to our insurance carriers under our insurance policies. During 2006,
we reached a final business interruption settlement with our insurance carriers, the proceeds from
which were recorded as a reduction to cost of sales. The amount received was immaterial to our
results of operations and financial position.
We are subject to extensive tax liabilities, including federal, state, and foreign income taxes and
transactional taxes such as excise, sales/use, payroll, franchise, withholding, and ad valorem
taxes. New tax laws and regulations and changes in existing tax laws and regulations are
continuously being enacted or proposed that could result in increased expenditures for tax
liabilities in the future. Many of these liabilities are subject to periodic audits by the
respective taxing authority. Subsequent changes to our tax liabilities as a result of these audits
may subject us to interest and penalties.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In July 2008, we entered into an agreement to participate as a prospective shipper on the 500,000
barrel-per-day expansion of the Keystone crude oil pipeline system, which is expected to be
completed by 2012. Once completed, the pipeline will enable crude oil to be transported from
Western Canada to the U.S. Gulf Coast at Port Arthur, Texas. In addition to our commitment to ship
crude oil through the pipeline, we have an option to acquire an equity interest in the Keystone
partnerships. We have also secured commitments from several Canadian oil producers to sell to us
heavy sour crude oil for shipment through the pipeline.
Liabilities for future remediation costs are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. Other than for
assessments, the timing and magnitude of these accruals generally are based on the completion of
investigations or other studies or a commitment to a formal plan of action. Environmental
liabilities are based on best estimates of probable undiscounted future costs using currently
available technology and applying current regulations, as well as our own internal environmental
policies.
Year Ended December 31,
2008
2007
2006
$
285
$
298
$
294
7
72
36
53
(51
)
(55
)
(56
)
(9
)
6
$
297
$
285
$
298
December 31,
2008
2007
$
42
$
55
255
230
$
297
$
285
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of February 1, 2009, we were named as a defendant in 29 active cases alleging liability related
to MTBE contamination in groundwater. The plaintiffs are generally water providers, governmental
authorities, and private water companies alleging that refiners and marketers of MTBE and gasoline
containing MTBE are liable for manufacturing or distributing a defective product. We have been
named in these lawsuits together with many other refining industry companies. We are being sued
primarily as a refiner and marketer of MTBE and gasoline containing MTBE. We do not own or operate
gasoline station facilities in most of the geographic locations in which damage is alleged to have
occurred. The lawsuits generally seek individual, unquantified compensatory and punitive damages,
injunctive relief, and attorneys fees. Most of the cases are pending in federal court and are
consolidated for pre-trial proceedings in the U.S. District Court for the Southern District of New
York (Multi-District Litigation Docket No. 1358,
In re: Methyl-Tertiary Butyl Ether Products
Liability Litigation
). Discovery is open in all cases. Three of the cases (
City of New York
,
Village of Hempstead
, and
West Hempstead Water District
) are set for trial on June 22, 2009. Two
other cases,
State of New Hampshire
and
People of the State of California
, are pending in state
court. We believe that we have strong defenses to all claims and are vigorously defending these
cases.
As of February 1, 2009, we were named in 21 consumer class action lawsuits relating to fuel
temperature. We have been named in these lawsuits together with several other defendants in the
retail petroleum marketing business. The complaints, filed in federal courts in several states,
allege that because fuel volume increases with fuel temperature, the defendants have violated state
consumer protection laws by failing to adjust the volume of fuel when the fuel temperature exceeded
60 degrees Fahrenheit. The complaints seek to certify classes of retail consumers who purchased
fuel in various locations. The complaints seek an order compelling the installation of temperature
correction devices as well as monetary relief. The federal lawsuits are consolidated into a
multi-district litigation case in the U.S. District Court for the District of Kansas
(Multi-District Litigation Docket No. 1840,
In re: Motor Fuel Temperature Sales Practices
Litigation
). Discovery has commenced. The court is expected to rule on
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Rosolowski v. Clark Refining & Marketing, Inc., et al
., Judicial Circuit Court, Cook County,
Illinois (Case No. 95-L 014703). We assumed this lawsuit in our acquisition of Premcor Inc. The
lawsuit relates in part to a 1994 release to the atmosphere of spent catalyst from the now-closed
Blue Island, Illinois refinery. The case was certified as a class action in 2000 with three
classes, two of which received nominal or no damages, and one of which received a sizeable jury
verdict. That class consisted of local residents who claimed property damage or loss of use and
enjoyment of their property over a period of several years. In 2005, the jury returned a verdict
for the plaintiffs of $80 million in compensatory damages and $40 million in punitive damages.
However, following our motions for new trial and judgment notwithstanding the verdict (citing,
among other things, misconduct by plaintiffs counsel and improper class certification), the trial
judge in 2006 vacated the jurys award and decertified the class. Plaintiffs appealed, and in June
2008 the state appeals court reversed the trial judges decision to decertify the class and set
aside the judgment. Thereafter, the Illinois Supreme Court refused to hear the case and returned
it to the trial court. We have submitted renewed motions for judgment notwithstanding the verdict
or, alternatively, a new trial. While we do not believe that the ultimate resolution of this
matter will have a material effect on our financial position or results of operations, we have
recorded a loss contingency liability with respect to this matter in accordance with Statement
No. 5.
We are also a party to additional claims and legal proceedings arising in the ordinary course of
business. We believe that there is only a remote likelihood that future costs related to known
contingent liabilities related to these legal proceedings would have a material adverse impact on
our consolidated results of operations or financial position.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6.75% senior notes due February 2011,
6.125% senior notes due May 2011,
6.75% senior notes due May 2014, and
7.5% senior notes due June 2015.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
215
$
$
725
$
$
940
23
2
106
131
36
2,861
2,897
360
4,277
4,637
76
197
(76
)
197
98
98
8
542
550
314
406
8,806
(76
)
9,450
6,025
22,078
28,103
(483
)
(4,407
)
(4,890
)
5,542
17,671
23,213
224
224
6,300
2,718
65
(9,083
)
15,354
(15,354
)
883
(883
)
121
136
1,273
1,530
$
22,972
$
8,802
$
28,039
$
(25,396
)
$
34,417
$
209
$
$
103
$
$
312
43
414
3,989
4,446
82
34
258
374
23
569
592
6
70
(76
)
485
485
819
477
4,989
(76
)
6,209
5,329
899
36
6,264
5,966
9,388
(15,354
)
1,200
3,846
(883
)
4,163
1,204
195
762
2,161
6
1
(1
)
6
7,190
1,598
4,349
(5,947
)
7,190
(6,884
)
(6,884
)
15,484
(1,523
)
4,507
(2,984
)
15,484
(176
)
(10
)
161
(151
)
(176
)
15,620
65
9,018
(9,083
)
15,620
$
22,972
$
8,802
$
28,039
$
(25,396
)
$
34,417
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
1,414
$
$
1,050
$
$
2,464
23
2
6
31
1
119
7,571
7,691
569
3,504
4,073
247
247
11
164
175
306
306
1,438
701
12,848
14,987
6,681
18,918
25,599
(420
)
(3,619
)
(4,039
)
6,261
15,299
21,560
2
288
290
1,816
2,203
4,019
7,080
1,183
73
(8,336
)
17,321
(17,321
)
386
165
1,315
1,866
$
26,225
$
10,128
$
32,026
$
(25,657
)
$
42,722
$
7
$
382
$
3
$
$
392
234
302
9,051
9,587
79
55
366
500
25
607
632
227
115
157
499
21
272
293
11
11
568
1,151
10,195
11,914
5,527
903
40
6,470
7,763
9,558
(17,321
)
852
57
3,112
4,021
771
181
858
1,810
6
2
(2
)
6
7,111
75
2,486
(2,561
)
7,111
(6,097
)
(6,097
)
16,914
5,764
(5,764
)
16,914
573
(2
)
11
(9
)
573
18,507
73
8,263
(8,336
)
18,507
$
26,225
$
10,128
$
32,026
$
(25,657
)
$
42,722
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
$
26,083
$
117,582
$
(24,551
)
$
119,114
25,282
106,698
(24,551
)
107,429
909
3,646
4,555
768
768
(9
)
40
528
559
253
1,223
1,476
(305
)
(305
)
1,837
2,232
4,069
(9
)
28,321
114,790
(24,551
)
118,551
9
(2,238
)
2,792
563
(1,436
)
882
(1,523
)
2,077
1,083
(69
)
868
(1,769
)
113
(577
)
(552
)
(1,091
)
1,769
(451
)
24
87
111
(921
)
(1,953
)
1,133
2,077
336
210
(430
)
1,687
1,467
$
(1,131
)
$
(1,523
)
$
(554
)
$
2,077
$
(1,131
)
(1)
The income tax expense (benefit) reflected in each column does not include any tax
