Document:

exv4w7

Exhibit 4.7

 

W. R. BERKLEY CORPORATION

TO

THE BANK OF NEW YORK MELLON, as Trustee

 

SIXTH SUPPLEMENTAL INDENTURE TO

INDENTURE DATED FEBRUARY 14, 2003

(SENIOR DEBT SECURITIES)

Dated as of September 14, 2009

 

7.375% Senior Notes due 2019

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	Relation to Indenture; Definitions
	 	 	 	 
	 
	 	 	 	 
	Section 1.1. RELATION TO INDENTURE
	 	1	 	 
	Section 1.2. DEFINITIONS
	 	1	 	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	The Series of Securities
	 	 	 	 
	 
	 	 	 	 
	Section 2.1. TITLE OF THE SECURITIES
	 	2	 	 
	Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT
	 	2	 	 
	Section 2.3. PRINCIPAL PAYMENT DATE
	 	2	 	 
	Section 2.4. INTEREST AND INTEREST RATES
	 	2	 	 
	Section 2.5. PLACE OF PAYMENT
	 	3	 	 
	Section 2.6. REDEMPTION
	 	3	 	 
	Section 2.7. DENOMINATION
	 	5	 	 
	Section 2.8. CURRENCY
	 	5	 	 
	Section 2.9. FORM OF NOTES
	 	5	 	 
	Section 2.10. REGISTRAR AND PAYING AGENT FOR THE NOTES
	 	5	 	 
	Section 2.11. SINKING FUND OBLIGATIONS
	 	5	 	 
	Section 2.12. DEFEASANCE AND COVENANT DEFEASANCE
	 	5	 	 
	Section 2.13. PAYMENT OF TAXES
	 	5	 	 
	Section 2.14. LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES
	 	5	 	 
	Section 2.15. LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES
	 	6	 	 
	Section 2.16. IMMEDIATELY AVAILABLE FUNDS
	 	6	 	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	Miscellaneous Provisions
	 	 	 	 
	 
	 	 	 	 
	Section 3.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS
	 	6	 	 
	Section 3.2. PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL
	 	7	 	 
	Section 3.3. ADOPTION, RATIFICATION AND CONFIRMATION
	 	7	 	 
	Section 3.4. COUNTERPARTS
	 	7	 	 
	Section 3.5. GOVERNING LAW
	 	7	 	 

 

 

W. R. BERKLEY CORPORATION

SIXTH SUPPLEMENTAL INDENTURE TO

INDENTURE DATED FEBRUARY 14, 2003

(SENIOR DEBT SECURITIES)

$300,000,000

7.375% Senior Notes due 2019

     SIXTH SUPPLEMENTAL INDENTURE, dated as of September 14, 2009, between W. R. BERKLEY
CORPORATION, a Delaware corporation (the “Company”), and THE BANK OF NEW YORK MELLON, a banking
corporation organized under the laws of the State of New York, as Trustee (the “Trustee”).

RECITALS

     The Company has heretofore executed and delivered to the Trustee an indenture for senior debt
securities, dated as of February 14, 2003 (the “Indenture”), providing for the issuance from time
to time of series of the Company’s Securities.

     Section 3.1 of the Indenture provides for various matters with respect to any series of
Securities issued under the Indenture to be established in an indenture supplemental to the
Indenture.

     Section 9.1(4) of the Indenture provides for the Company and the Trustee to enter into an
indenture supplemental to the Indenture to establish the form or terms of Securities of any series
as provided by Sections 2.1 and 3.1 of the Indenture.

     NOW, THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and the issuance of the series of Securities provided
for herein, it is mutually agreed, for the equal and proportionate benefit of all Holders of the
Securities of such series, as follows:

ARTICLE I

RELATION TO INDENTURE; DEFINITIONS

     Section 1.1. RELATION TO INDENTURE. This Sixth Supplemental Indenture constitutes an integral
part of the Indenture.

     Section 1.2. DEFINITIONS. For all purposes of this Sixth Supplemental Indenture:

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     (a) Capitalized terms used herein without definition shall have the meanings specified in the
Indenture;

     (b) All references herein to Articles and Sections, unless otherwise specified, refer to the
corresponding Articles and Sections of this Sixth Supplemental Indenture; and

     (c) The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this
Sixth Supplemental Indenture.

     (d) “Fair Value,” when used with respect to Common Stock, means the fair value thereof as
determined in good faith by the Board of Directors.

ARTICLE II

THE SERIES OF SECURITIES

     Section 2.1. TITLE OF THE SECURITIES. There shall be a series of Securities designated the
“7.375% Senior Notes due 2019” (the “Notes”).

     Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate principal amount of the
Notes shall initially be limited to $300,000,000. The Company may, without the consent of the
Holders of the Notes, issue additional Securities having the same interest rate, maturity date and
other terms as described in the related prospectus supplement and prospectus. Any additional
Securities, together with the Notes offered by the related prospectus supplement, will constitute a
single series of Securities under the Indenture. No additional Securities may be issued if an Event
of Default under the Indenture has occurred and is continuing with respect to the Securities.

     Section 2.3. PRINCIPAL PAYMENT DATE. The principal amount of the Notes outstanding (together
with any accrued and unpaid interest) shall be payable in a single installment on September 15,
2019, which date shall be the Stated Maturity of the Notes Outstanding.

     Section 2.4. INTEREST AND INTEREST RATES. The rate of interest on each Note shall be 7.375%
per annum, accruing from September 14, 2009, or from the most recent interest payment date (each
such date, an “Interest Payment Date”) to which interest has been paid or duly provided for,
payable semiannually in arrears on March 15 and September 15 of each year commencing March 15, 2010
until the principal thereof shall have become due and payable, and until the principal thereof is
paid or duly provided for or made available for payment. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The
amount of interest payable for any partial period shall be computed on the basis of the actual
number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on
which interest is payable on any Note is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay). The interest installment so payable in respect of
any Note, and punctually paid or duly provided for, on any Interest Payment Date will, as provided
in the Indenture, be paid to

2

 

the person in whose name such Note (or one or more Predecessor Securities) is registered at
the close of business on March 1 or September 1 prior to such Interest Payment Date. Any such
interest installment not punctually paid or duly provided for in respect of any Note shall
forthwith cease to be payable to the registered Holder on such Regular Record Date and may either
be paid to the Person in whose name such Note (or one or more Predecessor Securities) is registered
at the close of business on a Special Record Date to be fixed by the Company and the Trustee for
the payment of such Defaulted Interest, notice whereof shall be given to the Holders of the Notes
not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, all as more fully provided in the
Indenture.

     Section 2.5. PLACE OF PAYMENT. The Place of Payment where the Notes may be presented or
surrendered for payment, where the Notes may be surrendered for registration of transfer or
exchange and where notices and demand to or upon the Company in respect of the Notes and the
Indenture may be served shall be the Corporate Trust Office of the Trustee.

     Section 2.6. REDEMPTION.

     (a) The Company may redeem the Notes at its option, in whole or in part, at any time and from
time to time at a Redemption Price equal to the greater of (i) 100% of the principal amount of such
Securities to be redeemed or (ii) an amount, as determined by an Independent Investment Banker,
equal to the sum of the present values of the remaining scheduled payments of principal of and
interest on the securities to be redeemed (not including any portion of such payments of interest
accrued as of the date of redemption) discounted to the Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50
basis points, plus, in either of the above cases, accrued and unpaid interest thereon to, but not
including, the Redemption Date.

     (b) For the purposes of this Section 2.6,

     “Adjusted Treasury Rate” means, with respect to any Redemption Date:

	 	–	 	the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated “H.15(519)” published by the Board of Governors
of the Federal Reserve System (or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity) under the caption “Treasury Constant
Maturities,” for the maturity corresponding to the Comparable Treasury Issue.
If no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or

3

 

extrapolated from such yields on a straight line basis, rounding to the
nearest month; or

	 	–	 	if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.

     The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the
Redemption Date.

     “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the notes to
be redeemed that would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such securities (“Remaining Life”).

     “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury
Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.

     “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

     “Reference Treasury Dealer” means:

	 	–	 	each of Credit Suisse Securities (USA) LLC and Banc of America Securities
LLC and their respective successors; provided that, if any of the foregoing
ceases to be a primary U.S. Government securities dealer in the United States
(a “Primary Treasury Dealer”), the Company shall substitute therefor another
Primary Treasury Dealer; and
	 
	 	–	 	any other Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Independent Investment Banker, of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City Time, on the third Business Day preceding such Redemption Date.

     The Company will mail a notice of redemption at least 30 days but not more than 60 days before
the Redemption Date to each holder of the notes to be redeemed. If less than all

4

 

of the notes are to be redeemed, the trustee will select, by such method as it will deem fair
and appropriate, including pro rata or by lot, the notes to be redeemed in whole or in part.

     Unless the Company defaults in payment of the Redemption Price, on and after the Redemption
Date, interest will cease to accrue on the notes or portions thereof called for redemption.

     Section 2.7. DENOMINATION. The Notes shall be issuable only in registered form without
coupons and in denominations of $1,000 and integral multiples thereof.

     Section 2.8. CURRENCY. Principal and interest on the Notes shall be payable in such coin or
currency of the United States of America that at the time of payment is legal tender for payment of
public and private debts.

     Section 2.9. FORM OF NOTES. The Notes shall be substantially in the form attached as EXHIBIT
A hereto.

     Section 2.10. REGISTRAR AND PAYING AGENT FOR THE NOTES. The Trustee shall serve initially as
Registrar and Paying Agent for the Notes.

     Section 2.11. SINKING FUND OBLIGATIONS. The Company has no obligation to redeem or purchase
any Notes pursuant to any sinking fund or analogous requirement or upon the happening of a
specified event or at the option of a Holder thereof.

     Section 2.12. DEFEASANCE AND COVENANT DEFEASANCE. The Company has elected to have both
Section 4.2(2) of the Indenture (relating to defeasance) and Section 4.2(3) (relating to covenant
defeasance) applied to the Notes.

     Section 2.13. PAYMENT OF TAXES. The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or
property of the Company or any Subsidiary, and lawful claims for labor, materials and supplies,
which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment or governmental charge whose amount, applicability or
validity is being contested in good faith by appropriate proceedings or where the failure to effect
such payment is not adverse in any material respect to the Holders of the Notes.

