2002 Unit Option Plan

Exhibit 10.04


VALERO GP, LLC

AMENDED AND RESTATED

2002 UNIT OPTION PLAN


Amended and Restated as of January 1, 2005

I. Plan Purpose


The Valero GP, LLC 2002 Unit Option Plan (the " Plan" ) is intended to promote the interests of Valero L.P., a Delaware limited partnership (the " Partnership" ), by providing to employees and directors of Valero GP, LLC, a Delaware limited liability company (the " Company" ), and its Affiliates who perform services for the Partnership and its subsidiaries the incentive to acquire Units through the grant of Options to purchase such Units as described herein. The Plan is intended to assist the Company and its Affiliates in the attraction, motivation, and retention of employees who are vital to the growth and financial success of the Partnership and to align employees' interests with those of other Unit holders of the Partnership.

II. Definitions


In this Plan, except where the context indicates otherwise, the following definitions apply:

(a)" Affiliate" means an entity that controls, is controlled by, or is under common control with the Company, as defined in Sections 424(e) and (f) of the Code (but substituting " the Company" for " employer corporation" ), including entities which become such after adoption of the Plan.

(b)" Agreement" means a written agreement granting an Option that is executed by the Company and the Optionee. (c)" Award" means a grant of one or more Options pursuant to the Plan.

(d)" Beneficiary" means the person or persons described in Section XI(j).

(e)" Board" means the Board of Directors of the Company.

(f)" Cause" means:

(i) fraud or embezzlement on the part of the Participant (such determination to be made by the Committee in the good faith exercise of its reasonable judgment);

(ii) conviction of or the entry of a plea of nolo contendere by the Participant to any felony;

(iii) gross insubordination or a material breach of, or the willful failure or refusal by the Participant to perform and discharge his duties, responsibilities or obligations (other than by reason of disability or death) that is not corrected within 30 days following written notice thereof to the Participant, such notice to state with specificity the nature of the breach, failure or refusal; or (iv) any act of willful misconduct by the Participant that (a) is intended to result in substantial personal enrichment of the Participant at the expense of the Partnership, the Company or any of their Affiliates, or (b) has a material adverse impact on the business or reputation of the Partnership, the Company or any of their Affiliates (such determination to be made by the Partnership, the Company or any of their Affiliates in the good faith exercise of their reasonable judgment).


1 (g)" Code" means the Internal Revenue Code of 1986, as amended.

(h)" Committee" means the Compensation Committee of the Board, the committee appointed by the Board to administer the Plan. (i)" Company" means Valero GP, LLC, a Delaware limited liability company.

(j)" Date of Exercise" means the date on which the Company receives notice of the exercise of an Option in accordance with Section VI(c) of the Plan.

(k)" Date of Grant" means the date on which an Option is granted under the Plan.

(l)" Director" means a member of the Board of Directors of the Company or any Affiliate.

(m)" Employee" means any employee of the Company or an Affiliate, as determined by the Committee. (n)" Exchange Act" means the Securities Exchange Act of 1934, as amended.

(o)" Fair Market Value" means the closing price of a Unit on the New York Stock Exchange on the applicable date (or if there is no trading in the Units on such date, on the next preceding date on which there was trading). If Units are not publicly traded at the time a determination of fair market value is required to be made hereunder, the determination of fair market value shall be made in good faith by the Committee.

(p)" Option" means an option to purchase Units granted under the Plan. Such Options will be nonqualified unit options and are not intended to be Incentive Stock Options as defined in Section 422 of the Code.

(q)" Option Period" means the period during which an Option may be exercised.

(r)" Optionee" means a Participant to whom an Option has been granted.

(s)" Participant" means any Employee or Director granted an Award under the Plan.

(t)" Partnership" means Valero L.P., a Delaware limited partnership.

(u)" Plan" means the Valero GP, LLC 2002 Unit Option Plan as set forth herein.

(v)" Unit" means a common unit of the Partnership.

III. Administration of the Plan

(a) The Committee shall administer the Plan.

(b)

The Committee shall have full power and authority to interpret the provisions of the Plan and supervise its administration. All decisions and selections made by the Committee pursuant to the provisions of the Plan shall be made by a majority of its members. Any decision reduced to writing and signed by a majority of the members shall be fully effective as if adopted by a majority at a meeting duly held. Subject to the provisions of the Plan, the Committee shall have full and final authority to determine the Participants to whom Options hereunder shall be granted; the number of Units to be covered by each Option; the terms and conditions of any Option, the determination of whether, to what extent, and under what circumstances Options may be settled, exercised, cancelled, or forfeited; the determination of such rules and regulations as deemed proper for the


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administration of the Plan; and the making of any other determination or actions required for the proper interpretation and administration of the Plan.

(c) Unless expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or Option shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon the Company, the Partnership, any Affiliate, any Participant, and any beneficiary of any Award or Option.

IV. Units Available for Awards

(a) Units Available . Subject to adjustment as provided in Section IV. (c) hereunder, the number of Units with respect to which Awards may be granted under the Plan is 200,000. If any Award is forfeited or otherwise terminates or is canceled without the exercise of such Option grant, then the Units covered by such Award, to the extent of such forfeiture, termination, or cancellation, shall again be Units with respect to which Awards may be granted.

(b) Sources of Units Deliverable Under Awards . Any Units delivered pursuant to the exercise of an Option shall consist, in whole or in part, of Units acquired in the open market, from any Affiliate, the Partnership or any other person, or any combination of the foregoing, as determined by the Committee in its discretion.

(c) Adjustments . If the Committee determines that any distribution (whether in the form of cash, Units, other securities, or other property), recapitalization, split, reverse split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Units or other securities of the Partnership, issuance of warrants or other rights to purchase Units or other securities of the Partnership, or other similar transaction or event affects the Units suc ...