effect of the equity in earnings (losses) of subsidiaries.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
$
24,650
$
94,058
$
(23,381
)
$
95,327
22,280
82,746
(23,381
)
81,645
874
3,142
4,016
750
750
(6
)
30
614
638
305
1,055
1,360
(6
)
23,489
88,307
(23,381
)
88,409
6
1,161
5,751
6,918
4,556
668
1,320
(6,544
)
1,446
(245
)
869
(1,903
)
167
(520
)
(574
)
(1,275
)
1,903
(466
)
7
100
107
5,488
1,017
6,765
(6,544
)
6,726
254
187
1,720
2,161
5,234
830
5,045
(6,544
)
4,565
490
179
669
$
5,234
$
1,320
$
5,224
$
(6,544
)
$
5,234
(1)
The income tax expense reflected in each column does not include any tax effect of the
equity in earnings of subsidiaries.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
$
22,961
$
86,427
$
(21,748
)
$
87,640
21,233
74,378
(21,748
)
73,863
770
2,852
3,622
719
719
8
39
551
598
254
862
1,116
8
22,296
79,362
(21,748
)
79,918
(8
)
665
7,065
7,722
4,887
777
906
(6,570
)
45
45
1,342
(136
)
1,357
(2,213
)
350
(489
)
(703
)
(1,398
)
2,213
(377
)
57
108
165
(7
)
(7
)
5,732
660
8,076
(6,570
)
7,898
269
(70
)
2,412
2,611
5,463
730
5,664
(6,570
)
5,287
176
176
5,463
906
5,664
(6,570
)
5,463
2
2
$
5,461
$
906
$
5,664
$
(6,570
)
$
5,461
(1)
The income tax expense (benefit) reflected in each column does not include any tax
effect of the equity in earnings of subsidiaries.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG (1)
Subsidiaries (1)
Eliminations
Consolidated
$
46
$
(46
)
$
2,992
$
$
2,992
(593
)
(2,197
)
(2,790
)
(93
)
(315
)
(408
)
463
463
(25
)
(25
)
24
24
(1,235
)
(1,523
)
2,758
629
265
(894
)
25
25
596
(596
)
(144
)
(144
)
(7
)
(7
)
(10
)
(421
)
(3,699
)
1,268
(2,862
)
(6
)
(368
)
(374
)
296
296
(296
)
(296
)
(955
)
(955
)
16
16
9
9
(299
)
(299
)
(688
)
92
596
(894
)
894
1,523
1,235
(2,758
)
(4
)
(4
)
(1,235
)
467
429
(1,268
)
(1,607
)
(47
)
(47
)
(1,199
)
(325
)
(1,524
)
1,414
1,050
2,464
$
215
$
$
725
$
$
940
(1)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG (1)
Subsidiaries (1)
Eliminations
Consolidated
$
736
$
(51
)
$
4,573
$
$
5,258
(293
)
(1,967
)
(2,260
)
(64
)
(454
)
(518
)
1,873
555
2,428
(25
)
(50
)
(75
)
(209
)
(209
)
(2,742
)
(58
)
2,800
2,383
1,346
(3,729
)
3
60
63
3,969
(3,969
)
1
(12
)
(11
)
3,610
1,437
(731
)
(4,898
)
(582
)
2,245
2,245
(280
)
(183
)
(463
)
3,000
3,000
(3,000
)
(3,000
)
(5,788
)
(5,788
)
159
159
311
311
(271
)
(271
)
(1,346
)
(2,383
)
3,729
2,800
(2,800
)
143
(4,112
)
3,969
(20
)
(4
)
(24
)
(3,644
)
(1,386
)
(3,699
)
4,898
(3,831
)
29
29
702
172
874
712
878
1,590
$
1,414
$
$
1,050
$
$
2,464
(1)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(in millions)
Valero
Other Non-
Energy
Guarantor
Corporation
PRG
Subsidiaries
Eliminations
Consolidated
$
496
$
1,097
$
4,719
$
$
6,312
(1,074
)
(2,113
)
(3,187
)
(198
)
(371
)
(569
)
880
880
(25
)
(76
)
(101
)
(26
)
(26
)
4,912
777
906
(6,595
)
4
60
64
(2,556
)
2,556
(4
)
(28
)
(32
)
2,356
(520
)
(768
)
(4,039
)
(2,971
)
(220
)
(29
)
(249
)
8
822
830
(8
)
(822
)
(830
)
(54
)
(54
)
(2,020
)
(2,020
)
122
122
206
206
(184
)
(184
)
(906
)
(5,689
)
6,595
354
2,202
(2,556
)
(1
)
(1
)
(7
)
(9
)
(2,151
)
(582
)
(3,494
)
4,039
(2,188
)
1
1
701
(5
)
458
1,154
11
5
420
436
$
712
$
$
878
$
$
1,590
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2008 Quarter Ended
March 31
June 30
September 30 (a)
December 31 (b)
$
27,945
$
36,640
$
35,960
$
18,569
472
1,158
1,840
(2,907
)
261
734
1,152
(3,278
)
0.49
1.40
2.21
(6.36
)
assuming dilution (c)
0.48
1.37
2.18
(6.36
)
2007 Quarter Ended
March 31
June 30
September 30
December 31
$
18,755
$
24,202
$
23,699
$
28,671
1,673
3,193
1,168
884
1,144
2,249
1,274
567
1.91
3.99
2.31
1.04
assuming dilution (c) (e)
1.86
3.89
2.09
1.02
(a)
(b)
(c)
(d)
(e)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Table of Contents
Table of Contents
Page | ||||
57 | ||||
58 | ||||
61 | ||||
62 | ||||
63 | ||||
64 | ||||
65 | ||||
66 |
2.01
|
|
Agreement and Plan of Merger dated as of April 24, 2005 by and among Valero Energy Corporation and Premcor
Inc. incorporated by reference to Exhibit 2.1 to Valeros Current Report on Form 8-K dated April 24, 2005,
and filed April 25, 2005 (SEC File No. 1-13175).
|
||
|
||||
3.01
|
|
Amended and Restated Certificate of Incorporation of Valero Energy Corporation, formerly known as Valero
Refining and Marketing Company incorporated by reference to Exhibit 3.1 to Valeros Registration Statement
on Form S-1 (SEC File No. 333-27013) filed May 13, 1997.
|
||
|
||||
3.02
|
|
Certificate of Amendment (effective July 31, 1997) to Restated Certificate of Incorporation of Valero Energy
Corporation incorporated by reference to Exhibit 3.02 to Valeros Annual Report on Form 10-K for the year
ended December 31, 2003 (SEC File No. 1-13175).
|
||
|
||||
3.03
|
|
Certificate of Merger of Ultramar Diamond Shamrock Corporation with and into Valero Energy Corporation dated
December 31, 2001 incorporated by reference to Exhibit 3.03 to Valeros Annual Report on Form 10-K for the
year ended December 31, 2003 (SEC File No. 1-13175).
|
133
3.04
|
|
Amendment (effective December 31, 2001) to Restated Certificate of Incorporation of Valero Energy Corporation
- incorporated by reference to Exhibit 3.1 to Valeros Current Report on Form 8-K dated December 31, 2001, and
filed January 11, 2002 (SEC File No. 1-13175).
|
||
|
||||
3.05
|
|
Second Certificate of Amendment (effective September 17, 2004) to Restated Certificate of Incorporation of
Valero Energy Corporation incorporated by reference to Exhibit 3.04 to Valeros Quarterly Report on
Form 10-Q for the quarter ended September 30, 2004 (SEC File No. 1-13175).
|
||
|
||||
3.06
|
|
Certificate of Merger of Premcor Inc. with and into Valero Energy Corporation effective September 1, 2005 -
incorporated by reference to Exhibit 2.01 to Valeros Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 (SEC File No. 1-13175).
|
||
|
||||
3.07
|
|
Third Certificate of Amendment (effective December 2, 2005) to Restated Certificate of Incorporation of Valero
Energy Corporation incorporated by reference to Exhibit 3.07 to Valeros Annual Report on Form 10-K for the
year ended December 31, 2005 (SEC File No. 1-13175).
|
||
|
||||
3.08
|
|
Amended and Restated Bylaws of Valero Energy Corporation (as of July 12, 2007) incorporated by reference to
Exhibit 3.01 to Valeros Current Report on Form 8-K dated July 11, 2007, and filed July 17, 2007 (SEC File No.
1-13175).
|
||
|
||||
4.01
|
|
Indenture dated as of December 12,
1997 between Valero Energy Corporation and The Bank of New York
incorporated by reference to Exhibit 3.4 to Valeros Registration Statement on Form S-3 (SEC File
No. 333-56599) filed June 11, 1998.
|
||
|
||||
4.02
|
|
First Supplemental Indenture dated as of June 28, 2000 between Valero Energy Corporation and The Bank of New
York (including Form of 7 3/4% Senior Deferrable Note due 2005) incorporated by reference to Exhibit 4.6 to
Valeros Current Report on Form 8-K dated June 28, 2000, and filed June 30, 2000 (SEC File No. 1-13175).
|
||
|
||||
4.03
|
|
Indenture (Senior Indenture) dated as of
June 18, 2004 between Valero Energy Corporation and Bank of New York incorporated by reference to Exhibit 4.7 to Valeros Registration Statement on Form S-3 (SEC File No.
333-116668) filed June 21, 2004.
|
||
|
||||
4.04
|
|
Form of Indenture related to subordinated debt securities incorporated by reference to Exhibit 4.8 to
Valeros Registration Statement on Form S-3 (SEC File No. 333-116668) filed June 21, 2004.
|
||
|
||||
4.05
|
|
Third Supplemental Indenture dated as of August 31, 2005 between The Premcor Refining Group Inc. and Deutsche
Bank Trust Company Americas incorporated by reference to Exhibit 4.09 to Valeros Annual Report on Form 10-K
for the year ended December 31, 2005 (SEC File No. 1-13175).
|
||
|
||||
4.06
|
|
Fourth Supplemental Indenture dated as of September 1, 2005 among The Premcor Refining Group Inc., Valero
Energy Corporation, and Deutsche Bank Trust Company Americas incorporated by reference to Exhibit 4.10 to
Valeros Annual Report on Form 10-K for the year ended December 31, 2005 (SEC File No. 1-13175).
|
||
|
||||
4.07
|
|
Guaranty dated September 2, 2005 of The Premcor Refining Group Inc. (guaranteeing certain Valero-heritage
debt) incorporated by reference to Exhibit 4.11 to Valeros Annual Report on Form 10-K for the year ended
December 31, 2005 (SEC File No. 1-13175).
|
||
|
||||
4.08
|
|
Guaranty dated September 2, 2005
of Valero Energy Corporation (guaranteeing certain Premcor-heritage debt) incorporated by reference to Exhibit 4.12 to Valeros Annual Report on Form 10-K
for the year ended December
31, 2005 (SEC File No. 1-13175).
|
||
|
||||
4.09
|
|
Specimen Certificate of Common Stock incorporated by reference to Exhibit 4.1 to Valeros Registration
Statement on Form S-3 (SEC File No. 333-116668) filed June 21, 2004.
|
||
|
||||
*+10.01
|
|
Valero Energy Corporation Annual Bonus Plan, amended and restated as of October 15, 2008.
|
134
+10.02
|
|
Valero Energy Corporation 2005 Omnibus
Stock Incentive Plan, amended and restated as of October 1, 2005
incorporated by reference to Exhibit 10.01 to Valeros Current Report on Form 8-K dated October 20, 2005, and
filed October 26, 2005 (SEC File No. 1-13175).