     Section 2.14. LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES. The Company will not,
and it will not permit any Subsidiary of the Company to, at any time directly or indirectly create,
assume, incur or permit to exist any Indebtedness secured by a pledge, lien or other encumbrance
(any pledge, lien or other encumbrance being hereinafter in this Section referred to as a “lien”)
on the voting securities of Principal Subsidiaries, or the voting securities of a Subsidiary that
owns, directly or indirectly, the voting securities of any of the Principal Subsidiaries without
making effective provision whereby the Notes then Outstanding (and, if the Company so elects, any
other Indebtedness of the Company

5

 

that is not subordinate to the Notes and with respect to which the governing instruments
require, or pursuant to which the Company is otherwise obligated or required, to provide such
security) shall be equally and ratably secured with such secured Indebtedness so long as such other
Indebtedness shall be secured. For purposes of this Section 2.14 only, “Indebtedness”, in addition
to those items specified in Section 1.1 of the Indenture, shall include any obligation of, or any
such obligation guaranteed by, any Person for the payment of amounts due under a swap agreement or
other similar instrument or agreement or foreign currency hedge exchange or similar instrument or
agreement.

     If the Company shall hereafter be required to secure the Notes equally and ratably with any
other Indebtedness pursuant to this Section, (i) the Company will promptly deliver to the Trustee
an Officer’s Certificate stating that the foregoing covenant has been complied with, and an Opinion
of Counsel stating that in the opinion of such counsel the foregoing covenant has been complied
with and that any instruments executed by the Company or any Subsidiary of the Company in the
performance of the foregoing covenant comply with the requirements of the foregoing covenant and
(ii) the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto
and to take such action, if any, as it may deem advisable to enable it to enforce the rights of the
holders of the Notes so secured.

     Section 2.15. LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES.
As long as any of the Notes remain outstanding, the Company will not, and will not permit any
Subsidiary to, issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any
of the Common Stock of any Principal Subsidiary (except to the Company or to one or more
Subsidiaries or for the purpose of qualifying directors); provided, however, that this covenant
shall not apply if (i) the issuance, sale, assignment, transfer or other disposition is required to
comply with the order of a court or regulatory authority of competent jurisdiction, other than an
order issued at the request of the Company or of one of its Subsidiaries; (ii) the entire Common
Stock of a Principal Subsidiary then owned by the Company or by its Subsidiaries is disposed of in
a single transaction or in a series of related transactions, for consideration consisting of cash
or other property which is at least equal to the Fair Value of such Common Stock; or (iii) after
giving effect to the issuance, sale, assignment, transfer or other disposition, the Company and its
Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Common
Stock of such Principal Subsidiary and such issuance, sale, assignment, transfer or other
disposition is made for consideration consisting of cash or other property which is at least equal
to the Fair Value of such Common Stock.

     Section 2.16. IMMEDIATELY AVAILABLE FUNDS. All payments of principal and interest shall be
made in immediately available funds.

ARTICLE III

MISCELLANEOUS PROVISIONS

     Section 3.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals herein contained are made by
the Company and not by the Trustee, and the Trustee assumes no

6

 

responsibility for the correctness thereof. The Trustee makes no representation as to the
validity or sufficiency of this Sixth Supplemental Indenture.

     Section 3.2. PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL. Upon termination of this Sixth
Supplemental Indenture or the Indenture or the removal or resignation of the Trustee, unless
otherwise stated, the Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation.

     Section 3.3. ADOPTION, RATIFICATION AND CONFIRMATION. The Indenture, as supplemented and
amended by this Sixth Supplemental Indenture, is in all respects hereby adopted, ratified and
confirmed.

     Section 3.4. COUNTERPARTS. This Sixth Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall together constitute
but one and the same instrument.

     Section 3.5. GOVERNING LAW. THIS SIXTH SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.

7

 

     IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be
duly executed on the day and year first above written.

	 	 	 	 	 
	 	W. R. BERKLEY CORPORATION

 	 
	 	By:  	/s/ Eugene G. Ballard 	 
	 	 	Name:  	Eugene G. Ballard 	 
	 	 	Title:  	Senior Vice President and Chief Financial Officer 	 
	 
	 	THE BANK OF NEW YORK MELLON, as Trustee

 	 
	 	By:  	/s/ Timothy W. Casey 	 
	 	 	Name:  	Timothy W. Casey 	 
	 	 	Title:  	Senior Associate 	 

8

 

	 	 	 	 	 

EXHIBIT A

(FORM OF FACE OF NOTE)

     This Note is a global Security within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depository or a nominee of a Depository. This Note is exchangeable
for Securities registered in the name of a person other than the Depository or its nominee only in
the limited circumstances described in the Indenture, and no transfer of this Note (other than a
transfer of this Note as a whole by the Depository to a nominee of the Depository or by a nominee
of the Depository to the Depository or another nominee of the Depository) may be registered except
in limited circumstances.

     Unless this Note is presented by an authorized representative of The Depository Trust Company
(55 Water Street, New York, New York) to the issuer or its agent for registration of transfer,
exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company and any payment hereon
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON
IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.

	 	 	 
	Certificate No. [ • ]
Dated: September 14, 2009

	 	$300,000,000

CUSIP No. 084423 AQ5

ISIN No. US084423 AQ52

W. R. BERKLEY CORPORATION

7.375% Senior Notes due 2019

     W. R. BERKLEY CORPORATION, a Delaware corporation (the “Company,” which term includes any
successor corporation under the Indenture hereinafter referred to), for value received, hereby
promises to pay to CEDE & CO. or registered assigns, the principal sum of THREE HUNDRED MILLION
DOLLARS AND NO CENTS ($300,000,000) on September 15, 2019. The Company further promises to pay
interest on said principal sum outstanding from September 14, 2009, or from the most recent
interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid
or duly provided for, semiannually (subject to deferral as set forth herein) in arrears on March 15
and September 15 of each year commencing March 15, 2010 at the rate of 7.375% per annum, until the
principal hereof shall have become due and payable and, until the principal hereof is paid or duly
provided for or made available for payment. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any partial period shall be computed on the basis of the number of actual days
elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is
payable on this Note is not a Business Day, then payment of interest payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay). A “Business Day,” with respect to any Place of Payment or other
location, shall

A-1

 

mean any day other than a Saturday, Sunday or other day on which banking institutions in such
Place of Payment or other location are authorized or obligated by law, regulation or executive
order to close. The interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name
this Note (or one or more Predecessor Securities) is registered at the close of business on March 1
or September 1 prior to such Interest Payment Date. Any such interest installment not punctually
paid or duly provided for shall forthwith cease to be payable to the registered Holder on such
Regular Record Date and may either be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed
by the Trustee for the payment of such Defaulted Interest, notice whereof shall be given to the
Holder of this Note not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any securities exchange on
which this Note may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture.

     The principal of (and premium, if any) and the interest on this Note shall be payable at the
office or agency of the Company maintained for that purpose in the United States in such coin or
currency of the United States of America that at the time of payment is legal tender for payment of
public and private debts; provided, however, that payment of interest may be made at the option of
the Company by check mailed to the registered Holder at such address as shall appear in the
Security Register. Notwithstanding the foregoing, so long as the Holder of this Note is Cede & Co.,
the payment of the principal of (and premium, if any) and interest on this Note will be made at
such place and to such account as may be designated by Cede & Co. All payments of principal and
interest hereunder shall be made in immediately available funds.

     Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.

     Unless the certificate of authentication hereon has been executed by the Trustee referred to
on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the
Indenture or be valid for any purpose.

A-2

 

     IN WITNESS WHEREOF, the Company has caused this instrument to be executed.

	 	 	 	 	 
	 	W. R. BERKLEY CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated herein referred to in the
within-mentioned Indenture.

Dated: September 14, 2009

	 	 	 	 	 
	THE BANK OF NEW YORK MELLON,

as Trustee

 	 	 
	By:  	 	 	 
	 	Authorized Signatory 	 	 
	 	 	 	 

A-3

 

	 	 	 	 	 

(FORM OF REVERSE OF NOTE)

     This Note is one of a duly authorized issue of securities of the Company, designated as its
7.375% Senior Notes due 2019 (herein referred to as the “Securities”), issued under and pursuant to
an Indenture, dated as of February 14, 2003 between the Company and The Bank of New York Mellon, as
Trustee (herein called the “Trustee,” which term includes any successor trustee under the
Indenture), as supplemented by the Sixth Supplemental Indenture dated as of September 14, 2009,
between the Company and the Trustee (the Indenture as so supplemented, the “Indenture”), to which
Indenture and all indentures supplemental thereto reference is hereby made for a description of the
rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities, and of the terms upon which the Securities are, and are
to be, authenticated and delivered.

     All terms used in this Note that are defined in the Indenture shall have the
meanings assigned to them in the Indenture.

     The Company may redeem the Securities at the Company’s option , in whole or in part,
at any time and from time to time at a Redemption Price equal to the greater of (i) 100% of
the principal amount of such Securities to be redeemed or (ii) an amount, as determined by
an Independent Investment Banker, the sum of the present values of the remaining scheduled
payments of principal of and interest thereon on the Securities to be redeemed (not
including any portion of such payments of interest accrued to the date of redemption)
discounted to the Redemption Date on a semiannual basis assuming a 360-day year consisting
of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points, plus, in
either of the above cases, accrued and unpaid interest thereon to the Redemption Date.

     “Adjusted Treasury Rate” means, with respect to any Redemption Date:

	 	–	 	the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated “H.15(519)” published by the Board of Governors
of the Federal Reserve System (or any successor publication which is published
weekly by the Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity) under the caption “Treasury Constant
Maturities,” for the maturity corresponding to the Comparable Treasury Issue.
If no maturity is within three months before or after the Remaining Life,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight line
basis, rounding to the nearest month; or
	 
	 	–	 	if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per

A-4

 

annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date.

     The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the
Redemption Date.

     “Comparable Treasury Issue” means the United States Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining term of the
Securities to be redeemed that would be used, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Securities (“Remaining Life”).

     “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury
Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.

     “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

     “Reference Treasury Dealer” means:

	 	–	 	each of Credit Suisse Securities (USA) LLC and Banc of America Securities
LLC and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in the
United States (a “Primary Treasury Dealer”), the Company shall substitute
therefor another Primary Treasury Dealer; and
	 
	 	–	 	any other Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer
and any Redemption Date, the average, as determined by the Independent Investment Banker, of the
bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York
City Time, on the third Business Day preceding such Redemption Date.

