8-KMaterial Agreements

VALERO ENERGY CORP/TX 8-K Report, Material Agreement (Oct 3, 2006)

Filed October 3, 2006For Securities:VLO

Summary

Valero Energy Corporation (VLO) announced on October 3, 2006, a revision to its non-employee director compensation structure, effective January 1, 2007. The primary changes focus on the equity compensation awarded to directors, aiming to further align their interests with those of shareholders through increased stock ownership and options. While cash retainers and meeting fees remain largely consistent, the value of annual stock grants will increase, and initial option grants will be modified in terms of quantity and vesting schedule. Specifically, the annual stock grant's value for non-employee directors will rise from $60,000 to $80,000, with vesting over three years. The initial election option grant will double in number to 10,000 options, but the vesting period will change to a single cliff vesting on the first anniversary of the grant date, replacing the previous three-year installment vesting. Notably, annual option grants for directors will be discontinued under the new structure. These adjustments are intended to enhance director commitment and financial stake in the company's performance.

Key Highlights

  • 1Valero Energy Corporation is updating its compensation plan for non-employee directors, effective January 1, 2007.
  • 2Annual cash retainer for non-employee directors remains $60,000.
  • 3Meeting attendance fees: $1,500 for in-person, $1,000 for telephonic.
  • 4Committee Chairpersons will receive additional annual retainers ($20,000 for Audit/Compensation, $10,000 for others).
  • 5Annual stock grant value for non-employee directors increases from $60,000 to $80,000, vesting over three years.
  • 6Initial election option grant doubles to 10,000 options, with a one-time cliff vesting after one year.
  • 7Annual option grants for non-employee directors will be eliminated under the revised plan.

Frequently Asked Questions

The primary changes involve an increase in the value of annual stock grants for non-employee directors from $60,000 to $80,000, and a modification to the initial stock option grant upon election to the board. The annual stock grant will continue to vest over three years. The initial option grant doubles to 10,000 options but will now vest all at once on the first anniversary of the grant date. Annual option grants will no longer be issued.

The annual cash retainer for non-employee directors will remain $60,000. Meeting attendance fees also remain consistent at $1,500 for in-person and $1,000 for telephonic attendance. Additional retainers for committee chairpersons are also part of the plan.

By increasing the value of annual stock grants and modifying the initial option grant structure, Valero aims to deepen the financial stake of its non-employee directors in the company's stock performance. Increased stock ownership and the potential for equity gains are intended to incentivize directors to act in the best long-term interests of shareholders.

In the event of a 'Change of Control' as defined in the respective plans, all unvested shares of Common Stock and options previously granted under the Director Stock Plan and Director Option Plan will immediately become vested or exercisable, providing a benefit to directors in such scenarios.