|
||
|
||||
+10.03
|
|
Valero Energy Corporation 2001 Executive
Stock Incentive Plan, amended and restated as of October 1, 2005
incorporated by reference to Exhibit 10.04 to Valeros Annual Report on Form 10-K for the year ended December
31, 2005 (SEC File No. 1-13175).
|
||
|
||||
*+10.04
|
|
Valero Energy Corporation Deferred Compensation Plan, amended and restated as of January 1, 2008.
|
||
|
||||
*+10.05
|
|
Form of 2009 Elective Deferral Agreement pursuant to the Valero Energy Corporation Deferred Compensation Plan.
|
||
|
||||
*+10.06
|
|
Form of Investment Election Form pursuant to the Valero Energy Corporation Deferred Compensation Plan.
|
||
|
||||
*+10.07
|
|
Form of 2009 Distribution Election Form pursuant to the Valero Energy Corporation Deferred Compensation Plan.
|
||
|
||||
*+10.08
|
|
Valero Energy Corporation Amended and Restated Supplemental Executive Retirement Plan, amended and restated as
of November 10, 2008.
|
||
|
||||
+10.09
|
|
Valero Energy Corporation 2003 Employee Stock Incentive Plan, as amended and restated effective October 1,
2005 incorporated by reference to Exhibit 10.11 to Valeros Annual Report on Form 10-K for the year ended
December 31, 2005 (SEC File No. 1-13175).
|
||
|
||||
*+10.10
|
|
Valero Energy Corporation Stock Option Plan, as amended and restated effective January 1, 2009.
|
||
|
||||
+10.11
|
|
Valero Energy Corporation Restricted Stock Plan for Non-Employee Directors, as amended and restated July 11,
2007 incorporated by reference to Exhibit 10.02 to Valeros Current Report on Form 8-K/A dated July 11,
2007, and filed September 18, 2007 (SEC File No. 1-13175).
|
||
|
||||
+10.12
|
|
Valero Energy Corporation Non-Employee Director Stock Option Plan, as amended and restated effective January
1, 2007 incorporated by reference to Exhibit 10.02 to Valeros Quarterly Report on Form 10-Q for the quarter
ended September 30, 2006 (SEC File No. 1-13175).
|
||
|
||||
+10.13
|
|
Form of Indemnity Agreement between Valero Energy Corporation (formerly known as Valero Refining and Marketing
Company) and certain officers and directors incorporated by reference to Exhibit 10.8 to Valeros
Registration Statement on Form S-1 (SEC File No. 333-27013) filed May 13, 1997.
|
||
|
||||
+10.14
|
|
Schedule of Indemnity Agreements incorporated by reference to Exhibit 10.9 to Valeros Registration
Statement on Form S-1 (SEC File No. 333-27013) filed May 13, 1997.
|
||
|
||||
+10.15
|
|
Change of Control Agreement (Tier I) dated January 18, 2007 between Valero Energy Corporation and William R.
Klesse incorporated by reference to Exhibit 10.01 to Valeros Current Report on Form 8-K dated January 17,
2007 and filed January 19, 2007 (SEC File No. 1-13175).
|
||
|
||||
*+10.16
|
| Schedule of Change of Control Agreements (Tier I). | ||
|
||||
*+10.17
|
|
Change of Control Agreement (Tier II) dated March 15, 2007 between Valero Energy Corporation and Kimberly S.
Bowers.
|
||
|
||||
+10.18
|
|
Form of Performance Award Agreement pursuant to the Valero Energy Corporation 2005 Omnibus Stock Incentive
Plan incorporated by reference to Exhibit 10.02 to Valeros Current Report on Form 8-K dated January 18,
2006, and filed January 20, 2006 (SEC File No. 1-13175).
|
135
+10.19
|
|
Form of Stock Option Agreement pursuant to
the Valero Energy Corporation 2005 Omnibus Stock Incentive Plan
incorporated by reference to Exhibit 10.03 to Valeros Current Report on Form 8-K
dated October 20, 2005, and
filed October 26, 2005 (SEC File No. 1-13175).
|
||
|
||||
+10.20
|
|
Form of Stock Option Agreement pursuant to the Valero Energy Corporation Non-Employee Director Stock Option
Plan incorporated by reference to Exhibit 10.04 to
Valeros Quarterly Report on
Form 10-Q
for the quarter
ended September 30, 2006 (SEC File No. 1-13175).
|
||
|
||||
+10.21
|
|
Form of Restricted Stock Agreement
pursuant to the Valero Energy Corporation 2005 Omnibus Stock Incentive Plan incorporated by reference to Exhibit 10.02 to Valeros Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005 (SEC File No. 1-13175).
|
||
|
||||
+10.22
|
|
Form of Restricted Stock Agreement pursuant to the Valero Energy Corporation Restricted Stock Plan for
Non-Employee Directors incorporated by reference to Exhibit 10.03 to Valeros Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006 (SEC File No. 1-13175).
|
||
|
||||
*10.23
|
|
$2,500,000,000 5-Year Revolving Credit Agreement, dated as of August 17, 2005, among Valero Energy
Corporation, as Borrower; JPMorgan Chase Bank, N.A., as Administrative Agent and Global Administrative Agent;
and the lenders named therein.
|
||
|
||||
*10.24
|
|
First Amendment to $2,500,000,000 5-Year Revolving Credit Agreement, dated as of July 24, 2006.
|
||
|
||||
*10.25
|
|
Second Amendment to $2,500,000,000 5-Year Revolving Credit Agreement, dated as of November 9, 2007.
|
||
|
||||
*12.01
|
|
Statements of Computations of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends.
|
||
|
||||
14.01
|
|
Code of Ethics for Senior Financial Officers incorporated by reference to Exhibit 14.01 to Valeros Annual
Report on Form 10-K for the year ended December 31, 2003 (SEC File No. 1-13175).
|
||
|
||||
*21.01
|
| Valero Energy Corporation subsidiaries. | ||
|
||||
*23.01
|
| Consent of KPMG LLP dated February 26, 2009. | ||
|
||||
*24.01
|
|
Power of Attorney dated February 26, 2009 (on the signature page of this Form 10-K).
|
||
|
||||
*31.01
|
|
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive
officer.
|
||
|
||||
*31.02
|
|
Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial
officer.
|
||
|
||||
*32.01
|
|
Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of 2002).
|
||
|
||||
*99.01
|
| Audit Committee Pre-Approval Policy. |
* | Filed herewith. | |
+ | Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto. |
136
137
138
139
VALERO ENERGY CORPORATION
(Registrant)
By
/s/ William R. Klesse
(William R. Klesse)
Chief Executive Officer, President, and
Chairman of the Board
Table of Contents
Signature
Title
Date
Chief Executive Officer, President, and
Chairman of the Board
(Principal Executive Officer)
February 26, 2009
Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Director
February 26, 2009
Article | Topic | Page | ||||||
1 |
Definitions
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2 | ||||||
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2 |
Administration
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3 | ||||||
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Participation
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4 | ||||||
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Determination of Bonus Awards
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Bonus Targets
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Form of Payment
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7 |
Miscellaneous Terms and Provisions
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1.1 | Affiliate means (a) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (b) any entity in which the Company has a significant equity interest, in each case determined by the Committee. | |
1.2 | Board means the Board of Directors of the Company. | |
1.3 | Bonus Target means a percentage established to represent a normal or average bonus percentage determined through competitive survey analysis and based on each positions relative importance to the overall financial success of the Company. | |
1.4 | Committee means the Compensation Committee of the Board. | |
1.5 | Company means Valero Energy Corporation and its Affiliates. | |
1.6 | Discretionary Adjustment Factor means the authority of the Committee: |
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2.1 | The Plan shall be administered by the Committee. The Committee shall consist of no less than three Non-Employee Directors (as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended from time to time). In the event the Committee fails to meet the foregoing criteria, then additional non-employee persons shall be appointed by the Board for purposes of administering this Plan so that the committee administering this Plan shall be composed solely of three or more Non-Employee Directors. | |
2.2 | The Committee is empowered to: |
2.21 | Review and approve all determinations relating to the eligibility of Participants; | ||
2.22 | Make rules and regulations for the administration of the Plan which are not inconsistent with the terms and provisions hereof; | ||
2.23 | Construe all terms, provisions, conditions, and limitations of the Plan in good faith. All such determinations shall be final and conclusive on all parties of interest; |
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2.24 | Review and approve determinations and computations concerning the amounts to which any Participant or his beneficiary is entitled under the Plan; | ||
2.25 | Select, employ, and compensate from time to time consultants, accountants, attorneys and other agents as the Committee may deem necessary or advisable for the proper and efficient administration of the Plan. |
2.3 | The foregoing list of express powers is not intended to be either complete or exclusive, but the Committee shall, in addition, have such powers, whether or not expressly authorized, that it may deem necessary, desirable, advisable, or proper for the supervision and administration of the Plan. Except as otherwise specifically provided herein, the decision or judgment of the Committee on any question arising hereunder in connection with the exercise of any of its powers shall be final, binding, and conclusive upon all parties concerned. | |
2.4 | The Committee shall have the responsibility of authorizing payment to each eligible Participant and directing that such payment be disbursed by the Company. | |
2.5 | The Board or the Committee may, at any time, amend or terminate the Plan. Such amendments or terminations may be made without the consent of the Participants. |
3.1 | The designation of Employees of the Company as Participants under the Plan shall be approved by the Committee, and no Employee of the Company will have the right to require the Committee to make him or her a Participant or to allow him or her to remain a Participant under the Plan. |
4.1 | During the course of the Plan Year, the Committee shall review and approve those Performance Criteria which the Committee believes will measure the Companys financial, shareholder, and/or operational performance for the applicable Plan Year. The Performance Criteria will be developed by Company management and submitted to the Committee for review and discussion. The Committee may request Company management to provide threshold, target, and maximum levels of performance for each Performance Criteria considered. | |
4.2 | The Companys performance may be evaluated on an absolute basis by determining the Companys achievement versus a budgeted or pre-established level of performance approved by the Committee. Likewise, the Companys performance may be evaluated by comparing the Companys performance against a Peer Groups performance achievement for the same Performance Criteria. |
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4.3 | When the Performance Criteria are established and approved during the course of the Plan Year, the Committee may elect to weight each of the Performance Criteria based upon the strategic importance of the respective Performance Criteria in consideration of the Companys annual business plan. The weightings of the Performance Criteria may change from one Plan Year to the next. | |
4.4 | In determining the Companys performance during a measurement period, Performance Criteria will be utilized. These Performance Criteria may be modified, deleted, or added to from one Plan Year to the next as determined by the Committee in its judgment and discretion. | |
4.5 | Following the close of the Plan Year, the Committee will evaluate the Companys performance compared to the Performance Criteria. The results of this evaluation will serve as the basis for the determination of the amount of Bonus Target earned, which may range from 0 percent to as much as 200 percent of Participants Bonus Targets. At this time, the Committee has the authority to consider an addition to or subtraction from the bonus by applying a Discretionary Adjustment Factor (as defined in Article 1.6) as the Committee may determine. | |
4.6 | The Committee will normally authorize the payment of bonus awards within two and one-half months (75 days) after the close of the Plan Year. However, the Committee reserves the right to accelerate the determination and payment of bonus awards prior to the completion of the Plan Year based on the estimated or expected performance of the Company for such Plan Year. |