     The Company will mail a notice of redemption at least 30 days but not more than 60 days before
the Redemption Date to each holder of the Securities to be redeemed. If less than all of the
Securities are to be redeemed, the Trustee will select, by such method as it will deem fair and
appropriate, including pro rata or by lot, the Securities to be redeemed in whole or in part.

A-5

 

     Unless we default in payment of the Redemption Price, on and after the Redemption Date,
interest will cease to accrue on the Securities or portions thereof called for redemption.

     If an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions for satisfaction, discharge and defeasance at any time of
the entire indebtedness of this Note upon compliance by the Company with certain conditions set
forth in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in principal amount of the Securities of each
series at the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting Holders of specified percentages in principal amount of the Securities of
each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to
waive compliance by the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note
shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Note. No reference herein to
the Indenture and no provision of this Note or of the Indenture (other than Section 4.2 of the
Indenture) shall alter or impair the obligation of the Company to pay the principal and interest on
the Note at the times, place and rate, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Note is registrable in the Security Register, upon surrender of this Note for
registration of transfer at the office or agency of the Company maintained under Section 10.2 of
the Indenture duly endorsed by, or accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the Holder hereof or his
or her attorney duly authorized in writing, and thereupon one or more new Securities of this
series, of authorized denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees. No service charge shall be made for any such registration
of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

A-6

 

     This global Note is exchangeable for Securities in definitive form only under certain limited
circumstances set forth in the Indenture. Securities of this series so issued are issuable only in
registered form without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations herein and therein set forth,
Securities of this series so issued are exchangeable for a like aggregate principal amount of
Securities of this series of a different authorized denomination, as requested by the Holder
surrendering the same.

     The Company and, by its acceptance of this Note or a beneficial interest therein, the Holder
of, and any Person that acquires a beneficial interest in, this Note agree that for United States
federal, state and local tax purposes it is intended that this Note constitute indebtedness.

     THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE SECURITIES
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.

A-7exv10w2

Exhibit 10.02

VALERO ENERGY CORPORATION

2005 OMNIBUS STOCK INCENTIVE PLAN

Amended and Restated as of October 1, 2005

The Valero Energy Corporation 2005 Omnibus Stock Incentive Plan (hereinafter called the
“Plan”) was adopted by the Board of Directors of Valero Energy Corporation, a Delaware corporation
(hereinafter called the “Company”) on March 10, 2005. The Plan was approved by the Company’s
stockholders on April 28, 2005, and the Plan became effective on May 1, 2005.

ARTICLE 1. PURPOSE

The purpose of the Plan is to attract and retain the services of able persons as employees and
non-employee directors of the Company and its Subsidiaries, to provide such persons with a
proprietary interest in the Company through the granting of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock, or other forms of incentive awards, and
to motivate such persons using performance-related incentives linked to longer-range performance
goals and the interests of the Company’s stockholders, whether granted singly, or in combination,
or in tandem, that will (a) increase the interest of such persons in the Company’s welfare, and (b)
furnish an incentive to such persons to continue their services for the Company.

ARTICLE 2. DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have
the meanings indicated:

2.1 “Annual Incentive Plan” means the annual bonus program or successor plans of the Company, its
subsidiaries or its successors.

2.2 “Award” means the grant of any Incentive Stock Option, Non-qualified Stock Option, SAR,
Restricted Stock, Restricted Stock Unit, Stock Unit, Performance Share, Performance Unit,
Performance Cash, or Dividend Equivalent whether granted singly, in combination or in tandem (each
individually referred to herein as an “Incentive”). “Award” also means any Incentive to which an
award under the Annual Incentive Plan is converted into an Award made pursuant to the Plan.

2.3 “Award Agreement” means a written agreement between a Participant and the Company, which sets
out the terms of the grant of an Award.

2.4 “Award Period” means the period during which one or more Incentives granted under an Award may
be exercised or earned.

2.5 “Board” means the Board of Directors of the Company.

2.6 “Cause” 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 Company’s (or applicable
Affiliate’s) reasonable determination that the Participant has committed an act of fraud,
embezzlement, theft, or misappropriation of funds in connection with such Participant’s duties in
the course of his or her employment with the Company (or applicable Affiliate), (iv) the Company’s
(or its applicable Affiliate’s) 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
Company’s (or applicable Affiliate’s) 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 Participant’s

1

 

employment or service as a non-employee Director of the Company (or applicable Affiliate), or (b)
the Participant has failed to satisfactorily perform the material duties of Participant’s position
with the Company or any of its Affiliates.

2.7 “Change of Control.” A Change of Control shall be deemed to occur when:

	 	(a)	 	the stockholders of the Company approve any agreement or transaction pursuant
to which: (i) the Company will merge or consolidate with any other Person (other than a
wholly owned subsidiary of the Company) and will not be the surviving entity (or in
which the Company survives only as the subsidiary of another entity); (ii) the Company
will sell all or substantially all of its assets to any other Person (other than a
wholly owned subsidiary of the Company); or (iii) the Company will be liquidated or
dissolved; or

	 	(b)	 	any “person” or “group” (as these terms are used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934) other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or its subsidiaries, or any entity
holding Shares for or pursuant to the terms of such employee benefit plans, is or
becomes an “Acquiring Person” as defined in the Rights Agreement (or any successor
rights agreement) (or, if no Rights Agreement is then in effect, such person or group
acquires or holds such number of shares as, under the terms and conditions of the most
recent such rights agreement to be in force and effect, would have caused such person
or group to be an “Acquiring Person” thereunder); or

	 	(c)	 	any “person” or “group” shall commence a tender offer or exchange offer for 15%
or more of the Shares then outstanding, or for any number or amount of Shares which, if
the tender or exchange offer were to be fully subscribed and all Shares for which the
tender or exchange offer is made were to be purchased or exchanged pursuant to the
offer, would result in the acquiring person or group directly or indirectly
beneficially owning 50% or more of the Shares then outstanding; or

	 	(d)	 	individuals who, as of any date, constitute the Board (the “Incumbent Board”)
thereafter cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director whose election, or
nomination for election by the Company’s stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a person or group other than the Board; or

	 	(e)	 	the Distribution Date (as defined in the Rights Agreement) occurs; or

	 	(f)	 	any other event occurs that is or has been determined by the Board or the
Committee to constitute a “Change of Control” hereunder.

2.8 “Code” means the Internal Revenue Code of 1986, as amended, together with the published
rulings, regulations, and interpretations duly promulgated thereunder.

2.9 “Committee” means the Compensation Committee of the Board or such other Committee appointed or
designated by the Board to administer the Plan in accordance with Article 3 of this Plan.

2.10 “Common Stock” means the Company’s $0.01 par value common stock, which the Company is
currently authorized to issue or may in the future be authorized to issue.

2.11 “Company” means Valero Energy Corporation, a Delaware corporation, and any successor entity
and any affiliate companies or subsidiaries thereto.

2.12 “Covered Participant” means a Participant who is a “covered employee” as defined in Section
162(m)(3) of the Code, and the regulations promulgated thereunder, and any individual the Committee
determines should be treated as such a covered employee.

2

 

2.13 “Date of Grant” means the effective date on which an Award is made to a Participant as set
forth in the applicable Award Agreement.

2.14 “Dividend Equivalent” means an Award, designated as a Dividend Equivalent, granted to
Participants pursuant to Section 6.8 hereof, or in conjunction with other Awards, the value of
which is determined, in whole or in part, by the value of payments tied to or based on the payment
of dividends to holders of the Company’s Common Stock and may be conditioned on the attainment of
Performance Goals in a manner deemed appropriate by the Committee and described in the Agreement.

2.15 “Employee” means common law employee (as defined in accordance with the Regulations and
Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary
of the Company, or an individual who has agreed to become an employee of the Company or any
Subsidiary of the Company and actually becomes such an employee within the following six months.

2.16 “Executive Stock Incentive Plan” means the 2001 Executive Stock Incentive Plan, which is a
stockholder approved stock incentive plan from which the Company has granted equity or equity-based
incentive awards to its employees. Because the Plan was approved by stockholders, no future awards
will be made from the Executive Stock Incentive Plan and it will be terminated.

2.17 “Fair Market Value” of a share of Common Stock is the mean of the highest and lowest prices
per share on the New York Stock Exchange Consolidated Tape, or such reporting service as the Board
may select, on the appropriate date, or in the absence of reported sales on such day, then on the
next following day for which sales were reported.

2.18 “Incentive” means an Award under the Plan as defined by Section 2.2 of Article 2.

2.19 “Incentive Stock Option” or “ISO” means an incentive stock option within the meaning of
Section 422 of the Code, granted pursuant to this Plan.

2.20 “Limited SAR” or “Limited Stock Appreciation Right” means an Award designated as an SAR as
defined by Section 2.37 of Article 2, which is granted with certain limiting features as determined
by the Committee and as set forth in the Award Agreement at the time of grant.

2.21 “Non-Employee Director” means a member of the Board who is not an Employee.

2.22 “Non-qualified Stock Option” or “NQSO” means a stock option, granted pursuant to this Plan
that is not intended to comply with the requirements set forth in Section 422 of the Code.

2.23 “Option Price” means the price which must be paid by a Participant upon exercise of a Stock
Option to purchase a share of Common Stock.

2.24 “Participant” shall mean an Employee or Non-Employee Director to whom an Award is granted
under this Plan.

2.25 “Performance Award” means an Award made pursuant to this Plan to a Participant which Award is
subject to the attainment of one or more Performance Goals. Performance Awards may be in the form
of either Performance Shares, Performance Units, Performance Cash, or Dividend Equivalents.

2.26 “Performance Cash” means an Award, designated as Performance Cash and denominated in cash,
granted to a Participant pursuant to Section 6.7 hereof, the value of which is conditioned, in
whole or in part, by the attainment of Performance Goals in a manner deemed appropriate by the
Committee and described in the Agreement.

3

 

2.27 “Performance Criteria” or “Performance Goals” or “Performance Measures” mean the objectives
established by the Committee for a Performance Period, for the purpose of determining when an Award
subject to such objectives is earned.

2.28 “Performance Period” means the time period designated by the Committee during which
performance goals must be met.