5.1 | Bonus Targets for each position are established based upon competitive survey data and the positions relative importance to the overall financial success of the Company. The Committee shall review and approve a Bonus Target for each officer. | |
5.2 | Each bonus award shall be calculated by using the established Bonus Target for Participants in the Plan, adjusted by the results of the Performance Criteria and the Discretionary Adjustment Factor. A qualitative evaluation of a Participants performance may also be used to adjust a Participants bonus award. |
6.1 | Bonuses payable under the Plan shall be paid in the form of cash in whole or in part or, if permitted under applicable NYSE and SEC rules and regulations, in the form of common stock of the Company in whole or in part. Under the Plan, if permitted under applicable NYSE and SEC rules and regulations, certain Participants may also be provided with an election to purchase, at Fair Market Value, common stock of the Company utilizing a pre-determined portion of their bonus. |
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6.2 | With respect to Plan bonuses payable in part or in whole in shares of common stock of the Company, a Participant may pay all or part of the amount of any taxes required to be collected or withheld by the Company upon payment of the Participants bonus by electing, before an established date prior to the time of payment of the bonus, to have the Company withhold from the number of common shares otherwise deliverable under the bonus a number of common shares having a Fair Market Value on the established date not exceeding the amount of the tax payment. However, for this purpose, federal income tax may be withheld at the highest personal tax rate then in effect. | |
6.3 | The Committee may approve a deferral of the payment of bonuses with payment in whole at a later date or in installments over a period of time. The length of time of deferral or installment period will be determined at the discretion of the Committee in accordance with applicable laws and regulations. |
7.1 | No Employee shall have any claim or right to be paid a bonus or any form of award, and the award of a bonus will not be construed as giving a Participant the right to be retained in the employ of the Company. Further, the Company expressly reserves the right at any time to terminate the employment of any Participant free from any liability under the Plan. | |
7.2 | The validity, construction, and effect of the Plan and any actions taken or relating to the Plan shall be determined in accordance with the laws of the State of Texas and applicable Federal law. | |
7.3 | The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, expressly to assume and agree to perform the Companys obligations under this Plan in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. As used herein, the Company shall mean the Company as hereinbefore defined and any aforesaid successor to its business and/or assets. | |
7.4 | No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or Employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation. | |
7.5 | Notwithstanding anything in this Plan to the contrary, if any Plan provision or bonus award under the Plan would result in the imposition of an applicable tax under Section 409A of the Internal Revenue Code of 1986, as amended, and related regulations and Treasury pronouncements (Section 409A), that Plan provision or bonus award may be reformed to avoid imposition of the applicable tax and no action taken to comply with Section 409A shall be deemed to adversely affect the Participants rights to an award. |
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VALERO ENERGY CORPORATION | ||||||
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By: | |||||
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Page | ||||
ARTICLE I DEFINITIONS
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1 | |||
1.1 Account
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1 | |||
1.2 Affiliate
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2 | |||
1.3 Beneficiary
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2 | |||
1.4 Board of Directors
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2 | |||
1.5 Bonus
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2 | |||
1.6 Change in Control
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2 | |||
1.7 Code
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3 | |||
1.8 Committee
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3 | |||
1.9 Company
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3 | |||
1.10 Discretionary Credit
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3 | |||
1.11 Elective Deferral
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4 | |||
1.12 Elective Deferral Agreement
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4 | |||
1.13 Employee
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4 | |||
1.14 Employer
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4 | |||
1.15 Fund
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4 | |||
1.16 Grandfathered Amounts
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4 | |||
1.17 Insider
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4 | |||
1.18 Other Termination
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4 | |||
1.19 Participant
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4 | |||
1.20 Plan
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4 | |||
1.21 Plan Administrator
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5 | |||
1.22 Plan Year
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5 | |||
1.23 Prior Plan
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5 | |||
1.24 Retirement
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5 | |||
1.25 Salary
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5 | |||
1.26 Stock Fund
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5 | |||
1.27 Trust
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5 | |||
1.28 Trustee
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5 | |||
1.29 Unforeseeable Emergency
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5 | |||
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ARTICLE II ELIGIBILITY
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6 | |||
2.1 Initial Eligibility
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6 | |||
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ARTICLE III DEFERRAL
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6 | |||
3.1 Deferral Election
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6 | |||
3.2 Deferral Amount
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7 | |||
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ARTICLE IV ACCOUNTS
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7 | |||
4.1 Establishing a Participants Account
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7 | |||
4.2 Credit of the Participants Deferral
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7 | |||
4.3 Discretionary Credits
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7 | |||
4.4 Gauge for Determining Benefits
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8 |
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ARTICLE V VESTING
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9 | |||
5.1 Vesting of Elective Deferrals
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9 | |||
5.2 Vesting of Discretionary Credits
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10 | |||
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ARTICLE VI DISTRIBUTIONS
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10 | |||
6.1 Distribution Events and Elections Relating to Elective Deferrals
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10 | |||
6.2 Death; Beneficiary Designation
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11 | |||
6.3 Retirement or Other Termination
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11 | |||
6.4 Payment on Specified Date
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12 | |||
6.5 Payment Upon Unforeseeable Emergency
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6.6 Distribution of Discretionary Credits
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13 | |||
6.7 Responsibility for Distributions and Withholding of Taxes
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13 | |||
6.8 Forfeiture Upon Termination for Cause
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14 | |||
6.9 Changes in Distribution Elections
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15 | |||
6.10 Lump Sum Cash Out
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15 | |||
6.11 Delay of Payments for Specified Employees
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ARTICLE VII ADMINISTRATION
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16 | |||
7.1 Powers of the Committee
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16 | |||
7.2 Committee Discretion
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17 | |||
7.3 Delegation
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7.4 Annual Statements
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18 | |||
7.5 Reimbursement of Expenses
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ARTICLE VIII AMENDMENT AND/OR TERMINATION
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8.1 Amendment or Termination of the Plan
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8.2 No Retroactive Effect on Account
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8.3 Effect of Change in Control
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8.4 Effect of Termination
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ARTICLE IX FUNDING
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9.1 Payments Under This Agreement are the Obligation of the Company
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9.2 Agreement May Be Funded Through Rabbi Trust
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9.3 Participants Must Rely Only on General Credit of the Company
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ARTICLE X ADOPTION BY AFFILIATED EMPLOYERS
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10.1 Procedures for and Status After Adoption
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10.2 Guaranty
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10.3 Termination of Participation By Adopting Affiliate
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ARTICLE XI CLAIMS; ARBITRATION OF DISPUTES
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11.1 Filing of Claims
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11.2 Review of Denial
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11.3 Arbitration of Disputes
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ARTICLE XII MISCELLANEOUS
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12.1 Limitation of Rights
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12.2 Distributions to Incompetents or Minors
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12.3 Non-alienation of Benefits
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12.4 Reliance Upon Information
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12.5 Severability
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12.6 Notice
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12.7 Gender and Number
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12.8 Governing Law
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12.9 Grandfathered Amounts; Incorporation of Prior Plan
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o | I elect not to participate in the Plan during 2009 . | |
o | I hereby elect to defer a portion of my compensation for the period commencing January 1, 2009 and ending December 31, 2009 (the Plan Year) as follows: | |
Salary (elect either 1 or 2) |
1. | % (in even 1% increments not to exceed 30%) of the regular salary to which I may become entitled during the Plan Year; | ||
2. | $ per pay period of the regular salary to which I may become entitled with respect to (check either (a) or (b) below): |
(a) | all pay periods during the Plan Year | ||
(b) | the following pay periods (specify): |
Bonues (elect either 3 or 4 for bonus earned in 2009 and payable in 2010 ) |
3. | % (in even 1% increments not to exceed 50%) of any cash bonuses to which I may become entitled; | ||
4. | $ of any cash bonuses to which I may become entitled. |
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«First Name» «Last Name»
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«Emplid» | |||||
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Participants Name
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Participants Employee ID Number |
%
Dreyfus
Appreciation (DGAGX)