2.29 “Performance Share” means an Award, designated as a Performance Share in the form of shares of
Common Stock or other securities of the Company, granted to a Participant pursuant to Section 6.7
hereof, the value of which is determined, in whole or in part, by the value of Common Stock and/or
conditioned on the attainment of Performance Goals in a manner deemed appropriate by the Committee
and described in the Agreement.

2.30 “Performance Unit” means an Award, designated as a Performance Unit, granted to a Participant
pursuant to Section 6.7 hereof, the value of which is determined, in whole or in part, by the
attainment of Performance Goals in a manner deemed appropriate by the Committee and described in
the Agreement.

2.31 “Person” shall mean any individual, corporation, partnership, association, joint-stock
company, trust, unincorporated organization, government or political subdivision thereof or other
entity.

2.32 “Plan” means the Valero Energy Corporation 2005 Omnibus Stock Incentive Plan, as amended from
time to time.

2.33 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant
pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in
this Plan and in the related Award Agreement.

2.34 “Restricted Stock Unit” means a fixed or variable dollar denominated right to acquire Common
Stock, which may or may not be subject to restrictions, contingently awarded under Section 6.4 of
the Plan.

2.35 “Retirement” means any Termination of Service solely due to retirement upon attainment of
certain age and/or service requirements as specified by the Company’s qualified retirement
program(s) or successor programs or as determined by the Committee in the event of early
retirement.

2.36 “Rights Agreement” shall mean the Rights Agreement, dated as of June 18, 1997, between the
Company and Computershare Investor Services, L.L.C., as Rights Agent (successor Rights Agent to
Harris Trust and Savings Bank), as amended.

2.37 “SAR” or “Stock Appreciation Right” means the right to receive a payment, in cash and/or
Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of
Common Stock on the date the SAR is exercised over the SAR Price for such shares, and may be
granted as a Limited SAR.

2.38 “SAR Price” means the Fair Market Value of each share of Common Stock covered by a SAR,
determined by the Committee on the Date of Grant of the SAR.

2.39 “SEC” shall mean the Securities and Exchange Commission.

2.40 “Stock Option” means a Non-qualified Stock Option or an Incentive Stock Option.

2.41 “Stock Unit Award” means awards of Common Stock or other awards pursuant to Section 6.8 hereof
that are valued in whole or in part by reference to, or are otherwise based on, shares of Common
Stock or other securities of the Company.

2.42 “Subsidiary” means (i) any corporation in an unbroken chain of corporations beginning with the
Company, if each of the corporations other than the last corporation in the unbroken chain owns
stock possessing a majority of the total combined voting power of all classes of stock in one of
the other corporations in the chain, (ii)

4

 

any limited partnership, if the Company or any corporation described in item (i) above owns a
majority of the general partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and (iii) any partnership
or limited liability company, if the partners or members thereof are composed only of the Company,
any corporation listed in item (i) above or any limited partnership listed in item (ii) above.
“Subsidiaries” means more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

ARTICLE 3. ADMINISTRATION

3.1 The Committee shall administer the Plan unless otherwise determined by the Board. If said
Committee does not so serve, the Committee shall consist of not fewer than two persons; any member
of the Committee may be removed at any time, with or without cause, by resolution of the Board; and
any vacancy occurring in the membership of the Committee may be filled by appointment by the Board.

3.2 The Committee shall select one of its members to act as its Chairman. A majority of the
Committee shall constitute a quorum, and the act of a majority of the members of the Committee
present at a meeting at which a quorum is present shall be the act of the Committee.

3.3 The Committee shall determine and designate from time to time the eligible persons to whom
Awards will be granted and shall set forth in each related Award Agreement the Award Period, the
Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are
approved by the Committee, but not inconsistent with the Plan, including, but not limited to, any
rights of the Committee to cancel or rescind any such Award. The Committee shall determine whether
an Award shall include one type of Incentive, two or more Incentives granted in combination, or two
or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive
results in cancellation of all or a portion of the other Incentive).

3.4 The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend, and
rescind any rules and regulations necessary or appropriate for the administration of the Plan, and
(iii) make such other determinations and take such other action as it deems necessary or advisable
in the administration of the Plan. Any interpretation, determination, or other action made or
taken by the Committee shall be final, binding, and conclusive on all interested parties.

3.5 With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3
promulgated under the 1934 Act, Section 422 of the Code, Section 162(m) of the Code, the rules of
any exchange or inter-dealer quotation system upon which the Company’s securities are listed or
quoted, or any other applicable law, rule or restriction (collectively, “applicable law”), to the
extent that any such restrictions are no longer required by applicable law, the Committee shall
have the sole discretion and authority to grant Awards that are not subject to such mandated
restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.

ARTICLE 4. ELIGIBILITY

Any Employee (including an Employee who is also a director or an officer) or Non-Employee Director
is eligible to participate in the Plan. The Committee, upon its own action, may grant, but shall
not be required to grant, an Award to any Employee or Non-Employee Director. Awards may be granted
by the Committee at any time and from time to time to new Participants, or to then Participants, or
to a greater or lesser number of Participants, and may include or exclude previous Participants, as
the Committee shall determine. Except as required by this Plan, different Awards need not contain
similar provisions. The Committee’s determinations under the Plan (including without limitation
determinations of which Employees, if any, are to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not
be uniform and may be made by it selectively among Employees or Non-Employee Directors who receive,
or are eligible to receive, Awards under the Plan.

5

 

ARTICLE 5. SHARES SUBJECT TO PLAN

5.1 Total Shares Available. Subject to adjustment as provided in Articles 14 and 15, the
maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the
Plan is (a) 20,000,0001 shares of Common Stock, plus (b) shares of Common Stock
previously subject to Awards that are forfeited, terminated, cancelled or rescinded, settled in
cash in lieu of Common Stock, or exchanged for Awards that do not involve Common Stock, or expired
unexercised.

5.2 Source of Shares. Shares to be issued may be made available from authorized but
unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased
by the Company on the open market or otherwise. During the term of this Plan, the Company will at
all times reserve and keep available a number of shares of Common Stock that shall be sufficient to
satisfy the requirements of this Plan.

5.3 Restoration and Retention of Shares. If any shares of Common Stock subject to an Award
shall not be issued or transferred to a Participant and shall cease to be issuable or transferable
to a Participant because of the forfeiture, termination, expiration or cancellation, in whole or in
part, of such Award or for any other reason, or if any such shares shall, after issuance or
transfer, be reacquired by the Company because of the Participant’s failure to comply with the
terms and conditions of an Award or for any other reason, the shares not so issued or transferred,
or the shares so reacquired by the Company, as the case may be, shall no longer be charged against
the limitation provided for in Section 5.1 and may be used thereafter for additional Awards under
the Plan. To the extent an Award under the Plan is settled or paid in cash, shares subject to such
Award will not be considered to have been issued and will not be applied against the maximum number
of shares of Common Stock provided for in Section 5.1. If an Award may be settled in shares of
Common Stock or cash, such shares shall be deemed issued only when and to the extent that
settlement or payment is actually made in shares of Common Stock. To the extent an Award is
settled or paid in cash, and not shares of Common Stock, any shares previously reserved for
issuance or transfer pursuant to such Award will again be deemed available for issuance or transfer
under the Plan, and the maximum number of shares of Common Stock that may be issued or transferred
under the Plan shall be reduced only by the number of shares actually issued and transferred to the
Participant. If a Participant pays the purchase price of shares subject to a Stock Option or
applicable taxes by surrendering shares of Common Stock in accordance with the provisions of
Article 10, the number of shares surrendered shall be added back to the number of shares available
for issuance or transfer under the Plan so that the maximum number of shares that may be issued or
transferred under the Plan pursuant to Section 5.1 shall have been charged only for the net number
of shares issued or transferred pursuant to the Stock Option exercise. The Committee may from time
to time adopt and observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate.

5.4 Uncertificated Shares. The Company’s transfer agent will deliver the shares of Common
Stock each holder of Common Stock under the Plan is entitled to as a result of having received an
Award under the Plan. Shares issued under the Plan will be registered in uncertificated book-entry
form (unless a holder of Common Stock requests a certificate representing such holder’s shares of
Common Stock). As a result, instead of receiving Common Stock certificates, holders of Common
Stock will receive account statements reflecting their ownership interest in shares of Common
Stock. The book-entry shares will be held with the Company’s transfer agent, which will serve as
the record keeper for all shares of Common Stock being issued in connection with the Plan. Any
stockholder who wants to receive a physical certificate evidencing shares of Common Stock issued
under the Plan will be able to obtain a certificate at no charge by contacting the Company’s
transfer agent. Computershare Investor Services, Chicago, Illinois, currently serves as transfer
agent, registrar and dividend paying agent for Valero’s Common Stock. Correspondence relating to
any stock accounts, dividends or transfers of stock certificates should be addressed to:
Computershare Investor Services Shareholder Communications, 250 Royall Street, Canton,
Massachusetts 02021, (888) 470-2938/(312) 360-5261, www.computershare.com.

ARTICLE 6. GRANT OF AWARDS

6.1 In General.

	 	(a)	 	The grant of an Award shall be authorized by the Committee and may be evidenced
by an Award Agreement setting forth the Incentive or Incentives being granted, the
total number of

 

			
	1	 
	Reflects the 2-for-1 stock split of Valero’s
common stock on December 15, 2005.

6

 

	 	 	 	shares of Common Stock subject to the Incentive(s) or the value of the Performance
Award (if applicable), the Option Price (if applicable), the Award Period, the Date
of Grant, and such other terms, provisions, limitations, and performance objectives,
as are approved by the Committee, but not inconsistent with the Plan. The Company
may execute an Award Agreement with a Participant after the Committee approves the
issuance of an Award. Any Award granted pursuant to this Plan must be granted
within 10 years of the date of adoption of this Plan. The grant of an Award to a
Participant shall not be deemed either to entitle the Participant to, or to
disqualify the Participant from, receipt of any other Award under the Plan.

	 	(b)	 	If the Committee establishes a purchase price for an Award, the Participant
must accept such Award within a period of 30 days (or such shorter period as the
Committee may specify) after the Date of Grant by executing the applicable Award
Agreement and paying such purchase price.

6.2 Limitations on Awards.

	 	(a)	 	The Plan is subject to the following limitations:

	 	(i)	 	The Option Price of Stock Options cannot be less than 100% of
the Fair Market Value of a share of Common Stock on the Date of Grant of the
Stock Option.