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% Columbia Income Z (SRINX) | |
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%
Fidelity
Intermediate Govt (FSTGX)
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% Vanguard Asset Allocation (VAAPX) | |
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%
Janus
Worldwide (JAWWX)
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% Vanguard Index Extended Market (VEXMX) | |
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%
Oakmark I
(OAKMX)
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% Vanguard Index 500 (VFINX) | |
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%
Price
Mid-Cap Growth (RPMGX)
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% Vanguard Growth and Income (VQNPX) | |
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%
Vanguard
Treasury Money Market Fund
(VMPXX) |
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Participants Signature
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Date | |||
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«First
Name» «Last Name»
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«Emplid» | |||
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Participants Name
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Participants Employee ID Number |
Payment Election | DEFAULT PAYMENT IF NO ELECTION IS MADE: | |
Upon Retirement | Fifteen annual installments commencing at date of retirement | |
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o | As soon as administratively possible following retirement (this is the default if no election is made) | ||
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o | January 1 after the year of retirement |
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o | Lump sum payment | ||
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o | Five annual installments | ||
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o | Ten annual installments | ||
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o | Fifteen annual installments (this is the default payment if no election is made) |
Payment Election | DEFAULT PAYMENT IF NO ELECTION IS MADE: | |
Upon Other Separation | Immediate lump sum payable upon separation | |
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o | As soon as administratively possible following separation (this is the default if no election is made) | ||
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o | January 1 after the year of separation |
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o | Lump sum (this is the default payment if no election is made) | ||
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o | Five annual installments |
Amount of Elective Deferral or | ||
Specified Date | Total Amount of the Account (Whichever is Less) | |
ACKNOWLEDGED AND AGREED: | ||||
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Participants Signature
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Date | |||
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«First Name» «Last Name»
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«Emplid» | |||
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Participants Name
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Participants Employee ID Number |
Page | ||||
ARTICLE I DEFINITIONS
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1 | |||
1.1 Accrued Benefit
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1 | |||
1.2 Actuarial Equivalent or Actuarially Equivalent Basis
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1 | |||
1.3 Board of Directors
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1 | |||
1.4 Change in Control
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1.5 Code
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2 | |||
1.6 Company
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2 | |||
1.7 Committee
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2 | |||
1.8 Covered Compensation
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2 | |||
1.9 Credited Service
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3 | |||
1.10 Eligible Earnings
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3 | |||
1.11 Final Average Compensation
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3 | |||
1.12 Monthly Covered Compensation
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3 | |||
1.13 Monthly FICA Amount
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3 | |||
1.14 Normal Retirement Date
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4 | |||
1.15 NuStar
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4 | |||
1.16 NuStar Excess Pension Plan
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4 | |||
1.17 NuStar SERP
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4 | |||
1.18 Participant
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1.19 Plan
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4 | |||
1.20 Plan of Deferred Compensation
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4 | |||
1.21 Plan Year
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1.22 Retirement
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4 | |||
1.23 Rules
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4 | |||
1.24 Securities Act
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4 | |||
1.25 Separation from Service
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4 | |||
1.26 Subsidiary
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4 | |||
1.27 Surviving Spouse
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5 | |||
1.28 Trust
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5 | |||
1.29 Trustee
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5 | |||
1.30 Valero
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5 | |||
1.31 Valero Pension Plan
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5 | |||
1.32 Valero Pension Plan Benefit
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5 | |||
ARTICLE II ELIGIBILITY
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5 | |||
2.1 Eligibility
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5 | |||
2.2 Frozen Participation
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5 | |||
2.3 Renewed Eligibility
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6 | |||
ARTICLE III VESTING
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6 | |||
ARTICLE IV RETIREMENT BENEFIT
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4.1 Calculation of Retirement Benefit
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6 | |||
4.2 Form and Time of Payment
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7 | |||
4.3 Modification of Pension
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4.4 Delay of Certain Payments
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7 | |||
4.5 Application of Code Section 409A Transition Relief Provisions
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7 | |||
ARTICLE V PRERETIREMENT SPOUSAL DEATH BENEFIT
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8 | |||
5.1 Death Prior to Retirement
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8 | |||
5.2 Beneficiary Designation Prohibited
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8 | |||
ARTICLE VI PROVISIONS RELATING TO ALL BENEFITS
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8 | |||
6.1 Effect of This Article
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8 | |||
6.2 No Duplication of Benefits
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8 | |||
6.3 Forfeiture Upon Termination for Cause
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8 | |||
6.4 Forfeiture for Competition
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8 | |||
6.5 Expenses Incurred in Enforcing the Plan
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9 | |||
6.6 No Restrictions on any Portion of Benefits Determined to be Excess
Parachute Payments
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9 | |||
ARTICLE VII ADMINISTRATION
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9 | |||
7.1 Committee Appointment
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9 | |||
7.2 Committee Organization and Voting
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9 | |||
7.3 Powers of the Committee
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9 | |||
7.4 Committee Discretion
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10 | |||
7.5 Reliance Upon Information
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10 | |||
7.6 Approval of Benefit Modifications
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10 | |||
ARTICLE VIII ADOPTION BY SUBSIDIARIES
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10 | |||
8.1 Procedure for and Status After Adoption
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10 | |||
8.2 Termination of Participation By Adopting Subsidiary
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11 | |||
8.3 Spinoff Plan
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11 | |||
ARTICLE IX AMENDMENT AND/OR TERMINATION
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11 | |||
9.1 Amendment or Termination of the Plan
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11 | |||
9.2 No Retroactive Effect on Annual Benefits
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11 | |||
9.3 Effect of Termination
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12 | |||
9.4 Effect of Change in Control
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12 | |||
ARTICLE X FUNDING
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12 | |||
10.1 Payments from Trust
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12 | |||
10.2 Plan May Be Funded Through Life Insurance
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12 | |||
10.3 Required Funding of Rabbi Trust
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12 | |||
10.4 Ownership of Assets; Release
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13 | |||
10.5 Reversion of Excess Assets
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14 | |||
10.6 Repurchase of Valero Stock
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14 | |||
10.7 Participants Must Rely Only on General Credit of the Companies
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14 | |||
ARTICLE XI MISCELLANEOUS
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15 | |||
11.1 Responsibility for Distributions and Withholding of Taxes
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15 | |||
11.2 Limitation of Rights
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15 | |||
11.3 Arbitration of Disputes
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15 | |||
11.4 Distributions to Incompetents
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17 | |||
11.5 Nonalienation of Benefits
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11.6 Severability
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18 | |||
11.7 Notice
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18 | |||
11.8 Gender and Number
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18 | |||
11.9 Administration and Interpretation Consistent with Code Section 409A
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18 | |||
11.10 Governing Law
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18 | |||
11.11 Effective Date
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VALERO ENERGY CORPORATION
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By: | /s/ William R. Klesse | |||
18
(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) | Board of Directors shall mean the Board of Directors of Valero. | ||
(c) | Cause shall mean the (i) conviction of the Participant by a state or federal court of a felony involving moral turpitude, (ii) conviction of the Participant by a state or federal court of embezzlement or misappropriation of funds of the Company, (iii) the Companys (or applicable Affiliates) reasonable determination that the Participant has committed an act of fraud, embezzlement, theft, or misappropriation of funds in connection with such Participants duties in the course of his or her employment with the Company (or applicable Affiliate), (iv) the Companys (or its applicable Affiliates) reasonable determination that the Participant has engaged in gross mismanagement, negligence or misconduct which causes or could potentially cause material loss, damage or injury to the Company, any of its Affiliates or their respective employees, or (v) the Companys (or applicable Affiliates) reasonable determination that (a) the Participant has violated any policy of the Company (or applicable Affiliate), including but not limited to, policies regarding sexual harassment, insider trading, confidentiality, substance abuse and/or conflicts of interest, which violation could result in the termination of the Participants employment, or (b) the Participant has failed to satisfactorily perform the material duties of Participants position with the Company or any of its Affiliates. | ||
(d) | Change of Control shall have the meaning specified in Paragraph 4.12. | ||
(e) | Committee shall mean the persons administering this Plan from time to time pursuant to Paragraph 6.1. | ||
(f) | Common Stock shall mean the common stock, par value $0.01 per share, of Valero. | ||
(g) | Company shall mean Valero and its subsidiaries, and any successor or successors to such entities. |
(h) | Distribution Agreement shall mean the Agreement and Plan of Distribution, entered into between VEC and Valero, in connection with the transactions contemplated by the Merger Agreement. Distribution and Time of Distribution shall have the meanings specified in the Distribution Agreement. | ||
(i) | EBA shall mean the Employee Benefits Agreement, entered into between Valero and VEC, in connection with the transactions contemplated by the Merger Agreement. | ||
(j) | Employee shall mean any person employed by the Company, including officers and directors of the Company within the meaning of Section 16(a) of the Exchange Act, but shall include a director only if also employed by the Company on a full-time basis. | ||
(k) | Exchange Act shall mean the Securities Exchange Act of 1934, as amended and in effect from time to time. | ||
(l) | Exercise Date see Paragraph 4.3. | ||
(m) | Expiration Date see Paragraph 3.5. | ||
(n) | Exercise Notice see Paragraph 4.3. | ||
(o) | Key Employee shall mean any key Employee or prospective Employee of the Company having responsibility for planning the Companys operations, controlling or managing its business activities, or advising the management of the Company with respect to its operations and business activities. The determination of Key Employees for purposes of determining eligibility for participation in this Plan, and the determination of key employees for purposes of applying any New York Stock Exchange Rule or determining eligibility for participation in any other stock option plan of the Company, need not be consistent. | ||
(p) | Merger Agreement shall mean the Agreement and Plan of Merger, dated as of January 31, 1997, between VEC, PG&E Corporation and PG&E Acquisition Corporation. | ||
(q) | Option or Options shall mean an option or options granted pursuant to this Plan to purchase shares of Common Stock. | ||
(r) | Option Agreement shall mean a written agreement entered into between Valero and a Participant pursuant to Paragraph 3.9. | ||
(s) | Option Price see Paragraph 3.5. | ||
(t) | Option Share shall mean one share of Common Stock purchased or which may be purchased pursuant to an Option. | ||
(u) | Participant shall mean a Key Employee who is eligible to be granted an Option under this Plan. | ||
(v) | Plan see Paragraph 1. | ||
(w) | Preference Share Purchase Right shall mean one of the rights distributed pursuant to the Rights Agreement to purchase 1/100 share of the Junior Participating Preferred Stock, Series I, of Valero. | ||
(x) | Ratio shall mean the amount obtained by dividing the average of the daily high and low trading prices per share of VEC Common Stock as reported on the NYSE Composite Tape (the NYSE Tape) on each of the last 15 consecutive full NYSE trading days (the Averaging Period) ending on and including the trading day preceding the Distribution Date (as defined in the Distribution Agreement) (the Company Price) by the difference between (a) the Company Price and (b) the product of (1) the Per Share Merger Consideration (as defined in the Merger Agreement) and (2) the average of the daily high and low prices per share of Acquiror Common Stock (as defined in the Merger Agreement) as reported on the NYSE Tape during the Averaging Period. | ||
(y) | Rights Agreement shall mean that certain Rights Agreement, dated as of June 18, 1997, between Valero and Harris Trust and Savings Bank, as Rights Agent, as amended and in effect from time to time. |
2
(z) | Restricted Optionee shall mean any person who is a director or officer of Valero within the meaning of Section 16(a) of the Exchange Act, together with any person who is the beneficial owner of more than 10 percent of any class of equity security of Valero registered under Section 12 of the Exchange Act. | ||
(aa) | SAR or stock appreciation right shall mean the right, subject to the provisions of this Plan, to receive a payment in cash equal to the difference between the specified Strike Price of the SAR and the price of one share of the Common Stock at the time specified in Paragraph 4.2. | ||
(bb) | SEC shall mean the Securities and Exchange Commission. | ||
(cc) | Settlement Date see Paragraph 4.3. | ||
(dd) | Strike Price shall mean the price per share of the Common Stock, determined pursuant to Paragraph 3.7, from which the appreciation (if any) with respect to an SAR shall be calculated. | ||
(ee) | Tax Payment see Paragraph 4.3. | ||
(ff) | Time of Distribution see Distribution Agreement . | ||
(gg) | Valero shall mean Valero Energy Corporation, a Delaware corporation formerly known as Valero Refining and Marketing Company , incorporated in 1981 under the name Saber Energy, Inc . | ||
(hh) | VEC shall mean PG&E Gas Transmission, Texas Corporation, a Delaware corporation formerly known as Valero Energy Corporation , incorporated in 1955 under the name Coastal States Oil and Gas Company. | ||
(ii) | VEC Common Stock shall mean the Common Stock, $1.00 par value, of VEC. | ||
(jj) | VEC Option Plans shall mean the following stock option plans previously adopted by VEC: the VEC Stock Option Plan No. 3, the VEC Stock Option Plan No. 4, and the VEC Stock Option Plan No. 5. | ||
(kk) | VRM Participant shall have the same meaning as given in the EBA. |
3
4
5
6
7
8
9
a = the number of Option Shares available to be optioned under this Plan immediately prior to such change, | |||
b = the number of Option Shares available to be optioned under this Plan immediately following such change, and | |||
c = the number of SARs available for grant under this Plan immediately prior to such change. |
10
(a) | Make all determinations and computations concerning the selection of Participants, the granting of Options and SARs, the pricing thereof and the number of Option Shares to be optioned, and SARs to be granted, to each Participant; | ||
(b) | Cause Valero to enter into Option Agreements with Participants; | ||
(c) | With the consent of the Participant, enter into agreements amending any Option Agreement to grant SARs thereunder, change the Option Price or Expiration Date of any Option, the Strike Price of any SAR or any other term or condition thereof, or to terminate any such Option Agreement; | ||
(d) | Make rules and regulations for the administration of the Plan not inconsistent with the terms and provisions of this Plan, including rules providing for the accelerated exercise of Options and SARs in such circumstances as the Committee may deem appropriate; | ||
(e) | Construe all terms, provisions, conditions and limitations of the Plan in good faith, and adopt amendments to the Plan; | ||
(f) | Make equitable adjustments for any mistakes or errors in the administration of this Plan or deemed by the Committee to be necessary as the result of any unusual situation or any ambiguity in the Plan; | ||
(g) | Select, employ and compensate, from time to time, consultants, accountants, attorneys and other agents and employees as the Compensation Committee may deem necessary or advisable for the proper and efficient administration of this Plan. |
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if to the Executive: | At the most recent address on file in the Companys records | ||
|
||||
|
if to the Company: | Valero Energy Corporation | ||
|
One Valero Way | |||
|
San Antonio, Texas 78249 | |||
|
Attention: Corporate Secretary |
14
Kimberly S. Bowers
|
||||||
|
||||||
VALERO ENERGY CORPORATION | ||||||
|
||||||
|
By: | |||||
|
Name: |
|
||||
|
Title: | President |
15
Section 1.01
|
Defined Terms | 1 | ||||
Section 1.02
|
Classification of Loans and Borrowings | 17 | ||||
Section 1.03
|
Terms Generally | 17 | ||||
Section 1.04
|
Accounting Terms; GAAP | 18 | ||||
Section 1.05
|
Letter of Credit Amounts | 18 | ||||
|
||||||
ARTICLE II
THE CREDITS |
||||||
|
||||||
Section 2.01
|
Commitments | 18 | ||||
Section 2.02
|
Commitment Increase | 18 | ||||
Section 2.03
|
Acquisition Effective Date Commitment Increase | 20 | ||||
Section 2.04
|
Loans and Borrowings | 20 | ||||
Section 2.05
|
Requests for Borrowings | 21 | ||||
Section 2.06
|
Letters of Credit | 22 | ||||
Section 2.07
|
Funding of Borrowings | 27 | ||||
Section 2.08
|
Interest Elections | 28 | ||||
Section 2.09
|
Termination and Reduction of Commitments | 29 | ||||
Section 2.10
|
Repayment of Loans; Evidence of Debt | 29 | ||||
Section 2.11
|
Prepayment of Loans | 30 | ||||
Section 2.12
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Fees | 30 | ||||
Section 2.13
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Interest | 32 | ||||
Section 2.14
|
Alternate Rate of Interest | 32 | ||||
Section 2.15
|
Increased Costs | 33 | ||||
Section 2.16
|
Break Funding Payments | 34 | ||||
Section 2.17
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Taxes | 35 | ||||
Section 2.18
|
Payments Generally; Pro Rata Treatment; Sharing of Set-offs | 36 | ||||
Section 2.19
|
Mitigation Obligations; Replacement of Lenders | 37 | ||||
Section 2.20
|
Illegality | 38 | ||||
|
||||||
ARTICLE III
REPRESENTATIONS AND WARRANTIES |
||||||
|
||||||
Section 3.01
|
Organization; Powers | 39 | ||||
Section 3.02
|
Authorization; Enforceability | 39 | ||||
Section 3.03
|
Governmental Approvals; No Conflicts | 39 | ||||
Section 3.04
|
Financial Condition | 39 | ||||
Section 3.05
|
Environmental Matters | 39 | ||||
Section 3.06
|
No Default | 40 | ||||
Section 3.07
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Investment and Holding Company Status | 40 | ||||
Section 3.08
|
Taxes | 40 | ||||
Section 3.09
|
ERISA | 40 | ||||
Section 3.10
|
Disclosure | 40 |
i
ARTICLE IV
CONDITIONS |
||||||
|
||||||
Section 4.01
|
Revolving Effective Date | 41 | ||||
Section 4.02
|
Acquisition Effective Date | 42 | ||||
Section 4.03
|
Each Credit Event | 44 | ||||
|
||||||
ARTICLE V
AFFIRMATIVE COVENANTS |
||||||
|
||||||
Section 5.01
|
Financial Statements and Other Information | 45 | ||||
Section 5.02
|
Notices of Material Events | 46 | ||||
Section 5.03
|
Existence; Conduct of Business | 47 | ||||
Section 5.04
|
Payment of Obligations | 47 | ||||
Section 5.05
|
Maintenance of Properties; Insurance | 47 | ||||
Section 5.06
|
Books and Records; Inspection Rights | 47 | ||||
Section 5.07
|
Compliance with Laws | 48 | ||||
Section 5.08
|
Use of Proceeds | 48 | ||||
|
||||||
ARTICLE VI
NEGATIVE COVENANTS |
||||||
|
||||||
Section 6.01
|
Indebtedness | 48 | ||||
Section 6.02
|
Liens | 48 | ||||
Section 6.03
|
Fundamental Changes | 49 | ||||
Section 6.04
|
Hedging Agreements | 50 | ||||
Section 6.05
|
Transactions with Affiliates | 50 | ||||
Section 6.06
|
Subsidiary Indebtedness | 51 | ||||
Section 6.07
|
Consolidated Interest Coverage Ratio | 51 | ||||
Section 6.08
|
Project Financing Indebtedness | 51 | ||||
|
||||||
ARTICLE VII
EVENTS OF DEFAULT |
||||||
|
||||||
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE GLOBAL ADMINISTRATIVE AGENT |
||||||
|
||||||
ARTICLE IX
MISCELLANEOUS |
||||||
|
||||||
Section 9.01
|
Notices | 56 | ||||
Section 9.02
|
Waivers; Amendments | 58 | ||||
Section 9.03
|
Expenses; Indemnity; Damage Waiver | 59 | ||||
Section 9.04
|
Successors and Assigns | 60 | ||||
Section 9.05
|
Survival | 63 | ||||
Section 9.06
|
Counterparts; Integration; Effectiveness | 63 | ||||
Section 9.07
|
Severability | 64 | ||||
Section 9.08
|
Right of Setoff | 64 | ||||
Section 9.09
|
Governing Law; Jurisdiction; Consent to Service of Process | 64 | ||||
Section 9.10
|
Waiver Of Jury Trial | 65 | ||||
Section 9.11
|
Headings | 65 | ||||
Section 9.12
|
Confidentiality | 65 |
ii
Section 9.13
|
Interest Rate Limitation | 66 | ||||
Section 9.14
|
USA PATRIOT Act | 66 | ||||
Section 9.15
|
Waiver of Notice of Termination | 66 |
iii
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VALERO ENERGY CORPORATION
|
||||
By: | /s/ Michael S. Ciskowski | |||
Michael S. Ciskowski | ||||
Executive Vice President and
Chief Financial Officer |
S- 1
JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent and as Global Administrative Agent |
||||
By: | /s/ Robert C. Mertensotto | |||
Robert C. Mertensotto | ||||
Managing Director | ||||
S- 2
1.
|
Assignor: | |||
|
||||
2.
|
Assignee: | |||
|
[and is an Affiliate/Approved Fund of [ identify Lender ] 1 ] | |||
|
||||
3.