	 
	 	(ii)	 	The SAR Price of a SAR cannot be less than 100% of the Fair
Market Value of a share of Common Stock on the Date of Grant of the SAR.

	 
	 	(iii)	 	Repricing of Stock Options and SARs or other downward
adjustments in the Option Price or SAR Price of previously granted Stock
Options or SARs, respectively, are prohibited, except in connection with
certain capital adjustments as described in Article 14 or 15.

	 
	 	(iv)	 	No more than 40% (4,000,000), of the available shares pursuant
to Awards under the Plan may be in the form of time-lapse Restricted Stock.

	 
	 	(v)	 	No Participant may receive during any calendar year Awards that
are to be settled in Shares of Common Stock covering an aggregate of more than
1,000,000 Shares.

	 
	 	(vi)	 	No Participant may receive during any calendar year Awards that
are to be settled in cash covering an aggregate of more than $20,000,000.

	 
	 	(vii)	 	The term of Awards may not exceed 10 years.

	 	(b)	 	Limited SARs granted in tandem with Stock Options or other Awards shall not be
counted towards the maximum individual grant limitation set forth in this Section, as
the Limited SAR will expire based on conditions described in Section 6.5(b), below.

6.3 Rights as Stockholder. Except as provided in Section 6.4 of this Plan, until the
issuance of the Shares of Common Stock (as evidenced by the appropriate entry on the books of the
Company or any authorized transfer agent of the Company), no right to vote or receive dividends or
any other rights as a stockholder of the Company shall exist with respect to such Shares,
notwithstanding the exercise of any Incentive or Award. No adjustment will be made for a dividend
or other rights for which the record date is prior to the date Shares are issued, except as
otherwise provided in this Plan.

6.4 Restricted Stock/Restricted Stock Units. If Restricted Stock and/or Restricted Stock
Units are granted to a Participant under an Award, the Committee shall establish: (i) the number of
shares of Restricted Stock and/or the number of Restricted Stock Units awarded, (ii) the price, if
any, to be paid by the Participant for such Restricted Stock and/or Restricted Stock Units, (iii)
the time or times within which such Award may be subject to forfeiture, (iv) specified Performance
Goals of the Company, a Subsidiary, any division thereof or any group of

7

 

Employees of the Company, or other criteria, if any, which the Committee determines must be met in
order to remove any restrictions (including vesting) on such Award, and (v) all other terms,
limitations, restrictions, and conditions of the Restricted Stock and/or Restricted Stock Units,
which shall be consistent with this Plan. The provisions of Restricted Stock and/or Restricted
Stock Units need not be the same with respect to each Participant.

	 	(a)	 	Legend on Shares. Each Participant who is awarded Restricted Stock
shall be issued the number of shares of Common Stock specified in the Award Agreement
for such Restricted Stock, and such shares shall be recorded in the share transfer
records of the Company and ownership of such shares shall be evidenced by a certificate
or book entry notation in the share transfer records of the Company. Such shares shall
be registered in the name of the Participant, and shall bear or be subject to an
appropriate legend referring to the terms, conditions, and restrictions applicable to
such Restricted Stock, substantially as provided in Section 19.18 of the Plan. The
Committee may require that the stock certificates or other evidence of ownership of the shares of Restricted Stock be held in custody by the Company until the restrictions
thereon shall have lapsed, and that the Participant deliver to the Committee a stock
power or stock powers, endorsed in blank, relating to the shares of Restricted Stock.

	 	(b)	 	Restrictions and Conditions. Shares of Restricted Stock and Restricted
Stock Units shall be subject to the following restrictions and conditions:

	 	(i)	 	Subject to the other provisions of this Plan and the terms of
the particular Award Agreements, during such period as may be determined by the
Committee commencing on the Date of Grant (the “Restriction Period”), the
Participant shall not be permitted to sell, transfer, pledge or assign shares
of Restricted Stock and/or Restricted Stock Units. Any Restricted Stock or
Restricted Stock Units not granted pursuant to a Performance Award, shall have
a minimum Restriction Period of three years from the Date of Grant, provided
that the Committee may provide for earlier vesting following a Change in
Control or upon an Employee’s termination of employment by reason of death,
disability or Retirement. Except for these limitations, the Committee may in
its sole discretion, remove any or all of the restrictions on such Restricted
Stock and/or Restricted Stock Units whenever it may determine that, by reason
of changes in applicable laws or other changes in circumstances arising after
the date of the Award, such action is appropriate.

	 
	 	(ii)	 	Except as provided in subparagraph (i) above and subject to the
terms of a Participant’s Award Agreement, the Participant shall have, with
respect to his or her Restricted Stock, all of the rights of a stockholder of
the Company, including the right to vote the shares, and the right to receive
any dividends thereon. Certificates or evidence of ownership of shares of
Common Stock free of restriction under this Plan shall be delivered to the
Participant promptly after, and only after, the Restriction Period shall expire
without forfeiture in respect of such shares of Common Stock. Certificates for
the shares of Common Stock forfeited under the provisions of the Plan shall be
promptly returned to the Company by the forfeiting Participant. Each
Participant, by his or her acceptance of Restricted Stock, shall irrevocably
grant to the Company a power of attorney to transfer any shares so forfeited to
the Company and agrees to execute any documents requested by the Company in
connection with such forfeiture and transfer.

8

 

	 	(iii)	 	The Restriction Period of Restricted Stock and/or Restricted
Stock Units shall commence on the Date of Grant and, subject to Article 15 of
the Plan, unless otherwise established by the Committee in the Award Agreement
setting forth the terms of the Restricted Stock and/or Restricted Stock Units,
shall expire upon satisfaction of the conditions set forth in the Award
Agreement; such conditions may provide for vesting based on (i) length of
continuous service, (ii) achievement of specific business objectives, (iii)
increases in specified indices, (iv) attainment of specified growth rates, or
(v) other comparable Performance Measurements, as may be determined by the
Committee in its sole discretion.

	 	(c)	 	Forfeiture. Except as otherwise determined by the Committee or the
Chief Executive Officer, the provisions of Article 9 shall apply with respect to
Restricted Stock granted hereunder.

6.5 SARs and Limited SARs.

	 	(a)	 	An SAR shall entitle the Participant at his election to surrender to the
Company the SAR, or portion thereof, as the Participant shall choose, and to receive
from the Company in exchange therefore cash in an amount equal to the excess (if any)
of the Fair Market Value (as of the date of the exercise of the SAR) per share over the
SAR Price per share specified in such SAR, multiplied by the total number of shares of
the SAR being surrendered. In the discretion of the Committee, the Company may satisfy
its obligation upon exercise of an SAR by the distribution of that number of shares of
Common Stock having an aggregate Fair Market Value (as of the date of the exercise of
the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash
settlement to be made for any fractional share interests, or the Company may settle
such obligation in part with shares of Common Stock and in part with cash.

	 	(b)	 	A Limited SAR shall allow the Participant to receive from the Company cash in
an amount equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the Limited SAR) per share over the Limited SAR Price per share specified
in such Limited SAR, multiplied by the total number of shares of the Limited SAR being
surrendered. The Company will satisfy its obligation with a cash settlement to be made
for any fractional Limited SAR. Limited SARs will expire without consideration upon
the vesting, exercise, or settlement, in shares and/or in cash, of Awards for which the
Limited SAR was granted in tandem.

6.6 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form
of a “tandem award,” so that the right of the Participant to exercise one Incentive shall be
canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option
and an SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to 100
shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be
canceled to the extent of 100 shares of Common Stock.

6.7 Performance Based Awards.

	 	(a)	 	Grant of Performance Awards. The Committee may issue Performance Awards in the
form of Performance Units, Performance Shares, Performance Cash, or Dividend
Equivalents to Participants subject to the Performance Goals and Performance Period as
it shall determine. The terms and conditions of each Performance Award will be set
forth in the related Award Agreement. The Committee shall have complete discretion in
determining the number and/or value of Performance Awards granted to each Participant.
Any Performance Units or Performance Shares granted under the Plan shall have a minimum
Restriction Period of one year from the Date of Grant, provided that the Committee may
provide for earlier vesting following a Change in Control or upon an Employee’s
termination of employment by reason of death, disability or Retirement. Participants
receiving Performance Awards are not required to pay the Company therefor (except for
applicable tax withholding) other than the rendering of services.

	 	(b)	 	Value of Performance Awards. The Committee shall set Performance Goals in its
discretion for each Participant who is granted a Performance Award. Such Performance
Goals may be

9

 

	 	 	 	particular to a Participant, may relate to the performance of the Subsidiary which
employs him or her, may be based on the division which employs him or her, may be
based on the performance of the Company generally, or a combination of the
foregoing. The Performance Goals may be based on achievement of balance sheet or
income statement objectives, or any other objectives established by the Committee.
The Performance Goals may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated. The
extent to which such Performance Goals are met will determine the number and/or
value of the Performance Award to the Participant.

	 	(c)	 	Form of Payment. Payment of the amount to which a Participant shall be
entitled upon the settlement of a Performance Award shall be made in a lump sum or
installments in cash, shares of Common Stock, or a combination thereof as determined by
the Committee.

6.8 Other Stock Based Awards.

	 	(a)	 	Grant of Other Stock Based Awards. The Committee may issue to Participants,
either alone or in addition to other Awards made under the Plan, Stock Unit Awards
which may be in the form of Common Stock or other securities. The value of each such
Award shall be based, in whole or in part, on the value of the underlying Common Stock
or other securities. The Committee, in its sole and complete discretion, may determine
that an Award, either in the form of a Stock Unit Award under this Section or as an
Award granted pursuant to the other provisions of this Article, may provide to the
Participant (i) dividends or Dividend Equivalents (payable on a current or deferred
basis) and (ii) cash payments in lieu of or in addition to an Award. The Committee
shall determine the terms, restrictions, conditions, vesting requirements, and payment
rules (all of which are sometimes hereinafter collectively referred to as “rules”) of
the Award and shall set forth those rules in the related Award Agreement.

	 	(b)	 	Rules. The Committee, in its sole and complete discretion, may grant a Stock
Unit Award subject to the following rules:

	 	(i)	 	All rights with respect to such Stock Unit Awards granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or his or her guardian or legal representative.

	 
	 	(ii)	 	Stock Unit Awards may require the payment of cash consideration
by the Participant in receipt of the Award or provide that the Award, and any
Common Stock or other securities issued in conjunction with the Award be
delivered without the payment of cash consideration.