|
Credit Agreement: | The $2,500,000,000 5-Year Credit Agreement dated as of August 17, 2005 among Valero Energy Corporation, the Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto. |
1 | Select as applicable. |
Exhibit A-1
6. | Assigned Interest: |
Aggregate Amount of | Amount of | Percentage Assigned | ||
Commitment/Loans | Commitment/Loans | of | ||
for all Lenders | Assigned | Commitment/Loans 2 | ||
$ | $ | % | ||
$ | $ | % | ||
$ | $ | % |
ASSIGNOR
[NAME OF ASSIGNOR] |
||||
By: | ||||
Title: |
ASSIGNEE
[NAME OF ASSIGNEE] |
||||
By: | ||||
Title: | ||||
2 | Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder. |
Exhibit A-2
3 | To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement. |
Exhibit A-3
4 | To be added only if the consent of the Borrower is required by the terms of the Credit Agreement. |
Exhibit A-4
Exhibit A-5
Exhibit A-6
Exhibit B-1
Exhibit B-2
Very truly yours,
VALERO ENERGY CORPORATION |
||||
By: | ||||
Title: |
Exhibit C-1
|
||
$
|
New York, New York | |
|
August 17, 2005 |
Exhibit D-1
VALERO ENERGY CORPORATION
|
||||
By: | ||||
Title: |
Exhibit D-2
Interest Period and | Amount of | |||||||||||||
Amount Continued or | Eurodollar Rate | Amount of Principal | Eurodollar Loans | Unpaid Principal | ||||||||||
Amount of | Converted to | with Respect | of Eurodollar Loans | Converted to ABR | Balance of | Notation Made | ||||||||
Date | Eurodollar Loans | Eurodollar Loans | Thereto | Repaid | Loans | Eurodollar Loans | By | |||||||
|
Exhibit D-3
Amount of ABR Loans | ||||||||||||
Amount of ABR | Amount Converted | Amount of Principal of | Converted to Eurodollar | Unpaid Principal | Notation | |||||||
Date | Loans | to ABR Loans | ABR Loans Repaid | Loans | Balance of ABR Loans | Made By | ||||||
|
Exhibit D-4
Exhibit E-1
Exhibit E-2
Exhibit E-3
Exhibit E-4
2
3
4
VALERO ENERGY CORPORATION
|
||||
By: | /S/ Donna M. Titzman | |||
Donna Titzman | ||||
Treasurer | ||||
S-1
JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent and as Global Administrative Agent |
||||
By: | /s/ Robert W. Traband | |||
Robert W. Traband | ||||
Vice President | ||||
S-2
2
3
4
5
6
VALERO ENERGY CORPORATION
|
||||
By: | /s/ Donna M. Titzman | |||
Donna Titzman | ||||
Treasurer | ||||
S-1
JPMORGAN CHASE BANK, N.A.,
individually and as Administrative Agent and as Global Administrative Agent |
||||
By: | /s/ Robert W. Traband | |||
Robert W. Traband | ||||
Vice President | ||||
S-2
Year Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Ratio of Earnings to Fixed Charges:
|
||||||||||||||||||||
Earnings:
|
||||||||||||||||||||
Income from continuing operations
before income tax expense,
minority interest in net income of
consolidated subsidiaries, and income
from equity investees
|
$ | 320 | $ | 6,743 | $ | 7,872 | $ | 5,013 | $ | 2,726 | ||||||||||
Add:
|
||||||||||||||||||||
Fixed charges
|
643 | 658 | 566 | 474 | 410 | |||||||||||||||
Amortization of capitalized interest
|
18 | 15 | 9 | 8 | 7 | |||||||||||||||
Distributions from equity investees
|
| | 47 | 50 | 42 | |||||||||||||||
Less:
|
||||||||||||||||||||
Interest capitalized
|
(111 | ) | (107 | ) | (165 | ) | (66 | ) | (37 | ) | ||||||||||
|
||||||||||||||||||||
Total earnings
|
$ | 870 | $ | 7,309 | $ | 8,329 | $ | 5,479 | $ | 3,148 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Fixed charges:
|
||||||||||||||||||||
Interest expense, net
|
$ | 340 | $ | 359 | $ | 212 | $ | 268 | $ | 260 | ||||||||||
Interest capitalized
|
111 | 107 | 165 | 66 | 37 | |||||||||||||||
Rental expense interest factor (1)
|
192 | 192 | 189 | 140 | 113 | |||||||||||||||
|
||||||||||||||||||||
Total fixed charges
|
$ | 643 | $ | 658 | $ | 566 | $ | 474 | $ | 410 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio of earnings to fixed charges
|
1.4 | x | 11.1 | x | 14.7 | x | 11.6 | x | 7.7 | x | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends:
|
||||||||||||||||||||
Total earnings
|
$ | 870 | $ | 7,309 | $ | 8,329 | $ | 5,479 | $ | 3,148 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Total fixed charges
|
$ | 643 | $ | 658 | $ | 566 | $ | 474 | $ | 410 | ||||||||||
Preferred stock dividends
|
| | 3 | 20 | 19 | |||||||||||||||
|
||||||||||||||||||||
Total fixed charges and preferred
stock dividends
|
$ | 643 | $ | 658 | $ | 569 | $ | 494 | $ | 429 | ||||||||||
|
||||||||||||||||||||
|
||||||||||||||||||||
Ratio of earnings to fixed charges
and preferred stock dividends
|
1.4 | x | 11.1 | x | 14.6 | x | 11.1 | x | 7.3 | x | ||||||||||
|
(1) | The interest portion of rental expense represents one-third of rents, which is deemed representative of the interest portion of rental expense. |
Name of Entity | State of Incorporation/Organization | |
AUTOTRONIC SYSTEMS, INC.
|
Delaware | |
BIG DIAMOND, INC.
|
Texas | |
BIG DIAMOND NUMBER 1, INC.
|
Texas | |
CANADIAN ULTRAMAR COMPANY
|
Nova Scotia | |
CANALUX L.P.
|
Newfoundland and Labrador | |
COLONNADE VERMONT INSURANCE COMPANY
|
Vermont | |
DIAMOND ALTERNATIVE ENERGY, LLC
|
Delaware | |
DIAMOND OMEGA COMPANY, L.L.C.
|
Delaware | |
DIAMOND SHAMROCK ARIZONA, INC.
|
Delaware | |
DIAMOND SHAMROCK REFINING COMPANY, L.P.
|
Delaware | |
DIAMOND SHAMROCK STATIONS, INC.
|
Delaware | |
DIAMOND UNIT INVESTMENTS, L.L.C.
|
Delaware | |
DSRM NATIONAL BANK
|
U.S.A. | |
EMERALD MARKETING, INC.
|
Texas | |
HUNTWAY REFINING COMPANY
|
Delaware | |
MICHIGAN REDEVELOPMENT GP, LLC
|
Delaware | |
MICHIGAN REDEVELOPMENT, L.P.
|
Delaware | |
MRP PROPERTIES COMPANY, LLC
|
Michigan | |
NATIONAL CONVENIENCE STORES INCORPORATED
|
Delaware | |
NECHES RIVER HOLDING CORP.
|
Delaware | |
OCEANIC TANKERS AGENCY LIMITED
|
Quebec | |
PORT ARTHUR COKER COMPANY L.P.
|
Delaware | |
PREMCOR USA INC.
|
Delaware | |
PROPERTY RESTORATION, L.P.
|
Delaware | |
ROBINSON OIL COMPANY (1987) LIMITED
|
Nova Scotia | |
SABINE RIVER HOLDING CORP.
|
Delaware | |
SABINE RIVER LLC
|
Delaware | |
SIGMOR BEVERAGE, INC.
|
Texas | |
SIGMOR CORPORATION
|
Delaware | |
SIGMOR NUMBER 5, INC.
|
Texas | |
SIGMOR NUMBER 43, INC.
|
Texas | |
SIGMOR NUMBER 79, INC.
|
Texas | |
SIGMOR NUMBER 80, INC.
|
Texas | |
SIGMOR NUMBER 103, INC.
|
Texas | |
SIGMOR NUMBER 105, INC.
|
Texas | |
SIGMOR NUMBER 119, INC.
|
Texas | |
SIGMOR NUMBER 178, INC.
|
Texas | |
SIGMOR NUMBER 196, INC.
|
Texas | |
SIGMOR NUMBER 238, INC.
|
Texas | |
SIGMOR NUMBER 259, INC.
|
Texas | |
SIGMOR NUMBER 422, INC.
|
Texas | |
SKIPPER BEVERAGE COMPANY, INC.
|
Texas | |
SUNBELT REFINING COMPANY, L.P.
|
Delaware | |
SUNRAY WIND, LLC
|
Texas | |
SUNSHINE BEVERAGE CO.
|
Texas | |
THE PREMCOR PIPELINE CO.
|
Delaware | |
THE PREMCOR REFINING GROUP INC.
|
Delaware | |
THE SHAMROCK PIPE LINE CORPORATION
|
Delaware |
Page 1
Name of Entity | State of Incorporation/Organization | |
TOC-DS COMPANY
|
Delaware | |
ULTRAMAR ACCEPTANCE INC.
|
Canada | |
ULTRAMAR ENERGY INC.
|
Delaware | |
ULTRAMAR INC.
|
Nevada | |
ULTRAMAR LTD.
|
Canada | |
ULTRAMAR SERVICES INC.
|
Canada | |
VALERO ARUBA ACQUISITION COMPANY I, LTD.
|
Virgin Islands (U.K.) | |
VALERO ARUBA FINANCE INTERNATIONAL, LTD.
|
Virgin Islands (U.K.) | |
VALERO ARUBA HOLDING COMPANY N.V.
|
Aruba | |
VALERO ARUBA HOLDINGS INTERNATIONAL, LTD.
|
Virgin Islands (U.K.) | |
VALERO ARUBA MAINTENANCE/OPERATIONS COMPANY N.V.
|
Aruba | |
VALERO BONAIRE FUELS COMPANY N.V.
|
Bonaire | |
VALERO CALIFORNIA RETAIL COMPANY
|
Delaware | |
VALERO CANADA FINANCE, INC.
|
Delaware | |
VALERO CANADA L.P.
|
Newfoundland | |
VALERO CAPITAL CORPORATION
|
Delaware | |
VALERO CARIBBEAN SERVICES COMPANY
|
Delaware | |
VALERO CHOPS GP, L.L.C.
|
Delaware | |
VALERO CHOPS I, L.P.
|
Delaware | |
VALERO CHOPS II, L.P.
|
Delaware | |
VALERO CLAIMS MANAGEMENT, INC.
|
Texas | |
VALERO COKER CORPORATION ARUBA N.V.
|
Aruba | |
VALERO CUSTOMS & TRADE SERVICES, INC.
|
Delaware | |
VALERO DIAMOND, L.P.
|
Texas | |
VALERO DIAMOND METRO, INC.
|
Michigan | |
VALERO ENERGY ARUBA II COMPANY
|
Cayman Islands | |
VALERO ENERGY CORPORATION (parent)
|
Delaware | |
VALERO FINANCE L.P. I
|
Newfoundland | |
VALERO FINANCE L.P. II
|
Newfoundland | |
VALERO FINANCE L.P. III
|
Newfoundland | |
VALERO HOLDINGS, INC.
|
Delaware | |
VALERO JAVELINA, INC.
|
Delaware | |
VALERO JAVELINA, L.P.
|
Delaware | |
VALERO LUX COMPANY I S.à r.l.
|
Luxembourg | |
VALERO LUX COMPANY II S.à r.l.
|
Luxembourg | |
VALERO MARKETING & SUPPLY-ARUBA N.V.
|
Aruba | |
VALERO MARKETING AND SUPPLY COMPANY
|
Delaware | |
VALERO MARKETING AND SUPPY INTERNATIONAL LTD.
|
Cayman Islands | |
VALERO MKS LOGISTICS, L.L.C.
|
Delaware | |
VALERO NATURAL GAS PIPELINE COMPANY
|
Delaware | |
VALERO OMEGA COMPANY, L.L.C.
|
Delaware | |
VALERO PAYMENT SERVICES COMPANY
|
Delaware | |
VALERO POWER MARKETING COMPANY
|
Delaware | |
VALERO REFINING AND MARKETING COMPANY
|
Delaware | |
VALERO REFINING COMPANY-ARUBA N.V.
|
Aruba | |
VALERO REFINING COMPANY-CALIFORNIA
|
Delaware | |
VALERO REFINING COMPANY-NEW JERSEY
|
Delaware | |
VALERO REFINING COMPANY-OKLAHOMA
|
Michigan | |
VALERO REFINING COMPANY-TENNESSEE, L.L.C.
|
Delaware | |
VALERO REFINING-NEW ORLEANS, L.L.C.
|
Delaware | |
VALERO REFINING-TEXAS, L.P.
|
Texas | |
VALERO RENEWABLE FUELS COMPANY, LLC
|
Texas | |
VALERO RETAIL HOLDINGS, INC.
|
Delaware | |
VALERO SECURITY SYSTEMS, INC.
|
Delaware |
Page 2
Name of Entity | State of Incorporation/Organization | |
VALERO SERVICES, INC.
|
Delaware | |
VALERO TERMINALING AND DISTRIBUTION COMPANY
|
Delaware | |
VALERO TEXAS POWER MARKETING, INC.
|
Delaware | |
VALERO UK LTD
|
United Kingdom | |
VALERO ULTRAMAR HOLDINGS INC.
|
Delaware | |
VALERO UNIT INVESTMENTS, L.L.C.
|
Delaware | |
VALLEY SHAMROCK, INC.
|
Texas | |
VEC TRUST I
|
Delaware | |
VEC TRUST III
|
Delaware | |
VEC TRUST IV
|
Delaware | |
VRG PROPERTIES COMPANY
|
Delaware | |
VTD PROPERTIES COMPANY
|
Delaware |
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/s/ KPMG LLP |
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/s/ William R. Klesse | |||
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Chief Executive Officer and President |
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/s/ Michael S. Ciskowski | |||
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Executive Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ William R. Klesse
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Chief Executive Officer and President
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February 27, 2009
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1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Michael S. Ciskowski
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Executive Vice President and Chief Financial Officer
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February 27, 2009
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I. | Statement of Principles | |
Pursuant to Section 10A of the Securities Exchange Act of 1934, as amended by Section 202 of the Sarbanes-Oxley Act of 2002 (SOX Act), the Audit Committee of the board of directors (the Audit Committee) of Valero Energy Corporation (the Company) is required to pre-approve the audit and non-audit services performed by the Companys independent auditor to assure that the provision of such services does not impair the auditors independence. The SECs rules establish two approaches for pre-approving services. The two approaches are not mutually exclusive: |
| the Audit Committee may pre-approve each particular service on a case-by-case basis ( separate pre-approval ), and | ||
| the Audit Committee may adopt a pre-approval policy that is detailed as to the particular types of services that may be provided by the independent auditor without consideration by the Audit Committee on a case-by-case basis ( policy-based pre-approval ). |
| Audit Services | ||
| Audit-Related Services | ||
| Tax Services | ||
| All Other Services |
II. | Term of Pre-Approvals | |
The term of the policy-based pre-approvals stated in the appendices to this policy is the period from January 1, 2009 to January 31, 2010, unless the Audit Committee specifically provides for a different period. The Audit Committee will review and pre-approve, at least annually, the services that may be provided by the independent auditor. The Audit Committee will revise the list of policy-based pre-approved services from time to time as the Committee deems necessary or appropriate. |
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III. | Delegation | |
In accordance with the SOX Act and SEC rules, the Audit Committee hereby delegates to its Chairman the authority to grant separate pre-approvals of services and fees in accordance with this policy. The Audit Committee may further delegate pre-approval authority from time to time to one or more of its other members in its discretion. Any committee member to whom pre-approval authority is delegated shall report any pre-approval decisions to the full Audit Committee at its next meeting. The Audit Committee does not delegate its responsibilities to pre-approve services to any member of the Companys management. | ||
IV. | Services for which Separate Pre-Approval is Required | |
The terms and fees for the following services of the independent auditor require separate pre-approval by the Audit Committee: |
| the annual financial statement audit, including all audits, reviews, procedures and other services required to be performed by the independent auditor to form an opinion on the Companys consolidated financial statements, and | ||
| the annual audit of the Companys internal control over financial reporting, including all services required to be performed by the independent auditor to issue its report on the effectiveness of the Companys internal control over financial reporting. |
V. | Services for which Policy-Based Pre-Approval is Available |
A. | Audit Services |
| services associated with SEC registration statements ( e.g. , comfort letters, consents), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings, | ||
| statutory audits or financial audits for subsidiaries or affiliates of the Company. |
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B. | Audit-Related Services | ||
Audit-Related Services are assurance and related services that are reasonably related to the performance of the annual audit or quarterly review of the Companys financial statements or that are traditionally performed by the independent auditor. The Audit Committee may grant policy-based pre-approval for Audit-Related Services. These services would include: |
| employee benefit plan audits, and | ||
| due diligence services related to proposed mergers and acquisitions. |
The Audit Committee believes that the provision of the Audit-Related Services listed in Appendix B does not impair the independence of the auditor, and has given policy-based pre-approval for the Audit-Related Services listed in Appendix B . All other Audit-Related Services must be separately pre-approved by the Audit Committee. | |||
C. | Tax Services | ||
The Audit Committee believes that the independent auditor can provide Tax Services to the Company such as tax compliance, tax planning and tax advice without impairing the auditors independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the U.S. Internal Revenue Code and related regulations or in the tax laws and regulations of any jurisdiction in which the Company is subject to taxation. In addition, the independent auditor may not provide any tax services to the Company that are deemed to be incompatible with auditor independence per standards promulgated by the Public Company Accounting Oversight Board (PCAOB). | |||
The Audit Committee has given policy-based pre-approval for the Tax Services listed in Appendix C . All other Tax Services must be separately pre-approved by the Audit Committee, including Tax Services related to large and complex transactions and Tax Services proposed to be provided by the independent auditor to any executive officer or director of the Company, in his or her individual capacity, when such services are paid for by the Company. | |||
D. | All Other Services | ||
The Audit Committee may grant policy-based pre-approval for those permissible non-audit services classified as All Other Services that it believes are routine, recurring services that would not impair the independence of the auditor. The Audit Committee has given policy-based pre-approval for the All Other Services listed in Appendix D . Any permissible All Other Services that are not listed in Appendix D must be separately pre-approved by the Audit Committee. |
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VI. | Prohibited Services | |
A list of the SECs prohibited non-audit services is attached to this policy as Appendix E . The list sets forth the several services that the SOX Act and the SEC have specifically identified as services that may not be performed by the Companys independent auditor. The Audit Committee will consult the SECs rules and relevant guidance, with the assistance of counsel when necessary or appropriate, to determine whether any proposed service by the independent auditor falls within any category of prohibited non-audit services. | ||
In addition, the independent auditor may not provide any service or product to the Company for a contingent fee (as defined and interpreted by the SEC pursuant to Rule 2-01(c)(5) of Regulation S-X) or a commission, or pursuant to an agreement (written or otherwise) by the Company to pay a value added fee based on the results of the independent auditors performance of a service. | ||
VII. | Pre-Approval Fee Levels and Budgeted Amounts | |
Pre-approval fee levels or budgeted amounts for all services to be provided by the independent auditor will be established at least annually by the Audit Committee. All services that have received policy-based pre-approval are subject to the pre-approval fee levels or budgeted amounts set forth in the appendices to this policy. Any proposed services exceeding these amounts will require separate pre-approval by the Audit Committee or by any person to whom pre-approval authority is granted under Section III above. | ||
VIII. | Procedures | |
Requests or applications to provide services that require separate approval by the Audit Committee must be submitted to the Audit Committee by both the independent auditor and the Companys Chief Financial Officer (or his designee), and must include a joint statement as to whether, in their view, the request or application is consistent with the SECs rules on auditor independence. In connection with the Audit Committees consideration of any proposed service, the independent auditor, at the Committees request, will provide to the Audit Committee detailed documentation regarding the specific services to be provided so that the Committee can make a well-reasoned assessment of the impact of the service on the auditors independence. | ||
The Audit Committee hereby designates the Companys Vice President of Internal Audit (the Monitor) to monitor the performance of all services provided by the independent auditor and to determine whether such services are in compliance with this policy. The Monitor will report to the Audit Committee on a periodic basis the results of his monitoring. |
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| Bookkeeping or other services related to the accounting records or financial statements of the audit client* | ||
| Financial information systems design and implementation* | ||
| Appraisal or valuation services, fairness opinions or contribution-in-kind reports* | ||
| Actuarial services* | ||
| Internal audit outsourcing services* | ||
| Management functions | ||
| Human resources | ||
| Broker-dealer, investment adviser or investment banking services | ||
| Legal services | ||
| Expert services unrelated to the audit |
* | Provision of these non-audit services may be permitted if it is reasonable to conclude that the results of these services will not be subject to audit procedures. Materiality is not an appropriate basis upon which to overcome the rebuttable presumption that prohibited services will be subject to audit procedures. |