	 
	 	(iii)	 	The Committee, in its sole and complete discretion, may
establish certain Performance Criteria that may relate in whole or in part to
receipt of the Stock Unit Awards.

	 
	 	(iv)	 	Stock Unit Awards may be subject to a deferred payment schedule
and/or vesting over a specified employment period.

	 
	 	(v)	 	The Committee as a result of certain circumstances may waive or
otherwise remove, in whole or in part, any restriction or condition imposed on
a Stock Unit Award at the time of Award.

ARTICLE 7. OPTION PRICE; SAR/LIMITED SAR PRICE

7.1 Option/SAR Price. The Plan limitations stated in Section 6.2(a)(i) & -(ii) shall apply.

7.2 Repricing. The Plan limitations stated in Section 6.2(a)(iii) shall apply.

10

 

ARTICLE 8. AWARD PERIOD; VESTING

8.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its
discretion, provide that an Incentive may not be exercised in whole or in part for any period or
periods of time or beyond any date specified in the Award Agreement. Except as provided in the
Award Agreement, an Incentive may be exercised in whole or in part at any time during its term.

No Incentive granted under the Plan may be exercised at any time after the end of its Award Period.
The Plan limitations stated in Section 6.2(a)(vii) shall apply.

8.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will
be immediately exercisable, in whole or in part, or that all or any portion may not be exercised
until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more
specified events, subject in any case to the terms of the Plan. If the Committee imposes
conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may be exercised.

ARTICLE 9. TERMINATION OF SERVICE

9.1 Termination of Employment.

	 	(a)	 	Vesting and Exercise. Except as otherwise provided in the Plan, or otherwise
determined by the Committee and included in the applicable Award Agreement, a Stock
Option, SAR or other Award having an exercise provision (each, an “Exercisable Award”)
vests in and may be exercised by a Participant only while the Participant is and has
continually been since the date of the grant of the Exercisable Award an Employee or
Non-Employee Director.

	 
	 	(b)	 	Voluntary Termination by Participant (Exercisable Awards). If a Participant’s
employment or service as a Non-Employee Director with the Company is voluntarily
terminated by the Participant (other than through retirement, death or disability; see
Section 9.3 below), then: (i) that portion of any Exercisable Award that has not vested
on or prior to such date of termination shall automatically lapse and be forfeited, and
(ii) all vested but unexercised Exercisable Awards previously granted to that
Participant under the Plan shall automatically lapse and be forfeited at the close of
business on the 30th day following that date of such Participant’s termination, unless
an Exercisable Award expires earlier according to its original terms.

	 
	 	(c)	 	Involuntary Termination for Cause (Exercisable Awards). If a Participant’s
employment or service as a Non-Employee director is involuntarily terminated by the
Company for Cause: (i) that portion of any Exercisable Award that has not vested on or
prior to such date of termination shall automatically lapse and be forfeited, and (ii)
all vested but unexercised Exercisable Awards previously granted to that Participant
under the Plan shall automatically lapse and be forfeited at the close of business on
the 30th day following that date of such Participant’s termination, unless an
Exercisable Award expires earlier according to its original terms.

	 
	 	(d)	 	Involuntary Termination Other Than For Cause (Exercisable Awards). If a
Participant’s employment or service as a Non-Employee Director is involuntarily
terminated by the Company other than for Cause: (i) that portion of any Exercisable
Award that has not vested on or prior to such date of termination shall automatically
lapse and be forfeited, and (ii) all vested but unexercised Exercisable Awards
previously granted to that Participant under the Plan shall automatically lapse and be
forfeited at the close of business on the last business day of the twelfth month
following the date of the Participant’s termination, unless an Exercisable Award
expires earlier according to its original terms.

11

 

9.2 Awards Other Than Exercisable Awards. Except as otherwise provided in the Plan, or
otherwise determined by the Committee and included in the applicable Award Agreement, if a
Participant’s employment or service as a Non-Employee Director with the Company is voluntarily
terminated by the Participant (other than through retirement, death or disability; see Section 9.3
below), or is terminated by the Company with or without Cause, then any Award other than an
Exercisable Award previously granted to that Participant under the Plan which remains unvested
shall automatically lapse and be forfeited at the close of business on the date of such
Participant’s termination of employment or service.

9.3 Retirement, Death, Disability. Except as otherwise provided in the Plan, or otherwise
determined by the Committee and included in the applicable Award Agreement, if a Participant’s
employment or service as a Non-Employee Director is terminated because of retirement, death or
disability (with the determination of disability to be made within the sole discretion of the
Committee), any Award held by the Participant shall remain outstanding and vest or become
exercisable according to the Award’s original terms; provided, however, that any Restricted Stock
or Restricted Stock Units held by the Participant that remain unvested as of the date of
retirement, death or disability shall immediately vest and become non-forfeitable as of such date.

9.4 Amendment. The Committee or the Chief Executive Officer may prescribe new or
additional terms for the vesting, exercise or realization of any Award; provided, however, that no
such action shall deprive a Participant or beneficiary, without his or her consent, of the right to
any benefit accrued to his or her credit at the time of such action.

ARTICLE 10. EXERCISE OF INCENTIVE

10.1 In General. (a) A vested Incentive may be exercised during its Award Period, subject
to limitations and restrictions set forth therein and in Article 9. A vested Incentive may be
exercised at such times and in such amounts as provided in this Plan and the applicable Award
Agreement, subject to the terms, conditions, and restrictions of the Plan.

     (b) In no event may an Incentive be exercised or shares of Common Stock be issued pursuant to
an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or
inter-dealer quotation system or any registration under state or federal securities laws required
under the circumstances has not been accomplished. No Incentive may be exercised for a fractional
share of Common Stock.

10.2 Stock Options. (a) Subject to such administrative regulations as the Committee may
from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the
Company setting forth the number of shares of Common Stock with respect to which the Stock Option
is to be exercised (the “Exercise Notice”) and the date of exercise thereof (the “Exercise Date”)
in accordance with procedures established by the Company. On the Exercise Date, the Participant
shall deliver to the Company consideration with a value equal to the total Option Price of the
shares to be purchased, payable as follows: (a) cash, check, bank draft, or money order payable to
the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on
the Exercise Date, valued at its Fair Market Value on the Exercise Date, (c) by delivery (including
by fax) to the Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions from the Participant to a broker or dealer, reasonably
acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of
the Stock Option and promptly deliver to the Company the amount of sale proceeds necessary to pay
such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the
Company in its sole discretion. In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon
the exercise of the Stock Option equal to the number of shares of Restricted Stock used as
consideration therefor shall be subject to the same restrictions and provisions as the Restricted
Stock so submitted, as well as any additional restrictions that may be imposed by the Committee.

     (b) Upon payment of all amounts due from the Participant, the Company shall cause shares of
the Common Stock then being purchased to be delivered as directed by the Participant (or the person
exercising the Participant’s Stock Option in the event of his death) at its principal business
office promptly after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain possession of the shares acquired upon
exercise until the expiration of the holding periods described in

12

 

Section 422(a)(1) of the Code. The obligation of the Company to deliver shares of Common Stock
shall, however, be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock Option or the Common
Stock upon any securities exchange or inter-dealer quotation system or under any state or federal
law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Stock Option or the issuance or purchase of shares of
Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.

     (c) If the Participant fails to pay for any of the Common Stock specified in such notice or
fails to accept delivery thereof, the Participant’s right to purchase such Common Stock may be
terminated by the Company.

10.3 SARs. Subject to the conditions of this Section and such administrative regulations
as the Committee may from time to time adopt, an SAR may be exercised by the delivery (including by
fax) of written notice to the Committee setting forth the number of shares of Common Stock with
respect to which the SAR is to be exercised (the “Exercise Notice”) and the date of exercise
thereof (the “Exercise Date”) in accordance with procedures established by the Company. On the
Exercise Date, the Participant shall receive from the Company in exchange therefore cash in an
amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the
SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by
the total number of shares of Common Stock of the SAR being surrendered. In the discretion of the
Committee, the Company may satisfy its obligation upon exercise of an SAR by the distribution of
that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the
exercise of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash
settlement to be made for any fractional share interests, or the Company may settle such obligation
in part with shares of Common Stock and in part with cash.

10.4 Tax Payment Election. Subject to the approval of the Committee, and to any rules and
limitations as the Committee may adopt, a person exercising an Incentive may make the payment of
the amount of any taxes required to be collected or withheld by the Company in connection with such
exercise in whole or in part by electing, at or before the time of exercise, either (i) to have the
Company withhold from the number of Shares otherwise deliverable a number of Shares whose value
equals the amount of the applicable supplemental wage withholding required plus any required state,
local or employment tax withholdings, or (ii) to deliver certificates for other Shares owned by the
person exercising the Award, endorsed in blank with appropriate signature guarantee, having a value
equal to the amount otherwise to be collected or withheld.

10.5 Valuation. Any calculation with respect to a Participant’s income, required tax
withholding or other matters required to be made by the Company upon the exercise of an Incentive
shall be made using the Fair Market Value of the shares of Common Stock on the Exercise Date,
whether or not the Exercise Notice is delivered to the Company before or after the close of trading
on that date, unless otherwise specified by the Committee. Notwithstanding the foregoing, for
Stock Option exercises using the Company’s “same-day-sale for cash method” or “broker sale for
stock method,” a Participant’s taxable gain and related tax withholding on the exercise will be
calculated using the actual market price at which Shares were sold in the transaction.

ARTICLE 11. SPECIAL PROVISIONS

APPLICABLE TO COVERED PARTICIPANTS

Awards subject to Performance Criteria paid to Covered Participants under this Plan shall be
governed by the conditions of this Article 11 in addition to the requirements of Article 6, above.
Should conditions set forth under this Article 11 conflict with the requirements of Article 6, the
conditions of this Article 11 shall prevail.

11.1 Establishment of Performance Measures, Goals or Criteria. All Performance Measures,
Goals, or Criteria relating to Covered Participants for a relevant Performance Period shall be
established by the Committee in writing prior to the beginning of the Performance Period, or by
such other later date for the Performance Period as may be permitted under Section 162(m) of the
Code. The Performance Goals may be identical for all Participants

13

 

or, at the discretion of the Committee, may be different to reflect more appropriate measures of
individual performance.

11.2 Performance Goals. The Committee shall establish the Performance Goals relating to
Covered Participants for a Performance Period in writing. Performance Goals may include
alternative and multiple Performance Goals and may be based on one or more business and/or
financial criteria. In establishing the Performance Goals for the Performance Period, the
Committee in its discretion may include one or any combination of the following criteria in either
absolute or relative terms, for the Company or any Subsidiary:

	 	(a)	 	Increased revenue;

	 
	 	(b)	 	Net income measures (including but not limited to income after capital costs
and income before or after taxes);

	 
	 	(c)	 	Stock price measures (including but not limited to growth measures and total
stockholder return);

	 
	 	(d)	 	Market share;

	 
	 	(e)	 	Earnings per share (actual or targeted growth);

	 
	 	(f)	 	Earnings before interest, taxes, depreciation, and amortization (“EBITDA”);

	 
	 	(g)	 	Economic value added (“EVA®”);

	 
	 	(h)	 	Cash flow measures (including but not limited to net cash flow and net cash
flow before financing activities);

	 
	 	(i)	 	Return measures (including but not limited to return on equity, return on
average assets, return on capital, risk-adjusted return on capital, return on
investors’ capital and return on average equity);

	 
	 	(j)	 	Operating measures (including operating income, funds from operations, cash
from operations, after-tax operating income, sales volumes, production volumes, and
production efficiency);

	 
	 	(k)	 	Expense measures (including but not limited to cost-per-barrel, overhead cost
and general and administrative expense);

	 
	 	(l)	 	Margins;

	 
	 	(m)	 	Stockholder value;

	 
	 	(n)	 	Total stockholder return;

	 
	 	(o)	 	Proceeds from dispositions;

	 
	 	(p)	 	Production volumes;

	 
	 	(q)	 	Refinery runs or refinery utilization;

	 
	 	(r)	 	Total market value; and

	 
	 	(s)	 	Corporate values measures (including ethics compliance, environmental, and
safety).

11.3 Compliance with Section 162(m). The Performance Goals must be objective and must
satisfy third party “objectivity” standards under Section 162(m) of the Code, and the regulations
promulgated thereunder. In interpreting Plan provisions relating to Awards subject to Performance
Goals paid to Covered Participants, it is the intent of the Plan to conform with the standards of
Section 162(m) of the Code and Treasury Regulation §1.162-27(e)(2)(i), and the Committee in
establishing such goals and interpreting the Plan shall be guided by such provisions.

11.4 Adjustments. The Committee is authorized to make adjustments in the method of
calculating attainment of Performance Goals in recognition of: (i) extraordinary or non-recurring
items, (ii) changes in tax laws, (iii) changes in generally accepted accounting principles or
changes in accounting principles, (iv) charges related to restructured or discontinued operations,
(v) restatement of prior period financial results, and (vi) any other unusual, non-recurring gain
or loss that is separately identified and quantified in the Company’s financial statements.
Notwithstanding the foregoing, the Committee may, at its sole discretion, reduce the performance
results upon which Awards are based under the Plan, to offset any unintended result(s) arising from
events not anticipated when the Performance Goals were established, or for any other purpose,
provided that such adjustment is permitted by Section 162(m) of the Code.

11.5 Discretionary Adjustments. The Performance Goals shall not allow for any discretion
by the Committee as to an increase in any Award, but discretion to lower an Award is permissible.

14

 

11.6 Certification. The Award and payment of any Award under this Plan to a Covered
Participant with respect to a relevant Performance Period shall be contingent upon the attainment
of the Performance Goals that are applicable to such Covered Participant. The Committee shall
certify in writing prior to payment of any such Award that such applicable Performance Goals
relating to the Award are satisfied. Approved minutes of the Committee may be used for this
purpose.

11.7 Other Considerations. All Awards to Covered Participants under this Plan shall be
further subject to such other conditions, restrictions, and requirements as the Committee may
determine to be necessary to carry out the purpose of this Article 11.

ARTICLE 12. AMENDMENT OR DISCONTINUANCE

12.1 In General. Subject to the limitations set forth in this Article 12, the Committee
may at any time and from time to time, without the consent of the Participants, alter, amend,
revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment
which requires stockholder approval under the rules of the national exchange on which the shares of
Common Stock are listed (or in order for the Plan and Incentives awarded under the Plan to continue
to comply with Section 162(m) of the Code, including any successors to such Section), shall be
effective unless such amendment shall be approved by the requisite vote of the stockholders of the
Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or
advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under
the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event
of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall,
upon request of the Committee and as a condition to the exercisability thereof, execute a
conforming amendment in the form prescribed by the Committee to any Award Agreement relating
thereto.

12.2 Amendments to Awards. The Committee may waive any conditions or rights under, amend
any terms of, or alter any Award theretofore granted; provided that, unless required by law, no
action contemplated or permitted by this Article 12 shall adversely affect any rights of
Participants or obligations of the Company to Participants with respect to any Incentive
theretofore granted under the Plan without the consent of the affected Participant.

12.3 Unusual or Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms, conditions, and criteria of Awards in recognition of unusual or
nonrecurring events (including the events described in Section 14 of the Plan) affecting the
Company, any Affiliate, or the financial statements of the Company or any Affiliate, or in
recognition of changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan.

ARTICLE 13. EFFECTIVE DATE AND TERM

The Plan shall be effective as of May 1, 2005. Subject to earlier termination pursuant to Article
12, the Plan shall have a term of 10 years from its effective date and will terminate on April 30,
2015. After termination of the Plan, no future Awards may be made. However, any Incentives
granted before that date will continue to be effective in accordance with their terms and
conditions.

15

 

ARTICLE 14. CAPITAL ADJUSTMENTS

14.1 In General. If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and outstanding shares
of Common Stock resulting from (1) the declaration or payment of a stock dividend, (2) any
recapitalization resulting in a stock split-up, combination, or exchange of shares of Common Stock,
or (3) other increase or decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then:

	 	(a)	 	An appropriate adjustment shall be made in the maximum number of shares of
Common Stock then subject to being awarded under the Plan and in the maximum number of shares of Common Stock that may be awarded to a Participant to the end that the same
proportion of the Company’s issued and outstanding shares of Common Stock shall
continue to be subject to being so awarded.

	 	(b)	 	Appropriate adjustments shall be made in the number of shares of Common Stock
and the Option Price thereof then subject to purchase pursuant to each such Stock
Option previously granted and unexercised, to the end that the same proportion of the
Company’s issued and outstanding shares of Common Stock in each such instance shall
remain subject to purchase at the same aggregate Option Price.

	 	(c)	 	Appropriate adjustments shall be made in the number of SARs and the SAR Price
thereof then subject to exercise pursuant to each such SAR previously granted and
unexercised, to the end that the same proportion of the Company’s issued and
outstanding shares of Common Stock in each instance shall remain subject to exercise at
the same aggregate SAR Price.

	 	(d)	 	Appropriate adjustments shall be made in the number of outstanding shares of
Restricted Stock with respect to which restrictions have not yet lapsed prior to any
such change.

	 	(e)	 	Appropriate adjustments shall be made with respect to shares of Common Stock
applicable to any other Incentives previously awarded under the Plan as the Committee,
in its sole discretion, deems appropriate, consistent with the event.

14.2 Issuance of Stock or Other Convertible Securities. Except as otherwise expressly
provided herein, the issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in connection with direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to (i) the number of or Option Price
of shares of Common Stock then subject to outstanding Stock Options granted under the Plan, (ii)
the number of or SAR Price or SARs then subject to outstanding SARs granted under the Plan, (iii)
the number of outstanding shares of Restricted Stock, or (iv) the number of shares of Common Stock
otherwise payable under any other Incentive.

14.3 Notification. Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall notify each affected Participant its computation of such
adjustment, which shall be conclusive and shall be binding upon each such Participant.

ARTICLE 15. RECAPITALIZATION, MERGER AND CONSOLIDATION;

CHANGE OF CONTROL

15.1 Adjustments, Recapitalizations, Reorganizations, or Other Adjustments. The existence
of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company’s capital structure and its business, or any
merger or consolidation of the Company, or any issue of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any
rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company,
or

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any sale or transfer of all or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.

15.2 Acquiring Entity. Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any
Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash,
property, or assets) to which a Participant would have been entitled.

15.3 Acquired Entity. In the event of any merger, consolidation or share exchange pursuant
to which the Company is not the surviving or resulting corporation, there shall be substituted for
each share of Common Stock subject to the unexercised portions of such outstanding Incentives, that
number of shares of each class of stock or other securities or that amount of cash, property, or
assets of the surviving, resulting or consolidated company which were distributed or distributable
to the stockholders of the Company in respect to each share of Common Stock held by them, such
outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property
in accordance with their terms. Notwithstanding the foregoing, however, all Stock Options and SARs
may be canceled by the Company immediately prior to the effective date of any such reorganization,
merger, consolidation, share exchange or any dissolution or liquidation of the Company by giving
notice to each holder thereof or his personal representative of its intention to do so and by
permitting the purchase during the 30 day period next preceding such effective date of all or any
portion of all of the shares of Common Stock subject to such outstanding Incentives whether or not
such Incentives are then vested or exercisable.

15.4 Change of Control.

	 	(a)	 	In the event of a Change of Control, notwithstanding any other provision in
this Plan to the contrary all unmatured installments of Incentives outstanding and not
otherwise canceled in accordance with Section 15.3 above, shall thereupon automatically
be accelerated and exercisable in full and all Restriction Periods applicable to Awards
of Restricted Stock and/or Restricted Stock Units shall automatically expire. The
determination of the Committee that any of the foregoing conditions has been met shall
be binding and conclusive on all parties.

	 	(b)	 	In the event of a Change of Control, notwithstanding any other provision in
this Plan and not otherwise canceled in accordance with Section 15.3 above, previously
granted and unpaid Performance Cash and/or Dividend Equivalents or Performance Cash
and/or Dividend Equivalents granted in the year during which the Change of Control
occurs will be paid no later than 60 days from the date of the occurrence of such
Change of Control. The amount of the Performance Cash and/or Dividend Equivalent
payable shall be:

	 	(i)	 	One-half of the maximum value of Performance Cash and/or
Dividend Equivalent payable pursuant to the terms and provisions of the Award
(reduced by the application of the Committee’s negative discretion, if
applicable) to such person if the Change of Control occurs before 50 percent of
the Performance Period has elapsed; or

	 	(ii)	 	The full maximum value of the Performance Cash and/or Dividend
Equivalent payable pursuant to the terms and provisions of the Award (reduced
by the application of the Committee’s negative discretion, if applicable) to
such person if the Change of Control occurs on or after 50 percent of the
Performance Period has elapsed.

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ARTICLE 16. LIQUIDATION OR DISSOLUTION

In case the Company shall, at any time while any Incentive under this Plan shall be in force and
remain unexpired, sell all or substantially all of its property, or dissolve, liquidate, or wind up
its affairs (each, a “Dissolution Event”), then each Participant shall be thereafter entitled to
receive, in lieu of each share of Common Stock of the Company which such Participant would have
been entitled to receive under the Incentive, the same kind and amount of any securities or assets
as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or
winding up with respect to each share of Common Stock of the Company. If the Company shall, at any
time prior to the expiration of any Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in such event the
Option Prices or SAR Prices then in effect with respect to each Stock Option or SAR shall be
reduced, on the payment date of such distribution, in proportion to the percentage reduction in the
tangible book value of the shares of the Company’s Common Stock (determined in accordance with
generally accepted accounting principles) resulting by reason of such distribution.

ARTICLE 17. ADDITIONAL AUTHORITY OF COMMITTEE

In addition to the Committee’s authority set forth elsewhere, in order to maintain a Participant’s
rights in the event of any Change of Control or Dissolution Event described under Articles 15 and
16, the Committee, as constituted before the Change of Control or Dissolution Event, is hereby
authorized, and has sole discretion, as to any Incentive, either at the time the Award is made
hereunder or any time thereafter, to take any one or more of the following actions:

	 	(a)	 	provide for the acceleration of any time periods relating to the vesting,
exercise or realization of the Incentive so that the Incentive may be exercised or
realized in full on or before a date fixed by the Committee;

	 	(b)	 	provide for the purchase of any Incentive, upon the Participant’s request, for
an amount of cash equal to the amount that could have been attained upon the exercise
of the Incentive or realization of the Participant’s rights in the Incentive had the
Incentive been currently exercisable or payable;

	 	(c)	 	adjust any outstanding Incentive as the Committee deems appropriate to reflect
the Change of Control or Dissolution Event; or

	 	(d)	 	cause any outstanding Incentive to be assumed, or new rights substituted
therefor, by the acquiring or surviving corporation after a Change of Control or
successor following a Dissolution Event.

	 	(e)	 	The Committee may in its discretion include other provisions and limitations in
any Award Agreement as it may deem equitable and in the best interests of the Company.

ARTICLE 18. INCENTIVES IN SUBSTITUTION FOR

INCENTIVES GRANTED BY OTHER CORPORATIONS

Incentives may be granted under the Plan from time to time in substitution for similar instruments
held by employees of a corporation who become or are about to become Employees of the Company or
any Subsidiary as a result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation. The terms and
conditions of the substitute Incentives so granted may vary from the terms and conditions set forth
in this Plan to such extent as the Board at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the Incentives in substitution for which they are granted.

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ARTICLE 19. MISCELLANEOUS PROVISIONS

19.1 Code Section 409A. Notwithstanding anything in this Plan to the contrary, if any Plan
provision or Award under the Plan would result in the imposition of an applicable tax under Code
Section 409A and related regulations and Treasury pronouncements (“Section 409A”), that Plan
provision or Award may be reformed to avoid imposition of the applicable tax and no action taken to
comply with Section 409A shall be deemed to adversely affect the Participant’s rights to an Award.

19.2 Investment Intent. The Company may require that there be presented to and filed with
it by any Participant under the Plan, such evidence as it may deem necessary to establish that the
Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired
for investment and not with a view to their distribution.

19.3 No Right to Continued Employment. Neither the Plan nor any Incentive granted under
the Plan shall confer upon any Participant any right with respect to continuance of employment by
the Company or any Subsidiary.

19.4 Delegation. Subject to the terms of the Plan and applicable law, the Committee may
delegate to one or more officers or managers of the Company or any Affiliate, or to a committee of
such officers or managers, the authority, subject to the terms and limitations the Committee shall
determine, to grant Awards or to cancel, modify or waive rights with respect to, or to amend,
suspend, or terminate Awards.

19.5 Indemnification of Board and Committee. No member of the Board or the Committee, nor
any officer or employee of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the fullest extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action, determination, or
interpretation.

19.6 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or
the Committee shall be deemed to give any person any right to be granted an Award or any other
rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized
by the Committee and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

19.7 Compliance with Laws and Regulations. Notwithstanding anything contained herein to
the contrary, the Company shall not be required to sell or issue shares of Common Stock under any
Incentive if the issuance thereof would constitute a violation by the Participant or the Company of
any provisions of any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted
or traded (including without limitation Section 16 of the Securities Exchange Act of 1934 and
162(m) of the Code), and, as a condition of any sale or issuance of shares of Common Stock under an
Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may
deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver
shares of Common Stock, shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may be required; and
the grant or making of any Award shall be conditional and shall be granted or awarded subject to
acceptance of the Shares deliverable pursuant to the Award for listing on the NYSE.

19.8 Severability. If any provision of the Plan or any Award is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction as to any Person or Award, or would
disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially altering the intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award
and the remainder of the Plan and any such Award shall remain in full force and effect.

19

 

19.9 Tax Requirements, Withholding. The Company or any Affiliate is hereby authorized to
withhold from any Award, from any payment due or transfer made under any Award or under the Plan or
from any compensation or other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes with respect to an
Award, its exercise, the lapse of restrictions thereon, payment or transfer under an Award or under
the Plan, and to take any other action necessary in the opinion of the Company to satisfy all
obligations for the payment of the taxes. Notwithstanding the foregoing, in the event of an
assignment of a Non-qualified Stock Option or SAR, the Participant who assigns the Non-qualified
Stock Option or SAR shall remain subject to withholding taxes upon exercise of the Non-qualified
Stock Option or SAR by the transferee to the extent required by the Code or the rules and
regulations promulgated thereunder. Such payments shall be required to be made prior to the
delivery of any shares of Common Stock. Such payment may be made in cash, by check, or through the
delivery of shares of Common Stock owned by the Participant (which may be effected by the actual
delivery of shares of Common Stock by the Participant or by the Company’s withholding a number of
shares to be issued upon the exercise of a Stock Option, if applicable), which shares have an
aggregate Fair Market Value equal to the required minimum withholding payment, or any combination
thereof.

19.10 Assignability. (a) Incentive Stock Options may not be transferred or assigned other
than by will or the laws of descent and distribution and may be exercised during the lifetime of
the Participant only by the Participant or the Participant’s legally authorized representative, and
each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by
a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee
may waive or modify any limitation contained in the preceding sentences of this Section 19.10 that
is not required for compliance with Section 422 of the Code.

     (b) The Committee may, in its discretion, authorize all or a portion of a Non-qualified Stock
Option or SAR to be granted to a Participant to be on terms which permit transfer by such
Participant to (i) the spouse, children or grandchildren of the Participant (“Immediate Family
Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only partners, (iv) an entity
exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor
provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of
the Code or any successor provision, provided that (a) there shall be no consideration for any such
transfer, (b) the Award Agreement pursuant to which such Non-qualified Stock Option or SAR is
granted must be approved by the Committee and must expressly provide for transferability in a
manner consistent with this Section, and (c) subsequent transfers of transferred Non-qualified
Stock Options or SARs shall be prohibited except those by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in the Code or Title I
of the Employee Retirement Income Security Act of 1974, as amended. Following transfer, any such
Non-qualified Stock Option and SAR shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer, provided that for purposes of Articles 10, 12, 14,
16 and 18 hereof the term “Participant” shall be deemed to include the transferee. The events of
Termination of Service shall continue to be applied with respect to the original Participant,
following which the Non-qualified Stock Options and SARs shall be exercisable by the transferee
only to the extent and for the periods specified in the Award Agreement. The Committee and the
Company shall have no obligation to inform any transferee of a Non-qualified Stock Option or SAR of
any expiration, termination, lapse or acceleration of such Option. The Company shall have no
obligation to register with any federal or state securities commission or agency any Common Stock
issuable or issued under a Non-qualified Stock Option or SAR that has been transferred by a
Participant under this Section 19.10.

19.11 No Trust or Fund Created. Neither the Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or any fiduciary relationship between the
Company or any Affiliate and a Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured general creditor of the Company or any
Affiliate.

19.12 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to
Incentives granted under this Plan shall constitute general funds of the Company.

19.13 Governing Law. 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.

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19.14 Successors and Assigns. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, expressly to assume and agree to perform the Company’s
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 herein before defined and any aforesaid successor to its business and/or
assets.

19.15 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to
the Plan or any Award, and the Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of any fractional Shares or whether fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.

19.16 Headings. Headings are given to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. The headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

19.17 Construction. Use of the term “including” in this Plan shall be construed to mean
“including but not limited to.”

19.18 Legend. Each certificate or evidence of ownership representing shares of Restricted
Stock issued to a Participant shall bear or be subject to the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions hereof (any such
certificate not having such legend shall be surrendered upon demand by the Company and so
endorsed):

     On the face of the certificate:

	 	 	 	“Transfer of this stock is restricted in accordance with conditions printed on the
reverse of this certificate.”

     On the reverse:

	 	 	 	“The shares of stock evidenced hereby are subject to and transferable only in
accordance with the 2005 Valero Energy Corporation Omnibus Stock Incentive Plan, a
copy of which is on file at the principal office of the Company in San Antonio,
Texas. No transfer or pledge of the shares evidenced hereby may be made except in
accordance with and subject to the provisions of said Plan. By acceptance of shares
represented hereby, any holder, transferee or pledge beneficiary hereof agrees to
be bound by all of the provisions of said Plan.”

The following legend shall be inserted on a certificate or evidence of ownership of Common Stock
issued under the Plan if the shares were not issued in a transaction registered under the
applicable federal and state securities laws:

	 	 	 	“Shares of stock represented hereby have been acquired by the holder for investment
and not for resale, transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of applicable state and federal
securities laws, and may not be offered for sale, sold or transferred other than
pursuant to effective registration under such laws, or in transactions otherwise in
compliance with such laws, and upon evidence satisfactory to the Company of
compliance with such laws, as to which the Company may rely upon an opinion of
counsel satisfactory to the Company.”

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